NEENAH FOUNDRY CO - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2004.

[ ] 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 333-28751
NEENAH FOUNDRY COMPANY
(Exact name of registrant as specified in its charter)

WISCONSIN 39-1580331
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)

2121 BROOKS AVENUE, P.O. BOX 729, 54957
NEENAH, WISCONSIN (Zip Code)
(Address of principal executive offices)

(920) 725-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

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

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed second
quarter. $0

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]

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

Common Stock, $100 par value, which are owned as of record by ACP Holding
Co. -- 1,000 shares as of November 30, 2004

PART I

ITEM 1. BUSINESS

Unless otherwise stated in this document or unless the context otherwise
requires, references herein to the "Company", "we", "our", "ours", and "us",
include Neenah Foundry Company and its wholly owned subsidiaries, namely-Neenah
Transport, Inc., Deeter Foundry, Inc. ("Deeter"), Mercer Forge Corporation
("Mercer"), Dalton Corporation ("Dalton"), Advanced Cast Products ("Advanced
Cast Products"), and Gregg Industries, Inc. ("Gregg"), and their respective
subsidiaries. "Neenah" refers to Neenah Foundry Company, not including any of
its wholly owned subsidiaries. Neenah is a wholly owned subsidiary of NFC
Castings, Inc. ("NFC"), which is a wholly owned subsidiary of ACP Holding
Company ("ACP").

OVERVIEW

Neenah, together with its active domestic subsidiaries, manufactures and
markets a wide range of iron castings and forgings for the heavy municipal
market and selected segments of the industrial markets. Neenah began business in
1872 and has built a strong reputation for producing quality iron castings.
Neenah is one of the largest manufacturers of heavy municipal iron castings in
the United States. Neenah's broad range of heavy municipal iron castings
includes manhole covers and frames, storm sewer frames and grates, heavy duty
airport castings, specialized trench drain castings, specialty flood control
castings and ornamental tree grates. Neenah sells these municipal castings
throughout the United States to state and local government entities, utility
companies, precast concrete manhole structure producers and contractors for both
new construction and infrastructure replacement. In addition, Neenah is also a
leading manufacturer of a wide range of complex industrial castings, including
castings for the transportation industry, a broad range of castings for the farm
equipment industry, and specific components for compressors used in HVAC
systems.

BACKGROUND

On April 30, 1997, pursuant to an Agreement and Plan of Reorganization with
NC Merger Company and NFC, Neenah Corporation (the predecessor company) was
acquired by NFC, a holding company and a wholly owned subsidiary of ACP. Prior
to July 1, 1997, Neenah Foundry Company was one of three wholly owned
subsidiaries of Neenah Corporation, a holding company with no significant assets
or operations other than its holdings in the common stock of its three wholly
owned subsidiaries. The other two wholly owned subsidiaries were Neenah
Transport, Inc. and Hartley Controls, an entity that was later sold. On July 1,
1997, Neenah Foundry Company merged with and into Neenah Corporation and the
surviving company changed its name to Neenah Foundry Company.

On March 30, 1998, Neenah acquired all the capital stock of Deeter for
$24.3 million. Since 1945, Deeter has been producing gray iron castings for the
heavy municipal market. The municipal casting product line of Deeter includes
manhole frames and covers, storm sewer inlet frames, grates and curbs, trench
grating and tree grates. Deeter also produces a wide variety of special
application construction castings. These products are utilized in waste
treatment plants, airports, telephone and electrical construction projects.

On April 3, 1998, Neenah acquired all the capital stock of Mercer for $47.0
million in cash. Founded in 1954, Mercer produces complex-shaped forged
components for use in transportation, railroad, mining and heavy industrial
applications. Mercer is also a producer of microalloy forgings.

On September 8, 1998, Neenah acquired all the capital stock of Dalton for
$102.0 million in cash. Dalton manufactures and sells gray iron castings for
refrigeration systems, air conditioners, heavy equipment, engines, gear boxes,
stationary transmissions, heavy duty truck transmissions and other automotive
parts.

On September 8, 1998, the capital stock of Advanced Cast Products, an
entity held by ACP prior to the time ACP acquired its interest in NFC, was
contributed to Neenah by ACP. Advanced Cast Products

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is an independent manufacturer of ductile iron castings that are produced
through both traditional casting methods and through Advanced Cast Products'
Evapcast lost foam casting process. Advanced Cast Products' production
capabilities also include a range of finishing operations including austempering
and machining. Advanced Cast Products sells its products primarily to companies
in the heavy truck, construction equipment, railroad, mining and automotive
industries.

On December 31, 1998, Neenah purchased Cast Alloys, Inc. a manufacturer of
investment-cast titanium and stainless steel golf clubheads, for $40.1 million
in cash. Neenah discontinued the operations of Cast Alloys, Inc. in January
2002.

On November 30, 1999, Neenah purchased Gregg, a manufacturer of gray and
ductile iron castings, for $22.9 million in cash.

On October 2, 2000, Neenah sold all of the issued and outstanding shares of
common stock of Hartley Controls Corporation.

On August 8, 2002, Neenah sold substantially all of the assets of Peerless
Corporation.

On December 27, 2002, Neenah sold substantially all of the assets of
Belcher Corporation.

BANKRUPTCY PROCEEDINGS

Beginning in 2000, several trends converged to create an extremely
difficult operating environment for the Company. First, there were dramatic
cyclical declines in some of Neenah's most important markets including trucks,
railroad, construction and agriculture equipment. Second, there was a major
inventory adjustment by manufacturers in the residential segment of the HVAC
equipment industry, resulting in fewer orders for Dalton's HVAC castings. Third,
domestic foundries have been suffering from underutilized capacity,
significantly increased foreign competition, continued price reduction pressure
from customers and other competitors, and increased costs associated with
heightened safety and environmental regulations. These factors have caused and
continue to cause a substantial number of foundries to cease operations or file
for bankruptcy protection.

Beginning in May 2000, we took aggressive steps to offset the impact of the
decline in sales and earnings and improve cash flow in the difficult market
environment: William Barrett was appointed as the new chief executive officer of
NFC; Hartley Controls was sold in September 2000 for $5.0 million in total
proceeds; other excess assets were sold for $5.3 million in late 2001; the
operations of Cast Alloys, Inc. were discontinued in January 2002; substantially
all of the assets of Advanced Cast Product's subsidiary Peerless Corporation
were sold for $0.3 million in August 2002; and the assets of Belcher
Corporation, a subsidiary of Advanced Cast Products, were sold for $4.0 million
in December 2002. Furthermore, management also implemented a significant
reduction in the number of employees, a significant reduction in capital
expenditures and selected price increases. In January 2003, we engaged Houlihan
Lokey Howard & Zukin Capital to assist in the formulation and evaluation of
various options for a restructuring, reorganization, or other strategic
alternatives.

Despite these steps, the credit rating agencies began to downgrade our
outstanding debt obligations in early 2000. Our 11 1/8% Notes became highly
illiquid and traded infrequently. According to data obtained from Telerate, the
price of the notes fell from a trailing 12 month high of $57.50 in June 2002 to
a trailing 12 month low of $30.00 in late December 2002. The trailing six month
average price as of June 23, 2003 was approximately $38.60. As of May 2003,
Neenah was not in compliance with the March 31, 2003 EBITDA covenant of its old
credit facility and lacked sufficient liquidity to make the then-due interest
payment on the 11 1/8% Notes and maintain the liquidity covenants under the old
credit facility.

On May 1, 2003, we launched both an exchange offer for the 11 1/8% Notes
and the pre-petition solicitation of acceptances of the plan of reorganization
in accordance with section 1126(b) of the Bankruptcy Code. The exchange offer,
which was to be completed outside of Bankruptcy Court, did not result in the
requisite percentage of 11 1/8% Notes tendered and both the exchange offer and
the solicitation of acceptances for the May 1, 2003 plan of reorganization were
allowed to expire.

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On July 1, 2003, we launched a pre-petition solicitation of acceptances
with respect to an alternative joint plan of reorganization that was ultimately
approved. Having received sufficient votes to approve the plan of
reorganization, Neenah together with ACP, NFC and all of our wholly-owned
domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of
the United States Bankruptcy Code, as amended, with the United States Bankruptcy
Court for the District of Delaware on August 5, 2003. On that same date we
submitted to the Bankruptcy Court our Amended Prepackaged Joint Plan of
Reorganization, which we refer to as the Plan of Reorganization, and the
Disclosure Statement that we used to solicit votes for that plan.

At the time of the Chapter 11 bankruptcy filing, we had approximately $157
million of existing senior debt under our old credit facility and $282 million
of principal and accrued and unpaid interest under our 11 1/8% Notes. We
negotiated the continued use of our own cash collateral with our senior lenders,
thereby enabling us to utilize our own cash to conduct business operations
during the pendency of the Chapter 11 filing.

Pursuant to the Plan of Reorganization, we conducted a rights offering,
whereby holders of the 11 1/8% Notes were given the opportunity to provide up to
$110 million additional financing through the purchase of up to $119.996 million
face amount of 11% Senior Secured Notes (the "Notes") and warrants to acquire up
to 34.2 million shares of common stock of ACP. In case holders of the 11 1/8%
Notes failed to subscribe for the full $110.0 million, we also obtained standby
commitment agreements from Mackay Shields LLC, Exis Differential Holdings Ltd.,
Citicorp Mezzanine III, L.P., Trust Company of the West and Metropolitan Life
Insurance Company whereby these Standby Purchasers collectively agreed to
provide up to $110 million of financing for the Plan of Reorganization by
participating in the rights offering (to the extent that they were holders of
the 11 1/8% Notes) as well as purchasing any and all unsubscribed securities not
subscribed for by the other holders of 11 1/8% Notes. Approximately 94% of the
holders of the 11 1/8% Notes participated in the rights offering and the Standby
Purchasers were, therefore, only required to fund the shortfall of approximately
$6.4 million.

By order dated September 26, 2003, the Bankruptcy Court confirmed the Plan
of Reorganization and the Plan of Reorganization became effective on October 8,
2003. October 8, 2003 is hereinafter referred to as the Effective Date. The Plan
of Reorganization allowed us to emerge from bankruptcy with an improved capital
structure and, because we had arranged to continue paying our trade debt on a
timely basis during the pendency of the Chapter 11 case, at the time of
emergence, we had sufficient trade credit to continue operations in the ordinary
course of business.

The Plan of Reorganization resulted in significant changes to our capital
structure. Among other things, the Plan of Reorganization provided for the
repayment in full of our old credit facility, the cancellation of $282.0 million
in principal amount of 11 1/8% Notes, the cancellation of our PIK Note and the
elimination of the interests of the former equity owners of our indirect parent
company, ACP. The cash proceeds necessary to consummate the Plan of
Reorganization were provided from the consummation of the New Credit Facility
and the issuance of the Notes. The claims and interests of our various creditors
were satisfied as follows:

- our old credit facility was repaid in cash;

- our PIK Note was cancelled and Citicorp Mezzanine III, L.P., the holder
of that note, received Notes with a principal amount equal to $13.134
million, warrants to acquire 3.8 million shares of common stock of ACP
and cash in the amount of $45,400;

- our outstanding 11 1/8% Notes were cancelled and each holder of 11 1/8%
Notes received its pro rata share of (i) $30.0 million in cash, (ii)
$100.0 million in aggregate principal amount of new 13% Senior
Subordinated Notes due 2013 of the Company, (iii) 38 million shares of
common stock of ACP and (iv) rights to acquire for $110 million in cash
in the aggregate, units for up to $119.996 million face amount of Notes
and warrants to acquire up to 34.2 million shares of common stock of ACP;

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- the following debt and equity instruments were cancelled without further
consideration: 12% senior subordinated notes issued by ACP, 12% senior
subordinated notes issued by NFC and all equity interests of ACP; and

- the following claims and equity interests passed through our Chapter 11
bankruptcy proceedings unimpaired: all tax claims, intercompany debt,
other secured debt and general unsecured debt and the equity interests of
ACP Holding Company in NFC Castings, Inc., equity interests of NFC
Castings, Inc. in Neenah and equity interests of Neenah in its direct and
indirect subsidiaries.

BUSINESS SEGMENTS -- OVERVIEW

We have two reportable segments, Castings and Forgings. The Castings
segment manufactures and sells iron castings for the municipal and industrial
markets, while the Forgings segment manufactures and sells forged components for
the industrial market. The segments were determined based upon the production
process utilized and the type of product manufactured.

CASTINGS SEGMENT

We are a leading producer of iron castings for use in heavy municipal and
industrial applications. This segment sells directly to tier-one suppliers, as
well as to other industrial end users.

PRODUCTS, CUSTOMERS AND MARKETS

The castings segment provides a variety of products to both the heavy
municipal and industrial markets. Sales to the heavy municipal market are
comprised of storm and sanitary sewer castings, manhole covers and frames and
storm sewer frames and grates. Sales also include heavy airport castings,
specialized trench drain castings, specialty flood control castings and
ornamental tree grates. Customers for these products include state and local
government entities, utility companies, precast concrete structure producers and
contractors. Sales to the industrial market are comprised of differential
carriers and casings, transmission, gear and axle housings, yokes, planting and
harvesting equipment parts and compressor components. Markets for these products
include medium and heavy-duty truck, farm equipment and HVAC manufacturers.

Heavy Municipal

Our broad heavy municipal product line consists of two general categories
of castings, "standard" and "specialty" castings. Standard castings principally
consist of storm and sanitary sewer castings that are consistent with
pre-existing dimensional and strength specifications established by local
authorities. Standard castings are generally higher volume items that are
routinely used in new construction and infrastructure replacement. Specialty
castings are generally lower volume products which include heavy-duty airport
castings, trench drain castings, flood control castings, special manhole and
inlet castings and ornamental tree grates. These specialty items are frequently
selected and/or specified from our municipal product catalog and tree grate
catalog, which together encompass over 4,400 standard and specialty patterns.
For many of these specialty products, we believe that we are the only
manufacturer with existing patterns to produce such a particular casting,
although a competing manufacturer could elect to make the investment in patterns
or equipment necessary to produce a similar casting. We hold a number of patents
and trademarks related to their heavy municipal product line.

We sell our municipal castings to state and local government entities,
utility companies, pre-cast concrete manhole structure producers and contractors
for both new construction and infrastructure replacement. Our active municipal
customers generally make purchase decisions based on a number of criteria,
including acceptability of the product per local specification, quality,
service, price and the customer's relationship with the foundry.

During the 70 years that we have manufactured municipal products, we have
emphasized servicing specific marketing needs and believe that we have built a
strong reputation for customer service. We

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believe that we are one of the leaders in U.S. heavy municipal casting
production and that we have strong name recognition. We have one of the largest
sales and marketing force of any foundry serving the heavy municipal market. Our
dedicated sales force works out of regional sales offices to market municipal
castings to contractors and state and local governmental entities throughout the
United States. We operate a number of regional distribution and sales centers
throughout the United States. We believe that this regional approach enhances
our knowledge of local specifications and our position in the heavy municipal
market.

