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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 28, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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COMMISSION FILE NUMBER 333-21819
--------------
LDM TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in its Character)
MICHIGAN 38-2690171
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2500 EXECUTIVE HILLS DRIVE, AUBURN HILLS, MICHIGAN 48326
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (248) 858-2800
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
(TITLE OF CLASS)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes [X] No [ ]
As of December 1, 1997, 600 shares of Common Stock of the Registrant
were outstanding. There is no public trading market for the Common Stock.
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PART I
Item 1. Business
GENERAL
LDM Technologies, Inc. (the "Company" or "LDM") is a leading Tier 1
designer and manufacturer of highly engineered plastic instrument panel and
interior trim components, exterior trim components and under the hood
components supplied primarily to North American automotive original equipment
manufacturers (OEMs). Suppliers that sell directly to OEMs are referred to
herein as "Tier 1" suppliers. The Company is a full service supplier with
advanced computer design and engineering capabilities that have enabled it to
penetrate OEM new product programs during the concept stage of the product life
cycle and promote long-term customer relationships. The Company recently
constructed its Auburn Hills Design Center to enhance its conceptual design and
development capabilities.
The Company, a privately held Michigan corporation, was incorporated
in 1985 to pursue acquisitions in the automotive industry. In 1986, the
Company began to focus on the market for highly engineered plastic components
when it acquired Arrow Molded Plastics, Inc. In 1993, the Company strengthened
its presence in this market with the acquisition of Knapp Plastics Ltd., a
manufacturer of exterior trim components and in 1994, purchased selected assets
of Windsor Plastic Products Ltd., a manufacturer of instrument panel
components. In fiscal year 1997 the Company completed its acquisition of
substantially all the assets of Molmec, Inc., a manufacturer of under the hood
products (the "Molmec Acquisition"). The Company also completed its
acquisition of Aeroquip's Kendallville, Indiana facility in fiscal year 1997
(the "Kendallville Acquisition"). Through a combination of these acquisitions
and internal growth, the Company's net sales and EBITDA have increased from
approximately $110.3 million and $8.2 million, respectively, in fiscal year
1993 to approximately $324.5 million and $34.2 million, respectively, on a pro
forma basis in fiscal year 1997, which represents a compound annual growth rate
of 31% and 43%, respectively.
INDUSTRY OVERVIEW
The North American automotive industry is currently experiencing a
number of trends which are significant to the Company's business.
Increasing Utilization of Plastic. In recent years, OEMs have
focused their efforts on developing and employing lower cost and
lighter materials, such as plastic, in the design of components.
Plastic provides OEMs with a number of design advantages over metal
including increased design flexibility and aesthetic appeal,
resistance to corrosion and improved fuel-efficiency performance due
to lighter weight materials. Substituting plastic for metal can also
reduce manufacturing costs by eliminating machining costs, reducing
painting costs, facilitating assembly, minimizing tooling costs and
consolidating the number of parts used in a vehicle. The Company
believes that while the majority of the
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opportunities for converting metal into plastic have already
occurred in exterior and interior trim applications, there are
significant growth opportunities in the use of plastic in
under-the-hood components. Suppliers of under-the-hood components,
such as the Company, are increasingly being asked to develop complex
under-the-hood systems, including plastic transmission covers that
consolidate engine mounts and drive shaft seals and battery trays
that integrate fluid reservoirs.
Expansion of OEM Supplier Responsibilities. Since the 1980s,
OEMs such as Ford, General Motors and Chrysler have been actively
reducing their supplier base to include only those suppliers which
accept significant responsibility for product management and meet
increasingly strict standards for product quality, on time delivery
and manufacturing costs. These suppliers are expected to control
many aspects of the production of system components, including
design, development, component sourcing, manufacturing, quality
assurance, testing and delivery to the customer's assembly plant.
