1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended September 27, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to ______
COMMISSION FILE NUMBER 333-21819
---------------
LDM TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-2690171
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2500 EXECUTIVE HILLS DRIVE, AUBURN HILLS, MICHIGAN 48326
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 858-2800
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes [X] No [ ]
As of December 1, 1998, 600 shares of Common Stock of the Registrant were
outstanding. There is no public trading market for the Common Stock.
2
PART I
Item 1. Business
GENERAL
LDM Technologies, Inc. (the "Company" or "LDM") is a leading Tier 1 designer
and manufacturer of highly engineered plastic instrument panel and interior trim
components, exterior trim components and under-the-hood components supplied
primarily to North American automotive original equipment manufacturers (OEMs).
Suppliers that sell directly to OEMs are referred to herein as "Tier 1"
suppliers. The Company is a full service supplier with advanced computer design
and engineering capabilities that have enabled it to penetrate OEM new product
programs during the concept stage of the product life cycle and promote
long-term customer relationships. The Company recently constructed its Auburn
Hills Design Center to enhance its conceptual design and development
capabilities.
The Company, a privately held Michigan corporation, was incorporated in 1985
to pursue acquisitions in the automotive industry. In 1986, the Company began to
focus on the market for highly engineered plastic components when it acquired
Arrow Molded Plastics, Inc. In 1993, the Company strengthened its presence in
this market with the acquisition of Knapp Plastics Ltd., a manufacturer of
exterior trim components and in 1994, purchased selected assets of Windsor
Plastic Products Ltd., a manufacturer of instrument panel components.
In fiscal year 1997 the Company completed its acquisition of substantially
all the assets of Molmec, Inc., a manufacturer of under-the-hood products (the
"Molmec" Acquisition). The Company also completed its acquisition of Aeroquip's
Kendallville, Indiana facility in fiscal year 1997 (the "Kendallville"
Acquisition).
On September 30, 1997, the Company purchased the entire voting stock of
Kenco Plastics, Inc., a manufacturer of blow-molded, under-the-hood products
(the "Kenco" Acquisition). On November 25, 1997, the Company acquired the
business and certain net assets of Aeroquip-Vickers International GmbH (the
"Beienheim" Acquisition). The business is located in Beienheim, Germany and
manufactures interior and under-the-hood products, primarily for European OEM's.
On February 6, 1998, the Company acquired the stock of Huron Plastics Group,
Inc. and substantially all of the assets of Tadim, Inc. (collectively the "HPG"
Acquisition). HPG is a manufacturer of under-the-hood and functional products
for sale to OEM's and Tier I automotive suppliers.
Through a combination of the acquisitions described above and internal
growth, the Company's net sales and EBITDA have increased from approximately
$177.6 million and $15.1 million, respectively, in fiscal year 1994 to
approximately $525.6 million and $45.3 million, respectively, on a proforma
basis in fiscal year 1998, which represents a compound annual growth rate of 31%
and 31%, respectively.
The Company estimates that the strike at General Motors Corporation during
fiscal year 1998 resulted in lost product sales of approximately $13.0 million
and associated gross margins of approximately $3.5 million.
Since its acquisition, Kenco has not performed as originally anticipated and the
Company intends to dispose of the Kenco business and certain net assets to a
joint venture that will be 49% owned by the Company by December 31, 1998.
INDUSTRY OVERVIEW
The North American automotive industry is currently experiencing a number of
trends which are significant to the Company's business.
3
Increasing Utilization of Plastic. In recent years, OEMs have focused their
efforts on developing and employing lower cost and lighter materials, such as
plastic, in the design of components. Plastic provides OEMs with a number of
design advantages over metal including increased design flexibility and
aesthetic appeal, resistance to corrosion and improved fuel-efficiency
performance due to lighter weight materials. Substituting plastic for metal can
also reduce manufacturing costs by eliminating machining costs, reducing
painting costs, facilitating assembly, minimizing tooling costs and
consolidating the number of parts used in a vehicle. The Company believes that
while the majority of the opportunities for converting metal into plastic have
already occurred in exterior and interior trim applications, there are
significant growth opportunities in the use of plastic in under-the-hood
components. Suppliers of under-the-hood components, such as the Company, are
increasingly being asked to develop complex under-the-hood systems, including
plastic transmission covers that consolidate engine mounts and drive shaft seals
and battery trays that integrate fluid reservoirs.
Expansion of OEM Supplier Responsibilities. Since the 1980s, OEMs such as
Ford, General Motors and Chrysler have been actively reducing their supplier
base to include only those suppliers which accept significant responsibility for
product management and meet increasingly strict standards for product quality,
on time delivery and manufacturing costs. These suppliers are expected to
control many aspects of the production of system components, including design,
development, component sourcing, manufacturing, quality assurance, testing and
delivery to the customer's assembly plant.
Globalization of the OEM Supplier Base. Several OEMs have announced certain
models designed for the world automobile market ("World Car"). This departure
from the historical practice of designing separate models for each regional
market will generally require suppliers to establish international design and
manufacturing capabilities through internal development, joint ventures or
acquisitions. As a result, certain domestic and European OEMs have encouraged
their existing suppliers to establish foreign production support for World Car
programs.
Market-based Pricing. In an effort to reduce costs and to ensure the
affordability and competitiveness of their products, OEMs are sourcing
automotive components using a market-based pricing approach. In using such a
market-based approach, OEMs establish a target price, or the price the market is
willing to pay for a vehicle, and systematically divide this price into system
and component target prices. In addition, under market-based pricing, the OEMs
often require annual price reductions for the vehicle's systems and components.
As a result, the market-based approach to pricing has generally required
automotive suppliers to focus on continually reducing product costs while
improving quality standards.
AUTOMOTIVE PRODUCTS
The Company designs and manufactures highly-engineered plastic instrument
panel and interior trim components, exterior trim components and under-the-hood
components. In recent years, the Company has significantly expanded its design
and engineering capabilities which provide the Company with a competitive
advantage in obtaining new business. The Company's three automotive lines of
business are as follows:
Instrument Panel Components and Interior Trim Components. The Company
focuses on the production of complex products such as instrument panel
subassemblies which require the integration of multiple components. Instrument
panel components manufactured by the Company include cluster finish panels,
center trim panels, air vents, coin and cup holders, ashtrays, gloveboxes,
telephone holders and consoles. Certain products in this line of business demand
functional aesthetics appeal and typically require the Company to provide
innovative and design intensive solutions for application requirements
stipulated by OEMS. Historically, the Company's largest customer for its
instrument panel components has been Ford.
Exterior Trim Components. Exterior trim systems manufactured by the Company
include front and rear bumper fascias, end caps, body side claddings and
moldings, rocker panels and grills. The Company's broad range of exterior trim
class A painting capabilities provides it with a competitive advantage in
supplying exterior trim to domestic and foreign OEMs. The Company is able to
provide both high-bake high solids painting, which is traditionally preferred by
domestic OEMs, and low-bake, two component painting, which is preferred by
foreign OEMs. Historically, LDM's largest customer for its exterior trim
components has been General Motors.
4
Under-the-Hood/Functional Components. The Company is a designer and
manufacturer of fluid and air management components for under-the-hood
applications such as cowl vent assemblies, fluid reservoirs including degas
bottles, battery trays and covers, air deflectors and sight shields. The
Company believes that it supplies the majority of Ford's cowl vent
assemblies for North American car and truck platforms. OEMs are
increasingly substituting plastic for metal in under-the-hood components
and systems in an effort to reduce cost, noise and weight, to enhance
design flexibility, to improve airflow and to increase aesthetic appeal.
Historically, the largest customer for its under-the-hood components has
been Ford.
CONSUMER PRODUCTS
G.L. Industries of Indiana, Inc. (d/b/a Como Products ("Como"), a
manufacturer of consumer and office products, was acquired by the Company in
1993. Como is a manufacturer of plastic injection molded products for the
electronics, computer, television, office furniture, appliance, transportation
and business machine markets. Como's extensive finishing capabilities include
painting, EMI/RFI shielding, hot stamping, induction bonding, pad printing and
machining of molded parts. With injection molding machines ranging from 230 tons
to 3,000 tons, Como has the ability to produce a broad range of molded parts,
including injection molded, structural foam and counter pressure structural foam
parts. Como sales represented approximately 4.2% of the Company's fiscal year
1998 net product sales.
It is the intention of the Company to further concentrate efforts solely on its
automotive products business. The Company is in negotiations to complete the
disposal of Como.
CUSTOMERS
The Company's principal customers are Ford, General Motors, Volkswagen and
Chrysler for which it supplies components and subassemblies for a variety of
light duty trucks, minivans and passenger cars. While the Company's products are
generally used on a diverse group of over 60 models, the Company's sales and
marketing efforts have been directed towards those sectors of the automotive
market which have experienced strong consumer demand and growth in sales. The
Company supplies components and subassemblies for a variety of light duty
trucks, sports utility vehicles, minivans and passenger cars.
The approximate percentage of net production sales to the principal
customers for the Company for the twelve-month period ended September 27, 1998
are shown below:
Year Ended
September 27, 1998
------------------
Ford .................................................................... 36.5%
General Motors .......................................................... 32.7%
Chrysler................................................................. 5.9%
Volkswagen .............................................................. 3.4%
Other Automotive......................................................... 19.3%
Other Non-Automotive..................................................... 2.2%
-----
Total.......................................................... 100.0%
=====
The Company's customers typically award purchase orders on a limited source
basis that normally cover components to be supplied for a particular car model.
Such purchase orders generally provide for supplying the customer's requirements
for a model year, although, in practice, such purchase orders are typically
renewed until the component is redesigned or eliminated in a model change.
Products under development are assigned a selling price which is reevaluated
from time to time during the product development cycle. Prior to production, the
Company and the customer generally agree on a final price, which, in some
instances, may be subject to negotiated price reductions or increases over the
term of the project. Consequently, the Company's ability to improve operating
performance is generally dependent primarily on its ability to reduce costs and
operate more efficiently.
The Company has been chosen as a supplier for a variety of light trucks
(including pick-up trucks, minivans, full size vans and sport utility vehicles)
and passenger car models. The following table presents an overview of the major
models, for which the Company currently produces components for its OEM
customers:
5
Customer Model
- ----------------------------------------------------------------------------
General Motors-truck.......................................... APV/Transport
Astro/Safari
Blazer/Bravada/Jimmy
Sonoma/Blazer
Sonoma Pick-up
1500 Sierra
GMC Sierra/Silverado
Venture/Silhouette/Trans Sport
General Motors-car............................................ Achieva/Grand Am
Alero
Astra (Opel)
Aurora/Riviera
Cavalier/Sunbird/Sunfire
Corvette
Deville/Concourse
El Dorado
Firebird/Camaro
Grand Prix/Cutlass
Impact
Intrigue
Lumina
Malibu/Century
Monte Carlo
Park Avenue
Saturn/Z
Seville
Vectra (Opel)
Ford-truck.................................................... Aerostar
Econoline
Expedition
Explorer
F-Series truck F-250/F-350
Ranger
Villager/Quest
Windstar
Ford-car...................................................... Continental
Contour/Mystique/Mondeo
Crown Victoria/Grand Marquis
Escort (US and Europe)
Mark VIII
Mustang
T-Bird/Cougar /Lincoln LS
Taurus/Sable
Town Car
Chrysler-truck................................................ Caravan/Voyager/Town & Country
Dakota
Grand Cherokee
Ram Pick-up/Van
Chrysler-car.................................................. Avenger/Sebring
Breeze/Cirrus/Stratus
Concord/Intrepid
LHS
Neon
Volkswagen.................................................... Golf/Jetta
A3 (Audi)
A4 (Audi)
A6 (Audi)
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DESIGN AND PRODUCT ENGINEERING
The Company is a full service Tier I supplier with advanced engineering
capabilities which enable it to design innovative, high-quality products that
provide value to its customers. The Company recently built its Auburn Hills
Design Center to provide an environment for trend-setting conceptual design and
product development. The Company has made other significant investments in
conceptual design capabilities that allow it to participate in the earliest
stages of programs. For instance, the Company has embraced computer-aided
simulation directly linked to customer computer networks as a means to reduce
the cost and time required to develop new products. The industrial design
activity has augmented the Company's traditional modeling methods with
computer-aided technology which reduces staff requirements as well as
simplifying the integration of design and engineering functions. The Company has
transitioned from computer-aided design shell to solid modeling which provides a
direct link to rapid prototyping. The Company's design staff employs
state-of-the-art ALIAS computer software to provide three-dimensional virtual
modeling and product animation. Analytical tools employed include finite element
analysis for structural analysis, kinematics for mechanisms, computational fluid
dynamics for airflow studies and moldfilling analysis for injection molding
optimization and warp prediction.
MANUFACTURING
The Company's OEM customers are focusing on suppliers capable of delivering
quality products, controlling manufacturing costs and integrating, through
design capabilities, multiple components into larger systems. The Company has
responded to this challenge by implementing a lean manufacturing program and
adopting advanced processing technology.
The Company's lean manufacturing program has focused on "kanban" production
scheduling and materials management techniques and labor productivity
improvements. Kanban management techniques are characterized by flexible
production scheduling as well as vendor scheduling, reduced work queues, more
frequent vendor deliveries and reduced inventory levels. Through kanban, the
Company has experienced increased inventory turnover and generally reduced
inventory levels.
The Company continually seeks to achieve labor productivity improvement and
has established a work environment which encourages employee involvement in
identifying and eliminating waste. A key factor in the Company's operations is
maintaining the flexibility to respond to the demands of different product runs
and changing product delivery requirements while continuously increasing
production efficiency.
The Company believes its broad base of class A paint application
capabilities positions it well for supplying the domestic and foreign exterior
trim market. The Company is able to provide both high-bake high solids painting,
which is traditionally preferred by domestic OEMS, and low-bake, two component
painting, which is preferred by foreign OEMS. The Company has also recently
developed paint application technology utilizing innovative robotic applications
which has enabled the Company to reduce costs by improving paint transfer
efficiency.
The Company has been recognized as a quality supplier by its OEM customers
and has received Ford's Q1 Award and has been nominated for Chrysler's Pentastar
Award. The majority of the Company's facilities are QS 9000 certified and the
remaining facilities are in the process of being certified.
MARKETING
Sales of the Company's products to OEMs are made directly by the Company's
sales and engineering force, headquartered in Michigan. Through the sales and
engineering office, the Company services its OEM customers and manages its
continuing programs of product design improvement and development. The Company's
sales and engineering force currently consists of approximately 100 individuals,
including several who are located periodically at various OEMs' offices in order
to facilitate the development of new programs.
