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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___ TO ___
Commission file number 1-9634
<LOGO>
LARIZZA INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-1376202
(State of Incorporation) (I.R.S. Employer Identification No.)
Suite 1040
201 West Big Beaver Road
Troy, Michigan 48084
(Address of principal executive offices and zip code)
(810) 689-5800
(Registrant's telephone number, including area code)
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 X No ___
Number of shares of Common Stock, without par value, of the registrant
outstanding as of October 26, 1995: 22,088,107
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LARIZZA INDUSTRIES, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1995
INDEX
Page No.
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Part I. Financial Information:
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations -
Three Months and Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Condensed Financial Statements . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LARIZZA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
September 30, December 31,
1995 1994
------------ -----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 837 794
Accounts receivable, net 22,867 26,363
Inventories:
Raw materials 4,880 4,302
Work in process 1,409 1,992
Finished goods 2,378 2,307
---------- ---------
Total inventories 8,667 8,601
---------- ---------
Reimbursable tooling costs 15,346 4,810
Net current assets of discontinued operations - 1,624
Deferred income taxes 733 734
Other current assets 868 1,239
---------- ---------
Total current assets 49,318 44,165
---------- ---------
Property, plant and equipment, at cost 59,909 52,966
Less accumulated depreciation and amortization 27,417 23,479
---------- ---------
Net property, plant and equipment 32,492 29,487
---------- ---------
Notes receivable from principal shareholders 2,365 2,264
Goodwill and other intangibles, net 7,319 7,416
Net noncurrent assets of discontinued operations - 122
Deferred income taxes 1,404 250
---------- ---------
$ 92,898 83,704
========== =========
Current liabilities:
Current installments of long-term debt and capitalized lease obligation $ 257 2,101
Accounts payable 22,726 20,064
Income taxes payable 3,095 6,954
Accrued salaries and wages 2,468 2,047
Accrual for loss on sale of discontinued operations - 2,331
Other accrued expenses 5,419 7,020
---------- ---------
Total current liabilities 33,965 40,517
---------- ---------
Long-term debt, excluding current installments 34,150 30,000
Capitalized lease obligation, excluding current installments 335 510
Deferred income taxes 726 565
Other long-term liabilities 1,938 1,931
Shareholders' equity:
Common stock 76,780 76,780
Additional paid-in capital 5,551 5,551
Accumulated deficit (56,950) (67,484)
Foreign currency translation adjustment (3,597) (4,666)
---------- ---------
Total shareholders' equity 21,784 10,181
---------- ---------
$ 92,898 83,704
========== =========
See Accompanying notes to unaudited consolidated condensed financial
statements.
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LARIZZA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
Net sales $ 38,478 37,673 149,131 121,513
Cost of goods sold 33,644 30,334 123,111 95,356
---------- ------ ------- -------
Gross profit 4,834 7,339 26,020 26,157
Selling, general and administrative expenses 3,182 3,316 11,088 10,067
---------- ----- ------ -------
Operating income 1,652 4,023 14,932 16,090
Other income (expense):
Interest expense, net (645) (537) (1,956) (2,275)
Other, net 182 (3) (319) 252
---------- ----- ------ -------
(463) (540) (2,275) (2,023)
Income from continuing operations before income tax
provision and extraordinary gain 1,189 3,483 12,657 14,067
Income tax provision 175 735 2,925 3,550
---------- ------ ------- -------
Income from continuing operations before extraordinary gain 1,014 2,748 9,732 10,517
Discontinued operation:
Gain on disposal of discontinued operation - - 802 -
---------- ------ ------- -------
Income before extraordinary gain 1,014 2,748 10,534 10,517
Extraordinary gain on refinancing of debt - - - 2,405
---------- ------ ------- -------
Net income $ 1,014 2,748 10,534 12,922
========== ====== ======= =======
Income per common share:
Primary:
Income from continuing operations before extraordinary
gain $ 0.05 0.12 0.44 0.53
Gain from discontinued operation - - 0.04 -
Extraordinary gain - - - 0.12
---------- ------ ------- -------
Net income per common share $ 0.05 0.12 0.48 0.65
========== ====== ======= =======
Fully diluted:
Income from continuing operations before extraordinary
gain 0.51
Gain from discontinued operation -
Extraordinary gain 0.11
-------
Net income per common share 0.62
=======
Weighted average number of shares of common stock outstanding
Primary 22,088 22,088 22,088 19,995
Fully diluted 22,088
See accompanying notes to unaudited consolidated condensed financial
statements.
