1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 June 29, 1997
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 333-21819
LDM TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2690171
(State or other jurisdiciton of (I.R.S. Employer
incorporation or organization) Identification No.)
2500 Executive Hills Drive
Auburn Hills, Michigan 48326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (810) 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 files such reports), and (2) has been subject to the
filing requirements for the past 90 days.
YES X NO
----
Number of shares of common stock outstanding as of August 12, 1997: 600
Total pages:
Listing of exhibits:
2
LDM TECHNOLOGIES, INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statments (unaudited)
Condensed Consolidated Balance Sheets, June 29, 1997 and
September 29, 1996 3
Condensed Consolidated Statements of Income, Three months ended
June 29, 1997 and June 23, 1996 4
Condensed Consolidated Statements of Income, Nine months ended
June 29, 1997 and June 23, 1996 5
Condensed Consolidated Statements of Cash Flows, Nine months
ended June 29, 1997 and June 23, 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 22
ITEM 2. CHANGES IN SECURITIES 22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 22
ITEM 5. OTHER INFORMATION 22
SIGNATURE PAGE 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 24
INDEX TO EXHIBITS
EXHIBIT 27 - FIANCIAL DATA SCHEDULE
2
3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
JUNE 29, SEPTEMBER 29,
1997 1996
(UNAUDITED) (Note)
----------- -------------
ASSETS
Current assets:
Cash $5,462 $2,122
Accounts Receivable 52,575 35,482
Raw materials 9,381 7,713
Work in process 1,649 1,368
Finished goods 5,131 2,752
Mold costs 13,891 7,129
Deferred income taxes 973 829
Other current assets 1,643 454
-------- --------
Total current assets 90,705 57,849
Cash and equivalents restricted as to use 658
Net property, plant and equipment 82,686 58,956
Goodwill and other intangibles 42,954 1,298
-------- --------
Totals $216,345 $118,761
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan in default $20,935
Lines of credit and revolving loans $1,692
Long-term debt in default 27,422
Accounts payable 33,846 30,834
Accrued liabilities 11,022 7,394
Accrued interest 5,256 204
Accrued compensation 2,911 4,202
Advance mold payments from customers 10,812 3,661
Income taxes payable 3,118 2,095
Current maturities of long-term debt 1,188 1,320
-------- --------
Total current liabilities 69,845 98,067
Long-term debt due after one year 122,391 2,109
Deferred income taxes 870 841
Minority interests 343 422
Stockholders' Equity:
Common Stock (par value $.10, issued and
outstanding 600 shares; authorized 100,000 shares)
Additional paid-in capital 94 94
Retained earnings 22,884 17,290
Foreign currency translation adjustments (82) (62)
-------- --------
Total stockholders' equity 22,896 17,322
-------- --------
Totals $216,345 $118,761
======== ========
Note: The balance sheet at September 29, 1996 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 contained herein.
