<PAGE> 1
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 March 31, 1999
Commission file number 1-5985
NEWCOR, INC.
------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 38-0865770
- -------------------------------------------- ------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1825 S. Woodward Ave., Suite 240 48302
- -------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (248) 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 ( ).
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 10, 1999, the Registrant has 4,925,634 outstanding shares of common
stock, $1.00 par value, the Registrant's only class of common stock.
<PAGE> 2
PART I. FINANCIAL INFORMATION
NEWCOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Sales $ 64,700 $ 46,653
Cost of sales 52,146 38,845
---------- ----------
Gross margin 12,554 7,808
Selling, general and administrative expenses 6,949 5,027
Amortization expense 1,134 700
Nonrecurring gain (362)
---------- ----------
Operating income 4,471 2,443
Other income (expense):
Interest expense (3,486) (1,946)
Other, net (165) (35)
---------- ----------
Income before income taxes 820 462
Provision for income taxes 315 179
---------- ----------
Net income $ 505 $ 283
========== ==========
Amounts per share of common stock:
Net income - basic and diluted $ 0.10 $ 0.06
Dividends $ - $ 0.05
Weighted average common shares outstanding 4,938 4,942
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements
2
<PAGE> 3
NEWCOR, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, October 31,
1999 1998
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,051 $ 3,539
Accounts receivable 35,064 35,175
Inventories 15,853 14,014
Other current assets 8,150 9,454
----------- -----------
Total current assets 60,118 62,182
Property, plant and equipment, net of
accumulated depreciation of $22,195
at 3/31/99 and $19,288 at 10/31/98 54,006 53,837
Cost in excess of assigned value of
acquired companies, net of amortization 83,963 85,861
Debt issuance costs and other non-current assets 10,239 10,657
----------- -----------
Total assets $ 208,326 $ 212,537
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,000 $ 2,000
Accounts payable 20,832 21,072
Other accrued liabilities 9,875 10,068
----------- -----------
Total current liabilities 32,707 33,140
Long-term debt 138,133 141,467
Other non-current liabilities 12,164 12,401
----------- -----------
Total liabilities 183,004 187,008
----------- -----------
Shareholders' equity:
Common stock 4,930 4,942
Capital in excess of par 2,219 2,258
Accumulated other comprehensive income (580) (580)
Retained earnings 18,753 18,909
----------- -----------
Total shareholders' equity 25,322 25,529
----------- -----------
Total liabilities & shareholders' equity $ 208,326 $ 212,537
=========== ===========
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements
3
<PAGE> 4
NEWCOR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Operating Activities:
Net income $ 505 $ 283
Depreciation 1,890 1,242
Amortization 1,134 700
Gain on sale of capital assets (362)
Other, net 8 11
Changes in operating assets
and liabilities, net (3,351) (4,394)
-------- ----------
Net cash provided by (used in) operations 186 (2,520)
-------- ----------
Investing Activities:
Capital expenditures (2,052) (1,768)
Proceeds from sale of capital assets 1,367
Acquisitions, net of cash acquired (88,911)
-------- ----------
Net cash used in investing activities (2,052) (89,312)
-------- ----------
Financing Activities:
Net repayments on revolving credit line (1,900) (30,800)
Repayment of term note (500)
Repurchase of common stock (51)
Proceeds from issuance of subordinated notes 125,000
Subordinated notes issuance costs (4,137)
Cash dividends (246)
-------- ----------
Net cash (used in) provided by financing activities (2,451) 89,817
-------- ----------
Decrease in cash (4,317) (2,015)
Cash and cash equivalents, beginning of period 5,368 3,427
-------- ----------
Cash and cash equivalents, end of period $ 1,051 $ 1,412
======== ==========
</TABLE>
The accompanying notes are an integral part of
the condensed consolidated financial statements
4
<PAGE> 5
NEWCOR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The accompanying unaudited condensed consolidated 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. 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, 1998 and the
transition report on Form 10-Q for the two month period ended
December 31, 1998.
In 1998, the Company changed its annual reporting period from
a fiscal year ending October 31 to a calendar year ending
December 31. As a result, the financial information for the
three months ended March 31, 1998 presented in this Form 10-Q
has not been previously disclosed; however, management
believes that this financial information includes all
adjustments considered necessary for a fair presentation, and
such adjustments are of a normal recurring nature.