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LARIZZA INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1995 1994
-------- -------
Operations:
Net income
Noncash items: $ 10,534 12,922
Depreciation and amortization 3,883 3,106
Deferred income taxes (992) -
Amortization of deferred gain - (368)
Extraordinary gain on refinancing of debt - (2,405)
Gain on sale of discontinued operation (802) -
Interest accrued on long-term debt - 791
Operating working capital decrease (increase) (9,546) 1,406
Other, net 227 (408)
--------- --------
3,304 15,044
Investments:
Proceeds from sale of discontinued operation, net of subsidiary cash 1,164 -
Property, plant and equipment, net (6,107) (4,161)
Other, net (101) (96)
--------- --------
(5,044) (4,257)
Financing:
Issuance of debt - 36,000
Borrowings (repayments) of debt, net 2,105 (45,903)
--------- --------
2,105 (9,903)
Effect of exchange rates on cash (322) (617)
--------- --------
Net increase in cash and cash equivalents 43 267
Cash and cash equivalents at beginning of period 794 559
--------- --------
Cash and cash equivalents at end of period $837 826
========= ========
Noncash financing activities:
Conversion of debt to equity $ 59,578
========
See accompanying notes to unaudited consolidated condensed financial
statements.
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LARIZZA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(1) Basis of Presentation
In the opinion of management, the information furnished herein includes
all adjustments (all of which are of a normal recurring nature)
necessary for fair presentation of the results for the interim periods.
(2) Reclassifications
Certain amounts in the prior period's consolidated condensed financial
statements have been reclassified to conform to the 1995 presentation.
(3) Income Per Share
Primary income per common share is calculated by dividing net income by
the weighted average number of common shares outstanding during the
period.
On a fully-diluted basis for the nine months ended September 30, 1994,
both net income and shares outstanding were adjusted to assume the
conversion of the convertible term loan of $47,000,000 plus accrued
interest into 8,283,040 shares of common stock at the beginning of the
period. To adjust net income for the first nine months of 1994, interest
expense of $791,000 related to the convertible term loan was added back
into income.
(4) General Nuclear Corp. Divestiture
On June 1, 1995, the Company sold the common and preferred stock of its
wholly-owned subsidiary, General Nuclear Corp. The net cash proceeds of
approximately $1,155,000 resulted in a gain on sale of $802,000 after
considering the accrual for loss on sale of General Nuclear Corp. of
$2,195,000.
(5) Merger Agreement
On September 26, 1995, the Company signed a definitive Agreement and Plan
of Merger with Collins & Aikman Products Co. and its newly-formed,
wholly-owned subsidiary. Pursuant to the agreement, the subsidiary will
be merged with and into the Company, the Company will become a
wholly-owned subsidiary of Collins & Aikman Products Co. and each
outstanding share of the Company's common stock will be converted into
the right to receive $6.50 in cash, for a total purchase price of
approximately $144 million. In connection with the merger, Collins &
Aikman is expected to extinguish approximately $34 million of the
Company's existing debt. The agreement is subject to the approval of the
Company's shareholders and other customary conditions. Ronald T.
Larizza, the Company's Chairman of the Board and Chief Executive Officer,
has voting control over approximately 50.6% of the Company's outstanding
common stock and has agreed to vote those shares in favor of the merger.
Accordingly, the approval and adoption of the Agreement by the requisite
vote of the Company's shareholders is expected to occur irrespective of
whether, or the manner in which, any other shareholders of the Company
vote their shares.
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ITEM 2.
