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 June 28, 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 (1) has filed all reports required
to be filed by sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
YES X NO
Number of shares common stock outstanding as of August 7, 1998: 600
Total pages:
Listing of exhibits:
2
LDM TECHNOLOGIES, INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, June
28, 1998 and September 28, 1997 3
Condensed Consolidated Statements of Income,
three months ended June 28, 1998 and
June 29, 1997 4
Condensed Consolidated Statements of Income,
nine months ended June 28, 1998 and
June 29, 1997 5
Condensed Consolidated Statements of Cash
Flows, nine months ended June 28, 1998
and June 29, 1997 6
Notes to Condensed Consolidated Financial
Statements 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 18
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II OTHER INFORMATION
Item 1 Legal Proceedings 21
Item 2 Changes in Securities 21
Item 3 Defaults upon Senior Securities 21
Item 4 Submission of Matters to a Vote of
Security Holders 21
Item 5 Other Information 21
Item 6 Exhibits and Reports on Form 8-K 21
Index to Exhibits
Exhibit 27 - Financial Data Schedule
Signature Page 22
2
3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
JUNE 28, 1998 SEPTEMBER 28, 1997
(UNAUDITED) (NOTE)
------------- ------------------
ASSETS
Current assets:
Cash $5,981 $4,633
Accounts receivable 76,935 45,811
Inventory:
Raw materials 16,303 8,988
Work in process 1,417 1,626
Finished goods 7,068 4,434
Mold costs 18,214 13,825
Deferred income taxes 5,098 4,627
Other current assets 2,988 2,054
-------- --------
Total current assets 134,004 85,998
Net property, plant and equipment 117,557 82,259
Investment in joint venture 1,398 -
Goodwill, net 73,547 36,791
Debt issue costs, net 6,344 5,733
Other assets 595 1,014
-------- --------
Totals $333,445 $211,795
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loans $34,831 $3,530
Accounts payable 42,308 28,152
Accrued liabilities 15,751 13,107
Accrued interest 6,593 2,555
Accrued compensation 6,524 4,616
Advance mold payments from customers 7,003 11,082
Income taxes payable 416 1,249
Current maturities of long-term debt 9,621 979
-------- --------
Total current liabilities 123,047 65,270
Long-term debt due after one year 178,730 122,261
Deferred income taxes 7,812 3,513
Note payable to affiliate 87 87
Minority interest 142 279
STOCKHOLDERS' EQUITY
Common Stock (par value $.10, issued and
outstanding 600 shares; authorized
100,000 shares)
Additional paid-in capital 94 94
Retained earnings 23,575 20,353
Foreign currency translation adjustments (42) (62)
-------- --------
Total stockholders' equity 23,627 20,385
-------- --------
Totals $333,445 $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 contained herein.
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4
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
UNAUDITED
THREE MONTHS ENDED
JUNE 28, 1998 JUNE 29, 1997
---------------- -----------------
Revenues:
Net product sales $124,541 $77,821
Net mold sales 19,694 4,539
-------- -------
144,235 82,360
Cost of Sales
Cost of product sales 102,639 59,502
Cost of mold sales 16,737 4,209
-------- -------
119,376 63,711
-------- -------
Gross Margin 24,859 18,649
Selling, general and
administrative expenses 16,326 10,393
-------- -------
Operating profit 8,533 8,256
Interest expense (5,442) (3,405)
Foreign currency exchange
loss (66) -
Equity in joint venture loss (218) -
Gain on sale of land and
building - 215
Other income 18 115
-------- -------
Income before income taxes
and minority interest 2,825 5,181
Provision for income taxes 1,331 1,941
-------- -------
Income before minority
interest 1,494 3,240
Minority interest 66 (7)
-------- -------
Net income $ 1,560 $ 3,233
======== =======
See notes to condensed consolidated financial statements.
