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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19544
AUTOCAM CORPORATION
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(Exact name of Registrant as specified in its charter)
Michigan 38-2790152
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4070 East Paris Ave., Kentwood, Michigan 49512
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - (616) 698-0707
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Without Par Value
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(Title of Class)
2
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of voting stock of the Registrant held by
non-affiliates was $44,091,740 as of September 15, 1999.
The number of shares outstanding of the Registrant's common stock as of
September 15, 1999 was 6,311,090 shares of common stock without par value.
DOCUMENTS INCORPORATED BY REFERENCE
None.
[Cover page 2 of 2]
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AUTOCAM CORPORATION
FORM 10-K
Year Ended June 30, 1999
TABLE OF CONTENTS
Page
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PART I.
Item 1. Business 4-9
Item 2. Properties 9-10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security-Holders 10
PART II.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters 11
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 11
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure 12
PART III.
Item 10. Directors and Executive Officers of the Registrant 12-14
Item 11. Executive Compensation 14-19
Item 12. Security Ownership of Certain Beneficial Owners and Management 19
Item 13. Certain Relationships and Related Transactions 20-21
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K - Index 21-25
SIGNATURES
Principal Executive Officer, Principal Financial and Accounting Officer 27
Directors 27
EXHIBITS E-1 - E-100
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PART I
ITEM 1. BUSINESS
GENERAL
The Company designs and manufactures close-tolerance, specialty metal-alloy
components sold to the transportation and medical device industries. These
components are used primarily in gasoline and diesel fuel, power steering and
braking systems and devices for surgical procedures. The Company's production
equipment consists of high-precision, automatic cam-driven turning machines and
computer numerically-controlled turning, milling and grinding machines capable
of high-volume production while maintaining close tolerances.
BUSINESS STRATEGY
The Company's sales have grown from $18 million in fiscal 1990 to $179 million
in fiscal 1999. The Company's management attributes its growth to the following
factors: (i) the strategic acquisitions of complementary businesses; (ii) the
trend toward more environmentally efficient port electronic fuel injectors;
(iii) increased sales of anti-lock braking and power steering system components
reflecting increased demand and acceptance of these safety features; and, (iv)
the introduction of precision-machined medical devices, including stents, to its
product offerings. The Company's growth and profitability reflect its business
strategy to:
- Identify Products Which are Early in Their Life Cycles - The Company
selectively pursues new sales opportunities based primarily on
identifying products early in their product life cycles that have
strong unit growth potential. The Company believes these components can
be manufactured with unit price structures and quality standards that
favor the Company in its highly competitive environment. By identifying
products early in their life cycles and building strong customer
relationships, sales growth has been enhanced through sole source,
long-term supply contracts with selected customers. In fiscal 1999, 73%
of the Company's total sales were to five customers, Robert Bosch
Corporation, Delphi Automotive Systems, Inc., SMI-Koyo Group, ZF
Friedrichshafen AG, and TRW, Inc.
- Provide Technologically High Quality Products on a Timely Basis - The
Company believes that the reputation it has achieved in supplying high
quality components has been instrumental in allowing it to achieve new
business and maintain existing business. The Company's manufacturing
strategy is to produce high-volume, close-tolerance, high-precision
components that have excellent growth prospects. To this end, the
Company has identified products in the transportation industry, such as
fuel, power steering and braking system components and the medical
devices industry, such as minimally invasive ophthalmic and
cardiovascular surgery equipment components. As the recipient of
numerous quality awards from its customers, the Company has used in the
past and expects to use in the future this experience and knowledge to
diversify its industry, customer and product bases.
- Focus on Aggressively Reducing Cost - Since its inception, the Company
has emphasized a continuous improvement program involving all
employees. The Company believes that this ongoing program, in
conjunction with the capital expenditures it has made, allows it to be
the low-cost producer of the products it manufactures. The Company
believes that there are future opportunities to increase efficiency,
improve productivity and reduce costs.
- Capitalize on Acquisition Integration Experience - The Company has made
four acquisitions since 1992. The Company has successfully integrated
these acquisitions and implemented a series of strategic changes
designed to improve product quality, and reduce manufacturing and
administrative costs.
The Company intends to continue focusing on manufacturing components requiring
high-volume, close-tolerance, high-
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precision production, which have excellent growth prospects. The Company's
strategy is to expand its base of transportation customers as well as diversify
its product mix to that market. Current and future supplier consolidation within
the industry will require the Company to provide high-tolerance machining
capability for the production of many more products in order to maintain its
position as a premier supplier to the industry. In addition, the Company plans
to increase its penetration of non-transportation markets, such as medical
devices, by identifying products consistent with its business strategy. These
expansion plans may be realized through strategic acquisitions. The Company is
continually seeking to acquire businesses that complement and expand its product
offerings. Such opportunities should be created as original equipment
manufacturers ("OEM") continue to consolidate their supplier bases.
MARKETS
The Company currently sells its products in the transportation and medical
devices industries as described below.
Transportation Industry. The transportation parts industry is composed of two
major segments -- the OEM market and the transportation aftermarket. The Company
sells substantially all of its products to tier-one and tier-two suppliers to
OEMs for installation as original equipment on new cars, trucks and heavy
equipment. The market for new cars and light trucks is large and cyclical, with
new vehicle demand tied closely to the overall strength of the local economy.
Developments within the industry, including consolidation among suppliers and
increased outsourcing of components by OEMs, have substantially altered the
competitive environment for transportation suppliers and have had a favorable
impact on the Company's growth.
Due to ever-increasing global competition, OEMs are continually revising their
supplier requirements. OEMs are requiring suppliers to meet increasingly strict
standards of quality, overall cost reductions and increased support for up-front
design, engineering and project management. These requirements are continually
accelerating the trend toward consolidation of the OEMs' supplier bases. For
more capable suppliers, the new environment will continue to create the
opportunity to grow rapidly by obtaining business previously provided by other
suppliers.
In addition, automotive manufacturers are producing vehicles with more features
designed for convenience, vehicle performance, and, in response to both state-
and federally-imposed standards related to safety and the environment such as
the Federal Corporate Average Fuel Economy Requirements, emission standards and
passive restraint requirements. The requirements of reducing fuel consumption
while meeting increasingly stringent exhaust emissions dictate increasing
complexity in automotive engines and engine design. As a result, new, more
sophisticated systems have been added to automobiles that require components of
the type produced by the Company. As the OEMs follow this trend, significant
opportunities should develop for the Company.
The Company believes it will continue to be well positioned as a supplier to
this market.
Medical Devices Industry. The health care industry continues to undergo a major
transformation affecting all segments of the industry. While the final outcome
of this transformation is unknown, certain identifiable developments have
already impacted this industry. Global and individual consumer economics are
transforming the medical industry. Health care in the next century will be
controlled by a concern for cost effectiveness, process efficiency, and ease of
access. One of the most visible change resulting from this trend will be the
proliferation of outpatient and non-physician attended facilities. These
facilities will require more compact, mobile and user-friendly diagnostic and
surgical devices. The industry is also demanding suppliers that enhance quality
while lowering costs.
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Research and development departments of leading medical instrument manufacturers
are working diligently to respond to these changes with new and redesigned
products. Leading companies are exploring design and production alternatives
that will enhance quality while lowering overall costs. To help them achieve
this goal, manufacturers are actively seeking partnerships with suppliers who
can bring intelligence, ingenuity and expertise to the R&D process. Because of
the Company's reputation as a low total cost supplier to the transportation
market, it is in an excellent position to lead the medical industry's move to
greater cost efficiency. The Company's goal is to apply proactive engineering
services to the needs of this important and lucrative market. As the Company
builds relationships with market leaders in ophthalmic instrumentation, it is
actively pursuing additional partners in the areas of cardiovascular devices and
other invasive surgical products.
The Company believes it can capitalize on its transportation manufacturing
expertise by applying these skills to similar manufacturing processes used
within the medical devices industry. The Company has made positive impressions
on companies within this market who were skeptical about a transportation
company's ability to meet the expectations of the medical industry.
PRODUCT APPLICATIONS
A summary of the Company's sales and percentage of total sales by product
application for each of the last three fiscal years is presented on page E-73 of
the Exhibit 13 to this Form 10-K.
Fuel Systems. Fuel system component sales represented 46%, 57% and 74% of the
Company's sales for the years ended June 30, 1999, 1998 and 1997, respectively.
