1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION OR 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
LDM Technologies, Inc.
(Exact name of registrant as specified in its charter)
Michigan 333-21819 38-2690171
-------- --------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2500 Executive Hills Drive, Auburn Hills, Michigan 48326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 858-2800
Indicate by check mark whether the registrant has filed all reports required to
be filed by sections 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
YES X NO
Number of shares common stock outstanding as of May 7, 1999: 600
Total pages: 26
Listing of exhibits: 25
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LDM TECHNOLOGIES, INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, March 28, 1999 and
September 27, 1998 3
Condensed Consolidated Statements of Operations, three months ended
March 28, 1999 and March 29, 1998 4
Condensed Consolidated Statements of Operations, six months ended
March 28, 1999 and March 29, 1998 5
Condensed Consolidated Statements of Cash Flows, six months ended 6
March 28, 1999 and March 29, 1998
Notes to Condensed Consolidated Financial Statements 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF 17
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security Not applicable
Holders
Item 5 Other information Not applicable
Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 27-Financial
Data Schedule
Signatures 24
2
3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
MARCH 28, 1999 SEPTEMBER 27, 1998
(UNAUDITED) (NOTE)
-------------- ------------------
ASSETS
Current assets:
Cash $ 5,435 $ 3,317
Accounts receivable 87,375 81,781
Raw materials 12,054 14,791
Work in process 2,099 2,715
Finished goods 6,008 6,563
Mold costs 21,559 22,510
Refundable income taxes 43 1,251
Deferred income taxes 3,105 3,148
Other current assets 1,882 2,030
--------- --------
Total current assets 139,560 138,106
Net property, plant and equipment 118,285 118,201
Goodwill, net 61,622 64,047
Debt issue costs, net 6,086 6,303
Investment in joint venture 1,116 1,098
Notes receivable due from joint venture 3,078
Other assets 624 641
--------- --------
Totals $ 330,371 $328,396
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loans $ 32,832 $ 39,139
Accounts payable 58,386 54,363
Accrued liabilities 24,079 18,441
Accrued interest 3,795 4,035
Accrued compensation 7,652 10,097
Advance mold payments from customers 1,036
Income taxes payable 2,005 850
Current maturities of long-term debt 10,333 13,631
--------- --------
Total current liabilities 139,082 141,592
Long-term debt due after one year 177,071 171,674
Deferred income taxes 1,137 1,684
Note payable to affiliates 88 88
STOCKHOLDERS' EQUITY
Common Stock (par value $.10, issued and outstanding
600 shares; authorized 100,000 shares)
Additional paid-in capital 94 94
Retained earnings 13,001 13,286
Other comprehensive income (102) (22)
--------- --------
Total stockholders' equity 12,993 13,358
--------- --------
Totals $ 330,371 $328,396
========= ========
Note: The balance sheet at September 27, 1998 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
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4
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(dollars in thousands)
UNAUDITED
THREE MONTHS ENDED
MARCH 28, 1999 MARCH 29, 1998
-------------- --------------
Revenues:
Net product sales $ 111,179 $ 118,007
Net mold sales 22,547 7,883
--------- ---------
133,726 125,890
Cost of Sales
Cost of product sales 89,747 97,647
Cost of mold sales 22,339 7,916
--------- ---------
112,086 105,563
--------- ---------
Gross Margin 21,640 20,327
Selling, general and administrative expenses 15,151 14,572
--------- ---------
Operating profit 6,489 5,755
Interest expense (5,625) (5,035)
Equity in net loss of joint ventures (1,333) -
Unrealized loss on foreign currency (766) (357)
translation
Other expense, net 54 2
--------- ---------
Income (loss) before income taxes and (1,181) 365
minority interest
Provision for income taxes 806 241
--------- ---------
Income (loss) before minority interest (1,987) 124
Minority interest 28
--------- ---------
Net income (loss) $ (1,987) $ 152
========== =========
See notes to condensed consolidated financial statements.
