<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 September 30, 2000

                                       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    No X
                                              ---   ---

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)

<TABLE>
<CAPTION>
                                                                         September 30,             June 30,
                                                                              2000                   2000
                                                                        -----------------      -----------------
<S>                                                                     <C>                    <C>
                           ASSETS
                         ------------



CURRENT ASSETS:
    Cash and cash equivalents                                                     $4,185                 $3,815
    Customer accounts receivable, net of allowance for
      doubtful accounts of $634 and $584, respectively                            80,536                 87,401
    Inventories                                                                   54,928                 56,123
    Deferred income taxes                                                          9,544                 10,092
    Other current assets                                                          10,852                  9,517

                                                                        -----------------      -----------------
             Total current assets                                                160,045                166,948


PROPERTY, PLANT AND EQUIPMENT, Net                                               135,574                135,299

INTANGIBLE ASSETS, Net                                                            28,098                 28,525

DEFERRED FINANCING COSTS, Net                                                        918                    923

OTHER ASSETS                                                                      10,870                 10,728



                                                                        -----------------      -----------------
TOTAL                                                                           $335,505               $342,423
                                                                        =================      =================
</TABLE>

                         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>
                                                                         September 30,             June 30,
                                                                              2000                   2000
                                                                        -----------------      -----------------
<S>                                                                     <C>                    <C>
             LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                             $46,130                $42,867
    Accrued expenses                                                              33,268                 37,432
    Current maturities of long-term obligations                                  114,683                 80,919

                                                                        -----------------      -----------------
           Total current liabilities                                             194,081                161,218

LONG-TERM OBLIGATIONS                                                              6,867                 36,691

DEFERRED INCOME TAXES                                                             11,362                 11,912

OTHER LONG-TERM OBLIGATIONS                                                        2,441                  2,683

EXCESS OF FAIR VALUE OF ACQUIRED NET ASSETS
     OVER COST, Net of accumulated amortization of $2,518
     and $2,298, respectively                                                      3,814                  4,843

POSTRETIREMENT OBLIGATION OTHER THAN PENSION                                       9,422                  9,199

MINORITY INTEREST IN SUBSIDIARIES                                                  1,478                  1,544

                                                                        -----------------      -----------------
           Total liabilities                                                     229,465                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                                                            36,982                 42,848

     Accumulated other comprehensive income (loss)                                (6,494)                (4,010)
                                                                        -----------------      -----------------
                                                                                 112,088                120,381
     Less shares held in treasury:
       Common stock, 622,702 shares,  at cost                                     (6,048)                (6,048)


                                                                        -----------------      -----------------
           Total stockholders' equity                                            106,040                114,333

                                                                        -----------------      -----------------
TOTAL                                                                           $335,505               $342,423
                                                                        =================      =================
</TABLE>

                 See Notes to Consolidated Financial Statements.

<PAGE>

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

<TABLE>
<CAPTION>

                                                                     Three Months Ended
                                                                        September 30,
                                                                  2000                   1999
                                                                                     (As restated,
                                                                                     see Note 13)
                                                            -----------------      -----------------
<S>                                                         <C>                    <C>
NET SALES                                                            $99,208               $108,914

COST OF GOODS SOLD                                                    95,208                 98,497

                                                            -----------------      -----------------
GROSS PROFIT                                                           4,000                 10,417


OPERATING EXPENSES:

  Selling, general and administrative                                  9,429                  9,989

  Amortization of intangibles, net                                       (68)                  (157)

                                                            -----------------      -----------------
     Total operating expenses                                          9,361                  9,832


                                                            -----------------      -----------------
OPERATING INCOME (LOSS)                                               (5,361)                   585

INTEREST EXPENSE                                                       2,605                  2,234

MINORITY INTEREST IN NET LOSS                                            (12)                    (9)
  OF SUBSIDIARIES

                                                            -----------------      -----------------
LOSS BEFORE INCOME TAXES AND
  CUMULATIVE EFFECT OF A CHANGE IN
  ACCOUNTING PRINCIPLE                                                (7,954)                (1,640)