The Federal Clean Air Act mandates drastic cuts in tailpipe emissions, creating
intense market demand for cleaner-burning, more efficient fuel systems. The
adoption of tougher Corporate Average Fuel Economy (CAFE) standards will further
heighten this demand. From a fuel injection application standpoint, a leading
automotive research firm estimates that approximately 21% of the vehicles
produced use diesel engines and 8% use carburated engines, leaving the majority
of the engines produced, approximately 71% or 37 million, as gasoline fuel
injected. Autocam estimates that the average car has 3.86 fuel injectors.
In large part, electronic fuel injection has replaced carburetors. Virtually all
modern light vehicles in mature markets utilize fuel injection systems. Although
that description suggests the market is saturated, fuel injection systems are
evolving rapidly, and new components should stimulate opportunities for the
Company to gain market share.
Port Electronic Fuel Injection ("Port EFI") will play a key role in the
worldwide move to greater fuel efficiency. These systems are rapidly replacing
less efficient Throttle Body Injection (TBI) systems. Where TBI systems require
only one or two injectors per engine, Port EFI systems require one injector per
cylinder, exponentially increasing the size of the fuel injector market. Autocam
manufactures several components used in Port EFI systems.
Power Steering Systems. Power steering system component sales represented 24% of
the Company's sales for the year ended June 30, 1999. No sales of these products
were reported in fiscal 1998 or 1997. A manual power steering system
incorporates the following elements: a steering wheel; shaft and column; either
a manual gearbox and pitman arm or a rack and pinion assembly; linkage; steering
knuckles and ball joints; and, wheel spindle assemblies. The power steering
system adds a hydraulic pump, fluid reservoir, hoses, lines, and a power assist
unit mounted on, or integral with, a power steering gear assembly.
In the U.S. market, power steering appears as factory-installed equipment in
slightly over 98% of all passenger cars and light trucks. The primary benefits
to consumers are comfort, convenience, and possibly safety. Parking maneuvers,
in particular, can be difficult without the multiplying effect of the powered
assistance.
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Growth of power steering for the U.S. market will depend on growth in the
vehicle build, since this market is essentially saturated with the current
technology. There appears to be more opportunity in other mature markets. In
Europe, penetration has risen from 20% in 1989 to 60% in 1997. The pattern of
adoption has been typical, with the features showing up first on large luxury
vehicles and then trickling down to more mass-market applications. The room for
penetration in the European market and the above-average complexity of the
components used in these systems provides a vehicle for growth for the Company's
French operations.
Brake Systems. Braking system component sales represented 13%, 20% and 11% of
the Company's sales for the years ended June 30, 1999, 1998 and 1997,
respectively. Like fuel injection, the popularity of anti-lock brakes (ABS) is
significant. Millions of safety-conscious consumers have embraced ABS, and it
has become available on more and more lower-priced vehicles as the cost of the
technology has declined. Once expected to reach extremely high penetration
rates, the installation of the ABS feature has tapered off at 63% of North
American light vehicles in 1998. Part of the problem can be traced to the debate
over the effectiveness of ABS, an issue brake suppliers thought they had put to
rest years ago. ABS suppliers are exploring technological changes that will make
ABS lighter, more affordable, and better performing. It is likely that future
growth of ABS will occur in conjunction with other electronic brake and
suspension control systems.
ABS components have been identified by Company management as fitting well with
is core competencies, and the Company's customers recognize these competencies
as the Company is quickly becoming the component supplier of choice to the ABS
market. Its customers controlled over 70% of the 1998 light vehicle ABS market.
These companies are also among the industry's technological leaders and
frequently look to the Company for invaluable precision-machining expertise. The
Company's engineers are constantly working to help its customers keep up with
the pace of innovation, thereby increasing its market penetration.
Other Transportation Applications. Other automotive components sales represented
11%, 3% and 2% of the Company's sales for the years ended June 30, 1999, 1998
and 1997, respectively. The Company manufactures components used in automotive
electromechanical motors, which allow for the remote operation of power windows,
door locks and seats. The Company believes that the consumer-desired safety and
convenience of these features will lead to increased sales of these systems and
corresponding increased sales of components manufactured by the Company.
Medical Devices. Medical device components sales represented 4%, 11% and 10% of
the Company's sales for the years ended June 30, 1999, 1998 and 1997,
respectively. The Company believes it can capitalize on its transportation
manufacturing expertise by applying these skills to similar manufacturing
processes used within the medical devices industry. The Company has already made
positive impressions on companies within this market who were skeptical about a
transportation industry company's ability to meet the expectations of the
medical industry.
The Company's fastest growing market segment in the medical field, the stent
business, is a high priority. The Company's sales staff is vigorously
prototyping new designs and contacting potential new customers. Presently, there
are four stent designs in use -- slotted tube, coil, wire mesh, and ring. Each
has its advantages and disadvantages; however, the Company is presently
producing only one of the designs, the slotted tube stent. This is the design
that started the business and is the stent of choice for a majority of
applications. Stents, a scaffold like device used to keep human blood vessels
open after balloon angioplasty, were identified as a product that fit the
Company's core competencies.
The Company also produces components used in ophthalmic hand pieces. This is a
mature product line with strong margins, but limited growth prospects with the
current customer.
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MANUFACTURING
The Company manufactures its products using turning, grinding and milling
processes. Substantially all of the Company's production machinery has been
acquired new since 1985 and consists of high-precision, automatic cam-driven
turning machines and computer numerically-controlled turning, milling and
grinding machines. These machines are capable of high-volume production while
maintaining close tolerances. Products are typically produced from bar stock
using multi-spindle cam automatic bar machines or centerless grinders. Secondary
machining in some cases is necessary. Parts are then deburred, cleaned, in some
cases, plated or heat treated at outsource locations, packaged and shipped
directly to the customer.
On a new job, the first parts produced are used to establish process capability
and sent to the customer for approval. After approval, the part is placed in the
Company's production planning systems and, as production begins, statistical
process control techniques are employed to maintain quality and gather data for
the Company's continuous improvement efforts. The continuous improvement process
focuses the attention of all employees on improving each step of the process in
order to increase quality, lower cost and improve customer service. In the
manufacturing area, this focus emphasizes reducing dimensional variation to
narrow the tolerance range for a given process, increasing perishable tool life,
reducing scrap, and increasing both human and equipment productivity.
Raw materials and other resources used by the Company are generally not
restricted in availability. The Company purchases certain specialty alloys from
a dedicated source and the Company's customers allow for the pass through of
certain raw material adjustments. In the last year, the Company has not
experienced any significant price fluctuations. The Company does not purchase
any raw materials pursuant to blanket resale programs with its customers.
MARKETING AND SALES
The Company markets its products primarily by bidding upon component
specifications submitted by the customer. In addition, the Company makes direct
calls on potential customers, through its internal sales department and the use
of independent sales representatives. It is the Company's objective to establish
long-term sole source contracts in order to strengthen its position in the
marketplace. The Company continues to expand its base of customers in order to
reduce its dependence on any particular customer or industry.
CONTRACTS AND PURCHASE ORDERS
The Company's transportation customers typically award blanket purchase orders
for each calendar year, and is occasionally successful in receiving
life-of-the-product supplier agreements. The remainder of its components may be
subject to an annual rebidding process.
Additionally, the Company is currently operating with open and blanket purchase
orders from approximately 20 customers primarily covering transportation fuel,
power steering and braking system and medical device components. Orders are not
firm under blanket purchase orders until specific releases are granted.
BACKLOG AND SEASONALITY
The Company's business is relatively consistent throughout the year, except for
slowness traditionally experienced in July and August due to automotive model
changeovers and European holiday and during late December as its customers in
the transportation industry typically shut down around the Christmas and New
Year holidays.
The Company does not reflect an order in backlog until it has received a
purchase order and release committing to a quantity and delivery date.
Generally, orders are shipped within three months of a release and as a result,
the Company does not believe backlog is a material concept to its business.
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COMPETITION
The markets in which the Company competes are highly competitive, and the
Company believes that it competes within the above industries on the basis of
price, quality and technology. The Company believes that there are approximately
40 companies in the United States that have the equipment to be manufacturers of
precision metal parts in competition with the Company. The Company also competes
with approximately 10 companies in Europe and Asia. Certain of the Company
customers have greater resources than the Company and could move component
production currently manufactured by the Company in-house. Some of the
components currently manufactured by the Company can also be manufactured using
alternative technologies including stamping and coldheading processes which, in
some cases, can process high-precision parts as efficiently as those
technologies utilized by the Company.
