SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 22, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 333-21819
LDM TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2690171
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (248) 858-2800
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
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]
Number of shares of common stock outstanding as of January 31, 2003: 600
Total pages: 23
Listing of exhibits: 19
1
LDM TECHNOLOGIES, INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, December 22, 2002 and
September 29, 2002 3
Condensed Consolidated Statements of Operations, three months
ended December 22, 2002 and December 23, 2001 4
Condensed Consolidated Statements of Cash Flows, three months ended
December 22, 2002 and December 23, 2001 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 15
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 18
ITEM 4 DISCLOSURE CONTROLS AND PROCEDURES 18
PART II OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security Holders Not applicable
Item 5 Other Information Not applicable
Signature Page 18
Item 6 Exhibits and Reports on Form 8-K 19
Certifications 20
2
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
DECEMBER 22, 2002 SEPTEMBER 29, 2002
(UNAUDITED) (NOTE)
----------------- ------------------
ASSETS
Current assets:
Cash $603 $932
Accounts receivable 68,738 77,151
Raw materials 7,652 8,424
Work in process 1,428 1,664
Finished goods 5,751 5,878
Mold costs 5,407 5,138
Prepaid expenses 2,948 2,101
Deferred income taxes 3,347 3,433
----------------- ------------------
Total current assets 95,874 104,721
Net property, plant and equipment 88,248 91,497
Goodwill 50,152 50,152
Debt issue costs, net 3,188 3,389
Equity investments in affiliate 7,400 7,300
Other assets 396 428
----------------- ------------------
Totals $245,258 $257,487
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $49,748 $54,714
Accrued liabilities 21,784 17,223
Accrued interest 5,284 2,638
Accrued compensation 4,213 5,542
Income taxes payable 1,848 78
Current maturities of long-term debt 11,305 11,305
----------------- ------------------
Total current liabilities 94,182 91,500
Lines of credit and revolving debt 3,872 20,079
Long-term debt due after one year 136,780 138,887
Deferred income taxes 2,515 2,424
STOCKHOLDERS' EQUITY
Common stock (par value; $.10, issued
and outstanding 600 shares,
authorized 100,000 shares)
Additional paid-in capital 94 94
Retained earnings 7,815 4,503
----------------- ------------------
Total stockholders' equity 7,909 4,597
----------------- ------------------
Totals $245,258 $257,487
================= ==================
Note: The balance sheet at September 29, 2002 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(dollars in thousands)
(Unaudited)
Three Months Ended
------------------------------------------------------------
December 22, 2002 December 23, 2001
-------------------- -------------------
Net sales $108,285 $95,430
Cost of sales 89,848 82,957
-------------------- -------------------
Gross margin 18,437 12,473
Selling, general and administrative expenses 9,704 8,179
-------------------- -------------------
Operating profit 8,733 4,294
Interest expense (3,533) (3,759)
Equity in income of affiliates, net 100 300
International currency exchange losses (106) (308)
Other income (expense), net 470 (431)
-------------------- -------------------
Income before income taxes 5,664 96
Provision for income taxes 2,352 17
-------------------- -------------------
Net income $3,312 $79
==================== ===================
See notes to condensed consolidated financial statements.
4
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
Three Months Ended
----------------------------------------------
December 22, December 23,
2002 2001
----------------- ------------------
Net cash provided by operating activities $20,025 $4,945
Cash flows from investing activities
Additions to property, plant and equipment (1,984) (1,435)
Proceeds from disposal of property, plant and equipment 17
----------------- ------------------
Net cash provided (used) for investing activities (1,967) (1,435)
Cash flows from financing activities
Payments on long-term debt (2,107) (2,576)
Net repayments on line of credit (16,207) (1,922)
Costs associated with debt acquisition (73) (72)
----------------- ------------------
Net cash used for financing activities (18,387) (4,570)
----------------- ------------------
Net cash change (329) (1,060)
Cash at beginning of period 932 2,320
----------------- ------------------
Cash at end of period $603 $1,260
================= ==================
Supplemental information
Total depreciation and amortization $5,225 $4,759
================= ==================
See notes to condensed consolidated financial statements.