Industrial

Industrial castings have increased in complexity and are generally produced
in higher numbers than municipal castings. Complexity in the industrial market
is determined by the intricacy of a casting's shape, the thinness of its walls
and the amount of processing by a customer required before a part is suitable
for use. OEMs and their first tier suppliers have been demanding higher
complexity parts principally to reduce labor costs in their own production
processes by using fewer parts to manufacture the same finished product or
assembly and by using parts that require less preparation before being
considered a finished product.

We primarily sell our industrial castings to a limited number of customers
with whom we have established close working relationships. These customers base
their purchasing decisions on, among other things, our technical ability, price,
service, quality assurance systems, facility capabilities and reputation. Our
assistance in product engineering plays an important role in winning bids for
industrial castings. For the average industrial casting, 12 to 18 months
typically elapse between the design phase and full production. The product life
cycle of a typical industrial casting is quite long. Although the patterns for
industrial castings are owned by the customer and not the foundry as is the case
with the patterns for municipal castings, industrial patterns are not readily
transferable to other foundries without, in most cases, significant additional
investment. Foundries, including our company, generally do not design industrial
castings. Nevertheless, a close working relationship between the foundry and the
customer during a product launch is critical to reduce potential production
problems and minimize the customer's risk of incurring lost sales or damage to
its reputation due to a delayed launch. Involvement by a foundry early in the
design process generally increases the likelihood that the customer will design
a casting within the manufacturing capabilities of such foundry and also
improves the likelihood that such foundry will be awarded the casting for full
production.

We estimate that we have historically retained approximately 90% of the
castings that we have been awarded throughout the product life cycle, which is
typical for the industry. We believe industrial customers will continue to seek
out a foundry with a strong reputation for performance that is capable of
providing a cost-effective combination of manufacturing technology and quality.
Our strategy is to augment our relationships with existing customers by
participating in the development and production of more complex industrial
castings, while seeking out selected new customers who would value our
performance reputation, technical ability and high level of quality and service.

We employ a dedicated industrial casting sales force at all of our
subsidiary locations, with the exception of Deeter. Our sales force supports
ongoing customer relationships, as well as working with customers' engineers and
procurement representatives and our engineers, manufacturing management and
quality assurance representatives throughout all stages of the production
process to ensure that the final product consistently meets or exceeds the
specifications of our customers. This team approach, consisting of sales,
marketing, manufacturing, engineering and quality assurance efforts is an
integral part of our marketing strategy.

MANUFACTURING PROCESS

Our foundries manufacture gray and ductile iron and cast it into intricate
shapes according to customer metallurgical and dimensional specifications. We
continually invest in the improvement of process controls and product
performance and believe that these investments and our significant experience

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in the industry have made us one of the most efficient manufacturers of
industrial and heavy municipal casting products.

The casting process involves using metal, wood or urethane patterns to make
an impression of a desired shape in a mold made primarily of sand. Cores, also
made primarily of sand, are used to make the internal cavities and openings in a
casting. Once the casting impression is made in the mold, the cores are set into
the mold and the mold is closed. Molten metal is then poured into the mold,
which fills the mold cavity and takes on the shape of the desired casting. Once
the iron has solidified and cooled, the mold sand is separated from the casting
and the sand is recycled. The selection of the appropriate casting method,
pattern, core-making equipment and sand, and other raw materials depends on the
final product and its complexity, specifications and function as well as the
intended production volumes. Because the casting process involves many critical
variables, such as choice of raw materials, design and production of tooling,
iron chemistry and metallurgy and core and molding sand properties, it is
important to monitor the process parameters closely to ensure dimensional
precision and metallurgical consistency. We continually seek out ways to expand
the capabilities of existing technology to improve our manufacturing processes.

We also achieve productivity gains by improving upon the individual steps
of the casting process such as reducing the amount of time required to make a
pattern change or to produce a different casting product. Such time reductions
enable us to produce castings in medium volume quantities on high volume,
cost-effective molding equipment. Additionally, our extensive effort in real
time process controls permits us to produce a consistent, dimensionally accurate
casting, which saves time and effort in the final processing stages of
production. This dimensional accuracy contributes significantly to our
manufacturing efficiency.

Continual testing and monitoring of the manufacturing process is important
to maintain product quality. We, therefore, have adopted sophisticated quality
assurance techniques and policies for our manufacturing operations. During and
after the casting process, we perform numerous tests, including tensile,
proof-load, radiography, ultrasonic, magnetic particle and chemical analysis. We
utilize statistical process controls to measure and control significant process
variables and casting dimensions. We document the results of this testing in
metallurgical certifications that are sometimes included with each shipment to
our industrial customers. We strive to maintain systems that provide for
continual improvement of operations and personnel, emphasize defect prevention,
safety and reduce variation and waste in all areas.

RAW MATERIALS

The primary raw materials used to manufacture ductile and gray iron
castings are steel scrap, pig iron, metallurgical coke and silica sand. While
there are multiple suppliers for each of these commodities, we have generally
elected to maintain single-source arrangements with our suppliers for most of
these major raw materials except pig iron. Due to long standing relationships
with each of our suppliers, we believe that we will continue to be able to
secure the proper amount and type of raw materials at competitive prices.

Although the prices of the raw materials used vary, fluctuations in the
price of scrap metal are the most significant to us. We have arrangements with
our industrial customers that enable us to adjust industrial casting prices to
reflect scrap price fluctuations. In periods of rapidly rising or falling scrap
prices, these adjustments will lag the current scrap price because they are
generally based on average market prices for prior periods. Such prior periods
vary by customer, but are generally no longer than three months. Castings are
sometimes sold to the heavy municipal market on a bid basis and after a bid is
won the price for the municipal casting generally cannot be adjusted for
increases in the prices of raw materials. Rapidly fluctuating scrap prices may,
however, have an adverse or positive effect on our business, financial condition
and results of operations.

SEASONALITY

We have historically experienced moderate cyclicality in the heavy
municipal market as sales of municipal products are influenced by, among other
things, public spending. There is generally not a large backlog of business in
the municipal market due to the nature of the market. In the industrial market,
we
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experience cyclicality in sales resulting from fluctuations in our markets,
including the medium and heavy-duty truck and the farm equipment markets, which
are subject to general economic trends.

We experience seasonality in our municipal business where sales tend to be
higher during the construction season, which occurs during the warmer months,
generally the third and fourth quarters of our fiscal year. We attempt to
maintain level production throughout the year in anticipation of such
seasonality and therefore do not experience significant production volume
fluctuations. We build inventory in anticipation of the construction season.
This inventory build-up has a negative impact on working capital and increases
our liquidity needs during the second quarter. We have not historically
experienced significant seasonality in industrial casting sales.

COMPETITION

The markets for our products are highly competitive. Competition is based
mainly on price, but also on quality of product, range of capability, level of
service and reliability of delivery. We compete with numerous domestic
foundries, as well as with a number of foreign iron foundries. We also compete
with several large domestic manufacturers whose products are made with materials
other than ductile and gray iron, such as steel or aluminum. Industry
consolidation over the past 20 years has resulted in a significant reduction in
the number of foundries and a rise in the share of production by larger
foundries, some of which have significantly greater financial resources than do
we. Competition from foreign foundries has had an ongoing presence in the heavy
municipal market and continues to be a factor, primarily in the western and
eastern United States, due in part to costs associated with transportation.

FORGINGS SEGMENT

Our forgings segment, operated by Mercer, produces complex-shaped forged
components for use in transportation, railroad, mining and heavy industrial
applications. Mercer also produces micro alloy forgings. Mercer sells directly
to OEMs, as well as to industrial end users. Mercer's subsidiary, A&M, machines
forgings and castings for Mercer and other industrial applications. Until the
mid-1980's, Mercer produced military tank parts, but successfully converted from
a defense contractor to a commercial manufacturer. Mercer produces approximately
500 individually forged components and has developed specialized expertise in
forgings of micro alloy steel.

PRODUCTS, CUSTOMERS AND MARKETS

Mercer manufactures its products to customer specification with typical
production runs of 1,000 or more units. Mercer currently operates mechanical
press lines, from 1,300 tons to 4,000 tons. Key markets for Mercer include truck
and automotive parts, railroad equipment and general industrial machinery.

Mercer's in-house sales organization sells directly to end users and OEMs.
A key element of Mercer's sales strategy is its ability to develop strong
customer relationships through responsive engineering capability, dependable
quality and just-in-time delivery performance.

Demand for forged products closely follows the general business cycles of
the various market segments and the demand level for capital goods. While there
is a more consistent base level of demand for the replacement parts portion of
the business, the strongest expansions in the forging industry coincide with the
periods of industrial segment economic growth. Mercer's largest industry
segment, the heavy truck segment, is extremely weak. Mercer's other market
segments are also showing weakness following general economic slowdowns in those
industrial areas. Management attributes this to normal industrial cycles in
these markets and adjustments to overbuilds in inventory levels as well as high
energy costs.

MANUFACTURING PROCESS

Forgings and castings (together with a third process, fabrication) are the
principal commercial metal working processes. In forging, metal is pressed,
pounded or squeezed under great pressure, with or without

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the use of heat, into parts that retain the metal's original grain flow,
imparting high strength, ductility and resistance properties.

Forging itself usually entails one of four principal processes: impression
die; open die; cold; and seamless rolled ring forging. Impression die forging,
commonly referred to as "closed die" forging, is the principal process employed
by Mercer, and involves bringing two or more dies containing "impressions" of
the part shape together under extreme pressure, causing the forging stock to
take the desired shape. Because the metal flow is restricted by the die, this
process can yield more complex shapes and closer tolerances than the "open die"
forging process. Impression die forging is used to produce products such as
military and off-highway track and drive train parts; automotive and truck drive
train and suspension parts; railroad engine, coupling and suspension parts;
military ordinance parts and other items where close tolerances are required.

Once a rough forging is produced, regardless of the forging process, it
must generally still be machined. This process, known as "finishing" or
"conversion," smooths the component's exterior and mating surfaces and adds any
required specification, such as groves, threads and bolt holes. The finishing
process can contribute significantly to the value of the end product, in
particular in certain custom situations where high value specialized machining
is required. Machining can be performed either in-house by the forger, by a
machine shop which performs this process exclusively or by the end-user.

An internal staff of engineers designs products to meet customer
specifications incorporating computer assisted design workstations for tooling
design. Because its forged products are inherently less expensive and stronger,
Mercer has been successful in replacing certain cast parts previously supplied
by third party foundries. Management believes that Mercer is an industry leader
in forging techniques using micro alloy steel which produces parts which are
lighter and stronger than those forged from conventional carbon steel.

RAW MATERIALS

The principal raw materials used in Mercer's products are carbon and micro
alloy steel. Mercer purchases substantially all of its carbon steel from four
principal sources. While Mercer has never suffered an interruption of materials
supply, management believes that, in the event of any disruption from any
individual source, adequate alternative sources of supply are available within
the immediate vicinity.

SEASONALITY

Mercer has experienced moderate cyclicality in sales resulting from
fluctuations in the medium and heavy-duty truck market and the heavy industrial
market, which are subject to general economic trends. Mercer's current backlog
of industrial market business is smaller than there would be in a stronger, more
typical market.

COMPETITION

Mercer competes primarily in a highly fragmented industry which includes
several dozen other press forgers and hammer forge shops. Hammer shops cannot
typically match press forgers for high volume, single component manufacturing or
close tolerance production. Competition in the forging industry has also
historically been determined both by product and geography, with a large number
of relatively small forgers across the country carving out their own product and
customer niches. In addition, most end users manufacture some forgings
internally, often maintaining a critical minimum level of production in-house
and contracting out the balance. The primary basis of competition in the forging
industry is price, but engineering, quality and dependability are also
important, particularly with respect to building and maintaining customer
relationships. Some of Mercer's competitors have significantly greater resources
than Mercer. There can be no assurance that Mercer will be able to maintain or
improve its competitive position in the markets in which it competes.

8

INTELLECTUAL PROPERTY

We have registered, and are in the process of registering, various
trademarks and service marks with the U.S. Patent and Trademark Office.

EMPLOYEES

As of September 30, 2004, we had approximately 2,881 full time employees,
of whom 2,352 were hourly employees and 529 were salaried employees. Nearly all
of the hourly employees at Neenah, Dalton, Advanced Cast Products and Mercer are
members of either the United Steelworkers of America or the Glass, Molders,
Pottery, Plastics and Allied Workers International Union. A collective
bargaining agreement is negotiated every three to five years. The current
agreements expire as follows: Neenah, December 2006; Dalton- Warsaw, April 2005;
Dalton-Kendallville, June 2007; Advanced Cast Products-Meadville, October 2005;
and Mercer, June 2008. All employees at Deeter and Gregg are non-union. We
believe that we have a good relationship with our employees.

ENVIRONMENTAL MATTERS

Our facilities are subject to federal, state and local laws and regulations
relating to the protection of the environment and worker health and safety,
including those relating to discharges to air, water and land, the handling and
disposal of solid and hazardous waste and the cleanup of properties affected by
hazardous substances. Such laws include the Federal Clean Air Act, the Clean
Water Act, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), and
the Occupational Health and Safety Act. We believe that each of our operations
are currently in substantial compliance with applicable environmental laws, and
that we have no liabilities arising under such environmental laws which would
have a material adverse effect on our operations, financial condition or
competitive position. However, some risk of environmental liability and other
cost is inherent in each of our businesses. Any of our businesses might in the
future incur significant costs to meet current or more stringent compliance,
cleanup or other obligations pursuant to environmental requirements. Such costs
may include expenditures related to remediation of historical releases of
hazardous substances or clean-up of physical structures prior to
decommissioning.

Under the Federal Clean Air Act Amendments of 1990, the Environmental
Protection Agency ("EPA") is directed to establish maximum achievable control
technology ("MACT") standards for certain industrial operations that are major
sources of hazardous air pollutants ("HAPs"). The iron foundry industry will be
required to implement the MACT emission limits, control technologies or work
practices by April 2007. We estimate that the total cost for compliance with the
MACT standard will be less than $7.0 million.

9

ITEM 2. PROPERTIES

We maintain the following manufacturing, machining, and office facilities.
All of the facilities are owned, with the exception of Mercer's machining
facility, which is leased.

In addition to the facilities above, Neenah operates thirteen distribution
and sales centers. Six of those properties are owned and seven are leased.

The principal equipment at the facilities consists of molding machines,
presses, machining equipment, welding, grinding and painting equipment. We
regard our plant and equipment as well maintained and adequate for its needs.

ITEM 3. LEGAL PROCEEDINGS

We are involved in routine litigation incidental to our business. Such
litigation is not, in our opinion, likely to have a material adverse effect on
our financial condition or results of operations.

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

There were no matters submitted to a vote of security holders during the
year ended September 30, 2004.