EMPLOYEES
The Company had 1,773 full-time employees as of June 30, 1999. The following
table shows employment by manufacturing facility:
Pochons, France 467
Ternier, France 379
Kentwood, Michigan 252
Pinhal, Brazil 178
Campinas, Brazil 159
Dowagiac, Michigan 110
Boituva, Brazil 83
Marshall, Michigan 77
Hayward, California 42
Gaffney, South Carolina 26
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Totals 1,773
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None of the Company's U.S. employees are part of a collective bargaining unit.
Governmental unions represent all French and Brazilian employees. The Company
has never experienced a work stoppage and considers relations with its employees
to be excellent.
EXPORT SALES
During the fiscal years ended June 30, 1999, 1998 and 1997, the Company's U.S.
operations exported fuel and braking system, computer electronic, and
refrigeration and air-conditioning system components to 14 customers in Europe,
Mexico, Canada, Brazil and Asia resulting in sales of $8,296,000, $9,032,600 and
$8,485,000, respectively.
ITEM 2. PROPERTIES
The Company owns or leases manufacturing facilities suitable and adequate for
the production and marketing of its products. The Company's executive and
administrative offices occupy 12,000 square feet of its Kentwood, Michigan
facility. The following is a list of the Company's locations and approximate
square footages:
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Approximate Square
Feet
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Owned:
Kentwood, Michigan 88,000
Dowagiac, Michigan 67,000
Marshall, Michigan 56,000
Gaffney, South Carolina 25,000
Leased:
Pochons, France 143,000
Kentwood, Michigan 100,000
Ternier, France 73,000
Boituva, Brazil 36,000
Hayward, California 27,000
Pinhal, Brazil 24,000
Campinas, Brazil 22,000
The Company subleases 67,000 square feet of its leased Kentwood, Michigan
facility to a company related by virtue of its 100%-ownership by the Company's
president.
The Company has machinery and equipment with an aggregate cost of $184,939,000.
The Company owns $164,623,000 of this equipment and $20,316,000 is leased under
operating leases. For information concerning minimum future lease payments under
non-cancelable leases, see Note 6 of Notes to Consolidated Financial Statements
filed as Exhibit 13 hereto.
The Company believes its facilities are modern, well maintained, adequately
insured and suitable for their present and intended uses. In order to meet
demand primarily from transportation customers, management will purchase $15-20
million of equipment over the next year (on which deposits of $2.8 million had
been placed as of June 30, 1999). See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources," below.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently involved in any legal proceedings other than
ordinary or routine proceedings incidental to its operations, which in the
opinion of management, would not have a material adverse effect on the Company
if determined against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol ACAM. The following table sets forth the
range of high and low sales prices of the Company's common stock as reported by
the Nasdaq Stock Market, adjusted for the effects of share dividends issued
during the periods presented.
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High Low
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Fiscal 1999:
Fourth quarter 13 1/2 8 1/2
Third quarter 16 1/2 8
Second quarter 16 1/2 10 3/8
First quarter 17 1/8 11 5/16
Fiscal 1998:
Fourth quarter 20 1/8 15 5/8
Third quarter 15 15/16 12 1/2
Second quarter 14 3/4 11 9/16
First quarter 12 1/2 9 3/4
As of September 15, 1999, 183 holders of record, and approximately 2,000
beneficial shareholders held the Company's common stock.
Dividends
The Company began paying quarterly cash dividends of two cents per common share
in the second quarter of fiscal 1997. The Company expects this practice of
paying quarterly dividends on its common shares will continue, although future
dividends will continue to depend upon the Company's earnings, capital
requirements, financial condition and other factors.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this Item 6 is incorporated by reference to page E-71 of
the Company's Consolidated Financial Statements for the years ended June 30,
1999, 1998 and 1997 filed as Exhibit 13 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this Item 7 is incorporated by reference to pages E-72 -
E-79 of the Company's Consolidated Financial Statements for the years ended June
30, 1999, 1998 and 1997 filed as Exhibit 13 hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates the financial statements required by this Item 8
by reference to Item 14(a)(1) hereof, and the supplementary financial
information required by this Item 8 by reference to the Company's Consolidated
Financial Statements as of June 30, 1999 and 1998 and for the years ended June
30, 1999, 1998 and 1997, filed as Exhibit 13 hereto.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Board of Directors presently consists of seven members. The terms of the two
existing directors in Class II, David J. Wagner and Kim Korth, expire at the
Company's next annual meeting. They have agreed to stand for re-election and
serve if elected.
Although it has no present plans to do so, the bylaws of the Company permit the
Board of Directors to further increase its number and to fill the vacancies thus
created.
The Articles of Incorporation of the Company provide that the directors are
elected by classes, indicated by the table below, with terms expiring upon
election of their successors at the annual meeting of shareholders following the
close of the Company's 1999, 2000 and 2001 fiscal years, respectively. Thus, one
class of directors, consisting of two or three members, as the case may be, are
elected each year to serve for a three-year term.
The table below identifies and provides certain information regarding each of
the existing directors and the class to which each director is now elected. The
table below also identifies and provides certain information regarding the
executive officers and certain key employees of the Company.
DIRECTORS WHOSE TERMS EXPIRE AT THE NEXT ANNUAL MEETING:
Class II -- Nominated for election at the meeting to serve until the annual
meeting of shareholders in 2002 and until their successors are elected:
Has Served as
NAME PRINCIPAL OCCUPATION AGE DIRECTOR SINCE
---- -------------------- --- --------------
David J. Wagner (1)(2) Chairman, President, Chief Executive 45 October 1991
Officer of Old Kent Financial Corporation
Kim Korth (1) President, International Resource Network, Inc. 44 August 1997
David J. Wagner has been Chairman since November 1995 and President and Chief
Executive Officer since March 1995 and was President since March 1994 of Old
Kent Financial Corporation, a bank holding company, and was has been Chairman of
the Board and Chief Executive Officer of Old Kent Bank for more than the
preceding five years.
Kim Korth has been the owner and President of International Resource Network,
Inc., an automotive consulting and market research firm, for more than five
years.
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE NEXT ANNUAL MEETING:
Class III -- To serve until the annual meeting of shareholders in 2000 and until
their successors are elected:
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PRINCIPAL HAS SERVED AS
NAME OCCUPATION AGE DIRECTOR SINCE
---- ---------- --- --------------
John C. Kennedy President, Chief Executive Officer of Company 41 April 1988
Kenneth K. Rieth (2) President, Chief Executive Officer of Riviera 40 October 1991
Tool Company
Mark J. Bissell (1) President, Chief Executive Officer of 42 October 1997
BISSELL Inc.
John C. Kennedy has been a Director and President of the Company since its
inception in April 1988. Mr. Kennedy graduated with a Bachelor of Science degree
in Accounting and Finance from the University of Detroit in 1979.
Kenneth K. Rieth is a principal owner and for more than the past five years has
been a director and the President and Chief Executive Officer of Riviera Tool
Company, a Michigan corporation engaged in the manufacture of sheet metal
stamping dies for the automotive industry.
Mark J. Bissell has been President and Chief Executive Officer since April 1996,
and President and Chief Operating Officer from January 1994 to March 1996 of
BISSELL Inc., a manufacturer of floor care cleaning products, including carpet
vacuums, cleaners and sweepers. For more than two years prior to that, he served
as a Senior Vice President of BISSELL Inc., and as the General Manager of the
BISSELL Homecare Division.
Class I -- To serve until the annual meeting of shareholders in 2001 and until
their successors are elected:
PRINCIPAL HAS SERVED AS
NAME OCCUPATION AGE DIRECTOR SINCE
---- ---------- --- --------------
Warren A. Veltman Secretary, Treasurer, Chief Financial Officer 38 October 1991
of Company
Robert L. Hooker (1) Chief Executive Officer, Mazda Great Lakes 69 January 1992
Warren A. Veltman has been with the Company since November 1990 as the Chief
Financial Officer and Secretary/Treasurer since August 1991. Mr. Veltman
graduated in 1983 with a Bachelor of Business Administration degree from the
University of Michigan.
