1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION OR 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 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 (1) has filed all reports required
to be filed by sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
YES X NO
Number of shares common stock outstanding as of August 6, 1999: 600
Total pages:
Listing of exhibits:
2
LDM TECHNOLOGIES, INC.
INDEX
Page No.
--------
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, June 27, 1999 and
September 27, 1998 3
Condensed Consolidated Statements of Income, three months ended
June 27, 1999 and June 28, 1998 4
Condensed Consolidated Statements of Income, nine months ended
June 27, 1999 and June 28, 1998 5
Condensed Consolidated Statements of Cash Flows, nine months ended
June 27, 1999 and June 28, 1998 6
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 21
Item 2 Changes in Securities 21
Item 3 Defaults upon Senior Securities 21
Item 4 Submission of Matters to a Vote of Security Holders 21
Item 5 Other Information 21
Item 6 Exhibits and Reports on Form 8-K 21
Index to Exhibits
Exhibit 27 - Financial Data Schedule
Signature Page 22
2
3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
JUNE 27, 1999 SEPTEMBER 27, 1998
(UNAUDITED) (NOTE)
------------- ------------------
ASSETS
Current assets:
Cash $ 5,503 $ 3,317
Accounts receivable 100,493 81,781
Raw materials 12,099 14,791
Work in process 2,099 2,715
Finished goods 6,962 6,563
Mold costs 21,062 22,510
Refundable income taxes 1,251
Deferred income taxes 3,107 3,148
Other current assets 2,022 2,030
--------- --------
Total current assets 153,347 138,106
Net property, plant and equipment 120,717 118,201
Goodwill, net 60,513 64,047
Debt issue costs, net 5,811 6,303
Investment in joint venture 1,666 1,098
Notes receivable from joint venture 919
Other assets 695 641
--------- --------
Totals $ 343,668 $328,396
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loans $ 30,250 $ 39,139
Accounts payable 69,045 54,363
Accrued liabilities 26,623 18,441
Accrued interest 7,262 4,035
Accrued compensation 8,265 10,097
Advance mold payments from customers 778 1,036
Income taxes payable 1,937 850
Current maturities of long-term debt 10,333 13,631
--------- --------
Total current liabilities 154,493 141,592
Long-term debt due after one year 172,161 171,674
Deferred income taxes 1,405 1,684
Note payable to affiliate 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 15,634 13,286
Other comprehensive income (119) (22)
---------- ---------
Total stockholders' equity 15,609 13,358
--------- --------
Totals $ 343,668 $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 contained herein.
3
4
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
UNAUDITED
THREE MONTHS ENDED
JUNE 27, 1999 JUNE 28, 1998
----------------- -----------------
Revenues:
Net product sales $ 120,058 $124,541
Net mold sales 23,160 19,694
--------- ---------
143,218 144,235
Cost of Sales
Cost of product sales 96,004 102,639
Cost of mold sales 22,393 16,737
--------- ---------
118,397 119,376
--------- ---------
Gross Margin 24,821 24,859
Selling, general and administrative expenses 14,624 16,326
--------- ---------
Operating profit 10,197 8,533
Interest expense (5,140) (5,442)
Foreign currency exchange loss (166) (66)
Equity in joint venture loss (428) (218)
Other income (53) 18
--------- ---------
Income before income taxes and minority interest 4,410 2,825
Provision for income taxes 1,776 1,331
--------- ---------
Income before minority interest 2,634 1,494
Minority interest 66
--------- ---------
Net income $ 2,634 $1,560
========= =========
See notes to condensed consolidated financial statements.
4
5
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
UNAUDITED
NINE MONTHS ENDED
JUNE 27, 1999 JUNE 28, 1998
----------------- -----------------
Revenues:
Net product sales $ 363,674 $ 336,255
Net mold sales 51,365 34,166
-------------- ------------
415,039 370,421
Cost of Sales
Cost of product sales 292,509 276,822
Cost of mold sales 51,033 30,491
-------------- ------------
343,542 307,313
-------------- ------------
Gross Margin 71,497 63,108
Selling, general and administrative expenses 45,393 41,995
-------------- ------------
Operating profit 26,104 21,113
Interest expense (15,978) (14,410)
Foreign currency exchange loss (617) (735)
Equity in joint venture loss (1,878) (218)
Other income (451) 210
-------------- ------------
Income before income taxes and minority
interest 7,180 5,960
Provision for income taxes 4,832 2,880
-------------- ------------
Income before minority interest 2,348 3,080
Minority interest 142
-------------- ------------
Net income $ 2,348 $ 3,222
============== ============
See notes to condensed consolidated financial statements.
