10-Q 1 d10q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2002 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the Transition period from __________ to Commission File No. 333-43523 Elgin National Industries, Inc. (Exact name of registrant as specified in its charter) Delaware 36-3908410 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2001 Butterfield Road, Suite 1020, Downers Grove, Illinois 60515-1050 (Address of principal executive offices) Telephone Number: 630-434-7243 (Registrant's telephone number, including area code) 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. [X] Yes No As of October 31, 2002, there were outstanding 6,408.3 shares of Class A Common Stock and 19,951.7 shares of Preferred Stock. ELGIN NATIONAL INDUSTRIES, INC. TABLE OF CONTENTS

2 PART I ITEM 1. FINANCIAL STATEMENTS ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS (in thousands except share data) (Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements 3 ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENTS OF INCOME (in thousands) (Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements 4 ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S DEFICIT For the Nine Months Ended September 30, 2002 (in thousands except share data) (Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements 5 ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2002 and 2001 (in thousands) (unaudited) 2002 2001 -------- -------- Net cash (used) provided by operating activities ... $ (3,588) $ 7,735 -------- -------- Cash flows from investing activities: Business acquired, net of cash ................ (20,399) Purchase of property, plant and equipment ..... (3,270) (3,096) Proceeds from sale of assets .................. 73 13 -------- -------- Net cash used by investing activities ......... (3,197) (23,482) -------- -------- Cash flows from financing activities: Borrowings of long-term debt .................. 9,258 15,100 Repayments of long-term debt .................. (2,473) (1,500) Debt issuance costs ........................... (874) -------- -------- Net cash provided by financing activities ..... 6,785 12,726 -------- -------- Net decrease in cash ............................... 0 (3,021) Cash and cash equivalents at beginning of period ... 3,021 -------- -------- Cash and cash equivalents at end of period ......... $ 0 $ 0 ======== ======== The accompanying notes are an integral part of the condensed consolidated financial statements 6 ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Report Preparation The accompanying condensed consolidated financial statements, which have not been audited by independent certified public accountants, were prepared in conformity with generally accepted accounting principles and such principles were applied on a basis consistent with the preparation of the audited consolidated financial statements included in the Company's December 31, 2001 10-K filed with the Securities and Exchange Commission. The financial information furnished includes all normal recurring accrual adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim period. Results for the first nine months of 2002 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the December 31, 2001 financial statements for comperative purposes. For further information refer to the Company's consolidated financial statements included in the annual report on Form 10-K. 2. Inventories September 30, December 31, 2002 2001 ---- ---- (in thousands) Finished goods ....................... $ 11,011 $ 10,990 Work-in-process ...................... 3,095 2,387 Raw materials ........................ 6,171 6,744 -------- -------- 20,277 20,121 Less excess and obsolete reserve ..... 1,872 1,762 -------- -------- $ 18,405 $ 18,359 ======== ======== 7 ELGIN NATIONAL INDUSTRIES, INC. AND SUBSIDIARY COMPANIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -(Continued) 3. Segment Information The Company operates primarily in two industries, Manufactured Products and Engineering Services. In accordance with the Company's method of internal reporting, corporate headquarters costs are not allocated to the individual segments. Information about the Company by industry is presented below for the nine months and three months ended September 30:

September 30, December 31, 2002 2001 -------- -------- Assets: Manufactured Products ......... $ 66,669 $ 67,456 Engineering Services .......... 15,220 25,441 -------- -------- Total segment assets ...... 81,919 92,897 Corporate and other ....... 47,172 44,849 -------- -------- Total assets .............. $129,061 $137,746 ======== ======== 4. Contingencies The Company has claims against others, and there are claims by others against it, in a variety of matters arising out of the conduct of the Company's business. The ultimate resolution of all such claims would not, in the opinion of management, have a material effect on the Company's financial position, cash flows or results of operations. 8 5. Adoption of Accounting Principles In June 2001, the Financial Accounting Standards Board issued Statements of Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, 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 will continue to be amortized over their useful lives. The Company has applied the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income of approximately $660,000 per year. During the quarter ended June 30, 2002, the Company performed the first annual impairment evaluation and determined that none of the recorded goodwill was impaired. The Company has two reporting segments, Manufactured Products and Engineering Services, goodwill was allocated to these segments as follows: June 30, 2002 --------------------- (In thousands) Engineering Services $ 500 Manufactured Products 18,495 -------- Total $ 18,995 ======== The proforma impact of eliminating goodwill amortization on the consolidated statements of income is as follows: Nine months ended Three months ended September 30, 2001 September 30, 2001 ------------------------------------------- (In thousands) Reported net