UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 30, 1995
Commission file number 1-5985
NEWCOR, INC.
- ------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-0865770
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1825 S. Woodward Avenue
Suite 240
Bloomfield Hills, Michigan 48302
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(810) 253-2400
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
As of June 5, 1995 the Registrant has 4,679,597
outstanding shares of common stock $1.00 par value, the
Registrant's only class of common stock.
<PAGE>
PART I. FINANCIAL INFORMATION
NEWCOR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Six Months Ended Three Months Ended
4/30/95 4/30/94 4/30/95 4/30/94
Sales $57,412 $50,883 $29,489 $27,471
Cost of sales 48,771 45,906 25,420 25,050
Gross margin 8,641 4,977 4,069 2,421
SG&A expenses 7,679 7,493 4,085 3,779
Operating profit 962 (2,516) (16) (1,358)
Interest expense (976) (545) (461) (366)
Other income 74 51 36 12
Pre-tax profit 60 (3,010) (441) (1,712)
Income tax expense 21 (1,175) (150) (576)
Net income $ 39 $(1,835) $ (291) $(1,136)
Amounts per share
of common stock:
Net income (loss) $ 0.01 $ (0.39) $ (0.06) $ (0.24)
Dividends $ 0.10 $ 0.10 $ 0.05 $ 0.05
Weighted average number of common
shares outstanding 4,678 4,651 4,679 4,656
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended
4/30/95 4/30/94
Operating Activities:
Net income (loss) $ 39 $ (1,835)
Depreciation and amortization 1,716 1,290
Other 364 77
Changes in net operating assets 3,835 (13,312)
Net cash provided by (used in)
operating activities 5,954 (13,780)
Investing activities:
Capital expenditures (2,624) (2,411)
Purchase of Blackhawk Engineering - (9,126)
Use of EDC proceeds - 111
Proceeds from sale of capital assets 35 180
Net cash used in investing activities (2,589) (11,246)
Financing activities:
Long-term borrowings, net (2,900) 25,242
Cash dividends (468) (465)
Shares issued under stock option plans 24 262
Net cash provided by (used in)
financing activities (3,344) 25,039
Increase in cash and equivalents 21 13
Cash and equivalents, November 1 55 20
Cash and equivalents, April 30 $ 76 $ 33
The accompanying notes are an integral part of
the consolidated condensed financial statements.
<PAGE>
NEWCOR, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
4/30/95 10/31/94
ASSETS
Current assets:
Cash and equivalents $ 76 $ 55
Receivables 24,753 25,600
Costs and estimated earnings in excess of
related billings on uncompleted contracts 12,661 18,189
Inventories 4,736 4,123
Other current assets 2,157 3,575
Total current assets 44,383 51,542
Property, plant and equipment, net of
accumulated depreciation of $19,927
at 4/30/95 and $18,577 at 10/31/94 23,824 22,793
Other assets 10,384 10,501
Total assets $78,591 $84,836
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 1,300 $ 600
Accounts payable 7,379 11,132
Other accrued liabilities 8,032 7,624
Total current liabilities 16,711 19,356
Long-term debt, less current portion 27,300 30,900
Postretirement benefits and other 9,828 9,423
Total liabilities 53,839 59,679
SHAREHOLDERS' EQUITY
Common stock 4,679 4,676
Capital in excess of par 395 374
Unfunded pension liability (1,319) (1,319)
Retained earnings 20,997 21,426
Total shareholders' equity 24,752 25,157
Total liabilities and shareholders' equity $78,591 $84,836
The accompanying notes are an integral part of
the consolidated condensed financial statements.
<PAGE>
NEWCOR, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note A. The accompanying unaudited consolidated
condensed financial statements have been
prepared in accordance with generally accepted
accounting principles for interim financial
information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the
information and footnotes required by generally
accepted accounting principles for complete
financial statements. In the opinion of
management, all adjustments considered necessary
for a fair presentation have been included, and
such adjustments are of a normal recurring
nature. Results for interim periods should not
be considered indicative of results for a full
year. The year-end condensed balance sheet data
was derived from audited financial statements,
but does not include all disclosures required by
generally accepted accounting principles. For
further information, refer to the consolidated
financial statements and footnotes thereto
included in the Company's annual report on Form
10-K for the year ended October 31, 1994.
Note B. Interest of $870,000 and $326,000 was paid
during the six months ended April 30, 1995 and
1994, respectively. Income tax refunds of
$1,652,000 were received during the six months
ended April 30, 1995. No income taxes were paid
during the six months ended April 30, 1995 and
1994.
Note C. On February 10, 1994, Newcor purchased all the
assets of Blackhawk Engineering Company
("Blackhawk"), an Iowa corporation with
operations in Cedar Falls, and Waterloo, Iowa.
