10-Q 1 k72413e10vq.txt QUARTERLY REPORT FOR PERIOD ENDED 09/30/02 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 September 30, 2002 Commission file number 1-5985 ------ NEWCOR, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 38-0865770 ---------------------------------------- ------------------------------------ (State of incorporation) (I.R.S. Employer Identification No.) 4850 Coolidge Hwy, Suite 100 Royal Oak, Michigan 48073 ---------------------------------------- ------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (248) 435-4269 -------------- 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 (the "Exchange Act") during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ). Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X). As of November 11, 2002, the Registrant has 4,949,068 outstanding shares of common stock, $1.00 par value, the Registrant's only class of common stock. PART I. FINANCIAL INFORMATION NEWCOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements NEWCOR, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements NEWCOR, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements NEWCOR, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Accounting Policies BASIS OF PRESENTATION 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 in the period. Results for interim periods should not be considered indicative of results for a full year. Certain amounts from the prior year have been reclassified to conform to the current period's presentation. For further information, refer to the consolidated financial statements and footnotes thereto included in Newcor Inc.'s annual report on Form 10-K for the year ended December 31, 2001. On February 25, 2002 (the "Petition Date"), Newcor, Inc. and its subsidiaries (collectively, the "Company"), filed voluntary petitions for relief (the "Filing") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The Company is currently operating its businesses as debtors-in-possession in accordance with provisions of the Bankruptcy Code. The Chapter 11 cases of the Company (collectively, the "Chapter 11 Cases") are being jointly administered under Case No. 02-10575 (MFW). The accompanying Consolidated Financial Statements have been prepared in accordance with AICPA Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code," and on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. However, as a result of the Filing, such realization of assets and liquidation of liabilities are subject to uncertainty. While operating as debtor-in-possession under the protection of Chapter 11 of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the ordinary course of business, the Company may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in the Consolidated Financial Statements. As reflected in the Consolidated Financial Statements, "Liabilities Subject to Compromise" refers to the Company's liabilities incurred prior to the commencement of the Chapter 11 Cases. This amount represents Newcor, Inc.'s estimate of known or potential pre-petition claims to be resolved in connection with the Chapter 11 Cases. Such claims remain subject to future adjustments. Adjustments may result from (1) negotiations; (2) actions of the Bankruptcy Court; (3) further developments with respect to disputed claims; (4) rejection of executory contracts and unexpired leases; (5) the determination as to the value of any collateral securing claims; (6) proofs of claim; or (7) other events. Payment terms for those amounts will be established in connection with the Chapter 11 Cases. Pursuant to the Bankruptcy Code, the Company has filed schedules with the Bankruptcy Court setting forth the asset and liabilities of the Company. Differences between amounts recorded by the Company and claims filed by creditors will be investigated and resolved as part of the proceedings in the Chapter 11 Cases. A bar date of July 19, 2002 was set for the filings of proofs of claim against the Debtors. The Company is currently reviewing the claims that have been filed. The ultimate number and allowed amount of such claims are not presently known. COST IN EXCESS OF ASSIGNED VALUE OF ACQUIRED COMPANIES (GOODWILL) Effective January 1, 2002 the Company implemented Statement of Financial Accounting Standards No. 142. The pronouncement requires an impairment analysis be performed using various criteria to determine total value of the businesses acquired. The Company generally uses discounted cash flow as a measurement of enterprise value. As discussed in Note 7, the Company was notified by a major customer that it would not renew a sales contract for a certain assembly, which required an impairment charge of $29.1 million which was recorded in the three months ended June 30, 2002. In accordance with the provisions of Statement of Financial Accounting Standards No. 142 and as of January 1, 2002, the Company completed its two step impairment analysis during the quarter ended June 30, 2002. This analysis resulted in an impairment loss at certain of its reporting units of approximately $8.6 million which was recorded as a cumulative effect accounting change as of January 1, 2002. For the three months ended September 30, 2001, the Company reported that net loss and loss per share was $(33.9) million and $(6.85), respectively. Adjusted for non-amortization provisions of SFAS No. 142, the Company's reported net loss and loss per share would have been $(32.9) million and $(6.71), respectively, resulting in a decrease in net loss of $1.0 million or an improvement of $0.21 per share for the third