1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION OR 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
LDM Technologies, Inc.
(Exact name of registrant as specified in its charter)
Michigan 333-21819 38-2690171
-------- --------- ----------
(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
Indicate by check mark whether the registrant has filed all reports required to
be filed by sections 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
YES X NO
Number of shares common stock outstanding as of May 8, 1998: 600
Total pages: 24
Listing of exhibits: 23
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LDM TECHNOLOGIES, INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, March 29, 1998 and
September 28, 1997 3
Condensed Consolidated Statements of Income, three months ended
March 29, 1998 and March 30, 1997 4
Condensed Consolidated Statements of Income, six months ended
March 29, 1998 and March 30, 1997 5
Condensed Consolidated Statements of Cash Flows, six months ended 6
March 29, 1998 and March 30, 1997
Notes to Condensed Consolidated Financial Statements 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF 17
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security Not applicable
Holders
Item 5 Other information Not applicable
Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 27-Financial Data
Schedule
Signatures 22
2
3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
MARCH 29, 1998 SEPTEMBER 28, 1997
(UNAUDITED) (NOTE)
-----------------------------------
ASSETS
Current assets:
Cash $ 7,813 $ 4,633
Accounts receivable 85,328 45,811
Raw materials 15,945 8,988
Work in process 1,975 1,626
Finished goods 8,883 4,434
Mold costs 26,338 13,825
Deferred income taxes 5,021 4,627
Other current assets 2,956 2,054
------------------------------
Total current assets 154,259 85,998
Net property, plant and equipment 117,661 82,259
Goodwill, net 75,274 36,791
Debt issue costs, net 6,511 5,733
Other assets 2,207 1,014
------------------------------
Totals $ 355,912 $ 211,795
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loans $ 45,598 $ 3,530
Accounts payable 46,113 28,152
Accrued liabilities 19,712 13,107
Accrued interest 3,519 2,555
Accrued compensation 6,097 4,616
Advance mold payments from customers 15,853 11,082
Income taxes payable 736 1,249
Current maturities of long-term debt 9,601 979
------------------------------
Total current liabilities 147,229 65,270
Long-term debt due after one year 179,788 122,261
Deferred income taxes 6,428 3,513
Note payable to affiliates 88 87
Minority interest 203 279
STOCKHOLDERS' EQUITY
Common Stock (par value $.10, issued and outstanding 600 shares; authorized
100,000 shares)
Additional paid-in capital 94 94
Retained earnings 22,017 20,353
Foreign currency translation adjustments 65 (62)
------------------------------
Total stockholders' equity 22,176 20,385
------------------------------
Totals $ 355,912 $ 211,795
==============================
Note: The balance sheet at September 28, 1997 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.
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4
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
UNAUDITED
THREE MONTHS ENDED
MARCH 29, 1998 MARCH 30, 1997
--------------------------------------
Revenues:
Net product sales $ 118,007 $ 68,457
Net mold sales 7,883 12,156
---------------------------
125,890 80,613
Cost of Sales
Cost of product sales 97,647 54,115
Cost of mold sales 7,916 11,925
---------------------------
105,563 66,040
---------------------------
Gross Margin 20,327 14,573
Selling, general and administrative expenses 14,572 8,865
---------------------------
Operating profit 5,755 5,708
Interest expense (5,035) (2,857)
Other expense, net (355) (40)
---------------------------
Income before income taxes and minority interest 365 2,811
Provision for income taxes 241 942
---------------------------
Income before minority interest 124 1,869
Minority interest 28 35
---------------------------
Net income $ 152 $ 1,904
===========================
See notes to condensed consolidated financial statements.
