<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                   FORM 10-K/A

(Mark One)

/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

         For the fiscal year ended June 30, 2000 OR
/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
     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 or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)



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


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

          SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:


<TABLE>
<CAPTION>
                                                    Name of Each Exchange on
    Title of Each Class                                 Which Registered
   --------------------                             ------------------------
<S>                                                 <C>

Common Stock, $.01 par value                           New York Stock Exchange
</TABLE>

        SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /

The aggregate market value of the Common Stock, par value $.01 per share, of
the registrant held by nonaffiliates of the registrant as of April 17, 2001
was $14,463,710.

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.

Common Stock, $.01 par value, outstanding as of April 17, 2001: 7,689,347
Shares

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Annual Proxy Statement for the Annual Meeting of
Stockholders to be held June 29, 2001, are incorporated by reference into
Part III.

<PAGE>

                                     PART I
ITEM 1.   BUSINESS

GENERAL

     Atchison Casting Corporation ("ACC", "Atchison" or the "Company") was
formed in 1991 with the dual objectives of acting as a consolidator in the
foundry industry and bringing new technology for casting design and
manufacture to the foundries it acquires. While Atchison in its current form
has been in operation since 1991, its operating units have been in continuous
operation for much longer, in some cases for more than 100 years. The first
foundry acquired by ACC, the steel-castings division of Rockwell
International, has been in continuous operation since 1872. The period as a
semi-captive foundry, under Rockwell, was characterized by high quality
design and production, but less emphasis on outside customers and new markets.

     Atchison manufactures highly engineered metal castings and forgings that
are utilized in a wide variety of products, including cars, trucks, gas,
steam and hydroelectric turbines, mining equipment, locomotives, passenger
rail cars, pumps, valves, army tanks, navy ships, paper-making machinery, oil
field equipment, reactor vessels for plastic manufacturing, computer
peripherals, office furniture, home appliances, satellite receivers and
consumer goods. Having completed nineteen acquisitions since 1991, the
Company has established itself as a leading consolidator in the casting
industry. As a result of these acquisitions, the Company has the ability to
produce castings from a wide selection of materials, including carbon,
low-alloy and stainless steel, gray and ductile iron, aluminum and zinc as
well as the ability to manufacture parts in a variety of sizes, ranging from
small die cast components for the computer industry that weigh a few ounces
to mill stands for the steel industry that weigh up to 280 tons. The Company
believes that its broad range of capabilities, which addresses the needs of
many different markets, provides a distinct competitive advantage in the
casting and forging industry.

     The Company was founded to make acquisitions in the highly fragmented
foundry industry and to implement new casting design technology to make the
foundries more competitive. Following the initial acquisition of the steel
casting operations of Rockwell International in 1991, the Company has
continued to acquire foundries in the U.S., Canada and Europe. As a result of
these acquisitions, as well as internal growth, ACC's net sales have
increased from approximately $54.7 million in its first fiscal year ended
June 30, 1992, to $461.1 million for the fiscal year ended June 30, 2000,
resulting in a compound annual growth rate of 30.5%. The Company did not make
any acquisitions in fiscal 2000, and is not currently contemplating any major
acquisitions in fiscal 2001. The Company's primary focus in fiscal 2001 will
continue to be on the integration and improvement of existing operations.

     Since 1991, the number of customers served by the Company has increased
from 12 to more than 600, including companies such as Caterpillar, Gardner
Denver, General Motors, General Electric, Siemens Westinghouse, General
Dynamics, Shell, British Steel, Nucor, GEC-Alstom, Ingersoll-Dresser, John
Deere, DaimlerChrysler, Corus (formerly British Steel), CICH, Parker
Hannifin, Weirton Steel and Meritor (formerly Rockwell International). The
Company has received supplier excellence awards for quality from, or has been
certified by, substantially all of its principal customers.

     The Company's favorable industry position is attributable to several
factors, including: (i) its use of new and advanced casting technologies;
(ii) its ability to cast substantially all types of iron and steel, as well
as aluminum and zinc; (iii) the Company's emphasis on customer service and
marketing; and (iv) the Company's position as a long-term supplier to many of
its major customers.

     The principal executive offices of the Company are located at 400 South
Fourth Street, Atchison, Kansas 66002-0188, and the Company's telephone
number is (913) 367-2121.

                                       2

<PAGE>

RECENT DEVELOPMENTS

     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.

     As discussed in Notes 2 and 3 to the consolidated financial statements,
management considered the operating losses at PFG, recently discovered as a
result of the investigation, as a primary indication of impairment and has
concluded that certain asset impairment charges ($4.8 million, after tax) would
have been taken in fiscal year 2000 had actual operating and financial
information been known at that time. Accordingly, the restated amounts
presented below include amounts for such impairment charges related to
Pennsylvania Steel and Empire Steel. Additionally, in conjunction with the
restatement of the 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 as of June 30, 2000
and June 30, 1999 and for the fiscal years ended June 30, 2000, June 30, 1999
and June 30, 1998 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 25 to the consolidated financial
statements, and an overview is presented below.

     For the fiscal year ended June 30, 2000, the previously reported
consolidated financial statements primarily included an overstatement of
sales by $7.2 million, an understatement of cost of sales by $4.5 million and
an understatement of selling, general and administrative expense ("SG&A") by
$1.4 million. Also included in the restated results are approximately $6.2
million of charges related to the impairment of long-lived assets at
Pennsylvania Steel and the write-down of goodwill at Empire Steel. The impact
of these adjustments to reported operating results for the fiscal year ended
June 30, 2000 was to overstate gross profit by $11.7 million, operating
income by $19.3 million, net income by $14.1 million and diluted earnings per
share by $1.85.

     For the fiscal year ended June 30, 1999, the previously reported
consolidated financial statements primarily included an understatement of
sales by $1.8 million, an understatement of cost of sales by $10.0 million
and an understatement of SG&A expense by $608,000. The impact these
adjustments to reported operating results for the fiscal year ended June 30,
1999 was to overstate gross profit by $8.2 million, operating income by $8.8
million, net income by $6.7 million and diluted earnings per share by $0.87.

     For the fiscal year ended June 30, 1998, the previously reported
consolidated financial statements primarily included an overstatement of
sales by $661,000 and an understatement of cost of sales by $3.7 million. The
impact of these adjustments to reported operating results for the fiscal year
ended June 30, 1998 was to overstate gross profit and operating income by
$4.4 million, net income by $2.5 million and diluted earnings per share by
$0.30.

                                       3

<PAGE>

     For the fiscal year ended June 30, 1997, the previously reported
consolidated financial statements primarily included an understatement of
cost of sales by $2.1 million. The impact of these adjustments to reported
operating results for the fiscal year ended June 30, 1997 was to overstate
gross profit and operating income by $2.1 million, net income by $1.2 million
and diluted earnings per share by $0.21.

     The Company expects to file its quarterly reports on Form 10-Q for the
quarters ended September 30, 2000 and December 31, 2000 as soon as
practicable. The Company expects to file its quarterly report on Form 10-Q
for the quarter ended March 31, 2001 on a timely basis.

     ORGANIZATIONAL CHANGES

     The management team at Pennsylvania Foundry Group has been revamped.
Four of the Pennsylvania Foundry Group's former senior executives, its
President, Chief Financial Officer, Vice President of Operations and Vice
President of Human Resources, resigned from or were terminated by the Company.

     On January 8, 2001, Ian Sadler was appointed President of the
Pennsylvania Foundry Group. Mr. Sadler received his masters degree in
Metallurgy from Cambridge University in England. He has led the turn around
of two steel foundries: Shenango Industries and Johnstown Corporation. Prior
to accepting the Pennsylvania Foundry Group job, he was the president of
Shenango Industries, Inc., an iron and steel foundry in Terre Haute, Indiana.
Mr. Sadler has served on the Board of Directors of the Steel Founder's
Society of America, and will become president of the Iron and Steel Society
in 2002. On September 18, 2000, Duane Madrykowski was appointed the new Chief
Financial Officer of the Pennsylvania Foundry Group, and on December 5, 2000,
Allen Ebling was promoted to Director of Human Resources of the Pennsylvania
Foundry Group.

     On March 1, 2001, the Company hired Stephen Housh as its Manager of
Internal Audit. Mr. Housh has experience in public accounting and has served
as the manager of general accounting for several manufacturing companies
prior to owning his own company. In addition, the Company is evaluating
whether to transition its decentralized accounting functions into a more
centralized accounting system.

     LOAN AMENDMENTS

     The Company and the lenders under the Credit Agreement and Note Purchase
Agreement (as defined below in the section entitled Liquidity and Capital
Resources) entered into amendment and forbearance agreements that provide,
among other things, that such lenders will continue to forbear from
exercising their rights with respect to certain existing defaults through
July 30, 2001. These agreements also (i) revise the interest rates of these
loans, (ii) add a covenant requiring a minimum amount of earnings before
interest, taxes, depreciation and amortization ("EBITDA"), and (iii) cause
the Company to grant the lenders a security in real estate in North America.
The Company and the lenders under the GE Financing (as defined below in the
section entitled Liquidity and Capital Resources) have entered into an
agreement in which such lenders agreed to continue to forbear from exercising
their rights with respect to certain existing defaults through the earlier of
September 30, 2001 or any date on which the forbearance agreement related to
the Credit Agreement is breached. These agreements give the Company the
opportunity to renegotiate or refinance its lending arrangements, although no
assurance can be given as to whether the Company will be successful.

     CLOSURE OF PENNSYLVANIA STEEL AND PRIMECAST, INC. SUBSIDIARIES

     Following the discovery of the accounting irregularities, which revealed
substantial operating losses at each of the Company's three steel foundries
that comprise the Pennsylvania Foundry Group, the Company determined that the
carrying value of certain long-lived assets of Pennsylvania Steel and

                                       4

<PAGE>

Empire Steel had been impaired. Accordingly, the Company has recorded, in the
fourth quarter of fiscal 2000, a charge of $6.2 million ($4.8 million, net of
tax) primarily to reduce the carrying value of the fixed assets at
Pennsylvania Steel to estimated fair value and to write-off the goodwill at
Empire Steel. Subsequently, the Company committed to a plan to consolidate
the three operations into two, thereby improving the capacity utilization of
the remaining two and, on November 30, 2000, the Company announced plans to
close Pennsylvania Steel. The closure was completed by February 28, 2001.
Much of the work was transferred to the remaining two locations.

     On January 23, 2001, the Company announced plans to close its PrimeCast,
Inc. ("PrimeCast") foundry unit located in Beloit, Wisconsin and South
Beloit, Illinois. The Company had previously announced a partial shutdown of
the unit, following the closure of Beloit Paper Machinery Corporation, which
had been PrimeCast's major customer and the former owner of the foundry. The
closure was completed by March 31, 2001. As PrimeCast was the Company's only
foundry that could produce large iron castings, only a portion of PrimeCast's
work can be transferred to other operations of the Company.The Company had
previously recorded a charge of $6.9 million ($4.3 million, net of tax) for
the impairment of PrimeCast's fixed assets in the fourth quarter of fiscal
2000.

     LEGAL PROCEEDINGS

     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 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 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.

     In addition, 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.

                                       5

<PAGE>

COMPANY STRATEGY

     Until recently, ACC pursued growth and diversification through a
two-pronged approach of: (i) making strategic acquisitions within the widely
fragmented and consolidating foundry industry; and (ii) integrating the
acquired foundries to achieve economies of scale, while strengthening
marketing and promoting the use of new casting technology. ACC's primary
focus since the beginning of fiscal 2000 has been on the integration and
improvement of existing operations. No acquisitions are currently
contemplated during fiscal 2001.

     STRATEGIC ACQUISITIONS

     ACQUIRE LEADERS AND BUILD CRITICAL MASS. The Company initially acquired
foundries that were considered leaders in their respective sectors. After
acquiring a leader in a new market, ACC strives to make subsequent
acquisitions that further penetrate that market and take advantage of the
leader's technical expertise. The Atchison/St. Joe Division is a leader in
the field of large, complex steel castings. This acquisition in 1991 provided
credibility for ACC's presence in the industry and established a base for
add-on acquisitions. Following the Atchison/St. Joe Division acquisition, the
Company added capacity and strengthened its base through the add-on
acquisitions of Amite Foundry and Machine, Inc. ("Amite") in 1993 and
Canadian Steel Foundries, Ltd. ("Canadian Steel") in 1994. As an additional
example, Prospect Foundry, Inc. ("Prospect") was acquired in 1994 due to its
leading position in gray and ductile iron casting production. The subsequent
acquisition of La Grange Foundry Inc. ("La Grange") in 1995 further enhanced
ACC's position in this market.

     BROADEN PRODUCT OFFERINGS AND CAPABILITIES. The Company also acquired
foundries that added a new product line or customer base that can be
leveraged throughout ACC's network of foundries. For example, prior to the
acquisition of Prospect in 1994, which expanded ACC's capabilities to include
gray and ductile iron, the Company only produced carbon and low alloy steel
castings. The acquisition of Quaker Alloy, Inc. ("Quaker Alloy") expanded
ACC's stainless and high alloy steel capabilities to include a wider range of
casting sizes. Los Angeles Die Casting Inc. ("LA Die Casting"), a leading die
caster of aluminum and zinc components for the computer and recreation
markets, provides ACC with an entry into the aluminum and zinc die casting
markets. The acquisition of Sheffield Forgemasters Group Limited
("Sheffield") brings to ACC the ability to offer cast and forged rolls,
larger steel castings and centrifically cast parts. London Precision Machine
& Tool Ltd. ("London Precision") expanded ACC's capabilities in the machining
of castings.

     DIVERSIFY END MARKETS. The Company attempts to lessen the cyclical
exposure at individual foundries by creating a diversified network of
foundries that serve a variety of end markets. Kramer International, Inc.
("Kramer"), a supplier of pump impellers, was acquired in 1995, expanding
ACC's sales to the energy and utility sectors. The Company believes ACC's
presence in these markets somewhat offsets its exposure to the railroad and
mining and construction markets, as energy and utility cycles do not
necessarily coincide with railroad investment or mining and construction
cycles. The acquisition of Prospect diversified the end markets served by the
Company by providing access to both the agricultural equipment and trucking
industries. Sheffield provided a strong position as a supplier to the steel
industry, as well as substantial enhancement of ACC's presence in the oil and
gas industry. Currently, the Company serves more than ten major end-user
markets, compared to three in 1991.

     DIVERSIFY GEOGRAPHICALLY. The Company also seeks to acquire foundries,
which would expand the operations to other major world economies. Sheffield
and Fonderie d'Autun ("Autun") provide entry into the Euromarket.

                                       6

<PAGE>

    The following table presents the Company's current operations and their
primary strategic purpose.

<TABLE>
<CAPTION>
                                       DATE
  MANUFACTURING UNIT                 ACQUIRED                            STRATEGIC PURPOSE
--------------------------------    ------------   --------------------------------------------------------------
<S>                                 <C>            <C>
Atchison/St. Joe Division              06/14/91    Leader  in  carbon  and  low  alloy,  large,   complex  steel
                                                      castings. Initial platform for Company strategy.

Amite                                  02/19/93    Increase  capacity to take on new  projects  with  customers.
                                                      Add-on to Atchison/St. Joe Division.

Prospect                               04/01/94    Leader in gray and ductile iron castings.

Quaker Alloy                           06/01/94    Develop position in stainless and high alloy steel castings.

Canadian Steel                         11/30/94    Access to hydroelectric and steel mill markets. Develop
                                                      position in large castings.

Kramer                                 01/03/95    Leader in castings for pump industry.

Empire Steel Castings, Inc.            02/01/95    Build  position in pump and valve  markets.  Add-on to Quaker
                                                       Alloy.

La Grange                              12/14/95    Build position in gray and ductile iron casting markets.

The G&C Foundry Company                03/11/96    Highly  regarded in fluid  power  market.  Build  position in
                                                      gray and ductile iron casting markets

LA Die Casting                         10/01/96    Leader in aluminum and zinc die casting.

Canada Alloy Castings, Ltd.            10/26/96    Build  position in existing  markets.  Smaller  castings than
                                                      Canadian Steel, but similar markets and materials.

Jahn Foundry Corp.                     02/14/97    Develop  position in market for automotive  castings.  Add-on
                                                      iron foundry.

Inverness Castings Group, Inc.         10/06/97    Expand in automotive and aluminum products.

Sheffield                              04/06/98    Enter European marketplace and add new product lines,
                                                      including forgings. Gain strong position in steel industry
                                                      and off-shore oil and gas industry.

London Precision                       09/01/98    Enhance the Company's capability to machine castings,
                                                      including finish machining.

Autun                                  02/25/99    Establish operations in Europe.
</TABLE>

     INTEGRATION OF ACQUIRED FOUNDRIES

     STRENGTHEN MARKETING FUNCTIONS. Many foundries, particularly those that
operate as captive foundries or only rely on a small number of customers, do
not have strong marketing capabilities. ACC views this industry-wide
marketing weakness as an opportunity to establish a competitive advantage.
The Company places great emphasis on maximizing new business opportunities by
strengthening marketing capabilities, adding sales people and cross-selling
between foundries.

                                       7

<PAGE>

     One way in which ACC builds the marketing efforts of its foundries is to
increase the number of sales personnel at its foundries. In addition to sales
people added through acquisitions, the Company has incrementally increased
the sales force by 36%. ACC has established a central marketing organization
to assist the decentralized foundry sales teams. The central marketing group
is headed up by industry veteran Charles Armor, who joined ACC in April 2000.
Another element of the Company's marketing effort is to jointly develop
castings with its customers. Joint development projects using new technology,
and the resulting increased service and flexibility provided to customers, is
an important marketing tool and has been instrumental in receiving several
new orders. For example, a joint development project between Caterpillar and
ACC led to the production of the boom tip casting for one of Caterpillar's
new hydraulic excavators. Joint development projects have also taken place
with General Motors, Nordberg, John Deere, Case New Holland, Timberjack and
DaimlerChrysler, among others.

     An increasingly important aspect of the Company's marketing strategy has
been to develop its ability to cross-sell among its foundries. In acquiring
new foundries and expanding into new markets, the Company has gained a
significant advantage over smaller competitors since its sales force is able
to direct its customers to foundries with different capabilities. This
benefits ACC in that it enables foundries to use the Atchison name and
relationships to gain new customers as well as helping customers to reduce
their supplier base by providing "one-stop" shopping. The Company facilitates
cross-selling by reinforcing the sales force's knowledge of Company-wide
capabilities through visits to individual plants and providing sales
incentive opportunities.

     INTRODUCE ADVANCED TECHNOLOGY. The Company is systematically introducing
new advanced technologies into each of its acquired foundries to enhance
their competitive position. For example, the Company's capabilities in finite
element analysis and three-dimensional solid modeling are having a beneficial
impact on sales and casting production by helping customers to design lighter
and stronger castings, shortening design cycles, lowering casting costs and,
in some cases, creating new applications. These new technologies have
enhanced the Company's ability to assist customers in the component design
and engineering stages, strengthening the Company's relationships with its
customers. New techniques involve computerized solid models that are used to
simulate the casting process, to make patterns and auxiliary tooling and to
machine the finished castings. The Company is in the process of implementing
this technology in all of its foundries. The Company has established a
Fabrication-to-Casting design center at its Atchison, Kansas facility. The
focus of the design center is to help customers design new castings,
especially those which can replace existing fabricated assemblies.

     Investments by the Company in technology improvements include: (i) new
solidification software and hardware for better casting design and process
improvement; (ii) Computer Numerical Control ("CNC") machine tools,
computer-assisted, laser measurement devices and new cutting head designs for
machine tools to improve productivity and quality in the machining of
castings; (iii) Argon-Oxygen Decarburization ("AOD") refining, which is used
to make high-quality stainless steel; (iv) computer-controlled sand binder
pumps to improve mold quality and reduce cost; (v) equipment for measuring
the nitrogen content of steel, which helps in casting quality improvement;
(vi) CNC pattern making; (vii) new die casting machines; and (viii) automated
testing cells using resonate testing. ACC is one of the few foundry companies
that uses its own scanning electron microscope to analyze inclusions in cast
metal. The Company also participates in technical projects led by the Steel
Founders' Society of America and the American Foundrymen's Society, which are
exploring ways to melt and cast cleaner iron and steel, as well as U.S.
government/industry specific projects to shorten and improve the casting
design cycle.

     INCREASE CAPACITY UTILIZATION. A principal objective of the Company in
integrating and operating its foundries is to increase capacity utilization
at both its existing and newly acquired facilities. Many

                                       8

<PAGE>

of the Company's foundries at the time of their acquisition have been
operating with underutilized capacity. The Company seeks to improve capacity
utilization by introducing more effective marketing programs and applying
advanced technologies as described above.

     ACHIEVE PURCHASING ECONOMIES. ACC makes its volume purchasing programs
available to its foundries. ACC has realized meaningful cost savings by
achieving purchasing efficiencies for its foundries. By jointly coordinating
the purchase of raw materials, negotiation of insurance premiums and
procurement of freight services, ACC's individual foundries have, in some
cases, realized savings of 10% to 30% of these specific costs.

     LEVERAGE MANAGEMENT EXPERTISE. The Company believes that improvements
can often be made in the way acquired foundries are managed, including the
implementation of new technologies, advanced employee training programs,
standardized budgeting processes and profit sharing programs and providing
access to capital. In this view, ACC enhances management teams to add
technical, marketing or production experience, if needed. For example, ACC
was able to significantly improve the profitability of Canadian Steel by
adding new members to management, entering new markets, installing finite
element solidification modeling and providing capital. Under ACC ownership,
La Grange was able to negotiate a new labor agreement, create profit sharing
for all employees, broaden its customer base and install solidification
modeling. Amite captured one of the largest steel casting orders of the last
decade by combining proven management from the Atchison/St. Joe Division with
casting design assistance from the Atchison/St. Joe Division fab-to-cast
design center and a strong customer orientation.

INDUSTRY TRENDS

     The American Foundrymen's Society estimates that global casting
production was 64.9 million metric tons in 1999 of which steel castings
accounted for approximately 6.1 million tons, iron castings for approximately
49.3 million tons and nonferrous castings for approximately 9.5 million tons.
It is further estimated that the top ten producing countries represent 80% of
the total production, with the U.S. representing in excess of 20% of the
world market.

     The U.S. casting industry is estimated to have had shipments of
approximately 14.6 million tons in 1999, of which steel castings accounted
for approximately 1.4 million tons, iron castings for approximately 10.4
million tons and non-ferrous castings for approximately 2.8 million tons.
Metal casting shipments are forecast to grow at an annual rate of 1.4% to
16.0 million tons by 2010. The Company has been able to grow at a rate
substantially in excess of the overall industry principally as a result of
its strategy and due to key trends affecting the casting industry, including
the following:

     INDUSTRY CONSOLIDATION

     Although still highly fragmented, the U.S. foundry industry has
consolidated from approximately 465 steel foundries and 1,400 iron foundries
in 1982 to approximately 400 and 700 steel and iron foundries, respectively,
in 1999. This consolidation trend has been accompanied by increased
outsourcing of casting production and OEM supplier rationalization.

     OUTSOURCING. Many OEMs are outsourcing the manufacture of cast
components to independent foundries in an effort to reduce their capital and
labor requirements and to focus on their core businesses. Management believes
that captive foundries are often underutilized, inefficiently operated and
lack the latest technology. Several of ACC's OEM customers, such as
Caterpillar, General Motors, General Electric, Meritor (formerly Rockwell
International), Ingersoll-Dresser, Gardner Denver, Compagnie Internationale
du Chauffage and Beloit Corporation, have closed or sold one or more of their
captive foundries during the past ten years and have outsourced the castings
which they

                                       9

<PAGE>

once made to independent suppliers such as the Company. As described above,
the closure of these facilities has contributed to increased capacity
utilization at the remaining foundries.

     OEM SUPPLIER RATIONALIZATION. OEMs are rationalizing their supplier base
to fewer foundries that are capable of meeting increasingly complex
requirements. For example, OEMs are asking foundries to play a larger role in
the design, engineering and development of castings. In addition, some
customers have demanded that suppliers implement new technologies, adopt
quality (ISO 9000 and QS 9000) standards and make continuous productivity
improvements. As a result, many small, privately-owned businesses have chosen
to sell their foundries because they are unwilling or unable to make
investments necessary to remain competitive. Moreover, the EPA and OSHA
require compliance with increasingly stringent environmental and governmental
regulations.

     NEW CASTING TECHNOLOGY

     Recent advances in casting technology and pattern-making have created
new opportunities for reducing costs while increasing efficiency and product
quality. The combination of powerful, low cost computer workstations with
finite element modeling software for stress analysis and metal solidification
simulation is helping foundries and customers to design castings that are
lighter, stronger and more easily manufactured at a competitive cost.

     The Company believes new casting technologies have led to growth in
casting shipments by replacing forgings and fabrications in certain
applications. In the past, fabricated (welded) components have been used in
order to reduce tooling costs and product development lead-time. New casting
technology has helped to reduce the weight and cost, and shorten the
lead-time, of castings and has therefore increased the relative
attractiveness of cast components. For example, these improvements allowed an
ACC customer to replace a fabricated steel boom that is used in a typical
mining vehicle with one that is cast. The cast steel boom weighs 20% less
than the fabricated component that it replaced, allowing an increase in
payload. Product life is increased due to greater corrosion resistance.
Another customer replaced the combination cast/fabricated body of a rock
crusher with a one-piece casting, reducing labor for cutting, welding and
machining as a result.

     The Company has established a Fabrication-to-Casting Design Center at
its Atchison, Kansas facility. The focus of the design center is to help
customers design new castings, especially those which can replace existing
fabricated assemblies.

     STEEL INDUSTRY. The steel industry uses rolls to form cast steel into
sheets, bars, rods, beams and plates, which are then used to make end
products such as car bodies, tin cans and bridges. Rolls are consumed as
steel is rolled, so there is a steady demand for rolls. Customers in this
market include Corus (formerly British Steel) and Nucor, among others.
Sheffield Forgemasters Rolls Limited ("Forgemasters Rolls") is one of the
world leaders in cast and forged rolls for the steel-making industry. Steel
products produced by the Company accounted for approximately 7.0%, 18.8% and
18.5% of the Company's net sales in fiscal 1998, fiscal 1999 and fiscal 2000,
respectively.

     MINING AND CONSTRUCTION. ACC's castings are used in tractor-crawlers,
mining trucks, excavators, drag lines, wheel-loaders, rock crushers, diesel
engines, slurry pumps, coal mining machines and ore-processing equipment.
Mining and construction equipment customers include Caterpillar, Nordberg,
Meritor (formerly Rockwell International), Gardner Denver, John Deere,
Komatsu and Euclid, among others. Products supplied to the mining and
construction industry accounted for approximately 23.1%, 18.0% and 16.5% of
the Company's net sales in fiscal 1998, fiscal 1999 and fiscal 2000,
respectively.

                                       10

<PAGE>

     RAILROAD. The Company supplies cast steel undercarriages for
locomotives, among other parts, for this market. GM is ACC's largest
locomotive customer, and has purchased locomotive castings from the
Atchison/St. Joe Division for over 60 years. The Company further penetrated
this market through the purchase of London Precision. Rail products produced
by the Company accounted for approximately 6.6%, 11.3% and 10.5% of the
Company's net sales in fiscal 1998, fiscal 1999 and fiscal 2000, respectively.

     AUTOMOTIVE. The automotive industry uses both iron and aluminum
castings, as well as aluminum die castings. ACC entered this market through
the purchase of Jahn Foundry Corp. ("Jahn Foundry") in Springfield,
Massachusetts and Inverness Castings Group, Inc. ("Inverness") in Dowagiac,
Michigan. Customers in this market include General Motors and
DaimlerChrysler, among others. Automotive products produced by the Company
accounted for approximately 10.4%, 8.6% and 8.9% of the Company's net sales
in fiscal 1998, fiscal 1999 and fiscal 2000, respectively.

     ENERGY. The Company's products for the energy market include pumps,
valves and compressors for transmission and refining of petrochemicals,
blow-out preventers and mud pumps for drilling and work-over of wells,
lifting hooks and shackles for offshore installation of equipment, winch
components for rig positioning, nodes for platform construction, subsea
components and other oil field castings. Shell, Amoco, Aker-Verdal, Shaffer,
Rolls Royce, Hydril, Solar Turbines, Nordstrom, Ingersoll-Dresser Pumps and
Amclyde are among the Company's many energy-related customers.

     UTILITIES. Many of ACC's castings are used in products for the utility
industry, such as pumps, valves and gas compressors. ACC also makes steam,
gas and hydroelectric turbine castings, nuclear plant components, sewage
treatment parts and other castings for the utility industry. In addition, the
Company manufactures replacement products that are used when customers
perform refurbishments. Customers include Siemens Westinghouse, General
Electric, Solar Turbines, GEC-Alsthom, Sulzer, Siemens, Kvaerner, Goulds
Pumps and Neles Controls.