5
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. 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 Article 10 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 (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month periods ending December 22,
2002 and December 23, 2001 are not necessarily indicative of the results that
may be expected for the year ending September 28, 2003. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended September 29, 2002.
The Company closed its quarters ended December 22, 2002 and December 23, 2001
one week early to allow for the Christmas holiday and automotive shutdown. Both
quarters contain 12 weeks.
2. Commitments and Contingencies
There have been no significant changes in commitments and contingencies from the
matters described in footnote 11 of the Company's consolidated financial
statements as of and for the fiscal year ended September 29, 2002.
3. Reclassification
The Company incurs certain expenditures at its plant locations. In the past,
these expenditures have been classified as selling, general and administrative
expenses. The Company believes that these expenditures are more accurately
characterized as cost of sales expenses as they directly support manufacturing
activities within the manufacturing facilities. As a result, for the three month
period ending December 23, 2001, these expenses have been reclassified from
selling, general and administrative expenses to cost of sales. There was no
impact to net earnings or equity resulting from this reclassification.
6
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
4. Derivative Financial Instruments
The Company's fair values of the swap and the collar (refer to footnote 1 of the
Company's consolidated financial statements as of and for the fiscal year ended
September 29, 2002) are reported on the balance sheet with changes in fair
value reported in the statement of operations in accordance with Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities," as amended ("FAS 133"). The Company has reflected the
fair value of these derivatives as a liability of $2.7 million which is included
as a component of accrued liabilities. The change in fair value for the three
months ended December 22, 2002, and three months ended December 23, 2001
resulted in income of $449 thousand and expense of $438 thousand, respectively,
which has been included as a component of other income (expense), net.
5. Income Taxes
The effective tax rate for the first quarter of 2003 was 41.5% compared to 17.7%
for the first quarter 2002. The interim effective rates are estimated based upon
fiscal year operating forecasts. The effective tax rates differ from statutory
rates due to certain nondeductible expenses.
6. Related Party Transactions
During fiscal year 2002, the Company acquired certain assets and the booked
business of Security Plastics West, Ltd., located in McAllen, Texas. As part of
the transaction the Company is leasing the building and real estate in McAllen
from a company majority owned by the Company's two shareholders. The leased
facility is 73,000 square feet and annual rentals approximate $300 thousand. The
lease has an initial term of 8 years with an option to renew at the end of the
initial lease term. In fiscal year 2002, the Company paid rentals for the
McAllen manufacturing facility of approximately $190 thousand. To date in fiscal
year 2003, the Company paid rentals for the same facility of approximately $75
thousand.
The Company and its two shareholders are party to a binding stock redemption
agreement which may be terminated by mutual agreement of the parties. Upon the
death of either shareholder, the Company is required to purchase and the
shareholder's estate is required to sell all of the shareholder's stock at a
price equal to $25 million, subject to subsequent adjustment. This amount
payable includes the proceeds of the life insurance policies owned by the
Company on the shareholder's life. Any shortfall between the insurance proceeds
and the amount payable to the shareholder's estate will require funding by the
Company, subject to restrictions in the Company's loan agreements.
The Company maintains life insurance policies of $17.0 million on the life of
Mr. Nash and $25.0 million on the life of Mr. Balous, the Company's two
shareholders. The annual premiums for such policies of insurance are
approximately $1.5 million. The Company is prohibited from assigning, pledging
or borrowing against these life insurance policies without the consent of the
insured shareholder.
7
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
7. Supplemental Guarantor Information
The 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit Facility, the
standby letters of credit with respect to the Multi-Option Adjustable Rate
Notes, the Variable Rate Demand Limited Obligation Revenue Bonds and the Senior
Term Loan, as more fully described in footnotes 6 and 7 of the Company's 10-K
for its fiscal year ended September 29, 2002, filed December 6, 2002, are
obligations of LDM Technologies, Inc. The obligations are guaranteed fully,
unconditionally and jointly and severally by LDM Canada and certain holding
companies.