Robert L. Hooker has been Chief Executive Officer of Mazda Great Lakes, a
Michigan corporation engaged in the distribution of automobiles and related
products, for more than five years.
- ----------
(1) Member of Compensation Committee
(2) Member of Audit Committee
KEY EMPLOYEES:
NAME POSITION WITH COMPANY AGE
---- --------------------- ---
David H. Livingston Chief Operating Officer 49
Thomas K. O'Mara Sales and Marketing Manager 38
David H. Livingston has been with the Company since 1998 as the Chief Operating
Officer. Mr. Livingston was most recently Senior Vice President of Operations
for Delco Remy America since 1996, and Vice President for United Technologies
Automotive for more than two years prior thereto. Mr. Livingston graduated in
1973 with a Bachelor of Science degree in Mechanical Engineering from the
University of Kentucky.
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Thomas K. O'Mara has been with the Company since November 1989 as the Sales and
Marketing Manager. Mr. O'Mara graduated in 1982 with a Bachelor of Science
degree in Marketing from Central Michigan University.
BOARD MEETINGS AND COMMITTEES
The Directors had five meetings during the past fiscal year and acted twice by
consent resolution. No director attended less than 75% of directors meetings,
including appropriate committee meetings.
The Board of Directors has an audit committee, which is responsible for
approving the services performed by the Company's independent public accountants
and reviewing and evaluating the Company's accounting principles, reporting
practices and systems of internal control. The current members of the committee
are Messrs. Rieth and Wagner. The committee held two meetings during the last
fiscal year.
The Board of Directors has a compensation committee, which has the
responsibility of determining executive compensation and granting options
pursuant to the Company's 1991 Incentive Stock Option Plan. During fiscal 1999,
this committee consisted of Messrs. Wagner, Hooker, and Bissell and Ms. Korth.
The committee met five times during the fiscal year.
The Company has no nominating committee, the functions of which are performed by
the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's
directors and certain officers and persons who own 10% or more of the Company's
common stock file with the SEC and the NASDAQ National Market System initial
reports of ownership and reports of changes in ownership of Company Common
Stock. These officers, directors and 10% shareholders are required by SEC
regulation to furnish the Company with copies of these reports. To the Company's
knowledge, based solely upon review of the copies of such reports furnished to
the Company and written representations that no other reports were required
during the fiscal year ended June 30, 1999, all Section 16(a) requirements
applicable to its officers, directors and 10% beneficial owners were complied,
except that Messrs. Kennedy, Veltman and Livingston were late in filing their
required Forms 5, reporting their purchase of 318 shares of Company common stock
via a matching contribution by the Company in the Company's 401(k) employee
savings plan available to all regular employees of the Company.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Company's compensation program for officers is administered by the
Compensation Committee of the Board of Directors which is currently composed of
Ms. Korth and Messrs. Hooker, Wagner and Bissell.
Overall Officer Compensation Policy
The Company's compensation policy for executive officers is designed to support
the overall objective of enhancing value for shareholders by attracting,
developing, rewarding, and retaining highly qualified and productive
individuals, relating compensation to both Company and individual performance,
and ensuring compensation levels that are externally competitive and internally
equitable. To that end, the committee had an updated executive compensation
review performed in April 1999 by an independent compensation consultant, Watson
Wyatt Worldwide. In short, the report concluded that the base compensation level
for the Company's chief executive officer is "lower than would be expected,"
particularly in comparison to comparable companies.
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The key elements of the Company's officer compensation consist of base salary, a
maximum formula bonus for Mr. Kennedy and a discretionary bonus and stock
options for Messrs. Veltman and Livingston. The Compensation Committee's
policies with respect to each of these elements, including the bases for the
compensation awarded to Mr. Kennedy, are discussed below. In addition, while the
elements of compensation described below are considered separately, the
Compensation Committee takes into account the full compensation package afforded
by the Company to the individual, including insurance and other benefits.
Base Salary
The Committee reviews each officer's salary annually. In determining appropriate
salary levels, consideration is given to scope of responsibility, experience,
Company and individual performance as well as pay practices of other companies
relating to executives with similar responsibility.
With respect to the base salary of Mr. Kennedy in 1999, the Compensation
Committee took into account a comparison of base salaries of chief executive
officers of peer companies known to the members of the Committee, the Company's
continued financial success, and the assessment by the Compensation Committee of
Mr. Kennedy's individual performance. The Compensation Committee took into
account the longevity of Mr. Kennedy's service to the Company and its belief
that Mr. Kennedy is an excellent representative of the Company to the public by
virtue of his stature in the community and the industry. Mr. Kennedy's base
salary of $150,000 was established by the Board of Directors in September 1991.
Taking into consideration the report and recommendations of Watson Wyatt
Worldwide that Mr. Kennedy's base salary is below the 25th percentile among peer
companies, the Compensation Committee decided that Mr. Kennedy's base salary
should be increased. Effective April 29, 1999, his base compensation was
increased to $200,000 per year and premiums on four existing split dollar
insurance policies owned by Mr. Kennedy would continue to be paid by the
Company. Mr. Kennedy pays the Company the portion of the premiums equal to the
price of an equivalent amount of term insurance. The benefit to Mr. Kennedy of
premiums paid by the Company is the interest-free use of the non-term portion of
the premium. Such benefit was estimated at $86,333, calculated as the present
value of the interest payments not required to be made assuming Mr. Kennedy
would not repay the non-term portion until age 65, discounted at a market rate
of 8.0% (see Summary Compensation Table below). The Company has a lien on the
cash value and proceeds of each policy equal to the premiums paid by the
Company. This lien amounted to $909,800 at June 30, 1999 and is carried as an
officer receivable on the books of the Company.
Bonus Awards
The Company's officers may be considered for annual cash bonuses, which are
awarded to recognize and reward corporate and individual performance based on
meeting specified goals and objectives. The plan in effect for 1999 for Mr.
Kennedy provides that a bonus, not exceeding 3.5% of the Company's income from
operations before such bonus expense, will be awarded. This formula was
established by the Board of Directors in 1991. In awarding a bonus to Mr.
Kennedy, the Board reviews compensation levels and financial results available
to it for chief executive officers for similarly sized companies as well as
those located near the Company's headquarters. Mr. Kennedy sets Messrs.
Veltman's and Livingston's bonus based on his review of corporate and individual
performance as well as the performance bonus the management team awards to
employees of the Company generally other than Messrs. Veltman, Livingston and
Kennedy.
Stock Options
Under the Company's 1991 Incentive Stock Option Plan (the "1991 Plan"), which
was approved by the shareholders, stock options are granted to the Company's key
employees, including Messrs. Veltman, Livingston and O'Mara. Under the Company's
1998 Key Employee Stock Option Plan (the "1998 Plan"), also approved by the
shareholders, stock options are granted to the Company's key employees,
including Messrs. Kennedy, Veltman, Livingston and O'Mara. Key employees are
determined by the Compensation Committee through recommendation by the Company's
management, and the number of options granted under either plan is determined by
the subjective evaluation of the person's ability to influence the Company's
long-term growth and profitability.
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Stock options are granted with an exercise price equal to the market price of
the common shares on the date of grant. In fiscal 1999, options were granted to
Messrs. Kennedy, Veltman, O'Mara and Livingston under the 1998 Plan. Since the
value of an option bears a direct relationship to the Company's stock price, it
is an effective incentive for employees to create value for shareholders. The
Committee therefore views stock options as an important component of its
compensation policy.
Compensation Committee members:
Robert L. Hooker
David J. Wagner
Kim Korth
Mark J. Bissell.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth the total compensation earned by each executive
officer during the fiscal years ended June 30, 1999, 1998 and 1997 for services
rendered to the Company in all capacities during such years.
Long-Term
Annual Compensation (1) Compensation
----------------------- Awards
Name and Other -------
Principal Position Annual Stock All Other
at June 30, 1999 Year Salary Bonus Compensation Options Compensation (2)(3)
---------------- ---- ------ ----- ------------ ------- -------------------
John C. Kennedy, 1999 $154,808(4) $262,900 $6,136 47,250 $87,333
Chairman, President 1998 150,000 313,900 6,136 81,537
and Chief Executive 1997 150,000 202,557 6,136 82,776
Officer (4)
David H. Livingston, 1999 103,846 25,025 26,250 14,967
Chief Operating
Officer (5)
Warren A. Veltman, 1999 85,096 121,025 15,750 38,096
Secretary, Treasurer 1998 75,000 110,900 14,760
and Chief Financial 1997 75,000 86,686 9,450 15,639
Officer (6)
- ----------
(1) Does not include any value that might be attributable to job-related
personal benefits, the amount of which did not exceed the lesser of 10% of
annual salary plus bonus or $50,000 for each executive officer.