4
5
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
UNAUDITED
SIX MONTHS ENDED
MARCH 29, 1998 MARCH 30, 1997
---------------------------------
Revenues:
Net product sales $ 211,714 $ 119,516
Net mold sales 14,472 13,362
---------------------------
226,186 132,878
Cost of Sales
Cost of product sales 174,183 97,640
Cost of mold sales 13,754 12,717
---------------------------
187,937 110,357
---------------------------
Gross Margin 38,249 22,521
Selling, general and administrative expenses 25,669 15,128
---------------------------
Operating profit 12,580 7,393
Interest expense (8,968) (3,981)
Other (expense) income, net (477) 254
---------------------------
Income before income taxes and minority interest 3,135 3,666
Provision for income taxes 1,549 1,390
---------------------------
Income before minority interest 1,586 2,276
Minority interest 76 86
---------------------------
Net income $ 1,662 $ 2,362
===========================
See notes to condensed consolidated financial statements.
5
6
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
UNAUDITED
SIX MONTHS ENDED
MARCH 29, 1998 MARCH 30, 1997
--------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $4,076 ($977)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (4,229) (8,782)
Proceeds from disposal of property, plant and equipment 186 2
Use of investments restricted to property, plant and equipment 658
Purchase of Molmec, Inc., net of $2,705 cash acquired (52,609)
Purchase of Huron Plastics Group, net of $1,835 cash acquired (67,139)
Purchase of LDM Germany (9,706)
Purchase of Kenco Plastics, net of $500 cash acquired (27,000)
-------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (107,888) (60,731)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt issuance, net of $5,399 issuance 65,641 104,601
costs in 1997, $1,238 in 1998
Payments on long-term debt (1,077) (21,812)
Net borrowings (repayments) on lines of credit 42,428 (19,050)
-------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 106,992 63,739
-------------------------------------
Net cash change 3,180 2,031
Cash at beginning of period 4,633 2,122
-------------------------------------
Cash at end of period $7,813 $4,153
=====================================
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $8,998 $4,928
=====================================
See notes to condensed consolidated financial statements.
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LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six-month
periods ended March 1998 are not necessarily indicative of the results that
may be expected for the year ending September 27, 1998. For further information,
refer to the consolidated financial statements and footnotes thereto in the
Company's annual report on Form 10-K for the year ended September 28, 1997.
2. PURCHASES OF MOLMEC, AEROQUIP KENDALLVILLE - INDIANA FACILITY, KENCO
PLASTICS, AEROQUIP BEIENHEIM - GERMAN FACILITY, AND HURON PLASTICS GROUP
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 $55.9 million. The acquisition was financed by the issuance of
debt as described in note 3.
On April 25, 1997, the Company purchased the business and certain net assets of
Aeroquip, Inc.'s Kendallville, Indiana Facility (a manufacturer of automotive
plastic air register vents). The purchase price was approximately $7.2 million.
The acquisition was financed with working capital.
On September 30, 1997, the Company acquired the entire voting stock of Kenco
Plastics, Inc. (Michigan) and Kenco Plastics, Inc. (Kentucky) and the business
and net tangible assets of Narens Design and Engineering, Inc. for approximately
$27.1 million in cash. The acquisition was financed with additional borrowings
under the existing Senior Credit Facility.
On November 25, 1997, the Company acquired the business and certain net assets
comprising the `Beienheim' plant of Aeroquip Corporation for approximately $9.1
million in cash. The acquisition was financed with additional borrowings under
the existing Senior Credit Facility.
On February 6, 1998, LDM acquired the stock of Huron Plastics Group, Inc. and
substantially all the assets of Tadim, Inc. (collectively referred to herein as
"HPG") for $69.0 million in cash and the assumption of certain liabilities. The
transaction was funded with proceeds from a $66.0 million dollar term loan
issued by the Company's senior lender. HPG's sales and net income for its fiscal
year ended March 31, 1997 were $88.1 million and $0.8 million, respectively. HPG
manufactures a wide variety of interior trim and underhood components for many
automotive customers, including Ford, Chrysler, General Motors, Bundy, TRW,
and Johnson Controls.
