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 October 31, 1996 Commission File number 1-5985
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NEWCOR, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 38-0865770
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(State of incorporation) (I.R.S. Employer Identification No.)
1825 S. Woodward Ave., Suite 240
Bloomfield Hills, MI 48302 (810) 253-2400
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(Address of principal executive office) (Registrant's telephone number)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of exchange on which registered
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Common stock, $1 par value NASDAQ
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 and 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 the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to the Form 10-K. (X)
The aggregate market value of the voting common stock held by non-
affiliates of the registrant was $37,483,000 as of January 16, 1997.
The number of shares of common stock, $1 par value, outstanding as of
January 16, 1997 was 4,696,815.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Newcor, Inc. Annual Report to
Shareholders for the year ended October 31, 1996 Part I, II and IV
Portions of the Newcor, Inc. 1997 Proxy Statement Part III
Part I
Item 1. Business
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GENERAL DESCRIPTION OF BUSINESS:
Newcor, Inc., a Delaware corporation with its executive offices located in
Bloomfield Hills, Michigan, (together with its wholly-owned subsidiaries
referred to as the Company or Newcor) was organized in 1969 to succeed a
Michigan corporation organized in 1933. The Company classifies its
activities into two industry segments: Components and Assemblies and
Special Machines. The Components and Assemblies segment consists of
automotive components and farm equipment parts machined in dedicated
manufacturing cells, molded rubber and plastic parts, and non-symmetrical
machine contoured parts produced and sold in small quantities. This
segment had previously been referred to as the Precision Parts segment but
has been renamed to better reflect the current business of the companies
within the segment. Special machines consist of standard individual
machines, as well as custom designed machines, all manufactured on a made-
to-order basis, serving primarily the automotive and appliance industries.
Subsequent to year-end, in January 1997, the Company purchased the common
stock of Plastronics Plus, Inc. (Plastronics). Plastronics primarily
manufactures custom plastic injection-molded components for the automotive
industry. During 1996, the Company purchased three unrelated companies in
the molded rubber and plastic component parts industry. Each company
primarily manufactures parts for the automotive industry. In February
1994, Newcor purchased Blackhawk Engineering, whose principal line of
business is production machining gray iron, nodular iron and steel foundry
castings and its principal customer is John Deere.
During May 1996, the Company completed the sale of the business and certain
assets of its Wilson Automation division. Wilson designs and manufactures
engine, transmission, and axle assembly systems and had been the Company's
largest division based on revenue, with annual sales of approximately $27
million in 1995. The disposition of Wilson has been recorded as a
discontinued operation, and, accordingly, the results of Wilson have been
removed from continuing operations for all years presented in the
accompanying consolidated financial statements and notes thereto.
The Company completed the sale of its Newcor Machine Tool division in
October 1996. Newcor Machine Tool designs and manufactures new and rebuilt
metal cutting tools, including CNC lathes, two and four axis turning
machines and dial, shuttle and transfer machines. Annual sales at this
division had been in the $6 - $10 million range. In addition, the sale of
Newcor's Eonic division is pending. Eonic primarily manufactures precision
cams, camshafts and other contoured parts.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS:
Financial information about industry segments is presented in Note L -
Segment Reporting of the Notes to Consolidated Statements in Newcor's 1996
Annual Report to Shareholders. This information is hereby incorporated by
reference.
NARRATIVE DESCRIPTION OF BUSINESS:
Components and Assemblies Industry Segment:
During 1996, the Components and Assemblies segment accounted for 72% of
consolidated total revenue. This segment consists of seven divisions at
October 31, 1996: Deckerville, Blackhawk, Auburn Hills, Rochester Gear,
Walkerton, Eonic, and Livonia. In addition, Plastronics will be included
in this segment.
Deckerville's product line includes form dipped, slush cast, rotational
molded, and foam molded rubber and plastic parts. These products are used
in a wide range of applications including gear shift boots in trucks and
cars and coatings on various metal parts. Blackhawk's principal line of
business is machining large gray iron, nodular iron and steel foundry
castings. Auburn Hills principal line of business is manufacturing
flexible rubber and plastic injection molding. Rochester Gear produces
high-quality shafts, axles, transmission parts and other machined
components. Walkerton produces form dipped vinyl rubber and plastic parts.
Eonic produces precision cams, camshafts and other contoured parts.
Livonia manufactures coated metal and plastic parts.
In 1996, over 56% of the Components and Assemblies segment revenue came
from sales to the automotive market (OEM's and Tier 1 suppliers). In
addition, 24% of revenue is from sales to agricultural equipment
manufacturers, primarily John Deere. The remaining 20% of revenue comes
from a wide variety of markets including health care, defense, food
processing, office equipment and others.
Each of the divisions in the Components and Assemblies segment has several
competitors, primarily all domestic. Orders are almost exclusively
obtained through competitive bidding, based on quality, engineering
capabilities, delivery, and price. Each division has established itself as
a reliable high-quality, low-cost manufacturer in its marketplace.
Almost all of the segment's revenue comes from domestic sales through
either the Company's sales staff or independent manufacturers'
representatives.
Most raw materials, supplies and other components are purchased from a
number of suppliers. Occasionally, a division will depend upon a single
supplier for a particular item when instructed by the customer. The
Company has not experienced any difficulty obtaining necessary purchased
materials.
Throughout its product lines, Newcor has various patents and trademarks
which have been obtained over a number of years and expire at various
times. While Newcor considers each of them to be important to its
business, the loss of any patent or trademark would not materially affect
the sales and profitability of the Company.
The Components and Assemblies segment is considered seasonal, varying
primarily with the automotive industry's annual shutdowns in July and
December.
There are no unusual working capital requirements within Newcor's
Components and Assemblies divisions or the industries in which they
operate.
Newcor's Components and Assemblies segment primarily operates under long-
term blanket purchase orders with its customers. Specific releases against
these blanket purchase orders are made on a daily basis by the customer.
Accordingly, order backlog is not considered meaningful to this segment.
None of the Company's revenue is derived from government contracts.
Special Machines Industry Segment:
During 1996, the Special Machines segment accounted for 28% of consolidated
total revenue. This segment consists of one division at October 31, 1996:
Newcor Bay City (Bay City). Bay City produces innovative manufacturing
systems, particularly systems involving welding. Their expertise includes
eight different welding technologies. The Wilson Automation division and
Newcor Machine Tool division, previous components of this segment, were
sold during 1996.
Over 58% of the Special Machines segment revenue came from sales to the
automotive market (OEM's and Tier 1 suppliers) during 1996. The remaining
42% of Special Machines revenue comes from a variety of markets including
small engines, appliance, consumer goods, aerospace and others.
Competition in the special machine industry comes from both domestic and
foreign manufacturers. Most orders are obtained through a competitive
bidding process with decisions based on product design and performance,
production and engineering capabilities, delivery, service and price.
Repeat orders for a similar machine are sometimes single-sourced. The
level of competition varies widely depending upon the industry in which the
potential customer operates, the size of the order and technical complexity
involved in fulfilling the specific order requirements. The Company
attempts to differentiate itself by providing timely, innovative solutions
to its customers' requirements.
The products of this segment are marketed primarily in the major industrial
areas of the United States, Mexico, Canada and Asia by direct sales to its
customers. Most of the segment's sales are generated by sales engineers,
with some sales coming from independent manufacturers' representatives.
Competitive quotes are obtained for most components, raw materials and
supplies from a number of suppliers. Occasionally, a division will depend
upon a single supplier for a particular item when instructed by the
customer. The Company has not experienced any difficulty obtaining
necessary purchased materials.
Throughout its product lines, Newcor has various patents and trademarks
which have been obtained over a number of years and expire at various
times. While Newcor considers each of them to be important to its
business, the loss of any patent or trademark would not materially affect
the sales and profitability of the Company.
The Special Machines segment is not considered seasonal.
Due to the nature of the Special Machines industry, this segment's working
capital can fluctuate significantly based on the stage of contracts in
process.
As of October 31, 1996, the Special Machines segment backlog was $8.2
million. Backlog at October 31, 1995 was $30.7 million, of which $10.1
million related to Bay City. All of the October 31, 1996 backlog is
expected to be completed during fiscal 1997.
None of the segment's revenue comes from government contracts.
Environmental Compliance:
Compliance by the Company with federal, state and local laws and
regulations pertaining to the discharge of material into the environment
has not and is not anticipated to have any material effect upon the capital
expenditures, earnings or competitive position of the Company in conducting
its business.
Employees:
As of October 31, 1996, the Company had 1,047 employees.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND SALES:
The Company has no foreign operations and does not segregate its revenue by
geographic area due to the nature of its products. Export sales,
principally to Mexico and Canada, accounted for 5% of consolidated revenue
in 1996, 9% in 1995 and 8% in 1994.