(2) Represents the benefit of the interest-free use of the non-term portion of
the premium paid by the Company on insurance policies owned by the individual
under split dollar arrangements. Such benefit was estimated as the present value
of the interest payments which are not required to be made assuming the
executive would not repay the non-term portion until age 65, discounted at a
market rate of 8.0%. The portion of such premiums equal to the price of
equivalent amounts of term insurance are paid to the Company by Messrs. Kennedy,
Livingston and Veltman.
(3) Includes $1,000, $1,000 and $2,000 each for Messrs. Kennedy and Veltman
contributed by the Company during fiscal 1999, 1998 and 1997, respectively, to
the 401(k) plan maintained by the Company for its employees generally. Includes
$1,000 for Mr. Livingston contributed by the Company for fiscal 1999 to the same
401(k) plan.
(4) Mr. Kennedy's current base compensation is $200,000 per annum commencing
effective April 29, 1999. He is also
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entitled to receive annual bonus compensation not greater than 3.5% of the
Company's income from operations prior to such bonus calculation.
(5) Mr. Livingston's current base compensation is $150,000 per annum. He is
also entitled to receive a guaranteed bonus of not less than $85,000 at the
completion of one year of service.
(6) Mr. Veltman's current base compensation is $90,000 per annum. Included in
Other Compensation is $23,388, equal to the dollar value of the difference
between the option price for common stock pursuant to stock options exercised
and the fair market value of the stock on the date of purchase.
Option Grants in the Last Fiscal Year
The following table provides information on options granted to each of the
executive officers of the Company during the fiscal year ended June 30, 1999
pursuant to the 1991 Plan or the 1998 Plan:
Number of Percent of Potential Realizable
Securities Total Options Value at Assumed Annual
Underlying Granted to Exercise Rates of Stock Price
Options Employees in of Base Appreciation for
Granted Fiscal Year Price Expiration Date Option Term
------- ----------- ----- --------------- -----------
5% 10%
---- -----
John C. Kennedy 47,250 22.7% $12.38 September, 30, 2008 $367,875 $ 932,268
David H. Livingston 26,250 12.6% 12.38 September, 30, 2008 204,375 517,926
Warren A. Veltman 15,750 7.6% 12.38 September, 30, 2008 122,625 310,756
------ ----- -------- ----------
Total 89,250 42.9% $694,875 $1,760,950
====== ===== ======== ==========
Aggregated Option Exercises in Last Fiscal Year and Option Values at Fiscal Year
End
The following table provides information on the value of options held by each of
the executive officers of the Company at June 30, 1999 measured in terms of the
closing price of the Company's common stock on that day. There were options
exercised by officers during the year.
Shares Number of Unexercised Options Value of Unexercised In-The-
Acquired at June 30, 1999 Money Options at June 30, 1999
on Value ---------------- ------------------------------
Name Exercise Realized Exercisable (1) Unexercisable Exercisable (1) Unexercisable
---- -------- -------- --------------- ------------- --------------- -------------
John C. Kennedy 9,450 37,800 $ 10,584 $42,336
David H. Livingston 5,250 21,000 5,880 23,520
Warren A. Veltman 2,500 $23,388 34,682 16,767 202,809 35,240
(1) Includes 9,450, 5,250 and 5,233 options which Messrs. Kennedy, Livingston
and Veltman may exercise within sixty days of September 15, 1999, respectively.
- ------------
The Company pays each director who is not an employee a fee of $10,000 per year.
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PERFORMANCE GRAPH
The following graph compares the cumulative total return of the Company's common
stock, for periods subsequent to June 30, 1993, with the Standard & Poor's 500
Composite Index, the Standard & Poor's SmallCap 600 Index (Auto Parts and
Equipment Industry Group) and an index of peer companies selected by the
Company.
The comparison assumes $100 was invested on June 30, 1994 in the Company's
common stock, the Standard & Poor's 500 Composite Index, the Standard & Poor's
SmallCap 600 Index (Auto Parts and Equipment Industry Group) and the peer group.
The companies in the peer group, all of which are in the automotive parts
industry, are as follows:
Arvin Industries, Inc. Mascotech, Inc.
Dana Corporation Modine Manufacturing Company
Defiance, Inc. (1) Newcor, Inc.
Douglas & Lomason Company (2) Redlaw Industries
Excel Industries, Inc. (3) Simpson Industries, Inc.
Federal Screw Works SPX Corporation
Gentex Corporation Sudbury, Inc. (5)
Howell Industries, Inc. (4) Walbro Corporation
The Lamson & Sessions Company Worthington Industries, Inc.
- ----------
(1) Defiance, Inc. was acquired by General Chemical Group in March 1999.
(2) Douglas & Lomason was acquired by Magna International in November 1996.
(3) Excel Industries, Inc. merged with Dura Automotive Systems in April 1999.
(4) Howell Industries, Inc. acquired by Oxford Automotive in August 1997.
(5) Sudbury, Inc. was acquired by Intermet Corporation in February 1997.
[PERFORMANCE GRAPH]
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INDEXED RETURNS
- ------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED
-----------------------------------------------------------------------------------
BASE PERIOD
COMPANY NAME/INDEX JUN94 JUN95 JUN96 JUN97 JUN98 JUN99
- ------------------ ----- ----- ----- ----- ----- -----
Autocam Corporation 100 80.63 72.32 89.38 130.73 112.18
S&P 500 Index 100 126.07 158.85 213.97 278.51 341.88
Peer Group 100 108.56 115.62 134.40 159.22 170.10
Auto Parts & Equipment - Small 100 90.82 123.10 154.10 166.58 174.30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding the beneficial ownership of
the Company's common shares by the persons who beneficially own more than 5% of
its common shares, by each director and executive officer, and by all officers
and directors of the Company as a group, as of September 15, 1999:
Name of Number of Shares Percent of
Beneficial Owner Beneficially Owned Class (1)
---------------- ------------------ ---------
John C. Kennedy (2)(3) 3,809,431 60.4%
Warren A. Veltman (2)(4) 39,958 *
Robert L. Hooker (5) 3,123 *
David J. Wagner 4,486 *
Kenneth K. Rieth 4,727 *
Kim Korth *
Mark J. Bissell 1,575 *
David H. Livingston (2)(6) 5,354 *
FMR Corporation (7) 469,902 7.4%
All officers and directors and nominees as a
group (8 persons) (2)(4)(5)(6) 3,868,654 61.3%
- ----------
(1) An asterisk indicates beneficial ownership of less than 1% of the Class.
(2) Includes shares allocated to the individual accounts within the Company's
401(k) plan.
(3) The business address for Mr. Kennedy is 4070 East Paris Avenue, Kentwood,
Michigan 49512. Includes 9,450 shares of common stock Mr. Kennedy has the right
to acquire within sixty days of September 15, 1999 through the exercise of stock
options. Total also includes 4,450 shares owned by Mr. Kennedy's spouse and over
which she exercises voting control, and 11,316 shares owned by the Kennedy
Foundation and over which Mr. Kennedy and his wife exercise joint voting and
investment control. For purposes of calculating the percentage of outstanding
shares owned by Mr. Kennedy and the group, these shares are deemed to be owned
by Mr. Kennedy.
(4) Includes 34,682 shares of common stock Mr. Veltman has the right to acquire
within sixty days of September 15, 1999 through the exercise of stock options.
Total also includes 1,052 shares owned by Mr. Veltman's wife and over which she
exercises sole voting control. For purposes of calculating the percentage of
outstanding shares owned by Mr. Veltman and the group, these shares are deemed
to be owned by Mr. Veltman.
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(5) Includes 859 shares over which Mr. Hooker has voting control in a fiduciary
capacity. For purposes of calculating the percentage of outstanding shares owned
by Mr. Hooker and the group, these shares are deemed to be owned by Mr. Hooker.
(6) Includes 5,250 shares of common stock Mr. Livingston has the right to
acquire within sixty days of September 15, 1999 through the exercise of stock
options.