3
4
LDM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
--------------------
THREE MONTHS ENDED
--------------------
JUNE 29, JUNE 23,
1997 1996
-------- --------
Revenues:
Net product sales $77,821 $50,137
Net mold sales 4,539 6,743
------- -------
82,360 56,880
Cost of Sales
Cost of product sales 59,502 41,337
Cost of mold sales 4,209 5,753
------- -------
63,711 47,090
------- -------
Gross margin 18,649 9,790
Selling, general and administrative expenses 10,393 6,479
------- -------
Operating profit 8,256 3,311
Interest expense (3,405) (802)
Other income, net 330 231
------- -------
Income from continuing operations before income
taxes and minority interest 5,181 2,740
Provision for income taxes 1,941 1,369
------- -------
Income from continuing operations before minority
interest 3,240 1,371
Minority interest (7) 35
------- -------
Income from continuing operations 3,233 1,406
Loss from discontinued operations (70)
------- -------
Net Income $3,233 $1,336
======= =======
See accompanying notes
4
5
LDM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
-------------------
NINE MONTHS ENDED
-------------------
JUNE 29, JUNE 23,
1997 1996
-------- --------
Revenues:
Net product sales $197,337 $142,118
Net mold sales 17,901 19,851
-------- --------
215,238 161,969
Cost of Sales
Cost of product sales 157,142 117,730
Cost of mold sales 16,926 17,768
-------- --------
174,068 135,498
-------- --------
Gross margin 41,170 26,471
Selling, general and administrative expenses 25,521 19,873
-------- --------
Operating profit 15,649 6,598
Interest expense (7,386) (2,575)
Other income, net 584 454
-------- --------
Income from continuing operations before income
taxes, minority interest, and extraordinary item 8,847 4,477
Provision for income taxes 3,331 2,709
-------- --------
Income from continuing operations before minority
interest and extraordinary item 5,516 1,768
Minority interest 79 93
-------- --------
Income from continuing operations before
extraordinary item 5,595 1,861
Loss from discontinued operations (42)
-------- --------
Income before extraordinary item 5,595 1,819
Extraordinary gain on debt refinancing, no income tax effect 754
-------- --------
Net income $5,595 $2,573
======== ========
See accompanying notes
5
6
LDM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR NINE MONTHS
ENDED ENDED
JUNE 29, JUNE 23,
1997 1996
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $9,234 $7,370
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (10,850) (12,212)
Proceeds from disposals of property, plant and equipment 1,536 5
Use of investments restricted to property, plant and 658 5,563
equipment Purchase of Molmec, net of $2,705 cash acquired (53,198)
Purchase of Kendallville (6,878)
------- -------
NET CASH USED FOR INVESTING ACTIVITIES (68,732) (6,644)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt net of $5,911 and $349 debt
issuance costs in 1997 and 1996, respectively 104,089 9,058
Payments on long-term debt (22,039) (3,240)
Net repayments on line of credit borrowings (19,212) (7,206)
------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 62,838 (1,388)
------- -------
Net cash change 3,340 (662)
Cash at beginning of period 2,122 1,138
------- -------
Cash at end of period $5,462 $476
======= =======
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7
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. 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 nine-month
and three month periods ending June 29, 1997 and June 23, 1996 are not
necessarily indicative of the results that may be expected for the year ending
September 28, 1997. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
financial statements included in the Company's prospectus dated April 29, 1997.
2. IMPACT OF ACCOUNTING STANDARD ADOPTED IN THE FISCAL YEAR ENDING IN
SEPTEMBER, 1997
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of,which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company's former policy was to measure an impairment loss for assets held for
use based upon expected undiscounted future cash flows. The Company adopted
Statement 121 in the first quarter of the fiscal year ending September 28, 1997,
and based on current circumstances, no impairment losses were required to be
recognized.
3. EXTRAORDINARY ITEM
In November 1996, LDM Technologies Company, an indirect subsidiary of the
Company, retired notes payable to Barclays Bank of Canada and Gentra Canada,
resulting in a $753,510 extraordinary gain on extinguishment. Because of the
1996 Canadian operating losses, there was no tax effect related to the gain.
7
8
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
4. PURCHASE OF MOLMEC
On January 22, 1997, the Company purchased the business and certain net assets
of Molmec, Inc. (a manufacturer of automotive under the hood plastics products)
for approximately $55 million. The acquisition was financed by the issuance of
debt as described in note 6. The acquisition was accounted for using the
purchase method. Accordingly, the assets acquired and liabilities assumed were
recorded at fair values and the excess of the purchase price over the net
assets acquired was recorded as goodwill which will be amortized over 15 years
using the straight-line method.
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9
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
5. ISSUANCE OF DEBT
On January 22, 1997, the Company issued, in a private placement (the "Initial
Offering"), $110 million aggregate principal amount of its 10 3/4% Senior
Subordinated Notes due 2007, Series A (the "Notes"). The net proceeds of the
Initial Offering, which amounted to approximately $105 million, were used to
repay debt in default amounting to $37.8 million, to repay a $3 million note
payable to a former shareholder, to fund the acquisition described in note 5
and for general corporate purposes. In addition, the Company obtained a new
senior credit facility which provides available borrowings of up to $45 million
under revolving loans. The Company also obtained a replacement letter of credit
with respect to its $8.8 million Multi-Option Adjustable Rate Notes.