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COMPETITION
The automotive supplier industry in which the Company competes is highly
competitive. A large number of actual or potential competitors exist including
the internal component supply operations of the OEMs as well as independent
suppliers, many of which are larger than the Company. The Company believes its
principal competitors in its three lines of business include: Progressive
Dynamics Inc., Summit Polymers Inc. and Manchester Plastics, a business unit of
Collins & Aikman Corporation, in instrument panel components; Magna
International Inc., Venture Holdings Corporation, and JPE, Inc., in exterior
trim components; and Key Plastics Inc. and Lacks Industries in under-the-hood
components.
The Company principally competes for new business both at the initial
development of new models and upon the redesign of existing models by its major
customers. New model development generally begins two to four years prior to the
marketing of such models to the public. Because of the large investment by OEMs
and Tier I suppliers in tooling and the long lead time required to commence
production, OEMs and Tier I suppliers generally do not change a supplier during
a model production run.
RAW MATERIALS
The principal raw materials used by the Company are engineered plastic
resins such as nylon, polypropylene, polycarbonate,
acrylonitrile-butadiene-styrene, paint, and steel for production molds, all of
which are available from many sources. The resins used in the Company's business
historically have been subject to price fluctuations. In the past, the Company
has been unable to pass price increases in resins through to its customers.
There can be no assurance that a material increase in the price of resin will
not adversely affect the Company's results of operations. The Company has not
experienced significant raw material shortages and does not anticipate
significant raw material shortages in the foreseeable future.
EMPLOYEES
As of September 27, 1998, the Company's workforce included 4,357 employees,
of which 729 were salaried workers, and 3,628 were hourly workers including
temporary and part-time employees. The Company has 273 hourly employees
represented by the Canadian Automobile Workers union at its Leamington, Canada
facility, 142 hourly employees represented by the United Auto Workers at its
Como facility, and 173 hourly employees represented by United Food and
Commercial Workers Union at its Owensboro, Kentucky facility. The Company's
three-year contract with the bargaining unit for the Leamington facility expires
January 15, 2001. The Company's contract with the bargaining unit for the Como
facility expires December 31, 2000. The contract with the bargaining unit for
the Owensboro facility expires in May of 2000. None of the Company's other
employees are subject to collective bargaining agreements. The Company has not
experienced any work stoppages and considers relations with its employees to be
good.
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to a wide variety of
international, federal, state and local laws and regulations, including those
governing the use, storage, handling, generation, treatment, emission, release,
discharge and disposal of certain materials, substances and wastes, the
remediation of contaminated soil and groundwater, and the health and safety of
employees (collectively, "Environmental Laws"). As such, the nature of the
Company's operations exposes it to the risk of claims with respect to such
matters and there can be no assurance that material costs or liabilities will
not be incurred in connection with such claims.
The Company has taken steps, including the installation of an Environmental,
Health and Safety group to reduce the environmental risks associated with its
operations and believes that it is currently in substantial compliance with
applicable Environmental Laws. See Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Environmental."
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Item 2. Properties
The Company conducts molding, painting and assembly operations in
approximately 1.9 million square feet of space in a total of 25 manufacturing
locations. The utilization and capacity of the Company's facilities fluctuates
based upon the mix of components the Company produces and the vehicle models for
which they are being produced. Detail of each manufacturing location is
scheduled below:
LOCATION OWNED/LEASED SQUARE FOOTAGE
- --------- ------------ --------------
Circleville, OH Owned 71,300
Napoleon, OH Leased 150,000
Franklin, TN Owned 122,000
Kendallville, IN Owned 60,000
Byesville, OH Owned 160,000
Leamington, Ontario, Canada Owned 200,000
Rochester Hills, MI Leased 33,000
New Hudson, MI Owned 57,900
Hartland, MI Owned 44,600
Fowlerville, MI Owned 65,000
Clarkston, MI Owned 21,600
Corunna, MI Leased 120,000
Owosso, MI Leased 42,500
Owosso, MI Leased 22,000
Owensboro, KY Leased 40,000
Owensboro, KY Leased 69,400
Gallatin, TN Leased 43,000
Croswell, MI Leased 80,900
St. Clair, MI Leased 35,000
St. Clair, MI Leased 29,100
Harlingen, TX Leased 42,900
Port Huron, MI Leased 71,000
Port Huron, MI Leased 71,000
Beienheim, Germany Leased 140,000
Columbus, IN Leased 148,200
In October, 1996 the Company relocated its principal executive offices and
design and engineering staff from Troy, Michigan to Auburn Hills, Michigan. The
Auburn Hills offices are owned by the Company. The Company believes that its
facilities and equipment are in good condition and are adequate for the
Company's present and anticipated future operations.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the Company or its
subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
There is no public trading market for the Company's Common Stock. As of
September 27, 1998, there were two holders of record of the Registrant's Common
Stock.
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Item 6. Selected Financial Data
Summary Financial Data
The following table sets forth (i) summary historical financial data of LDM
Technologies, Inc. for the fiscal years ended September 25, 1994, September 24,
1995, September 29, 1996, September 28, 1997, and September 27, 1998 and (ii)
summary pro forma financial data giving effect to the Kenco Acquisition, the
Beienheim Acquisition, and the HPG Acquisition for the fiscal year ended
September 27, 1998, and additional debt assumed related to each of the
acquisitions, as if each had occurred on September 29, 1997. The following table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the historical consolidated
financial statements of LDM presented elsewhere in this document.
UNAUDITED
PROFORMA
AUDITED ---------
------------------------------------------------------------- SEPT 27
SEPT. 25 SEPT. 24 SEPT. 29 SEPT. 28 SEPT. 27 1998
1994 1995 1996 1997 1998 (a)
---- ---- ---- ---- ---- ----------
(dollars in thousands)
Statement of operations
Data
Net sales $177,597 $ 220,991 $ 217,759 $ 293,020 $ 483,224 $ 525,579
Cost of sales 151,692 182,408 182,896 240,929 404,001 443,886
Gross profit 25,905 38,583 34,863 52,091 79,223 81,693
Selling, general and
administrative
expenses 17,137 23,515 26,418 35,561 56,607 58,494
Interest expense 2,144 3,178 3,280 11,076 19,814 21,852
Impairment of long-lived
assets - - - - 10,523 10,523
Income (loss) from
continuing operations,
before extraordinary
item 2,570 6,248 1,173 3,063 (7,884) (9,345)
Other financial data
Cash flows from operating
activities $ 7,801 $ 14,788 $ 12,912 $ 9,336 $ 19,547 $ -
EBITDA (b) 15,110 21,261 16,473 28,182 42,598 45,281
Depreciation and
amortization 6,593 6,778 8,006 11,955 19,866 21,972
Capital expenditures 29,023 15,150 20,286 12,776 14,143 -
Ratio of earnings to
fixed charges(c) 3.5 3.9 1.9 1.4 .6 .6
Ratio of EBITDA to
interest expense 7.0 6.7 5.0 2.5 2.2 1.4
Ratio of debt to EBITDA 2.4 2.1 3.1 4.5 5.3 4.0
Balance sheet data
Cash $ 976 $ 1,138 $ 2,122 $ 4,632 $ 3,317
Total assets 86,777 107,655 119,125 212,187 328,396
Total debt 36,489 44,936 51,786 126,770 224,444
Stockholder's equity 17,319 23,635 17,322 20,385 13,358
(a) Gives pro forma effect to the Kenco Acquisition, Beienheim Acquisition, and
HPG Acquisition in the manner described in note 2 to the historical
financial statements contained in Item 14 of this document.
(b) EBITDA is defined as income (loss) from continuing operations before the
effect of extraordinary items plus the following: interest, income taxes,
depreciation, amortization and long-lived asset impairment charge. EBITDA
is presented because it is a widely accepted financial indicator of a
company's ability to incur and service debt. EBITDA is not, and should not
be used as, an indicator or alternative to operating income, net income
(loss) or cash flow as reflected in the Consolidated Financial Statements,
is not intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses, is not a measure of financial
performance under generally accepted
10
accounting principles, should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles and may not be compared to other
similarly-titled measures of other companies. A reconciliation of net
income to EBITDA is as follows:
AUDITED UNAUDITED
--------------------------------------------------------------- PROFORMA
SEPT. 25 SEPT. 24 SEPT. 29 SEPT. 28 SEPT. 27 SEPT. 27
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----
(dollars in thousands)
Net Income (loss) $ 2,752 $ 6,334 $ 1,869 $ 3,063 $(7,067) $(8,098)
Add (deduct) the following:
Extraordinary Item - - (754) - - -
Discontinued operations (182) (87) 58 - - -
Adjustment for
impairment of long-lived
assets - - - - 10,523 10,523
Provision (credit) for income
taxes 3,803 5,058 4,014 2,088 (538) (968)
Interest expense 2,144 3,178 3,280 11,076 19,814 21,852
Depreciation and
amortization 6,593 6,778 8,006 11,955 19,866 21,972
-------- ------- ------- ------- ------- -------
EBITDA $ 15,110 $21,261 $16,473 $28,182 $42,598 $45,281
======== ======= ======= ======= ======= =======
(c) For purposes of the ratio of earnings to fixed charges, (i) earnings include
income from continuing operations before the following: income taxes,
extraordinary items, minority interests, and fixed charges and (ii) fixed
charges include interest on all indebtedness, amortization of deferred
financing costs and portion of rental expense that the Company believes to
be representative of interest. The September 27, 1998 pro forma ratio of
earnings to fixed charges of .6 gives effect only to the change in expense
related to the replacement of the existing debt. For the year ended
September 27, 1998, earnings are inadequate to cover fixed charges on both
an actual and a proforma basis. On an actual basis, the deficiency of
earnings was $7,966,000. On a proforma basis, the deficiency of earnings
was $9,427,000.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
LDM is a leading Tier I designer and manufacturer of highly engineered
plastic instrument panel and interior trim components, exterior trim components
and under-the-hood components supplied primarily to North American automotive
OEMs. LDM supplies components and subassemblies for a variety of light duty
trucks, sport utility vehicles, minivans and passenger cars. Automotive products
under development are assigned a selling price which is reevaluated from time to
time during the product development cycle. Prior to production, the Company and
the customer generally agree on a final price, which, in some instances, may be
subject to negotiated price reductions or increases over the term of the
project. Consequently, the Company's ability to improve operating performance is
generally dependent primarily on its ability to reduce costs and operate more
efficiently. Molds used in LDM's operations are requisitioned by LDM's customers
and are purchased from mold builders who design and construct the molds under
LDM supervision. Upon acceptance of the molds, title is passed to customers and
revenue is recognized. In addition to automotive products, LDM's net sales
include some consumer product sales and mold sales.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED SEPTEMBER 27, 1998 COMPARED TO YEAR ENDED SEPTEMBER 28, 1997
NET SALES: Net sales for fiscal year 1998 were $483.2 million, an increase of
$190.2 million, or 64.9% from $293.0 million in fiscal year 1997. For fiscal
year 1998, net sales, before intercompany eliminations of $.1 million, were
comprised of $420.9 million of automotive product sales, $18.1 million of
consumer and other product sales, and $44.3 million of mold sales. As discussed
above, a strike at the General Motors Corporation during fiscal year 1998
resulted in lost automotive product sales of approximately $13.0 million.
11
Automotive product sales in fiscal year 1998 were $420.9 million, an
increase of $177.6 million, or 73.0%, from $243.3 million in fiscal year 1997.
The strong growth of automotive product sales was mainly attributable to
increased automotive product sales related to the Company's fiscal year 1998
acquisitions (Kenco, $56.5 million; Beienheim, $20.6 million; and HPG, $66.6
million), a full year of sales related to the 1997 acquisitions of Molmec and
Kendallville and the continued strength of the Company's other production parts
programs.
Consumer and other product sales were $18.1 million in fiscal year
1998, compared to $19.2 million in fiscal year 1997. This decrease of $1.1
million, or 5.7%, is primarily the result of lower sales of television cabinets
due to the manufacturer's resourcing of these products to local suppliers.
Mold sales in fiscal year 1998 were $44.3 million, an increase of $12.4
million, or 38.9% from $31.9 million in fiscal year 1997. 1998 mold sales were
comprised of $42.2 million automotive mold sales and $2.1 million of consumer
and other mold sales.
GROSS MARGIN: Gross margin was $79.2 million or 16.4% of net sales, for fiscal
year 1998 compared to $52.1 million or 17.8% of net sales, for fiscal year 1997.
Gross margin related to automotive product sales was $75.8 million, or
18.0% of net automotive product sales in fiscal year 1998 compared to $50.2
million or 20.6% of net automotive product sales in fiscal year 1997. As
discussed previously, the strike at General Motors Corporation during fiscal
year 1998 resulted in lost gross margin of approximately $3.5 million. If the
strike at General Motors had not occurred, gross margin related to product sales
would have approximated $79.3 million or 18.8% of net automotive product sales.
The remaining decrease in gross margin as a percentage of net product sales
relates to gross margins at Kenco and Beienheim being lower than those achieved
historically by the Company.
Gross margin related to consumer and other sales was $0.2 million or
0.2% of net consumer and other sales in fiscal year 1998 compared to $.4 million
or 2.0% of net consumer and other sales in fiscal year 1997.
Gross margin related to mold sales was $3.2 million or 7.2% of mold
sales in fiscal year 1998 compared to $1.5 million or 4.7% of mold sales in
fiscal year 1997.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
1998 were $56.6 million, or 11.7% of net sales, compared to $35.6 million, or
12.1% of net sales, for fiscal year 1997.
INTEREST EXPENSE: Interest expense was $19.8 million during fiscal year 1998,
compared to $11.1 million for fiscal year 1997. The increased interest expense
is the result of a full year's effect of the issuance of $110.0 million Senior
Subordinated Notes in January 1997, and additional indebtedness assumed in
fiscal year 1998 related to acquisitions. The Kenco Acquisition ($27.1 million)
and the Beienheim Acquisition ($9.7 million) were financed with the Company's
existing Senior Credit Facility. The HPG Acquisition ($69.0) million was
financed with the proceeds of a new $66.0 million Senior Term Credit Facility
and the existing Senior Credit Facility.
INCOME TAXES: The credit for income taxes for fiscal year 1998 was $538 thousand
with an effective tax rate of 6.8%, as compared to a provision of $2.1 million
with an effective tax rate of 41.7% for fiscal year 1997. The low effective tax
rate is the result of certain non-deductible expenses, foreign tax in excess of
foreign tax credits, and establishment of a valuation allowance against deferred
tax assets at Como. These are partly offset by the settlement of a prior year
income tax audit.
ACQUISITION OF 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 Co. (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 blowmolded plastic parts including HVAC components, air induction
components, functional components and fluid reservoirs at six manufacturing
locations located in Michigan, Kentucky and Tennessee.
12
ACQUISITION OF BEIENHEIM: On November 25, 1997 the Company acquired
substantially all of the operating assets of Aeroquip-Vickers International
GmbH., including the manufacturing operation located in Beienheim Germany, for
approximately $9.7 million in cash, and the assumption of approximately $2.5
million of liabilities, subject to certain adjustments. 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 OEMs.