(7) The business address for FMR Corporation is 82 Devonshire Street, Boston,
Massachusetts, 02109-3614.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kennedy serves as President and Chief Executive Officer of the Company and
serves on the Board of Directors of Riviera Tool Company, where Mr. Rieth is
President and Chief Executive Officer and also on the Board of Directors. The
Company's Compensation Committee consists of Ms. Korth and Messrs. Hooker,
Wagner and Bissell.
The Company has entered into four Stock Redemption Agreements (the "Agreements")
dated as of November 6, 1992, September 20, 1993, August 1, 1996 and September
1, 1998 with John C. Kennedy and Nancy G. Kennedy, his wife, in their individual
capacities and as co-trustees of the John C. Kennedy Living Trust u/a, dated
February 14, 1986, as amended. The Agreements provide that upon the death of the
last to die of Mr. or Mrs. Kennedy, the Company shall redeem up to $23,000,000
of common stock in a redemption under Section 303 of the Internal Revenue Code
of 1986, as amended, in order to pay estate and inheritance taxes, and funeral
and administrative expenses of the estate. It is the Company's belief that these
Agreements will avoid a potentially significant market price impact that could
result from the Kennedy estates needing to sell Company stock in order to pay
death taxes and expenses. Pursuant to the Agreements, the Company maintains some
life insurance policies in order to fund its obligations.
The Company leases certain real property and formerly leased certain equipment
from its majority shareholder. At the beginning of fiscal 1994, all such leases
were on a month-to-month basis. Effective May 1994, the Company and its majority
shareholder executed a long-term lease covering the equipment. The lease was to
expire May 31, 2001 and granted the Company an option to purchase the equipment
at the expiration of the term. Effective January 1, 1999, the equipment lease
was terminated and the Company purchased the leased equipment from its majority
shareholder for $625,400. Total lease expense for all items leased from the
majority shareholder was $193,400 for fiscal 1999.
The Company leases a building at 4060 East Paris Avenue, S.E., Kentwood,
Michigan, adjacent to its primary facility, with approximately 100,000 square
feet suitable for industrial use. Mr. Rieth, directly or indirectly through his
wife, owns a 50% interest in such building. The lease expires in March 2005 and
contains an option to purchase the facility for a fixed price of $3,125,000 at
the expiration of the lease. Rent under the lease is fixed at $25,000 per month
for its entire term but will be adjusted to reflect changes in the interest rate
charged by the landlord's mortgage lender. Currently, that rate is fixed until
2000. The Company pays all taxes, maintenance, insurance and utilities. The
Company subleases approximately 67,000 square feet of this building on a
month-to-month basis to Conway Products Corporation, which is 100% owned by Mr.
Kennedy, at a monthly rental charge, plus occupancy expense, taxes, utilities
and insurance of approximately $283,300 in the aggregate during fiscal 1999.
The Company leases an aircraft for use in its business activities. From time to
time, Mr. Kennedy used the aircraft for personal use and paid the Company for
the variable costs of operating the aircraft incurred by the Company. This
reimbursement totaled $16,700 during fiscal 1999.
On August 13, 1998, the Company committed to acquire an aircraft for use in its
business operations from Cessna Aircraft
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21
Corporation ("Cessna") pursuant to a fifteen-year lease based upon a market
value of $4,700,000. This acquisition occurred in connection with a trade-in of
the aircraft by Mazda Great Lakes Corporation ("Mazda") to Cessna. Mr. Hooker is
an officer, director and greater than 10% shareholder of Mazda.
On May 12, 1995, the Company obtained an equipment loan from Old Kent Bank ("Old
Kent"), a division of Old Kent Financial Corporation, of which Mr. Wagner is
President and Chief Executive Officer. At the end of fiscal 1998, the principal
balance of the note was $1,458,330, which amount was secured by certain
equipment of the Company. The Company paid this obligation in monthly
installments of $41,660, plus interest of 8.35% per annum. On October 1, 1998,
the Company refinanced this loan through its primary commercial lender, Comerica
Bank ("Comerica"), as agent, and this loan has been repaid in full.
On June 27, 1997, the Company entered into a credit agreement with Comerica,
which included a $10,000,000 term loan payable in monthly principal installments
of $138,889, plus interest of 7.76% per annum. Old Kent purchased a
participation in this term loan from Comerica and the principal amount of
$3,555,555 was due to Old Kent at the end of fiscal 1998. On October 1, 1998,
the Company refinanced this loan through Comerica, as agent, and this loan has
been repaid in full. Interest paid to Old Kent on this obligation was $60,398
during fiscal 1999.
On December 23, 1997, the Company issued $9,000,000 in industrial revenue bonds,
the entire amount of which was outstanding at the end of fiscal 1998. These
bonds were backed in part by letters of credit issued by Comerica. Old Kent
agreed to assume responsibility for satisfying 40%, or $3,600,000, of the
letters of credit, and the Company agreed to be indebted to Old Kent in the
amount of any such satisfaction. The total cost to the Company of the letters of
credit during fiscal 1998 were $54,575, 40% of which was paid by Comerica to Old
Kent. Old Kent did not participate in the new lending agreement with Comerica on
October 1, 1998, and therefore, no letter of credit fees were paid to Old Kent
in fiscal 1999.
The Company has utilized and expects to continue utilizing the consulting
services of International Resource Network, Inc. where Ms. Korth is President.
During fiscal 1999, the Company incurred $51,541 in expense for such services.
The Company believes that all of the transactions described above were at rents,
prices and terms no less favorable to the Company than would have been available
in similar transactions with unaffiliated third parties. The policy of the
Company is that proposed transactions with affiliates of the Company must have
the prior approval of a majority of the disinterested members of the Board of
Directors and, as in prior transactions, will be made on terms no less favorable
to the Company than could be obtained from unaffiliated parties.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - INDEX
(a) The following documents are filed as a part of this report:
1. Financial Statements - The following consolidated financial statements
and the report of independent auditors set forth on pages E-71 - E-97
of Exhibit 13 hereto:
Consolidated Balance Sheets as of June 30, 1999 and 1998
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22
For each of the three years in the period ended June 30, 1999:
Consolidated Statements of Operations and Comprehensive Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
2. Financial Statement Schedules - No such schedules are included because
of the absence of the conditions under which they are required, or
because the information called for is included in the consolidated
financial statements or notes thereto.
3. Exhibits
3(a) Amended and Restated Articles of Incorporation of the
Registrant (incorporated by reference to Exhibit 3(a) of the
Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
3(b) Bylaws of the Registrant (incorporated by reference to Exhibit
3(b) of the Registrant's Form S-1, Registration No. 33-42670,
filed September 17, 1991).
4(a) Specimen Common Stock Certificate of Registrant (incorporated
by reference to Exhibit 4(a) of the Registrant's Form S-1,
Registration No. 33-42670, filed September 17, 1991).
10(a) Second Amended and Restated Revolving Credit and Term Note
Agreement, dated November 12, 1998, between Comerica Bank, as
agent, and the Registrant (incorporated by reference to
Exhibit 10.1 of the Registrant's Form 10-Q, filed February 12,
1999).
10(b) Stock Redemption Agreements, dated November 6, 1992 and
September 20, 1993, between John C. Kennedy and Nancy G.
Kennedy in their individual capacities and as co-trustees of
the John C. Kennedy Living Trust u/a, dated February 14, 1986,
as amended, and the Registrant (incorporated by reference to
Exhibit 10(b) of the Registrant's Form 10-K, filed September
27, 1993).
Stock Redemption Agreement, dated August 1, 1996, between John
C. Kennedy and Nancy G. Kennedy in their individual capacities
and as co-trustees of the John C. Kennedy Living Trust u/a,
dated February 14, 1986, as amended, and the Registrant
(incorporated by reference to Exhibit 10(b) of the
Registrant's Form 10-K, filed September 19, 1996).
Stock Redemption Agreement, dated September 1, 1998, between John
C. Kennedy and Nancy G. Kennedy in their individual capacities and
as co-trustees of the John C. Kennedy Living Trust u/a, dated
February 14, 1986, as amended, and the Registrant (incorporated by
reference to Exhibit 10(b) of the Registrant's Form 10-K, filed
September 23, 1998).
10(c) Autocam Corporation 1991 Incentive Stock Option Plan (incorporated
by reference to Exhibit 10(c) of the Registrant's Form 10-K, filed
September 23, 1994).
