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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549
                                    FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                For the fiscal year ended June 30, 2001 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:

                                                 Name of Each Exchange on
  Title of Each Class                                Which Registered
  -------------------                            -------------------------

Common Stock, $.01 par value                      New York Stock Exchange

        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 / X/ NO / /

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

The aggregate market value of the Common Stock, par value $.01 per share, of
the registrant held by nonaffiliates of the registrant as of October 9, 2001
was $16,490,830.

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 October 9, 2001: 7,723,031
Shares

                       DOCUMENTS INCORPORATED BY REFERENCE
         Portions of the Annual Proxy Statement for the Annual Meeting of
Stockholders to be held December 6, 2001, are incorporated by reference into
Part III.

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                                     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, oil field equipment, reactor vessels for
plastic manufacturing, computer peripherals, office furniture, home appliances,
satellite receivers and consumer goods. Between June 1991 and February 1999,
Atchison completed nineteen acquisitions. 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 did not make any acquisitions in fiscal 2000 or 2001, and is
not currently contemplating any acquisitions in fiscal 2002. The Company's
primary focus in fiscal 2002 will continue to be on the integration and
improvement of existing operations and earnings.

     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, Case New Holland, Babcock & Wilcox 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.

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RECENT DEVELOPMENTS

     FINANCING ARRANGEMENTS

     In September 2001, the Company and its revolving credit lenders entered
into the Eleventh Amendment and Forbearance Agreement to the Amended and
Restated Credit Agreement (the "Credit Agreement"). The Eleventh Amendment
provides that, among other things, these lenders will forbear from enforcing
their rights with respect to certain existing defaults through October 12, 2001.
This amendment also allowed Atchison Casting UK Limited ("ACUK"), a subsidiary
of the Company, to enter into a new financing agreement (the "Facility
Agreement") with Burdale Financial Limited ("Burdale"), an affiliate of Congress
Financial Corporation, a portion of which will reduce the lenders' commitments
thereunder.

     In September, 2001, the Company and the insurance company holding the
senior notes (the "Notes") entered into the Eighth Amendment and Forbearance
Agreement to the Note Purchase Agreement (the "Note Purchase Agreement"). The
Eighth Amendment provides that, among other things, the Noteholder will forbear
from enforcing its rights with respect to certain existing defaults through
October 12, 2001. This amendment also allows ACUK to enter the Facility
Agreement, a portion of which will be used to reduce the principal amount of the
Notes.

     In September 2001, ACUK and Burdale Financial Limited entered into the
Facility Agreement. This Facility Agreement provides for a 25 million British
pound (approximately $35 million US ) facility to be used to fund working
capital requirements at Sheffield, a subsidiary of ACUK, and up to $1.0 million
British pounds for working capital at Fonderie d'Autun ("Autun"), the Company's
subsidiary in France. In addition, the Facility Agreement will provide security
for Sheffield's foreign currency exchange contracts and performance bond
commitments, repay $5.0 million of intercompany working capital loans and may
provide for a loan of up to $9.0 million of additional working capital funds in
North America, subject to availability and other restrictions in the U.K. This
facility matures on September 17, 2004 and is secured by substantially all of
Sheffield's assets in the U.K. Loans under this Facility Agreement will bear
interest at LIBOR plus 2.60%.

     The Company is currently negotiating with new and existing lenders to
extend its current arrangements while it attempts to establish a new credit
facility with covenants that the Company believes it will be able to satisfy and
additional borrowing capacity.

     CLOSURE OF PENNSYLVANIA STEEL, PRIMECAST, INC. AND EMPIRE STEEL
     SUBSIDIARIES

     Following the discovery of 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 Empire
Steel had been impaired. Accordingly, 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 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

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produce large iron castings, only a portion of PrimeCast's work can be
transferred to other operations of the Company. PrimeCast has been merged with
and into Kramer International Inc. ("Kramer"). The Company had previously
recorded a charge of $6.9 million for the impairment of PrimeCast's fixed assets
in the fourth quarter of fiscal 2000.

     Following continued losses in fiscal 2001, the Company announced, on August
31, 2001, plans to close Empire. Accordingly, the carrying values of Empire's
fixed assets were written down to the Company's estimate of fair value, which
was based on discounted future cash flows. The resulting impairment charge of
$1.6 million to reduce the carrying value of these fixed assets was recorded in
the fourth quarter ended June 30, 2001. Actual results could vary significantly
from such estimates. Prior to the impairment charge, these assets had a carrying
value of $2.6 million. The Company plans to close Empire by November 30, 2001,
and transfer as much work as possible to other Company locations.

     LEGAL PROCEEDINGS

     The Company, its chief executive officer, and its chief financial officer
were named as defendants in five lawsuits filed following the Company's
announcements concerning the discovery of accounting irregularities at the
Pennsylvania Foundry Group. The cases have been consolidated before the U.S.
District Court for the District of Kansas. An amended complaint filed after the
consolidation alleges, among other things, that the defendants intentionally or
recklessly issued materially false and misleading financial statements in
violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. That complaint seeks certification of a class of
purchasers of the Company's common stock between December 10, 1997 and November
3, 2000 and asks for damages for the class in an unspecified amount. Discovery
has been stayed pending the resolution of the defendants' anticipated motion to
dismiss the amended complaint. The Company believes the claims are without merit
and intends to defend them vigorously. There can be no assurance, however, that
an adverse outcome with respect to the case 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.

     PLANNED SALE OF LOS ANGELES DIE CASTING AND JAHN FOUNDRY CORP. ASSETS

     The Company is negotiating the sale of substantially all of the assets of
Los Angeles Die Castings Inc. ("LA Die Casting"). Under the terms of the
proposed agreement, the Company would receive approximately $4.5 million in cash
in exchange for certain assets and the assumption of certain liabilities by the
buyer, subject to certain post-closing adjustments. There can be no assurance
that a definitive agreement will ultimately be executed or consummated. If
consummated, it is anticipated that this transaction would close during the
second quarter of fiscal 2002.

     In the fourth quarter of fiscal 2001, the Company recognized an impairment
charge of $2.7 million to write-down the carrying value of the intangible assets
at LA Die Casting to the Company's estimate of fair value. The Company
considered its decision to realign its operations, resulting in its decision to
dispose of LA Die Casting as the primary indicator of impairment. Prior to the
impairment charge, the intangible assets had a carrying value of $3.5 million.
For fiscal years 1999, 2000 and 2001, LA Die Casting recorded net sales of $9.6
million, $9.5 million and $8.2 million, respectively, and net income of
$196,000, $280,000 and $61,000, respectively, excluding the impairment charge in
the fourth quarter of fiscal 2001.

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     The Company is negotiating the sale of substantially all of the assets of
Jahn Foundry Corp. ("Jahn Foundry"). Under the terms of the proposed agreement,
the Company would receive approximately $500,000 in cash, $500,000 in preferred
stock of the buyer and $1.0 million principal amount over ten years in exchange
for certain assets and the assumption of up to approximately $4.0 million of
certain liabilities by the buyer, subject to certain post-closing adjustments.
There can be no assurance that a definitive agreement will ultimately be
executed or consummated. If consummated, it is anticipated that this transaction
would close during the second quarter of fiscal 2002.

     In the fourth quarter of fiscal 2001, the Company recognized an impairment
charge of $13.9 million to write-down the carrying value of the fixed assets at
Jahn Foundry to the Company's estimate of fair value. The Company considered its
decision to realign its operations, resulting in its decision to dispose of Jahn
Foundry as the primary indicator of impairment. Prior to the impairment charge,
the fixed assets had a carrying value of $15.9 million. For fiscal years 1999,
2000 and 2001, Jahn Foundry recorded net sales of $12.0 million, $10.7 million
and $8.4 million, respectively, and net income (losses) of $124,000, $(113,000)
and $(2.4) million, respectively, excluding the impairment charge in the fourth
quarter of fiscal 2001 and a non-recurring gain of $10.9 million recorded in the
second quarter of fiscal 2001 relating to insurance claims resulting from the
industrial accident at Jahn Foundry on February 25, 1999.

COMPANY STRATEGY

     Until fiscal 2000, 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 2002.

     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 would strive to make subsequent
acquisitions that further penetrate that market and take advantage of the
leader's technical expertise. Atchison Steel Casting & Machining 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 Steel Casting & Machining 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. 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.

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     DIVERSIFY END MARKETS. The Company attempts to lessen the cyclical exposure
at individual foundries by operating a diversified network of foundries that
serve a variety of end markets. 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 sought to acquire foundries, which
would expand the operations to other major world economies. Sheffield and Autun
provide entry into the Euromarket.

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    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 Steel Casting &                06/14/91        Leader in carbon and low alloy, large, complex steel
  Machining                                                castings. Initial platform for Company strategy.

Amite                                   02/19/93        Increase capacity to take on new  projects with customers.
                                                            Add-on to Atchison Steel Casting & Machining.

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.

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. Proposed to be sold.

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

Jahn Foundry                            02/14/97        Develop  position in market for automotive  castings.  Add-on
                                                          iron foundry.  Proposed to be sold.

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        Continue to expand geographically in Europe and to increase
                                                          penetration of the automotive market.
</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.

     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

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has incrementally increased the sales force by 36%. 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, Bombardier 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 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.

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     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.

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 13.7 million tons in 1999, of which steel castings accounted for
approximately 1.4 million tons, iron castings for approximately 9.7 million tons
and non-ferrous castings for approximately 2.6 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 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 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.

                                       9
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     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.

MARKETS AND PRODUCTS

     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 18.8%, 18.5% and 20.2% of the Company's net sales in
fiscal 1999, fiscal 2000 and fiscal 2001, 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 18.0%, 16.5% and 15.9% of the Company's net sales in
fiscal 1999, fiscal 2000 and fiscal 2001, respectively.

     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 Atchison Steel Casting & Machining 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 11.3%, 10.5% and 10.9% of the Company's net sales in fiscal 1999,
fiscal 2000 and fiscal 2001, 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 in Springfield, Massachusetts and Inverness Castings Group, Inc.
("Inverness") in Dowagiac, Michigan. Customers in this market include General
Motors and DaimlerChrysler, among others.

                                       10
<Page>

     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.

     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.

     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.

     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 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. As discussed above, LA Die Casting may be sold.

     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

                                       11
<Page>

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, 2001, the Company's backlog was approximately $206.8
million, as compared to backlog of approximately $168.6 million at June 30,
2000. The backlog is scheduled for delivery in fiscal 2002 except for
approximately $36.9 million, of which $27.8 million is scheduled for delivery in
fiscal 2003. 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 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.

                                       12
<Page>

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 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.

                                       13
<Page>

     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 Atchison Steel Casting & Machining, 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.

     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 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

                                       14
<Page>

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        2001        UTILIZATION
-------------------  ----------------  -------------------------   ------------  ---------------  ------------
<S>                  <C>              <C>                         <C>            <C>              <C>
Atchison Steel       Carbon, low       Mining and construction,       30,000         23,166           77.2%
Casting &            alloy and         rail, military, valve,
Machining            stainless         turbine and compressor
                     steel

Amite                Carbon and low    Marine, mining and             14,000          3,658           26.1%
                     alloy steel       construction

Prospect             Gray and          Construction,                  12,500          6,613           52.9%
                     ductile iron      agricultural, trucking,
                                       hydraulic, power
                                       transmission and machine
                                       tool

Quaker Alloy         Carbon, low       Pump and valve                  6,000          2,092           34.9%
                     alloy and
                     stainless
                     steel

Canadian Steel       Carbon, low       Hydroelectric and steel         6,000          2,518           42.0%
                     alloy and         mill
                     stainless steel

Kramer               Carbon, low       Pump impellers and              1,450            876           60.5%
                     alloy and         casings
                     stainless
                     steel, gray
                     and ductile
                     iron

La Grange            Gray, ductile     Mining and construction        14,000         10,159          72.6%
                     and compacted     and transportation
                     graphite iron

G&C                  Gray and          Fluid power (hydraulic         12,000          9,893           82.4%
                     ductile iron      control valves)

LA Die Casting       Aluminum and      Communications,                 1,750            861           49.2%
                     zinc              recreation and computer

Canada Alloy         Carbon, low       Power generation, pulp          2,500          1,554           62.2%
                     alloy and         and paper machinery,
                     stainless steel   pump and valve
</Table>

                                                15
<Page>

<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        2001        UTILIZATION
-------------------  ----------------  -------------------------   ------------  ---------------  ------------
<S>                  <C>              <C>                         <C>            <C>              <C>
Jahn Foundry         Gray iron         Automotive, air                11,000          4,241           42.4%
                                       conditioning and
                                       agricultural

Inverness            Aluminum          Automotive, furniture          12,500          8,375           67.0%
                                       and appliances

Forgemasters         Iron and Steel    Steel and aluminum             31,000         23,734           76.6%
Rolls                                  rolling

Sheffield            Iron and Steel    Oil and gas, ingot,            88,200         47,254           53.6%
Forgemasters                           petrochemical, power
Engineering                            generation
Limited

Autun                Iron              Heating , domestic             35,000         19,015           54.3%
                                       appliance and automotive
                                       castings
                                                                   -------------  ---------------  ------------
        Totals                                                       277,900        164,009           59.0%
                                                                   =============  ===============  ============

</Table>

<Table>
<Caption>
                                                                                    MACHINING
                                                                                      HOURS
                                                                   ESTIMATED*       12 MONTHS
                                                                     ANNUAL           ENDED        ESTIMATED*
 MANUFACTURING           METALS                                    MACHINING         JUNE 30,       CAPACITY
      UNIT              MACHINED          MAJOR APPLICATIONS         HOURS             2001        UTILIZATION
-------------------  ----------------  -------------------------  -------------   ---------------  ------------
<S>                  <C>              <C>                         <C>            <C>              <C>
London Precision     Carbon, low       Mining and                    170,000        210,530           123.8%
                      alloy,           construction, rail,
                      stainless        military, valve,
                      steel, iron      turbine and compressor
                      and aluminum

                                                                   ------------   ---------------  ------------
        Totals                                                       170,000        210,530           123.8%
                                                                   ============   ===============  ============
------
</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.