Supplemental consolidating financial information of LDM Technologies, Inc. and
LDM Canada (including the related holding company guarantors) is presented
below. Investments in subsidiaries are presented on the equity method of
accounting. Separate financial statements of the guarantors are not provided
because management has concluded that the summarized financial information below
provides sufficient information to allow investors to separately determine the
nature of the assets held by and the operations of LDM Technologies, Inc., and
the guarantor subsidiaries.
8
LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of December 22, 2002 (Unaudited)
(dollars in thousands)
LDM Consolidating
Technologies, Inc. LDM Canada Entries Consolidated
------------------ -------------- --------------- ------------
ASSETS
Current assets:
Cash $ 602 $ 1 $ 603
Accounts receivable 64,797 3,941 68,738
Raw materials 6,342 1,310 7,652
Work in process 1,133 295 1,428
Finished goods 5,627 124 5,751
Mold costs 5,383 24 5,407
Prepaid expenses 2,927 21 2,948
Deferred income taxes 3,300 47 3,347
--------------- -------------- --------------- -----------
Total current assets 90,111 5,763 95,874
Net property, plant and equipment 78,620 9,628 88,248
Investment in subsidiaries and affiliates 9,758 $ (2,358) 7,400
Note receivable affiliates 9,336 1,057 (10,393)
Goodwill 50,152 50,152
Debt issue costs 3,188 3,188
Other 396 396
--------------- -------------- --------------- -----------
$ 241,561 $ 16,448 $ (12,751) $ 245,258
=============== ============== =============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,479 $ 3,593 $ (324) $ 49,748
Accrued liabilities 21,739 45 21,784
Accrued interest 5,284 5,284
Accrued compensation 3,830 383 4,213
Income taxes payable 1,848 1,848
Current maturities of long-term debt 11,305 11,305
--------------- -------------- --------------- -----------
Total current liabilities 90,485 4,021 (324) 94,182
Lines of credit and revolving debt 3,872 3,872
Long-term debt due after one year 136,780 10,068 (10,068) 136,780
Deferred income taxes 2,515 2,515
Stockholders' equity:
Common stock 5,850 (5,850)
Additional paid-in capital 94 94
Retained earnings 7,815 (3,491) 3,491 7,815
--------------- -------------- --------------- -----------
Total stockholders' equity 7,909 2,359 (2,359) 7,909
--------------- -------------- --------------- -----------
Total liabilities and stockholders' equity $ 241,561 $ 16,448 $ (12,751) $ 245,258
=============== ============== =============== ===========
9
LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of September 29, 2002 (Unaudited)
(dollars in thousands)
LDM Consolidating
Technologies, Inc. LDM Canada Entries Consolidated
------------------ -------------- --------------- ------------
ASSETS
Current assets:
Cash $ 683 $ 249 $ 932
Accounts receivable 72,343 4,808 77,151
Raw materials 7,042 1,382 8,424
Work in process 1,182 482 1,664
Finished goods 5,518 360 5,878
Mold costs 5,073 65 5,138
Prepaid expenses 2,087 14 2,101
Deferred income taxes 3,386 47 3,433
------------- ------------- -------------- ----------
Total current assets 97,314 7,407 104,721
Net property, plant and equipment 81,313 10,184 91,497
Investment in subsidiaries and affiliates 9,887 $ (2,587) 7,300
Note receivable affiliates 9,242 (9,242)
Goodwill 50,152 50,152
Debt issue costs 3,389 3,389
Other 428 428
------------- ------------- -------------- ----------
$ 251,725 $ 17,591 $ (11,829) $ 257,487
============= ============= ============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,204 $ 5,683 $ (173) $ 54,714
Accrued liabilities 17,223 17,223
Accrued interest 2,638 2,638
Accrued compensation 5,290 252 5,542
Income taxes payable 78 78
Current maturities of long-term debt 11,305 11,305
------------- ------------- -------------- ----------
Total current liabilities 85,738 5,935 (173) 91,500
Lines of credit and revolving debt 20,079 20,079
Long-term debt due after one year 138,887 9,068 (9,068) 138,887
Deferred income taxes 2,424 2,424
Stockholders' equity:
Common stock 5,850 (5,850)
Additional paid-in capital 94 94
Retained earnings 4,503 (3,262) 3,262 4,503
------------- ------------- -------------- ----------
Total stockholders' equity 4,597 2,588 (2,588) 4,597
------------- ------------- -------------- ----------