LARIZZA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPEMENTS:
On September 26, 1995, the Company signed a definitive Agreement and Plan of
Merger with Collins & Aikman Products Co. and it's newly-formed, wholly-owned
subsidiary. Pursuant to the agreement, the subsidiary will be merged with and
into the Company, the Company will become a wholly-owned subsidiary of Collins
& Aikman Products Co. and each outstanding share of the Company's common stock
will be converted into the right to receive $6.50 in cash, for a total purchase
price of approximately $144 million. In connection with the merger, Collins &
Aikman is expected to extinguish approximately $34 million of the Company's
existing debt. The Agreement is subject to the approval of the Company's
shareholders and other customary conditions. Ronald T. Larizza, the Company's
Chairman of the Board and Chief Executive Officer, has voting control over
approximately 50.6% of the Company's outstanding common stock and has agreed to
vote those shares in favor of the merger. Accordingly, the approval and
adoption of the Agreement by the requisite vote of the Company's shareholders
is expected to occur irrespective of whether, or the manner in which, any other
shareholders of the Company vote their shares.
RESULTS OF OPERATIONS:
Third Quarter Ended September 30, 1995 compared with
Third Quarter Ended September 30, 1994
Net sales increased $0.8 million, or 2.1%, in the quarter ended September 30,
1995 compared to the quarter ended September 30, 1994. This increase was
primarily due to new programs which were launched since the third quarter of
1994 and the acquisition of Hughes Plastics, Inc., in October 1994, partially
offset by the conclusion, in July 1995, of the contract to produce door panels
for the Chrysler Jeep Grand Cherokee. The Company has been awarded a contract
to produce door panels for the Cadillac Concours which will begin in the third
quarter of 1996.
Gross profit decreased $2.5 million, or 34.1%, in the quarter ended September
30, 1995 compared to the quarter ended September 30, 1994. The gross profit
margin decreased to 12.6% in the 1995 period from 19.5% in the 1994 period.
This decrease was caused primarily by the conclusion of the Chrysler Jeep Grand
Cherokee contract, which substantially idled one facility. This facility will
begin manufacturing door panels for the Cadillac Concours in the third quarter
of 1996, and accordingly, many of the fixed costs needed to operate this
facility remain in place. Gross profit margins were also impacted negatively
by losses incurred at Hughes Plastics and increased raw material costs.
Operating income for the quarter ended September 30, 1995 was $1.7 million
compared to operating income of $4.0 million for the quarter ended September
30, 1994. Operating income as a percentage of net sales was 4.3% in the
current quarter compared to 10.7% in the comparable prior year's quarter. The
decrease in operating income margins resulted from decreased gross profit
margins, partially offset by lower selling, general and administrative expenses
as a percentage of net sales. Selling, general and administrative expenses for
the quarter decreased by $0.1 million compared to the prior year's quarter.
Nine Months Ended September 30, 1995 compared with
Nine Months Ended September 30, 1994
Net sales for the nine months ended September 30, 1995 increased $27.6 million,
or 22.7%, compared with the net sales for the nine months ended September 30,
1994. This increase was primarily due to new programs which were launched
since the third quarter of 1994, increased production levels of certain
vehicles in which the Company's products are used and the acquisition of Hughes
Plastics, Inc. in October 1994, partially offset by the conclusion, in July
1995, of the contract to produce door panels for the Chrysler Jeep Grand
Cherokee. The Company has been awarded a contract to produce door
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LARIZZA INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
panels for the Cadillac Concours which will begin in the third quarter of 1996.
Gross profit decreased $0.1 million, or 0.5%, in the nine-month period ended
September 30, 1995 compared to the nine-month period ended September 30, 1994.
The gross profit margin decreased to 17.4% in the 1995 period from 21.5% in the
1994 period. This decrease was caused primarily by losses incurred at Hughes
Plastics, Inc., the conclusion of the Chrysler Jeep Grand Cherokee contract,
which substantially idled one facility, and increased raw material costs,
partially offset by the effect of higher sales on fixed costs. The idled
facility will begin manufacturing door panels for the Cadillac Concours in the
third quarter of 1996, and accordingly, many of the fixed costs needed to
operate this facility remain in place.