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5
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Operations
(dollars in thousands)
UNAUDITED
SIX MONTHS ENDED
MARCH 28, 1999 MARCH 29, 1998
-------------- --------------
Revenues:
Net product sales $ 243,616 $ 211,714
Net mold sales 28,205 14,472
--------- ---------
271,821 226,186
Cost of Sales
Cost of product sales 196,506 174,183
Cost of mold sales 28,639 13,754
--------- ---------
225,145 187,937
--------- ---------
Gross Margin 46,676 38,249
Selling, general and administrative expenses 30,771 25,669
--------- ---------
Operating profit 15,905 12,580
Interest expense (10,822) (8,968)
Equity in net loss of joint ventures (1,316) -
Unrealized loss on foreign currency (728) (357)
translation
Other (expense) income, net (268) (120)
---------- ---------
Income before income taxes and minority 2,771 3,135
interest
Provision for income taxes 3,056 1,549
--------- ---------
Income (loss) before minority interest (285) 1,586
Minority interest 76
--------- ---------
Net income (loss) $ (285) $ 1,662
========== =========
See notes to condensed consolidated financial statements.
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6
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
for the Six-Months Ended March 28, 1997
(unaudited)
(dollars in thousands)
UNAUDITED
SIX MONTHS ENDED
MARCH 28, 1999 MARCH 29, 1998
-------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 11,014 $ 4,074
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (8,151) (4,229)
Proceeds from disposal of Kenco Plastics to DBM Technologies joint 5,515
venture
Proceeds from disposal of property, plant and equipment 186
Purchase of Huron Plastics Group, net of $1,835 cash acquired (67,139)
Purchase of LDM Germany (9,706)
Purchase of Kenco Plastics, net of $500 cash acquired (27,000)
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (2,636) (107,888)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to DBM Technologies joint venture (1,803)
Proceeds from long-term debt issuance, net of $1,238 issuance costs in
1998; 7,251 65,638
$249 in 1999
Payments on long-term debt (5,401) (1,072)
Net borrowings (repayments) on lines of credit (6,307) 42,428
---------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (6,260) 106,994
---------- ---------
Net cash change 2,118 3,180
Cash at beginning of period 3,317 4,633
--------- ---------
Cash at end of period $ 5,435 $ 7,813
========= =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 10,410 $ 8,998
========= =========
See notes to condensed consolidated financial statements.
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LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six-month periods ended March
28, 1999 are not necessarily indicative of the results that may be expected for
the fiscal year ending September 26, 1999. For further information, refer to the
consolidated financial statements and footnotes thereto in the Company's annual
report on Form 10-K for the year ended September 27, 1998.
2. PURCHASES OF KENCO PLASTICS, AEROQUIP BEIENHEIM - GERMAN FACILITY, HURON
PLASTICS GROUP AND FORMATION OF BLOWMOLDING JOINT VENTURE
On September 30, 1997, the Company acquired all outstanding capital stock of
Kenco Plastics, Inc. (Michigan) and Kenco Plastics, Inc. (Kentucky) and the
business and substantially all operating assets of Narens Design and Engineering
Co. for approximately $27.1 million in cash. The acquisition was financed with
additional borrowings under the existing Senior Credit Facility.
On November 25, 1997, the Company acquired the business and certain net assets
and assumed certain liabilities comprising the `Beienheim' plant of
Aeroquip-Vickers International GmbH for approximately $9.7 million in cash. The
acquisition was financed with additional borrowings under the existing Senior
Credit Facility.
On February 6, 1998, the Company acquired the stock of Huron Plastics Group,
Inc. and substantially all of the operating assets of Tadim, Inc. (collectively
known as "HPG") for $69.0 million in cash and the assumption of certain
liabilities. The acquisition was funded with proceeds from a $66.0 million term
loan issued by the Company's senior lender and additional borrowings under the
existing Senior Credit Facility.
Effective as of December 31, 1998, the Company entered into a joint venture (DBM
joint venture) that is 49% owned by the Company and 51% owned by an independent
third party. The Company sold the Kenco business and most of its net current
assets to the joint venture at an amount equal to the net book value of the net
current assets. The sales price of the net current assets approximated $8.8
million.