5
6
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
UNAUDITED
NINE MONTHS ENDED
JUNE 27, 1999 JUNE 28, 1998
----------------- -----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 24,407 $16,889
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (15,661) (7,708)
Proceeds from sale of Kenco Plastics to DBM Technologies joint
venture 5,515
Proceeds from disposal of property, plant and equipment 186
Purchase of Huron Plastics Group, net of $1,835 cash acquired (66,780)
Purchase of LDM Germany (9,706)
Purchase of Kenco Plastics, net of $500 cash acquired (26,641)
------------ ----------
NET CASH USED FOR INVESTING ACTIVITIES (10,146) (110,649)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt issuance, net of issuance
costs of $249 in 1999, $1,313 in 1998 7,251 65,566
Payments on long-term debt (10,311) (2,119)
Net borrowings (repayments) on lines of credit (7,363) 31,661
Loans provided to unconsolidated subsidiaries (1,652)
------------ ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (12,075) 95,108
------------ ----------
Net cash change 2,186 1,348
Cash at beginning of period 3,317 4,633
------------ ----------
Cash at end of period $ 5,503 $ 5,981
============ ==========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 16,129 $ 13,939
============ ==========
See notes to condensed consolidated financial statements.
6
7
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine-month periods ended June
27,1999 are not necessarily indicative of the results that may be expected for
the 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. BUSINESS ACQUISITIONS AND DIVESTITURES
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, Inc. for approximately $27.1 million in cash. The acquisition was
financed with additional borrowings under the existing Senior Credit Facility.
On November 25, 1997, the Company acquired the business and certain net assets
and assumed certain liabilities comprising the `Beienheim' plant of Aeroquip
Corporation for approximately $9.7 million in cash. The acquisition was financed
with additional borrowings under the existing Senior Credit Facility.
On February 6, 1998, LDM acquired the stock of Huron Plastics Group, Inc. and
substantially all of the operating assets of Tadim, Inc. (collectively known as
"HPG") for $69.0 million in cash and the assumption of certain liabilities. The
transaction was funded with proceeds from a $66.0 million dollar term loan
issued by the Company's senior lender, 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 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 investment 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.
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 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 note
has been fully reserved on the Company's books.
7
8
The Company's ownership percentage in New GLI has become less than 50%. As a
result, New GLI's results are reported as equity earnings. 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
ended 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 capital deficiency.
The pro forma unaudited results of operations for the nine months ended June 27,
1999 and June 28, 1998, assuming consummation of the purchases, issuance of the
debt, formation of the DBM joint venture, and sale of Como Products, as
described above had occurred on September 30, 1997, are as follows:
For nine months ended
(dollars in thousands)
June 27, 1999 June 28, 1998
--------------------- ------------------
Net sales $ 391,648 $ 347,118
Net income $ 2,289 $ 3,190
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. SUPPLEMENTAL GUARANTOR INFORMATION
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility, and the standby letter of credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes are obligations of LDM Technologies, Inc.,
and are guaranteed fully, unconditionally and jointly and severally by LDM
Technologies Company, ("LDM Canada") and certain holding companies (LDM Holdings
L.L.C., and LDM Canada Limited Partnership). Non-guarantor subsidiaries consist
of LDM Germany ("Beienheim"), a wholly owned subsidiary.
Supplemental consolidating financial information of LDM Technologies, Inc., the
guarantor subsidiaries, and the nonguarantor subsidiaries is presented below.