Note 2. On March 4, 1998, the Company purchased the common stock of
Grand Machining Company, Deco Technologies, Inc. and Deco
International, Inc. (collectively, "Deco") for approximately
$55.0 million in cash. Deco manufactures high volume,
precision machined components and assemblies for the medium
and heavy duty truck and automotive industries. Deco's
products include rocker arm components and assemblies,
transmission shafts, axle shafts and thrust plates. The
Company made a $5.0 million deposit to the Deco shareholders
in December 1997. The balance of the purchase price was paid
in March 1998, with the proceeds from the Company's issuance
of $125 million of 9.875% Senior Subordinated Notes due 2008
(the "Notes") as described in Note 3. The acquisition was
recorded using the purchase method of accounting. The cost in
excess of net assets acquired of approximately $40 million is
being amortized on a straight-line basis over twenty years.
On March 4, 1998, the Company purchased the stock of
Turn-Matic, Inc. ("Turn-Matic") for approximately $17.0
million in cash. Contingent consideration of up to $3.5
million may be paid if profitability achieves certain levels
over the next five years. Turn-Matic manufactures high volume
precision machined components and assemblies for the
automotive industry. Turn-Matic's products include oil filter
adapters, main bearing caps and intake and exhaust manifolds.
The purchase was financed with the proceeds from the Notes.
The acquisition was recorded using the purchase method of
accounting. The cost in excess of net assets acquired of
approximately $9 million is being amortized on a straight-line
basis over twenty years. Any contingent purchase price
payments, if required, will be recognized as additional cost
in excess of the net assets acquired and amortized over the
remaining amortization period.
The 1998 unaudited pro-forma results of operations as if Deco
and Turn-Matic had been acquired on January 1, 1998 would have
been as follows:
<TABLE>
<CAPTION>
Three Months Ended
------------------
Actual Pro Forma
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Sales $ 64,700 $ 65,400
======== =========
Net income $ 505 $ 351
======== =========
Net income per share - basic and diluted $ 0.10 $ 0.07
======== =========
</TABLE>
5
<PAGE> 6
These pro-forma results do not purport to be indicative of the
results that would actually have occurred had the acquisitions
been made on January 1, 1998 or which may occur in the future.
Note 3. The Company completed the issuance of the Notes on March 4,
1998 as described in Note 2. Interest on the Notes is payable
semi-annually on March 1 and September 1 of each year. The
Notes will mature on March 1, 2008. The Notes are unsecured
and will be redeemable, in whole or in part, at the option of
the Company, on or after March 1, 2003. Proceeds from the
Notes were used to finance the Deco and Turn-Matic
acquisitions and pay down the Company's existing debt.
In conjunction with the Notes offering, the Company's
revolving credit agreement was amended to allow the Company to
increase total availability to $50.0 million. The revolving
credit agreement is collateralized by substantially all of the
Company's non-real estate assets and by Rochester Gear, Inc.
real estate. The current expiration date for the revolving
credit agreement is February 28, 2001.
The revolving credit agreement, the Company's $10 million term
note and the Notes require the Company to comply with certain
financial covenants including net worth, debt service coverage
and total debt. The Company was in compliance with these
covenants at March 31, 1999. In addition, the terms of the
Notes required the Company to suspend its cash dividend.
The Company's domestic subsidiaries; Plastronics, Rochester
Gear, Deco, and Turn-Matic, are full and unconditional
guarantors of obligations issued under the Notes. The
following summarized financial information is derived from the
consolidating financial statements of the Company for the
periods presented. No intercompany balances or transactions
occurred among the subsidiaries during the periods presented.
<TABLE>
<CAPTION>
March 31, October 31,
1999 1998
---- ----
<S> <C> <C>
Current assets $ 26,400 $ 24,700
========== ==========
Total assets $ 108,100 $ 107,500
========== ==========
Current liabilities $ 15,500 $ 15,300
========== ==========
Long-term debt $ 6,100 $ 6,100
========== ==========
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1999 1998
---- ----
<S> <C> <C>
Sales $ 34,200 $ 15,600
========== ==========
Operating income $ 5,000 $ 1,200
========== ==========
</TABLE>
Note 4. Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31, October 31,
1999 1998
---- ----
<S> <C> <C>
Cost and estimated earnings of uncompleted
contracts in excess of related billings of $286
at 3/31/99 and $1,679 at 10/31/98 $ 3,500 $ 3,244
Raw materials 3,239 4,903
Work in process and finished goods 9,114 5,867
---------- ----------
$ 15,853 $ 14,014
========== ==========
</TABLE>
6
<PAGE> 7
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.