10(d) Employment Agreement dated September 1, 1991, between Registrant
and Edward W. Hekman (incorporated by reference to Exhibit 10(e)
of the Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
10(e) Northwestern Mutual Life Insurance Company Joint Comp Life
insurance policies covering John C. Kennedy and Nancy G. Kennedy,
Policy Nos. 12 443 196 and 12 200 147 (incorporated by reference
to
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Exhibit 10(e) of the Registrant's Form 10-K, filed September
27, 1993).
10(f) Northwestern Mutual Life Insurance Company Adjustable Whole Life
Insurance Policies covering John C. Kennedy, Policy Nos. 9 718
337, 10 755 204 and 10 755 185 (incorporated by reference to
Exhibit 10(f) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(g) Northwestern Mutual Life Insurance Company Extraordinary Life
Insurance Policies covering John C. Kennedy, Policy Nos. 9 053
592, 9 112 232 and 10 369 805 (incorporated by reference to
Exhibit 10(g) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991).
10(h) Northwestern Mutual Life Insurance Company Disability Income
Policies covering John C. Kennedy, Policy Nos. D316131, D316137,
D374518, D532736 (incorporated by reference to Exhibit 10(h) of
the Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
10(i) Northwestern Mutual Life Insurance Company Joint Comp Life
Insurance Policy covering John C. Kennedy and Nancy G. Kennedy,
Policy No. 11 199 261 (incorporated by reference to Exhibit 10(i)
of the Registrant's Form S-1, Registration No. 33-42670, filed
September 17, 1991).
10(j) Northwestern Mutual Life Insurance Company Whole Life Insurance
Policies covering John C. Kennedy, Policy Nos. 11 466 899 and 11
467 109 (incorporated by reference to Exhibit 10(j) of the
Registrant's Form S-1, Registration No. 33-42670, filed September
17, 1991).
10(k) Connecticut Mutual Life Insurance Company Whole Life Insurance
Policy covering John C. Kennedy, Policy No. 4 400 303
(incorporated by reference to Exhibit 10(k) of the Registrant's
Form S-1, Registration No. 33-42670, filed September 17, 1991).
10(l) Northwestern Mutual Life Insurance Company Disability Income
Policy covering Edward W. Hekman, Policy No. D597564 (incorporated
by reference to Exhibit 10(l) of the Registrant's Form S-1,
Registration No. 33-42670, filed September 17, 1991).
10(m) Northwestern Mutual Life Insurance Company Joint CompLife Policy
covering John C. Kennedy and Nancy G. Kennedy, Policy No. 13 542
762 (incorporated by reference to Exhibit 10(m) of the
Registrant's Form 10-K, filed September 19, 1996).
10(n) Northwestern Mutual Life Insurance Company Joint CompLife Policy
covering John C. Kennedy and Nancy G. Kennedy, Policy No. 14 538
421 (incorporated by reference to Exhibit 10(n) of the
Registrant's Form 10-K, filed September 23, 1998).
10(o) Lease Agreement, dated March 1, 1995, between Registrant as
lessee, and Rieth Partners and Marys' Share, both Michigan
partnerships, as lessors, regarding industrial facilities located
at 4060 East Paris Avenue, Kentwood, Michigan (incorporated by
reference to Exhibit 10(n) of the Registrant's Form 10-K, filed
September 25, 1995).
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10(p) Equipment Leases:
1. Master Lease Agreement, dated August 21, 1989, between
Registrant and General Electric Capital Corporation, with
Schedule Nos. 4 & 5, dated May 11, 1992 and June 30, 1992,
respectively, covering three Tornos Bechler MS-7 Automatic
Lathes, one Mikron PAS-16 Multi-spindle Horizontal Machining
Center, and one Tornos Bechler SAS-16DC Multi-spindle
Automatic Bar Machine (incorporated by reference to Exhibit
10(o)(1) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991 (master lease) and the
Registrant's Form 10-K, filed September 25, 1992
(schedules)).
Equipment Lease Schedule Nos. 6, 7, 8 & 9, dated December
11, 1992, March 31, 1993, April 30, 1993, and June 1, 1993,
respectively, covering five Tornos Bechler SAS-16DC
Multi-spindle Automatic Bar Machines and one Mikron PAS-16
Multi-spindle Horizontal Machining Center (incorporated by
reference to Exhibit 10(o)(1) of the Registrant's Form 10-K,
filed September 27, 1993).
Equipment Lease Schedule Nos. 10 and 11, dated September 10,
1993 and October 22, 1993, respectively, covering five
Tornos Bechler SAS-16DC Multi-spindle Automatic Bar Machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 23, 1994).
Equipment Lease Schedule Nos. 12 and 13, both dated November
22, 1994, covering four Tornos Bechler SAS-16DCH
Multi-spindle Automatic Screw Machines and two Mikron PAS-16
rotary transfer machines (incorporated by reference to
Exhibit 10(o)(1) of the Registrant's Form 10-K, filed
September 25, 1995).
Equipment Lease Schedule No. 14, dated September 1, 1995,
covering two Tornos Bechler SAS-16DCH Multi-spindle
Automatic Screw Machines (incorporated by reference to
Exhibit 10(o)(1) of the Registrant's Form 10-K, filed
September 25, 1995).
Equipment Lease Schedule Nos. 15 & 16, dated January 1,
1996, covering one Index G200 Horizontal Turning Center and
one Index MS-25E Multi-spindle Automatic Screw Machine
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 19, 1996).
Equipment Lease Schedule No. 17, dated June 1, 1997,
covering four Mikron CX-24 Rotary Transfer Machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 23, 1997).
Equipment Lease Schedule No. 18, dated November 1, 1997,
covering one Tornos Bechler BS20B Multi-spindle Automotive
Screw Machine (incorporated by reference to Exhibit 10(p)(1)
of the Registrant's Form 10-K, filed September 23, 1998).
Equipment Lease Schedule No. 19, dated November 1, 1998,
covering two Mikron CX-24 Rotary Transfer Machines (filed
herewith, E-1 - E-7).
2. Aircraft Lease Agreement, dated November 12, 1998, between
Registrant and General Electric Capital Corporation covering
a Cessna Citation V aircraft (filed herewith, E-8 - E-32).
24
25
3. Master Equipment Lease Agreement, dated July 10, 1995,
between Registrant and KeyCorp Leasing, Ltd., with Schedule
No. 1 covering four Tornos Bechler SAS-16DCH Multi-spindle
Automatic Screw Machines (incorporated by reference to
Exhibit 10(o)(12) of the Registrant's Form 10-K, filed
September 25, 1995).
Equipment Lease Schedule No. 2, dated September 18, 1997,
covering one Hydromat Rotary Transfer Machine (incorporated
by reference to Exhibit 10(p)(4) of the Registrant's Form
10-K, filed September 23, 1998).
Equipment Lease Schedule No. 3 & 4, both dated December 16,
1997, covering one Tornos Bechler BS20.8 and six Tornos
Bechler SAS-16DCH Multi-spindle Automatic Screw Machines
(incorporated by reference to Exhibit 10(p)(4) of the
Registrant's Form 10-K, filed September 23, 1998).
Equipment Lease Schedule No. 5, dated May 21, 1999, covering
two Sugino Jet Flex Centers (filed herewith, E-33 - E-42).
Equipment Lease Schedule No. 6, dated June 28, 1999,
covering four Tornos Bechler Multi-Spindle Automatic BS-20.8
Screw Machines (filed herewith, E-43 - E-52).
Equipment Lease Schedule No. 7, dated August 23, 1999,
covering one Mikron CX-24 Rotary Transfer Machine (filed
herewith, E-53 - E-62).
10(q) Lifetime contract, dated April 26, 1993, between Registrant
and General Motors Corporation (incorporated by reference to
Exhibit 10(p) of the Registrant's Form 10-K, filed September 27,
1993, as amended by the Registrant's Form 10-K/A, Amendment No. 1,
filed November 29, 1993).
10(r) Lifetime contract, dated May 1, 1994, between Registrant and
General Motors Corporation (incorporated by reference to Exhibit
10(p) of the Registrant's Form S-3, filed September 23, 1994).
10(s) Autocam Corporation 1998 Key Employee Stock Option Plan
(incorporated by reference to the Registrant's 1998 Definitive
Proxy Statement, filed September 23, 1998).