quarter 2001. For the nine months ended September 30, 2001, the Company reported that net loss and per share was $(40.4) million and $(8.16), respectively. Adjusted for non-amortization provisions of SFAS No. 142, the Company's reported net loss and loss per share would have been $(37.3) million and $(7.54), respectively, resulting in a decrease in net loss of $3.1 million or an improvement of $0.63 per share for the nine months ended September 30, 2001. Note 2. Reorganization The Company 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 the Company is stayed automatically by section 362 of the Bankruptcy Code and, absent further order of the Bankruptcy Court, no party may take any action to recover on claims against the Company that arose prior to the Filing. In addition, pursuant to section 365 of the Bankruptcy Code, the Company may reject or assume certain executory contracts and unexpired leases, and other parties to contracts or leases that are rejected may assert rejection damages claims as permitted by the Bankruptcy Code. As of the date hereof, the Company has received approval from the Bankruptcy Court to pay or otherwise honor certain of their pre-petition obligations, including employee wages, salaries, benefits and other employee obligations, pre-petition claims of critical vendors and certain other pre-petition claims including certain customer program and warranty claims. In addition, in connection with the Filing, the Company obtained approval from the Bankruptcy Court to use cash collateral and to borrow $3 million under a debtor-in-possession credit facility from Comerica Bank (the "DIP Order"). The Debtors have operated their businesses without the need of the DIP Financing. The ability of the Company to continue as a going concern and the appropriateness of using the going concern basis for its financial statements are dependent upon, among other things, (i) the Company's ability to comply with the terms of the cash collateral order and cash management order entered by the Bankruptcy Court in connection with the Chapter 11 Cases, (ii) the ability of the Company to maintain adequate cash on hand, (iii) the ability of the Company to generate cash from operations, (iv) confirmation of a plan or plans of reorganization under the Bankruptcy Code, (v) the Company's ability to obtain profitable new business and (vi) the Company's ability to achieve profitability following such confirmation. A creditors' committee has been appointed as the official committee in the Chapter 11 Cases and, in accordance with the provisions of the Bankruptcy Code, has had the right to be heard on all matters that come before the Bankruptcy Court. The appointed committee has played an important role in the Chapter 11 Cases and the negotiation of the terms of the Company's proposed Chapter 11 plan of reorganization, which was filed with the Bankruptcy Court, along with the disclosure statement, on October 10, 2002 (the "Proposed Plan"). The Company anticipates that substantially all liabilities of the Company as of the date of the Filing will be resolved under the Proposed Plan and the Proposed Plan of reorganization will be voted on in the Chapter 11 Cases in accordance with the provisions of the Bankruptcy Code. The Proposed Plan provides for the Company to continue as a going concern and would result in a significant reduction of debt from the Company's capital structure. Specifically, the Proposed Plan provides for the cancellation of $125 million of senior notes and a distribution of $28 million of new notes to holders of allowed unsecured claims. Additionally, the Proposed Plan provides for, among other things, holders of administrative claims, priority tax claims, priority non-tax claims, and secured creditors to be paid in full. Holders of unsecured claims are to receive their pro-rated share of the $28 million of new notes and $20 million in cash, of which $6 million shall be from a rights offering to equity holders of the Company, that will be guaranteed by EXX, Inc. A hearing to consider approval of the disclosure statement to the Proposed Plan has been set for November 20, 2002, subject to adjournments. There can be no assurance that the disclosure statement will be approved by the Bankruptcy Court. Although the Company has filed the Proposed Plan with the Bankruptcy Court, there can be no assurance that the Proposed Plan will be confirmed by the Bankruptcy Court and consummated. As provided by the Bankruptcy Code, the Company has the exclusive right to propose a plan of reorganization within 120 days following the Petition Date and to solicit votes for such a plan for 180 days. The Company has been granted an extension of the exclusivity period for soliciting votes for a plan of reorganization to December 24, 2002. If the Company fails to complete the solicitation of votes during such period or any further extension thereof, other parties in interest in the Chapter 11 Cases may be permitted to propose their own plan(s) of reorganization for the Company. As noted above, it is not possible at this time to predict the outcome of the Chapter 11 Cases, the terms and provisions of any plan of reorganization, including the Proposed Plan, or the effect of the Chapter 11 reorganization process on the claims of the creditors of the Debtors or the interests of Newcor's equity security holders. The Company believes this filing with the United States Bankruptcy Court will materially change the future consolidated financial statements of the Company. Note 3. Inventory Inventories are summarized as follows:

Costs and estimated earnings on uncompleted contracts in excess of related billings represents revenue recognized under the percentage of completion method in excess of amounts billed. Note 4. Comprehensive Income Other comprehensive income for the nine months ended September 30, 2002 and 2001 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 5. Segment Reporting 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. Other is primarily composed of corporate activities. 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:

A reconciliation of operating income for reportable segments to consolidated operating income is as follows:

Note 6. Recent Pronouncement In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement supercedes FASB Statement No. 121; Accounting for the Impairment of Long-Lived Assets and for Long-Lived Asset to be Disposed Of, and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. This standard applies to long-lived assets other than goodwill. It describes a probability-weighted cash flow estimation approach regarding the recovery of the carrying amount of long-lived assets, such as property, plant and equipment. The Company has adopted this standard effective January 1, 2002 and the impact on the September 30, 2002 statement is not material. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities, " which supercedes EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan as was required by EITF 94-3. This statement is effective for disposal activities initiated after December 31, 2002, with early application encouraged. SFAS No. 146 is not expected to have a material effect on the Company's consolidated results of operations or financial position. Note 7. Recent Developments The Company was notified in July 2002 that a major customer will not renew a sales contract for a certain assembly. The current contract expires in January 2003. Sales of that assembly were approximately 20% of total sales of the Company for the nine months ended September 30, 2002. The lost contract resulted in a goodwill impairment charge, which was recorded in the three months ended June 30, 2002 of $29.1 million. Note 8. Credit Arrangements and Debt A summary of debt at September 30, 2002 and December 31, 2001 is as follows:

*Amount included in liabilities subject to compromise in the balance sheet. The Company failed to make the required interest payment, due September 4, 2001, March 1, 2002 and September 1, 2002, on the Notes. As such, the Company caused an Event of Default as defined in the Indenture. The Company is currently engaged in discussions with Noteholders and their legal representatives to restructure the Company's indebtedness. All of the Company's Notes have been classified as a current obligation on the Balance Sheet including $12.1 million of unpaid interest accrued prior to the Filing. In addition, the default on the Notes also caused a default on the Bank Facility, and as such, the total indebtedness under the Bank Facility has been classified as current. In September 1995, Rochester Gear, Inc., a wholly owned subsidiary of the Company (the "Subsidiary"), entered into a loan agreement whereby $6.1 million of limited obligation refunding revenue bonds were issued. These bonds mature on January 1, 2008 and are collateralized by the Subsidiary's land, building and equipment and guaranteed by the Company. The Company currently has received authorization from the Bankruptcy Court to enter into a DIP facility in the amount of $3.0 million, which has not been drawn upon as of September 30, 2002. Note 9. Condensed Consolidating Information The Notes and the Facility of Newcor, Inc. are guaranteed by all of its wholly-owned subsidiaries, including Grand Machining Co., Newcor Technologies, Inc, Deco International, Inc., Turn-Matic Inc., Rochester Gear, Inc., and Plastronics Plus, Inc (the Guarantor Subsidiaries). The guarantee of the Notes and the Facility by the Guarantor Subsidiaries is full and unconditional. The following condensed financial information presents the financial position, results of operations and cash flows of the Company as if it accounted the Guarantor Subsidiaries on the equity method. Deferred income taxes are accounted for through intercompany accounts. NEWCOR, INC. CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 2002 (In thousands)

NEWCOR, INC. CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS QUARTER ENDED SEPTEMBER 30, 2001 (In thousands)

NEWCOR, INC. CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS NINE MONTH ENDED SEPTEMBER 30, 2002 (In thousands)

NEWCOR, INC. CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2001 (In thousands)

NEWCOR, INC. (DEBTOR IN POSSESSION) CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2002 (In thousands)

NEWCOR, INC. CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2001 (In thousands)

NEWCOR, INC. CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2002 (In thousands)