Beienheim's customers include Ford, Opel and Audi.
ACQUISITION OF HURON PLASTICS: On February 6, 1998, the Company acquired the
stock of Huron Plastics Group, Inc. and substantially all of the assets of
Tadim, Inc. (collectively "HPG") for $69.0 million in cash and the assumption of
certain liabilities. The acquisition was financed with proceeds from a new $66
million Senior Term Credit Facility and additional borrowings under the
Company's existing Senior Credit Facility. HPG designs and manufactures
under-the-hood and functional injection molded plastic parts at six
manufacturing facilities located in Michigan and Texas.
PROPOSED DIVESTITURE OF KENCO: Since its acquisition on September 30, 1997, the
Kenco business has performed significantly below original expectations, causing
the Company to undertake a strategic review of the future viability of the
business. As a result, the Company plans to enter into a transaction to sell
the business and certain net assets of Kenco to a joint venture that will be 49%
owned by the Company. This initiated an impairment review of the long-lived
assets of Kenco which led the Company to recognize an impairment charge of
approximately $10.5 million, representing all of the goodwill and $1.6 million
of the carrying value of the tangible fixed assets. See note 4 to the
historical financial statements contained in item 14 of this document for
additional information.
YEAR ENDED SEPTEMBER 28, 1997 COMPARED TO YEAR ENDED SEPTEMBER 29, 1996
NET SALES: Net sales for fiscal year 1997 were $293.0 million, an increase of
$75.2 million, or 34.5%, from $217.8 million in fiscal year 1996. For fiscal
year 1997, net sales, before intercompany eliminations of $1.4 million, were
comprised of $243.3 million of automotive product sales, $19.2 million of
consumer and other product sales, and $31.9 million of mold sales.
Automotive product sales in fiscal year 1997 were $243.3 million, an
increase of $70.0 million, or 40.4%, from $173.3 million in fiscal year 1996.
The strong growth of automotive products sales was mainly attributable to
increased automotive product sales related to the Company's January 22, 1997
acquisition of Molmec, Inc., $54.0 million and the continued strength of the
Company's other production parts programs. Consumer and other product sales were
$19.2 million in fiscal year 1997, compared to $21.5 million in fiscal year
1996. This decrease of $2.3 million, or 10.7%, is primarily the result of lower
sales of television cabinets due to the manufacturer's resourcing of these
products to local suppliers. Mold sales in fiscal year 1997 were $31.9 million,
an increase of $6.6 million, or 26.1% from $25.3 million in fiscal year 1996.
1997 mold sales were comprised of $27.9 million of automotive mold sales and
$4.0 million of consumer and other mold sales.
GROSS MARGIN: Gross margin was $52.1 million, or 17.8% of net sales, for fiscal
year 1997 compared to $34.9 million, or 16.0% of net sales, for fiscal year
1996. Fiscal year 1997 gross profits related to automotive product sales,
consumer and other sales and mold sales were $50.2 million, or 20.6% of net
automotive product sales, $0.4 million, or 2.0% of net consumer and other
product sales, and $1.5 million, or 4.7% of net mold sales, respectively. The
increase in total gross margin was primarily due to the additional gross margin
associated with Molmec product sales, $15.7 million, and improved profitability
of the Company's Canadian automotive operation, a $2.5 million increase versus
the prior year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
1997 were $35.6 million, or 12.1% of net sales, compared to $26.4 million, or
12.1% of net sales, for fiscal year 1996.
INTEREST EXPENSE: Interest expense was $11.1 million for fiscal year 1997,
compared to $3.3 million for fiscal year 1996. The increased interest expense
was primarily due to the January 1997 issuance of $110.0 million Senior
Subordinated Notes related to the acquisition of Molmec and the refinancing of
the Company's existing debt.
INCOME TAXES: The provision for income taxes for fiscal year 1997 was $2.1
million with an effective tax rate of 41.7%, as compared to $4.0 million with an
effective tax rate of 78.6% for fiscal year 1996. The lower effective tax rate
is due to the Company's utilization of Canadian tax benefits not available in
the 1996 period and an Internal Revenue Service settlement of prior years taxes
in the 1996 fiscal year. See Note 10, "Income Taxes" in the Notes to LDM's
Consolidated Financial Statements.
13
ACQUISITION OF MOLMEC: On January 22, 1997, LDM 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.
SENIOR SUBORDINATED NOTES AND NEW SENIOR CREDIT FACILITY: In January of 1997,
LDM issued Senior Subordinated Notes in the aggregate principal amount of $110.0
million bearing interest at 10.75% annually. The proceeds were primarily used to
fund the purchase of Molmec and to retire certain of LDM's existing
indebtedness. Also in January of 1997, LDM obtained a new senior credit facility
which provides available borrowings of up to $45.0 million under revolving
loans.
ACQUISITION OF KENDALLVILLE: On April 25, 1997, the Company acquired certain
assets of Aeroquip Corporation's Kendallville Indiana plant for $7.2 million in
cash. The Kendallville plant manufactures automotive air vents.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's principal capital requirements are to fund working capital needs,
to meet required debt obligations, and to fund capital expenditures for facility
maintenance and expansion. The Company believes its future cash flow from
operations, combined with its revolving credit availability will be sufficient
to meet its planned debt service, capital requirements and internal growth
opportunities. Potential growth from acquisitions will be funded from a variety
of sources including cash flow from operations and permitted additional
indebtedness. As of September 27, 1998 the Company had $185.3 million of
long-term debt outstanding and $19.0 million of borrowing availability under its
revolving credit facility.
Cash provided by operating activities in fiscal year 1998 was $19.5 million
compared to $9.3 million of cash provided by operating activities in the same
period in 1997. The increase in cash provided by operating activities was
primarily the result of the additional gross margins provided by the Company's
acquisitions.
Capital expenditures for fiscal year 1998 were $14.1 million compared to $12.8
million for fiscal year 1997. Fiscal 1998 capital expenditures include several
injection molding machines and secondary equipment, as well as new hardware and
software related to a common computer system being implemented throughout the
entire organization.
The Company believes its capital expenditures (exclusive of any potential
acquisitions) will be approximately $15.0 million in each of the fiscal years
ended September 1999, 2000, and 2001. 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.
ENVIRONMENTAL:
The Company has previously been notified of violations of certain permitted air
emission levels for organic compounds at its Byesville and Circleville plant
locations. It is the Company's policy to accrue environmental expenses when it
is both probable that a liability has been incurred and the amount can be
reasonably estimated. On March 27, 1997, the Company settled the emission
violation matter related to its Byesville plant in the amount of $188,000. The
Company had accrued $150,000 as of September 29, 1996 for this settlement and
accrued the remaining $38,000 during the quarter ended March 30, 1997.
14
During fiscal year 1998, the Company settled the emission violation matter
related to its Circleville plant for $170,000. The Company had accrued $160,000
in prior years. The additional $10,000 was expensed during fiscal year 1998.
The Company has been named as a Defendant in a lawsuit in connection with a
failed landfill in Byesville, Ohio. The lawsuit seeks contribution from the
Company as a potentially responsible party for allegedly generating waste that
was disposed of at the landfill. The Company has reached a tentative agreement
in principle with the United States Environmental Protection Agency (USEPA) to
settle this matter for a nominal amount. The Company has also received a letter
from a group of corporations which have entered into an agreement with the USEPA
to prepare a remedial design for curing a failed landfill site in Circleville,
Ohio. The Company was identified as a potentially responsible party for alleged
waste disposal at the Circleville landfill. The Company believes that, based on
the available information, the ultimate liability with respect to these issues
will not materially exceed $50,000 and charged that amount to expense in the
quarter ended March 30, 1997.
YEAR 2000 COMPLIANCE:
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Based on recent assessments, the Company determined that it will be required to
modify or replace significant portions of its software and certain hardware so
that those systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications or replacements of existing
software and certain hardware, the Year 2000 Issue can be mitigated. However, if
such modifications and replacements are not made, or are not completed timely,
the Year 2000 Issue could have a material impact on the operations of the
Company.
The Company's plan to resolve the Year 2000 Issue involves the following four
phases: assessment, remediation, testing, and implementation. To date, the
Company has fully completed its assessment of all systems that could be
significantly affected by the Year 2000. The completed assessment indicated that
most of the Company's significant information technology systems could be
affected, particularly the general ledger, billing, and inventory systems. That
assessment also indicated that software and hardware (embedded chips) used in
production and manufacturing systems (hereafter also referred to as operating
equipment) is at risk. Affected systems include automated assembly lines and
related robotic technologies used in various aspects of the manufacturing
process. In addition, the Company has gathered information about the Year 2000
compliance status of its significant suppliers and subcontractors and continues
to monitor their compliance.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE FOR
COMPLETION OF EACH REMAINING PHASE
For its information technology exposures, to date the Company has completed its
remediation phase and expects to complete software replacement, including
testing and implementation, no later than June 30, 1999. Once software is
selected and tailored for the Company's use, the Company begins testing and
implementation. These phases run concurrently for different systems. To date,
the Company has completed 80% of its testing and has implemented 40% of its
remediated systems. Completion of the testing phase for all significant systems
is expected by March 31, 1999, with all remediated systems fully tested and
implemented by June 30, 1999.
15
The remediation of operating equipment is significantly more difficult than the
remediation of the information technology systems because some of the
manufacturers of that equipment are no longer in business. As such, the Company
is only 60% complete in the remediation phase of its operating equipment.
Testing of this equipment is also more difficult than the testing of information
technology systems; as a result, the Company is only 40% complete with the
testing of its remediated operating equipment. Once testing is complete, the
operating equipment will be ready for immediate use. The Company expects to
complete its remediation efforts by March 31, 1999. Testing and implementation
of affected equipment is expected to be complete by June 30, 1999.
NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR
2000
The Company's accounts receivable system interfaces directly with significant
customers. The Company is in the process of working with these customers to
ensure that the Company's systems that interface directly with third parties are
Year 2000 compliant by June 30, 1999. The Company has completed its remediation
efforts on these systems and is 80% complete with the testing phase. Testing of
all significant systems is expected no later than March 31, 1999. Implementation
is 40% complete and is expected to be complete by June 30, 1999. The Company
understands that these key customers are in the process of making their accounts
payable systems Year 2000 compliant. Each customer queried believed that its
payables system would be Year 2000 compliant by the end of 1999.
The Company has queried its significant suppliers and subcontractors that do not
share information systems with the Company (external agents). To date, the
Company is not aware of any external agent with a Year 2000 issue that would
materially impact the Company's results of operations, liquidity, or capital
resources. However, the Company has no means of ensuring that external agents
will be Year 2000 ready. The inability of external agents to complete their Year
2000 resolution process in a timely fashion could materially impact the Company.
The effect of non-compliance by external agents is not determinable.
COST
The Company will utilize both internal and external resources to reprogram, or
replace, test, and implement the software and operating equipment for Year 2000
modifications. The total cost of the Year 2000 project is estimated at $7
million, and is being funded through operating cash flows. To date, the Company
has incurred approximately $3.5 million ($0.4 million expensed and $3.1 million
capitalized for new systems and equipment), related to all phases of the Year
2000 project. Of the total remaining project costs, approximately $1.0 million
is attributable to the purchase of new software and operating equipment, which
will be capitalized. The remaining $2.5 million relates to repair of hardware
and software, and implementation consulting fees which will be expensed as
incurred.
RISKS
Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the Year 2000 program. In the event
that the Company does not complete any additional phases, the Company would be
unable to take customer orders, manufacture and ship products, invoice
customers, or collect payments. In addition, disruptions in the economy
generally resulting from Year 2000 issues could also materially adversely affect
the Company. The amount of potential liability and lost revenue cannot be
reasonably estimated at this time.
CONTINGENCY PLAN
The Company has contingency plans for certain critical applications, and is
working on such plans for others. These contingency plans involve, among other
actions, manual workarounds, increasing inventories, and adjusting staffing
strategies.
16
YEAR 2000 DISCLOSURE CHART
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Information Technology 100% complete 100% complete 80% complete 40% complete
Expected completion Expected completion
date, March 1999 date, June 1999
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Operating Equipment with 100% complete 60% complete 40% complete 40% complete
Embedded Chips or Software
Expected completion Expected completion Expected completion
date, March 1999 date, June 1999 date, June 1999
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Products 100% complete 100% complete 100% complete 100% complete
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Third Party 100% complete for 100% complete for 80% complete for 40% complete for
system interface; system interface system interface system interface
80% complete for
all other material Develop contingency Expected completion Expected completion
exposures plans as date for system date for system
appropriate, March interface work, interface work, June
Expected 1998 March 1999 1999
completion date
for surveying all Implement
third parties, contingency plans or
February 1999 other alternatives
as necessary,
September 1999
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Item 7A Quantitative and Qualitative Disclosures About Market Risk
FOREIGN CURRENCY RISK
QUANTITATIVE AND QUALITATIVE ANALYSIS
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures its products in
the United States, Canada, and Germany and sells the products in those markets
as well. As a result, the Company's financial results could be significantly
affected by factors such as changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which the Company distributes its
products. The Company's operating results are exposed to changes in exchange
rates between the U.S. dollar and the Canadian dollar, and the U.S. dollar and
the German mark.
In Canada, the Company operates in both the U.S. and the Canadian dollar, and is
funded by a U.S. dollar loan from the parent Company. The functional currency is
the U.S. dollar. The Company is exposed to exchange gains or losses on assets
and liabilities denominated in the Canadian dollar.
In Germany, the functional currency is the German mark, in which all operating
cash-flows are denominated. The German operation is also funded by a U.S. dollar
loan from the parent Company. The Company is exposed to exchange gains or losses
on assets and liabilities denominated in the German mark.
As of September 27, 1998, the Company's net assets (defined as current assets
less current liabilities) subject to foreign currency translation risk are
$9,035. The potential loss from a hypothetical 10% adverse change in quoted
foreign currency exchange rates would be approximately $904.
The model assumes a parallel shift in foreign currency exchange rates. Exchange
rates rarely move in the same direction. This assumption may overstate the
impact of changing exchange rates on individual assets and liabilities
denominated in a foreign currency.
INTEREST RATE RISK
QUALITATIVE AND QUANTITATIVE ANALYSIS
The Company's variable interest expense is sensitive to changes in the general
level of U.S. interest rates. Some of the Company's interest expense is fixed
through long-term borrowings to mitigate the impact of such potential exposure.
17
The following table provides information about the Company's financial
instruments that are sensitive to changes in interest rates. The table presents
principal cash flows and related weighted-average interest rates by expected
maturity dates. Weighted-average variable rates are based on spot rate
observations as of the reporting date.
