<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

(Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
      EXCHANGE ACT OF 1934

      For the quarterly period ended March 31, 2001

                                       OR

|_|   TRANSITION REPORT PURSUANT TO THE SECTION 13 OR 15(d) OF THE SECURITIES
      AND EXCHANGE ACT OF 1934

      For the transition period from ____________ to ____________

                                   ----------

Commission File Number 1-12541

                          Atchison Casting Corporation
       ------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            Kansas                                      48-1156578
-------------------------------            ------------------------------------
(State of other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)

 400 South Fourth Street, Atchison, Kansas                        66002
-------------------------------------------                     ----------
 (Address of principal executive offices)                       (Zip Code)

(Registrant's telephone number, including area code) (913) 367-2121

                                 Not Applicable
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report.)

                                   ----------

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements from the past 90 days. Yes |X|  No |_|

There were 7,689,347 shares of common stock, $.01 par value per share,
outstanding on May 11, 2001

<PAGE>

                                     PART I

ITEM 1. Financial Statements.

                  ATCHISON CASTING CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                        (In thousands, except share data)

                                                             March 31,  June 30,
                                                               2001       2000
                                                             --------   --------

                                     ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                                $  1,042   $  3,815
    Customer accounts receivable, net of allowance for
      doubtful accounts of $442 and $584, respectively         79,482     87,401
    Inventories                                                56,655     56,123
    Deferred income taxes                                       8,394     10,092
    Other current assets                                        9,518      9,517

                                                             --------   --------
             Total current assets                             155,091    166,948

PROPERTY, PLANT AND EQUIPMENT, Net                            131,284    135,299

INTANGIBLE ASSETS, Net                                         27,050     28,525

DEFERRED FINANCING COSTS, Net                                     807        923

OTHER ASSETS                                                   11,956     10,728

                                                             --------   --------
TOTAL                                                        $326,188   $342,423
                                                             ========   ========

                 See Notes to Consolidated Financial Statements.

<PAGE>

                  ATCHISON CASTING CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED BALANCE SHEETS (Cont'd)
                                   (Unaudited)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                             March 31,     June 30,
                                                                               2001         2000
                                                                             ---------    ---------
<S>                                                                          <C>          <C>
           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                         $  52,931    $  42,867
    Accrued expenses                                                            26,326       37,432
    Current maturities of long-term obligations                                113,742       80,919
                                                                             ---------    ---------
           Total current liabilities                                           192,999      161,218

LONG-TERM OBLIGATIONS                                                            6,720       36,691

DEFERRED INCOME TAXES                                                           11,404       11,912

OTHER LONG-TERM OBLIGATIONS                                                      1,136        2,683

EXCESS OF FAIR VALUE OF ACQUIRED NET ASSETS
     OVER COST, Net of accumulated amortization of $3,307
     and $2,298, respectively                                                    3,025        4,843

POSTRETIREMENT OBLIGATION OTHER THAN PENSION                                     9,907        9,199

MINORITY INTEREST IN SUBSIDIARIES                                                  966        1,544

                                                                             ---------    ---------
           Total liabilities                                                   226,157      228,090

STOCKHOLDERS' EQUITY:

     Preferred stock, $.01 par value, 2,000,000
       authorized shares; no shares issued and outstanding                          --           --

     Common stock, $.01 par value, 19,300,000
       authorized shares; 8,312,049 and 8,295,974
       shares issued, respectively                                                  83           83

     Class A common stock (non-voting), $.01 par value,
       700,000 authorized shares; no shares issued and outstanding                  --           --

     Additional paid-in capital                                                 81,517       81,460

     Retained earnings                                                          33,834       42,848

     Accumulated other comprehensive income (loss)                              (9,355)      (4,010)
                                                                             ---------    ---------
                                                                               106,079      120,381
     Less shares held in treasury:
       Common stock, 622,702 shares,  at cost                                   (6,048)      (6,048)

                                                                             ---------    ---------
           Total stockholders' equity                                          100,031      114,333

                                                                             ---------    ---------
TOTAL                                                                        $ 326,188    $ 342,423
                                                                             =========    =========
</TABLE>

                     See Notes to Consolidated Financial Statements.

<PAGE>

                  ATCHISON CASTING CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                      Three Months Ended             Nine Months Ended
                                                            March 31,                    March 31,
                                                       2001           2000           2001           2000
                                                                  (As restated,                 (As restated,
                                                                   see Note 13)                 see Note 13)
                                                   -----------    -----------    -----------    -----------
<S>                                                <C>            <C>            <C>            <C>
NET SALES                                          $   116,924    $   121,765    $   321,941    $   344,782

COST OF GOODS SOLD                                     108,885        111,518        301,851        311,825

                                                   -----------    -----------    -----------    -----------
GROSS PROFIT                                             8,039         10,247         20,090         32,957

OPERATING EXPENSES:

  Selling, general and administrative                   12,271         11,355         33,928         32,821

  Amortization of intangibles, net                         (77)           (68)          (197)          (360)

  Other income, net                                         --             --        (10,920)          (681)

                                                   -----------    -----------    -----------    -----------
     Total operating expenses                           12,194         11,287         22,811         31,780

                                                   -----------    -----------    -----------    -----------
OPERATING INCOME (LOSS)                                 (4,155)        (1,040)        (2,721)         1,177

INTEREST EXPENSE                                         2,982          2,445          8,532          6,956

MINORITY INTEREST IN NET INCOME                            121             44            130            108
   OF SUBSIDIARIES
                                                   -----------    -----------    -----------    -----------
LOSS BEFORE INCOME TAXES AND                            (7,258)        (3,529)       (11,383)        (5,887)
  CUMULATIVE EFFECT OF A CHANGE IN
  ACCOUNTING PRINCIPLE

INCOME TAX BENEFIT                                      (2,254)        (8,727)        (2,915)        (8,896)
                                                   -----------    -----------    -----------    -----------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
  OF A CHANGE IN ACCOUNTING PRINCIPLE              $    (5,004)   $     5,198    $    (8,468)   $     3,009

CUMULATIVE EFFECT ON PRIOR YEARS (TO JUNE 30,
  2000) OF A CHANGE IN ACCOUNTING FOR DERIVATIVE
  FIANCIAL INSTRUMENTS, NET OF $364 TAX BENEFIT                                         (546)

                                                   -----------    -----------    -----------    -----------
NET INCOME (LOSS)                                  $    (5,004)   $     5,198    $    (9,014)   $     3,009
                                                   ===========    ===========    ===========    ===========

INCOME (LOSS) PER SHARE - BASIC:

  INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A
    CHANGE IN ACCOUNTING PRINCIPLE                 $     (0.65)   $      0.68    $     (1.10)   $      0.39

  CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
     FOR DERIVATIVE FINANCIAL INSTRUMENTS                                              (0.07)

                                                   -----------    -----------    -----------    -----------
  NET INCOME (LOSS)                                $     (0.65)   $      0.68    $     (1.17)   $      0.39
                                                   ===========    ===========    ===========    ===========

INCOME (LOSS) PER SHARE - DILUTED:

  INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A
    CHANGE IN ACCOUNTING PRINCIPLE                 $     (0.65)   $      0.68    $     (1.10)   $      0.39

  CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
     FOR DERIVATIVE FINANCIAL INSTRUMENTS                                              (0.07)

                                                   -----------    -----------    -----------    -----------
  NET INCOME (LOSS)                                $     (0.65)   $      0.68    $     (1.17)   $      0.39
                                                   ===========    ===========    ===========    ===========

WEIGHTED AVERAGE NUMBER OF
  SHARES USED IN CALCULATION:

    BASIC                                            7,689,347      7,651,746      7,684,008      7,644,269
                                                   ===========    ===========    ===========    ===========

    DILUTED                                          7,689,347      7,651,828      7,684,008      7,648,400
                                                   ===========    ===========    ===========    ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.
<PAGE>

                 ATCHISON CASTING CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                       Three Months Ended             Nine Months Ended
                                                             March 31,                    March 31,
                                                       2001           2000           2001           2000
                                                                  (As restated,                 (As restated,
                                                                   see Note 13)                 see Note 13)
                                                   -----------    -----------    -----------    -----------
<S>                                                <C>            <C>            <C>            <C>

NET INCOME (LOSS)                                  $    (5,004)   $     5,198    $    (9,014)   $     3,009

OTHER COMPREHENSIVE INCOME (LOSS):

  Foreign currency translation adjustments              (4,173)          (193)        (5,345)          (586)

                                                   -----------    -----------    -----------    -----------
OTHER COMPREHENSIVE INCOME (LOSS)                  $    (9,177)   $     5,005    $   (14,359)   $     2,423
                                                   ===========    ===========    ===========    ===========
</TABLE>

                 See Notes to Consolidated Financial Statements.

