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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 31, 2003
EXX INC
(Exact name of registrant as specified in its charter)
NEVADA 001-0654 88-0325271
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
organization) Number)
1350 EAST FLAMINGO ROAD, SUITE 689
LAS VEGAS, NEVADA 89119-5263
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 598-3223
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
This amendment no. 1 to the current report on Form 8-K
filed on February 4, 2003 by EXX INC (the "Registrant") relates to the
Registrant's purchase of 11,877 shares of common stock, $.01 par value, of
Newcor, Inc. ("Newcor") under Newcor's Plan of Reorganization, effective
January 31, 2003. As a result of that purchase, Newcor, Inc. ceased to be a
stand-alone public reporting company and became a subsidiary of the
Registrant.
The purpose of this amendment no. 1 is to provide the
financial statements and pro forma financial information required by Items
7(a) and 7(b) of Form 8-K, respectively, which financial statements and pro
forma financial information were excluded from the original filing in
reliance upon Items 7(a)(4) and 7(b)(2) of Form 8-K.
Certain information contained herein includes information
that is forward-looking. The matters referred to in forward-looking
statements may be affected by the risks and uncertainties involved in the
Registrant's business. These forward-looking statements are qualified in
their entirety by the cautionary statements contained in filings by the
Registrant with the Commission.
(a) Financial statements of business acquired.
-----------------------------------------
The following consolidated financial statements of Newcor
are filed herewith:
Page
----
(i) Reports of Independent Accountants 2-3
(ii) Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000 4
(iii) Consolidated Balance Sheets as of December 31, 2002 and 2001 5
(iv) Consolidated Statements of Shareholders' Equity (Deficit) for
the years ended December 31, 2002, 2001 and 2000 6
(v) Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000 7
(vi) Notes to Consolidated Financial Statements 9
(b) Pro forma financial information.
-------------------------------
The following pro forma condensed consolidated financial
information of the Registrant is filed herewith:
(i) Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of December 31, 2002 23-24
(ii) Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the year ended December 31, 2002 25
(iii) Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Statements 26
(c) Exhibits. Not applicable.
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* * * * *
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Newcor, Inc.:
We have audited the accompanying consolidated balance sheet of Newcor, Inc.
and its Subsidiaries (the "Company") as of December 31, 2002 and the related
consolidated statements of operations, shareholders' equity (deficit) and
cash flows for year then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Newcor,
Inc. and Subsidiaries as of December 31, 2002 and the results of their
operations and their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
March 22, 2003
2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Newcor, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of shareholders' equity (deficit),
and of cash flows present fairly, in all material respects, the financial
position of Newcor, Inc. and its Subsidiaries (the "Company") at December
31, 2001, and the results of their operations and their cash flows for each
of the two years in the period ended December 31, 2001 in conformity with
accounting principles generally accepted in the United States of America.
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 of these statements
in accordance with auditing standards generally accepted in the United
States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, on February 25, 2002, the
Company filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code, thereby raising substantial doubt about
their ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might result from
the outcome of the petition for reorganization.
/s/ PricewaterhouseCoopers LLP
Detroit, Michigan
March 22, 2002
3
NEWCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
2002 2001 2000
------------------------------------------------
Sales $170,647 $177,342 $238,115
Cost of sales 145,725 162,470 205,257
------------------------------------------------
Gross margin 24,922 14,872 32,858
Selling, general and administrative
expenses 14,316 18,403 20,028
Amortization expense -- 3,837 4,135
Impairment charges 32,550 28,757 --
Plant consolidation costs -- 450 1,277
------------------------------------------------
Operating income (loss) (21,944) (36,575) 7,418
Other expense:
Interest expense (3,348) (14,293) (14,403)
Other professional fees -- (300) (2,450)
Reorganization costs (14,140) -- --
Other (980) (989) (540)
------------------------------------------------
Loss before income taxes (40,412) (52,157) (9,975)
Provision (benefit) for income taxes -- 5,093 (3,393)
------------------------------------------------
Net loss before cumulative effect of accounting change (40,412) (57,250) (6,582)
Cumulative effect of accounting change (8,645) -- --
------------------------------------------------
Net loss $(49,057) $(57,250) $ (6,582)
================================================
Amounts per share of common stock:
Net loss before cumulative effect of accounting change $ (9.73) $ (11.58) $ (1.33)
Cumulative effect of accounting change (0.18) -- --
------------------------------------------------
Net loss - basic and diluted $ (9.91) $ (11.58) $ (1.33)
================================================
Weighted average common shares outstanding 4,950 4,950 4,950
The accompanying notes are an integral part of the consolidated financial statements.
4
NEWCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31,
2002 2001
-----------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 23,832 $ 127
Accounts receivable 21,721 23,699
Inventories 8,968 11,175
Prepaid expenses and other 3,008 2,864
-----------------------------------
Total current assets 57,529 37,865
Property, plant and equipment, net 35,308 44,670
Prepaid pension expense 3,907 3,884
Goodwill, net -- 37,741
Other non-current assets 1,619 5,593
-----------------------------------
Total assets $ 98,363 $129,753
===================================
LIABILITIES
Current Liabilities:
Credit arrangements and debt $ 21,454 $137,934
Accounts payable 6,559 14,049
Other current liabilities 8,436 17,332
-----------------------------------
Total current liabilities 36,449 169,315
Liabilities subject to compromise 150,978 --
Post retirement benefits other than pension 6,123 6,386
Credit arrangements and debt, net of current portion 2,215 2,657
Pension liability and other 11,506 2,447
-----------------------------------
Total liabilities 207,271 180,805
-----------------------------------
SHAREHOLDERS' EQUITY
Preferred stock, no par value
Authorized: 1,000 shares
Issued: None -- --
Common stock, par value $1.00 per share
Authorized: 10,000 shares
Issued: 5,019 shares 5,019 5,019
Capital in excess of par 2,415 2,415
Accumulated other comprehensive loss (9,632) (833)
Accumulated deficit (106,221) (57,164)
Treasury stock at cost (489) (489)
-----------------------------------
Total shareholders' equity (deficit) (108,908) (51,052)
-----------------------------------
Total liabilities and shareholders' equity (deficit) $ 98,363 $129,753
===================================
The accompanying notes are an integral part of the consolidated financial statements.