On February 14, 1997 the Company filed a registration statement on Form S-4 to
register $110 million aggregate principal amount of its 10 3/4% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes"). The Exchange
Notes have identical terms and conditions as the Notes, except for certain
transfer restrictions relating to the Notes. The Company's registration
statement was declared effective on April 29, 1997 by the Commission. As of May
28, 1997, the day the exchange offer expired, $109 million Exchange Notes were
exchanged for the Notes. The Notes and the Exchange Notes are guaranteed by
certain subsidiaries of the Company, namely LDM Holdings, L.L.C., LDM Canada
Limited Partnership and LDM Technologies Company, but will not be guaranteed by
Como or LDM Technologies S. de R.L. Neither LDM Holdings, L.L.C. nor LDM Canada
Limited Partnership have investments or activities other than their ownership
interests in LDM Technologies Company. Supplemental financial information for
the guarantor and nonguarantor subsidiaries is disclosed below.
6. PURCHASE OF AEROQUIP KENDALLVILLE, INDIANA FACILITY
On April 25, 1997, the Company acquired certain assets of a U.S. manufacturer
of automotive instrumental panel air vents for a purchase price of
approximately $6.9 million. Net sales for the entity were approximately $15.5
million for the twelve month period ended March 30, 1997 of which approximately
$5.9 million were sales to the Company. The acquisition will allow the Company
to vertically integrate and increase its instrument panel manufacturing
capabilities. The acquisition was financed with operating cash and was
accounted for using the purchase method. Accordingly, the assets acquired and
liabilities assumed were recorded at fair values and the excess of the purchase
price over the net assets acquired was recorded as goodwill which be amortized
over 15 years using the straight-line method.
7. PRO FORMA UNAUDITED RESULTS OF OPERATIONS
The pro forma unaudited results of operations for the nine month period ended
June 29, 1997 and June 23, 1996, assuming consummation of the Molmec and
Kendallville purchases and issuance of debt described in notes 4, 5 and 6 as of
September 25, 1995, are as follows:
For nine months ended
June 29, 1997 June 23, 1996
------------- -------------
(dollars in thousands)
Net sales $246,756 $238,019
Net income $ 6,697 $ 841
8. SUPPLEMENTAL GUARANTOR INFORMATION
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility and the standby letter of credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes are obligations of LDM Technologies, Inc.
The obligations are guaranteed fully, unconditionally and jointly and severally
by LDM Technologies Company and certain other subsidiaries, as described in
note 5. Distributions by the guarantor subsidiaries to the Company are
restricted so long as the Notes and Exchange Notes are outstanding.
Non-guarantor subsidiaries are Como, a 75% owned subsidiary and LDM
Technologies de Mexico, a 99% owned subsidiary.
Supplemental consolidating financial information of LDM Technologies, Inc., LDM
Canada and nonguarantor subsidiaries is presented below.