4
5
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
UNAUDITED
NINE MONTHS ENDED
JUNE 28, 1998 JUNE 29, 1997
---------------------------------
Revenues:
Net product sales $336,255 $197,337
Net mold sales 34,166 17,901
-------- --------
370,421 215,238
Cost of Sales
Cost of product sales 276,822 157,142
Cost of mold sales 30,491 16,926
-------- --------
307,313 174,068
-------- --------
Gross Margin 63,108 41,170
Selling, general and
administrative expenses 41,995 25,521
-------- --------
Operating profit 21,113 15,649
Interest expense (14,410) (7,386)
Foreign currency exchange loss (735) -
Equity in joint venture loss (218) -
Gain on sale of land and
building - 215
Other income 210 369
-------- --------
Income before income taxes
and minority interest 5,960 8,847
Provision for income taxes 2,880 3,331
-------- --------
Income before minority
interest 3,080 5,516
Minority interest 142 79
-------- --------
Net income $ 3,222 $ 5,595
======== ========
See notes to condensed consolidated financial statements.
5
6
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
UNAUDITED
NINE MONTHS ENDED
JUNE 28, 1999 JUNE 29, 1997
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 16,889 $ 9,234
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,708) (10,850)
Proceeds from disposal of property, plant
and equipment 186 1,536
Use of investments restricted to property,
plant and equipment 658
Purchase of Molmec, Inc., net of $2,705
cash acquired (53,198)
Purchase of Kendallville (6,878)
Purchase of Huron Plastics Group, net of
$1,835 cash acquired (66,780)
Purchase of LDM Germany (9,706)
Purchase of Kenco Plastics, net of $500
cash acquired (26,641)
---------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (110,649) (68,732)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt issuance, net of
issuance costs of $1,313 in 1998, $5,911 in 1997 65,566 104,089
Payments on long-term debt (2,119) (22,039)
Net borrowings (repayments) on lines of credit 31,661 (19,212)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 95,108 62,838
---------- ---------
Net cash change 1,348 3,340
Cash at beginning of period 4,633 2,122
---------- ---------
Cash at end of period $ 5,981 $ 5,462
========== =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 13,939 $ 8,189
========== =========
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 nine-month periods ended June
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 nine months ended June 28,
1998 and June 29, 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:
7
8
For nine months ended
(dollars in thousands)
June 28, 1998 June 29, 1997
--------------- ---------------
Net sales $412,776 $347,896
Net income $2,605 $3,556
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 $75 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, capital expenditure 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 capital expenditure
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 of 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.
8
9
LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
----------- ------------- -------------- -------------- -------------
ASSETS
Current assets:
Cash $ 503 $ 3,631 $ 1,847 $ $ 5,981
Accounts receivable 65,020 8,894 5,743 (2,812) 76,935
Notes receivable due
from affiliates 22,255 3,478 (25,733)
Inventory:
Raw materials 12,155 1,255 2,893 16,303
Work in process 1,104 113 200 1,417
Finished goods 6,138 573 357 7,068
Mold costs 8,201 4,109 5,904 18,214
Deferred income taxes 4,898 200 5,098
Other current assets 2,792 55 141 2,988
--------- --------- --------- --------- ---------
Total current assets 123,066 22,198 17,285 (28,545) 134,004
Net property, plant and
equipment 95,841 14,713 7,003 117,557
Investment in
subsidiaries 7,937 (6,539) 1,398
Goodwill, net 73,547 73,547
Debt issue costs, net 6,344 6,344
Other assets 539 56 595
--------- --------- --------- --------- ---------
Totals $ 307,274 $ 36,911 $ 24,344 $ (35,084) $ 333,445
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and
revolving loans $ 32,659 $ $ 2,172 $ $ 34,831
Accounts payable 33,839 5,882 5,670 (3083) 42,308
Accrued liabilities 11,542 2,713 1,496 15,751
Accrued interest 6,593 6,593
Accrued compensation 4,082 380 2,062 6,524
Advance mold payments from
customers 5,122 1,881 7,003