INCOME TAX BENEFIT                                                    (2,634)                  (453)

                                                            -----------------      -----------------
LOSS BEFORE CUMULATIVE EFFECT OF
  A CHANGE IN ACCOUNTING PRINCIPLE                                    (5,320)                (1,187)

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

                                                            -----------------      -----------------
NET LOSS                                                             ($5,866)               ($1,187)
                                                            =================      =================



LOSS PER SHARE - BASIC AND DILUTED:

  LOSS BEFORE CUMULATIVE EFFECT OF A
    CHANGE IN ACCOUNTING PRINCIPLE                                    ($0.69)                ($0.16)

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

                                                            -----------------      -----------------
  NET LOSS                                                            ($0.76)                ($0.16)
                                                            =================      =================



WEIGHTED AVERAGE NUMBER OF
  SHARES USED IN CALCULATION:

    BASIC                                                          7,673,449              7,636,981
                                                            =================      =================

    DILUTED                                                        7,673,449              7,636,981
                                                            =================      =================
</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
                                                                          September 30,
                                                                   2000                    1999
                                                                                       (As restated,
                                                                                        see Note 13 )
                                                             -----------------       -----------------
<S>                                                          <C>                     <C>
NET LOSS                                                              ($5,866)                ($1,187)

OTHER COMPREHENSIVE INCOME (LOSS):

  Foreign currency translation adjustments                             (2,484)                    876

                                                             -----------------       -----------------
OTHER COMPREHENSIVE INCOME (LOSS)                                     ($8,350)                  ($311)
                                                             =================       =================
</TABLE>

                 See Notes to Consolidated Financial Statements.

<PAGE>

                  ATCHISON CASTING CORPORATION AND SUBSIDIARIES

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

<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                     September 30,
                                                                               2000                   1999
                                                                                                 (As restated,
                                                                                                  see Note 13)
                                                                         -----------------      -----------------
<S>                                                                      <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Loss                                                                     ($5,866)               ($1,187)

     Adjustments to reconcile net loss to
       net cash from operating activities:
             Depreciation and amortization                                          3,071                  3,385
             Minority interest in net loss of subsidiaries                            (21)                    (8)
             (Gain) loss on disposal of capital assets                               (354)                    50
             Deferred income taxes                                                   (571)                   (65)
             Changes in assets and liabilities:
               Receivables                                                          5,641                  1,905
               Inventories                                                             66                  4,633
               Other current assets                                                (1,550)                (4,234)
               Accounts payable                                                     4,033                   (170)
               Accrued expenses                                                    (3,570)                (2,753)
               Postretirement obligation other
                 than pension                                                         223                    153
               Other                                                                 (688)                   314

                                                                         -----------------      -----------------
                         Cash provided by operating activities                        414                  2,023
                                                                         -----------------      -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:

     Capital expenditures                                                          (4,644)                (3,219)
     Proceeds from sale of capital assets                                             731                     26
     Payment for purchase of minority interest in subsidiaries                          -                 (2,408)

                                                                         -----------------      -----------------
                         Cash used in investing activities                         (3,913)                (5,601)
                                                                         -----------------      -----------------

CASH FLOWS FROM FINANCING ACTIVITIES:

     Proceeds from issuance of common stock, net of costs                              57                     60
     Payments on long-term obligations                                             (3,800)                (4,349)
     Capitalized financing costs paid                                                 (78)                     -
     Net borrowings under revolving loan note                                       7,828                  6,060

                                                                         -----------------      -----------------
                         Cash provided by financing activities                      4,007                  1,771

EFFECT OF EXCHANGE RATE ON CASH                                                      (138)                   141

                                                                         -----------------      -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 $370                ($1,666)

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

                                                                         -----------------      -----------------
CASH AND CASH EQUIVALENTS, End of period                                           $4,185                 $2,240
                                                                         =================      =================
</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 September 30, 1999 amounts have been reclassified to
               conform with September 30, 2000 classifications.