9
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of June 29, 1997 (Unaudited)
(Dollars in Thousands)
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
---- ------ ------------ ------- ------------
ASSETS
Current assets:
Cash $ 1,827 $ 3,282 $ 353 $ $ 5,462
Trade accounts receivable 46,643 5,818 2,520 (2,406) 52,575
Raw materials 6,444 1,512 1,425 9,381
Work in process 1,278 189 182 1,649
Finished goods 3,957 750 424 5,131
Mold costs 5,580 2,023 6,288 13,891
Deferred income taxes 768 205 973
Other current assets 937 194 512 1,643
---------------------------------------------------------
Total current assets 67,434 13,768 11,909 (2,406) 90,705
Cash & equivalents restricted to property, plant
and equipment
Property, plant, and equipment less
accumulated depreciation 64,283 16,098 2,305 82,686
Notes receivable due from affiliates 20,684 (20,684)
Investment in subsidiaries 337 (337)
Other assets 42,769 56 129 42,954
---------------------------------------------------------
Totals $195,507 $29,922 $14,343 ($23,427) $216,345
=========================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ $ $ 1,692 $ $ 1,692
Accounts payable 27,963 5,917 2,713 (2,747) 33,846
Accrued liabilities 8,304 2,474 244 11,022
Accrued interest 5,256 5,256
Accrued payroll and withholding taxes 1,855 584 472 2,911
Advance mold payments from customers 990 2,567 7,418 (163) 10,812
Income taxes payable 3,376 (258) 3,118
Current portion of long-term debt 850 338 1,188
---------------------------------------------------------
Total current liabilities 48,594 11,542 12,619 (2,910) 69,845
Long-term debt - net of current portion 122,298 5 88 122,391
Deferred income taxes 555 315 870
Notes payable due to affilitates 15,412 262 (15,674)
Minority interest in subsidiaries 343 343
Stockholders' Equity
Common Stock (par value $.10, issued and
outstanding 600 shares; authorized 100,000
shares) 5,850 1 (5,851)
Additional paid-in capital 94 133 (133) 94
Retained earnings 24,028 (2,805) 925 736 22,884
Foreign currency translation adjustment (62) (82) 62 (82)
---------------------------------------------------------
Total stockholders' equity 24,060 2,963 1,059 (5,186) 22,896
---------------------------------------------------------
Totals $195,507 $29,922 $14,343 ($23,427) $216,345
=========================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of September 29, 1996 (Unaudited)
(Dollars in Thousands)
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
---- ------ ------------ ------- ------------
ASSETS
Current assets:
Cash $9 $17 $ 2,096 $ $ 2,122
Trade accounts receivable 24,257 9,405 3,132 (1,312) 35,482
Raw materials 4,274 2,250 1,189 7,713
Work in process 950 279 139 1,368
Finished goods 1,833 488 431 2,752
Mold costs 5,503 399 1,227 7,129
Deferred income taxes 624 205 829
Other current assets 165 218 71 454
--------------------------------------------------------------------
Total current assets 37,615 13,056 8,490 (1,312) 57,849
Cash & equivalents restricted to property, plant and equipment 658 658
Property, plant, and equipment less
accumulated depreciation 40,441 16,040 2,475 58,956
Notes receivable due from affiliates 3,909 (3,909)
Investment in subsidiaries 514 (514)
Other assets 548 165 585 1,298
--------------------------------------------------------------------
Totals $83,685 $ 29,261 $11,550 ($5,735) $118,761
====================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan in default $15,500 $ 3,634 $ 1,801 $ $ 20,935
Long-term debt in default 17,781 9,641 27,422
Accounts payable 18,152 11,896 2,091 (1,305) 30,834
Accrued liabilities 4,401 845 2,148 7,394
Accrued interest 204 204
Accrued payroll and withholding taxes 4,202 4,202
Advance mold payments from customers 45 3,616 3,661
Income taxes payable 2,087 8 2,095
Current portion of long-term debt 1,168 4 148 1,320
--------------------------------------------------------------------
Total current liabilities 63,495 26,073 9,804 (1,305) 98,067
Long-term debt - net of current portion 1,920 2 187 2,109
Deferred income taxes 526 315 841
Notes payable due to affilitates 3,909 (3,909)
Minority interest in subsidiaries 422 422
Stockholders' Equity
Common Stock (par value $.10, issued and
outstanding 600 shares; authorized 100,000 shares) 1,350 1 (1,351)
Additional paid-in capital 94 133 (133) 94
Retained earnings 17,290 (2,011) 1,110 901 17,290
Foreign currency translation adjustment (62) (62) 62 (62)
--------------------------------------------------------------------
Total stockholders' equity 17,322 (723) 1,244 (521) 17,322
--------------------------------------------------------------------