5
NEWCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ACCUMULATED
OTHER RETAINED TOTAL
CAPITAL IN COMPREHENSIVE EARNINGS SHAREHOLDERS'
COMMON EXCESS INCOME (ACCUMULATED) TREASURY EQUITY
STOCK OF PAR (LOSS) (DEFICIT) STOCK (DEFICIT)
-------------------------------------------------------------------------------------
Balance, January 1, 2000 $4,980 $2,340 $ (443) $ 6,668 $(489) $ 13,056
Decrease in unfunded
pension liability 220 220
Net loss (6,582) (6,582)
-------------
Comprehensive loss, net of tax (6,362)
-------------
Shares issued 39 75 114
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Balance, December 31, 2000 5,019 2,415 (223) 86 (489) 6,808
Increase in unfunded
pension liability (610) (610)
Net loss (57,250) (57,250)
------------
Comprehensive loss (57,860)
------------------------------------------------------------------------------------
Balance, December 31, 2001 5,019 2,415 (833) (57,164) (489) (51,052)
Increase in unfunded
pension liability (8,799) (8,799)
Net loss (40,412) (40,412)
------------
Comprehensive loss (49,211)
------------------------------------------------------------------------------------
Balance, December 31, 2002 $5,019 $2,415 $(9,632) $(97,576) $(489) $(100,263)
====================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
6
NEWCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
2002 2001 2000
------------------------------------------------
OPERATING ACTIVITIES
Net loss $(49,057) $(57,250) $(6,582)
Adjustments to reconcile net loss
to cash provided by (used in) operating activities:
Depreciation 7,807 9,106 8,924
Impairment charges 41,195 32,594 4,135
Reorganization costs 12,343 -- --
Deferred income taxes -- 5,093 (3,326)
Pensions 130 (610) (420)
Loss on disposition of capital assets -- -- 2,655
Other, net 751 240 291
Changes in operating assets and liabilities:
Accounts receivable 1,978 9,520 3,952
Inventories 2,207 3,886 4,653
Prepaid expenses and other (144) (96) 815
Accounts payable 271 (8,128) (9,453)
Other current liabilities 2,045 3,631 (649)
-------------------------------------------------
Net cash provided by (used in) operating activities 19,526 (2,014) 4,995
-------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (1,567) (2,681) (7,508)
Proceeds from sale of capital assets 18 620 --
-------------------------------------------------
Net cash used in investing activities (1,549) (2,061) (7,508)
-------------------------------------------------
FINANCING ACTIVITIES
Net borrowings on revolving credit line 6,788 5,689 --
Repayments of term notes (533) (2,000) (2,000)
Shares issued under employee stock plans -- -- 114
Capital lease financing of capital expenditures -- -- 3,485
Payments on capital lease/promissory note (527) (191) (113)
-------------------------------------------------
Net cash provided by financing activities 5,728 3,498 1,486
-------------------------------------------------
Increase (decrease) in cash 23,705 (577) (1,027)
Cash and cash equivalents, beginning of year 127 704 1,731
-------------------------------------------------
Cash and cash equivalents, end of year $ 23,832 $ 127 $ 704
=================================================
(Continued on next page)
The accompanying notes are an integral part of the consolidated financial statements.
7
NEWCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
(IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
2002 2001 2000
------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of machinery and equipment for
notes payable $ 919 $ -- $ --
=================================================
SUPPLEMENTAL DISCLOSURE OF OPERATING CASH FLOWS
FROM ORGANIZATION ITEMS:
Cash paid for reorganization expenses $ 1,973 $ -- $ --
=================================================
The accompanying notes are an integral part of the consolidated financial statements.
8
NEWCOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. ACCOUNTING POLICIES
Description of the Business - Newcor, Inc. and its subsidiaries
("Newcor") design and manufacture precision machined components and
assemblies and custom rubber and plastic products primarily for the
automotive and agricultural vehicle markets.
Principles of Consolidation - The consolidated financial statements
include the accounts of Newcor, Inc. and all of its subsidiaries, as to all
of which Newcor has financial and operating control. All significant
intercompany accounts and transactions are eliminated.
Cash Equivalents - Newcor considers all highly liquid investments
with an initial maturity of three months or less to be cash equivalents.
Bankruptcy Accounting - On February 25, 2002, Newcor filed
voluntary petitions for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. Newcor operated its businesses as debtors-in-possession in
accordance with provisions of the United States Bankruptcy Code until
January 31, 2003, at which time the previously confirmed plan of
reorganization was made effective. Since the Chapter 11 bankruptcy filing,
Newcor has applied the provisions of SOP 90-7, which does not significantly
change the application of accounting principles generally accepted in the
United States. However, SOP 90-7 does require that the financial statements
for periods including and subsequent to filing the Chapter 11 bankruptcy
petition distinguish transactions and events that are directly associated
with the plan of reorganization from the ongoing operations of the business.
Accounts Receivable - Newcor carries its accounts receivable at
cost less an allowance for doubtful accounts. On a periodic basis, Newcor
evaluates its accounts receivable and establishes an allowance for doubtful
accounts based on a history of past write-offs, collections and current
credit conditions.
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 basis.
Contract Accounting - The percentage of completion method of
accounting is used by Newcor'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 in the current period for revisions in estimated
total contract costs and contract values. Estimated losses are recognized
when known.
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 15 to 30 years for building and land improvements
and four to ten years for machinery, office equipment and vehicles.