<PAGE>

                  ATCHISON CASTING CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                          March 31,
                                                                      2001        2000
                                                                              (As restated,
                                                                               see Note 13)
                                                                    --------    --------
<S>                                                                 <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income (Loss)                                              $ (9,014)   $  3,009
     Adjustments to reconcile net income (loss) to
       net cash provided by operating activities:
           Depreciation and amortization                              10,109      10,660
           Minority interest in net income (loss) of subsidiaries        121         (19)
           Loss on disposal of capital assets                            288          98
           Gain on termination of interest rate swap agreement                      (681)
           Deferred income taxes                                         500      (8,766)
           Changes in assets and liabilities:
             Receivables                                               5,402        (882)
             Inventories                                              (2,613)      5,472
             Other current assets                                       (424)     (7,359)
             Accounts payable                                         11,724       3,226
             Accrued expenses                                         (9,965)      3,937
             Postretirement obligation other
               than pension                                              708         643
             Other                                                    (3,270)     (1,814)
                                                                    --------    --------
                     Cash provided by operating activities             3,566       7,524
                                                                    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Capital expenditures                                             (9,690)    (14,084)
     Proceeds from sale of capital assets                              1,256         267
     Payment for purchase of stock in subsidiaries                      (591)     (2,557)

                                                                    --------    --------
                     Cash used in investing activities                (9,025)    (16,374)
                                                                    --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from issuance of common stock, net of costs                 57         183
     Proceeds from issuance of long-term obligations                              35,000
     Payments on long-term obligations                                (5,689)    (41,069)
     Capitalized financing costs paid                                   (155)       (525)
     Termination of interest rate swap agreement                          --       1,238
     Net borrowings under revolving loan notes                         8,631      11,563

                                                                    --------    --------
                     Cash provided by financing activities             2,844       6,390

EFFECT OF EXCHANGE RATE ON CASH                                         (158)         59

                                                                    --------    --------
NET DECREASE IN CASH AND CASH EQUIVALENTS                             (2,773)     (2,401)

CASH AND CASH EQUIVALENTS, Beginning of period                         3,815       3,906

                                                                    --------    --------
CASH AND CASH EQUIVALENTS, End of period                            $  1,042    $  1,505
                                                                    ========    ========
</TABLE>

                 See Notes to Consolidated Financial Statements.

<PAGE>

                  ATCHISON CASTING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Accounting Policies and Basis of Presentation

      The unaudited consolidated financial statements should be read in
      conjunction with the consolidated financial statements of the Company for
      the year ended June 30, 2000, as included in the Company's amended Annual
      Report on Form 10-K/A for the fiscal year ended June 30, 2000.

      The accompanying unaudited consolidated financial statements include all
      adjustments (consisting only of normal recurring accruals), which in the
      opinion of management are necessary for a fair presentation of financial
      position, results of operations and cash flows. Results of operations for
      interim periods are not necessarily indicative of results to be expected
      for a full year.

      Certain March 31, 2000 amounts have been reclassified to conform with
      March 31, 2001 classifications.

2.    Inventories

                                                            As of
                                                 --------------------------
                                                 March 31,         June 30,
                                                   2001             2000
                                                  -------          -------
                                                         (Thousands)
      Raw materials                               $ 7,394          $ 8,491
      Work-in-process                              37,200           33,656
      Finished goods                                9,336           11,038
      Supplies                                      2,725            2,938
                                                  -------          -------
                                                  $56,655          $56,123
                                                  =======          =======

<PAGE>

3.    Income Taxes

      Income tax expense (benefit) consisted of:


                                                      Nine Months Ended
                                                          March 31,
                                                 2001              2000
                                                               (As restated,
                                                                see Note 13)
                                                -------           -------
                                                       (Thousands)
      Current:
           Domestic                             $(3,027)          $(1,367)
           Foreign                                 (752)            1,237
                                                -------           -------
                                                 (3,779)             (130)

      Deferred:
           Domestic                                (717)           (8,284)
           Foreign                                1,217              (482)
                                                -------           -------
                                                    500            (8,766)

                                                -------           -------
      Total                                     $(3,279)          $(8,896)
                                                =======           =======

      The Company recorded a $7.8 million deferred income tax benefit in fiscal
      2000 with respect to the reinvestment of certain flood insurance proceeds
      received in 1995 and 1996. The Company recorded pretax gains of
      approximately $20.1 million in 1995 and 1996 related to insurance proceeds
      resulting from flood damage to the Company's Atchison, Kansas foundry in
      July 1993. For federal income tax purposes, the Company treated the flood
      as an involuntary conversion event under the Internal Revenue Code
      ("Code") and related Treasury Regulations.

      The Code provides generally that if certain conditions are met, gains on
      insurance proceeds from an involuntary conversion are not taxable if the
      proceeds are reinvested in qualified replacement property within two years
      after the close of the first taxable year in which any part of the
      conversion gain is realized. The Company believed that its treatment of
      certain foundry subsidiary stock acquisitions as qualified replacement
      property was subject to potential challenge by the Internal Revenue
      Service ("Service") in 1996 (the first year in which involuntary
      conversion gain was

<PAGE>

      realized for federal income tax purposes). The Company recorded income tax
      expense on the insurance gains in 1996 pending review of its position by
      the Service or the expiration of the statute of limitations under the Code
      for the Service to assess income taxes with respect to the Company's
      position.

      The Company's treatment of certain foundry subsidiary stock acquisitions
      as qualified replacement property creates differing basis in the foundry
      subsidiary stock for financial statement and tax purposes. These
      differences have not been recognized as taxable temporary differences
      under Statement of Financial Accounting Standards No. 109, "Accounting for
      Income Taxes," since the subsidiary basis differences can be permanently
      deferred through subsidiary mergers or tax-free liquidations. On March 15,
      2000, the statute of limitations for the Service to assess taxes with
      respect to the Company's position expired. The deferred taxes recorded in
      the consolidated financial statements in prior years were no longer
      required.

4.    Supplemental Cash Flow Information

                                                         Nine Months Ended
                                                             March 31,
                                                        2001         2000
                                                                  (As restated,
                                                                  see Note 13)
                                                       ------       ------
                                                           (Thousands)
      Cash paid during the period for:
           Interest                                    $8,966       $7,274
                                                       ======       ======
           Income Taxes                                $    0       $1,674
                                                       ======       ======

<PAGE>

5.    Earnings Per Share

      Following is a reconciliation of basic and diluted EPS for the three month
      and nine month periods ended March 31, 2001 and 2000, respectively.

<PAGE>

<TABLE>
<CAPTION>
For the three months ended March 31, 2001
                                                                  Weighted        Loss Per
                                                Net Loss        Average Shares      Share
                                               -----------      --------------    ---------
<S>                                            <C>                <C>             <C>
Basic EPS
  Loss available to                            $(5,004,000)       7,689,347       $   (0.65)
     common stockholders
Effect of Dilutive Securities:
   Options
                                               -----------        ---------       ---------
Diluted EPS                                    $(5,004,000)       7,689,347       $   (0.65)
                                               ===========        =========       =========

<CAPTION>
For the three months ended March 31, 2000
                                                                  Weighted      Earnings Per
                                               Net Income       Average Shares     Share
                                               -----------      --------------  ------------
<S>                                            <C>                <C>             <C>
Basic EPS
  Income available to
     common stockholders                       $ 5,198,000        7,651,746       $    0.68
Effect of Dilutive Securities:
   Options                                                               82
                                               -----------        ---------       ---------
Diluted EPS                                    $ 5,198,000        7,651,828       $    0.68
                                               ===========        =========       =========

<CAPTION>
For the nine months ended March 31, 2001
                                                                  Weighted        Loss Per
                                                Net Loss        Average Shares      Share
                                               -----------      --------------    ---------
<S>                                            <C>                <C>             <C>
Basic EPS
  Loss before cumulative
     effect of a change in accounting
     principle available to common
     stockholders                              $(8,468,000)       7,684,008       $   (1.10)
  Cumulative effect on prior years
     (to June 30, 2000) of a change in
     accounting for derivative financial
     instruments, net of $364,000 tax
     benefit                                      (546,000)                           (0.07)
Effect of Dilutive Securities:
   Options
                                               -----------        ---------       ---------
Diluted EPS                                    $(9,014,000)       7,684,008       $   (1.17)
                                               ===========        =========       =========
<CAPTION>
For the nine months ended March 31, 2000
                                                                  Weighted       Earnings Per
                                               Net Income       Average Shares      Share
                                               -----------      --------------   ------------
<S>                                            <C>                <C>             <C>
Basic EPS
  Income available to
     common stockholders                       $ 3,009,000        7,644,269       $    0.39
Effect of Dilutive Securities:
   Options                                                            4,131
                                               -----------        ---------       ---------
Diluted EPS                                    $ 3,009,000        7,648,400       $    0.39
                                               ===========        =========       =========
</TABLE>

<PAGE>

6.    New Accounting Standards

      Effective July 1, 2000, the Company adopted Statement of Financial
      Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
      Instruments and Hedging Activities" and SFAS No. 138, "Accounting for
      Certain Derivative Instruments and Certain Hedging Activities, an
      amendment of FASB Statement No. 133." SFAS No. 133 and 138 require
      companies to record derivative instruments as assets or liabilities,
      measured at fair value. The recognition of gains or losses resulting from
      changes in the values of those derivative instruments is based on the use
      of each derivative instrument and whether it qualifies for hedge
      accounting. The key criterion for hedge accounting is that the hedging
      relationship must be highly effective in achieving offsetting changes in
      fair value or cash flows.

      At July 1, 2000, the Company had derivatives in the form of foreign
      exchange contracts ("FX contracts") to buy and sell various currencies.
      The Company uses FX contracts as an economic hedge of trade receivables
      and payables denominated in foreign currencies, as well as anticipated
      sales to foreign customers in the customers' local currency. On July 1,
      2000, the Company recorded its FX contracts at their fair value of
      approximately ($910,000). This resulted in a charge to income of
      approximately $910,000 ($546,000 net of deferred income tax benefit). This
      is presented in the Company's consolidated financial statements as the
      cumulative effect of a change in accounting principle. Additionally, the
      translation of the foreign denominated trade receivables resulted in the
      increase in value of the receivables and the Company recorded a currency
      translation gain of approximately $435,000 ($264,000 net of deferred
      income tax expense.

      On March 31, 2001, the Company recorded its FX contracts at their fair
      value of approximately ($1.8 million). This resulted in a loss of
      approximately $1.5 million ($917,000, net of deferred income taxes).
      Additionally, the translation of the foreign denominated trade receivables
      resulted in an increase in the value of the receivables and the Company
      recorded a currency translation gain of approximately $169,000 ($101,000,
      net of deferred income taxes).