1999 2000 2001 2002 2003 Thereafter Total FMV
---- ---- ---- ---- ---- ---------- ----- ---
Fixed rate (maturity) - - - - - $110,000 $110,000 $95,700
Fixed rate % (average) 10.75% 10.75% 10.75% 10.75% 10.75% 10.75% 10.75%
Variable rate (maturity) $49,586 $10,471 $10,492 $35,305 $520 $8,070 $114,444 $114,444
Variable rate % (spot rates) 7.89% 7.89% 7.89% 7.89% 7.89% 7.89% 7.89%
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this Form
10-K. See Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
The names and ages of all executive officers and directors of the Company
are as follows:
HAS SERVED
IN POSITION
NAME AGE POSITION SINCE
------------------------- --- -------- -----
Joe Balous............... 73 Chairman of the Board, Secretary and Director 1985
Richard J. Nash.......... 54 Chief Executive Officer and Director 1985
Robert C. Vamos.......... 52 President 1997
Gary E. Borushko......... 53 Chief Financial Officer 1987
Gordon F. Steil.......... 49 Vice President of Engineering 1991
William Kessler.......... 52 Vice President of Development 1993
Vincent P. Buscemi....... 50 Group Vice President - Sales 1991
Michael T. Heneka........ 51 Group Vice President - Sales 1991
Directors of the Company are elected each year at the Annual Meeting of
Stockholders to serve for the ensuing year or until their successors are elected
and qualified. The officers of the Company are elected each year at the Annual
Meeting of the Board of Directors to serve for the ensuing year or until their
successors are elected and qualified.
Each of the directors of the Company has had the same principal occupation
during the past five years.
All of the executive officers of the Company named above have held various
executive positions with the Company for more than five years except Mr. Vamos
who joined Molmec in 1992 as Vice President of Manufacturing and was named
President of Molmec in 1993. Prior to 1992, he held various manufacturing
management positions with the Budd Company. Upon LDM's acquisition of Molmec in
January 1997 he was named Executive Vice President of Manufacturing of the
Company and on September 2, 1997 he was named to his current position. Mr.
Kessler joined the Company in 1993. Prior thereto he was Vice President of Sales
at Velcro Industries for 22 years.
18
Item 11. Executive Compensation
The following table sets forth the compensation paid to each of the
Company's five highest paid executive officers and significant employees for
fiscal year 1998.
SUMMARY COMPENSATION TABLE 1(1)
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION COMPENSATION
--------------------------------- ---- --------- ----------- --------------------- -----------------
Richard J. Nash.................... 1998 $ 550,000 $ 1,000,000 -- $ 3,750(2)
Chief Executive Officer and Director 1997 550,000 1,050,000 -- 3,562(2)
1996 550,000 750,000 -- 2,917(2)
Joe Balous......................... 1998 -- -- $1,340,000(3) --
Chairman of the Board and Secretary 1997 -- -- 1,420,000(3) --
1996 -- -- 1,395,000(3) --
--
Gary E. Borushko................... 1998 230,015 361,700
Chief Financial Officer 1997 202,923 450,000 -- --
1996 180,000 -- -- --
Robert C. Vamos.................... 1998 289,075 100,000 -- $ 1,000(2)
President 1997 185,353 100,000 -- --
1996 -- -- -- --
Vincent P. Buscemi................. 1998 190,531 45,000 96,000(5) --
Group Vice President - Sales 1997 45,000 9,000 376,692(4) --
1996 -- -- 446,346(4) --
(1) This table does not include any value that might be attributable to certain
job related benefits, the amount of which for any executive officer does
not exceed the lesser of $50,000 or 5% of combined salary and bonus for
such executive officer.
(2) Represents contributions to the Company's 401 (k) plan.
(3) Consulting fees paid to a management company owned by Joe Balous.
(4) Represents sales commission paid to a company owned by such individual.
(5) Represents payments made under sales representative buyout agreement.
The Company does not pay director fees to its two directors. The Company
does not have a Compensation Committee and Messrs. Nash and Balous participate
in all deliberations concerning executive officer compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the outstanding capital stock of the Company is owned beneficially
and equally by Messrs. Richard J. Nash and Joe Balous.
Item 13. Certain Relationships and Related Transactions.
The Company and its two stockholders entered into a stock redemption agreement
which provides that upon the death of either stockholder, the Company is
required to purchase, and their respective estates are required to sell, all of
the capital stock of the Company owned by such stockholder, as the case may be,
at a price equal to $50.0 million, which amount would be payable upon receipt of
the proceeds of life insurance policies owned by the Company on each of the
lives of the stockholders. Pursuant to the terms of the stock redemption
agreement, the Company is required to maintain life insurance policies of $50.0
million on the lives of Mr. Nash and Mr. Balous. The annual premiums for such
policies of insurance are approximately $1,800,000.
Como, a 75% owned subsidiary of the Company, leases its general office and
plant facility and certain equipment from entities controlled by such
subsidiary's minority stockholder, Laurence M. Luke. Payments pursuant to these
leases were $467,000 during fiscal year 1998. Como also pays management fees to
Mr. Luke based on a percentage of sales. Such management fees were waived during
fiscal year 1998.
19
During 1998, Como transferred equipment with a net book value of
approximately $609,000 to LDM. In exchange for the equipment, LDM relieved Como
of its liability for accrued corporate charges and other accounts payable of
approximately $604,000, which had been included in Como's accrued liabilities in
prior years.
During fiscal year 1998, the Company paid consulting fees of $1,340,000 to a
management company owned by Joe Balous. The nature of the services performed by
Mr. Balous are development of corporate policy and strategic planning,
integration of recent acquisitions, and overseeing facilities construction and
leasehold improvements.
In September 1996, the Company entered into a five-year lease for its Troy
offices with Messrs. Nash and Balous and a relative of one of them. Monthly rent
expense pursuant to this lease was $15,000 per month. In July of 1997 the
Company terminated the lease for the Troy offices and purchased Mr. Nash's
interest in the office for $714,000. In November 1998, Joe Balous acquired The
Company's 50% interest in the Troy office for $625,000.
The terms of these leases are not the result of arms-length bargaining;
however, the Company believes that such leases and other transactions described
above are on terms no less favorable to the Company than could be obtained if
such leases were arms-length transactions with non-affiliated persons.
It is the Company's policy to continue future transactions with its
affiliates as long as the terms of such transactions are fair and reasonable and
no less favorable to the Company than could have been obtained through
arms-length negotiations with an independent third party.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
The following consolidated financial statements of LDM Technologies,
Inc. and subsidiaries filed herewith.
Consolidated Balance Sheets at September 27, 1998 and September 28,
1997.
Consolidated Statements of Operations for each of the years in the
three-year period ended September 27, 1998.
Consolidated Statements of Comprehensive Income (Loss) and
Stockholders' Equity for each of the years in the three-year period
ended September 27, 1998.
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended September 27, 1998.
Notes to Consolidated Financial Statements.
All Schedules have been omitted because they are not applicable or
are not required or the information to be set forth therein is
included in the Consolidated Financial Statements or Notes thereto.
20
EXHIBITS
The Exhibits marked with one asterisk below were filed as
Exhibits to the Registration Statement of the Company on Form S-4
(No. 333-21819); the Exhibit marked with two asterisks below was
filed as an Exhibit to the Form 8-K of the Company dated
September 30, 1997; the Exhibits marked with three asterisks
below were filed with the Form 10-K dated December 10, 1997; and
the Exhibits marked with four asterisks below were filed with the
Form 8-K of the Company dated February 20, 1998; and are
incorporated herein by reference, the Exhibit numbers in brackets
being those in such Registration Statement, Form 10-K or Form 8-K
Report.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
3.1 Articles of Incorporation of LDM Technologies, Inc. (the "Company"),
as amended [3.1]*
3.2 By-laws of the Company [3.5]*
4.1 Indenture dated as of January 15, 1997 by and among the Company, LDM
Holdings, LDM Partnership, LDM Canada and IBJ Schroder Bank & Trust
Company, as Trustee [4.1]*
4.2 Form of 10 3/4% Senior Subordinated Note Due 2007, Series B [4.2]* 4.3
Form of Guarantee [4.3]*
10.1(a) Loan and Security Agreement dated as of January 22, 1997 ("Loan
Agreement") by and between the Company, as Borrower, and BankAmerica
Business Credit, Inc. ("BankAmerica"), as Agent for the Lenders
[10.2]*
10.1(b) First Amendment to Loan Agreement dated May 1, 1997. [10.1(b)]***
10.1(c) Amendment No. 2 and Affirmation of Guaranties to Loan Agreement dated
as of July 14, 1997. [10.1(c)]***
10.1(d) Amendment No. 3 and Affirmation of Guaranties to Loan Agreement dated
as of September 30, 1997. [10.1(d)]***
10.1(e) Amendment No. 4 and Affirmation of Guaranties to Loan Agreement dated
as of November 25, 1997 [10.1(e)]***
10.1(f) Amendment No. 5 and Affirmation of Guaranties to Loan Agreement dated
as of February 6, 1998. [3]****
10.1(g) Amendment No. 6 and Affirmation of Guaranties to Loan Agreement dated
as of July 21, 1998.
10.2 Intellectual Property Security Agreement dated as of January 22, 1997
made by the Company in favor of BankAmerica, as Agent for Lenders
[10.4]*
10.3 Stock Purchase Agreement among the Company and the various
stockholders of Kenco Plastics, Inc., a Michigan corporation, and
Kenco Plastics, Inc., a Kentucky corporation, and Narens Design &
Engineering Co., a Michigan corporation, dated September 30, 1997
[1].**
10.4(a) Term Loan and Security Agreement dated as of February 6, 1998 among
the financial institutions named therein, as the Lenders, BankAmerica
Business Credit, Inc., as Agent and LDM Technologies, Inc., as
Borrower. [2]****
10.4(b) Amendment No. 1 and Affirmation of Guaranties to Term Loan and
Security Agreement dated as of July 21, 1998.
10.5 Stock and Asset Purchase Agreement by and among LDM Technologies,
Inc., Tadim, Inc., Huron Plastics Group, Inc. and certain "Selling
Shareholders" dated December 23, 1997, First Amendment thereto dated
January 23, 1998, Second Amendment thereto dated January 30, 1998,
Third Amendment thereto dated February 2, 1998 and Fourth Amendment
thereto dated February 6, 1998. [1]****
11 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Registrant for the quarter ended September 27, 1998.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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 on the twenty-eighth
day of December, 1998.
LDM TECHNOLOGIES, INC.
By: /s/ Richard J. Nash
--------------------------
Richard J. Nash
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Gary E. Borushko
--------------------------
Gary E. Borushko
(Chief Financial Officer)
By: /s/ Brad N. Frederick
--------------------------
Brad N. Frederick
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on December 28, 1998.
Signature Title
- --------- -----
/s/ Joe Balous Director
- ---------------------
Joe Balous
/s/ Richard J. Nash Director
- ---------------------
Richard J. Nash
22
Report of Independent Auditors
Board of Directors of LDM Technologies, Inc.
We have audited the accompanying consolidated balance sheets of LDM
Technologies, Inc. as of September 27, 1998 and September 28, 1997, and the
related consolidated statements of operations, comprehensive income (loss) and
stockholders' equity, and cash flows for each of the three years in the period
ended September 27, 1998. These financial statements are the responsibility of
the Company's 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 consolidated financial position of LDM Technologies,
Inc. at September 27, 1998 and September 28, 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 27, 1998 in conformity with generally accepted accounting
principles.
Detroit, Michigan ERNST & YOUNG LLP
December 21, 1998
F-1
23
LDM Technologies, Inc.
Consolidated Balance Sheets
(in thousands)
SEPTEMBER 27, SEPTEMBER 28,
1998 1997
------------------ ------------------
ASSETS
Current assets:
Cash $ 3,317 $ 4,633
Accounts receivable 81,781 45,812
Inventories 24,069 15,048
Mold costs 22,510 13,825
Prepaid expenses 2,030 2,055
Refundable income tax 1,251 390
Deferred income taxes 3,148 4,627
---------- ------------
Total current assets 138,106 86,390
Net property, plant and equipment 118,201 82,259
Investment in joint venture 1,098 -
Goodwill, net of accumulated amortization of
$5,620 in 1998 and $1,668 in 1997 64,047 36,791
Debt issue costs, net of accumulated
amortization of $1,521 in 1998 and $599 in 1997 6,303 5,733
Other 641 1,014
---------- ------------
Total assets $ 328,396 $ 212,187
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 39,139 $ 3,530
Accounts payable 54,363 28,152
Demand notes payable to shareholders 88 88
Accrued liabilities 22,476 15,662
Accrued compensation 10,097 4,616
Advance mold payments from customers 1,036 11,082
Income taxes payable 850 1,639
Current maturities of long-term debt 13,631 979
---------- ------------
Total current liabilities 141,680 65,748
Long-term debt due after one year 171,674 122,261
Deferred income taxes 1,684 3,512
Minority interest - 279
Stockholders' equity:
Common stock ($.10 par value; 100,000 shares
authorized, 600 shares issued and outstanding) - -
Additional paid in capital 94 94
Retained earnings 13,286 20,353
Accumulated other comprehensive loss (22) (61)
---------- ------------
Total stockholders' equity 13,358 20,386
---------- ------------
Total liabilities and stockholders' equity $ 328,396 $ 212,187
========== ============
See accompanying notes.
F-2
24
LDM Technologies, Inc.
Consolidated Statements of Operations
(in thousands)
YEARS ENDED
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 29,
1998 1997 1996
-------------- ------------------ ---------------
Net sales:
Product sales $ 438,960 $ 261,103 $ 192,471
Mold sales 44,264 31,917 25,288
-------------- ----------------- ---------------
483,224 293,020 217,759
Cost of sales:
Product cost of sales 362,983 210,532 160,094
Mold cost of sales 41,018 30,397 22,801
------------ ----------------- ---------------
404,001 240,929 182,895
------------ ----------------- ---------------
Gross margin 79,223 52,091 34,864
Selling, general and administrative
expenses 56,607 35,562 26,419
Interest 19,814 11,076 3,280
Share of joint venture loss 285 - -
Adjustment for impairment of long-lived
assets 10,523 - -
Other, net (122) 445 56
------------ ----------------- ---------------
87,107 47,083 29,755
------------ ----------------- ---------------
Income (loss) from continuing
operations before income taxes, minority
interest and extraordinary item (7,884) 5,008 5,109
Provision (credit) for income taxes (538) 2,088 4,014
----------- ----------------- --------------
Income (loss) from continuing
operations before minority interest and
extraordinary item (7,346) 2,920 1,095
Minority interest 279 143 79
------------ ----------------- ---------------
Income (loss) from continuing
operations before extraordinary item (7,067) 3,063 1,174
Extraordinary item, gain on debt
refinancing, no income tax effect - - 754
------------ ----------------- ---------------
Income (loss) from continuing operations (7,067) 3,063 1,928
Income (loss) from discontinued
operations, net of income taxes
and minority interest - - (59)
------------ ----------------- ---------------
Net income (loss) $ (7,067) $ 3,063 $ 1,869
============ ================= ===============
See accompanying notes.