     MILITARY. Weapons and equipment for the Army, Navy and Coast Guard
employ many different types of castings. The Company makes components for
ships, battle tanks, howitzers and other heavy weapons. The capabilities of
Sheffield has allowed ACC to bid on a wider range of work for the U.S. Navy.
The military casting market has declined sharply, but ACC has been able to
replace this volume by targeting new products such as turbines, compressors,
pumps and valves. Customers in this market include General Dynamics, Litton,
Bath Iron Works, Boeing, SEI, the U.S. Army and Avondale Shipyards, among
others.

     TRUCKING. The Company manufactures components used on truck engines and
suspension systems. Many of ACC's castings are used in aftermarket products
to achieve better fuel economy or to enhance ride characteristics. Customers
include Horton Industries, Detroit Diesel and others.

     FARM EQUIPMENT. ACC makes a variety of castings for farm tractors,
baling equipment, harvesters, sugar cane processors and other agricultural
equipment for customers such as John Deere, Caterpillar and New Holland.

     MASS TRANSIT. ACC began making undercarriages for passenger rail cars in
1992 and is a leading casting supplier to the mass transit market. The
Company's castings are used on the BART system in San Francisco, METRA in
Chicago, NCTD in San Diego, MARTA in Atlanta, and in Miami and Vancouver. La
Grange casts components used in subway cars in several cities, including New
York City, which is the largest user of subway cars in North America.

     OTHER. Other markets include process equipment such as rubber mixers,
plastic extruders, dough mixers, machine tools and a variety of general
industrial applications. With the acquisition of LA Die

                                       11

<PAGE>

Casting, the Company entered the consumer market. LA Die Casting supplies
components used to make recreational vehicles, computer peripherals, direct
satellite receivers, telescopes and pool tables. Customers include California
Amplifier, RC Design, Celestron and Printronix.

     For financial information about geographic areas, see Note 20 to the
consolidated financial statements.

     SALES AND MARKETING

     New foundry technologies and the new applications resulting therefrom
require a more focused and knowledgeable sales force. The Company pursues an
integrated sales and marketing approach that includes senior management,
engineering and technical professionals, production managers and others, all
of whom work closely with customers to better understand their specific
requirements and improve casting designs and manufacturing processes. The
Company supplements its direct sales effort with participation in trade
shows, marketing videos, brochures, technical papers and customer seminars on
new casting designs.

     The Company's engineering and technical professionals are actively
involved in marketing and customer service, often working with customers to
improve existing products and develop new casting products and applications.
They typically remain involved throughout the product development process,
working directly with the customer to design casting patterns, build the
tooling needed to manufacture the castings and sample the castings to ensure
they meet customers' specifications. The Company believes that the technical
assistance in product development, design, manufacturing and testing that it
provides to its customers gives it an advantage over its competition.

     Customers tend to develop long-term relationships with foundries that
can provide high quality, machined castings delivered on a just-in-time basis
that do not require on-site inspection. Frequently, the Company is the only
current source for the castings that it produces. Maintaining duplicate
tooling in multiple locations is costly, so customers prefer to rely on one
supplier for each part number. Moving the tooling to another foundry is
possible, however, such a move entails considerable time and expense on the
customer's part. In addition, ACC is forming product development partnerships
with a number of customers to develop new applications for castings.

     BACKLOG

     The Company's backlog is based upon customer purchase orders that the
Company believes are firm and does not include purchase orders anticipated
but not yet placed. At June 30, 2000, the Company's backlog was approximately
$168.6 million, as compared to backlog of approximately $178.9 million at
June 30, 1999. The backlog is scheduled for delivery in fiscal 2001 except
for approximately $20.8 million, of which $11.5 million is scheduled for
delivery in fiscal 2002. As of March 31, 2001, the backlog had increased to
approximately $194 million. The level of backlog at any particular time is
not necessarily indicative of the future operating performance of the
Company. The Company historically has not experienced cancellation of any
significant portion of customer orders.

     COMPETITION

     The Company competes with a number of foundries in one or more product
lines, although none of the Company's competitors compete with it across all
product lines. The principal competitive factors in the castings market are
quality, delivery and price; however, breadth of capabilities and customer
service have become increasingly important. The Company believes that it is
able to compete successfully in its markets by: (i) offering high quality,
machined castings; (ii) working with

                                       12

<PAGE>

customers to develop and design new castings; (iii) providing reliable
delivery and short lead-times; (iv) containing its manufacturing costs,
thereby pricing competitively; and (v) offering a broad range of cast
materials.

     The Company believes that the market for iron and steel castings is
attractive because of a relatively favorable competitive environment, high
barriers to entry and the opportunity to form strong relationships with
customers. New domestic competitors are unlikely to enter the foundry
industry because of the high cost of new foundry construction, the need to
secure environmental approvals at a new foundry location, the technical
expertise required and the difficulty of convincing customers to switch to a
new, unproven supplier.

     ACC, and the foundry industry in general, competes with manufacturers of
fabrications in some application areas. The Company believes that the
relative advantages of castings, particularly in light of new casting design
technology, which reduces weight, cost and leadtime while improving casting
quality, will lead to increased replacement of fabrications by iron and steel
castings. The Company competes with foundries in Asia, Europe and North
America.

     MANUFACTURING

     CASTINGS. Casting is one of several methods, along with forging and
fabricating, which shape metal into desired forms. Castings are made by
pouring or introducing molten metal into a mold and allowing the metal to
cool until it solidifies, creating a monolithic component. Some castings,
such as die castings, are made with a permanent metal mold which can be used
repeatedly. Others, such as sand castings, are made in a sand mold which is
used only once. Forgings are made by shaping solid metal with pressure,
usually in a die or with hammers. Fabrications are made by welding together
separate pieces of metal. Castings may offer significant advantages over
forgings and fabrications. A well-designed casting can be lighter, stronger
and more stress and corrosion resistant than a fabricated part. Although
castings and forgings are similar in several respects, castings are generally
less expensive than forgings.

     CASTING PROCESS. The steel casting manufacturing process involves
melting steel scrap in electric arc or induction furnaces, adding alloys,
pouring the molten metal into molds made of sand or iron and removing the
solidified casting for cleaning, heat treating and quenching prior to
machining the casting to final specifications. The manufacture of a steel
casting begins with the molding process. Initially, a pattern constructed of
wood, aluminum or plastic is created to duplicate the shape of the desired
casting. The pattern, which has similar exterior dimensions to the final
casting, is positioned in a flask and foundry sand is packed tightly around
it. After the sand mold hardens, the pattern is removed. When the sand mold
is closed, a cavity remains within it shaped to the contours of the removed
pattern. Before the mold is closed, sand cores are inserted into the cavity
to create internal passages within the casting. For example, a core would be
used to create the hollow interior of a valve casing. With the cores in
place, the mold is closed for pouring. Castings for rolls are sometimes made
by stirring the mold while the liquid steel or iron is being poured into it.

     Steel scrap and alloys are melted in an electric arc furnace at
approximately 2,900 degrees Fahrenheit, and the molten metal is poured from a
ladle into molds. After pouring and cooling, the flask undergoes a "shakeout"
procedure in which the casting is removed from the flask and vibrated to
remove sand. The casting is then moved to a blasting chamber for removal of
any remaining foundry sand and scale. Next, the casting is sent to the
cleaning room, where an extensive process removes all excess metal. Cleaned
castings are put through a heat treating process, which improves properties
such as hardness and tensile strength through controlled increases and
decreases in temperature. A quench tank to reduce temperatures rapidly is
also available for use in heat treatment. The castings are shot blasted again
and checked for dimensional accuracy. Each casting undergoes a multi-stage

                                       13

<PAGE>

quality control procedure before being transported to one of the Company's or
the customer's machine shops for any required machining.

     Iron castings are processed similarly in many respects to steel
castings. Melting and pouring temperatures for molten iron are approximately
2,400 degrees Fahrenheit, and less cleaning and finishing is required for
iron castings than is typically required for steel castings. Iron and steel
scrap may both be used in making cast iron.

     Die casting, as contrasted to sand casting, uses a permanent metal mold
that is reused. Melting and pouring temperatures for aluminum and zinc are
less than half that used for steel, and die castings normally require less
cleaning than iron or steel castings.

     FORGING PROCESS. The forging process applies pressure by hitting or
pressing a heated ingot or wrought steel blank. The forged piece is then
heat-treated and machined much in the same manner as a steel casting.

     MATERIALS. Steel is more difficult to cast than iron, copper or aluminum
because it melts at higher temperatures, undergoes greater shrinkage as it
solidifies, causing the casting to crack or tear if the mold is not properly
designed, and is highly reactive with oxygen, causing chemical impurities to
form as it is poured through air into the mold. Despite these challenges,
cast steel has become a vital material due to its superior strength compared
to other ferrous metals. In addition, most of the beneficial properties of
steel match or exceed those of competing ferrous metals. The Company's first
foundry, which today forms the Atchison/St. Joe Division, produced carbon and
low alloy steel castings when it was acquired from Rockwell International in
1991. ACC added an AOD vessel for making stainless steel in order to better
supply the pump and valve markets, which sometimes require stainless steel
castings to be made from the same patterns used for carbon steel castings.
Also in 1994, ACC purchased Quaker Alloy, which specializes in casting high
alloy and stainless steels for valves, pumps and other equipment. Sheffield,
Canadian Steel and Canada Alloy Castings, Ltd. ("Canada Alloy") also make
high alloy and stainless castings, further reinforcing ACC's market position
and skill base concerning the casting of stainless and specialty, high alloy
steels.

     In applications that do not require the strength, ductility and/or
weldability of steel, iron castings are generally preferred due to their
lower cost, shorter lead-times and somewhat simpler manufacturing processes.
Ductile iron is stronger and more flexible than traditional cast iron, known
as gray iron, and is easier and less expensive to cast than steel. Due to
these qualities, the demand for ductile iron is increasing faster than for
either traditional gray cast iron or cast steel. In 1994, ACC initiated
manufacturing of gray and ductile iron through the acquisition of Prospect.
ACC's presence in ductile iron was increased through the subsequent purchases
of La Grange and The G&C Foundry Company ("G&C").

     Aluminum castings (including die castings) generally offer lighter
weight than iron or steel, and are usually easier to cast because aluminum
melts at a lower temperature. These advantages, coupled with low prices for
aluminum during the last decade, have led to a substantial increase in the
use of aluminum castings, especially in motor vehicles. Aluminum's relative
softness, lower tensile strength and poor weldability limit its use in many
applications where iron and steel castings are currently employed. In 1996,
ACC entered the nonferrous market with the purchase of LA Die Casting, which
die casts aluminum and zinc.

     Steel, unlike iron, can be forged as well as cast. Forging compresses
steel, and is preferred for some critical applications like nuclear vessels,
turbine shafts and pressure vessels, among others.

                                       14

<PAGE>

     The ability to provide cast and forged components in a broad range of
materials allows ACC to present itself as a "one-stop shop" for some
customers and simplifies purchasing for others. Since customers in general
have a goal of reducing their total number of suppliers, a broader range of
materials and casting skills gives ACC an advantage over many other foundry
operations.

     MACHINING. The Company machines many of its steel castings, typically to
tolerances within 30 thousandths of an inch. Some castings are machined to
tolerances of one thousandth of an inch. Machining includes drilling,
threading or cutting operations. The Company's Sheffield, St. Joe, Amite,
Inverness and London Precision machine shops have a wide variety of machine
tools, including CNC machine tools. The Company also machines some of its
castings at Canadian Steel, Quaker Alloy, Empire Steel Castings, Inc.
("Empire") and Kramer. The ability to machine castings provides a higher
value-added product to the customer and improved quality. Casting
imperfections, which are typically located near the surface of the casting,
are usually discovered during machining and corrected before the casting is
shipped to the customer.

     NON-DESTRUCTIVE TESTING. Customers typically specify the physical
properties, such as hardness and strength, which their castings are to
possess. The Company determines how best to meet those specifications.
Regular testing and monitoring of the manufacturing process are necessary to
maintain high quality and to ensure the consistency of the castings.
Electronic testing and monitoring equipment for tensile, impact, radiography,
ultrasonic, magnetic particle, dye penetrant and spectrographic testing are
used extensively to analyze molten metal and test castings.

     ENGINEERING AND DESIGN. The Company's process engineering teams assist
customers in designing castings and work with manufacturing departments to
determine the most cost effective manufacturing process. Among other
computer-aided design techniques, the Company uses three-dimensional solid
modeling and solidification software. This technology reduces the time
required to produce sample castings for customers by several weeks and
improves the casting design.

     CAPACITY UTILIZATION. The following table shows the type and the
approximate amount of available capacity, in tons, for each operating foundry
and die caster. The actual number of tons that a foundry can produce annually
is dependent on product mix. Complicated castings, such as those used for
military applications or in steam turbines, require more time, effort and use
of facilities, than do simpler castings such as those for the mining and
construction market. Also, high alloy and stainless steel castings generally
require more processing time and use of facilities than do carbon and low
alloy steel castings.

<TABLE>
<CAPTION>
                                                                                      TONS
                                                                                     SHIPPED
                                                                     ESTIMATED*     12 MONTHS
                                                                      ANNUAL           ENDED        ESTIMATED*
  MANUFACTURING       METALS CAST OR                                 CAPACITY         JUNE 30,       CAPACITY
      UNIT                FORGED           MAJOR APPLICATIONS       IN NET TONS         2000        UTILIZATION
-------------------  ----------------  -------------------------   ------------   ---------------  ------------
<S>                  <C>               <C>                         <C>            <C>              <C>
Atchison/St. Joe     Carbon, low       Mining and construction,       30,000          22,277          74.3%
Division              alloy and        rail, military, valve,
                      stainless        turbine and compressor
                      steel

Amite                Carbon and low    Marine, mining and
                      alloy steel       construction                  14,000            4,850         34.6%

Prospect             Gray and          Construction,
                      ductile iron     agricultural, trucking,        12,500            8,115         64.9%
                                       hydraulic, power
                                       transmission and machine
                                       tool

Quaker Alloy         Carbon, low       Pump and valve
                      alloy and                                        6,000            1,867         31.1%
                      stainless
                      steel

                                        15
<PAGE>

Canadian Steel       Carbon, low       Hydroelectric and steel
                     alloy and         mill                            6,000            1,995         33.3%
                     stainless steel


Kramer               Carbon, low       Pump impellers and
                     alloy and         casings                         1,450               858        59.2%
                     stainless
                     steel, gray
                     and ductile
                     iron

Empire               Carbon and low    Pump and valve
                     alloy steel                                       4,800             1,327        27.6%
                     and gray,
                     ductile and
                     nickel
                     resistant
                     iron

La Grange            Gray, ductile     Mining and construction
                     and compacted     and transportation             14,000             9,879        70.6%
                     graphite iron

G&C                  Gray and          Fluid power (hydraulic
                     ductile iron      control valves)                12,000             8,592        71.6%

LA Die Casting       Aluminum and      Communications,
                     zinc              recreation and computer        1,750              1,062        60.7%

Canada Alloy         Carbon, low       Power generation, pulp
                     alloy and         and paper machinery,           2,500              1,360        54.4%
                     stainless steel   pump and valve

Jahn                 Gray iron         Automotive, air
                                       conditioning and               11,000             5,643        51.3%
                                       agricultural

Inverness            Aluminum          Automotive, furniture
                                       and appliances                 12,500             8,680        69.4%

Forgemasters         Iron and Steel    Steel and aluminum
Rolls                                  rolling                        31,000            25,197        81.3%

Sheffield            Iron and Steel    Oil and gas, ingot,
Forgemasters                           petrochemical, power          113,000            30,266        26.8%
Engineering                            generation
Limited


Autun                Iron              Heating , domestic
                                       appliance and automotive       30,000          19,229          64.1%
                                       castings
                                                                   -------------  ---------------  ------------
        Totals                                                       302,500          151,197         50.0%
                                                                   =============  ===============  ============
</TABLE>

                                       16

<PAGE>


<TABLE>
<CAPTION>
                                                                                    MACHINING
                                                                                      HOURS
                                                                   ESTIMATED*       12 MONTHS
                                                                     ANNUAL           ENDED        ESTIMATED*
  MANUFACTURING          METALS                                    MACHINING         JUNE 30,       CAPACITY
       UNIT              MACHINED          MAJOR APPLICATIONS         HOURS             2000        UTILIZATION
-------------------  ----------------  -------------------------  -------------   ---------------  ------------
<S>                  <C>               <C>                        <C>             <C>              <C>
London Precision     Carbon, low       Mining and                    170,000         201,223         118.4%
                      alloy,           construction, rail,
                      stainless        military, valve,
                      steel, iron      turbine and compressor
                      and aluminum

                                                                   ------------   ---------------  ------------
        Totals                                                       170,000          201,223        118.4%
                                                                   ============   ===============  ============
</TABLE>

------

* Estimated annual capacity and utilization are based upon management's
estimate of the applicable manufacturing unit's theoretical capacity assuming
a certain product mix and assuming such unit operated five days a week, three
shifts per day and assuming normal shutdown periods for maintenance. Actual
capacities will vary, and such variances may be material, based upon a number
of factors, including product mix and maintenance requirements.

     RAW MATERIALS

     The principal raw materials used by the Company include scrap iron and
steel, aluminum, zinc, molding sand, chemical binders and alloys, such as
manganese, nickel and chrome. The raw materials utilized by the Company are
available in adequate quantities from a variety of sources. From time to time
the Company has experienced fluctuations in the price of scrap steel, which
accounts for approximately 4% of net sales, and alloys, which account for
less than 2% of net sales. The Company has generally been able to pass on the
increased costs of raw materials and has escalation clauses for scrap with
certain of its customers. As part of its commitment to quality, the Company
issues rigid specifications for its raw materials and performs extensive
inspections of incoming raw materials.

     QUALITY ASSURANCE

     The Company has adopted sophisticated quality assurance techniques and
policies which govern every aspect of its operations to ensure high quality.
During and after the casting process, the Company performs many tests,
including tensile, impact, radiography, ultrasonic, magnetic particle, dye
penetrant and spectrographic tests. The Company has long utilized statistical
process control to measure and control dimensions and other process
variables. Analytical techniques such as Design of Experiments and the
Taguchi Method are employed for troubleshooting and process optimization.

     As a reflection of its commitment to quality, the Company has been
certified by, or won supplier excellence awards from, substantially all of
its principal customers. Of 600 suppliers to General Motors' Electromotive
Division, the Company was the first supplier to receive the prestigious
Targets of Excellence award. Reflecting its emphasis on quality, the
Atchison/St. Joe Division was certified to ISO 9001 in August 1995, which
represents compliance with international standards for quality assurance.
Quaker Alloy, La Grange, Canada Alloy, Jahn Foundry, G & C, Inverness, London
Precision, Forgemasters Rolls and Canadian Steel have each been certified to
ISO 9002. Sheffield Forgemasters Engineering Ltd. ("Forgemasters
Engineering") has been certified to ISO 9001. Other ACC foundries are
preparing for ISO certification.

     EMPLOYEE AND LABOR RELATIONS

     As of March 31, 2001, the Company had approximately 4,000 full-time
employees. Since its inception, the Company has had two work stoppages. The
Company's hourly employees are covered

                                       17

<PAGE>

by collective bargaining agreements with several unions at seventeen of its
locations. These agreements expire at varying times over the next several
years. The following table sets forth a summary of the principal unions and
term of the principal collective bargaining agreements at the respective
locations in operation. The labor laws of France prevent the Company from
learning the number of employees in the union at Autun.

<TABLE>
<CAPTION>
                                                                                                                        APPROXIMATE
                                                                                                                         NUMBER OF
   MANUFACTURING                                                                                   DATE OF              MEMBERS (AS
       UNIT                     NAME OF PRINCIPAL UNION                   EFFECTIVE DATE          EXPIRATION            OF 3/31/01)
--------------------      -----------------------------------------    --------------------  ------------------  ----------------
<S>                          <C>                                          <C>                     <C>              <C>
      Atchison/St. Joe       United Steelworkers of America, Local              05/11/99             05/12/02              338
                             6943

      Prospect               Glass, Molders, Pottery,                           08/31/00             06/30/03              147
                             Plastics & Allied Workers
                             International, Local 63B

      Quaker Alloy           United Steelworkers of                             05/15/99             07/15/03              133
                             America, Local 7274

      Canadian Steel         Metallurgistes Unis                                02/12/96          In negotiation            77
                             d'Amerique, Local 6859

      Kramer                 United Steelworkers of                             07/29/00             07/29/03               81
                             America, Local 1343

      Empire                 United Steelworkers of                             03/01/97             02/28/02
                             America, Local 3178                                                                           104

      La Grange              Glass, Molders, Pottery,                           12/18/00             12/16/05              168
                             Plastics & Allied Workers
                             Union, Local 143

      La Grange              International Association of Machinists            12/18/00             12/21/05               15
                             and Aerospace Workers, Local 822

      G&C                    United Electrical, Radio and                       03/01/97             06/30/01              128
                             Machine Workers of America,
                             Local 714

      LA Die Casting         United Automobile, Aircraft,                       12/09/00             12/12/03               42
                             Agricultural Implement
                             Workers of America, Local 509

      Canada Alloy           United Steelworkers of                             04/04/97             04/03/02               77
                             America, Local 5699

      Jahn                   Glass, Molders, Pottery,                           06/01/98             06/03/01               78
                             Plastics and Allied Workers
                             International, Local 97

      Inverness              United Paperworker's International,                02/05/97             08/05/01              199
                             Local 7363
</TABLE>

                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                     APPROXIMATE
                                                                                                                      NUMBER OF
   MANUFACTURING                                                                                 DATE OF             MEMBERS (AS
       UNIT                     NAME OF PRINCIPAL UNION                 EFFECTIVE DATE          EXPIRATION           OF 3/31/01)
--------------------      -----------------------------------------   ------------------  ---------------------    ----------------
<S>                          <C>                                        <C>                    <C>                   <C>
      Sheffield              Steel and Industrial Managers                     1/1/00          In negotiation              4
       Forgemasters          Association
       Engineering
       Limited               Iron and Steel Trades Confederation               1/1/00          In negotiation             63

                             Electrical Engineering and plumbing               1/1/00          In negotiation             17
                             Trades Union

                             Manufacturing Science and Finance                 1/1/00          In negotiation             29

                             Trades Associated to Steel and                    1/1/00          In negotiation              4
                             Sheetmakers

                             Association of Professional and                   1/1/00          In negotiation              7
                             Executive Staff

                             General Municipal and Boilermakers                1/1/00          In negotiation             41

                             Allied Engineering and Electrical Union           1/1/00          In negotiation            128

                             Transport and General Workers Union               1/1/00          In negotiation              8

                             Amalgamated Metal and Steelworkers Union          1/1/00          In negotiation             10

                             Union of Construction, allied Trades and          1/1/00          In negotiation              3
                             Technicians

      Forgemasters           Amalgamated Engineering and Electrical
       Rolls                 Union
                             -        Sheffield                                1/1/00          In negotiation             79
                             -        Crewe                                    8/1/00              7/31/01               196
                             -        Coatbridge                               1/1/00          In negotiation             39

                             Iron and Steel Trades Confederation
                             -        Sheffield                                1/1/00          In negotiation              9

                             General and Municipal Workers Union
                             -        Sheffield                                1/1/00          In negotiation              1


                             Transport and General Workers Union
                             -        Sheffield                                1/1/00          In negotiation              3


                             Manufacturing Science and Finance
                             -        Crewe                                    8/1/00              7/31/01                19
                             -        Sheffield                                1/1/00          In negotiation              7


      London                 United Steelworkers of America, Local             8/31/00             8/31/04                81
       Precision             2699
</TABLE>


                                       19
<PAGE>


EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table sets forth certain information with respect to the
executive officers of the Company.

<TABLE>
<CAPTION>
NAME                                       AGE      POSITION WITH THE COMPANY
-----------------------------------------  -------  ------------------------------------------------------------
<S>                                        <C>      <C>
Hugh H. Aiken...........................     57     Chairman of the Board, President, Chief Executive Officer
                                                             and Director

Thomas K. Armstrong, Jr.................     47     Chief Operating Officer - North America

David Fletcher..........................     55     Vice President - Europe

John R. Kujawa..........................     47     Vice President - Large Steel Castings

Donald J. Marlborough...................     64     Vice President - Corporate Development

Kevin T. McDermed.......................     41     Vice President, Chief Financial Officer, Treasurer and
                                                             Secretary

James Stott.............................     59     Vice President
</TABLE>

     HUGH H. AIKEN has been the Chairman of the Board, President, Chief
Executive Officer and a Director since June 1991. From 1989 to 1991, Mr.
Aiken served as an Associate of Riverside Partners, Inc., an investment firm
located in Boston, Massachusetts, and from 1985 to 1989, Mr. Aiken served as
General Manager for AMP Keyboard Technologies, Inc., a manufacturer of
electromechanical assemblies located in Milford, New Hampshire. Mr. Aiken
previously served as a Director and Chief Operating Officer of COMNET
Incorporated and as a Director and Chief Executive Officer of General
Computer Systems, Inc., both public companies.

     THOMAS K. ARMSTRONG, JR. has been Chief Operating Officer - North
America since March 1999. From 1987 to 1999, Mr. Armstrong served as
President of Texas Steel Co., a Citation Corp. company. From 1979 to 1986,
Mr. Armstrong held positions at Texas Steel of Executive Vice President,
Information Systems and Engineering Manager. In addition, Mr. Armstrong
served as Chief Executive Officer of Southwest Steel Casting Corp., a Texas
Steel subsidiary, from 1984 through 1989. Mr. Armstrong began his career as
an engineer with E.I. DuPont from 1976 through 1979. From 1997 to 1999 he has
served as President of the Steel Founders' Society of America.

     DAVID FLETCHER has been Vice President and Chairman and CEO of Atchison
Casting UK Limited and the Sheffield Forgemasters Group since April 1998.
Prior to this he was Chief Executive Officer of the Sheffield Forgemasters
Group in Sheffield, England, having joined the group in 1986 as the main
board director responsible for the Engineering group of companies comprising
Forgemasters Steel & Engineering Limited, River Don Castings Limited, Forged
Rolls (UK) Limited and British Rollmakers Corporation. From 1977 to 1986, Mr.
Fletcher was Managing Director of various subsidiaries of the Aurora Group,
including Darwin Alloy Castings, Edgar Allen Foundry, Willen Metals and
Aurora Steels.

     JOHN R. KUJAWA has been Vice President - Large Steel Castings since
August 1999. Prior to this he was Vice President - Atchison/St. Joe and Amite
from November 1996 to August 1999 and Vice


                                       20
<PAGE>

President-Atchison/St. Joe from August 1994 to November 1996. He served as
Executive Vice President-Operations of the Company from July 1993 to August
1994, Vice President-Foundry of the Company from June 1991 to July 1993,
Assistant Foundry Manager of the Company from 1990 to 1991 and as Senior
Process Engineer of the Company from 1989 to 1990. He served as Operations
Manager for Omaha Steel Castings, a foundry in Omaha, Nebraska, from 1984 to
1989.

     DONALD J. MARLBOROUGH has been Vice President - Corporate Development
since September 2000. Prior to this he was Vice President - Iron Castings
from August 1999 to August 2000, Vice President-Canadian Steel, La Grange,
Canada Alloy and London Precision from November 1996 to August 1999, Vice
President-Corporate Development and Canadian Steel from December 1994 to
November 1996 and Vice President-La Grange from December 1995 to November
1996. From May 1991 to October 1994, Mr. Marlborough served as Vice
President-Manufacturing and Plant Manager for American Steel Foundries, a
foundry in Chicago, Illinois, and served as President and Director of
Manufacturing for Racine Steel Castings, a foundry in Racine, Wisconsin, from
1985 to June 1990.

     KEVIN T. MCDERMED has been Vice President, Chief Financial Officer and
Treasurer of the Company since June 1991 and has served as Secretary of the
Company since May 1992. He served as the Controller of the Company from 1990
to June 1991 and as its Finance Manager from 1986 to 1990. Mr. McDermed has
been with the Company since 1981.

     JAMES STOTT has been Vice President - Kramer since May 1998. He served
as Vice President - Empire, Kramer, Pennsylvania Steel and Quaker Alloy from
November 1996 to May 1998 and Vice President - Kramer from January 1995 to
November 1996. He has served as President, Chief Executive Officer and Chief
Operating Officer of Kramer International, Inc. (the predecessor of Kramer)
since 1980.

PRODUCT WARRANTY

     The Company warrants that every product will meet a set of
specifications, which is mutually agreed upon with each customer. The
Company's written warranty provides for the repair or replacement of its
products and excludes contingency costs. Often, the customer is authorized to
make the repair within a dollar limit, in order to minimize freight costs and
the time associated therewith. Although the warranty period is 90 days, this
time limit is not strictly enforced if there is a defect in the casting. In
fiscal 2000, warranty costs amounted to less than one percent of the
Company's net sales.