The Company is leasing all machinery and equipment of the Kenco business to the
joint venture, and is subleasing to the joint venture all real properties used
in the Kenco operations.
Under the terms of the agreement, the Company provided a subordinated $1.8
million loan to the joint venture, and guaranteed $1.0 million of the joint
venture line of credit borrowings. As a result of those terms, and the
relatively small amount of equity contributed to the joint venture by the
independent third party, the Company retained substantially all of the risks of
ownership. The transaction is treated as an equity investment for accounting
purposes, but the Company will record 100% of the joint venture losses as equity
losses, if any, up to its investment, subordinated loan and guarantee amounts.
The pro forma unaudited results of operations for the six months ended March 28,
1999, and March 29, 1998 assuming consummation of the purchases and issuance of
the debt, and formation of the DBM joint venture, as described above had
occurred on September 29, 1997, are as follows:
For six months ended
March 28, 1999 March 29, 1998
--------------------------- ---------------------------
Net revenues $257,144 $232,140
======== ========
Net income (loss) $ (285) $ 1,597
======== ========
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3. COMMITMENTS AND CONTINGENCIES
There have been no significant changes in commitments and contingencies from the
matters described in footnote 13 of the Company's consolidated financial
statements as of and for the fiscal year ended September 27, 1998.
4. SUBSEQUENT EVENT: SALE OF COMO PRODUCTS
On April 15, 1999, all of the assets and liabilities of GL Industries of
Indiana, Inc. (d/b/a Como Products), a 75% owned subsidiary of the Company, were
sold to New GLI, Inc., an Indiana corporation, which is now doing business as
"Como Products." A new independent partner joined the new business (New GLI) and
purchased all but 36.75% of the Company's stake in New GLI for a minimal amount.
Under terms of the purchase agreement, the Company has accepted a subordinated
note from New GLI for approximately $0.5 million, which represents previous
loans, accrued interest and working capital advances from the Company to Como.
The Company's ownership percentage in New GLI has become less than 50%. As a
result, New GLI's results will be reported as equity earnings in the future.
Como's net sales and net loss for the year ended September 27, 1998 were $18.1
million and $1.5 million, respectively. Como's net sales and net income for the
six-month period ending March 28, 1999 were $8.7 million and $0.1 million,
respectively. The Company wrote its equity investment down to zero during fiscal
year 1998 due to Como's operating losses and a stockholder's equity deficit.
5. 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, LDM
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.
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of March 28, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
ASSETS
Current assets:
Cash $ 27 $ 2,778 $ 2,630 $ 5,435
Accounts receivable 73,838 5,753 7,784 87,375
Raw materials 8,717 1,173 2,164 12,054
Work in process 1,283 187 629 2,099
Finished goods 4,588 495 925 6,008
Mold costs 16,364 5,088 107 21,559
Refundable income taxes 43 43
Deferred income taxes 3,105 3,105
Other current assets 1,628 93 161 1,882
--------- -------- -------- --------- --------
Total current assets 109,550 15,567 14,443 139,560
Net property, plant and
equipment 98,289 13,704 6,292 118,285
Investment in subsidiaries 7,018 (7,018)
Goodwill, net 61,622 61,622
Debt issue costs, net 6,086 6,086
Investment in joint venture 1,116 1,116
Notes receivable due from
affiliates and joint venture 25,389 (22,311) 3,078
Other assets 624 624
--------- -------- -------- --------- --------
Totals $ 309,694 $ 29,271 $ 20,735 (29,329) $330,371
========= ======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and
revolving loans $ 31,306 $ 1,526 $ 32,832
Accounts payable 47,712 $ 3,828 7,657 (811) 58,386
Accrued liabilities 15,842 5,594 2,643 24,079
Accrued interest 3,795 3,795