F-3
25
LDM Technologies, Inc.
Consolidated Statements of Comprehensive Income (Loss) and Stockholders' Equity
(in thousands)
--------------------------------------------------------
ACCUMULATED
ADDITIONAL OTHER
COMMON COMMON PAID-IN RETAINED COMPREHENSIVE
SHARES STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL
------ ----- ------- -------- ------------- -----
(NUMBER) (IN DOLLARS)
Balance at September 24, 1995 700 $ 70 $110 $23,562 $ (37) $23,635
Redemption of a stockholder's (100) (10) (16) (8,141) - (8,157)
interest
Comprehensive Income:
Net income for 1996 - - - 1,869 - 1,869
Currency translation adjustment - - - - (24) (24)
-------
Comprehensive income 1,843
----- ----- ------- ------- ----- -------
Balance at September 29, 1996 600 60 94 17,290 (61) 17,323
Net income (comprehensive
income) for 1997 - - - 3,063 - 3,063
----- ----- ------- ------- ----- -------
Balance at September 28, 1997 600 60 94 20,353 (61) 20,386
Comprehensive Income:
Net loss for 1998 - - - (7,067) - (7,067)
Currency translation adjustment - - - - 39 39
-------
Comprehensive loss - - - - - (7,028)
----- ----- ------- ------- ----- -------
Balance at September 27, 1998 600 $ 60 $ 94 $13,286 $ (22) $13,358
===== ===== ===== ======= ===== =======
See accompanying notes.
F-4
26
LDM Technologies, Inc.
Consolidated Statements of Cash Flows
(in thousands)
YEARS ENDED
-----------------------------------------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 29,
1998 1997 1996
----------------- ----------------- -----------------
OPERATING ACTIVITIES
Net income (loss) $ (7,067) $ 3,063 $ 1,869
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 19,866 11,955 8,006
Adjustment for impairment of long-lived assets 10,523 - -
Share of joint venture loss 285 - -
Extraordinary gain on retirement of debt - - (754)
(Gain) loss on sale of property and equipment 97 (156) 103
Deferred income taxes (2,033) (1,127) 383
Other - 453 (505)
Changes in assets and liabilities, net of the 1996 effect
of the distribution of IMCA and the effect of 1997 and
1998 acquisitions:
Accounts and notes receivable (4,960) (5,458) (7,379)
Refundable income taxes - - (365)
Inventory and mold costs (2,153) (4,954) (975)
Prepaid expenses 979 (1,494) (78)
Other assets - 415 7
Accounts payable and accrued liabilities 5,790 7,357 12,247
Income taxes payable (1,780) (718) 353
------------- ------------ ------------
Net cash provided by operating activities 19,547 9,336 12,912
INVESTING ACTIVITIES
Additions to property, plant and equipment (14,143) (12,776) (20,286)
Purchase of Molmec (net of $2,705 cash acquired) - (53,198) -
Purchase of Kendallville - (7,159) -
Purchase of Kenco Plastics (net of $500 cash acquired) (26,641) - -
Purchase of LDM Technologies, GmbH (9,703) - -
Purchase of Huron Plastics Group (net of $1,835 cash acquired) (67,140) - -
Proceeds from disposal of property and equipment 814 1,777 284
Cash and cash equivalents restricted for construction of
new corporate facility - 658 6,686
Other - (484) 1,247
------------ ------------ ------------
Net cash used for investing activities (116,813) (71,182) (12,069)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, (net of debt
issuance
costs of $1,540 in 1998 and $6,039 in 1997) 63,992 103,962 19,993
Payments on notes payable and long-term debt (4,809) (22,199) (16,135)
Net (repayments) proceeds from borrowings on line of credit 36,767 (17,406) 833
Redemption of stockholder's interest - - (4,713)
Other - - 163
------------ ------------ ------------
Net cash provided by financing activities 95,950 64,357 141
------------ ------------ ------------
Net increase (decrease) in cash (1,316) 2,511 984
Cash at beginning of year 4,633 2,122 1,138
------------ ------------ ------------
Cash at end of year $ 3,317 $ 4,633 $ 2,122
============ ============ ============
See accompanying notes.
F-5
27
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of LDM Technologies,
Inc. (the "Company") and its subsidiaries, LDM Holding Canada, Inc., LDM
Technologies GmbH ("LDM Germany"), LDM Canada Limited Partnership, LDM
Technologies Company ("LDM Canada"), LDM Holding Mexico, Inc., LDM Technologies,
S.de R.L. ("LDM Mexico"), and G.L. Industries of Indiana, Inc. (d/b/a Como
Products "Como"). All subsidiaries are wholly owned with the exception of Como
(75% owned) and LDM Mexico (99% owned). As of September 27, 1998, the Company,
LDM Canada, LDM Germany and Como are the only subsidiaries which are operating
entities. All intercompany accounts and transactions have been eliminated in
consolidation.
DESCRIPTION OF BUSINESS
The Company's domestic automotive operations are conducted through divisions
and, in Canada and Germany, through LDM Canada and LDM Germany. Such operations
principally consist of manufacturing of molded and blow-molded plastic interior
and exterior trim, under the hood, and powertrain components for sale
principally to several North American automobile manufacturers and their
suppliers. Como is a manufacturer of molded plastic products for end-use
application primarily in the consumer appliance, office products, and commercial
furniture markets.
DISCONTINUED OPERATIONS
On September 29, 1996, the Company contributed $4 million in cash to the capital
of its 83% owned subsidiary, Industrial Machining Corporation of Arkansas
("IMCA") and immediately exchanged its stock in IMCA plus $500 in cash and a two
year 6.5% interest bearing promissory note in the amount of $3 million for all
of the LDM stock held by the shareholder. The acquired stock was immediately
retired. No gain or loss was recorded and results of operation have been classed
as discontinued in the statement of operations.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company operates with a 52/53 week fiscal year ending on the last Sunday in
September. The fiscal years ended September 27, 1998, September 28, 1997, and
September 29, 1996 included 52, 52 and 53 weeks, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
In January, 1997, LDM Canada was re-financed with inter company loans and
additional equity, which were funded with part of the proceeds of the Senior
Subordinated Notes, and existing loans were repaid. In prior years, the Canadian
dollar was considered to be the functional currency for the Canadian operations.
During the 1997 fiscal year, as a result of the U.S. dollar based re-financing
and the volume of U.S. dollar denominated sales and operating costs, the Company
determined that the functional currency of LDM Canada should be the U.S. dollar.
Accordingly long lived assets and inter company debt has been translated at the
historical rate and exchange differences arising on translation have been
included in 1998 and 1997 operations.
F-6
28
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories at September 27, 1998 and September 28, 1997
consist of the following:
1998 1997
---- ----
(In thousands)
Raw materials and supplies $14,791 $ 8,902
Work-in-process 2,715 2,105
Finished goods 6,563 4,041
------- ------------
Total $24,069 $ 15,048
======= ============
MOLDS
Molds used in Company operations are requisitioned by the Company's customers
and are purchased from mold builders who design and construct the molds under
Company supervision. Upon acceptance of the molds, title is passed to customers
and revenue is recognized.
DEPRECIATION AND AMORTIZATION
Depreciation of property, plant and equipment is determined principally using
the straight-line method based upon the following estimated useful lives:
ESTIMATED USEFUL
LIFE (YEARS)
---------------------------------------------------
Buildings and improvements 10 - 20
Machinery and equipment 3 - 12
Transportation equipment 3 - 10
Furniture and fixtures 3 - 12
Leasehold improvements are amortized using the straight-line method over the
useful life of the improvement or the term of the lease, whichever is less.
Goodwill is amortized over its estimated useful economic life of 15 years.
Debt issue costs are amortized over the term of the associated debt.
IMPAIRMENT OF LONG-LIVED ASSETS, INCLUDING GOODWILL
Impairment losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the asset's carrying amount.
Impairment losses are determined based on the estimated shortfall of discounted
cash flows.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.
Short and long-term debt: The carrying amounts of the Company's borrowings
under its short-term revolving credit agreements approximate their fair
value. The Company's Senior Subordinated Notes carry fixed interest rates.
Smith Barney currently makes a market for the Notes. As of September 27,
1998, the average of the bid and asking price was 87.0 giving a fair market
value of $14.3 million below stated value ($110 million). As of November 27,
1998, the average of the bid and asking price was 96.7. The remainder of the
Company's long-term debt carries variable interest rates and, accordingly,
the carrying amount approximates fair value.
F-7
29
IMPACT OF ACCOUNTING STANDARDS ADOPTED IN THE FISCAL YEAR ENDING IN SEPTEMBER,
1998
The Company has adopted the Financial Accounting Standards Board Statement No.
130, "Reporting Comprehensive Income". Statement 130 requires that all items
recognized under accounting standards as components of comprehensive income be
reported in the financial statements. The Company's comprehensive income other
than net income consists solely of currency translation differences arising on
consolidation of overseas subsidiaries. The Company has elected to report total
comprehensive income in the statement of stockholders' equity. Total
comprehensive income (loss) during the years presented is not significantly
different than the respective net income (loss).
The Company has adopted the Financial Accounting Standards Board Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information".
Statement 131 superseded FASB Statement No. 14, Financial Reporting for Segments
of a Business Enterprise. Statement 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports. Statement 131
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The adoption of Statement 131 did not
affect the Company's results of operations or financial position, but did affect
the disclosure of segment information. See note 3.
The Company has adopted the Financial Accounting Standards Board Statement No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits."
Statement 132 superseded FASB Statement No. 87, Employers' Accounting for
Pensions, Statement No. 88, Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits, and
Statement No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions. Adoption of Statement 132 had no effect on disclosures for the
Company's defined contribution plans.
The Company has adopted Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities." SOP 98-5 requires that costs of start-up activities be
expensed as incurred. The SOP broadly defines start-up activities as those
one-time activities related to opening a new facility, introducing a new product
or service, conducting business in a new territory, conducting business with a
new class of customer or beneficiary, initiating a new process in an existing
facility, or commencing some new operation. The adoption of SOP 98-5 did not
materially affect the results of operations or financial position of the
Company.
The Company has adopted the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants Statement of Position 98-1,
"Accounting for the Costs of Software Developed or Obtained for Internal Use".
SOP 98-1 provides criteria for the capitalization of certain software
development costs. Since the Company's previous accounting policy was generally
consistent with the provisions of SOP 98-1, the adoption of SOP 98-1 did not
materially impact the costs that would otherwise historically have been
capitalized.
IMPACT OF ACCOUNTING STANDARDS TO BE ADOPTED SUBSEQUENT TO THE FISCAL YEAR
ENDING IN SEPTEMBER, 1998
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is required to be adopted in years
beginning after June 15, 1999, with earlier adoption encouraged. At this time
the Company has not adopted Statement 133 but has not entered into any
derivative or hedging activity and accordingly does not anticipate the
provisions of Statement 133 will affect future results of operations or
financial position.
2. ACQUISITIONS
On November 4, 1996, the Company signed a definitive agreement to acquire the
business and certain net assets of Molmec, Inc. for $55.9 million in cash. The
acquisition was consummated on January 17, 1997. The fair value of the net
tangible assets acquired amounted to $19.1 million.
F-8
30
On May 1, 1997, the Company acquired the business and certain net assets
comprising the 'Kendallville' plant of Aeroquip Corporation for a consideration
of $7.2 million in cash. The fair value of the net tangible assets acquired
amounted to $5.5 million.
On September 30, 1997, the Company purchased the entire voting stock of Kenco
Plastics, Inc. (a Michigan Corporation) and Kenco Plastics, Inc. (a Kentucky
corporation) and the business and net tangible assets of Narens Design &
Engineering Company (collectively known as "Kenco Plastics") for a consideration
of $27.1 million in cash. The fair value of the net tangible assets acquired
amounted to $17.7 million.
On November 25, 1997, the Company acquired the business and certain net assets
of Aeroquip-Vickers International GmbH, for a consideration of $9.7 million in
cash and the assumption of certain liabilities. The fair value of the net
tangible assets acquired amounted to $9.7 million.
On February 6, 1998, the Company acquired the stock of Huron Plastics Group,
Inc. and substantially all of the assets of Tadim, Inc. (collectively known as
"HPG") for $69.0 million in cash and the assumption of certain liabilities. The
fair value of the net tangible assets acquired amounted to $37.7 million.
A summary of the allocation of purchase price of each of the acquisitions during
the year ended September 27, 1998 is given below:
KENCO LDM
PLASTICS GERMANY HPG
---------- ----------- ----------
(In thousands)
Current assets $ 12,576 $ 6,143 $ 30,047
Net property, plant and equipment 11,638 6,132 21,703
Other assets - - 1,354
Long term debt - -
Other liabilities (6,510) (2,540) (15,356)
---------- ---------- --------
Net tangible assets 17,704 9,735 37,748
Goodwill 9,438 31,227
---------- ---------- --------
Cost $ 27,142 $ 9,735 $ 68,975
========== ========== ========
All of the above acquisitions have been accounted for using the purchase method.
Accordingly, the assets acquired and the liabilities assumed have been recorded
at fair values and the excess of the purchase price over the net tangible assets
acquired recorded as goodwill to be amortized over 15 years. The results of
operations of the above acquisitions have been included in the consolidated
financial statements from the date of acquisition.
The following unaudited pro forma condensed consolidated results of operations
of the Company, for the fiscal years ended September 27, 1998 and September 28,
1997, gives effect to the above acquisitions and associated financing as if such
events had occurred on September 29, 1996. 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 September 29, 1996 or to project the Company's financial position or
results of operations for any future date or period.
YEAR ENDED YEAR ENDED
SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
-------------------------------------------
(In thousands)
Net sales $ 525,579 $ 528,744
Cost of sales 443,886 436,308
---------------- --------------------
Gross margin 81,693 92,436
Selling, general and administrative expenses 58,494 63,666
Impairment of long-lived assets 10,523 -
Other expenses, principally interest 22,021 22,798
---------------- --------------------
Income (loss) from continuing operations before
income taxes and minority interests (9,345) 5,972
Provision for income taxes (968) 2,993
---------------- --------------------
Income (loss) from continuing operations
before minority interest (8,377) 2,979
Minority interest 279 143
---------------- --------------------
Income (loss) from continuing operations $ (8,098) $ 3,122
================ ====================
F-9
31
3. SEGMENT AND GEOGRAPHICAL DATA
The Company currently operates in two industries; automotive components and
consumer products. Machined parts operations for marine outboard engine
manufacturers were discontinued in 1996. The Company's automotive components
include the design and manufacture of plastic injection molded and blow molded
products for certain original equipment manufacturers of cars, minivans and
sport utility vehicles. The Company's automotive products include exterior and
interior trim, under the hood components, and powertrain components. The Company
has one consumer products plant which manufactures plastic molded products for
the consumer appliance, office products and commercial furniture markets.