Item 2. Properties
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The Components and Assemblies segment conducts its business in company-
owned facilities totaling 309,000 square feet of office, engineering and
manufacturing space located in Detroit, Clifford, Deckerville, and Auburn
Hills, Michigan, Walkerton, Indiana, and Cedar Falls, Iowa. This segment
also leases 32,000 square feet of office, warehouse and manufacturing space
in Detroit and Livonia, Michigan.
The Special Machines segment conducts its business in company-owned
facilities totaling 123,000 square feet of office, engineering and
manufacturing space in Bay City, Michigan.
The Company leases 7,000 square feet of office space for its corporate
headquarters in Bloomfield Hills, Michigan.
All of these facilities are fully utilized and are suitable to meet the
current capacity needs of the divisions.
Item 3. Legal Proceedings
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Various lawsuits arising during the normal course of business are pending
against the Company. In the opinion of management, the ultimate liability,
if any, resulting from these matters will have no significant effect on the
Company's results of operations, liquidity or financial position.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended October 31, 1996.
Part II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
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The information required by this item is contained in " Management's
Discussion and Analysis" in the Newcor, Inc. 1996 Annual Report to
Shareholders. This information is incorporated herein by reference.
Item 6. Selected Financial Data
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The information required by this item is contained in the Newcor, Inc. 1996
Annual Report to Shareholders under the heading " Financial Summary". This
information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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The information required by this item is contained in " Management's
Discussion and Analysis" in the Newcor, Inc. 1996 Annual Report to
Shareholders. This information is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
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The information required by this item is contained in the consolidated
financial statements, " Notes to Consolidated Statements", and " Report of
Independent Accountants" in the Newcor, Inc. 1996 Annual Report to
Shareholders. This information is incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
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None.
Part III
Item 10. Directors and Executive Officers of the Registrant
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The information required by Items 401 and 405 of Regulation S-K which will
be contained in the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on March 5, 1997 (the 1997 Proxy Statement) is
incorporated herein by reference.
Item 11. Executive Compensation
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The information required by Item 402 of Regulation S-K which will be
contained in the Company's 1997 Proxy Statement is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
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The information required by Item 403 of Regulation S-K which will be
contained in the Company's 1997 Proxy Statement is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
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None.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
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(a) 1. Financial Statements
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The consolidated Financial Statements and Notes thereto contained in
Newcor's 1996 Annual Report to Shareholders are incorporated herein by
reference. Except as specifically indicated herein, no other data
appearing in the Company's 1996 Annual Report to Shareholders is deemed to
be filed as part of this Form 10-K Annual Report.
2. Financial Statement Schedules
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None required.
3. Exhibits (File number for all documents incorporated
by reference is Commission File Number 1-5985)
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3(a) Restated Certificate of Incorporation dated July 25, 1990
incorporated herein by reference from Exhibit 3(a) to report on Form
10-K for the fiscal year ended October 31, 1990.
3(b) By Laws of Registrant as amended through January 14, 1991
incorporated herein by reference from Exhibit 3(b) to report on Form
10-K for the fiscal year ended October 31, 1990.
4(a) Second Amended and Restated Revolving Credit Agreement between
Newcor, Inc. and Comerica Bank dated March 6, 1995, incorporated by
reference from Exhibit 4(a) to report on Form 10-Q for the quarter
ended April 30, 1996.
4(b) Fourth Amendment to the Second Amended and Restated Revolving Credit
Agreement with Comerica Bank dated April 12, 1996, incorporated by
reference from Exhibit 4(b) to report on Form 10-Q for the quarter
ended April 30, 1996.
4(c) Fifth Amendment to Second Amended and Restated Revolving Credit
Agreement with Comerica Bank dated October 15, 1996.
10(a)* 1982 Incentive Stock Option Plan incorporated herein by reference
from Exhibit 10(a) to report on Form 10-K for the fiscal year ended
October 31, 1983.
10(b)* Newcor, Inc. Directors' Retirement Plan incorporated herein by
reference from Exhibit 10(b) to report on Form 10-K for the fiscal
year ended October 31, 1988.
10(c)* Board of Directors Deferred Directors' Fees incorporated herein by
reference from Exhibit 10(e) to report on Form 10-K for the fiscal
year ended October 31, 1987.
10(d)* Agreement with Thomas D. Parker dated June 7, 1989 incorporated
herein by reference from Exhibit 10(h) to report on Form 10-K for
the fiscal year ended October 31, 1992.
10(e)* Newcor, Inc. 1993 Management Stock Incentive Plan incorporated
herein by reference from Exhibit 10(j) to report on Form 10-K for
the fiscal year ended October 31, 1994.
10(f)* Amendment to Newcor, Inc. 1993 Management Stock Incentive Plan
incorporated herein by reference from Exhibit 10(k) to report on
Form 10-K for the fiscal year ended October 31, 1994.
10(g)* Employment Agreement with W. John Weinhardt dated February 13, 1995
incorporated herein by reference from Exhibit 10(g) to report on
Form 10-K for the fiscal year ended October 31, 1995.
10(h)* Change in Control Agreement with W. John Weinhardt dated February
13, 1995 incorporated herein by reference from Exhibit 10(h) to
report on Form 10-K for the fiscal year ended October 31, 1995.
10(i)* 1996 Employee Incentive Stock Plan dated March 6, 1996, incorporated
by reference from the 1996 Proxy Statement dated February 5, 1996.
10(j)* 1996 Non-Employee Directors Stock Option Plan dated March 6, 1996,
incorporated by reference from the 1996 Proxy Statement dated
February 5, 1996.
13 Portion of Newcor, Inc. 1996 Annual Report to Shareholders.
21 List of Subsidiaries of Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule (EDGAR file only).
* - Indicates management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
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On January 27, 1996, Newcor, Inc. filed a Form 8-K announcing the
purchase of the common stock of Plastronics Plus, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant Newcor, Inc.
------------
By: /s/ W. John Weinhardt 1/29/97
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W. John Weinhardt, President Date
and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date Signed
- --------- ----- -----------
- ---------------------------------- Director ---------
Jerry D. Campbell
/s/ John Garber 1/29/97
- ---------------------------------- Vice President Finance and ---------
John Garber Chief Financial Officer
- ---------------------------------- Director ---------
Shirley E. Gofrank
- ---------------------------------- Director ---------
Frank L. Klapperich, Jr.
/s/ William A. Lawson 1/29/97
- ---------------------------------- Director ---------
William A. Lawson
/s/ Jack R. Lousma 1/29/97
- ---------------------------------- Director ---------
Jack R. Lousma
/s/ Richard A. Smith 1/29/97
- ---------------------------------- Director ---------
Richard A. Smith
/s/ Kurt O. Tech 1/29/97
- ---------------------------------- Director ---------
Kurt O. Tech
/s/ W. John Weinhardt 1/29/97
- ---------------------------------- President and Chief ---------
W. John Weinhardt Executive Officer
NEWCOR, INC.
Exhibit 13 to Form 10-K
For the Year Ended October 31, 1996
Portion of Newcor, Inc. 1996 Annual Report to Shareholders
MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview of Fiscal 1996
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Newcor is organized into two business segments: Components and Assemblies
and Special Machines. The Components and Assemblies segment consists of
automotive components and farm equipment parts machined in dedicated
manufacturing cells, molded rubber and plastic parts, and non-symmetrical
machine contoured parts produced and sold in small quantities. This
segment had previously been referred to as the Precision Parts segment but
has been renamed to better reflect the current business of the companies
within the segment. Special machines consist of standard individual
machines, as well as custom designed machines, all manufactured on a made-
to-order basis, serving primarily the automotive and appliance industries.
The events of 1996 have marked a significant turning point in Newcor's
history. The Company sold two of the three divisions that comprised the
Special Machines segment and acquired three additional companies that are a
part of the Components and Assemblies segment. These events have continued
Newcor down the path that has been charted to strengthen and grow its
components and assemblies business while divesting those divisions deemed
to have unacceptably high levels of volatility and risk. Newcor is now
predominantly an automotive component supplier.
The three companies acquired were all in the rubber and plastic component
parts industry, primarily serving the automotive market. The acquisitions
have been combined with Midwest Rubber, a division acquired in 1992, to
strengthen Newcor's market position in this industry and to create the
critical mass necessary to effectively provide the engineering support,
innovative products, and superior quality required to satisfy their
customers. This growth strategy was further enhanced with a fourth
acquisition, Plastronics Plus, Inc., in January 1997. On a combined basis,
the four companies acquired should represent annual sales of approximately
$40 million.
Effective May 6, 1996, Newcor completed the sale of the business and
certain assets of its Wilson Automation division. Wilson designs and
manufactures engine, transmission, and axle assembly systems and had been
Newcor's largest division based on revenue. The competition in this line
of business was primarily large, multi-billion dollar global companies that
were better able to handle the volatility relating to both operating
results and working capital needs. The disposition of Wilson has been
recorded as a discontinued operation and, accordingly, the results of
Wilson have been removed from continuing operations for all years presented
in the accompanying financial statements and notes thereto. In addition,
in June 1996, Newcor announced its intention to sell two more of its
divisions: Newcor Machine Tool and Eonic. Newcor Machine Tool was sold in
October 1996, and the sale of Eonic is pending.