Accrued compensation 4,970 351 2,331 7,652
Income taxes payable 235 1,770 2,005
Current maturities of
long-term debt 10,333 10,333
--------- -------- -------- --------- --------
Total current liabilities 114,193 11,543 14,157 (811) 139,082
Long-term debt due after one year 177,071 177,071
Deferred income taxes 1,108 29 1,137
Note payable to affiliates 10,710 10,878 (21,500) 88
STOCKHOLDERS' EQUITY
Common stock 5,850 2,945 (8,795)
Additional paid-in capital 94 126 (126) 94
Retained earnings 17,250 1,168 (7,320) 1,903 13,001
Other comprehensive income (22) (80) (102)
---------- -------- --------- --------- ---------
Total stockholders' equity 17,322 7,018 (4,329) (7,018) 12,993
--------- -------- --------- ---------- --------
Totals $ 309,694 $ 29,271 $ 20,735 $ (29,329) $330,371
========= ======== ======== ========== ========
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of September 27, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
ASSETS
Current assets:
Cash $ 673 $ 1,317 $ 1,327 $ 3,317
Accounts receivable 63,856 10,849 7,076 81,781
Notes receivable due from
affiliates 21,487 ($21,487)
Raw materials 11,611 1,095 2,085 14,791
Work in process 1,531 139 1,045 2,715
Finished goods 5,822 333 408 6,563
Mold costs 17,967 4,543 22,510
Refundable income taxes 1,204 47 1,251
Deferred income taxes 3,148 3,148
Other current assets 1,785 136 109 2,030
--------- -------- -------- --------- --------
Total current assets 129,084 13,869 16,640 (21,487) 138,106
Net property, plant and
equipment 96,662 14,498 7,041 118,201
Investment in subsidiaries 6,491 (6,491)
Goodwill, net 64,047 64,047
Debt issue costs, net 6,303 6,303
Investment in joint venture 1,098 1,098
Other assets 632 9 641
--------- -------- -------- --------- --------
Totals $ 304,317 $ 28,367 $ 23,690 ($27,978) $328,396
========= ======== ======== ========== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and
revolving loans $ 36,699 $ 2,440 $ 39,139
Accounts payable 39,923 $ 7,737 7,032 ($329) 54,363
Accrued liabilities 16,357 745 1,339 18,441
Accrued interest 4,035 4,035
Accrued compensation 7,629 247 2,221 10,097
Advance mold payments from
customers 443 593 1,036
Income taxes payable 850 850
Current maturities of
long-term debt 13,631 13,631
--------- -------- -------- --------- --------
Total current liabilities 118,274 10,022 13,625 (329) 141,592
Long-term debt due after one year 171,674 171,674
Deferred income taxes 285 1,369 30 1,684
Note payable to affiliates 10,709 10,537 (21,158) 88
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
Other comprehensive income (22) 2 (2) (22)
---------- -------- --------- ---------- ---------
Total stockholders' equity 14,084 6,267 (502) (6,491) 13,358
--------- -------- --------- ---------- --------
Totals $ 304,317 $ 28,367 $ 23,690 ($27,978) $328,396
========= ======== ======== ========== ========
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended March 28, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $ 85,294 $ 13,916 $ 11,969 $111,179
Net mold sales 21,661 886 22,547
--------- -------- -------- -------- --------
106,955 13,916 12,855 133,726
Cost of Sales
Cost of product sales 65,033 12,683 12,031 89,747
Cost of mold sales 21,496 843 22,339
--------- -------- -------- -------- --------
86,529 12,683 12,874 112,086
--------- -------- -------- -------- --------
Gross Margin 20,426 1,223 (19) 21,640
Selling, general and administrative
expenses 13,973 280 898 15,151
--------- -------- -------- -------- --------
Operating profit (loss) 6,453 953 (917) 6,489
Interest expense (5,543) (307) (225) 450 (5,625)
Unrealized loss on foreign currency
translation (766) (766)
Other income (expense), net 536 (32) (450) 54
Equity in net loss of subsidiaries
and joint ventures (1,005) (328) (1,333)
---------- -------- -------- -------- --------
Income (loss) before income taxes 441 614 (1,908) (328) (1,181)
Provision (credit) for income taxes 504 286 16 806
--------- -------- -------- -------- --------
Net income (loss) $ (63) $ 328 $ (1,924) $ (328) $ (1,987)
========= ======== ======== ======== ========
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LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $ 93,575 $ 13,846 $ 10,694 ($108) $118,007