PART II

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

There is no public market for our common stock. There was one holder of
record of our common stock as of September 30, 2004, ACP Holdings, Inc.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

On August 5, 2003, ACP, NFC, Neenah and their domestic wholly-owned
subsidiaries filed for bankruptcy protection and emerged therefrom on October 8,
2003. Although the Plan of Reorganization became effective on October 8, 2003,
due to the immateriality of the results of operations for the period between
October 1, 2003 and the Effective Date, for financial reporting purposes we
recorded the fresh-start adjustments necessitated by the American Institute of
Certified Public Accountants Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code," ("SOP 90-7") on October
1, 2003.

As a result of our emergence from Chapter 11 bankruptcy and the application
of fresh-start reporting, our consolidated financial statements for the periods
commencing on October 1, 2003 are referred to as the "Reorganized Company" and
will not be comparable with any periods prior to October 1, 2003, which are
referred to as the "Predecessor Company" (see Notes 1, 2 and 3 to our
consolidated financial statements).

10

All references to the years ended September 30, 2000, 2001, 2002 and 2003 are to
the Predecessor Company. All references to the year ended September 30, 2004 are
to the Reorganized Company.

The following table sets forth our selected historical consolidated
financial and other data as of and for the years ended September 30, 2000, 2001,
2002, 2003, and 2004 which have been derived from our historical consolidated
financial statements. The information contained in the following table should
also be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and our historical consolidated
financial statements and related notes included elsewhere in this report. All
amounts are presented in thousands.

- ---------------

(1) On October 2, 2000, we sold all of the issued and outstanding shares of
common stock of Hartley Controls Corporation. The results of the operations
of Hartley Controls Corporation have been reported separately as
discontinued operations for all periods presented.

(2) During the year ended September 30, 2002, we discontinued the operations of
Cast Alloys. The results of Cast Alloys have been reported separately as
discontinued operations for all periods presented.

11

(3) During the year ended September 30, 2003, we sold substantially all of the
assets of Belcher Corporation. The results of Belcher Corporation have been
reported separately as discontinued operations for all periods presented.

(4) The amounts include the results of Gregg subsequent to November 30, 1999.

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

Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other sections of this annual
report are "forward-looking statements" intended to qualify for the safe harbors
from liability established by the Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally be identified as such
because the context of the statement will include words such as "believe,"
"anticipate," "expect" or words of similar import. Similarly, statements that
describe our future plans, objectives or goals are also forward-looking
statements. Such forward-looking statements are subject to certain risks and
uncertainties which are described in close proximity to such statements and
otherwise herein and which may cause actual results to differ materially from
those currently anticipated. The forward-looking statements made herein are made
only as of the date of this report and we undertake no obligation to update such
forward-looking statements to reflect subsequent events or circumstances.

RESULTS OF OPERATIONS

We derive substantially all of our revenue from manufacturing and marketing
a wide range of metal castings and forgings for the heavy municipal market and
selected segments of the industrial markets. We have two reportable segments,
Castings and Forgings. The Castings segment is a leading producer of iron
castings for use in heavy municipal and industrial applications. This segment
sells directly to original equipment manufacturers, hereinafter referred to as
OEMs, as well as to industrial end users. The forgings segment, operated by
Mercer, is a producer of complex-shaped forged components for use in
transportation, railroad, mining and heavy industrial applications. Mercer is
also a producer of microalloy forgings. Mercer sells directly to OEMs, as well
as to industrial end users. Mercer's subsidiary, A&M Specialties, Inc., machines
forgings and castings for Mercer and other industrial applications.
Restructuring charges and certain other expenses, such as income taxes, general
corporate expenses and financing costs, are not allocated between our two
operating segments.

BANKRUPTCY PROCEEDINGS

On August 5, 2003, we, together with ACP, NFC, and all of our wholly-owned
domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of
the United States Bankruptcy Code, as amended, with the United States Bankruptcy
Court for the District of Delaware and submitted to the Bankruptcy Court for
approval the Disclosure Statement for our Amended Prepackaged Joint Chapter 11
Plan of Reorganization, which we call the Plan of Reorganization.

By order dated September 26, 2003, the Bankruptcy Court confirmed the Plan
of Reorganization and the Plan of Reorganization became effective on October 8,
2003. October 8, 2003 is hereinafter referred to as the "Effective Date". The
Plan of Reorganization allowed us to emerge from bankruptcy with an improved
capital structure. Because we had arranged to continue paying our trade debt on
a timely basis, we had sufficient trade credit to continue operations in the
ordinary course of business during the pendency of the Chapter 11 proceedings.
On the Effective Date, we entered into a new senior credit facility. See
"Liquidity and Capital Resources -- New Credit Facility" below for further
discussion.

The Plan of Reorganization resulted in significant changes to our capital
structure. Among other things, the Plan of Reorganization provided for the
repayment in full of our old credit facility, the cancellation of $282.0 million
in principal amount of 11 1/8% Notes, the cancellation of our PIK Note and the
elimination of the interests of the former equity owners of our indirect parent
company, ACP. The cash proceeds necessary to consummate the Plan of
Reorganization were provided from the consummation

12

of the New Credit Facility and the issuance of 11% Senior Secured Notes (the
"Notes"). The claims and interests of our various creditors were satisfied as
follows:

- our old credit facility was repaid in cash;

- our PIK Note was cancelled and Citicorp Mezzanine III, L.P., the holder
of that note, received Notes with a principal amount equal to $13.134
million, warrants to acquire 3.8 million shares of common stock of ACP
and cash in the amount of $45,400;

- our outstanding 11 1/8% Notes were cancelled and each holder of 11 1/8%
Notes received its pro rata share of (i) $30.0 million in cash, (ii)
$100.0 million in aggregate principal amount of new 13% Senior
Subordinated Notes due 2013 of the Company, (iii) 38 million shares of
common stock of ACP and (iv) rights to acquire for $110 million in cash
in the aggregate, units for up to $119.996 million face amount of Notes
and warrants to acquire up to 34.2 million shares of common stock of ACP;

- the following debt and equity instruments were cancelled without further
consideration: 12% senior subordinated notes issued by ACP, 12% senior
subordinated notes issued by NFC and all equity interests of ACP; and

- the following claims and equity interests passed through our Chapter 11
bankruptcy proceedings unimpaired: all tax claims, intercompany debt,
other secured debt and general unsecured debt and the equity interests of
ACP Holding Company in NFC Castings, Inc., equity interests of NFC
Castings, Inc. in Neenah and equity interests of Neenah in its direct and
indirect subsidiaries.

As a result of the Plan of Reorganization, significant changes resulted to
our capital structure. Although the Plan of Reorganization became effective on
October 8, 2003, due to the immateriality of the results of operations for the
period between October 1, 2003 and the Effective Date, for financial reporting
purposes we recorded the fresh-start adjustments necessitated by the American
Institute of Certified Public Accountants Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code," ("SOP 90-7")
on October 1, 2003.

Reorganization value is defined by SOP 90-7 as "the fair value of the
entity before considering liabilities and approximates the amount a willing
buyer would pay for the assets of the entity immediately after the
restructuring." Our reorganization value was $290 million and was determined
based on the consideration of many factors and by reliance on various valuation
techniques, including comparable company analysis and discounted cash flow
analyses.

As a result of our emergence from Chapter 11 bankruptcy and the application
of fresh-start reporting, our consolidated financial statements for the periods
commencing on October 1, 2003 are referred to as the "Reorganized Company" and
are not comparable with any periods prior to October 1, 2003, which are referred
to as the "Predecessor Company" (see Notes 1, 2 and 3 to our consolidated
financial statements). All references to years ended September 30, 2003, 2002,
2001, and 2000 are to the Predecessor Company. All references to the periods
subsequent to October 1, 2003 are to the Reorganized Company.

REORGANIZED COMPANY FISCAL YEAR ENDED SEPTEMBER 30, 2004 COMPARED TO THE
PREDECESSOR COMPANY FISCAL YEAR ENDED SEPTEMBER 30, 2003

Net Sales. Net sales for the year ended September 30, 2004 were $450.9
million, which was $75.8 million or 20.2% higher than the year ended September
30, 2003. Approximately $34.8 million, which represents 46% of the total
increase in net sales, was due to the increased cost of steel scrap charged to
customers. Most of the remainder of the increase was due to significantly
increased demand for industrial castings used in the heavy duty truck market and
lesser increases in construction, agricultural and municipal products. New
business at all locations also contributed to sales growth.

Gross Profit. Gross profit was $75.8 million for the year ended September
30, 2004, which was $22.6 million or 42.4% higher than the year ended September
30, 2003. Gross profit as a percentage of net sales increased to 16.8% during
the year ended September 30, 2004 from 14.2% for the fiscal year ended
13

September 30, 2003. The increase in gross profit resulted from sales volume
increases and the efficiencies achieved by operating the manufacturing plants at
higher capacity. This increase was partially offset by an approximately $3.3
million increase in scrap metal costs which have not yet been recovered from
customers. These increased scrap metal costs are recovered on a delayed basis
from the Company's industrial customers and require a general price increase to
recover the costs from municipal customers.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended September 30, 2004 were $27.4
million, an increase of $1.3 million from the $26.1 million for the year ended
September 30, 2003. As a percentage of net sales, selling, general and
administrative expenses decreased to 6.1% for the year ended September 30, 2004
from 7.0% for the fiscal year ended September 30, 2003. The percentage decrease
was due to relatively stable selling, general and administrative expenses spread
across a larger sales volume.

Amortization of Intangible Assets. Amortization of intangible assets for
the year ended September 30, 2004 was $7.1 million, an increase of $3.3 million
from the $3.8 million for the year ended September 30, 2003. The increase was
due to the increase in amortizable identifiable intangible assets resulting from
applying fresh start accounting as discussed in Note 3 -- Fresh Start
Accounting.

Other Expenses. Other expenses for the years ended September 30, 2004 and
2003 consist of losses of $0.5 million and $0.2 million, respectively, for the
disposal of long-lived assets in the ordinary course of business.

Operating Income. Operating income was $40.9 million for the year ended
September 30, 2004, an increase of $17.8 million or 77.0% from the year ended
September 30, 2003. The increase was caused by the reasons discussed above under
gross profit and was partially offset by slightly higher selling, general and
administrative expenses. As a percentage of net sales, operating income
increased from 6.2% for the year ended September 30, 2003 to 9.1% for the year
ended September 30, 2004.

Net Interest Expense. Net interest expense decreased to $33.4 million for
the year ended September 30, 2004 from $46.6 million for the year ended
September 30, 2003. The decreased interest expense resulted from the reduction
in borrowing due to the reorganization discussed in Note 2 -- Reorganization.

Reorganization Expense. We recorded $7.9 million of reorganization
expenses in 2003 which related to professional fees incurred in connection with
the restructuring of our company and our filing for Chapter 11 bankruptcy
protection as well as the write-off of debt issuance costs and premiums related
to the 11 1/8% Notes.

Provision for Income Taxes. The provision for income taxes for the year
ended September 30, 2004 is higher than the amount computed by applying our
statutory rate of 35% to the income before income taxes principally due to state
income taxes and the loss of benefit on current year NOL's due to
reorganization.

Loss from Discontinued Operations. During December, 2002, we sold
substantially all of the assets of Belcher. The disposition of Belcher resulted
in a loss of $1.6 million net of income taxes, which we recognized in the year
ended September 30, 2003. In accordance with the provisions of Statement of
Financial Accounting Standards No. 144, or SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," the results of operations for
Belcher have been reported as discontinued operations in the statement of
operations for all periods presented.

PREDECESSOR COMPANY FISCAL YEAR ENDED SEPTEMBER 30, 2003 COMPARED TO THE FISCAL
YEAR ENDED SEPTEMBER 30, 2002

Net Sales. Net sales for the year ended September 30, 2003 were $375.1
million, which was $12.6 million or 3.2% lower than the year ended September 30,
2002. The decrease in net sales resulted from a decreased demand for industrial
castings used for the heavy duty truck market. This decrease in

14

demand was caused by prior year demand being inflated by pre-buying to avoid new
engine emission standards that became effective October 1, 2002.

Gross Profit. Gross profit was $53.2 million for the year ended September
30, 2003, which was $10.8 million or 16.9% lower than the year ended September
30, 2002. Gross profit as a percentage of net sales decreased to 14.2% during
the year ended September 30, 2003 from 16.5% for the fiscal year ended September
30, 2002. The decrease in gross margin resulted from lower sales volume noted
above, higher scrap metal prices and price compression in all market segments
due to severe competitive pressures.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended September 30, 2003 were $26.1
million, a decrease of $2.6 million from the $28.7 million for the year ended
September 30, 2002. As a percentage of net sales, selling, general and
administrative expenses decreased to 7.0% for the year ended September 30, 2003
from 7.4% for the fiscal year ended September 30, 2002. The decrease was due to
cost cutting measures undertaken in response to the lower sales volume noted
above.

Amortization of Intangible Assets. Amortization of intangible assets for
the years ended September 30, 2003 and 2002 was $3.8 million.

Other Expenses. Other expenses for the years ended September 30, 2003 and
2002 consist of losses of $0.2 million and $0.5 million, respectively, for the
disposal of long-lived assets in the ordinary course of business.

Operating Income. Operating income was $23.1 million for the year ended
September 30, 2003, a decrease of $7.7 million or 25.0% from the year ended
September 30, 2002. The decrease was caused by the reasons discussed above under
gross profit and was partially offset by lower selling, general and
administrative expenses. As a percentage of net sales, operating income
decreased from 7.9% for the year ended September 30, 2002 to 6.2% for the year
ended September 30, 2003.

Net Interest Expense. Net interest expense increased to $46.6 million for
the year ended September 30, 2003 from $42.6 million for the year ended
September 30, 2002. The increased interest expense resulted from interest
accrued on the CVC PIK Note and an interest premium on our borrowings under our
credit facility in the current year. In addition, $6.3 million of payments to
bondholders in connection with the reorganization were classified as interest
expense. We did not record $5.0 million of contractual interest expense for
interest incurred on the 11 1/8% Notes subsequent to our filing voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code.

Reorganization Expense. We recorded $7.9 million of reorganization
expenses in 2003 which related to professional fees incurred in connection with
the restructuring of our company and our filing for Chapter 11 bankruptcy
protection as well as the write-off of debt issuance costs and premiums related
to the 11 1/8% Notes.

Provision for Income Taxes. The credit for income taxes for the year ended
September 30, 2003 is lower than the amount computed by applying our statutory
rate of 35% to the loss before income taxes principally due to permanent
differences related to the reorganization expenses incurred as noted above.

Loss from Discontinued Operations. During December, 2002, we sold
substantially all of the assets of Belcher. The disposition of Belcher resulted
in a loss of $1,596 net of income taxes, which we recognized in the year ended
September 30, 2003. In accordance with the provisions of SFAS 144, the results
of operations for Belcher have been reported as discontinued operations in the
statement of operations for all periods presented.