During fiscal 1996, Newcor reported income from continuing operations of
$3.6 million, or $0.76 per share, on sales of $111.7 million compared with
income from continuing operations of $2.4 million, or $0.51 per share, on
sales of $90.2 million during fiscal 1995. Included in 1996 income from
continuing operations is the estimated pre-tax loss on the sale of Newcor
Machine Tool and Eonic of $824,000, or $.11 per share. Excluding this
loss, income from continuing operations would have been $.87 per share.
The increase in sales was due to both internal growth from new parts
programs as well as growth related to the three acquisitions. The
increased income reflected the combination of higher sales and internal
performance improvement resulting from the rigorous implementation of lean
manufacturing and continuous improvement programs.
Continuing Operations in Fiscal 1996 Compared with Fiscal 1995
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Consolidated sales in 1996 represented a 24% increase over sales in 1995.
Sales for the Components and Assemblies segment were up 36%, while sales
for the Special Machines segment were up less than 1%. Of the $21.3
million increase in sales within the Components and Assemblies segment,
$13.4 million was due to the three acquisitions. The remaining increase of
almost $8 million represented a 12% year over year increase at our existing
divisions due to new parts programs that began production over the past two
years. Although sales for the Special Machines segment remained basically
flat, sales at the only remaining division within this segment increased
18%.
Consolidated gross profit margin improved to 20.4% in 1996 from 18.4% in
1995 reflecting the benefits of implementing lean manufacturing concepts
and a comprehensive quality operating system which are driving continuous
improvement within Newcor. The Company has also strengthened and upgraded
its management teams and has been training all employees in the use of
productivity tools such as Kaizen, statistical process control, and team
based problem solving.
Selling, general and administrative expenses (SG&A) increased from $11.8
million in 1995 to $15.4 million in 1996. Over $2 million of the increase
represented the additional SG&A related to the three acquisitions and the
remainder of the increase primarily related to the costs of hiring and
training management personnel and implementing the continuous improvement
techniques discussed above.
Consolidated operating income from continuing operations of $6.5 million
for fiscal 1996 was 36% higher than the operating profit in 1995 of $4.8
million. The improved operating profit reflected the improved gross
margin, partially offset by the increased SG&A, as well as an $824,000
estimated pre-tax loss on the sale of Newcor Machine Tool and Eonic.
Interest expense increased to $1.8 million in 1996 from $1.5 million in
1995 due to the additional debt related to the acquisitions. The effective
income tax rate was 31% in 1996 which was below the statutory rate of 34%
due to the reversal of certain accruals related to the final settlement of
an IRS audit during the fourth quarter of 1996.
Discontinued Operations
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Although assets were sold at approximately net book value, reserves were
established for curtailment of the pension plan, employee separation costs,
costs associated with the collection of accounts receivable and additional
liabilities related to contracts for which Newcor has retained the
responsibility, and the operating loss from the measurement date, March 31,
1996, to the sale date. These reserves resulted in a net loss of $3.5
million on the disposition of Wilson Automation.
The loss from discontinued operations for 1994 was caused by cost overruns
on a number of jobs that were shipped in 1994 by Wilson Automation. The
loss from discontinued operations for 1995 represented additional costs
incurred to fix field problems related to jobs that were shipped in 1993
and 1994. The loss from discontinued operations for 1996 reflected the
operations of Wilson Automation through the measurement date and was
primarily the result of under-absorbed manufacturing expenses due to the
stage of contracts in process during that time period and additional costs
to fix problems related to the jobs shipped in 1994.
Continuing Operations in Fiscal 1995 Compared with Fiscal 1994
- --------------------------------------------------------------
Consolidated sales in fiscal 1995 were 22% higher than in fiscal 1994.
This represented a 27% increase in sales by the Components and Assemblies
segment and a 13% increase in sales by the Special Machines segment. The
increase in the Components and Assemblies segment sales was due to higher
automotive releases, additional new business that began production in 1995,
and the acquisition of a business in the second quarter of 1994. The
increase in the Special Machines segment sales was due to an improved
marketing focus and a re-definition of the customer base of the segment.
Consolidated gross profit margin improved to 18.4% in 1995 from 14.9% in
1994. The increase in margins during 1995 were primarily a result of the
cost overruns on certain special machine systems that were shipped in 1994.
SG&A costs increased to $11.8 million in 1995 from $11.7 million in 1994
due to the acquisition of a business in the second quarter of 1994.
Interest expense increased to $1.5 million in 1995 from $1.1 million in
1994. The increase was primarily due to the additional debt incurred to
purchase the business in 1994 and higher average interest rates in 1995
compared with 1994. The effective income tax rate was 34% in 1995.
Outlook for 1997
- ----------------
Newcor desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The following important
factors in some cases have affected, and in the future could affect,
Newcor's actual results and could cause Newcor's actual results to differ
materially from those expressed in any forward looking statements in this
document: domestic automotive production, domestic agricultural equipment
production, significant changes in Newcor's competitive industries, and
Newcor's status with its current customer base.
Sales growth is one of Newcor's primary goals, both internally at our
existing divisions and through acquisitions. Sales at existing divisions
within Newcor's Components and Assemblies segment are expected to be higher
in 1997 than in 1996 because of production that began on a number of new
programs during fiscal 1996 and additional new programs that will start up
during fiscal 1997. Margins are anticipated to be higher in total in 1997
as operational improvements should continue to improve operating margins
while the continuing cost of implementing these operational improvements is
expected to cause SG&A spending to increase. The first quarter of 1997 is
expected to be the weakest due to the seasonal effect of the holidays on
the Components and Assemblies segment as well as the stage of contracts in
process within the Special Machines segment. Additional acquisitions will
be pursued during 1997 and, if executed, would likely be financed through
additional borrowings, issuing additional securities, or both.
Liquidity and Capital Resources
- -------------------------------
During 1996, Newcor spent over $14.5 million on acquisitions and capital
spending. At the same time, debt was reduced by $800,000 as continuing
operations generated $7.8 million of cash and discontinued operations
generated almost $6 million of cash. Income from continuing operations plus
depreciation and amortization generated $7.2 million of the cash from
continuing operations. As of October 31, 1996, Newcor had $9.3 million
outstanding under a $29 million revolving credit agreement that expires on
February 28, 1998. An additional $12.3 million was borrowed against this
revolver on January 10, 1997 to finance the purchase of Plastronics Plus,
Inc. and to retire the outstanding debt of Plastronics.
During 1995, Newcor's continuing operations generated $1.5 million of cash
while discontinued operations generated $9.1 million of cash, primarily
from the collection of receivables. This cash was used to finance $4.6
million of capital expenditures and pay down $4.9 million of debt.
In April 1996, the Company amended its revolving credit agreement to allow
for a portion of the revolving credit to be replaced with a fixed-rate term
loan. In May 1996, the Company entered into a $10 million seven-year fixed-
rate term loan at 7.85% interest. No principal payments are due for the
first two years. Monthly principal payments of $166,667 are due from June
10, 1998 through May 10, 2003. 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.
The Company continues to pay a quarterly cash dividend of $.05 per share of
common stock. Total dividends paid in 1996 were $938,000 compared to
$936,000 in 1995 and $932,000 in 1994. 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
and strategic direction.
Various lawsuits arising during the normal course of business are pending
against the Company. Management believes that the ultimate liability, if
any, resulting from these matters will have no significant effect on the
Company's results of operations, liquidity or financial position.
Market Prices and Dividends
- ---------------------------
Newcor's common stock is traded on the NASDAQ National Market System under
the symbol "NEWC." The high and low sales prices for the common stock and
the cash dividends declared per share in 1996 and 1995 are shown in the
table below. The Company estimates that there are approximately 2,900
shareholders of record.
1996 High Sales Price Low Sales Price Dividends
- -------------- ---------------- --------------- ---------
First Quarter $ 10 1/4 $ 7 1/4 $ .05
Second Quarter 10 3/4 7 5/8 .05
Third Quarter 12 1/2 8 7/8 .05
Fourth Quarter 9 7/8 8 1/4 .05
1995 High Sales Price Low Sales Price Dividends
- -------------- ---------------- --------------- ---------
First Quarter $ 8 1/2 $ 6 3/4 $ .05
Second Quarter 7 5/8 6 5/8 .05
Third Quarter 8 5/8 6 1/4 .05
Fourth Quarter 8 7/8 7 1/2 .05
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Newcor, Inc.
We have audited the consolidated balance sheets of Newcor, Inc. and
Subsidiaries as of October 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years
ended October 31, 1996, 1995, and 1994. These 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 generally accepted auditing
standards. 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Newcor, Inc. and Subsidiaries as of October 31, 1996, and 1995 and the
consolidated results of operations and cash flows for the years ended
October 31, 1996, 1995, and 1994, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Detroit, Michigan
December 5, 1996, except as to
the information presented in the
first paragraph of Note B, for
which the date is January 14, 1997.
