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, 2002.

[ ] 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 Identification Number)
Incorporation or Organization)

2121 Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54957
(Address of principal executive offices) (Zip Code)

(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 [X] No [ ]

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

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

Common Stock, Class A, $100 par value- 1,000 shares as of November 30,
2002
Common Stock, Class B, $100 par value- 0 shares as of November 30,
2002

1

PART I
Item 1. BUSINESS

Unless otherwise stated in this document or unless the context otherwise
requires, references herein to the "Company" 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 ("ACP"), Gregg Industries, Inc. ("Gregg"),
and Niemin Porter & Co. d/b/a Cast Alloys, Inc. ("Cast Alloys"), which is
inactive, and their respective subsidiaries. "Neenah" refers to Neenah Foundry
Company, not including any of its wholly owned subsidiaries.

General Development of Business

The Company designs, manufactures and markets a wide range of metal
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. After Neenah was acquired by ACP
Holding Company in 1997, the Company began a strategic initiative to grow and
diversify its business by making selected acquisitions within the metals
industry. As part of the Company's strategy, the Company completed the following
acquisitions:

- - Deeter, a manufacturer of gray iron castings for the heavy municipal
market, in March 1998.
- - Mercer, a producer of complex-shaped forged components for use in
transportation, railroad, mining and heavy industrial applications, in
April 1998.
- - Dalton, a manufacturer of gray iron castings primarily for the
refrigeration and air conditioning, transportation and heavy equipment
industrial markets, in September 1998.
- - ACP, a manufacturer of ductile and malleable iron castings for various
industrial markets, in September 1998.
- - Cast Alloys, a manufacturer of investment-cast titanium and stainless steel
golf clubheads, in December 1998. The operations of Cast Alloys were
discontinued in January, 2002 and this subsidiary is currently inactive.
- - Gregg, a manufacturer of gray and ductile iron castings for various
industrial markets, in November 1999.

The Company believes it is one of the largest manufacturers of heavy
municipal iron castings in the United States. The Company'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. These municipal
castings are sold 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. The
Company believes it 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 heating, ventilation and air conditioning (HVAC) systems.

The Company has 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.

2

CASTINGS SEGMENT

Overview

The Castings segment is a leading producer of iron and other metal castings
for use in heavy municipal and industrial applications. This segment sells
directly to original equipment manufacturers (OEMs), as well as to 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, calipers, yokes, planting and
harvesting equipment parts, and compressor components. Customers for these
products include medium and heavy-duty truck, farm equipment, and heating,
ventilating, and air-conditioning manufacturers.

Heavy Municipal. The Company's 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 dimension and strength specifications
established by local authorities. Standard castings are generally high volume
items that are routinely used in new construction and infrastructure
replacement. Specialty castings are generally lower volume, higher margin
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 the
Company's municipal product catalog and its tree grate catalog, which together
encompass over 4,400 standard and specialty patterns. For many of these
specialty products, the Company believes it is 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. The Company holds a number of patents
and trademarks related to its heavy municipal product line.

The Company's municipal castings are sold to state and local government
entities, utility companies, pre-cast concrete manhole structure producers and
contractors for both new construction and infrastructure replacement. The
Company's 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. Relative to customers in the industrial market, municipal market
customers are less technically demanding and rely more on published product
specifications to ensure product performance.

Over its 70 years of heavy municipal market participation, the Company has
emphasized sales and marketing and believes it has built a strong reputation for
customer service. The Company believes that it is one of the leaders in U.S.
heavy municipal casting production and that it has strong name recognition. The
Company has the largest sales and marketing effort of any foundry serving the
heavy municipal market. The dedicated sales force works out of regional sales
offices to market the Company's municipal castings to contractors and state and
local governmental entities throughout the United States. The Company operates a
number of regional distribution and sales centers throughout the Unites States.
The Company believes this regional approach enhances its knowledge of local
specifications and its position in the heavy municipal market.

3

Industrial. The Company's industrial castings have increased in complexity
since the early 1990's and are generally produced in higher volumes 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 which require less preparation before entering the production process.

The Company's industrial castings are primarily sold to a limited number of
customers with whom the Company has established a close working relationship.
These customers make purchasing decisions based on, among other things,
technical ability, price, service, quality assurance systems, facility
capabilities and reputation. However, as in the municipal market, the Company's
assistance in product engineering plays an important role in winning bids for
industrial castings. The average industrial casting typically takes between 12
and 18 months to go from the design phase to full production and has an average
product life cycle of approximately 8 to 10 years. The patterns for industrial
castings, unlike the patterns for municipal castings, are owned by the Company's
customers rather than the Company. However, such industrial patterns are not
readily transferable to other foundries without, in most cases, significant
additional investment. Although foundries, including the Company, do not design
industrial castings, a close working relationship between a 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 improves 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.

The Company estimates that it has historically retained approximately 90%
of the castings it has been awarded throughout the product life cycle, which is
typical for the industry. The Company believes industrial customers will
continue to seek out foundries with a strong reputation for performance who are
capable of providing a cost-effective combination of manufacturing technology
and quality. The Company's strategy is to further its relationships with
existing customers by participating in the design and production of more complex
industrial castings, while seeking out selected new customers who would value
the Company's performance reputation, technical ability and high level of
quality and service.

The Company employs a dedicated industrial casting sales force at all of
its subsidiary locations. The sales force supports ongoing customer
relationships and organizes the scheduling and delivery of shipments, as well as
working with customers' engineers and procurement representatives, Company
engineers, manufacturing management and quality assurance representatives
throughout all stages of the production process to ensure that the final product
consistently meets or exceeds customer specifications. This team approach,
consisting of sales, marketing, manufacturing, engineering and quality assurance
efforts is an integral part of the Company's marketing strategy.

Manufacturing Process

The Company's foundries manufacture gray and ductile iron and cast it into
intricate shapes according to customer metallurgical and dimensional
specifications. The Company continually invests in the improvement of process
controls and product performance and believes that these investments and its
significant experience in the industry have made it one of the most efficient
manufacturers of industrial and heavy municipal casting products.

4

The casting process involves using metal, wood or urethane patterns to make
an impression of a casting product 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 product. 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
product. Once the iron has solidified and cooled, the mold is shaken 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, including its complexity, specifications, and function as
well as 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. The Company continually seeks to find
ways to expand the capabilities of existing technology to improve its
manufacturing processes.

The Company also achieves 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 to produce a different casting product. The
reduced time permits it to profitably produce castings in medium volume
quantities on high volume, cost-effective equipment. Additionally, extensive
effort in real time process controls permits the Company to produce a
consistent, dimensionally accurate casting product, which requires less time and
effort in the final processing stages of production. This accuracy contributes
significantly to the Company's manufacturing efficiency.

Continual testing and monitoring of the manufacturing process is important
to maintain product quality. The Company has adopted sophisticated quality
assurance techniques and policies for its manufacturing operations. During and
after the casting process, the Company performs numerous tests, including
tensile, proof-load, radiography, ultrasonic, magnetic particle and chemical
analysis. The Company utilizes statistical process controls to measure and
control significant process variables and casting dimensions. The results of
this testing are documented in metallurgical certifications, which are provided
with each shipment to most industrial customers. The Company strives to maintain
systems that provide for continual improvement of operations and personnel,
emphasize defect prevention and reduce variation and waste in all areas.

Raw Materials

The primary raw materials used by the Company 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, the
Company has single-source arrangements with its suppliers for each of these
major raw materials, with the exception of pig iron. Due to long standing
relationships with each of its suppliers, the Company believes that it will
continue to be able to secure raw materials at competitive prices. The primary
energy sources for the Company's operations, electricity and natural gas, are
purchased through utilities.

5

Although the prices of all raw materials used by the Company vary, the
fluctuations in the price of steel scrap are the most significant to the
Company. The Company has arrangements with most of its industrial customers
which allow the Company 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, which periods vary by customer but are
generally no longer than six months. Castings are generally 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 raw material price increases.
However, in most cases the Company believes it has been successful in obtaining
higher municipal casting unit prices in subsequent bids to compensate for rises
in scrap prices in prior periods. Rapidly fluctuating scrap prices may have an
adverse or positive effect on the Company's financial condition and results of
operations.

Seasonality

The Company has historically experienced moderate cyclicality in the heavy
municipal market. Sales of municipal products are influenced by, among other
things, public spending. There is generally not a backlog of business in the
municipal market due to the nature of the market. In the industrial market, the
Company has experienced cyclicality in sales resulting from fluctuations in the
medium and heavy-duty truck market and the farm equipment market, which are
subject to general economic trends. The Company's current backlog of industrial
market business is smaller than there would be in a stronger, more typical
market.

The Company experiences seasonality in its 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 the Company's fiscal year.
The Company maintains level production throughout the year in anticipation of
such seasonality and does not experience production volume fluctuations as a
result. The Company builds inventory in anticipation of the construction season
with such inventories reaching a peak near the end of its second quarter in
March. This inventory build has a negative impact on working capital and
increases liquidity needs during the second quarter. The Company has not
historically experienced seasonality in industrial casting sales.

Competition

The markets for the Company's products are highly competitive. Competition
is based not only on price, but also on quality of product, range of capability,
level of service and reliability of delivery. The Company competes with numerous
independent and captive foundries, as well as with a number of foreign iron
foundries, including certain foundries located in India. The Company also
competes with several large domestic manufacturers whose products are made with
materials other than ductile and gray iron, such as steel or aluminum. The
industry consolidation that has occurred over the past 20 years has resulted in
a significant reduction in the number of smaller foundries and a rise in the
share of production by larger foundries, some of which have significantly
greater financial resources than the Company. Competition from India has had a
strong 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.

6

FORGINGS SEGMENT

Overview

The forgings segment, operated by Mercer, is a leading producer of
complex-shaped forged components for use in transportation, railroad, mining and
heavy industrial applications. Mercer is also a leading producer of microalloy
forgings. Mercer sells directly to OEMs, as well as to industrial end users.
Mercer's subsidiary, A&M Specialties, Inc. (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 and today is
one of the leading suppliers to the heavy duty truck sector. Mercer produces
approximately 500 individually forged components and has developed specialized
expertise in forgings of microalloy 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 direct 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 performance.

Demand for forged products for civilian application 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 due to overbuilds and energy costs. 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 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
undergo plastic reformation. Because the metal flow is restricted by die
containers, 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.

7

Once a rough forging is produced, regardless of the forging process, it
must generally still be machined. This process, known as "finishing" or
"conversion", smoothes the component's exterior and mating surfaces and adds any
required specification, such as groves, threads, bolt holes and brand name
markings. 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 (CAD) work stations 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 microalloy 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
microalloy 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
themselves, 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.

EMPLOYEES

As of September 30, 2002 the Company had approximately 2,970 full time
employees, of whom 2,420 were hourly employees and 550 were salaried employees.
Nearly all of the hourly employees at Neenah, Dalton, ACP 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 2003;
Dalton-Kendallville, June 2004; ACP-Meadville, October 2004; ACP-Belcher, June
2004; and Mercer, June 2004. All employees at Deeter and Gregg are non-union.
The Company believes that it has a good relationship with its employees.

8

ENVIRONMENTAL MATTERS

The facilities of the Company 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. The Company believes
that each of its operations are currently in substantial compliance with
applicable environmental laws, and that it has no liabilities arising under such
environmental laws which would have a material adverse effect on the Company's
operations, financial condition or competitive position. However, some risk of
environmental liability and other cost is inherent in each of the Company's
businesses. Any of the Company's 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 is not
expected to be required to implement the MACT emission limits, control
technologies or work practices until the year 2004 at the earliest. Although the
Company cannot accurately estimate the costs to comply with the MACT standard
until it is issued, the MACT standard, when implemented, and state laws
governing the emission of toxic air pollutants may require that certain of the
Company's facilities incur significant costs for air emission control equipment,
air emission monitoring equipment or process modifications.

Compliance Impacts

Dalton's Warsaw facility was issued an NPDES permit in 2000 that limits
the level of chlorine and the temperature of its non-contact cooling water
permitted to be discharged to a waterway by the year 2003. Although the chlorine
is already in the water when purchased from the city, Dalton is responsible for
the elimination. Dalton has several alternatives to meet the chlorine discharge
permit requirements by 2003, and is currently implementing a system to lower the
chlorine levels of its cooling water. The cost of implementing this system will
not be material. Dalton believes the system will be tested and operational
before the 2003 deadline.

ACP's Belcher facility has received two notices of violation from the
Massachusetts Department of Environmental Protection, and one notice from OSHA
related to environmental matters. Corrective plans have been devised and will be
implemented in 2003 to correct these violations. The cost of implementing these
corrective plans will not be material.

9

Item 2. PROPERTIES

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

ENTITY LOCATION PURPOSE
------ -------- -------

Neenah Foundry Company Neenah, WI 2 manufacturing facilities
Office facility

Dalton Corporation Warsaw, IN Manufacturing and office facilities
Kendallville, IN Manufacturing facility
Stryker, OH Machining facility

Advanced Cast Products, Inc. Meadville, PA Manufacturing and office facility
South Easton, MA Manufacturing facility

Mercer Forge Corporation Mercer, PA Manufacturing and office facility
Sharon, PA Machining facility

Deeter Foundry, Inc. Lincoln, NE Manufacturing and office facility

Gregg Industries, Inc. El Monte, CA Manufacturing and office facility

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

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

Item 3. LEGAL PROCEEDINGS

The Company is involved in routine litigation incidental to its business.
Such litigation is not, in the opinion of management, likely to have a material
adverse effect on the financial condition or results of operations of the
Company.