                                       16
<Page>

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, Atchison Steel Casting &
Machining 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 June 30, 2001, the Company had approximately 3,800 full-time
employees. Since its inception, the Company has had two work stoppages. The
Company's hourly employees are covered by collective bargaining agreements with
several unions at fifteen 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 6/30/01)
----------------       -----------------------------------------  ----------------------   ---------------------    ----------------
<S>                     <C>                                       <C>                      <C>                     <C>
  Atchison Steel         United Steelworkers of America, Local           05/11/99                 05/12/02                 319
  Casting &              6943
  Machining

  Prospect               Glass, Molders, Pottery,                        08/31/00                 06/30/03                 144
                         Plastics & Allied Workers
                         International, Local 63B

  Quaker Alloy           United Steelworkers of                          05/15/99                 07/15/03                 185
                         America, Local 7274
</Table>

                                       17
<Page>

<Table>
<Caption>
                                                                                                                       APPROXIMATE
                                                                                                                        NUMBER OF
 MANUFACTURING                                                                                      DATE OF            MEMBERS (AS
      UNIT                  NAME OF PRINCIPAL UNION                   EFFECTIVE DATE              EXPIRATION           OF 6/30/01)
----------------       -----------------------------------------  ----------------------   ---------------------    ----------------
<S>                     <C>                                       <C>                      <C>                     <C>
  Canadian Steel         Metallurgistes Unis                             02/12/01                 02/14/04                  79
                         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                 131
                         America, Local 3178

  La Grange              Glass, Molders, Pottery,                        12/18/00                 12/16/05                 171
                         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              In negotiation              122
                         Machine Workers of America,
                         Local 714

  LA Die Casting         United Automobile, Aircraft,                    12/09/00                 12/12/03                  37
                         Agricultural Implement
                         Workers of America, Local 509

  Canada Alloy           United Steelworkers of                          04/04/97                 04/03/02                 102
                         America, Local 5699

  Jahn Foundry           Glass, Molders, Pottery,                        06/01/98                 12/03/01                  73
                         Plastics and Allied Workers
                         International, Local 97

  Inverness              United Paperworker's International,             04/20/01                 08/06/04                 215
                         Local 7363


  Sheffield              Steel and Industrial Managers Association       01/07/01                 01/01/02                   4
   Forgemasters
   Engineering           Iron and Steel Trades Confederation
   Limited                                                               01/07/01                 01/01/02                  58

                         Electrical Engineering and Plumbing             01/07/01                 01/01/02                  17
                         Trades Union

                         Manufacturing Science and Finance               01/07/01                 01/01/02                  30

                         Trades Associated to Steel and                  01/07/01                 01/01/02                   4
                         Sheetmakers

                         Association of Professional and                 01/07/01                 01/01/02                   7
                         Executive Staff
</Table>

                                       18
<Page>

<Table>
<Caption>
                                                                                                                       APPROXIMATE
                                                                                                                        NUMBER OF
 MANUFACTURING                                                                                      DATE OF            MEMBERS (AS
      UNIT                  NAME OF PRINCIPAL UNION                   EFFECTIVE DATE              EXPIRATION           OF 6/30/01)
----------------       -----------------------------------------  ----------------------   ---------------------    ----------------
<S>                     <C>                                       <C>                      <C>                     <C>
                         General Municipal and Boilermakers              01/07/01                 01/01/02                  41

                         Allied Engineering and Electrical Union         01/07/01                 01/01/02                 129

                         Transport and General Workers Union             01/07/01                 01/01/02                   8

                         Amalgamated Metal and Steelworkers Union        01/07/01                 01/01/02                  10

                         Union of Construction, allied Trades and        01/07/01                 01/01/02                   3
                         Technicians

  Forgemasters           Amalgamated Engineering and Electrical
   Rolls                 Union
                         -        Sheffield                              01/01/01                 12/31/02                  78
                         -        Crewe                                  01/08/00              In negotiation              195
                         -        Coatbridge                             01/01/01                 12/31/01                  40

                         Iron and Steel Trades Confederation
                         -        Sheffield                              01/01/01                 12/31/02                   9

                         General and Municipal Workers Union
                         -        Sheffield                              01/01/01                 12/31/02                   2

                         Transport and General Workers Union
                         -        Sheffield                              01/01/01                 12/31/02                   3

                                                                                                                            19
                         Manufacturing Science and Finance
                         -        Crewe                                  08/01/00              In negotiation               19
                         -        Sheffield                              01/01/01                 12/31/02                   7

  London Precision       United Steelworkers of America, Local            8/31/00                  8/31/04                  81
                         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..........................     56     Vice President - Europe

John R. Kujawa..........................     48     Vice President - Large Steel Castings

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

James Stott.............................     60     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 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

                                       20
<Page>

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.

     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. In
fiscal 2001, 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.

     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 in excess of $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

                                       21
<Page>

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                             165,511

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                                38,000

Empire                                 Reading, PA            Iron and steel foundry                      177,000
                                                              (planned to be closed)

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 (proposed to be
                                                              sold)

Canada Alloy                           Kitchener, Ontario     Steel foundry                                83,000

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

</Table>

                                       23
<Page>

<Table>
<Caption>
                                                                                                 FLOOR SPACE IN
               NAME                         LOCATION                 PRINCIPAL USE                  SQ. FEET
------------------------------------   -------------------    -----------------------------    -------------------
<S>                                    <C>                    <C>                               <C>
Jahn Foundry                           Springfield, MA        Iron foundry (proposed to                   207,689
                                                              be sold)

PrimeCast                              South Beloit, IL       Iron foundry (closed)                       320,000
                                       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 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 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 will
aggressively defend. In addition, Jahn Foundry has brought a Third Party
Counterclaim against Borden and the independent sales representative of the
chemical compound, J.R. Oldhan Company, 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 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 will 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

                                       25
<Page>

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

     The Company, its chief executive officer, and its chief financial officer
were named as defendants in five lawsuits filed following the Company's
announcements concerning the discovery of accounting irregularities at the
Pennsylvania Foundry Group. The cases have been consolidated before the U.S.
District Court for the District of Kansas. An amended complaint filed after the
consolidation alleges, among other things, that the defendants intentionally or
recklessly issued materially false and misleading financial statements in
violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. That complaint seeks certification of a class of
purchasers of the Company's common stock between December 10, 1997 and November
3, 2000 and asks for damages for the class in an unspecified amount. Discovery
has been stayed pending the resolution of the defendants' motion to dismiss the
amended complaint. The Company believes the claims are without merit and intends
to defend them vigorously. There can be no assurance, however, that an adverse
outcome with respect to the case 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

     The Annual Meeting of Stockholders was held on June 29, 2001.

     Stockholders owning 7,166,639 shares voted in favor of David D. Colburn as
a Class I director. There were 743,955 shares withheld. Stockholders owning
7,138,812 shares voted in favor of Hugh H. Aiken as a Class I director. There
were 771,781 shares withheld. Accordingly, Mr. Colburn and Mr. Aiken were
elected as Class I directors for a term of three years. Previously elected and
continuing to serve their terms are David L. Belluck, Ray H. Witt and Stuart Z.
Uram.

     Stockholders owning 3,886,859 shares voted in favor of adopting the
Shareholder Rights Plan and the Rights Agreement dated as of March 28, 2000
between the Company and American Stock Transfer & Trust Company, as amended.
There were 1,891,944 shares voted against, 9,181 shares abstained and 1,901,363
broker non-votes. Accordingly, the Shareholders Rights Plan and the Rights
agreement has been adopted.

                                       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, 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..........................................................               3.20       2.25


FISCAL YEAR ENDING JUNE 30, 2002:
First Quarter..........................................................                4.05       2.55
Second Quarter (through October 9, 2001)...............................                3.00       2.10
</Table>


     As of October 9, 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. David D. Colburn, Mr. Ray Witt,
and Mr. Stuart Uram were each provided at their election 8,421 shares of common
stock on September 10, 2001, with a then-current market value of $2.85 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.

                                       27
<Page>

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. 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.


                                       28
<Page>

<Table>
<Caption>
                                                                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                            FISCAL YEAR ENDED JUNE 30,
                                                     1997            1998           1999              2000            2001
                                                  --------         --------       --------         --------         --------
STATEMENT OF OPERATIONS DATA:
<S>                                              <C>              <C>            <C>              <C>              <C>
Net Sales.......................................  $245,769         $373,107       $477,405         $461,137         $428,150

Cost of Sales...................................   205,480          322,002        417,816          419,299          400,289
                                                  --------         --------       --------         --------         --------
     Gross Profit...............................    40,289           51,105         59,589           41,838           27,861

  Operating Expenses:

     Selling, General & Administrative..........    21,559           28,846         45,290           44,526           44,172

       Impairment Charges.......................         -                -              -           16,414 (2)       18,139 (5)

       Amortization of Intangibles..............       632              850            544             (408)            (255)

     Other Income ..............................         -               -          (2,750)(1)         (606)(3)      (10,920)
                                                  --------         --------       --------         --------         --------
     Operating Income (Loss)....................    18,098           21,409         16,505          (18,088)         (23,275)

 Interest Expense...............................     3,227            3,896          8,352            9,452           11,329

 Minority Interest in Net Income (Loss) of
     Subsidiaries...............................       270              448            237               66              (57)
                                                  --------         --------       --------         --------         --------

     Income (Loss) Before Taxes.................    14,601           17,065          7,916          (27,606)         (34,547)

 Income Taxes...................................     6,100            6,823          4,844          (15,927)(4)        1,892
                                                  --------         --------       --------         --------         --------
     Net Income (Loss) before Cumulative Effect
        of a change in Accounting Principal......    8,501           10,242          3,072          (11,679)         (36,439)
  Cumulative Effect on Prior Years of a change
    in Accounting for Derivative Financial
    Instruments, net of tax                              -                -              -                -             (546)
                                                  --------         --------       --------         --------         --------
     Net Income (Loss)                              $8,501          $10,242         $3,072         $(11,679)        $(36,985)
                                                  ========         ========       ========         ========         ========
Earnings (Loss) Per Share:
   Basic.........................................    $1.47            $1.25          $0.39           $(1.53)          $(4.81)
                                                  ========         ========       ========         ========         ========
   Diluted.......................................    $1.46            $1.25          $0.39           $(1.53)          $(4.81)
                                                  ========         ========       ========         ========         ========

Weighted Average Number of  Common and
Equivalent Shares Outstanding

   Basic.........................................5,796,281        8,167,285      7,790,781        7,648,616        7,685,339

   Diluted.......................................5,830,695        8,218,686      7,790,781        7,648,616        7,685,339

SUPPLEMENTAL DATA:

 Depreciation and Amortization...................   $8,667          $11,695        $13,416          $14,198          $13,584

 Capital Expenditures ...........................   13,852           17,868         17,899           20,531           11,182

 Number of Operating Plants at Period End .......       13               17             19               19               16

BALANCE SHEET DATA (AT PERIOD END):

 Working Capital  (Defiency).....................  $56,061          $73,755        $78,932           $5,730         $(52,925)

 Total Assets....................................  211,482          340,981        361,114          342,423          305,873


 Long-Term Obligations...........................   27,758           87,272        104,607           36,691            6,648


 Total Stockholders' Equity (7)..................  121,504          131,864        128,585          114,333           72,689

</Table>

                                       29
<Page>

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

(2)  Impairment charges consist of a $3.4 million charge relating to the
     Company's planned closure of Claremont Foundry, Inc. ("Claremont"), a $6.9
     million charge relating to an impairment of long-lived assets at PrimeCast,
     Inc., a $3.4 million charge relating to the impairment of long-lived assets
     at Pennsylvania Steel Foundry & Machine Company and a $2.7 million charge
     relating to an impairment of goodwill at Empire Steel Castings, Inc
     ("Empire Steel").

(3)  Other income consists primarily of gains of $1.1 million on the termination
     of interest rate swap agreements.

(4)  Includes a $7.8 million 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.

(5)  Impairment charges consist of a $1.6 million charge relating to the
     Company's planned closure of Empire Steel, a $2.7 million charge relating
     to an impairment of goodwill at Los Angeles Die Casting ("LA Die Casting"
     and a $13.9 million charge relating to the impairment of long-lived assets
     at Jahn Foundry Corp ("Jahn Foundry").

(6)  Includes a $10.9 million gain relating to the industrial accident that
     occurred on February 25, 1999 at Jahn Foundry

(7)  There have been no cash dividends paid during fiscal year 1997 through
     2001.


                                       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,
closed, or is in the process of closing, four foundries and is in the process of
selling two foundries since its inception. The Company did not make any
acquisitions in fiscal 2000 or 2001 and is not currently contemplating any
acquisitions in fiscal 2002. The Company's primary focus in fiscal 2002 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."

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, 2001 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2000

     Net sales for fiscal 2001 were $428.2 million, representing a decrease of
$32.9 million, or 7.1%, from net sales of $461.1 million in fiscal 2000. This
7.1% decrease in net sales was due primarily to decreases in net sales to the
offshore oil and gas, military, mining, automotive and power generation markets.
Net sales of Sheffield Forgemasters Group Limited ("Sheffield") for fiscal 2001
decreased $6.6 million from net sales in fiscal 2000. In addition to the weak
market conditions, net sales have also been impacted by the bankruptcy and
subsequent cessation of operations of a major customer at the Company's
PrimeCast, Inc. ("PrimeCast") subsidiary. Through fiscal 2000, PrimeCast
aggressively worked at replacing the volume lost from Beloit Corporation
("Beloit"), which filed for bankruptcy in June 1999. During February 2000,
Beloit was sold at auction, in parts, and as a result, the plants to which
PrimeCast supplied castings subsequently ceased operations. For fiscal 2001,
PrimeCast's net sales decreased $9.7 million from net sales in fiscal 2000. In
addition, the Company closed Claremont Foundry, Inc. ("Claremont") in November
2000. Claremont's net sales for fiscal 2001 decreased $3.1 million from net
sales in fiscal 2000.

     Gross profit for fiscal 2001 decreased by $13.9 million, or 33.3%, to $27.9
million, or 6.5% of net sales, compared to $41.8 million, or 9.1% of net sales,
for fiscal 2000. The decrease in gross profit and gross profit as a percentage
of net sales was primarily due to lower net sales and reduced absorption of
overhead at the Company's subsidiaries which primarily serve the mining,
offshore oil and gas, automotive, power generation and military markets. In
addition, increased fuel costs decreased gross profit by approximately $7.0
million in fiscal 2001 compared to fiscal 2000.

     Gross profit at Jahn Foundry Corp. ("Jahn Foundry") in fiscal 2001
decreased $4.5 million, to a gross loss of $3.3 million, or 39.4% of net sales,
compared to a gross profit of $1.2 million, or 11.2% of net sales, in fiscal
2000. The negative impact to gross profits primarily resulted from the
industrial accident in February 1999 that shut down the shell mold department
until the second quarter of fiscal 2001.