For the purpose of FAS 131, "Disclosures about Segments of an Enterprise and
Related Information," the Company is presented as one segment, being automotive
plastics components. The consumer products operations are considered
insignificant with sales of $20.2 million, $19.2 million and $21.5 million and
net losses of $1.5 million, $.7 million and $.5 million during the years ended
1998, 1997 and 1996, respectively.
The following provides a summary of selected financial information by geographic
area: (In thousands)
SEPTEMBER 27, 1998 SEPTEMBER 28, 1997
---------------------------------------------------------------------------------------------------
Long-Lived Long-Lived
Revenues (a) Assets Net Income (loss) Revenues (a) Assets Net Income
---------------------------------------------------------------------------------------------------
United States $ 394,882 $ 170,134 $ (7,638) $ 247,558 $ 109,558 $3,000
LDM Canada 65,399 14,498 3,293 45,462 16,239 63
LDM Germany 22,943 5,658 (2,722) - - -
---------------------------------------------------------------------------------------------------
Consolidated total $ 483,224 $ 190,290 $ (7,067) $ 293,020 $ 125,797 $ 3,063
===================================================================================================
(a) Revenues are attributed to countries based on point of manufacturing.
During the years ended September 1998, 1997 and 1996, approximately 96%, 93% and
90% of consolidated sales were to customers in the automotive industry.
Following is a summary of customers that accounted for more than 10% of
consolidated net product sales as of each fiscal year end: (In thousands)
1998 1997 1996
----------------------------------------------------
Ford Motor Company $ 169,293 $ 114,446 $ 71,519
General Motors Corporation 151,880 88,818 79,640
Volkswagen A.G 15,822 15,856 19,172
4. IMPAIRMENT OF LONG-LIVED ASSETS
Since its acquisition on September 30, 1997, the Kenco business has performed
significantly below original expectations, causing management to undertake a
strategic review of the future viability of the business.
During the fourth quarter of 1998, the Company entered into negotiations to form
a joint venture that will be 49% owned by the Company and 51% owned by an
independent third party. Under the proposed transaction, the Company would (i)
sell the Kenco business and most of its net current assets to the joint venture
at a price equal to the book value of the net current assets, (ii) retain
ownership of the machinery and equipment used in the Kenco operations and enter
into an operating lease with the joint venture for its use of those assets and
(iii) sublease the joint venture the real properties used in the Kenco
operations. Although the agreement has not been finalized, the Company is in the
latter stages of negotiation and expects to close the transaction in the second
quarter of fiscal 1999.
F-10
32
Under the terms of the proposed agreement, the Company would provide a
subordinated $2,000,000 loan (approximate) to the joint venture, and would
guarantee $1,000,000 of the joint venture line of credit borrowings. As a result
of these proposed terms, and the relatively small amount of equity contributed
to the joint venture by the independent third party, the Company will retain
substantively all the risks of ownership and, accordingly, the transaction will
not be recognized as a sale for accounting purposes until the risks have been
transferred.
The Company evaluated the on-going value of the long-lived assets (goodwill and
tangible fixed assets) associated with the Kenco business, as if they were
held-for-use. Based upon this evaluation, the Company determined that
long-lived assets with a carrying amount of $19.6 million were impaired and
recognized an impairment charge of $10.5 million. In determining undiscounted
future cash flows the Company developed its best estimate of operating cash
flows over the life of the tangible long-lived assets. Fair value was determined
by discounting projected future cash flows at a market rate of interest.
The following presents a summary of the net assets of Kenco as of September 27,
1998: (In thousands)
Assets
Cash $ 509
Accounts receivable 9,086
Inventory 3,561
Other current assets 1,551
--------
Total current assets 14,707
Property, plant and equipment 9,005
--------
Total assets 23,712
Accrued liabilities $ (4,352)
--------
Net assets $ 19,360
========
The following presents a summary of operations of Kenco for the year ended
September 27, 1998: (In thousands)
Revenue $ 61,603
Cost of goods sold 58,733
--------
Gross margin 2,870
Selling, general and administrative expenses 4,068
--------
Operating loss before impairment charges,
interest and income taxes $ (1,198)
========
5. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
NON-CASH TRANSACTIONS
On September 29, 1996, LDM Technologies, Inc. issued a note payable to a former
shareholder in the amount of $3.0 million as part of the consideration for the
redemption of LDM Technologies, Inc. common stock owned by that shareholder. In
connection with that transaction, the stock of IMCA was distributed to the
former shareholder.
INTEREST PAID, TAXES PAID AND INTEREST CAPITALIZED
1998 1997 1996
----- ----- ----
(In thousands)
Interest paid $ 17,643 $ 7,919 $ 2,502
Income taxes paid $ 2,176 $ 3,996 $ 3,051
Interest capitalized $ 185 $ 312 $ 780
6. EXTRAORDINARY ITEM
During the year ended September 29, 1996, LDM Canada retired notes payable to
Barclays Bank of Canada and Gentra Canada, resulting in a $754,000 extraordinary
gain on extinguishment. Because of the Canadian operating losses, there was no
tax effect related to the gain.
F-11
33
7. PROPERTY, PLANT AND EQUIPMENT
At September 27, 1998 and September 28, 1997, property, plant and equipment
consists of the following: (In thousands)
1998 1997
--------- ---------
Land, buildings and improvements $ 43,827 $ 39,322
Machinery and equipment 116,047 79,717
Transportation equipment 2,490 1,947
Furniture and fixtures 7,390 4,227
Construction in process 7,290 1,982
--------- ---------
Total, at cost 177,044 127,195
Less accumulated depreciation (58,843) (44,936)
--------- ---------
Net property, plant, and equipment $ 118,201 $ 82,259
========= =========
8. LINES OF CREDIT AND REVOLVING DEBT
On January 22, 1997, the Company entered into a five-year Senior Credit
Facility. At September 27, 1998, the Senior Credit Facility is secured by
substantially all of the assets of the Company and its guarantors (LDM Holdings
Canada, Inc. and LDM Technologies Company). The Senior Credit Facility provides
for advances up to (i) 85% of eligible accounts receivable, and (ii) the lesser
of $12,000,000 or 60% of eligible inventory, up to a maximum availability of
$75,000,000. The Senior Credit Facility provides for the issuance of commercial
and stand-by letters of credit up to a portion of the $75,000,000 Senior Credit
Facility. The Senior Credit Facility bears interest at rates based upon a prime
or LIBOR rate, in each case plus an applicable basis point spread; and provides
that the Company will pay an issuance fee with respect to letters of credit
based on a percentage of the full amount of such letters of credit, and an
unused line fee equal to a percentage of the unused portion of the Senior Credit
Facility. The Senior Credit Facility contains customary covenants, including
financial covenants relating to, among other things, fixed charge coverage
ratios, capital expenditure limitations and profitability.
The Company had borrowings outstanding under the Senior Credit Facility at
September 27, 1998 and September 28, 1997 of $36,700,000 and $1,700,000,
respectively. Borrowings available under the Senior Credit Facility were
$19,000,000 and $25,000,000 at September 27, 1998 and September 28, 1997,
respectively.
Como has a line of credit with a bank in an amount not to exceed at any time the
lesser of $3,500,000 or the sum of 80% of eligible accounts receivable plus the
lesser of 50% of eligible inventory or $1,000,000. The outstanding balance on
the line of credit was $2,400,000 and $1,700,000 at September 27, 1998 and
September 28, 1997, respectively. The line of credit bears interest at the prime
rate plus 0.5% (8.75% in 1998). The line of credit is collateralized by
substantially all the assets of Como and is guaranteed by LDM Technologies, Inc.
Additional borrowing availability on the line of credit was approximately
$230,000 and $750,000 at September 27, 1998 and September 28, 1997,
respectively. The original agreement expired in January 1997, has not been
formally replaced, and is currently operating on a day-by-day basis.
F-12
34
Summary of lines of credit and revolving debt outstanding: (In thousands)
SEPTEMBER 27, SEPTEMBER 28,
1998 1997
--------------------------------------
Borrowings under lines of credit:
LDM Technologies Inc. $ 36,700 $ 1,700
Como $ 2,439 1,650
---------- ----------
39,139 3,350
Borrowings under revolving debt:
Como - 180
---------- ----------
$ 39,139 $ 3,530
========== ==========
The weighted average interest rate on all short-term borrowings as of September
27, 1998 and September 28, 1997 was 8.77% and 8.66%, respectively.
9. LONG-TERM DEBT
On January 22, 1997, the Company issued, in a private placement, 10 3/4% Senior
Subordinated Notes due 2007, Series A, with an aggregate principal amount of
$110,000,000. The net proceeds of the Offering, which amounted to $104,000,000
were used to repay debt in default amounting to $27,300,000 to repay a
$2,700,000 note payable to a former shareholder, to fund the $55,900,000
acquisition of Molmec, to re-finance LDM Canada and for general corporate
purposes.
On April 29, 1997, the Company exchanged its 10 3/4% Senior Subordinated Notes
due 2007, Series A, for 10 3/4% Senior Subordinated Notes due 2007, Series B
("the Notes"). The terms of the Series B Notes are identical to those of the
Series A Notes, except for certain transfer restrictions and registration rights
relating to the Series A Notes.
The Indenture under which the Notes issued contains certain covenants, including
limitations on the following matters: (i) the incurrence of additional
indebtedness, (ii) the issuance of preferred stock by subsidiaries, (iii) the
creation of liens, (iv) restricted payments, (v) the sales of assets and
subsidiary stock, (vi) mergers and consolidations, (vii) payment restrictions
affecting subsidiaries and (viii) transactions with affiliates.
Interest on the Notes is payable semi-annually at 10 3/4%. The Notes are subject
to redemption on or after January 15, 2002, at the option of the Company, in
whole or in part, at redemption prices ranging from 105.375% to 100% of the
principal amount. Up to 25% of the Notes may be redeemed on or before January
15, 2000, at 110.75% of the principal amount in the event of a Public Equity
Offering. At September 27, 1998, the Notes are guaranteed by certain
subsidiaries of the Company namely LDM Holding Canada, Inc. and LDM Technologies
Company but not by Como, LDM Mexico, or LDM Germany. Supplemental financial
information for the guarantor and non-guarantor subsidiaries is disclosed in
Note 15.
The notes rank subordinate in right of payment to all existing and future Senior
Debt.
The Company has a letter of credit that secures its $8,800,000 Multi-Option
Adjustable Rate Notes and on acquisition of Molmec assumed Molmec's Variable
Rate Demand Limited Obligation Revenue Bonds with an aggregate principal amount
of $4,400,000.
F-13
35
On February 6, 1998, the Company entered into an additional term and capital
expenditure line of credit. The term line of credit is not to exceed the lesser
of (i) $66,000,000 or (ii) the sum of (A) one hundred percent (100%) of the
appraised orderly liquidation value of Equipment of the Borrower and LDM Canada;
plus (B) eighty percent (80%) of the fair market value of all owned Real Estate
of the Borrower and LDM Canada. The capital expenditure line of credit is not to
exceed the lesser of (i) $10,000,000 or (ii) eighty percent (80%) of actual
invoiced cost of the equipment. These obligations, totaling a maximum
availability of $76,000,000 at September 27, 1998, are subject to interest at a
Base or LIBOR Rate plus a variable margin as set forth in the loan agreement.
These loans are also subject to interest for any unused line of credit equal to
.375% per annum on an average daily unused facility for the immediate preceding
month. The loans are repayable in monthly installments of $786,000 commencing
May 1, 1998 in addition to an annual payment due the first day of the fourth
month after the end of each fiscal year of 50% of any excess cash flow (as
defined in the loan agreement) for such fiscal year, with any remaining balance
repayable at February 2002. The lines of credit contain customary covenants,
including financial covenants relating to, among other things, fixed charge
coverage ratios, capital expenditure limitations and profitability. The Company
may terminate these obligations upon written notice and full payment of
principal and accrued interest.
The Company had borrowings outstanding under the term and capital expenditure
line of credit at September 27, 1998 of $63,000,000. Borrowings available under
the term and capital expenditure line of credit were $9,000,000 at September 27,
1998.
Long-term debt at September 27, 1998 and September 28, 1997 consists of the
following: (In thousands)
1998 1997
---- ----
Senior Subordinated Notes due 2007. $ 110,000 $ 110,000
Term and capital expenditure line of credit,
principal payable in monthly installments of
$786, at Base or LIBOR plus margin
(7.86% at September 27, 1998). Balance 63,048 -
repayable February 2002.
Multi-Option Adjustable Rate Notes, principal
payable in various annual installments ranging
from $240 to $780 through April 1, 2015, plus
interest payable monthly
at the higher of the 30 day commercial paper
rate or 90 day commercial paper rate (5.76% at
September 27, 1998). Borrowings are
collateralized by the corporate headquarters
facility which has a carrying value of
approximately $14,890 at September 27, 1998 8,340 8,580
Variable Rate Demand Limited Obligation Revenue
Bonds, principal payable in various annual
installments through December 1, 2009
ranging from $630 to $160, plus
variable interest (subject to a maximum of
12%), payable semi-annually (4.2% at
September 27, 1998),
collateralized by a letter of credit. 3,825 4,415
Other 92 245
------------ -------------
Total $ 185,305 $ 123,240
Current maturities of long-term debt (13,631) (979)
------------ -------------
Long-term debt due after one year $ 171,674 $ 122,261
============ =============
LDM Technologies, Inc. has the option to convert the interest rate on the
Multi-Option Adjustable Rate Notes to the Six Month, One Year, Three Year, Five
Year, Seven Year, or the Fixed Interest Rates Modes.
F-14
36
Annual maturities of long-term debt are as follows (In thousands):
FISCAL YEAR
1999 $ 13,631
2000 10,619
2001 10,608
2002 31,858
2003 500
Thereafter 118,089
------------
Total $185,305
============
10. RELATED PARTY TRANSACTIONS
Como leases its general office and plant facilities, in addition to certain
computer and manufacturing equipment, from corporations whose directors and
stockholders include Como's minority stockholder. Lease rental payments made to
these corporations for 1998, 1997, and 1996 were $467,000, $502,000, and
$487,000, respectively. Como also pays management fees to its minority
stockholder based on a percentage of sales. Selling, general and administrative
expenses include $63,000 and $121,000 in 1997 and 1996, respectively, for
management fees to the minority stockholder. The minority shareholder did not
charge Como a management fee during fiscal year 1998.