Totals $83,685 $29,261 $11,550 ($5,735) $118,761
====================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Three Months Ended June 29,
1997 (Unaudited)
(Dollars in Thousands)
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
---- ------ ------------ ------- ------------
Revenues:
Net product sales $63,467 $10,203 $4,469 ($318) $77,821
Net mold sales 2,868 212 1,459 4,539
--------------------------------------------------------------------------
66,335 10,415 5,928 (318) 82,360
Cost of Sales
Cost of product sales 46,274 9,325 4,221 (318) 59,502
Cost of mold sales 2,834 124 1,251 4,209
--------------------------------------------------------------------------
49,108 9,449 5,472 (318) 63,711
--------------------------------------------------------------------------
Gross margin 17,227 966 456 18,649
Selling, general and administrative expenses 9,517 489 387 10,393
--------------------------------------------------------------------------
Operating profit 7,710 477 69 8,256
Interest expense (3,331) (438) (65) 429 (3,405)
Other income, net 726 29 4 (429) 330
Equity in net income of subsidiaries 58 (58)
--------------------------------------------------------------------------
Income from continuing operations before income
taxes and minority interest 5,163 68 8 (58) 5,181
Provision for income taxes 1,923 18 1,941
--------------------------------------------------------------------------
Income (loss) from continuing operations before
minority interest 3,240 68 (10) (58) 3,240
Minority interest loss (7) (7)
--------------------------------------------------------------------------
Net income (loss) $ 3,233 $68 ($10) ($58) $3,233
==========================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Three Months Ended June 23,
1996 (Unaudited)
(Dollars in Thousands)
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
---- ------ ------------ ------- ------------
Revenues:
Net product sales $38,892 $6,369 $4,876 $ $50,137
Net mold sales 4,582 2,033 128 6,743
-------------------------------------------------------------------------
43,474 8,402 5,004 56,880
Cost of Sales
Cost of product sales 29,400 7,313 4,624 41,337
Cost of mold sales 4,119 1,520 114 5,753
-------------------------------------------------------------------------
33,519 8,833 4,738 47,090
-------------------------------------------------------------------------
Gross margin 9,955 (431) 266 9,790
Selling, general and administrative expenses 5,557 459 463 6,479
-------------------------------------------------------------------------
Operating profit (loss) 4,398 (890) (197) 3,311
Interest expense (465) (278) (59) (802)
Other income, net 191 31 9 231
Equity in net loss of subsidiaries (915) 915
-------------------------------------------------------------------------
Income (loss) from continuing operations before income
taxes and minority interest 3,209 (1,137) (247) 915 2,740
Provision for income taxes 1,838 (399) (70) 1,369
-------------------------------------------------------------------------
Income (loss) from continuing operations before
minority interest 1,371 (738) (177) 915 1,371
Minority interest loss 35 35
-------------------------------------------------------------------------
Income (loss) from continuing operations before
extraordinary item 1,406 (738) (177) 915 1,406
Income from discontinued operations, net of income
taxes and minority interest (70) (70)
-------------------------------------------------------------------------
Net income (loss) $ 1,336 ($738) ($177) $915 $1,336
=========================================================================
13
14
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Nine Months Ended June 29,
1997 (Unaudited)
(Dollars in Thousands)
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
---- ------ ------------ ------- ------------
Revenues:
Net product sales $154,769 $28,445 $15,259 ($1,136) $197,337
Net mold sales 13,592 1,126 3,183 17,901
--------------------------------------------------------------------------
168,361 29,571 18,442 (1,136) 215,238
Cost of Sales
Cost of product sales 116,034 27,398 14,846 (1,136) 157,142
Cost of mold sales 13,230 976 2,720 16,926
--------------------------------------------------------------------------
129,264 28,374 17,566 (1,136) 174,068
--------------------------------------------------------------------------
Gross margin 39,097 1,197 876 41,170
Selling, general and administrative expenses 22,968 1,202 1,351 25,521
--------------------------------------------------------------------------
Operating profit (loss) 16,129 (5) (475) 15,649