Total liabilities and stockholders' equity $ 251,725 $ 17,591 $ (11,829) $ 257,487
============= ============= ============== ==========
10
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Three Months ended
December 22, 2002 (Unaudited)
(dollars in thousands)
LDM
Technologies, LDM Consolidating
Inc. Canada Entries Consolidated
------------- ----------- --------------- -------------
Net sales $100,970 $7,315 $108,285
Cost of Sales 82,712 7,136 89,848
----------- ------------ --------------- -------------
Gross Margin 18,258 179 18,437
Selling, general and administrative expenses 9,649 55 9,704
----------- ------------ --------------- -------------
Operating profit 8,609 124 8,733
Interest expense (3,507) (253) $227 (3,533)
Other income (expense), net 691 6 (227) 470
International currency exchange losses (106) (106)
Equity in net income (loss) of
subsidiaries and affiliates (129) 229 100
----------- ------------ --------------- -------------
Income (loss) before income taxes 5,664 (229) 229 5,664
Provision for income taxes 2,352 2,352
----------- ------------ --------------- -------------
Net income (loss) $3,312 $(229) $229 $3,312
=========== ============ =============== =============
11
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Three Months ended
December 23, 2001 (Unaudited)
(dollars in thousands)
LDM
Technologies, LDM Consolidating
Inc. Canada Entries Consolidated
------------- ----------- --------------- -------------
Net sales $80,621 $14,809 $95,430
Cost of Sales 68,834 14,123 82,957
------------- ------------ --------------- -------------
Gross Margin 11,787 686 12,473
Selling, general and administrative expenses 8,081 98 8,179
------------- ------------ --------------- -------------
Operating profit 3,706 588 4,294
Interest expense (3,733) (264) $238 (3,759)
Other income (expense), net (193) (238) (431)
International currency exchange losses (308) (308)
Equity in net income of subsidiaries
and affiliates 284 16 300
------------- ------------ --------------- -------------
Income before income taxes 64 16 16 96
Provision for income taxes (15) 32 17
------------- ------------ --------------- -------------
Net income (loss) $79 $(16) $16 $79
============= ============ =============== =============
12
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows for Three Months Ended
December 22, 2002 (Unaudited)
(dollars in thousands)
LDM
Technologies, LDM
Inc. Canada Consolidated
------------ ---------- -------------
Net cash provided (used) by operating activities $20,325 $(300) $20,025
Cash flows from investing activities
Additions to property, plant and equipment (1,942) (42) (1,984)
Proceeds from sale of property, plant and equipment 17 17
------------ ---------- -------------
Net cash used by investing activities (1,925) (42) (1,967)
Cash flows from financing activities
Borrowing (to)/from affiliates (94) 94
Costs associated with debt acquisition (73) (73)
Payments on long-term debt (2,107) (2,107)
Net repayments on line of credit borrowings (16,207) (16,207)
------------ ---------- -------------
Net cash provided (used) by financing activities (18,481) 94 (18,387)
------------ ---------- -------------
Net cash change (81) (348) (329)
Cash at beginning of period 683 249 932
------------ ---------- -------------
Cash at end of period $602 $1 $603
============ ========== =============
Supplemental information:
Depreciation and amortization $4,627 $598 $5,225
============ ========== =============
13
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows for Three Months Ended
December 23, 2001 (Unaudited)
(dollars in thousands)
LDM
Technologies, LDM
Inc. Canada Consolidated
------------ ---------- -------------
Net cash provided (used) by operating activities $5,695 $(750) $4,945
Cash flows from investing activities
Additions to property, plant and equipment (1,502) 67 (1,435)
------------ ---------- -------------
Net cash provided (used) by investing activities (1,502) 67 (1,435)
Cash flows from financing activities
Borrowing (to)/from affiliates 452 (452)
Costs associated with debt acquisition (72) (72)
Payments on long-term debt (2,576) (2,576)
Net repayments on line of credit borrowings (1,922) (1,922)
------------ ---------- -------------