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, 2002.

10

PART II

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

There is no public market for the common stock of the Company. There was
one holder of record of the Company's common stock as of September 30, 2002.

Item 6. SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth the selected historical consolidated
financial and other data of the Company for the years ended September 30, 1998,
1999, 2000, 2001, and 2002 which have been derived from the Company's 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 the Company's
historical consolidated financial statements and related notes included
elsewhere in this report.

Fiscal Year Ended
September 30,
-------------------------------------------------------------------------
1998(1)(5)(6) 1999(2)(5)(6) 2000(3)(5)(6) 2001(5)(6) 2002 (6)
-----------------------------------------------------------------------------------
STATEMENT OF
INCOME DATA: (Dollars in thousands)

Net sales $ 303,090 $ 491,151 $ 504,311 $ 416,907 $ 405,218

Cost of sales 224,548 395,336 406,652 352,737 341,013
-----------------------------------------------------------------------------------

Gross profit 78,542 95,815 97,659 64,170 64,205

Selling, general, and
Administrative
Expenses 21,435 31,491 33,619 28,017 29,297
Amortization expense 7,727 11,082 10,503 10,613 3,829
Provision for impairment of
assets - - - - 5,453
Other expenses (income) (4) 38 7,518 85 (434) 544
-----------------------------------------------------------------------------------

Operating income 49,342 45,724 53,452 25,974 25,082

Interest expense, net 27,208 39,238 43,433 43,542 43,132
-----------------------------------------------------------------------------------

Income (loss) from continuing
operations before taxes 22,134 6,486 10,019 (17,568) (18,050)

Provision (credit) for
income Taxes 10,650 4,182 6,175 (4,149) (8,389)
-----------------------------------------------------------------------------------
Income (loss) from
continuing operations 11,484 2,304 3,844 (13,419) (9,661)

Income (loss) from
discontinued operations 397 (4,196) (8,987) (4,035) (38,042)

Gain on sale of
discontinued operations - - - 2,404 -

Extraordinary item (7) (392) - - - -
-----------------------------------------------------------------------------------
Net income (loss) $ 11,489 $(1,892) $ (5,143) $ (15,050) $ (47,703)
===================================================================================

11

Fiscal Year Ended
September 30,
--------------------------------------------------------------
1998(1)(5)(6) 1999(2)(5)(6) 2000(3)(5)(6) 2001(5)(6) 2002 (6)
------------- ------------- ------------- ---------- --------
(Dollars in thousands)

BALANCE SHEET
DATA (AT END
OF PERIOD):
Cash and cash $ 19,978 $ 17,368 $ 19,478 $ 4,346 $ 26,354
Equivalents
Working capital 78,186 83,962 86,080 72,140 78,135
Total assets 584,309 641,702 666,218 626,443 582,473
Total debt 371,871 428,007 449,607 434,077 451,432
Total stockholder's 67,922 63,750 58,518 41,939 (12,146)
equity (deficit)
- --------------------------------------------------------------------------------------------

(1) The amounts include the results of Deeter subsequent to March 30, 1998, the
results of Mercer subsequent to April 3, 1998 and the results of Dalton
subsequent to September 8, 1998.
(2) The amounts include the results of Cast Alloys subsequent to December 31,
1998.
(3) The amounts include the results of Gregg subsequent to November 30, 1999.
(4) In 1999, other expenses includes a $6,713 charge related to the closure of
Dalton's Ashland facility.
(5) On October 2, 2000, the Company sold all of the issued and outstanding
shares of common stock of Hartley Controls Corporation (Hartley). The
results of the operations of Hartley have been reported separately as
discontinued operations for all periods presented.
(6) During the year ended September 30, 2002, the Company discontinued the
operations of Cast Alloys. The results of Cast Alloys have been reported
separately as discontinued operations for all periods presented.
(7) Extraordinary item includes the write-off of unamortized deferred financing
costs due to the early extinguishment of debt, net of tax of $260

12

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 the Company
"believes," "anticipates," "expects" or words of similar import. Similarly,
statements that describe the Company's 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 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 the Company undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.

COMPARISON OF FISCAL YEAR ENDED SEPTEMBER 30, 2002 TO FISCAL YEAR ENDED
SEPTEMBER 30, 2001

Net Sales. Net sales for the year ended September 30, 2002 were $405.2
million, which was $11.7 million or 2.8% lower than the year ended September 30,
2001. The decrease in net sales resulted from weakness in the demand for
industrial castings used for the HVAC market and an overall slowing of demand
for castings in the Company's other major markets.

Gross Profit. Gross profit was $64.2 million in each of the years ended
September 30, 2002 and 2001. Gross profit as a percentage of net sales increased
to 15.8% during the year ended September 30, 2002 from 15.4% for the fiscal year
ended September 30, 2001. Gross profit percentage was positively impacted during
the year ended September 30, 2002 by modest reductions in raw material costs and
improved efficiency in the manufacturing process.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended September 30, 2002 were $29.3
million, an increase of $1.3 million from the $28.0 million for the year ended
September 30, 2001. As a percentage of net sales, selling, general and
administrative expenses increased to 7.2% for the year ended September 30, 2002
from 6.7% for the fiscal year ended September 30, 2001. The increase was due to
increased professional fees paid in conjunction with debt refinancing and other
corporate projects in 2002 and a favorable escrow refund received in 2001 which
did not occur in 2002.

Amortization of intangible assets. Amortization of intangible assets for
the year ended September 30, 2002 was $3.8 million, a decrease of $6.8 million
from the $10.6 million for the year ended September 30, 2001. The decrease was
due to the adoption of Statement of Financial Accounting Standards No. 142 (SFAS
142) as of October 1, 2001. Under SFAS 142, goodwill is no longer amortized but
instead is tested for impairment. Except for the discontinued operations of Cast
Alloys, there was no deemed impairment of intangible assets.

Provision for impairment of assets. A provision for the impairment of
long-lived assets of $5.5 million was recorded during the year ended September
30, 2002 after the Company identified indicators of impairment at one of its
foundries which is held for use. In accordance with SFAS No. 144, since the net
book value of the foundries' 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 $5.4 million to adjust the carrying
value of the foundries' long-lived assets to fair value. The Company also
recognized an impairment charge of $0.1 million related to a building held for
sale.

Other expenses. Other expenses for the years ended September 30, 2002 and
2001 consist of losses of $0.5 million and gains of $0.4 million, respectively,
for the disposal of long-lived assets in the ordinary course of business.

13

Operating Income. Operating income was $25.1 million for the year ended
September 30, 2002, a decrease of $0.9 million or 3.4% from the year ended
September 30, 2001. The decrease was caused by a $1.3 million increase in
selling, general and administrative expenses and the $5.5 million provision for
impairment of assets noted above, partially offset by $6.8 million of lower
amortization expense. As a percentage of net sales, operating income was 6.2%
for each of the years ended September 30, 2002 and 2001.

Net Interest Expense. Net interest expense decreased to $43.1 million for
the year ended September 30, 2002 from $43.5 million for the year ended
September 30, 2001. The decreased interest expense resulted from the Company's
principal debt repayments and lower interest rates on the Company's Senior Bank
Facility, partially offset by the interest on the higher level of borrowings
outstanding on the Company's Revolving Credit Facility during the year ended
September 30, 2002 as compared to the year ended September 30, 2001.

Provision for Income Taxes. The credit for income taxes for the year ended
September 30, 2002 is higher than the amount computed by applying the Company's
statutory rate of approximately 40% to the loss before income taxes due to
permanent differences related to the discontinuance of Cast Alloys.

Discontinued Operations. On October 2, 2000, the Company sold the common
stock of Hartley. The disposition of Hartley resulted in a gain of $2.4 million,
net of income taxes of $1.6 million, which was recorded during the year ended
September 30, 2001.

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 $10.7
million was recognized during the three months ended December 31, 2001, related
to the decline in fair value of Cast Alloys.

These events also had a significant impact on the value of Cast Alloys'
fixed assets 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 $20.4
million was recognized for the difference between the fair value and carrying
value of such assets during the year ended September 30, 2002.

In January 2002, management initiated a plan for the discontinuation of the
operations of Cast Alloys by closing its manufacturing facilities. Severance
costs of approximately $2.2 million associated with this plan were recognized
during the three months ending March 31, 2002. All employees of Cast Alloys were
terminated by April 2002. In accordance with the provisions of SFAS No. 144,
"Accounting for the Impairment of Long-Lived Assets", the results of operations
of Cast Alloys have been reported as discontinued operations in the consolidated
statements of operations for all periods presented.

COMPARISON OF FISCAL YEAR ENDED SEPTEMBER 30, 2001 TO FISCAL YEAR ENDED
SEPTEMBER 30, 2000

Net Sales. Net sales for the year ended September 30, 2001 were $416.9
million, which was $87.4 million or 17.3% lower than the year ended September
30, 2000. The decrease in net sales resulted from significant weakness in the
demand for industrial castings used for the heavy duty truck and HVAC markets
and an overall slowing of demand for castings in the Company's other major
markets.

Gross Profit. Gross profit for the year ended September 30, 2001 was $64.2
million, a decrease of $33.5 million or 34.3%, as compared to the year ended
September 30, 2000. Gross profit as a percentage of net sales decreased to 15.4%
during the year ended September 30, 2001 from 19.4% for the fiscal year ended
September 30, 2000. The decrease in gross profit resulted from lower sales
volumes noted above and an inability, at the lower production and sales levels,
to sufficiently absorb the overhead costs

14

necessary to effectively run the foundry operations. Gross profit percentage was
also negatively impacted during the year ended September 30, 2001 by intense
market pressure to reduce product pricing.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended September 30, 2001 were $28.0
million, a decrease of $5.6 million from the $33.6 million for the year ended
September 30, 2000. The decrease was due to decreased corporate expense and the
implementation of other cost cutting measures, including salary reductions and
consolidation of facilities, in response to the decreased sales level. As a
percentage of net sales, selling, general and administrative expenses were 6.7%
for each of the years ended September 30, 2002 and 2001.

Amortization of intangible assets. Amortization of intangible assets for
the year ended September 30, 2001 was $10.6 million, an increase of $0.1 million
from the $10.5 million for the year ended September 30, 2000.

Other expenses. Other expenses for the years ended September 30, 2001 and
2000 consist of gains of $0.4 million and losses of $0.1 million, respectively,
for the disposal of long-lived assets in the ordinary course of business.

Operating Income. Operating income was $26.0 million for the year ended
September 30, 2001, a decrease of $27.5 million or 51.4% from the year ended
September 30, 2000. As a percentage of net sales, operating income was 6.2% for
the year ended September 30, 2001, as compared to 10.6% for the year ended
September 30, 2000. These decreases were caused by the reasons discussed above
under gross profit, partially offset by decreased selling, general and
administrative expenses

Net Interest Expense. Net interest expense increased from $43.4 million for
the year ended September 30, 2000 to $43.5 million for the year ended September
30, 2001. The increase in net interest expense resulted from interest on capital
leases entered into during the second half of fiscal 2000 and interest on the
increased borrowings outstanding on the Company's Revolving Credit Facility,
partially offset by lower interest rates on the Company's Senior Bank
Facilities.

Provision for Income Taxes. The credit for income taxes for the year ended
September 30, 2001 is lower than the amount computed by applying the statutory
rate of approximately 40% to loss before income taxes principally due to the
amortization of goodwill, which is not deductible for income tax purposes.

Discontinued Operations. On October 2, 2000, the Company sold the common
stock of Hartley. The disposition of Hartley resulted in a gain of $2.4 million,
net of income taxes of $1.6 million, which was recorded during the year ended
September 30, 2001. The results of operations of Hartley have been reported
separately as discontinued operations in the consolidated statements of
operations for all periods presented.

15

LIQUIDITY AND CAPITAL RESOURCES

The Company has outstanding $284.8 million principal of 11 1/8% Senior
Subordinated Notes due 2007 (the "Senior Subordinated Notes"). In addition, the
Company has entered into a credit agreement (the "Senior Bank Facility" or
"Credit Agreement"), as amended, providing for term loans in two tranches, with
Tranche A maturing in September 2003 and Tranche B maturing in September 2005,
an Acquisition Loan Facility maturing in June 2004 and a Revolving Credit
Facility of up to $28.5 million maturing in September 2003. At September 30,
2002, there is $28.5 million outstanding on the Revolving Credit Facility, $10.8
million outstanding on the Acquisition Loan Facility and $117.3 million
outstanding under the term loans. The Company also has outstanding a $9.9
million PIK Note maturing in December, 2005.

The Company's liquidity needs will arise primarily from debt service on the
above indebtedness, working capital needs and the funding of capital
expenditures. Borrowings under the Senior Bank Facility bear interest at
variable interest rates. Both the Senior Bank Facility and the indentures
governing the Senior Subordinated Notes limit the Company's ability to incur
additional indebtedness. The covenants contained in the Senior Bank Facility
also, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur guarantee obligations, prepay the
Senior Subordinated Notes or amend its indentures, pay dividends, create liens
on assets, enter into sale and leaseback transactions, make investments, loans
or advances, make acquisitions, engage in mergers or consolidations, change the
business conducted by the Company, engage in certain transactions with
affiliates, and otherwise restrict corporate activities. These covenants also
require the Company to maintain leverage, net worth and interest coverage
ratios. Effective December 31, 2001, the Credit Agreement was amended to provide
relief from the above financial ratio covenants through December 31, 2003, to
reduce the amount of the Revolving Credit Facility from $50.0 million to $28.5
million and define minimum EBITDA and liquidity covenants. At September 30,
2002, the Company is in compliance with existing bank covenants.