Income taxes payable 1,675 (1,259) 416
Current maturities of
long-term debt 9,621 9,621
--------- --------- --------- --------- ---------
Total current liabilities 100,011 14,097 12,022 (3,083) 123,047
Long-term debt due after
one year 178,727 3 178,730
Deferred income taxes 5,791 1,707 314 7,812
Note payable to affiliates 15,408 10,138 (25,459) 87
Minority interest 142 142
STOCKHOLDERS' EQUITY
Common stock 5,857 1 (5,858)
Additional paid-in capital 94 126 (126) 94
Retained earnings 22,571 (161) 1,723 (558) 23,575
Foreign currency
translation adjustments (62) 20 (42)
--------- --------- --------- --------- ---------
Total stockholders' equity 22,603 5,696 1,870 (6,542) 23,627
--------- --------- --------- --------- ---------
Totals $ 307,274 $ 36,911 $ 24,344 $ (35,084) $ 333,445
========= ========= ========= ========= =========
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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)
Inventory:
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 June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ -------------- ------------- -------------
Revenues:
Net product sales $ 98,771 $ 15,115 $ 10,712 $ (57) $ 124,541
Net mold sales 6,257 13,665 (228) 19,694
--------- --------- --------- --------- ---------
105,028 28,780 10,484 (57) 144,235
Cost of Sales
Cost of product sales 79,057 12,993 10,646 (57) 102,639
Cost of mold sales 5,186 11,798 (247) 16,737
--------- --------- --------- --------- ---------
84,243 24,791 10,399 (57) 119,376
--------- --------- --------- --------- ---------
Gross Margin 20,785 3,989 85 24,859
Selling, general and
administrative expenses 14,843 305 1,178 16,326
--------- --------- --------- --------- ---------
Operating profit (loss) 5,942 3,684 (1,093) 8,533
Interest expense (5,417) (411) (236) 622 (5,442)
Foreign currency
exchange gain/(loss) (192) 126 (66)
Equity in joint
venture loss (218) (218)
Other income (expense), net 648 9 (17) (622) 18
Equity in net income of
subsidiaries 1,201 (1,201)
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and minority
interest 2,156 3,090 (1,220) (1,201) 2,825
Provision (credit) for
income taxes 662 1,149 (480) 1,331
--------- --------- --------- --------- ---------
Income (loss) before
minority interest 1,494 1,941 (740) (1,201) 1,494
Minority interest 66 66
--------- --------- --------- --------- ---------
Net income (loss) $ 1,560 $ 1,941 $ (740) $ (1,201) $ 1,560
========= ========= ========= ========= =========
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended June 29, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies Guarantor Nonguarantor Consolidating
Inc. Subsidiaries 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 (loss) 7,710 477 69 8,256
Interest expense (3,331) (438) (65) 429 (3,405)
Gain on sale of land and building 215 215
Other income, net 511 29 4 (429) 115
Equity in net income of
subsidiaries 58 (58)
-------- -------- -------- ------- --------
Income before income
taxes and minority interest 5,163 68 8 (58) 5,181
Provision for income taxes 1,923 18 1,941
-------- -------- -------- ------- --------
Income (loss) 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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13
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Nine-Months Ended June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- -------------- -------------- --------------- -------------
Revenues:
Net product sales $ 269,429 $ 38,768 $ 28,452 $ (393) $ 336,255
Net mold sales 19,698 13,848 620 34,166
--------- --------- --------- --------- ---------
289,126 52,616 29,072 (393) 370,421
Cost of Sales
Cost of product sales 215,279 33,706 28,230 (393) 276,822
Cost of mold sales 18,074 11,949 468 30,491
--------- --------- --------- --------- ---------
233,353 45,655 28,698 (393) 307,313
--------- --------- --------- --------- ---------
Gross Margin 55,773 6,961 374 63,108
Selling, general and
administrative expenses 38,497 975 2,523 41,995
--------- --------- --------- --------- ---------
Operating profit (loss) 17,276 5,986 (2,149) 21,113
Interest expense (14,294) (1,247) (587) 1,718 (14,410)
Foreign currency exchange loss (504) (231) (735)
Equity in joint venture loss (218) (218)
Other income (expense), net 1,765 213 (50) (1,718) 210
Equity in net income of
subsidiaries 861 (861)