                                       31
<Page>

     The loss of Beloit as a major customer also had a negative effect on gross
profit. PrimeCast's gross profit for fiscal 2001 decreased by $3.8 million to a
gross loss of $4.3 million, compared to a gross loss of $582,000 for fiscal
2000. 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 was transferred to other operations of the
Company.

     During fiscal 2001, the Company's reserve for warranty expense decreased to
$9.0 million at June 30, 2001 from $9.8 million at June 30, 2000. The decrease
in the warranty reserve during fiscal 2001 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 2001, the Company's
warranty reserve requirement declined primarily due to better than expected
results relative to the historical estimates for cast back-up rolls.

     During fiscal 2001, the Company's reserve for workers' compensation and
employee health care increased to $4.0 million at June 30, 2001 from $3.8
million at June 30, 2000. Workers' compensation and employee health care expense
was $16.8 million for fiscal 2001, compared to $17.4 million in fiscal 2000. The
increase in the reserve for workers' compensation and employee health care
primarily reflects changes in the amount and timing of actual payments.

     Selling, general and administrative expense ("SG&A") for fiscal 2001 was
$44.2 million, or 10.3% of net sales, compared to $44.5 million, or 9.7% of net
sales, in fiscal 2000. The increase in SG&A expense as a percentage of net sales
is primarily due to the decrease in net sales. Included in SG&A in fiscal 2001
were expenses of approximately $1.3 million relating to fees and audit and
appraisal expenses incurred by the Company in pursuing various options to
refinance its bank credit facility. Also included in fiscal 2001 were expenses
of approximately $800,000, relating to the investigation of the accounting
irregularities at the Company's Pennsylvania Foundry Group of operations.

     Amortization of certain intangibles for fiscal 2001 was $1.4 million, or
0.3% of net sales, compared to $1.5 million, or 0.3% of net sales, in fiscal
2000. 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 Fonderie d'Autun ("Autun"). The amortization of negative
goodwill was a credit to income in fiscal 2001 of $1.6 million, or 0.4% of net
sales, as compared to $1.9 million, or 0.4% of net sales, in fiscal 2000. The
liability recorded in connection with the acquisition of Canadian Steel became
fully amortized in the second quarter of fiscal 2000.

     Impairment charges for fiscal 2001 were $18.1 million, which consisted of a
$1.6 million fixed asset impairment charge relating to the Company's planned
closure of Empire Steel Castings, Inc. ("Empire Steel"), a $13.9 million fixed
asset impairment charge relating to the Company's intent to sell Jahn Foundry
Corp. ("Jahn Foundry"), and a $2.7 million intangible asset impairment charge
relating to the Company's intent to sell Los Angeles Die Casting Inc. ("LA Die
Casting"). (See below).

     Following continued losses in fiscal 2001, the Company announced, on
August 31, 2001, plans to close Empire.  Accordingly, the carrying values of
Empire Steel's fixed assets were written down to the Company's estimate of
fair value, which was based on discounted future cash flows.  The resulting
impairment charge of $1.6 million to reduce the carrying value of these fixed
assets was recorded in the fourth quarter ended June 30, 2001.  Actual


                                       32
<Page>

results could vary significantly from such estimates.  Prior to the
impairment charge, these assets had a carrying value of $2.6 million.  The
Company plans to close Empire Steel by November 30, 2001, and transfer as
much work as possible to other Company locations.  The Company will terminate
approximately 130 employees and will recognize a charge for severance
benefits of approximately $89,000 in the quarter ended December 31, 2001.

     The Company is negotiating the sale of substantially all of the assets of
LA Die Casting. Under the terms of the proposed agreement, the Company would
receive approximately $4.5 million in cash in exchange for certain assets and
the assumption of certain liabilities by the buyer, subject to certain
post-closing adjustments. There can be no assurance that a definitive agreement
will ultimately be executed or consummated. If executed and consummated, it is
anticipated that this transaction would close during the second quarter of
fiscal 2002.

     In the fourth quarter of fiscal 2001, the Company recognized an impairment
charge of $2.7 million to write-down the carrying value of the intangible assets
at LA Die Casting to the Company's estimate of fair value. The Company
considered its decision to realign its operations, resulting in its decision to
dispose of LA Die Casting as the primary indicator of impairment. Prior to the
impairment charge, the intangible assets had a carrying value of $3.5 million.
For fiscal years 1999, 2000 and 2001, LA Die Casting recorded net sales of $9.6
million, $9.5 million and $8.2 million, respectively, and net income of
$196,000, $280,000 and $61,000, respectively, excluding the impairment charge in
the fourth quarter of fiscal 2001.

     The Company is negotiating the sale of substantially all of the assets
of Jahn Foundry. Under the terms of the proposed agreement, the Company would
receive approximately $500,000 in cash, $500,000 in preferred stock of the
buyer and $1.0 million principal amount over ten years in exchange for
certain assets and the assumption of up to approximately $4.0 million of
certain liabilities by the buyer, subject to certain post-closing
adjustments. There can be no assurance that a definitive agreement will
ultimately be executed or consummated. If executed and consummated, it is
anticipated that this transaction would close during the second quarter of
fiscal 2002.

     In the fourth quarter of fiscal 2001, the Company recognized an impairment
charge of $13.9 million to write-down the carrying value of the fixed assets at
Jahn Foundry to the Company's estimate of fair value. The Company considered its
decision to realign its operations, resulting in its decision to dispose of Jahn
Foundry as the primary indicator of impairment. Prior to the impairment charge,
the fixed assets had a carrying value of $15.9 million. For fiscal years 1999,
2000 and 2001, Jahn Foundry recorded net sales of $12.0 million, $10.7 million
and $8.4 million, respectively, and net income (losses) of $124,000, $(113,000)
and $(2.4) million, respectively, excluding the impairment charge in the fourth
quarter of fiscal 2001 and a non-recurring gain of $10.9 million recorded in the
second quarter of fiscal 2001 relating to insurance claims resulting from the
industrial accident at Jahn Foundry on February 25, 1999.

     Other income for fiscal 2001 primarily consisted of $10.9 million of
non-recurring gains relating to the Jahn Foundry industrial accident which
occurred in 1999. This gain 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 (See Note 23). See Liquidity and Capital Resources. Other
income for fiscal 2000 primarily consisted of non-recurring gains of $1.1
million on the termination of interest rate swap agreements. The net gains were
triggered by the Company's early retirement of a term loan.


                                       33
<Page>

     Interest expense for fiscal 2001 increased to $11.3 million, or 2.6% of net
sales, from $9.5 million, or 2.0% of net sales, in fiscal 2000. The increase in
interest expense primarily reflects higher average interest rates on the
Company's outstanding indebtedness.

     The Company recorded income tax expense of $1.9 million in fiscal 2001. Due
to the Company's current income tax position, no income tax benefit was recorded
in connection with the fixed asset impairment charges discussed above. In
addition, the Company recorded a $6.1 million valuation allowance related to
certain foreign net operating loss carryforwards. This valuation allowance
reduces the deferred tax assets to the amounts that management believes are more
likely than not to be realized. Excluding the $7.8 million deferred income tax
benefit discussed below, the income tax benefit for fiscal 2000 reflected an
effective rate of approximately 29%. The effective tax rate is lower than the
combined federal, state and provincial statutory rates primarily due to the
impact of non-deductible goodwill and foreign dividends. The Company's income
tax expense and benefit reflect the combined effective tax rates of the
different federal, state and provincial jurisdictions in which the Company
operates, and the proportion of taxable income earned in each of those tax
jurisdictions.

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

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

     On June 30, 2001 the Company recorded its FX contracts at their fair value
of approximately ($844,000). This resulted in a gain of approximately $66,000.
Additionally, the translation of the foreign denominated trade receivables
resulted in a decrease in the value of the receivables and the Company recorded
a currency translation loss of approximately $249,000.

     As a result of the foregoing, the net loss increased to $37.0 million in
fiscal 2001 from a net loss of $11.7 million in fiscal 2000.

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:


                                       34
<Page>

<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
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 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
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 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 foundries.

     During fiscal 2000, the Company's reserve for warranty expense decreased to
$10.2 million at June 30, 2000 from $11.8 million at June 30, 1999. Warranty
expense recorded by the Company in


                                       35
<Page>

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.

     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 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 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 (see Liquidity and Capital Resources).

     During fiscal 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 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


                                       36
<Page>

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 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


                                       37
<Page>

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.
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.

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 2001
was $3.3 million, a decrease of $11.7 million from fiscal 2000. This decrease
was primarily attributable to the net loss incurred by the Company. Partially
offsetting this was the accelerated collection of trade receivable balances and
more aggressive management of trade payable balances.

     Working capital was a negative $52.9 million at June 30, 2001, as compared
to $5.7 million at June 30, 2000. The working capital levels primarily reflect
the reclassification of $105.3 million and $72.8 million of the Company's bank
credit facility, term loan and senior notes with an insurance company as current
at June 30, 2001 and June 30, 2000, respectively. The Company has not been in
compliance with certain financial covenants under the Credit Agreement, Note
Purchase Agreement and the GE Financing, as defined below, and, accordingly,
such amounts have been classified as current liabilities.

     During fiscal 2001, the Company made capital expenditures of $11.2 million,
as compared to $20.5 million for fiscal 2000. Included in fiscal 2001 and fiscal
2000 were capital expenditures of $4.1 million and $7.7 million, respectively,
to rebuild the shell molding area and boiler room damaged in the industrial
accident in 1999 at Jahn Foundry. (see below) Fiscal 2000 also included $2.7
million to expand Autun's product line capabilities in the manufacture of gray
and ductile iron castings. The balance of capital expenditures in both periods
were used for routine projects at each of the Company's facilities. The Company
currently expects to make approximately $10.0 million of capital expenditures
during fiscal 2002.

     As described above, the Company has closed Pennsylvania Steel and PrimeCast
and is in the process of closing Empire Steel. Much of the work at Pennsylvania
Steel and Empire was transferred to Quaker Alloy. As PrimeCast was the Company's
only foundry that could make large iron castings, only a portion of PrimeCast's
work was transferred to other Company operations.


                                       38
<Page>

     As discussed above, the Company is also in the process of selling
substantially all of the assets of LA Die Casting and Jahn Foundry. If
definitive agreements are executed and consummated, the Company currently
expects the sales will be completed during the second quarter of fiscal 2002.

     The Company has four primary credit facilities: a revolving credit facility
with Harris Trust and Savings Bank, as agent for several lenders (the "Credit
Agreement"); senior notes (the "Notes") with an insurance company issued under a
note purchase agreement (the "Note Purchase Agreement"); a term loan with
General Electric Capital Corporation (the "GE Financing"); and a receivables
program combined with a revolving credit facility with Burdale Financial Limited
pursuant to a facility agreement (the "Facility Agreement"). Each of these
facilities require compliance with various covenants, including, but not limited
to, financial covenants related to equity levels, cash flow requirements, fixed
charge coverage ratios and ratios of debt to equity.

     The Credit Agreement, as amended, currently consists of a $75.5 million
revolving credit facility, which is secured by substantially all of the
Company's North American assets. In addition to the financial covenants, the
Credit Agreement contains customary restrictions on, among other things,
acquisitions, additional indebtedness, further investments in Autun and the use
of net proceeds from the sale of assets (other than inventory), insurance
settlements and other non-recurring items . Loans under this revolving credit
facility 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%.

     At June 30, 2001, Notes with an aggregate principal amount of $11.4 million
were outstanding with interest accruing at 10.19% per year. The Note Purchase
Agreement provides for annual principal payments of $2.9 million, the most
recent of which has not been paid. The Notes are secured by the same assets that
secure the Credit Agreement and contain similar restrictions to those described
above under the Credit Agreement.

     In September 2001, the Company entered into the Eleventh Amendment and
Forbearance Agreement to the Credit Agreement and the Eighth Amendment and
Forbearance Agreement to the Note Purchase Agreement. These amendments provide
that, among other things, these lenders will forbear from enforcing their rights
with respect to certain existing defaults through October 12, 2001. These
amendments also allowed ACUK to enter into the Facility Agreement.

     At June 30, 2001, the balance of the term loan under the GE Financing was
$29.8 million. This loan provides for monthly principal payments of $291,667
plus accrued interest. 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% per year. General Electric Capital Corporation
has agreed to forbear from enforcing its rights with respect to certain events
of default under the GE Financing through September 30, 2001.

     In September 2001, ACUK, a subsidiary of the Company and its subsidiaries,
and Burdale Financial Limited entered into the Facility Agreement This Facility
Agreement provides for a 25 million British pound facility (approximately $35
million US) to be used to fund working capital requirements at Sheffield, a
subsidiary of ACUK, and up to $1.0 million British pounds for working capital at
Autun, the Company's subsidiary in France. In addition, the Facility Agreement
will provide security for Sheffield's foreign currency exchange contracts and
performance bond commitments, repay $5.0 million of an intercompany working
capital loan ($1.1 million of which was paid to certain of the lenders as
principal payments) and may provide for a loan of up to $9.0 million of some
additional working capital funds in North America, subject to availability and
other restrictions in the U.K. This facility matures on September 17, 2004 and
is secured by substantially

                                       39
<Page>

all of Sheffield's assets in the U.K. Loans under this Facility Agreement will
bear interest at LIBOR plus 2.60%. The Company is currently in compliance with
the covenants under the Facility Agreement.

     Cash requirements for fiscal 2001 have been negatively affected by (1)
significantly higher fuel costs (approximately $7.0 million higher than 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 $800,000 through June 30, 2001), and (3) nonrecurring
fees and appraisal and audit expenses (approximately $1.3 million through June
30, 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 under the Credit Agreement
and the Note Purchase Agreement have foregone their rights to accelerate their
debt and foreclose on their collateral through October 12, 2001. 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 and to date in fiscal 2002, the Company borrowed the
full amount of the revolving credit facility under the Credit Agreement and
managed 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, (3) the reduction of expenses after
closing locations operating with a negative cash flow, and (4) recently, funds
available through the Facility Agreement, particularly for its operations in the
U.K. and France. 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 is pursuing 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 2001 were 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 extend its
current arrangements while it attempts 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 and the
Facility Agreement will be adequate to fund its capital expenditure and working
capital requirements through June 2002. 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 could recur. In addition, future revenue may be negatively
affected if the markets that the Company serves weaken as a result of terrorist
activities on and after September 11, 2001 and any related military responses.
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. If the lenders accelerate

                                       40
<Page>

their indebtedness, there can be no assurance that the Company would be able to
locate alternative sources of financing.