The pro forma unaudited results of operations for the six months ended March 29,
1998 and March 30, 1997, assuming consummation of the above described purchases
and issuance of the debt as described in note 3 had occurred on September 30,
1996, are as follows:
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8
For six months ended
March 29, 1998 March 30, 1997
-------------- --------------
(dollars in thousands)
Net sales $268,541 $236,462
Net income $827 $1,371
3. ISSUANCE OF DEBT
On January 22, 1997, the Company issued $110 million aggregate principal amount
of its 10 3/4% Senior Subordinated Notes due 2007. The net proceeds, which
amounted to approximately $105 million, were used to repay debt in default
amounting to $37.8 million, to repay the $3 million note payable to a former
shareholder, to fund the Molmec acquisition described in note 2, and for general
corporate purposes. In addition, the Company obtained a new Senior Credit
Facility, which provides available borrowings of $65 million under revolving
loans.
On April 6, 1998, the Company secured additional financing from Bank of America,
its current senior lender. The financing was comprised of a $66.0 million term
loan and an additional $10.0 million line of credit facility. The term loan and
line of credit facility bear interest at the prime rate plus .5% or libor plus
2.5%. Proceeds from the term loan were used to fund the HPG purchase. No draws
have been made on the additional line of credit facility to date.
4. COMMITMENTS AND CONTINGENCIES
On February 20, 1998, the Company settled a lawsuit for damages and specific
performance of a contract related to certain equipment purchase obligations,
which resulted in a reversal to income of $0.4 million from the previously
recorded estimated settlement reserve.
In March 1998, the Company settled an outstanding notification of violation of
certain permitted air emission levels at one of its plants. The amount of the
settlement was $170,000. At September 28, 1997, the Company had a related
reserve for $160,000. The additional $10,000 was expensed in the current
quarter.
5. SUPPLEMENTAL GUARANTOR INFORMATION
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility, and the standby letter or credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes are obligations of LDM Technologies, Inc.,
and are guaranteed fully, unconditionally and jointly and severally by LDM
Technologies Company, ("LDM Canada") and certain holding companies (LDM Holdings
L.L.C., and LDM Canada Limited Partnership). Non-guarantor subsidiaries consist
of Como, a 75% owned subsidiary, and LDM Germany ("Beienheim"), a wholly owned
subsidiary.
Supplemental consolidating financial information of LDM Technologies, Inc., the
guarantor subsidiaries, and the nonguarantor subsidiaries is presented below.
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
---------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $1,320 $3,745 $2,748 $7,813
Accounts receivable 70,664 10,477 6,482 $(2,295) 85,328
Notes receivable due from
affiliates 24,662 500 (25,162)
Raw materials 11,878 1,373 2,694 15,945
Work in process 1,537 249 189 1,975
Finished goods 8,207 294 382 8,883
Mold costs 8,498 13,437 4,403 26,338
Deferred income taxes 4,821 200 5,021
Other current assets 2,738 128 90 2,956
-------------------------------------------------------------------------------
Total current assets 134,325 30,203 17,188 (27,457) 154,259
Net property, plant and
equipment 95,559 15,150 6,952 117,661
Goodwill, net 75,261 13 75,274
Debt issue costs, net 6,511 6,511
Other assets 8,783 24 (6,600) 2,207
-------------------------------------------------------------------------------
Totals $320,439 $45,353 $24,177 ($34,057) $355,912
===============================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and
revolving loans $43,397 $2,201 $45,598
Accounts payable 36,742 $ 6,872 5,233 ($2,734) 46,113
Accrued liabilities 13,936 4,124 1,652 19,712
Accrued interest 3,519 3,519
Accrued compensation 3,896 383 1,818 6,097
Advance mold payments from
customers 14,222 1,631 15,853
Income taxes payable 1,516 (780) 736
Current maturities of
long-term debt 9,601 9,601
-------------------------------------------------------------------------------
Total current liabilities 112,607 25,601 11,755 (2,734) 147,229
Long-term debt due after one
year 179,788 179,788
Deferred income taxes 5,528 586 314 6,428
Note payable to affiliates 15,412 9,391 (24,715) 88
Minority interest 203 203
STOCKHOLDERS' EQUITY
Common stock 5,857 2,945 (8,802)
Additional paid-in capital 94 126 (126) 94
Retained earnings 22,281 (2,103) (481) 2,320 22,017
Foreign currency
translation adjustments (62) 127 65
-------------------------------------------------------------------------------
Total stockholders' equity 22,313 3,754 2,717 (6,608) 22,176