In January, 2002, management initiated a plan for the discontinuation of
the operations of Cast Alloys, Inc., hereafter referred to as Cast Alloys, by
closing its manufacturing facilities. In accordance with the provisions of SF AS
144, the results of operations for Cast Alloys have been reported as
discontinued operations in the statement of operations for all periods
presented.

15

LIQUIDITY AND CAPITAL RESOURCES

New Credit Facility. In connection with our Chapter 11 filing and
emergence therefrom, we entered into the New Credit Facility with a syndicate of
financial institutions for which Fleet Capital Corporation acts as agent, Fleet
Securities, Inc. acts as arranger, Congress Financial Corporation (Central) acts
individually and as syndication agent and General Electric Capital Corporation
acts individually and as documentation agent. The New Credit Facility has a
five-year maturity and Neenah Foundry Company and all of its active domestic
subsidiaries are the borrowers under the New Credit Facility.

The New Credit Facility consists of a revolving credit facility of up to
$70.0 million (with a $5.0 million sublimit available for letters of credit) and
borrowing base term loans in the aggregate amount of $22.085 million. The New
Credit Facility has a five-year maturity and bears interest at rates based on
the lenders' Base Rate, as defined in the New Credit Facility or an adjusted
rate based on LIBOR. Availability under the New Credit Facility is based on
various advance rates against our accounts receivable and inventory. Amounts
under the revolving credit facility may be borrowed, repaid and reborrowed
subject to the terms of the facility. At September 30, 2004, we had
approximately $39.5 million outstanding under the revolving credit facility and
approximately $19.7 million outstanding under the term loan facility. No portion
of the term loan, once repaid, may be reborrowed. The proceeds of the loan
facility on the Effective Date were utilized to repay a portion of the old
credit facility pursuant to the Plan of Reorganization and other cash
distributions.

NFC and the inactive subsidiaries of Neenah jointly and severally guarantee
Neenah's obligations under the New Credit Facility, subject to customary
exceptions for transactions of this type. The borrower's and guarantors'
obligations under the New Credit Facility are secured by a first priority
perfected security interest, subject to customary restrictions, in substantially
all of Neenah's tangible and intangible assets. The Notes, and the guarantees in
respect thereof, are equal in right of payment to the New Credit Facility, and
the guarantees in respect thereof. The liens in respect of the Notes are junior
to the liens securing the New Credit Facility and guarantees thereof.

Voluntary prepayments may be made at any time on the term loan borrowings
or the revolving borrowings upon customary prior notice. Prepayments on the term
loan borrowings may be made at any time without premium or penalty unless a
simultaneous prepayment is being made on the revolving borrowings or if any such
prepayment has been made previously. For the first three years of the New Credit
Facility, prepayments on the revolving borrowings are subject to certain
premiums specified in the New Credit Facility. Mandatory repayments are required
under certain circumstances, including a sale of assets or the issuance of debt
or equity.

The New Credit Facility requires Neenah to observe certain customary
conditions, affirmative covenants and negative covenants including financial
covenants. The New Credit Facility also contains events of default customary for
these types of facilities, including, without limitation, payment defaults,
material misrepresentations, covenant defaults, bankruptcy and a change of
ownership of Neenah Foundry Company, NFC or ACP.

11% Senior Secured Notes due 2010. In connection with Neenah's Chapter 11
filing and emergence therefrom, Neenah issued Senior Secured Notes due 2010 in
the principal amount of $133.1 million, with a coupon rate of 11%. The
obligations under the senior secured notes are pari passu in right of payment to
the New Credit Facility and the associated guarantees. The liens securing the
senior secured notes are junior to the liens securing the New Credit Facility
and guarantees thereof. The senior secured notes are subordinate to the New
Credit Facility. Interest on the senior secured notes is payable on a
semi-annual basis. Neenah's obligations under the notes are guaranteed on a
secured basis by each of its wholly-owned subsidiaries. Subject to the
restrictions in the New Credit Facility, the notes are redeemable at our option
in whole or in part at any time after the fourth anniversary of their issuance,
with not less than 30 days nor more than 60 days notice for an amount to be
determined pursuant to a formula set forth in the indenture governing the notes.
Upon the occurrence of a "change of control" as defined in the indenture
governing the notes, Neenah Foundry Company may be required to make an offer to
purchase the secured notes at 101% of the outstanding principal amount thereof,
plus accrued and unpaid interest up to the
16

purchase date. The secured notes contain customary covenants typical to this
type of financing, such as limitations on (1) indebtedness, (2) restricted
payments, (3) liens, (4) restrictions on distributions from restricted
subsidiaries, (5) sale of assets, (6) affiliate transactions, (7) mergers and
consolidations and (8) lines of business. The secured notes also contain
customary events of default typical to this type of financing, such as (1)
failure to pay principal and/or interest when due, (2) failure to observe
covenants, (3) certain events of bankruptcy, (4) the rendering of certain
judgments or (5) the loss of any guarantee.

13% Senior Subordinated Notes due 2013. In connection with Neenah's
Chapter 11 filing and emergence therefrom, Neenah Foundry Company issued Senior
Subordinated Notes due 2013 in the principal amount of $100.0 million, with a
coupon rate of 13%. The obligations under the senior subordinated notes are
senior to all of Neenah Foundry Company's subordinated unsecured indebtedness
and are subordinate to the New Credit Facility and the senior secured notes.
Interest on the senior subordinated notes is payable on a semi-annual basis.
Five percent of the interest on the senior subordinated notes will be paid in
cash and 8% interest may be paid-in-kind. Neenah Foundry Company's obligations
under the notes are guaranteed on an unsecured basis by each of its wholly-owned
subsidiaries. Subject to the restrictions in the New Credit Facility, the notes
are redeemable at our option in whole or in part at any time, with not less than
30 days nor more than 60 days notice for an amount to be determined pursuant to
a formula set forth in the indenture governing the notes. Upon the occurrence of
a "change of control" as defined in the indenture governing the notes, Neenah
Foundry Company may be required to make an offer to purchase the subordinated
notes at 101% of the outstanding principal amount thereof, plus accrued and
unpaid interest up to the purchase date. The subordinated notes contain
customary covenants typical to this type of financing, such as limitations on
(1) indebtedness, (2) restricted payments, (3) liens, (4) restrictions on
distributions from restricted subsidiaries, (5) sale of assets, (6) affiliate
transactions, (7) mergers and consolidations and (8) lines of business. The
subordinated notes also contain customary events of default typical to this type
of financing, such as, (1) failure to pay principal and/or interest when due,
(2) failure to observe covenants, (3) certain events of bankruptcy, (4) the
rendering of certain judgments or (5) the loss of any guarantee.

For the fiscal years ended September 30, 2004, 2003 and 2002, capital
expenditures were $12.7 million, $11.9 million and $9.1 million, respectively.
These amounts represent a level of capital expenditures necessary to maintain
equipment and facilities.

The Company's principal source of cash to fund its liquidity needs will be
net cash from operating activities and borrowings under the Revolving Credit
Facility. Net cash provided by operating activities for the fiscal year ended
September 30, 2004 was $2.7 million, a decrease of $20.3 million from cash
provided by operating activities for the fiscal year ended September 30, 2003 of
$23.0 million. The decrease in net cash provided by operating activities was
primarily due to a large increase in the accounts receivable balance
proportional to our increased sales volume. The $23.0 million cash provided by
operating activities for the fiscal year ended September 30, 2003 included an
income tax refund that the Company received in December, 2002 of $18.4 million
from the carryback of net operating losses. Net cash provided by operating
activities for the fiscal year ended September 30, 2003 was $23.0 million, an
increase of $6.6 million from cash provided by operating activities for the
fiscal year ended September 30, 2002 of $16.4 million. The increase in net cash
provided by operating activities was primarily due to an income tax refund that
the Company received in December, 2002 of $18.4 million from the carryback of
net operating losses, partially offset by higher inventory levels in 2003.

Future Capital Needs. Despite our significant decrease in leverage as a
result of the Plan of Reorganization, we are still significantly leveraged and
our ability to meet our debt obligations will depend upon future operating
performance which will be affected by many factors, some of which are beyond our
control. Based on our current level of operations, we anticipate that our
operating cash flows and available credit facilities will be sufficient to fund
our anticipated operational investments, including working capital and capital
expenditure needs, for at least the next twelve months. If, however, we are
unable to service our debt requirements as they become due or are unable to
maintain ongoing compliance with restrictive covenants, we may be forced to
adopt alternative strategies that may include reducing or delaying capital

17

expenditures, selling assets, restructuring or refinancing indebtedness or
seeking additional equity capital. There can be no assurances that any of these
strategies could be effected on satisfactory terms, if at all.

A reconciliation of EBITDA for the fiscal year ended September 30, 2004 is
provided below (in thousands):

Net income.................................................. $ 3,255
Income tax provision........................................ 3,881
Net interest expense........................................ 33,363
Depreciation and amortization............................... 17,992
Loss on disposal of equipment............................... 465
Loss from discontinued operations........................... 359
Gregg non-cash inventory charge............................. 1,172
Deeter non-cash inventory charge............................ 624
-------
Consolidated EBITDA......................................... $61,111
=======

EBITDA is defined in our New Credit Facility and is generally calculated as
the sum of net income (excluding non-cash charges), income taxes, interest
expense, and depreciation and amortization. EBITDA is adjusted for acquisitions
and dispositions. EBITDA is not a measure prepared in accordance with accounting
principles generally accepted in the United States, but is being presented
because we and our lenders use it to evaluate our operating performance relative
to the financial covenants contained in our credit agreement. EBITDA should not
be considered a substitute for income from operations, net income, cash flows or
other measures of financial performance prepared in accordance with accounting
principles generally accepted in the United States.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table includes the Company's significant contractual
obligations at September 30,2004 (in millions):

As of September 30, 2004, the Company had no material purchase obligations
other than those created in the ordinary course of business related to inventory
and property, plant and equipment, which generally have terms of less than 90
days. The Company also has long-term obligations related to its pension and
post-retirement plans which are discussed in detail in Note 11 of the Notes to
Consolidated Financial Statements. As of the most recent actuarial measurement
date, the Company anticipates making $4.6 million of contributions to pension
plans in fiscal 2005. Post-retirement medical claims are paid as they are
submitted and are anticipated to be $.5 million in fiscal 2005.

Please see "Item 11. Executive Compensation" for discussion of other
obligations we have committed to as a result of the Plan of Reorganization.

18

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are, in management's view, both
very important to the portrayal of our financial condition and results of
operations and they require management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain.

Future events and their effects cannot be determined with absolute
certainty. The determination of estimates, therefore, requires the exercise of
judgment. Actual results may differ from those estimates, and such differences
may be material to the financial statements. Our accounting policies are more
fully described in Note 4 to our consolidated financial statements included
herein.

We believe that the most significant accounting estimates inherent in the
preparation of our financial statements include estimates associated with the
evaluation of the recoverability of certain assets including goodwill, other
intangible assets and fixed assets as well as those estimates used in the
determination of reserves related to the allowance for doubtful accounts,
obsolescence, workers compensation and pensions and other post-retirement
benefits. Various assumptions and other factors underlie the determination of
these significant estimates. In addition to assumptions regarding general
economic conditions, the process of determining significant estimates is
fact-specific and accounts for such factors as historical experience, product
mix and, in some cases, actuarial techniques. We constantly reevaluate these
significant factors and make adjustments where facts and circumstances
necessitate. Historically, our actual results have not significantly deviated
from those determined using the estimates described above.

We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements:

- Defined-Benefit Pension Plans. We account for our defined benefit
pension plans in accordance with SFAS No. 87, "Employers' Accounting for
Pensions", which requires that amounts recognized in financial statements
be determined on an actuarial basis. The most significant element in
determining our pension expense in accordance with SFAS 87 is the
expected return on plan assets. We have assumed that the expected
long-term rate of return on plan assets will be 7.50% to 8.50%, depending
on the plan. Over the long term, our pension plan assets have earned in
excess of these rates; therefore, we believe that our assumption of
future returns is reasonable. The plan assets, however, have earned a
rate of return substantially less than these rates in the last two years.
Should this trend continue, our future pension expense would likely
increase. At the end of each year, we determine the discount rate to be
used to discount plan liabilities. In developing this rate, we use the
Moody's Average AA Corporate Bonds index. At September 30, 2004, we
determined the discount rate to be 6.25%. Changes in discount rates over
the past few years have not materially affected our pension expense. The
net effect of changes in this rate, as well as other changes in actuarial
assumptions and experience, have been deferred as allowed by SFAS 87.

- Other Postretirement Benefits. We provide retiree health benefits to
qualified employees under an unfunded plan. We use various actuarial
assumptions including the discount rate and the expected trend in health
care costs and benefit obligations for our retiree health plan.
Consistent with our pension plans, we used a discount rate of 6.25%. In
2004, our assumed healthcare cost trend rate was 8.5% decreasing
gradually to 5.0% in 2010 and then remaining at that level thereafter.
Changes in these rates could materially affect our future operating
results and net worth.

RECENT DEVELOPMENTS

Subsequent to our fiscal year end, we received a letter of intent from an
outside party to buy all of the outstanding stock of Mercer. The long-lived
assets of Mercer were classified as held for use as of September 30, 2004.
During the quarter ended December 31, 2004 these assets will be transferred to a
held for sale classification. In accordance with SFAS No. 144, a calculation
will be performed to determine if an impairment charge needs to be recognized to
adjust the carrying value of Mercer's long-lived assets to fair value.

19

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk related to changes in interest rates.
The Company does not use derivative financial instruments for speculative or
trading purposes.

Interest Rate Sensitivity. The Company's earnings are affected by changes
in short-term interest rates as a result of its borrowings under the New Credit
Facility. If market interest rates for such borrowings change by 1%, the
Company's interest expense would increase or decrease by approximately $.6
million. This analysis does not consider the effects of changes in the level of
overall economic activity that could occur due to interest rate changes.
Further, in the event of an upward change of such magnitude, management could
take actions to further mitigate its exposure to the change. However, due to the
uncertainty of the specific actions that would be taken and their possible
effects, the sensitivity analysis assumes no changes in the Company's financial
structure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and schedules are listed in Part IV Item 15 of
this Annual Report on Form 10-K.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Based on their evaluations, as of the end of the period covered by this
Annual Report on Form 10-K, our principal executive officer and principal
financial officer have concluded that our disclosure controls an procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the "Exchange Act")) are effective to ensure that information required to
be disclosed by us in reports that we file for furnish under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

(b) Changes in internal controls over financial reporting. There were no
significant changes in our internal controls over financial reporting or in
other factors that could significantly affect our disclosure controls and
procedures, nor were there any significant deficiencies or material weaknesses
in our internal controls. As a result, no corrective actions were required or
undertaken.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information as of September 30, 2004, with
respect to the persons who are members of the Board of Directors of ACP and our
executive officers.