         2.    Inventories

<TABLE>
<CAPTION>
                                                           As of
                                              -------------------------------
                                                Sept. 30,        June 30,
                                                  2000             2000
                                                  ----             ----
                                                       (Thousands)
<S>                                           <C>              <C>
               Raw materials                        $ 8,542          $ 8,491
               Work-in-process                       34,049           33,656
               Finished goods                         9,662           11,038
               Supplies                               2,675            2,938
                                              --------------   --------------
                                                   $ 54,928         $ 56,123
                                              ==============   ==============
</TABLE>

<PAGE>

         3.    Income Taxes

               Income tax expense (benefit) consisted of:

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                                        Sept. 30,
                                                  2000             1999
                                                                (As restated,
                                                                see Note 13)
                                              --------------   --------------
                                                       (Thousands)
<S>                                           <C>              <C>
    Current:
         Domestic                                 $ (2,544)         $  (756)
         Foreign                                       117              368
                                              --------------   --------------
                                                    (2,427)            (388)


    Deferred:
         Domestic                                     (472)            (325)
         Foreign                                       (99)             260
                                              --------------   --------------
                                                      (571)             (65)

                                              --------------   --------------
    Total                                         $ (2,998)         $  (453)
                                              ==============   ==============
</TABLE>

         4.    Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                          Sept. 30,
                                                   2000              1999
                                                                 (As restated,
                                                                 see Note 13)
                                              ---------------   ----------------
                                                         (Thousands)
<S>                                           <C>               <C>
    Cash paid during the period for:
         Interest                                   $  3,453           $  2,480
                                              ===============   ================
         Income Taxes                                $   196            $   869
                                              ===============   ================
</TABLE>

<PAGE>

         5.    Earnings Per Share

               Following is a reconciliation of basic and diluted EPS for the
               three month period ended September 30, 2000 and 1999,
               respectively.

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000

<TABLE>
<CAPTION>
                                                                    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                               $ (5,320,000)         7,673,449      $  (0.69)
  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                                     $ (5,866,000)         7,673,449      $  (0.76)
                                              ================  ================ ==============
</TABLE>

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999

<TABLE>
<CAPTION>
                                                                    Weighted       Loss Per
                                                 Net Loss        Average Shares      Share
                                              ----------------  ----------------- -------------
<S>                                           <C>               <C>               <C>
Basic EPS
  Loss available to
     common stockholders                        $ (1,187,000)         7,636,981      $  (0.16)
Effect of Dilutive Securities:
   Options
                                              ----------------  ---------------- --------------
Diluted EPS                                     $ (1,187,000)         7,636,981      $  (0.16)
                                              ================  ================ ==============
</TABLE>

         6.    New Accounting Standards

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

<PAGE>

               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 September 30, the Company recorded its FX contracts at their
               fair value of approximately ($90,000). This resulted in a gain of
               approximately $820,000 ($492,000 net of deferred income tax
               expense). Additionally, the translation of the foreign
               denominated trade receivables resulted in a decrease in the value
               of the receivables and the Company recorded a currency
               translation loss of approximately $270,000 ($162,000 net of
               deferred income tax benefit).


         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
               ($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

<PAGE>

               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 first quarter of fiscal 2000 and fiscal 2001, Claremont
               recorded net sales of $1.5 million and $353,000, respectively,
               and incurred net losses of $374,000 and $458,000, 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 first
               quarter of fiscal 2000 and fiscal 2001, Pennsylvania Steel
               recorded net sales of $2.9 million and $2.1 million,
               respectively, and incurred net losses of $1.2 million and
               $623,000, respectively.

               In addition to the long-lived asset impairment, the Company will
               recognize other exit costs associated with the closure of

<PAGE>

               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 first quarter of fiscal 2000 and fiscal 2001, PrimeCast
               recorded net sales of $5.8 million and $4.6 million,
               respectively, and incurred net losses of $665,000 and $1.2
               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. 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)."

<PAGE>

        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 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 of
               September 30, 2000, the Company has received approximately $24.2
               million of insurance advances and has incurred charges of
               approximately $14.4 million related to the explosion and
               fire-related damages.