-------------------------------------------------------------------------------
Totals $320,439 $45,353 $24,177 ($34,057) $355,912
===============================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of September 28, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
-------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $12 $4,598 $23 $4,633
Accounts receivable 40,102 6,688 1,773 ($2,752) 45,811
Notes receivable due from
affiliates 16,098 (16,098)
Raw materials 6,046 1,422 1,520 8,988
Work in process 1,173 310 143 1,626
Finished goods 3,674 382 378 4,434
Mold costs 3,887 8,902 1,036 13,825
Deferred income taxes 1,852 2,575 200 4,627
Other current assets 1,851 121 82 2,054
-------------------------------------------------------------------------------
Total current assets 74,695 24,998 5,155 (18,850) 85,998
Net property, plant and
equipment 64,073 16,239 1,947 82,259
Investment in subsidiaries 4,536 (4,536)
Goodwill, net 36,791 36,791
Debt issue costs, net 5,733 5,733
Other assets 680 334 1,014
-------------------------------------------------------------------------------
Totals $186,508 $41,237 $7,436 ($23,386) $211,795
===============================================================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and
revolving loans $1,700 $1,830 $3,530
Accounts payable 21,262 $ 7,802 2,260 ($3,172) 28,152
Accrued liabilities 10,236 2,070 801 13,107
Accrued interest 2,555 2,555
Accrued compensation 3,895 286 435 4,616
Advance mold payments from
customers 10,102 980 11,082
Income taxes payable 1,631 8 (390) 1,249
Current maturities of
long-term debt 881 98 979
-------------------------------------------------------------------------------
Total current liabilities 42,160 20,268 6,014 (3,172) 65,270
Long-term debt due after one
year 122,256 5 122,261
Deferred income taxes 1,490 1,709 314 3,513
Note payable to affiliates 15,408 350 (15,671) 87
Minority interest 279 279
STOCKHOLDERS' EQUITY
Common stock 5,857 1 (5,858)
Additional paid-in capital 94 126 (126) 94
Retained earnings 20,291 (2,010) 631 1,441 20,353
Foreign currency
translation adjustments (62) (62)
-------------------------------------------------------------------------------
Total stockholders' equity 20,323 3,847 758 (4,543) 20,385
-------------------------------------------------------------------------------
Totals $186,508 $41,237 $7,436 ($23,386) $211,795
===============================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
----------------------------------------------------------------------------------------
Revenues:
Net product sales $93,575 $13,846 $10,694 ($108) $118,007
Net mold sales 6,900 140 843 7,883
---------------------------------------------------------------------------------------
100,475 13,986 11,537 (108) 125,890
Cost of Sales
Cost of product sales 75,622 11,475 10,658 (108) 97,647
Cost of mold sales 7,089 119 708 7,916
---------------------------------------------------------------------------------------
82,711 11,594 11,366 (108) 105,563
---------------------------------------------------------------------------------------
Gross Margin 17,764 2,392 171 20,327
Selling, general and administrative
expenses 13,457 306 809 14,572
---------------------------------------------------------------------------------------
Operating profit (loss) 4,307 2,086 (638) 5,755
Interest expense (4,992) (417) (289) 663 (5,035)
Other income (expense), net 526 155 (373) (663) (355)
Equity in net loss of subsidiaries 404 (404)
---------------------------------------------------------------------------------------
Income (loss) before income taxes and
minority interest 245 1,824 (1,300) (404) 365
Provision (credit) for income taxes 121 623 (503) 241
---------------------------------------------------------------------------------------
Income (loss) before minority interest 124 1,201 (797) (404) 124
Minority interest 28 28
---------------------------------------------------------------------------------------
Net income (loss) $152 $1,201 ($797) ($404) $152
=======================================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended March 30, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------------- ------------------ ------------------ ------------------- ------------------
Revenues:
Net product sales $53,886 $10,084 $4,851 ($364) $68,457
Net mold sales 9,848 603 1,705 12,156
--------------------------------------------------------------------------------------------
63,734 10,687 6,556 (364) 80,613
Cost of Sales
Cost of product sales 40,803 8,794 4,882 (364) 54,115
Cost of mold sales 9,891 580 1,454 11,925
--------------------------------------------------------------------------------------------
50,694 9,374 6,336 (364) 66,040
--------------------------------------------------------------------------------------------
Gross Margin 13,040 1,313 220 14,573