     Total indebtedness of the Company at June 30, 2001 was $121.5 million, as
compared to $117.6 million at June 30, 2000. This increase of $3.9 million
primarily reflects indebtedness incurred to fund the Company's capital
expenditures and operating losses. At June 30, 2001 the Company had fully
utilized its revolving credit facility.

     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.

     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 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

                                       41
<Page>

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 will
aggressively defend. In addition, Jahn Foundry has brought a Third Party
Counterclaim against Borden and the independent sales representative of the
chemical compound, J. R. Oldhan Company, 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 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 will 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 will aggressively
defend. The Company has filed a cross-claim for contribution against Borden and
J.R. Oldhan Company.

     The Company, its chief executive officer, and its chief financial officer
were named as defendants in five lawsuits filed following the Company's
announcements concerning the discovery of accounting irregularities at the
Pennsylvania Foundry Group. The cases have been consolidated before the U.S.
District Court for the District of Kansas. An amended complaint filed after the
consolidation alleges, among other things, that the defendants intentionally or
recklessly issued materially false and misleading financial statements in
violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder. That complaint seeks certification of a class of
purchasers of the Company's common stock between December 10, 1997 and November
3, 2000 and asks for damages for the class in an unspecified amount. Discovery
has been stayed pending the resolution of the defendants' motion to dismiss the
amended complaint. The Company believes the claims are without merit and intends
to defend them vigorously. There can be no assurance, however, that an adverse
outcome with respect to the case 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


                                       42
<Page>

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, 2001, 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 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 2001 and 2000, 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 change 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
impact the Company's earnings by approximately $900,000 and $500,000 in fiscal
2001 and 2000, 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, 2001 and
2000, a hypothetical 10% depreciation in the pound sterling and the Canadian
dollar versus all other currencies would impact the Company's earnings by
approximately $3.7 million and $1.7 million in fiscal 2001 and 2000,
respectively. This analysis does not include the offsetting impact from the
Company's 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.


                                       43
<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: costs of closing foundries, success in selling
Jahn Foundry and LA Die Casting, the impact that terrorist activities on and
after September 11, 2001 may have on the markets served by the Company, 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 2000 and
fiscal 2001 are included in Note 15 to the consolidated financial statements.


                                       44
<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 Annual
Report on Form 10-K.

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 49 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


                                       45
<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
2001 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 2001 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 2001 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 2001 Annual Meeting of Stockholders
to be filed pursuant to Regulation 14A.


                                       46
<Page>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

<Table>
<Caption>
                                                                                               PAGE
                                                                                              NUMBER
                                                                                              ------
<S>                                                                                           <C>
  (a)      DOCUMENTS LIST

           (1)      The following financial statements are included in Part II Item 8:

                    Independent Auditors' Report                                                F-1

                    Consolidated Balance Sheets -- June 30, 2000 and 2001                       F-2

                    Consolidated Statements of Operations -- Years Ended June 30,
                    1999, 2000 and 2001                                                         F-4

                    Consolidated Statements of Comprehensive Income (Loss) -- Years
                    Ended June 30, 1999, 2000 and 2001                                          F-5

                    Consolidated Statements of Stockholders' Equity -- Years Ended
                    June 30, 1999, 2000 and 2001                                                F-6

                    Consolidated Statements of Cash Flows -- Years Ended June 30,
                    1999, 2000 and 2001                                                         F-7

                    Notes to Consolidated Financial Statements                                  F-8

           (2)      Financial Statement Schedules

                    Valuation and Qualifying Accounts Schedules                                  49

           (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.

  (b)      REPORTS ON FORM 8-K

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

           Items Reported:

           Item 5. Other Events - Press Release dated April 24, 2001
                   announcing that the Company would be filing an amended annual
                   report on Form 10-K/A containing restated financial results
                   for the fiscal years 1998-2000, describing organizational
                   changes


                                       47
<Page>

                   and loan amendments, discussing other developments and
                   announcing the rescheduled annual meeting of stockholders.

           Item 7. Exhibits

                  (1) Press Release dated April 24, 2001

           The Company filed a Form 8-K dated May 11, 2001.

           Items Reported:

           Item 5. The Company issued a press release announcing results for
                   the first three quarters and nine months of 2001 and restated
                   results for prior periods.

           Item 7. Financial Statements and Exhibits

                  (1) Press Release dated May 11, 2001

           The Company filed a Form 8-K dated June 8, 2001.

           Items Reported:

           Item 5. The Company issued a press release revising earnings
                   guidance included in its press release of May 11, 2001.

           Item 7. Financial Statements and Exhibits

                  (1) Press Release dated June 8, 2001

           The Company filed a Form 8-K dated June 29, 2001.

           Items Reported:

           Item 5. The Company issued a press release announcing backlog
                   improvements and other matters to be discussed at the Annual
                   Meeting.

           Item 7. Financial Statements and Exhibits

                  (1) Press Release dated June 29, 2001

  (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).
</Table>
                                       48
<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 2001                 $  584       $ 1,089          $828          $845

Fiscal 2000                    259           855           530           584

Fiscal 1999                    197           282           220           259

</Table>


RESERVE FOR FLOOD REPAIRS

<Table>
<Caption>
                                                            DEDUCTIONS FROM
                           BEGINNING   ADDITIONS TO     -------------------------      ENDING
                            BALANCE     (EXPENSE)       PAYMENTS      ADJUSTMENTS      BALANCE
                           ---------   ------------     --------      -----------      -------
<S>                        <C>          <C>             <C>           <C>              <C>
Fiscal 2001                 $  645             -         $   48          $    -         $  597

Fiscal 2000                  1,197             -            552               -            645

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

</Table>


                                       49
<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:  October 9, 2001


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

<Table>
<Caption>
       SIGNATURE                            TITLE                                       DATE
       ---------                            -----                                       ----

<S>                                  <C>                                         <C>
  /s/ Hugh H. Aiken                  Chairman of the Board,                      October 9, 2001
  ---------------------------        President, Chief Executive
      Hugh H. Aiken                  Officer and Director
                                     (Principal Executive Officer)


  /s/ Stuart Z. Uram                 Director                                    October 9, 2001
  ---------------------------
      Stuart Z. Uram


  /s/ David L. Belluck               Director                                    October 12, 2001
  ---------------------------
      David L. Belluck


  /s/ Ray H. Witt                    Director                                    October 9, 2001
  ---------------------------                                                                                              -
       Ray H. Witt


  /s/ Kevin T. McDermed              Vice President, Chief                       October 10, 2001
  ---------------------------        Financial Officer, Treasurer
      Kevin T. McDermed              and Secretary
                                     (Principal Financial Officer
                                     and Principal Accounting
                                     Officer)

</Table>

                                       50
<Page>

                                  EXHIBIT INDEX
<Table>
<Caption>
     EXHIBIT
     -------
<S>               <C>
      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 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)
</Table>


                                       51
<Page>

                                  EXHIBIT INDEX

<Table>
<Caption>
     EXHIBIT
     -------
<S>               <C>

     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 and Waiver 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 and Waiver 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 and Waiver 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 (the "Tenth Amendment"), among the Company, the Banks
                  party thereto and Harris Trust and Savings Bank, as Agent
                  (incorporated by reference to Exhibit 4.1 (l) of the Company's
                  Amended Report on Form 10-K/A filed on April 24, 2001)

     4.1(m)       Letter Agreement dated July 30, 2001 modifying the Tenth
                  Amendment

     4.1(n)       Letter Agreement dated August 20, 2001 further modifying the
                  Tenth Amendment

     4.1(o)       Eleventh Amendment and Forbearance Agreement dated as of
                  September 12, 2001 (the "Eleventh Amendment"), among the
                  Company, the Banks party thereto and Harris Trust and Savings
                  Bank, as agent.

     4.1(p)       Letter Agreement dated September 20, 2001 modifying the
                  Eleventh Amendment

     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 (incorporated by
                  reference to Exhibit 4.3(b) of the Company's Amended Annual
                  Report on Form 10-K/A filed on April 24, 2001)
</Table>


                                       52
<Page>

                                  EXHIBIT INDEX

<Table>
<Caption>
     EXHIBIT
     -------
<S>               <C>

     4.4(a)       Facility Agreement dated as of September 17, 2001, among
                  Atchison Casting UK Limited, Sheffield Forgemasters Rolls
                  Limited, Sheffield Forgemasters Engineering Limited and
                  Burdale Financial Limited

     4.4(b)       Deed of Debenture dated as of September 17, 2001, among
                  Atchison Casting UK Limited, its subsidiaries and Burdale
                  Financial Limited

     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)

     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)
</Table>


                                       53
<Page>

                                  EXHIBIT INDEX

<Table>
<Caption>
     EXHIBIT
     -------
<S>               <C>
     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
</Table>

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


                                       54
<Page>





ATCHISON CASTING
CORPORATION AND
SUBSIDIARIES



CONSOLIDATED FINANCIAL STATEMENTS AS OF
JUNE 30, 2001 AND 2000, AND FOR EACH OF THE THREE
YEARS IN THE PERIOD ENDED JUNE 30, 2001, AND
INDEPENDENT AUDITORS' REPORT



<Page>


ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------------------------------------------------

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

CONSOLIDATED FINANCIAL STATEMENTS

   Consolidated Balance Sheets - June 30, 2000 and 2001                                       F-2-F-3

   Consolidated Statements of Operations - Years Ended June 30, 1999, 2000 and 2001             F-4

   Consolidated Statements of Comprehensive Income (Loss) - Years Ended
   June 30, 1999, 2000 and 2001                                                                 F-5

   Consolidated Statements of Stockholders' Equity - Years Ended
   June 30, 1999, 2000 and 2001                                                                 F-6

   Consolidated Statements of Cash Flows - Years Ended June 30, 1999, 2000 and 2001             F-7

   Notes to Consolidated Financial Statements                                                 F-8-F-43
</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, 2001 and 2000 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, 2001. 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, 2001 and
2000, and the results of its operations and its cash flows for each of the three
years in the period ended June 30, 2001 in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 10 to
the consolidated financial statements, at June 30, 2001, the Company was not in
compliance with certain covenants of its loan agreements and has entered into
various amendments and forbearance agreements with its lenders. The Company is
attempting to renegotiate the terms and covenants of the loan agreements and
also is seeking other sources of long-term financing. The Company's difficulties
in meeting its loan covenants and financing needs, its recurring losses from
operations and its negative working capital position discussed in Note 24 raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 24. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

/s/ DELOITTE & TOUCHE LLP

September 28, 2001
Kansas City, Missouri


<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
------------------------------------------------------------------------------------------------------------

ASSETS                                                                                2000            2001
<S>                                                                                 <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                         $  3,815        $  1,329
  Customer accounts receivable, net of allowance for doubtful
    accounts of $584 and $845 at June 30, 2000 and 2001, respectively                 87,401          83,010
  Inventories                                                                         56,123          58,617
  Deferred income taxes                                                               10,092           1,345
  Other current assets                                                                 9,517          10,437
                                                                                    --------        -------

           Total current assets                                                      166,948         154,738

PROPERTY, PLANT AND EQUIPMENT, Net                                                   135,299         113,009

INTANGIBLE ASSETS, Net                                                                28,525          24,362

DEFERRED FINANCING COSTS, Net                                                            923             721

OTHER ASSETS                                                                          10,728          13,043
                                                                                    --------        --------

TOTAL                                                                               $342,423        $305,873
                                                                                    ========        ========


                                                                                                  (Continued)
</Table>



                                     -F-2-

<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
-------------------------------------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY                                                 2000             2001
<S>                                                                                 <C>             <C>
CURRENT LIABILITIES:
  Accounts payable                                                                  $ 42,867        $ 58,392
  Accrued expenses                                                                    37,432          34,377
  Current maturities of long-term obligations                                         80,919         114,894
                                                                                    --------        --------
          Total current liabilities                                                  161,218         207,663

LONG-TERM OBLIGATIONS                                                                 36,691           6,648

DEFERRED INCOME TAXES                                                                 11,912           3,460

OTHER LONG-TERM OBLIGATIONS                                                            2,683             898

EXCESS OF FAIR VALUE OF ACQUIRED NET ASSETS OVER
  COST, Net of accumulated amortization of $2,298 and $3,577
  at June 30, 2000 and 2001, respectively                                              4,843           2,543

POSTRETIREMENT OBLIGATION OTHER
  THAN PENSION                                                                         9,199          10,082

MINORITY INTEREST IN SUBSIDIARIES                                                      1,544           1,890
                                                                                    --------        --------
          Total liabilities                                                          228,090         233,184
                                                                                    --------        --------
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; 8,295,974 and
    8,312,049 shares issued at June 30, 2000
    and 2001, 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                                                          81,460          81,517
  Retained earnings                                                                   42,848           5,863
  Accumulated other comprehensive income (loss)                                       (4,010)         (8,726)
  Less common stock held in treasury, 622,702 shares at June 30, 2000
    and 2001, at cost                                                                 (6,048)         (6,048)
                                                                                    --------        --------
           Total stockholders' equity                                                114,333          72,689
                                                                                    --------        --------
TOTAL                                                                               $342,423        $305,873
                                                                                    ========        ========

See notes to consolidated financial statements.                                                   (Concluded)
</Table>


                                     -F-3-


<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1999, 2000 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
----------------------------------------------------------------------------------------------------------

                                                                       1999          2000          2001
<S>                                                                <C>            <C>           <C>
NET SALES                                                          $  477,405     $  461,137    $ 428,150

COST OF GOODS SOLD                                                    417,816        419,299      400,289
                                                                   ----------     ----------    ---------
GROSS PROFIT                                                           59,589         41,838       27,861

OPERATING EXPENSES:
  Selling, general and administrative                                  45,290         44,526       44,172
  Impairment charges                                                                  16,414       18,139
  Amortization of intangibles                                             544           (408)        (255)
  Other income, net                                                    (2,750)          (606)     (10,920)
                                                                   ----------     ----------    ---------
     Total operating expenses, net                                     43,084         59,926       51,136
                                                                   ----------     ----------    ---------
OPERATING INCOME (LOSS)                                                16,505        (18,088)     (23,275)

INTEREST EXPENSE                                                        8,352          9,452       11,329

MINORITY INTEREST IN NET INCOME (LOSS) OF
  SUBSIDIARIES                                                            237             66          (57)
                                                                   ----------     ----------    ---------
INCOME (LOSS) BEFORE INCOME TAXES                                       7,916        (27,606)     (34,547)

INCOME TAX EXPENSE (BENEFIT)                                            4,844        (15,927)       1,892
                                                                   ----------     ----------    ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
  OF A CHANGE IN ACCOUNTING PRINCIPLE                                   3,072        (11,679)     (36,439)
                                                                   ----------     ----------    ---------
CUMULATIVE EFFECT ON PRIOR YEARS
  OF A CHANGE IN ACCOUNTING FOR
  DERIVATIVE FINANCIAL INSTRUMENTS,
  NET OF $364 TAX BENEFIT                                                                            (546)
                                                                   ----------     ----------    ---------
NET INCOME (LOSS)                                                  $    3,072     $  (11,679)  $  (36,985)
                                                                   ==========     ==========   ==========
NET EARNINGS (LOSS) PER COMMON AND
  EQUIVALENT SHARES:
    BASIC:
      Earnings (loss) before cumulative effect of a change
        in accounting principle                                    $     0.39     $    (1.53)  $    (4.74)
                                                                   ==========     ==========   ==========
      Cumulative effect of a change in accounting for
        derivative financial instruments                           $              $            $    (0.07)
                                                                   ==========     ==========   ==========
      Net earnings (loss)                                          $     0.39     $    (1.53)  $    (4.81)
                                                                   ==========     ==========   ==========
    DILUTED:
      Earnings (loss) before cumulative effect of a change
        in accounting principle                                    $     0.39     $    (1.53)  $    (4.74)
                                                                   ==========     ==========   ==========
      Cumulative effect of a change in accounting for
        derivative financial instruments                           $              $            $    (0.07)
                                                                   ==========     ==========   ==========
      Net earnings (loss)                                          $     0.39     $    (1.53)  $    (4.81)
                                                                   ==========     ==========   ==========
WEIGHTED AVERAGE NUMBER OF COMMON
  AND EQUIVALENT SHARES OUTSTANDING:
    BASIC                                                           7,790,781      7,648,616    7,685,339
                                                                   ==========     ==========   ==========
    DILUTED                                                         7,790,781      7,648,616    7,685,339
                                                                   ==========     ==========   ==========
</Table>

See notes to consolidated financial statements.

