<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For The Quarter Ended March 31, 1998
Commission File Number 0-19544
AUTOCAM CORPORATION
A Michigan Corporation
I.R.S. Employer Identification No. 38-2790152
4070 East Paris Avenue, Kentwood, Michigan 49512
Telephone: (616) 698-0707
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--------- -------
The number of Common Shares outstanding at May 6, 1998 was 6,066,855.
1 of 14
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of March 31, 1998 and
June 30, 1997 3
Consolidated Statements of Operations for the Three and Nine
Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the Nine Months
Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities - None.
Item 3. Default Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. 6. Exhibits and Reports on Form 8-K - The Company filed a Form 8-K
Report, dated January 30, 1998 and filed February 6, 1998, to
report under Item 2 of the Form 8-K the purchase of a 51% interest
in Qualipart Industria E Comercio Ltda., a precision-machining
manufacturer, headquartered in Pinhal-SP, Brazil, subsequently
renamed, Autocam do Brasil Usinagem, Ltda. ("Autocam do Brasil").
Autocam do Brasil, supplying gasoline and diesel fuel injector
components to leading global automotive and heavy construction,
original equipment manufacturers and their tier-one suppliers,
initially expects to report annualized sales approximating $14
million.
</TABLE>
2
<PAGE> 3
AUTOCAM CORPORATION & SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) JUNE 30, 1997
----------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 1,014,292 $ 2,510,500
Accounts receivable 12,502,980 8,841,516
Inventories 6,819,686 5,444,420
Prepaid expenses and other 1,275,697 722,020
------------- -------------
TOTAL CURRENT ASSETS 21,612,655 17,518,456
PROPERTY, PLANT AND EQUIPMENT, NET 62,173,610 53,291,418
RESTRICTED CASH AND EQUIVALENTS 5,560,980
GOODWILL AND OTHER INTANGIBLE ASSETS 14,265,976 6,443,363
OTHER LONG-TERM ASSETS 6,992,880 6,384,591
------------- -------------
TOTAL ASSETS $ 110,606,101 $ 83,637,828
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term obligations $ 6,277,995 $ 5,905,541
Accounts payable 6,088,519 4,398,050
Accrued liabilities 5,063,777 2,911,939
------------- -------------
TOTAL CURRENT LIABILITIES 17,430,291 13,215,530
LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES 39,532,355 25,191,778
DEFERRED TAXES 8,602,000 7,802,000
DEFERRED CREDITS AND OTHER 623,006 813,550
MINORITY INTEREST 1,859,607
SHAREHOLDERS' EQUITY:
Preferred stock - 200,000 shares authorized; no shares
issued or outstanding
Common stock - 10,000,000 shares authorized; 6,058,470 and 5,711,587 shares
issued and outstanding as of March 31, 1998 and June 30, 1997, respectively 31,226,482 26,270,940
Deferred compensation (529,583) (645,833)
Cumulative translation adjustments (11,337)
Retained earnings 11,873,280 10,989,863
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 42,558,842 36,614,970
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 110,606,101 $ 83,637,828
============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
AUTOCAM CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------------------- -----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $24,789,959 $16,057,586 $64,013,913 $45,975,116
Cost of sales 18,285,577 12,950,188 48,785,555 35,910,481
----------- ----------- ----------- -----------
Gross profit 6,504,382 3,107,398 15,228,358 10,064,635
Selling, general and administrative 1,669,179 1,026,483 3,989,304 2,716,853
Other operating expenses 51,875 51,875 155,625 155,625
----------- ----------- ----------- -----------
Income from operations 4,783,328 2,029,040 11,083,429 7,192,157
Interest and other expense, net 801,384 378,458 2,056,294 1,018,995
Minority interest in net income 80,939 80,939
----------- ----------- -----------
Income before tax provision 3,901,005 1,650,582 8,946,196 6,173,162
Tax provision 1,418,522 570,100 3,224,222 2,147,839
----------- ----------- ----------- -----------
NET INCOME $ 2,482,483 $ 1,080,482 $ 5,721,974 $ 4,025,323
=========== =========== =========== ===========
BASIC NET INCOME PER SHARE $ .41 $ .18 $ .95 $ .67
=========== =========== =========== ===========
DILUTED NET INCOME PER SHARE $ .40 $ .18 $ .92 $ .66
=========== =========== =========== ===========
Basic weighted average shares 6,047,480 5,992,128 6,024,996 5,989,658
Diluted weighted average shares 6,267,266 6,087,172 6,210,101 6,063,672
outstanding
Dividends declared per share $ .04 $ .02 $ .08 $ .06
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
AUTOCAM CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,721,974 $ 4,025,323
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,517,840 4,051,049
Loss on sale of assets 100,332
Deferred taxes and other 788,710 500,000
Changes in assets and liabilities that provided (used) cash:
Accounts receivable (1,626,266) 853,257
Inventories (203,128) 120,989
Prepaid expenses and other (261,009) (86,923)
Other long-term assets (63,396) 158,926
Accounts payable 952,198 539,859
Accrued liabilities 2,231,771 297,997
Deferred credits and other (47,724) (87,618)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,111,302 10,372,859