Selling, general and
administrative expenses 8,224 195 446 8,865
--------------------------------------------------------------------------------------------
Operating profit (loss) 4,816 1,118 (226) 5,708
Interest expense (2,697) (416) (62) 318 (2,857)
Other income (expense), net 169 89 20 (318) (40)
Equity in net loss of
subsidiaries 647 (647)
--------------------------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 2,935 791 (268) (647) 2,811
Provision (credit) for income
taxes 1,031 (89) 942
--------------------------------------------------------------------------------------------
Income (loss) before minority
interest 1,904 791 (179) (647) 1,869
Minority interest 35 35
--------------------------------------------------------------------------------------------
Net income (loss) $1,904 $791 ($144) ($647) $1,904
============================================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Six-Months Ended March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
---------------------------------------------------------------------------------------------
Revenues:
Net product sales $170,657 $23,653 $17,740 ($336) $211,714
Net mold sales 13,441 183 848 14,472
--------------------------------------------------------------------------------------------
184,098 23,836 18,588 (336) 226,186
Cost of Sales
Cost of product sales 136,222 20,713 17,584 (336) 174,183
Cost of mold sales 12,888 151 715 13,754
--------------------------------------------------------------------------------------------
149,110 20,864 18,299 (336) 187,937
--------------------------------------------------------------------------------------------
Gross Margin 34,988 2,972 289 38,249
Selling, general and
administrative expenses 23,654 670 1,345 25,669
--------------------------------------------------------------------------------------------
Operating profit (loss) 11,334 2,302 (1,056) 12,580
Interest expense (8,877) (836) (351) 1,096 (8,968)
Other income (expense), net 1,117 (108) (390) (1,096) (477)
Equity in net loss of
subsidiaries (340) 340
--------------------------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 3,234 1,358 (1,797) 340 3,135
Provision (credit) for income
taxes 1,648 585 (684) 1,549
--------------------------------------------------------------------------------------------
Income (loss) before minority
interest 1,586 773 (1,113) 340 1,586
Minority interest 76 76
--------------------------------------------------------------------------------------------
Net income (loss) $1,662 $773 ($1,113) $340 $1,662
============================================================================================
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Six-Months Ended March 30, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
---------------------------------------------------------------------------------------------
Revenues:
Net product sales $91,302 $18,242 $10,790 ($818) $119,516
Net mold sales 10,724 914 1,724 13,362
---------------------------------------------------------------------------------------------
102,026 19,156 12,514 (818) 132,878
Cost of Sales
Cost of product sales 69,760 18,073 10,625 (818) 97,640
Cost of mold sales 10,396 852 1,469 12,717
---------------------------------------------------------------------------------------------
80,156 18,925 12,094 (818) 110,357
---------------------------------------------------------------------------------------------
Gross Margin 21,870 231 420 22,521
Selling, general and
administrative expenses 13,451 713 964 15,128
---------------------------------------------------------------------------------------------
Operating profit (loss) 8,419 (482) (544) 7,393
Interest expense (3,505) (728) (124) 376 (3,981)
Other income (expense), net 255 348 27 (376) 254
Equity in net loss of
subsidiaries (617) 617
---------------------------------------------------------------------------------------------
Income (loss) before income
taxes and minority interest 4,552 (862) (641) 617 3,666
Provision (credit) for income
taxes 2,190 (579) (221) 1,390
---------------------------------------------------------------------------------------------
Income (loss) before minority
interest 2,362 (283) (420) 617 2,276
Minority interest 86 86
---------------------------------------------------------------------------------------------
Net income (loss) $2,362 ($283) ($334) $617 $2,362
=============================================================================================
14
15
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Six-Months Ended March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
-----------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $4,022 ($660) $716 ($2) $4,076
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property, plant
and equipment (3,722) (191) (316) (4,229)
Proceeds from disposal of