Net mold sales 6,900 140 843 7,883
--------- -------- -------- ------- --------
100,475 13,986 11,537 (108) 125,890
Cost of Sales
Cost of product sales 75,622 11,475 10,658 (108) 97,647
Cost of mold sales 7,089 119 708 7,916
--------- -------- -------- ------- --------
82,711 11,594 11,366 (108) 105,563
--------- -------- -------- -------- --------
Gross Margin 17,764 2,392 171 20,327
Selling, general and administrative
expenses 13,457 306 809 14,572
--------- -------- -------- ------- --------
Operating profit (loss) 4,307 2,086 (638) 5,755
Interest expense (4,992) (417) (289) 663 (5,035)
Unrealized loss on foreign currency
translation (357) (357)
Other income (expense), net 526 155 (16) (663) 2
Equity in net loss of subsidiaries 404 (404)
--------- -------- -------- -------- --------
Income (loss) before income taxes
and minority interest 245 1,824 (1,300) (404) 365
Provision (credit) for income taxes 121 623 (503) 241
--------- -------- --------- ------- --------
Income (loss) before minority 124 1,201 (797) (404) 124
interest
Minority interest 28 28
--------- -------- -------- ------- --------
Net income (loss) $ 152 $ 1,201 ($797) ($404) $ 152
========= ======== ========= ======== ========
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13
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Six-Months Ended March 28, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $ 190,925 $ 29,460 $ 23,231 $243,616
Net mold sales 27,275 18 912 28,205
--------- -------- -------- ------- --------
218,200 29,478 24,143 271,821
Cost of Sales
Cost of product sales 145,625 26,985 23,896 196,506
Cost of mold sales 27,773 866 28,639
--------- -------- -------- ------- --------
173,398 26,985 24,762 225,145
--------- -------- -------- ------- --------
Gross Margin 44,802 2,493 (619) 46,676
Selling, general and administrative
expenses 28,339 563 1,869 30,771
--------- -------- -------- ------- --------
Operating profit (loss) 16,463 1,930 (2,488) 15,905
Interest expense (10,643) (611) (492) 924 (10,822)
Unrealized loss on foreign currency
translation (728) (728)
Other income (expense), net 771 (115) (924) (268)
Equity in net loss of subsidiaries
and joint ventures (787) (529) (1,316)
---------- -------- -------- -------- ---------
Income (loss) before income taxes
and minority interest 5,804 1,204 (3,708) (529) 2,771
Provision (credit) for income taxes 2,566 453 37 3,056
-------- ------- ------- ------- -------
Net income (loss) $ 3,238 $ 751 $ (3,745) $ (529) $ (285)
======== ======= ======== ======== ========
13
14
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Six-Months Ended March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $ 170,657 $ 23,653 $ 17,740 ($336) $211,714
Net mold sales 13,441 183 848 14,472
--------- -------- -------- ------- --------
184,098 23,836 18,588 (336) 226,186
Cost of Sales
Cost of product sales 136,222 20,713 17,584 (336) 174,183
Cost of mold sales 12,888 151 715 13,754
--------- -------- -------- ------- --------
149,110 20,864 18,299 187,937
--------- -------- -------- ------- --------
Gross Margin 34,988 2,972 289 38,249
Selling, general and
administrative expenses 23,654 670 1,345 25,669
--------- -------- -------- ------- --------
Operating profit (loss) 11,334 2,302 (1,056) 12,580
Interest expense (8,877) (836) (351) 1,096 (8,968)
Unrealized loss on foreign
currency translation (357) (357)
Other income (expense), net 1,117 (108) (33) (1,096) (120)
Equity in net loss of
subsidiaries (340) 340
---------- -------- -------- ------- --------
Income (loss) before income
taxes and minority 3,234 1,358 (1,797) 340 3,135
interest
Provision (credit) for income
taxes 1,648 585 (684) 1,549
--------- -------- --------- ------- --------
Income (loss) before minority
interest 1,586 773 (1,113) 340 1,586
Minority interest 76 76
--------- -------- -------- ------- --------
Net income (loss) $ 1,662 $773 ($1,113) $ 340 $ 1,662
========= ======== ========= ======= ========
14
15
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Six-Months Ended March 28, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor
Inc. Subsidiaries Subsidiaries Consolidated
------------- ------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 7,033 $ 1,750 $ 2,231 $ 11,014
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (7,848) (289) (14) (8,151)
Proceeds from disposal of Kenco Plastics 5,515 5,515
-------- -------- -------- --------
Division
NET CASH USED FOR INVESTING ACTIVITIES (2,333) (289) (14) (2,636)
CASH FLOW FROM FINANCING ACTIVITIES
Borrowing (to)/from affiliates (1,803) (1,803)
Costs associated with debt acquisition (249) (249)
Proceeds from long-term debt 7,500 7,500
Payments on long-term debt (5,401) (5,401)
Net proceeds from lines of credit borrowings (5,393) (914) (6,307)
-------- -------- -------- --------
NET CASH (USED) BY FINANCING ACTIVITIES (5,346) (914) (6,260)
-------- -------- -------- --------
Net cash change (646) 1,461 1,303 2,118
Cash at beginning of period 673 1,317 1,327 3,317
-------- -------- -------- --------
Cash at end of period $ 27 $ 2,778 $ 2,630 $ 5,435
======== ======== ======== ========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 8,693 $ 954 $ 763 $ 10,410
======== ======== ======== ========
15
16
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Six-Months Ended March 29, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor
Inc. Subsidiaries Subsidiaries Consolidated
------------- ------------ ------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ 4,020 $ (662) $ 716 $ 4,074
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (3,722) (191) (316) (4,229)
Proceeds from disposal of property, plant and 186 186
equipment
Purchase of Huron Plastics Group, Inc.,
net of $1,835 cash acquired (67,139) (67,139)
Purchase of LDM Germany (9,706) (9,706)
Purchase of Kenco Plastics, net of $500 cash (27,000) (27,000)
--------- --------- --------- ---------
acquired
NET CASH USED FOR INVESTING ACTIVITIES (107,381) (191) (316) (107,888)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing (to)/from affiliates (2,052) 2,052
Costs associated with debt acquisition (1,238) (1,238)
Proceeds from long-term debt 66,876 66,876
Payments on long-term debt (614) (458) (1,072)
Net proceeds from lines of credit borrowings 41,697 731 42,428
--------- --------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 104,669 2,325 106,994
--------- --------- --------- ---------
Net cash change 1,308 (853) 2,725 3,180
Cash at beginning of period 12 4,598 23 4,633
--------- --------- --------- ---------
Cash at end of period $ 1,350 $ 3,745 $ 2,748 $ 7,813
========= ========= ========= =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 7,242 $ 998 $ 758 $ 8,998
========= ========= ========= =========
16
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. When used in this report, the words
"anticipate," "believe," "estimate" and "expect" and similar expressions are
generally intended to identify forward-looking statements. Readers are cautioned
that any forward-looking statements, including statements regarding the intent,
belief or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
the actual results may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to: (i)
general economic conditions in the markets in which the Company operates; (ii)
fluctuations in worldwide or regional automobile and light and heavy truck
production, (iii) labor disputes involving the Company or its significant
customers; (iv) changes in practices and/or policies of the Company's
significant customers toward outsourcing automotive components and systems; (v)
foreign currency and exchange fluctuations; (vi) factors affecting the ability
of the Company or its key suppliers to resolve Year 2000 issues in a timely
manner; and (vii) other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission. The Company does not intend
to update these forward-looking statements.
OVERVIEW
The Company's operating profit for the quarter and six months ended March 28,
1999 (second quarter 1999 and second half 1999) have improved compared to the
same periods in 1998. This is the result of improved performance of the
Company's North American facilities offset by losses at its facility in
Beienheim, Germany.
