1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K-A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 30, 1997
LDM Technologies, Inc.
(Exact name of registrant as specified in its charter)
Michigan 333-21819 38-269-0171
- ---------------------------- ----------- ------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2500 Executive Hills Drive, Auburn Hills, Michigan 48326
- -------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 858-2800
2
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired: Combined
Financial Statements of Kenco Plastics, Inc., a Michigan
corporation, Kenco Plastics, Inc., a Kentucky corporation, and
Narens Design and Engineering, Inc. for the years ended
December 31, 1996, 1995 and 1994 with Report of Independent
Auditors
(b) Pro forma financial information: Unaudited Pro Forma
Consolidated Financial Information of Registrant giving effect
to the acquisition referred to in 1(a) above.
(c) Unaudited Condensed Combined Interim Financial Statements
of Kenco Plastics, Inc., a Michigan corporation, Kenco
Plastics, Inc., a Kentucky corporation and Narens Design and
Engineering, Inc. for the nine months ended September 28,
1997 and September 29, 1996.
3
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.
LDM TECHNOLOGIES, INC.
By: /s/ Gary E. Borushko
-------------------------------
Gary E. Borushko
Chief Financial Officer
Dated: December 12, 1997
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Combined Financial Statements
Kenco Plastics, Inc. (A Michigan
Corporation), Kenco Plastics, Inc. (A
Kentucky Corporation) and
Narens Design and Engineering, Inc.
Years ended December 31, 1996, 1995
and 1994
with Report of Independent Auditors
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Years ended December 31, 1996, 1995 and 1994
CONTENTS
Report of Independent Auditors.................................... 1
Audited Financial Statements
Balance Sheets.................................................... 2
Combined Statements of Income and Retained Earnings............... 3
Combined Statement of Cash Flows.................................. 4
Notes to Combined Financial Statements............................ 5
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Report of Independent Auditors
The Board of Directors and Shareholders
Kenco Plastics, Inc. (Michigan)
Kenco Plastics, Inc. (Kentucky)
Narens Design and Engineering, Inc.
We have audited the accompanying combined balance sheets of Kenco Plastics, Inc.
(A Michigan Corporation), Kenco Plastics, Inc. (A Kentucky Corporation), and
Narens Design and Engineering, Inc. (collectively referred to as the "Company")
as of December 31, 1996 and 1995, and the related combined statements of income
and retained earnings and cash flows for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994. These financial statements are the
responsibility of the Companies management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Companies at
December 31, 1996 and 1995, and the combined results of their operations and
their cash flows for the years ended December 31, 1996, December 31, 1995 and
December 31, 1994 in conformity with generally accepted accounting principles.
Detroit, Michigan ERNST & YOUNG LLP
November 26, 1997
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Kenco Plastics, Inc.
(A Michigan Corporation),
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Combined Balance Sheets
DECEMBER 31
----------------------------
1996 1995
----------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 4,895,145 $ 4,230,878
Accounts receivable 5,777,218 5,761,898
Inventories 3,228,807 3,660,478
Tooling 1,508,857 1,058,003
Prepaid expenses 336,456 176,799
---------------------------
Total current assets 15,746,483 14,888,056
Property and equipment, net 10,773,661 10,786,953
Other assets: 274,727 942,594
---------------------------
$26,794,871 $26,617,603
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,100 $ 500,000
Current portion of long-term debt 767,274 891,717
Accounts payable 4,591,819 4,684,173
Taxes payable other than on income 65,853 25,269
Accrued salaries and wages 207,108 149,894
Accrued expenses 238,254 210,110
---------------------------
Total current liabilities 5,871,408 6,461,163
Long-term debt, less current portion 1,322,421 1,712,786
Stockholders' equity:
Kenco Plastics, Inc (Michigan):
Common stock, par value $.01 per share:
Class A common voting shares authorized, issued and
outstanding 1,000 shares 10 10
Class B common non-voting shares authorized, issued and
outstanding 9,000 shares 90 90
Kenco Plastics, Inc (Kentucky):
Common stock, par value $.01 per share:
Class A common voting shares authorized, issued and
outstanding 1,000 shares 10 10
Class B common non-voting shares authorized, issued and
outstanding 9,000 shares 90 90
Narens Design and Engineering:
Common stock, $1.00 par; authorized 50,000 shares; issued and
outstanding 1,000 shares 1,000 1,000
Additional paid-in capital 19,550 19,550
Retained earnings 19,580,292 18,422,904
---------------------------
19,601,042 18,443,654
---------------------------
$26,794,871 $26,617,603
===========================
See accompanying notes
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Kenco Plastics, Inc.