property, plant and
equipment 186 186
Purchase of Huron Plastics
Group, Inc., net of $1,835
cash acquired (67,139) (67,139)
Purchase of LDM Germany (9,706) (9,706)
Purchase of Kenco Plastics,
net of $500 cash acquired (27,000) (27,000)
----------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING
ACTIVITIES (107,381) (191) (316) (107,888)
CASH FLOWS FROM FINANCING
ACTIVITIES
Borrowing (to)/from affiliates (2,054) 2,052 2
Costs associated with debt
acquisition (1,238) (1,238)
Proceeds from long-term debt 66,876 3 66,879
Payments on long-term debt (614) (5) (458) (1,077)
Net proceeds from lines of
credit borrowings 41,697 731 42,428
----------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 104,667 (2) 2,325 2 106,992
----------------------------------------------------------------------------------------
Net cash change 1,308 (853) 2,725 3,180
Cash at beginning of period 12 4,598 23 4,633
----------------------------------------------------------------------------------------
Cash at end of period $1,320 $3,745 $2,748 $7,813
========================================================================================
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $7,242 $998 $ 758 $8,998
========================================================================================
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16
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Six-Months Ended March 30, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor
Inc. Subsidiaries Subsidiaries Consolidated
-----------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES ($196) $785 ($1,566) ($977)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (5,906) (2,583) (293) (8,782)
Proceeds from disposal of property,
plant and equipment 2 2
Use of investments restricted to
property, plant and equipment 658 658
Purchase of Molmec, net of $2,705
cash acquired (52,609) (52,609)
----------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (57,855) (2,583) (293) (60,731)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt issuance 89,172 15,429 104,601
Payments on long-term debt (12,165) (9,647) (21,812)
Net proceeds (repayment) from lines of
credit borrowings (15,500) (3,634) 84 (19,050)
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NET CASH PROVIDED BY FINANCING
ACTIVITIES 61,507 2,148 84 63,739
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Net cash change 3,456 350 (1,775) 2,031
Cash at beginning of period 9 17 2,096 2,122
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Cash at end of period $3,465 $ 367 $321 $4,153
============================================================================
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $3,458 $ 1,083 $387 $4,928
============================================================================
16
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's financial results for the quarter and six months ended March 29,
1998 (second quarter 1998 and second half 1998) are less favorable than the same
periods in 1997. This is the result of increased goodwill amortization and
lower margins associated with its fiscal 1998 acquisitions.
FISCAL YEAR 1998 ACQUISITIONS
KENCO: On September 30, 1997, the Company acquired the entire outstanding stock
of Kenco Plastics, Inc. of Michigan, Kenco Plastics, Inc. of Kentucky and the
business and net tangible assets of Narens Design and Engineering, Inc.
(collectively referred to herein as "Kenco") for approximately $27.1 million in
cash. The acquisition was financed with additional borrowings under the
Company's Senior Credit Facility. Kenco designs and manufactures a full range of
blow molded plastic parts including HVAC components, air induction components,
functional components, and fluid reservoirs at six manufacturing locations in
Michigan, Kentucky, and Tennessee. Kenco's customers include Chrysler, Ford,
General Motors, Mercedes, Mitsubishi, and Toyota. Kenco's net sales for the
twelve-month period ended September 28, 1997 were approximately $60.5 million.
BEIENHEIM: On November 25, 1997, the Company acquired substantially all of the
operating assets of Aeroquip Vickers International GmbH, related to its
manufacturing operation located in Beienheim Germany for approximately $9.7
million in cash, and the assumption of approximately $2.5 million of
liabilities. The acquisition was made through the Company's newly formed German
subsidiary and was financed with additional borrowings under the Company's
Senior Credit Facility. The Beienheim facility manufactures various interior
trim components, exterior trim components, and under the hood components
supplied primarily to European automotive OEM's. Beienheim's customers include
Ford, Opel, and Audi. Net sales for the Beienheim facility over the
twelve-month period ended September 28, 1997 were approximately $33.0 million.