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and deposits on equipment (11,950,170) (9,388,121)
Proceeds from sale of equipment 392,042 7,050
Purchase of the net assets of the Hamilton Group (828,075)
Investment in Autocam do Brasil Usinagem, Ltda (10,403,483)
Payment of life insurance premiums and other (395,376) (349,212)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (23,185,062) (9,730,283)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on line of credit, net (798,091)
Proceeds from issuance of long-term obligations 19,825,000 2,550,000
Increase in restricted cash and equivalents (5,560,980)
Principal payments of long-term obligations (4,810,959) (2,986,330)
Debt issue costs (194,356)
Cash contribution by minority shareholder 25,749
Cash dividends paid (351,459) (223,823)
Proceeds from exercise of employee stock options 442,648 68,658
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 8,577,552 (591,495)
------------ ------------
Net increase (decrease) in cash and equivalents (1,496,208) 51,081
Cash and equivalents at beginning of period 2,510,500 1,466,751
------------ ------------
Cash and equivalents at end of period $ 1,014,292 $ 1,517,832
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period
for:
Interest $ 1,774,182 $ 950,132
Income taxes 1,131,750 1,395,000
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
AUTOCAM CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements (the
"Financial Statements") of Autocam Corporation and its subsidiaries (together,
the "Company") have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, the Financial Statements do not
include all the information and footnotes normally included in the annual
consolidated financial statements prepared in accordance with generally accepted
accounting principles. All significant intercompany accounts and transactions
have been eliminated in consolidation.
In the opinion of management, the Financial Statements reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
such information in accordance with generally accepted accounting principles.
These Financial Statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1997.
Weighted average shares outstanding and earnings per share for the three and
nine months ended March 31, 1997 have been restated to give effect to a 5% share
dividend declared on October 21, 1997 and paid on November 17, 1997 to
shareholders of record on November 3, 1997.
RECLASSIFICATIONS - Certain reclassifications have been made to the Balance
Sheet as of June 30, 1997 in order to conform to the March 31, 1998
presentation.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) JUNE 30, 1997
----------- -------------
<S> <C> <C>
Raw materials $1,559,790 $1,389,735
Production supplies 1,291,758 1,163,588
Work in-process 2,691,073 2,073,987
Finished goods 1,277,065 817,110
---------- -----------
TOTAL INVENTORIES $6,819,686 $5,444,420
========== ==========
</TABLE>
6
<PAGE> 7
AUTOCAM CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
MARCH 31, 1998
3. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment is summarized by major classification as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) JUNE 30, 1997
----------- -------------
<S> <C> <C>
Land and improvements $ 1,896,133 $ 1,842,781
Buildings and improvements 7,207,963 6,869,861
Leasehold improvements 417,866 340,014
Machinery and equipment 70,102,668 59,268,918
Furniture and fixtures 3,358,163 2,543,855
Construction in progress 1,471,339 57,546
------------ ------------
TOTAL 84,454,132 70,922,975
Accumulated depreciation and amortization (22,280,522) (17,631,557)
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, NET $ 62,173,610 $ 53,291,418
============ ============
</TABLE>
4. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (interest rates are as of March
31, 1998):
<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED) JUNE 30, 1997
----------- -------------
<S> <C> <C>
Term notes with banks, 6.4% to 9.25% $23,769,056 $21,599,739
Note payable to Propart Corporation, 12% 4,706,000
Industrial Revenue Bonds, 3.8% 9,000,000
Mortgage payable to bank, 9.35% 970,487 1,039,234
Second mortgage payable to bank, 7% 963,252 1,007,829
Revolving credit note with bank, 8% 6,401,555 6,782,853
Capital lease obligation 667,664
----------- -----------
TOTAL 45,810,350 31,097,319
Less current maturities 6,277,995 5,905,541
----------- -----------
LONG-TERM $39,532,355 $25,191,778
=========== ===========
</TABLE>
In January 1998, the Company borrowed $5.2 million from a bank and issued a $5
million note payable to Propart Corporation (the minority shareholder;
"Propart") in connection with the Company's acquisition of a 51% ownership
interest in Qualipart Industria E Comercio, Ltda., subsequently renamed, Autocam
do Brasil Usinagem, Ltda. ("Autocam do Brasil"; see Note 6 below). Principal
payments on the bank borrowings will be retired over 5 years with equal monthly
principal installments plus interest at a rate of 7.1% per annum. Annual
principal obligations under the note to Propart will begin in 2003, but may be
prepaid through a capital contribution made directly to Autocam do Brasil.