7.    Impairment at and Closure of Claremont Foundry, Inc.

      During fiscal year 2000, the Company recorded an impairment loss
      associated with the planned closure of Claremont Foundry, Inc.
      ("Claremont"). The resulting impairment charge of $3.4 million

<PAGE>

      ($2.1 million, net of tax) to reduce the carrying value of these fixed
      assets was recorded in the fourth quarter ended June 30, 2000. During the
      fourth quarter of fiscal 2000, the Company's Board of Directors committed
      to a plan for the closure of Claremont as a result of continued operating
      losses. As such, the carrying values of Claremont's fixed assets were
      written down to the Company's estimates of fair value, which was based on
      discounted future cash flows. Accordingly, actual results could vary
      significantly from such estimates. Prior to the impairment charge, these
      assets had a carrying value of $3.5 million. The Company transferred as
      much work as possible to its other foundries, and closed the foundry by
      November 30, 2000. For the third quarter of fiscal 2000, Claremont
      recorded net sales of $843,000. For the third quarter of fiscal 2000,
      Claremont incurred a net loss of $516,000. For the first nine months of
      fiscal 2000 and fiscal 2001, Claremont recorded net sales of $3.4 million
      and $816,000, respectively, and incurred net losses of $1.3 million and
      $523,000, respectively.

      In addition to the long-lived asset impairment, the Company recognized
      certain other exit costs associated with the closure of Claremont in
      fiscal year 2001 related to employee termination costs. The number of
      employees terminated in the process was approximately 45. As such, in the
      second quarter of fiscal year 2001, the Company recognized approximately
      $113,000 in severance benefits related to the Claremont closure.

8.    Impairment at and Closure of Pennsylvania Steel Foundry & Machine Company

      Following the discovery of accounting irregularities as discussed in Note
      13, which revealed substantial operating losses at the Company's three
      Pennsylvania foundry operations, the Company considered the now known
      losses as a primary indicator of impairment. An impairment loss was
      recognized as the future undiscounted cash flows of Pennsylvania Steel
      Foundry & Machine Company ("Pennsylvania Steel") were estimated to be
      insufficient to recover the carrying value of the fixed assets.
      Accordingly, in connection with the restatement of the fiscal year 2000
      financial statements, the carrying values of Pennsylvania Steel's fixed
      assets were written down to the Company's estimates of fair value, which
      was based on discounted future cash flows. The resulting impairment charge
      of $3.5 million ($2.1 million, net of tax) to reduce the carrying value of
      these fixed assets was recorded in the fourth quarter ended June 30, 2000.
      Actual results could vary significantly from such estimates. Prior to the
      impairment charge, these assets had a carrying value of $4.8 million.
      Subsequently, on February 28, 2001 the Company closed Pennsylvania Steel
      and intends to transfer as much work as possible to the other two
      Pennsylvania foundries. For the third quarter of fiscal 2000 and fiscal
      2001,

<PAGE>

      Pennsylvania Steel recorded net sales of $3.0 million and $1.1 million,
      respectively, and incurred net losses of $722,000 and $1.0 million,
      respectively. For the first nine months of fiscal 2000 and fiscal 2001,
      Pennsylvania Steel recorded net sales of $9.0 million and $4.9 million,
      respectively, and incurred net losses of $3.0 million and $2.4 million,
      respectively.

      In addition to the long-lived asset impairment, the Company will recognize
      other exit costs associated with the closure of Pennsylvania Steel in
      fiscal 2001 related to the employee termination costs. The Company
      terminated approximately 75 employees and will recognize a charge for
      severance benefits of approximately $20,000 in the third quarter ended
      March 31, 2001.

      Other costs directly related to the closure of Pennsylvania Steel which
      are not eligible for recognition at the commitment date will be expensed
      as incurred under EITF 94-3, "Liability Recognition for Certain Employee
      Termination Benefit and Other Costs to Exit an Activity (including Certain
      Costs Incurred in a Restructuring)."

9.    Impairment at and Closure of PrimeCast, Inc.

      The Company recognized an impairment charge of $6.9 million ($4.3 million,
      net of tax) to reduce the carrying value of fixed assets at PrimeCast,
      Inc. ("PrimeCast") in the fourth quarter ended June 30, 2000. The Company
      considered continued operating losses, caused primarily by the bankruptcy
      of PrimeCast's major customer in June 1999 and subsequent closure of
      facilities to which PrimeCast supplied a significant amount of castings,
      as the primary indicator of impairment. An impairment loss was recognized
      as the future undiscounted cash flows of PrimeCast were estimated to be
      insufficient to recover the carrying values of the fixed assets. As such,
      the carrying values of these assets were written down to the Company's
      estimate of fair value, which was based upon discounted future cash flows
      of PrimeCast. Following continued losses in fiscal 2001, the Company
      announced, on January 23, 2001, plans to close PrimeCast. The closure was
      completed by March 31, 2001. Prior to the impairment charge, these assets
      had a remaining carrying amount of $8.2 million. For the third quarter of
      fiscal 2000 and fiscal 2001, PrimeCast recorded net sales of $6.5 million
      and $4.6 million, respectively, and incurred net losses of $439,000 and
      $1.3 million, respectively. For the first nine months of fiscal 2000 and
      fiscal 2001, PrimeCast recorded net sales of $18.2 million and $14.9
      million, respectively, and incurred net losses of $1.8 million and $3.2
      million, respectively.

      In addition to the long-lived asset impairment, the Company recognized
      certain other exit costs associated with the closure of PrimeCast in
      fiscal 2001 related to employee termination costs.

<PAGE>

      The Company terminated approximately 225 employees and recognized a charge
      for severance benefits of approximately $175,000 in the quarter ended
      March 31, 2001.

      Other costs directly related to the closure of PrimeCast which are not
      eligible for recognition at the commitment date will be expensed as
      incurred under EITF 94-3, "Liability Recognition for Certain Employee
      Termination Benefit and Other Costs to Exit an Activity (including Certain
      Costs Incurred in a Restructuring)."

10.   Contingencies

      An accident, involving an explosion and fire, occurred on February 25,
      1999 at Jahn Foundry Corp. ("Jahn Foundry"), located in Springfield,
      Massachusetts. Nine employees were seriously injured and there were three
      fatalities. The damage was confined to the shell molding area and boiler
      room. The other areas of the foundry remained operational. Molds were
      being produced at other foundries, as well as Jahn Foundry, while the
      repairs were made. The new shell molding department became operational in
      November 2000.

      The Company carries insurance for property and casualty damages (over $475
      million of coverage), business interruption (approximately $115 million of
      coverage), general liability ($51 million of coverage) and workers'
      compensation (up to full statutory liability) for itself and its
      subsidiaries. The Company recorded charges of $750,000 ($450,000 after
      tax) during the third quarter of fiscal 1999, primarily reflecting the
      deductibles under the Company's various insurance policies. At this time,
      there can be no assurance that the Company's ultimate costs and expenses
      resulting from the accident will not exceed available insurance coverage
      by an amount, which could be material to its financial condition or
      results of operations and cash flows.

      In November 2000, the Company and its insurance carrier settled the Jahn
      Foundry property portion of the Company's claim. The settlement provided,
      among other things, (i) for additional payments from the carrier in the
      amount of $2.6 million, (ii) that of the payments received to date,
      totaling $26.8 million, the insurance carrier will allocate no more than
      $9.5 million for property damage, (iii) that the remaining proceeds of
      $17.3 million will be allocated to business interruption losses and will
      not be subject to recovery by the insurance carrier and (iv) that the
      Company shall not be entitled to any additional payments unless it is
      determined by reference, appraisal, arbitration, litigation or otherwise
      that the Company's business interruption losses exceed $17.3 million. The
      Company disagrees with the insurance carrier regarding the duration and
      amount of the business interruption losses. The Company plans to

<PAGE>

      seek additional insurance payments through arbitration. There can be no
      assurance that the Company will ultimately receive any additional
      insurance payments or that the excess of the Company's costs and expenses
      resulting from the accident over the insurance payments received will not
      be material to its financials condition or results of operations and cash
      flows.

      As a result of the above settlement, the Company recorded a non-recurring
      gain of $10.9 million in the second quarter of fiscal 2001, which
      consisted of a $3.7 million business interruption insurance gain and a
      $7.2 million property insurance gain. The property insurance gain
      primarily represents the difference between the net proceeds received for
      the property damage and the property's net book value immediately before
      the accident. These net proceeds were used to rebuild the damaged property
      and were accounted for as capital expenditures.

      A civil action has been commenced in Massachusetts Superior State Court on
      behalf of the estates of deceased workers, their families, injured workers
      and their families, against the supplier of a chemical compound used in
      Jahn Foundry's manufacturing process. The supplier of the chemical
      compound, Borden Chemical, Inc. ("Borden"), filed a Third Party Complaint
      against Jahn Foundry in Massachusetts Superior State Court on February 2,
      2000 seeking indemnity for any liability it has to the plaintiffs in the
      civil action. The Company's comprehensive general liability insurance
      carrier has retained counsel on behalf of Jahn Foundry and the Company and
      is aggressively defending Jahn Foundry in the Third Party Complaint. It is
      too early to assess the potential liability to Jahn Foundry for the Third
      Party Complaint, which in any event Jahn Foundry would aggressively
      defend. In addition, Jahn Foundry has brought a Third Party Counterclaim
      against Borden seeking compensation for losses sustained in the explosion,
      including amounts covered by insurance.