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For the years ended October 31, 1996 1995 1994
Sales $111,744 $90,173 $ 74,116
Cost of sales 88,969 73,555 63,047
-------- ------- -------
Gross margin 22,775 16,618 11,069
Selling, general and
administrative expense 15,424 11,802 11,719
Loss on sale of businesses 824 - -
-------- ------- -------
Operating income (loss) from
continuing operations 6,527 4,816 (650)
Other income (expense):
Interest expense (1,787) (1,504) (1,111)
Other 432 309 174
-------- ------- -------
Income (loss) from continuing operations
before income taxes 5,172 3,621 (1,587)
Provision (benefit) for income taxes 1,614 1,230 (737)
-------- ------- -------
Income (loss) from continuing
operations 3,558 2,391 (850)
-------- ------- -------
Discontinued operations:
Loss from discontinued operations,
net of income tax benefit of $611,
$853 and $1,793, respectively (1,203) (1,510) (1,352)
Loss on sale of discontinued
operations, net of income tax
benefit of $1,800 (3,500) - -
-------- ------- -------
Loss from discontinued operations (4,703) (1,510) (1,352)
-------- ------- -------
Net income (loss) $ (1,145) $ 881 $(2,202)
======== ======= =======
Amounts per share of common stock:
Income (loss) from continuing
operations $ 0.76 $ 0.51 $ (0.18)
Loss from discontinued operations (1.00) (0.32) (0.29)
-------- ------- -------
Net income (loss) $ (0.24) $ 0.19 $ (0.47)
======== ======= =======
Weighted average common shares
outstanding 4,689 4,679 4,662
======== ======= =======
The accompanying notes are an integral part
of the consolidated financial statements
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In Thousands)
Capital in Unfunded
Common Excess Pension Retained Treasury
Stock of Par Liability Earnings Stock
Balance, October 31, 1993 $4,842 $ 1,607 $ (852) $ 24,560 $(1,717)
Unfunded pension liability (467)
Net loss (2,202)
Cash dividends (932)
Shares issued under
employee stock plans 33 285
Cancellation of treasury
shares (199) (1,518) 1,717
------ ------ ------ ------ -----
Balance, October 31, 1994 4,676 374 (1,319) 21,426 -
Unfunded pension liability 783
Net income 881
Cash dividends (936)
Shares issued under
employee stock plans 3 21
------ ------ ------ ------ -----
Balance, October 31, 1995 4,679 395 (536) 21,371 -
Unfunded pension liability 481
Net loss (1,145)
Cash dividends (938)
Shares issued under
employee stock plans 18 116
------ ------ ------ ------ -----
Balance, October 31, 1996 $4,697 $ 511 $ (55) $19,288 $ -
====== ====== ====== ======= =====
The accompanying notes are an integral part
of the consolidated financial statements.
NEWCOR, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
October 31, 1996 1995
Assets
Current Assets:
Cash $ 34 $ 29
Accounts receivable including retainages
of $1,554 in 1996 and $859 in 1995 17,369 24,906
Inventories 8,196 14,763
Prepaid expenses and other 4,634 1,576
Deferred income taxes 1,891 1,620
-------- --------
Total current assets 32,124 42,894
Property, plant and equipment, net of
accumulated depreciation 23,131 24,518
Prepaid pension expense 3,871 3,460
Cost in excess of assigned value of
acquired companies, net of amortization 12,689 5,534
Net assets held for sale 3,844 -
Other long-term assets 1,840 1,147
-------- --------
Total assets $ 77,499 $ 77,553
======== ========
Liabilities
Current Liabilities:
Accounts payable $ 10,175 $ 7,605
Accrued payroll and related expenses 3,401 3,731
Accrued installation costs 547 2,898
Accrued liabilities 3,050 2,085
-------- --------
Total current liabilities 17,173 16,319
Long-term debt 25,400 26,200
Postretirement benefits other than pensions 6,345 6,371
Pension liability and other 4,140 2,754
-------- --------
Total liabilities 53,058 51,644
-------- --------
Shareholders' Equity
Preferred stock, no par value.
Authorized: 1,000 shares. Issued: None
Common stock, par value $1 per share.
Authorized: 10,000 shares.
Issued: 4,697 shares in 1996 and
4,679 shares in 1995 4,697 4,679
Capital in excess of par 511 395
Unfunded pension liability (55) (536)
Retained earnings 19,288 21,371
-------- --------
Total shareholders' equity 24,441 25,909
-------- --------
Total liabilities and shareholders'
equity $ 77,499 $ 77,553
======== ========
The accompanying notes are an integral part
of the consolidated financial statements.
NEWCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the years ended October 31, 1996 1995 1994
Operating Activities
Income (loss) from continuing
operations $ 3,558 $ 2,391 $ (850)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Loss on sale of businesses 824 - -
Depreciation and amortization 3,622 2,850 2,235
Non-current deferred income taxes (366) 402 418
Pensions (893) 451 196
Gain on sale of capital assets (168) (354) (40)
Other - net (27) (131) 283
Changes in operating assets
and liabilities:
Accounts receivable 444 (3,072) (1,296)
Inventories 747 (815) 3,061
Deferred income taxes and other (2,275) 385 (2,063)
Accounts payable 2,921 (1,783) (2,344)
Accrued liabilities (589) 1,139 (1,628)
------- ------- -------
Total cash provided by (used in)
continuing operating activities 7,798 1,463 (2,028)
------- ------- -------
Discontinued Operations:
Loss on disposal of discontinued
operations (3,500) - -
Loss from discontinued operations (1,203) (1,510) (1,352)
Cash provided by (used in)
discontinued operations 10,634 10,606 (2,818)
------- ------- -------
Total cash provided by (used in)
discontinued operations 5,931 9,096 (4,170)
------- ------- -------
Net cash provided by (used in)
operating activities 13,729 10,559 (6,198)
------- -------
- -------
Investing Activities
Capital expenditures (2,946) (4,580) (4,568)
Proceeds from sale of business 1,984 - -
Acquisitions (11,578) - (8,765)
Proceeds from sale of capital assets 420 407 569
Use of EDC proceeds - - 111
------- ------- -------
Net cash used in investing
activities (12,120) (4,173) (12,653)
------- ------- -------
Financing Activities
Net borrowings (repayments) on
long term debt (800) (4,900) 19,500
Principal payment on EDC bonds - (600) -
Shares issued under employee
stock plans 134 24 318
Cash dividends paid (938) (936) (932)
------- ------- -------
Net cash provided by (used in)
financing activities (1,604) (6,412) 18,886
------- ------- -------
Increase (decrease) in cash 5 (26) 35
Cash, beginning of year 29 55 20
------- ------- -------
Cash, end of year $ 34 $ 29 $ 55
======= ======= =======
The accompanying notes are an integral part
of the consolidated financial statements.
NEWCOR, INC.
NOTES TO CONSOLIDATED STATEMENTS
(Dollars in thousands, except per share data)
A. ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial statements
include the accounts of Newcor, Inc. and all subsidiaries (the Company).
All significant intercompany accounts and transactions are eliminated.
Inventory Valuation - Inventories are stated at the lower of cost or
net realizable value. Costs, other than those specifically identified to
contracts, are determined primarily on the first-in, first-out (FIFO)
basis.
Contract Accounting - The percentage of completion method of
accounting is used by the Company's Special Machines segment. Sales and
gross profit are recognized as work is performed based on the relationship
between actual costs incurred and total estimated costs at completion.
Sales and gross profit are adjusted prospectively for revisions in
estimated total contract costs and contract values. Estimated losses are
recognized when determinable.
Property, Plant and Equipment - Property, plant and equipment is
stated at cost and is depreciated using the straight-line method. The
general range of lives is fifteen to thirty years for building and land
improvements and four to ten years for machinery, office equipment and
vehicles.
Cost in Excess of Assigned Value of Acquired Companies - The costs of
acquired companies that exceed the assigned value at dates of acquisition
(goodwill) are generally being amortized over a twenty year period.
Several factors are used to evaluate the recoverability of goodwill,
including management's plans for future operations, recent operating
results and each division's projected undiscounted cash flows. Accumulated
amortization was $1,825 and $1,463 at October 31, 1996 and 1995,
respectively.
Statement of Financial Accounting Standards No. 121, " Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of " (FAS 121) requires that, effective in fiscal 1997, long-lived
assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. The effect of adopting FAS 121 is not expected to be
material.
Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities.
Use of Estimates - The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires the Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Financial Instruments - The carrying amount of the Company's financial
instruments, which includes cash, accounts receivable, accounts payable,
notes payable and long-term debt approximates their fair market value at
October 31, 1996.