10(t) Stock Purchase Agreement, dated October 1, 1998, between Autocam
Corporation, Autocam France SARL and Compagnie Financiere du
Leman, a French Societe Anonyme (incorporated by reference to
Exhibit 2.1 of the Registrant's Form 8-K, filed October 14, 1998).
10(u) Indemnification Agreement, dated August 13, 1999, between
Autocam Corporation and each member of its Board of Directors,
individually (filed herewith, pages E-63 - E-70).
13 Consolidated Financial Statements for the Years Ended June
30, 1999, 1998 and 1997 (filed herewith, pages E-71 - E-97).
21 Subsidiaries of Registrant (filed herewith, page E-98).
23 Consent of Deloitte & Touche LLP (filed herewith, page E-99).
27 Financial Data Schedule (filed herewith, page E-100).
(b) Reports on Form 8-K during quarter ended June 30, 1999 - None.
25
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AUTOCAM CORPORATION
By: /s/ John C. Kennedy
--------------------
John C. Kennedy,
Principal Executive Officer
By: /s/ Warren A. Veltman
----------------------
Warren A. Veltman,
Principal Financial and
Accounting Officer
Dated: September 27, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature and Title Date
------------------- ----
By: /s/ John C. Kennedy September 27, 1999
- -------------------------
John C. Kennedy, Chairman of the Board
By: /s/ Mark J. Bissell September 27, 1999
- -------------------------
Mark J. Bissell, Director
By: /s/ Robert L. Hooker September 27, 1999
- --------------------------
Robert L. Hooker, Director
By: /s/ Kim Korth September 27, 1999
- -------------------
Kim Korth, Director
By: /s/ Kenneth K. Rieth September 27, 1999
- --------------------------
Kenneth K. Rieth, Director
By: /s/ Warren A. Veltman September 27, 1999
- ---------------------------
Warren A. Veltman, Director
By: /s/ David J. Wagner September 27, 1999
- -------------------------
David J. Wagner, Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
Not Applicable.
26
27
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
--------------------
EXHIBITS
TO
1999
FORM 10-K
UNDER
THE SECURITIES AND EXCHANGE ACT OF 1934
-------------------
AUTOCAM CORPORATION
================================================================================
27
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Exhibit Index
Exhibit No. Description
10(p) Equipment Leases:
1. Master Lease Agreement, dated August 21, 1989, between
Registrant and General Electric Capital Corporation, with
Schedule Nos. 4 & 5, dated May 11, 1992 and June 30, 1992,
respectively, covering three Tornos Bechler MS-7 Automatic
Lathes, one Mikron PAS-16 Multi-spindle Horizontal Machining
Center, and one Tornos Bechler SAS-16DC Multi-spindle
Automatic Bar Machine (incorporated by reference to Exhibit
10(o)(1) of the Registrant's Form S-1, Registration No.
33-42670, filed September 17, 1991 (master lease) and the
Registrant's Form 10-K, filed September 25, 1992
(schedules)).
Equipment Lease Schedule Nos. 6, 7, 8 & 9, dated December
11, 1992, March 31, 1993, April 30, 1993, and June 1, 1993,
respectively, covering five Tornos Bechler SAS-16DC
Multi-spindle Automatic Bar Machines and one Mikron PAS-16
Multi-spindle Horizontal Machining Center (incorporated by
reference to Exhibit 10(o)(1) of the Registrant's Form 10-K,
filed September 27, 1993).
Equipment Lease Schedule Nos. 10 and 11, dated September 10,
1993 and October 22, 1993, respectively, covering five
Tornos Bechler SAS-16DC Multi-spindle Automatic Bar Machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 23, 1994).
Equipment Lease Schedule Nos. 12 and 13, both dated November
22, 1994, covering four Tornos Bechler SAS-16DCH
Multi-spindle Automatic Screw Machines and two Mikron PAS-16
rotary transfer machines (incorporated by reference to
Exhibit 10(o)(1) of the Registrant's Form 10-K, filed
September 25, 1995).
Equipment Lease Schedule No. 14, dated September 1, 1995,
covering two Tornos Bechler SAS-16DCH Multi-spindle
Automatic Screw Machines (incorporated by reference to
Exhibit 10(o)(1) of the Registrant's Form 10-K, filed
September 25, 1995).
Equipment Lease Schedule Nos. 15 & 16, dated January 1,
1996, covering one Index G200 Horizontal Turning Center and
one Index MS-25E Multi-spindle Automatic Screw Machine
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 19, 1996).
Equipment Lease Schedule No. 17, dated June 1, 1997,
covering four Mikron CX-24 Rotary Transfer Machines
(incorporated by reference to Exhibit 10(o)(1) of the
Registrant's Form 10-K, filed September 23, 1997).
Equipment Lease Schedule No. 18, dated November 1, 1997,
covering one Tornos Bechler BS20B Multi-spindle Automotive
Screw Machine (incorporated by reference to Exhibit 10(p)(1)
of the Registrant's Form 10-K, filed September 23, 1998).
Equipment Lease Schedule No. 19, dated November 1, 1998,
covering two Mikron CX-24 Rotary Transfer Machines (filed
herewith, E-1 - E-7).
2. Aircraft Lease Agreement, dated November 12, 1998, between
Registrant and General Electric Capital Corporation covering
a Cessna Citation V aircraft (filed herewith, E-8 - E-32).
29
3. Master Equipment Lease Agreement, dated July 10, 1995,
between Registrant and KeyCorp Leasing, Ltd., with Schedule
No. 1 covering four Tornos Bechler SAS-16DCH Multi-spindle
Automatic Screw Machines (incorporated by reference to
Exhibit 10(o)(12) of the Registrant's Form 10-K, filed
September 25, 1995).
Equipment Lease Schedule No. 2, dated September 18, 1997,
covering one Hydromat Rotary Transfer Machine (incorporated
by reference to Exhibit 10(p)(4) of the Registrant's Form
10-K, filed September 23, 1998).
Equipment Lease Schedule No. 3 & 4, both dated December 16,
1997, covering one Tornos Bechler BS20.8 and six Tornos
Bechler SAS-16DCH Multi-spindle Automatic Screw Machines
(incorporated by reference to Exhibit 10(p)(4) of the
Registrant's Form 10-K, filed September 23, 1998).
Equipment Lease Schedule No. 5, dated May 21, 1999, covering
two Sugino Jet Flex Centers (filed herewith, E-33 - E-42).
Equipment Lease Schedule No. 6, dated June 28, 1999,
covering four Tornos Bechler Multi-Spindle Automatic BS-20.8
Screw Machines (filed herewith, E-43 - E-52).
Equipment Lease Schedule No. 7, dated August 23, 1999,
covering one Mikron CX-24 Rotary Transfer Machine (filed
herewith, E-53 - E-62).
10(q) Lifetime contract, dated April 26, 1993, between Registrant and
General Motors Corporation (incorporated by reference to Exhibit
10(p) of the Registrant's Form 10-K, filed September 27, 1993, as
amended by the Registrant's Form 10-K/A, Amendment No. 1, filed
November 29, 1993).
10(r) Lifetime contract, dated May 1, 1994, between Registrant and
General Motors Corporation (incorporated by reference to Exhibit
10(p) of the Registrant's Form S-3, filed September 23, 1994).
10(s) Autocam Corporation 1998 Key Employee Stock Option Plan
(incorporated by reference to the Registrant's 1998 Definitive
Proxy Statement, filed September 23, 1998).
10(t) Stock Purchase Agreement, dated October 1, 1998, between Autocam
Corporation, Autocam France SARL and Compagnie Financiere du
Leman, a French Societe Anonyme (incorporated by reference to
Exhibit 2.1 of the Registrant's Form 8-K, filed October 14, 1998).
10(u) Indemnification Agreement, dated August 13, 1999, between
Autocam Corporation and each member of its Board of Directors,
individually (filed herewith, pages E-63 - E-70).
13 Consolidated Financial Statements for the Years Ended June
30, 1999, 1998 and 1997 (filed herewith, pages E-71 - E-97).
21 Subsidiaries of Registrant (filed herewith, page E-98).
23 Consent of Deloitte & Touche LLP (filed herewith, page E-99).
27 Financial Data Schedule (filed herewith, page E-100).
(b) Reports on Form 8-K during quarter ended June 30, 1999 - None.