Note 5. The Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," in 1998.
Other comprehensive income for the three months ended March
31, 1999 and 1998 was zero, as the only component of other
comprehensive income for these periods was the minimum pension
liability adjustment which is determined on an annual basis at
the end of each fiscal year.
Note 6. The Company manages and reports its operating activities
under three industry segments: Precision Machined Products,
Rubber and Plastic, and Special Machines. The Precision
Machined Products segment consists of automotive components
and agricultural equipment parts machined in dedicated
manufacturing cells. The Rubber and Plastic segment consists
of molded rubber and plastic parts primarily for the
automotive industry. The Special Machines segment consists of
standard individual machines, as well as custom designed
machines, all manufactured on a made-to-order basis. Other is
primarily composed of corporate activities. Comparability of
the information for the Precision Machined Products segment is
affected by the acquisitions described in Note 2.
The accounting policies of the segments are the same as those
of the Company. There are no intersegment sales and management
does not allocate all corporate expenses to the segments. The
Company evaluates the performance of its segments and
allocates resources to them based on operating income from
continuing operations. Information by operating segment is
summarized below:
<TABLE>
<CAPTION>
Precision
Machined Rubber and Special
Products Plastic Machines Other Total
-------- ------- -------- ----- -----
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers
Three months ended March 31,
1999 $ 45,607 $ 13,373 $ 5,720 $ 64,700
1998 29,376 13,135 4,142 46,653
Operating income (loss)
Three months ended March 31,
1999 $ 5,930 $ 713 $ 272 $ 6,915
1998 3,345 551 50 3,946
Identifiable assets
March 31, 1999 $ 146,368 $ 32,074 $ 8,845 $ 21,039 $ 208,326
October 31, 1998 143,977 34,313 10,492 23,755 212,537
</TABLE>
A reconciliation of operating income for reportable segments to consolidated
operating income is as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Operating income for reportable segments $ 6,915 $ 3,946
Other operating loss, mainly unallocated corporate
and other expenses (1,310) (1,165)
Amortization expense (1,134) (700)
Nonrecurring gain 362
---------- --------
Consolidated operating income $ 4,471 $ 2,443
========== ========
</TABLE>
7
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
OVERVIEW
Newcor, Inc. (the "Company") is organized into three business segments: the
Precision Machined Products segment, the Rubber and Plastic segment and the
Special Machines segment. The Precision Machined Products segment produces
transmission, powertrain and engine components and assemblies for the
automotive, medium and heavy duty truck, and agricultural vehicle industries.
The Rubber and Plastic segment produces cosmetic and functional seals and boots
and functional engine compartment products primarily for the automotive
industry. The Special Machines segment designs and manufactures welding,
assembly, forming, heat treating and testing machinery and equipment for the
automotive, appliance and other industries.
The Company continued its strategy to build the Precision Machined Products
segment as a high volume automotive supplier when, on March 4, 1998, the Company
purchased the common stock of Grand Machining Company, Deco Technologies, Inc.
and Deco International, Inc. (collectively, "Deco") for approximately $55.0
million and the common stock of Turn-Matic, Inc. ("Turn-Matic") for
approximately $17.0 million. These acquisitions were financed concurrent with
the issuance of $125 million of 9.875% Senior Subordinated Notes due 2008 (the
"Notes"). Deco manufactures high-volume, precision-machined engine and
powertrain components and assemblies for the medium and heavy truck and
automotive industries, while Turn-Matic manufactures high volume, precision
machined engine components and assemblies for the automotive industry. These
companies have product lines and capabilities that management believes are
complementary to the other businesses in Newcor's Precision Machined Products
segment.
RESULTS OF OPERATIONS
The following tables summarize the principal factors causing the Company's
change in sales by segment, including the effect of acquisitions and change in
sales from existing operations, for the quarter ended March 31, 1999 compared
with the same period one year ago.