      On February 26, 2001, Borden filed a Third Party Complaint against the
      Company seeking a contribution, under Massachusetts law, from the Company
      in the event that the plaintiffs prevail against Borden. The Third Party
      Complaint alleges that the Company undertook a duty to oversee industrial
      hygiene, safety and maintenance at Jahn Foundry and that the Company
      designed, installed and maintained equipment and machinery at Jahn
      Foundry, and that the Company's carelessness, negligence or gross
      negligence caused the explosion and resulting injuries. It is too early to
      assess the potential liability for such a claim, which in any event the
      Company would aggressively defend.

      On March 30, 2001, the plaintiffs amended their complaint by adding the
      Company as a third party defendant. The plaintiffs allege that the Company
      undertook a duty to oversee industrial hygiene, safety and maintenance at
      Jahn Foundry and that the

<PAGE>

      Company's carelessness, negligence or gross negligence caused the
      explosion and resulting injuries. The plaintiffs seek an unspecified
      amount of damages and punitive damages. It is too early to assess the
      potential liability to the Company for such claims, which in any event the
      Company would aggressively defend. The Company has filed a cross-claim for
      contribution against Borden.

      Following the Company announcements related to accounting irregularities
      at the Pennsylvania Foundry Group as discussed in Note 13, the Company,
      its Chief Executive Officer and its Chief Financial Officer were named as
      defendants in five complaints filed between January 8, 2001 and February
      15, 2001 in the U.S. District Court for the District of Kansas. The
      complaints allege, among other things, that certain of the Company's
      previously issued financial statements were materially false and
      misleading in violation of Sections 10(b) and 20(a) of the Securities
      Exchange Act of 1934 and Rule 10b-5 promulgated thereunder (the
      "Securities Actions"). The Securities Actions purport to have been brought
      on behalf of a class consisting of purchasers of the Company's common
      stock between January 8, 1998 and November 3, 2000. The Securities Actions
      seek damages in unspecified amounts. The Company believes that the
      claims alleged in the Securities Actions have no merit and intends to
      defend them vigorously. There can be no assurance that an adverse
      outcome with respect to the Securities Actions will not have a material
      adverse impact on the Company's financial condition, results of
      operations or cash flows.

      The Company understands that on or about November 29, 2000 the Securities
      and Exchange Commission issued a formal order of investigation as a result
      of the events underlying the Company's earlier disclosure of certain
      accounting irregularities. The Company is cooperating with the
      investigation.

      In addition to these matters, from time to time, the Company is the
      subject of legal proceedings, including employee matters, commercial
      matters, environmental matters and similar claims. There are no other
      material claims pending. The Company maintains comprehensive general
      liability insurance, which it believes to be adequate for the continued
      operation of its business.

      The Company assumed a contingent liability when it purchased Foundrie
      d'Autun ("Autun") in France. This contingency includes (i) the cost of
      employee severance payments and (ii) the cost of environmental
      cleanup/restoration if any, in the event that the foundry was to be
      closed. The Company has no plans to close Autun. However, the credit
      agreement with its bank group prohibits the Company from transferring
      funds to Autun to cover operating losses. If Autun were unable to fund its
      operations without financial

<PAGE>

      assistance from the Company, there is a risk that it would have to cease
      operations, and become subject to the above liabilities. The Company
      estimates that the liability could total between $10.0 million and $20.0
      million.

11.   Loan Amendments

      On September 29, 2000, the Company and certain of its lenders entered into
      a Forbearance Agreement to the Amended and Restated Credit Agreement (the
      "Credit Agreement"). This Forbearance Agreement provided that, among other
      things, the Company's lenders would forbear from enforcing their rights
      with respect to certain existing defaults through December 15, 2000.
      However, a condition to the effectiveness of this Forbearance Agreement
      was never met. The Company borrowed the maximum amount available under its
      revolving credit facility in order to meet its cash needs on an ongoing
      basis while it has been in technical default under its Credit Agreement.

      On April 13, 2001, the Company and certain of its lenders entered into the
      Tenth Amendment and Forbearance Agreement to the Credit Agreement. The
      Tenth Amendment provides that, among other things, these lenders will
      forbear from enforcing their rights with respect to certain existing
      defaults through July 30, 2001. This amendment also provides that loans
      under this revolving credit facility will bear interest at fluctuating
      rates of (1) the agent bank's corporate base rate plus 1.75% (for loans up
      to $70 million less outstanding letters of credit) and the agent bank's
      corporate base rate plus 1.25% (for loans in excess of such amount); or
      (2) LIBOR plus 4.25%. The domestic rate spread of 1.25% and the LIBOR
      spread of 4.25% described in the preceding sentence will be reduced by
      .25% (25 basis points) after the Company has satisfied the agent bank
      (which acts as collateral agent for the lenders under the Credit Agreement
      as well as for the holder of the Company's senior notes ("the Notes"))
      that it has delivered the documents and satisfied related requirements set
      forth in the Tenth Amendment required to grant the lenders valid first
      mortgages on the Company's Canadian real estate. This amendment also
      requires the Company to maintain minimum cumulative earnings before
      interest, taxes, depreciation and amortization (without giving effect to
      Fonderie d'Autun and subject to certain other adjustments) ("EBITDA").

      On April 13, 2001, the Company and the insurance company holding the Notes
      entered into the Seventh Amendment and Forbearance Agreement to the Note
      Purchase Agreement. The Seventh Amendment provides, among other things,
      that the Noteholder will forbear from enforcing its rights with respect to
      certain existing defaults through July 30, 2001. This amendment

<PAGE>

      also provides that the Notes will bear interest at the rate of 10.44% per
      year. The interest rate will be reduced by .25% after the Company has
      satisfied the Noteholder that it has delivered the documents and satisfied
      related requirements set forth in the Seventh Amendment required to grant
      the collateral agent valid first mortgages on the Company's Canadian real
      estate. The Seventh Amendment contains the same minimum EBITDA
      requirements as the Tenth Amendment to the Credit Agreement.

      On April 19, 2001, the Company and the lenders under the Master Security
      Agreement with General Electric Capital Corporation (the "GE Financing")
      entered into an agreement, which provides, among other things, that these
      lenders will forbear from enforcing their rights with respect to certain
      existing defaults through the earlier of September 30, 2001 or any date on
      which the Tenth Amendment to the Credit Agreement is breached.

      The Company has not been in compliance with certain financial covenants
      under the Credit Agreement, Note Purchase Agreement and the GE Financing,
      and, accordingly, such amounts have been classified as current
      liabilities.

12.   Financial Results and Management's Plans

      In fiscal 2000, the Company incurred a pre-tax loss of $27.6 million
      ($11.2 million excluding impairment charges of $16.4 million) and, as of
      June 30, 2000, the Company was not in compliance with certain financial
      covenants included in its debt agreements (See Note 11). These conditions
      have continued subsequent to June 30, 2000.

      To address these conditions, management has taken or is in the process of
      taking the following actions:

      Operations

      As discussed in Notes 7, 8 and 9, the Company has closed three
      unprofitable foundries during the period from November 2000 to March 2001.
      Operations from these foundries have been a major factor in the Company's
      pre-tax losses, producing combined pre-tax losses of $26.2 million ($12.5
      million before impairment charges of $13.7 million) for fiscal 2000.
      Management believes that it will be able to transfer a significant portion
      of the work previously performed by Claremont and Pennsylvania Steel to
      other foundries, thereby increasing the utilization and profitability of
      these other foundries.

      Jahn Foundry has been unable to achieve the productivity and earnings
      levels experienced prior to the industrial accident that

<PAGE>

      occurred there on February 25, 1999 (Note 10). During fiscal 2000, Jahn
      Foundry had pre-tax losses of $187,000 (after insurance payments).
      Excluding non-recurring insurance gains of $10.9 million, Jahn Foundry has
      had pre-tax losses of $3.9 million for the first nine months of fiscal
      2001. To improve operating results, Jahn Foundry 1) has focused on only
      one type of molding process, transferring work requiring a different
      process to G&C and La Grange and 2) is focusing on a smaller number of key
      customers, with a significantly reduced workforce.

      To enhance the Company's sales and marketing efforts, the Company had
      previously established four corporate sales director positions that
      represent all locations in certain markets and has increased sales efforts
      at operating locations. As a result, backlog has increased since June 30,
      2000.

      Other Actions

      Management continues to pursue new or revised long-term debt arrangements
      with terms and covenants acceptable to the Company and to the lenders.
      Over the past few years the Company has successfully negotiated with its
      lenders to obtain amendments, waivers and forbearances for violations of
      various covenants of its loan agreements, and the lenders have
      demonstrated a history of working with the Company in providing an
      adequate credit facility to meet its ongoing needs. The Company currently
      has forbearance agreements in place through at least July 2001. Management
      believes, however, that certain of the existing loan arrangements will
      need to be revised or replaced to provide the Company with the additional
      borrowing capacity and with financial covenants within such agreements
      that are achievable by the Company. Management is currently in
      negotiations with various financial institutions to extend, renegotiate or
      replace the current credit agreements on a long-term basis. Although
      management believes that it will be successful in obtaining an acceptable
      long-term credit facility, there can be no assurance that management will
      be successful in these negotiations.

13.   Restatement of Financial Statements

      Subsequent to the issuance of the Company's 2000 financial statements, the
      Company's management determined that there were various accounting
      irregularities at its Quaker Alloy, Inc., Empire Steel Castings, Inc. and
      Pennsylvania Steel subsidiaries (collectively referred to as the
      "Pennsylvania Foundry Group" or "PFG"). The Board of Directors authorized
      the Company's Audit Committee (the "Committee") to conduct an independent
      investigation, with the assistance of special counsel and other

<PAGE>

      professionals retained by the Committee. The Committee retained special
      counsel, which engaged an independent consulting firm to assist in the
      investigation. As a result of the investigation, it was determined that
      certain balance sheet and income statement accounts at PFG were misstated.
      The Company believes the irregularities were limited to PFG.