Interest expense (6,836) (1,166) (189) 805 (7,386)
Other income, net 981 377 31 (805) 584
Equity in net loss of subsidiaries (559) 559
--------------------------------------------------------------------------
Income (loss) from continuing operations before income
taxes and minority interest 9,715 (794) (633) 559 8,847
Provision for income taxes 4,113 (579) (203) 3,331
--------------------------------------------------------------------------
Income (loss) from continuing operations before
minority interest 5,602 (215) (430) 559 5,516
Minority interest loss (7) 86 79
--------------------------------------------------------------------------
Net income (loss) $5,595 ($215) ($344) $559 $5,595
==========================================================================
14
15
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Nine Months Ended June 23,
1996 (Unaudited)
(Dollars in Thousands)
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
---- ------ ----------- ------- ------------
Revenues:
Net product sales $106,405 $21,469 $15,471 ($1,227) $142,118
Net mold sales 14,880 4,536 435 19,851
--------------------------------------------------------------------
121,285 26,005 15,906 (1,227) 161,969
Cost of Sales
Cost of product sales 82,805 21,356 14,564 (995) 117,730
Cost of mold sales 13,824 3,874 404 (334) 17,768
--------------------------------------------------------------------
96,629 25,230 14,968 (1,329) 135,498
--------------------------------------------------------------------
Gross margin 24,656 775 938 102 26,471
Selling, general and administrative expenses 16,871 1,530 1,472 19,873
--------------------------------------------------------------------
Operating profit (loss) 7,785 (755) (534) 102 6,598
Interest expense (1,548) (838) (185) (4) (2,575)
Other income (expense), net 391 152 9 (98) 454
Equity in net income of subsidiaries (836) 836
--------------------------------------------------------------------
Income (loss) from continuing operations before income
taxes and minority interest 5,792 (1,441) (710) 836 4,477
Provision for income taxes 3,212 (281) (222) 2,709
--------------------------------------------------------------------
Income (loss) from continuing operations before
minority interest 2,580 (1,160) (488) 836 1,768
Minority interest loss 35 58 93
--------------------------------------------------------------------
Income (loss) from continuing operations before
extraordinary item 2,615 (1,160) (430) 836 1,861
Income from discontinued operations, net of income
taxes and minority interest (42) (42)
--------------------------------------------------------------------
Income (loss) before extraordinary item 2,573 (1,160) (430) 836 1,819
Extraordinary gain on debt refinancing, no income tax effect 754 754
--------------------------------------------------------------------
Net income (loss) $ 2,573 ($406) ($430) $836 $2,573
====================================================================
15
16
LDM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR NINE MONTHS ENDED JUNE 29,
1997 (UNAUDITED)
(DOLLARS IN THOUSANDS)
LDM
TECHNOLOGIES LDM NONGUARANTOR
INC. CANADA SUBSIDIARIES CONSOLIDATED
------------ ------ ------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $7,956 $2,649 ($1,371) $9,234
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment (9,020) (1,537) (293) (10,850)
Proceeds from disposals of property, plant, and equipment 1,536 1,536
Use of investments restricted to property, plant and equipment 658 658
Purchase of Molmec net of $2,705 cash acquired (53,198) (53,198)
Purchase of Kendallville (6,878) (6,878)
-------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (66,902) (1,537) (293) (68,732)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt net of $5,911 debt issuance costs 88,660 15,429 104,089
Payments on long-term debt (12,397) (9,642) (22,039)
Net proceeds from line of credit borrowings (15,500) (3,634) (78) (19,212)
-------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 60,763 2,153 (78) 62,838
-------------------------------------------
Net cash change 1,817 3,265 (1,742) 3,340
Cash at beginning of period 9 17 2,096 2,122
-------------------------------------------
Cash at end of period $1,826 $3,282 $354 $5,462
===========================================
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LDM TECHNOLOGIES, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR NINE MONTHS ENDED JUNE 23,
1996 (UNAUDITED)
(DOLLARS IN THOUSANDS)
LDM
TECHNOLOGIES, LDM NONGUARANTOR
INC. CANADA SUBSIDIARIES CONSOLIDATED
------------- ------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $6,812 $298 $260 $7,370