Globalization of the OEM Supplier Base. Several OEMs have
announced certain models designed for the world automobile market
("World Car"). This departure from the historical practice of
designing separate models for each regional market will generally
require suppliers to establish international design and manufacturing
capabilities through internal development, joint ventures or
acquisitions. As a result, certain domestic and European OEMs have
encouraged their existing suppliers to establish foreign production
support for World Car programs.
Market-based Pricing. In an effort to reduce costs and to
ensure the affordability and competitiveness of their products, OEMs
are sourcing automotive components using a market-based pricing
approach. In using such a market-based approach, OEMs establish a
target price, or the price the market is willing to pay for a
vehicle, and systematically divide this price into system and
component target prices. In addition, under market-based pricing,
the OEMs often require annual price reductions for the vehicle's
systems and components. As a result, the market-based approach to
pricing has generally required automotive suppliers to focus on
continually reducing product costs while improving quality standards.
AUTOMOTIVE PRODUCTS
The Company designs and manufactures highly-engineered plastic
instrument panel and interior trim components, exterior trim components and
under-the-hood components. In recent years, the Company has significantly
expanded its design and engineering capabilities which provide the Company
with a competitive advantage in obtaining new business. The Company's three
automotive lines of business are as follows:
Instrument Panel Components and Interior Trim Components. The
Company focuses on the production of complex products such as
instrument panel subassemblies which require the integration of
multiple components. Instrument panel components
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manufactured by the Company include cluster finish panels,
center trim panels, air vents, coin and cup holders, ashtrays,
gloveboxes, telephone holders and consoles. Certain products in this
line of business demand functional aesthetics appeal and typically
require the Company to provide innovative and design intensive
solutions for application requirements stipulated by OEMS.
Historically, the Company's largest customer for its instrument panel
components has been Ford.
Exterior Trim Components. Exterior trim systems manufactured
by the Company include front and rear bumper fascias, end caps,
body side claddings and moldings, rocker panels and grills. The
Company's broad range of exterior trim class A painting capabilities
provides it with a competitive advantage in supplying exterior trim
to domestic and foreign OEMs. The Company is able to provide both
high-bake high solids painting, which is traditionally preferred by
domestic OEMs, and low-bake, two component painting, which is
preferred by foreign OEMs. Historically, LDM's largest customer for
its exterior trim components has been General Motors.
Under-the-Hood Components. The Company is a designer and
manufacturer of fluid and air management components for
under-the-hood applications such as cowl vent assemblies, fluid
reservoirs including degas bottles, battery trays and covers, air
deflectors and sight shields. The Company believes that it supplies
the majority of Ford's cowl vent assemblies for North American car
and truck platforms. OEMs are increasingly substituting plastic for
metal in under-the-hood components and systems in an effort to reduce
cost, noise and weight, to enhance design flexibility, to
improve airflow and to increase aesthetic appeal. Historically, the
largest customer for its under-the-hood components has
been Ford.
CONSUMER PRODUCTS
G.L. Industries of Indiana, Inc. (d/b/a Como Products ("Como"), a
manufacturer of consumer and office products, was acquired by the
Company in 1993. Como is a manufacturer of plastic injection molded products
for the electronics, computer, television, office furniture, appliance,
transportation and business machine markets. Como's extensive finishing
capabilities include painting, EMI/RFI shielding, hot stamping, induction
bonding, pad printing and machining of molded parts. With injection molding
machines ranging from 230 tons to 3,000 tons, Como has the ability to produce a
broad range of molded parts, including injection molded, structural foam and
counter pressure structural foam parts. Como sales represented approximately
7.3% of the Company's fiscal year 1997 net product sales. See Note 8,
"Segment Data from Continuing Operations" of the Notes to the Company's
Consolidated Financial Statements.