ENVIRONMENTAL REGULATIONS

     Companies in the foundry industry must comply with numerous federal,
state and local (and, with respect to Canadian, France and U.K. operations,
federal, provincial and local) environmental laws and regulations relating to
air emissions, solid waste disposal, stormwater runoff, landfill operations,
workplace safety and other matters. The Clean Air Act, as amended, the Clean
Water Act, as amended, and similar provincial, state and local counterparts
of these federal laws regulate air and water emissions and discharges into
the environment. The Resource Conservation and Recovery Act, as amended, and
the Comprehensive Environmental Response, Compensation and Liability Act, as
amended ("CERCLA"), among other laws, address the generation, storage,
treatment, transportation and disposal of solid and hazardous waste and
releases of hazardous substances into the environment, respectively. The
Company believes that it is in material compliance with applicable
environmental laws and regulations, other than violations or citations, the
resolution of which would not have a material adverse effect on the Company's
financial condition and results of operations.


                                       21
<PAGE>

     A Phase I environmental assessment of each of the Company's facilities
has been performed, and no significant or widespread contamination has been
identified at any Company facility. A Phase I assessment includes an
historical review, a public records review, a preliminary investigation of
the site and surrounding properties and the preparation and issuance of a
written report, but it does not include soil sampling or subsurface
investigations. There can be no assurance that these Phase I assessments have
identified, or could be expected to identify, all areas of contamination. As
the Company evaluates and updates the environmental compliance programs at
foundry facilities recently acquired, the Company may become aware of matters
of noncompliance that need to be addressed or corrected. In addition, there
is a risk that material adverse conditions could have developed at the
Company's facilities since such assessments. Groundwater testing confirmed
that solvent and metals contamination is migrating off of a property owned by
Inverness. Current estimates suggest that corrective action costs could be
approximately $400,000.

     The chief environmental issues for the Company's foundries are air
emissions and solid waste disposal. Air emissions, primarily dust particles,
are handled by dust collection systems. The Company anticipates that it will
incur additional capital and operating costs to comply with the Clean Air Act
Amendments of 1990 and the regulations that are in the process of being
promulgated thereunder. The Company is currently in the process of obtaining
permits under the new regulations and estimating the cost of compliance with
these requirements and the timing of such costs. Such compliance costs,
however, could have a material adverse effect on the Company's results of
operations and financial condition.

     The solid waste generated by the Company's foundries generally consists
of nonhazardous foundry sand that is reclaimed for reuse in the foundries
until it becomes dust. Nonhazardous foundry dust waste is then disposed of in
landfills, two of which are owned by the Company (one in Atchison County,
Kansas, and one in Myerstown, Pennsylvania). No other parties are permitted
to use the Company's landfills, which are both in material compliance with
all applicable regulations to the Company's knowledge. Costs associated with
the future closure of the landfills according to regulatory requirements
could be material. In the event a foundry generates waste that is identified
as hazardous, then a hazardous waste permit is obtained and the Company
complies in all material respects with its provisions for the collection,
storage and disposal of hazardous waste.

     The Company also operates pursuant to regulations governing work place
safety. The Company samples its interior air quality to ensure compliance
with OSHA requirements. To the Company's knowledge, it currently operates in
material compliance with all OSHA and other regulatory requirements governing
work place safety, subject to Jahn Foundry's compliance with the settlement
agreement with OSHA in connection with the industrial accident at Jahn
Foundry on February 25, 1999.

     The Company continues to evaluate its manufacturing processes and
equipment (including its recently acquired facilities) to ensure compliance
with the complex and constantly changing environmental laws and regulations.
Although the Company believes it is currently in material compliance with
such laws and regulations, the operation of casting manufacturing facilities
entails environmental risks, and there can be no assurance that the Company
will not be required to make substantial additional expenditures to remain in
or achieve compliance in the future.


                                       22
<PAGE>

ITEM 2.        PROPERTIES

     The Company's principal facilities are listed in the accompanying table,
together with information regarding their location, size and primary function.
The two landfills are used solely by the Company and contain nonhazardous
materials only, principally foundry sand. All of the Company's principal
facilities are owned.

     The following table sets forth certain information with respect to the
Company's principal facilities.

<TABLE>
<CAPTION>
                                                                                                 FLOOR SPACE IN
               NAME                         LOCATION                 PRINCIPAL USE                  SQ. FEET
------------------------------------   -------------------    -----------------------------    -------------------
<S>                                    <C>                    <C>                                <C>
Corporate Office                       Atchison, KS           Offices                                       3,907

Atchison Foundry                       Atchison, KS           Steel foundry                               451,218

Atchison Pattern Storage               Atchison, KS           Pattern storage                             159,711

St. Joe Machine Shop                   St. Joseph, MO         Machine shop                                142,676

Atchison Casting Landfill              Atchison, KS           Landfill for foundry sand                       N/A

Amite                                  Amite, LA              Steel foundry and machine                   339,000
                                                              shop

Prospect                               Minneapolis, MN        Iron foundry                                133,000

Quaker Alloy                           Myerstown, PA          Steel foundry & landfill                    301,000
                                                              for foundry sand

Canadian Steel                         Montreal, Quebec       Steel foundry                               455,335

Kramer                                 Milwaukee, WI          Steel foundry                                23,000

Empire                                 Reading, PA            Iron and steel foundry                      177,000

La Grange                              La Grange, MO          Iron foundry                                189,000

G & C                                  Sandusky, OH           Iron foundry                                111,000

LA Die Casting                         Los Angeles, CA        Aluminum and zinc die                        35,000
                                                              casting

Canada Alloy                           Kitchener, Ontario     Steel foundry                                83,000

Pennsylvania Steel                     Hamburg, PA            Steel foundry (closed)                      158,618

Jahn Foundry                           Springfield, MA        Iron foundry                                207,689
</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
                                                                                                 FLOOR SPACE IN
               NAME                         LOCATION                 PRINCIPAL USE                  SQ. FEET
------------------------------------   -------------------    -----------------------------    -------------------
<S>                                    <C>                    <C>                                <C>
PrimeCast                              South Beloit, IL       Iron foundry(closed)                        325,000
                                       and Beloit, WI

Inverness                              Dowagiac, MI           Aluminum die casting                        210,900

Forgemasters Rolls                     Sheffield and          Iron and steel foundry                      694,306
                                       Crewe, England         and machine shop
                                       and Coatbridge,
                                       Scotland

Forgemasters Engineering               Sheffield, England     Iron and steel foundry,                   1,181,277
                                                              forge and machine shop

Claremont                              Claremont, NH          Steel Foundry (closed)                      110,000

London Precision                       London, Ontario        Machine Shop                                 63,000

Autun                                  Autun, France          Iron foundry                                376,600
</TABLE>


                                       24
<PAGE>


     ITEM 3.   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, for (i) 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 financial 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., 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.


                                       25
<PAGE>

       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 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.

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

         None



                                       26
<PAGE>

                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND
          RELATED STOCKHOLDER MATTERS.

                           PRICE RANGE OF COMMON STOCK

     The Common Stock is traded on the New York Stock Exchange under the
symbol "FDY." The following table sets forth the high and low sales prices
for the shares of Common Stock on the New York Stock Exchange for the periods
indicated.

<TABLE>
<CAPTION>
                                                                                     HIGH        LOW
                                                                                     ----        ----
<S>                                                                                  <C>         <C>
FISCAL YEAR ENDING JUNE 30, 1999:
First Quarter..........................................................              18 1/2       9 1/2
Second Quarter.........................................................              10           8 3/8
Third Quarter..........................................................              10 15/16     7 7/8
Fourth Quarter.........................................................              12 1/8       7 1/2


FISCAL YEAR ENDING JUNE 30, 2000:
First Quarter..........................................................              11 3/8       8 11/16
Second Quarter.........................................................              11           8 1/2
Third Quarter..........................................................               9 1/8       6 9/16
Fourth Quarter.........................................................               8 5/16      5 11/16


FISCAL YEAR ENDING JUNE 30, 2001:
First Quarter..........................................................                6 3/4      3
Second Quarter.........................................................                4 15/16    2 7/16
Third Quarter..........................................................                4          2 5/8
Fourth Quarter (through April 17, 2001).................................               3.20       2.25
</TABLE>



     As of April 17, 2001, there were over 2,200 holders of the Common Stock,
including shares held in nominee or street name by brokers.

                                 DIVIDEND POLICY

     The Company has not declared or paid cash dividends on shares of its
Common Stock. The Company does not anticipate paying any cash dividends or
other distributions on its Common Stock in the foreseeable future. The
current policy of the Company's Board of Directors is to reinvest all
earnings to finance the expansion of the Company's business. The agreements
governing the Company's credit facility and $20 million senior notes contain
limitations on the Company's ability to pay dividends. See Note 10 to the
consolidated financial statements.

                      UNREGISTERED SECURITIES TRANSACTIONS

     In lieu of cash compensation for services rendered in their capacity, as
Directors of the Company, Mr. David Belluck, Mr. Ray Witt, Mr. John Whitney
and Mr. Stuart Uram were each provided at their election 2,314 shares of
common stock on August 3, 1999, with a then-current market value of $9.91 per
share. Mr. David D. Colburn and Messrs. Belluck, Witt and Uram were each
provided at their election 5,545, 2,783, 4,174, 4,174 shares, respectively,
of common stock on August 9, 2000, with a

                                       27

<PAGE>

then-current market value of $5.99 per share. Such transactions were exempt
from registration under the Securities Act of 1993, as amended (the "Act"),
pursuant to Section 4(2) of the Act.

ITEM 6.   SELECTED FINANCIAL DATA

     The following table contains certain selected historical consolidated
financial information and is qualified by the more detailed Consolidated
Financial Statements and Notes thereto included elsewhere in this Annual
Report on Form 10-K/A. The information below should be read in conjunction
with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Annual Report on Form 10-K/A.

                                       28

<PAGE>

<TABLE>
<CAPTION>
                                                                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                  -------------------------------------------------------------------------
                                                                          FISCAL YEAR ENDED JUNE 30,
                                                  -------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:                                         1997         1998          1999             2000
                                                                       AS           AS            AS               AS
                                                      1996          RESTATED(1)  RESTATED(1)   RESTATED(1)      RESTATED(1)
                                                    ---------       ----------   -----------   -----------      -----------
<S>                                                 <C>             <C>          <C>           <C>              <C>
Net Sales .......................................   $ 185,081        $ 245,769    $ 373,107    $ 477,405        $ 461,137

Cost of Sales ...................................     156,612          205,480      322,002      417,816          419,299
                                                    ---------        ---------    ---------    ---------        ---------
     Gross Profit ...............................      28,469           40,289       51,105       59,589           41,838

  Operating Expenses:

     Selling, General & Administrative ..........      15,459           21,559       28,846       45,290           44,526

     Impairment Charges .........................          --               --           --           --           16,414(4)

     Amortization of Intangibles ................       1,508              632          850          544             (408)

     Other Income ...............................     (26,957)(2)           --           --       (2,750)(3)         (606)(5)
                                                    ---------        ---------    ---------    ---------        ---------
     Operating Income (Loss) ....................      38,459           18,098       21,409       16,505          (18,088)

 Interest Expense ...............................       2,845            3,227        3,896        8,352            9,452

 Minority Interest in Net Income of Subsidiaries.         225              270          448          237               66
                                                    ---------        ---------    ---------    ---------        ---------
     Income (Loss) Before Taxes .................      35,389           14,601       17,065        7,916          (27,606)

 Income Taxes ...................................      14,063            6,100        6,823        4,844          (15,927)
                                                    ---------        ---------    ---------    ---------        ---------
     Net Income (Loss) ..........................   $  21,326        $   8,501    $  10,242        $3072        ($ 11,679)
                                                    ---------        ---------    ---------    ---------        ---------
Earnings (Loss) Per Share:

   Basic ........................................   $    3.87        $    1.47    $    1.25    $    0.39        ($   1.53)
                                                    =========        =========    =========    =========        =========
   Diluted ......................................   $    3.87        $    1.46    $    1.25    $    0.39        ($   1.53)
                                                    =========        =========    =========    =========        =========

Weighted Average Number of  Common and
Equivalent Shares Outstanding

   Basic ........................................   5,510,410        5,796,281    8,167,285    7,790,781        7,648,616

   Diluted ......................................   5,516,597        5,830,695    8,218,686    7,790,781        7,648,616

SUPPLEMENTAL DATA:

 Depreciation and Amortization ..................  $    7,411       $    8,667   $   11,695   $   13,416       $   14,198

 Capital Expenditures ...........................      12,740           13,852       17,868       17,899           20,531

 Number of Operating Plants at Period End                   9               13           17           19               19

BALANCE SHEET DATA (AT PERIOD END):

 Working Capital ................................  $   36,419       $   56,061   $   73,755    $   78,932          $ 5,730

 Total Assets ...................................     162,184          211,482      340,981       361,114          342,423

 Long-Term Obligations ..........................      34,655           27,758       87,272       104,607           36,691

 Total Stockholders' Equity (7)..................      74,654          121,504      131,864       128,585          114,333
</TABLE>


                                       29
<PAGE>

(1)  As restated. See "Item 7. Management's Discussion and Analysis of Financial
     Condition and Results of Operations - Restatement of Financial Results" and
     Note 25 to the consolidated financial statements for a summary of the
     significant effects of the restatement.

(2)  Other income consists of $27.0 million ($16.2 million, net of tax or $2.95
     per share), consisting primarily of insurance proceeds related to the July
     1993 Missouri River flood.

(3)  Other income consists of a $3.5 million ($2.1 million, net of tax or $0.27
     per share) gain resulting from a revision to the flood damage
     reconstruction reserve, partially offset by a charge of $750,000 ($450,000,
     net of tax or $0.06 per share) recorded in connection with an industrial
     accident that occurred on February 25, 1999 at Jahn Foundry.

(4)  Impairment charges consists of a $3.4 million ($2.1 million, net of tax
     or $0.28 per share) charge relating to the Company's planned closure of
     Claremont Foundry, Inc. ("Claremont"), $6.9 million ($4.3 million, net of
     tax or $0.56 per share) charge relating to an impairment of long-lived
     assets at PrimeCast, Inc., a $3.4 million ($2.1 million, net of tax or
     $0.28 per share) charge relating to the impairment of long-lived assets
     at Pennsylvania Steel Foundry & Machine Company and a $2.7 million ($2.7
     million, net of tax or $0.35 per share) charge relating to an impairment
     of goodwill at Empire Steel Castings, Inc.

(5)  Other income consists primarily of gains of $1.1 million ($650,000, net of
     tax) on the termination of interest rate swap agreements.

(6)  Includes a $7.8 million, or $1.02 per share, deferred income tax benefit
     relating to the resolution of the Company's tax treatment of certain flood
     insurance proceeds received in fiscal 1995 and 1996.

(7)  There have been no cash dividends paid during fiscal year 1996 through
     2000.

                                       30

<PAGE>


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

GENERAL

     Prior to fiscal 2000, the Company pursued an active acquisition program
designed to take advantage of consolidation opportunities in the widely
fragmented foundry industry. The Company has acquired nineteen foundries
since its inception. As a result of these completed transactions as well as
internal growth, the Company's net sales have increased from approximately
$54.7 million for its first full fiscal year ended June 30, 1992 to $461.1
million for the fiscal year ended June 30, 2000.

     The Company did not make any acquisitions in fiscal 2000 and is not
currently contemplating any acquisitions in fiscal 2001. The Company's
primary focus in fiscal 2001 will be on the integration and improvement of
existing operations.

     Due to the large size of certain orders, the timing for deliveries of
orders and the number and types of castings produced, the Company's net sales
and net income may fluctuate materially from quarter to quarter. Generally,
the first fiscal quarter is seasonally weaker than the other quarters as a
result of plant shutdowns for maintenance at most of the Company's foundries
as well as at many customers' plants. See "Supplemental Quarterly
Information."

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.

     As discussed in Notes 2 and 3 to the consolidated financial statements,
management considered the operating losses at PFG, recently discovered as a
result of the investigation, as a primary indication of impairment and has
concluded that certain asset impairment charges ($4.8 million, after tax)
would have been taken in fiscal year 2000 had actual operating and financial
information been known at that time. Accordingly, the restated amounts
presented below include amounts for such impairment charges related to
Pennsylvania Steel and Empire Steel. Additionally, in conjunction with the
restatement of the 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 as of June 30, 2000
and June 30, 1999 and for the fiscal years ended June 30, 2000, June 30, 1999
and June 30, 1998 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 25 to the consolidated financial
statements, and an overview is presented below. Additionally, Management's
Discussion and Analysis of Financial Condition and Results of Operations has
been revised for the effects of the restatement.

     For the fiscal year ended June 30, 2000, the previously reported
consolidated financial statements primarily included an overstatement of
sales by $7.2 million, an understatement of cost of sales by $4.5 million and
an understatement of selling, general and administrative expense ("SG&A") by
$1.4 million. Also included in the restated results are approximately $6.2
million of charges related to the impairment of long-lived assets at
Pennsylvania Steel and the write-down of goodwill at Empire Steel. The impact
of these adjustments to reported operating results for the fiscal year ended
June 30, 2000 was to overstate gross profit by $11.7 million, operating
income by $19.3 million, net income by $14.1 million and diluted earnings per
share by $1.85.

                                       31

<PAGE>

     For the fiscal year ended June 30, 1999, the previously reported
consolidated financial statements primarily included an understatement of
sales by $1.8 million, an understatement of cost of sales by $10.0 million
and an understatement of SG&A expense by $608,000. The impact of these
adjustments to reported operating results for the fiscal year ended June 30,
1999 was to overstate gross profit by $8.2 million, operating income by $8.8
million, net income by $6.7 million and diluted earnings per share by $0.87.

     For the fiscal year ended June 30, 1998, the previously reported
consolidated financial statements primarily included an overstatement of
sales by $661,000 and an understatement of cost of sales by $3.7 million. The
impact of these adjustments to reported operating results for the fiscal year
ended June 30, 1998 was to overstate gross profit and operating income by
$4.4 million, net income by $2.5 million and diluted earnings per share by
$0.30.

     For the fiscal year ended June 30, 1997, the previously reported
consolidated financial statements primarily included an understatement of
cost of sales by $2.1 million. The impact of these adjustments to reported
operating results for the fiscal year ended June 30, 1997 was to overstate
gross profit and operating income by $2.1 million, net income by $1.2 million
and diluted earnings per share by $0.21.

     The Company expects to file its quarterly reports on Form 10-Q for the
quarters ended September 30, 2000 and December 31, 2000 as soon as
practicable. The Company expects to file its quarterly report on Form 10-Q
for the quarter ended March 31, 2001 on a timely basis.

RESULTS OF OPERATIONS

     The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Consolidated
Financial Statements and Notes thereto and other financial information
included elsewhere in this Report.

FISCAL YEAR ENDED JUNE 30, 2000 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1999

     Net sales for fiscal 2000 were $461.1 million, representing a decrease
of $16.3 million, or 3.4%, from net sales of $477.4 million in fiscal 1999.
The operations acquired by the Company since September 1, 1998 generated net
sales of $26.4 million and $39.2 million in fiscal 1999 and fiscal 2000,
respectively, as follows:

<TABLE>
<CAPTION>
                                                        Date              FY 1999            FY 2000
      Operation                                       Acquired           Net Sales           Net Sales
     -------------------------------------------  -----------------   -----------------  ------------------
                                                                        (In millions)      (In millions)
<S>                                               <C>                 <C>                <C>
      London Precision.........................       09/01/98              $21.9               $21.5
      Autun....................................       02/25/99                4.5                17.7
</TABLE>

     Excluding net sales attributable to the operations acquired since
September 1, 1998, net sales for fiscal 2000 were $421.9 million,
representing a decrease of $29.1 million, or 6.5%, from net sales of $451.0
million in fiscal 1999. This 6.5% decrease in net sales was due primarily to
decreases in net sales to the offshore oil and gas, steel, mining and power
generation markets, partially offset by increases in net sales to the
military markets. Net sales of Sheffield Forgemasters Group Limited
("Sheffield") for fiscal 2000 decreased $18.0 million from net sales in
fiscal 1999. 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.
Through fiscal 2000, PrimeCast has aggressively worked at replacing the
volume lost from Beloit Corporation, 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

                                       32

<PAGE>

subsequently ceased operations. For fiscal 2000, PrimeCast's net sales were
$24.5 million compared to net sales of $27.5 million in fiscal 1999. Included
in this $3.0 million decrease was a $3.8 million decrease in net sales to
Beloit Corporation.

     Gross profit for fiscal 2000 decreased by $17.8 million, or 29.9%, to
$41.8 million, or 9.1% of net sales, compared to $59.6 million, or 12.5% of
net sales, for fiscal 1999. 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 mining, offshore oil and gas, power generation and steel markets. The
largest impact of these weak market conditions was at Sheffield, where its
gross profit for fiscal 2000 decreased by $10.2 million to $10.2 million, or
8.9% of net sales, compared to $20.4 million, or 15.4% of net sales, in
fiscal 1999.

     The bankruptcy of a major customer at PrimeCast and, with a lesser
impact, the loss of a major customer at Claremont Foundry, Inc. ("Claremont")
have also had a negative effect on gross profit. Lower sales volume, coupled
with the costs of developing new customers and training employees on new work
has resulted in lower gross profits at these operations. PrimeCast's gross
profit for fiscal 2000 decreased by $2.4 million to a gross loss of $582,000,
compared to a gross profit of $1.8 million for fiscal 1999. Claremont's gross
profit in fiscal 2000 was a loss of $1.5 million on net sales of $4.0
million, compared to a loss of $1.0 million on net sales of $7.1 million in
fiscal 1999. The Company closed Claremont, and transferred much of the work
to other Company operations. The Company completed the closure of PrimeCast
by March 31, 2001. As PrimeCast was the Company's only foundry that could
produce large iron castings, only a portion of PrimeCast's work can be
transferred to other operations of the Company.

     Lower net sales to the energy and utility markets at the Company's
Pennsylvania steel foundries also had a negative effect on gross profit.
Pennsylvania Steel's gross profit for fiscal 2000 decreased by $1.0 million
to a gross loss of $3.7 million, compared to a gross loss of $2.7 million
from fiscal 1999. Empire Steel's gross profit from fiscal 2000 decreased by
$1.9 million to a gross loss of $1.7 million, compared to a gross profit of
$197,000 for fiscal 1999. On November 30, 2000, the Company announced plans
to close Pennsylvania Steel. The closure was completed by February 28, 2001.
Much of Pennsylvania Steel's work was transferred to the Company's other two
Pennsylvania steel foundries.

     During fiscal 2000, the Company's reserve for warranty expense decreased
to $9.8 million at June 30, 2000 from $11.8 million at June 30, 1999.
Warranty expense recorded by the Company in fiscal 2000 was a credit to
income of $685,000 compared to a credit to income of $1.7 million in fiscal
1999. The decrease in the warranty reserve during fiscal 2000 primarily
related to the Company's Sheffield subsidiary located in the United Kingdom.
The Company maintains reserves for warranty charges based on specific claims
made by customers, for which management estimates a final settlement of the
claim, and for expected claims not yet received. The estimate for claims not
yet received is based on historical results and is estimated monthly. During
fiscal 2000, the Company's warranty reserve requirement and related expense
declined primarily due to the resolution of specific warranty claims with
three different customers whose products were replaced or determined by the
customer to be satisfactory.

     During fiscal 2000, the Company's reserve for workers' compensation and
employee health care increased to $3.8 million at June 30, 2000 from $3.2
million at June 30, 1999. Workers' compensation and employee health care
expense was $17.4 million for fiscal 2000, compared to $14.6 million in
fiscal 1999, primarily reflecting higher health care costs. The increase in
the reserve for workers' compensation and employee health care primarily
reflects changes in the amount and timing of actual payments.

                                       33

<PAGE>

     Selling, general and administrative expense ("SG&A") for fiscal 2000 was
$44.5 million, or 9.7% of net sales, compared to $45.3 million, or 9.5% of
net sales, in fiscal 1999. The decrease in SG&A was primarily attributable to
the consolidation of four operating units into two at Sheffield, partially
offset by expenses associated with Fonderie d'Autun ("Autun"), which was
acquired on February 25, 1999.

     Amortization of certain intangibles for fiscal 2000 was $1.5 million, or
0.3% of net sales, compared to $1.4 million, or 0.3% of net sales, in fiscal
1999. The intangible assets consist of goodwill recorded in connection with
certain of the Company's acquisitions. 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 Autun. The amortization of negative
goodwill was a credit to income in fiscal 2000 of $1.9 million, or 0.4% of
net sales, as compared to $870,000, or 0.2% of net sales, in fiscal 1999.

     Impairment charges for fiscal 2000 were $16.4 million. This $16.4
million reflects a $3.4 million charge relating to the Company's closure of
Claremont and a $6.9 million fixed asset impairment charge at PrimeCast, a
$3.4 million charge relating to the fixed asset impairment charge at
Pennsylvania Steel and a $2.7 million charge relating to an impairment of
goodwill at Empire Steel.

     Other income for fiscal 2000 primarily consisted of non-recurring gains
of $1.1 million on the termination of interest rate swap agreements. Other
income for fiscal 1999 was $2.8 million. Following the July 1993 Missouri
River flood, the Company established a reserve to repair long-term damage
caused by the flood to the Company's plant. During fiscal 1999, the Company
revised this estimate downward resulting in a non-recurring gain of $3.5
million. Partially offsetting this 1999 gain was a charge of $750,000 related
to an industrial accident at Jahn Foundry Corp. ("Jahn Foundry") (see
Liquidity and Capital Resources).

     During 2000, the Board of Directors committed to a plan for the closure
of Claremont due to continued operating losses. The Company recorded a charge
of $3.4 million primarily to reduce the carrying value of the Claremont fixed
assets to estimated fair value. The Company transferred as much work as
possible to other ACC foundries by November 30, 2000 and closed the plant.
The Company terminated approximately 45 employees and recognized a charge for
severance benefits of approximately $113,000 in the quarter ended September
30, 2000.

     On July 1, 1997, a newly formed subsidiary of the Company, PrimeCast,
acquired the foundry division of Beloit Corporation ("Beloit") for $8.2
million. Simultaneous with the purchase, PrimeCast entered a five-year supply
agreement to supply castings to Beloit. As a captive supplier, historically
over 40% of this operation's sales had been to Beloit. In June 1999, Beloit
declared bankruptcy, in combination with the bankruptcy of its parent,
Harnischfeger Industries. Beloit continued to operate in bankruptcy, and the
court granted Beloit's request to re-instate the five-year casting supply
agreement. In February 2000, Beloit was sold at auction, in parts.
Expectations were that the new owners would continue to operate the former
Beloit business which PrimeCast primarily served. This business consisted
primarily of paper mill equipment and was located in Beloit, Wisconsin.
However, ultimately these parts of the former Beloit were closed, resulting
in the elimination of this work for PrimeCast, and the termination of the
five-year supply agreement. These events have caused PrimeCast to operate at
a substantial loss, due to much lower production volume and a less profitable
mix of work. As a result, the carrying value of PrimeCast's long-lived assets
have been determined to be impaired. The Company recorded an impairment
charge of $6.9 million relating to the fixed assets at PrimeCast. Following
continued losses in the first half of fiscal 2001, the Company announced on
January 23, 2001 plans to close PrimeCast. The closure was completed by March
31, 2001. 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
ACC locations. The

                                       34

<PAGE>

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

     The Company acquired Quaker Alloy, Empire Steel and Pennsylvania Steel
on June 1, 1994, February 1, 1995 and October 31, 1996, respectively. Each
primarily serves the energy and utility markets. The operations and
management of these three Pennsylvania steel foundries were subsequently
combined to achieve operating and marketing synergies. The three locations
were marketed as the Pennsylvania Foundry Group. Following the discovery of
the accounting irregularities, which revealed substantial operating losses at
each of the three operations, the Company evaluated each operation for
potential impairment. As a result, the carrying value of certain of
Pennsylvania Steel's and Empire Steel's long-lived assets have been
determined to be impaired. The Company recorded, in the fourth quarter of
fiscal 2000, a charge of $6.2 million primarily to reduce the carrying value
of the fixed assets of Pennsylvania Steel to estimated fair value and to
write-off the impaired value of goodwill at Empire Steel. On November 30,
2000, the Company announced plans to close Pennsylvania Steel. The closure
was completed by February 28, 2001. Much of the work was transferred to the
remaining two locations. The Company terminated approximately 75 employees
and will recognize a charge for severance benefits of approximately $20,000
in the quarter ended March 31, 2001.