                                     -F-4-

<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED JUNE 30, 1999, 2000 AND 2001
(DOLLARS IN THOUSANDS)
--------------------------------------------------------------------------------------------------------

                                                                 1999           2000            2001
<S>                                                              <C>           <C>            <C>
NET INCOME (LOSS)                                                $3,072        $(11,679)      $(36,985)

OTHER COMPREHENSIVE INCOME (LOSS) -
  Foreign currency translation adjustments                         (563)         (2,817)        (4,716)
                                                                 ------        --------       --------

COMPREHENSIVE INCOME (LOSS)                                      $2,509        $(14,496)      $(41,701)
                                                                 ======        ========       ========
</Table>

See notes to consolidated financial statements.


                                     -F-5-


<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 2000 AND 2001
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
--------------------------------------------------------------------------------------------------------------------------------

                                                                                          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, 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
  Issuance of 16,075 shares                                            57                                                    57
  Foreign currency translation
    adjustment of investment in subsidiaries                                                (4,716)                      (4,716)
  Net loss                                                                     (36,985)                                 (36,985)
                                                   ---------    ----------    --------    ---------       --------     --------
Balance, June 30, 2001                             $      83    $  81,517     $  5,863    $ (8,726)      $  (6,048)    $ 72,689
                                                   =========    ==========    ========    =========       ========     ========
</Table>

See notes to consolidated financial statements.


                                     -F-6-

<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

<Table>
<Caption>

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 2000 AND 2001
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                               1999          2000           2001
<S>                                                                                          <C>           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                                          $  3,072       $(11,679)      $(36,985)
  Adjustments to reconcile net income (loss) to net cash provided by
    operating activities:
    Depreciation and amortization                                                              13,416         14,198         13,584
    Minority interest in net income (loss) of subsidiaries                                        237             66            (57)
    Asset impairment charges                                                                                  16,414         18,139
    Loss (gain) on disposal of capital assets                                                    (190)          (486)           588
    Gain on termination of interest rate swap agreements                                                      (1,083)
    Deferred income tax expense (benefit)                                                       2,761        (12,852)         1,364
    Changes in assets and liabilities (exclusive of effects of acquisitions):
      Customer accounts receivable                                                              6,573         (5,848)         1,915
      Inventories                                                                               1,434          8,292         (4,423)
      Other current assets                                                                     (6,230)         6,902         (1,324)
      Accounts payable                                                                          2,008          2,119         17,133
      Accrued expenses                                                                        (16,904)        (1,887)        (3,742)
      Postretirement obligation other than pension                                                682            921            883
      Other                                                                                    (1,436)           (81)        (3,808)
                                                                                             --------       --------       --------

           Cash provided by operating activities                                                5,423         14,996          3,267
                                                                                             --------       --------       --------
CASH FLOWS FROM  INVESTING ACTIVITIES:
  Capital expenditures                                                                        (17,899)       (20,531)       (11,182)
  Proceeds from sale of capital assets                                                          1,829          3,408          2,228
  Payment for purchase of net assets of subsidiaries,
    net of cash acquired                                                                       (7,494)
  Payments for purchase of minority interest in subsidiaries                                     (728)        (2,737)          (617)
  Payment for investments in unconsolidated subsidiaries                                         (150)
                                                                                             --------       --------       --------

           Cash used in investing activities                                                  (24,442)       (19,860)        (9,571)
                                                                                             --------       --------       --------
CASH FLOWS FROM  FINANCING ACTIVITIES:
  Proceeds from issuance of common stock                                                          260            244             57
  Payments for repurchase of common stock                                                      (6,048)
  Proceeds from issuance of long-term obligations                                                             35,000          1,065
  Payments on long-term obligations                                                            (6,528)       (42,010)        (6,636)
  Capitalized financing costs paid                                                               (108)          (620)          (155)
  Termination of interest rate swap agreements                                                                 1,083
  Net borrowings under revolving loan note                                                     26,675         11,285          9,668
                                                                                             --------       --------       --------

           Cash provided by financing activities                                               14,251          4,982          3,999
                                                                                             --------       --------       --------

EFFECT OF EXCHANGE RATE ON CASH                                                                  (503)          (209)          (181)
                                                                                             --------       --------       --------

NET DECREASE  IN CASH AND CASH EQUIVALENTS                                                     (5,271)           (91)        (2,486)

CASH AND CASH EQUIVALENTS, Beginning of period                                                  9,177          3,906          3,815
                                                                                             ========       ========       ========

CASH AND CASH EQUIVALENTS, End of period                                                     $  3,906       $  3,815       $  1,329
                                                                                             ========       ========       ========
</Table>

See notes to consolidated financial statements.


                                     -F-7-

<Page>

ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1999, 2000 AND 2001
(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, London Precision and Autun are wholly owned
     subsidiaries. The Company owns 96.0%, 98.9%, 95.0%, 96.7% and 95.5% of the
     outstanding capital stock of Prospect Foundry, G&C, LA Die Casting,
     Inverness and ACUK, respectively. Sheffield Forgemasters Group, Ltd.
     ("Sheffield") is a wholly-owned subsidiary of ACUK. 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.

     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.


                                      -F-8-

<Page>


     CUSTOMER ACCOUNTS RECEIVABLE - Approximately 16%, 16%, and 17% of the
     Company's revenue in 1999, 2000 and 2001, respectively, was with two major
     customers who operate in the automotive, locomotive and general industrial
     markets. As of June 30, 2000 and 2001, 8% 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 18% 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 - The Company's long-term supply arrangements
     typically provide for specific reimbursement of pre-production costs, which
     include tooling, dies, fixtures, patterns and drawings, among other items,
     by the customer. As of June 30, 2000 and 2001, the Company had $8,038 and
     $7,136 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.

     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 year 1999, while $82 and $411 was
     capitalized in fiscal years 2000 and 2001.

     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


                                      -F-9-

<Page>

     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, 2001, the Company had letters of credit aggregating $1,870 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.

     DERIVATIVE INSTRUMENTS - The Company adopted SFAS No. 133, "ACCOUNTING FOR
     DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES," as amended effective July
     1, 2000 to record derivative instruments. At July 1, 2000, the Company had
     derivatives in the form of foreign exchange contracts ("FX contracts") to
     buy and sell various currencies. The Company uses FX contracts as an
     economic hedge of trade receivables and payables denominated in foreign
     currencies, as well as anticipated sales to foreign customers in the
     customers' local currency. On July 1, 2000, the Company recorded its FX
     contracts at their fair value of approximately $(910). 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. The
     impact of the adoption of SFAS No. 133 is presented in the Company's fiscal
     year 2001 consolidated financial statements as the cumulative effect of a
     change in accounting principle.

     On June 30, 2001, the Company recorded its FX contracts at their fair value
     of approximately ($844). This resulted in a gain of approximately $66.
     Additionally, the translation of the foreign denominated trade receivables
     resulted in a decrease in the value of the receivables and the Company
     recorded a currency translation loss of approximately $249.


                                     -F-10-

<Page>

     NEW ACCOUNTING STANDARDS - The FASB has recently issued SFAS No. 141,
     "BUSINESS COMBINATIONS", SFAS No. 142 "GOODWILL AND OTHER INTANGIBLE
     ASSETS", SFAS No. 143 "ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS" and
     SFAS No. 144 "ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED
     ASSETS". SFAS No. 141 requires that the purchase method of accounting be
     used for all business combinations initiated after June 30, 2001 and that
     the use of the pooling-of-interest method is no longer allowed. SFAS No.
     142 requires that upon adoption, amortization of goodwill will cease and
     instead, the carrying value of goodwill will be evaluated for impairment on
     an annual basis. Identifiable intangible assets will continue to be
     amortized over their useful lives and reviewed for impairment in accordance
     with SFAS No. 121 "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND
     FOR LONG-LIVED ASSETS TO BE DISPOSED OF". SFAS No. 143 establishes
     accounting standards for recognition and measurement of a liability for an
     asset retirement obligation and the associated asset retirement cost. SFAS
     No. 144 supercedes SFAS No. 121 and establishes accounting standards for
     long-lived assets and long-lived assets to be disposed of. SFAS Nos. 142
     and 144 are effective for fiscal years beginning after December 15, 2001
     and SFAS No. 143 is effective for fiscal years beginning after June 15,
     2002, so the Company will adopt these standards as of July 1, 2002. The
     Company is evaluating the impact of the adoption of these standards and has
     not yet determined the effect of adoption on its financial position and
     results of operations.

     RECLASSIFICATIONS - Certain reclassifications have been made in the 1999
     and 2000 financial statements to conform with current year presentation.

2.   PLANT CLOSURES AND 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 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 1999, 2000, and 2001, Claremont recorded net sales
     of $7,068, $3,958, and $816, respectively, and incurred net losses of
     $1,554, $1,819, and $519, respectively, excluding the impairment charge in
     the fourth quarter of fiscal year 2000.

     In addition to the long-lived asset impairment, in the first half of fiscal
     year 2001 the Company recognized approximately $113 in severance benefits
     when such benefit arrangements were communicated to the approximately 45
     affected employees 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, the Company recognized an impairment loss 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 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,


                                     -F-11-

<Page>

     which was based on discounted future cash flows. The resulting impairment
     charge of $3,450 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 transferred work to the
     other two Pennsylvania foundries. For fiscal years 1999, 2000 and 2001,
     Pennsylvania Steel recorded net sales of $12,269, $11,582, and $4,916,
     respectively, and incurred net losses of $3,525, $4,080, and $2,821,
     respectively, excluding the impairment charge in the fourth quarter of
     fiscal year 2000.

     In addition to the long-lived asset impairment, the Company recognized
     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 recognized 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 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
     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 1999, 2000, and 2001, PrimeCast recorded net sales of $27,531,
     $24,464, and $14,835, respectively, and incurred net losses of $644,
     $2,188, and $4,137, respectively, excluding the impairment charge in the
     fourth quarter of fiscal year 2000.

     In addition to the long-lived asset impairment, the Company recognized
     certain other exit costs associated with the closure of PrimeCast in fiscal
     year 2001 related to employee termination costs. The Company terminated
     approximately 225 employees and recognized a charge for severance benefits
     of approximately $175 in the quarter ended March 31, 2001.

     EMPIRE

     In the fourth quarter of fiscal 2000, following discovery of accounting
     irregularities which revealed substantial operating losses at the Company's
     three Pennsylvania foundry operations, the Company recognized an impairment
     charge of $2,708 to write-off the intangible assets (goodwill) at its
     Empire Steel foundry. 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.

     Following continued losses in fiscal 2001, the Company announced, on August
     31, 2001, plans to close Empire. Accordingly, the carrying values of
     Empire'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 $1,610 to reduce the carrying value of these fixed
     assets was recorded in the fourth quarter ended June 30, 2001. Actual
     results could vary significantly from such estimates. Prior to the
     impairment charge, these assets had a carrying value of $2,610. The Company
     plans to close Empire by


                                     -F-12-

<Page>

     November 30, 2001, and transfer as much work as possible to other
     locations. For fiscal years 1999, 2000 and 2001, Empire recorded net sales
     of $10,414, $9,935 and $10,086, respectively, and incurred net losses of
     $1,204, $2,726 and $2,583, respectively, excluding the impairment charges
     in the fourth quarter of fiscal 2000 and the fourth quarter of fiscal 2001.

     In addition to the long-lived asset impairment, the Company will recognize
     certain other exit costs associated with the closure of Empire in fiscal
     2002 related to employee termination costs. The Company will terminate
     approximately 130 employees and will recognize a charge for severance
     benefits of approximately $89 in the quarter ending December 31, 2001.

     Other costs directly related to the closure of Claremont, Pennsylvania
     Steel, PrimeCast and Empire 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.   PENDING SALES AND ASSET IMPAIRMENTS

     LA DIE CASTING

     The Company is negotiating the sale of substantially all of the assets of
     LA Die Casting. Under the terms of the proposed agreement, the Company
     would receive approximately $4,500 in cash in exchange for certain assets
     and the assumption of certain liabilities by the buyer, subject to certain
     post-closing adjustments. There can be no assurance that a definitive
     agreement will ultimately be executed. If executed and consummated, it is
     anticipated that this transaction would close during the second quarter of
     fiscal 2002.