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CUSTOMERS
The Company's principal customers are Ford, General Motors, Volkswagen
and Chrysler for which it supplies components and subassemblies for a variety
of light duty trucks, minivans and passenger cars. While the Company's
products are generally used on a diverse group of over 40 models, the Company's
sales and marketing efforts have been directed towards those sectors of the
automotive market which have experienced strong consumer demand and growth in
sales. The Company supplies components and subassemblies for a variety of
light duty trucks, sports utility vehicles, minivans and passenger cars
including: Ford's F-Series truck, Expedition and Explorer sport utility
vehicles, Windstar minivan, and Contour/Mystique and Taurus/Sable passenger
cars; General Motors' Sonoma Blazer and Jimmy sport utility vehicles, and Grand
Prix/Cutlass, Cadillac Deville and Seville passenger cars; Volkswagen's
Golf/Jetta passenger car and Chrysler's Dakota light truck, Caravan/Voyager
minivan, and Neon passenger car.
The approximate percentage of net production sales to the principal
customers for the Company for the twelve-month period ended September 28, 1997
are show below:
Year Ended
September 28, 1997
------------------
Ford . . . . . . . . . . . . . . . . . . . . . . 43.6%
General Motors . . . . . . . . . . . . . . . . . 33.8%
Volkswagen . . . . . . . . . . . . . . . . . . . 6.0%
Chrysler . . . . . . . . . . . . . . . . . . . . 2.4%
Other Automotive . . . . . . . . . . . . . . . . 6.8%
Other Non-Automotive . . . . . . . . . . . . . . 7.4%
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Total . . . . . . . . . . . . . . . . . 100.0%
======
The Company's customers typically award purchase orders on a limited
source basis that normally cover components to be supplied for a particular car
model. Such purchase orders generally provide for supplying the customer's
requirements for a model year, although, in practice, such purchase orders are
typically renewed until the component is redesigned or eliminated in a model
change.
Products under development are assigned a selling price which is
reevaluated from time to time during the product development cycle. Prior to
production, the Company and the customer generally agree on a final price,
which, in some instances, may be subject to negotiated price reductions or
increases over the term of the project. Consequently, the Company's ability to
improve operating performance is generally dependent primarily on its ability
to reduce costs and operate more efficiently.
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The Company has been chosen as a supplier for a variety of light trucks
(including pick-up trucks, minivans, full size vans and sport utility vehicles)
and passenger car models. The following table presents an overview of the
major models, listed alphabetically, for which the Company currently produce
components for its OEM customers:
Customer Model
- ----------------------------------------------------------------------------
General Motors truck . . . . . . . . . . APV/Transport
Astro/Safari
Blazer
Bravada
Jimmy
Sonoma/Blazer
Sonoma Pick-up
1500 Series
General Motors-car . . . . . . . . . . . Achieva/Grand Am
Alero
Corvette
Deville/Concourse
El Dorado
Firebird/Camaro
Grand Prix/Cutlass
Malibu/Century
Seville
Ford-truck . . . . . . . . . . . . . . . Aerostar
Econoline
Expedition
Explorer
F-Series truck
F-250/F-350
Villager
Windstar
Ford-car . . . . . . . . . . . . . . . . Continental
Contour/Mystique
Crown Victoria/Grand Marquis
Mark VIII
Mustang
Probe
T-Bird/Cougar
Taurus/Sable
Town Car
Chrysler-truck . . . . . . . . . . . . . Caravan/Voyager
Dakota
Chrysler-car . . . . . . . . . . . . . . Neon
Volkswagen . . . . . . . . . . . . . . . Golf/Jetta
Concept
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DESIGN AND PRODUCT ENGINEERING
The Company is a full service Tier I supplier with advanced
engineering capabilities which enable it to design innovative, high-quality
products that provide value to its customers. The Company recently
built its Auburn Hills Design Center to provide an environment for
trend-setting conceptual design and product development. The Company has made
other significant investments in conceptual design capabilities that allow it
to participate in the earliest stages of programs. For instance, the Company
has embraced computer-aided simulation directly linked to customer computer
networks as a means to reduce the cost and time required to develop new
products. The industrial design activity has augmented the Company's
traditional modeling methods with computer-aided technology which reduces staff
requirements as well as simplifying the integration of design and engineering
functions. The Company has transitioned from computer-aided design shell to
solid modeling which provides a direct link to rapid prototyping. The
Company's design staff employs state-of-the-art ALIAS computer software to
provide three-dimensional virtual modeling and product animation. Analytical
tools employed include finite element analysis for structural analysis,
kinematics for mechanisms, computational fluid dynamics for airflow studies and
moldfilling analysis for injection molding optimization and warp prediction.