Stock-Based Compensation - Statement of Financial Accounting Standards
No. 123, " Accounting for Stock-Based Compensation " (FAS 123) allows two
alternative methods of accounting for stock-based employee compensation
plans. Either the fair value (recognition) method set forth in FAS 123 can
be applied or the entity can continue to apply the intrinsic value method
as set forth in Accounting Principles Board Opinion No. 25, " Accounting
for Stock Issued to Employees " for financial statement purposes and then
disclose pro forma net income and earnings per share determined as if the
fair value method had been applied. The Company anticipates adopting the
disclosure method effective in fiscal 1997.
B. ACQUISITIONS:
On January 13, 1997, the Company purchased for cash the common stock
of Plastronics Plus, Inc. (Plastronics), a Wisconsin corporation.
Plastronics primarily manufactures custom plastic injection-molded
components for the automotive industry. The purchase price was
approximately $8 million and was financed through the Company's existing
line of credit facility. The acquisition will be recorded using the
purchase method of accounting. The cost in excess of net assets acquired of
approximately $4 million will be amortized on a straight-line basis over
twenty years.
On December 4 and 5, 1995, the Company signed three separate
definitive agreements to purchase for cash certain assets of three
unrelated companies in the molded rubber and plastic component parts
industry. Each company primarily manufactures parts for the automotive
industry. Two of the acquisitions were completed on January 2, 1996, and
the third was completed on April 1, 1996. The total purchase price for all
three acquisitions was approximately $11.6 million. The acquisitions were
recorded using the purchase method of accounting. The cost in excess of
net assets acquired of approximately $8 million is being amortized on a
straight-line basis over twenty years.
The following table presents unaudited pro forma results of operations
as if the four acquisitions described above had been acquired at the
beginning of fiscal 1995. These pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of the
results that would have occurred had the acquisitions been made at the
beginning of fiscal 1995 or which may occur in the future.
1996 1995
Sales $133,023 $125,207
Income from continuing operations 3,965 3,342
Net income (loss) (738) 1,832
Per share income from continuing
operations 0.85 0.71
Net income (loss) per share (0.16) 0.39
On February 10, 1994, Newcor purchased for cash 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, nodular iron, and
steel foundry castings, and its principal customer is Deere & Company. The
purchase price was approximately $8.7 million. The acquisition has been
recorded using the purchase method of accounting. The cost in excess of
net assets acquired of approximately $4.6 million is being amortized on a
straight-line basis over twenty years.
C. DISCONTINUED OPERATIONS:
The Company sold the business and certain assets of its Wilson
Automation division (Wilson) on May 6, 1996. Wilson designs and
manufactures engine, transmission, and axle assembly systems. All
receivables, the land and building, and certain liabilities were retained
by the Company. The building is being leased to the buyer through April
30, 2001. Although assets were sold at approximately net book value,
reserves were established for curtailment of the pension plan, employee
separation costs, costs associated with the collection of accounts
receivable and additional liabilities related to contracts for which the
Company has retained the responsibility and liabilities. These reserves
coupled with the operating loss from the measurement date (March 31, 1996)
to the sale date resulted in a net loss of $3.5 million on the disposition
of Wilson. Net current assets at October 31, 1995 were approximately $6.2
million. Summary operating results of discontinued operations through the
measurement date are as follows:
1996 1995 1994
Revenues $9,173 $26,457 $37,870
Loss before income taxes(1,814) (2,363) (3,145)
Benefit from income taxes (611) (853) (1,793)
Net loss from
discontinued operations(1,203) (1,510) (1,352)
D. DISPOSITIONS AND NET ASSETS HELD FOR SALE:
On October 21, 1996, the Company sold the business and substantially
all assets of its Newcor Machine Tool operation. Although assets were sold
at approximately net book value, reserves were established for employee
separation costs, costs associated with the collection of accounts
receivable and pension plan costs. The Company is negotiating an agreement
to sell substantially all of the assets and liabilities of its Eonic
operation and anticipates using the proceeds from the sale to reduce long-
term debt. Accordingly, the net assets of Eonic's operations have been
classified as a long-term asset at October 31, 1996. The Company has
recorded a loss of $824 at October 31, 1996 for the estimated loss on the
sale of these two businesses.
E. INVENTORIES:
Inventories at October 31, 1996 and 1995 are summarized as follows:
1996 1995
Costs and estimated earnings of uncompleted
contracts in excess of related billings
of $225 in 1996 and $2,428 in 1995 $ 4,075 $ 9,784
Components and Assemblies segment 3,765 4,589
Other 356 390
-------- --------
$ 8,196 $ 14,763
======== ========
Costs and estimated earnings of uncompleted contracts in excess of
related billings represents revenue recognized under the percentage of
completion method in excess of amounts billed.
F. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment at October 31, 1996 and 1995 is
summarized as follows:
1996 1995
Land and improvements $ 1,036 $ 1,158
Buildings 11,956 11,520
Machinery 20,935 25,356
Office and transportation equipment 2,893 4,984
Construction in progress 723 1,581
-------- --------
37,543 44,599
Less accumulated depreciation 14,412 20,081
-------- --------
$ 23,131 $ 24,518
======== ========
G. OPERATING LEASES:
The Company leases certain manufacturing equipment and facilities,
office space and other equipment under lease agreements accounted for as
operating leases. Rent expense related to these leases aggregated
approximately $866, $355 and $355 in 1996, 1995 and 1994, respectively.
Future minimum rental payments required at October 31, 1996 are as follows:
Year Ending
October 31, Amount
1997 $ 980
1998 761
1999 584
2000 584
2001 661
Thereafter 2,156
------
$ 5,726
======
H. CREDIT ARRANGEMENTS AND LONG-TERM DEBT:
A summary of long-term debt at October 31, 1996 and 1995 is as
follows:
1996 1995
Revolving credit line $ 9,300 $ 20,100
Term note 10,000 -
EDC limited obligation revenue bonds, variable
interest rate (average 3.6% in 1996 and
4.6% in 1995),payable January 1, 2008 6,100 6,100
-------- --------
$ 25,400 $ 26,200
======== ========
As of October 31, 1996, the Company had $9.3 million outstanding under
an unsecured credit agreement with a major U.S. bank which is scheduled to
expire February 28, 1998. The unsecured credit agreement allows for
maximum borrowings of $29 million through February 28, 1997, and $25
million thereafter. The rate of interest on outstanding borrowings is
principally at the Eurodollar base rate plus 1%, which ranges from 6.38% to
6.63%. During 1996, the Company converted $10 million from the unsecured
credit agreement to a term note. The interest rate is fixed at 7.85%. The
term note requires quarterly interest payments through May 1998 and monthly
interest and principal payments from June 1998 through May 2003. The
unsecured revolving credit agreement and the term note require the Company
to comply with certain financial covenants including working capital, total
debt and tangible net worth.
On September 29, 1995, Rochester Gear, Inc., a wholly owned subsidiary
of the Company (the Subsidiary), entered into a loan agreement whereby $6.1
million of limited obligation refunding revenue bonds were issued. These
bonds which mature on January 1, 2008 are collateralized by the
Subsidiary's land, building and equipment and guaranteed by the Company.
Total interest payments aggregated $2,109, $1,553 and $1,453 in 1996,
1995 and 1994, respectively. Annual maturities of long-term debt are as
follows:
Year Ending
October 31, Amount
1997 $ -
1998 10,133
1999 2,000
2000 2,000
2001 2,000
Thereafter 9,267
-------
$ 25,400
=======
I. INCOME TAXES:
Provision (benefit) for federal income taxes from continuing
operations is as follows:
1996 1995 1994
Current $ 940 $ 1,411 $(1,103)
Deferred 674 (181) 366
------- ------- -------
$ 1,614 $ 1,230 $ (737)
======= ======= =======
Significant components of the deferred tax assets and liabilities as
of October 31, 1996 and 1995 are as follows:
1996 1995
Deferred tax assets:
Accrued postretirement benefits $ 2,157 $ 2,166
Net operating loss carryforward 358 -
Alternative minimum tax carryforward 207 256
Percentage of completion revenue 113 590
Accrued vacation and employee benefits 379 404
Costs related to sale of businesses 1,270 -
Other 254 370
------- -------
Total deferred tax assets 4,738 3,786
------- -------
Deferred tax liabilities:
Depreciation 1,395 1,145
Pensions 634 610
Other 258 217
------- -------
Total deferred tax liabilities 2,287 1,972
------- -------
Net deferred tax asset $ 2,451 $ 1,814
======= =======
The net operating loss carryforward expires in 2010.