20

Mr. Barrett has served as our President and Chief Executive Officer since
May 2000. Mr. Barrett joined us in 1992 serving as General Sales
Manager -- Industrial Castings until May 1, 1997. Mr. Barrett was Vice President
and General Manager from May 1, 1997 to September 30, 1998 and President from
October 1, 1998 to April 30, 2000. From 1985 to 1992, Mr. Barrett was the Vice
President -- Sales for Harvard Industries Cast Products Group. Mr. Barrett has
also been one of our directors since May 2000.

Mr. LaChey has served as our Corporate Vice President -- Finance since June
2000. Mr. LaChey joined us in 1971 and has served in a variety of positions of
increasing responsibility in the finance department. Mr. LaChey was most
recently Vice President -- Finance, Treasurer and Secretary.

Mr. Zehner has served as our Vice President, Assistant Secretary and
Assistant Treasurer since June 2000. Mr. Zehner joined the Company in 1974,
serving in a variety of positions of increasing responsibility in the finance
department.

Mr. DeRita has served as Division President of the Dalton Corporation since
1999. He joined Newnam Manufacturing in 1989 and became the Vice
President -- Sales when the Dalton Corporation acquired Newnam Manufacturing in
1992. Prior to joining our company, Mr. DeRita was the Manager of Engineering
and Maintenance at Erie Malleable, the same position he held previously at Zurn
Industries.

Mr. Andrews has served as our Corporate Vice President -- Manufacturing
since August 2003. Mr. Andrews joined us in 1988 and has served in a variety of
manufacturing positions with increasing responsibility. Prior to joining Neenah
Foundry, Mr. Andrews was Division Manager for Dayton Walther Corporation's
Camden Casting Center from 1986 to 1988 and served as Manufacturing Manager and
then Plant Manager for Waupaca Foundry's Marinette Plant from 1973 to 1986.

Mr. Duster has served as a director since October 2003. Mr. Duster is
currently Chairman of the Board of Algoma Steel, Inc., a Toronto Stock Exchange
listed integrated steel manufacturer based in Canada. Mr. Duster is also a
principal in Masson & Company, a financial restructuring advisory and turnaround
management firm based in New York.

Mr. Cohen has served as a director since October 2003. Mr. Cohen is
currently an analyst at SAC Capital Advisors, LLC. Previously, Mr. Cohen spent
six years in the investment banking division of Morgan Stanley. Mr. Cohen
received his BA and MBA degrees from the University of Pennsylvania.

Mr. Farrell has served as a director since February 2003. Mr. Farrell is
currently the President of Farrell & Co., a merchant banking firm specializing
in heavy manufacturing companies, and the Chief Executive Officer of Standard
Steel, LLC. Mr. Farrell has also served in executive capacities for MK Rail
Corporation, Motor Coils Manufacturing Co. and Season-ALL Industries. Mr.
Farrell currently also serves as a director of C-Cor.net Corp. and Federated
Investors, Inc. Mr. Farrell is a certified public accountant.

Mr. Marshall has served as a director since October 2003. Mr. Marshall is
currently the Chairman of Smith Marshall, a subsidiary of the NextMedia Company
Limited. Previously, he was the President and Chief Executive Officer of Aluma
Enterprises, Inc., a construction technology company, for six years. Prior to
joining Aluma Enterprises, Inc., Mr. Marshall successively held the positions of
President and Chief Executive Officer at Marshall Steel Limited, Marshall
Drummond McCall Inc. and the Ontario Clean Water Agency.

AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors has determined that all members of the Audit
Committee are independent and financially literate in accordance with the audit
committee requirements of the NYSE. The Board has determined that Mr. Michael J.
Farrell is an audit committee financial expert within the meaning of SEC rules.

21

CODE OF ETHICS

The Company has adopted a Code of Ethics applicable to all officers of the
Company as well as certain other key accounting staff. A copy of the Code of
Ethics can be obtained free of charge by writing to the Company.

BOARD COMPOSITION

The Board of Directors of ACP, the ultimate parent company of Neenah
Foundry Company consists of five directors. ACP's Amended and Restated Bylaws
permits the holders of a majority of the shares of common stock of ACP then
entitled to vote at an election of directors, to remove any director or the
entire board of directors at any time, with or without cause. Under ACP's
Amended and Restated Bylaws, vacancies on the Board of Directors may be filled
by the affirmative vote of a majority of the holders of ACP's outstanding stock
entitled to vote thereon.

DIRECTOR COMPENSATION

Subject to certain limitations, each member of the Board of Directors of
ACP who is not an officer of ACP shall be entitled to receive annual
compensation for their services in the amount $40,000, payable in cash quarterly
in four equal installments, and are entitled to receive reimbursement by ACP for
all reasonable out-of-pocket expenses, including, without limitation, travel
expenses, incurred by such director in connection with the performance of such
director's duties. In addition, each member of the Board of Directors that is
not an officer of our company shall be paid a fee of $1,000 for in person
attendance at annual, regular, special and adjourned meetings of the Board of
the Directors of the company or committee meetings of the Board of the Directors
of the company. On the Effective Date, we issued 200,000 shares of common stock
representing 0.25% of ACP's Common Stock on a fully-diluted basis as of the
Effective Date to each outside director.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The current members of the Compensation Committee of ACP's Board of
Directors are Andrew B. Cohen and Benjamin C. Duster, IV, Esq. The current
members of the Audit Committee of ACP's Board of Directors are Michael J.
Farrell and Jeffrey G. Marshall.

During fiscal 2004, no executive officer of ACP:

- served as a member of the compensation committee or other board committee
performing similar functions or, in the absence of any such committee,
the board of directors, of another entity, one of whose executive
officers served on ACP's Compensation Committee;

- served as a director of another entity, one of whose executive officers
served on ACP's Compensation Committee; or

- served as a member of the compensation committee or other board committee
performing similar functions or, in the absence of any such committee,
the board of directors, of another entity, one of whose executive
officers served as a director of ACP.

LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION

The Amended and Restated Bylaws of ACP which became effective on October 8,
2003, provide that, to the extent permitted by the Delaware General Corporate
Law, or DGCL, it will indemnify its current and former directors and officers
against all expenses actually and reasonably incurred by them as a result of
their being threatened with or otherwise involved in any action, suit or
proceeding by virtue of the fact that they are or were an officer or director of
ACP. ACP, however, is not required to indemnify an officer or director for an
action, suit or proceeding commenced by that officer or director unless it
authorized that director or officer to commence the action, suit or proceeding.
The Amended and Restated Bylaws of ACP

22

also provide that ACP shall advance expenses incurred by any person it is
obligated to indemnify, upon presentation of appropriate documentation.

Furthermore, the Amended and Restated Bylaws of ACP provide that ACP may
purchase and maintain insurance on behalf of its directors and officers against
any liability, expense or loss, whether or not it would otherwise have the power
to indemnify such person under its Amended and Restated Bylaws or the DGCL.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted for directors, officers and controlling persons of ACP pursuant
to the foregoing provisions, or otherwise, ACP has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table. The following summarizes, for the year
indicated, the principal components of compensation for our Chief Executive
Officer and our other four highest compensated executive officers (collectively,
the "named executive officers"). The compensation set forth below fully reflects
compensation for work performed on our behalf.

- ---------------

(1) The named officers have participated in our voluntary profit sharing
contributions or matching 401(k) contributions and excess benefit programs.
The aggregate payments made by the Company pursuant to such employee
benefits programs are listed on the above table as "Other Annual
Compensation."

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with certain members of our
management. The agreements establish a base salary as well as a severance
payment calculation in the event of termination, health (subject to satisfying
insurability requirements), 401 (k) and other benefits that the named employees
are entitled to receive. Non-competition and non-solicitation agreements have
been signed as part of the employment agreements, which will apply during a
period of three years for our chief executive officer and two years for the
chief financial officer and other members of management of the Company, in each
case, after termination. We have executed employment agreements with the
following executives: John Andrews, William M. Barrett, Joseph L. DeRita, Frank
C. Headington, Timothy Koller, Gary W. LaChey, William Martin, Steve Shaffer and
Joseph Varkoly.

23

MANAGEMENT INCENTIVE PLAN

Under the Management Incentive Plan, members of management and certain
other specified employees will receive annual performance awards if the Company
achieves certain EBITDA targets set by the board of director of the Company at
the beginning of each fiscal year. The bonus paid will equal (i) 50% of the
target bonus amount for each individual should the Company reach 85% of the
EBITDA target, (ii) 100% of the target bonus on reaching 100% of the target
EBITDA and (iii) 200% of the target bonus on reaching 120% of the target EBITDA.
Target bonuses range up to 35.0% of base salary depending upon job
responsibility. Earned bonus is payable within ten business days of the approval
of the Company's audited financial statements by the board of directors.

In addition, a one time aggregate incremental $450,000 emergence bonus was
paid upon emergence in 2004 to certain members of management upon the Effective
Date.

For 2005 and beyond, the executives and certain other specified employees
will receive annual performance awards upon achieving certain milestones,
including EBITDA targets, debt reduction targets and other certain criteria as
determined from time to time by the compensation committee of the board of
directors of Reorganized Neenah. Target bonus as a percentage of salary for each
member of management will be consistent with historical levels. Target levels,
timing of payments and other terms and conditions of the annual incentive plan
will be determined by the Company's compensation committee.

2003 MANAGEMENT EQUITY INCENTIVE PLAN

Under the 2003 Management Equity Incentive Plan, which was established on
the Effective Date, certain members of management received restricted shares
which represented 5% of common stock of ACP on a fully diluted basis as of the
Effective Date. The 4,000,000 restricted shares issued pursuant to the 2003
Management Equity Incentive Plan were 25% vested upon grant and the balance will
vest on an annual straight-line basis over the ensuing three years subject to
acceleration on a Change of Control, as defined in the 2003 Management Equity
Incentive Plan, termination (other than for Cause) or an event that triggers
tag-along or drag-along rights described below. The 2003 Management Equity
Incentive Plan also provides that a pool of options for an additional 5% of
common stock of ACP be reserved for future grants as determined by the
compensation committee of the new board of directors of ACP. The 2003 Management
Equity Incentive Plan provides certain members of management with certain
tag-along and drag-along rights with respect to any transaction involving a sale
of 50% or more of the equity of the Company on a fully diluted basis, or a sale
of substantially all of the assets, or a merger or other transaction having
similar effect in a single transaction or a series of transactions to the same
party and anti-dilution protection.

2003 SEVERANCE AND CHANGE OF CONTROL PLAN

Under our 2003 Severance and Change of Control Plan, the executives with
whom we have executed employment agreements, shall be entitled to receive
Severance Payments, as defined in the 2003 Severance and Change of Control Plan,
if the Company terminates his or her employment without cause or if he or she
terminates his or her employment with cause and a Change of Control Payment if a
participating executive's employment is terminated or the executive resigns from
employment for Good Reason within 180 days of a Change of Control, as such terms
are defined in the 2003 Severance and Change of Control Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information known to us with respect to the
beneficial ownership of the common stock of ACP, our parent company, as of
September 30, 2004:

- each person or entity who owns of record or beneficially more than 5% or
more of any class of our voting securities;

- each of the named executive officers of our Company;
24

- each director of ACP; and

- all directors and named executive officers as a group.

- ---------------

* Less than 1%

(1) Unless otherwise indicated, the business address of each person named in
the table above is c/o Neenah Foundry Company, 2121 Brooks Avenue, Neenah,
Wisconsin 54957.

(2) As used in this table, a beneficial owner of a security includes any person
who, directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (1) the power to vote, or direct
the voting of, such security or (2) investing power which includes the
power to dispose, or to direct the disposition of, such security. In
addition, a person is deemed to be the beneficial owner of a security if
that person has the right to acquire beneficial ownership of such security
within 60 days of October 8, 2003. Except as otherwise noted, the persons
and entities listed on this table have sole voting and investment power
with respect to all of the shares of common stock owned by them.
Calculations are based on a total of 80,800,000 shares of common stock
outstanding as of October 8, 2003.

(3) Includes the following number of shares issuable upon conversion of
warrants exercisable within 60 days of October 8,2003: (1) 9,879,031
warrants by Mackay Shields LLC; (2) 90,644 warrants by Exis Differential
Holdings Ltd.; 7,848,293 warrants by Citicorp Mezzanine III, L.P.;
3,113,554 warrants by Trust Company of the West and (3) 217,547 warrants by
Metropolitan Life Insurance Company.

(4) The address for Mackay Shields LLC is 9 West 57th Street, 33rd Floor, New
York, NY 10019.

(5) Citicorp Mezzanine III, L.P. received 4,096,665 warrants for being a
Standby Purchaser and 3,751,628 warrants in exchange for cancellation of
the PIK Note. The address for Citicorp Mezzanine III, L.P. is 399 Park
Avenue, 14th Floor, New York, NY 10043.

(6) Includes shares held by TCW Shared Opportunity Fund II, L.P., Shared
Opportunity Fund IIB LLC, TCW Shared Opportunity Fund IV, L.P., TCW Shared
Opportunity Fund IVB, L.P., AIMCO CDO, Series 2000-A, TCW High Income
Partners, Ltd. and TCW High Income Partners II, Ltd. The Trust Company of
the West is the ultimate beneficial holder of these shares. The address for
Trust Company of the West is 11100 Santa Monica Boulevard, Suite 2000, Los
Angeles, CA 90025.

(7) Includes 937,500 unvested shares of common stock. One-third of the unvested
shares shall vest on a cumulative basis on each anniversary of the
Effective Date, if as of such date, Mr. Barrett is still in our employ.

25

(8) Includes 716,912 unvested shares of common stock. One-third of the unvested
shares shall vest on a cumulative basis on each anniversary of the
Effective Date, if as of such date, Mr. LaChey is still in our employ.

(9) Includes 303,309 unvested shares of common stock. One-third of the unvested
shares shall vest on a cumulative basis on each anniversary of the
Effective Date, if as of such date, Mr. DeRita is still in our employ.

(10) Includes 110,294 unvested shares of common stock. One-third of the unvested
shares shall vest on a cumulative basis on each anniversary of the
Effective Date, if as of such date, Mr. Andrews is still in our employ.

(11) Pursuant to the Plan of Reorganization, Messrs. Duster, Cohen, Farrell and
Marshall each received 200,000 shares of common stock as of the Effective
Date.

(12) Excludes 1,242,647 shares beneficially owned by certain executive employees
of our Company and certain of our subsidiaries. Collectively, our
management and directors own an aggregate of 4,800,000 shares of our common
stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH ACP HOLDINGS

ACP Holdings is the parent company of NFC Castings, Inc., and thus ACP
Holdings indirectly owns 100% of the Common Stock of the Company. William M.
Barrett, who serves as the President and Chief Executive Officer of the Company,
currently serves as President and Chief Executive Officer of ACP Holdings.