8
9
LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of June 27, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
ASSETS
Current assets:
Cash $ 30 $ 3,441 $ 2,032 $ 5,503
Accounts receivable 85,412 10,225 4,856 100,493
Raw materials 9,297 1,878 924 12,099
Work in process 1,294 188 617 2,099
Finished goods 5,557 723 682 6,962
Mold costs 14,779 6,283 21,062
Deferred income taxes 3,107 3,107
Other current assets 1,742 244 36 2,022
--------- -------- -------- --------- --------
Total current assets 121,218 22,982 9,147 153,347
Net property, plant and
equipment 102,036 14,056 4,625 120,717
Investment in subsidiaries 7,729 $ (7,729)
Goodwill, net 60,513 60,513
Debt issue costs, net 5,811 5,811
Investment in joint venture 1,666 1,666
Notes receivable due from
affiliates and joint venture 23,460 (22,541) 919
Other assets 695 695
--------- -------- -------- --------- --------
Totals $ 323,128 $ 37,038 $ 13,772 $ (30,270) $343,668
========= ======== ======== ========= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and
revolving loans $ 30,250 $ 30,250
Accounts payable 55,657 $ 10,236 $ 3,603 $ (451) 69,045
Accrued liabilities 18,826 6,063 2,512 27,401
Accrued interest 7,262 7,262
Accrued compensation 6,033 370 1,862 8,265
Income taxes payable (215) 2,152 1,937
Current maturities of
long-term debt 10,333 10,333
--------- -------- -------- --------- --------
Total current liabilities 128,146 18,821 7,977 (451) 154,493
Long-term debt due after one year 172,161 172,161
Deferred income taxes 1,405 1,405
Note payable to affiliates 10,709 10,712 (21,421)
STOCKHOLDERS' EQUITY
Common stock 5,850 2,944 (8,794)
Additional paid-in capital 94 94
Retained earnings 21,344 1,658 (7,764) 396 15,634
Other comprehensive income (22) (97) (119)
---------- -------- --------- --------- ---------
Total stockholders' equity 21,416 7,508 (4,917) (8,398) 15,609
--------- -------- --------- ---------- --------
Totals $ 323,128 $ 37,038 $ 13,772 $ (30,270) $343,668
========= ======== ======== ========== ========
9
10
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
========= ======== ======== ========= ========
10
11
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended June 27, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $ 96,294 $ 14,568 $ 9,196 $ 120,058
Net mold sales 23,160 23,160
--------- ---------- ----------- ---------- --------
119,454 14,568 9,196 143,218
Cost of Sales
Cost of product sales 73,298 13,339 9,367 96,004
Cost of mold sales 22,393 22,393
--------- -------- -------- ------- --------
95,691 13,339 9,367 118,397
--------- -------- -------- ------- --------
Gross Margin 23,763 1,229 (171) 24,821
Selling, general and administrative
expenses 13,804 271 549 14,624
--------- -------- -------- ------- --------
Operating profit (loss) 9,959 958 (720) 10,197
Interest expense (5,140) (316) (181) 497 (5,140)
Foreign currency exchange 172 (338) (166)
gain/(loss)
Equity in joint venture loss (428) (428)
Other income (expense), net 444 (497) (53)
Equity in net income of
subsidiaries 490 (490)
--------- -------- -------- ------- --------
Income (loss) before income taxes 5,325 814 (1,239) (490) 4,410
Provision (credit) for income taxes 1,452 324 1,776
--------- -------- -------- ------- --------
Net income (loss) $ 3,873 $ 490 $ (1,239) $ (490) $ 2,634
======== ======= ======== ======= =======
11
12
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for the
Three-Months Ended June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $98,771 $15,115 $10,712 $(57) $124,541
Net mold sales 6,257 13,665 (228) 19,694
--------- -------- --------- ------- --------
105,028 28,780 10,484 (57) 144,235
Cost of Sales
Cost of product sales 79,057 12,993 10,646 (57) 102,639
Cost of mold sales 5,186 11,798 (247) 16,737
--------- -------- --------- ------- --------
84,243 24,791 10,399 (57) 119,376
--------- -------- -------- -------- --------
Gross Margin 20,785 3,989 85 24,859
Selling, general and administrative
expenses 14,843 305 1,178 16,326
--------- -------- -------- ------- --------
Operating profit (loss) 5,942 3,684 (1,093) 8,533
Interest expense (5,417) (411) (236) 622 (5,442)
Foreign currency exchange (192) 126 (66)
gain/(loss)
Equity in joint venture loss (218) (218)
Other income (expense), net 648 9 (17) (622) 18
Equity in net income of 1,201 (1,201)
--------- -------- -------- --------
subsidiaries
Income (loss) before income taxes
and minority interest 2,156 3,090 (1,220) (1,201) 2,825
Provision (credit) for income taxes 662 1,149 (480) 1,331