(A Michigan Corporation),
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Combined Statements of Income and Retained Earnings
YEARS ENDED DECEMBER 31
------------------------------------------------
1996 1995 1994
------------------------------------------------
Net product sales $ 46,072,916 $ 49,909,989 $ 62,152,902
Cost of product sales 40,724,817 43,089,844 52,355,385
------------------------------------------------
Gross margin on product sales 5,348,099 6,820,145 9,797,517
Tooling:
Sales 6,304,681 2,861,722 2,682,005
Cost of sales 5,157,606 2,176,251 1,891,414
------------------------------------------------
Net tooling income 1,147,075 685,471 790,591
------------------------------------------------
Total gross margin 6,495,174 7,505,616 10,588,108
Selling, general and administrative expenses 3,439,016 3,311,385 3,203,366
------------------------------------------------
Income from operations 3,056,158 4,194,231 7,384,742
Other income (expense):
Interest income 137,132 97,104 78,881
Interest expense (227,355) (318,637) (339,366)
Other, net (24,034) 186,500 29,864
------------------------------------------------
Net income 2,941,901 4,159,198 7,154,121
Retained earnings, beginning of year 18,422,904 15,622,329 11,834,884
Distributions to stockholders (1,784,513) (1,358,623) (3,366,676)
------------------------------------------------
Retained earnings, end of year $ 19,580,292 $ 18,422,904 $ 15,622,329
================================================
See accompanying notes.
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Kenco Plastics, Inc.
(A Michigan Corporation),
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Combined Statements of Cash Flows
YEARS ENDED DECEMBER 31
---------------------------------------------
1996 1995 1994
---------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,941,901 $ 4,159,198 $ 7,154,121
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,048,365 1,861,212 1,691,681
Loss on investment 55,000 - -
Gain (loss) on sale of property and equipment 48,951 (127,807) -
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (113,117) 1,457,127 (1,331,358)
(Increase) decrease in inventories and tooling (19,183) (777,774) 1,158,586
(Increase) decrease in prepaid expenses (159,657) 61,747 44,480
Increase (decrease) in accounts payable 5,443 (356,237) (396,517)
Increase (decrease) in accrued salaries and wages 57,214 (133,011) 89,831
Increase (decrease) in other accrued expenses and
taxes payable 68,728 (345,066) (28,497)
---------------------------------------------
Net cash provided by operating activities 4,933,645 5,799,389 8,382,327
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,089,524) (2,737,552) (3,289,563)
Decrease (increase) in deposits on equipment 548,752 (584,235) (159,019)
(Increase) decrease in other assets (7,216) 18,580 (15,400)
Proceeds from sale of property and equipment 5,500 16,450 117,449
Payments in note receveivable - 230,977 55,030
Other 71,331 (1,566) (1,525)
---------------------------------------------
Net cash used in investing activities (1,471,157) (3,057,346) (3,293,028)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt - - 500,000
Net proceeds on line of credit 1,100 499,990 400,000
Proceeds from long-term borrowing 300,000 - -
Payments on notes payable to stockholders - (350,000) (297,250)
Payments on long-term debt (1,314,808) (1,341,251) (1,277,195)
Distribution to stockholders (1,784,513) (1,358,623) (3,366,676)
---------------------------------------------
Net cash used in financing activities (2,798,221) (2,549,884) (4,041,121)
---------------------------------------------
Increase in cash and cash equivalents 664,267 192,159 1,048,178
Cash and cash equivalents at beginning of year 4,230,878 4,038,719 2,990,541
---------------------------------------------
Cash and cash equivalents at end of year $ 4,895,145 $ 4,230,878 $ 4,038,719
=============================================
See accompanying notes.
.
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements
1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMBINATION
The combined financial statements include the accounts of Kenco Plastics, Inc.
(a Michigan corporation), Kenco Plastics, Inc. (a Kentucky corporation) and
Narens Design and Engineering, Inc.(collectively referred to as the "Company"),
which are related through common stockholders. All significant intercompany
accounts and transactions have been eliminated.
BUSINESS ACTIVITY
Kenco Plastics, Inc. (Michigan) and Kenco Plastics, Inc. (Kentucky) are
manufacturers of blow molded plastic parts for the auto industry and operate
from facilities in Michigan, Kentucky and Tennessee.