Goodwill - Effective January 1, 2002, Newcor adopted SFAS No. 142,
"Goodwill and Other Intangible Assets," which eliminates amortization of
goodwill and certain other intangible assets, but
9
requires annual testing for impairment (comparison of estimated fair value
to carrying value). 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. Our
policy is to test annually for impairment. As of December 31, 2002, all
goodwill associated with Newcor had been eliminated.
Asset Impairment - Newcor recognizes impairment losses for assets
or groups of assets where the sum of the estimated future cash flows
(undiscounted and without interest charges) is less than the carrying amount
of the related asset or group of assets. The amount of the impairment loss
is the excess of the carrying amount over the fair value of the asset or
group of assets being measured.
Debt Issuance Costs - Costs incurred to issue debt were
historically amortized over the life of the related term of the debt ranging
from three to ten years. In accordance with SOP 90-7 all debt issuance costs
were eliminated as of December 31, 2002.
Income Taxes - Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the tax basis of
Newcor's assets and liabilities. Valuation allowances are established, when
necessary, to reduce the deferred income tax assets to the amount expected
to be realized.
Treasury Stock - Treasury stock is carried at cost and included
approximately 69,000 shares at both December 31, 2002 and 2001.
Use of Estimates - The preparation of consolidated financial
statements in conformity with accounting principles generally accepted in
the United States requires Newcor 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. Management's estimates include, but are not limited to,
reserves for warranty, insurance claims, accounts receivable valuation,
inventory valuation, employee retirement benefit obligations and impairment
of long-lived assets. Actual results could differ from those estimates.
Financial Instruments - The carrying amount of Newcor's financial
instruments, which includes cash and cash equivalents, accounts receivable,
accounts payable and notes payable approximates their fair value at December
31, 2002 and 2001.
Earnings Per Share - Common stock options were excluded from the
calculation of diluted earnings per share because they would have been
anti-dilutive for all periods presented.
Recent Pronouncements - In May 2002, the FASB issued SFAS No. 145,
"Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13, and Technical Corrections". The statement rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," and an amendment
of that statement, SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". As a result, gains and losses from
extinguishment of debt will be classified as extraordinary items only if
they are determined to be unusual and infrequently occurring items. SFAS No.
145 also requires that gains and losses from debt extinguishments, which
were classified as extraordinary items in prior periods, be reclassified to
continuing operations if they do not meet the criteria for extraordinary
items. The provisions of SFAS No. 145 will be effective for our fiscal year
beginning January 1, 2003. We will apply the provisions of this statement
for all debt extinguishments going forward.
10
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or Disposal
Activities". SFAS No. 146 addresses significant issues regarding the
recognition, measurement, and reporting of costs associated with exit and
disposal activities, including restructuring activities that are currently
accounted for pursuant to the guidance that the Emerging Issues Task Force
("EITF") set forth in EITF Issue No. 94-3. The scope of SFAS No. 146 also
includes (1) costs related to terminating a contract that is not a capital
lease and (2) termination benefits that employees who are involuntarily
terminated receive under the terms of a one-time benefit arrangement that is
not an ongoing benefit arrangement, or an individual deferred compensation
contract. SFAS No. 146 was effective for exit or disposal activities that
were initiated after December 31, 2002. We have applied the provisions of
this statement to restructuring activities following the effective date. As
a result of adopting the provisions of this standard, certain lease
termination and other restructuring costs that otherwise would have been
accrued in the fourth quarter of 2002 will be recorded in the first quarter
of 2003 at the point that the liability is incurred under the new guidance.
Reclassifications - Certain items in prior years' financial
statements have been reclassified to conform with the presentation used in
the year ended December 31, 2002.
2. REORGANIZATION
As discussed under the subheading "Bankruptcy Accounting" in Note 1, Newcor
filed a voluntary bankruptcy petition under Chapter 11 of the United States
Bankruptcy Code on February 25, 2002. Newcor filed for relief under Chapter
11 to address liquidity issues resulting from the current economic downturn,
which substantially and generally harmed the automotive supply and heavy
truck industry. As a consequence of the filing, all pending litigation
against Newcor was stayed automatically by section 362 of the United States
Bankruptcy Code and no party could take legal action to recover on
pre-petition claims against Newcor. In addition, pursuant to section 365 of
the United States Bankruptcy Code, Newcor rejected certain pre-petition
executory contracts and unexpired leases. Parties to these contracts or
leases asserted claims as permitted by the United States Bankruptcy Code.
Under Newcor's plan of reorganization, all impaired creditors in Class 4 of
the plan, essentially all unsecured creditors, received their pro-rata
shares of a $20,000 cash payment made by Newcor in January 2003 and $28,000
aggregate principal amount of senior unsecured notes issued by Newcor in
January 2003. These notes bear interest at 6% per annum and mature through
2013. Equity holders in Class 5 of the plan, with holdings of at least 412
shares of old Newcor common stock, received a right to purchase new shares
of common stock of restructured Newcor for $500 per share. Also in
connection with the plan, all previously outstanding common stock options
were terminated.
As part of Newcor's plan of reorganization, EXX INC entered into a proceeds
election guarantee under which EXX would guarantee to the creditors that any
unexercised rights would be assumed by EXX and exercised at the pro-rata
price. Under the proceeds election guarantee, and by exercising the rights
directly issued to EXX under the plan, EXX now holds 98.975% of the
outstanding common stock of Newcor.
As of December 31, 2002, Newcor had classified obligations which were
subject to impairment under the plan as liabilities subject to compromise as
follows:
Senior subordinated debt $123,000
Interest on senior subordinated debt 12,144
Vendor claims 7,761
Claims for rejected contracts 8,073
--------
Total $150,978
========
11
Newcor's reorganization costs for the year ended December 31, 2002 include
approximately $8,100 for its estimate of allowable claims filed with the
United States Bankruptcy Court in July 2002, relating to executory contracts
rejected by Newcor, the write-off of $3,000 of deferred financing costs
related to liabilities subject to compromise and professional fees,
primarily legal counsel, of $3,000.