--------- -------- --------- ------- --------
Income (loss) before minority
interest 1,494 1,941 (740) (1,201) 1,494
Minority interest 66 66
--------- -------- -------- ------- --------
Net income (loss) $1,560 $1,941 $(740) $(1,201) $1,560
========= ======== ========= ======== ========
12
13
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Nine-Months Ended June 27, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $ 287,219 $ 44,028 $ 32,427 $ $ 363,674
Net mold sales 50,435 18 912 51,365
--------- -------- -------- ------- --------
337,654 44,046 33,339 415,039
Cost of Sales
Cost of product sales 218,923 40,323 33,263 292,509
Cost of mold sales 50,167 866 51,033
--------- -------- -------- ------- --------
269,090 40,323 34,129 343,542
--------- -------- -------- ------- --------
Gross Margin 68,564 3,723 (790) 71,497
Selling, general and
administrative expenses 42,142 834 2,417 45,393
--------- -------- -------- ------- --------
Operating profit (loss) 26,422 2,889 (3,207) 26,104
Interest expense (15,982) (927) (1,067) 1,998 (15,978)
Foreign currency exchange
loss 56 (673) (617)
Equity in joint venture loss (1,878) (1,878)
Other income (expense), net 1,547 (1,998) (451)
Equity in net income of
subsidiaries 1,241 (1,241)
--------- -------- -------- -------- --------
Income (loss) before income
taxes 11,350 2,018 (4,947) (1,241) 7,180
Provision (credit) for income
taxes 4,018 777 37 4,832
--------- -------- -------- ------- --------
Net income (loss) $ 7,332 $ 1,241 $ (4,984) $ (1,241) $ 2,348
========= ======== ========= ======== ========
13
14
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations
for the Nine-Months Ended June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor Consolidating
Inc. Subsidiaries Subsidiaries Entries Consolidated
------------- ------------ ------------ ------------- ------------
Revenues:
Net product sales $269,429 $38,768 $28,452 $(393) $336,255
Net mold sales 19,698 13,848 620 34,166
--------- -------- -------- ------- --------
289,126 52,616 29,072 (393) 370,421
Cost of Sales
Cost of product sales 215,279 33,706 28,230 (393) 276,822
Cost of mold sales 18,074 11,949 468 30,491
--------- -------- -------- ------- --------
233,353 45,655 28,698 (393) 307,313
--------- -------- -------- -------- --------
Gross Margin 55,773 6,961 374 63,108
Selling, general and
administrative expenses 38,497 975 2,523 41,995
--------- -------- -------- ------- --------
Operating profit (loss) 17,276 5,986 (2,149) 21,113
Interest expense (14,294) (1,247) (587) 1,718 (14,410)
Foreign currency exchange loss (504) (231) (735)
Equity in joint venture loss (218) (218)
Other income (expense), net 1,765 213 (50) (1,718) 210
Equity in net income of
subsidiaries 861 (861)
--------- -------- -------- --------
Income (loss) before income
taxes and minority 5,390 4,448 (3,017) (861) 5,960
interest
Provision (credit) for income
taxes 2,310 1,734 (1,164) 2,880
--------- -------- --------- ------- --------
Income (loss) before minority
interest 3,080 2,714 (1,853) (861) 3,080
Minority interest 142 142
--------- -------- -------- ------- --------
Net income (loss) $3,222 $2,714 $(1,853) $(861) $3,222
========= ======== ========= ======== ========
14
15
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Nine-Months Ended June 27, 1999
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor
Inc. Subsidiaries Subsidiaries Consolidated
------------- ------------ ------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 20,160 $ 3,140 $ 1,107 $ 24,407
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property, plant
and equipment (14,631) (1,016) (14) (15,661)
Proceeds from sale of Kenco
Plastics to DBM Technologies joint
venture 5,515 5,515
Proceeds from disposal of
property, plant and equipment
---------- ------- -------- ----------
NET CASH USED FOR INVESTING
ACTIVITIES (9,116) (1,016) (14) (10,146)
CASH FLOWS FROM FINANCING
ACTIVITIES
Borrowings (to)/from affiliates (2,178) 526 (1,652)
Proceeds from long-term debt
issuance 7,251 7,251
Payments on long-term debt (10,311) (10,311)
Net proceeds from lines of
credit borrowings (6,449) (914) (7,363)
---------- ------- -------- ----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (11,687) (388) (12,075)
---------- ------- -------- ----------
Net cash change (643) 2,124 705 2,186
Cash at beginning of period 673 1,317 1,327 3,317
--------- ------- ------- ---------
Cash at end of period $ 30 $ 3,441 $ 2,032 $ 5,503
========= ======= ======= =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $ 13,532 $ 1,458 $ 1,139 $ 16,129