In conjunction with the amendment of the Credit Agreement, in April 2002,
the Company received cash of $9.9 million from its parent company in exchange
for the issuance of a PIK note with principal plus 14% annual interest payable
at the maturity date of December 31, 2005.

For the years ended September 30, 2002, 2001 and 2000, capital expenditures
were $9.1 million, $16.9 million, and $19.3 million, respectively. During the
year ended September 30, 2000, the Company incurred additional capital
expenditures of $13.3 million, which the Company financed by entering into
capital leases. The Company did not enter into any capital leases during the
years ended September 30, 2002 and 2001. The decrease in capital expenditures
during the year ended September 30, 2002 was the result of tighter spending
controls placed on capital expenditures.

The Company's principal source of cash to fund its liquidity needs will be
net cash from operating activities and borrowings under its Senior Bank
Facilities. Net cash provided by operating activities for the years ended
September 30, 2002 and 2001 was $16.4 million and $9.3 million, respectively.
The increase in net cash provided by operating activities for the year ended
September 30, 2002 was due to an acceleration of account receivable collections
and the implementation of inventory reduction programs at some of the subsidiary
companies. Net cash from operating activities for the year ended September 30,
2001 was $9.3 million, a decrease of $20.2 million from $29.5 million for the
year ended September 30, 2000, primarily as a result of decreased operating
income, which was caused by lower sales volume and an inability to absorb
overhead costs at the reduced sales level, and a slowdown in accounts receivable
collections.

16

The Company believes that cash generated from operations and existing
revolving lines of credit under the Senior Bank Facilities will be sufficient to
meet its normal operating requirements for fiscal 2003, including working
capital needs and interest payments on the Company's outstanding indebtedness.
In fiscal 2003, the Company anticipates receiving an income tax refund of
approximately $18.4 million from the carryback of net operating losses which
will assist the Company in generating sufficient cash to meet its operating
requirements.

Amounts under the Revolving Credit Facility may be used for working capital
and general corporate purposes, subject to certain limitations under the Senior
Bank Facilities. Although the maximum amount available under the Revolving
Credit Facility has been reduced to the current borrowing level, the Company
believes that it has adequate resources, together with the potential future use
of debt or equity financing, to allow the Company to pursue its strategic goals
of growth and returning to acceptable levels of profitability. The Company's
ability to utilize future debt or equity financing is subject to risks such as
the demand for such instruments and the risk of interest rate fluctuations.

CRITICAL ACCOUNTING POLICIES

Our accounting policies are more fully described in Note 1 of notes to
consolidated financial statements included herein. As disclosed in Note 1 of
notes to consolidated financial statements, the preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions about future events
that affect the amounts reported in the financial statements and accompanying
notes. Future events and their effects cannot be determined with absolute
certainty. Therefore, the determination of estimates requires the exercise of
judgment. Actual results inevitably will differ from those estimates, and such
differences may be material to the financial statements.

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 takes into
account factors such as historical experience, product mix, and in some cases,
actuarial techniques. We constantly reevaluate these significant factors and
make adjustments where facts and circumstances dictate. Historically, actual
results have not significantly deviated from those determined using the
estimates described above.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

- - Impairment of long-lived assets. The Company determined that the carrying
value of the long-lived assets of one of its foundries is no longer
recoverable based on the undiscounted cash flows expected to be realized
from the respective assets. As a result, the Company recognized an
impairment charge of $5.4 million during the year ended September 30, 2002.
The long-lived assets have a post-impairment carrying value of $7.3
million. Changes in estimates of future cash flows used to test the assets
for recoverability could have a significant effect on the amount ultimately
realized from these long-lived assets.

17

- - Defined-Benefit Pension Plans. The Company accounts for its 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 the Company's pension expense in accordance with SFAS 87 is the
expected return on plan assets. The Company has assumed that the expected
long-term rate of return on plan assets will be 6.75% to 9.00%, depending
on the plan. Over the long term, the Company's pension plan assets have
earned in excess of these rates; therefore, the Company believes that its
assumption of future returns is reasonable. However, the plan assets have
earned a rate of return substantially less than these rates in the last two
years. Should this trend continue, future pension expense would likely
increase. At the end of each year, the Company determines the discount rate
to be used to discount plan liabilities. In developing this rate, the
Company uses the Moody's Average AA Corporate Bonds index. At September 30,
2002, the Company determined the discount rate to be 6.75%. Changes in
discount rates over the past few years have not materially affected 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. This has had a significant negative effect on the reported net
worth of the Company.

- - 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 6.75%. In 2002, our
assumed healthcare cost trend rate was 7.5% decreasing gradually to 4.5% in
2011 and then remaining at that level thereafter. Changes in these rates
could materially affect future operating results and net worth of the
Company.

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,
hedging 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 Senior Bank
Facilities. If market interest rates for such borrowings averaged 1% more during
the fiscal year ended September 30, 2003 than they did during fiscal 2002, the
Company's interest expense would increase, and income before income taxes would
decrease by approximately $1.6 million. This analysis does not consider the
effects of the reduced level of overall economic activity that may exist in such
an environment. Further, in the event of a change of such magnitude, management
could take actions to further mitigate its exposure to such 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 14 of
this Form 10-K.

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

None.

18

Part III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain information as of September 30, 2002, with
respect to the persons who are members of the Board of Directors and executive
officers.

Name Age Position
---- --- --------

William M. Barrett 55 President and Chief Executive Officer, Director
Gary W. LaChey 56 Corporate Vice President - Finance
Charles M. Kurtti 65 Executive Vice President
Phillip C. Zehner 60 Vice President, Secretary and Treasurer
Brenton F. Halsey 73 Director
David F. Thomas 52 Director
John D. Weber 38 Director

Mr. Barrett is President and Chief Executive Officer of the Company, a
position he has held since May 15, 2000. Mr. Barrett joined the Company 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 a director of the Company since May, 2000.

Mr. LaChey is Corporate Vice President - Finance of the Company, a position
he has held since June 1, 2000. Mr. LaChey joined the Company in 1971, serving
in a variety of positions of increasing responsibility in the finance
department. Mr. LaChey was most recently Vice President - Finance, Treasurer and
Secretary of the Company.

Mr. Kurtti was Executive Vice President of the Company, a position he had
held since July 2000. Mr. Kurtti joined the Company in 1976 as a salesman. Mr.
Kurtti has served as Director of Marketing, Director of Purchasing -
Engineering, Director - Manufacturing and Engineering and Vice President -
Manufacturing and Engineering. Mr. Kurtti retired from the Company in May, 2002.

Mr. Zehner is Vice President, Secretary and Treasurer for the Company, a
position he has held since June 1, 2000. Mr. Zehner joined the Company in 1974,
serving in a variety of positions of increasing responsibility in the finance
department.

Mr. Halsey is a director of the Company, a position he has held since May
1, 1997. Mr. Halsey was the founding Chief Executive Officer and Chairman of the
James River Corporation from 1969 to 1990. He continued as Chairman until 1992
when he became Chairman Emeritus. Mr. Halsey has expressed his intention to
retire during 2003 and a replacement director will be appointed at the time of
his retirement.

Mr. Thomas is a director of the Company, a position he has held since May
1, 1997. Mr. Thomas has been a Managing Director of Citicorp Venture Capital,
Ltd. since 1991. Mr. Thomas is a director of Lifestyles Furnishings
International Ltd., Galey & Lord, Inc., Anvil Knitwear, Inc. and a number of
private companies.

Mr. Weber is a director of the Company, a position he has held since May 1,
1997. Since 1994, Mr. Weber has been employed at Citicorp Venture Capital, Ltd.,
first as Vice President and currently as Managing Director. Previously, Mr.
Weber worked at Putnam Investments from 1992 through 1994. Mr. Weber is a
director of Anvil Knitwear, Inc. and a number of private companies.

19

ITEM 11. Executive Compensation

The compensation of executive officers of the Company is determined by the
Board of Directors of the Company. The following table sets forth information
concerning compensation received by the officers of the Company for services
rendered in the fiscal years ended September 30, 2002, 2001 and 2000. Directors
of the Company do not receive compensation for their services as directors. They
are reimbursed for their out-of-pocket expenses in connection with their travel
to and attendance at meetings of the board of directors.

Long-Term Compensation
----------------------
Other All
Annual Compensation Annual Restricted Securities Other
Name and Principal Fiscal ------------------- Compen- Stock Underlying LTIP Compen-
Position Year Salary Bonus sation(1) Awards Options/SARs Payouts sation
-------- ---- ------ ----- --------- ------ ------------ ------- -------

William M. Barrett 2002 306,254 -- 35,684 -- -- -- --
President and Chief 2001 275,000 -- 33,048
Executive Officer 2000 275,000 99,418 31,866

Gary W. LaChey 2002 219,374 -- 35,110 -- -- -- --
Corporate Vice 2001 208,334 -- 33,680
President - Finance 2000 200,000 58,568 31,452

Charles M. Kurtti 2002 182,000 37,774 35,271 -- -- -- --
Executive Vice 2001 176,174 48,319 34,321
President 2000 167,500 87,549 32,743

Phillip C. Zehner 2002 129,000 19,124 32,701 -- -- -- --
Vice President, 2001 125,800 26,312 30,902
Secretary and 2000 109,200 37,459 29,021
Treasurer

Joseph L. DeRita 2002 224,000 -- 18,015 -- -- -- --
President- 2001 224,000 -- 19,182
Dalton Corporation 2000 218,000 92,887 18,915

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

20

MANAGEMENT INCENTIVE PLAN

The Company provides performance-based compensation awards to executive
officers and key employees for achievement during each year as part of a bonus
plan. Such compensation awards may be a function of individual performance and
consolidated corporate results. The qualitative and quantitative criteria will
be determined from time to time by the Board of Directors of the Company.

MANAGEMENT EQUITY PARTICIPATION

Certain Management Investors have acquired units representing membership
interests in ACP Products, L.L.C., which represent, in the aggregate,
approximately a ten percent beneficial interest in the Company (the "Purchased
Interests"). Neenah is owned by NFC Castings, Inc., which is a wholly owned
subsidiary of ACP Holdings which in turn is wholly owned by ACP Products, L.L.C.
In addition, in connection with certain of the acquisitions, certain senior
managers of certain of the subsidiaries purchased common interests in ACP
Products, L.L.C. The Management Investors and certain other employees of the
Company may be given the opportunity to purchase additional Purchased Interests
either in connection with future acquisitions or otherwise.

Upon the termination of employment with the Company, an employee's
Purchased Interests will be subject to certain repurchase provisions exercisable
by ACP Products, L.L.C. or its designees. Any Purchased Interests issued in the
future are expected to be subject to rights and restrictions similar to those of
the Purchased Interests purchased in connection with the Merger. The price of
the future Purchased Interests will be established by ACP Products, L.L.C. in
consultation with the Board of Directors of the Company or a compensation
committee thereof.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The Company's authorized capital stock consists of (a) 11,000 shares of
common stock of Neenah Foundry Company, par value $100 per share (the "Common
Stock"), 1,000 shares of which are issued and outstanding and owned by NFC
Castings, Inc. and are pledged to the lenders under the Senior Bank Facilities;
(b) 3,000 shares of preferred stock, par value $100 per share, none of which are
issued or outstanding.

The Company's authorized preferred stock consists of 3,000 shares of
preferred stock, par value $100 per share. There are no issued or outstanding
shares of preferred stock.

The outstanding common units of ACP Products, L.L.C. consist of 102,070
Class A-3 Common Units (the "Class A Common Units"), 929,391 Class B-3 Common
Units (the "Class B Common Units") and 713,637 Class C-3 Common Units (the
"Class C Common Units"), and together with the Class A "Common Units" and the
Class B Common Units, the "Common Units"). Holders of Class A Common Units are
entitled to one vote per Class A Common Unit on all matters to be voted upon by
the holders of Class A Common Units. Holders of Class C Common Units are
entitled to a number of votes per Class C Common Unit based on the total number
of Class C Common Units outstanding, on all matters to be voted upon by the
holders of Class C Common Units. Holders of Class B Common Units have no right
to vote on any matters to be voted on by holders of Common Units. Holders of
Class B Common Units may elect at any time to convert any or all of such Units
into Class A Common Units, on a Common Unit-for-Common-Unit basis.

21

Set forth below is certain information regarding the beneficial
ownership as of September 30, 2002 of Class A Common Units and Class C Common
Units, respectively, by each person who beneficially owns 5.0% or more of the
outstanding Class A Common Units or Class C Common Units, each director and
named executive officer and all directors and named executive officers as a
group. Except as indicated below, the address for each of the persons listed
below is c/o Neenah Foundry Company, 2121 Brooks Avenue, Box 729, Neenah,
Wisconsin 54957.

(1) Each holder of Class C Common Units is entitled to approximately 0.17
votes per Class C Common Unit.

(2) Does not include 754,779 Class B Common Units, which are convertible at
any time into the same number of Class A Common Units.

(3) Does not include 78,712 Class B Common Units, which are convertible at
any time into the same number of Class A Common Units.