During 1998, Como transferred equipment with a net book value of approximately
$609,000 to LDM. In exchange for the equipment, LDM relieved Como of its
liability for accrued corporate charges and other accounts payable of
approximately $604,000, which had been included in accrued liabilities as of
September 28, 1997.
Through July 15, 1997, the Company leased certain corporate administrative
facilities from its shareholders. Lease rental payments were $110,000 for the
year ended September 28, 1997, and $156,000 for the year ended in September 29,
1996. The Company also paid the repairs and maintenance, insurance and property
taxes on these facilities. During July, 1997, the Company purchased a 50%
interest in the administrative facilities it previously leased from its
shareholders. The purchase price totaled $714,000. In November 1998, the Company
sold its' interest in this property to one of its shareholders at book value.
11. INCOME TAXES
The Company's provision for income taxes for continuing operations for the years
ended September 27, 1998, September 28, 1997, and September 29, 1996 is
comprised of the following:
1998 1997 1996
--------------------------------------
(In thousands)
Domestic:
Federal:
Current $ 121 $ 2,789 $ 2,770
Deferred (2,692) (262) 612
----------- ----------- -----------
(2,571) 2,527 3,382
State and local:
Current (253) 405 841
Deferred - (29) 17
----------- ----------- -----------
(253) 376 858
Foreign:
Current 850 20 20
Deferred 1,436 (835) (246)
----------- ----------- -----------
2,286 (815) (226)
----------- ----------- -----------
Total income tax provision (credit) $ (538) $ 2,088 $ 4,014
=========== =========== ===========
F-15
37
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and tax basis of the Company's assets and liabilities.
At September 27, 1998 and September 28, 1997 deferred tax assets and liabilities
are comprised of the following:
1998 1997
-----------------------
(In thousands)
Deferred tax assets:
Net operating loss carryovers $ 1,523 $ 2,480
Capital loss carryovers 194 -
Impairment charge 3,904 -
Accounts receivable 391 139
Inventory 834 640
Other accrued liabilities 820 585
Employee benefits 930 783
--------- -----------
Total deferred tax assets 8,596 4,627
Less valuation allowances for loss carryovers (686) -
---------- -----------
Total net deferred tax asset 7,910 4,627
Deferred tax liabilities:
Property, plant and equipment 6,446 3,513
--------- -----------
Net deferred tax asset $ 1,464 $ 1,114
========= ===========
A reconciliation of the Company's income tax expense at the federal statutory
tax rate to the actual income tax expense follows:
YEAR ENDED
---------------------------------------------------
SEPTEMBER 27, SEPTEMBER 28, SEPTEMBER 29,
1998 1997 1996
---------------- ---------------- ---------------
(In thousands)
Tax at federal statutory rate of 34% $ (2,681) $ 1,703 $ 1,737
State and local taxes, net of
federal tax effect (299) 248 566
Settlement of prior years' income
tax liabilities (1,056) - 582
Nondeductible expenses 838 742 211
Reversal of valuation allowance for
Canadian loss carryovers - (728) -
Foreign tax in excess of
foreign tax credits 1,781 - -
Effect of unrealized Canadian tax
losses - - 857
Deferred tax valuation
allowance 685 - -
Other, net 194 123 61
-------- ---------- ----------
Provision (credit) for income taxes $ (538) $ 2,088 $ 4,014
======== ========== ==========
For Canadian income tax purposes, approximately $3,383,000 of net operating
losses are available at September 27, 1998 for carryover against taxable income
in future years. These carryovers expire $1,901,000 in 2003 and $1,482,000 in
2004. The net operating loss carry forwards include timing differences,
principally tax depreciation in excess of financial statement depreciation, of
approximately $5,116,000, for which a $1,842,000 deferred tax liability has been
recorded.
12. RETIREMENT AND PROFIT SHARING PLANS
The Company provides defined contribution retirement plans to substantially all
employees of LDM Technologies, Inc. and Como. During 1998, the Company obtained
two additional defined contribution plans through the acquisitions disclosed in
Note 2. In July 1998, two of the defined contribution plans were merged into one
plan. Contributions by the Company, which are different for each individual
plan, are based on matching 50% of employees contributions, up to a maximum
range of 3-4 % of earnings or $500,000 to $1,000,000. Costs under the plans
amounted to $378,000, $296,000, and $252,000 in 1998, 1997 and 1996,
respectively.
F-16
38
13. COMMITMENTS AND CONTINGENCIES
LEASES AND PURCHASE COMMITMENTS
The Company leases certain of its facilities, furniture and fixtures, and
equipment. Rental expense, including short-term cancelable leases, approximated
$6,367, $2,227, and $1,865 for the years ended September 27, 1998, September 28,
1997 and September 29, 1996, respectively. Future commitments under
noncancelable operating leases are as follows: (In thousands)
RELATED UNRELATED
FISCAL YEAR PARTIES PARTIES TOTAL
------------- ---------------------------------------
1999 $509 $5,016 $5,525
2000 509 4,802 5,311
2001 509 2,838 3,347
2002 509 1,125 1,634
2003 255 654 909
Thereafter - 1,024 1,024
------ ------- -------
Total $2,291 $15,459 $17,750
====== ======= =======
STOCK REDEMPTION AGREEMENT
The Company and its two shareholders are party to a binding stock redemption
agreement providing the following:
Upon the death of each shareholder, the Company is required to purchase and the
shareholder's estate is required to sell all of the shareholder's stock at a
price equal to $50,000,000. This amount is payable upon receipt of the proceeds
of the life insurance policies owned by the Company on the shareholders' lives.
Any shortfall between the insurance proceeds and the amount payable to the
shareholder's estate will require funding by the Company, subject to
restrictions in the Company's loan agreements.
The Company is required to purchase and maintain life insurance policies of
$50,000,000 on the lives of each of the shareholders for as long as the Stock
Redemption Agreement is in effect. The aggregate premium for these policies
presently approximates $1.8 million per year. Further, the Company is prohibited
from assigning, pledging or borrowing against these life insurance policies
without the consent of the insured shareholder.
CONTINGENCIES
Environmental Matters
The Company settled on a permitted air emission level violation at one of its
plants during fiscal year 1998 for $170,000 of which $160,000 had been accrued
in prior years. The additional $10,000 was expensed during fiscal 1998.
The Company settled on an emission violation at a second facility during fiscal
year 1997 for $188,000, of which $150,000 had been accrued in prior years and
$38,000 was expensed in fiscal year 1997.
F-17
39
The Company previously received letters from a corporation and a group of
corporations, which have entered into agreements with the United States
Environmental Protection Agency ("USEPA") to prepare remedial designs for curing
two separate failed landfill sites. In each letter, the Company was identified
as a potentially responsible party for its alleged waste disposal at such
landfills. In the first case, a lawsuit was brought against the Company for
which the USEPA subsequently agreed to provide contribution protection on
payment of a nominal fee. Although subject to approval by the United States
Assistant General Attorney, the plaintiff has indicated they will dismiss the
lawsuit. In the second case, no lawsuit has yet been filed and the Company has
no reason to believe that any liability associated with the particular landfill
will materially exceed the recorded liability of $50,000; however the ultimate
outcome of such matters cannot be predicted with certainty.
LITIGATION
The Company accrues contingent liabilities when it is probable that future costs
will be incurred and such costs can be reasonably estimated. Such accruals are
based on developments to date, the Company's estimates of the outcomes of these
matters and its experience in contesting, litigating and settling other matters.
As the scope of the liabilities becomes better defined, there will be changes in
the estimates of future costs; however the Company does not believe any such
charges will have a material effect on the Company's future results of
operations and financial condition or liquidity.
14. SUPPLEMENTAL GUARANTOR INFORMATION
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility, the standby letters of credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes and the $4.4 million Variable Rate Demand
Limited Obligation Revenue Bonds and the Senior Term and Capital Expenditures
Line of Credit are obligations of LDM Technologies, Inc. The obligations are
guaranteed fully, unconditionally and jointly and severally by LDM Technologies
Company and LDM Holding Canada, Inc. The non-guarantor subsidiaries are Como,
LDM Germany, LDM Mexico, and LDM Holding Mexico, Inc. LDM Mexico is
currently inactive.
Supplemental consolidating financial information of LDM Technologies, Inc., LDM
Canada (including the related holding company guarantors) and combined Como,
Mexico and LDM Germany (the "non-guarantor subsidiaries") is presented below (in
thousands). Investments in subsidiaries are presented on the equity method of
accounting. Separate financial statements of the guarantors are not provided
because management has concluded that the summarized financial information below
provides sufficient information to allow investors to separately determine the
nature of the assets held by and the operations of LDM Technologies, Inc., and
the guarantor and non-guarantor subsidiaries.
F-18
40
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 27, 1998
UNCONSOLIDATED
------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
-----------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash $ 673 $ 1,317 $ 1,327 $ 3,317
Accounts receivable 63,856 10,849 7,076 81,781
Note receivable affiliates 21,487 - - $ (21,487) -
Inventories 18,964 1,567 3,538 24,069
Mold costs 17,967 - 4,543 22,510
Prepaid expenses 1,785 136 109 2,030
Refundable income taxes 1,204 - 47 1,251
Deferred income taxes 3,148 - - 3,148
------------ ------------ ------------ ------------ ------------
Total current assets 129,084 13,869 16,640 (21,487) 138,106
Net property, plant and equipment, at
cost 96,662 14,498 7,041 118,201
Investment in subsidiaries 7,589 - - (6,491) 1,098
Goodwill 64,047 - - - 64,047
Debt issue costs 6,303 - - 6,303
Other 632 - 9 641
------------ ------------ ------------ ------------ ------------
$ 304,317 $ 28,367 $ 23,690 $ (27,978) $ 328,396
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 36,699 - $ 2,440 $ 39,139
Accounts payable 39,923 $ 7,737 7,032 $ (329) 54,363
Demand note payable to shareholders - - 88 88
Accrued liabilities 20,392 745 1,339 22,476
Accrued compensation 7,629 247 2,221 10,097
Advance mold payments - 443 593 1,036
Income taxes payable - 850 850
Note payable to affiliates - - -
Current maturities of long-term debt 13,631 - 13,631
-------------- ------------ ------------ ------------ ------------
Total current liabilities 118,274 10,022 13,713 (329) 141,680
Long-term debt due after one year 171,674 10,709 10,449 (21,158) 171,674
Deferred income taxes 285 1,369 30 1,684
Stockholders' equity:
Common stock - 5,850 2,945 (8,795) -
Additional paid-in capital 94 - 126 (126) 94
Retained earnings 14,012 417 (3,575) 2,432 13,286
Accumulated other comprehensive income
(loss) (22) - 2 (2) (22)
------------ ------------ ------------ ------------ ------------
Total stockholders' equity 14,084 6,267 (502) (6,491) 13,358
------------ ------------ ------------- ------------ ------------
Total liabilities and stockholder's equity $ 304,317 $ 28,367 $ 23,690 $ (27,978) $ 328,396
============ ============ ============ ============ ============
F-19
41
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 28, 1997
UNCONSOLIDATED
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
---------------- ------------------- ------------------- ------------------- -----------------
ASSETS
Current assets:
Cash $ 12 $ 4,598 $ 23 $ 4,633
Accounts receivable 40,102 6,688 1,773 $ (2,751) 45,812
Note receivable affiliates 16,098 (16,098)
Inventories 10,893 2,114 2,041 15,048
Mold costs 3,887 8,902 1,036 13,825
Prepaid expenses 1,852 121 82 2,055
Refundable income taxes - 390 390
Deferred income taxes 1,852 2,575 200 4,627
------------ ------------ ---------- ------------ ------------
Total current assets 74,696 24,998 5,545 (18,849) 86,390
Net property, plant and equipment 64,073 16,239 1,947 82,259
Investment in subsidiaries 4,318 (4,318)
Goodwill 36,791 36,791
Debt issue costs 5,733 5,733
Other 680 334 1,014
------------ ------------ ---------- ------------ ------------
$ 186,291 $ 41,237 $ 7,826 $ (23,167) $ 212,187
============ ============ ========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 1,700 $ 1,830 $ 3,530
Accounts payable 21,262 $ 7,802 2,260 $ (3,172) 28,152
Accrued liabilities 12,791 2,070 801 15,662
Accrued compensation 3,895 286 435 4,616
Advance mold payments from
customers 10,102 980 11,082
Income taxes payable 1,631 8 1,639
Note payable to affiliates 350 (262) 88
Current maturities of long-term
debt 881 98 979
------------ ------------ ---------- ------------ ------------
Total current liabilities 42,160 20,268 6,754 (3,434) 65,748
Long-term debt due after one year 122,256 15,414 (15,409) 122,261
Deferred income taxes 1,490 1,709 314 3,513
Minority interests 279 279
Stockholders' equity:
Common stock - 5,856 1 (5,857) -
Additional paid-in capital 94 126 (126) 94
Retained earnings 20,291 (2,010) 631 1,441 20,353
Accumulated other comprehensive loss (61) (61)
------------ ------------ ---------- ------------ ------------
Total stockholders' equity 20,385 3,846 758 (4,603) 20,386
------------ ------------ ---------- ------------ ------------
Total liabilities and stockholders'
equity $ 186,291 $ 41,237 $ 7,826 $ (23,167) $ 212,187
============ ============ ========== ============ ============
F-20
42
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 27, 1998
UNCONSOLIDATED
------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
------------- -------------- -------------- ------------- ------------
Net sales:
Product sales $ 349,218 $ 51,228 $ 38,641 $ (127) $ 438,960
Mold sales 25,589 14,172 4,503 44,264
------------- ------------ ---------- ---------- ----------
374,807 65,400 43,144 (127) 483,224
Cost of sales:
Product cost of sales 278,818 44,443 39,849 (127) 362,983
Mold cost of sales 24,643 12,154 4,221 41,018
------------- ------------ ---------- ---------- ----------
303,461 56,597 44,070 (127) 404,001
------------- ------------ ---------- ---------- ----------
Gross margin 71,346 8,803 (926) 79,223
Selling, general and
administrative expenses 52,664 1,195 2,748 56,607
Equity in net income
of subsidiaries 187 - - (187) -
Interest 19,703 1,633 860 (2,382) 19,814
Share of joint
venture loss 285 - - - 285
Adjustment for
impairment of