The filing with the United States Bankruptcy Court has materially changed
the consolidated financial statements of Newcor. See Note 12 for further
disclosure.
3. GOODWILL AND IMPAIRMENT
Effective January 1, 2002, Newcor adopted SFAS No. 142, "Goodwill and Other
Intangible Assets," which eliminates amortization of goodwill and certain
other intangible assets, but requires annual testing for impairment
(comparison of estimated fair value to carrying value). Fair value is
estimated using the present value of expected future cash flows and other
valuation measures. Due to implementation of the new standard and the
results of Newcor's impairment analysis, an impairment of $8,645 was
recorded as a cumulative effect of accounting change as of January 1, 2002.
In addition, as a result of changed conditions stemming from the bankruptcy
proceedings and other economic factors, Newcor recorded an impairment charge
of $29,096 in 2002.
In accordance with periodic long-lived asset impairment analysis, management
determined that the cost basis of certain unused machinery equipment was
impaired on December 31, 2002 in the amount of $3,454. The equipment
primarily related to a facility which was closed in 2002.
The following adjusts reported net loss and basic and diluted loss per share
to exclude goodwill amortization.
FOR THE YEARS ENDED DECEMBER 31,
2002 2001 2000
-------------------------------------------------------
Reported net loss $ (49,057) $ (57,250) $ (6,582)
Goodwill amortization -- 3,837 2,447
-------------------------------------------------------
Adjusted net loss $ (49,057) $ (53,413) $ (4,135)
=======================================================
Reported basic and diluted loss per share $ (9.91) $ (11.58) $ (1.33)
Goodwill amortization, net of tax -- 0.78 0.49
-------------------------------------------------------
Adjusted basic and diluted loss per share $ (9.91) $ (10.78) $ (.84)
=======================================================
12
4. INVENTORIES
Inventories at December 31, 2002 and 2001 are summarized as follows:
2002 2001
--------------------------------------
Costs and estimated earnings of uncompleted
contracts in excess of related billings
of $486 in 2002 and $1,009 in 2001 $ 47 $ 270
Raw materials 3,306 5,672
Work in process and finished goods 5,615 5,233
-------------------------------------
$ 8,968 $ 11,175
=====================================
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 for Newcor's Special Machines Segment.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 2002 and 2001 are summarized
as follows:
2002 2001
--------------------------------------
Land and improvements $ 1,828 $ 2,142
Buildings 13,767 13,773
Machinery 55,195 59,048
Office and transportation equipment 8,307 8,466
Construction in progress 67 681
-------------------------------------
79,164 84,110
Less accumulated depreciation 43,856 39,440
-------------------------------------
$ 35,308 $ 44,670
=====================================
6. REJECTED EQUIPMENT LEASES
During the pendency of the bankruptcy proceedings, Newcor reviewed its
executory contracts and unexpired equipment leases and received approval
from the United States Bankruptcy Court to reject substantially all
equipment leases. In this context, "rejection" means that Newcor was
relieved from its obligations to perform further under the contract or
lease. Certain equipment previously subject to the rejected leases has been
purchased by Newcor and obligations pursuant to such purchases are disclosed
in Note 7. Any claim for damages resulting from the rejection of a contract
or lease was treated as a general unsecured claim in the bankruptcy
proceedings and a $8,100 charge for the estimated maximum allowed claims
under bankruptcy law was recognized as a reorganization cost (See Note 2).
13
7. CREDIT ARRANGEMENTS AND DEBT
A summary of debt at December 31, 2002 and December 31, 2001 is as follows:
2002 2001
--------------------------------------
Revolving credit line (bank facility) $ 12,477 $ 5,689
Term note, bank 2,300 2,833
Promissory notes 2,792 --
Capital lease -- 2,969
Limited obligation revenue bonds, variable
interest rate (average 1.5% in 2002 and
3.0% in 2001) 6,100 6,100
Senior subordinated notes, net of treasury notes of $2,000 -- 123,000
-------------------------------------
$ 23,669 $ 140,591
=====================================
On March 4, 1998, Newcor completed the issuance of $125,000 of 9.875% Senior
Subordinated Notes due 2008. Interest on the Notes is payable semi-annually
on March 1 and September 1 of each year. The Notes were to mature on March
1, 2008. During the year ended October 31, 1998, Newcor repurchased in the
open market $2,000 face value of the Notes and is currently holding these
notes in treasury. In connection with the bankruptcy filing and in
accordance with SOP 90-7, these notes stopped accruing interest in February
2002. Had interest been accrued through December 31, 2002, approximately
$10,000 of additional interest would have been recorded. At December 31,
2002, these notes were classified as liabilities subject to compromise.
At December 31, 2002, Newcor had $12,477 outstanding under a line of credit
facility and $2,300 under a term loan to a particular financial institution.
The credit line bears interest at the prime rate plus 1.5% per annum (5.75%
at December 31, 2002) and the term loan bears interest at 8.35% per annum.
Both of the financing arrangements were collateralized by all of the assets
of Newcor. In connection with its plan of reorganization, Newcor paid off
the line of credit and term note on January 31, 2003 and entered into a loan
and security agreement with another financial institution. Pursuant to the
new credit agreement, Newcor may borrow up to $22,933 under a term note of
$4,933 and a line of credit facility up to $18,000. Both instruments bear
interest at defined rates based upon two different indexes and are secured
by substantially all of the assets of Newcor.
On May 1, 2002 a promissory note was issued to ICX Corporation in the
principal amount of $919. This note requires monthly payments of $22
including interest at 8.5% per annum through April 2006. In July 2000,
Newcor entered into a capital lease agreement providing for interest at 7.9%
per annum and payments through July 2007 for certain machinery and
equipment. The lease was rejected pursuant to the filing and, on December 1,
2002, a promissory note was issued to Transamerica Equipment Financial
Services Corporation in the principal amount of $2,400. The note required an
initial down payment of $360 and monthly payments of $40 including interest
at 7% per annum through October 2007. These notes are collateralized by
certain equipment of Newcor.