Operating income for the nine months ended September 30, 1995 was $14.9 million
compared to operating income of $16.1 million for the nine months ended
September 30, 1994. Operating income as a percentage of net sales was 10.0% in
the current period compared to 13.2% in the comparable prior year period. The
decrease in operating income margins resulted from decreased gross profit
margins, partially offset by lower selling, general and administrative expenses
as a percentage of net sales.
Selling, general and administrative expenses increased $1.0 million in the nine
months ended September 30, 1995 compared to the nine months ended September 30,
1994, due to increased sales, the addition of Hughes Plastics, Inc. and higher
corporate expenses. General and administrative expenses for the prior nine
months included costs associated with the filing of a Registration Statement
which was subsequently withdrawn and a refinancing of the Company's debt.
Selling, general and administrative expenses also declined as a percentage of
net sales because of the effect of higher sales on fixed costs.
For a description of the Company's sale of its shares of General Nuclear Corp.
and the resulting gain on the disposal of discontinued operations, see Note 4
of Notes to Consolidated Condensed Financial Statements in Part I of this
report.
Interest expense for the nine months ended September 30, 1995 decreased $0.3
million compared to the nine months ended September 30, 1994, primarily as a
result of the conversion of $47 million in principal amount of debt, plus the
related accrued interest, into common stock on March 11, 1994.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's net cash position at September 30, 1995 remained approximately
the same as at December 31, 1994. After investing $9.5 million in working
capital due primarily to investments in tooling for new programs and payments
of income taxes, $3.3 million was generated from operations. Cash of $6.1
million was used for capital expenditures, $1.2 million was generated from the
sale of a discontinued operation and $2.1 million was generated from additional
borrowings. The Company expects capital expenditures for 1995 to be
approximately $7.5 million.
In the event the merger with a subsidiary of Collins & Aikman Products Co.
occurs and the Company becomes a wholly-owned subsidiary of Collins & Aikman
Products approximately $34 million of the Company's existing indebtedness will
be extinguished by Collins & Aikman Products. The Company's primary needs for
liquidity during the next twelve months will be to support its working capital
needs, debt service requirements and capital expenditures. The Company
believes that cash generated by operations plus amounts available under its
line of credit will be adequate to fund its cash requirements for the next
twelve months. At September 30, 1995, the Company had $7.6 million available
under its line of credit.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
2.1 Agreement and Plan of Merger among the Company, Collins &
Aikman Products Co. and LRI Acquisition Corporation, dated
September 26, 1995, incorporated by reference from exhibit
number 2 to Amendment No. 5 to Schedule 13D filed with the
Securities and Exchange Commission by Ronald T. Larizza on
October 3, 1995.
2.2 Stock Agreement, between Ronald T. Larizza and Collins &
Aikman Products Co., dated September 26, 1995, incorporated
by reference from exhibit number 3 to Amendment No. 5 to
Schedule 13D filed with the Securities and Exchange
Commission by Ronald T. Larizza on October 3, 1995.
27 Financial Data Schedule
b) Reports on Form 8-K filed during the third quarter:
There were no reports on Form 8-K filed by the Registrant during the
quarter ended September 30, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LARIZZA INDUSTRIES, INC.
/s/ Terence C. Seikel
----------------------
Terence C. Seikel
Date: October 26, 1995 Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Officer of the
Registrant)
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EXHIBIT INDEX
Exhibit
No. Description Page
- ------- ----------- ----
2.1 Agreement and Plan of Merger among the Company, Collins & Aikman Products Co. n/a
and LRI Acquisition Corporation, dated September 26, 1995, incorporated by reference
from exhibit number 2 to Amendment No. 5 to Schedule 13D filed with the Securities
and Exchange Commission by Ronald T. Larizza on October 3, 1995.
2.2 Stock Agreement between Ronald T. Larizza and Collins & Aikman Products Co., dated n/a
September 26, 1995, incorporated by reference from exhibit number 3 to Amendment
No. 5 to Schedule 13D filed with the Securities and Exchange Commission by Ronald T.
Larizza on October 3, 1995.
27 Financial Data Schedule