<TABLE>
<CAPTION>
Precision
Machined Rubber and Special
(In thousands) Products Plastic Machines Total
-------- ------- -------- -----
<S> <C> <C> <C> <C>
Quarter ended March 31, 1998 sales $ 29,376 $ 13,135 $ 4,142 $ 46,653
Acquisitions 16,053 16,053
Change from existing business 178 238 1,578 1,994
---------- ---------- --------- ----------
Quarter ended March 31, 1999 sales $ 45,607 $ 13,373 $ 5,720 $ 64,700
========== ========== ========= ==========
</TABLE>
Consolidated sales were $64.7 million for the quarter, an increase of $18.0
million, or 38.7%, compared with sales of $46.7 million for the first quarter of
1998. Sales for the Precision Machined Products segment increased $16.2 million,
or 55.3%, to $45.6 million, sales for the Rubber and Plastic segment increased
$0.2 million, or 1.8%, to $13.3 million, and sales for the Special Machines
segment increased $1.6 million, or 38.1%, to $5.7 million. The increase in sales
for the Precision Machined Products segment was due to sales from the
acquisitions of Deco and Turn-Matic referred to collectively as the
"Acquisitions." This segment continued to experience lower sales of agricultural
machined components, but this loss in sales was more than offset by volume
increases at customers of automotive and heavy duty truck machined components.
Sales in the Rubber and Plastic segment were comparable to sales for the same
period one year ago. The Special Machines segment sales for the quarter
increased due to the increase in new orders experienced during the quarter as
compared to the first quarter of 1998.
Consolidated gross margin was $12.6 million, or 19.4% of sales, for the quarter
ended March 31, 1999 compared with $7.8 million, or 16.7% of sales, for the same
period of 1998. The gross margin increase of $4.8 million was due to $2.3
million of gross margin from the Acquisitions and to $2.5 million of gross
margin increases at the Company's existing operations. The increase in gross
margin at the Company's existing operations is a result of the increase in sales
and management's focus on improving the manufacturing operations of the Company
through continuous improvement (Kaizen) programs and other methods.
Selling, general and administrative expenses (SG&A) increased to $6.9 million,
or 10.7% of sales, for the first quarter from $5.0 million, or 10.8% of sales,
for the first quarter of 1998. The increase in SG&A was primarily due to the
increase in sales as well as the Acquisitions, which added SG&A of approximately
$0.8 million in 1999.
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<PAGE> 9
Amortization expense increased to $1.1 million in the quarter ended March 31,
1999 from $0.7 million in the same period of 1998 due to the Acquisitions.
The first quarter of 1998 included a nonrecurring gain of approximately $0.4
million related to the sale of the land and building where the Company's Machine
Tool division was located prior to its being sold in October 1996.
Operating income (loss) by segment was as follows (in thousands):
<TABLE>
<CAPTION>
Precision Amortization
Machined Rubber and Special Expense/Non-
(In thousands) Products Plastic Machines Other recurring Items Total
-------- ------- -------- ----- --------------- -----
<S> <C> <C> <C> <C> <C> <C>
Quarter ended March 31, 1998 $ 3,345 $ 551 $ 50 $ (1,165) $ (338) $ 2,443
Acquisitions 2,265 (434) 1,831
Change from existing business 320 162 222 (145) (362) 197
-------- --------- ------- --------- --------- ---------
Quarter ended March 31, 1999 $ 5,930 $ 713 $ 272 $ (1,310) $ (1,134) $ 4,471
======== ========= ======= ========= ========= =========
</TABLE>
Consolidated operating income for the first quarter of 1999 was $4.5 million, or
6.9% of sales, compared with operating income of $2.4 million, or 5.2% of sales
for the same period one year ago. The increase in operating income was due
primarily to the Acquisitions, which contributed approximately $1.8 million of
operating income, as well as the operating performance improvements noted above.
Operating income for the Precision Machined Products segment increased $2.6
million to $5.9 million in the quarter ended March 31, 1999 from $3.3 million in
the same period of 1998. Operating margin increased to 13.0% of segment sales in
1999 from 11.4% of segment sales in 1998. The increase in operating income and
operating margin was primarily due to the Acquisitions and operating performance
improvements at the existing divisions. Although this segment continued to
experience lower sales of agricultural machined components as compared to the
prior year, these declines were more than offset by sales increases of the
Company's automotive and heavy duty truck machined components.