Interest is payable quarterly at 12% per annum.
7
<PAGE> 8
AUTOCAM CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED
MARCH 31, 1998
5. INCOME TAXES
Income taxes were provided at effective rates of 36.4% and 36.0% for the three
and nine months ended March 31, 1998 versus 34.5% and 34.8% for the respective
periods in fiscal 1997. All fiscal 1998 amounts include provisions for Brazilian
Federal and South Carolina State income taxes. All amounts include provisions
for California Unitary taxes.
6. BUSINESS COMBINATION
Effective January 1, 1998, the Company purchased a 51% interest in the equity of
Autocam do Brasil, which supplies gasoline and diesel fuel injector components
to leading global automotive and heavy construction, original equipment
manufacturers and their tier-one suppliers. On January 30, 1998, the acquisition
was consummated for $5 million in cash consideration and a $5 million note
payable issued to Propart. The acquisition was accounted for as a purchase, and
accordingly, the purchase price was allocated to assets acquired and liabilities
assumed based upon their relative fair market values. Cost in excess of the fair
value of the net assets acquired (goodwill) was $7.3 million and is being
amortized over 40 years on a straight-line basis. The final purchase price may
be reduced as a result of a deficiency in earnings before interest and taxes
from an agreed-upon level during the eighteen months ending June 30, 1999.
8
<PAGE> 9
AUTOCAM CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 1998
This Quarterly Report on Form 10-Q contains forward-looking statements as
defined by the Private Securities Litigation Reform Act of 1995. Forward-looking
statements should be read with the cautionary statements and important factors
included herein. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance and underlying
assumptions and other statements, which are other than statements of historical
facts. Such forward-looking statements may be identified, without limitation, by
the use of the words "anticipates," "estimates," "expects," "intends," "plans,"
"predicts," "projects," and other similar expressions. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third parties,
but there can be no assurance that management's expectations, beliefs or
projections will result or be achieved or accomplished.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Consolidated Statements of Operations as a percentage of sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
-------------------------------------- --------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 73.8% 80.6% 76.2% 78.1%
------ ------- ------ ------
Gross profit 26.2% 19.4% 23.8% 21.9%
Selling, general and administrative 6.7% 6.4% 6.2% 5.9%
Other operating expenses .2% .3% .3% .3%
------ ------- ------ ------
Income from operations 19.3% 12.7% 17.3% 15.7%
Interest and other expense, net 3.2% 2.4% 3.2% 2.2%
Minority interest in net income .4% .1%
------ ------- ------
Income before tax provision 15.7% 10.3% 14.0% 13.5%
Tax provision 5.7% 3.6% 5.1% 4.7%
------ ------- ------ ------
NET INCOME 10.0% 6.7% 8.9% 8.8%
====== ======= ====== ======
</TABLE>
9
<PAGE> 10
AUTOCAM CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
MARCH 31, 1998
SALES
The following table indicates the Company's sales (in thousands) and percentage
of total sales by product application for the three- and nine-month periods
ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, FOR THE NINE MONTHS ENDED MARCH 31,
--------------------------------------------- ----------------------------------------------
1998 1997 1998 1997
--------------------- ------------------- ---------------------- --------------------
Transportation:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fuel systems $13,427 54.2% $11,996 74.7% $36,208 56.6% $33,862 73.7%
Braking systems 4,829 19.4 1,750 10.9 12,908 20.1 5,070 11.0
Other 708 2.9 384 2.4 1,601 2.5 1,022 2.2
-------- ----- --------- ----- -------- ----- --------- -----
Total transportation 18,964 76.5 14,130 88.0 50,717 79.2 39,954 86.9
Medical devices 2,462 9.9 1,411 8.8 6,785 10.6 4,704 10.2
Computer electronics 2,728 11.0 517 3.2 5,348 8.4 1,311 2.9
Other 636 2.6 1,164 1.8 6
</TABLE>
Sales of components for fuel system applications were $13,427,000 and
$36,208,000 for the three and nine months ended March 31, 1998, respectively,
representing increases of 12% and 7% over sales of the same respective periods
in the prior year. The Company continues to benefit from increasing demand from
its gasoline and diesel fuel systems customers as their new injector programs
expand. It also gained market share in the production of diesel fuel injection
components through acquiring a controlling interest in Qualipart Industria E
Comercio, Ltda., subsequently renamed, Autocam do Brasil Usinagem, Ltda.