========= ======= ======= =========
15
16
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows
for the Nine-Months Ended June 28, 1998
(unaudited)
(dollars in thousands)
LDM
Technologies, Guarantor Nonguarantor
Inc. Subsidiaries Subsidiaries Consolidated
------------- ------------ ------------ ------------
NET CASH PROVIDED (USED) BY $17,271 $(714) $332 $16,889
OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING
ACTIVITIES
Additions to property, plant
and equipment (6,652) (250) (806) (7,708)
Proceeds from disposal of
property, plant and equipment 186 186
Purchase of Huron Plastics Group
Inc., net of $1,835 cash
acquired (66,780) (66,780)
Purchase of LDM Germany (9,706) (9,706)
Purchase of Kenco Plastics,
net of $500 cash acquired (26,641) (26,641)
---------- ------- ------- ----------
NET CASH USED FOR INVESTING
ACTIVITIES (109,593) (250) (806) (110,649)
CASH FLOWS FROM FINANCING
ACTIVITIES
Borrowings (to)/from affiliates (2,054) 2,054
Proceeds from long-term debt
issuance 65,563 3 65,566
Payments on long-term debt (1,655) (6) (458) (2,119)
Net proceeds from lines of
credit borrowings 30,959 702 31,661
--------- ------- ------- ---------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 92,813 (3) 2,298 95,108
--------- -------- ------- ---------
Net cash change 491 (967) 1,824 1,348
Cash at beginning of period 12 4,598 23 4,633
--------- ------- ------- ---------
Cash at end of period $503 $3,631 $1,847 $5,981
========= ======= ======= =========
SUPPLEMENTAL INFORMATION:
Depreciation and amortization $11,235 $1,494 $1,210 $13,939
========= ======= ======= =========
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 pre-tax financial results for the quarter and nine months ended
June 27, 1999 are more favorable than the same periods in 1998. This is the
result of a strike at one of its major customers during 1998, and improved
operations in its North American facilities during 1999, offset by poor results
from its facility in Beienheim, Germany.
RESULTS OF CONTINUING OPERATIONS
QUARTER ENDED JUNE 27, 1999 COMPARED TO QUARTER ENDED JUNE 28, 1998
NET SALES: Net sales for the three-month period ended June 27, 1999 ("third
quarter 1999") were $143.2 million, a decrease of $1.0 million, or 0.7%, from
the three-month period ended June 28, 1998 ("third quarter 1998"). Third quarter
1999 net sales were comprised of $120.1 million of automotive product sales, and
$23.1 million of mold sales. The sales decline is primarily the result of the
DBM joint venture described previously herein, offset by a strike at a major
customer, which resulted in estimated lost product sales of $6.5 million during
1998.
GROSS MARGIN: Gross margin was $24.8 million or 17.3% of net sales for the third
quarter of 1999. Third quarter 1999 gross margin related to product sales was
$24.1 million or 20.0% of net product sales compared to $21.9 million or 17.6%
of net product sales for the third quarter of 1998. The increase in gross margin
related to product sales is the result of improved operations at the Company's
North American facilities and the sale of the Company's blowmolding division to
the DBM Technologies joint venture offset by poor results at the Company's
Beienheim, Germany facility, and a strike at a major customer during 1998. The
strike resulted in estimated lost gross margin of $1.8 million. If the strike
had not occurred, third quarter 1998 estimated gross margin related to product
sales would have been $23.7 million or 18.1% of net product sales.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for third
quarter 1999 were $14.6 million, or 10.2% of net sales, compared to $16.3
million, or 11.3% of net sales, for third quarter 1998. The decrease in SG&A as
a percentage of net sales was the result of continued synergies as recent
acquisitions are melded into the Company's internal structure.
INTEREST EXPENSE: Interest expense was $5.1 million for third quarter 1999
compared to $5.4 million for third quarter of 1998. The decreased interest
expense was primarily due to the sales of LDM's interests in Como Products and
the Company's blowmolding division.
INCOME TAXES: The provision for income taxes for third quarter 1999 was $1.8
million with an effective tax rate of 40.3%, as compared to $1.3 million with an
effective tax rate of 47.1% for third quarter 1998. The rate difference relates
principally to certain nondeductible expenses, and a change in the estimated tax
rate related to the Company's Beienheim, Germany facility, during third quarter
1999.