     Interest expense for fiscal 2000 increased to $9.5 million, or 2.0% of
net sales, from $8.4 million, or 1.7% of net sales, in fiscal 1999. The
increase in interest expense primarily reflects higher average interest rates
on the Company's outstanding indebtedness.

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

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

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

     Excluding this $7.8 million deferred income tax benefit, the income tax
benefit for fiscal 2000 reflected an effective rate of approximately 29%,
which is lower than the combined federal, state and provincial statutory rate
primarily due to the impact of nondeductible goodwill and foreign dividends.

                                       35

<PAGE>

Income tax expense for fiscal 1999 reflected an effective rate of approximately
59%. 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.

     As a result of the foregoing, net income decreased from $3.1 million in
fiscal 1999 to a net loss of $11.7 million in fiscal 2000.

FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998

     Net sales for fiscal 1999 were $477.4 million, representing an increase of
$104.3 million, or 28.0%, over net sales of $373.1 million in fiscal 1998. The
operations acquired by the Company since October 6, 1997 generated net sales of
$80.8 million and $213.8 million in fiscal 1998 and fiscal 1999, respectively,
as follows:

<TABLE>
<CAPTION>

                                                            Date             FY 1998           FY 1999
      Operation                                           Acquired          Net Sales         Net Sales
     -----------------------------------------------  ----------------  -----------------  ----------------
                                                                          (In millions)     (In millions)
<S>                                                   <C>               <C>                <C>
      Inverness....................................       10/06/97            $41.9            $ 48.1
      Sheffield....................................       04/06/98             37.6             132.2
      Claremont....................................       05/01/98              1.3               7.1
      London Precision.............................       09/01/98               --              21.9
      Autun........................................       02/25/99               --               4.5

</TABLE>

     Excluding net sales attributable to the operations acquired since October
6, 1997, net sales for fiscal 1999 were $263.6 million, representing a decrease
of $28.7 million, or 9.8%, from net sales of $292.3 million in fiscal 1998. This
9.8% decrease in net sales was due primarily to decreases in net sales to the
offshore oil and gas, steel, mining, power generation, agriculture and
petrochemical markets, partially offset by an increase in net sales to the rail
market.

     Gross profit for fiscal 1999 increased by $8.5 million, or 16.6%, to $59.6
million, or 12.5% of net sales, compared to $51.1 million, or 13.7% of net
sales, for fiscal 1998. The increase in gross profit was primarily due to
increased sales volume levels resulting from the acquisitions of Sheffield and
London Precision Machine and Tool Ltd. ("London Precision"). The contribution
from London Precision and improved results at Amite Foundry and Machine, Inc.
("Amite") due to increased sales volume levels, improved productivity and
reduced employee turnover and training positively impacted gross profit as a
percentage of net sales.

     Offsetting these factors were: (i) decreased absorption of overhead
resulting from lower net sales to the offshore oil and gas, mining, steel, power
generation, petrochemical and agricultural markets, (ii) delays in the scheduled
delivery of orders by customers in the mining, construction and rail markets,
(iii) continued productivity and scrap problems at Inverness Castings Group,
Inc. ("Inverness") and Claremont, (iv) increased warranty costs at Canada Alloy
Castings, Ltd. ("Canada Alloy") and (v) increased training costs, higher
employee turnover and increased overtime due to the generally tight labor
markets. In addition, gross profit as a percentage of net sales was impacted by
(i) reduced productivity and excessive overtime due to power curtailments under
the Company's interruptible electricity contracts resulting from the extreme
heat during the first quarter and (ii) higher plant maintenance shutdown costs
at Atchison/St. Joe and Prospect Foundry, Inc. ("Prospect").

     During fiscal 1999, the Company's reserve for warranty expense decreased to
$11.8 million at June 30, 1999 from $16.3 million at June 30, 1998. Warranty
expense recorded by the Company was


                                  36
<PAGE>


a credit to income of $1.7 million in fiscal 1999 compared to expense of
$900,000 in fiscal 1998. The decrease in both the warranty reserve and
warranty expense during fiscal 1999 primarily related to the Company's
Sheffield subsidiary located in the United Kingdom. The Company maintains
reserves for warranty charges based on specific claims made by customers, for
which management estimates a final settlement of the claim, and for expected
claims not yet received. The estimate for claims not yet received is based on
historical results and is estimated monthly. During fiscal 1999, the
Company's estimated reserve requirement and related expense declined
primarily due to 1) an overall improvement in Sheffield's claim experience
over the prior year and 2) a decline in sales volume resulting in a reduced
estimate of claims not yet received. Sheffield's customer claims experience
as a percentage of sales declined from 2.9% in fiscal 1998 to 2.2% in fiscal
1999. Sheffield's net sales for fiscal 1999 were $132.2 million, representing
a decrease of $24.0 million, or 15.4%, from net sales of $156.2 million for
the twelve months ended June 30, 1998. In addition, two specific customer
claims included in the reserve at June 30, 1998 were withdrawn by the
customer in fiscal 1999, as the products were determined to be satisfactory.
This resulted in an adjustment to the reserve, and a reduction in warranty
expense, of approximately $800,000.

     During fiscal 1999, the Company's reserve for workers' compensation and
employee health care decreased to $3.2 million at June 30, 1999 from $4.1
million at June 30, 1998. Workers' compensation and employee health care expense
was $14.6 million for fiscal 1999, compared to $12.7 million in fiscal 1998, of
which $1.2 million of the increase was associated with operations acquired by
the Company since October 1997. The decrease in the reserve for workers'
compensation and employee health care primarily reflects changes in the amount
and timing of actual payments.

     SG&A for fiscal 1999 was $45.3 million, or 9.5% of net sales, compared to
$28.8 million, or 7.7% of net sales, in fiscal 1998. The increase in SG&A was
primarily attributable to expenses associated with the operations acquired by
the Company in fiscal 1998 and fiscal 1999. The increase in SG&A as a percentage
of net sales was primarily due to higher average SG&A as a percentage of net
sales at Sheffield.

     Other income for fiscal 1999 was $2.8 million. Following the July 1993
Missouri River flood, insurance proceeds related to property damage were
reserved for estimated future repairs to the plant. During the fourth quarter,
the Company revised this estimate downward resulting in a non-recurring gain of
$3.5 million. Partially offsetting this gain was a charge of $750,000 related to
an industrial accident at the Company's subsidiary, Jahn Foundry (see Liquidity
and Capital Resources).

     Amortization of certain intangibles for fiscal 1999 was $1.4 million or
0.3% of net sales, compared to $1.1 million, or 0.3% of net sales, in fiscal
1998. The intangible assets consist of goodwill recorded in connection with
certain of the Company's acquisitions. 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 and Autun. The
amortization of negative goodwill was a credit to income in fiscal 1999 of
$870,000, or 0.2% of net sales, as compared to $257,000, or 0.1% of net sales,
in fiscal 1998.

     Interest expense for fiscal 1999 increased to $8.4 million, or 1.7% of net
sales, from $3.9 million, or 1.0% of net sales, in fiscal 1998. The increase in
interest expense primarily reflects an increase in the average amount of
outstanding indebtedness during fiscal 1999 primarily incurred to finance the
Company's acquisitions.

     Income tax expense for fiscal 1999 and fiscal 1998 reflected the combined
federal, state and provincial statutory rate of approximately 59% and 39%,
respectively, which differs from the combined federal, state and provincial
statutory rate primarily due to the impact of nondeductible


                                   37
<PAGE>


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.

     As a result of the foregoing, net income decreased from $10.2 million in
fiscal 1998 to $3.1 million in fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has historically financed operations with internally generated
funds, proceeds from the sale of senior notes and available borrowings under its
bank credit facilities. Cash provided by operating activities for fiscal 2000
was $15.0 million, an increase of $9.6 million from fiscal 1999. This increase
was primarily attributable to advances by the Company's insurance carrier
against the claim relating to the industrial accident at Jahn Foundry. (See
below)

     Working capital was $5.7 million at June 30, 2000, as compared to $78.9
million at June 30, 1999. The decrease in working capital primarily reflects the
classification of $72.8 million of the Company's bank credit facility, term loan
and senior notes with an insurance company as current at June 30, 2000. The
Company has not been in compliance with certain financial covenants under the
Credit Agreement or Note Purchase Agreement and, accordingly, such amounts have
been classified as current liabilities.

     During fiscal 2000, the Company made capital expenditures of $20.5 million,
as compared to $17.9 million for fiscal 1999. Included in fiscal 2000 were
capital expenditures of $7.7 million to rebuild the shell molding area and
boiler room damaged in the industrial accident on February 25, 1999 at Jahn
Foundry (see below) and $2.7 million to expand Autun's product line capabilities
in the manufacture of gray and ductile iron castings. Included in fiscal 1999
were capital expenditures of $2.1 million on upgrading the 1,500 ton forging
press to 2,500 tons at Sheffield. The balance of capital expenditures in both
periods were used for routine projects at each of the Company's facilities. The
Company now expects to make approximately $12.0 million of capital expenditures
during fiscal 2001.

     As described above, the Company has closed Pennsylvania Steel. Much of
Pennsylvania Steel's work was transferred to the remaining two locations of the
Pennsylvania Foundry Group.

     The Company has also closed PrimeCast as described above in more detail. 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 October 7, 1998, the Company and its lenders entered into the First
Amendment to the Amended and Restated Credit Agreement (the "Credit Agreement").
At that time, the Credit Agreement consisted of a $40 million term loan and a
$70 million revolving credit facility. This amendment permitted the Company to
repurchase up to $24 million of its common stock, subject to a limitation of $10
million in any fiscal year unless certain financial ratios were met, and
provided for an option to increase the revolving portion of the credit facility
to $100 million if the Company issued senior subordinated notes. Proceeds from
the issuance of any senior subordinated notes must be used to permanently
pre-pay the $40 million term loan portion of the credit facility.

     On April 23, 1999, the Company and its lenders entered into the Second
Amendment to the Credit Agreement. This amendment provided that the Company
maintain a ratio of earnings before interest, taxes and amortization to fixed
charges ("Fixed Charge Coverage Ratio") of at least 1.10 increasing to 1.25 on
March 31, 2000 and 1.50 on March 31, 2001. The Second Amendment also


                                   38
<PAGE>


provided that the Company must maintain a ratio of total senior debt to
earnings before interest, taxes, amortization and depreciation ("Cash Flow
Leverage Ratio") of not more than 3.2 prior to the issuance by the Company of
any subordinated debt, and not more than 3.0 after the issuance of any
subordinated debt. In addition, the Second Amendment provided that the
Company may not make acquisitions prior to May 1, 2000 and, from and after
May 1, 2000, the Company may not make acquisitions unless the Fixed Charge
Coverage Ratio is at least 1.50, among other existing restrictions. The
Second Amendment also provided that loans under the revolving portion of this
credit facility would bear interest at fluctuating rates of either: (i) the
agent bank's corporate base rate or (ii) LIBOR plus 1.85% subject, in the
case of the LIBOR rate option, to a reduction of up to 0.50% (50 basis
points) if certain financial ratios are met. Loans under the revolving
portion of this credit facility may be used for general corporate purposes,
permitted acquisitions and approved investments. Absent the Second Amendment,
the Company would not have been in compliance with the Fixed Charge Coverage
Ratio.

     On August 20, 1999, the Company and its lenders entered into the Third
Amendment to the Credit Agreement. This amendment provided that the Company's
subsidiary, Autun, is not subject to the provisions governing subsidiary
indebtedness. It further provides that the Company and its subsidiaries may not
make any investment in Autun and the Company must exclude Autun's results in the
calculation of various financial covenants.

     On October 20, 1999, the Company and the insurance company holding the
Company's $20 million aggregate principal amount of unsecured, senior notes (the
"Notes") entered into the Fourth Amendment to the Note Purchase Agreement. This
amendment provided that the Company's subsidiary, Autun, is not subject to the
provisions governing subsidiary indebtedness. It further provides that the
Company and its subsidiaries may not make any investment in Autun and the
Company must exclude Autun's results in the calculation of various financial
covenants.

     On November 5, 1999, the Company and its lenders entered into the Fourth
Amendment and Waiver to the Credit Agreement. The Fourth Amendment provided,
among other things, that (1) the Company maintain a Fixed Charge Coverage Ratio
of at least 1.10 on December 31, 1999, increasing to 1.25 on March 31, 2000 and
1.50 on March 31, 2001, (2) the fixed charges used in calculating the Fixed
Charge Coverage Ratio include 15% of the aggregate principal amount outstanding
under the revolving credit facility after October 1, 1999 and (3) the Company
would grant the lenders under the Credit Agreement liens on the Company's assets
by February 14, 2000. The Fourth Amendment also provided that the Company must
maintain a ratio of consolidated total debt to total capitalization of not more
than 55%. Absent the Fourth Amendment and Waiver, the Company would not have
been in compliance with the Fixed Charge Coverage Ratio.


     On December 21, 1999, the Company and its lenders entered into the Fifth
Amendment to the Credit Agreement. The Fifth Amendment provided that the Company
may incur up to $35 million of indebtedness from General Electric Capital
Corporation or its assignees (the "GE Financing"). In addition, the Fifth
Amendment provided that (1) the revolving portion of this credit facility be
increased from $70 million to $80 million through April 30, 2000, (2) the fixed
charges used in calculating the Fixed Charge Coverage Ratio would not include
15% of the aggregate principal amount outstanding under the revolving credit
facility through June 30, 2000 and (3) the Company would grant the lenders under
the Credit Agreement liens in certain of the Company's assets. Absent the Fifth
Amendment, the Company would not have been in compliance with the Fixed Charge
Coverage Ratio.


     On December 21, 1999, the Company and the insurance company holding the
Notes entered into the Fifth Amendment to the Note Purchase Agreement. This
amendment allowed the Company to


                                     39
<PAGE>


incur indebtedness through the GE Financing. This amendment further provided
that (1) the Company must maintain a ratio of consolidated total debt to
total capitalization of not more than 55%, (2) the Company maintain a Fixed
Charge Coverage Ratio of at least 1.10 on December 31, 1999, increasing to
1.25 on March 31, 2000 and 1.50 on March 31, 2001 and (3) the fixed charges
used in calculating the Fixed Charge Coverage Ratio would not include 15% of
the aggregate principal amount outstanding under the revolving portion of
this credit facility through June 30, 2000.

     On December 29, 1999, the Company entered into a Master Security Agreement
with General Electric Capital Corporation ("GECC") and its assigns providing for
a term loan of $35 million. The GE Financing is secured by certain of the
Company's fixed assets, real estate, equipment, furniture and fixtures located
in Atchison, Kansas and St. Joseph, Missouri, matures in December 2004, and
bears interest at a fixed rate of 9.05%. On December 29, 1999 the proceeds of
the GE Financing, together with borrowings under the Company's revolving credit
facility, were used to retire the $35.7 million of outstanding indebtedness
under the Company's term loan under the Credit Agreement.


     On February 15, 2000, the Company, its lenders and the holder of the Notes
entered into the Sixth Amendments to the Credit Agreement and the Note Purchase
Agreement. Together with the GE Financing, the Sixth Amendments provided for the
perfection of a security interest in favor of GECC, the lenders under the Credit
Agreement and the holder of the Notes in substantially all of the Company's
assets in North America other than real estate.


     On May 1, 2000, the Company and its lenders entered into the Seventh
Amendment and Waiver to the Credit Agreement. The Seventh Amendment provided,
among other things, for a waiver of compliance by the Company with the Cash Flow
Leverage Ratio covenant through July 1, 2000. The Cash Flow Leverage Ratio
covenant required the Company to maintain a ratio of total debt to earnings
before interest, taxes, depreciation and amortization of no greater than 3.2.
The Seventh Amendment also provided that loans under this revolving credit
facility would bear interest at fluctuating rates of either: (1) the agent
bank's corporate base rate plus 0.75% or (2) LIBOR plus 2.25%, increasing to
LIBOR plus 2.50% on June 1, 2000. Absent the Seventh Amendment and Waiver, the
Company would not have been in compliance with the Cash Flow Leverage Ratio.

     On June 30, 2000, the Company and its lenders entered into the Eighth
Amendment and Waiver to the Credit Agreement. The Eighth Amendment provided,
among other things, for a waiver of compliance by the Company with the Cash Flow
Leverage Ratio and Fixed Charge Coverage Ratio covenants through July 31, 2000,
and that this revolving credit facility would be decreased from $80.0 million to
$77.3 million through July 31, 2000. The Eighth Amendment provided that loans
under this revolving credit facility would bear interest at the agent bank's
corporate base rate plus 1.25%. Absent the Eighth Amendment and Waiver, the
Company would not have been in compliance with the Cash Flow Leverage and Fixed
Charged Coverage Ratio Covenants.

     Effective June 30, 2000, the insurance company holding the Notes granted a
limited waiver of compliance with the Fixed Charge Coverage Ratio covenant
through September 30, 2000. Absent the waiver, the Company would not have been
in compliance with the Fixed Charge Coverage Ratio covenant.

     On July 31, 2000, the Company and its lenders entered into the Ninth
Amendment and Waiver to the Credit Agreement. The Ninth Amendment provided,
among other things, for a waiver of compliance by the Company with the Cash Flow
Leverage Ratio and Fixed Charge Leverage Ratio covenants through September 30,
2000, and that this revolving facility would be maintained at $77.3 million
through September 30, 2000. The Ninth Amendment also provided that loans under
this revolving credit facility would bear interest at fluctuating rates of
either (1) the agent bank's corporate


                                   40
<PAGE>


base rate plus 1.75% or (2) LIBOR plus 3.00%. Absent the Ninth Amendment and
Waiver, the Company would not have been in compliance with the Cash Flow
Leverage Ratio and Fixed Charge Coverage Ratio covenants.

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

     On April 13, 2001, the Company and its lenders entered into the Tenth
Amendment and Forbearance Agreement to the Credit Agreement. The Tenth Amendment
provides that, among other things, these lenders will forbear from enforcing
their rights with respect to certain existing defaults through July 30, 2001.
This amendment also provides that loans under this revolving credit facility
will bear interest at fluctuating rates of (1) the agent bank's corporate base
rate plus 1.75% (for loans up to $70 million less outstanding letters of credit)
and the agent bank's corporate base rate plus 1.25% (for loans in excess of such
amount); or (2) LIBOR plus 4.25%. The domestic rate spreads of 1.75% and 1.25%
and the LIBOR spread of 4.25% described in the preceding sentence will be
reduced 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 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 (approximately $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

                                      41
<PAGE>


debt and foreclose on their collateral. Although the lenders have agreed not
to accelerate their debt to date, there can be no assurance that they will
not do so in the future if future defaults occur. During much of fiscal 2001,
the Company has borrowed the full amount of the revolving credit facility
under the Credit Agreement and manages its cash position accordingly. To
date, the Company has been able to meet its cash needs by traditional cash
management procedures in addition to: (1) the collection of 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 be successful in recovering funds
or that they 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 2000 were and fiscal 2001
have been 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 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 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 June 30, 2000 was $117.6 million, as
compared to $113.4 million at June 30, 1999. This increase of $4.2 million
primarily reflects indebtedness incurred of $2.7 million to purchase common
stock in certain of the Company's subsidiaries. At June 30, 2000, $11.4 million
was available for borrowing under the Company's revolving credit facility. Since
September 29, 2000, the Company has borrowed the maximum amount available for
borrowing under its revolving credit facility. Available cash balances at March
31, 2001 were approximately $1.2 million.

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

                                    42
<PAGE>


     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, for (i) 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 financial 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.

     Following the accident, OSHA conducted an investigation of the accident. On
August 24, 1999, OSHA issued a citation describing violations of the
Occupational Safety and Health Act of 1970, which primarily related to
housekeeping, maintenance and other specific, miscellaneous items. Neither of
the two violations specifically addressing conditions related to the explosion
and fire were classified as serious or willful. Without admitting any
wrongdoing, Jahn Foundry entered into a settlement with OSHA that addresses the
alleged work place safety issues and agreed to pay $148,500 in fines.

     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., 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.

                                   43
<PAGE>


     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 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 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.

MARKET RISK

     The Company operates manufacturing facilities in the U.S., Canada and
Europe and utilizes fixed and floating rate debt to finance its global
operations. As a result, the Company is subject to business risks inherent in
non-U.S. activities, including political and economic uncertainty, import and
export limitations, and market risk related to changes in interest rates and
foreign currency exchange rates. The Company believes the political and economic
risks related to its foreign operations are mitigated due to the stability of
the countries in which its largest foreign operations are located.

     In the normal course of business, the company uses derivative financial
instruments including interest rate swaps and foreign currency forward exchange
contracts to manage its market risks, although, at June 30, 2000, the Company
had no outstanding interest rate swap agreements. Additional information
regarding the Company's financial instruments is contained in Note 12 to the
Company's consolidated financial statements. The Company's objective in managing
its exposure to changes in interest rates is to limit the impact of such changes
on earnings and cash flow and to lower its overall borrowing costs. The
Company's objective in managing its exposure to changes in foreign


                                    44
<PAGE>


currency exchange rates is to reduce volatility on earnings and cash flow
associated with such changes. The Company's principal currency exposures are in
the major European currencies and the Canadian dollar. The Company does not hold
derivatives for trading purposes.

     For 2000 and 1999, the Company's exposure to market risk has been estimated
using sensitivity analysis, which is defined as the change in the fair value of
a derivative or financial instrument assuming a hypothetical 10% adverse change
in market rates or prices. The Company used current market rates on its debt and
derivative portfolio to perform the sensitivity analysis. Certain items such as
lease contracts, insurance contracts, and obligations for pension and other
post-retirement benefits were not included in the analysis. The results of the
sensitivity analyses are summarized below. Actual changes in interest rates or
market prices may differ from the hypothetical changes.

     The Company's primary interest rate exposures relate to its cash and
short-term investments and fixed and variable rate debt. 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 1999, respectively.

     The Company's exposure to fluctuations in currency rates against the
British pound sterling 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 sterling 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 sterling and Canadian dollar.
Based on the Company's holdings of financial instruments at June 30, 2000 and
1999, a hypothetical 10% depreciation in the pound sterling and the Canadian
dollar versus all other currencies would have a material impact on the Company's
earnings of approximately $1.7 million and $2.7 million in fiscal 2000 and 1999,
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.

INFLATION

     Management does not believe that the Company's operations have been
materially adversely affected by inflation or changing prices.


                                     45
<PAGE>

FORWARD-LOOKING STATEMENTS

     Statements above in the subsections entitled "General," "Legal
Proceedings," "Liquidity and Capital Resources" and "Market Risk," and in the
Letter to Stockholders, such as "expects," "intends," "contemplating" and
statements regarding quarterly fluctuations, statements regarding the
adequacy of funding for capital expenditure and working capital requirements
for the next twelve months and similar expressions that are not historical
are forward-looking statements that involve risks and uncertainties. Such
statements include the Company's expectations as to future performance. Among
the factors that could cause actual results to differ materially from such
forward-looking statements are the following: the size and timing of future
acquisitions, business conditions and the state of the general economy,
particularly the capital goods industry, the strength of the U.S. dollar,
British pound sterling and the Euro, interest rates, the Company's ability to
renegotiate or refinance its lending arrangements, utility rates, the
availability of labor, the successful conclusion of union contract
negotiations, the results of any litigation arising out of the accident at
Jahn Foundry, 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.

NEW ACCOUNTING STANDARDS

     For a discussion of new accounting standards, see Note 1 of the Company's
Notes to Consolidated Financial Statements.

SUPPLEMENTAL QUARTERLY INFORMATION

     The Company's business is characterized by large unit and dollar volume
customer orders. As a result, the Company has experienced and may continue to
experience fluctuations in its net sales and net income from quarter to quarter.
Generally, the first fiscal quarter is seasonally weaker than the other quarters
as a result of plant shutdowns for maintenance at most of the Company's
foundries as well as at many customers' plants. In addition, the Company's
operating results may be adversely affected in fiscal quarters immediately
following the consummation of an acquisition while the operations of the
acquired business are integrated into the operations of the Company.

     The selected unaudited supplemental quarterly results for fiscal 1999 and
fiscal 2000 are included in Note 15 to the consolidated financial statements.


                                       46
<PAGE>

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES
           ABOUT MARKET RISK

     The information required by this item is incorporated herein by
reference to the section entitled "Market Risk" in the Company's Management's
Discussion and Analysis of Financial Condition and Results of Operations in
this amended Annual Report on Form 10-K/A.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The consolidated financial statements of the Company are filed under this
Item, beginning on page F-1 of this Report. The financial statement schedule
required to be filed under Regulation S-X. is filed on page 51 of this report.

     Selected quarterly financial data required under this item is included in
Note 15 to the consolidated financial statements.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE

   None



                                       47
<PAGE>

                                    PART III


ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item with respect to directors and
compliance with Section 16(a) of the Securities Exchange Act of 1934 is
incorporated herein by reference to the Registrant's Proxy Statement for the
2000 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A. The
required information as to executive officers is set forth in Part I hereof.

ITEM 11.   EXECUTIVE COMPENSATION

     The information required by this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A.

ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

     The information called for by this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this item is incorporated herein by reference
to the Registrant's Proxy Statement for the 2000 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A.



                                       48
<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        NUMBER
                                                                                        --------

  (a)     DOCUMENTS LIST
          --------------
         <S>                                                                              <C>
          (1)     The following financial statements are included in Part II
                  Item 8:

                  Independent Auditors' Report                                             F-1

                  Consolidated Balance Sheets at June 30, 1999 and 2000,                   F-2
                  as restated

                  Consolidated Statements of Operations For the Years                      F-4
                  Ended June 30, 1998, 1999 and 2000, as restated

                  Consolidated Statements of Comprehensive Income                          F-5
                  For the Years Ended June 30, 1998, 1999 and 2000, as
                  restated

                  Consolidated Statements of Stockholders' Equity                          F-6
                  For the Years Ended June 30, 1998, 1999 and 2000, as
                  restated

                  Consolidated Statements of Cash Flows For the Years                      F-7
                  Ended June 30, 1998, 1999 and 2000, as restated

                  Notes to Consolidated Financial Statements For the Years                 F-8
                  Ended June 30, 1998, 1999 and 2000, as restated

          (2)     Financial Statement Schedules

                  Valuation and Qualifying Accounts Schedules                              51


          (3)     List of Exhibits:

                  Exhibits required by Item 601 of Regulation S-K are
                  listed in the Exhibit Index which is incorporated
                  herein by reference.
</TABLE>

  (b)     REPORTS ON FORM 8-K
          -------------------


          The Company filed a Form 8-K dated May 19, 2000.

          Items Reported:


                                       49
<PAGE>

                  Item 5.  Other Events (Description of By-Law amendments)
                  Item 7.  Exhibits

                           (1) Amendments to By-Laws of the Company
                           (2) Amended and Restated By-Laws of the Company

  (c)     EXHIBITS
          --------

          The response to this portion of Item 14 is submitted as a separate
          section to this report.

  (d)     FINANCIAL STATEMENTS SCHEDULES
          ------------------------------

          The consolidated financial statement schedules required by this Item
          are listed under Item 14(a)(2).