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18
RESULTS OF CONTINUING OPERATIONS
QUARTER ENDED MARCH 28, 1999 COMPARED TO QUARTER ENDED MARCH 29, 1998
NET SALES: Net sales for the three-month period ended March 28, 1999
("second quarter 1999") were $133.7 million versus $125.9 million for the
three-month period ended March 29, 1998 ("second quarter 1998"). This is an
increase of $7.8 million or 6.2%. The increase is the result of increased mold
sales related to product launches in the third and fourth quarters of fiscal
1999 and a full quarter of HPG sales consolidated in second quarter 1999, offset
by no longer consolidating the DBM Technologies operations (formerly Kenco).
DBM's net sales for the second quarter 1999 were $13.1 million.
Second quarter 1999 net sales were comprised of $107.6 million of automotive
product sales, $3.6 million of consumer and other product sales and $22.5
million of mold sales. Taking the accounting treatment of DBM into account,
automotive product sales increased by approximately $7.7 million.
GROSS MARGIN: Gross margin was $21.6 million or 16.2% of net sales for second
quarter 1999 versus $20.3 million or 16.1% for the second quarter 1998. Second
quarter 1999 gross margin related to product sales was $21.4 million or 19.3% of
net product sales compared to $20.3 million or 17.3% of net product sales for
the second quarter 1998. The increase in gross margin related to product
sales is primarily the result of improved operations at the Company's North
American facilities offset by losses at its facility in Beienheim, Germany.
SELLING, GENERAL, AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for second
quarter 1999 were $15.2 million or 11.4% of net sales, compared to $14.6 million
or 11.6% of net sales, for second quarter 1998.
INTEREST EXPENSE: Interest expense was $5.6 million for second quarter 1999
compared to $5.0 million for second quarter 1998. The increased interest was
primarily due to the incurrence of additional indebtedness related to the Huron
Plastics acquisition.
INCOME TAXES: The provision for income taxes for second quarter 1999 was $0.8
million on a pretax loss of $1.2 million. The tax rate for second quarter 1998
was 66%. The positive tax provision on a pretax loss in second quarter 1999 was
caused by certain nondeductible expenses and the continued establishment of 100%
valuation allowances against deferred tax assets at the Company's Beienheim,
Germany facility.
SIX MONTHS ENDED MARCH 28, 1999 COMPARED TO SIX MONTHS ENDED MARCH 29, 1998
NET SALES: Net sales for the six-month period ended March 28, 1999 ("first half
1999") were $271.8 million versus $226.2 million for the six-month period ended
March 29, 1998 ("first half 1998"). This is an increase of $45.6 million or
20.2%. The practice of no longer consolidating the DBM Technologies operations
reduced sales during first half 1999 by $13.1 million. Considering this, the
proforma sales increase was $58.7 million or 26.0%. The sales growth is
primarily the result of increased mold sales and acquisitions described
previously herein.
First half 1999 net sales were comprised of $235.8 million of automotive product
sales, $7.8 million of consumer and other product sales and $28.2 million of
mold sales. Taking the accounting treatment of DBM into account, automotive
product sales increased by approximately $46.9 million. The automotive product
sales growth is primarily the result of acquisitions described previously
herein.
18
19
GROSS MARGIN: Gross margin was $46.7 million or 17.2% of net sales for first
half 1999 versus $38.2 million or 16.9% for the first half 1998. First half 1999
gross margin related to product sales was $47.1 million or 19.3% of net product
sales compared to $37.5 million or 17.7% of net product sales for the first half
of 1998. The increase in gross margin related to product sales is primarily the
result of improved operations at the Company's North American facilities offset
by losses at its Beienheim, Germany facility.
SELLING, GENERAL, AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for first
half 1999 were $30.8 million or 11.3% of net sales, compared to $25.7 million or
11.3% of net sales, for first half 1998.
INTEREST EXPENSE: Interest expense was $10.8 million for first half 1999
compared to $9.0 million for first half 1998. The increased interest was
primarily due to the incurrence of additional indebtedness related to
acquisitions described previously herein.