HURON PLASTICS GROUP: On February 6, 1998, the Company acquired the stock of
Huron Plastics Group, Inc. and substantially all the assets of Tadim, Inc,
(collectively referred to herein as "HPG") for $69.0 million in cash and the
assumption of certain liabilities. The transaction was funded with proceeds from
a $66.0 million dollar term loan issued by the Company's senior lender. HPG's
sales and net income for its fiscal year ended March 31, 1997 were $88.1 million
and $0.8 million, respectively. HPG manufactures a wide variety of interior
trim, underhood and functional components for many automotive customers,
including Ford, Chrysler, General Motors, Bundy, TRW, and Johnson Controls.
FISCAL YEAR 1997 ACQUISITIONS
MOLMEC: On January 22, 1997, the Company acquired substantially all the assets
of Molmec for approximately $55.9 million in cash and the assumption of certain
liabilities including $4.6 million of indebtedness and $8.4 million of current
liabilities. Molmec is an industry leader in the design, manufacture, and
integration of fluid and air management components and under the hood
assemblies.
KENDALLVILLE: On April 25, 1997, the Company acquired certain net assets of
Aeroquip Corporation's Kendallville, Indiana plant for $7.2 million in cash. The
Kendallville plant manufactures automotive air vents.
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18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS
QUARTER ENDED MARCH 29, 1998 COMPARED TO QUARTER ENDED MARCH 30, 1997
NET SALES: Net sales for the three-month period ended March 29, 1998 ("second
quarter 1998") were $125.9 million, an increase of $45.3 million, or 56.2%, from
the three-month period ended March 30, 1997 ("second quarter 1997"). Second
quarter 1998 net sales were comprised of $113.0 million of automotive product
sales, $5.0 million of consumer and other product sales, and $7.9 million of
mold sales. The sales growth is primarily the result of acquisitions described
previously herein.
GROSS MARGIN: Gross margin was $20.3 million or 16.1% of net sales for the
second quarter of 1998. Second quarter 1998 gross margin related to product
sales was $20.4 million or 17.3% of net product sales compared to $14.3 million
or 20.9% of net product sales for the second quarter of 1997. The decrease in
gross margin related to product sales is the result of lower margins associated
with the 1998 acquisitions.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for second
quarter 1998 were $14.6 million, or 11.6% of net sales, compared to $8.9
million, or 11.0% of net sales, for second quarter 1997. The increase in SG&A as
a percentage of net sales was the result of increased goodwill amortization
related to the acquisitions described previously herein.
INTEREST EXPENSE: Interest expense was $5.0 million for second quarter 1998
compared to $2.9 million for second quarter of 1997. The increased interest
expense was primarily due to the incurrence of additional debt related to the
acquisitions described above.
INCOME TAXES: The provision for income taxes for second quarter 1998 was $0.2
million with an effective tax rate of 66.0%, as compared to $0.9 million with an
effective tax rate of 33.5% for second quarter 1997. The rate difference relates
principally to certain nondeductible expenses.
SIX MONTHS ENDED MARCH 29, 1998 COMPARED TO SIX MONTHS ENDED MARCH 30, 1997
NET SALES: Net sales for the six-month period ended March 29, 1998 ("first half
1998") were $226.2 million, an increase of $93.3 million, or 70.2%, from the
six-month period ended March 30, 1997 ("first half 1997"). First half 1998 net
sales were comprised of approximately $202.0 million of automotive product
sales, $9.7 million of consumer and other product sales, and $14.5 million of
mold sales. The sales growth is primarily the result of acquisitions
described previously herein.
GROSS MARGIN: Gross margin was $38.2 million or 16.9% of net sales for the first
half of 1998. First half 1998 gross margin related to product sales was $37.5
million or 17.7% of net product sales compared to $21.9 million or 18.3% of net
product sales for the first half of 1997. The decrease was the result of lower
margins associated with the 1998 acquisitions.