      As a result of that investigation, the Company has concluded that a small
      number of PFG employees violated Company policies and procedures and used
      improper accounting practices, resulting in the overstatement of revenue,
      income and assets and the understatement of liabilities and expenses. The
      Company believes that certain of these same personnel also misappropriated
      Company funds. The direct benefit to the former employees as a result of
      such activities is currently believed to be approximately $2.2 million.
      The Company believes the accounting irregularities primarily resulted
      from a scheme to cover up such benefits and the actual operating
      results at these subsidiaries. The Company intends to pursue recovery
      of economic losses from insurance coverage, income tax refunds and
      other responsible parties, but no provision has been included herein
      for any potential recoveries.

      In conjunction with the restatement of consolidated financial statements
      related to the items discussed above, management also made adjustments for
      other errors in previously issued financial statements which had not been
      recorded previously because they were not material. As a result, the
      accompanying consolidated financial statements for the three month and
      nine month periods ended March 31, 2000 have been restated from amounts
      previously reported to correct the misstatements discussed above. A
      summary of the significant effects of the restatement to the statement of
      operations follows:
<PAGE>

<TABLE>
<CAPTION>
                                      Three Months Ended                 Nine Months Ended
                                         March 31, 2000                    March 31, 2000
                                   --------------------------        --------------------------
                                       As                               As
                                   Previously                       Previously
                                    Reported       As Restated       Reported        As Restated
                                   ---------        ---------        ---------        ---------
                                                (In thousands, except per share data)
<S>                                <C>              <C>              <C>              <C>
STATEMENT OF OPERATIONS

Net sales                          $ 124,745        $ 121,765        $ 350,149        $ 344,782
Cost of goods sold                   111,053          111,518          308,713          311,825
Operating expenses                    10,962           11,287           30,946           31,780
Income (loss) before taxes               241           (3,529)           3,426           (5,887)
Income tax expense (benefit)          (7,604)          (8,727)          (6,175)          (8,896)
Net income                             7,845            5,198            9,601            3,009

Net earnings per share:

  Basic                            $    1.03        $    0.68        $    1.26        $    0.39
  Diluted                               1.03             0.68             1.26             0.39
</TABLE>

<PAGE>

ITEM 2.

               MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
                       OPERATIONS AND FINANCIAL CONDITION

Restatement of Financial Results

The Company previously announced that it had discovered accounting
irregularities at its Quaker Alloy, Inc. ("Quaker Alloy"), Empire Steel
Castings, Inc. ("Empire Steel") and Pennsylvania Steel Foundry & Machine Company
("Pennsylvania Steel") subsidiaries (collectively referred to as the
"Pennsylvania Foundry Group"). The Board of Directors authorized the Company's
Audit Committee (the "Committee") to conduct an independent investigation, with
the assistance of special counsel and other professionals retained by the
Committee. The Committee retained Jenner & Block, LLC as special counsel, and
Jenner & Block engaged PricewaterhouseCoopers LLP to assist in the
investigation. As a result of the investigation, it was determined that certain
balance sheet and income statement accounts at the Pennsylvania Foundry Group
were affected. The Company believes the irregularities were limited to the
Pennsylvania Foundry Group.

As a result of that investigation, the Company has concluded that a small number
of PFG employees violated Company policies and procedures and used improper
accounting practices, resulting in the overstatement of revenue, income and
assets and the understatement of liabilities and expenses. The Company believes
that certain of these same personnel also misappropriated Company funds. The
direct benefit to the former employees as a result of such activities is
currently believed to be approximately $2.2 million. The Company believes that
$25.9 million ($18.2 million after tax) of the restatement, which relates to the
accounting irregularities at PFG, primarily resulted from a scheme to cover-up
such benefits and the actual operating results over four years at these three
subsidiaries by manipulating many accounts incrementally, which increased and
accumulated over time. The Company intends to pursue recovery of economic losses
from insurance coverage, income tax refunds and other responsible parties.

In conjunction with the restatement of consolidated financial statements related
to the items discussed above, management also made adjustments for other errors
in previously issued financial statements which had not been recorded previously
because they were not material. As a result, the consolidated financial
statements for the three month and nine month periods ended March 31, 2000 have
been restated from amounts previously reported to correct the items discussed
above. A summary of the significant effects of the restatement is included in
Note 13 to the consolidated financial statements. Additionally, Management's
Discussion and Analysis of Financial Condition and Results of Operations has
been revised for the effects of the restatement.

<PAGE>

Results of Operations:

Net sales for the third quarter of fiscal 2001 were $116.9 million, representing
a decrease of $4.9 million, or 4.0%, from net sales of $121.8 million in the
third quarter of fiscal 2000. The decrease in net sales was due primarily to
decreases in net sales to the automotive, mining and power generation markets.
Net sales of Sheffield Forgemasters Group Limited ("Sheffield") for the third
quarter of fiscal 2001 decreased $1.7 million from net sales in the third
quarter of fiscal 2000.

Net sales for the first nine months of fiscal 2001 were $321.9 million,
representing a decrease of $22.9 million, or 6.6%, from net sales of $344.8
million in the first nine months of fiscal 2000. The decrease in net sales was
due primarily to decreases in net sales to the automotive, mining, power
generation and military markets. Net sales of Sheffield for the first nine
months of fiscal 2001 decreased by $6.8 million from net sales in the first nine
months of fiscal 2000. In addition to the weak market conditions, net sales have
also been impacted by the bankruptcy and subsequent cessation of operations of a
major customer at the Company's PrimeCast, Inc. ("PrimeCast") subsidiary.
PrimeCast aggressively worked at replacing the volume lost from Beloit
Corporation ("Beloit"), which filed for bankruptcy in June 1999. During February
2000, Beloit was sold at auction, in parts, and as a result, the plants to which
PrimeCast supplied castings subsequently ceased operations. For the first nine
months of fiscal 2001, PrimeCast's net sales decreased $3.3 million from net
sales in the first nine months of fiscal 2000. In addition, the Company closed
Claremont Foundry, Inc. ("Claremont") in November 2000. Claremont's net sales in
the first nine months of fiscal 2001 decreased $2.6 million from net sales in
the first nine months of fiscal 2000.

Gross profit for the third quarter of fiscal 2001 decreased $2.2 million, or
21.6%, to $8.0 million, or 6.8% of net sales, compared to $10.2 million, or 8.4%
of net sales, for the third quarter of fiscal 2000. Gross profit for the first
nine months of fiscal 2001 decreased $12.9 million, or 39.1%, to $20.1 million,
or 6.2% of net sales, compared to $33.0 million, or 9.6% of net sales, for the
first nine months of fiscal 2000. The decrease in gross profit and gross profit
as a percentage of net sales for both periods was primarily due to lower net
sales and reduced absorption of overhead at the Company's subsidiaries which
primarily serve the automotive, mining, power generation and military markets.
In addition, increased fuel costs decreased gross profit by approximately $3.3
million and $5.5 million in the third quarter and first nine months,
respectively, of fiscal 2001 compared to the prior year periods.

Gross profit at Jahn Foundry Corp. ("Jahn Foundry") in the third quarter of
fiscal 2001 decreased $1.0 million, to a gross loss of $767,000, or 34.2% of net
sales, compared to a gross profit of $238,000, or 8.6% of net sales, in the
third quarter of fiscal 2000. Gross profit at Jahn Foundry in the first nine
months of fiscal 2001 decreased $4.5 million, to a gross loss of $3.1 million,
or 50.3% of net sales, compared to a gross profit of $1.4 million, or 16.9% of
net sales, in the first nine months of fiscal 2000. The negative impact to gross
profits primarily resulted from the industrial accident in February 1999 that
shut down the shell mold department until the second quarter of fiscal 2001.

In addition to the lower sales volumes after the loss of Beloit as a major
customer, PrimeCast's results were impacted by a labor strike that was settled
on September 29,

<PAGE>

2000 and by a serious injury to an employee that resulted in increased workers'
compensation expense of approximately $375,000. The gross loss at PrimeCast in
the third quarter of fiscal 2001 increased $1.4 million to $1.4 million, or
30.5% of net sales, compared to a gross loss of $15,000, or 0.2% of net sales,
in the third quarter of fiscal 2000. PrimeCast's gross loss in the first nine
months of fiscal 2001 increased $2.4 million to a gross loss of $3.1 million, or
20.7% of net sales, compared to a gross loss of $701,000, or 3.9% of net sales,
in the first nine months of fiscal 2000.

Selling, general and administrative expense ("SG&A") for the third quarter of
fiscal 2001 was $12.3 million, or 10.5% of net sales, compared to $11.4 million,
or 9.4% of net sales, in the third quarter of fiscal 2000. For the first nine
months of fiscal 2001, SG&A was $33.9 million, or 10.5% of net sales, compared
to $32.8 million, or 9.5% of net sales, for the first nine months of fiscal
2000. The increase in SG&A expense as a percentage of net sales in both periods
is primarily due to the decrease in net sales. Included in SG&A in the first
nine months of fiscal 2001 were expenses of approximately $1.0 million relating
to fees and audit and appraisal expenses incurred by the Company in pursuing
various options to refinance its bank credit facility. Also included in the
third quarter and first nine months of fiscal 2001 were expenses of
approximately $390,000 and $870,000, respectively, relating to the investigation
of the accounting irregularities at the Company's Pennsylvania Foundry Group of
operations.