income $ 2,091 $ 530 Goodwill amortization, net of tax 511 179 ------- ------- Adjusted net income $ 2,602 $ 709 ======= ======= 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001 Net Sales: Net sales for the quarter ended September 30, 2002 decreased $6.7 million, or 15.3%, to $36.9 million from $43.6 million for the corresponding period in 2001. The Engineering Services Segment's sales decreased $5.6 million, or 26.4% to $15.7 million from $21.3 million for the corresponding period in 2001 as customers have not committed to major capital projects. For the quarter ended September 30, 2002 the Engineering Services Segment had $2.4 million in projects with sales less than $500,000, compared to $4.1 million for the quarter ended September 30, 2001.They had five projects with sales in excess of $500,000, totalling $13.3 million in sales for the quarter ended September 30, 2002, compared to eight such projects totalling $17.2 million in sales for the quarter ended September 30, 2001. The Manufactured Products Segment's sales decreased $1.1 million, or 4.8%, primarily due to the decrease of equipment sales to the coal and oil industries, partially offset with increased fastener sales. Gross Profit: Gross profit for the quarter ended September 30, 2002 of $7.9 million was $1.8 million or 18.3% lower than the gross profit of $9.7 million for the corresponding period in 2001 due to the lower sales level. As a percentage of net sales, the gross profit decreased to 21.5% for the quarter ended September 30, 2002 from 22.2% for the corresponding period in 2001. The decrease resulted from lower margins earned on Engineering Services Segment's projects. Selling, General and Administrative Expenses: Selling, general and administrative expenses of the Company for the quarter ended September 30, 2002 of $5.9 million were $0.2 million or 4.0% below the selling, general and administrative expenses of $6.1 million for the corresponding period in 2001. This was due to lower employee related costs. As a percentage of net sales, selling, general and administrative expenses increased from 14.1% for the quarter ended September 30, 2001 to 16.0% for the quarter ended September 30, 2002 due to decreased sales. Amortization Expense: Beginning January 1, 2002 the Company discontinued the amortization of goodwill in accordance with the provisions of Statement of Accounting Standards No. 142 - Goodwill and Other Intangible Assets. Goodwill amortization was $0.3 million for the quarter ended September 30, 2001. Interest Income: Interest income of the Company for the quarter ended September 30, 2002 of $0.1 million approximated interest income for the corresponding period ended September 30, 2001. Interest Expense: Interest expense of the Company for the quarter ended September 30, 2002 of $2.4 million approximated interest expense for the corresponding period in 2001. (Benefit) Provision for Income Taxes: Benefit for income taxes of the Company for the quarter ended September 30, 2002 of $0.1 million compared to an income tax provision of $0.4 million for the quarter ended September 30, 2001. The decrease of $0.5 million was due to the loss before income taxes for the quarter ended September 30, 2002. Net (Loss) Income: The net loss for the Company for the quarter ended September 30, 2002 of $0.2 million was $0.7 million lower than the net income of $0.5 million for the quarter ended September 30, 2001 for the reasons discussed above. Net loss as a percentage of net sales was 0.6% for the quarter ended September 30, 2002 compared to net income as a percentage of net sales of 1.2% for the corresponding quarter in 2001. 10 Nine months ended September 30, 2002 Compared to Nine months ended September 30, 2001 Net Sales: Net sales for the nine months ended September 30, 2002 decreased $25.7 million, or 18.6%, to $112.4 million from $138.1 million for the corresponding period in 2001. The Engineering Services Segment's sales decreased $24.8 million, or 36.3% as compared to the prior year period. For the nine months ended September 30, 2002 the Company had seven projects with sales in excess of $1.0 million, totalling $34.3 million, compared to twelve such projects, totalling $57.6 million for the nine months ended September 30, 2001. The Manufactured Products Segment's sales decreased $0.9 million, or 1.3%, primarily due to decreased sales of centrifugal dryers and industrial capital equipment, partially offset with increased fastener and electronic component sales. Gross Profit: Gross profit for the nine months ended September 30, 2002 decreased $6.6 million to $23.0 million from $29.6 million for the corresponding period in 2001. As a percentage of net sales the gross profit decreased to 20.5% for the nine months ended September 30, 2002 from 21.4% for the nine months ended September 30, 2001. Within the Engineering Services Segment the gross profit of $4.0 million was $5.2 million or 56.1% lower than the gross profit of $9.2 million for the corresponding period in 2001. The lower gross profit resulted from the lower sales level, a reduction of margins on larger jobs due to higher than anticipated labor and equipment costs in the nine months ended September 30, 2002 as well as higher margins realized upon the completion of Engineering Services Segment projects within the nine months ended September 30, 2001. Within the Manufactured Products Segment the gross profit of $19.0 million decreased $1.4 million or 6.8% from $20.4 million for the corresponding period in 2001 due to the lower sales level and costs incurred towards the start-up of a plating facility. As a percentage of sales the Manufactured Products Segment's gross profit decreased to 27.6% from 29.2%. Selling, General and Administrative Expenses: Selling, general and administrative expenses of the Company for the nine months ended September 30, 2002 of $18.3 million represented a decrease of $0.1 million, or 0.7%, from $18.4 million for the corresponding period in 2001. This was primarily due to lower employee related costs, partially offset with the