17
18
NINE MONTHS ENDED JUNE 27, 1999 COMPARED TO NINE MONTHS ENDED JUNE 28, 1998
NET SALES: Net sales for the nine-month period ended June 27, 1999 ("Year to
date June 1999") were $415.0 million, an increase of $44.6 million, or 12.0%,
from the nine-month period ended June 28, 1998 ("Year to date June 1998"). Year
to date June 1999 net sales were comprised of approximately $355.8 million of
automotive product sales, $7.8 million of consumer and other product sales, and
$51.4 million of mold sales. The sales growth is primarily the result of
acquisitions described previously herein, and increased mold sales related to
major launches scheduled for the Company's fiscal fourth quarter. This growth
was offset slightly by a strike at a major customer during 1998, which resulted
in estimated lost product sales of $6.5 million.
GROSS MARGIN: Gross margin was $71.5 million or 17.2% of net sales for Year to
date June 1999. Year to date June 1999 gross margin related to product sales was
$71.2 million or 19.6% of net product sales compared to $59.4 million or 17.7%
of net product sales for Year to date June 1998. The increase was the result of
improved operations at the Company's North American facilities and the sale of
the Company's blowmolding division to the DBM Technologies joint venture, offset
by poor results at the Company's Beienheim, Germany facility, and a strike at a
major customer during 1998. The strike resulted in estimated lost gross margin
of $1.8 million. If the strike had not occurred, Year to date June 1998
estimated gross margin related to product sales would have been $61.2 million or
17.9% of net product sales.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for Year to
date June 1999 were $45.4 million, or 10.9% of net sales, compared to $42.0
million, or 11.3% of net sales, for Year to Date June 1998.
INTEREST EXPENSE: Interest expense was $16.0 million for Year to date June 1999
compared to $14.4 million for Year to date June 1998. The increased interest
expense was primarily due to the incurrence of additional debt related to the
acquisitions, offset by divestitures, described elsewhere herein.
INCOME TAXES: The provision for income taxes for Year to date June 1999 was $4.8
million with an effective tax rate of 67.3.%, as compared to $2.9 million with
an effective tax rate of 48.3% for Year to date June 1998. The rate difference
relates principally to certain nondeductible expenses, and a change in the
estimated tax rate related to the Company's Beienheim, Germany facility due to
operational losses to date.
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 that 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 additional indebtedness. As
of June 27, 1999, the Company had $172.2 million of long-term debt outstanding,
$40.6 million of revolving loans and current maturities of long-term debt
outstanding and $19.2 million of borrowing availability under its revolving
credit facilities.
Cash provided by operating activities Year to date June 1999 was $24.4 million
compared to $16.9 million Year to date June 1998. The increase in cash provided
by operating activities was the result of the sales growth and improved
operating results described above.
Capital expenditures Year to date June 1999 were $15.7 million compared to $7.7
million Year to date June 1998. The Company believes its capital expenditures
will be approximately $18.0 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 installation of 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.
18
19
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.
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
With regard to its information technology exposures, to date the Company has
completed its remediation phase as well as testing and implementation, as of
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. The Company is
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 75% complete with the testing of its
remediated operating equipment. Once testing is complete, the operating
equipment will be ready for immediate use. 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 has completed work with these customers to ensure that
the Company's systems that interface directly with third parties are Year 2000
compliant. The Company has completed its remediation efforts on these systems
and is 100% complete with the testing phase. Implementation is 75% 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.
19
20
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 $5.6 million ($1.5 million expensed and $4.1 million
capitalized for new systems and equipment), related to all phases of the Year
2000 project. The remaining $1.4 million of estimated project costs relates to
repair of hardware and software, and implementation consulting fees which will
be expensed as incurred.
RISKS
Management of the Company believes that 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.
YEAR 2000 DISCLOSURE CHART
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Information Technology 100% complete 100% complete 100% complete 100% complete
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Operating Equipment with 100% complete 100% complete 75% complete 75% complete
Embedded Chips or Software
Expected completion Expected completion
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 100% complete for
system interface; system interface system interface system interface
80% complete for
all other material Develop contingency Implement
exposures plans as contingency plans or
appropriate, June other alternatives
1999 as necessary,
September 1999
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
20
21
PART II - OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security 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.
21
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LDM TECHNOLOGIES, INC.
By: /s/ G. E. Borushko
--------------------------------
Gary E. Borushko
Chief Financial Officer
/s/ B. N. Frederick
--------------------------------
Bradley N. Frederick
Chief Accounting Officer
Date: August 11, 1999
22
23
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- -----------------------
27 Financial Data Schedule
23