Blackhawk's principal line of business is the
production machining of gray iron, modular iron,
and steel foundry castings, and its principal
customer is Deere & Company. The acquisition
has been recorded using the purchase method of
accounting. Blackhawk's results of operations
have been included in the Company's consolidated
financial statements as of February 11, 1994.
<PAGE>
NEWCOR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
During the second quarter of 1995, Newcor incurred a net
loss of $291,000 on sales of $29.5 million. Year-to-date
net income was $39,000 on sales of $57.4 million. While
this represented a significant improvement over results
for the previous year, a net loss of $1,136,000 for the
second quarter of 1994 and $1,835,000 for the first six
months of 1994, performance continued to be negatively
impacted by costs incurred to fix problems with special
machine systems that were shipped during 1994. Although
the time and cost required to accomplish this objective
has been greater than was previously estimated, we
believe that the resolution of the major special machine
systems' problems is behind us. However, it is possible
that we may incur additional costs toward this end in
subsequent months.
Newcor, Inc. is organized into two business segments:
Special Machines and Precision Parts. Special machines
are custom designed and sold individually on a made-to-
order basis or incorporated into complete systems.
Revenues and costs for special machines are determined
under the percentage of completion method of accounting.
Operating results and backlog levels are dependent upon
this segment's ability to obtain individual contracts
through competitive quotes. Accordingly, this ability to
obtain contracts can result in significant fluctuations
in sales, net income, order backlog, working capital and
bank borrowings.
The Precision Parts segment consists of automotive and
farm equipment parts machined on dedicated manufacturing
cells, molded rubber and plastic parts and special
contoured parts produced and sold in small quantities.
Sales are recorded when title transfers upon shipment.
Operating results and working capital of the Precision
Parts segment are more consistent between accounting
periods than the Special Machines segment.
Results of Operations
Consolidated sales (in thousands) by segment are as
follows:
Six Months Ended Three Months Ended
4/30/95 4/30/94 4/30/95 4/30/94
Special Machines $27,227 $30,964 $14,063 $15,414
Precision Parts 30,185 19,919 15,426 12,057
------- ------- ------- -------
Total $57,412 $50,883 $29,489 $27,471
Consolidated sales increased $6.5 million or 13% for the
six months ended April 30, 1995 and $2 million or 7% for
the quarter ended April 30, 1995. Precision Parts
segment sales for the quarter increased 28% over 1994's
level due primarily to incremental new business for the
1995 model year combined with the strong automotive
market. This segment's year-to-date sales are up over
50% from the first six moths of 1994 due to the reasons
listed above, as well as the purchase of Blackhawk
Engineering in February 1994. Blackhawk, one of the
Precision Parts divisions, had sales of approximately $4
million in the first quarter of 1995. Sales for the
remainder of 1995 should remain strong, although a
decline in the automotive market would probably cause a
slowdown in sales by this segment. Looking towards
fiscal 1996, this segment was recently awarded
significant new business that will start up in the fourth
quarter of 1995 and approach full production during the
first quarter of 1996.
Sales at the Special Machines segment were down 9% for
the second quarter and 12% year-to-date. This decrease
was due to a more careful job selection process after the
problems of 1994, as well as the stage of certain
contracts-in-process.
Consolidated gross profit percentage was up 5 percentage
points to 15% for the six months ended April 30, 1995.
The improvement was primarily due to a reduction of cost
overruns compared with 1994. The 15% margin achieved in
1995 remained below normal because of the additional
costs incurred in the first half of 1995 to fix problems
with certain special machines systems that were shipped
during 1994.
Selling, general and administrative expenses were 8%
higher for the quarter ended April 30, 1995. The
increase was primarily due to inflation and costs related
to various personnel changes that occurred during the
second quarter of 1995. Year-to-date SG&A expenses were
only 2.5% higher as various cost-saving measures have
offset the items mentioned above as well as the
additional 1995 SG&A expenses at Blackhawk which was not
acquired until February 1994.
Operating income (in thousands) by segment was as
follows:
Six Months Ended Three Months Ended
4/30/95 4/30/94 4/30/95 4/30/94
Special Machines $ (643) $(3,289) $ (664) $(2,119)
Precision Parts 2,465 1,348 1,196 1,036
Corporate (860) (575) (548) (275)
------ ------- ------ -------
Total $ 962 $(2,516) $ (16) $(1,358)
The improved operating profitability of the Special
Machines segment resulted from the effect of reducing the
cost overruns that occurred in 1994. The improved
operating profitability of the Precision Parts segment
reflected the acquisition of Blackhawk and the
incremental new business for 1995. Corporate expenses
increased due to costs related to various personnel
changes.
Interest expense was higher in 1995 due primarily to a
higher average borrowing level, as well as higher
interest rates. The higher average borrowing level was
due principally to the acquisition of Blackhawk.