                                       50
<PAGE>

   Financial Statement Schedules - Valuation and Qualifying Accounts Schedule
                                  (in thousands)


ACCOUNTS RECEIVABLE ALLOWANCE

<TABLE>
<CAPTION>
                             BEGINNING             ADDITIONS TO         DEDUCTION FROM              ENDING
                              BALANCE                (EXPENSE)            (WRITEOFFS)               BALANCE
                          ---------------       -----------------      ------------------      -----------------
<S>                       <C>                   <C>                    <C>                     <C>
Fiscal 2000                $         259         $           855        $           530         $          584

Fiscal 1999                          197                     282                    220                    259

Fiscal 1998                          381                     120                    304                    197


RESERVE FOR FLOOD REPAIRS

                                                                   DEDUCTIONS FROM
                        BEGINNING        ADDITIONS TO       -------------------------------         ENDING
                         BALANCE          (EXPENSE)           PAYMENTS        ADJUSTMENTS           BALANCE
                      -------------    ----------------     ------------   ----------------      ------------
<S>                   <C>                     <C>           <C>            <C>                   <C>
Fiscal 2000            $     1,197             -             $      552     $           -         $      645

Fiscal 1999                  5,932             -                  1,235             3,500              1,197

Fiscal 1998                  6,773             -                    841                 -              5,932

</TABLE>


                                       51
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amended report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                       ATCHISON CASTING CORPORATION
                                       (Registrant)

                                       By:     /s/ Hugh H. Aiken
                                           ------------------------
                                               Hugh H. Aiken
                                               Principal Executive Officer

Dated:  April 24, 2001



                                       52
<PAGE>

                                  EXHIBIT INDEX

     EXHIBIT
     -------

      3.1         Articles of Incorporation of Atchison Casting Corporation, a
                  Kansas corporation (incorporated by reference to Exhibit 4.1
                  of the Company's Quarterly Report on Form 10-Q for the quarter
                  ended December 31, 1994)

      3.2         Amended and Restated By-Laws of Atchison Casting Corporation,
                  a Kansas corporation (incorporated by reference to Exhibit 3.2
                  of the Company's Current Report on Form 8-K filed May 19,
                  2000)

      4.0         Long-term debt instruments of the Company in amounts not
                  exceeding 10% of the total assets of the Company and its
                  subsidiaries on a consolidated basis will be furnished to the
                  Commission upon request

     4.1(a)       The Amended and Restated Credit Agreement dated as of April 3,
                  1998, among the Company, the Banks party thereto and Harris
                  Trust and Savings Bank, as Agent (incorporated by reference to
                  Exhibit 4.1(a) of the Company's Current Report on Form 8-K
                  filed April 16, 1998)

     4.1(b)       Pledge and Security Agreement dated as of April 3, 1998,
                  between the Company and Harris Trust and Savings Bank, as
                  Agent (incorporated by reference to Exhibit 4.1(b) of Form 8-K
                  filed April 16, 1998)

     4.1(c)       First Amendment to Amended and Restated Credit Agreement dated
                  as of October 7, 1998, among the Company, the Banks party
                  thereto and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.1 of the Company's
                  Quarterly Report on Form 10-Q for the quarter ended September
                  30, 1998)

     4.1(d)       Second Amendment to the Amended and Restated Credit Agreement
                  dated as of April 23, 1999, among the Company, the Banks party
                  thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4 of the Company's
                  Quarterly Report on Form 10-Q for the quarter ended March 31,
                  1999)

     4.1(e)       Third Amendment to the Amended and Restated Credit Agreement
                  dated as of August 20, 1999, among the Company, the Banks
                  party thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.1(e) of the Company's
                  Form 10-K for the year ended June 30, 1999)

     4.1(f)       Fourth Amendment and Waiver to the Amended and Restated Credit
                  Agreement dated as of November 5, 1999, among the Company, the
                  Banks party thereto, and Harris Trust and Savings Bank, as
                  Agent (incorporated by reference to Exhibit 4.2 of the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1999)

     4.1(g)       Fifth Amendment to the Amended and Restated Credit Agreement
                  dated as of December 21, 1999, among the Company, the Banks
                  party thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.2 of the Company's
                  Quarterly Report on Form 10-Q for the quarter ended December
                  31, 1999)


                                       53
<PAGE>

                                  EXHIBIT INDEX

     EXHIBIT
     -------

     4.1(h)       Sixth Amendment to the Amended and Restated Credit Agreement
                  dated as of February 15, 1999, among the Company, the Banks
                  party thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.1 of the Company's
                  Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2000)

     4.1(i)       Seventh Amendment to the Amended and Restated Credit Agreement
                  dated as of May 1, 2000, among the Company, the Banks party
                  thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.3 of the Company's
                  Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2000)

     4.1(j)       Eighth Amendment to the Amended and Restated Credit Agreement
                  dated as of June 30, 2000, among the Company, the Banks party
                  thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.1(j) of the Company's
                  Annual Report on Form 10-K for the year ended June 30, 2000)

     4.1(k)       Ninth Amendment to the Amended and Restated Credit Agreement
                  dated as of July 31, 2000, among the Company, the Banks party
                  thereto, and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.1(k) of the Company's
                  Annual Report on Form 10-K for the year ended June 30, 2000)

     4.1(l)       Tenth Amendment and Forbearance Agreement dated as of April
                  13, 2001, among the Company, the Banks party thereto and
                  Harris Trust and Savings Bank, as Agent

     4.2          Specimen  stock  certificate  (incorporated  by reference to
                  Exhibit 4.3 of Amendment  No. 2 to Form S-2 Registration
                  Statement No. 333-25157 filed May 19, 1997)

     4.3(a)       Rights Agreement, dated as of March 28, 2000 between Atchison
                  Casting Corporation and American Stock Transfer & Trust
                  Company, as Rights Agent (incorporated by reference to Exhibit
                  1 of the Company's Form 8-A Registration Statement filed March
                  28, 2000)

     4.3(b)       Amendment  No. 1 to Rights  Agreement  dated as of November
                  17,  2000  between the Company and American Stock Transfer &
                  Trust Company, as Rights Agent

     10.1(a)*     Employment Agreement between the Company and Hugh H. Aiken
                  dated as of June 14,1991 (incorporated by reference to Exhibit
                  10.1 of Form S-1 Registration Statement No. 33-67774
                  filed August 23, 1993)

     10.1(b)*     Amendment  No. 1 dated as of September  27, 1993 to
                  Employment  Agreement  between the Company and Hugh H. Aiken
                  (incorporated  by  reference to Exhibit  10.1(b) of Amendment
                  No. 1 to Form S-1 Registration Statement No. 33-67774 filed
                  September 27, 1993)

     10.1(c)*     Amendment No.2 dated as of September 10, 1998 to Employment
                  Agreement between the Company and Hugh H. Aiken (incorporated
                  by reference to Exhibit 10.1 of the Company's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 1998)


                                       54
<PAGE>

     10.2*        Atchison  Casting 1993 Incentive Stock Plan  (incorporated by
                  reference to Exhibit 10.7 of Form S-1 Registration Statement
                  No. 33-67774 filed August 23, 1993)

     10.3         Confidentiality and Noncompetition Agreements by and among the
                  Company and executive officers of the Company (incorporated by
                  reference to Exhibit 10.8 of Form S-1 Registration Statement
                  No. 33-67774 filed August 23, 1993)

     10.4*        Atchison Casting Non-Employee Director Option Plan
                  (incorporated by reference to Exhibit 10.7 of the Company's
                  Annual Report on Form 10-K for the year ended June 30, 1994)

     10.5*        Plan for conversion of subsidiary stock to Atchison Casting
                  Corporation stock (incorporated by reference to Exhibit 10.3
                  of the Company's Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1994)

     10.6         The Share Exchange Agreement dated April 6, 1998 in respect
                  of the ordinary shares of Sheffield by and among David
                  Fletcher and others, ACUK and the Company (incorporated by
                  reference to Exhibit 10.1 of Form 8-K filed April 16, 1998)

     10.7(a)*     Service Agreement between Sheffield and David Fletcher dated
                  November 1, 1988 (incorporated by reference to Exhibit
                  10.10(a) of the Company's Annual Report on Form 10-K for the
                  year ended June 30, 1998)

     10.7(b)*     Novation  Agreement  between  Sheffield and David Fletcher
                  dated May 2, 1996.  (incorporated by reference to Exhibit
                  10.10(b) of the  Company's  Annual Report on Form 10-K for the
                  year ended June 30, 1998)

     10.7(c)*     Letter  Agreement  between  Sheffield and David  Fletcher
                  dated May 2, 1996.  (incorporated  by reference to Exhibit
                  10.10(c) of the  Company's  Annual Report on Form 10-K for
                  the year ended June 30, 1998)

     21.1         Subsidiaries of the Company

     23.1         Consent of Deloitte & Touche LLP and Report on Schedules

     27.1         Financial Data Schedule - Fiscal year ended FY 2000

     * Represents a management contract or a compensatory plan or arrangement.


                                       55
<PAGE>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(AS RESTATED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
INDEPENDENT AUDITORS' REPORT                                                                                      F-1

CONSOLIDATED FINANCIAL STATEMENTS FOR EACH OF THE THREE YEARS IN THE PERIOD
  ENDED JUNE 30, 2000:

Consolidated Balance Sheets (As Restated) - June 30, 1999 and 2000                                                F-2 - F-3

Consolidated Statements of Operations (As Restated) - Years Ended June 30, 1998, 1999 and 2000                    F-4

Consolidated Statements of Comprehensive Income (Loss) (As Restated) - Years Ended
June 30, 1998, 1999 and 2000                                                                                      F-5

Consolidated Statements of Stockholders' Equity (As Restated) - Years Ended
June 30, 1998, 1999 and 2000                                                                                      F-6

Consolidated Statements of Cash Flows (As Restated) - Years Ended June 30, 1998, 1999 and 2000                    F-7

Notes to Consolidated Financial Statements (As Restated)                                                          F-8 - F-45
</TABLE>




<PAGE>


INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders of
  Atchison Casting Corporation and Subsidiaries
Atchison, Kansas

We have audited the accompanying consolidated balance sheets of Atchison
Casting Corporation and subsidiaries (the "Company") as of June 30, 2000 and
1999 and the related consolidated statements of operations, comprehensive
income (loss), stockholders' equity and cash flows for each of the three
years in the period ended June 30, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of June 30, 2000
and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended June 30, 2000 in conformity with
accounting principles generally accepted in the United States of America.

As discussed in Note 25 to the consolidated financial statements, the
accompanying consolidated financial statements have been restated.

As discussed in Note 10 to the consolidated financial statements, the Company
has classified approximately $72.8 million of debt as current due to debt
covenant violations as of June 30, 2000.



/s/ Deloitte & Touche LLP

April 19, 2001
Kansas City, Missouri


                                      F-1


<PAGE>


ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS                                                                                             1999            2000
                                                                                                (As Restated, see Note 25)
<S>                                                                                              <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                      $  3,906        $  3,815
  Customer accounts receivable, net of allowance for doubtful
    accounts of $259 and $584 at June 30, 1999 and 2000, respectively                              80,678          87,401
  Inventories                                                                                      65,409          56,123
  Deferred income taxes                                                                             2,401          10,092
  Other current assets                                                                             14,045           9,517
                                                                                                 --------        --------

           Total current assets                                                                   166,439         166,948

PROPERTY, PLANT AND EQUIPMENT, Net                                                                147,274         135,299

INTANGIBLE ASSETS, Net                                                                             32,846          28,525

DEFERRED FINANCING COSTS, Net                                                                         660             923

OTHER ASSETS                                                                                       13,895          10,728
                                                                                                 --------        --------

TOTAL                                                                                            $361,114        $342,423
                                                                                                 ========        ========

                                                                                                              (Continued)
</TABLE>



                                      F-2
<PAGE>




ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY                                         1999            2000
                                                                          (As Restated, see Note 25)
<S>                                                                        <C>           <C>
CURRENT LIABILITIES:
  Accounts payable                                                         $  41,386     $  42,867
  Accrued expenses                                                            37,288        37,432
  Current maturities of long-term obligations                                  8,833        80,919
                                                                           ---------     ---------

          Total current liabilities                                           87,507       161,218

LONG-TERM OBLIGATIONS                                                        104,607        36,691

DEFERRED INCOME TAXES                                                         17,074        11,912

OTHER LONG-TERM OBLIGATIONS                                                    3,969         2,683

EXCESS OF FAIR VALUE OF ACQUIRED NET ASSETS OVER
  COST, Net of accumulated amortization of $1,776 and $2,298
  at June 30, 1999 and 2000, respectively                                      6,889         4,843

POSTRETIREMENT OBLIGATION OTHER
  THAN PENSION                                                                 8,278         9,199

MINORITY INTEREST IN SUBSIDIARIES                                              4,205         1,544
                                                                           ---------     ---------

           Total liabilities                                                 232,529       228,090
                                                                           ---------     ---------

STOCKHOLDERS' EQUITY:
  Preferred stock, $.01 par value, participating, cumulative, 2,000,000
    authorized shares; no shares issued and outstanding
  Common stock, $.01 par value, 19,300,000 authorized shares;
    8,259,603 and 8,295,974 shares issued at June 30, 1999
    and 2000, 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                                                  81,216        81,460
  Retained earnings                                                           54,527        42,848
  Accumulated other comprehensive income (loss)                               (1,193)       (4,010)
  Less common stock held in treasury, 622,702 shares at June 30, 1999
     and 2000, at cost                                                        (6,048)       (6,048)
                                                                           ---------     ---------

          Total stockholders' equity                                         128,585       114,333
                                                                           ---------     ---------

TOTAL                                                                      $ 361,114     $ 342,423
                                                                           =========     =========
</TABLE>
See notes to consolidated financial statements.                     (Concluded)



                                      F-3
<PAGE>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1998, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                        1998              1999              2000
                                                                               (As Restated, see Note 25)
<S>                                                               <C>               <C>               <C>
NET SALES                                                                 $ 373,107         $ 477,405        $ 461,137

COST OF GOODS SOLD                                                          322,002           417,816          419,299
                                                                  ----------------- ----------------- ----------------
GROSS PROFIT                                                                 51,105            59,589           41,838

OPERATING EXPENSES:
  Selling, general and administrative                                        28,846            45,290           44,526
  Impairment charges                                                                                            16,414
  Amortization of intangibles                                                   850               544             (408)
  Other income, net                                                                            (2,750)            (606)
                                                                  ----------------- ----------------- ----------------
     Total operating expenses, net                                           29,696            43,084           59,926
                                                                  ----------------- ----------------- ----------------
OPERATING INCOME (LOSS)                                                      21,409            16,505          (18,088)

INTEREST EXPENSE                                                              3,896             8,352            9,452

MINORITY INTEREST IN NET INCOME OF
  SUBSIDIARIES                                                                  448               237               66
                                                                  ----------------- ----------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES                                            17,065             7,916          (27,606)

INCOME TAX EXPENSE (BENEFIT)                                                  6,823             4,844          (15,927)
                                                                  ----------------- ----------------- ----------------
NET INCOME (LOSS)                                                         $  10,242          $  3,072        $ (11,679)
                                                                  ================= ================= ================
NET EARNINGS (LOSS) PER COMMON AND
  EQUIVALENT SHARES:
    BASIC                                                                  $   1.25          $   0.39         $  (1.53)
                                                                  ================= ================= ================
    DILUTED                                                                $   1.25          $   0.39         $  (1.53)
                                                                  ================= ================= ================
WEIGHTED AVERAGE NUMBER OF COMMON
  AND EQUIVALENT SHARES OUTSTANDING:
    BASIC                                                                 8,167,285         7,790,781        7,648,616
                                                                  ================= ================= ================
    DILUTED                                                               8,218,686         7,790,781        7,648,616
                                                                  ================= ================= ================

</TABLE>


See notes to consolidated financial statements.


                                      F-4
<PAGE>


ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED JUNE 30, 1998, 1999 AND 2000
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                     1998            1999             2000
                                                                                         (As Restated, see Note 25)
<S>                                                                                  <C>             <C>             <C>
NET INCOME (LOSS)                                                                    $ 10,242        $ 3,072         $ (11,679)

OTHER COMPREHENSIVE INCOME (LOSS) -
  Foreign currency translation adjustments                                               (498)          (563)           (2,817)
                                                                                     --------        -------         ---------
COMPREHENSIVE INCOME (LOSS)                                                          $  9,744        $ 2,509         $ (14,496)
                                                                                     ========        =======         =========

</TABLE>

See notes to consolidated financial statements.


                                      F-5
<PAGE>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998, 1999 AND 2000
(AS RESTATED, SEE NOTE 25)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                              ACCUMULATED     COMMON
                                                               ADDITIONAL                        OTHER         STOCK
                                                  COMMON        PAID-IN         RETAINED     COMPREHENSIVE    HELD IN
                                                   STOCK        CAPITAL         EARNINGS     INCOME (LOSS)   TREASURY       TOTAL
                                                  ------      -----------     ----------     -------------   --------     ---------
<S>                                               <C>         <C>             <C>            <C>             <C>          <C>
Balance, July 1, 1997                             $ 81        $ 80,342        $ 41,213        $  (132)                    $ 121,504
  Issuance of 15,793 shares                                        227                                                          227
  Exercise of stock options (28,060 shares)          1             388                                                          389
  Foreign currency translation
    adjustment of investment in subsidiaries                                                     (498)                         (498)
  Net income                                                                    10,242                                       10,242
                                                  ------      -----------     ----------     -------------                ---------
Balance, June 30, 1998                              82          80,957          51,455           (630)                      131,864
  Issuance of 33,033 shares                          1             259                                                          260
  Purchase of 586,700 shares under Stock
    Repurchase Plan                                                                                          $ (6,048)       (6,048)
  Foreign currency translation
    adjustment of investment in subsidiaries                                                     (563)                         (563)
  Net income                                                                    3,072                                         3,072
                                                  ------      -----------     ----------     -------------   --------     ---------
Balance, June 30, 1999                              83          81,216          54,527         (1,193)         (6,048)      128,585
  Issuance of 36,371 shares                                        244                                                          244
  Foreign currency translation
    adjustment of investment in subsidiaries                                                   (2,817)                       (2,817)
  Net loss                                                                     (11,679)                                     (11,679)
                                                  ------      -----------     ----------     -------------   --------     ---------
Balance, June 30, 2000                            $ 83        $ 81,460        $ 42,848        $ (4,010)      $ (6,048)    $ 114,333
                                                  ======      ===========     ==========     =============   ========     =========

</TABLE>

See notes to consolidated financial statements.


                                      F-6
<PAGE>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1999 AND 2000
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                            1998        1999        2000
                                                                             (As Restated, see Note 25)
<S>                                                                         <C>        <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                         $ 10,242   $  3,072     $(11,679)
  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
    Depreciation and amortization                                             11,695     13,416       14,198
    Minority interest in net income of subsidiaries                              448        237           66
    Provision for loss on closure of Claremont foundry                                                 3,373
    Impairment charge related to PrimeCast facility                                                    6,883
    Impairment charge related to Pennsylvania Steel                                                    3,450
    Impairment charge related to Empire Steel                                                          2,708
    Loss (gain) on disposal of capital assets                                    176       (190)        (486)
    Gain on termination of interest rate swap agreements                                              (1,083)
    Deferred income tax expense (benefit)                                      1,802      2,761      (12,852)
    Changes in assets and liabilities (exclusive of effects of acquisitions):
      Customer accounts receivable                                            14,118      6,573       (5,848)
      Inventories                                                                543      1,434        8,292
      Other current assets                                                        28     (6,230)       6,902
      Accounts payable                                                        (5,927)     2,008        2,119
      Accrued expenses                                                       (18,822)   (16,904)      (1,887)
      Postretirement obligation other than pension                               467        682          921
      Other                                                                      306     (1,436)         (81)
                                                                            --------    -------      -------
           Cash provided by operating activities                              15,076      5,423       14,996
                                                                            --------    -------      -------

CASH FLOWS FROM  INVESTING ACTIVITIES:
  Capital expenditures                                                       (17,868)   (17,899)     (20,531)
  Proceeds from sale of capital assets                                         1,219      1,829        3,408
  Payment for purchase of net assets of subsidiaries,
    net of cash acquired                                                     (74,299)    (7,494)
  Payments for purchase of minority interest in subsidiaries                     (64)      (728)      (2,737)
  Repayments of subordinated note receivable                                     800
  Payment for investments in unconsolidated subsidiaries                                   (150)
                                                                            --------    -------      -------
           Cash used in investing activities                                 (90,212)   (24,442)     (19,860)
                                                                            --------    -------      -------
CASH FLOWS FROM  FINANCING ACTIVITIES:
  Proceeds from issuance of common stock, net of costs                           616        260          244
  Payments for repurchase of common stock                                                (6,048)
  Proceeds from issuance of long-term obligations                                                     35,000
  Payments on long-term obligations                                             (979)    (6,528)     (42,010)
  Capitalized financing costs paid                                              (409)      (108)        (620)
  Termination of interest rate swap agreements                                                         1,083
  Net borrowings under revolving loan note                                    65,519     26,675       11,285
                                                                            --------    -------      -------

           Cash provided by financing activities                              64,747     14,251        4,982
                                                                            --------    -------      -------

EFFECT OF EXCHANGE RATE ON CASH                                                 (253)      (503)        (209)
                                                                            --------    -------      -------

NET DECREASE  IN CASH AND CASH EQUIVALENTS                                   (10,642)    (5,271)         (91)

CASH AND CASH EQUIVALENTS, Beginning of period                                19,819      9,177        3,906
                                                                            --------    -------      -------

CASH AND CASH EQUIVALENTS, End of period                                    $  9,177   $  3,906     $  3,815
                                                                            ========    =======      =======
</TABLE>

See notes to consolidated financial statements.

                                      F-7
<PAGE>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998, 1999 AND 2000
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
--------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      NATURE OF OPERATIONS - Atchison Casting Corporation and subsidiaries
      ("ACC" or the "Company") was organized in 1991 for the purpose of becoming
      a broad-based manufacturer of metal castings, producing iron, steel and
      non-ferrous castings ranging in size from a few ounces to 280 tons. A
      majority of the Company's sales are to U.S. customers, however, the
      Company also has sales to Canadian, European and other foreign customers.

      PERVASIVENESS OF ESTIMATES - The preparation of financial statements in
      conformity with accounting principles generally accepted in the United
      States of America requires management to make estimates and assumptions
      that affect the reported amounts of assets and liabilities and disclosure
      of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates.

      BASIS OF PRESENTATION - The consolidated financial statements present the
      financial position of the Company and its subsidiaries, Amite Foundry and
      Machine, Inc. ("AFM"), Prospect Foundry, Inc. ("Prospect Foundry"), Quaker
      Alloy, Inc. ("Quaker"), Canadian Steel Foundries, Ltd. ("Canadian Steel"),
      Kramer International, Inc. ("Kramer"), Empire Steel Castings, Inc.
      ("Empire"), La Grange Foundry Inc. ("La Grange Foundry"), The G&C Foundry
      Company ("G&C"), Los Angeles Die Casting Inc. ("LA Die Casting"), Canada
      Alloy Castings, Ltd. ("Canada Alloy"), Pennsylvania Steel Foundry &
      Machine Company ("Pennsylvania Steel"), Jahn Foundry Corp. ("Jahn
      Foundry"), PrimeCast, Inc. ("PrimeCast"), Inverness Castings Group, Inc.
      ("Inverness"), Atchison Casting UK Limited ("ACUK"), Claremont Foundry,
      Inc. ("Claremont"), London Precision Machine & Tool Ltd. ("London
      Precision") and Fonderie d'Autun SA ("Autun"). AFM, Quaker, Canadian
      Steel, Kramer, Empire, La Grange Foundry, Canada Alloy, Pennsylvania
      Steel, Jahn Foundry, PrimeCast, Claremont and London Precision are wholly
      owned subsidiaries. The Company owns 96.0%, 97.2%, 90.6%, 96.7%, 95.5% and
      73.8% of the outstanding capital stock of Prospect Foundry, G&C, LA Die
      Casting, Inverness, ACUK and Autun, respectively. Sheffield Forgemasters
      Group, Ltd. ("Sheffield") is a wholly-owned subsidiary of ACUK. In August
      2000, ACC acquired the remaining 26% of Autun for $150. All significant
      intercompany accounts and balances have been eliminated.

      STATEMENT OF CASH FLOWS - Cash and cash equivalents include cash on hand,
      amounts due from banks and temporary investments with original maturities
      of 90 days or less at the date of purchase.


                                      F-8
<PAGE>

      REVENUE RECOGNITION - Sales and related cost of sales are recognized upon
      shipment of products. The Company provides for estimated product warranty
      costs based on historical experience at the time the product is sold and
      accrues for specific items at the time their existence is known and the
      amounts are determinable.

      CUSTOMER ACCOUNTS RECEIVABLE - Approximately 18%, 16% and 16% of the
      Company's revenue in 1998, 1999 and 2000, respectively, was with two major
      customers who operate in the automotive, locomotive and general industrial
      markets. As of June 30, 1999 and 2000, 13% and 8%, respectively, of
      accounts receivable were with these two major customers. The Company
      generally does not require collateral or other security on accounts
      receivable. Credit risk is controlled through credit approvals, limits and
      monitoring procedures.

      INVENTORIES - Approximately 11% of the Company's inventory is valued at
      the lower of cost, determined on the last-in, first-out ("LIFO") method,
      or market. The remaining inventory is valued at the lower of cost,
      determined on the first-in, first-out ("FIFO") method, or market.

      PRE-PRODUCTION COSTS - In September 1999, the Emerging Issues Task Force
      ("EITF") of the American Institute of Certified Public Accountants issued
      EITF 99-5, "ACCOUNTING FOR PRE-PRODUCTION COSTS RELATED TO LONG-TERM
      SUPPLY ARRANGEMENTS." The guidance in EITF 99-5 is effective for
      pre-production costs, which include tooling, dies, fixtures, patterns and
      drawings, among other items, incurred after December 31, 1999. The
      Company's long-term supply arrangements typically provide for specific
      reimbursement of such pre-production costs by the customer. As of June 30,
      1999 and 2000, the Company had $9,069 and $8,038 of capitalized
      pre-production costs recorded within other current assets within the
      consolidated balance sheets. Generally, the supply arrangements entered
      into by ACC provide the Company the noncancelable right to use the tooling
      during the supply arrangement even though the customer owns the tooling.
      As such, the adoption of EITF 99-5 has not had a material effect upon the
      Company's consolidated financial statements.

      PROPERTY, PLANT AND EQUIPMENT - Major renewals and betterments are
      capitalized while replacements, maintenance and repairs which do not
      improve or extend the life of the respective assets are charged to expense
      as incurred. Upon sale or retirement of assets, the cost and related
      accumulated depreciation applicable to such assets are removed from the
      accounts and any resulting gain or loss is reflected in operations.

      Property, plant and equipment is carried at cost less accumulated
      depreciation. Plant and equipment is depreciated over the estimated useful
      lives of the assets using the straight-line method.

      Applicable interest charges incurred during the construction of new
      property, plant and equipment are capitalized as one of the elements of
      cost and are amortized over the assets' estimated useful lives. There was
      no interest capitalized during fiscal years 1998 and 1999, while $82 was
      capitalized in fiscal year 2000.


                                      F-9
<PAGE>

      INTANGIBLE ASSETS - Intangible assets acquired, primarily goodwill, are
      being amortized over their estimated lives of 25 years using the
      straight-line method.

      DEFERRED FINANCING COSTS - Costs incurred in connection with obtaining or
      amending financing are capitalized and amortized over the remaining term
      of the related debt instrument on a method approximating the interest
      method.

      FOREIGN CURRENCY TRANSLATION - Assets and liabilities of foreign
      subsidiaries are translated into U.S. dollars at the rate of exchange at
      the balance sheet date. Revenues and expenses are translated into U.S.
      dollars at average monthly exchange rates prevailing during the year.
      Resulting translation adjustments are recorded in the accumulated foreign
      currency translation adjustment account, which is a component of other
      comprehensive income and a separate component of stockholders' equity.
      Foreign currency transaction gains and losses are included in the results
      of operations as incurred.

      LONG-LIVED ASSETS - The Company periodically evaluates the carrying value
      of long-lived assets to be held and used, including goodwill and other
      intangible assets, when events and circumstances warrant such a review.
      The carrying value of a long-lived asset is considered impaired when the
      anticipated undiscounted cash flow from such asset is separately
      identifiable and is less than its carrying value. In that event, a loss is
      recognized based on the amount by which the carrying value exceeds the
      fair market value of the long-lived asset.

      ACCRUED INSURANCE EXPENSE - The accrual for employee medical benefits and
      casualty insurance programs includes estimates for claims incurred but not
      reported.

      At June 30, 2000, the Company had letters of credit aggregating $1,877 and
      a certificate of deposit of $200 which support claims for workers'
      compensation benefits.

      INCOME TAXES - Deferred income taxes are provided on temporary differences
      between the financial statement and tax basis of the Company's assets and
      liabilities in accordance with the liability method. SFAS No. 109,
      "ACCOUNTING FOR INCOME TAXES," requires a valuation allowance against
      deferred tax assets if, based on the weight of available evidence, it is
      more likely than not that some or all of the deferred tax assets will not
      be realized.

      STOCK OPTION PLANS - The Financial Accounting Standards Board ("FASB")
      issued Statement of Financial Accounting Standards ("SFAS") No. 123,
      "ACCOUNTING FOR STOCK-BASED COMPENSATION," in October 1995. SFAS No. 123
      allows companies to continue under the approach set forth in Accounting
      Principles Board Opinion ("APB") No. 25, "ACCOUNTING FOR STOCK ISSUED TO
      EMPLOYEES," for recognizing stock-based compensation expense in the
      financial statements, but encourages companies to adopt provisions of SFAS
      No. 123 based on the estimated fair value of employee stock options.
      Companies electing to retain the approach under APB No. 25 are required to
      disclose pro forma net income and net income per share in the notes to the
      financial statements, as if they had adopted the fair value accounting
      method under SFAS No. 123. The Company has elected to retain its current
      accounting approach under APB No. 25.

      EARNINGS PER SHARE - Basic earnings per share ("EPS") is computed by
      dividing net income by the weighted-average number of common shares
      outstanding for the year. Diluted EPS reflects the potential dilution that
      could occur if dilutive securities, such as stock options, were exercised.


                                     F-10
<PAGE>

      NEW ACCOUNTING STANDARDS - In June 1998, the FASB issued SFAS No. 133,
      "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES." SFAS No.
      133 requires 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. In June 2000, the FASB issued SFAS
      No. 138, "ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN
      HEDGING ACTIVITIES, AN AMENDMENT OF FASB STATEMENT NO. 133," which amends
      certain provisions of SFAS No. 133. SFAS Nos. 133 and 138 are effective
      for fiscal years beginning after June 15, 2000.