     In the fourth quarter of fiscal 2001, the Company recognized an impairment
     charge of $2,658 to write-down the carrying value of the intangible assets
     at LA Die Casting to the Company's estimate of fair value. The Company
     considered its decision to realign its operations, resulting in its intent
     to dispose of LA Die Casting as the primary indicator of impairment. Prior
     to the impairment charge, the intangible assets had a carrying value of
     $3,512. For fiscal years 1999, 2000 and 2001, LA Die Casting recorded net
     sales of $9,557, $9,483 and $8,233, respectively, and net income of $196,
     $280 and $61, respectively, excluding the impairment charge in the fourth
     quarter of fiscal 2001.

     JAHN FOUNDRY

     In September, 2001, the Company entered into a non-binding letter of intent
     with a third party to sell substantially all of the assets of Jahn Foundry.
     Under the terms of the proposed agreement, the Company would receive
     approximately $500 in cash, $500 in preferred stock of the buyer and $1,000
     principal amount over ten years in exchange for certain assets and the
     assumption of certain liabilities by the buyer, subject to certain
     post-closing adjustments. There can be no assurance that a definitive
     agreement will ultimately be executed. If executed and consummated, it is
     anticipated that this transaction would close during the second quarter of
     fiscal 2002.

     In the fourth quarter of fiscal 2001, the Company recognized an impairment
     charge of $13,871 to write-down the carrying value of the fixed assets at
     Jahn Foundry to the Company's estimate of fair value. The Company
     considered its decision to realign its operations, resulting in its intent
     to dispose of Jahn Foundry as the primary indicator of impairment. Prior to
     the impairment charge, the fixed assets had a carrying value of $15,936.
     For fiscal years 1999, 2000 and 2001, Jahn Foundry recorded net sales of


                                     -F-13-

<Page>

     $11,988, $10,697 and $8,364, respectively, and net income (losses) of $124,
     $(113) and $(2,412), respectively, excluding the impairment charge in the
     fourth quarter of fiscal 2001 and a non-recurring gain of $10,920 recorded
     in the second quarter of fiscal 2001 relating to insurance claims resulting
     from the industrial accident at Jahn Foundry on February 25, 1999.

4.   ACQUISITIONS

     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 specialized 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 London
     Precision acquisition, 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 Autun acquisition, 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)     2000      2001
          <S>                                                       <C>           <C>       <C>
          Excess of fair value of acquired net assets over cost          4        $7,141    $6,120
          Less accumulated amortization                                            2,298     3,577
                                                                                  ------    ------

                                                                                  $4,843    $2,543
                                                                                  ======    ======
</Table>

     Amortization of negative goodwill was $870, $1,897, and $1,607 for the
     years ended June 30, 1999, 2000, and 2001, respectively.


                                     -F-14-

<Page>

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

<Table>
<Caption>

                                                                                    1999
          <S>                                                                     <C>
          Cash                                                                    $ 6,501
          Customer accounts receivable                                              2,748
          Inventories                                                               7,117
          Property, plant and equipment                                             7,705
          Intangible assets, primarily goodwill                                     8,427
          Other assets                                                                 15
          Accounts payable and accrued expenses                                    (7,489)
          Deferred income taxes                                                    (1,269)
          Excess of fair value of acquired net assets over cost                    (7,872)
          Other long-term obligations                                              (1,888)
                                                                                  -------

                                                                                   13,995

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

          Cash used in acquisitions                                               $ 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 1999 consolidated
     results of operations as if the acquisitions occurred at July 1, 1998,
     after giving effect to certain adjustments, including amortization of
     goodwill, interest expense on the acquisition debt and related income tax
     effects: net sales - $496,426; net income - $5,849; basic and diluted net
     earnings per common and equivalent share - $0.75. 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.

5.   INVENTORIES

<Table>
<Caption>

                                                           2000          2001
          <S>                                             <C>           <C>
          Raw materials                                   $ 8,491       $ 7,587
          Work-in-process                                  33,656        38,889
          Finished goods                                   11,038        10,138
          Supplies                                          2,938         2,003
                                                          -------       -------

                                                          $56,123       $58,617
                                                          =======       =======
</Table>

     Inventories as of June 30, 2000 and 2001 would have been higher by $416 and
     $710, respectively, had the Company used the FIFO method of valuing those
     inventories valued using the LIFO method.


                                     -F-15-
<Page>

6.   PROPERTY, PLANT AND EQUIPMENT

<Table>
<Caption>

                                                          LIVES
                                                        (IN YEARS)          2000            2001
          <S>                                           <C>               <C>             <C>
          Land                                                            $ 14,868        $ 13,332
          Improvements to land                             12-15             4,807           2,587
          Buildings and improvements                         35             30,033          31,258
          Machinery and equipment                           5-14           123,550         122,819
          Automobiles and trucks                             3               1,688           1,200
          Office furniture, fixtures and equipment          5-10             5,691           5,996
          Tooling and patterns                             1.5-6             4,367           4,376
                                                                          --------        --------

                                                                           185,004         181,568
          Less accumulated depreciation                                     61,104          72,220
                                                                          --------        --------

                                                                           123,900         109,348
          Construction in progress                                          11,399           3,661
                                                                          --------        --------

                                                                          $135,299        $113,009
                                                                          ========        ========
</Table>

     Depreciation expense was $12,663, $14,345, and $13,489 for the years ended
     June 30, 1999, 2000 and 2001, respectively.

     As of June 30, 2001, property, plant and equipment with a remaining net
     carrying value of $7,724 are related to the foundries discussed in Notes 2
     and 3 and are included in the amounts above.

7.   INTANGIBLE ASSETS

<Table>
<Caption>

                                                          LIVES
                                                        (IN YEARS)          2000          2001
          <S>                                           <C>               <C>           <C>

          Goodwill                                           25           $33,850       $31,021
          Less accumulated amortization                                     5,325         6,659
                                                                          -------       -------

                                                                          $28,525       $24,362
                                                                          =======       =======
</Table>

     Amortization expense was $1,429, $1,489, and $1,345 for the years ended
     June 30, 1999, 2000 and 2001, respectively.

8.   DEFERRED FINANCING COSTS

<Table>
<Caption>

                                                          LIVES
                                                        (IN YEARS)          2000            2001
          <S>                                           <C>               <C>             <C>
          Deferred financing costs                         3 to 10         $1,355       $1,510
          Less accumulated amortization                                       432          789
                                                                           ------       ------

                                                                           $  923       $  721
                                                                           ======       ======
</Table>


                                     -F-16-

<Page>

     Amortization of such costs, included in interest expense, was $194, $261,
     and $357 for the years ended June 30, 1999, 2000 and 2001, respectively.

9.   ACCRUED EXPENSES

<Table>
<Caption>

                                                                                  2000          2001
          <S>                                                                   <C>           <C>
          Accrued warranty                                                      $ 9,786       $ 9,001
          Payroll, vacation and other compensation                                8,205         7,978
          Accrued pension liability                                               2,481         1,993
          Advances from customers                                                 3,426         7,849
          Reserve for flood repairs (Note 22)                                       645           597
          Reserve for workers' compensation and employee
            health care                                                           3,846         4,009
          Taxes other than income                                                   477           826
          Interest payable                                                        1,036         1,030
          Insurance advances for Jahn Foundry industrial accident (Note 23)       5,998
          Other                                                                   1,532         1,094
                                                                                -------       -------

                                                                                $37,432       $34,377
                                                                                =======       =======
</Table>


                                     -F-17-

<Page>

10.  LONG-TERM OBLIGATIONS

     Long-term obligations consist of the following as of June 30, 2000 and
     2001:

<Table>
<Caption>

                                                                                               2000           2001
          <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% and 10.19% at
            June 30, 2000 and June 30, 2001, respectively                                    $ 14,286       $ 11,429
          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 2.50%, $50,000 at 9.15% at June 30, 2000
            Prime plus 0.75%, $11,385 at 10.25% at June 30, 2000
            Prime plus 1.75%, $63,220 at 8.50% at June 30, 2001
            Prime plus 1.25%, $7,272 at 8.00% at June 30, 2001                                 61,385         70,492
          Term loan between the Company and GECC, secured by certain
            assets of the Company, maturing on December 29, 2004, subject to
            acceleration due to covenant violations, bearing interest at 9.05%                 33,250         29,750
          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%                                                           2,119          1,840
          Term loan between La Grange Foundry and the Missouri Development
            Finance Board, secured by a letter of credit of approximately $5,200,
            maturing on November 1, 2011, bearing interest at 4.87% and 3.22%
            at June 30, 2000 and 2001, 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% and 4.50% at June 30, 2000 and
            June 30, 2001, respectively                                                         1,470          1,866
          Term loan between the Company and Cananwill, Inc. secured by certain
            prepaid and unearned insurance premiums, maturing on March 14, 2002,
            bearing interest at 7.50%                                                                          1,065
                                                                                             --------        --------

                                                                                              117,610         121,542
          Less amounts classified as current                                                   80,919         114,894
                                                                                             --------        --------

          Total long-term obligations                                                        $ 36,691        $  6,648
                                                                                             ========        ========
</Table>

     The Company has three primary credit facilities: a revolving credit
     facility with Harris Trust and Savings Bank, as agent for several lenders
     (referred to as the Credit Agreement with Harris or merely the Credit
     Agreement); senior notes with an insurance company (referred to as the
     Senior Notes or the Note Purchase Agreement); and a term loan with General
     Electric Capital Corporation (referred to as the Master Security Agreement
     with GECC). Each of these credit facilities require compliance with various
     covenants, including, but not limited to, financial covenants related to
     equity levels, cash flow requirements, fixed charge coverage ratios and
     ratios of debt to equity.


                                     -F-18-

<Page>

     The Credit Agreement and the Note Purchase Agreement, including certain of
     the financial and other covenants, have been amended at various times since
     their originations and waivers of compliance with certain financial
     covenants have been granted by the lenders. At June 30, 2000, absent the
     waivers obtained from the lenders, the Company would not have been in
     compliance with various financial covenants contained in the Credit
     Agreement and the Note Purchase Agreement. Accordingly, amounts due under
     such agreements have been classified as current in the fiscal 2000
     financial statements.

     In fiscal 2001, the Company has continued to be in violation of virtually
     all of the financial covenants of the Credit Agreement and the Note
     Purchase Agreement. At various dates throughout and subsequent to fiscal
     2001, the Company and these lenders have entered into amendments and
     forbearance agreements wherein the lenders have agreed to forbear from
     enforcing their rights with respect to certain events of default under the
     debt agreements. These forbearance agreements currently expire on October
     12, 2001, after which the lenders could exercise their rights to demand
     payment of the amounts due under the debt agreements. The Company was also
     in violation of certain financial covenants contained in the Master
     Security Agreement with GECC. GECC agreed to forbear from enforcing its
     rights with respect to certain events of default under the Master Security
     Agreement through September 30, 2001. Accordingly, all of the debt under
     these agreements is classified as current in the accompanying consolidated
     financial statements.

     Virtually all assets of the Company in North America are pledged as
     collateral under the various debt agreements and proceeds from the sales of
     assets other than inventory, insurance settlements and other non-recurring
     items may only be used by Atchison for purposes approved by these secured
     lenders. Terms of the Credit Agreement, the Note Purchase Agreement and the
     Master Security Agreement, as amended, prohibit the Company from paying
     dividends and incurring additional debt, except for the new debt as
     discussed below. As of June 30, 2001 the Company has no available borrowing
     capacity under the Credit Agreement.

     In September 2001, ACUK, a subsidiary of the Company, and its subsidiaries,
     and Burdale Financial Limited, an affiliate of Congress Financial
     Corporation, entered into a Facility Agreement ("Facility Agreement"). This
     Facility Agreement provides for a 25 million British pound (approximately
     $35 million US) facility to be used to fund working capital requirements at
     Sheffield, a subsidiary of ACUK, and up to $1.0 million British pounds for
     working capital at Autun, the Company's subsidiary in France. In addition,
     the Facility Agreement will provide security for Sheffield's foreign
     currency exchange contracts and performance bond commitments, repay $5.0
     million of an intercompany working capital loan and may provide for some
     additional working capital funds in North America, subject to availability
     and other restrictions in the U.K. This facility matures on September 17,
     2004 and is secured by substantially all of Sheffield's assets in the U.K.
     Loans under this Facility Agreement will bear interest at LIBOR plus 2.60%.
     To date, $5.0 million has been made available to the Company in the United
     States as a repayment of an intercompany working capital loan, $1.1 million
     of which was paid to certain of the lenders as principal payments.


                                     -F-19-

<Page>

     The amounts of long-term obligations outstanding as of June 30, 2001 are
     payable as follows, after giving effect to reclassification due to covenant
     violations:

<Table>

          <S>                                                          <C>
          2002                                                         $114,894
          2003                                                              307
          2004                                                              329
          2005                                                              350
          2006                                                              373
          Thereafter                                                      5,289
</Table>

     The amounts of interest expense for the years ended June 30, 1999, 2000 and
     2001 consisted of the following:

<Table>
<Caption>

                                                               1999          2000           2001
          <S>                                                <C>            <C>           <C>
          Senior notes with an insurance company             $ 1,467        $1,224        $ 1,076
          Credit facility with Harris                          6,194         6,071          6,851
          Term loan with GECC                                                1,520          2,951
          Amortization of deferred financing costs               194           261            357
          Other                                                  497           376             94
                                                             -------        ------        -------

                                                             $ 8,352        $9,452        $11,329
                                                             =======        ======        =======
</Table>

11.  INCOME TAXES

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

<Table>
<Caption>

                                                            1999            2000            2001
          <S>                                              <C>           <C>             <C>
          Domestic                                         $ (126)       $(28,533)       $(35,946)
          Foreign                                           8,042             927             489
                                                           ------        --------        --------
                                                           $7,916        $(27,606)       $(35,457)
                                                           ======        ========        ========
</Table>


                                     -F-20-

<Page>


     Income taxes for the years ended June 30, 1999, 2000 and 2001 are comprised
     of the following:

<Table>
<Caption>

                                                     1999            2000         2001
          <S>                                       <C>            <C>            <C>
          Current expense (benefit):
            Federal                                 $  175         $ (3,329)      $     0
            State and local                            253             (201)          173
            Foreign                                  1,655              455            (9)
                                                    ------         --------       -------

                                                     2,083           (3,075)          164

          Deferred expense (benefit):
            Federal                                   (105)         (10,654)       (4,881)
            State and local                            397           (1,558)         (558)
            Foreign                                  2,469             (640)        6,803
                                                    ------         --------       -------

                                                     2,761          (12,852)        1,364
                                                    ------         --------       -------

                                                    $4,844         $(15,927)      $ 1,528
                                                    ======         ========       =======
</Table>