Reconciliation of the statutory federal tax rate to the effective rate
is summarized as follows:
1996 1995 1994
Statutory rate 34.0% 34.0% (34.0)%
Foreign sales corporation (1.2) (1.4) (8.3)
Other items, net (1.6) 1.4 (4.1)
----- ----- -----
Effective tax rate 31.2% 34.0% (46.4)%
===== ===== =====
1996 1995 1994
Income taxes paid (refunded) $550 $(1,667) $(471)
J. EMPLOYEE RETIREMENT BENEFITS:
Pension Plans:
The Company provides retirement benefits for substantially all
employees under several defined benefit and defined contribution pension
plans. Benefits from these plans are based on compensation, years of
service and either fixed dollar amounts per year of service or employee
compensation during the later years of employment. The assets of the plans
consist principally of cash equivalents, corporate and government bonds,
and common and preferred stocks. The Company's policy is to fund only
amounts required to satisfy minimum legal requirements.
The following tables summarize the funded status, net periodic pension
expense and actuarial assumptions:
1996 1995
Accumulated Assets Accumulated
Assets Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Actuarial present value of benefit obligations:
Vested benefit obligation $15,438 $ 7,974 $14,863 $ 7,715
Nonvested benefit obligation 499 99 424 133
------- ------- ------- -------
$15,937 $ 8,073 $15,287 $ 7,848
------- ------- ------- -------
Actuarial present value of
projected benefit
obligations $17,851 $ 8,073 $18,046 $ 7,848
Plan assets at market value 21,230 6,428 18,248 5,016
------- ------- ------- -------
Plan assets in excess of
(less than) projected
benefit obligation 3,379 (1,645) 202 (2,832)
Unrecognized net asset (1,500) (131) (1,765) (115)
Unrecognized net losses
and other 414 1,425 2,926 2,634
------- ------- ------- -------
Prepaid (accrued) pension
expense $ 2,293 $ (351) $ 1,363 $ (313)
======= ======= ======= =======
The sale of Wilson during 1996 resulted in Wilson employees no longer
earning additional benefits under the plans. As a result, the Company
recognized a pre-tax pension curtailment charge of approximately $400 as a
component of the loss on discontinued operations for 1996. The charge is
primarily due to the recognition of prior service costs for these
employees.
Net periodic pension expense: 1996 1995 1994
Service cost-benefits earned
during the period $ 808 $ 846 $ 765
Interest cost on projected
benefit obligation 1,938 1,912 1,743
Actual (return) loss on assets (4,045) (4,015) 527
Amortization of net gain and
deferral 2,335 2,370 (2,487)
------- ------- -------
Net periodic pension expense $ 1,036 $ 1,113 $ 548
======= ======= =======
Actuarial assumptions at end of year: 1996 1995 1994
Discount rates 8% 8% 8%
Expected return on plan assets 9% 9% 9%
Compensation increases 5% 6% 6%
Retiree Health Care and Life Insurance Benefits:
The Company provides health care and life insurance benefits to
certain eligible retired employees but has discontinued retiree health
benefits for all active employees who retire after January 1, 1993. The
plans are unfunded. Benefits and cost-sharing provisions vary by location.
Generally, the medical plans pay a stated percentage of most medical
expenses, reduced for any deductible and payments made by government
programs or other group coverage. The cost of providing most of these
benefits is shared with the retirees. The cost sharing limits the
Company's future retiree medical cost increases to the rate of inflation,
as measured by the Consumer Price Index.
The following tables summarize the accrued postretirement benefit
obligation, net periodic postretirement benefit costs and actuarial
assumptions:
1996 1995
Accumulated postretirement benefit obligation:
Retirees $6,333 $5,482
Fully eligible participants 46 455
Other active participants 52 520
------ ------
Total accumulated postretirement
benefit obligations 6,431 6,457
Unrecognized net loss from changes
in assumptions (86) (86)
------ ------
Accrued postretirement benefit cost $6,345 $6,371
====== ======
Net periodic postretirement benefit costs 1996 1995 1994
Service cost - benefits earned during
the period $ 5 $ 26 $ 24
Interest cost on projected benefit
obligations 480 512 509
------ ------ ------
Net periodic postretirement benefit cost $ 485 $ 538 $ 533
====== ====== ======
1996 1995
Actuarial assumptions:
Discount rates 8.0% 8.0%
Health care cost current rate of increase:
Medical 8.0% 10.7%
Prescription drugs 10.0% 13.7%
Ultimate health care cost rate of
increase by 2004:
Medical 6.0% 7.0%
Prescription drugs 6.0% 7.0%
Increase due to a 1% increase in health
care cost trend rate:
APBO 6.6% 5.3%
Net periodic postretirement benefit cost 6.9% 5.4%
K. STOCK OPTION PLANS:
The Company has four stock option plans: a 1982 plan and a 1993 plan
which are expired except as to options still outstanding and two 1996 plans
(the Non-Employee Directors Stock Option Plan and the Employee Incentive
Stock Plan). Under the Non-Employee Directors Stock Option Plan, 100,000
common stock options may be granted to non-employee directors. The
Employee Incentive Stock Plan provides for the use of several long-term
incentive compensation tools for key employees including incentive stock
options which are limited to a maximum of 300,000 shares. Option prices
for both plans must not be less than the fair market value of the Company's
stock on the date granted. Options are exercisable over 10 years and vest
at a rate of 25% each year, commencing in the second year. Options expire
upon termination of employment or one year following death or retirement.
No charge is made against income when options are exercised. Common stock
options outstanding are as follows:
Shares Option Price
Outstanding at October 31, 1993 58,360 $4.50 - 9.50
Granted 42,000 11.75
Exercised (12,913) 4.50 - 9.50
Expired (15,573) 4.50 - 9.50
Outstanding at October 31, 1994 71,874 4.50 -11.75
Granted 108,500 7.31 - 7.63
Exercised (1,800) 4.50 - 5.92
Expired (25,299) 4.50 -11.75
Outstanding at October 31, 1995 153,275 4.50 -11.75
Granted 15,900 4.50 - 9.44
Exercised (7,268) 5.92
Expired (6,250) 7.56 - 9.50
Outstanding at October 31, 1996 155,657 $4.50 -11.75
L. SEGMENT REPORTING:
The Company reports its activities under two industry segments:
Components and Assemblies and Special Machines. The Components and
Assemblies segment consists of automotive components and farm equipment
parts machined in dedicated manufacturing cells, molded rubber and plastic
parts, and non-symmetrical machine contoured parts produced and sold in
small quantities. This segment has previously been referred to as the
Precision Parts segment. Special Machines consist of standard individual
machines, as well as custom designed machines, all manufactured on a made-
to-order basis. Information by industry segment is summarized below:
Components Special
and Assemblies Machines Corporate Consolidated
Sales to unaffiliated
customers (1,2)
1996 $ 80,886 $ 30,858 $ 111,744
1995 59,547 30,626 90,173
1994 46,916 27,200 74,116
Operating income (loss) from
continuing operations
1996 $ 5,463 $ 2,809 $(1,745) $ 6,527
1995 4,572 1,917 (1,673) 4,816
1994 3,656 (3,071) (1,235) (650)
Identifiable assets
1996 $ 51,729 $ 15,050 $10,720 $ 77,499
1995 38,086 30,857 8,610 77,553
1994 35,121 39,774 9,941 84,836
Capital expenditures
1996 $ 2,302 $ 639 $ 5 $ 2,946
1995 4,160 395 25 4,580
1994 3,607 866 95 4,568
Depreciation and amortization
1996 $ 3,048 $ 468 $ 106 $ 3,622
1995 2,364 453 33 2,850
1994 1,747 453 35 2,235
(1) Sales to manufacturers in the automotive industry were approximately
$63, $50, and $39 million in 1996, 1995, and 1994, respectively. Sales
to agricultural equipment manufacturers were $19, $14, and $10 million
in 1996, 1995, and 1994, respectively.
(2) Export sales, principally to Mexico and Canada, amounted to $6, $8, and
$6 million in 1996, 1995, and 1994, respectively.
M. CONTINGENT LIABILITIES:
Various lawsuits arising during the normal course of business are
pending against the Company. In the opinion of management, the ultimate
liability, if any, resulting from these matters will have no significant
effect on the Company's results of operations, liquidity or financial
position.
FIVE YEAR FINANCIAL SUMMARY
The following financial summary for the years indicated has been
derived from the consolidated financial statements of Newcor, Inc.
Information for all years, excluding balance sheet information, has been
restated to exclude discontinued operations of Wilson Automation. The
information set forth below should be read in conjunction with Management's
Discussion and Analysis and the financial statements and notes thereto.