      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 adopted SFAS Nos. 133 and 138, and as required, recorded
      its FX contracts at their fair value of approximately $(910). This
      resulted in a charge to income of approximately $910 ($546 net of deferred
      income tax benefit). 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 ($264 net of deferred income tax expense). The impact
      of the adoption of SFAS Nos. 133 and 138 will be presented in the
      Company's fiscal year 2001 consolidated financial statements as the
      cumulative effect of a change in accounting principle.

      In December 1999, Staff Accounting Bulletin ("SAB") No. 101, "REVENUE
      RECOGNITION IN FINANCIAL STATEMENTS," was issued. SAB No. 101 summarizes
      the Securities and Exchange Commission staff's view on applying accounting
      principles generally accepted in the United States of America to revenue
      recognition in financial statements and must be implemented no later than
      the fourth fiscal quarter of the Company's fiscal year ending June 30,
      2001. The Company does not believe that the implementation of SAB No. 101
      will have a material effect on the Company's consolidated financial
      statements.

      RECLASSIFICATIONS - Certain reclassifications have been made in the 1998
      and 1999 financial statements to conform with current year presentation.

2.    PLANT CLOSURES AND FIXED ASSET IMPAIRMENTS

      CLAREMONT

      During fiscal year 2000, the Company recorded an impairment loss
      associated with the planned closure of the Claremont foundry. The
      resulting impairment charge of $3,373 ($2,125, 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 year 2000, the
      Company's Board of Directors committed to a plan for the closure of
      Claremont as a result of continued operating losses. As such, the carrying
      values of Claremont's fixed assets were written down to the Company's
      estimates of fair value, which was based on discounted future cash flows.
      Accordingly, actual results could vary significantly from such estimates.
      Prior to the impairment charge, these assets had a carrying value of
      $3,534. The Company transferred as much work as possible to other ACC
      foundries, and closed the foundry by November 30, 2000. For fiscal years
      1998, 1999, and 2000, Claremont recorded net sales of $1,297, $7,068, and
      $3,958, respectively, and incurred net losses of $97, $1,554, and $1,819,
      respectively, excluding the impairment charge in the fourth quarter of
      fiscal year 2000.


                                     F-11
<PAGE>

      In addition to the long-lived asset impairment, the Company will recognize
      certain other exit costs associated with the closure of Claremont in
      fiscal year 2001 related to employee termination costs. Such costs are
      recognized when benefit arrangements are communicated to affected
      employees in sufficient detail to enable the employees to determine the
      amount of benefits to be received upon termination. As of June 30, 2000,
      the planned closure of Claremont had not been communicated to the
      Claremont employees. The number of employees terminated in the process was
      approximately 45. As such, in the first half of fiscal year 2001, the
      Company will recognize approximately $113 in severance benefits related to
      the Claremont closure.

      PENNSYLVANIA STEEL

      Following the discovery of accounting irregularities which revealed
      substantial operating losses at the Company's three Pennsylvania foundry
      operations (see Note 25), 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 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 $3,450 ($2,105, 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 $4,774.
      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 fiscal years 1998, 1999 and 2000, Pennsylvania
      Steel recorded net sales of $15,804, $12,269 and $11,582, respectively,
      and incurred net losses of $687, $3,525 and $4,080, respectively,
      excluding the impairment charge in the fourth quarter of fiscal year 2000.

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

      PRIMECAST

      The Company recognized an impairment charge of $6,883 ($4,336, net of tax)
      to reduce the carrying value of fixed assets at its PrimeCast foundry 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 estimates 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 $8,248. For fiscal years 1998, 1999,
      and 2000, PrimeCast recorded net sales of $33,861, $27,531, and $24,464,
      respectively, and incurred net income (losses) of $609, $(644), and
      $(2,188), respectively, excluding the impairment charge in the fourth
      quarter of fiscal year 2000.

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


                                     F-12
<PAGE>

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

      Other costs directly related to the closure of Claremont, Pennsylvania
      Steel and PrimeCast which are not yet eligible for recognition will be
      expensed as incurred under EITF 94-3, "LIABILITY RECOGNITION FOR CERTAIN
      EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS TO EXIT AN ACTIVITY
      (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING)."

3.    IMPAIRMENT OF EMPIRE STEEL GOODWILL

      Following the discovery of accounting irregularities which revealed
      substantial operating losses at the Company's three Pennsylvania foundry
      operations (see Note 25), the Company considered the now known losses as
      a primary indicator of impairment. The Company recognized an impairment
      charge of $2,708 ($2,708, net of tax) to write-off the intangible assets
      (goodwill) at its Empire Steel foundry in the fourth quarter ended
      June 30, 2000 in connection with the restatement. An impairment loss was
      recognized as the estimated future undiscounted cash flows of Empire Steel
      were insufficient to recover the carrying value of the intangible assets.

4.    ACQUISITIONS

      On July 1, 1997, the Company purchased the Beloit Castings Division
      ("BCD") of Beloit Corporation for $8,209 in cash and $102 of related
      expenses. BCD was operated under the name PrimeCast, as a subsidiary of
      ACC. PrimeCast was a group of four foundries in Beloit, Wisconsin and
      South Beloit, Illinois, including two iron foundries, a steel foundry and
      a non-ferrous foundry, that produced castings for the paper-machinery,
      pump, valve, mining and construction markets. The Company financed this
      acquisition with available cash balances. See Note 2 regarding the recent
      closing of PrimeCast.

      On October 6, 1997, the Company acquired approximately 91.5% of the
      outstanding capital stock of Inverness, a Delaware corporation, for $5,882
      in cash and $202 of related expenses, in addition to the assumption of
      $587 of outstanding indebtedness. Contemporaneous with the consummation of
      this acquisition, the Company retired approximately $11,602 of Inverness'
      outstanding indebtedness. The remaining 8.5% of Inverness capital stock
      was retained by Inverness management. During fiscal year 1999, the Company
      purchased additional shares from Inverness management. Inverness, located
      in Dowagiac, Michigan, produces aluminum die castings for the automotive,
      furniture and appliance markets. The Company financed this transaction
      with available cash balances and funds available under its revolving
      credit facility.

      On April 6, 1998, ACUK, a subsidiary of the Company, acquired all of the
      outstanding capital stock, consisting of 76,987,733 ordinary shares of
      Sheffield, incorporated in England and Wales, from the stockholders of
      Sheffield for approximately $54,931 in cash, 1,040,000 shares of ACUK
      valued at $915 and $226 of related expenses. The 1,040,000 ordinary
      shares, consisting of 5.0% of the outstanding stock, of ACUK were issued
      to Sheffield management in exchange for 1,267,477 shares of Sheffield
      instead of cash consideration. Sheffield includes Forgemasters Steel &
      Engineering Limited, River Don Castings Limited, Forged Rolls (UK) Limited
      and British Rollmakers Limited, among other operating units. The
      companies' products serve a variety of markets and end users, including
      steel rolling mills, paper and plastic processing, oil and gas exploration
      and production, fossil and nuclear electricity generation and forging
      ingots. The Company financed this transaction with funds available under
      its bank credit facility.

      On May 31, 1996, the Company purchased approximately 21.0% of the
      outstanding shares of capital stock of Claremont for $330 in cash and $17
      of related expenses. On November 29, 1996, the Company purchased an
      additional 4.5% of the outstanding capital stock of Claremont for $40 in
      cash. On

                                     F-13
<PAGE>

      May 1, 1998, the Company purchased the balance of Claremont's
      outstanding capital stock for $1 in cash, the contribution of equipment
      with a fair market value of $300, the forgiveness of a subordinated
      note payable to the Company of $2,924 and related expenses of $7.
      Contemporaneous with the consummation of this acquisition, the Company
      retired $165 of Claremont's outstanding indebtness. Claremont, located
      in Claremont, New Hampshire, is a foundry that produces steel castings
      for the mining and mass transit industries, among others. The Company
      financed this transaction with funds available under its revolving
      credit facility. See Note 2 regarding the closure of Claremont.

      Effective September 1, 1998, the Company purchased 90% of the outstanding
      shares of London Precision for $13,663 in cash and $124 of related
      expenses. On June 16, 1999, the Company purchased the remaining 10% of the
      outstanding shares of London Precision for $1,847 in cash. London
      Precision, located in London, Ontario, Canada, is an industrial machine
      shop which serves the locomotive, mining and construction, pulp and paper
      markets, among others. The Company financed this transaction with funds
      available under its revolving credit facility.

      On February 25, 1999, Autun purchased the foundry division assets of
      Compagnie Internationale du Chauffage ("CICH") located in Autun, France.
      Autun received certain assets of the foundry, including $5,847 in cash and
      $5,505 in inventory, in exchange for the assumption of potential
      environmental and employment liabilities if the facility is ever closed.
      CICH is a subsidiary of Blue Circle Industries plc, headquartered in
      London, England. Autun specializes in the manufacture of cast iron
      radiators and boiler castings.

      The acquisitions have been accounted for by the purchase method of
      accounting, and accordingly, the purchase price including the related
      acquisition expenses has been allocated to the assets acquired based on
      the estimated fair values at the date of the acquisitions. For the
      Inverness and London Precision acquisitions, the excess of purchase price
      over estimated fair values of the net assets acquired has been included in
      "Intangible Assets" on the Consolidated Balance Sheets. For the PrimeCast,
      Sheffield, Claremont and Autun acquisitions, the fair value of the net
      assets acquired exceeded the purchase price. Accordingly, the excess fair
      value was subtracted from identifiable long-term assets ratably based on
      their relative fair values as a percentage of total long-term assets. The
      purchase of Autun resulted in remaining excess fair value after allocation
      to long-term assets, which was recorded as negative goodwill and included
      in "Excess of Fair Value of Acquired Net Assets Over Cost" on the
      Consolidated Balance Sheets.

<TABLE>
<CAPTION>
                                                                        LIVES
                                                                      (IN YEARS)         1999         2000
<S>                                                                   <C>              <C>          <C>
        Excess of fair value of acquired net assets over cost             4            $ 8,665      $ 7,141
        Less accumulated amortization                                                    1,776        2,298
                                                                                       -------      -------
                                                                                       $ 6,889      $ 4,843
                                                                                       =======      =======
</TABLE>

                                     F-14
<PAGE>

      Amortization of negative goodwill was $257, $870, and $1,897 for the years
      ended June 30, 1998, 1999 and 2000, respectively. The increase in negative
      goodwill from fiscal year 1999 to fiscal year 2000 relates to the purchase
      of Autun.

      The estimated fair values of assets and liabilities acquired in the 1998
      and 1999 acquisitions are summarized as follows:

<TABLE>
<CAPTION>
                                                                        1998           1999
<S>                                                                   <C>            <C>
         Cash                                                         $ 10,244       $ 6,501
         Customer accounts receivable                                   61,669         2,748
         Inventories                                                    31,231         7,117
         Property, plant and equipment                                  38,164         7,705
         Intangible assets, primarily goodwill                           4,666         8,427
         Other assets                                                   14,670            15
         Accounts payable and accrued expenses                         (75,775)       (7,489)
         Deferred income taxes                                           6,731        (1,269)
         Excess of fair value of acquired net assets over cost                        (7,872)
         Other long-term obligations                                    (6,470)       (1,888)
         Long-term obligations                                            (587)
                                                                      --------       -------
                                                                        84,543        13,995

         Cash acquired                                                 (10,244)       (6,501)
                                                                      --------       -------

         Cash used in acquisitions                                    $ 74,299       $ 7,494
                                                                      ========       =======
</TABLE>

      The operating results of the acquired companies are included in ACC's
      consolidated statements of operations from the dates of acquisition. The
      following unaudited pro forma summary presents the consolidated results of
      operations as if the acquisitions occurred at July 1, 1997, after giving
      effect to certain adjustments, including amortization of goodwill,
      interest expense on the acquisition debt and related income tax effects.
      These pro forma results have been prepared for comparative purposes only
      and do not purport to be indicative of what would have occurred had the
      acquisitions been made as of that date or of results which may occur in
      the future.

<TABLE>
<CAPTION>
                                                                      PRO FORMA
                                                             ---------------------------
                                                                 1998            1999
                                                             (UNAUDITED)     (UNAUDITED)
<S>                                                          <C>             <C>
         Net sales                                             $548,350        $496,426
         Net income                                              14,498           5,849
         Net earnings per common and equivalent shares:
           Basic                                                   1.78            0.75
           Diluted                                                 1.76            0.75

</TABLE>


                                     F-15
<PAGE>

5.    INVENTORIES

<TABLE>
<CAPTION>
                                                                  1999          2000
<S>                                                             <C>           <C>
         Raw materials                                          $ 9,780       $ 8,491
         Work-in-process                                         39,651        33,656
         Finished goods                                          12,408        11,038
         Supplies                                                 3,570         2,938
                                                                -------       -------

                                                                $65,409       $56,123
                                                                =======       =======
</TABLE>

      Inventories as of June 30, 1999 and 2000 would have been higher by $381
      and $416, respectively, had the Company used the FIFO method of valuing
      those inventories valued using the LIFO method.

6.    PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                            LIVES
                                                          (IN YEARS)       1999            2000
<S>                                                       <C>           <C>             <C>
         Land                                                           $ 15,686        $ 14,868
         Improvements to land                               12-15          4,781           4,807
         Buildings and improvements                           35          31,817          30,033
         Machinery and equipment                             5-14        124,567         123,550
         Automobiles and trucks                               3            1,784           1,688
         Office furniture, fixtures and equipment            5-10          5,675           5,691
         Tooling and patterns                               1.5-6          4,445           4,367
                                                                        --------        --------

                                                                         188,755         185,004
         Less accumulated depreciation                                    47,512          61,104
                                                                        --------        --------

                                                                         141,243         123,900
         Construction in progress                                          6,031          11,399
                                                                        --------        --------

                                                                        $147,274        $135,299
                                                                        ========        ========
</TABLE>

      Depreciation expense was $10,656, $12,663 and $14,345 for the years ended
      June 30, 1998, 1999 and 2000, respectively.

7.    INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                            LIVES
                                                          (IN YEARS)       1999            2000
<S>                                                       <C>            <C>             <C>
         Goodwill                                            25          $37,440         $33,850
         Less accumulated amortization                                     4,594           5,325
                                                                         -------         -------
                                                                         $32,846         $28,525
                                                                         =======         =======
</TABLE>

      Amortization expense was $1,108, $1,429 and $1,489 for the years ended
      June 30, 1998, 1999 and 2000, respectively.


                                     F-16
<PAGE>

8.    DEFERRED FINANCING COSTS

<TABLE>
<CAPTION>
                                                 LIVES
                                               (IN YEARS)        1999         2000
<S>                                            <C>              <C>          <C>
Deferred financing costs                        3 to 10         $1,045       $1,355
Less accumulated amortization                                      385          432
                                                                ------       ------

                                                                $  660       $  923
                                                                ======       ======
</TABLE>

      Amortization of such costs, included in interest expense, was $188, $194
      and $261 for the years ended June 30, 1998, 1999 and 2000, respectively.

9.    ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                                                           1999          2000
<S>                                                                                       <C>           <C>
Accrued warranty                                                                          $11,785       $ 9,786
Payroll, vacation and other compensation                                                    8,968         8,205
Accrued pension liability                                                                   3,089         2,481
Advances from customers                                                                     4,509         3,426
Reserve for flood repairs (Note 22)                                                         1,197           645
Reserve for workers' compensation and employee
  health care                                                                               3,207         3,846
Taxes other than income                                                                       395           477
Interest payable                                                                            1,145         1,036
Insurance advances for Jahn Foundry industrial accident (Note 23)                                         5,998
Other                                                                                       2,993         1,532
                                                                                          -------       -------

                                                                                          $37,288       $37,432
                                                                                          =======       =======
</TABLE>

10.   LONG-TERM OBLIGATIONS

      On April 3, 1998, the Company and the insurance company holding the
      Company's $20,000 aggregate principal amount of unsecured, senior notes
      (the "Notes") entered into the Third Amendment to the Note Purchase
      Agreement providing for an increase in permitted subsidiary indebtedness
      from $3,500 to $8,000.

      On April 3, 1998, the Company and Harris Trust and Savings Bank
      ("Harris"), as agent for the lenders, entered into the Amended and
      Restated Credit Agreement (the "Credit Agreement") providing for an
      increase in unsecured loans from $60,000 to $110,000 and an extension of
      the maturity date to April 3, 2003. This Credit Agreement consists of a
      $40,000 term loan and a $70,000 revolving credit facility. Payments began
      on March 31, 1999, with a final maturity of April 3, 2003. Loans under the
      Credit Agreement will bear interest at fluctuating rates of either: (i)
      the agent bank's corporate base rate subject to a reduction of 0.25% (25
      basis points) if certain financial ratios are met or (ii) LIBOR plus 1.50%
      subject, in the case of the LIBOR rate option, to a reduction of up to
      0.50% (50 basis points) if certain financial ratios are met. Loans under
      this revolving credit facility may be used for general corporate purposes,
      acquisitions and approved investments.

      On October 7, 1998, the Company and Harris entered into the First
      Amendment to the Credit Agreement. This amendment permits the Company to
      repurchase up to $24,000 of its common stock, subject to a


                                     F-17

<PAGE>

      limitation of $10,000 in any fiscal year unless certain financial
      ratios are met, and provides for an option to increase the revolving
      portion of the credit facility to $100,000 if the Company issues senior
      subordinated notes. Proceeds from the issuance of any senior
      subordinated notes must be used to permanently pre-pay the $40,000 term
      loan portion of the credit facility.

      As of April 23, 1999, the Company and Harris entered into the Second
      Amendment to the Credit Agreement. This amendment provides that the
      Company maintain a ratio of earnings before interest, taxes and
      amortization to fixed charges ("Fixed Charge Coverage Ratio") of at least
      1.10, increasing to 1.25 on March 31, 2000 and 1.50 on March 31, 2001. The
      amendment also provides that the Company must maintain a ratio of total
      senior debt to earnings before interest, taxes, amortization and
      depreciation of not more that 3.2 prior to the issuance by the Company of
      any subordinated debt, and not more than 3.0 after the issuance of any
      subordinated debt. In addition, this amendment provides that the Company
      may not make acquisitions prior to May 1, 2000 and, from and after May 1,
      2000, the Company may not make acquisitions unless the Fixed Charge
      Coverage Ratio is at least 1.50, among other existing restrictions. Loans
      under this revolving credit facility will bear interest at fluctuating
      rates of either: (i) Harris' corporate base rate subject to a reduction of
      0.25% (25 basis points) if certain financial ratios are met or (ii) LIBOR
      plus 1.85% subject, in the case of the LIBOR rate option, to a reduction
      of up to 0.50% (50 basis points) if certain financial ratios are met.
      Loans under this revolving credit facility may be used for general
      corporate purposes, permitted acquisitions and approved investments.

      On August 20, 1999, the Company and Harris entered into the Third
      Amendment to the Credit Agreement. This amendment provides that the
      Company's subsidiary, Autun, is not subject to the provisions governing
      subsidiary indebtedness. It further provides that the Company and its
      subsidiaries may not make any investment in Autun and the Company must
      exclude Autun's results in the calculation of various financial covenants.

      On October 20, 1999, the Company and the insurance company holding the
      Company's $20 million aggregate principal amount of unsecured, senior
      notes entered into the Fourth Amendment to the Note Purchase Agreement.
      This amendment provides that the Company's subsidiary, Autun, is not
      subject to the provisions governing subsidiary indebtedness. It further
      provides that the Company and its subsidiaries may not make any investment
      in Autun and the Company must exclude Autun's results in the calculation
      of various financial covenants.

      On November 5, 1999, the Company and Harris entered into the Fourth
      Amendment and Waiver (the "Fourth Amendment") to the Credit Agreement. The
      Fourth Amendment provided, among other things, that the Company maintain a
      Fixed Charge Coverage Ratio of at least 1.10 on December 31, 1999,
      increasing to 1.25 on July 1, 2000, if the Company incurs at least $20
      million of subordinated debt by January 31, 2000. If the Company did not
      obtain a commitment for the private placement of at least $20 million of
      subordinated debt by December 15, 1999, the Fourth Amendment provided that
      (1) the Company maintain a Fixed Charge Coverage Ratio of at least 1.10 on
      December 31, 1999, increasing to 1.25 on March 31, 2000 and 1.50 on March
      31, 2001, (2) the fixed charges used in calculating the Fixed Charge
      Coverage Ratio will include 15% of the aggregate principal amount
      outstanding under the revolving credit facility after October 1, 1999
      rather than after July 1, 2000, and (3) the Company will grant the lenders
      under the Credit Agreement liens on the Company's assets by February 14,
      2000. The Company was unable to obtain such a commitment by December 15,
      1999. The Fourth Amendment also provided that the Company must maintain a
      ratio of consolidated total debt to total capitalization of not more than
      55%. Absent the waiver within the Fourth Amendment, the Company would not
      have been in compliance with the Fixed Charge Coverage Ratio. Loans under
      this credit facility bear interest at fluctuating rates of either: (1)
      Harris' corporate base rate plus 0.25%, subject to a reduction of 0.25%
      (25


                                     F-18

<PAGE>

      basis points) if certain financial ratios are met or (2) LIBOR plus 2.10%,
      subject to a reduction of up to 0.50% (50 basis points) if certain
      financial ratios are met.

      On December 21, 1999, the Company and Harris entered into the Fifth
      Amendment (The "Fifth Amendment") to the Credit Agreement. The Fifth
      Amendment provided that the Company may incur up to $35 million of
      indebtedness from General Electric Capital Corporation or its assignees
      (the "GE Financing"). In addition, the Fifth Amendment provided that (1)
      the bank revolving credit facility will be increased from $70 million to
      $80 million through April 30, 2000, (2) the fixed charges used in
      calculating the Fixed Charge Coverage Ratio will not include 15% of the
      aggregate principal amount outstanding under the revolving credit facility
      through June 30, 2000 and (3) the Company will grant the lenders under the
      Credit Agreement liens in certain of the Company's assets. Absent the
      Fifth Amendment, the Company would not have been in compliance with the
      Fixed Charge Coverage Ratio.

      On December 21, 1999, the Company and the insurance company holding the
      Notes entered into the Fifth Amendment to the Note Purchase Agreement.
      This amendment provided that the Company may incur indebtedness through
      the GE Financing. This amendment further provided that (1) the Company
      must maintain a ratio of consolidated total debt to total capitalization
      of not more than 55%, (2) the Company maintain a Fixed Charge Coverage
      Ratio of at least 1.10 on December 31, 1999, increasing to 1.25 on March
      31, 2000 and 1.50 on March 31, 2001 and (3) the fixed charges used in
      calculating the Fixed Charge Coverage Ratio will not include 15% of the
      aggregate principal amount outstanding under the revolving credit facility
      through June 30, 2000.

      On December 29, 1999, the Company entered into a Master Security Agreement
      with General Electric Capital Corporation ("GECC") and its assigns
      providing for a term loan of $35 million. The term loan is secured by
      certain of the Company's fixed assets, real estate, equipment, furniture
      and fixtures located in Atchison, Kansas and St. Joseph, Missouri, matures
      in December 2004, and bears interest at a fixed rate of 9.05%. On December
      29, 1999, the proceeds of the term loan, together with borrowings under
      the Company's revolving credit facility, were used to retire the $35.7
      million of outstanding indebtedness under the Company's term loan under
      its bank credit facility. The Master Security Agreement requires
      compliance with certain financial covenants, including minimum tangible
      net worth, debt to tangible net worth and debt service coverage ratio.

      On February 15, 2000, the Company, its lenders and the holder of the Notes
      entered into the Sixth Amendments (the "Sixth Amendments") to the Credit
      Agreement and the Note Purchase Agreement. Together with the GECC term
      loan, the Sixth Amendments provided for the perfection of a security
      interest in favor of GECC, the lenders under the Credit Agreement and the
      holder of the Notes in substantially all of the Company's assets other
      than real estate.

      On May 1, 2000, the Company and Harris entered into the Seventh Amendment
      and Waiver (the "Seventh Amendment") to the Credit Agreement. The Seventh
      Amendment provided, among other things, for a waiver of compliance with
      the Cash Flow Leverage Ratio covenant through July 1, 2000 and that the
      bank credit facility will be maintained at $80.0 million through June 30,
      2000. The Cash Flow Leverage Ratio covenant requires the Company to
      maintain a ratio of total debt to earnings before interest, taxes,
      depreciation and amortization of no greater than 3.2. Absent the waiver,
      the Company would not have been in compliance with the Cash Flow Leverage
      Ratio. Loans under this credit facility will bear interest at fluctuating
      rates of either: (1) Harris' corporate base rate plus 0.75% or (2) LIBOR
      plus 2.25%, increasing to LIBOR plus 2.50% on June 1, 2000.


                                      F-19

<PAGE>

      On June 30, 2000, the Company and Harris entered into the Eighth Amendment
      and Waiver (the "Eighth Amendment") to the Credit Agreement. The Eighth
      Amendment provides, among other things, for a waiver of compliance with
      the Cash Flow Leverage Ratio and Fixed Charge Coverage Ratio covenants
      through July 31, 2000, and that the bank credit facility will be decreased
      from $80.0 million to $77.3 million through July 31, 2000. Loans under
      this Credit Agreement will bear interest at Harris' corporate base rate
      plus 1.25%. Absent the waiver, the Company would not have been in
      compliance with the Cash Flow Leverage Ratio and Fixed Charge Coverage
      Ratio covenants. At June 30, 1999 and 2000, $9,866 and $11,367,
      respectively, was available for borrowing under this facility after
      consideration of outstanding advances of $88,817 and $61,385 and letters
      of credit of $8,460 and $7,248, respectively.

      Effective June 30, 2000, the insurance company holding the Notes granted a
      limited waiver of compliance with the Fixed Charge Coverage Ratio covenant
      through September 30, 2000. Absent the waiver, the Company would not have
      been in compliance with the Fixed Charge Coverage Ratio covenant.

      On July 31, 2000, the Company and Harris entered into the Ninth Amendment
      and Waiver (the "Ninth Amendment") to the Credit Agreement. The Ninth
      Amendment provided, among other things, for a waiver of compliance for the
      Company with the Cash Flow Leverage Ratio and Fixed Charge Coverage Ratio
      covenants through September 30, 2000, and that the bank facility will be
      maintained at $77.3 million through September 30, 2000. Loans under the
      Credit Agreement will bear interest at fluctuating rates of either (1)
      Harris' corporate base rate plus 1.75% or (2) LIBOR plus 3.00%. Absent the
      waiver, the Company would not have been in compliance with the Cash Flow
      Leverage Ratio and Fixed Charge Coverage Ratio covenants.

      On September 29, 2000, the Company and its lenders entered into a
      Forbearance Agreement to 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 default under its
      Credit Agreement.

      On April 13, 2001, the Company and its lenders entered into the Tenth
      Amendment and Forbearance Agreement to the Credit Agreement. The Tenth
      Amendment provides that, among other things, these lenders will forbear
      from enforcing their rights with respect to certain existing defaults
      through July 30, 2001. This amendment also provides that loans under this
      revolving credit facility will bear interest at fluctuating rates of (1)
      the agent bank's corporate base rate plus 1.75% (for loans up to $70
      million less outstanding letters of credit) and the agent bank's corporate
      base rate plus 1.25% (for loans in excess of such amount); or (2) LIBOR
      plus 4.25%. The domestic rate spreads of 1.75% and 1.25% and the LIBOR
      spread of 4.25% described in the preceding sentence will be reduced 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


                                     F-20

<PAGE>

      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 GECC entered into an agreement, which
      provides, among other things, that GECC 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.