(4) Includes (a) Class A Common Units beneficially owned by Mr. Thomas and
(b) 81,000 Class A Common Units beneficially owned by Citicorp Venture
Capital, Ltd. and certain affiliated individuals and entities,
(collectively, "CVC"). Does not include 754,779 Class B Common Units
beneficially owned by CVC or 32,526 Class B Common Units beneficially
owned by Mr. Thomas, which Class B Common Units are convertible at any
time into the same number of Class A Common Units. Mr. Thomas is a
managing director of CVC. Mr. Thomas disclaims beneficial ownership of
the Class A Common Units and Class B Common Units beneficially owned by
CVC, except to the extent of his pecuniary interest therein.

(5) Includes (a) Class A Common Units beneficially owned by Mr. Weber and
(b) 81,000 Class A Common Units beneficially owned by CVC. Does not
include 754,779 Class B Common Units beneficially owned by CVC or 4,228
Class B Common Units beneficially owned by Mr. Weber, which Class B
Common Units are convertible at any time into the same number of Class
A Common Units. Mr. Weber is a managing director of CVC. Mr. Weber
disclaims beneficial ownership of the Class A Common Units and Class B
Common Units beneficially owned by CVC, except to the extent of his
pecuniary interest therein.

22

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH ACP HOLDINGS

ACP Products, L.L.C. holds all of the issued and outstanding shares of
capital stock of 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.

SHAREHOLDER RELATIONSHIPS

The Management Investors and certain institutional investors, including
Citicorp Venture Capital, Ltd., are parties to the Fifth Amended and Restated
Limited Liability Agreement of ACP Products, L.L.C. (the "L.L.C. Agreement").
The L.L.C. Agreement contains certain provisions with respect to the beneficial
equity interests and corporate governance of the Company. The L.L.C. Agreement
provides that the Investor Group and the Management Investors, as the only
members of ACP Products, L.L.C. holding beneficial interests in the Company,
have the right to direct all actions taken in respect of NFC Castings, Inc. and
the Company, including, without limitation, appointing members of the Board of
Directors of the Company and of NFC Castings, Inc..

CONTRIBUTION OF ACP CAPITAL STOCK

On September 8, 1998, the capital stock of ACP was contributed to the
Company by ACP Holdings. In connection with the contribution, the Company
assumed $14.6 million of indebtedness of ACP, which was refinanced through
borrowings of Tranche A Loans. In connection with the contribution of the
capital stock of ACP to the Company, (i) NFC Castings, Inc. issued a $4.2
million senior subordinated note to CVC in exchange for a $4.2 million current
pay obligation of ACP to CVC and (ii) $6.7 million of outstanding subordinated
debt of ACP to ACP Holdings and NFC Castings, Inc. was contributed to the
capital of ACP.

REGISTRATION RIGHTS AGREEMENT

The Company entered into a registration rights agreement (the "Registration
Rights Agreement") with the Investor Group and the Management Investors.
Pursuant to the terms of the Registration Rights Agreement, certain holders of
the Company's Common Stock have the right to require the Company, at the
Company's sole cost and expense and subject to certain limitations, to register
under the Securities Act of 1933, as amended, or list on any recognized stock
exchange all or part of the Common Stock beneficially owned by such holders (the
"Registrable Securities"). All such holders will be entitled to participate in
all registrations by the Company or other holders, subject to certain
limitations. In connection with all such registrations, the Company agreed to
indemnify all beneficial owners of Registrable Securities against certain
liabilities, including liabilities under the Securities Act of 1933, as amended,
and other applicable state or foreign securities laws. Registrations pursuant to
the Registration Rights Agreement will be made, if applicable, on the
appropriate registration form and may be underwritten registrations.

23

EMPLOYMENT AGREEMENTS

The Company, ACP, ACP Holdings and ACP Products, L.L.C. entered into an
executive employment and consulting agreement with James K. Hildebrand dated as
of September 15, 1998. Such agreement provided for (i) an initial term of
employment until September 30, 2001 after which, barring termination by the
Company under certain circumstances (including gross negligence, willful
misconduct and commission of certain crimes), Mr. Hildebrand will serve as a
consultant to the Company for a period of two years with automatic renewal,
subject to earlier termination notice by either party, for successive one year
periods up to an additional three years; (ii) a minimum base salary of $500,000
and a bonus to be calculated based on achieved EBITDA performance so long as Mr.
Hildebrand is employed by the Company; (iii) severance benefits; (iv)
non-competition, non-solicitation and confidentiality agreements; (v) an option
to purchase certain common membership units of ACP Products L.L.C.; and (vi)
other terms and conditions of Mr. Hildebrand's employment including health
benefits. Mr. Hildebrand resigned his position in May, 2000. At that time, the
Company recorded severance benefits payable to Mr. Hildebrand under the terms of
the above agreement.

ITEM 14. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. In accordance with Rule
13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), within 90
days prior to the filing date of this annual report on Form 10-K, an evaluation
was carried out under the supervision and with the participation of the
Company's management, including the Company's President and Chief Executive
Officer and Corporate Vice President - Finance, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-14 (c) under the Exchange Act). Based upon their evaluation
of these disclosure controls and procedures, the President and Chief Executive
Officer and Corporate Vice President - Finance concluded that the disclosure
controls and procedures were effective as of the date of such evaluation to
ensure that material information relating to the Company, including its
consolidated subsidiaries, was made known to them by others within those
entities, particularly during the period in which this Annual Report on Form
10-K was being prepared. One of the consolidated subsidiaries had inadequate
controls and procedures at the time the Company acquired it. The Company has
made substantial progress to resolve these inadequacies and is continuing to
address them. This issue was considered in the evaluation of disclosure controls
and procedures for the Company but did not affect the conclusion referred to
above.

(b) Changes in internal controls. There were no significant changes in the
Company's internal controls or other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.

24

Part IV

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

Page
----

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

Report of Ernst & Young LLP, Independent Auditors 34

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

(2) Financial Statements Schedules

Report of Ernst & Young LLP, Independent Auditors 70

Schedule II - Valuation and Qualifying Accounts of Neenah Foundry Company 71

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

(b) Reports on Form 8-K.

The Company did not file any reports on Form 8-K during the quarter
ended September 30, 2002.

(c) Exhibits

See Exhibit Index.

25

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 20, 2002.

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 20, 2002, by the following persons on behalf
of the registrant and in the capacities indicated.

/s/William M. Barrett /s/ Brenton F. Halsey
- ---------------------------- -----------------------------
William M. Barrett Brenton F. Halsey
President and Director
Chief Executive Officer, Director
(Principal Executive Officer)

/s/ David F. Thomas /s/ Gary W. LaChey
- ---------------------------- ----------------------------
David F. Thomas Gary W. LaChey
Director Corp. Vice President - Finance
(Principal Financial and Principal
Accounting Officer)

/s/ John D. Weber
-----------------------
John D. Weber
Director

26

CERTIFICATIONS

I, William M. Barrett, President and Chief Executive Officer of Neenah Foundry
Company, certify that:

1. I have reviewed this annual report on Form 10-K of Neenah Foundry
Company.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: December 20, 2002

/s/William M. Barrett
------------------------------
William M. Barrett
President and Chief Executive Officer

27

CERTIFICATIONS

I, Gary W. LaChey, Corporate Vice President - Finance of Neenah Foundry Company,
certify that:

1. I have reviewed this annual report on Form 10-K of Neenah Foundry
Company.
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, including its consolidated subsidiaries,
is made known to us by others within those entities,
particularly during the period in which this annual
report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process,
summarize and report financial data and have
identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: December 20, 2002

/s/Gary W. LaChey
--------------------------
Gary W. LaChey
Corporate Vice President- Finance

28

EXHIBIT INDEX
EXHIBITS
- --------

2.1 Agreement and Plan of Reorganization, dated November 20, 1996, by and
among NFC Castings, Inc., NC Merger Company and Neenah Corporation. **
2.2 First Amendment to Agreement and Plan of Reorganization, dated as of
January 13, 1997, by and among NFC Castings, Inc., NC Merger Company
and Neenah Corporation. **
2.3 Second Amendment to Agreement and Plan of Reorganization, dated as of
February 21, 1997, by and among NFC Castings, Inc., NC Merger Company
and Neenah Corporation. **
2.4 Third Amendment to Agreement and Plan of Reorganization, dated as of
April 3, 1997, by and among NFC Castings, Inc., NC Merger Company and
Neenah Corporation. **
2.5 Merger Agreement, made as of July 1,1997, by and between Neenah
Corporation and Neenah Foundry Company. **
2.6 Stock Purchase Agreement for the acquisition of Deeter Foundry, Inc.
dated as of March 26, 1998 by and among Neenah Foundry Company and the
Selling Shareholders of Deeter Foundry, Inc. (incorporated by reference
to the Company's Form 10-Q for the period ended March 31, 1998 filed on
May 14, 1998.)
2.7 Stock Purchase Agreement for the acquisition of Mercer dated as of
April 3, 1998 by and among Neenah Foundry Company, Mercer Forge
Corporation and the Selling Shareholders of Mercer (incorporated by
reference to the Company's Form 8-K filed on April 14, 1998.)
2.8 Stock Purchase Agreement for the acquisition of Dalton dated as of
August 7, 1998 by and among Neenah Foundry Company, Dalton Corporation
and the Dalton Corporation Employee Stock Ownership Plan and Trust
(incorporated by reference to the Company's Form 8-K filed on September
21, 1998.)
2.9 Stock Purchase Agreement dated as of December 3, 1998 among Niemin
Porter & Co. d/b/a Cast Alloys, Inc., the Sellers as defined therein
and Neenah Foundry Company. ****
2.10 First Amendment to the Stock Purchase Agreement dated December 30, 1998
among Niemin Porter & Co. d/b/a Cast Alloys, Inc., the Sellers as
defined therein and Neenah Foundry Company. ****
3.1 Restated Articles of Incorporation of Neenah Foundry Company. **
3.2 By-laws of Neenah Foundry Company. **
3.3 (Intentionally omitted.)
3.4 (Intentionally omitted.)
3.5 Restated Articles of Incorporation of Hartley Controls Corporation. **
3.6 By-laws of Hartley Controls Corporation. **
3.7 Restated Articles of Incorporation of Neenah Transport, Inc.**
3.8 By-laws of Neenah Transport, Inc. **
4.1 Indenture dated as of April 30, 1997 among NC Merger Company and United
States Trust Company of New York. **
4.2 Purchase Agreement dated as of April 23, 1997 among NC Merger Company,
Chase Securities Inc. and Morgan Stanley & Co. Incorporated. **
4.3 Exchange and Registration Rights Agreement dated as of April 30, 1997
among Neenah Corporation, Neenah Foundry Company, Hartley Controls
Corporation and Neenah Transport, Inc. and Chase Securities, Inc.**
4.4 First Supplemental Indenture, dated as of April 30, 1997 among Neenah
Corporation, Neenah Foundry Company, Neenah Transport, Inc. and Hartley
Controls Corporation and United States Trust Company of New York. **
4.5 Letter Agreement, dated as of April 30, 1997 among Neenah Corporation,
Neenah Foundry Company, Hartley Controls Corporation and Neenah
Transport, Inc. and Chase Securities Inc. and Morgan Stanley & Co.
Incorporated. **
4.6 Form of Global Note relating to the Indenture dated as of April 23,
1997. **

29

4.7 Indenture dated as of July 1, 1997 among Neenah Corporation, Neenah
Foundry Company, Neenah Transport, Inc., Hartley Controls Corporation
and United States Trust Company of New York. **
4.8 Purchase Agreement dated as of June 26, 1997 among Neenah Corporation,
Neenah Foundry Company, Hartley Controls Corporation, Neenah Transport,
Inc. and Chase Securities Inc. **
4.9 Exchange and Registration Rights Agreement dated as of July 1, 1997 by
and between Neenah Corporation, Neenah Foundry Company, Hartley
Controls Corporation, Neenah Transport, Inc. and Chase Securities, Inc.
**
4.10 Form of Global Note related to the Indenture dated as of July 1, 1997.
**
4.11 Indenture dated as of November 24, 1998 among Neenah Foundry Company,
Neenah Transport, Inc., Hartley Controls Corporation, the
Guarantors and United States Trust Company of New York. ****
10.1 Master Lease Agreement between Neenah Foundry Company and Bank One
Leasing Corporation dated December 14, 1992. **
10.2 Agreement between Neenah Foundry Company and Rockwell International
Corporation effective April 1, 1995. **
10.3 Letter Agreement between Neenah Foundry Company and Eaton Corporation
dated April 4, 1996.**
10.4 (Intentionally omitted).
10.5 (Intentionally omitted).
10.6 (Intentionally omitted).
10.7 Credit Agreement dated as of April 30, 1997 as Amended and Restated as
of September 12, 1997, as of April 3, 1998, and as of September 8, 1998
by and among Neenah Foundry Company, NFC Castings, Inc., the Chase
Manhattan Bank as Administrative Agent, Chase Securities, Inc. as
Arranger and the other Lenders from time to time party thereto
(incorporated by reference to the Company's Form 8-K filed on September
21, 1998.)
10.8 Employment Agreement dated September 9, 1994 between the Neenah
Corporation, Neenah Foundry Company, Harley Controls Corporation,
Neenah Transport, Inc. and James P. Keating, Jr.**
10.9 Consulting Agreement dated September 9, 1994 between the Neenah Foundry
Company and the Guarantors and James P. Keating, Jr. **
10.10 First Amendment to Employment Agreement, dated September 9, 1994,
between Neenah Foundry Company, Neenah Corporation, Hartley Controls
Corporation and James P. Keating, Jr. **
10.11 Pledge Agreement dated as of April 30, 1997, among NC Merger Company, a
Wisconsin Corporation, NFC Castings, Inc., a Delaware Corporation. **
10.12 Subsidiary Guarantee Agreement dated as of April 30, 1997, among each
of the subsidiaries listed of NC Merger Company, a Wisconsin
corporation, and The Chase Manhattan Bank, a New York banking
corporation, as collateral agent for the secured parties. **
10.13 Parent Guarantee Agreement dated as of April 30, 1997, between NFC
Castings, Inc., a Delaware corporation and The Chase Manhattan Bank, a
New York banking corporation, as collateral agent for the secured
parties. **
10.14 Security Agreement dated as of April 30, 1997, among NC Merger Company,
a Wisconsin corporation, each subsidiary of the borrower and The Chase
Manhattan Bank, a New York banking corporation, as collateral agent for
the secured parties. **
10.15 Form of Mortgage. **