In September 1995, Rochester Gear, Inc., a wholly owned subsidiary of Newcor
("Rochester"), entered into a loan agreement whereby $6,100 of limited
obligation refunding revenue bonds were issued. These bonds mature on
January 1, 2008 and are collateralized by Rochester's land, building and
equipment and guaranteed by Newcor.
14
Total interest payments aggregated $1,312, $7,628 and $13,783 in the years
ended December 31, 2002, 2001 and 2000, respectively. Interest accrued, but
unpaid at December 31, 2002, was approximately $12,200, of which $12,100 is
included in liabilities subject to compromise.
Aggregate principal payments for the years subsequent to December, 31, 2002
are as follows:
YEAR ENDING DECEMBER 31,
2003 $ 21,454
2004 613
2005 662
2006 529
2007 411
--------
$ 23,669
========
8. INCOME TAXES
Federal income tax benefit is as follows:
FOR THE YEARS ENDED DECEMBER 31,
2002 2001 2000
-------------------------------------------------------
Currently refundable $ -- $ (296) $ (67)
Deferred, net -- 5,389 (3,326)
-------------------------------------------------------
$ -- $ 5,093 $ (3,393)
=======================================================
15
Significant components of the deferred tax assets and liabilities as of
December 31, 2002 and 2001 are as follows:
2002 2001
-------------------------------------
Deferred tax assets
Net operating loss carryforward $ 20,809 $ 15,212
Goodwill 16,627 7,761
Accrued postretirement benefits 2,040 2,127
AMT and other credits 1,720 1,720
Accrued vacation and employee benefits 452 891
Other 1,126 983
-------------------------------------
Total deferred tax assets 42,774 28,694
-------------------------------------
Deferred tax liabilities
Depreciation 3,602 4,197
Pensions 1,202 1,352
Other -- 58
-------------------------------------
Total deferred tax liabilities 4,804 5,607
-------------------------------------
Valuation allowance 37,970 23,087
-------------------------------------
Net deferred tax asset $ -- $ --
=====================================
Reconciliation of loss multiplied by the statutory federal tax rate to
reported income tax expense (benefit) is summarized as follows:
FOR THE YEARS ENDED DECEMBER 31,
2002 2001 2000
-------------------------------------------------------
Net loss multiplied by statutory
rate (34%) $ (16,679) $ (17,733) $ (3,391)
Operating losses with no current tax
benefit 14,883 17,694 --
Nondeductible expenses 1,104 123 158
Reversal of tax benefit -- 5,093 --
Other items, net 692 (84) (160)
-------------------------------------------------------
Income tax (benefit) expense $ -- $ 5,093 $ (3,393)
=======================================================
In 2001, $5,100 of previously recognized tax benefits relating to the
operating loss carryforwards were reversed into income since realization of
these tax benefits became less assured. The bankruptcy proceedings and the
related tax effect of the restructuring of Newcor's debt obligations will
have a negative effect on the tax carrying value of certain assets. The
final tax basis of the assets has not been determined.
16
At December 31, 2002, Newcor has net operating loss carryforwards for
federal income tax purposes of approximately $61,000 that begin to expire in
2018. In addition, Newcor has alternative minimum tax and other credits of
approximately $1,700 at December 31, 2002 that do not expire. Newcor
anticipates that the net operating loss carryforwards will be eliminated as
a result of the plan of reorganization.
9. EMPLOYEE RETIREMENT BENEFITS
Pension Plans - Newcor provides retirement benefits for certain
employees under several defined benefit 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 pension plans consist principally of cash
equivalents, corporate and government bonds, and common and preferred
stocks. Newcor's policy is to fund only amounts required to satisfy minimum
legal requirements.
The following tables summarize the funded status, net periodic pension
(benefit) expense and actuarial assumptions for the pension benefits based
on the measurement date of September 30 for each period presented:
17
2002 2001
-------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at prior measurement date $ 34,194 $ 32,743
Service cost 790 822
Interest cost 2,453 2,382
Actuarial gain/(loss) 2,643 150
Amendment -- 239
Benefits paid (2,023) (2,142)
-------------------------------------
Benefit obligation at current measurement date $ 38,058 $ 34,194
=====================================
CHANGE IN PLAN ASSETS
Fair value of plan assets at prior measurement date $ 36,583 $ 34,351
Actual return on plan assets (6,229) 3,457
Employer contributions -- 917
Benefits paid (2,023) (2,142)
-------------------------------------
Fair value of plan assets at current measurement date $ 28,331 $ 36,583
=====================================
Funded status $ (9,727) $ 2,389
Unamortized net asset at transition -- (199)
Unrecognized prior service cost 1,374 1,651
Unrecognized net loss and other 11,890 (176)
-------------------------------------
Net amount recognized $ 3,537 $ 3,665
=====================================
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
Prepaid benefit cost $ 3,907 $ 3,830
Accrued benefit liability (11,376) (2,968)
Intangible asset 1,374 1,541
Accumulated other comprehensive loss 9,632 1,262
-------------------------------------
Net amount recognized $ 3,537 $ 3,665
=====================================
WEIGHTED AVERAGE ASSUMPTIONS AS OF END OF YEAR
Discount rate 6.75% 7.50%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 5.00% 5.00%
FOR THE YEARS ENDED DECEMBER 31,
2002 2001 2000
-------------------------------------------------------
COMPONENTS OF NET PERIODIC BENEFIT COST
Service cost $ 790 $ 822 $ 683
Interest cost 2,453 2,382 2,315
Estimated return on plan assets (3,202) (3,043) (2,808)
Amortization of net gain and deferral 89 (21) (56)
-------------------------------------------------------
Net periodic benefit cost $ 130 $ 140 $ 134
=======================================================
18
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for pension plans with accumulated benefit obligations
in excess of plan assets were $38,058, $35,800 and $28,331, respectively, as
of December 31, 2002 and $10,522, $10,522 and $8,177, respectively, as of
December 31, 2001.