      Long-term obligations consist of the following as of June 30, 1999 and
      2000:

<TABLE>
<CAPTION>
                                                                                             1999           2000
<S>                                                                                        <C>            <C>
Senior notes with an insurance company, secured by certain assets of the
  Company, maturing on June 30, 2004, subject to acceleration due to covenant
  violations, bearing interest at a fixed
  rate of 8.44% per year                                                                   $ 17,143       $ 14,286
Revolving credit facility with Harris, secured by certain assets of the
  Company, maturing on April 3, 2003, subject to acceleration due to covenant
  violations, bearing interest at:
  LIBOR plus 1.50%, $40,000 at a weighted average rate of 6.47%
    at June 30, 1999
  LIBOR plus 1.85%, $37,142 at 7.18% at June 30, 1999
  LIBOR plus 2.50%, $50,000 at 9.15% at June 30, 2000
  Prime, $11,675 at 7.75% at June 30, 1999
  Prime plus 0.75%, $11,385 at 10.25% at June 30, 2000                                       88,817         61,385
Term loan between the Company and GECC, secured by certain assets of the
   Company, maturing on December 29, 2004, bearing interest at 9.05%                                        33,250
Term loan between G&C and OES Capital, Incorporated (assignee of loan agreement
   with Ohio Air Quality Development Authority), secured by certain assets of
   G&C, maturing on December 31, 2006, bearing interest at 6.50%                              2,380          2,119
Term loan between La Grange Foundry and the Missouri Development Finance Board,
   secured by a letter of credit, maturing on November 1, 2011, bearing interest
   at 3.87% and 4.87% at June 30, 1999 and 2000, respectively                                 5,100          5,100
Revolving credit facility between Autun and Societe Generale, secured by trade
  receivables of Autun, maturing on April 17, 2007, bearing interest at EURIBOR
  plus 0.8% (5.21%) at June 30, 2000                                                                         1,470
                                                                                           --------       --------


                                                                                            113,440        117,610
Less amounts classified as current                                                            8,833         80,919
                                                                                           --------       --------

Total long-term obligations                                                                $104,607       $ 36,691
                                                                                           ========       ========
</TABLE>


      The Credit Agreement with Harris, the Note Purchase Agreement with an
      insurance company and the Master Security Agreement with GECC, as amended,
      essentially eliminate the Company's current ability to pay dividends.


                                     F-21

<PAGE>

      The amounts of long-term obligations outstanding as of June 30, 2000 are
      payable as follows, after giving effect to reclassification due to
      covenant violations:

<TABLE>
<S>                                              <C>
2001                                             $ 80,919
2002                                                3,798
2003                                                3,818
2004                                                3,839
2005                                               19,610
Thereafter                                          5,626
</TABLE>

      The amounts of interest expense for the years ended June 30, 1998, 1999
      and 2000 consisted of the following:

<TABLE>
<CAPTION>
                                                                            1998          1999           2000
<S>                                                                        <C>            <C>           <C>
Senior notes with an insurance company                                     $ 1,688        $1,467        $ 1,224
Credit facility with Harris                                                  2,020         6,194          6,071
Term loan with GECC                                                                                       1,520
Amortization of deferred financing costs                                       188           194            261
Other                                                                                        497            376
                                                                           -------        ------        -------

                                                                           $ 3,896        $8,352        $ 9,452
                                                                           =======        ======        =======
</TABLE>

11.   INCOME TAXES

      Income (loss) before income taxes is comprised of the following:

<TABLE>
<CAPTION>
                                                                            1998          1999           2000
<S>                                                                        <C>           <C>          <C>
Domestic                                                                   $13,755       $ (126)      $(28,533)
Foreign                                                                      3,310        8,042            927
                                                                           --------      ------       --------

                                                                           $17,065        $7,916       $(27,606)
                                                                           =======        ======       ========
</TABLE>


                                      F-22

<PAGE>

      Income taxes for the years ended June 30, 1998, 1999 and 2000 are
      comprised of the following:

<TABLE>
<CAPTION>
                                                     1998         1999           2000
<S>                                                 <C>           <C>         <C>
Current expense (benefit):
  Federal                                           $3,200        $  175      $ (3,329)
  State and local                                      908           253          (201)
  Foreign                                              913         1,655           455
                                                    ------        ------      --------

                                                     5,021         2,083        (3,075)

Deferred expense (benefit):
  Federal                                            1,288          (105)      (10,654)
  State and local                                       73           397        (1,558)
  Foreign                                              441         2,469          (640)
                                                    ------        ------      --------

                                                     1,802         2,761       (12,852)
                                                    ------        ------      --------

                                                    $6,823        $4,844      $(15,927)
                                                    ======        ======      ========
</TABLE>

<TABLE>
<CAPTION>
                                                                             1998         1999           2000
<S>                                                                         <C>           <C>         <C>
Items giving rise to the deferred income tax provision (benefit):
  Deferred gain on flood proceeds                                                         $  975      $ (7,786)
  Impairment reserve                                                                                    (5,589)
  Depreciation and amortization                                             $1,774           935         1,623
  Net operating loss carryforwards                                             313           754          (916)
  Missappropriation                                                                          (55)         (695)
  Flood wall capitalization                                                                                429
  Postretirement (benefits) costs                                               10           (97)         (419)
  Pension costs                                                               (397)         (163)          267
  Inventories                                                                 (430)          112           245
  Accrued expenses                                                             249           282             4
  Valuation allowance                                                          128            56             4
  Other, net                                                                   155           (38)          (19)
                                                                            ------        ------       --------

                                                                            $1,802        $2,761      $(12,852)
                                                                           ========      ========     =========
</TABLE>


                                     F-23
<PAGE>

      Following is a reconciliation between total income taxes and the amount
      computed by multiplying income (loss) before income taxes plus the
      minority interest in net income of subsidiaries by the statutory federal
      income tax rate:

<TABLE>
<CAPTION>
                                         1998                        1999                         2000
                               -----------------------      ----------------------      ----------------------
                               AMOUNT            %            AMOUNT          %          AMOUNT           %
<S>                             <C>              <C>        <C>              <C>        <C>              <C>
Computed expected
  federal income tax
  expense (benefit)             $  6,130         35.0       $  2,854         35.0       $  (9,639)       (35.0)
State income tax
  expense (benefit),
  net of federal benefit             787          4.5            527          6.4            (389)        (1.4)
Non - U.S. taxes                     (75)        (0.4)                                        156          0.6
Foreign dividends                                              1,238         15.2             780          2.8
Goodwill                             323          1.9            340          4.2             709          2.6
Revision of estimate
  for deferred taxes
  associated with flood
  proceeds                                                                                 (7,786)       (28.3)
Other, net                          (342)        (2.0)          (115)        (1.4)            242          0.9
                                --------       ------       --------       ------       ---------        ------

                                $  6,823         39.0       $  4,844         59.4       $ (15,927)       (57.8)
                                ========       ======       ========       ======       =========        ======
</TABLE>

      Deferred income taxes reflect the impact of temporary differences between
      the amount of assets and liabilities for financial reporting purposes and
      such amounts as measured by tax laws and regulations. Deferred income
      taxes as of June 30, 1999 and 2000 are comprised of the following:

<TABLE>
<CAPTION>
                                                                                          1999            2000
<S>                                                                                    <C>            <C>
Deferred tax assets:
  Net operating loss carryforwards                                                     $  18,115      $  19,031
  Impairment reserve                                                                                      5,589
  Postretirement benefits                                                                  3,105          3,524
  Accrued expenses                                                                         2,712          2,708
  Pension costs                                                                            1,549          1,282
  General business tax credits                                                               574            588
  Flood wall capitalization                                                                  429
  Missappropriations                                                                          55            695
  Other                                                                                      151            120
                                                                                     ------------    ----------
                                                                                          26,690         33,537
  Valuation allowance                                                                    (13,410)       (13,414)
                                                                                     ------------    ----------

           Net deferred tax assets                                                        13,280         20,123
                                                                                     ------------    ----------

Deferred tax liabilities:
  Depreciation and amortization                                                          (17,996)       (19,619)
  Deferred gain on flood proceeds                                                         (7,786)
  Inventories                                                                             (1,276)        (1,520)
  Discharge of indebtedness                                                                 (422)          (422)
  Other                                                                                     (473)          (382)
                                                                                     ------------    ----------

                                                                                         (27,953)       (21,943)
                                                                                     ------------    ----------

Total                                                                                 $  (14,673)     $  (1,820)
                                                                                     ============    ==========
</TABLE>


                                       F-24

<PAGE>

      In general, it is the practice and intention of the Company to reinvest
      the earnings of its non - U.S. subsidiaries in those operations on a
      permanent basis. Applicable U.S. federal taxes are provided only on
      amounts actually or deemed to be remitted to the Company as dividends.
      U.S. income taxes have not been provided on $3,074 and $1,850 of
      cumulative undistributed earnings from United Kingdom operations for 1999
      and 2000, respectively. U.S. income taxes on such earnings, if ultimately
      remitted to the U.S., may be recoverable as foreign tax credits.

      The Company has federal net operating loss carryforwards totaling
      approximately $6,880 at June 30, 2000, which expire in the years 2007
      through 2012. The federal net operating loss carryforwards were acquired
      during previous years and are subject to the ownership change rules
      defined by section 382 of the Internal Revenue Code (the "Code"). As a
      result of this event, the Company will be limited in its ability to use
      such net operating loss carryforwards. The amount of taxable income that
      can be offset by pre-change tax attributes in any annual period is limited
      to approximately $500.

      The Company has foreign net operating loss carryforwards totaling
      approximately $43,157 at June 30, 2000, which have no expiration date. The
      utilization of such net operating loss carryforwards are restricted to the
      earnings of specific foreign subsidiaries. As a result of such
      restrictions, the Company has established a valuation allowance of $13,410
      and $13,414 in 1999 and 2000, respectively, related to the foreign net
      operating loss carryforwards and certain state net operating loss
      carryforwards to reduce the deferred tax assets to the amounts that
      management believes are more likely than not to be realized.

      The Company has recorded a $7,786 deferred income tax benefit in fiscal
      year 2000 with respect to the reinvestment of certain flood insurance
      proceeds received in 1995 and 1996. The Company recorded pretax gains of
      approximately $20,100 in 1995 and 1996 related to insurance proceeds
      resulting from flood damage to the Company's Atchison, Kansas foundry in
      July 1993. For federal income tax purposes, the Company treated the flood
      as an involuntary conversion event under the Code and related Treasury
      Regulations.

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

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


                                       F-25
<PAGE>

12.   FINANCIAL INSTRUMENTS

      The Company's financial instruments include cash and cash equivalents,
      customer accounts receivable, accounts payable, debt obligations, and
      derivative financial instruments, including interest rate swap agreements,
      forward foreign exchange contracts and a foreign currency swap agreement.

      The derivative financial instruments are used by the Company to manage its
      exposure to interest rate and foreign currency risk. The Company does not
      intend to use such instruments for trading or speculative purposes. The
      counterparties to these instruments are major financial institutions with
      which the Company has other financial relationships. The Company is
      exposed to credit loss in the event of nonperformance by these
      counterparties. However, the Company does not anticipate nonperformance by
      the counter parties, and no material loss would be expected from their
      nonperformance. The Company's financial instruments also expose it to
      certain additional market risks as discussed below.

      INTEREST RATE RISK - The Company's floating rate debt obligations (Note
      10) expose the Company to interest rate risk, such that when LIBOR,
      EURIBOR or Prime rates increase or decrease, so will the Company's
      interest expense. To manage this potential risk, the Company may use
      interest rate swap agreements to limit the effect of increases in interest
      rates on any of the Company's U.S. dollar floating rate debt by fixing the
      rate without the exchange of the underlying principal or notional amount.
      Net amounts paid or received are added to or deducted from interest
      expense in the period accrued.

      At June 30, 1999 and 2000, the Company had $88,817 and $62,855,
      respectively, of floating rate debt tied to LIBOR, EURIBOR or Prime rates.
      In April 1998, the Company entered into a $15,000 notional amount interest
      rate swap agreement under which the Company paid a fixed rate of 5.92% and
      received a LIBOR floating rate (5.0% at June 30, 1999). This agreement was
      a hedge against $15,000 of the $88,817 outstanding on the Company's
      revolving credit facility as of June 30, 1999. At June 30, 1999, the fair
      value of this agreement based on a quote received from the counterparty,
      indicating the amount the Company would pay or receive to terminate the
      agreement, is a payment of $67. This agreement was terminated on June 23,
      2000, with the Company receiving $402 upon termination. Such amount is
      included within other income on the accompanying consolidated statements
      of income for fiscal year 2000.

      In September 1998, the Company entered into a $40 million notional amount
      interest rate swap agreement under which the Company paid a fixed rate of
      5.00% and received a LIBOR floating rate (5.3275% at June 30, 1999). Under
      this agreement, the notional amount was amortized at $1,429 per quarter
      beginning March 31, 1999. At June 30, 1999, this agreement was a hedge
      against $37,142 of the $88,817 outstanding on the Company's revolving
      credit facility. At June 30, 1999, the fair value of this agreement based
      on a quote received from the counterparty, indicating the amount the
      Company would pay or receive to terminate the agreement, was a receipt of
      $965. This agreement was terminated on December 29, 1999, with the Company
      receiving $1,238 upon termination. Such amount is included within other
      income on the accompanying consolidated statements of income for fiscal
      year 2000.

      FOREIGN CURRENCY RISK - The Company's British subsidiary, Sheffield,
      generates significant sales to customers outside of Great Britain whereby
      Sheffield invoices and receives payment from those customers in their
      local currencies. This creates foreign currency risk for Sheffield as the
      value of such currencies in British Pounds may be higher or lower when
      such transactions are actually settled. To manage this risk, Sheffield
      uses forward foreign exchange contracts to hedge receipts and payments of
      foreign currencies related to sales to its customers and purchases from
      its vendors outside of Great Britain. When Sheffield accepts an order from
      a customer that will be invoiced in a currency other than British Pounds


                                       F-26
<PAGE>

      (anticipated sales), it enters into a forward foreign exchange contract to
      sell such currency and receive British Pounds at a fixed rate during some
      specified future period that is expected to approximate the customer's
      payment date. Upon shipment of the product to the customer, the sale and
      receivable are recorded in British Pounds in the amount of the contract.
      When Sheffield purchases materials or equipment from a vendor that bills
      it in foreign currency, Sheffield will also enter into a forward foreign
      exchange contract to sell British Pounds and purchase that foreign
      currency to settle the payable.

      At June 30, 1999 and 2000, the Company's foreign subsidiaries, primarily
      Sheffield, have the following net contracts to sell the following
      currencies and has no significant un-hedged foreign currency exposure
      related to sales and purchase transactions:

<TABLE>
<CAPTION>
                                                      JUNE 30, 1999                      JUNE 30, 2000
                                            -------------------------------      -------------------------------
                                                  LOCAL        APPROXIMATE           LOCAL        APPROXIMATE
                                                CURRENCY         VALUE(1)          CURRENCY         VALUE(1)
<S>                                             <C>            <C>                  <C>              <C>
U.S. Dollars                                           25,740     $25,060              17,860           $17,851
Deutsche Marks                                         15,975       8,877               8,165             3,968
French Francs                                          38,225       6,133              19,022             2,757
Swiss Francs                                              496         320                  64                39
Italian Lira                                        3,564,490       1,959           2,229,242             1,095
Canadian Dollars                                          560         362               1,344               905
Dutch Guilder                                           1,854         897
Swedish Krona                                           6,018         718               4,000               452
Spanish Pesata                                         72,463         464              65,980               377
Austrian Schilling                                      5,204         425
Japanese Yen                                            9,807          80                 757                 7
Danish Krona                                            1,519         216
Belgian Franc                                           8,601         231
Finish Marka                                               21           4                 106                17
Norwegian Kroner                                        3,609         451
Euro                                                      653         712               4,134             3,930
                                                                ---------                               -------

Total                                                             $46,909                               $31,398
                                                                =========                               =======
</TABLE>

        (1)  The approximate value is the value of the local currencies
             translated first into the foreign subsidiaries' functional
             currency, at the June 30, 1999 and 2000 spot rates, respectively,
             and then translated to U.S. dollars at the June 30, 1999 and 2000
             spot rates.

      The Company also has foreign currency exposure with respect to its net
      investment in Sheffield. This exposure is to changes in the British Pound
      and affects the translation of the investment into U.S. Dollars in
      consolidation. To manage a portion of this exposure, the Company entered
      into a combined interest rate currency swap ("CIRCUS") in April 1998. The
      CIRCUS was an amortizing principal swap that fixed the exchange rate on
      the periodic and final principal cash exchanges and initially required the
      payment of interest on 24,002 British Pounds by the Company at a fixed
      rate of 6.82% and the receipt of interest on 40,000 U.S. Dollars at a
      floating rate tied to LIBOR rates. The currency portion of the CIRCUS was
      designated as an effective hedge of a portion of the Company's net
      investment in Sheffield. The interest portion of the CIRCUS was also
      effective and was designated as a hedge of the 40,000 U.S. Dollars LIBOR
      debt.


                                       F-27
<PAGE>

      In September 1998, the Company terminated the CIRCUS and entered into a
      separate interest rate swap (described in INTEREST RATE RISK above) and a
      separate amortizing principal currency swap. The termination of the CIRCUS
      resulted in a loss of $900 on the interest portion, which was deferred and
      amortized to interest expense over the remaining term of the underlying
      debt obligation to which it was originally designated until such debt was
      retired on December 29, 1999. The retirement of this debt triggered the
      recognition of the remaining $557 of deferred loss. This loss was recorded
      as a reduction of other income in fiscal year 2000.

      This currency swap entered into in September 1998, like the currency
      portion of the CIRCUS, was an amortizing principal swap that fixed the
      exchange rate on the periodic and final principal cash exchanges. The
      currency swap initially required the payment of interest on 24,002 British
      Pounds by the Company at a fixed rate of 6.82% and the receipt of interest
      by the Company on 40,000 U.S. Dollars at a fixed rate of 5.00%. The
      currency swap was designated as an effective hedge of a portion of the
      Company's net investment in Sheffield and was recorded as an adjustment to
      the accumulated foreign currency translation adjustment account and as a
      component of other assets. At June 30, 1999, the currency swap had a
      carrying value of $1,513 and a fair value, based on amounts that would be
      paid or received by the Company to terminate the swap, of $(188). On June
      23, 2000, the Company terminated the currency swap, with the Company
      receiving $1,549 upon termination. This payment was recorded as a deferred
      gain within the accumulated foreign currency translation adjustment
      account. This deferred gain will only be recognized within operations if
      and when the Company sells the Sheffield subsidiary.

      FAIR VALUE OF FINANCIAL INSTRUMENTS - As of June 30, 1999 and 2000, the
      carrying value of cash and cash equivalents approximates fair value of
      those instruments due to their liquidity and short-term nature.

      Based on borrowing rates currently available to the Company and the
      remaining terms, the carrying value of debt obligations as of June 30,
      1999 and 2000 approximates fair value.

      The estimated fair values of the Company's financial instruments have been
      determined by the Company using available market information and
      appropriate valuation methodologies. However, considerable judgement is
      required in interpreting market data to develop estimates of fair value.
      Accordingly, the estimates presented herein are not necessarily indicative
      of the amounts that the Company could realize in a current market
      exchange. The use of different market assumptions and/or estimation
      methodologies may have a material effect on the estimated fair value
      amounts.

13.   STOCKHOLDERS' EQUITY

      In fiscal year 2000, the Company's Board of Directors established a
      Stockholder Rights Plan and distributed to stockholders, one preferred
      stock purchase right for each outstanding share of common stock. Under
      certain circumstances, a right may be exercised to purchase one
      one-thousandth of a share of Series A Participating Cumulative Preferred
      Stock at an exercise price of $30, subject to adjustment. The rights
      become exercisable on the business day following the tenth business day
      after the commencement of a tender offer for at least 20% of the Company's
      common stock or a public announcement that a party or group has acquired
      at least 20% of the Company's common stock. Generally, after the rights
      become exercisable, the holders may purchase that number of preferred
      shares having a market value equal to twice the exercise price, for an
      amount in cash equal to the exercise price. If the Company's Board of
      Directors elects, it may exchange all of the outstanding rights for shares
      of common stock on a one-for-one basis. If the Company is a party to
      certain merger or business combination transactions, or transfers 50% or
      more of its assets or earnings power, and certain other events occur, each
      right will entitle its holders, other than the acquiring person, to buy
      for the exercise price a number of shares of common stock


                                       F-28
<PAGE>

      of the Company, or of the other party to the transaction, having a
      value equal to twice the exercise price of the right. The rights expire
      on March 28, 2010, and may be redeemed by the Company for $.01 per
      right at any time until ten business days following the date of the
      public announcement of the acquisition of 20% or more of the Company's
      common stock or the commencement date of a tender offer for at least
      20% of the Company's common stock. The Company is authorized by the
      Board of Directors to issue 2,000,000 shares of preferred stock, none
      of which have been issued. The Company has designated 10,000 shares of
      the preferred stock as Series A Participating Cumulative Preferred
      Stock for the purpose of the Stockholder Rights Plan. The Stockholder
      Rights Plan is subject to stockholder ratification at the Company's
      next annual meeting.

      In August 1998, the Company announced that its Board of Directors had
      authorized a stock repurchase program of up to 1,200,000 shares of the
      Company's common stock. During the remainder of fiscal year 1999, the
      Company repurchased 586,700 shares under this program for $6,048. The
      Company accounts for these shares as treasury stock and has recorded them
      at cost. On February 18, 2000, the Board of Directors terminated the stock
      repurchase program. The Company's Credit Agreement and the Note Purchase
      Agreement (Note 10) each restrict certain payments by the Company, such as
      stock repurchases, from exceeding certain limits.

      The 1993 Atchison Casting Corporation Employee Stock Purchase Plan (the
      "Purchase Plan") was adopted by the Board of Directors on August 10, 1993
      and approved by the Company's stockholders on September 27, 1993. An
      aggregate of 400,000 shares of common stock were initially made available
      for purchase by employees upon the exercise of options under the Purchase
      Plan. On the first day of every option period (option periods are
      three-month periods beginning on January 1, April 1, July 1 or October 1
      and ending on the next March 31, June 30, September 30 or December 31,
      respectively), each eligible employee is granted a nontransferable option
      to purchase common stock from the Company on the last day of the option
      period. As of the last day of an option period, employee contributions
      (authorized payroll deductions) during such option period will be used to
      purchase full and partial shares of common stock. The price for stock
      purchased under each option is 90% of the stock's fair market value on the
      first day or the last day of the option period, whichever is lower. During
      the years ended June 30, 1998, 1999 and 2000, 15,793, 33,033 and 36,371
      common shares, respectively, were purchased by employees under the
      Purchase Plan. At June 30, 2000, 253,669 shares remained available for
      grant.



                                       F-29
<PAGE>

      The Atchison Casting 1993 Incentive Stock Plan (the "Incentive Plan") was
      adopted by the Board of Directors on August 10, 1993 and approved by the
      Company's stockholders on September 27, 1993. At the annual meeting in
      November 1997, the Company's stockholders approved increasing the number
      of options available for grant under the Incentive Plan by 400,000. The
      Incentive Plan allows the Company to grant stock options to employees to
      purchase up to 700,000 shares of common stock at prices that are not less
      than the fair market value at the date of grant. The options vest equally
      over a three year period from the date of grant and remain exercisable for
      a term of not more than 10 years after the date of grant. The Incentive
      Plan provides that no options may be granted more than 10 years after the
      date of approval by the stockholders. Activity in the Incentive Plan for
      the three years ended June 30, 2000, is summarized in the following table:

<TABLE>
<CAPTION>
                                                                                                   WEIGHTED
                                                                                                    AVERAGE
                                                               SHARES            PRICE RANGE       PRICE PER
                                                            UNDER OPTION          PER SHARE          SHARE
<S>                                                         <C>                 <C>                <C>
Outstanding, July 1, 1997                                          229,999      $12.88-19.13            $14.13

  Issued                                                            33,333       15.75-18.63             16.56
  Exercised                                                        (18,060)      12.88-14.50             13.58
  Surrendered                                                      (11,873)      13.38-14.50             13.70
                                                           ---------------

Outstanding, June 30, 1998                                         233,399       12.88-19.13             14.54

  Issued                                                           119,000        8.50-18.00             11.01
  Surrendered                                                      (24,366)       9.88-18.63             14.95
                                                           ---------------

Outstanding, June 30, 1999                                         328,033        8.50-19.13             13.23

  Issued                                                            66,500        7.06-10.38              9.39
  Surrendered                                                      (12,300)      10.38-14.13             13.01
                                                           ---------------

Outstanding, June 30, 2000                                         382,233        7.06-19.13             12.57
                                                           ===============
</TABLE>

      As of June 30, 1998, 1999 and 2000, there were 164,044, 191,633 and
      235,067 options, respectively, exercisable under the Incentive Plan. The
      weighted-average exercise price for options exercisable at June 30, 1998,
      1999 and 2000 are $13.88, $14.09 and $13.91, respectively.

      At June 30, 2000, options to purchase 292,107 shares were authorized but
      not granted. The weighted average remaining contractual life of options
      outstanding under the Incentive Plan at June 30, 1998, 1999 and 2000 is
      7.0 years, 7.1 years, and 6.7 years, respectively.



                                       F-30
<PAGE>

      On November 18, 1994, the Company's stockholders approved the Atchison
      Casting Non-Employee Director Option Plan (the "Director Option Plan").
      The Director Option Plan provides that each non-employee director of
      the Company who served in such capacity on April 15, 1994 and each
      non-employee director upon election or appointment to the Board of
      Directors thereafter shall automatically be granted an option to
      purchase 10,000 shares of the Company's common stock. No person shall
      be granted more than one such option pursuant to the Director Option
      Plan. An aggregate of 100,000 shares were reserved for purchase under
      the plan. The price for stock purchased under the plan is the fair
      market value at the date of grant. The options under this plan have a 6
      month vesting period from the date of grant and remain exercisable for
      a term of not more than 10 years after the date of grant. Activity in
      the Director Option Plan for the three years ended June 30, 2000, is
      summarized in the following table:

<TABLE>
<CAPTION>
                                                                         WEIGHTED
                                                                          AVERAGE
                                         SHARES          PRICE           PRICE PER
                                      UNDER OPTION     PER SHARE           SHARE
                                      ------------     ---------        -----------
<S>                                   <C>              <C>              <C>
Outstanding, July 1, 1997                40,000          $13.38           $ 13.38

  Issued                                 10,000           19.13             19.13
  Exercised                             (10,000)          13.38             13.38
                                        -------
Outstanding, June 30, 1998               40,000        13.38-19.13          14.81
                                        -------
Outstanding, June 30, 1999               40,000        13.38-19.13          14.81

  Issued                                 10,000            8.75              8.75
                                        -------
Outstanding, June 30, 2000               50,000         8.75-19.13          13.60
                                        -------
</TABLE>

      As of June 30, 1998, 1999 and 2000, there were 40,000 options
      exercisable under the Director Option Plan. The weighted-average
      exercise price for options exercisable at June 30, 1998, 1999 and 2000
      is $14.81.

      At June 30, 2000, options to purchase 30,000 shares were authorized but
      not granted. The weighted average remaining contractual life of options
      outstanding under the Director Option Plan at June 30, 1998, 1999 and
      2000 is 6.6 years, 5.6 years, and 5.6 years, respectively.

                                      F-31

<PAGE>

      The following table illustrates the range of exercise prices and the
      weighted average remaining contractual lives for options outstanding
      under both the Incentive Plan and Director Option Plan as of June 30,
      2000:

<TABLE>
<CAPTION>
                                                       OPTIONS OUTSTANDING                          OPTIONS EXERCISABLE
                                     ----------------------------------------------------------------------------------------
                                       NUMBER        WEIGHTED AVERAGE    WEIGHTED AVERAGE       NUMBER       WEIGHTED AVERAGE
                                     OUTSTANDING         REMAINING           EXERCISE         EXERCISABLE        EXERCISE
  RANGE OF EXERCISE PRICES           AT 6/30/00      CONTRACTUAL LIFE         PRICE            AT 6/30/00          PRICE

<S>                                  <C>             <C>                 <C>                  <C>            <C>
$13.38                                 125,533           4 years             $ 13.38             125,533          $13.38
 14.13-14.75                            51,000           5 years               14.39              51,000           14.39
 12.88-15.75                            28,000           6 years               14.93              28,000           14.93
 16.63-19.13                            40,200           7 years               17.68              33,533           17.76
  9.88                                  20,000           8 years                9.88               6,667            9.88
 18.06                                  20,000           8 years               18.06               6,667           18.06
  8.50-10.38                           127,500           9 years                9.61              23,667            9.45
  8.75-8.88                             20,000          10 years                7.91                 -               -
                                       -------                                                   -------
                                       432,233                                                   275,067
                                       -------                                                   -------
</TABLE>

      The Company applies APB No. 25 in accounting for its stock option and
      stock purchase plans, under which no compensation cost has been
      recognized for such awards. Had compensation cost for the stock option
      and stock purchase plans been determined in accordance with the fair
      value accounting method prescribed under SFAS No. 123, the Company's
      net income (loss) and net earnings (loss) per share on a pro forma
      basis would have been as follows:

<TABLE>
<CAPTION>
                                                             1998       1999        2000

<S>                                                        <C>         <C>        <C>
Net income (loss):
  As reported                                              $10,242     $3,072     $(11,679)
  Pro forma                                                 10,055      2,896      (12,004)
Net income (loss) and net earnings (loss) per share:
  As reported:
    Basic                                                     1.25       0.39        (1.53)
    Diluted                                                   1.25       0.39        (1.53)
  Pro forma:
    Basic                                                     1.23       0.37        (1.57)
    Diluted                                                   1.22       0.37        (1.57)

</TABLE>

      The SFAS No. 123 fair value method of accounting is not required to be
      applied to options granted prior to July 1, 1995, therefore, the pro
      forma compensation cost may not be representative of that to be
      expected in future years.