Narens Design and Engineering, Inc. is engaged in the business of providing
design and engineering services, tooling and prototype parts to customers
principally in the automotive industry.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with an original maturity
of three months or less.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
TOOLING
Profits are recognized on tooling sales when the project is complete and
ownership transfers. Losses are recognized when it becomes evident that a loss
will be incurred.
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Depreciation and amortization are computed by the straight-line method for Kenco
Plastics, Inc. and on the accelerated cost recovery method for Narens Design and
Engineering, Inc. over the following useful lives:
Machinery and equipment 8-10 years
Leasehold improvements 10 years
Office equipment 7 years
Transportation equipment 5 years
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Companies to concentrations
of credit risk consist principally of cash and cash equivalents and accounts
receivable. The Companies place their cash with local financial institutions;
however, the cash balances on these accounts may periodically exceed federally
insured amounts. The Companies invest their cash equivalents with a national
brokerage firm and these accounts are not federally insured. Credit risk with
respect to accounts receivable is concentrated with major automotive
manufacturers. To control credit risk the Companies perform on going credit
evaluations of their customers, local financial institutions and broking firms.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from those estimates.
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements (continued)
2. INVENTORIES
Inventories consist of the following:
DECEMBER 31
-------------------------
1996 1995
-------------------------
Finished goods $1,518,411 $1,821,709
Raw materials and supplies 1,701,320 1,735,071
Work-in-process 9,076 103,698
=========================
$3,228,807 $3,660,478
=========================
3. PROPERTY PLANT AND EQUIPMENT
At December 31, 1996 and December 31, 1995 property, plant and equipment
consists of the following:
1996 1995
------------------------------
Leasehold improvements $ 1,824,220 $ 1,811,277
Machinery and equipment 20,691,951 18,798,238
Transportation equipment 341,442 329,635
Furniture and fixtures 572,218 558,888
------------------------------
TOTAL 23,429,831 21,498,038
Less accumulated depreciation (12,656,170) (10,711,085)
------------------------------
Net property, plant and
equipment $ 10,773,661 $ 10,786,953
==============================
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements (continued)
4. LINE OF CREDIT
The Company had the following lines of credit at December 31:
AMOUNT INTEREST RATE EXPIRING SECURITY DRAWING
----------------------------------------------------------------------------------------
1996 $1,000,000 0.5% below prime July 15, 1997 Accounts receivable, $ 1,100
750,000 Oct. 16, 1997 inventory and equipment
1995 900,000 0.25% above prime Feb. 1, 1996 Accounts receivable, 500,000
1,000,000 July 15, 1996 inventory and equipment
750,000 Aug. 25, 1996
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
1996 1995
---------------------------------
Notes payable to banks, secured by accounts
receivable, inventory and machinery due in
monthly installments ranging from $75,866 to
$139,279, including interest at 8.0% to 8.5%,
through March, 2001 $ 2,089,695 $ 2,576,143
Notes payable - 28,360
Notes payable to stockholders - -
---------------------------------
2,089,695 2,604,503
Less current portion of long-term debt 767,274 891,717
=================================
$ 1,322,421 $ 1,712,786
=================================
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements
5. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt are as follows:
1997 $ 767,274
1998 816,179
1999 284,437
2000 182,915
2001 38,890
-----------
$ 2,089,695
===========
6. INCOME TAXES
The Companies, with the consent of their stockholders, elected under the
Internal Revenue Code to be S corporations. In lieu of corporation income taxes,
the stockholders of an S corporation are taxed on their proportionate share of
the Company's taxable income. Therefore, no provision or liability for Federal
income taxes has been included in the financial statements.
Distributions are made annually to the stockholders in amounts necessary to pay
personal income tax liabilities generated from operations of the Companies.
7. RELATED PARTY TRANSACTIONS
COMMISSIONS
Sales commissions were paid to an entity which is 100% owned by the principal
stockholder of the Companies, as follows:
1996 $1,414,009
1995 1,386,525
1994 1,670,538
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements
7. RELATED PARTY TRANSACTIONS (CONTINUED)
LEASES
The Companies lease facilities, under operating leases, from a partnership owned
by the Companies' major stockholders. Lease payments are as follows:
MONTHLY
FACILITY PAYMENT EXPIRING
---------------------------------------------------------------
Corunna, Michigan $20,000 December, 1999
Owosso, Michigan 5,047 December, 1999
Owosso, Michigan 10,375 February, 2007
Owensboro, Kentucky 10,000 November, 1997
Galatin, Tennessee 10,875 May, 2001
Rent paid under these leases aggregated $644,444 for 1996, $432,069 for 1995 and
$408,269 for 1994. In addition, under the terms of these leases the Companies
pay property taxes, insurance and maintenance on the leased facilities.