<Table>
<Caption>
                                                     1999            2000         2001
          <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)      $(5,516)
            Depreciation and amortization              935            1,623         3,427
            Net operating loss carryforwards           754             (916)       (9,789)
            Missappropriation                          (55)            (695)          695
            Flood wall capitalization                                   429
            Postretirement (benefits) costs            (97)            (419)         (408)
            Pension costs                             (163)             267           163
            Inventories                                112              245          (304)
            Accrued expenses                           282                4          (279)
            Valuation allowance                         56                4        13,427
            Other, net                                 (38)             (19)          (52)
                                                    ------         --------       -------

                                                    $2,761         $(12,852)      $ 1,364
                                                    ======         ========       =======
</Table>


                                     -F-21-

<Page>


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

<Table>
<Caption>

                                                1999                         2000                          2001
                                     ------------------------       ----------------------      -------------------------
                                       Amount             %          Amount            %           Amount            %
<S>                                  <C>                <C>         <C>              <C>         <C>                <C>
Computed expected
  federal income tax
  expense (benefit)                   $  2,854           35.0       $ (9,639)         (35.0)      $(12,410)         (35.0)
State income tax
  expense (benefit),
  net of federal benefit                   527            6.4           (389)          (1.4)          (765)          (2.1)
Non - U.S. taxes                                                         156            0.6            504            1.4
Foreign dividends                        1,238           15.2            780            2.8            828            2.3
Goodwill                                   340            4.2            709            2.6           (272)          (0.8)
Revision of estimate
  for deferred taxes
  associated with flood
  proceeds                                                            (7,786)         (28.3)
Other, net                                (171)          (2.1)           238            0.9            216            0.6
Valuation Allowance                         56            0.7              4                        13,427           37.9
                                      --------          -----       --------         ------       --------           ----
                                      $  4,844           59.4       $(15,927)         (57.8)      $  1,528            4.3
                                      ========          =====       ========         ======       ========           ====
</Table>


                                     -F-22-

<Page>

     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. The 2000 deferred tax
     asset balances for net operating loss carryforwards, foreign tax credit and
     AMT credit have been adjusted with an offsetting adjustment to the
     valuation allowance. These adjustments have no net affect on the net
     deferred tax asset at June 30, 2000. Deferred income taxes as of
     June 30, 2000 and 2001 are comprised of the following:

<Table>
<Caption>

                                                                       2000            2001
          <S>                                                        <C>            <C>
          Deferred tax assets:
            Net operating loss carryforwards                         $ 19,978       $ 30,838
            Impairment reserve                                          5,589         11,104
            Postretirement benefits                                     3,524          3,932
            Accrued expenses                                            2,708          2,987
            Pension costs                                               1,282          1,119
            General business tax credits                                  588            529
            Foreign tax credit                                          1,873          1,873
            AMT credit                                                    918            918
            Missappropriations                                            695              0
            Other                                                         120            497
                                                                     --------       --------

                                                                       37,275         53,797
          Valuation allowance                                         (17,152)       (30,579)
                                                                     --------       --------

                    Net deferred tax assets                            20,123         23,218
                                                                     --------       --------

          Deferred tax liabilities:
            Depreciation and amortization                             (19,619)       (23,046)
            Inventories                                                (1,520)        (1,216)
            Discharge of indebtedness                                    (422)          (422)
            Other                                                        (382)          (649)
                                                                     --------       --------

                                                                      (21,943)       (25,333)
                                                                     --------       --------

          Total                                                      $ (1,820)      $ (2,115)
                                                                     ========       ========
</Table>

     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 $1,850 and $1,468 of cumulative undistributed
     earnings from United Kingdom operations for 2000 and 2001, 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 that were acquired
     during previous years totaling approximately $7,225 at June 30, 2001, which
     expire in the years 2007 through 2012. These federal net operating loss
     carryforwards that were acquired during previous years 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.


                                     -F-23-

<Page>

     The Company has additional federal net operating loss carryforwards
     totaling approximately $23,452 at June 30, 2001 which will expire in the
     year 2021. The utilization of such net operating loss carryforwards is
     restricted to the earnings of the U.S. consolidated group. The Company also
     has foreign net operating loss carryforwards totaling approximately $53,323
     at June 30, 2001, 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 $17,152 and $30,579 in 2000 and 2001,
     respectively, related to the federal, state and foreign net operating loss
     carryforwards to reduce the deferred tax assets to the amounts that
     management believe 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.

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.


                                     -F-24-

<Page>

     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, 2000 and 2001, the Company had $62,855 and $72,359,
     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, was 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
     (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.


                                     -F-25-

<Page>

     At June 30, 2000 and 2001, 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, 2000                      JUNE 30, 2001
                                         ----------------------------       ----------------------------
                                             LOCAL        APPROXIMATE           LOCAL        APPROXIMATE
                                            CURRENCY         VALUE(1)          CURRENCY         VALUE(1)
          <S>                             <C>             <C>                  <C>           <C>
          U.S. Dollars                        17,860        $17,851              45,734        $45,758
          Deutsche Marks                       8,165          3,968               7,605          3,306
          French Francs                       19,022          2,757               5,244            680
          Swiss Francs                            64             39                  64             36
          Italian Lira                     2,229,242          1,095             550,154            242
          Canadian Dollars                     1,344            905               5,482          3,624
          Dutch Guilder                                                              91             35
          Swedish Krona                        4,000            452              14,728          1,358
          Spanish Pesetas                     65,980            377              57,563            294
          Austrian Schilling                                                      3,978            367
          Japanese Yen                           757              7                 757              6
          Danish Krona                                                            6,454            735
          Finish Marka                           106             17                 426             61
          Euro                                 4,134          3,930              15,721         13,367
                                                            -------                            -------

          Total                                             $31,398                            $69,869
                                                            =======                            =======
</Table>

          (1)  The approximate value is the value of the local currencies
               translated first into the foreign subsidiaries' functional
               currency, at the June 30, 2000 and 2001 spot rates, respectively,
               and then translated to U.S. dollars at the June 30, 2000 and 2001
               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.

     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.


                                     -F-26-

<Page>

     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, 2000 and 2001, 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, 2000
     and 2001 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 per share, 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 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


                                     -F-27-

<Page>

     Cumulative Preferred Stock for the purpose of the Stockholder Rights Plan.
     The Stockholder Rights Plan was ratified by stockholders at the Company's
     annual meeting on June 29, 2001.

     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, 1999, 2000, and 2001 33,033, 36,371 and 16,075
     common shares, respectively, were purchased by employees under the Purchase
     Plan. At June 30, 2001, 237,594 shares remained available for grant. After
     accounting irregularities were discovered in the second quarter of fiscal
     2001, purchases of shares under the Purchase Plan were temporarily
     suspended. The Purchase Plan was still frozen as of June 30, 2001.


                                     -F-28-

<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, 2001, 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, 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

      Issued                                133,500       2.30-6.25              6.03
      Surrendered                           (10,000)      6.25-10.38             8.33
                                            -------

     Outstanding June 30, 2001              505,733       2.30-19.13            10.92
                                            =======
</Table>

     As of June 30, 1999, 2000 and 2001, there were 191,633, 235,067 and 266,733
     options, respectively, exercisable under the Incentive Plan. The
     weighted-average exercise price for options exercisable at June 30, 1999,
     2000 and 2001 were $14.09, $13.91 and $13.25, respectively.

     At June 30, 2001, options to purchase 168,607 shares were authorized but
     not granted. The weighted average remaining contractual life of options
     outstanding under the Incentive Plan at June 30, 1999, 2000 and 2001 was
     7.1 years, 6.7 years and 6.5 years, respectively.


                                     -F-29-

<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, 2001, is summarized in the following table:

<Table>
<Caption>

                                                                               WEIGHTED
                                                                                AVERAGE
                                                SHARES          PRICE          PRICE PER
                                            UNDER OPTION      PER SHARE          SHARE
     <S>                                    <C>              <C>               <C>
     Outstanding, June 30, 1998                 40,000       $13.38-19.13      $   14.81

      Issued                                    10,000              19.13          19.13
      Exercised                                (10,000)             13.38          13.38
                                                ------

     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

     Outstanding June 30, 2001                  50,000         8.75-19.13          13.60
                                                ======
</Table>

     As of June 30, 1999, 2000 and 2001, there were 40,000, 40,000 and 50,000
     options exercisable, respectively, under the Director Option Plan. The
     weighted-average exercise price for options exercisable at June 30, 1999,
     2000 and 2001 was $14.81, $13.60 and $13.60, respectively.

     At June 30, 2001, 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, 1999, 2000 and 2001
     was 5.6 years, 5.6 years and 4.6 years, respectively.


                                     -F-30-

<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, 2001:

<Table>
<Caption>

                                                          OPTIONS OUTSTANDING                              OPTIONS EXERCISABLE
                                     --------------------------------------------------------    ---------------------------------
                                           NUMBER       WEIGHTED AVERAGE     WEIGHTED AVERAGE       NUMBER        WEIGHTED AVERAGE
                                        OUTSTANDING         REMAINING         EXERCISE            EXERCISABLE      EXERCISE
      RANGE OF EXERCISE PRICES           AT 6/30/01     CONTRACTUAL LIFE        PRICE             AT 6/30/01         PRICE
      <S>                               <C>             <C>                  <C>                  <C>             <C>
               $13.38                      125,533         3 years             $ 13.38                125,533       $ 13.38
            14.13-14.75                     51,000         4 years               14.39                 51,000         14.39
            12.86-15.75                     28,000         5 years               14.93                 28,000         14.93
            16.63-19.13                     40,200         6 years               17.68                 40,200         17.68
             9.88-18.06                     38,000         7 years               14.18                 25,332         14.19
             8.50-10.38                    123,000         8 years                9.61                 64,166          9.54
             5.75-8.75                     145,000         9 years                6.41                 13,333          8.33
                2.30                         5,000        10 years                2.30                                 0.00
                                           -------                                                    -------

                                           555,733                                                    347,564
                                           =======                                                    =======
</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>

                                                                   1999           2000         2001
     <S>                                                          <C>           <C>          <C>
     Net income (loss):
       As reported                                                $ 3,072       $(11,679)    $(36,985)
       Pro forma                                                    2,896        (12,004)     (37,325)
     Net income (loss) and net earnings (loss) per share:
      As reported:
       Basic                                                         0.39          (1.53)       (4.81)
       Diluted                                                       0.39          (1.53)       (4.81)
      Pro forma:
       Basic                                                         0.37          (1.57)       (4.85)
       Diluted                                                       0.37          (1.57)       (4.85)
</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-31-

<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 1999, 2000 and 2001 was
     $6.87, $5.92 and $5.23 per share, respectively. For the Director Option
     Plan, the weighted average grant-date fair value of stock options granted
     during fiscal year 2000 was $5.66 per share, respectively. No options were
     issued under the Director Option Plan in fiscal year 2001. The following
     weighted average assumptions were used for grants under both option plans
     during the years ended June 30, 1999, 2000 and 2001:

<Table>
<Caption>

                                                 1999          2000            2001
     <S>                                       <C>            <C>            <C>
     Risk-free interest rate                     5.3%           5.9%           6.0 %
     Expected life                             10 years       10 years       10 years
     Expected volatility                         36%             41%            85%
     Dividend yield                              Nil             Nil            Nil
</Table>

     For the Purchase Plan, the weighted average grant-date fair value of
     options granted under the plan was $1.81, $1.57 and $1.47, respectively,
     for the years ended June 30, 1999, 2000 and 2001. The following weighted
     average assumptions were used for grants under the Purchase Plan during the
     years ended June 30, 1999, 2000 and 2001:

<Table>
<Caption>
                                                  1999         2000            2001
     <S>                                       <C>            <C>            <C>
     Risk-free interest rate                     4.4%           5.2%           6.0%
     Expected life                             3 months       3 months       3 months
     Expected volatility                         36%            41%            85%
     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, 1999, 2000 and 2001, respectively.

<Table>
<Caption>

                                            1999                          2000                           2001
                            -------------------------------  ------------------------------   -----------------------------
                                       WEIGHTED    EARNINGS              WEIGHTED    LOSS                 WEIGHTED     LOSS
                               NET      AVERAGE      PER       NET        AVERAGE     PER       NET       AVERAGE      PER
                              INCOME    SHARES     SHARE       LOSS        SHARES    SHARE     LOSS        SHARES     SHARE
<S>                          <C>       <C>         <C>       <C>         <C>        <C>       <C>         <C>        <C>
Basic EPS                    $ 3,072   7,790,781   $ 0.39    $ (11,679)  7,648,616  $ (1.53)  $(36,985)   7,685,339  $ (4.81)

Effect of dilutive
  securities -
  stock options
                             -------   ---------   ------    ---------   ---------   -------   --------   ---------  --------

Diluted EPS                  $ 3,072   7,790,781   $ 0.39    $ (11,679)  7,648,616   $ (1.53)  $(36,985)  7,685,339  $ (4.81)
                             =======   =========   ======    =========   =========   =======   ========   =========  =======
</Table>


                                     -F-32-

<Page>

15.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<Table>
<Caption>

                              THREE MONTHS ENDED        THREE MONTHS ENDED         THREE MONTHS ENDED         THREE MONTHS ENDED
                                  SEPTEMBER 30             DECEMBER 31                 MARCH 30                    JUNE 30
                            ------------------------ ------------------------  ------------------------   ------------------------
                                1999         2000      1999 (1)      2000 (4)     2000 (2)       2001        2000 (3)     2001 (5)
<S>                         <C>           <C>          <C>          <C>         <C>          <C>          <C>          <C>
Net sales                    $ 108,914    $  99,208    $ 114,103    $ 105,809   $ 121,765    $ 116,924    $ 116,355    $ 106,209
Gross profit                    10,417        4,000       12,293        8,051      10,247        8,039        8,881        7,771
Operating income (loss)            585       (5,361)       1,632        6,795      (1,040)      (4,155)     (19,265)     (20,554)
Net income (loss)               (1,187)      (5,866)      (1,002)       1,856       5,198       (5,004)     (14,688)     (27,971)
Earnings (loss)
  per common share):
    Basic                        (0.16)       (0.76)       (0.13)        0.24        0.68        (0.65)       (1.92)       (3.64)
    Diluted                      (0.16)       (0.76)       (0.13)        0.24        0.68        (0.65)       (1.92)       (3.64)
</Table>

     (1)  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).

     (2)  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).

     (3)  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 $.57 per share (Note 2); c) a
          $3,450 impairment charge and $400 of other costs recorded in
          connection with the closure of 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 2). 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).