<PAGE>

               The excess advances over expenses incurred is recorded in accrued
               expenses within the consolidated balance sheet.

               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

<PAGE>

               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.


        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

<PAGE>

               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 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,

<PAGE>

               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
               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 The G&C Foundry Company and La Grange Foundry Inc. and
               2) is focusing on a smaller number of key customers, with a
               significantly reduced workforce.

<PAGE>

               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
               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.

<PAGE>

               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 period ended September
               30, 1999 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:

<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                         September 30, 1999
                                                --------------------------------------
                                                      As
                                                  Previously
                                                   Reported          As Restated
                                                ----------------   ----------------
                                                        (In thousands, except
                                                           per share data)
<S>                                             <C>                <C>
               STATEMENT OF OPERATIONS

               Net sales                              $ 109,693          $ 108,914
               Cost of goods sold                        96,980             98,497
               Operating expenses                         9,611              9,832
               Income (loss) before taxes                   877             (1,640)
               Income tax expense (benefit)                 265               (453)
               Net income (loss)                            612             (1,187)

               Net earnings (loss) per share:

                 Basic                                 $   0.08         $    (0.16)
                 Diluted                                   0.08              (0.16)
</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 months ended September 30, 1999 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.

RESULTS OF OPERATIONS:

Net sales for the first quarter of fiscal 2001 were $99.2 million, representing
a decrease of $9.7 million, or 8.9%, from net sales of $108.9 million in the
first quarter of fiscal 2000. The decrease in net sales was due primarily to
decreases in net sales to the rail, mining and military markets. Net sales of
Sheffield Forgemasters Group Limited

<PAGE>

("Sheffield") for the first quarter of fiscal 2001 decreased $3.3 million from
net sales in the first quarter 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 quarter of fiscal 2001, PrimeCast's net sales
decreased $1.1 million from net sales in the first quarter of fiscal 2000. In
addition, the Company closed Claremont Foundry, Inc. ("Claremont") in November
2000. Claremont's net sales in the first quarter of fiscal 2001 decreased $1.1
million from net sales in the first quarter of fiscal 2000.

Gross profit for the first quarter of fiscal 2001 decreased $6.4 million, or
61.5%, to $4.0 million, or 4.0 % of net sales, compared to $10.4 million, or
9.6% of net sales, for the first quarter of fiscal 2000. The decrease in gross
profit and gross profit as a percentage of net sales was primarily due to lower
net sales and reduced absorption of overhead at the Company's subsidiaries which
primarily serve the rail, mining and military markets. The largest impact of
these weak market conditions was at Sheffield, where its gross profit for the
first quarter of fiscal 2001 decreased by $1.1 million to $1.9 million, or 7.9%
of net sales, compared to $3.0 million, or 11.0% of net sales, in the first
quarter of fiscal 2000.

Gross profit at Jahn Foundry Corp. ("Jahn Foundry") in the first quarter of
fiscal 2001 decreased $1.7 million, to a gross loss of $1.1 million, or 54.5% of
net sales, compared to a gross profit of $564,000, or 22.6% of net sales, in the
first quarter of fiscal 2000, primarily as a result of 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 volume after the loss of Beloit as a major
customer, PrimeCast's results were impacted by a labor strike that was settled
on September 29, 2000 and by a serious injury to an employee that resulted in
increased workers' compensation expense of approximately of $375,000. The gross
loss at PrimeCast in the first quarter of fiscal 2001 increased $1.0 million to
$1.4 million, or 29.5% of net sales, compared to a gross loss of $410,000, or
7.1% of net sales in the first quarter of fiscal 2000.

Selling, general and administrative expense ("SG&A") for the first quarter of
fiscal 2001 was $9.4 million, or 9.5% of net sales, compared to $10.0 million,
or 9.2% of net sales, in the first quarter of fiscal 2000. The increase in SG&A
expense as a percentage of net sales is primarily due to the decrease in net
sales. Included in SG&A in the first quarter of fiscal 2001 was a net gain of
approximately $550,000 ($380,000, net of tax) to record the Company's foreign
exchange contracts and related foreign denominated trade receivables at fair
value (see Note 6). Offsetting this gain were expenses of approximately $520,000
($312,000, net of tax) of fees and audit and appraisal expenses incurred by the
Company in pursuing various options to refinance its bank credit facility.
Included in SG&A in the first quarter of fiscal 2000 was a charge of $148,500
($89,000 net of tax) relating to fines levied by the Occupational Safety and
Health Administration ("OSHA") concerning an industrial accident at Jahn Foundry
(see "Liquidity and Capital Resources").