("Autocam do Brasil") in January 1998. Sales of fuel systems components to the
Company's two largest fuel systems customers represented 71% and 78% of total
fuel system component sales during the three and nine months ended March 31,
1998, respectively.
Sales of braking system components for the three and nine months ended March 31,
1998 were $4,829,000 and $12,908,000, respectively. The increases in sales of
these components can be attributed almost entirely to sales generated by
facilities acquired as part of the Company's purchase of The Hamilton Group
("Hamilton") in June 1997.
Sales of medical device components were $2,462,000 and $6,785,000 for the three
and nine months ended March 31, 1998, respectively, representing increases of
74% and 44% as compared to the same respective periods in the prior year. During
the second half of fiscal 1997, the Company began manufacturing
precision-machined metal components for innovative cardiovascular surgical
device manufacturers, commonly known as coronary stents. The sale of these
components is the primary reason for the sales increase between the periods
presented.
Sales of components for computer electronic applications were $2,728,000 and
$5,348,000 during the three and nine months ended March 31, 1998, respectively.
The increases in sales of these components are attributable to the production
and sale of key components used in computer microprocessor subassemblies during
fiscal 1998. No such components were produced during fiscal 1997.
10
<PAGE> 11
AUTOCAM CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
MARCH 31, 1998
SALES - CONCLUDED
Management believes that year-over-year sales growth in fiscal 1998 will
approximate 45%. Growth is expected in all areas. The Autocam do Brasil
acquisition is expected to generate an additional $3.5 million in sales during
the fourth quarter, primarily in fuel system component sales to gasoline and
diesel fuel injection customers in Brazil and the United States. Braking system
component sales increases are expected from shipments of components from
facilities acquired in the Hamilton acquisition; such sales should approximate
$4 million during the fourth quarter. Sales increases to the computer
electronics industry are expected from additional shipments of computer
microprocessor subassembly components, although sales are not expected to be as
strong as were reported during the third quarter consistent with the recent
decline in microprocessor demand.
GROSS PROFIT
Gross profit for the three and nine months ended March 31, 1998 represented
26.2% and 23.8% of sales, respectively, verses 19.4% and 21.9% for the same
respective periods of fiscal 1997. The increase in margins can be attributed to
increases in sales of higher margin medical device components and better labor
and equipment utilization due to growth in demand for new fuel systems and
computer electronics program components. Also, during the third quarter of
fiscal 1997, the Company experienced significant project start-up costs
associated with new fuel system programs. Certain machine tools were not only
delivered late, but did not perform as expected. In order to meet customer
demand for these components, the Company was forced to employ less efficient
work-around manufacturing processes in lieu of the production processes that
relied on the machine tools in question. All such matters were rectified in the
first quarter of fiscal 1998.
Management expects that fourth quarter gross profit, as a percentage of sales,
will return to levels reported during the nine-month period ended March 31,
1998. The Company believes that those trends that resulted in year-over-year
profit margin improvement during the second and third quarters of fiscal 1998
will continue for the balance of the fiscal year, but at a slightly slower pace
due to the expected decline in shipments of the aforementioned computer
electronic components. Management believes that the continued integration of
Hamilton's and Autocam do Brasil's operations and the implementation of
continuous improvement concepts employed by the rest of the Company will result
in improved margins on products manufactured in those facilities.