RELATIONSHIP WITH THE STANDBY PURCHASERS

As a result of the standby purchase agreements that we entered into with
the Standby Purchasers, we gave certain of the Standby Purchasers the right to
name members to our board of directors. Mackay Shields LLC may designate two
members of our board of directors and Citicorp Venture Capital, Ltd. and Trust
Company of the West may each designate one member of our board of directors.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

We paid the following fees to Ernst & Young LLP in 2004 and 2003:

Audit Fees. Fees for audit services totaled $484,400 and $372,600 for
the years ended September 30, 2004 and 2003, respectively, which included
fees associated with the annual audit, filings under the Securities Act of
1933, as amended, and other services performed related to regulatory
filings.

Audit-Related Fees. Fees for audit-related services totaled $21,600
and $0 for the years ended September 30, 2004 and 2003, respectively, for
accounting consultations.

Tax Fees. Fees for tax services totaled $482,000 and $895,200 for the
years ended September 30, 2004 and 2003, respectively, and consisted
primarily of tax consulting services.

All Other Fees. There were no other fees incurred by the Company
during the years ended September 30, 2004 and 2003. The Company's Audit
Committee appoints the independent auditors and pre-approves the services.
The Audit Committee has considered whether the fees of Ernst & Young LLP
for non-audit services is compatible with maintaining Ernst & Young LLP's
independence.

26

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Consolidated Financial Statements of Neenah Foundry Company

Schedules I, III, IV, and V are omitted since they are not applicable or
not required under the rules of Regulation S-X.

(b)Exhibits

See Exhibit Index.

(c)None required

27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of Neenah,
State of Wisconsin, on December 23, 2004.

NEENAH FOUNDRY COMPANY
(Registrant)

/s/ GARY W. LACHEY
--------------------------------------
Gary W. LaChey
Corp. Vice President -- Finance
(Principal Financial and Principal
Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 23, 2004, by the following persons on
behalf of the registrant and in the capacities indicated.

/s/ WILLIAM M. BARRETT /s/ GARY W. LACHEY
- --------------------------------------------- ---------------------------------------------
William M. Barrett Gary W. LaChey
President and Corp. Vice President -- Finance
Chief Executive Officer, Director (Principal Financial and Principal
(Principal Executive Officer) Accounting Officer)

/s/ JEFFREY G. MARSHALL /s/ MICHAEL J. FARRELL
- --------------------------------------------- ---------------------------------------------
Jeffrey G. Marshall Michael J. Farrell
Director Director

/s/ BENJAMIN C. DUSTER, IV, ESQ. /s/ ANDREW B. COHEN
- --------------------------------------------- ---------------------------------------------
Benjamin C. Duster, IV, Esq. Andrew B. Cohen
Director Director

28

EXHIBIT INDEX

2.1 Disclosure Statement for Pre-Petition Solicitation of Votes
with respect to the Prepackaged Joint Plan of Reorganization
of ACP Holding Company, NFC Castings, Inc. and Neenah
Foundry Company (incorporated by reference to Exhibit T3E-1
to application for qualification of indenture on Form T-3
(File No. 022-28687)).
2.2 Prepackaged Joint Plan of Reorganization of ACP Holding
Company, NFC Castings, Inc., Neenah Foundry Company and
Certain of its Subsidiaries under Chapter 11 of the United
States Bankruptcy Code (incorporated by reference to Exhibit
T3E-2 to application for qualification of indenture on Form
T-3 (File No. 022-28687)).
3.1 Amended and Restated Certificate of Incorporation of Neenah
Foundry Company.*
3.2 Third Amended and Restated Certificate of Incorporation of
ACP Holding Company.*
3.3 Amended and Restated Certificate of Incorporation of NFC
Castings, Inc.*
3.4 Amended and Restated Certificate of Incorporation of
Advanced Cast Products, Inc.*
3.5 Amended and Restated Articles of Incorporation of Dalton
Corporation.*
3.6 Articles of Incorporation of Dalton Corporation, Warsaw
Manufacturing Facility.*
3.7 Articles of Incorporation of Dalton Corporation, Stryker
Manufacturing Facility.*
3.8 Articles of Incorporation of Dalton Corporation, Ashland
Manufacturing Facility.*
3.9 Amended and Restated Incorporation of Incorporation of
Dalton Corporation, Kendallville Manufacturing Facility.*
3.10 Amended and Restated Certificate of Incorporation of Deeter
Foundry, Inc.*
3.11 Amended Articles of Incorporation of Gregg Industries, Inc.*
3.12 Articles of Incorporation of A&M Specialties, Inc.*
3.13 Restated Articles of Incorporation of Neenah Transport,
Inc.*
3.14 Restated Articles of Incorporation of Cast Alloys, Inc.*
3.15 Certificate of Incorporation of Belcher Corporation.*
3.16 Articles of Incorporation of Peerless Corporation.*
3.17 Amended Bylaws of Neenah Foundry Company.*
3.18 Amended Bylaws of ACP Holding Company*
3.19 Amended Bylaws of NFC Castings, Inc.*
3.20 Bylaws of Advanced Cast Products, Inc.*
3.21 Amended Code of Regulations of Dalton Corporation.*
3.22 Amended Code of Regulations of Dalton Corporation, Warsaw
Manufacturing Facility.*
3.23 Code Regulations of Dalton Corporation, Stryker
Manufacturing Facility.*
3.24 Amended and Restated Code of Regulations Dalton Corporation,
Ashland Manufacturing Facility.*
3.25 Amended and Restated Code of Regulations of Dalton
Corporation, Kendallville Manufacturing Facility.*
3.26 Bylaws of Deeter Foundry, Inc.*
3.27 Bylaws of Gregg Industries, Inc.*
3.28 Amended and Restated Bylaws of A&M Specialties, Inc.*
3.29 Amended and Restated Bylaws of Neenah Transport, Inc.*
3.30 Bylaws of Cast Alloys, Inc.*
3.31 Amended and Restated Bylaws of Belcher Corporation.*
3.32 Code of Regulations of Peerless Corporation.*
10.1 Credit Agreement by and among Neenah Foundry Company, the
subsidiaries named therein, the various lenders party
thereto and Fleet Capital Corporation, as agent, dated
October 8, 2003.*

29

10.2 Subscription Agreement, dated as of October 7, 2003, by and
among ACP Holding Company, Neenah Foundry Company, the
subsidiary guarantors named therein and the Standby
Purchasers as defined therein.*
10.3 Warrant Agreement, dated October 8, 2003, by and between ACP
Holding Company and The Bank of New York as warrant agent.*
10.4 Warrant Registration Rights Agreement, dated October 8,
2003, by and between ACP Holding Company and the initial
holders of the warrants.*
10.5 Stockholders' Agreement, dated October 8, 2003, by and among
ACP Holding Company, the Standby Purchasers, the Executives
and the Directors (as such terms are defined therein).*
10.6 Indenture by and among Neenah Foundry Company, the
guarantors named therein, and The Bank of New York, as
Trustee, dated October 8, 2003, for the 13% Senior
Subordinated Notes due 2013.*
10.7 Form of Note (included in Exhibit 10.6)*
10.8 Registration Rights Agreement, dated October 8, 2003, by and
among ACP Holding Company and the parties named therein re
warrants and common stock of ACP Holding Company.*
10.9 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and John Andrews.*
10.10 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and William M. Barrett.*
10.11 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and Joseph L. DeRita.*
10.12 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and Frank C. Headington.*
10.13 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and Timothy Koller.*
10.14 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and Gary W. LaChey.*
10.15 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and William Martin.*
10.16 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and Steve Shaffer.*
10.17 Form of Employment Agreement by and among Neenah Foundry
Company, ACP Holding Company and Joseph Varkoly.*
10.18 Neenah Foundry Company 2003 Management Annual Incentive
Plan.*
10.19 Neenah Foundry Company 2003 Severance and Change of Control
Plan.*
10.20 Indenture by and among Neenah Foundry Company, the
guarantors named therein and The Bank of New York, as
Trustee, dated October 8, 2003, for the 11% Senior Secured
Notes due 2010.*
10.21 Form of Note (included in Exhibit 10.20).*
10.22 Lien Subordination Agreement, dated October 8, 2003, by and
among Fleet Capital Corporation, Neenah Foundry Company, the
subsidiaries named therein, NFC Castings, Inc. and The Bank
of New York as Trustee on behalf of the Noteholders under
the Indenture governing the 11% Senior Secured Notes due
2010.*
10.23 Registration Rights Agreement, dated October 8, 2003, by and
among Neenah Foundry Company, the guarantors named therein
and The Bank of New York as Trustee for the 11% Senior
Secured Notes due 2010.*
10.24 Subordinated Security Agreement, dated October 8, 2003, by
Neenah Foundry Company and the guarantors named therein in
favor of The Bank of New York as Trustee for the Noteholders
under the Indenture governing the 11% Senior Secured Notes
due 2010.*
10.25 Subordinated Pledge Agreement, dated October 8, 2003, by
Dalton Corporation in favor of The Bank of New York as
Trustee for the Noteholders under the Indenture governing
the 11% Senior Secured Notes due 2010.*

30

10.26 Subordinated Pledge Agreement, dated October 8, 2003, by
Mercer Forge Corporation in favor of The Bank of New York as
Trustee for the Noteholders under the Indenture governing
the 11% Senior Secured Notes due 2010.*
10.27 Subordinated Copyright, Patent, Trademark and License
Mortgage, dated October 8, 2003, by Neenah Foundry Company
in favor of The Bank of New York as Trustee for the
Noteholders under the Indenture governing the 11% Senior
Secured Notes due 2010.*
10.28 Subordinated Copyright, Patent, Trademark and License
Mortgage, dated October 8, 2003, by Advanced Cast Products,
Inc. in favor of The Bank of New York as Trustee for the
Noteholders under the Indenture governing the 11% Senior
Secured Notes due 2010.*
10.29 Subordinated Copyright, Patent, Trademark and License
Mortgage, dated October 8, 2003, by Peerless Corporation in
favor of The Bank of New York as Trustee for the Noteholders
under the Indenture governing the 11% Senior Secured Notes
due 2010.*
10.30 Subordinated Pledge Agreement, dated October 8, 2003, by
Neenah Foundry Company in favor of The Bank of New York as
Trustee for the Noteholders under the Indenture governing
the 11% Senior Secured Notes due 2010.*
10.31 Subordinated Pledge Agreement, dated October 8, 2003, by
Advanced Cast Products, Inc. in favor of The Bank of New
York as Trustee for the Noteholders under the Indenture
governing the 11% Senior Secured Notes due 2010.*
12.1 Statement re computation of ratio of earnings to fixed
charges.
21.1 Subsidiaries of Neenah Foundry Company.
23.1 Consent of Ernst & Young LLP.*
31.1 Certification by the President and Chief Executive Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated December 23, 2004.
31.2 Certification by the Corporate Vice-President-Finance,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
dated December 23, 2004.
32 Written Statement of the Chief Executive Officer and the
Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley act of 2002, dated December 23, 2004.

- ---------------

* Incorporated by reference to the Company's Form S-4 (Registration No.
333-111008) which was originally filed December 8, 2003.

31

CONSOLIDATED FINANCIAL STATEMENTS

NEENAH FOUNDRY COMPANY

YEARS ENDED SEPTEMBER 30, 2004 (REORGANIZED COMPANY),
2003 AND 2002 (PREDECESSOR COMPANY)

32

NEENAH FOUNDRY COMPANY

CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2004 (REORGANIZED COMPANY),
2003 AND 2002 (PREDECESSOR COMPANY)

CONTENTS

Report of Independent Registered Public
Accounting Firm........................ 34
Consolidated Financial Statements
Consolidated Balance Sheets.............. 35
Consolidated Statements of Operations.... 37
Consolidated Statements of Changes in
Stockholder's Equity (Deficit)......... 38
Consolidated Statements of Cash Flows.... 39
Notes to Consolidated Financial
Statements............................. 41

33

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
Neenah Foundry Company

We have audited the accompanying consolidated balance sheets of Neenah
Foundry Company (the Company) as of September 30, 2004 and October 1, 2003
(Reorganized Company) and September 30, 2003 (Predecessor Company), and the
related consolidated statements of operations, changes in stockholder's equity
(deficit) and cash flows for the period from October 1, 2003 to September 30,
2004 (Reorganized Company) and the years ended September 30, 2003 and 2002
(Predecessor Company) and the portion of October 1, 2003 related to the
Predecessor Company's reorganization gain. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Reorganized Company at September 30, 2004 and October 1, 2003 and the
Predecessor Company at September 30, 2003, and the related consolidated results
of operations and cash flows for the period from October 1, 2003 to September
30, 2004 (Reorganized Company) and the years ended September 30, 2003 and 2002
(Predecessor Company) and the portion of October 1, 2003 related to the
Predecessor Company's reorganization gain, in conformity with U.S. generally
accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, effective
October 8, 2003, the Company was reorganized under a plan of reorganization
confirmed by the United States Bankruptcy Court, District of Delaware. The
consolidated financial statements of the Reorganized Company reflect the impact
of adjustments to reflect the fair value of assets and liabilities under fresh
start accounting, which was applied effective October 1, 2003. As a result, the
consolidated financial statements of the Reorganized Company are presented on a
different basis than those of the Predecessor Company and, therefore, are not
comparable in all respects.

Milwaukee, Wisconsin
November 5, 2004

34

NEENAH FOUNDRY COMPANY

CONSOLIDATED BALANCE SHEETS

See accompanying notes.
35

NEENAH FOUNDRY COMPANY

CONSOLIDATED BALANCE SHEETS -- (CONTINUED)

See accompanying notes.
36

NEENAH FOUNDRY COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes.
37

NEENAH FOUNDRY COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)

See accompanying notes.
38

NEENAH FOUNDRY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.
39

NEENAH FOUNDRY COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOW -- (CONTINUED)

See accompanying notes.
40

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Neenah Foundry Company (Neenah), together with its subsidiaries (the
Company), manufactures gray and ductile iron castings and forged components for
sale to industrial and municipal customers. Industrial castings are
custom-engineered and are produced for customers in several industries,
including the medium and heavy-duty truck components, farm equipment, heating,
ventilation and air-conditioning industries. Municipal castings include manhole
covers and frames, storm sewer frames and grates, tree grates and specialty
castings for a variety of applications and are sold principally to state and
local government entities, utilities and contractors. The Company's sales
generally are unsecured.