The Company has recorded intangible assets, consisting of goodwill, in
connection with certain of the Company's acquisitions. Amortization of these
assets for the third quarter of fiscal 2001 was expense of $338,000, or 0.3% of
net sales, as compared to $375,000, or 0.3% of net sales, in the third quarter
of fiscal 2000. Amortization of these assets for the first nine months of fiscal
2001 was expense of $1.0 million, or 0.3% of net sales, as compared to $1.1
million, or 0.3% of net sales, in the first nine months of fiscal 2000. The
Company has also recorded a liability, consisting of the excess of acquired net
assets over cost ("negative goodwill"), in connection with the acquisitions of
Canadian Steel Foundries Ltd. ("Canadian Steel") and Fonderie d'Autun ("Autun").
The amortization of negative goodwill was a credit to income in the third
quarter of fiscal 2001 of $415,000, or 0.4% net sales, as compared to $443,000,
or 0.4% of net sales, in the third quarter of fiscal 2000. Amortization of
negative goodwill was a credit to income in the first nine months of fiscal 2001
of $1.2 million, or 0.4% net sales, as compared to $1.5 million or 0.4% of net
sales, in the first nine months of fiscal 2000. The liability recorded in
connection with the acquisition of Canadian Steel became fully amortized in the
second quarter of fiscal 2000.

Other income for the first nine months of fiscal 2001 was $10.9 million ($6.6
million, net of tax), which is a non-recurring gain consisting of $3.7 million
and $7.2 million against the Company's business interruption and property damage
claims, respectively, relating to the industrial accident at Jahn Foundry on
February 25, 1999. The property insurance gain primarily represents the
difference between the net proceeds received for the property damage and the
property's net book value immediately before the accident. (See Note 10). Other
income for the first nine months of fiscal 2000 was $681,000 ($406,000, net of
tax). This $681,000 reflects a net gain on the termination of interest rate swap
agreements. The net gain was triggered by the Company's early retirement of a
term loan.

<PAGE>

Interest expense for the third quarter of fiscal 2001 increased to $3.0 million,
or 2.6% of net sales, from $2.4 million or 2.0% of net sales, in the third
quarter of fiscal 2000. For the first nine months of fiscal 2001, interest
expense increased to $8.5 million, or 2.6% of net sales, from $7.0 million, or
2.0% of net sales, in the first nine months of fiscal 2000. The increase in
interest expense primarily reflects higher average interest rates on the
Company's outstanding indebtedness.

The income tax benefits for the third quarter and first nine months of fiscal
2001 reflected an effective rate of approximately 32% and 27%, respectively.
Excluding the $7.8 million deferred income tax benefit discussed below, the
income tax benefit for the third quarter and first nine months of fiscal 2000
reflected an effective rate of approximately 27% and 19%, respectively. The
effective tax rates are lower than the combined federal, state and provincial
statutory rates primarily due to the impact of non-deductible goodwill and
foreign dividends. The Company's income tax expense and benefit reflect the
combined effective tax rates of the different federal, state and provincial
jurisdictions in which the Company operates, and the proportion of taxable
income earned in each of those tax jurisdictions.

The Company recorded a $7.8 million deferred income tax benefit in fiscal 2000
with respect to the reinvestment of certain flood insurance proceeds received in
1995 and 1996. The Company recorded pretax gains of approximately $20.1 million
in 1995 and 1996 related to insurance proceeds resulting from flood damage to
the Company's Atchison, Kansas foundry in July 1993. For federal income tax
purposes, the Company treated the flood as an involuntary conversion event under
the Internal Revenue Code ("Code") and related Treasury Regulations.

The Code provides generally that if certain conditions are met, gains on
insurance proceeds from an involuntary conversion are not taxable if the
proceeds are reinvested in qualified replacement property within two years after
the close of the first taxable year in which any part of the conversion gain is
realized. The Company believed that its treatment of certain foundry subsidiary
stock acquisitions as qualified replacement property was subject to potential
challenge by the Internal Revenue Service ("Service") in 1996 (the first year in
which involuntary conversion gain was realized for federal income tax purposes).
The Company recorded income tax expense on the insurance gains in 1996 pending
review of its position by the Service or the expiration of the statute of
limitations under the Code for the Service to assess income taxes with respect
to the Company's position.

The Company's treatment of certain foundry subsidiary stock acquisitions as
qualified replacement property creates differing basis in the foundry subsidiary
stock for financial statement and tax purposes. These differences have not been
recognized as taxable temporary differences under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," since the
subsidiary basis differences can be permanently deferred through subsidiary
mergers or tax-free liquidations. On March 15, 2000, the statute of limitations
for the Service to assess taxes with respect to the Company's position expired.
The deferred taxes recorded in the consolidated financial statements in prior
years were no longer required.

Effective July 1, 2000, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging

<PAGE>

Activities" and SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FASB Statement No. 133." SFAS No.
133 and 138 require companies to record derivative instruments as assets or
liabilities, measured at fair value. The recognition of gains or losses
resulting from charges in the values of those derivative instruments is based on
the use of each derivative instrument and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the hedging
relationship must be highly effective in achieving offsetting changes in fair
value or cash flows.

At July 1, 2000, the Company had derivatives in the form of foreign exchange
contracts ("FX contracts") to buy and sell various currencies. The Company uses
FX contracts as an economic hedge of trade receivables and payables denominated
in foreign currencies, as well as anticipated sales to foreign customers in the
customers' local currency. On July 1, 2000, the Company recorded its FX
contracts at their fair value, which resulted in a charge to income of
approximately $910,000 ($546,000 net of deferred income tax benefit). This is
presented in the Company's consolidated financial statements as the cumulative
effect of a change in accounting principle.

As a result of the foregoing, the net loss for the third quarter of fiscal 2001
was $5.0 million compared to net income of $5.2 million for the third quarter of
fiscal 2000. The net loss for the first nine months of fiscal 2001 was $9.0
million compared to net income of $3.0 million for the first nine months of
fiscal 2000.

Liquidity and Capital Resources:

Cash provided by operating activities for the first nine months of fiscal 2001
was $3.6 million, a decrease of $4.8 million from the first nine months of
fiscal 2000. This decrease was primarily attributable to the net loss incurred
by the Company, net of non-recurring gains relating to the Company's Jahn
Foundry insured claim (see below), which were previously recorded under accrued
expenses as insurance advances. Partially offsetting this was the accelerated
collection of trade receivable balances and more aggressive management of trade
payable balances.

Working capital was a negative $37.9 million at March 31, 2001, as compared to
$5.7 million at June 30, 2000. The working capital levels primarily reflect the
reclassification of $105.7 million and $72.8 million of the Company's bank
credit facility, term loan and senior notes with an insurance company as current
at March 31, 2001 and June 30, 2000, respectively. The Company has not been in
compliance with certain financial covenants under the Credit Agreement, Note
Purchase Agreement and the GE Financing, as defined below, and, accordingly,
such amounts have been classified as current liabilities.

During the first nine months of fiscal 2001, the Company made capital
expenditures of $9.7 million, as compared to $14.1 million for the first nine
months of fiscal 2000. Included in the first nine months of fiscal 2001 were
capital expenditures of $4.1 million to rebuild the shell molding area and
boiler room damaged in the industrial accident on February 25, 1999 at Jahn
Foundry (see below). The balance of capital expenditures were used for routine
projects at each of the Company's facilities.
<PAGE>

As described in Note 7 to the consolidated financial statements, the Company
closed Claremont. Much of Claremont's work was transferred to other foundries of
the Company.

As described in Note 8 to the consolidated financial statements, the Company
closed Pennsylvania Steel. Much of Pennsylvania Steel's work was transferred to
the remaining two locations of the Pennsylvania Foundry Group.

As described in Note 9 to the consolidated financial statements, the Company has
also closed PrimeCast. As PrimeCast was the Company's only foundry that could
make large iron castings, only a portion of PrimeCast's work can be transferred
to other Company operations.

On September 29, 2000, the Company and certain of its lenders entered into a
Forbearance Agreement to the Amended and Restated Credit Agreement (the "Credit
Agreement"). This Forbearance Agreement provided that, among other things, the
Company's lenders would forbear from enforcing their rights with respect to
certain existing defaults through December 15, 2000. However, a condition to the
effectiveness of this Forbearance Agreement was never met. The Company borrowed
the maximum amount available under its revolving credit facility in order to
meet its cash needs on an ongoing basis while it has been in technical default
under its Credit Agreement.

On April 13, 2001, the Company and its lenders entered into the Tenth Amendment
and Forbearance Agreement to the Credit Agreement. The Tenth Amendment provides
that, among other things, these lenders will forbear from enforcing their rights
with respect to certain existing defaults through July 30, 2001. This amendment
also provides that loans under this revolving credit facility will bear interest
at fluctuating rates of (1) the agent bank's corporate base rate plus 1.75% (for
loans up to $70 million less outstanding letters of credit) and the agent bank's
corporate base rate plus 1.25% (for loans in excess of such amount); or (2)
LIBOR plus 4.25%. The domestic rate spread of 1.25% and the LIBOR spread of
4.25% described in the preceding sentence will be reduced by .25% (25 basis
points) after the Company has satisfied the agent bank (which acts as collateral
agent for the lenders under the Credit Agreement as well as for the holder of
the Notes) that it has delivered the documents and satisfied related
requirements set forth in the Tenth Amendment required to grant the lenders
valid first mortgages on the Company's Canadian real estate. This amendment also
requires the Company to maintain minimum cumulative earnings before interest,
taxes, depreciation and amortization (without giving effect to Fonderie d'Autun
and subject to certain other adjustments) ("EBITDA").

On April 13, 2001, the Company and the insurance company holding the Notes
entered into the Seventh Amendment and Forbearance Agreement to the Note
Purchase Agreement. The Seventh Amendment provides, among other things, that the
Noteholder will forbear from enforcing its rights with respect to certain
existing defaults through July 30, 2001. This amendment also provides that the
Notes will bear interest at the rate of 10.44% per year. The interest rate will
be reduced by .25% after the Company has satisfied the Noteholder that it has
delivered the documents and satisfied related requirements set forth in the
Seventh Amendment required to grant the collateral agent valid first mortgages
on the Company's Canadian real estate. The Seventh

<PAGE>

Amendment contains the same minimum EBITDA requirements as the Tenth Amendment
to the Credit Agreement.