30

10.16 Amendment No. 1, Consent and Waiver, dated as of November 18, 1998, to
the Credit Agreement dated as of April 30, 1997 as Amended and Restated
as of September 12, 1997, as of April 3, 1998, and as of September 8,
1998 by and among Neenah Foundry Company, NFC Castings, Inc., the
Lenders from time to time party thereto, and the Chase Manhattan Bank.
***
10.17 Cash Collateral Account Agreement dated as of November 24, 1998,
between Neenah Foundry Company and the Chase Manhattan Bank. ***
10.18 Executive Employment and Consulting Agreement dated September 15, 1998
by and among Neenah Foundry Co., Advanced Cast Products, Inc., ACP
Holding Co., ACP Products, LLC and James K. Hildebrand.***
10.19 Dalton Corporation, KLDavidson Employment Agreement dated September 8,
1998. ***
10.20 Purchase Agreement dated November 19, 1998 among Neenah Foundry
Company. Neenah Transport, Inc., Hartley Controls Corporation, the
Guarantors and the Initial Purchasers. ****
10.21 Exchange and Registration Rights Agreement dated November 24, 1998
among Neenah Foundry Company, Neenah Transport, Inc., Hartley Controls
Corporation, the Guarantors and the Initial Purchasers. ****
10.22 Stock Purchase Agreement dated October 2, 2000 by and between Neenah
Foundry Company (as seller) and Simpson Technologies Corp. (as buyer)
(incorporated by reference to the Company's Form 10-Q for the period
ended December 31, 2000 filed on February 9, 2001).
10.23 Amendment No. 2 dated as of March 16, 2001, to the Credit Agreement
dated as of April 30, 1997 as Amended and Restated as of September 12,
1997, as of April 3, 1998, and as of September 8, 1998 by and among
Neenah Foundry Company, NFC Castings, Inc., the Lenders from time to
time party thereto, and the Chase Manhattan Bank (incorporated by
reference to the Company's Form 10-Q for the period ended March 31,
2001 filed on May 9, 2001).
10.24 Amendment No. 3 dated as of December 31, 2001, to the Credit Agreement
dated as of April 30, 1997 as Amended and Restated as of September 12,
1997, as of April 3, 1998, as of September 8, 1998, as of November 18,
1998, and as of March 23, 2001 by and among Neenah Foundry Company, NFC
Castings, Inc., the Lenders from time to time party thereto, and the
Chase Manhattan Bank (incorporated by reference to the Company's Form
10-Q for the period ended March 31, 2002 filed on May 13, 2002).
10.25 Secured PIK Note dated as of April 29, 2002 between Neenah Foundry
Company and Citicorp Venture Capital, Ltd. (incorporated by reference
to the Company's Form 10-Q for the period ended March 31, 2002 filed on
May 13, 2002).
10.26 Secured PIK Note Purchase Agreement dated as of April 29, 2002, by and
among Neenah Foundry Company, NFC Castings, Inc., and Citicorp Venture
Capital, Ltd. (incorporated by reference to the Company's Form 10-Q for
the period ended March 31, 2002 filed on May 13, 2002).
21.1 Subsidiaries of the Registrant. *

- ----

* Filed herewith.

** Incorporated by reference to the Company's Form S-4 (Registration No.
333-28751) which became effective August 29, 1997.

*** Incorporated by reference to the Company's Form 10-K (Registration No.
332-28751) which was filed December 23, 1998.

**** Incorporated by reference to the Company's Form S-4 (Registration No.
333-72455) which became effective May 13, 1999.

31

CONSOLIDATED FINANCIAL STATEMENTS

Neenah Foundry Company
Years ended September 30, 2002, 2001 and 2000

32

Neenah Foundry Company

Consolidated Financial Statements

Years ended September 30, 2002, 2001 and 2000

CONTENTS

Report of Independent Auditors...........................................................................1

Consolidated Financial Statements

Consolidated Balance Sheets..............................................................................2
Consolidated Statements of Operations....................................................................4
Consolidated Statements of Changes in Stockholder's Equity (Deficit).....................................5
Consolidated Statements of Cash Flows....................................................................6
Notes to Consolidated Financial Statements...............................................................8

33

Report of Independent Auditors

Board of Directors
Neenah Foundry Company

We have audited the accompanying consolidated balance sheets of Neenah Foundry
Company (the Company) as of September 30, 2002 and 2001, and the related
consolidated statements of operations, changes in stockholder's equity (deficit)
and cash flows for each of the three years in the period ended September 30,
2002. 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 auditing standards generally accepted
in the 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
Company at September 30, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
September 30, 2002, in conformity with accounting principles generally accepted
in the United States.

/s/ Ernst & Young LLP

Milwaukee, Wisconsin
November 5, 2002

34

Neenah Foundry Company

Consolidated Balance Sheets
(In Thousands, Except Share and per Share Amounts)

SEPTEMBER 30
2002 2001
----------------------------------

ASSETS
Current assets:
Cash and cash equivalents $ 26,354 $ 4,346
Accounts receivable, less allowance for doubtful
accounts of $1,062 in 2002 and $1,437 in 2001 59,260 69,845
Inventories 51,896 71,695
Refundable income taxes 14,850 2,148
Deferred income taxes 15,880 3,069
Other current assets 5,765 5,852
Current assets of discontinued operations 665 -
----------------------------------
Total current assets 174,670 156,955

Property, plant and equipment:
Land 6,353 6,226
Buildings and improvements 29,123 31,346
Machinery and equipment 217,139 236,852
Patterns 28,881 28,034
Construction in progress 5,811 6,240
----------------------------------
287,307 308,698
Less accumulated depreciation 110,017 94,865
----------------------------------
177,290 213,833

Deferred financing costs, net of accumulated amortization of $8,340 in
2002 and $6,327 in 2001 6,656 7,811
Identifiable intangible assets, net of accumulated amortization of
$18,116 in 2002 and $22,163 in 2001 37,173 55,932
Goodwill, net of accumulated amortization of $26,566 in 2002 and
$22,619 in 2001 180,214 186,005
Other assets 6,470 5,907
----------------------------------
230,513 255,655
----------------------------------
$ 582,473 $ 626,443
==================================

35

Neenah Foundry Company

Consolidated Balance Sheets (continued)
(In Thousands, Except Share and per Share Amounts)

SEPTEMBER 30
2002 2001
---------------------------------

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 23,140 $ 30,568
Accrued wages and employee benefits 12,855 13,250
Accrued interest 13,733 13,567
Other accrued liabilities 2,904 4,701
Current portion of long-term debt 40,917 20,424
Current portion of capital lease obligations 2,519 2,305
Current liabilities of discontinued operations 467 -
---------------------------------
Total current liabilities 96,535 84,815

Long-term debt 410,515 413,653
Capital lease obligations 5,248 7,845
Deferred income taxes 56,971 63,719
Postretirement benefit obligations 6,696 6,345
Other liabilities 18,654 8,127
---------------------------------
Total liabilities 594,619 584,504

Commitments and contingencies

Stockholder's equity (deficit):
Preferred stock, par value $100 per share; 3,000 shares authorized;
no shares issued or outstanding - -
Common stock, Class A (voting), par value $100 per share; 1,000
shares authorized, issued and outstanding 100 100
Common stock, Class B (nonvoting), par value $100 per share; 10,000
shares authorized; no shares issued or outstanding - -
Capital in excess of par value 51,317 51,317
Accumulated deficit (55,563) (7,860)
Accumulated other comprehensive loss (8,000) (1,618)
---------------------------------
Total stockholder's equity (deficit) (12,146) 41,939
---------------------------------
$ 582,473 $ 626,443
=================================

36

Neenah Foundry Company

Consolidated Statements of Operations
(In Thousands)

YEAR ENDED SEPTEMBER 30
2002 2001 2000
---------------------------------------------------------------

Net sales $ 405,218 $ 416,907 $ 504,311
Cost of sales 341,013 352,737 406,652
---------------------------------------------------------------
Gross profit 64,205 64,170 97,659

Selling, general and administrative
expenses 29,297 28,017 33,619
Amortization expense 3,829 10,613 10,503
Provision for impairment of assets 5,453 - -
(Gain) loss on disposal of
equipment 544 (434) 85
---------------------------------------------------------------
Operating income 25,082 25,974 53,452

Other income (expense):
Interest expense (43,951) (43,987) (44,411)
Interest income 819 445 978
---------------------------------------------------------------
Income (loss) from continuing operations
before income taxes (18,050) (17,568) 10,019
Provision (credit) for income taxes (8,389) (4,149) 6,175
---------------------------------------------------------------
Income (loss) from continuing
operations (9,661) (13,419) 3,844

Discontinued operations:
Loss from discontinued operations net of
income tax credit of $(20,475) in
2002, $(2,318) in 2001 and $(4,575) in
2000 (38,042) (4,035) (8,987)

Gain on sale of discontinued operations,
net of income taxes of $1,603 in 2001 - 2,404 -
---------------------------------------------------------------
Net loss $ (47,703) $ (15,050) $ (5,143)
===============================================================

See accompanying notes.

37

Neenah Foundry Company

Consolidated Statements of Changes in Stockholder's Equity (Deficit)
(In Thousands)

Common Stock Retained Accumulated
------------------ Earnings Other
Preferred Capital in Excess (Accumulated Comprehensive
Stock Class A Class B of Par Value Deficit) Loss Total
--------- --------- -------- ----------------- --------------- ------------- -------

Balance at September 30, 1999 $ - $100 $ - $51,317 $ 12,333 $ - $ 63,750
Components of comprehensive loss:
Net loss - - - - (5,143) - (5,143)
Pension liability adjustment,
net of tax effect of $60 - - - - - (89) (89)
---------
Total comprehensive loss (5,232)
--------- --------- -------- --------------- --------------- ------------ ---------
Balance at September 30, 2000 - 100 - 51,317 7,190 (89) 58,518
Components of comprehensive income:
Net loss - - - - (15,050) - (15,050)
Pension liability adjustment,
net of tax effect of $1,018 - - - - - (1,529) (1,529)
---------
Total comprehensive loss (16,579)
--------- --------- -------- --------------- --------------- ------------ ---------
Balance at September 30, 2001 - 100 - 51,317 (7,860) (1,618) 41,939
Components of comprehensive
income:
Net loss - - - - (47,703) - (47,703)
Pension liability adjustment,
net of tax effect of $4,255 - - - - - (6,382) (6,382)
---------
Total comprehensive loss (54,085)
--------- --------- -------- --------------- --------------- ------------ ---------
Balance at September 30, 2002 $ - $100 $ - $51,317 $(55,563) $(8,000) $(12,146)
========= ========= ======== =============== =============== ============ =========

See accompanying notes.

38

Neenah Foundry Company

Consolidated Statements of Cash Flows
(In Thousands)

YEAR ENDED SEPTEMBER 30
2002 2001 2000
------------------------------------------------

OPERATING ACTIVITIES
Net loss $(47,703) $(15,050) $ (5,143)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Provision for obsolete inventories 240 248 2,500
Provision for impairment of assets 36,533 - -
Depreciation 25,532 29,636 28,112
Amortization of identifiable intangible assets and
goodwill 3,947 11,638 11,641
Amortization of deferred financing costs and premium
on notes 1,392 1,222 1,082
Gain on sale of discontinued operations - (4,007) -
(Gain) loss on disposal of property, plant and
equipment 559 (337) 104
Deferred income taxes (10,650) (1,630) (358)
Changes in operating assets and liabilities:
Accounts receivable 10,275 2,145 8,558
Inventories 19,559 (7,405) (7,759)
Other current assets 1,043 45 (378)
Accounts payable (7,118) (474) (3,842)
Accrued liabilities (2,983) (3,911) (3,924)
Income taxes (14,104) (2,152) (1,183)
Postretirement benefit obligations 351 379 477
Other liabilities (437) (1,060) (405)
--------------------------------------------------
Net cash provided by operating activities 16,436 9,287 29,482

INVESTING ACTIVITIES
Acquisition of business, net of cash acquired - - (29,502)
Proceeds from disposition of business, net of fees - 5,190 -
Purchase of property, plant and equipment (9,055) (16,882) (19,268)
Proceeds from sale of property, plant and equipment 323 2,859 2,381
Other (431) 2,373 (936)
--------------------------------------------------
Net cash used in investing activities (9,163) (6,460) (47,325)

39

Neenah Foundry Company

Consolidated Statements of Cash Flows (continued)
(In Thousands)

YEAR ENDED SEPTEMBER 30
2002 2001 2000
-------------------------------------------------

FINANCING ACTIVITIES
Proceeds from long-term debt $ 33,400 $ 5,000 $29,750
Payments on long-term debt and capital
lease obligations (17,807) (22,053) (9,797)
Debt issuance costs (858) (906) -
-------------------------------------------------
Net cash provided by (used in) financing activities 14,735 (17,959) 19,953
-------------------------------------------------
Increase (decrease) in cash and cash equivalents 22,008 (15,132) 2,110
Cash and cash equivalents at beginning of period 4,346 19,478 17,368
-------------------------------------------------
Cash and cash equivalents at end of period $ 26,354 $ 4,346 $19,478
=================================================

Supplemental disclosures of cash flow information:
Interest paid $ 44,340 $ 47,428 $47,475
Income taxes paid (refunded) (4,080) (1,253) 3,141

40

Neenah Foundry Company

Notes to Consolidated Financial Statements

September 30, 2002
(In Thousands)

1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

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.