The Company is a wholly owned subsidiary of NFC Castings, Inc., which is a
wholly owned subsidiary of ACP Holding Company. Neenah has the following
subsidiaries, all of which are wholly owned: Deeter Foundry, Inc. (Deeter);
Mercer Forge Corporation and subsidiaries (Mercer); Dalton Corporation and
subsidiaries (Dalton); Advanced Cast Products, Inc. and subsidiaries (ACP);
Gregg Industries, Inc. (Gregg); Neenah Transport, Inc. (Transport) and Cast
Alloys, Inc. (Cast Alloys), which is inactive. Deeter manufactures gray iron
castings for the municipal market and special application construction castings.
Mercer manufactures forged components for use in transportation, railroad,
mining and heavy industrial applications and microalloy forgings for use by
original equipment manufacturers and industrial end users. Dalton manufactures
gray iron castings for refrigeration systems, air conditioners, heavy equipment,
engines, gear boxes, stationary transmissions, heavy-duty truck transmissions
and other automotive parts. ACP manufactures ductile and malleable iron castings
for use in various industrial segments, including heavy truck, construction
equipment, railroad, mining and automotive. Gregg manufactures gray and ductile
iron castings for industrial and commercial use. Transport is a common and
contract carrier licensed to operate in the continental United States. The
majority of Transport's revenues are derived from transport services provided to
the Company.

As further discussed in Note 2, on August 5, 2003 (the Petition Date), the
Company filed a voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code) with the United States Bankruptcy
Court, District of Delaware (the Bankruptcy Court). Accordingly, the
accompanying consolidated financial statements as of and for the year ended
September 30, 2003, and the portion of October 1, 2003 related to the
reorganization gain have been prepared in accordance with the American Institute
of Certified Public Accountants Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization under the Bankruptcy Code," (SOP 90-7) and on a
going concern basis which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business. In
accordance with SOP 90-7, the financial statements for the periods presented
distinguish transactions and events that are directly associated with the
reorganization from the ongoing operations of the Company.

On October 8, 2003 (the Effective Date), the Company emerged from the
Bankruptcy Court proceedings pursuant to the terms of its plan of reorganization
(the Plan of Reorganization). As discussed in Note 3, the Company implemented
fresh start accounting under the provisions of SOP 90-7 as of October 1, 2003.
Under the fresh start accounting provisions of SOP 90-7, the fair value of the
reorganized Company was allocated to its assets and liabilities, and its
accumulated deficit as of October 1, 2003 was eliminated. As discussed in Note
3, the implementation of fresh start accounting resulted in a substantial
reduction in the carrying value of the Company's long-lived assets, including
property, plant and equipment and intangible assets, and long-term liabilities.
As a result, the historical financial statements are not comparable to the
financial statements of the reorganized Company.

41

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. REORGANIZATION

THE CHAPTER 11 PETITION AND PLAN OF REORGANIZATION

On August 5, 2003, the Company filed for protection under Chapter 11 of the
Bankruptcy Code in the Bankruptcy Court. On September 26, 2003, the Bankruptcy
Court confirmed the Company's Plan of Reorganization, and, on October 8, 2003,
the Company consummated the Plan of Reorganization and emerged from its Chapter
11 reorganization proceedings with a significantly restructured balance sheet.

During the period immediately preceding and after the filing of the
Company's Chapter 11 petition, the Company met with a committee of lenders under
the secured credit facility (the Pre-Petition Credit Facility), an informal
committee of unsecured creditors that represented holders of the senior
subordinated notes and potential investors to discuss potential restructuring
transactions that could be implemented to reorganize the Company's capital
structure. These discussions led to an agreement with the lenders under the
Pre-Petition Credit Facility regarding the terms of a Plan of Reorganization.
The Plan of Reorganization was filed on August 5, 2003 and distributed to
creditors of the Company eligible to vote in the reorganization.

The consummation of the Plan of Reorganization resulted in $147,441 of
loans under the Pre-Petition Credit Facility being terminated through payment in
full with cash using proceeds from the Second Secured Notes and the New Credit
Facility.

The Plan of Reorganization also resulted in the cancellation of all of the
Company's Pre-Petition Senior Subordinated Notes in exchange for the following:

- $30,000 in cash;

- $100,000 in aggregate principal amount of New Senior Subordinated Notes;

- Shares representing 47.5% of the issued and outstanding shares of New
Common Stock in ACP Holding Company on a fully diluted basis as of
October 8, 2003, other than shares of restricted stock granted pursuant
to the Management Equity Incentive Plan of ACP Holding Company; and

- Rights to acquire, for $110,000 in cash in the aggregate, units for up to
$119,996 face amount of Second Secured Notes and warrants to acquire up
to 42.81% of the new ACP Holding Company Common Stock on a fully diluted
basis as of October 8, 2003. The warrants have an exercise price of $0.01
per share and will expire 10 years from the date of issuance.

In addition, under the Plan of Reorganization, the PIK Note was canceled
and the holder received Second Secured Notes with a principal amount equal to
$13,134 and warrants to acquire up to 4.69% of the new ACP Holding Company
Common Stock on a fully diluted basis as of October 8, 2003 and cash of $45.

ACCOUNTING IMPACT OF CHAPTER 11 FILING

In accordance with SOP 90-7, liabilities subject to compromise reflected in
the accompanying consolidated balance sheet as of September 30, 2003 were
recorded at the amount allowed on pre-petition claims in the Chapter 11
proceedings. Other obligations that were not subject to compromise at September
30, 2003 retained their historical balance sheet classifications and amounts.

42

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Liabilities subject to compromise consisted of the following as of
September 30, 2003:

Senior Subordinated Notes................................... $282,000
Credit Facility............................................. 147,441
PIK Note.................................................... 9,900
Accrued interest............................................ 26,183
Other debt.................................................. 16
--------
$465,540
========

In order to record its debt instruments at the amount allowed by the
Bankruptcy Court in accordance with SOP 90-7, as of the Petition Date, the
Company wrote off all of its debt issuance costs and premiums related to the
Pre-Petition Senior Subordinated Notes (collectively the Deferred Financing
Fees) as a component of reorganization expense in the accompanying consolidated
statement of operations for the year ended September 30, 2003. Reorganization
expense also includes professional fees incurred in connection with the Chapter
11 proceedings. Reorganization expense for the year ended September 30, 2003
consisted of the following:

Deferred Financing Fees..................................... $1,464
Professional fees........................................... 6,410
------
Total reorganization expense................................ $7,874
======

Under SOP 90-7, the Company was required to accrue interest expense during
the Chapter 11 proceedings only to the extent that such interest was expected to
be paid pursuant to the proceedings. Under the Plan of Reorganization, there
were no cash payments of interest on the outstanding Senior Subordinated Notes.
Therefore, the Company ceased accruing interest on the Senior Subordinated Notes
as of the Petition Date. The contractual interest amount parenthetically
disclosed on the accompanying consolidated statement of operations represents
the interest expense that would have been accrued during the year ended
September 30, 2003 had the Company not ceased accruing interest as described
above.

3. FRESH START ACCOUNTING

The Company adopted the fresh start accounting provisions (fresh start) of
SOP 90-7 as of October 1, 2003. Under SOP 90-7, the implementation of fresh
start reporting is triggered, in part, by the emergence of the Company from its
Chapter 11 proceedings. Although the effective date of the Plan of
Reorganization was October 8, 2003, due to the immateriality of the results of
operations for the period between October 1, 2003 and the effective date, the
Company has accounted for the consummation of the Plan of Reorganization as if
it had occurred on October 1, 2003 and implemented fresh start reporting as of
that date. Fresh start required that the Company adjust the historical cost of
its assets and liabilities to their fair value. The fair value of the
reorganized Company, or the reorganization value, of approximately $290,000 was
determined by an independent party based on multiples of earnings before
interest, income taxes, depreciation and amortization (EBITDA) and discounted
cash flows under the Company's financial projections.

Fresh start requires that the reorganization value be allocated to the
entity's net assets in conformity with procedures specified by Statement of
Financial Accounting Standards (SFAS) No. 141, "Business Combinations." The
Company engaged an independent appraiser to assist in the allocation of the
reorganization value to the reorganized Company's assets and liabilities by
determining the fair market value of its property, plant and equipment and
intangible assets. The accompanying October 1, 2003 statement of operations and
balance sheet show the impact of this valuation, but do not reflect any of

43

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company's operating results as attributable to that date. A reconciliation
of the adjustments recorded in connection with the debt restructuring and the
adoption of fresh start accounting are as follows:

44

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- ---------------

a. To record the discharge of pre-petition indebtedness, including $26,183 of
accrued interest and the elimination of Predecessor Neenah's common stock.

b. Record borrowings of $47,112 on the New Credit Facility, the issuance of
$100,000 New Senior Subordinated Notes and the issuance of $121,438 (net of
discount of $11,692) of Second Secured Notes.

c. To record the issuance of common stock in Reorganized Neenah and detachable
warrants issued with the Second Secured Notes.

d. To adjust the carrying value of assets, liabilities and stockholder's equity
to fair value, in accordance with fresh start accounting.

45

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reorganization gain for the Predecessor on October 1, 2003 consists of the
following:

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Neenah and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. The carrying value,
which approximates fair value, of cash equivalents, which consist entirely of
repurchase agreements, totaled $21,850 at September 30, 2003. There were no cash
equivalents at October 1, 2003 or September 30, 2004.

ACCOUNTS RECEIVABLE

The Company evaluates the collectibility of its accounts receivable based
on a number of factors. For larger accounts, an allowance for doubtful accounts
is recorded based on the applicable parties' ability and likelihood to pay based
on management's review of the facts. For all other accounts, the Company
recognizes an allowance based on the length of time the receivable is past due
based on historical experience.

INVENTORIES

Inventories at September 30, 2004 and 2003 are stated at the lower of cost
or market. The cost of inventories for Neenah and Dalton is determined on the
last-in, first-out (LIFO) method for substantially all inventories except
supplies, for which cost is determined on the first-in, first-out (FIFO) method.
The cost of inventories for Deeter, Mercer, ACP and Gregg is determined on the
FIFO method. LIFO inventories comprise 47% and 49% of total inventories at
September 30, 2004 and 2003, respectively. If the FIFO method of inventory
valuation had been used by all companies, inventories would have been
approximately $4,938 and $2,623 higher than reported at September 30, 2004 and
2003, respectively. The Reorganized Company's inventories at October 1, 2003
were valued based on their estimated net selling prices less a reasonable profit
allowance.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment acquired prior to September 30, 2003 are
stated at fair value at October 1, 2003, as required by fresh start accounting.
Additions to property, plant and equipment subsequent to October 1, 2003 are
stated at cost. Depreciation for financial reporting purposes is provided over
the estimated useful lives (3 to 40 years) of the respective assets using the
straight-line method.

46

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED FINANCING COSTS

Costs incurred to obtain long-term financing are amortized using the
effective interest method over the term of the related debt.

IDENTIFIABLE INTANGIBLE ASSETS

Identifiable intangible assets are amortized on a straight-line basis over
the estimated useful lives of 10 to 40 years.

GOODWILL

Goodwill is tested for impairment annually during the fourth quarter or
more frequently if an event indicates that the goodwill might be impaired in
accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." Based on
such tests, there was no impairment of goodwill recorded in fiscal 2003 or 2004.

IMPAIRMENT OF LONG-LIVED ASSETS

Property, plant and equipment and identifiable intangible assets are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. If the sum of the expected
undiscounted cash flows is less than the carrying value of the related asset or
group of assets, a loss is recognized for the difference between the fair value
and carrying value of the asset or group of assets. Such analyses necessarily
involve significant judgment.

REVENUE RECOGNITION

Revenues are recognized upon shipment of product, which generally
corresponds with the transfer of title.

SHIPPING AND HANDLING COSTS

Shipping and handling costs are included in cost of sales.

ADVERTISING COSTS

Advertising costs are expensed as incurred. Advertising costs for
continuing operations were $525, $445 and $587 for the years ended September 30,
2004, 2003 and 2002, respectively.

INCOME TAXES

Deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of the Company's assets and liabilities
and are measured using currently enacted tax rates and laws.

FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, notes receivable and investment in
preferred stock (see Note 5), accounts payable and capital lease obligations
approximate fair value. The fair value of the Company's long-term debt is
approximately $295,800 at September 30, 2004. The fair value of the Senior
Subordinated and Second Secured Notes with a face value of $233,130 is based on
quoted market prices. At September 30, 2003, long-term debt was included in the
accompanying consolidated balance sheet as a liability subject to compromise.
47

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.

5. DISCONTINUED OPERATIONS

During the year ended September 30, 2002, the Company identified indicators
of impairment at its Belcher Corporation (Belcher) foundry, which was held for
use at that date. Belcher is a wholly-owned subsidiary of Advanced Cast
Products, Inc. Because the net book value of the foundry's long-lived assets
exceeded the sum of the undiscounted cash flows expected to be realized from the
respective assets, the Company recognized an impairment charge of $5,379 to
adjust the carrying value of the foundry's long-lived assets to fair value.

On December 27, 2002, the Company sold substantially all of the assets of
Belcher for cash of $648 (net of fees and escrow deposits), a $1,500 note
receivable and $1,000 of preferred stock of the buyer. The cost method was used
to account for the Company's investment in preferred stock as the Company did
not have the ability to exercise significant influence over the investee's
operations and financial policies. At September 30, 2003, the cost of the
preferred stock approximated fair value. The disposition of Belcher resulted in
a loss of $1,596, net of taxes of $860. Included in the loss on disposal is a
curtailment loss on Belcher's defined benefit pension plan of $367, net of taxes
of $198, which was retained by the Company. The results of operations of Belcher
have been reported as discontinued operations in the consolidated statements of
operations for all periods presented.

Revenues for Belcher, which were previously included in the Castings
segment, for the years ended September 30, 2003 and 2002 were $3,186 and
$17,511, respectively. Interest allocated to Belcher of $139 and $485 for the
years ended September 30, 2003 and 2002, respectively, was based on the purchase
price of Belcher in relation to the purchase price of all other acquisitions
funded by additional Company borrowings.

Customer actions and the significant deterioration of the U.S. economy
during the quarter ended December 31, 2001, had a dramatic effect on the
operations of Cast Alloys. This resulted in a significant reduction in sales,
operating profits and cash flows of Cast Alloys for the three months ended
December 31, 2001. Based on these factors, a goodwill impairment charge of
$10,668 was recognized during the three months ended December 31, 2001, related
to the decline in fair value of the Cast Alloys reporting unit, which was
included in the Castings segment.

These events also had a significant impact on the value of Cast Alloys'
property, plant and equipment and long-lived assets with finite lives. Due to
the existing impairment indicators, management assessed the recoverability of
these fixed assets and long-lived assets. As the expected undiscounted cash
flows were less than the carrying value of the related assets, an impairment
charge of $20,412 was recognized for the difference between the fair value and
the carrying value of such assets during the year ended September 30, 2002.

In January 2002, management initiated a plan for discontinuing the
operations of Cast Alloys by closing its manufacturing facilities. Severance
costs of approximately $2,200 associated with this plan were recognized during
the three months ended March 31, 2002. All employees of Cast Alloys were
terminated by April 2002. In accordance with the provisions of SFAS No. 144, the
results of operations of Cast Alloys have been reported as discontinued
operations in the consolidated statements of operations for all periods
presented. Previously, Cast Alloys was included in the Castings segment.