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19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for first
half 1998 were $25.7 million, or 11.3% of net sales, compared to $15.1 million,
or 11.4% of net sales, for first half 1997.
INTEREST EXPENSE: Interest expense was $9.0 million for first half 1998 compared
to $4.0 million for first half 1997. The increased interest expense was
primarily due to the incurrence of additional debt related the acquisitions
described elsewhere herein.
INCOME TAXES: The provision for income taxes for first half 1998 was $1.5
million with an effective tax rate of 49.4%, as compared to $1.4 million with an
effective tax rate of 37.9% for first half 1997. The rate difference relates
principally to certain nondeductible expenses.
ACQUISITION OF HURON PLASTICS GROUP: On February 6, 1998, the Company acquired
100% of the issued stock of Huron Plastics Group, Inc. and substantially all of
the operating assets of Tadim, Inc. (collectively "HPG"). The aggregate purchase
price was $69.0 million in cash and the assumption of certain liabilities. HPG
is engaged in molded plastics manufacturing for North American OEM's and their
suppliers. HPG's net sales and net income for the year ended March 31, 1997 were
$88.1 million and $0.8 million, respectively.
TERM LOAN AND ADDITIONAL LINE OF CREDIT FACILITY: On February 6, 1998, the
Company secured additional financing from Bank of America Business Credit, its
current senior lender. The financing was comprised of a $66 million term loan
and an additional $10 million line of credit facility. The term loan and line
of credit bear interest at the prime rate plus .5% or libor plus 2.5%. Proceeds
from the term loan were used to fund the HPG acquisition. No borrowings have
been made on the additional line of credit facility to date.
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 flows 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 March 29, 1998, the Company had $179.8 million of long-term
debt outstanding, $55.2 million of revolving loans and current maturities of
long-term debt outstanding and $16.6 million of borrowing availability under its
revolving credit facilities.
Cash provided by operating activities in the first half of 1998 was $4.1
million compared to $1.0 million of cash used by operating activities in the
first half of 1997. The increase in cash provided by operating activities was
the result of the sales growth described above.
Capital expenditures for the first half of 1998 were $4.2 million compared to
$8.8 million for the first half of 1997. The Company believes its capital
expenditures (exclusive of the HPG acquisition) will be approximately $20.0
million in fiscal year 1998, and approximately $15.0 in fiscal years 1999 and
2000. The majority of the Company's fiscal 1998 capital expenditures will be
used to facilitize for new programs launching in fiscal 1999, install a new
enterprise-wide information system and upgrade certain
19
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
elements of the newly acquired facilities to LDM standards. However, the
Company's capital expenditures may be greater than currently anticipated as the
result of new business opportunities.
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.
YEAR 2000 COMPLIANCE: The information technology systems at the Company are not
Year 2000 compliant. The Company has selected and is in the process of preparing
for the implementation of new information technology systems that are fully Year
2000 compliant. The implementation is expected to be completed by June 30, 1999.
The expenditure related to this project is estimated to be $6 to $7 million over
the next one and a half years. The estimated cost has increased due to
expansion of the project to include hardware upgrades to facilitate the year
2000 compliant software.
20
21
PART II - OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security Holders Not applicable
Item 5 Other information Not applicable
Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 27-Financial Data
Schedule
(b) The registrant filed a Current
Report on Form 8-K dated April
22, 1998 as to the Huron
Plastics acquisition, Current
Report on Form 8-K dated
September 30, 1997 as to the
Kenco acquisition, and filed a
Current Report on Form 8-K
dated November 25, 1997 as to
the Beienheim acquisition.
21
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LDM TECHNOLOGIES, INC.
By: /s/ G. E. Borushko
---------------------------
Gary E. Borushko
Chief Financial Officer
/s/ B. N. Frederick
---------------------------
Bradley N. Frederick
Chief Accounting Officer
Date: May 13, 1998
22
23
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
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27 Financial Data Schedule
23