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

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.

41

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 cost, which
approximates fair value, of cash equivalents, which consist entirely of
repurchase agreements, totaled $25,500 at September 30, 2002. There were no cash
equivalents at September 30, 2001.

INVENTORIES

Inventories 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 38% of total inventories at September 30, 2002 and 2001,
respectively. If the FIFO method of inventory valuation had been used by all
companies, inventories would have been approximately $1,458 and $1,041 higher
than reported at September 30, 2002 and 2001, respectively.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation for financial
reporting purposes is provided over the estimated useful lives of the respective
assets using the straight-line method.

DEFERRED FINANCING COSTS

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

42

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

IDENTIFIABLE INTANGIBLE ASSETS

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

GOODWILL

Effective October 1, 2001, goodwill is no longer amortized but is subject to an
annual test for impairment. Prior to October 1, 2001, goodwill was amortized on
a straight-line basis over 15 to 40 years.

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 amounted to $587, $615 and $636 for the years ended September 30,
2002, 2001 and 2000, respectively.

43

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 Company has a number of financial instruments, none of which are held for
trading purposes. The following presents the carrying amounts and estimated fair
values of such instruments:

SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
----------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------- -------------- -------------- -------------

Cash and cash equivalents $ 26,354 $ 26,354 $ 4,346 $ 4,346
Accounts receivable 59,260 59,260 69,845 69,845
Accounts payable 23,140 23,140 30,568 30,568
Long-term debt 451,432 285,052 434,077 308,586
Capital lease obligations 7,767 7,767 10,150 10,150

The fair value of the Senior Subordinated Notes with a face value of $282,000 is
based on quoted market prices.

2. DISCONTINUED OPERATIONS

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The Company adopted SFAS No. 144 as of
October 1, 2001. The provisions of SFAS No. 144 were applied during the year
ended September 30, 2002, as discussed below.

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 is included in
the Castings segment.

44

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

2. DISCONTINUED OPERATIONS (CONTINUED)

These events also had a significant impact on the value of Cast Alloys' fixed
assets 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 carrying value of such
assets during the year ended September 30, 2002.

In January 2002, management initiated a plan for the discontinuation of 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 ending 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.

Revenues for Cast Alloys for the years ended September 30, 2002, 2001 and 2000
were $8,641, $53,130 and $45,345, respectively. Interest expense allocated to
Cast Alloys of $1,954, $4,309 and $3,892 for the years ended September 30, 2002,
2001 and 2000, respectively, was based on the purchase price of Cast Alloys in
relation to the purchase price of all other acquisitions funded by additional
Company borrowings.

On October 2, 2000, the Company sold all of the issued and outstanding shares of
common stock of Hartley for cash of $5,190, net of fees of $129. The disposition
of Hartley resulted in a gain of $2,404, net of income taxes of $1,603. Proceeds
from the sale were used to reduce outstanding debt. Hartley designs and
manufactures customized sand control systems. In accordance with the provisions
of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," which has been amended by SFAS
No. 144, the results of operations of Hartley have been reported as discontinued
operations in the consolidated statements of operations. Revenues for Hartley
for the year ended September 30, 2000 were $5,514.

45

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

3. ACQUISITION

On November 30, 1999, the Company purchased Gregg, a manufacturer of gray and
ductile iron castings, for $23,002 (including direct costs of $485 and net of
$403 of acquired cash). Additional purchase consideration of $6,500 was paid in
April 2000 based on Gregg's operating results for the calendar year ended
December 31, 1999. The acquisition of Gregg was financed through borrowings
under the Company's Acquisition Loan Facility.

The acquisition of Gregg has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated on the basis
of fair values to the underlying assets acquired and liabilities assumed. The
excess of the cost of acquisition over the fair value of the net tangible and
identifiable intangible assets acquired has been allocated to goodwill. The
operating results of Gregg are included in the consolidated statements of
operations since the date of acquisition.

4. INVENTORIES

Inventories consist of the following as of September 30:

2002 2001
---------- -----------

Raw materials $ 4,021 $ 9,519
Work in process and finished goods 35,482 50,210
Supplies 12,393 11,966
---------- -----------
$ 51,896 $ 71,695
========== ===========

5. INTANGIBLE ASSETS

In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and No.
142, "Goodwill and Other Intangible Assets." The Company adopted SFAS No. 142 as
of October 1, 2001. Under SFAS No. 142, goodwill and intangible assets deemed to
have indefinite lives are no longer amortized but are subject to annual
impairment tests in accordance with the Statements. Other intangible assets
continue to be amortized over their estimated useful lives.

Upon adoption of SFAS No. 141, the Company reclassified the identifiable
intangible assets related to the assembled workforce and facilities in place
with an unamortized balance of $4,660 and $3,469, respectively, net of related
deferred income taxes of $1,864 and $1,388, respectively, to goodwill.

46

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

5. INTANGIBLE ASSETS (CONTINUED)

The Company performed the transitional impairment test of goodwill as of October
1, 2001, and concluded that no impairment existed at the time of adoption of
SFAS No. 142. As discussed in Note 2, subsequent to the adoption of SFAS No.
142, a goodwill impairment charge of $10,668 related to Cast Alloys, a
discontinued operation, was recognized. The Company performed the annual
impairment test of goodwill as of July 1, 2002, and concluded that no additional
goodwill impairment existed. The impairment tests were performed based on the
expected present value of future cash flows for each of the Company's reporting
units.

Identifiable intangible assets consist of the following as of September 30:

SEPTEMBER 30, 2002 SEPTEMBER 30, 2001
----------------------------------------------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
----------------------------------------------------------------

Amortizable intangible assets:
Customer lists $31,441 $14,814 $35,041 $12,662
Tradenames 22,553 2,649 27,053 2,392
Assembled workforce - - 10,942 6,282
Facilities in place - - 3,764 295
Other 1,295 653 1,295 532
----------------------------------------------------------------
$55,289 $18,116 $78,095 $22,163
================================================================

The Company does not have any intangible assets deemed to have indefinite lives.
Amortization expense expected to be recognized during fiscal years subsequent to
September 30, 2002, is as follows:

2003 $3,832
2004 3,832
2005 3,832
2006 3,832
2007 3,195

47

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

5. INTANGIBLE ASSETS (CONTINUED)

Changes in the carrying amount of goodwill during the year ended September 30,
2002, consist of the following:

Castings Forgings Other
Segment Segment Segment Total
------------------------------------------------------------

Balance as of September 30, 2001 $168,709 $17,296 $ - $186,005
Reclassification of assembled workforce and
facilities in place net of deferred income
tax liability of $3,064, $188, $0 and
$3,252, respectively 4,595 282 - 4,877
Impairment charge related to
discontinued operations - See
Note 2 (10,668) - - (10,668)
------------------------------------------------------------
Balance as of September 30, 2002 $162,636 $17,578 $ - $180,214
============================================================

As required by SFAS No. 142, the results of operations of the Company for
periods prior to its adoption have not been restated. The following table
reconciles reported net loss to pro forma net loss that would have resulted for
the years ending September 30, 2001 and 2000, if SFAS No. 142 had been adopted
effective October 1, 1999:

YEAR ENDED SEPTEMBER 30
2001 2000
----------------------------------

Reported net loss $(15,050) $(5,143)
Amortization of goodwill 5,552 5,522
Amortization of assembled workforce, net of tax 1,025 995
Amortization of facilities in place, net of tax 45 45
==================================
Pro forma net income (loss) $ (8,428) $ 1,419
==================================

48

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

6. LONG-TERM DEBT

Long-term debt consists of the following as of September 30:

2002 2001
---------------- -------------

11 1/8% Series B Senior Subordinated Notes $150,000 $150,000
11 1/8% Series D Senior Subordinated Notes, including
unamortized premium of $1,206 in 2002 and $1,469 in 2001 46,206 46,469
11 1/8% Series F Senior Subordinated Notes, including
unamortized premium of $1,642 in 2002 and $2,000 in 2001 88,642 89,000
Term Loan Facilities 117,292 123,542
Acquisition Loan Facility 10,794 19,891
Revolving Credit Facility 28,500 5,000
PIK Note 9,900 -
Other 98 175
------------------------------
451,432 434,077
Less current portion 40,917 20,424
------------------------------
$410,515 $413,653
==============================

The Series B, Series D and Series F Senior Subordinated Notes (collectively, the
Notes) are unsecured and mature on May 1, 2007. Interest is payable semiannually
on May 1 and November 1. The Notes are fully, unconditionally, jointly and
severally guaranteed by all subsidiaries. The Notes are subordinated to all
existing and future senior indebtedness of the Company but rank equally in right
of payment with any future senior subordinated indebtedness of the Company. The
Notes contain covenants, which restrict the Company from incurring additional
indebtedness and prohibit dividend payments, stock redemptions and certain other
transactions.

The Company has a Credit Agreement, as amended, with a group of banks, which
provides Term Loan Facilities, an Acquisition Loan Facility and a Revolving
Credit Facility. Borrowings under the Credit Agreement are secured by
substantially all assets of the Company. Covenants in the Credit Agreement
restrict the payment of dividends, capital expenditures and certain other
transactions and require the Company to maintain leverage, net worth and
interest coverage ratios. 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. The Company is in
compliance with existing bank covenants at September 30, 2002.

49

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

6. LONG-TERM DEBT (CONTINUED)

The Term Loan Facilities consist of two tranches of term loans. The Tranche A
term loans outstanding at September 30, 2002 and 2001, total $4,057 and $9,057,
respectively, and mature on September 30, 2003. The Tranche B term loans
outstanding at September 30, 2002 and 2001, total $113,235 and $114,485,
respectively, and mature on September 30, 2005. Installments of the Tranche A
term loans are due in aggregate principal amounts of $1,250 per quarter from
December 31, 2002 through June 30, 2003, and the remaining principal due
September 30, 2003. Installments on $47,583 of the Tranche B term loans are due
in aggregate principal amounts of $250 per quarter until September 30, 2003,
$6,250 per quarter from December 31, 2003 through June 30, 2005, and the
remaining principal due September 30, 2005. Installments on $65,652 of the
Tranche B term loans are due in aggregate principal amounts of $8,750 per
quarter commencing on December 31, 2003, with the remaining principal due
September 30, 2005. Interest on the Tranche A and Tranche B term loans is at
LIBOR (2.50% at September 30, 2002) plus 4.50% and 4.75%, respectively.

Borrowings under the Acquisition Loan Facility are due in quarterly principal
installments of $1,820 through March 31, 2004, with the remaining principal due
June 30, 2004, with interest at LIBOR plus 4.50%.

The Revolving Credit Facility matures on September 30, 2003. The Company is
entitled to draw amounts under the Revolving Credit Facility to a maximum of
$28,500 for general corporate purposes, including permitted acquisitions, as
defined, and to a maximum of $1,065 for letters of credit. As of September 30,
2002, the Company had outstanding letters of credit of $1,065, which secure
certain workers' compensation and other obligations.

The PIK Note is secured by substantially all assets of the Company. Principal
and interest at 14% are payable on December 31, 2005.

Scheduled maturities of long-term debt during fiscal years subsequent to
September 30, 2002, are as follows:

2003 $ 40,917
2004 63,532
2005 52,235
2006 9,900
2007 282,000
-----------------
$ 448,584
=================

50

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

7. 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, 2002, 2001 and 2000 totaled $3,222, $2,793 and $2,860, respectively.

The Company did not enter into any capital leases during the years ended
September 30, 2002 or 2001. During the year ended September 30, 2000, the
Company financed purchases of property, plant and equipment totaling $13,348 by
entering into capital leases.

Property, plant and equipment under leases accounted for as capital leases as of
September 30 are as follows:

2002 2001
----------------- ------------------

Machinery and equipment $13,893 $14,308
Less accumulated depreciation 3,593 2,419
----------------- ------------------
$10,300 $11,889
================= ==================

Minimum rental payments due under operating and capital leases for fiscal years
subsequent to September 30, 2002, are as follows:

Operating Capital
Leases Leases
------------------------------------

2003 $2,352 $3,358
2004 1,593 3,158
2005 1,047 2,332
2006 683 556
2007 280 -
Thereafter 13 -
------------------------------------
Total minimum lease payments $5,968 9,404
====================

Less amount representing interest 1,637
-----------------
Present value of minimum lease payments 7,767
Less current portion 2,519
-----------------
Capital lease obligations $5,248
=================

51

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

7. COMMITMENTS AND CONTINGENCIES (CONTINUED)

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 62% 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 2003.