     (4)  The second quarter of fiscal 2001 contains a $10,920 insurance gain
          recorded in connection with an industrial accident that occurred on
          February 25, 1999 at the Company's subsidiary, Jahn Foundry, which
          increased net income by $6,552 or $0.87 per share (Notes 3 and 23).

     (5)  The fourth quarter of fiscal 2001 contains the following charges: a) a
          $13,871 impairment charge recorded in connection with the planned sale
          of Jahn Foundry, which decreased net income by $1.80 per share (Note
          3) ; b) a $1,610 impairment charge recorded in connection with the
          closure of Empire, which decreased net income by $0.21 per share (Note
          2); c) a $2,658 impairment charge recorded in connection with the
          planned sale of LA Die Casting, which decreased net income by $0.35
          per share (Note 3).


                                     -F-33-

<Page>

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>

                                                  1999           2000            2001
     <S>                                        <C>             <C>            <C>
     Service costs                              $ 7,734         $ 6,824        $ 6,055
     Interest costs                              14,980          15,376         15,579
     Actual return on net assets                (15,272)        (40,543)        21,265
     Net deferral items                          (3,012)         22,269        (41,172)
                                                -------        --------        --------

                                                $ 4,430         $ 3,926        $ 1,727
                                                =======         =======        =======
</Table>


                                     -F-34-

<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, 2000 and 2001 is presented below.

<Table>
<Caption>

                                                             2000                          2001
                                              -------------------------------- ----------------------------
                                                  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                              $(230,530)      $(10,983)         $(224,295)      $(27,938)
Service cost                                        (6,496)          (328)            (5,519)          (536)
Interest cost                                      (14,613)          (763)           (13,439)        (2,140)
Curtailments                                                                                            934
Actuarial (loss) gain                               (3,196)         1,116             21,439         (1,912)
Plan amendments
Foreign currency exchange rate
  changes                                            8,093              8             13,049             26
Participant contributions                           (1,739)                           (1,559)
Benefits paid                                        6,707            491              6,968          1,522
                                                 ---------       --------          ---------       --------
Projected benefit obligation at end
  of year                                         (241,774)       (10,459)          (203,356)       (30,044)
                                                 ---------       --------          ---------       --------
CHANGE IN PLAN ASSETS

Fair value of plan assets at
  beginning of year                                235,859          8,323            249,374         25,031
Actual return on plan assets                        39,967            576            (22,329)         1,064
Participant contributions                            1,739                             1,559
Employer contribution                                3,750            389              2,869          1,702
Foreign currency exchange rate
  changes                                           (8,993)            (7)           (14,893)           (23)
Benefits paid                                       (6,707)          (491)            (6,968)        (1,522)
                                                 ---------       --------          ---------       --------
Fair value of plan assets at end of
  year                                             265,615          8,790            209,612         26,252
Plan assets in excess (deficiency) of
  projected benefit obligation                      23,841         (1,669)             6,256         (3,792)
Unrecognized prior service costs                       426            600                403            452
Unrecognized net obligation                            132           (161)                57           (100)
Unrecognized net (gain)/loss                       (17,015)          (663)             3,775          1,204
Additional liability                                                 (122)                             (887)
                                                 ---------       --------          ---------       --------

Accrued pension asset (liability)                 $  7,384       $ (2,015)         $ 10,491        $ (3,123)
                                                 =========       ========          ========        ========
THE ACTUARIAL VALUATION WAS PREPARED
 ASSUMING:
  Discount rate                                     7.75 %                            7.25 %
  Expected long-term rate of return
    on plan assets                                  9.00 %                            9.00 %
  Salary increases per year                         5.00 %                            5.00 %
</Table>


                                     -F-35-

<Page>

     In accordance with SFAS No. 87, "EMPLOYERS' ACCOUNTING FOR PENSIONS", the
     Company has recorded an additional minimum pension liability for
     underfunded plans of $122 and $887 at June 30, 2000 and 2001, 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 $519, $1,387 and $1,230 for the years ended June 30, 1999, 2000 and
     2001, respectively.

     The Company's subsidiaries, Prospect Foundry, LA Die Casting and Jahn
     Foundry contributed $302, $320 and $256 for the years ended June 30, 1999,
     2000 and 2001, 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, 2000), no withdrawal liabilities exist.

     The Company also has various other profit sharing plans. Costs of such
     plans charged against earnings were $1,234, $907 and $862 for the years
     ended June 30, 1999, 2000 and 2001, respectively.


                                     -F-36-

<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, 2000 and 2001 are as follows:

<Table>
<Caption>

                                                                        2000          2001
     <S>                                                               <C>           <C>
     CHANGE IN ACCUMULATED POSTRETIREMENT BENEFIT
      OBLIGATION

     Accumulated postretirement benefit obligation
      at beginning of year                                             $ 9,864       $11,171
     Service cost                                                          516           552
     Interest cost                                                         744           876
     Actuarial loss                                                        371         1,892
     Benefits paid                                                        (324)         (529)
                                                                       -------       -------

     Accumulated postretirement benefit obligation                      11,171        13,962
     Plan assets
                                                                       -------       -------
     Accumulated postretirement benefit obligation
      in excess of plan assets                                          11,171        13,962
     Unrecognized net loss                                              (2,555)       (4,331)
     Unrecognized prior service cost                                       583           451
                                                                       -------       -------

     Accrued postretirement obligation                                 $ 9,199       $10,082
                                                                       =======       =======
</Table>

     Net postretirement benefit cost for the years ended June 30, 1999, 2000 and
     2001 consisted of the following components:

<Table>
<Caption>

                                                                1999        2000       2001
     <S>                                                       <C>          <C>        <C>
     Service cost - benefits earned during the year            $  480       $  516     $  552
     Interest cost on accumulated benefit obligation              643          744        876
     Amortization of prior service cost                          (132)        (132)      (132)
     Amortization of loss                                         138          116        116
                                                               ------       ------     ------

                                                               $1,129       $1,244     $1,412
                                                               ======       ======     ======
</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, 2001 was 9.14% decreasing each successive year until it
     reaches 5.25% in 2021, 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, 2001 by approximately $2,064 (14.8%) and the
     aggregate of the service and interest cost components of the net periodic
     postretirement benefit cost for the year then ended by approximately $239
     (16.7%). 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,


                                     -F-37-

<Page>

     2001 by approximately $1,662 (11.9%) and the aggregate of the service and
     interest cost components of the net periodic postretirement benefit cost
     for the year then ended by approximately $190 (13.3%). The assumed discount
     rates used in determining the accumulated postretirement benefit
     obligation, the service costs and interest costs as of and for the years
     ended June 30, 1999, 2000 and 2001 were 7.5%, 8.0% and 7.25%, 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 $1,675, $3,862 and $5,462 for
     the years ended June 30, 1999, 2000 and 2001, 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>
     2002                                                         $5,943
     2003                                                          5,359
     2004                                                          4,594
     2005                                                          4,117
     2006                                                          3,086
     Thereafter                                                    2,646
</Table>

19.  MAJOR CUSTOMERS

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

<Table>
<Caption>

                                                          AMOUNT OF NET SALES
                                                  1999            2000            2001
     <S>                                         <C>             <C>             <C>
     Customer A                                  $25,219         $24,826         $23,507
     Customer B                                   53,276          46,677          49,626
                                                 -------         -------         -------

                                                 $78,495         $71,503         $73,133
                                                 =======         =======         =======
</Table>

<Table>
<Caption>

                                                              CUSTOMER
                                                              ACCOUNTS
                                                             RECEIVABLE
                                                       ---------------------
                                                         2000           2001
     <S>                                                <C>            <C>
     Customer A                                         $ 2,916        $  970
     Customer B                                           4,191         5,418
                                                        -------        ------

                                                        $ 7,107        $6,388
                                                        =======        ======
</Table>

20.  SEGMENT AND GEOGRAPHIC INFORMATION

     Each of the Company's subsidiaries and its Atchison Steel Casting &
     Machining 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


                                     -F-38-

<Page>

     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, 1999, 2000 and 2001
     are as follows and long-lived assets located in each of these countries as
     of June 30, 2000 and 2001 are as follows:

<Table>
<Caption>

                                                    REVENUES
                  --------------------------------------------------------------------------
                      UNITED          GREAT
                      STATES         BRITAIN        CANADA         FRANCE        TOTAL
<S>                  <C>             <C>            <C>            <C>          <C>
1999                 $295,537        $132,154       $45,178        $ 4,536      $477,405
2000                  289,010         114,183        40,238         17,706       461,137
2001                  261,895         107,596        41,258         17,401       428,150
</Table>

<Table>
<Caption>

                                              LONG-LIVED ASSETS
                  --------------------------------------------------------------------------
                      UNITED          GREAT
                      STATES         BRITAIN        CANADA         FRANCE        TOTAL
<S>                  <C>             <C>            <C>            <C>          <C>
2000                 $122,994       $29,854        $21,026        $ 678         $174,552
2001                   99,903        29,474         19,989        1,048          150,414
</Table>

21.  ADDITIONAL CASH FLOWS INFORMATION

<Table>
<Caption>

                                                                      1999          2000          2001
<S>                                                                  <C>          <C>           <C>
Cash paid during the year for:
  Interest                                                           $8,235       $9,398        $11,562
  Income taxes                                                        5,751           56
Supplemental schedule of noncash investing and financing
  activities:
  Recording of other asset related to pension liability                 421          706           (765)
  Recording of additional pension liability                            (421)        (706)           765
</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.

     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


                                     -F-39-

<Page>

     charged to repairs and maintenance as incurred. As of June 30, 2000 and
     2001, the Company has $645 and $597 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 are 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 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 $3.7 million business interruption insurance gain and a $7.2 million
     property insurance gain. The property insurance gain primarily represents
     the difference between the net proceeds received for the property damage
     and the property's net book value immediately before the accident. These
     net proceeds were used to rebuild the damaged property and were accounted
     for as capital expenditures.

     A civil action has 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 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 the Jahn Foundry would aggressively defend.
     In addition, Jahn Foundry has brought a


                                     -F-40-

<Page>

     Third Party Counterclaim against Borden and the independent sales
     representative of the chemical compound, J.R. Oldhan Company, 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 and J.R. Oldhan.

     The Company, its chief executive officer, and its chief financial officer
     were named as defendants in five lawsuits filed following the Company's
     announcements concerning the discovery of accounting irregularities at the
     Pennsylvania Foundry Group. The cases have been consolidated before the
     U.S. District Court for the District of Kansas. An amended complaint filed
     after the consolidation alleges, among other things, that the defendants
     intentionally or recklessly issued materially false and misleading
     financial statements in violation of Section 10(b) of the Securities
     Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. That complaint
     seeks certification of a class of purchasers of the company's common stock
     between December 10, 1997 and November 3, 2000 and asks for damages for the
     class in an unspecified amount. Discovery has been stayed pending the
     resolution of the defendant's motion to dismiss the amended complaint. The
     Company believes the claims are without merit and intends to defend them
     vigorously. There can be no assurance, however, that an adverse outcome
     with respect to the case 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 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.


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<Page>

24.  FINANCIAL RESULTS AND MANAGEMENT PLANS

     In fiscal 2000 and fiscal 2001, the Company incurred pre-tax losses of
     $27.6 million ($11.2 million excluding impairment charges of $16.4 million)
     and $34.5 million ($16.4 million excluding impairment charges of $18.1
     million), respectively, and, has not been in compliance with certain
     financial covenants included in its debt agreements (See Note 10). At June
     30, 2001, the Company had a deficiency in working capital of $52,925. These
     conditions have continued subsequent to June 30, 2001.

     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 fiscal 2001 and is in the process of closing a fourth. Operations
     from these four foundries have been a major factor in the Company's pre-tax
     losses, producing combined pre-tax losses of $32.7 million ($16.3 million
     before impairment charges of $16.4 million) and $17.1 million ($15.5
     million before impairment charges of $1.6 million) in fiscal 2000 and
     fiscal 2001, respectively. Management believes it can continue 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.

     PLANNED SALE OF OPERATIONS

     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). Jahn Foundry had pre-tax losses of $187 (after
     insurance payments) and $7.0 million ($4.0 million excluding an impairment
     charge of $13.9 million and a non-recurring gain of $10.9 million relating
     to insurance claims resulting from the industrial accident at Jahn Foundry
     on February 25, 1999) in fiscal 2000 and fiscal 2001, respectively. To
     improve operating results, Jahn Foundry began focusing on 1) only one type
     of molding process, transferring work requiring a different process to G&C
     and La Grange and 2) a smaller number of key customers, with a
     significantly reduced workforce. While Jahn Foundry has made some gradual
     improvement as a result of these actions, the Company has decided to try to
     sell Jahn Foundry. The Company is negotiating the sale of substantially all
     of the assets of Jahn Foundry (Note 3). If a definitive agreement is
     executed and consummated, it is expected this transaction would close
     during the second quarter of fiscal 2002.

     The Company is negotiating the sale of substantially all of the assets of
     LA Die Casting (Note 3). If consummated, it is expected that this
     transaction would close during the second quarter of fiscal 2002. LA Die
     Casting recorded pre-tax income of $488 and $64 (excluding an impairment
     charge of $2.7 million) for fiscal 2000 and fiscal 2001, respectively.

     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 which expire September 30, 2001 and October 12,
     2001. The Company believes that its operating cash flow and amounts
     available for borrowing under its existing credit facility and the


                                     -F-42-

<Page>

     Facility Agreement will be adequate to fund its capital expenditure and
     working capital requirements through June 2002.

     On September 17, 2001, the Company's 95% owned U.K. subsidiary, ACUK,
     entered into a new financing agreement with Burdale Financial Limited, an
     affiliate of Congress Financial Corporation (Note 10). This 25 million
     British pound (approximately $35 million U.S.) facility will provide
     additional working capital to fund future growth. The purpose of the
     facility is to fund working capital requirements at Sheffield, a subsidiary
     of ACUK, as well as up to 1.0 million British pounds in working capital
     funds at the Company's subsidiary in France, Autun. It also provided for up
     to $9 million additional working capital funds in North America if certain
     conditions are met.

     Management believes, however, that certain of the existing loan
     arrangements will need to be revised or replaced to provide the Company
     with additional borrowing capacity and with financial covenants within such
     arrangements that are achievable by the Company. Management is currently in
     negotiations with various financial institutions to extend, renegotiate or
     replace the current credit agreements with a long-term credit facility, but
     there can be no assurance that management will be successful in these
     negotiations.

                                  * * * * * *


                                     -F-43