Retiree Health Care and Life Insurance Benefits - Newcor is
obligated to provide health care and life insurance benefits to certain
eligible retired employees. However, all post retirement benefits, other
than pensions, were discontinued for all employees who retired after January
1, 1993. This plan obligation is unfunded but the accumulated post
retirement benefit obligation, as actuarially determined, has been fully
accrued for in the accompanying consolidated balance sheets. The medical
plan pays 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 these benefits is shared with the retirees. The cost
sharing arrangements limit Newcor's future retiree medical cost increases to
the rate of inflation, as measured by the Consumer Price Index.
10. CONTINGENT LIABILITIES
Various legal matters arising during the normal course of business are
pending against Newcor. Management does not expect that the ultimate
liability, if any, of these matters will have a material adverse effect on
future results of operations or financial condition of Newcor.
Newcor operates in industries that are highly competitive, though
fragmented. If any customer becomes dissatisfied with Newcor's prices,
quality or timeliness of delivery, it could award future business or move
existing business to a competitor. There can be no assurance that Newcor's
products will continue to compete successfully with the products of
competitors, including original equipment manufacturers ("OEMs") themselves,
many of which are significantly larger and have greater financial and other
resources than Newcor.
11. SEGMENT REPORTING
Newcor manages and reports its operating activities under three operating
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.
The accounting policies of Newcor's operating segments are the same as those
presented in Note 1. There are no inter-segment sales and management does
not allocate all corporate expenses to the segments. Newcor evaluates the
performance of its segments and allocates resources to them based on segment
operating income. Information by operating segment is summarized below:
19
PRECISION
MACHINED RUBBER AND SPECIAL
PRODUCTS PLASTIC MACHINES OTHER TOTAL
-----------------------------------------------------------------------
SALES TO UNAFFILIATED CUSTOMERS
Year ended December 31, 2002 $ 128,251 $ 33,813 $ 8,583 $ -- $ 170,647
Year ended December 31, 2001 123,076 36,218 18,048 -- 177,342
Year ended December 31, 2000 170,297 45,783 22,035 -- 238,115
SEGMENT OPERATING INCOME (LOSS)
Year ended December 31, 2002 $ 11,212 $ 3,382 $ (12) $ (3,976) $ 10,606
Year ended December 31, 2001 (371) (141) 1000 (4,019) (3,531)
Year ended December 31, 2000 10,110 3,129 3,067 (3,476) 12,830
DEPRECIATION AND AMORTIZATION
Year ended December 31, 2002 $ 5,310 $ 1,465 $ 282 $ 750 $ 7,807
Year ended December 31, 2001 9,744 2,114 323 762 12,943
Year ended December 31, 2000 10,085 2,218 209 547 13,059
IDENTIFIABLE ASSETS
December 31, 2002 $ 47,436 $ 14,716 $ 4,528 $ 31,683 $ 98,363
December 31, 2001 85,131 24,965 7,172 12,485 129,753
December 31, 2000 122,945 31,117 15,059 20,191 189,312
CAPITAL EXPENDITURES
Year ended December 31, 2002 $ 1,914 $ 3 $ -- $ -- $ 1,917
Year ended December 31, 2001 1,567 796 115 209 2,687
Year ended December 31, 2000 4,062 1,888 144 1,414 7,508
GOODWILL IMPAIRMENT
Year ended December 31, 2002 $ 27,894 $ 1,202 $ -- $ -- $ 29,096
Year ended December 31, 2001 23,882 2,353 -- -- 26,235
GOODWILL AMORTIZATION
Year ended December 31, 2002 $ -- $ -- $ -- $ -- $ --
Year ended December 31, 2001 3,212 614 -- 11 3,837
A reconciliation of segment operating income for reportable segments to
consolidated operating income is as follows:
FOR THE YEARS ENDED DECEMBER 31,
2002 2001 2000
-------------------------------------------------------
Operating income for reportable segments $ 14,582 $ 488 $ 16,306
Other operating loss, mainly unallocated
corporate and other expenses (3,976) (4,019) (3,476)
Amortization expense -- (3,837) (4,135)
Impairment charge (32,550) (28,757) --
Plant consolidation costs and other -- (450) (1,277)
-------------------------------------------------------
Consolidated operating income (loss) $ (21,944) $ (36,575) $ 7,418
=======================================================
20
For the year ended December 31, 2002, 2001 and 2000, Newcor had customers
which represented over 10% of total sales in some, or all, of these years.
For the year ended December 31, 2002, sales to each of these customers as a
percentage of total sales were 25%, 19% and 10%, respectively. For the year
ended December 31, 2001 sales to significant customers as a percentage of
total sales were 20%, 9%, 20% and 9%, respectively. For the year ended
December 31, 2000 sales to significant customers as a percentage of total
sales were 21%, 18%, 13% and 10%, respectively.
12. SUBSEQUENT EVENTS
As discussed in Note 2, Newcor's plan of reorganization became effective on
January 31, 2003. Under a rights offering to shareholders included as part
of Newcor's plan of reorganization, EXX purchased 11,877 shares of common
stock of Newcor for a total purchase price of $5,939. As a result of this
purchase, EXX now holds 98.975% of the outstanding common stock of the
reorganized Newcor entity. Moreover, Newcor ceased to be a stand-alone
public reporting company and became a subsidiary of EXX. The purchase price
was established in the plan of reorganization, as approved by the creditors,
the United States Trustee for the District of Delaware and the United States
Bankruptcy Court in the District of Delaware. In addition to the purchase
made by EXX, certain other shareholders purchased shares of common stock of
Newcor under the rights offering made in connection with the plan of
reorganization. The other shareholders purchased an aggregate of 123 shares,
or 1.025%, of the aggregate issued and outstanding common stock of Newcor
for an aggregate purchase price of $62.