Net cash used by financing activities (4,118) (452) (4,570)
------------ ---------- -------------
Net cash change 75 (1,135) (1,060)
Cash at beginning of period 23 2,297 2,320
------------ ---------- -------------
Cash at end of period $98 $ 1,162 $1,260
============ ========== =============
Supplemental information:
Depreciation and amortization $4,149 $610 $4,759
============ ========== =============
14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. When used in this report, the words
"anticipate," "believe," "estimate" and "expect" and similar expressions are
generally intended to identify forward-looking statements. Readers are cautioned
that any forward-looking statements, including statements regarding the intent,
belief or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
the actual results may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to: (i)
general economic conditions in the markets in which the Company operates or will
operate; (ii) fluctuations in worldwide or regional automobile and light and
heavy truck production; (iii) labor disputes involving the Company or its
significant customers or suppliers; (iv) changes in practices and/or policies of
the Company's significant customers toward outsourcing automotive components and
systems; (v) foreign currency and exchange fluctuations; and (vi) other risks
detailed from time to time in the Company's filings with the Securities and
Exchange Commission. The Company does not intend to update these forward-looking
statements.
CRITICAL ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. The Company's significant accounting policies are
more fully described in Note 1 of the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended September 29, 2002. Certain of the accounting policies require the
application of significant judgment by management in selecting appropriate
assumptions for calculating financial estimates. By their nature, these
judgments are subject to an inherent degree of uncertainty.
GOODWILL
Goodwill totaled $50.2 million at December 22, 2002 and represented
approximately 20.4% of total assets. The majority of the goodwill resulted from
the acquisitions of Molmec, Inc. and Huron Plastics Group, Inc. which were
completed in fiscal year 1997 and fiscal year 1998, respectively. Effective
October 1, 2001, the Company elected to early adopt Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. Under the
new standard, goodwill is no longer amortized but is subject to annual
impairment tests in accordance with the Statement. Under Statement No. 142 the
Company estimates the fair value of each of its reporting units with goodwill.
Estimated fair value was based upon discounted cash flows. The results of the
Company's Statement No. 142 analysis indicate that no reduction in goodwill is
required. Statement No. 142 requires the Company to perform impairment tests of
goodwill on an annual basis (or more frequently if impairment indicators exist).
INCOME TAXES
The Company provides an estimate of actual current tax due together with an
assessment of temporary differences resulting from the treatment of items for
tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included within the balance sheets. Based on known and
projected earnings information and any available tax planning strategies, the
Company then assesses the likelihood that the deferred tax assets will be
recovered. To the extent that the Company believes recovery is not likely, a
valuation allowance is established.
Significant management judgment is required in determining the provision for
income taxes, deferred tax assets and liabilities and any valuation allowance
recorded against net deferred tax assets. At December 22, 2002, the Company had
net deferred tax assets, after valuation allowances, of $0.8 million.
15
Deferred tax assets in Canada relate primarily to net operating loss
carryforwards (NOL's) for which the Company has recognized a valuation allowance
of $1.2 million.
In the United States realization of the deferred tax assets is dependent upon
future taxable income. Based on consideration of historical and future earnings
before income taxes, the Company believes it is more likely than not that the
deferred tax assets, beyond those specifically reserved, will be realized.