The apparent income tax rate was 34% for the six months
ended April 30, 1995. For the six months ended April 30,
1994, the apparent income tax rate was 39% due to the
reversal of certain tax liabilities related to Newcor's
Canadian subsidiary which was shut down in 1990.
Liquidity and Capital Resources
During the first six months of 1995, Newcor's
consolidated operations generated cash of $6 million
which was used to fund $2.6 million of capital purchases
and pay down $2.9 million of debt. The positive cashflow
from operations was generated by the net income plus
depreciation and amortization of approximately $1.8
million and a reduction in net operating assets of $3.8
million. The main cause of the change in net operating
assets was a reduction in the Special Machines segment
inventory build due to the stage of contracts-in-
progress. Capital spending was primarily for machinery
and plant expansions needed to support new business
awarded to the Precision Parts segment. We expect to
spend approximately $6 million during the balance of 1995
for additional equipment to manufacture the
aforementioned new business.
During the first six months of 1994, Newcor's
consolidated operations used cash of $13.8 million due
primarily to increases in net operating assets of $13.3
million. This, coupled with the purchase of Blackhawk
for approximately $9 million and capital purchases of
$2.4 million, caused bank borrowings to increase by $25.2
million.
The company continues to pay a quarterly cash dividend of
$.05 per share of common stock. Total dividends paid
during the first six months of 1995 and 1994 were
$468,000 and $465,000, respectively. Future dividends
will be determined at the quarterly meetings of the Board
of Directors after considering cash requirements for
operations and reviewing the company's financial
condition, but are expected to remain at the current
level.
The company believes that existing and potential debt
capacity and cash from operations will be adequate to
service debt obligations, continue capital improvements,
and maintain adequate working capital.
New Orders and Backlog
The following table shows the new orders booked each
quarter for the past three fiscal years:
(In millions)
New orders booked by quarter
1995 1994 1993
First quarter (January 31) $27.3 $18.2 $23.9
Second quarter (April 30) 21.9 31.5 29.2
Third quarter (July 31) 30.7 33.4
Fourth quarter (October 31) 36.2 27.0
New orders booked during the first six months of 1995
were $49.2 million, which approximated the $49.7 million
booked during the same period one year ago. New order
bookings of $21.9 million for the second quarter of 1995
were below the $31.5 million booked during the second
quarter of 1994 due principally to the cancellation of a
multi-million dollar assembly system as the result of a
change in product plans by the customer. Newcor had
previously been awarded a simultaneous engineering
contract for this business. The Special Machines segment
is completing another important simultaneous engineering
contract for which it expects to be awarded the
production order during the third quarter of 1995. In
addition, the segment has submitted numerous equipment
proposals to its customers, and new orders are expected
to improve during the third and fourth quarters of 1995.
The following table shows the backlog as of the end of
each quarter for the past three fiscal years:
(In millions)
Backlog as of the end of the quarter
1995 1994 1993
First quarter (January 31) $54.0 $44.8 $48.2
Second quarter (April 30) 46.4 48.8 46.5
Third quarter (July 31) 50.1 53.0
Fourth quarter (October 31) 54.6 50.0
The April 30, 1995 backlog involves proven technology and
provides a solid platform for the remainder of the fiscal
year.
<PAGE>
NEWCOR, INC.
PART II. OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders
(a) The Annual Meeting of Shareholders was held
March 8, 1995 for the following purposes:
1. To elect two Directors to serve until
the 1998 Annual Meeting of Shareholders
or until their successors have
been duly elected and qualified.
2. To transact such other business as
may properly come before the meeting,
or any adjournment thereof.
(b) Jerry D. Campbell was elected to serve
on the Board of Directors until the 1998
Annual Meeting of Shareholders or until
his respective successor shall be
elected and qualified.
Due to the death of Frank L. Gofrank,
who was standing for reelection, only
one director was elected at the meeting.
The Board of Directors addressed the
issue of Mr. Gofrank's replacement at
its board meeting immediately following
the annual meeting by appointing W. John
Weinhardt to serve on the Board of
Directors until the 1996 Annual Meeting
of Shareholders.
The following directors' term of office
continues until the 1996 Annual Meeting
of Shareholders:
Frank L. Klapperich, Jr.
William A. Lawson
The following directors' term of office
continues until the 1997 Annual meeting
of Shareholders.
Jack R. Lousma
Richard A. Smith
Kurt O. Tech
(c) The only matter voted on at the Annual
Meeting of Shareholders was the election
of Mr. Campbell. The results of the
vote were:
Votes cast for 3,772,736
Votes against or withheld 43,191
Abstentions and broker non-votes 862,920
(d) No settlements were needed to be reached
to terminate any solicitation.
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
NEWCOR, INC.
Registrant
June 7, 1995 John Garber
John Garber
Vice President - Finance
Principal Financial & Accounting Officer
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