The following condensed balance sheet reflects the assets and liabilities of
Newcor at their fair market values as determined under purchase accounting
at January 31, 2003 based on preliminary estimates by management.
(UNAUDITED)
-----------
Current assets $36,575
Property and equipment 37,507
Intangibles and other assets 4,608
-------
Total assets $78,690
=======
Current liabilities $24,062
Long-term debt 35,148
Pension, post retirement
and other liabilities 13,480
-------
Total liabilities $72,690
=======
The intangible and other assets include approximately $2,219 allocated to
customer lists and patents which will be amortized over periods ranging from
two to ten years. These amounts will not be deductible for income tax
purposes. The balance of the intangible assets of approximately $2,143 has
been allocated to goodwill which will not be deductible for income tax
purposes. The above allocations are based on management's estimate at this
time and are subject to final determination.
21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information is based on the historical financial statements of the
Registrant and Newcor included elsewhere in this report, and give effect to
the following:
o the Plan of Reorganization of Newcor under Chapter XI of the
United States Bankruptcy Code; and
o the purchase accounting adjustments relating to the
acquisition of 100% of the outstanding stock of Newcor by EXX
and certain minority shareholders.
The transaction will be accounted for under the purchase method of
accounting. The allocation of the purchase accounting adjustments is
preliminary and based on limited information currently available to the
management of EXX. Due to the lack of information available with respect to
Newcor's assets and liabilities, it is possible that there could be material
changes to the accompanying unaudited pro forma condensed consolidated
financial statements. The unaudited pro forma consolidated and statement of
operations gives effect to the events described above as if they occurred as
of January 1, 2002, and the Unaudited pro forma consolidated balance sheet
gives effect to the events described above as if they occurred as of
December 31, 2002.
The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The pro forma
financial statements do not purport to represent what EXX's results of
operations or financial condition would actually have been had the events
described above in fact occurred on such dates or project EXX results of
operations or financial condition for any future period or date. The pro
forma consolidated financial information should be read in conjunction with
the historical financial statements of EXX and Newcor, included elsewhere in
this Form 8-K, as amended.
22
EXX INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
(IN THOUSANDS)
EXX INC NEWCOR, INC.
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,889 $ 23,832 $ (20,000)(A) $ 6,328
(7,454)(B)
61 (E)
Accounts receivable, net 2,897 21,721 24,618
Inventories 2,711 8,968 500 (D) 12,179
Other current assets 304 3,008 3,312
Deferred tax asset 564 564
------------------------------------------------------------------
Total current assets 16,365 57,529 (26,893) 47,001
PROPERTY AND EQUIPMENT, NET 1,620 35,308 2,199 (D) 39,127
INVESTMENT IN NEWCOR, INC. 5,939 (E) --
(5,939)(F)
OTHER ASSETS 420 5,526 (5,280)(C) 666
GOODWILL & INTANGIBLES 2,219 (D) 4,362
2,143 (D)
------------------------------------------------------------------
$18,405 $ 98,363 $ (25,612) $91,156
==================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable current portion $ 73 $ 21,454 $ (2,000)(B) $10,140
3,390 (B)
(12,777)(B)
Accounts payable and other current liabilities 3,859 14,995 18,854
Income taxes payable 316 316
------------------------------------------------------------------
Total current liabilities 4,248 36,449 (11,387) 29,310
LONG-TERM LIABILITIES
Liabilities subject to compromise 150,978 (150,978)(A) --
Notes payable, less current portion 1,481 2,215 3,933 (B) 35,629
28,000 (A)
Pension liability and other postretirement
benefits 359 17,629 (2,501)(C) 13,839
(1,648)(C)
Deferred tax liability 596 596
------------------------------------------------------------------
Total liabilities 6,684 207,271 (134,581) 79,374
(Continued on the next page)
23
EXX INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET, CONTINUED
DECEMBER 31, 2002
(IN THOUSANDS)
EXX INC NEWCOR, INC.
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------------------------------------------------------------
MINORITY INTEREST 61 (E) 61
-- (I)
STOCKHOLDERS' EQUITY
Preferred stock --
Common stock 127 5,019 (5,019)(D) 127
12 (E)
(12)(F)
Capital in excess of par value 2,670 2,415 (2,415)(D) 2,670
5,927 (E)
(5,927)(F)
Accumulated comprehensive income (237) (9,632) 9,632 (C) (237)
Retained earnings 10,147 (106,221) 102,978 (A) 10,147
(10,763)(C)
14,006 (D)
-- (I)
Treasury stock (986) (489) 489 (D) (986)
------------------------------------------------------------------
Total stockholders' equity 11,721 (108,908) 108,908 11,721
------------------------------------------------------------------
$18,405 $98,363 $(25,612) $91,156
==================================================================
24
EXX INC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
EXX INC NEWCOR, INC.
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------------------------------------------------------------------
Net sales $16,186 $170,647 $ -- $186,833
-----------------
Cost of sales 10,933 145,725 (6,460)(G) 150,198
----------------- ---------------- ---------------- --------------
Gross profit 5,253 24,922 6,460 36,635
----------------- ---------------- ---------------- --------------
Selling, general and
administrative expenses 4,098 14,316 422 (G) 18,836
Impairment of cost in excess of
assigned value of acquired companies -- 41,195 (41,195)(G) --
----------------- ---------------- ---------------- --------------
4,098 55,511 (40,773) 18,836
----------------- ---------------- ---------------- --------------
Operating income (loss) 1,155 (30,589) 47,233 17,799
Interest income 139 -- 139
Interest expense (144) (3,187) 847 (G) (2,484)
Reorganization costs -- (14,140) 14,140 (G) --
Other income (expense) 79 (1,141) (1,062)
Minority interest -- -- (87)(I) (87)
----------------- ---------------- ---------------- --------------
Income (loss) before income taxes 1,229 (49,057) 62,133 14,305
Income taxes 393 -- 5,265 (H) 5,658
----------------- ---------------- ---------------- --------------
Net income $ 836 $(49,057) $ 56,868 $ 8,647
================= ================ ================ ==============
Net income (loss) per common share
Basic and diluted $ 0.07 $ (9.91) $ 0.77
================= ================ ==============
Weighted average shares outstanding
Basic 11,230 4,950 11,230
================= ================ ==============
Diluted 11,276 4,950 11,276
================= ================ ==============
25
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS EXCEPT SHARES AND PER SHARE AMOUNTS)
(A) The unaudited pro forma condensed consolidated balance sheet gives
effect to the Plan of Reorganization ("the Plan") of Newcor, Inc.