Operating income for the Rubber and Plastic segment increased $0.1 million to
$0.7 million in the first quarter from operating income of $0.6 million in the
first quarter of 1998. The increase in operating income was primarily due to
improvements in operational inefficiencies experienced in the 1998 period that
were mainly the result of high labor turnover caused by full employment in local
economies.
Operating income for the Special Machines segment increased $0.2 million to $0.3
million in the quarter ended March 31, 1999 from operating income of $0.1
million in the same period of 1998. Operating margin increased to 4.9% of
segment sales in 1999 from 1.2% in 1998. The increase in operating income and
operating margin was primarily due to the increased revenue and the
profitability of contracts in progress within the segment.
Interest expense increased $1.6 million to $3.5 million in the first quarter
from $1.9 million in the first quarter of 1998. The increase in interest expense
was due to additional debt related to the issuance of the Notes which was
incurred to finance the Acquisitions and pay down existing indebtedness.
Interest expense for the 1999 period included approximately $0.1 million of
amortization of debt issuance costs.
The Company's sales outlook for the balance of 1999 remains positive. The
Company anticipates automotive and heavy and medium duty truck sales to be
comparable or slightly positive compared with 1998. The Company's Special
Machines segment backlog was $12.1 million as of March 31, 1999, up $4.6 million
compared with March 31, 1998. Agricultural machined component sales will
continue to be down for the balance of 1999 compared with 1998 due to the
downturn in the agricultural market which began in the summer of 1998.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash provided by operations was approximately $6.4 million, not
including $6.2 million of cash used for the semi annual interest payment on the
Notes, which reduced the Company's cash provided by operations to $0.2 million
for the first quarter of 1999. Existing cash balances were primarily used for
capital expenditures of approximately $2.1 million and repayment of the
Company's bank revolving credit facility and term loan of $2.4 million.
Effective January 15, 1998 the Company's revolving credit facility was amended
and restated to become the Senior Credit Facility and was increased to provide
total revolving credit availability of $50.0 million concurrent with completion
of the issuance of the Notes on March 4, 1998. Availability of funds under the
Senior Credit Facility is subject to satisfaction of certain financial ratios
and other conditions. At March 31, 1999 the Company had $0.7 million outstanding
under its Senior Credit Facility. The Senior Credit Facility covenant related to
the ratio of funded debt to earnings before interest, taxes, depreciation, and
amortization would have limited the borrowing availability to $20.2 million at
March 31, 1999. The Senior Credit Facility is collateralized by substantially
all of the Company's non-real estate assets and by Rochester Gear, Inc.'s real
estate. The current expiration of the Senior Credit Facility is February 28,
2001.
The Company is highly leveraged as a result of the Notes. The Company's ability
to make scheduled payments of principal of, or to pay the interest on, or to
refinance, its indebtedness (including the Notes) or to fund planned capital
expenditures will depend on its future performance, which, to a certain extent,
is subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond its control.
The Company believes that, through a combination of cash flow from operations
and available credit under the Senior Credit Facility it will have adequate cash
available to service debt obligations, fund capital improvements and maintain
adequate working capital.
No dividends were declared or paid during the first quarter of 1999. The Company
paid a dividend of $0.05 per share of common stock during the first quarter of
1998. Total dividends paid during the first quarter of 1998 were $246,000. The
terms of the Notes required the suspension of cash dividends.
OTHER FINANCIAL DATA/INFORMATION
Newcor's sales, operating income, interest expense, depreciation, amortization,
and capital expenditures for the three and twelve months ended March 31, 1999
were as follows:
<TABLE>
<CAPTION>
Period Ended March 31, 1999
Three Months Twelve Months
------------ -------------
<S> <C> <C>
Sales $ 64,700 $ 243,300
Operating income 4,500 13,300
Interest expense 3,500 14,100
Depreciation 1,900 6,900
Amortization 1,100 4,500
Capital expenditures 2,100 10,600
</TABLE>
YEAR 2000
The year 2000 ("Y2K") issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's systems or equipment that have date-sensitive software using only two
digits may recognize a date using "00" as the year 1900 rather than the year
2000. The resulting system failures or miscalculations may cause disruption of
operations, including the temporary inability to process transactions or send
and receive electronic data with third parties or engage in similar normal
business activities.