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, and equipment (10,392) (1,231) (589) (12,212)
Proceeds from disposals of property, plant, and equipment 5 5
Use of investments restricted to property, plant and equipment 5,563 5,563
--------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (4,824) (1,231) (589) (6,644)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt net of $349 of debt issuance costs 7,651 1,407 9,058
Payments on long-term debt (3,240) (3,240)
Net proceeds from line of credit borrowings (7,001) (546) 341 (7,206)
--------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (2,590) 861 341 (1,388)
--------------------------------------------
Net cash change (602) (72) 12 (662)
Cash at beginning of period 811 55 272 1,138
--------------------------------------------
Cash at end of period $209 ($17) $284 $476
============================================
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF CONTINUING OPERATIONS
QUARTER ENDED JUNE 29, 1997 COMPARED TO QUARTER ENDED JUNE 23, 1996
NET SALES: Net sales for the three month period ended June 29, 1997 ("third
quarter 1997") were $82.4 million, an increase of $25.5 million, or 44.8%, from
the three month period ended June 23, 1996 ("third quarter 1996"). Third
quarter 1997 net sales were comprised of $73.4 million of automotive product
sales, $4.5 million of consumer and other product sales, and $4.5 million of
mold sales. The strong sales growth was mainly attributable to increased
automotive product sales related to the Company's January 22, 1997 acquisition
of Molmec, Inc. and continued strength of the Company's existing production
parts programs.
GROSS MARGIN: Gross margin was $18.7 million, or 22.6% of net sales, for the
third quarter 1997 compared to $9.8 million, or 17.2% of net sales, for third
quarter 1996. The increase was primarily due to the Molmec acquisition and
improved profitability of the Company's Canadian automotive operation.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for the
third quarter 1997 were $10.4 million, or 12.6% of net sales, compared to
$6.5 million, or 11.4% of net sales, for the third quarter 1996.
INTEREST EXPENSE: Interest expense was $3.4 million for the third quarter 1997
compared to $0.8 million for the third quarter 1996. The increased interest
expense was primarily due to the incurrence of additional debt related to the
Molmec acquisition.
INCOME TAXES: The provision for income taxes for the third quarter 1997 was
$1.9 million with an effective tax rate of 37.5%, as compared to $1.4 million
with an effective tax rate of 49.96% for the third quarter 1996. The lower
effective tax rate is due to the Company's utilization of Canadian tax
benefits not available in the 1996 period and that the Company made payments in
1996 to settle prior year's income tax liabilities.
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19
NINE MONTHS ENDED JUNE 29, 1997 COMPARED TO NINE MONTHS ENDED JUNE 23, 1996
NET SALES: Net sales for the nine month period ended June 29, 1997 ("year to
date June 1997") were $215.2 million, an increase of $53.3 million, or 32.9%,
from the nine month period ended June 23, 1996 ("year to date June 1996").
Year to date June 1997 net sales were comprised of approximately $182.0
million of automotive product sales, $15.3 million of consumer and other
product sales, and $17.9 million of mold sales. The strong sales growth was
mainly attributable to increased automotive product sales related to the
Company's January 22, 1997 acquisition of Molmec, Inc. and continued strength
of the Company's existing products.
GROSS MARGIN: Gross margin was $41.2 million, or 19.1% of net sales, for the
nine months ended June 29, 1997 compared to $26.5 million, or 16.3% of net
sales, for the nine months ended June 23, 1996. The increase was primarily due
to the Molmec acquisition and improved profitability of the Company's existing
automotive operations.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for the
nine months ended June 29, 1997 were $25.5 million, or 11.9% of net sales,
compared to $19.9 million, or 12.3% of net sales, for the nine months ended
June 23, 1996. The reduction of SG&A as a percentage of net sales was mainly
the result of increased net sales mentioned herein.
INTEREST EXPENSE: Interest expense was $7.4 million for the nine months ended
June 29, 1997 compared to $2.6 million for the nine months ended June 23, 1996.
The increased interest expense was primarily due to the incurrence of
additional debt related to the Molmec acquisition.