reversal of a provision on a note receivable that was collected in full in 2001 within the Engineering Services Segment. Amortization Expense: Beginning January 1, 2002 the Company discontinued the amortization of goodwill in accordance with the provisions of Statement of Accounting Standards No. 142 - Goodwill and Other Intangible Assets. Goodwill amortization was $0.8 million for the nine months ended September 30, 2001. Interest Income: Interest income of the Company of $0.3 million for the nine months ended September 30, 2002 decreased $0.3 million or 44.6% from $0.6 million for the corresponding period in 2001. The decrease was due to interest earned on a note receivable within the Engineering Services Segment during 2001. Interest Expense: Interest expense of the Company for the nine months ended September 30, 2002 of $7.1 million was $0.1 million lower than the interest expense of $7.2 million for the corresponding period in 2001. This decrease was due to decreased interest rates, partially offset with an increased debt level. (Benefit) Provision for Income Taxes: Benefit for income taxes of the Company for the nine months ended September 30, 2002 of $0.7 million was $2.3 million lower than the provision for income taxes of $1.6 million for the nine months ended September 30, 2001 due to the loss before taxes for the nine month period ended September 30, 2002. Net (Loss) Income: The net loss for the Company for the nine months ended September 30, 2002 of $1.3 million compared to net income of $2.1 million for the nine months ended September 30, 2001 for the reasons discussed above. Net loss as a percentage of net sales was 1.1% for the nine months ended September 30, 2002 compared to net income as a percentage of sales of 1.5% for the corresponding nine month period in 2001. 11 Liquidity and Capital Resources Net cash used by operating activities for the nine months ended September 30, 2002 of $3.6 million was used to decrease accounts payable and accrued expenses and to increase prepaid expenses and other assets. These uses were partially offset with cash generated from the net loss adjusted for non-cash charges and decreased accounts receivable. Included in non-cash charges for the nine months ended September 30, 2002 was depreciation of $2.9 million and other non-cash charges of $0.3 million, partially offset with pension overfunding income of $1.1 million. Cash flows from operations for any specific period are often materially affected by the timing and amounts of cash receipts and cash disbursements related to engineering services projects. Cash used in investing activities for the nine months ended September 30, 2002 of $3.2 million consisted of $2.6 million used for the construction of a plating facility and $0.7 million for the Company's regular practice of upgrading and maintaining its equipment base and facilities, partially offset with $0.1 million of proceeds from the sale of equipment. Cash provided by financing activities for the nine months ended September 30, 2002 of $6.8 million consisted of the borrowing of $8.2 million of long-term debt drawn on the Company's revolver loan and borrowings of $1.1 million on the construction loan for the plating facility, partially offset by repayment of long-term debt of $2.5 million. The Company's liquidity requirements, both long-term and short-term, are primarily for debt service, working capital needs and capital expenditures. The recent decline in the cash flow generated by the Company's business during the nine months ended September 30, 2002 has resulted in the Company's liquidity being constrained. The Company anticipates that with improved operating results, the funds provided from future operations and anticipated borrowing should be sufficient to meet its anticipated debt service requirements, working capital needs and capital expenditures. However, there can be no assurance as to the foregoing, and it is uncertain whether the Company's operating results will improve. The failure of the Company's future operations to generate improved cash flow would require the Company to pursue other sources of liquidity in order to meet it liquidity needs. There can be no assurance that any such sources would be available if required. The Company has entered into a Waiver and Fourth Amendment to Credit Agreement with its senior lenders, the purpose of which was, among other things, to waive non-compliance with certain financial covenants for the period ending September 30, 2002, and to revise certain financial covenants in its Senior Credit Facility. This waiver expires on January 31, 2003, at which time the Company will need to be in compliance with the covenants contained in its Senior Credit Facility, or obtain another waiver or amendment. The Company continues to work with its senior lenders to address the Company's liquidity requirements. Backlog The Company's backlog consists primarily of that portion of engineering services contracts that have been awarded but not performed and also includes open manufacturing orders. Backlog at September 30, 2002 was $35.1 million. Approximately $11.8 million relates to the Manufactured Products Segment, with the remainder of $23.3 million relating to the Engineering Services Segment. A substantial majority of current backlog is expected to be realized in the next twelve months. Safe Harbor Certain statements herein constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Act of 1934; including statements regarding the Company's ability to meet its liquidity requirements, and the Company's expected realization of current backlog. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Further, statements herein regarding the Company's performance in future periods are subject to risks relating to deterioration of relationships with, or the loss of, material customers or suppliers, possible product liability claims, decreases in demand for the Company's products and services, adverse changes in general market and industry conditions and any resulting inability to comply with the financial covenants imposed by the Company's senior credit facility. Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on such forward-looking statements, which are based on current expectations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company continues to use its reputation in the United States to expand into international markets. In the nine months ended September 30, 2002 approximately 13% of the Company's net sales were attributable to services provided or products sold for use outside the United States, primarily to Puerto Rico, Australia and Venezuela. A portion of these net sales and cost of sales is derived from international operations which are conducted in foreign 12 currencies. Changes in the value of these foreign currencies relative to the U.S. dollar could adversely affect the Company's business, financial condition, results of operation and debt service capability. The majority of the Company's foreign sales and costs are denominated in U.S. dollars. With respect to transactions denominated in foreign currencies, the Company attempts to mitigate foreign exchange risk by contractually shifting the burden of the risk of currency fluctuations to the other party to the transactions. It has been the Company's historic practice to conduct international sales in accordance with the foregoing. There can be no assurance that the Company's strategies will ensure that the Company will be fully protected from foreign exchange risk. Foreign sales, particularly construction management projects undertaken at foreign locations, are subject to various risks, including exposure to currency fluctuations, political, religious and economic instability, local labor market conditions, the imposition of foreign tariffs and other trade barriers, and changes in governmental policies. There can be no assurance that the Company's foreign operations, or expansion thereof, would not have a material adverse effect on the Company's business, financial condition, results of operations and debt service capability. ITEM 4. CONTROLS AND PROCEDURES Elgin National Industries, Inc. management, including the Chief Executive Officer and the Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in other factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evalution. PART II ITEM 1. LEGAL PROCEEDINGS The Company and its subsidiaries are involved in legal proceedings from time to time in the ordinary course of its business. As of the date of this filing, neither the Company nor any of its subsidiaries are a party to any lawsuit or proceeding which, individually or in the aggregate, in the opinion of management, is reasonably likely to have a material adverse effect on the financial condition, results of operation or cash flow of the Company. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Elgin National Industries, Inc. By /s/ Wayne J. Conner ----------------------------------- Name: Wayne J. Conner Title: Vice President, Treasurer, and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) Dated: November 12, 2002 14 Certification: I, Wayne J. Conner, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Elgin National Industries, Inc.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 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 quarterly 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 quarterly report (the "Evaluation Date"); and c) presented in this quarterly 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 registrant's board of directors (or persons fulfilling the equivalent function): 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 quarterly report whether 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: November 12, 2002 /s/ Wayne J. Conner ----------------------------------- Chief Financial Officer 15 Certification: I, Fred C. Schulte, certify that: 7. I have reviewed this quarterly report on Form 10-Q of Elgin National Industries, Inc.; 8. Based on my knowledge, this quarterly 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 quarterly report; 9. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 10. 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 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 quarterly 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 quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 11. 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 registrant's board of directors (or persons fulfilling the equivalent function): 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 12. The registrant's other certifying officers and I have indicated in this quarterly report whether 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: November 12, 2002 /s/ Fred C. Schulte ----------------------------------- Chief Executive Officer 16 EXHIBIT INDEX

17 10.9 Third Amendment to Credit Agreement dated as of September 24, 1993, as Amended and Restated as of January 18, 2001, and further amended as of March 31, 2002 by and among Elgin National Industries, Inc., various financial institutions, and PNC Bank, National Association, (5) individually and as agent. 10.10 Waiver and Fourth Amendment to Credit Agreement dated as of September 24, 1993, as Amended and Restated as of January 18, 2001, and further amended as of Septmber 30, 2002 by and among Elgin National Industries, Inc., various financial institutions, and PNC Bank, National (1) Association, individually and as agent.

(1) Filed within (2) Incorporated by reference to Form S-4 Registration Statement of the Company (File No. 333-43523) filed with the Commission on December 30, 1997. (3) Incorporated by reference to Amendment No. 1 to Form S-4 Registration Statement of the Company (File No. 333-43523) filed with the Commission on January 23, 1998. (4) Incorporated by reference to Form 10-Q of the Company (File No. 001-03771) filed with the Commission on August 10, 2001. (5) Incorporated by reference to Form 10-Q of the Company (File No. 001-05771) filed with the Commission on May 15, 2002 a. Management contract or compensatory plan or arrangement. 18

ELGIN NATIONAL INDUSTRIES INC 10-Q