NEWCOR, INC. CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2001 (In thousands)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 outcome of the proceeding in United States Bankruptcy Court, 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; 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. 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. RESULTS OF OPERATIONS Sales of $44.6 million for the quarter ended September 30, 2002 increased $2.9 million, or 7.0%, as compared with sales of $41.7 million for the same quarter of 2001. Sales for the Precision Machined Products segment increased $6.3 million, or 22.1%, to $34.9 million. The increase is primarily due to increased sales to the heavy-duty truck market of $6.0 million, or 54.2%, to $17.0 million as compared to $11.0 million in the third quarter of 2001. The higher sales in the heavy-duty market were the result of increased demand prior to the enactment of more restrictive environmental standards, which were effective October 1, 2002. Precision Machined Products sales in the automotive and agricultural market were flat for the quarter ended September 30, 2002. Sales for the Rubber and Plastic segment decreased $0.2 million, or 2.4%, from the same quarter in 2001. Sales for the Special Machines segment decreased $3.2 million, or 63.3%, to $1.9 million from $5.1 million in the third quarter of 2001. The decrease in the Special Machines segment is due to overall market decline in capital goods. Sales for the nine months ended September 30, 2002 were $135.8 million, a decrease of $2.1 million, or 1.5%, compared with sales of $137.8 million for the same period in 2001. Sales in the Precision Machined Products segment increased $8.0 million to $102.9 million, primarily due to sales increases in the heavy-duty market for the reasons noted above, compared to the same period in 2001. Sales for the Rubber and Plastic segment were $26.0 million, a decrease $1.5 million, or 5.6%, due to sales decreases in the automotive market. Sales in the Special Machines segment were $6.9 million a decrease of $8.5 million, or 55.1% from the prior year. Gross margin was $6.9 million, or 15.4% of sales, for the quarter ended September 30, 2002 compared with $2.8 million, or 6.8% of sales, for the same period of 2001. In the Precision Machined Products segment the gross margin increased by $4.1 million primarily due to mix in sales in the heavy-duty market of approximately $3.3 million. Cost reductions attributed to certain employee benefit plans, production improvements and lower lease expense from rejected leases resulting from the restructuring process accounting for the remaining improvements. In the Rubber and Plastics segments gross margin increased $1.0 million due to productivity improvements and cost reductions. In the Special Machines Segment gross margin decreased to $0.6 million, or 31.1% of sales compared with $1.7 million, or 33.6% of sales in the same period of 2001. Gross margin was $19.5 million, or 14.3% of sales, for the nine months ended September 30, 2002 compared with $12.0 million, or 8.7% of sales, for the nine months ended September 30, 2001. The increases in gross margin and gross margin percentage were primarily due to improved sales mix caused by the increase in sales in the heavy-duty market in Precision Machined segment. Selling, general and administrative expenses ("SG&A") for the three months and nine months ended September 30, 2002 decreased due to cost savings measures taken throughout the Company, primarily reduction of salaried headcount. Consolidated operating income for the third quarter of 2002 was $3.6 million, or 8.1% of sales compared with operating loss of $21.8 million, or 52.3% of sales for the same period one year ago. Included in the prior year results was an impairment charge of $19.3 million. The increase in operating income was due primarily to the heavy-duty market in the Precision Machined Products Segment, which had increases in gross margin, and lower SG&A costs also noted above. Operating income for the nine months ended September 30, 2002 increased to $8.6 million, or 6.3% of sales, excluding plant consolidation costs and goodwill impairment charges of $30.4 million, for all segments as noted in Note 5 Segment reporting, due to increases in sales and gross margin as noted above. The Company was notified in July 2002 that a major customer will not renew a sales contract for a certain assembly. The current contract expires in January 2003. Sales of that assembly were approximately 20% of total sales of the Company for the nine months ended September 30, 2002. The lost contract resulted in an impairment charge in the three months ended June 30, 2002 of $29.1 million. LIQUIDITY AND CAPITAL RESOURCES The Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") were $14.6 million for the first nine months ended September 30, 2002, excluding plant consolidation costs of $1.3 million and reorganization fees of $3.0 million. The Company's capital expenditures for the nine months ended September 30, 2002 were $1.7 million. The Company's changes in operating working capital had no significant impact on net cash. The Company accrued $2.0 million of interest relating to the subordinated debt, which is subject to compromise as a pre-petition obligation. Cash on hand at September 30, 2002 was $19.0 million. Prior to the Filing, on December 19, 2001, the Company, in connection with its Pre-Petition Bank Facility with Comerica Bank, had entered into a Forbearance Agreement in which certain restrictive covenants were agreed to by Comerica Bank and the Company. These covenants included a limit on the revolving credit loan beginning at $10.0 million as of December 19, 2001, and increasing to $13.5 million on February 15, 2002. In addition, the Agreement required certain appraisals be completed prior to March 1, 2002, as well as a definitive agreement with the Company's debenture holders be in place as of March 1, 2002. As of February 25, 2002, the Filing date, the Company had $21.1 million of secured debt with Comerica Bank. The secured debt included $12.5 million on the Revolving Credit Loan, $2.5 million on a term loan and $6.1 million under a certain industrial revenue bond obligation related to one of the Company's facilities. These bonds are secured under a Repurchase Agreement obligating Comerica Bank upon an event of default to repurchase the bonds. As noted above, the Company, on October 25, 2002 filed a motion which, among other things, modifies the DIP Order and provides for the Company to immediately repay the Term note issued by Comerica Bank. The Company failed to make the required interest payment, due September 4, 2001 and on March 1, 2002, on the Senior Subordinated Notes (the "Notes") in the amount of approximately $12.2 million. As such, the Company caused an Event of Default as defined in the Indenture. The Company is currently engaged in discussions with Noteholders and their legal representatives to restructure the Company's indebtedness. As such, all of the Company's Notes have been classified as a current obligation, subject to compromise, on the balance sheet at September 30, 2002. In addition, the default on the Notes also caused a default on the Bank Facility, and as such, the total indebtedness under the Bank Facility has been classified as current. As noted above, the Company believes, based on information presently available to it, that the cash available from its operations will provide sufficient liquidity to allow it to continue as a going concern for the foreseeable future. However, the ability of the Company to continue as a going concern and the appropriateness of using the going concern basis for its financial statements are dependent upon, among other things, (i) the Company's ability to comply with the terms of the cash collateral order and cash management order entered by the Bankruptcy Court in connection with the Chapter 11 Cases, (ii) the ability of the Company to maintain adequate cash on hand, (iii) the ability of the Company to generate cash from operations, (iv) confirmation of a plan or plans of reorganization under the Bankruptcy Code, (v) the Company's ability to obtain profitable new business and (vi) the Company's ability to achieve profitability following such confirmation. The Company believes the Filing with the United States Bankruptcy Court will materially change the future consolidated financial statements. As a result of the use of cash collateral and the DIP Financing on February 28, 2002 certain changes in the schedule of payments are required by the Company which were not in effect at December 31, 2001. The effect of the Filing and subsequent plan of reorganization, as it relates to the payment requirements scheduled, cannot be ascertained at this time. The table below reflects contractual commitments as of Sept 30, 2002:

*Comerica Bank can accelerate payment under the related letter of credit. **Liabilities not on the balance sheet subject to compromise The Company has not recognized tax benefits relating to current operating losses and loss carryforwards since realization of these tax benefits is not assured. The Filing and the related tax effect of the restructuring of the Company's debt obligations may have a negative effect on the tax carrying value of certain assets. No assurance can be made as to the actual tax basis of such assets and the related effect on the Company's effective tax rate until a plan of reorganization is confirmed by the Creditors and approved by the Court. No dividends were declared or paid during 2002 and 2001. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures Within 90 days prior to the date of this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President and co-Chief Executive Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon that evaluation the Company's management concluded that the Company's disclosure controls and procedures are effective. (b) Changes in Internal Controls There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. NEWCOR, INC. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits 99.1 Certification pursuant to 18 U.S.C. section 1350 for David A. Segal. 99.2 Certification pursuant to 18 U.S.C. section 1350 for James J. Connor. (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: November 14, 2002 /s/ James J. Connor ----------------- ------------------------------ James J. Connor President and co-Chief Executive Officer Principal Financial Officer I, David A. Segal, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Newcor, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ David A. Segal ------------------------------ David A. Segal, Chairman and co-Chief Executive Officer I, James J. Connor, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Newcor, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ James J. Connor ------------------------------- James J. Connor, President, co-Chief Executive Officer and Chief Financial Officer 10-Q EXHIBIT INDEX EXHIBIT NO. DESCRIPTION EX-99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 EX-99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

NEWCOR INC 10-Q