INCOME TAXES: The provision for income taxes for the nine month period ended
June 29, 1997 was $3.3 million with an effective tax rate of 37.7%, as compared
to $2.7 million with an effective tax rate of 60.5% for the nine months ended
June 23, 1996. The lower effective tax rate is due to the Company's
utilization of Canadian tax benefits not available in the 1996 period and that
the Company made payments in 1996 to settle prior year's income tax liabilities.
ACQUISITION OF MOLMEC: On January 22, 1997, LDM acquired substantially all the
net assets of Molmec for approximately $55.0 million in cash. Molmec is an
industry leader in the design, manufacture and integration of fluid and air
management components and under the hood assemblies. Molmec's net sales for
the year ended December 31, 1996 were $88.1 million.
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SENIOR SUBORDINATED NOTES AND NEW SENIOR CREDIT FACILITY: In January of 1997,
LDM issued senior subordinated notes in the aggregate principal amount of
$110.0 million bearing interest at 10.75% annually. The proceeds were primarily
used to fund the purchase of Molmec and to retire certain of LDM's existing
indebtedness. Also in January of 1997, LDM obtained a new senior credit
facility which provides available borrowings of up to $45.0 million under
revolving loans.
PURCHASE OF AEROQUIP KENDALLVILLE, INDIANA FACILITY: On April 25,
1997, the Company consummated the acquisition of certain assets of a U.S.
manufacturer of automotive air vents for approximately $6.9 million. The
acquired assets include certain elements of the seller's real property,
machinery, equipment and inventory. The company funded the acquisition with
cash and available funds under its senior credit facility. Net sales for the
entity were approximately $15.5 million for the twelve month period ended
March 30, 1997 of which approximately $5.9 million were sales to LDM.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's principal capital requirements are to fund working capital needs,
to meet required debt obligations, and 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. Potential growth from acquisitions will be funded from a variety
of sources including, cash flow from operations and permitted additional
indebtedness. As of June 29, 1997 the Company had $123.6 million of long term
debt outstanding and $28.4 million of borrowing availability under its
revolving credit facility.
Cash provided by operating activities in the nine month period ended June 29,
1997 was $9.2 million compared to $7.4 million of cash provided by operating
activities in the nine month period ended June 23, 1996. The increase in cash
provided by operating activities was primarily the result of higher operating
profits discussed elsewhere in this document.
Capital expenditures for the nine month period ended June 29, 1997 were $10.9
million compared to $12.2 million for the nine months ended June 23, 1996.
Fiscal 1997 capital expenditures include several injection molding machines,
secondary equipment related to the F-Series Truck program and expenditures
related to the Auburn Hills Design Center. On May 13, 1997 the Company sold
the Molmec Headquarters facility located in Walled Lake, Michigan. The net
proceeds from the sale of this facility were $1.5 million.
The Company believes its capital expenditures (exclusive of any potential
acquisitions) will be approximately $9.0 million to $13.5 million in each of
the fiscal years ended September 1997, 1998 and 1999. However, the Company's
capital expenditures may be greater than currently anticipated as the result of
new business opportunities.
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21
The Company's liquidity is affected by both the cyclical nature of its business
and levels 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.
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS NOT APPLICABLE
ITEM 2. CHANGES IN SECURITIES NOT APPLICABLE
ITEM 3. DEFAULTS UPON SENIOR NOT APPLICABLE
SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A NOT APPLICABLE
VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON
FORM 8-K (a) EXHIBIT 27 - FINANCIAL DATA SCHEDULE
(b) NOT APPLICABLE
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report or amendment thereto to be
signed on its behalf by the undersigned.
LDM TECHNOLOGIES, INC.
By: /s/ GARY E. BORUSHKO
------------------------------
Gary E. Borushko
Chief Financial Officer
/s/ GARY E. BORUSHKO
------------------------------
Gary E. Borushko
Chief Financial Officer
Date: August 13, 1997 /s/ JOSEPH E. BLAKE
------------------------------
Joseph E. Blake
Director of Finance
(chief accounting officer)
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27 Financial Data Schedule
24