(In thousands, except
per share amounts) 1996 1995 1994 1993 1992
Operating Results
Components and Assemblies:
Sales $ 80,886 $ 59,547 $ 46,916 $ 36,155 $ 27,963
Operating income
from continuing
operations 5,463 4,572 3,656 1,805 1,784
Special Machines:
Sales 30,858 30,626 27,200 29,228 31,410
Operating income
(loss) from continuing
operations 2,809 1,917 (3,071) 111 3,005
Consolidated:
Sales 111,744 90,173 74,116 65,383 59,373
Gross margin 22,775 16,618 11,069 11,645 13,917
Interest expense 1,787 1,504 1,111 575 590
Income (loss) from
continuing operations before
cumulative effect of changes
in accounting
principles 3,558 2,391 (850) 72 2,476
Per share income(loss)
from continuing operations
before cumulative effect of
changes in accounting
principles 0.76 0.51 (0.18) 0.02 0.53
Net income (loss) (1,145) 881 (2,202) 884 4,529
Net income (loss)
per share (0.24) 0.19 (0.47) 0.19 0.98
Dividends per share 0.20 0.20 0.20 0.20 0.16
Financial Position
Working capital $14,951 $ 26,575 $ 32,186 $ 25,309 $ 33,752
Current ratio 1.87 2.63 2.66 2.05 2.70
Net property, plant
and equipment 23,131 24,518 22,793 17,632 14,100
Total assets 77,499 77,553 84,836 73,305 75,702
Total debt 25,400 26,200 31,500 12,000 24,300
Shareholders' equity 24,441 25,909 25,157 28,440 28,560
Debt as percent of
total capitalization 51.0% 50.3% 55.6% 29.7% 46.0%
Other Financial Data
Shareholders' equity
per share $ 5.20 $ 5.54 $ 5.38 $ 6.13 $ 6.23
Depreciation and
amortization 3,622 2,850 2,235 1,593 1,533
Capital expenditures 2,946 4,580 4,568 4,951 2,281
Weighted average
shares outstanding 4,689 4,679 4,662 4,607 4,644
Quarterly Financial Information (Unaudited)
(In thousands, except per share amounts)
Quarter
First Second Third Fourth Total
1996:
Sales $23,260 $27,128 $27,902 $33,454 $111,744
Gross margin $ 5,335 $ 5,497 $ 5,038 $ 6,905 $ 22,775
Income from continuing
operations $ 1,247 $ 834 $ 604 $ 873 $ 3,558
Loss from discontinued
operations (772) (3,931) - - (4,703)
Net income loss) $ 475 $(3,097) $ 604 $ 873 $ (1,145)
Earnings (loss) per share:
Continuing operations $ 0.26 $ 0.18 $ 0.13 $ 0.19 $ 0.76
Discontinued operations (0.16) (0.84) - - (1.00)
Net income (loss) $ 0.10 $ (0.66) $ 0.13 $ 0.19 $ (0.24)
Quarter
First Second Third Fourth Total
1995:
Sales $22,196 $22,653 $21,327 $23,997 $90,173
Gross margin $ 4,574 $ 3,904 $ 3,198 $ 4,942 $16,618
Income from continuing
operations $ 992 $ 288 $ 211 $ 900 $ 2,391
Loss from discontinued
operations (662) (579) (108) (161) (1,510)
Net income (loss) $ 330 $ (291) $ 103 $ 739 $ 881
Earnings (loss) per share:
Continuing operations $ 0.21 $ 0.06 $ 0.05 $ 0.19 $ 0.51
Discontinued operations (0.14) (0.12) (0.03) (0.03) (0.32)
Net income (loss) $ 0.07 $ (0.06) $ 0.02 $ 0.16 $ 0.19
AMENDMENT NO. 5
FIFTH AMENDMENT TO SECOND AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
THIS FIFTH AMENDMENT, dated as of the 15th day of October, 1996, by
and between Newcor, Inc., a Delaware corporation, of Bloomfield Hills,
Michigan (herein collectively called "Company") and Comerica Bank, a
Michigan banking corporation, of Detroit, Michigan (herein called "Bank");
WITNESSETH:
WHEREAS, Company and Bank desire to amend that certain Second Amended
and Restated Revolving Credit Agreement dated as of March 6, 1995, entered
into by and between Company and Bank, as previously amended on December 29,
1995, January 31, 1996, March 22, 1996 and April 12, 1996 (herein called
"Agreement");
NOW, THEREFORE, it is agreed that the Agreement is amended as follows:
1. The definition of "Commitment" set forth in Section 1 of the
Agreement is amended to read in its entirety as follows:
"'Commitment' shall mean the total commitment of Bank to
make Advances to Company pursuant to this Agreement in the amount
of (a) Twenty Nine Million Dollars ($29,000,000) for the period
from October 15, 1996 through February 28, 1997, and (b)
thereafter, in the amount of Twenty Five Million Dollars
($25,000,000), subject to reduction as herein provided."
2. The definition of "Base Tangible Net Worth" set forth in Section
1 of the Agreement is amended to read in its entirety as follows:
"'Base Tangible Net Worth' shall initially mean $6,250,000.
On the last day of each fiscal quarter of Company (commencing
January 31, 1997), base Tangible Net Worth shall be increased by
an amount equal to fifty percent (50%) of Net Income for the
fiscal quarter then ended. Base Tangible Net Worth shall also be
increased by one hundred percent (100%) of the amount of the
Reserves which Company determines from time to time no longer to
be necessary to be maintained. Such increase shall be effective
on the last day of the fiscal quarter in which such determination
is made. For any fiscal quarter with respect to which Net Income
is less than zero, Net Income shall be deemed to be zero."
3. The definition of "Reserves" set forth in Section 1 of the
Agreement is amended to read in its entirety as follows:
"'Reserves' shall mean each and all of the reserves
established by Company in connection with the sale of Company's
Wilson Automation Division, Eonic, Inc. and Newcor Machine Tool,
Inc."
4. The definition of "Net Income" set forth in Section 1 of the
Agreement is amended to read in its entirety as follows:
"'Net Income' shall mean the net income (or loss) of Company
and its consolidated Subsidiaries for any period determined in
accordance with generally accepted accounting principles
consistently applied but excluding in any event (i) any
extraordinary gains or losses, (ii) any gains or losses from
discontinued operations or the sale of Eonic, Inc. or Newcor
Machine Tool, Inc., and (iii) any taxes on the excluded gains and
any tax deductions or credits on account of any excluded losses."
5. The first two lines of the definition of "Eurodollar-based Rate"
in Section 1 of the Agreement are amended to read in their entirety as
follows:
"'Eurodollar-based Rate' shall mean a per annum interest
rate which is the Applicable Margin plus the quotient of:
6. The following definitions are hereby added to Section 1 of the
Agreement in alphabetical order:
"'Applicable Margin' shall mean as of any date of
determination, the interest rate margin determined in accordance
with the provisions of Section 2.12 and Schedule 2.12.
'Applicable Commitment Fee Percentage' shall mean as of any
date of determination, the commitment fee percentage determined
in accordance with the provisions of Section 2.12 and Schedule
2.12."
7. Section 2.10 of the Agreement is amended to read in its entirety
as follows:
"2.10 Company agrees to pay to Bank a commitment fee on
the average daily balance of the unused portion of the revolving
credit (less any outstanding Letters of Credit) at the rate of
the Applicable Commitment Fee Percentage (as in effect from time
to time) per annum, computed on the actual number of days elapsed
using a year of 360 days. The commitment fee shall be payable
quarterly commencing April 30, 1995."
8. Section 2.11 of the Agreement is amended to read in its entirety
as follows:
"2.11 On February 28, 1997, the amount of the Commitment
shall automatically be reduced to Twenty Five Million Dollars
($25,000,000). On the date that the Commitment automatically
reduces, Company shall pay to Bank the amount, if any, by which
the aggregate amount of outstanding Advances and outstanding
Letters of Credit exceeds the amount of the Commitment as so
reduced. If such payment requires the prepayment of a Eurodollar-
based Advance, Company shall pay to Bank on such date any amount
required to be paid pursuant to the provisions of Section 3.1."
9. The following Section 2.12 is hereby added to the Agreement:
"2.12 The Applicable Margin and Applicable Commitment
Fee Percentage shall be based on the Company's Funded Debt to
EBITDA Ratio (determined as of the last day of each fiscal
quarter of Company) and determined in accordance with Schedule
2.12 hereto and shall be implemented on a quarterly basis.
Adjustments shall be effective on the first day of the first
month following the required date of delivery of the financial
statements for October, January, April and July required pursuant
to the provisions of Section 6.1(b) of this Agreement. Until the
financial statements for the period ending October 31, 1996 are
delivered, Level V pricing shall apply."
10. Section 6.1(a) of the Agreement is amended to delete the words
"one hundred twenty (120) days" and replace those words with "ninety
(90) days".
11. Section 6.4 of the Agreement is amended to read in its entirety
as follows:
"6.4 On a Consolidated statement basis, maintain, as of the
end of each fiscal quarter, a Debt to Worth Ratio of not more
than 11.0 to 1.0 through April 29, 1997, not more than 9.25 to
1.0 from April 30, 1997 through July 30, 1997 and not more than
6.5 to 1.0 beginning July 31, 1997 and thereafter."