COST SHARING AGREEMENT
The Company utilizes the corporate administrative services of an entity which is
100% owned by the principal stockholder of the Companies. Effective January 1,
1995, the Company entered into a cost sharing agreement for administrative
services covering office rent, corporate staffing and office equipment usage
through December 31, 2005 with payments of $7,150 per month. In 1994, the
Company paid $24,000 for these services.
Narens Design and Engineering, Inc. utilizes the services of certain personnel
of an entity which is 100% owned by the principal stockholder of the Companies
and paid $200,000 for such services for the year ended December 31, 1996,
$100,000 for the year ended December 31, 1995 and $200,000 for the year ended
December 31, 1994.
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Kenco Plastics, Inc.
(A Michigan Corporation)
Kenco Plastics, Inc.
(A Kentucky Corporation)
and
Narens Design and Engineering, Inc.
Notes to Combined Financial Statements
8. LEASES
The Companies lease manufacturing facilities from a related party as disclosed
in Note 7. The Companies also lease manufacturing facilities, vehicles and
equipment under operating leases from unrelated entities.
The following is a yearly schedule of future minimum rental payments under all
operating leases, including related party leases disclosed in Note 7:
1997 $ 834,448
1998 714,953
1999 680,701
2000 341,486
2001 and after 1,240,750
===========
$ 3,812,338
===========
9. CASH FLOW INFORMATION
Cash paid for interest amounted to $225,117 in 1996, $322,470 in 1995 and
$355,504 in 1994.
10. SUBSEQUENT EVENT
Effective September 30, 1997, LDM Technologies, Inc. purchased all the
outstanding shares of Kenco Plastics, Inc. (a Michigan corporation) and Kenco
Plastics, Inc. (a Kentucky corporation) and substantially all the operating
assets of Narens Design and Engineering, Inc. for approximately $27,500,000.
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated statement of operations
of the Company for the fiscal year ended September 28, 1997, gives effect to
the Molmec Acquisition, the Kendallville Acquisition, the Senior Credit
Facility and the Initial Offering (each as defined below, collectively the
"1997 Transactions") and the Kenco Acquisition as if such transactions had
occurred on September 30, 1996. The unaudited pro forma condensed consolidated
balance sheet at September 28, 1997 gives effect to the Kenco Acquisition as if
such acquisition had occurred on that date. The allocation of the purchase
price in the Kenco Acquisition to the assets and liabilities of Kenco as
reflected below is a preliminary estimate. The actual allocation, when
finalized, may differ. The 1997 Transactions are reflected in the historical
balance sheet at September 28, 1997. The unaudited pro forma consolidated
financial information does not purport to represent what the Company's
financial position or results of operations would actually have been had the
transactions occurred on the dates indicated above or to project the Company's
results of operations for any future period. This unaudited pro forma
consolidated financial information should be read in conjunction with the
accompanying notes, the historical financial statements of Kenco, including the
notes thereto, included elsewhere herein and the historical financial
statements of the Company, including the notes thereto, included in the
Company's Annual Report on Form 10-K for the year ended September 28, 1997.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 28, 1997
(DOLLARS IN THOUSANDS)
LDM, as
Adjustments adjusted Kenco
LDM for 1997 for 1997 Kenco Pro Forma
Historical Transactions(a) Transactions Historical Adjustments Pro Forma
---------- ------------ ------------ ---------- ----------- ---------
Net sales:
Product sales $261,103 $ 29,125 $290,228 $53,881 $ (475)(b) $343,634
Mold sales 31,917 2,393 34,310 6,642 40,952
-------- -------- -------- ------- -------- --------
293,020 31,518 324,538 60,523 (475) 384,586
Cost of sales:
Product cost of sales 210,532 19,751 230,283 46,508 (235)(c) 276,556
Mold cost of sales 30,398 2,150 32,548 4,921 37,469
-------- -------- -------- ------- -------- --------
240,930 21,901 262,831 51,429 (235) 314,025
-------- -------- -------- ------- -------- --------
Gross profit 52,090 9,617 61,707 9,094 (240) 70,561
Selling, general and
administrative
expenses 35,561 5,713 41,274 3,577 540 (d) 45,391
-------- -------- -------- ------- -------- --------
Operating profit 16,529 3,904 20,433 5,517 (780) 25,170