("Newcor") which became effective on January 31, 2003. Under the Plan,
all impaired creditors in Class 4 of the Plan, essentially all
unsecured creditors, received their pro-rata share of a $20,000 cash
payment made by Newcor and $28,000 aggregate principal amount of senior
unsecured notes issued by Newcor (the "Notes") in January 2003. The
senior unsecured notes bear interest at 6% per annum and mature through
June 2008. Equity holders in Class 5 of the Plan with holdings of at
least 412 shares of common stock, $1.00 par value, of Newcor received
rights to purchase new shares of common stock of the restructured
Newcor for $500 per share. The unaudited pro forma condensed
consolidated balance sheet gives effect to the settlement of $150,978
of liabilities subject to compromise for $48,000.
(B) The unaudited pro forma condensed consolidated balance sheet gives
effect to the repayment of Newcor's term loan of $2,000 and amounts
outstanding under its line of credit of $12,777 through the payment of
$7,454 in cash and amounts borrowed under its new long-term and
short-term lines of credit from a financial institution in the amounts
of $4,933 and $2,390, respectively. $1,000 of the of the long-term line
has been classified as a current liability.
(C) The unaudited pro forma condensed consolidated balance sheet gives
effect to:
o the elimination of prepaid pension costs of $5,280,
o the $1,648 reduction of the pension liability to reflect the
projected benefit obligation in excess of plan assets at December
31, 2002,
o the $2,501 reduction of accrued post retirement benefits to
eliminate unamortized transitional adjustments, and
o the elimination of accumulated comprehensive losses of $9,632
recorded in accordance with FAS 87.
(D) The unaudited pro forma condensed consolidated balance sheet gives
effect to the acquisition of Newcor by EXX and certain minority
shareholders based on estimated fair market values and resulted in
adjustments to historical costs as follows:
Cash $ 6,000
Newcor liabilities assumed 100,144
------------
$106,144
============
26
DECEMBER 31, 2002
--------------------------------------------------------------------
FMV HISTORICAL ADJUSTMENT
-------------------- ----------------- -------------------
Current assets $ 64,029 $63,529 $ 500
Property and equipment 37,507 35,308 2,199
Intangibles 2,219 -- 2,219
Other assets 246 246 --
Goodwill 2,143 -- 2,143
-------------------- ----------------- -------------------
$106,144 $99,083 $7,061
==================== ================= ===================
Property and equipment will be depreciated over five to 20 years.
Intangible assets will be amortized over two to ten years. Goodwill
recorded in connection with the acquisition of Newcor by EXX will be
accounted for under the provisions of Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets," which
requires an impairment-based approach to the valuation of goodwill
generated through the application of purchase accounting.
(E) The unaudited pro forma condensed consolidated balance sheet gives
effect to the acquisition of Newcor by EXX and certain minority
shareholders in connection with the Plan of Reorganization of Newcor as
discussed in (A) above. The unaudited pro forma condensed consolidated
balance sheet reflects the acquisition of 11,877 shares of Newcor
common stock, $.01 par value, by EXX for a purchase price of $5,939 and
the acquisition of 123 shares of Newcor common stock by certain
minority shareholders for a purchase price of $61.
(F) The unaudited pro forma condensed consolidated balance sheet gives
effect to the elimination of the investment by EXX in the common stock
of Newcor, as described in (E) above for consolidation purposes.
(G) In connection with the purchase accounting for the acquisition of
Newcor by EXX as mentioned in (D) above, and the debt restructuring set
forth in (A) and (B) above, the unaudited pro forma consolidated
statement of operations have been adjusted as follows:
o Impairment charges of $41,195 and reorganization costs of $14,140
have been eliminated.
o Depreciation expense and leased equipment expense in cost of sales
have been reduced by $2,858 and $3,602, respectively, to give
effect to the new basis of assets as set forth in (D) above and the
rejection of the leases by Newcor as set forth in Note 6 to the
historical financial statements of Newcor.
o Selling general and administrative expenses have been increased by
$422 to reflect the amortization resulting from the allocation of
the purchase price in (D) above to patents and customer lists which
are being amortized over periods of two to ten years.
o Interest expense has been reduced by $847 to give effect to (1) the
6% interest rate on the senior unsecured notes with an aggregate
principal amount of $28,000 issued in connection with the unsecured
creditors, (2) interest on the new lines of credit set forth in (B)
above, and (3) interest relating to notes incurred in connection
with equipment purchased in 2002, as if all of the obligations had
been outstanding since January 1, 2002.
27
(H) Income taxes in the pro forma condensed consolidated statement of
operations have been adjusted to reflect the tax effect of the pro
forma adjustments noted in (G) above, reduced by the $49,057 loss of
Newcor, using a blended effective tax rate of 40%.
(I) The unaudited pro forma condensed consolidated statement of operations
has been adjusted to eliminate the $87 minority interest in the
earnings of Newcor.
28
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 hereunto duly authorized.
Dated: April 15, 2003
EXX INC
By /s/ David A. Segal
-------------------------------------------
Name: David A. Segal
Title: Chairman, Chief Executive Officer and
Chief Financial Officer
29