The Company evaluates its deferred taxes and related valuation allowances
quarterly. If at any time the Company believes that current or future taxable
income will not support the basis for recognizing the benefit of the deferred
tax assets, valuation allowances are provided accordingly.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE
Accounts receivable have been reduced by an allowance for amounts that may
become uncollectible in the future. This estimated allowance is based primarily
on management's evaluation of customer productivity reimbursement programs and
historical experience. The allowance amount at December 22, 2002 and September
29, 2002 was $0.5 million.
RESULTS OF OPERATIONS
The Company closed its quarters ended December 22, 2002 and December 23, 2001
one week early to allow for the Christmas holiday and automotive shutdown. Both
quarters contain 12 weeks.
QUARTER ENDED DECEMBER 22, 2002 COMPARED TO THE QUARTER ENDED
DECEMBER 23, 2001
Net sales for the quarter ended December 22, 2002 ("first quarter 2003") were
$108.3 million, an increase of $12.9 million or 13.5% from the quarter ended
December 23, 2001 ("first quarter 2002"). The increase in net sales is primarily
due to the launch of new products from the Company's facility in Romulus,
Michigan in March and August of 2002. The Romulus facility reported $23.6
million in net sales for the first quarter of 2003.
Gross margin was $18.4 million or 17.0% of net sales for the first quarter 2003
compared with $12.5 million or 13.1% of net sales for the first quarter 2002.
The gross margin improvement is due to the fiscal 2003 sales generated at the
Romulus facility to absorb fixed costs generated by the facility.
Selling, General and Administrative (SG&A) expense for the first quarter 2003
was $9.7 million, or 9.0% of net sales compared to $8.2 million, or 8.6% of net
sales for the first quarter of 2002. Expense has increased due to the
reinstatement of certain employee benefits as the Company has returned to
profitability.
Interest expense for the first quarter 2003 was $3.5 million compared to $3.8
million for the first quarter 2002. The decrease in interest expense is due to
scheduled debt repayments, a decrease in variable interest rates and lower
average borrowings outstanding on the Company's line of credit.
The effective tax rate for the first quarter of 2003 was 41.5% compared to 17.7%
for the first quarter 2002. The interim effective rates are estimated based upon
fiscal year operating forecasts. The effective tax rates differ from statutory
rates due to certain nondeductible expenses.
At December 22, 2002, the Company had net deferred tax assets of $832 thousand.
The Company evaluates the necessity for a valuation allowance on deferred tax
assets by taxing jurisdiction. Deferred tax assets in the United States and
Canada relate primarily to net operating loss carryforwards (NOL's).
In Canada, the Company has recognized a valuation allowance of $1.2 million.
16
In the United States realization of the deferred tax assets is dependent upon
future taxable income. Based on consideration of historical and future earnings
before income taxes, the Company believes it is more likely than not that the
deferred tax assets, beyond those specifically reserved, will be realized.
The Company evaluates its deferred taxes and related valuation allowances
quarterly. If at any time the Company believes that current or future taxable
income will not support the basis for recognizing the benefit of the deferred
tax assets, valuation allowances are provided accordingly.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital needs,
to meet required debt obligations, and to fund capital expenditures for facility
maintenance and expansion. The Company believes its future cash flow from
operations, combined with its revolving credit availability will be sufficient
to meet its planned debt service, capital requirements, and internal growth
opportunities. As of December 22, 2002, the Company had $136.8 million of
long-term debt outstanding, $15.2 million of revolving loans and current
maturities of long-term debt outstanding, and $41.4 million of borrowing
availability under its revolving credit facility.
Cash provided by operating activities in first quarter 2003 was $20.0 million
compared to $4.9 million in the first quarter 2002. The increase is due to the
timing of accounts receivable reimbursement in first quarter 2003. Approximately
$15 million in customer payments, expected to be received in late September
2002, were received instead in early October 2002.
Capital expenditures for first quarter 2003 were $2.0 million compared to $1.4
million for first quarter 2002. The Company believes its capital expenditures
will be approximately $16 million in fiscal year 2003. The majority of the
Company's fiscal year 2003 capital expenditures will be used to refresh current
equipment and facilitate new programs launching in fiscal year 2003.