11
<PAGE> 12
AUTOCAM CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED
MARCH 31, 1998
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses, as a percentage of sales, were
6.7% and 6.2% during the three and nine months ended March 31, 1998,
respectively, versus 6.4% and 5.9% for the same respective periods in the prior
year. These expenses increased monetarily and as a percentage of sales due to
the Hamilton and Autocam do Brasil acquisitions. The Company also pays a 6%
royalty on the sale of coronary stents; such expense was nearly non-existent in
fiscal 1997 as it began producing these devices late in the third quarter of
that year. Management expects selling, general and administrative expenses, as a
percentage of sales, to remain consistent with third quarter of 1998 levels
during the fourth fiscal quarter.
OTHER OPERATING EXPENSES
Other operating expenses represent the straight-line amortization of employment
and deferred compensation agreements between the Company and a key employee.
INTEREST AND OTHER EXPENSE, NET
Net interest and other expense was 3.2% of sales for both fiscal 1998 periods
presented as compared to 2.4% and 2.2% for the three and nine months ended March
31, 1997. This increase is due primarily to an increase in average borrowings
outstanding during the fiscal 1998 periods presented in order to finance the
Hamilton and Qualipart acquisitions.
Management anticipates that interest expense over the next three months will
increase monetarily over third quarter levels; however, as a percentage of
sales, interest expense should remain consistent with third quarter levels. The
Company issued notes totaling $10.2 million on January 30, 1998 to finance the
acquisition of Qualipart that will generate interest expense during the last
three months of fiscal 1998 of approximately $242,000.
MINORITY INTEREST IN NET INCOME
The amount reported in this line represents the minority shareholder's interest
in the net earnings of Autocam do Brasil.
12
<PAGE> 13
AUTOCAM CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONCLUDED
MARCH 31, 1998
TAX PROVISION
Income taxes were provided at effective rates of 36.4% and 36.0% for the three
and nine months ended March 31, 1998 versus 34.5% and 34.8% for the respective
periods in fiscal 1997. All fiscal 1998 amounts include provisions for Brazilian
Federal and South Carolina State income taxes. All amounts include provisions
for California Unitary taxes.
Management expects the Company's effective tax rate to approximate 36% for the
fourth quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company spent $12 million for fixed assets during the nine months ended
March 31, 1998, including $1.5 million in facilities and $10.5 million in other
fixed assets. All of these assets were financed through operating cash flows,
bank borrowings ($625,000), and a portion of the funds raised through the
issuance of Industrial Revenue Bonds ($9 million).
In order to meet demand primarily from transportation and computer electronics
customers, management will purchase $11.3 million of equipment and invest $2.3
million in facilities over the next six months (on which deposits of $1.8
million and $1.5 million, respectively, had been placed as of March 31, 1998).
Management expects to finance these purchases with cash on hand (some of which
was generated from the issuance of Industrial Revenue Bonds), operating cash
flows, operating leases, and/or bank borrowings, including its equipment line of
credit ($5,375,000 in availability as of March 31, 1998) which allows the
Company to retire borrowings over a period not to exceed six years with either
variable or fixed interest rates. On December 23, 1997, the Company issued
Industrial Revenue Bonds totaling $9 million through the Michigan Strategic Fund
in order to partially fund the construction of a new manufacturing facility in
Marshall, Michigan and to purchase new equipment for that facility. Principal
payments are due annually (amortizing over a 15-year period), with variable
interest payments due monthly. The interest rate on the bonds resets weekly and
was set at 3.8% per annum as of March 31, 1998.
The January 1998 Qualipart acquisition was financed through bank borrowings and
a note to the seller of $5.2 million and $5 million, respectively. The funds
used to complete the acquisition were obtained through an acquisition term note
with the Company's primary lending institution and will be paid in 60 equal
monthly principal installments, plus interest at 7.1% per annum. The note to the
seller bears interest at 12% per annum to be paid annually. Annual principal
obligations under the note are required to begin in 2003, but may be prepaid
through a capital contribution made directly to Autocam do Brasil.
Management believes that the Company has adequate credit facilities and cash
available to meet its working capital needs through the remainder of fiscal
1998. As of March 31, 1998, the Company had $5,135,000 in availability under its
revolving line of credit. Management anticipates retiring current maturities of
long-term obligations with future operating cash flows. As of March 31, 1998,
$15.4 million of the Company's long-term debt was subject to variable interest
rates.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements 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.
Date: May 13, 1998
Autocam Corporation
/s/ John C. Kennedy
--------------------
John C. Kennedy
Principal Executive Officer
/s/ Warren A. Veltman
---------------------
Warren A. Veltman
Principal Financial and
Accounting Officer
14
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
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