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and minority
interest 5,390 4,448 (3,017) (861) 5,960
Provision (credit) for income
taxes 2,310 1,734 (1,164) 2,880
--------- --------- --------- --------- ---------
Income (loss) before minority
interest 3,080 2,714 (1,853) (861) 3,080
Minority interest 142 142
--------- --------- --------- --------- ---------
Net income (loss) $ 3,222 $ 2,714 $ (1,853) $ (861) $ 3,222
========= ========= ========= ========= =========
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14
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Nine-Months Ended June 29, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies Guarantor Nonguarantor Consolidating
Inc. Subsidiaries 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)
Gain on sale of land and building 215 215
Other income, net 766 377 31 (805) 369
Equity in net loss of subsidiaries (559) 559
--------- --------- --------- --------- ---------
Income (loss) 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) 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
========= ========= ========= ========= =========
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15
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Nine-Months Ended June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies Gauarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------ ------------ ------------ ------------- ------------
NET CASH PROVIDED (USED) BY $ 17,271 $(714) $ 334 $ (2) $ 16,889
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property, plant
and equipment (6,652) (250) (806) (7,708)
Proceeds from disposal of
property, plant and equipment 186 186
Purchase of Huron Plastics Group
Inc., net of $1,835 cash acquired (66,780) (66,780)
Purchase of LDM Germany (9,706) (9,706)
Purchase of Kenco Plastics,
net of $500 cash acquired (26,641) (26,641)
--------- ----- -------- ----- ---------
NET CASH USED FOR INVESTING
ACTIVITIES (109,593) (250) (806) (110,649)
CASH FLOWS FROM FINANCING
ACTIVITIES
Borrowings (to)/from affiliates (2,054) 2,052 2
Proceeds from long-term debt issuance 65,563 3 65,566
Payments on long-term debt (1,655) (6) (458) (2,119)
Net proceeds from lines of
credit borrowings 30,959 702 31,661
--------- ----- -------- ----- ---------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 92,813 (3) 2,296 2 95,108
--------- ----- -------- ----- ---------
Net cash change 491 (967) 1,824 1,348
Cash at beginning of period 12 4,598 23 4,633
--------- ----- -------- ----- ---------
Cash at end of period $ 503 3,631 $ 1,847 $ $ 5,981
========= ===== ======== ===== =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 11,235 1,494 $ 1,210 $ $ 13,939
========= ===== ======== ===== =========
15
16
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Nine-Months Ended June 29, 1997
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor
Inc. Subsidiaries 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 disposal 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
======== ======== ======= =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 6,072 $ 1,536 $ 581 $ 8,189
======== ======== ======= =========
16
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company's financial results for the quarter and nine months ended June 28,
1998 are less favorable than the same periods in 1997. This is the result of
increased goodwill amortization, lower margins associated with its fiscal 1998
acquisitions, and a strike at one of its major customers.
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.
17
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF CONTINUING OPERATIONS
QUARTER ENDED JUNE 28, 1998 COMPARED TO QUARTER ENDED JUNE 29, 1997
NET SALES: Net sales for the three-month period ended June 28, 1998 ("third
quarter 1998") were $144.2 million, an increase of $61.9 million, or 75.1%, from
the three-month period ended June 29, 1997 ("third quarter 1997"). Third quarter
1998 net sales were comprised of $120.4 million of automotive product sales,
$4.1 million of consumer and other product sales, and $19.7 million of mold
sales. The sales growth is primarily the result of acquisitions described
previously herein. This growth was offset slightly by a strike at a major
customer resulting in lost product sales of $6.5 million.