On April 19, 2001, the Company and the lenders under the Master Security
Agreement with General Electric Capital Corporation (the "GE Financing") entered
into an agreement, which provides, among other things, that these lenders will
forbear from enforcing their rights with respect to certain existing defaults
through the earlier of September 30, 2001 or any date on which the Tenth
Amendment to the Credit Agreement is breached.

Cash requirements for fiscal 2001 have been negatively affected by (1)
significantly higher fuel costs (approximately $5.5 million higher than the
first nine months of fiscal 2000), (2) the fees and expenses related to the
investigation of the accounting irregularities discovered at the Pennsylvania
Foundry Group and the related litigation ($870,000 through March 31, 2000), and
(3) nonrecurring fees and appraisal and audit expenses (approximately $600,000
through March 31, 2001) paid by the Company in pursuing various options to
refinance its bank credit facility.

The Company has been in default under the Credit Agreement, Note Purchase
Agreement and the GE Financing. To date the lenders have foregone their right to
accelerate their debt and foreclose on their collateral. Although the lenders
have agreed not to accelerate their debt to date, there can be no assurance that
they will not do so in the future if future defaults occur. During much of
fiscal 2001, the Company has borrowed the full amount of the revolving credit
facility under the Credit Agreement and manages its cash position accordingly.
To date, the Company has been able to meet its cash needs by traditional cash
management procedures in addition to: (1) the collection of income tax refunds
resulting from the restatement of its financial statements related to the
accounting irregularities at the Pennsylvania Foundry Group, (2) accelerated
payments of receivables from certain longstanding customers from time to time,
and (3) the reduction of expenses after closing locations operating with a
negative cash flow. The Company is also seeking the recovery under various
insurance policies for losses due to the accounting irregularities at the
Pennsylvania Foundry Group and the industrial accident at Jahn Foundry. In
addition, the Company intends to pursue other responsible parties. There can be
no assurance that such actions will allow the Company to operate without
additional borrowing capacity.

Compliance with certain financial covenants under the Credit Agreement, Note
Purchase Agreement and the GE Financing is determined on a
"trailing-twelve-month" basis. The results for fiscal 2001 have been and
expected results for the remainder of fiscal 2001 will likely continue to be,
below results needed to achieve compliance with these covenants under the Credit
Agreement, Note Purchase Agreement and GE Financing. Accordingly, the Company is
currently negotiating with new and existing financial institutions to establish
a new credit facility with covenants that the Company believes it will be able
to satisfy and to obtain additional borrowing capacity. During the past several
years, the Company has been able to negotiate operating flexibility with its
lenders, although future success in achieving any such renegotiations or
refinancings, or the specific terms thereof, including interest rates, capital
expenditure limits or borrowing capacity, cannot be assured. The Company
believes that its operating cash flow and amounts available for borrowing under
its existing credit facility will be adequate to fund its capital expenditure
and working capital requirements through July

<PAGE>

31, 2001. However, the level of capital expenditure and working capital
requirements may be greater than currently anticipated as a result of unforeseen
expenditures such as compliance with environmental laws, the accident at Jahn
Foundry, the investigation and related litigation in connection with the
accounting irregularities at the Pennsylvania Foundry Group and substantially
higher fuel costs that arose during this past winter, which may continue. If the
Company fails to achieve compliance with the terms of its Credit Agreement or,
in the absence of such compliance, if the Company fails to amend such financial
covenants on terms favorable to the Company, the Company will continue to be in
default under such covenants. Accordingly, the lenders could accelerate the debt
under the Credit Agreement, which in turn, would permit acceleration of the
Notes under the Note Purchase Agreement and the indebtedness under the GE
Financing.

Total indebtedness of the Company at March 31, 2001 was $120.5 million, as
compared to $117.6 million at June 30, 2000. This increase of $2.9 million
primarily reflects indebtedness incurred to fund the Company's capital
expenditures and operating losses. At March 31, 2001 the Company had fully
utilized its revolving credit facility. Since September 29, 2000, the Company
has borrowed the maximum amount available for borrowing under its revolving
credit facility. Available cash balances at March 31, 2001 were approximately
$1.0 million.

An accident, involving an explosion and fire, occurred on February 25, 1999 at
Jahn Foundry, located in Springfield, Massachusetts. Nine employees were
seriously injured and there were three fatalities. The damage was confined to
the shell molding area and boiler room. The other areas of the foundry remained
operational. Molds were being produced at other foundries, as well as Jahn
Foundry, while the repairs were made. The new shell molding department became
operational in November 2000.

The Company carries insurance for property and casualty damages (over $475
million of coverage), business interruption (approximately $115 million of
coverage), general liability ($51 million of coverage) and workers' compensation
(up to full statutory liability) for itself and its subsidiaries. The Company
recorded charges of $750,000 ($450,000 after tax) during the third quarter of
fiscal 1999, primarily reflecting the deductibles under the Company's various
insurance policies. At this time, there can be no assurance that the Company's
ultimate costs and expenses resulting from the accident will not exceed
available insurance coverage by an amount, which could be material to its
financial condition or results of operations and cash flows.

In November 2000, the Company and its insurance carrier settled the Jahn Foundry
property portion of the Company's claim. The settlement provided, among other
things, (i) for additional payments from the carrier in the amount of $2.6
million, (ii) that of the payments received to date, totaling $26.8 million, the
insurance carrier will allocate no more than $9.5 million for property damage,
(iii) that the remaining proceeds of $17.3 million will be allocated to business
interruption losses and will not be subject to recovery by the insurance carrier
and (iv) that the Company shall not be entitled to any additional payments
unless it is determined by reference, appraisal, arbitration, litigation or
otherwise that the Company's business interruption losses exceed $17.3 million.
The Company disagrees with the insurance carrier regarding the duration and
amount of the business interruption losses. The Company plans to seek additional
insurance payments through arbitration. There can be no assurance that the
Company will

<PAGE>

ultimately receive any additional insurance payments or that the excess of the
Company's costs and expenses resulting from the accident over the insurance
payments received will not be material to its financials condition or results of
operations and cash flows.

As a result of the above settlement, the Company recorded a non-recurring gain
of $10.9 million in the second quarter of fiscal 2001, which consisted of a $3.7
million business interruption insurance gain and a $7.2 million property
insurance gain. The property insurance gain primarily represents the difference
between the net proceeds received for the property damage and the property's net
book value immediately before the accident. These net proceeds were used to
rebuild the damaged property and were accounted for as capital expenditures.

A civil action has been commenced in Massachusetts Superior State Court on
behalf of the estates of deceased workers, their families, injured workers and
their families, against the supplier of a chemical compound used in Jahn
Foundry's manufacturing process. The supplier of the chemical compound, Borden
Chemical, Inc. ("Borden"), filed a Third Party Complaint against Jahn Foundry in
Massachusetts Superior State Court on February 2, 2000 seeking indemnity for any
liability it has to the plaintiffs in the civil action. The Company's
comprehensive general liability insurance carrier has retained counsel on behalf
of Jahn Foundry and the Company and is aggressively defending Jahn Foundry in
the Third Party Complaint. It is too early to assess the potential liability to
Jahn Foundry for the Third Party Complaint, which in any event Jahn Foundry
would aggressively defend. In addition, Jahn Foundry has brought a Third Party
Counterclaim against Borden seeking compensation for losses sustained in the
explosion, including amounts covered by insurance.

On February 26, 2001, Borden filed a Third Party Complaint against the Company
seeking a contribution, under Massachusetts law, from the Company in the event
that the plaintiffs prevail against Borden. The Third Party Complaint alleges
that the Company undertook a duty to oversee industrial hygiene, safety and
maintenance at Jahn Foundry and that the Company designed, installed and
maintained equipment and machinery at Jahn Foundry, and that the Company's
carelessness, negligence or gross negligence caused the explosion and resulting
injuries. It is too early to assess the potential liability for such a claim,
which in any event the Company would aggressively defend.

On March 30, 2001, the plaintiffs amended their complaint by adding the Company
as a third party defendant. The plaintiffs allege that the Company undertook a
duty to oversee industrial hygiene, safety and maintenance at Jahn Foundry and
that the Company's carelessness, negligence or gross negligence caused the
explosion and resulting injuries. The plaintiffs seek an unspecified amount of
damages and punitive damages. It is too early to assess the potential liability
to the Company for such claims, which in any event the Company would
aggressively defend. The Company has filed a cross-claim for contribution
against Borden.

Following the Company announcements related to accounting irregularities at the
Pennsylvania Foundry Group, the Company, its Chief Executive Officer and its
Chief Financial Officer were named as defendants in five complaints filed
between January 8, 2001 and February 15, 2001 in the U.S. District Court for the
District of Kansas. The

<PAGE>

complaints allege, among other things, that certain of the Company's previously
issued financial statements were materially false and misleading in violation of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder (the "Securities Actions"). The Securities Actions
purport to have been brought on behalf of a class consisting of purchasers of
the Company's common stock between January 8, 1998 and November 3, 2000. The
Securities Actions seek damages in unspecified amounts. The Company believes
that the claims alleged in the Securities Actions have no merit and intends
to defend them vigorously. There can be no assurance that an adverse outcome
with respect to the Securities Actions will not have a material adverse
impact on the Company's financial condition, results of operations or cash
flows.