INCOME TAXES: The provision for income taxes for first half 1999 was $3.1
million with an effective tax rate of 110.3% compared with an effective rate of
49.4% for first half 1998. The rate increase relates principally to certain
nondeductible expenses and the continued establishment of 100% valuation
allowances against deferred tax assets at the Company's Beienheim, Germany
facility.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital requirements are to fund working capital needs,
to meet required debt obligations, and capital expenditures for facility
maintenance and expansion. The Company believes its future cash flows from
operations, combined with its revolving credit availability will be sufficient
to meet its planned debt service, capital requirements and internal growth
opportunities. Potential growth from acquisitions will be funded from a variety
of sources, including cash flow from operations and additional indebtedness. As
of March 28, 1999, the Company had $177.1 million of long-term debt outstanding,
$43.2 million of revolving loans and current maturities of long-term debt
outstanding and $18.2 million of borrowing availability under its revolving
credit facilities.
Cash provided by operating activities in the first half of 1999 was $11.1
million compared to $4.1 million in the first half of 1998. The increase in cash
provided by operating activities was the result of the sales growth described
above.
Capital expenditures for the first half of 1999 were $8.2 million compared to
$4.2 million for the first half of 1998. The Company believes its capital
expenditures will be approximately $16.0 million in fiscal year 1999. The
majority of the Company's fiscal 1999 capital expenditures will be used to
facilitate new programs launching in fiscal 1999, and continue installing a new
enterprise-wide information system at all plant facilities. However, the
Company's capital expenditures may be greater than currently anticipated as the
result of new business opportunities.
The Company's liquidity is affected by both the cyclical nature of its business
and levels of net sales to its major customers. The Company's ability to meet
its working capital and capital expenditure requirements and debt obligations
will depend on its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. However, the Company believes that its
existing borrowing ability and cash flow from operations will be sufficient to
meet its liquidity requirements in the foreseeable future.
YEAR 2000 COMPLIANCE
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 digits 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.
19
20
Based on recent assessments, the Company has 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 Issue. 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 July 31, 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 100% of its testing and has implemented 50% of its
remediated systems. The Company expects completion of remediation and
implementation by July 31, 1999.
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 50% 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 June 30, 1999. Testing and implementation of
affected equipment is expected to be complete by September 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 100% complete with the testing phase.
Implementation is 50% complete and is expected to be complete by July 31, 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 compliant by the end of 1999. 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 $5.1 million ($1.0 million expensed and $4.1 million
capitalized for new systems and equipment), related to all phases of the Year
2000 project. The remaining $1.9 million of estimated project costs relates to
repair of hardware and software, and implementation consulting fees which will
be expensed as incurred.
20
21
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
experience difficulties taking customer orders, manufacturing and shipping
products, invoicing customers, or collecting 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.
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22
YEAR 2000 DISCLOSURE CHART
- ----------------------------------------------------------------------------------------------------------------------
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
- ----------------------------------------------------------------------------------------------------------------------
Information Technology 100% complete 100% complete 100% complete 50% complete
Expected completion
date, July 1999
- ----------------------------------------------------------------------------------------------------------------------
Operating Equipment with 100% complete 60% complete 50% complete 50% complete
Embedded Chips or Software
Expected completion Expected completion Expected completion
date, June 1999 date, September 1999 date, September 1999
- ----------------------------------------------------------------------------------------------------------------------
Products 100% complete 100% complete 100% complete 100% complete
- ----------------------------------------------------------------------------------------------------------------------
Third Party 100% complete for 100% complete for 100% complete for 50% complete for
system interface; system interface system interface system interface
80% complete for
all other material Develop contingency Expected completion
exposures plans as date for system
appropriate, June interface work, July
1999 1999
Implement
contingency plans or
other alternatives
as necessary,
September 1999
- ----------------------------------------------------------------------------------------------------------------------
22
23
PART II - OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security Not applicable
Holders
Item 5 Other information Not applicable
Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 27-Financial
Data Schedule
The Company did not file
any reports on Form 8-K
during the quarter for
which this report is
filed.
23
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LDM TECHNOLOGIES, INC.
By: /s/ G. E. Borushko
-------------------------------------
Gary E. Borushko
Chief Financial Officer
/s/ B. N. Frederick
-------------------------------------
Bradley N. Frederick
Chief Accounting Officer
Date: May 12, 1999
24
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------
27 Financial Data Schedule
25