Interest expense 11,076 2,985 14,061 152 2,117 (e) 16,330
Other expense, net 444 - 444 (100) - 344
-------- -------- -------- ------- -------- --------
Income (loss) from
continuing opera-
tions before
income taxes and
minority interests 5,009 919 5,928 5,465 (2,897) 8,496
Provision for income taxes 2,088 368 2,456 - 1,027 (f) 3,483
-------- -------- -------- ------- -------- --------
Income (loss) from
continuing operations
before minority
interests 2,921 551 3,472 5,465 (3,924) 5,013
Minority interest 142 - 142 - - 142
-------- -------- -------- ------- -------- --------
Income (loss) from
continuing operations
before extraordinary
item $ 3,063 $ 551 $ 3,614 $ 5,465 $ (3,924) $ 5,155
======== ======== ======== ======= ======== ========
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 28, 1997
(DOLLARS IN THOUSANDS)
(a) To adjust the Company's historical results of operations for the 1997
Transactions as if such transactions had occurred on September 30, 1996. On
January 22, 1997, the Company consummated the acquisition of the business
and certain net assets of Molmec, Inc. (the "Molmec Acquisition") The
results of operations of the Molmec business are included in the Company's
results of operations effective on the acquisition date. On May 1, 1997,
the Company consummated the acquisition of the business and net assets of
the Kendallville Plant of Aeroquip, Inc. (the "Kendallville Acquisition").
The results of operations of the Kendallville Plant are included in the
Company's results of operations effective on the acquisition date. On
January 22, 1997, the Company issued $110 million aggregate principal
amount of its 10 3/4% Senior Subordinated Notes, the proceeds of which were
used to repay certain outstanding borrowings, to fund the Molmec
acquisition and for general corporate purposes (the "Initial Offering"). In
connection with the Initial Offering, the Company obtained a new senior
credit facility (the "Senior Credit Facility").
(b) To eliminate Kenco's sales to other Company facilities.
(c) To decrease cost of sales by $475,000 to eliminate the Company's purchases
from Kenco and to increase cost of sales by $240,000 for increased
depreciation expense as a result of the Kenco purchase price allocation.
(d) Reflects $540,000 of amortization of goodwill from the acquisition of
Kenco, assuming a 15 year amortization period.
(e) To increase interest expense for interest on borrowings incurred to fund
the acquisition of Kenco, net of reductions for interest on Kenco debt
obligations not assumed by the Company.
(f) To provide income taxes on the pro forma pretax income of Kenco using an
assumed effective tax rate of 40%.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 28, 1997
(DOLLARS IN THOUSANDS)
Kenco
LDM Kenco Pro Forma
Historical Historical Adjustments Pro Forma
----------- ---------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 4,632 $ 1,078 $ (578)(a) $ 5,132
Trade accounts receivable 45,812 7,005 52,817
Inventories 15,048 3,001 18,049
Mold costs 13,826 1,903 15,729
Other current assets 7,072 314 7,386
-------- ------- --------- --------
Total current assets 86,390 13,301 (578) 99,113
Property, plant, and equipment less
accumulated depreciation 82,259 11,690 1,683 (b) 95,632
Goodwill 36,791 8,100 (c) 44,891
Other assets 6,747 9 6,756
-------- ------- --------- --------
Totals $212,187 $25,000 $ 9,205 $246,392
======== ======= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 3,530 $ 281 $ 3,811
Accounts payable 28,153 5,515 33,668
Accrued liabilities 20,365 909 21,274
Advance mold payments from
customers 11,082 11,082
Income taxes payable 1,640 1,640
Current maturities of long-term
debt 979 979
-------- ------- --------- --------
Total current liabilities 65,749 6,705 72,454
Long-term debt net of current
portion 122,261 $ 27,500 (d) 149,761
Deferred income taxes 3,513 3,513
Minority interest in subsidiaries 279 279
Stockholders' equity 20,385 18,295 (18,295)(e) 20,385
-------- ------- --------- --------
Totals $212,187 $25,000 $ 9,205 $246,392
======== ======= ========= ========
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
SEPTEMBER 28, 1997
(dollars in thousands)
(a) To reduce Kenco cash and cash equivalents for amounts to be distributed
prior to the effective date of the acquisition.
(b) To adjust the property, plant and equipment of Kenco to estimated fair
value.
(c) To record goodwill related to the acquisition of Kenco.
(d) To adjust for borrowings incurred to fund the acquisition of Kenco.
(e) To eliminate the historical stockholder's equity of Kenco.