Forward-Looking Statements

The sections entitled "Liquidity and Capital Resources" contain forward-looking
statements that involve a number of risks and uncertainties. Forward-looking
statements such as "expects," "intends," "contemplating" and statements
regarding quarterly fluctuations, statements regarding the adequacy of funding
for capital expenditure and working capital requirements for the next twelve
months and similar expressions that are not historical are forward-looking
statements that involve risks and uncertainties. Such statements include the
Company's expectations as to future performance. Among the factors that could
cause actual results to differ materially from such forward-looking statements
are the following: the size and timing of future acquisitions, business
conditions and the state of the general economy, particularly the capital goods
industry, the strength of the U.S. dollar, British pound sterling and the Euro,
interest rates, the Company's ability to renegotiate or refinance its lending
arrangements, utility rates, the availability of labor, the successful
conclusion of union contract negotiations, the results of any litigation arising
out of the accident at Jahn Foundry, the results of any litigation or regulatory
proceedings arising from the accounting irregularities at the Pennsylvania
Foundry Group, the competitive environment in the casting industry and changes
in laws and regulations that govern the Company's business, particularly
environmental regulations.

<PAGE>

ITEM 3.

                          DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative information about market risk was addressed in Item
7A of the Company's Form 10-K/A for the fiscal year ended June 30, 2000.

The Company's primary interest rate exposures relate to its cash and short-term
investments, fixed and variable rate debt and interest rate swaps, which are
mainly exposed to changes in short-term interest rates (e.g. USD LIBOR). The
potential loss in fair values is based on an immediate change in the net present
values of the Company's interest rate-sensitive exposures resulting from a 10%
change in interest rates. The potential loss in cash flows and earnings is based
on the change in the net interest income/expense over a one-year period due to
an immediate 10% change in rates. A hypothetical 10% change in interest rates
would have a material impact on the Company's earnings of approximately $500,000
and $400,000 in fiscal 2000 and the first nine months of fiscal 2001,
respectively.

The Company's exposure to fluctuations in currency rates against the British
pound and Canadian dollar result from the Company's holdings in cash and
short-term investments and its utilization of foreign currency forward exchange
contracts to hedge customer receivables and firm commitments. The potential loss
in fair values is based on an immediate change in the U.S. dollar equivalent
balances of the Company's currency exposures due to a 10% shift in exchange
rates versus the British pound and Canadian dollar. The potential loss in cash
flows and earnings is based on the change in cash flow and earnings over a
one-year period resulting from an immediate 10% change in currency exchange
rates versus the British pound and Canadian dollar. Based on the Company's
holdings of financial instruments at June 30, 2000 and March 31, 2001, a
hypothetical 10% depreciation in the British pound and the Canadian dollar
versus all other currencies would have a material impact on the Company's
earnings of approximately $1.7 million and $2.6 million in fiscal 2000 and the
first nine months of fiscal 2001, respectively. The Company's analysis does not
include the offsetting impact from its underlying hedged exposures (customer
receivables and firm commitments). If the Company included these underlying
hedged exposures in its sensitivity analysis, these exposures would
substantially offset the financial impact of its foreign currency forward
exchange contracts due to changes in currency rates.

<PAGE>

PART II

ITEM 1 - Legal Proceedings

An accident, involving an explosion and fire, occurred on February 25, 1999 at
Jahn Foundry, located in Springfield, Massachusetts. Nine employees were
seriously injured and there were three fatalities. The damage was confined to
the shell molding area and boiler room. The other areas of the foundry remained
operational. Molds were being produced at other foundries, as well as Jahn
Foundry, while the repairs were made. The new shell molding department became
operational in November 2000.

The Company carries insurance for property and casualty damages (over $475
million of coverage), business interruption (approximately $115 million of
coverage), general liability ($51 million of coverage) and workers' compensation
(up to full statutory liability) for itself and its subsidiaries. The Company
recorded charges of $750,000 ($450,000 after tax) during the third quarter of
fiscal 1999, primarily reflecting the deductibles under the Company's various
insurance policies. At this time, there can be no assurance that the Company's
ultimate costs and expenses resulting from the accident will not exceed
available insurance coverage by an amount, which could be material to its
financial condition or results of operations and cash flows.

In November 2000, the Company and its insurance carrier settled the Jahn Foundry
property portion of the Company's claim. The settlement provided, among other
things, (i) for additional payments from the carrier in the amount of $2.6
million, (ii) that of the payments received to date, totaling $26.8 million, the
insurance carrier will allocate no more than $9.5 million for property damage,
(iii) that the remaining proceeds of $17.3 million will be allocated to business
interruption losses and will not be subject to recovery by the insurance carrier
and (iv) that the Company shall not be entitled to any additional payments
unless it is determined by reference, appraisal, arbitration, litigation or
otherwise that the Company's business interruption losses exceed $17.3 million.
The Company disagrees with the insurance carrier regarding the duration and
amount of the business interruption losses. The Company plans to seek additional
insurance payments through arbitration. There can be no assurance that the
Company will ultimately receive any additional insurance payments or that the
excess of the Company's costs and expenses resulting from the accident over the
insurance payments received will not be material to its financials condition or
results of operations and cash flows.

A civil action has been commenced in Massachusetts Superior State Court on
behalf of the estates of deceased workers, their families, injured workers and
their families, against the supplier of a chemical compound used in Jahn
Foundry's manufacturing process. The supplier of the chemical compound, Borden
Chemical, Inc. ("Borden"), filed a Third Party Complaint against Jahn Foundry in
Massachusetts Superior State Court on February 2, 2000 seeking indemnity for any
liability it has to the plaintiffs in the civil action. The Company's
comprehensive general liability insurance carrier has retained counsel on behalf
of Jahn Foundry and the Company and is aggressively defending Jahn Foundry in
the Third Party Complaint. It is too early to assess the potential liability to
Jahn Foundry for the Third Party Complaint, which in any event Jahn Foundry
would aggressively defend. In addition, Jahn Foundry has brought a Third

<PAGE>

Party Counterclaim against Borden seeking compensation for losses sustained in
the explosion, including amounts covered by insurance.

On February 26, 2001, Borden filed a Third Party Complaint against the Company
seeking a contribution, under Massachusetts law, from the Company in the event
that the plaintiffs prevail against Borden. The Third Party Complaint alleges
that the Company undertook a duty to oversee industrial hygiene, safety and
maintenance at Jahn Foundry and that the Company designed, installed and
maintained equipment and machinery at Jahn Foundry, and that the Company's
carelessness, negligence or gross negligence caused the explosion and resulting
injuries. It is too early to assess the potential liability for such a claim,
which in any event the Company would aggressively defend.

On March 30, 2001, the plaintiffs amended their complaint by adding the Company
as a third party defendant. The plaintiffs allege that the Company undertook a
duty to oversee industrial hygiene, safety and maintenance at Jahn Foundry and
that the Company's carelessness, negligence or gross negligence caused the
explosion and resulting injuries. The plaintiffs seek an unspecified amount of
damages and punitive damages. It is too early to assess the potential liability
to the Company for such claims, which in any event the Company would
aggressively defend. The Company has filed a cross-claim for contribution
against Borden.

Following the Company announcements related to accounting irregularities at the
Pennsylvania Foundry Group, the Company, its Chief Executive Officer and its
Chief Financial Officer were named as defendants in five complaints filed
between January 8, 2001 and February 15, 2001 in the U.S. District Court for the
District of Kansas. The complaints allege, among other things, that certain of
the Company's previously issued financial statements were materially false and
misleading in violation of Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder (the "Securities Actions").
The Securities Actions purport to have been brought on behalf of a class
consisting of purchasers of the Company's common stock between January 8, 1998
and November 3, 2000. The Securities Actions seek damages in unspecified
amounts. The Company believes that the claims alleged in the Securities
Actions have no merit and intends to defend them vigorously. There can be no
assurance that an adverse outcome with respect to the Securities Actions will
not have a material adverse impact on the Company's financial condition,
results of operations or cash flows.

The Company understands that on or about November 29, 2000 the Securities and
Exchange Commission issued a formal order of investigation as a result of the
events underlying the Company's earlier disclosure of certain accounting
irregularities. The Company is cooperating with the investigation.

In addition to these matters, from time to time, the Company is the subject of
legal proceedings, including employee matters, commercial matters, environmental
matters and similar claims. There are no other material claims pending. The
Company maintains comprehensive general liability insurance, which it believes
to be adequate for the continued operation of its business.
<PAGE>

ITEM 2 -    Changes in Securities and Use of Proceeds

            Unregistered  Securities Transactions

            NOT APPLICABLE

ITEM 3 -    Defaults Upon Senior Securities

            See Liquidity and Capital Resources Above

ITEM 4 -    Submission of Matters to a Vote of Security Holders

            NOT APPLICABLE

ITEM 5 -    Other Information

            NOT APPLICABLE

ITEM 6 -    Exhibits and Reports of Form 8-K

            (A)   Exhibits

                  None

            (B)   Reports on Form 8-K

                  The Company has filed a Form 8-K dated January 24, 2001.

                  Items Reported

                  Item 5. Press release issued regarding the closing of
                  PrimeCast.

                  Item 7. Exhibits.

                          Press Release dated January 23, 2001
<PAGE>

                         * * * * * * * * * * * * * * * *

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                 Atchison Casting Corporation
                                                 -------------------------------
                                                         (Registrant)


DATE:     May 11,  2001                          /s/ HUGH H. AIKEN
                                                 -------------------------------
                                                 Hugh H. Aiken, Chairman of the
                                                 Board, President and Chief
                                                 Executive Officer


DATE:     May 11, 2001                           /s/ KEVIN T. MCDERMED
                                                 -------------------------------
                                                 Kevin T. McDermed, Vice
                                                 President, Chief Financial
                                                 Officer, Treasurer and
                                                 Secretary