Long-term debt has decreased due to scheduled principal repayments of senior
term debt, including an excess cash flow payment. This payment is due January
1st of every year if excess cash flow exists as defined by the senior term loan
agreement. As a result of excess cash flow generated in fiscal year 2002, the
Company made an additional senior term loan payment of $2.8 million in January
2003.
The following information summarizes the Company's significant contractual cash
obligations and other commercial commitments at December 22, 2002:
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD (000'S)
---------------------------------------------------------------------
LESS THAN 1
TOTAL YEAR 1-3 YEARS 4 - 5 YEARS AFTER 5 YEARS
-------- ------- -------- ----------- -------------
Long Term Debt $148,085 $11,305 $23,435 $107,675 $5,670
Lines of Credit 3,872 3,872
Operating Leases 39,621 12,178 11,708 5,647 10,088
-------- ------- ------- -------- -------
Total Contractual Cash Obligations $191,578 $23,483 $39,015 $113,322 $15,758
======== ======= ======= ======== =======
OTHER COMMERCIAL AMOUNT OF COMMITMENT EXPIRATION PER PERIOD (000'S)
COMMITMENTS ---------------------------------------------------------------
-----------
TOTAL AMOUNTS LESS THAN 1
COMMITTED YEAR 1 -- 3 YEARS OVER 5 YEARS
--------- ---- ------------ ------------
Unused Lines of Credit $43,506 $43,506
Standby Letters of Credit 15,622 14,173 - 1,449
------- ------- ------- ------
Total Commercial Commitments $59,128 $14,173 $43,506 $1,449
======= ======= ======= ======
17
The Company's liquidity is affected by both the cyclical nature of its business
and the level of net sales to its major customers. The Company's ability to meet
its working capital and capital expenditure requirements and debt obligations
will depend on its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. However, the Company believes that its
existing borrowing ability and cash flow from operations will be sufficient to
meet its liquidity requirements in the foreseeable future.
Item 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's exposure to market risk
since September 29, 2002.
Item 4: DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, an evaluation was performed
under the supervision and with the participation of the Company's management,
including the CEO and CFO, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based on that evaluation, the
Company's management, including the CEO and CFO, concluded that the Company's
disclosure controls and procedures are effective in causing the material
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Act of 1934 to be recorded, processed,
summarized and reported, to the extent applicable, within the time periods
specified in the Securities and Exchange Commission's rules and forms. There
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to the date
the Company carried out its evaluation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LDM TECHNOLOGIES, INC.
By: /s/ Gary E. Borushko
---------------------------
Gary E. Borushko
Chief Financial Officer
By: /s/ Bradley N. Frederick
---------------------------
Bradley N. Frederick
V.P. of Finance
Chief Accounting Officer
Dated: February 4, 2003
18
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. EXHIBIT DESCRIPTION
99.1 Certification of the Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of the Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
The registrant filed no reports on Form 8-K during the quarter for which this
Report is filed.
19
CERTIFICATION
I, Alan C. Johnson certify that:
1. I have reviewed this quarterly report on Form 10-Q of LDM Technologies,
Inc. ("the registrant");
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
registrant's board of directors:
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 weakness 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 Company's other certifying officer and I have indicated in this
quarterly report whether 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.
By: /s/ A.C. Johnson
---------------------------
Alan C. Johnson
Chief Executive Officer
February 4, 2003
20
CERTIFICATION
I, Gary E. Borushko certify that:
1. I have reviewed this quarterly report on Form 10-Q of LDM Technologies,
Inc. ("the registrant");
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
registrant's board of directors:
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 weakness 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 Company's other certifying officer and I have indicated in this
quarterly report whether 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.
By: /s/ G.E. Borushko
----------------------------
Gary E. Borushko
Chief Financial Officer
February 4, 2003
21
10-Q EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-99.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
EX-99.2 Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002