Revenue for Cast Alloys for the year ended September 30, 2002 was $8,641.
Interest expense allocated to Cast Alloys of $1,954 for the year ended September
30, 2002 was based on the purchase price

48

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of Cast Alloys in relation to the purchase price of all other acquisitions
funded by additional Company borrowings.

6. INVENTORIES

Inventories consist of the following:

7. INTANGIBLE ASSETS

As further discussed in Notes 2 and 3, on August 5, 2003, the Company filed
for protection under Chapter 11 of the Bankruptcy Code and on October 8, 2003
emerged from the Chapter 11 reorganization proceedings with a significantly
restructured balance sheet, including a substantial reduction in the carrying
value of the Company's goodwill and identifiable intangible assets.

Identifiable intangible assets consist of the following:

The Company does not have any intangible assets deemed to have indefinite
lives. The Company expects to recognize amortization expense of $7,120 in each
of the five fiscal years subsequent to September 30, 2004.

Upon the consummation of the Plan of Reorganization on October 1, 2003 (see
Note 3) and implementation of fresh start accounting, the Company eliminated
historical Predecessor goodwill and recorded $86,699 of goodwill representing
the excess of the fair value of the Reorganized Company. All goodwill was
allocated to reporting units within the Castings Segment based on the relative
fair values of all reporting units.

49

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. LONG-TERM DEBT

Long-term debt consists of the following:

The Company had a Credit Facility, as amended, with a group of banks, which
provided Term Loan Facilities, an Acquisition Loan Facility and a Revolving
Credit Facility. Borrowings under this Pre-Petition Credit Facility were secured
by substantially all assets of the Company. Covenants in the Pre-Petition Credit
Facility restricted the payment of dividends, capital expenditures and certain
other transactions and required the Company to maintain leverage, net worth and
interest coverage ratios. The Pre-Petition Credit Facility bore interest at
LIBOR plus 4.5% or LIBOR plus 4.75%. Effective December 31, 2001, the Credit
Agreement was amended to provide relief from the above financial ratio covenants
through December 31, 2003, reduce the amount of the Revolving Credit Facility to
$29,565 and establish minimum EBITDA and liquidity covenants. At March 31, 2003,
the Company was in default of the minimum EBITDA covenant on the Pre-Petition
Credit Facility and was prohibited, under a Forbearance Agreement, to make the
scheduled May 1, 2003 interest payment on the Pre-Petition Senior Subordinated
Notes.

As of September 30, 2003, as a result of the Chapter 11 filing, the
carrying value of the Company's debt was classified as long-term liabilities
subject to compromise. As discussed in Note 2, in order to record the debt
instruments at the amount allowed by the Bankruptcy Court, in accordance with
SOP 90-7, unamortized premiums of $2,226 related to the Pre-Petition Senior
Subordinated Notes were written off as a component of reorganization expense in
2003.

As further discussed in Note 2, upon the Company's consummation of the Plan
of Reorganization, all of the Company's Pre-Petition Senior Subordinated Notes
and Pre-Petition Credit Facility and PIK Note were canceled or repaid.

As further discussed in Note 2, as a result of the cancellation of the
Pre-Petition Senior Subordinated Notes and the PIK Note, such holders were
granted warrants to purchase shares up to an additional 47.5% of the new ACP
Holding Company Common Stock. The fair value of the warrants at the date of
issuance are included in the Reorganized Company's stockholder's equity in the
accompanying consolidated balance

50

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sheets. The warrants have an exercise price of $0.01 per share and will expire
10 years from the date of issuance.

The New Revolving Credit Facility (New Credit Facility) has a 5-year
maturity, provides for a revolving credit line of up to $70,000 (with a $5,000
sublimit available for letters of credit), a term loan which requires annual
principal payments of $3,155 through 2008, with the remainder due in 2009. The
New Credit Facility contains various financial and non-financial covenants and
is secured by substantially all of the Company's tangible and intangible assets.
The interest rate on the New Credit Facility is based on LIBOR (2% at September
30, 2004) or prime plus an applicable margin, based upon the Company meeting
certain financial statistics. The weighted average interest rate on the
revolving credit line outstanding borrowings at September 30, 2004 is 4.48%. The
Company, including its wholly-owned subsidiaries, jointly and severally
guarantee the Company's obligation under the New Credit Facility.

The Second Secured Notes mature on September 30, 2010 and bear interest at
11%. Interest is payable semiannually on January 1 and July 1. The Second
Secured Notes are secured by substantially all of the Company's tangible and
intangible assets; however, they are second in priority to the borrowings under
the New Credit Facility.

The new Senior Subordinated Notes are unsecured, mature on September 30,
2013 and bear interest at 13%. Interest of 5% is payable in cash and 8% may be
paid-in-kind semiannually on January 1 and July 1. Through July 1, 2004, the
Company has paid the interest in cash.

The Second Secured and the new Senior Subordinated Notes contain covenants,
which restrict the Company from incurring additional indebtedness and prohibit
dividend payments, stock redemptions and certain other transactions. The Second
Secured and the new Senior Subordinated Notes are fully, unconditionally,
jointly and severally guaranteed by all subsidiaries.

Scheduled annual principal payments on long-term debt for the years
subsequent to September 30, 2004 are:

9. COMMITMENTS AND CONTINGENCIES

The Company leases certain plants, warehouse space, machinery and
equipment, office equipment and vehicles under operating leases. Rent expense
for continuing operations under these operating leases for the years ended
September 30, 2004, 2003 and 2002 totaled $2,999, $2,885 and $3,147,
respectively.

51

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Property, plant and equipment under leases accounted for as capital leases
are as follows:

Total minimum rental payments under capital lease obligations, which all
expire in fiscal 2005, are $1,641, including $58 representing interest. Minimum
rental payments due under operating leases for fiscal years subsequent to
September 30, 2004, are as follows:

The Company is partially self-insured for workers' compensation claims. An
accrued liability is recorded for claims incurred but not yet paid or reported
and is based on current and historical claim information. The accrued liability
may ultimately be settled for an amount different than the recorded amount.
Adjustments of the accrued liability are recorded in the period in which they
become known.

Approximately 66% of the Company's work force is covered by collective
bargaining agreements. The collective bargaining agreement for the Warsaw
location of Dalton is scheduled to expire during fiscal 2005.

10. INCOME TAXES

The provision (credit) for income taxes consists of the following:

52

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision (credit) for income taxes is included in the consolidated
statements of operations as follows:

The provision (credit) for income taxes differs from the amount computed by
applying the federal statutory rate of 35% to income (loss) before income taxes
as follows:

53

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income tax assets and liabilities consist of the following:

As of September 30, 2004, the Company has no federal and state net
operating loss carryforwards for income tax purposes.

11. EMPLOYEE BENEFIT PLANS

DEFINED-BENEFIT PENSION PLANS AND POSTRETIREMENT BENEFITS

The Company sponsors five defined-benefit pension plans covering the
majority of its hourly employees. Retirement benefits under the pension plans
are based on years of service and defined-benefit rates. In connection with
fresh start accounting, the Company elected a measurement date of June 30 for
all of its pension plans. In 2003, three of the defined-benefit pension plans
had measurement dates of September 30. The remaining two plans had a measurement
date of June 30. The Company funds the pension plans based on actuarially
determined cost methods allowable under Internal Revenue Service regulations.

The Company also sponsors unfunded defined-benefit postretirement health
care plans covering substantially all salaried and hourly employees at Neenah
and their dependents. For salaried employees at Neenah, benefits are provided
from the date of retirement for the duration of the employee's life, while
benefits for hourly employees at Neenah are provided from retirement to age 65.
Retirees' contributions to the plans are based on years of service and age at
retirement. The Company funds benefits as incurred. In connection with fresh
start accounting, the Company elected a measurement date of June 30 for these
plans. In 2003, the measurement date for these plans was September 30.

54

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FASB Financial Staff Position No. FAS 106-2, "Accounting and Disclosure
Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003" (the Act), addresses the impact of the Act enacted in
December 2003. The Act provides a prescription drug benefit for Medicare
eligible employees starting in 2006. The Company does not believe that the Act
will have an impact on the Company's postretirement benefit obligation because
benefit levels of the Company's plans currently do not meet the criteria set
forth by the Act to qualify for the subsidy.

OBLIGATIONS AND FUNDED STATUS

The following table summarizes the funded status of the pension plans and
postretirement benefit plans and the amounts recognized in the consolidated
balance sheets at September 30, 2004 and 2003:

55

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The accumulated benefit obligation for the Company's defined benefit
pension plans was $62,190 and $60,049 at September 30, 2004 and 2003,
respectively.

BENEFIT COSTS

Components of net periodic benefit cost for the years ended September 30,
2004, 2003 and 2002, respectively, are as follows:

ASSUMPTIONS

Weighted-average assumptions used to determine benefit obligations as of
September 30:

Weighted-average assumptions used to determine net periodic benefit cost
for the years ended September 30:

For measurement purposes, the healthcare cost trend rate was assumed to be
8.5% decreasing gradually to 5.0% in 2010 and then remaining at that level
thereafter. The healthcare cost trend rate

56

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assumption has a significant effect on the amounts reported. A one percentage
point change in the healthcare cost trend rate would have the following effect:

PENSION PLAN ASSETS

The following table summarizes the weighted-average asset allocations of
the pension plans at September 30, 2004 and 2003:

The Company employs a total return investment approach whereby a mix of
equities and fixed income investments are used to maximize the long-term return
of plan assets for a prudent level of risk. The intent of this strategy is to
minimize plan expenses by maximizing investment returns within that prudent
level of risk. The investment portfolio contains a diversified blend of equity
and fixed income investments. Furthermore, equity investments are diversified
across U.S. and non-U.S. stocks as well as growth, value, and small and large
capitalizations. The Company's targeted asset allocation ranges as a percentage
of total market value are as follows: equity securities 45% to 50% and debt
securities 35% to 40%. None of the plans' equity securities are invested in
common stock of the plan sponsor's parent company, ACP Holding Company.
Additionally, cash balances are maintained at levels adequate to meet near term
plan expenses and benefit payments. Investment risk is measured and monitored on
an ongoing basis through quarterly investment portfolio reviews.

The Company's overall expected long-term rate of return on assets is 7.50%
to 8.50%. The expected long-term rate of return is based on the portfolio as a
whole and not on the sum of the returns on individual asset categories. The
return is based on historical returns adjusted to reflect the current view of
the long-term investment market.

PENSION PLAN BENEFIT PAYMENTS AND CONTRIBUTIONS

The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid for fiscal years subsequent to September
30, 2004:

57

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company expects to contribute $4,551 to its pension plans during fiscal
2005.

DEFINED-CONTRIBUTION RETIREMENT PLANS

The Company sponsors various defined-contribution retirement plans (the
Plans) covering substantially all salaried and certain hourly employees. The
Plans allow participants to make 401(k) contributions in amounts ranging from 1%
to 15% of their compensation. The Company matches between 35% and 50% of the
participants' contributions up to a maximum of 6% of the employee's
compensation, as defined. The Company may make additional voluntary
contributions to the Plans as determined annually by the Board of Directors.
Total Company contributions for continuing operations amounted to $1,195, $1,694
and $1,456 for the years ended September 30, 2004, 2003 and 2002, respectively.

OTHER EMPLOYEE BENEFITS

The Company provides unfunded supplemental retirement benefits to certain
active and retired employees at Dalton. At September 30, 2004, the present value
of the current and long-term portion of these supplemental retirement
obligations totaled $215 and $2,656, respectively. At September 30, 2003, the
present value of the current and long-term portion of these supplemental
retirement obligations totaled $201 and $2,846, respectively.

Certain of Dalton's hourly employees are covered by a multi-employer,
defined-benefit pension plan pursuant to a collective bargaining agreement. The
Company's expense for the years ended September 30, 2004, 2003 and 2002, was
$361, $417 and $397, respectively.

Substantially all of Mercer's union employees are covered by a
multiemployer, defined-benefit pension plan pursuant to a collective bargaining
agreement. The Company's expense for the years ended September 30, 2004, 2003
and 2002, was $141, $102 and $119, respectively.

12. SEGMENT INFORMATION

The Company has two reportable segments, Castings and Forgings. The
Castings segment manufactures and sells gray and ductile iron castings for the
industrial and municipal markets, while the Forgings segment manufactures forged
components for the industrial market. The Other segment includes machining
operations and freight hauling.

The Company evaluates performance and allocates resources based on the
operating income before depreciation and amortization charges of each segment.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. Intersegment sales
and

58

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

transfers are recorded at cost plus a share of operating profit. The following
segment information is presented for continuing operations:

59

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GEOGRAPHIC INFORMATION

- ---------------

(1) Represents tangible long-lived assets only.

13. GUARANTOR SUBSIDIARIES

The following tables present condensed consolidating financial information
for the period from October 1, 2003 to September 30, 2004 (Reorganized Company)
and fiscal 2003 and 2002 (Predecessor Company) for: (a) the Company, and (b) on
a combined basis, the guarantors of the Second Secured

60

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Notes and the Senior Subordinated Notes, which include all of the wholly owned
subsidiaries of the Company (Subsidiary Guarantors). Separate financial
statements of the Subsidiary Guarantors are not presented because the guarantors
are jointly, severally and unconditionally liable under the guarantees, and the
Company believes separate financial statements and other disclosures regarding
the Subsidiary Guarantors are not material to investors.

CONDENSED CONSOLIDATING BALANCE SHEET -- REORGANIZED COMPANY
SEPTEMBER 30, 2004

61

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEET -- PREDECESSOR
SEPTEMBER 30, 2003

62

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -- REORGANIZED COMPANY
YEAR ENDED SEPTEMBER 30, 2004

63

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -- PREDECESSOR
YEAR ENDED SEPTEMBER 30, 2003

64

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS -- PREDECESSOR
YEAR ENDED SEPTEMBER 30, 2002

65

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -- REORGANIZED COMPANY
YEAR ENDED SEPTEMBER 30, 2004

66

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -- PREDECESSOR
YEAR ENDED SEPTEMBER 30, 2003

67

NEENAH FOUNDRY COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -- PREDECESSOR
YEAR ENDED SEPTEMBER 30, 2002

14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the consolidated financial statements of Neenah Foundry
Company as of September 30, 2004 (Reorganized Company) and September 30, 2003
(Predecessor Company) and for the year ended September 30, 2004 (Reorganized
Company) and the years ended September 30, 2003 and 2002 (Predecessor Company)
and have issued our report thereon dated November 5, 2004 (included elsewhere in
this Annual Report on Form 10-K). Our audits also included the financial
statement schedule listed in the index at Item 15(a). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

Milwaukee, Wisconsin
November 5, 2004

69

SCHEDULE II

NEENAH FOUNDRY COMPANY

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 2002, 2003, AND 2004

- ---------------

(A) Uncollectible accounts written off, net of recoveries

(B) Reduction for disposition of inventory

70