<PAGE>

The Company has recorded intangible assets, consisting of goodwill, in
connection with certain of the Company's acquisitions. Amortization of these
assets for the first quarter of fiscal 2001 was expense of $340,000, or 0.3% of
net sales, as compared to $374,000, or 0.3% of net sales, in the first quarter
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 first quarter of fiscal 2001 of $408,000, or 0.4% of net sales,
as compared to $531,000, or 0.5% of net sales, in the first quarter of fiscal
2000. The liability recorded in connection with the acquisition of Canadian
Steel became fully amortized in the second quarter of fiscal 2000.

Interest expense for the first quarter of fiscal 2001 increased to $2.6 million,
or 2.6% of net sales, from $2.2 million or 2.0% of net sales, in the first
quarter of fiscal 2000. The increase in interest expense primarily reflects
higher average interest rates on the Company's outstanding indebtedness.

The income tax benefit for the first quarter of fiscal 2001 reflected the
combined federal, state and provincial statutory rate of approximately 33%.
Income tax expense for the first quarter of fiscal 2000 reflected a rate of
approximately 22%. In addition, the Company recorded an $87,000 tax refund at
its Sheffield subsidiary in the first quarter of fiscal 2000. 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 combined effective tax rate reflects the different federal, state
and provincial statutory rates of the various jurisdictions in which the Company
operates, and the proportion of taxable income earned in each of those tax
jurisdictions.

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 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.

<PAGE>

As a result of the foregoing, the net loss for the first quarter of fiscal 2001
was $5.9 million compared to a net loss of $1.2 million for the first quarter of
fiscal 2000.

LIQUIDITY AND CAPITAL RESOURCES:

Cash provided by operating activities for the first three months of fiscal 2001
was $414,000, a decrease of $1.6 million from the first three months of fiscal
2000. This decrease was primarily attributable to the net loss incurred by the
Company, partially offset by reduced inventory balances, the accelerated
collection of trade receivables and more aggressive management of trade payable
balances.

Working capital was a negative $34.0 million at September 30, 2000, as compared
to $5.7 million at June 30, 2000. The working capital levels primarily reflect
the classification of $107.4 million and $72.8 million of the Company's bank
credit facility, term loan and senior notes with an insurance company as current
at September 30, 2000 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 three months of fiscal 2001, the Company made capital
expenditures of $4.6 million, as compared to $3.2 million for the first three
months of fiscal 2000. Included in the first quarter of fiscal 2001 were capital
expenditures of $2.8 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.

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.

<PAGE>

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 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, 2001), 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

<PAGE>

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 the 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 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 September 30, 2000 was $121.6 million, as
compared to $117.6 million at June 30, 2000. This increase of $4.0 million
primarily reflects indebtedness incurred to fund the Company's capital
expenditures and operating losses. At September 30, 2000 the Company had fully
utilized its revolving credit facility. Available cash balances at September 30,
2000 were approximately $4.3 million. 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

<PAGE>

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.

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

<PAGE>

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 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

<PAGE>

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 $200,000 in fiscal 2000 and
the first three 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
September 30, 2000, 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 $300,000 in
fiscal 2000 and the first three 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 Party Counterclaim

<PAGE>

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

                      27      Financial Data Schedule

               (B)    Reports on Form 8-K

               The Company has filed a Form 8-K dated August 31, 2000.
               Items Reported

                   Item 5.  Press Release issued regarding 4th quarter and
                            fiscal 2000 results and the planned closure of
                            Claremont Foundry.

                   Item 7.  Exhibits.

                            Press Release dated August 31, 2000


<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