8. INCOME TAXES

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

YEAR ENDED SEPTEMBER 30
2002 2001 2000
--------------------------------------------------------
Current:

Federal $(18,522) $(2,902) $1,804
State 308 (1,218) 154
Foreign - 886 -
--------------------------------------------------------
(18,214) (3,234) 1,958
Deferred (10,650) (1,630) (358)
--------------------------------------------------------
$(28,864) $(4,864) $1,600
========================================================

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

YEAR ENDED SEPTEMBER 30
2002 2001 2000
--------------------------------------------------------

Continuing operations $ (8,389) $(4,149) $6,175
Discontinued operations (20,475) (715) (4,575)
--------------------------------------------------------
$(28,684) $(4,864) $1,600
========================================================

52

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

8. INCOME TAXES (CONTINUED)

The provision (credit) for income taxes differs from the amount computed by
applying the federal statutory rate of 35% as of September 30, 2002, 2001 and
2000, to income (loss) before income taxes as follows:

YEAR ENDED SEPTEMBER 30
2002 2001 2000
---------------------------------------------------

Provision (credit) at statutory rate $(26,798) $(6,970) $(1,240)
State income taxes (benefit), net of federal taxes 74 (535) 452
Amortization of goodwill - 1,943 1,927
Additional provision recorded in connection with tax
examinations 932 417 405
Permanent difference related to the discontinuance of
Cast Alloys (2,734) - -
Other (338) 281 56
-------------------------------------------------
Provision (credit) for income taxes $(28,864) $(4,864) $ 1,600
=================================================

Deferred income tax assets and liabilities consist of the following as of
September 30:

2002 2001
-------------------------------------

Deferred income tax liabilities:
Book basis of assets in excess of tax basis:
Inventories $ (3,023) $ (2,605)
Property, plant and equipment (37,277) (44,519)
Identifiable intangible assets (14,890) (22,892)
Other (1,779) (1,619)
------------------------------------
(56,969) (71,635)
Deferred income tax assets:
Employee benefit plans 8,773 5,570
Accrued vacation 2,498 2,251
Other accrued liabilities 2,801 1,251
State net operating loss carryforwards 1,806 1,945
Other - 622
Valuation allowance - (654)
------------------------------------
15,878 10,985
------------------------------------
Net deferred income tax liability $(41,091) $ (60,650)
====================================

Included in the consolidated balance sheets as:
Current deferred income tax asset $ 15,880 $ 3,069
Noncurrent deferred income tax liability (56,971) (63,719)
------------------------------------
$(41,091) $ (60,650)
====================================

53

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

8. INCOME TAXES (CONTINUED)

As of September 30, 2002, the Company has state net operating loss (NOL)
carryforwards for income tax purposes for continuing operations of approximately
$35,000, which expire in varying amounts through September 30, 2017. The
valuation allowance as of September 30, 2001, was provided against the deferred
tax asset related to the state NOL carryforwards of Cast Alloys as the benefit
related to these carryforwards was not expected to be realized.

9. 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. The Company funds the pension plans
based on actuarially determined cost methods allowable under Internal Revenue
Service regulations. Plan assets consist primarily of mutual funds. The
measurement date for three of the defined-benefit pension plans is September 30.
The remaining two plans use a measurement date of June 30.

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. These plans use a measurement date of
September 30.

54

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

9. EMPLOYEE BENEFIT PLANS (CONTINUED)

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, 2002 and 2001:

PENSION POSTRETIREMENT
BENEFITS BENEFITS
-----------------------------------------------------------
2002 2001 2002 2001
-----------------------------------------------------------

Change in benefit obligation:
Benefit obligation, October 1 $ 44,166 $ 40,400 $ 7,024 $ 6,692
Service cost 1,512 1,543 198 204
Interest cost 3,269 3,036 476 493
Curtailment - - - (153)
Actuarial losses 5,077 1,246 1,037 148
Benefits paid (2,113) (2,059) (362) (360)
-----------------------------------------------------------
Benefit obligation, September 30 $ 51,911 $ 44,166 $ 8,373 $ 7,024
===========================================================

Change in plan assets:
Fair value of plan assets, October 1 $ 40,020 $ 42,122 $ - $ -
Actual loss on plan assets (1,769) (2,068) - -
Company contributions 2,062 2,025 362 360
Benefits paid (2,113) (2,059) (362) (360)
-----------------------------------------------------------
Fair value of plan assets, September 30 $ 38,200 $ 40,020 $ - $ -
===========================================================

Funded status of the plans:
Benefit obligation in excess of plan
assets $ (13,711) $ (4,146) $(8,373) $(7,024)
Unrecognized prior service cost 2,184 1,856 581 626
Unrecognized net losses 13,279 3,447 1,096 53
-----------------------------------------------------------
$ 1,752 $ 1,157 $(6,696) $(6,345)
===========================================================

Amounts recognized in the consolidated
balance sheets at September 30:
Accrued pension liability $ (13,765) $ (3,395) $(6,696) $(6,345)
Intangible asset 2,184 1,856 - -
Deferred income tax asset 5,333 1,078 - -
Accumulated other comprehensive loss 8,000 1,618 - -
-----------------------------------------------------------
$ 1,752 $ 1,157 $(6,696) $(6,345)
===========================================================

55

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

9. EMPLOYEE BENEFIT PLANS (CONTINUED)

Amounts applicable to the Company's pension plans with accumulated benefit
obligations and projected benefit obligations in excess of plan assets:

2002 2001
-------------------------------

Projected benefit obligation $51,911 $44,166
Accumulated benefit obligation 51,911 44,166
Fair value of plan assets 38,200 40,020

Components of net periodic pension cost for the years ended September 30, 2002,
2001 and 2000, respectively, are as follows:

PENSION BENEFITS POSTRETIREMENT BENEFITS
----------------------------------- -------------------------------
2002 2001 2000 2002 2001 2000
----------------------------------- -------------------------------

Service cost $ 1,512 $1,543 $ 1,383 $198 $204 $206
Interest cost 3,269 3,036 2,768 476 493 476
Expected return on plan assets (3,486) (3,580) (2,755) - - -
Amortization of prior service cost 146 123 117 45 45 45
Recognized net actuarial loss 26 2 1 (5) 2 -
----------------------------------- -------------------------------
Net periodic benefit cost $ 1,467 $1,124 $ 1,514 $714 $744 $727
================================== ==============================

Assumptions as of September 30:
Discount rate 6.75% 7.25% to 7.25% to
7.625% 7.75% 6.75% 7.625% 7.75%

Expected long-term rate of return 6.75% to 7.50% to 7.50% to
9.00% 9.00% 9.50% - - -

For measurement purposes, the healthcare cost trend rate was assumed to be 7.5%
decreasing gradually to 4.5% in 2011 and then remaining at that level
thereafter. The healthcare cost trend rate 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:

1% Increase 1% Decrease
---------------------------------

Effect on total of service cost and interest cost $ 125 $ (99)
Effect on postretirement benefit obligation 1,498 (1,192)

56

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

9. EMPLOYEE BENEFIT PLANS (CONTINUED)

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 $1,493, $1,882
and $1,828 for the years ended September 30, 2002, 2001 and 2000, respectively.

OTHER EMPLOYEE BENEFITS

The Company provides unfunded supplemental retirement benefits to certain active
and retired employees at Dalton. At September 30, 2002, the present value of the
current and long-term portion of these supplemental retirement obligations
totaled $334 and $2,955, respectively. At September 30, 2001, the present value
of the current and long-term portion of these supplemental retirement
obligations totaled $147 and $2,954, 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, 2002, 2001 and 2000, was
$397, $470 and $567, 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, 2002, 2001 and 2000, was
$119, $135 and $159, respectively.

10. PROVISION FOR IMPAIRMENT OF ASSETS

During the year ended September 30, 2002, the Company identified indicators of
impairment at one of its foundries, which is held for use. In accordance with
SFAS No. 144, since the net book value of the foundries' 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 foundries' long-lived assets to fair value. The
impaired long-lived assets are included in the Castings segment.

57

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

10. PROVISION FOR IMPAIRMENT OF ASSETS (CONTINUED)

In accordance with SFAS No. 144, the Company recognized an impairment charge of
$74 during the year ended September 30, 2002, related to a building held for
sale to adjust the carrying value of the building to fair value less costs to
sell.

11. 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
transfers are recorded at cost plus a share of operating profit. The following
segment information is presented for continuing operations:

YEAR ENDED SEPTEMBER 30
2002 2001 2000
----------------------------------------------------

Revenues from external customers:
Castings $ 379,425 $ 381,958 $ 457,319
Forgings 21,893 28,109 36,779
Other 20,498 19,460 28,147
Elimination of intersegment revenues (16,598) (12,620) (17,934)
----------------------------------------------------
$ 405,218 $ 416,907 $ 504,311
====================================================

Income (loss) from continuing operations:
Castings $ (63,156) $ (13,419) $ 3,844
Forgings (4,135) (5,112) (3,716)
Other (764) (711) 509
Elimination of intersegment loss 58,394 5,823 3,207
----------------------------------------------------
$ (9,661) $ (13,419) $ 3,844
====================================================

Total assets:
Castings $ 681,754 $ 770,044 $ 832,256
Forgings 41,584 51,148 57,933
Other 16,494 16,149 19,654
Elimination of intersegment assets (157,359) (210,898) (243,625)
----------------------------------------------------
$ 582,473 $ 626,443 $ 666,218
====================================================

58

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

11. SEGMENT INFORMATION (CONTINUED)

Castings Forgings Other Total
-------------------------------------------------------------

Year ended September 30, 2002:
Interest expense $38,681 $4,439 $831 $43,951
Interest income 819 - - 819
Provision for income taxes (5,477) (2,790) (122) (8,389)
Depreciation and amortization expense 24,257 2,627 1,669 28,553
Expenditures for long-lived assets 8,466 415 82 8,963

Year ended September 30, 2001:
Interest expense $38,051 $4,953 $ 983 $43,987
Interest income 445 - - 445
Provision (credit) for income taxes (958) (3,273) 82 (4,149)
Depreciation and amortization expense 30,878 3,884 1,505 36,267
Expenditures for long-lived assets 15,604 228 435 16,267

Year ended September 30, 2000:
Interest expense $38,740 $4,816 $ 855 $44,411
Interest income 967 - 11 978
Provision (credit) for income taxes 7,959 (2,204) 420 6,175
Depreciation and amortization expense 29,514 3,357 1,942 34,813
Expenditures for long-lived assets 14,368 793 1,088 16,249

GEOGRAPHIC INFORMATION
Long-Lived
Assets
Net Sales (1)
-------------------------------------

Year ended September 30, 2002:
United States $392,366 $177,290
Foreign countries 12,852 -
-------------------------------------
$405,218 $177,290
=====================================

Year ended September 30, 2001:
United States $406,894 $211,375
Foreign countries 10,013 2,458
-------------------------------------
$416,907 $213,833
=====================================

Year ended September 30, 2000:
United States $490,754 $225,244
Foreign countries 13,557 2,995
-------------------------------------
$504,311 $228,239
=====================================

(1) Represents tangible long-lived assets only.

59

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES

The following tables present condensed consolidating financial information for
fiscal 2002, 2001 and 2000 for: (a) the Company, and (b) on a combined basis,
the guarantors of 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.