long-lived assets 10,523 - - - 10,523
Other, net (2,627) 396 (273) 2,382 (122)
------------- ------------ ---------- ---------- ----------
80,735 3,224 3,335 (187) 87,107
------------- ------------ ---------- ---------- ----------
Income (loss) from
continuing operations
before income taxes (9,389) 5,579 (4,261) 187 (7,884)
and minority interest
Provision (credit) for income taxes (2,769) 2,286 (55) (538)
------------- ------------ ---------- ---------- ----------
Income (loss) from
continuing operations
before minority interest (6,620) 3,293 (4,206) 187 (7,346)
Minority interest loss 279 - - 279
------------- ------------ ---------- ---------- ----------
Net income (loss) $ (6,341) $ 3,293 $ (4,206) $ 187 $ (7,067)
============= ============ ========== ========== ==========
F-21
43
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 28, 1997
UNCONSOLIDATED
-----------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
--------------------------------------------------------------------------------------
Net sales:
Product sales $ 204,902 $ 38,427 $ 19,207 $ (1,433) $ 261,103
Mold sales 20,843 7,035 4,039 31,917
------------ ----------- ----------- ----------- ------------
225,745 45,462 23,246 (1,433) 293,020
Cost of sales:
Product cost of sales 156,477 36,651 18,837 (1,433) 210,532
Mold cost of sales 20,425 6,485 3,487 30,397
------------ ----------- ----------- ----------- ------------
176,902 43,136 22,324 (1,433) 240,929
------------ ----------- ----------- ----------- ------------
Gross margin 48,843 2,326 922 52,091
Selling, general and administrative
expenses 32,396 1,573 1,781 (188) 35,562
Equity in net loss of subsidiaries 722 (722) -
Interest 10,499 1,567 250 (1,240) 11,076
Other, net (914) (32) (38) 1,429 445
------------ ----------- ----------- ----------- ------------
42,703 3,108 1,993 (722) 47,083
------------ ----------- ----------- ----------- ------------
Income (loss) from continuing
operations before income taxes and
minority interest 6,140 (783) (1,071) 722 5,008
Provision for income taxes 3,282 (846) (348) 2,088
------------ ----------- ----------- ----------- ------------
Income (loss) from continuing
operations before minority interest 2,858 63 (723) 722 2,920
Minority interest loss 143 143
------------ ----------- ----------- ----------- ------------
Net income (loss) $ 3,001 $ 63 $ (723) $ 722 $ 3,063
============ =========== =========== =========== ============
F-22
44
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
UNCONSOLIDATED
-------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
----------------------------------------------------------------------------------------
Net sales:
Product sales $ 142,229 $ 31,037 $ 21,535 $ (2,330) $ 192,471
Mold sales 18,832 5,933 523 25,288
------------ ----------- ----------- ----------- ------------
161,061 36,970 22,058 (2,330) 217,759
Cost of sales:
Product cost of sales 110,646 31,796 19,982 (2,330) 160,094
Mold cost of sales 16,980 5,342 479 22,801
------------ ----------- ----------- ----------- ------------
127,626 37,138 20,461 (2,330) 182,895
------------ ----------- ----------- ----------- ------------
Gross margin 33,435 (168) 1,597 34,864
Selling, general and administrative
expenses 23,722 1,277 1,420 26,419
Equity in net loss of subsidiaries 2,530 (2,530)
Interest 1,834 1,218 228 3,280
Other, net (938) 531 463 56
------------ ----------- ----------- ----------- ------------
27,148 3,026 2,111 (2,530) 29,755
------------ ----------- ----------- ----------- ------------
Income (loss) from continuing
operations before income taxes, minority
interest and extraordinary item 6,287 (3,194) (514) 2,530 5,109
Provision for income taxes 4,438 (226) (198) 4,014
------------ ----------- ----------- ----------- ------------
Income (loss) from continuing
operations before minority interest and
extraordinary item 1,849 (2,968) (316) 2,530 1,095
Minority interest loss 79 79
------------ ----------- ----------- ----------- ------------
Income from continuing operations
before extraordinary item 1,928 (2,968) (316) 2,530 1,174
Loss from discontinued operations,
net of income taxes and minority interest (59) (59)
------------ ----------- ----------- ----------- ------------
Income (loss) before extraordinary item 1,869 (2,968) (316) 2,530 1,115
Extraordinary item, no income tax effect 754 754
------------ ----------- ----------- ----------- ------------
Net income (loss) $ 1,869 $ (2,214) $ (316) $ 2,530 $ 1,869
============ =========== =========== =========== ============
F-23
45
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 27, 1998
UNCONSOLIDATED
----------------------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
------------------- ----------------- ------------------- ------------------- ---------------
OPERATING ACTIVITIES
Net income (loss) $ (6,341) $ 6,341 $ (4,206) $ 187 $ (7,067)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity in subsidiaries losses 187 - (187) -
Share of joint venture loss 285 - - - 285
Depreciation and amortization 16,260 1,974 1,632 19,866
Adjustment for impairment 10,523 - - - 10,523
of long-lived assets
(Gain) loss on sale of
property and equipment 36 61 97
Deferred income taxes (3,370) 1,421 (84) (2,033)
Changes in assets and liabilities,
net of the effect of the 1998
acquisitions
Accounts and notes receivable (775) (4,905) (791) 1,511 (4,960)
Inventory and mold costs (6,584) 6,129 (1,698) (2,153)
Prepaid expenses 1,025 (32) (13) 979
Accounts payable and accrued
liabilities 9,947 (7,320) 3,163 5,790
Income taxes payable (2,982) 846 356 (1,780)
------------ --------- ------------ ------------ ------------
Net cash provided by operating
activities 18,211 1,406 (1,580) 1,511 19,547
INVESTING ACTIVITIES
Purchase of Kenco (net of $500 cash
received in acquisition) (26,641) (26,641)
Additions to property, plant and (12,083) (370) (1,690) (14,143)
equipment
Purchase of Huron Plastics (net of
$1,835 cash received in acquisition) (67,140) (67,140)
Proceeds from disposal of property,
and equipment 622 192 814
Purchase of LDM Technologies, GmbH (9,703) (9,703)
Disbursements to affiliates (7,837) 7,837 -
Payments from affiliates 10,073 (10,073) -
------------ --------- ------------ ------------ ------------
Net cash (used for) provided by
investing activities (112,709) (370) (1,498) (2,236) (116,813)
FINANCING ACTIVITIES
Proceeds from issuance of long term
debt 63,992 3,869 (3,869) 63,992
Payments on long-term debt (4,809) (4,317) (278) 4,595 (4,809)
Net proceeds from Line of Credit/
Revolver 35,976 791 36,767
------------ ------------ ------------ ------------ ------------
Net cash provided (used) by
financing activities 95,159 (4,317) 4,382 726 95,950
------------ ----------- ------------ ------------ ------------
Net increase (decrease) in cash 661 (3,281) 1,304 - (1,316)
Cash at beginning of year 12 4,598 23 4,633
------------ ----------- ------------ ------------ ------------
Cash at end of year $ 673 $ 1,317 $ 1,327 $ - $ 3,317
============ =========== ============ ============ ============
F-24
46
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 28, 1997
UNCONSOLIDATED
-----------------------------------------------------
LDM TECHNOLOGIES, NON-GUARANTOR CONSOLIDATING
INC. LDM CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
---------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 3,001 $ 63 $ (723) $ 722 $ 3,063
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity in subsidiaries losses 722 (722)
Depreciation and amortization 9,054 2,141 760 11,955
(Gain) loss on sale of property and
equipment (151) (5) (156)
Deferred income taxes (265) (866) 4 (1,127)
Other 203 250 453
Changes in assets and liabilities,
net of the effect of the 1997
acquisitions
Accounts and notes receivable (8,222) 2,632 132 (5,458)
Inventory and mold costs 2,165 (7,028) (91) (4,954)
Prepaid expenses (1,573) 90 (11) (1,494)
Other assets 65 350 415
Accounts payable and accrued
liabilities 2,320 4,489 82 466 7,357
Income taxes payable (693) (25) (718)
------------ ---------- --------- ----------- ------------
Net cash provided by operating
activities 6,626 2,121 123 466 9,336
INVESTING ACTIVITIES
Purchase of Molmec (net of $2,704,958
cash received in acquisition) (53,198) (53,198)
Additions to property, plant and (10,521) (2,174) (81) (12,776)
equipment Purchase of Kendallville (7,159) (7,159)
Proceeds from disposal of property, and
equipment 1,769 8 1,777
Cash and cash equivalents restricted for
construction of new corporate facility 658 658
Disbursements to affiliates (12,587) 12,587
Payments from affiliates 1,553 (1,553)
Equity investment in affiliate (4,500) 4,500
Other (484) (484)
------------ ---------- --------- ----------- ------------
Net cash (used for) provided by investing
activities (84,469) 2,326 (73) 11,034 (71,182)
FINANCING ACTIVITIES
Proceeds from issuance of long term debt 103,962 11,500 (11,500) 103,962
Payments on long-term debt (12,316) (9,647) (236) (22,199)
Net proceeds from Line of Credit/Revolver (13,800) (3,634) 28 (17,406)
------------ ---------- --------- ----------- ------------
Net cash provided (used) by financing
activities 77,846 (1,781) (208) (11,500) 64,357
------------ ---------- -------- ----------- -----------
Net increase (decrease) in cash 3 2,666 (158) 2,511
Cash at beginning of year 9 1,933 180 2,122
------------ ---------- -------- ----------- ------------
Cash at end of year $ 12 $ 4,599 $ 22 $ - $ 4,633
============ ========== ======== =========== ============
F-25
47
15. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
UNCONSOLIDATED
-------------------------------------------------------
LDM
TECHNOLOGIES, ARROW NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
----------------- ---------------- ------------------ ------------------ ---------------
OPERATING ACTIVITIES
Net income (loss) $ 1,869 $ (2,214) $ (316) $ 2,530 $ 1,869
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Equity in subsidiaries losses 2,530 (2,530)
Depreciation and amortization 5,371 2,020 615 8,006
Extraordinary gain on retirement (754) (754)
of debt
(Gain) loss on sale of property and
equipment 106 (3) 103
Deferred income taxes 521 (250) 112 383
Other (480) (25) (505)
Changes in assets and liabilities,
net of the effect of the
distribution of IMCA:
Accounts and notes receivable (3,475) (5,718) 1,814 (7,379)
Refundable income taxes (365) (365)
Inventory and mold costs 1,969 (699) (2,245) (975)
Prepaid expenses (25) (41) (12) (78)
Other assets (221) 228 7
Accounts payable and accrued liabilities 3,583 6,266 2,398 12,247
Income taxes payable 353 - 353
------------ ------------- ----------- ------------- -------------
Net cash provided (used) by operating
activities 11,347 (433) 1,998 12,912
INVESTING ACTIVITIES
Additions to property, plant and (17,383) (2,502) (401) (20,286)
equipment
Proceeds from disposal of property,
and equipment 269 15 284
Cash and cash equivalents restricted
for construction of new corporate facility 6,686 6,686
Other 1,229 18 1,247
------------ ------------- ----------- ------------- -------------
Net cash used for investing activities (9,199) (2,502) (368) (12,069)
FINANCING ACTIVITIES
Redemption of stockholder's interest,
including cash owned by IMCA of $212,968 (4,713) (4,713)
Proceeds from issuance of long term debt 18,805 1,188 19,993
Borrowings on line of credit:
Proceeds 12,100 4,388 1,815 18,303
Repayments (13,800) (2,680) (990) (17,470)
Payments on notes payable and
long-term debt (15,734) (401) (16,135)
Other 156 7 163
------------ ------------- ----------- ------------- -------------
Net cash provided (used) by financing
activities (3,186) 2,896 431 141
------------ ------------- ----------- ------------- -------------
Net increase (decrease) in cash (1,038) (39) 2061 984
Cash at beginning of year 1,047 55 36 1,138
------------ ------------- ----------- ------------- -------------
Cash at end of year $ 9 $ 16 $ 2,097 $ - $ 2,122
============ ============= =========== ============= =============
F-26
48
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1 Articles of Incorporation of LDM Technologies, Inc. (the
"Company"), as amended [3.1]*
3.2 By-laws of the Company [3.5]*
4.1 Indenture dated as of January 15, 1997 by and among the
Company, LDM Holdings, LDM Partnership, LDM Canada and IBJ
Schroder Bank & Trust Company, as Trustee [4.1]*
4.2 Form of 10 3/4% Senior Subordinated Note Due 2007, Series
B[4.2]* 4.3 Form of Guarantee [4.3]*
10.1(a) Loan and Security Agreement dated as of January 22, 1997
("Loan Agreement") by and between the Company, as Borrower,
and BankAmerica Business Credit, Inc. ("BankAmerica"), as
Agent for the Lenders [10.2]*
10.1(b) First Amendment to Loan Agreement dated May 1,
1997. [10.1(b)]***
10.1(c) Amendment No. 2 and Affirmation of Guaranties to Loan
Agreement dated as of July 14, 1997. [10.1(c)]***
10.1(d) Amendment No. 3 and Affirmation of Guaranties to Loan
Agreement dated as of September 30, 1997. [10.1(d)]***
10.1(e) Amendment No. 4 and Affirmation of Guaranties to Loan
Agreement dated as of November 25, 1997. [10.1(e)]***
10.1.(f) Amendment No. 5 and Affirmation of Guaranties to Loan
Agreement dated as of February 6, 1998. [3]****
10.1(g) Amendment No. 6 and Affirmation of Guaranties to Loan
Agreement dated as of July 21, 1998.
10.2 Intellectual Property Security Agreement dated as of January
22, 1997 made by the Company in favor of BankAmerica, as
Agent for Lenders [10.4]*
10.3 Stock Purchase Agreement among the Company and the various
stockholders of Kenco Plastics, Inc., a Michigan
corporation, and Kenco Plastics, Inc., a Kentucky
corporation, and Narens Design & Engineering Co., a Michigan
corporation, dated September 30, 1997 [1].**
10.4(a) Term Loan and Security Agreement dated as of February 6,
1998 among the financial institutions named therein, as the
Lenders, BankAmerica Business Credit, Inc., as Agent and LDM
Technologies, Inc., as Borrower. [2]****
10.4(b) Amendment No. 1 and Affirmation of Guaranties to Term Loan
and Security Agreement dated as of July 21, 1998.
10.5 Stock and Asset Purchase Agreement by and among LDM
Technologies, Inc., Tadim, Inc., Huron Plastics Group, Inc.
and certain "Selling Shareholders" dated December 23, 1997,
First Amendment thereto dated January 23, 1998, Second
Amendment thereto dated January 30, 1998, Third Amendment
thereto dated February 2, 1998 and Fourth Amendment thereto
dated February 6, 1998. [1]****
11 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed
by the Registrant for the quarter ended September 27, 1998.
The Exhibits marked with one asterisk were filed as Exhibits
to the Registration Statement of the Company on Form S-4
(No. 333-21819); the Exhibit marked with two asterisks was
filed as an Exhibit to the Form 8-K of the Company dated
September 30, 1997; the Exhibits marked with three asterisks
were filed with Form 10-K dated December 10, 1997; and the
Exhibits marked with four asterisks were filed with the Form
8-K of the Company dated February 20, 1998; and are
incorporated herein by reference, the Exhibit numbers in
brackets being those in such Registration Statement, Form
10-K, or Form 8-K Report.