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KENCO PLASTICS, INC.
(A MICHIGAN CORPORATION),
KENCO PLASTICS, INC.
(A KENTUCKY CORPORATION)
AND
NARENS DESIGN AND ENGINEERING, INC.
CONDENSED COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 28, DECEMBER 31,
1997 1996
------------------------------
(UNAUDITED) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ 1,078 $ 4,895
Accounts receivable 7,005 5,777
Inventories 3,001 3,229
Mold costs 1,903 1,509
Other current assets 314 336
--------------------------
Total current assets 13,301 15,746
Property and equipment 11,690 10,774
Other assets 9 275
--------------------------
$25,000 $26,795
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 281 $ 1
Accounts payable 5,515 4,592
Accrued salaries and wages 368 207
Accrued expenses 456 238
Current portion of long-term debt - 767
Other 85 66
--------------------------
Total current liabilities 6,705 5,871
Notes payable - 1,323
Stockholders' equity:
Kenco Plastics, Inc (Michigan):
Common stock, par value $.01 per share:
Class A common voting shares authorized, issued and outstanding 1,000 - -
shares
Class B common non-voting shares authorized, issued and outstanding - -
9,000 shares
Kenco Plastics, Inc (Kentucky):
Common stock, par value $.01 per share:
Class A common voting shares authorized, issued and outstanding 1,000 - -
shares
Class B common non-voting shares authorized, issued and outstanding - -
9,000 shares
Narens Design and Engineering:
Common stock, $1.00 par; authorized 50,000 shares; issued and outstanding
1,000 shares 1 1
Additional paid-in capital 20 20
Retained earnings 18,274 19,580
--------------------------
$25,000 $26,795
==========================
Note: The balance sheet at December 31, 1996 has been derived from the audited 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 accompanying notes.
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23
KENCO PLASTICS, INC.
(A MICHIGAN CORPORATION),
KENCO PLASTICS, INC.
(A KENTUCKY CORPORATION)
AND
NARENS DESIGN AND ENGINEERING, INC.
CONDENSED COMBINED INTERIM STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
---------------------------------
(UNAUDITED) (UNAUDITED)
Net Product sales $43,187 $34,850
Cost of product sales 37,215 31,044
-------------------------------
Gros margin on product sales 5,972 3,806
Tooling:
Sales 4,630 4,293
Cost of sales 3,270 3,506
-------------------------------
Net tooling income 1,360 787
-------------------------------
Total gross margin 7,332 4,593
Selling, general and administrative expenses 2,729 2,717
-------------------------------
Income from operations 4,603 1,876
Other expenses:
Interest expense (10) (83)
Other, net 44 47
===============================
Net income $ 4,637 $ 1,840
===============================
See accompanying notes.
-23-
24
KENCO PLASTICS, INC.
(A MICHIGAN CORPORATION),
KENCO PLASTICS, INC.
(A KENTUCKY CORPORATION)
AND
NARENS DESIGN AND ENGINEERING, INC.
CONDENSED COMBINED INTERIM STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------------------------
(UNAUDITED) (UNAUDITED)
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 4,868 $ 4,316
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (2,555) (1,567)
Other 1 52
------------------------------
Net cash used in investing activities (2,554) (1,515)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowing 211 226
Payments on long-term debt (1,704) (986)
Distribution to stockholders (4,638) (1,338)
------------------------------
Net cash used in financing activities (6,131) (2,098)
------------------------------
Increase (decrease) in cash and cash equivalents (3,817) 703
Cash and cash equivalents at beginning of Period 4,895 4,231
------------------------------
Cash and cash equivalents at end of Period $ 1,078 $ 4,934
==============================
See accompanying notes.
-24-
25
KENCO PLASTICS, INC.
(A MICHIGAN CORPORATION),
KENCO PLASTICS, INC.
(A KENTUCKY CORPORATION)
AND
NARENS DESIGN AND ENGINEERING, INC.
NOTES TO CONDENSED COMBINED INTERIM 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 nine month period ended September 28,
1997 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. For further information, refer to the combined
financial statements and footnotes thereto included in the Companies annual
financial statements included elsewhere herein.
2. SUBSEQUENT EVENTS
Effective September 30, 1997, LDM Technologies, Inc. purchased all the
outstanding shares of Kenco Plastics, Inc. (a Michigan Corporation) and Kenco
Plastics, Inc. (a Kentucky Corporation) and substantially all the operating
assets of Narens Design & Engineering, Inc. for approximately $27,500,000.
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