60

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2002

Subsidiary
Company Guarantors Eliminations Consolidated
-------------- ---------------- --------------- ------------------

ASSETS
Current assets:
Cash and cash equivalents $ 29,290 $(2,936) $ - $ 26,354
Accounts receivable, net 30,829 28,431 - 59,260
Inventories 20,535 31,361 - 51,896
Refundable income taxes 14,850 - - 14,850
Deferred income taxes 8,720 7,160 - 15,880
Other current assets 3,372 3,058 - 6,430
-------------------------------------------------------------------
Total current assets 107,596 67,074 - 174,670

Investments in and advances to
subsidiaries 198,460 (23,829) (174,631) -
Property, plant and equipment, net 83,523 93,767 - 177,290
Deferred financing costs,
identifiable intangible assets and
goodwill, net 129,687 94,356 - 224,043
Other assets 4,191 2,279 - 6,470
-------------------------------------------------------------------
$523,457 $233,647 $(174,631) $582,473
===================================================================

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 7,740 $15,400 - $ 23,140
Accrued wages and employee benefits 6,151 6,704 - 12,855
Accrued interest 13,733 - - 13,733
Other accrued liabilities 1,151 2,220 - 3,371
Current portion of long-term debt 40,917 - - 40,917
Current portion of capital lease
obligations - 2,519 - 2,519
-------------------------------------------------------------------
Total current liabilities 69,692 26,843 - 96,535

Long-term debt 410,515 - - 410,515
Capital lease obligations - 5,248 - 5,248
Deferred income taxes 36,603 20,368 - 56,971
Postretirement benefit obligations 6,696 - - 6,696
Other liabilities 12,097 6,557 - 18,654
Stockholder's equity (deficit) (12,146) 174,631 (174,631) (12,146)
-------------------------------------------------------------------
$523,457 $233,647 $(174,631) $582,473
===================================================================

61

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2001

Subsidiary
Company Guarantors Eliminations Consolidated
-------------------------------------------------------------------

ASSETS
Current assets:
Cash and cash equivalents $ 4,682 $ (336) $ - $ 4,346
Accounts receivable, net 30,862 38,983 - 69,845
Inventories 21,131 50,564 - 71,695
Refundable income taxes 2,148 - - 2,148
Deferred income taxes 559 2,510 - 3,069
Other current assets 2,361 3,491 - 5,852
-------------------------------------------------------------------
Total current assets 61,743 95,212 - 156,955

Investments in and advances to
subsidiaries 263,249 (41,712) (221,537) -
Property, plant and equipment, net 87,587 126,246 - 213,833
Deferred financing costs,
identifiable intangible assets and
goodwill, net 133,255 116,493 - 249,748
Other assets 3,891 2,016 - 5,907
-------------------------------------------------------------------
$ 549,725 $ 298,255 $ (221,537) $ 626,443
===================================================================

LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 7,534 $ 23,034 $ - $ 30,568
Accrued wages and employee benefits 5,300 7,950 - 13,250
Accrued interest 13,567 - - 13,567
Other accrued liabilities 1,200 3,501 - 4,701
Current portion of long-term debt 20,424 - - 20,424
Current portion of capital lease
obligations - 2,305 - 2,305
-------------------------------------------------------------------
Total current liabilities 48,025 36,790 - 84,815

Long-term debt 413,653 - - 413,653
Capital lease obligations - 7,845 - 7,845
Deferred income taxes 35,357 28,362 - 63,719
Postretirement benefit obligations 6,345 - - 6,345
Other liabilities 4,406 3,721 - 8,127
Stockholder's equity 41,939 221,537 (221,537) 41,939
-------------------------------------------------------------------
$ 549,725 $ 298,255 $ (221,537) $ 626,443
===================================================================

62

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2002

Subsidiary
Company Guarantors Eliminations Consolidated
---------------------------------------------------------------------

Net sales $ 168,519 $ 244,811 $ (8,112) $ 405,218
Cost of sales 119,442 229,683 (8,112) 341,013
---------------------------------------------------------------------
Gross profit 49,077 15,128 - 64,205

Selling, general and
administrative expenses 13,357 15,940 - 29,297
Amortization expense 1,833 1,996 - 3,829
Provision for impairment of assets - 5,453 - 5,453
Loss on disposal of equipment 98 446 - 544
---------------------------------------------------------------------
Operating income 33,789 (8,707) - 25,082

Other income (expense):
Interest expense (22,568) (21,383) - (43,951)
Interest income 805 14 - 819
---------------------------------------------------------------------

Income (loss) from continuing
operations before income taxes
and equity in earnings of
subsidiaries 12,026 (30,076) - (18,050)
Provision (credit) for income
taxes 1,293 (9,682) - (8,389)
---------------------------------------------------------------------
10,733 (20,394) - (9,661)
Equity in losses of subsidiaries (58,436) - 58,436 -
---------------------------------------------------------------------
Loss from continuing operations (47,703) (20,394) 58,436 (9,661)
Loss from discontinued operations,
net of income
taxes - (38,042) - (38,042)
---------------------------------------------------------------------
Net loss $ (47,703) $ (58,436) $ 58,436 $ (47,703)
=====================================================================

63

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2001

Subsidiary
Company Guarantors Eliminations Consolidated
----------------------------------------------------------------------

Net sales $ 160,735 $ 262,300 $(6,128) $ 416,907
Cost of sales 113,550 245,315 (6,128) 352,737
----------------------------------------------------------------------
Gross profit 47,185 16,985 - 64,170

Selling, general and
administrative expenses 11,857 16,160 - 28,017
Amortization expense 4,919 5,694 - 10,613
Gain on disposal of equipment (11) (423) - (434)
----------------------------------------------------------------------
Operating income 30,420 (4,446) - 25,974

Other income (expense):
Interest expense (19,828) (24,159) - (43,987)
Interest income 411 34 - 445
----------------------------------------------------------------------

Income (loss) from continuing
operations before income taxes
and equity in earnings of
subsidiaries 11,003 (28,571) - (17,568)
Provision (credit) for income
taxes 6,361 (10,510) - (4,149)
----------------------------------------------------------------------
4,642 (18,061) - (13,419)
Equity in losses of subsidiaries (22,096) - 22,096 -
----------------------------------------------------------------------
Loss from continuing operations (17,454) (18,061) 22,096 (13,419)
Loss from discontinued operations,
net of income taxes - (4,035) - (4,035)
Gain on sale of discontinued
operations, net of income
taxes 2,404 - - 2,404
----------------------------------------------------------------------
Net loss $ (15,050) $ (22,096) $22,096 $ (15,050)
======================================================================

64

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 2000

Subsidiary
Company Guarantors Eliminations Consolidated
----------------------------------------------------------------------

Net sales $ 191,138 $ 319,367 $ (6,194) $ 504,311
Cost of sales 132,061 280,785 (6,194) 406,652
----------------------------------------------------------------------
Gross profit 59,077 38,582 - 97,659

Selling, general and
administrative expenses 15,014 18,605 - 33,619
Amortization expense 4,916 5,587 - 10,503
(Gain) loss on disposal of
equipment 298 (213) - 85
----------------------------------------------------------------------
Operating income 38,849 14,603 - 53,452

Other income (expense):
Interest expense (22,003) (22,408) - (44,411)
Interest income 764 214 - 978
----------------------------------------------------------------------

Income (loss) from continuing
operations before income taxes
and equity in earnings of
subsidiaries 17,610 (7,591) - 10,019
Provision (credit) for income
taxes 8,335 (2,160) - 6,175
----------------------------------------------------------------------
9,275 (5,431) - 3,844
Equity in losses of subsidiaries (14,418) - 14,418 -
----------------------------------------------------------------------
Income (loss) from continuing
operations (5,143) (5,431) 14,418 3,844
Loss from discontinued operations,
net of income taxes - (8,987) - (8,987)
----------------------------------------------------------------------
Net loss $ (5,143) $ (14,418) $ 14,418 $ (5,143)
======================================================================

65

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

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

Subsidiary
Company Guarantors Eliminations Consolidated
----------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss $(47,703) $(58,436) $58,436 $(47,703)
Noncash adjustments 10,773 46,780 - 57,553
Changes in operating assets and
liabilities (13,173) 19,759 - 6,586
----------------------------------------------------------------------
Net cash provided by (used in)
operating activities (50,103) 8,103 58,436 16,436
----------------------------------------------------------------------
INVESTING ACTIVITIES
Investments in and advances to
subsidiaries 62,066 (3,630) (58,436) -
Purchase of property, plant and
equipment (4,510) (4,545) - (9,055)
Other 37 (145) - (108)
----------------------------------------------------------------------
Net cash provided by (used in)
investing activities 57,593 (8,320) (58,436) (9,163)

FINANCING ACTIVITIES
Proceeds from long-term debt 33,400 - - 33,400
Payments on long-term debt and
capital lease obligations (15,424) (2,383) - (17,807)
Debt issuance costs (858) - - (858)
----------------------------------------------------------------------
Net cash provided by (used in)
financing activities 17,118 (2,383) - 14,735
----------------------------------------------------------------------

Increase (decrease) in cash and
cash equivalents 24,608 (2,600) - 22,008
Cash (overdraft) and cash
equivalents at beginning
of year 4,682 (336) - 4,346
----------------------------------------------------------------------
Cash (overdraft) and cash
equivalents at end of year $ 29,290 $ (2,936) - $26,354
======================================================================

66

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 2001

Subsidiary
Company Guarantors Eliminations Consolidated
---------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss $(15,050) $(22,096) $ 22,096 $(15,050)
Gain on sale of discontinued
operations (4,007) - - (4,007)
Noncash adjustments 11,621 29,156 - 40,777
Changes in operating assets and
liabilities (4,849) (7,584) - (12,433)
---------------------------------------------------------------------
Net cash provided by (used in)
operating activities (12,285) (524) 22,096 9,287

INVESTING ACTIVITIES
Investments in and advances to
subsidiaries 14,650 7,446 (22,096) -
Proceeds from disposition of
business, net of fees 5,190 - - 5,190
Purchase of property, plant and
equipment (4,371) (12,511) - (16,882)
Other 99 5,133 - 5,232
---------------------------------------------------------------------
Net cash provided by (used in)
investing activities 15,568 68 (22,096) (6,460)

FINANCING ACTIVITIES
Proceeds from long-term debt 5,000 - - 5,000
Payments on long-term debt and
capital lease obligations (19,677) (2,376) - (22,053)
Debt issuance costs (906) - - (906)
---------------------------------------------------------------------
Net cash used in financing
activities (15,583) (2,376) - (17,959)
---------------------------------------------------------------------

Decrease in cash and cash
equivalents (12,300) (2,832) - (15,132)
Cash and cash equivalents at
beginning of year 16,982 2,496 - 19,478
---------------------------------------------------------------------
Cash (overdraft) and cash
equivalents at end of year $ 4,682 $ (336) $ - $ 4,346
=====================================================================

67

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

12. GUARANTOR SUBSIDIARIES (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 2000

Subsidiary
Company Guarantors Eliminations Consolidated
-------------------------------------------------------------------------

OPERATING ACTIVITIES
Net loss $ (5,143) $(14,418) $ 14,418 $ (5,143)
Noncash adjustments 14,490 28,591 - 43,081
Changes in operating assets and
liabilities (1,946) (6,510) - (8,456)
-------------------------------------------------------------------------
Net cash provided by operating
activities 7,401 7,663 14,418 29,482

INVESTING ACTIVITIES
Investments in and advances to
subsidiaries (23,061) 37,479 (14,418) -
Acquisition of business - (29,502) - (29,502)
Purchase of property, plant and
equipment (5,644) (13,624) - (19,268)
Other 212 1,233 - 1,445
-------------------------------------------------------------------------
Net cash used in investing
activities (28,493) (4,414) (14,418) (47,325)

FINANCING ACTIVITIES
Proceeds from long-term debt 29,750 - - 29,750
Payments on long-term debt and
capital lease obligations (7,528) (2,269) - (9,797)
-------------------------------------------------------------------------
Net cash provided by (used in)
financing activities 22,222 (2,269) - 19,953
-------------------------------------------------------------------------

Increase in cash and cash
equivalents 1,130 980 - 2,110
Cash and cash equivalents at
beginning of year 15,852 1,516 - 17,368
-------------------------------------------------------------------------
Cash and cash equivalents at end
of year $ 16,982 $ 2,496 $ - $ 19,478
=========================================================================

68

Neenah Foundry Company

Notes to Consolidated Financial Statements (continued)
(In Thousands)

13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

YEAR ENDED SEPTEMBER 30, 2002
--------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
---------------- ----------------- ------------------ --------------

Net sales $ 88,098 $ 92,852 $115,476 $108,792
Gross profit 10,285 11,063 22,073 20,784
Net income (loss) (41,074) (9,167) (2,209) (a) 4,747

YEAR ENDED SEPTEMBER 30, 2001
--------------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
--------------------------------------------------------------------

Net sales $102,249 $100,898 $111,197 $102,563
Gross profit 14,062 11,246 19,669 19,193
Net loss (4,248) (6,841) (2,661) (1,300)

(a) Net income as previously reported $ 1,287
Adjustment to recognize impairment on long-lived
assets held for use, net of income taxes of
$1,883 (3,496)
-----------------
Net loss as restated $(2,209)
=================

During the fourth quarter of fiscal 2002, the Company identified indicators of
impairment, which existed at June 30, 2002, at one of its foundries, which is
held for use. In accordance with SFAS No. 144, the Company compared the net book
value of the respective long-lived assets to the sum of the undiscounted future
cash flows expected to be realized from the assets, which resulted in an
impairment charge of $5,379. The effect of this impairment charge is to decrease
previously reported fiscal 2002 third quarter net income by $3,496.

69

Report of Ernst & Young LLP, Independent Auditors

We have audited the consolidated financial statements of Neenah Foundry Company
as of September 30, 2002 and 2001 and for each of the three years in the period
ended September 30, 2002, and have issued our report thereon dated November 5,
2002 (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.

Milwaukee, Wisconsin ERNST & YOUNG LLP
November 5, 2002

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Schedule II

NEENAH FOUNDRY COMPANY

VALUATION AND QUALIFYING ACCOUNTS
Years ended September 30, 2002, 2001, and 2000.
(Dollars in Thousands)

BALANCE AT PURCHASE ADDITIONS
BEGINNING ACCOUNTING CHARGED TO BALANCE AT
DESCRIPTION OF PERIOD ADJUSTMENTS EXPENSE DEDUCTIONS END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------

Allowance for doubtful
accounts receivable:

2000 $ 1,020 $ 130 $ 242 $ 391 (A) $1,001
======= ======= ======= ======= ======

2001 $ 1,001 $ - $ 761 $ 325 (A) $1,437
======= ======= ======= ======= ======

2002 $ 1,437 $ - $ 533 $ 908 (A) $1,062
======= ======= ======= ======= ======

(A) Uncollectible accounts written off, net of recoveries

Reserve for obsolete
inventory:

2000 $ 686 $ - $ 2,300 $ - $2,986
======= ======= ======= ======= ======

2001 $ 2,986 $ - $ 248 $ 2,749 (B) $ 485
======= ======= ======= ======= ======

2002 $ 485 $ - $ 240 $ 240 (B) $ 485
======= ======= ======= ======= ======

(B) Reduction for disposition of inventory

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