The Company began to address the Y2K issue in 1997 by identifying all systems
and equipment that could be affected by the Y2K issue. This process is
substantially complete, and management has determined that only one location of
the Company is currently using an information technology system that is not Y2K
compliant. This location represents approximately 2% of the Company's revenues.
Management estimates that it is approximately 10% complete in replacing this
system with a computer system that is Y2K compliant, with full completion
expected by the end of the third quarter. The Company is in the process of
implementing a new
10
<PAGE> 11
company-wide information system. The cost of replacing the non-compliant system
is a part of the company-wide implementation cost and is therefore not tracked
separately. Most of the Company's non-information technology systems and
equipment, including production equipment, telephones, security and electrical
are currently Y2K compliant. Any costs incurred for replacing or remediating
non-information technology systems and equipment are not expected to be
material. The Company's Y2K efforts are funded through operating cash flow.
In 1997 the Company began communicating with its significant suppliers and large
customers to determine the extent to which the Company is vulnerable to such
parties' failure to remediate their own Y2K issues. Management continues to
evaluate the responses received and their remediation plans. The Company's
evaluation of these remediation plans and its assessment of the risk that any
issues identified could have a material adverse impact on the Company could
impact its development of a contingency plan. Although a failure on the part of
the Company's significant suppliers or large customers to effectively remediate
their Y2K issues in a timely manner may affect Company operations, management
does not currently believe that any material exposure to significant business
interruption exists as a result of Y2K compliance issues. Therefore, the Company
has not adopted any formal contingency plan. While management expects all
planned work to be completed, there can be no guarantee that all systems will be
in compliance by the year 2000, that the systems of the Company's significant
suppliers and large customers will be converted in a timely manner, or that
contingency planning will be able to fully address all potential interruptions.
Therefore, Y2K issues could cause delays in the Company's ability to produce or
ship its products, process transactions, or otherwise conduct its business.
CAUTIONARY STATEMENTS UNDER THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements contained in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section and, in particular, the last
paragraph under "Results of Operations" concerning the Company's performance for
the remainder of fiscal 1999 and the paragraph concerning year 2000 conversion
constitute "forward-looking statements" within the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. A number of factors could
cause actual results to differ materially from those included in or suggested by
such forward-looking statements, including without limitation: the cyclical
nature of the industries served by the Company, all of which have encountered
significant downturns in the past; the level of production by and demand from
the Company's principal customers, upon which the Company is substantially
dependent, including the three major domestic automobile manufacturers, American
Axle, Inc., Deere & Company and Detroit Diesel, Inc.; whether, when and to what
extent expected orders materialize; the impact on the Company of actions by its
competitors, some of which are significantly larger and have greater financial
and other resources than the Company; and the extent to which the Company's new
ERP computer system performs as anticipated and the accuracy of the information
supplied by the Company's suppliers and customers concerning their year 2000
readiness. All forward-looking statements in the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section are qualified
by such factors. The Company disclaims any obligation to update any such
forward-looking statements.
11
<PAGE> 12
NEWCOR, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit 27 - Financial Data Schedule (EDGAR version only)
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWCOR, INC.
-----------------------------
Registrant
Date: May 14, 1999 /s/ James J. Connor
--------------- -----------------------------
James J. Connor
Vice President-Finance
Principal Financial and
Accounting Officer
12
<PAGE> 13
EXHIBIT INDEX
27 Financial Data Schedule (EDGAR version only).
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,051
<SECURITIES> 0
<RECEIVABLES> 35,064
<ALLOWANCES> 0
<INVENTORY> 15,853
<CURRENT-ASSETS> 60,118
<PP&E> 76,201
<DEPRECIATION> 22,195
<TOTAL-ASSETS> 208,326
<CURRENT-LIABILITIES> 32,707
<BONDS> 6,100
0
0
<COMMON> 4,930
<OTHER-SE> 20,392
<TOTAL-LIABILITY-AND-EQUITY> 208,326
<SALES> 64,700
<TOTAL-REVENUES> 64,700
<CGS> 52,146
<TOTAL-COSTS> 60,229
<OTHER-EXPENSES> (165)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,486
<INCOME-PRETAX> 820
<INCOME-TAX> 315
<INCOME-CONTINUING> 505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 505
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