12. Section 6.15 of the Agreement is amended to read in its entirety
as follows:
"6.15 On a Consolidated statement basis, maintain as of the
end of each fiscal quarter, a Debt Service Coverage Ratio of not
less than the following amounts during the periods specified
below:
May 1, 1996 through October 30, 1996 1.5 to 1.0
October 31, 1996 and thereafter 1.75 to 1.0"
13. The following Section 6.16 is hereby added to the Agreement:
"6.16 On a Consolidated statement basis, maintain as of
the end of each fiscal quarter through October 31, 1997 a
cumulative Net Income for the period beginning November 1, 1996
and ending on the applicable date of determination of not less
than the following amounts for the periods indicated below:
January 31, 1997 $ 450,000
April 30, 1997 $1,300,000
July 31, 1997 $2,300,000
January 31, 1997 $3,400,000
For purposes of determining compliance with the provisions of
this Section 6.16, Net Income shall be determined without giving
any effect to any one time loss resulting from the sale of the
stock or assets of Newcor Machine Tool, Inc. and/or Eonic, Inc."
14. Exhibit "A" to the Agreement is deleted and attached Exhibit "A"
substituted therefor and attached Schedule 2.12 is hereby added to the
Agreement.
15. Company hereby represents and warrants that, after giving effect
to the amendments contained herein, (a) execution, delivery and
performance of this Amendment and any other documents and instruments
required under this Amendment or the Agreement are within Company's
corporate powers, have been duly authorized, are not in contravention
of law or the terms of Company's Certificate of Incorporation or
Bylaws, and do not require the consent or approval of any governmental
body, agency, or authority; and this Amendment and any other documents
and instruments required under this Amendment or the Agreement, will
be valid and binding in accordance with their terms; (b) the
continuing representations and warranties of Company set forth in
Sections 5.1 through 5.7 and 5.9 through 5.15 of the Agreement are
true and correct on and as of the date hereof with the same force and
effect as made on and as of the date hereof; (c) the continuing
representations and warranties of Company set forth in Section 5.8 of
the Agreement are true and correct as of the date hereof with respect
to the most recent financial statements furnished to the Bank by
Company in accordance with Section 6.1 of the Agreement; and (d) no
event of default, or condition or event which, with the giving of
notice or the running of time, or both, would constitute an event of
default under the Agreement, has occurred and is continuing as of the
date hereof.
16. This Amendment shall be effective upon (i) execution of this
Amendment by Company and Bank and delivery to Bank of a replacement
Revolving Credit Note in the form attached hereto as Exhibit "A".
17. Except as modified hereby, all of the terms and conditions of the
Agreement shall remain in full force and effect.
WITNESS the due execution hereof on the day and year first above
written.
COMERICA BANK NEWCOR, INC.
/s/ Brian E. Marshall /s/ W. John Weinhardt
By:------------------------- By: ---------------------
W. John Weinhardt
Its: Vice President Its: President
/s/ John J. Garber
By-----------------------------
John J. Garber
Its: Treasurer
The undersigned accept and agree to the Amendment No. 5 to the Second
Amended and Restated Revolving Credit Agreement and agree to the continued
effectiveness of the Guaranty originally executed and delivered to Comerica
Bank by the undersigned on March 9, 1992.
ROCHESTER GEAR, INC.
/s/ W. John Weinhardt
By:----------------------------
W. John Weinhardt
Its: Chairman of the Board
/s/ John J. Garber
By:---------------------------
John J. Garber
Its: Treasurer
NEWCOR MACHINE TOOL, INC.
/s/ W. John Weinhardt
By:---------------------------
W. John Weinhardt
Its: Chairman of the Board
/s/ John J. Garber
By:---------------------------
John J. Garber
Its: Treasurer
EONIC, INC.
/s/ W. John Weinhardt
By:---------------------------
W. John Weinhardt
Its: Chairman of the Board
/s/ John J. Garber
By:-----------------------------
John J. Garber
Its: Treasurer
EXHIBIT "A"
REVOLVING CREDIT NOTE
Detroit, Michigan
$29,000,000 October 15, 1996
On or before the Revolving Credit Maturity Date (which initially is
February 28, 1998), FOR VALUE RECEIVED, NEWCOR, INC., a Delaware
corporation (herein called "Company") promises to pay to the order of
COMERICA BANK, a Michigan banking corporation (herein called "Bank") at its
Main Office at 500 Woodward Avenue, Detroit, Michigan, 48226 in lawful
money of the United States of America the indebtedness or so much of the
sum of Twenty Nine Million Dollars ($29,000,000) as may from time to time
have been advanced and then be outstanding hereunder pursuant to the Second
Amended and Restated Revolving Credit Agreement dated March 6, 1995, made
by and between Company and Bank (herein called "Agreement"), together with
interest thereon as hereinafter set forth. For the period from October 15,
1996 through February 28, 1997, the amount available hereunder shall,
subject to the terms of the Agreement, be Twenty Nine Million Dollars
($29,000,000). After February 28, 1997, the amount available hereunder
shall, subject to the terms of the Agreement, be Twenty Five Million
Dollars ($25,000,000). Company agrees to reduce the indebtedness
outstanding hereunder to an amount not to exceed Twenty Five Million
Dollars ($25,000,000) on or before February 28, 1997.
Each of the Advances made hereunder shall bear interest at the
Eurodollar-based Rate or the Prime-based Rate as elected by Company or as
otherwise determined under the Agreement.
Interest on the unpaid balance of all Prime-based Advances shall be
payable quarterly commencing on October 31, 1996 and on the last day of
each quarter thereafter. Interest accruing at the Prime-based Rate shall be
computed on the basis of a 360 day year and assessed for the actual number
of days elapsed, and in such computation effect shall be given to any
change in the Prime-based Rate on the date of such change in the Prime-
based Rate.
Interest on each Eurodollar-based Advance shall be payable on the last
day of the Interest Period applicable thereto. Interest accruing at the
Eurodollar-based Rate shall be computed on the basis of a 360 day year and
assessed for the actual number of days elapsed from the first day of the
Interest Period applicable thereto to but not including the last day
thereof.
From and after the occurrence of any event of default hereunder or
under the Agreement or any event which automatically causes the
indebtedness outstanding hereunder to become immediately due and payable,
the indebtedness outstanding hereunder shall bear interest at Three percent
(3%) above the Prime-based Rate as it may vary from time to time, which
interest shall be payable daily.
This Note is a note under which advances, repayments and readvances
may be made from time to time, subject to the terms and conditions of the
Agreement. This Note evidences borrowing under, is subject to, is secured
in accordance with, and may be matured under, the terms of the Agreement,
to which reference is hereby made. As additional security for this Note,
Company grants Bank a lien on all property and assets including deposits
and other credits of the Company, at any time in possession or control of
or owing by Bank for any purpose.
Company hereby waives presentment for payment, demand, protest and
notice of dishonor and nonpayment of this Note and agrees that no
obligation hereunder shall be discharged by reason of any extension,
indulgence, release, or forbearance granted by any holder of this Note to
any party now or hereafter liable hereon or any present or subsequent owner
of any property, real or personal, which is now or hereafter security for
this Note. Any transferees of, or endorser, guarantor or surety paying this
Note in full shall succeed to all rights of Bank, and Bank shall be under
no further responsibility for the exercise thereof or the loan evidenced
hereby. Nothing herein shall limit any right granted Bank by other
instrument or by law.
This Note is a replacement for a Revolving Credit Note dated April 12,
1996 in the original principal amount of $32,500,000 by Company payable to
Bank.
All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Agreement.
NEWCOR, INC.
/s/ W. John Weinhardt
By:----------------------------
W. John Weinhardt
Its: President
/s/ John J. Garber
By: ----------------------------
John J. Garber
Its: Treasurer
SCHEDULE 2.12
Level I Level II Level III Level IV
Funded Debt to >4.5 to 1.0 >4.0 to 1.0 & >3.5 to 1.0 & >3.0 to 1.0 &
EBITDA Ratio <4.5 to 1.0 <4.0 to 1.0 <3.5 to 1.0
Applicablae Margin 2% 1 3/4% 1 1/2% 1 1/4%
Applicable
Commitment Fee
Percentage 1/2% 1/2% 3/8% 3/8%
Level V Level VI Level VII
Funded Debt to >2.5 to 1.0 & >2.0 to 1.0 & <2.0 to 1.0
EBITDA Ratio <3.0 to 1.0 <2.5 to 1.0
Applicablae Margin 1% 3/4% 1/2%
Applicable
Commitment Fee
Percentage 1/4% 1/4% 1/4%
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
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<RECEIVABLES> 17369
<ALLOWANCES> 0
<INVENTORY> 8196
<CURRENT-ASSETS> 32124
<PP&E> 37543
<DEPRECIATION> 14412
<TOTAL-ASSETS> 77499
<CURRENT-LIABILITIES> 17173
<BONDS> 6100
0
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<COMMON> 4697
<OTHER-SE> 19744
<TOTAL-LIABILITY-AND-EQUITY> 77499
<SALES> 111744
<TOTAL-REVENUES> 111744
<CGS> 88969
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<OTHER-EXPENSES> (432)
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<INCOME-PRETAX> 5172
<INCOME-TAX> 1614
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