GROSS MARGIN: Gross margin was $24.9 million or 17.2% of net sales for the third
quarter of 1998. Third quarter 1998 gross margin related to product sales was
$21.9 million or 17.6% of net product sales compared to $18.3 million or 23.5%
of net product sales for the third quarter of 1997. The decrease in gross margin
related to product sales is the result of lower margins associated with the 1998
acquisitions, and a strike at a major customer. The strike resulted in lost
gross margin of $1.8 million. If the strike had not occurred, third quarter 1998
gross margin related to product sales would have been $23.7 million or 18.1% of
net product sales.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for third
quarter 1998 were $16.3 million, or 11.3% of net sales, compared to $10.4
million, or 12.6% of net sales, for third quarter 1997. The decrease in SG&A as
a percentage of net sales was the result of increased net sales mentioned
herein.
INTEREST EXPENSE: Interest expense was $5.4 million for third quarter 1998
compared to $3.4 million for third 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 third quarter 1998 was $1.3
million with an effective tax rate of 43.7%, as compared to $1.9 million with an
effective tax rate of 37.5% for third quarter 1997. The rate difference relates
principally to certain nondeductible expenses.
NINE MONTHS ENDED JUNE 28, 1998 COMPARED TO NINE MONTHS ENDED JUNE 29, 1997
NET SALES: Net sales for the nine-month period ended June 28, 1998 ("Year to
date June 1998") were $370.4 million, an increase of $155.2 million, or 72.1%,
from the nine-month period ended June 29, 1997 ("Year to date June 1997"). Year
to date June 1998 net sales were comprised of approximately $322.4 million of
automotive product sales, $13.9 million of consumer and other product sales, and
$34.1 million of mold sales. The sales growth is primarily the result of
acquisitions described previously herein. This growth was offset slightly by a
strike at a major customer resulting in lost product sales of $6.5 million.
GROSS MARGIN: Gross margin was $63.1 million or 17.0% of net sales for Year to
date June 1998. Year to date June 1998 gross margin related to product sales was
$59.4 million or 17.7% of net product sales compared to $40.2 million or 20.4%
of net product sales for Year to date June 1997. The decrease was the result of
lower margins associated with the 1998 acquisitions, and a strike at a major
customer. The strike resulted in lost gross margin of $1.8 million. If the
strike had not occurred, Year to date June 1998 gross margin related to product
sales would have been $61.2 million or 17.9% of net product sales.
18
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for Year to
date June 1998 were $42.0 million, or 11.3% of net sales, compared to $25.5
million, or 11.9% of net sales, for Year to Date June 1997.
INTEREST EXPENSE: Interest expense was $14.4 million for Year to date June 1998
compared to $7.4 million for Year to date June 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 Year to date June 1998 was $2.9
million with an effective tax rate of 46.6%, as compared to $3.3 million with an
effective tax rate of 37.7% for Year to date June 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 capital expenditure 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 capital expenditure 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 June 28, 1998, the Company had $178.8 million of long-term
debt outstanding, $34.8 million of revolving loans and current maturities of
long-term debt outstanding and $19.1 million of borrowing availability under its
revolving credit facilities.
Cash provided by operating activities Year to date June 1998 was $16.9 million
compared to $9.2 million of cash provided by operating activities in Year to
date June 1997. The increase in cash provided by operating activities was the
result of the sales growth described above.
Capital expenditures for Year to date June 1998 were $7.7 million compared to
$10.9 million for Year to date June 1997. The Company believes its capital
expenditures (exclusive of the HPG acquisition) will be approximately $15.0
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. The Company's sales are concentrated
with a few OEM customers and a change in their demand for products could have a
material impact on the Company. Labor relations problems at General Motors
Corporation have significantly affected the Company's production during the
months of June and July 1998. 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
Submission of Matters to a Vote
Item 4 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: August 11, 1998
22
23
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
------------- ------------------------
27 Financial Data Schedule
23