                                F-32

<PAGE>

      For the purpose of computing the pro forma effects of stock option
      grants under the fair value accounting method, the fair value of each
      stock option grant was estimated on the date of the grant using the
      Black Scholes option pricing model. For the Incentive Plan, the
      weighted average grant-date fair value of stock options granted during
      fiscal year 1998, 1999 and 2000 was $10.07, $6.87 and $5.92 per share,
      respectively. For the Director Option Plan, the weighted average
      grant-date fair value of stock options granted during fiscal year 1998
      and 2000 was $11.55 and $5.66 per share, respectively. No options were
      issued under the Director Option Plan in fiscal year 1999. The
      following weighted average assumptions were used for grants under both
      option plans during the years ended June 30, 1998, 1999 and 2000:

<TABLE>
<CAPTION>
                                       1998          1999          2000

<S>                                  <C>           <C>           <C>
Risk-free interest rate                5.2%          5.3%          5.9%
Expected life                        10 years      10 years      10 years
Expected volatility                    36%           36%           41%
Dividend yield                         Nil           Nil           Nil

</TABLE>

      For the Purchase Plan, the weighted average grant-date fair value of
      options granted under the plan was $2.99, $1.81 and $1.57,
      respectively, for the years ended June 30, 1998, 1999 and 2000. The
      following weighted average assumptions were used for grants under the
      Purchase Plan during the years ended June 30, 1998, 1999 and 2000:

<TABLE>
<CAPTION>
                                      1998          1999          2000

<S>                                 <C>           <C>           <C>
Risk-free interest rate               5.1 %         4.4 %         5.2 %
Expected life                       3 months      3 months      3 months
Expected volatility                    36%           36%           41%
Dividend yield                         Nil           Nil          Nil

</TABLE>

14.   EARNINGS PER SHARE

      Following is a reconciliation of basic and diluted EPS for the years
      ended June 30, 1998, 1999 and 2000, respectively.

<TABLE>
<CAPTION>
                                           1998                          1999                            2000
                             ------------------------------------------------------------------------------------------
                                       WEIGHTED   EARNINGS             WEIGHTED  EARNINGS             WEIGHTED    LOSS
                               NET     AVERAGE      PER       NET      AVERAGE     PER       NET      AVERAGE      PER
                             INCOME    SHARES      SHARE     INCOME    SHARES     SHARE      LOSS     SHARES      SHARE

<S>                          <C>      <C>         <C>        <C>      <C>        <C>       <C>       <C>         <C>
Basic EPS                    10,242   8,167,285     1.25      3,072   7,790,781    0.39    (11,679)  7,648,616   (1.53)
Effect of dilutive
 securities - stock options              51,401
                             ------   ---------     ----      -----   ---------    ----    --------  ---------   ------
Diluted EPS                  10,242   8,218,686     1.25      3,072   7,790,781    0.39    (11,679)  7,648,616   (1.53)
                             ======   =========     ====      =====   =========    ====    ========  =========   ======
</TABLE>

                                         F-33

<PAGE>

15.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

      The Company's interim consolidated financial information for the
      quarterly periods ended September 30, December 31, March 30 and June 30
      in fiscal years 1999 and 2000 have been restated. See Note 25 for a
      discussion of the restatement.

<TABLE>
<CAPTION>
                         THREE MONTHS ENDED        THREE MONTHS ENDED       THREE MONTHS ENDED       THREE MONTHS ENDED
                         SEPTEMBER 30, 1998        DECEMBER 31, 1998        MARCH 30, 1999 (1)       JUNE 30, 1999 (2)
                       ----------------------   -----------------------  -----------------------   ------------------------
                           AS                       AS                       AS                        AS
                       PREVIOUSLY               PREVIOUSLY               PREVIOUSLY                PREVIOUSLY
                        REPORTED  AS RESTATED    REPORTED   AS RESTATED   REPORTED   AS RESTATED    REPORTED    AS RESTATED
                       ----------------------   -----------------------  -----------------------   ------------------------
<S>                    <C>        <C>           <C>         <C>          <C>         <C>           <C>          <C>
Net sales                116,576     116,226      122,955     122,785      119,533      120,594      116,495     117,800
Gross profit              13,921      12,820       18,747      16,925       17,535       15,592       17,569      14,252
Operating income           2,701       1,494        6,810       4,748        4,590        2,588       11,195       7,675
Net income (loss)            337        (584)       2,708       1,045        1,265         (249)       5,496       2,860
Earnings (loss)
  per common share (6):
    Basic                   0.04       (0.07)        0.35        0.13         0.17        (0.03)        0.72        0.37
    Diluted                 0.04       (0.07)        0.35        0.13         0.17        (0.03)        0.72        0.37

</TABLE>

<TABLE>
<CAPTION>
                         THREE MONTHS ENDED       THREE MONTHS ENDED        THREE MONTHS ENDED        THREE MONTHS ENDED
                         SEPTEMBER 30, 1999      DECEMBER 31, 1999 (3)      MARCH 30, 2000 (4)           JUNE 30, 2000
                       ----------------------   -----------------------  -----------------------   ------------------------
                           AS                       AS                       AS                        AS
                       PREVIOUSLY               PREVIOUSLY               PREVIOUSLY                PREVIOUSLY
                        REPORTED  AS RESTATED    REPORTED   AS RESTATED   REPORTED   AS RESTATED    REPORTED    AS RESTATED
                       ----------------------   -----------------------  -----------------------   ------------------------
<S>                    <C>        <C>           <C>         <C>          <C>         <C>           <C>          <C>
Net sales                109,693     108,914      115,711     114,103      124,745      121,765      118,152      116,355
Gross profit              12,713      10,417       15,031      12,293       13,692       10,247       12,117        8,881
Operating income (loss)    3,102         585        4,658       1,632        2,730       (1,040)      (9,268)     (19,265)
Net income (loss)            612      (1,187)       1,144      (1,002)       7,845        5,198       (7,145)     (14,688)
Earnings (loss)
  per common share:
    Basic                   0.08       (0.16)        0.15       (0.13)        1.03         0.68        (0.93)       (1.92)
    Diluted                 0.08       (0.16)        0.15       (0.13)        1.03         0.68        (0.93)       (1.92)

</TABLE>

      (1) The third quarter of fiscal 1999 contains a $750 charge recorded in
          connection with an industrial accident that occurred on February 25,
          1999 at the Company's subsidiary, Jahn Foundry, which decreased net
          income by $450 or $0.06 per share (Note 23).

      (2) The fourth quarter of fiscal 1999 contains a $3,500 revision to the
          flood damage reconstruction reserve which increased net income by
          $2,086 or $0.27 per share. The flood damage reconstruction reserve
          relates to the July 1993 Missouri River Flood (Note 22).

      (3) The second quarter of fiscal 2000 contains a $681 gain on the
          termination of an interest rate swap agreement, which increased net
          income by $412 or $.05 per share (Note 12).

      (4) The third quarter of fiscal 2000 contains a $7,786 deferred income tax
          benefit relating to the resolution of the Company's tax treatment of
          certain flood insurance proceeds received in 1995 and 1996, which
          increased net income by $7,786, or $1.02 per share (Note 11).

                                  F-34

<PAGE>

      (5) The fourth quarter of fiscal 2000 contains the following charges:
          a) a $3,373 impairment charge and $227 of other costs recorded
          in connection with the closure of Claremont, which decreased
          net income by $2,268 or $.30 per share (Note 2); b) a $6,883
          impairment charge recorded in connection with the write-down of
          PrimeCast fixed assets, which decreased net income by $4,336 or $.56
          per share (Note 2); c) a $3,450 impairment charge and $400 of other
          costs recorded in connection with Pennsylvania Steel, which decreased
          net income by $2,348 or $0.31 per share (Note 2); d) a $2,708
          impairment charge recorded in connection with the write-off of Empire
          Steel goodwill, which decreased net income by $2,708 or $0.35 per
          share (Note 3). In addition, the fourth quarter contains a $402 gain
          on the termination of an interest rate swap agreement, which
          increased net income by $243 or $.03 per share (Note 12).

      (6) The aggregate total of the individual quarterly amounts do not equal
          the amount reported for the fiscal year due to rounding.

16.   EMPLOYEE BENEFIT PLANS

      The Company sponsors separate defined benefit pension plans for certain
      of its salaried and hourly employees. Employees are eligible to
      participate on the date of employment with vesting after five years of
      service. Benefits for hourly employees are determined based on years of
      credited service and employee earnings.

      Pension expense for the defined benefit plans is presented below:

<TABLE>
<CAPTION>
                                       1998           1999          2000

<S>                                  <C>           <C>            <C>
Service costs                        $ 1,018       $  7,734       $  6,824
Interest costs                         2,851         14,980         15,376
Actual return on net assets           (8,263)       (15,272)       (40,543)
Net deferral items                     5,141         (3,012)        22,269
                                     -------       --------       --------
                                     $   747       $  4,430       $  3,926
                                     =======       ========       ========
</TABLE>

                               F-35

<PAGE>

      The pension plans' assets (primarily U.S. Government securities,
      common stock and corporate bonds) are deposited with a bank. A
      comparison of the projected benefit obligation and plan assets at fair
      value as of June 30, 1999 and 2000 is presented below.

<TABLE>
<CAPTION>
                                                        1999                         2000
                                             --------------------------    --------------------------
                                               ASSETS       ACCUMULATED      ASSETS       ACCUMULATED
                                               EXCEED        BENEFITS        EXCEED        BENEFITS
                                             ACCUMULATED      EXCEED       ACCUMULATED      EXCEED
                                              BENEFITS        ASSETS        BENEFITS        ASSETS

<S>                                          <C>             <C>           <C>             <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION

Projected benefit obligation at
  beginning of year                          $(217,524)      $(24,379)     $(230,530)      $(10,983)
Service cost                                    (7,066)          (668)        (6,496)          (328)
Interest cost                                  (13,334)        (1,646)       (14,613)          (763)
Actuarial (loss) gain                              583           (107)        (3,196)         1,116
Plan amendments                                   (305)          (673)
Foreign currency exchange rate
  changes                                       11,101             38          8,093              8
Participant contributions                                                     (1,739)
Benefits paid                                   10,250          2,217          6,707            491
                                             ---------       --------      ---------       --------
Projected benefit obligation at end
  of year                                     (216,295)       (25,218)      (241,774)       (10,459)
                                             ---------       --------      ---------       --------

CHANGE IN PLAN ASSETS
Fair value of plan assets at
  beginning of year                            228,851         19,910        235,859          8,323
Actual return on plan assets                    15,803           (531)        39,967            576
Participant contributions                                                      1,739
Employer contribution                            3,698            599          3,750            389
Foreign currency exchange rate
  changes                                      (11,644)           (37)        (8,993)            (7)
Benefits paid                                  (10,250)        (2,217)        (6,707)          (491)
                                             ---------       --------      ---------       --------
Fair value of plan assets at end of
  year                                         226,458         17,724        265,615          8,790
Plan assets in excess (deficiency) of           10,163         (7,494)        23,841         (1,669)
  projected benefit obligation
Unrecognized prior service costs                   422            699            426            600
Unrecognized net obligation                        102           (113)           132           (161)
Unrecognized net (gain)/loss                    (1,570)         3,355        (17,015)          (663)
Additional liability                                             (828)                         (122)
                                             ---------       --------      ---------       --------
Accrued pension asset (liability)             $  9,117       $ (4,381)     $   7,384       $ (2,015)
                                             =========       ========      =========       ========

THE ACTUARIAL VALUATION WAS PREPARED
  ASSUMING:
  Discount rate                                   7.00%                         7.75%
  Expected long-term rate of return
    on plan assets                                9.00%                         9.00%
  Salary increases per year                       5.00%                         5.00%

</TABLE>

                                   F-36

<PAGE>


      In accordance with SFAS No. 87, "EMPLOYERS' ACCOUNTING FOR PENSIONS",
      the Company has recorded an additional minimum pension liability for
      underfunded plans of $828 and $122 at June 30, 1999 and 2000,
      respectively, representing the excess of unfunded accumulated benefit
      obligations over previously recorded pension cost liabilities. A
      corresponding amount is recognized as an intangible asset except to the
      extent that these additional liabilities exceed related unrecognized
      prior service cost and net transition obligation, in which case the
      increase in liabilities is charged directly to stockholders' equity as
      a component of other comprehensive income.

      In addition, the Company sponsors a defined contribution 401(k) benefit
      plan covering certain of its employees who have attained age 21 and
      have completed one year of service. The Company matches 75% of employee
      contributions up to 8% of an employee's salary. Employees vest in the
      Company matching contributions after five years. The Company's
      contribution was $535, $519 and $1,387 for the years ended June 30,
      1998, 1999 and 2000, respectively.

      The Company's subsidiaries, Prospect Foundry, LA Die Casting and Jahn
      Foundry contributed $345, $302 and $320 for the years ended June 30,
      1998, 1999 and 2000, respectively, to multiemployer pension plans for
      employees covered by a collective bargaining agreement. These plans are
      not administered by the Company and contributions are determined in
      accordance with provisions of negotiated labor contracts. Information
      with respect to the Company's proportionate share of the excess of the
      actuarially computed value of vested benefits over the total of the
      pension plans' net assets is not available from the plans'
      administrators. The Multiemployer Pension Plan Amendments Act of 1980
      (the "Act") significantly increased the pension responsibilities of
      participating employers. Under the provisions of the Act, if the plans
      terminate or the Company withdraws, the Company may be subject to a
      substantial "withdrawal liability". As of the date of the most current
      unaudited information submitted by the plan's administrators (December
      31, 1999), no withdrawal liabilities exist.

      The Company also has various other profit sharing plans. Costs of such
      plans charged against earnings were $913, $1,234 and $907 for the years
      ended June 30, 1998, 1999 and 2000, respectively.

                                    F-37

<PAGE>

17.   POSTRETIREMENT OBLIGATION OTHER THAN PENSIONS

      The Company provides certain health care and life insurance benefits to
      certain of its retired employees. SFAS No. 106, "EMPLOYERS' ACCOUNTING FOR
      POSTRETIREMENT BENEFITS OTHER THAN PENSIONS," requires the Company to
      accrue the estimated cost of retiree benefit payments during the years the
      employee provides services. The Company funds these benefits on a
      pay-as-you-go basis. The accumulated postretirement benefit obligation and
      fair value of plan assets as of June 30, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                           1999          2000
<S>                                                                                    <C>            <C>
CHANGE IN ACCUMULATED POSTRETIREMENT BENEFIT
  OBLIGATION

Accumulated postretirement benefit obligation
  at beginning of year                                                                    $ 9,643       $ 9,864
Service cost                                                                                  480           516
Interest cost                                                                                 643           744
Actuarial (gain) loss                                                                        (455)          371
Benefits paid                                                                                (447)         (324)
                                                                                          -------       -------

Accumulated postretirement benefit obligation
  in excess of plan assets                                                                  9,864        11,171
Unrecognized net loss                                                                      (2,301)       (2,555)
Unrecognized prior service cost                                                               715           583
                                                                                          -------       -------

Accrued postretirement obligation                                                         $ 8,278       $ 9,199
                                                                                          =======       =======
</TABLE>

      Net postretirement benefit cost for the years ended June 30, 1998, 1999
      and 2000 consisted of the following components:

<TABLE>
<CAPTION>
                                                                                1998          1999         2000
<S>                                                                          <C>           <C>          <C>
Service cost - benefits earned during the year                                  $ 386        $ 480        $ 516
Interest cost on accumulated benefit obligation                                   599          643          744
Amortization of prior service cost                                               (132)        (132)        (132)
Amortization of loss                                                               69          138          116
                                                                              -------      -------      -------
                                                                                $ 922       $1,129       $1,244
                                                                              =======      =======      =======
</TABLE>


      The assumed health care cost trend rate used in measuring the accumulated
      postretirement benefit obligation for pre-age 65 and post-age 65 benefits
      as of June 30, 2000 was 9.1% decreasing each successive year until it
      reaches 6.0% in 2020, after which it remains constant. A
      one-percentage-point increase in the assumed health care cost trend rate
      for each year would increase the accumulated postretirement benefit
      obligation as of June 30, 2000 by approximately $1,616 (14.5%) and the
      aggregate of the service and interest cost components of the net periodic
      postretirement benefit cost for the year then ended by approximately $213
      (16.9%). A one-percentage-point decrease in the assumed health care cost
      trend rate for each year would decrease the accumulated postretirement
      benefit obligation as of June 30, 2000 by approximately $1,306 (11.7%) and
      the aggregate of the service and interest cost components of the net
      periodic postretirement benefit cost for the year then ended by
      approximately $169 (13.4%). The assumed discount rate used in determining
      the accumulated postretirement benefit obligation as of June 30, 1998,
      1999 and 2000 was 6.75%, 7.5% and 8.0%, respectively, and the assumed
      discount

                                       F-38

<PAGE>

      rate used in determining the service cost and interest cost for
      the years ended June 30, 1998, 1999 and 2000 was 7.75%, 7.5% and 8.0%,
      respectively.

18.   OPERATING LEASES

      The Company leases certain buildings, equipment, automobiles and trucks,
      all accounted for as operating leases, on an as needed basis to fulfill
      general purposes. Total rental expense was $1,006, $1,675 and $3,862 for
      the years ended June 30, 1998, 1999 and 2000, respectively. Long-term,
      noncancellable operating leases having an initial or remaining term in
      excess of one year require minimum rental payments as follows:

<TABLE>
<S>                                                                        <C>
     2001                                                                  $4,664
     2002                                                                   4,572
     2003                                                                   4,125
     2004                                                                   3,745
     2005                                                                   3,477
</TABLE>

19.   MAJOR CUSTOMERS

      Net sales to and customer accounts receivable from major customers are as
      follows:

<TABLE>
<CAPTION>
                                                                             AMOUNT OF NET SALES
                                                                       -----------------------------------
                                                                        1998            1999          2000
<S>                                                                    <C>             <C>           <C>
Customer A                                                             $27,713         $25,219       $24,826
Customer B                                                              39,999          53,276        46,677
                                                                       -------         -------       -------
                                                                       $67,712         $78,495       $71,503
                                                                       =======         =======       =======
</TABLE>

<TABLE>
<CAPTION>
                                                                                              CUSTOMER
                                                                                              ACCOUNTS
                                                                                             RECEIVABLE
                                                                                   -----------------------------
                                                                                         1999           2000
<S>                                                                                <C>               <C>
Customer A                                                                              $ 2,912        $2,916
Customer B                                                                                7,189         4,191
                                                                                        -------        ------
                                                                                        $10,101        $7,107
                                                                                        =======        ======
</TABLE>

                                       F-39

<PAGE>

20.   SEGMENT AND GEOGRAPHIC INFORMATION

      Each of the Company's subsidiaries and its Atchison/St. Joseph Division is
      a separate operating segment. Due to the similarity of the Company's
      products and services, its production processes, the type or class of
      customer for its products and services, and the methods used to distribute
      products and provide services, the Company has aggregated these operating
      segments into a single reportable segment for reporting purposes. Due to
      the many casting products produced by the Company, it is not practicable
      to disclose revenues by casting or forging product.

      The Company operates in four countries, the United States, Great Britain,
      Canada and France. Revenues from external customers derived from
      operations in each of these countries for the years ended June 30, 1998,
      1999 and 2000 are as follows and long-lived assets located in each of
      these countries as of June 30, 1999 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                        REVENUES
                                          ---------------------------------------------------------------------
                                          UNITED           GREAT
                                          STATES          BRITAIN        CANADA         FRANCE          TOTAL
<S>                                       <C>             <C>            <C>           <C>             <C>
1998                                      $309,574        $ 37,607       $25,926                       $373,107
1999                                       295,537         132,154        45,178        $ 4,536         477,405
2000                                       289,010         114,183        40,238         17,706         461,137
</TABLE>

<TABLE>
<CAPTION>

                                                                         LONG-LIVED ASSETS
                                               ---------------------------------------------------------------
                                                UNITED          GREAT
                                                STATES         BRITAIN        CANADA       FRANCE        TOTAL
<S>                                            <C>            <C>            <C>           <C>         <C>
1999                                           $141,837       $29,045        $22,952       $181        $194,015
2000                                            122,994        29,854         21,026        678         174,552
</TABLE>

21.   ADDITIONAL CASH FLOWS INFORMATION


<TABLE>
<CAPTION>
                                                                                1998          1999         2000
<S>                                                                            <C>          <C>          <C>
Cash paid during the year for:
  Interest                                                                     $3,915       $8,235       $9,398
  Income taxes                                                                  7,731        5,751           56
Supplemental schedule of noncash investing and financing activities:
  Recording of other asset related to pension liability                           365          421          706
  Recording of additional pension liability                                      (365)        (421)        (706)
  Unexpended bond funds                                                          (519)
</TABLE>

22.   FLOOD RESERVE

      In 1996, the Company received an insurance settlement for losses incurred
      as a result of the July 1993 Missouri River flood. At that time the
      Company established a reserve to be used for future repairs due to
      long-term flood damage to the Company's foundry. Since that time the
      Company has been charging the reserve balance for costs incurred resulting
      from those repairs.

                                       F-40

<PAGE>

      During 1999, management updated its analysis of the required repairs by
      performing its periodic re-evaluation of the effects of the flood based on
      current information. As a result, management committed to a revised repair
      plan, which included several remaining projects. These projects and their
      final estimated costs to complete represent the remaining flood reserve
      balance that is considered necessary. The amount of the reserve balance,
      over and above the estimated costs of such identified projects, was
      considered to be excess and was reversed. Such excess amounted to $3,500
      and was included in other income in the fourth quarter of fiscal year
      1999. Any future repairs outside the scope of the projects identified, if
      any, will be charged to repairs and maintenance as incurred. As of June
      30, 1999 and 2000, the Company has $1,197 and $645 recorded, respectively,
      as reserves for future flood repairs, which have been classified as
      accrued expenses.

23.   CONTINGENCIES

      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 the 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 ($450 after tax) during
      the third quarter of fiscal year 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 consolidated financial
      statements.

      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, for (i) 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 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 financial condition or results of
      operations and cash flows. As of June 30, 2000, the Company has received
      approximately $20,000 of insurance advances and has incurred charges
      approximating $14,000 related to the explosion and fire related damages.
      The excess of advances received over expenses incurred is recorded in
      accrued expenses within the consolidated balance sheet.

      A civil action has commenced in the 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., filed a Third Party Complaint against
      Jahn Foundry in the 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

                                        F-41

<PAGE>

      behalf of Jahn Foundry and the Company and is aggressively defending
      Jahn Foundry in the Third Pary Complaint. It is too early to assess the
      potential liability to Jahn Foundry for the Third Party Complaint, which
      in any event Jahn Foundry would aggressively defend. In addition, Jahn
      Foundry has brought a Third Party Counterclaim against Borden seeking
      compensation for losses sustained in the explosion, including amounts
      covered by insurance.

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

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

      Following the accident, the Occupational Safety and Health Administration
      ("OSHA") conducted an investigation of the accident. On August 24, 1999,
      OSHA issued a citation describing violations of the Occupational Safety
      and Health Act of 1970, which primarily related to housekeeping,
      maintenance and other specific, miscellaneous items. Neither of the two
      violations, specifically addressing conditions related to the explosion
      and fire, were classified as serious or willful. Without admitting any
      wrongdoing, Jahn Foundry entered into a settlement with OSHA that
      addresses the alleged work place safety issues and agreed to pay $149 in
      fines.

      Following the Company's announcements related to accounting
      irregularities at the Pennsylvania Foundry Group (See Note 25), 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 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.

                                       F-42

<PAGE>

      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 in the normal course of
      business. In the opinion of management, the resolution of these matters
      will not have a material effect on the Company's consolidated financial
      statements.

24.      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 10). 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 Note 2, 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 these locations 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 23). During fiscal 2000, Jahn Foundry had pre-tax
      losses of $187 (after insurance payments). To improve operating results,
      Jahn Foundry 1) has focused on only one type of molding process,
      transferring work requiring a different process to G&C and La Grange and
      2) is focusing on a smaller number of key customers, with a significantly
      reduced workforce.

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

      OTHER ACTIONS

      Management continues to pursue new or revised long-term debt arrangements
      with terms and covenants acceptable to the Company and to the lenders. As
      discussed in Note 10, over the past few years the Company has successfully
      negotiated with its lenders to obtain waivers 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, and the Company currently has
      forbearance agreements in place through 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. The Company has received
      nonbinding commitments to provide long-term financing. 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.

                                        F-43

<PAGE>

25.   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, Empire 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.

      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, in amounts of approximately $600 or less
      charged to expense in each year presented. 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.

      As discussed in Notes 2 and 3 herein, management considered the
      operating losses at PFG, recently discovered as a result of the
      investigation, as a primary indication of impairment and has concluded
      that certain asset impairment charges ($4,813, after tax) would have
      been taken in fiscal year 2000 had actual operating and financial
      information been known at that time. Accordingly, the restated amounts
      presented below include amounts for such impairment charges related to
      Pennsylvania Steel and Empire Steel. Additionally, in conjunction with
      the restatement of the 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.

                                        F-44

<PAGE>

      As a result, the accompanying consolidated financial statements as of
      June 30, 2000 and 1999 and for the three years in the period ended June
      30, 2000 have been restated from amounts previously reported to correct
      the misstatements discussed above. A summary of the significant effects
      of the restatement follows:

<TABLE>
<CAPTION>
                                                            AS OF JUNE 30, 1999         AS OF JUNE 30, 2000
                                                          -----------------------     -----------------------
                                                              AS                          AS
                                                          PREVIOUSLY                  PREVIOUSLY
                                                           REPORTED   AS RESTATED      REPORTED   AS RESTATED
                                                          -----------------------     -----------------------
<S>                                                       <C>         <C>             <C>         <C>
ASSETS
Cash and cash equivalents                                    $  4,222     $  3,906       $  5,932     $  3,815
Customer accounts receivable                                   83,235       80,678         94,988       87,401
Inventories                                                    68,777       65,409         61,804       56,123
Deferred income taxes                                                        2,401            816       10,092
Other current assets                                           18,829       14,045         26,096        9,517
Total current assets                                          175,063      166,439        189,636      166,948

Property, plant and equipment, net                            150,056      147,274        142,367      135,299
Intangible assets, net                                         32,846       32,846         31,233       28,525
Other assets                                                   15,153       13,895         13,106       10,728
Total assets                                                  373,778      361,114        377,265      342,423

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable                                             $ 39,452     $ 41,386       $ 40,607     $ 42,867
Accrued expenses                                               43,130       37,288         56,316       37,432
Current deferred income taxes                                   6,126
Total current liabilities                                      97,541       87,507        177,842      161,218

Long-term deferred income taxes                                 9,220       17,074          5,511       11,912
Retained earnings                                              65,011       54,527         67,467       42,848
Total stockholders equity                                     139,069      128,585        138,952      114,333
</TABLE>


<TABLE>
<CAPTION>
                                          FOR THE YEAR ENDED          FOR THE YEAR ENDED          FOR THE YEAR ENDED
                                             JUNE 30, 1998               JUNE 30, 1999                 JUNE 30, 2000
                                       ------------------------    ------------------------    --------------------------
                                           AS                          AS                          AS
                                       PREVIOUSLY                  PREVIOUSLY                  PREVIOUSLY
                                        REPORTED    AS RESTATED     REPORTED    AS RESTATED     REPORTED    AS RESTATED
                                       ------------------------    ------------------------    --------------------------
<S>                                    <C>          <C>            <C>          <C>            <C>          <C>
STATEMENT OF OPERATIONS
Net sales                                 $ 373,768   $  373,107      $ 475,559   $  477,405    $  468,301     $ 461,137
Cost of goods sold                          318,280      322,002        407,787      417,816       414,748       419,299
Operating expenses                           29,648       29,696         42,476       43,084        52,331        59,926
Income (loss) before taxes                   21,496       17,065         16,707        7,916       (8,296)      (27,606)
Income taxes expense (benefit)                8,731        6,823          6,901        4,844      (10,752)      (15,927)
Net income (loss)                            12,765       10,242          9,806        3,072         2,456      (11,679)

NET EARNINGS (LOSS) PER COMMON
  AND EQUIVALENT SHARES:
    Basic                                $   1.56     $   1.25       $   1.26     $   0.39      $   0.32      $  (1.53)
                                         ========== ============     ========== ============  ============    =========
    Diluted                              $   1.55     $   1.25       $   1.26     $   0.39      $   0.32      $  (1.53)
                                         ========== ============     ========== ============  ============    =========

STATEMENT OF RETAINED EARNINGS
Retained earnings, July 1, 1997          $ 42,440     $ 41,213
                                         ========== ============
</TABLE>

                                     ******

                                       F-45