MANUFACTURING
The Company's OEM customers are focusing on suppliers capable of
delivering quality products, controlling manufacturing costs and integrating,
through design capabilities, multiple components into larger systems. The
Company has responded to this challenge by implementing a lean manufacturing
program and adopting advanced processing technology.
The Company's lean manufacturing program has focused on "kanban"
production scheduling and materials management techniques and labor
productivity improvements. Kanban management techniques are characterized by
flexible production scheduling as well as vendor scheduling, reduced work
queues, more frequent vendor deliveries and reduced inventory levels. Through
kanban, the Company has experienced increased inventory turnover and generally
reduced inventory levels.
The Company continually seeks to achieve labor productivity
improvement and has established a work environment which encourages employee
involvement in identifying and eliminating waste. A key factor in the
Company's operations is maintaining the flexibility to respond to the demands
of different product runs and changing product delivery requirements while
continuously increasing production efficiency.
The Company believes its broad base of class A paint application
capabilities positions it well for supplying the domestic and foreign exterior
trim market. The Company is able to provide both high-bake high solids
painting, which is traditionally preferred by domestic OEMS, and low-bake, two
component painting, which is preferred by foreign OEMS. The Company has
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also recently developed paint application technology utilizing innovative
robotic applications which has enabled the Company to reduce costs by improving
paint transfer efficiency.
The Company has been recognized as a quality supplier by its OEM
customers and has received Ford's Q1 Award and has been nominated for
Chrysler's Pentastar Award. The majority of the Company's facilities
are QS 9000 certified and the remaining facilities are in the process of being
certified.
MARKETING
Sales of the Company's products to OEMs are made directly by the
Company's sales and engineering force, headquartered in Michigan. Through the
sales and engineering office, the Company services its OEM customers and
manages its continuing programs of product design improvement and development.
The Company's sales and engineering force currently consists of approximately
100 individuals, including several who are located periodically at various
OEMs' offices in order to facilitate the development of new programs.
COMPETITION
The automotive supplier industry in which the Company competes is
highly competitive. A large number of actual or potential competitors exist
including the internal component supply operations of the OEMs as well as
independent suppliers, many of which are larger than the Company. The Company
believes its principal competitors in its three lines of business include:
Progressive Dynamics Inc., Summit Polymers Inc. and Manchester Plastics, a
business unit of Collins & Aikman Corporation, in instrument panel components;
Magna International Inc., Venture Holdings Corporation, and JPE, Inc., in
exterior trim components; and Huron Inc., Key Plastics Inc. and Lacks
Industries in under-the-hood components.
The Company principally competes for new business both at the initial
development of new models and upon the redesign of existing models by its major
customers. New model development generally begins two to four years prior to
the marketing of such models to the public. Because of the large investment by
OEMs and Tier I suppliers in tooling and the long lead time required to
commence production, OEMs and Tier I suppliers generally do not change a
supplier during a model production run.
RAW MATERIALS
The principal raw materials used by the Company are engineered plastic
resins such as nylon, polypropylene, polycarbonate and
acrylonitrile-butadiene-styrene, paint, and steel for production molds, all of
which are available from many sources. The resins used in the Company's
business historically have been subject to price fluctuations. In the past,
the Company has been unable to pass price increases in resins through to its
customers. There can be no assurance that a material increase in the price of
resin will not adversely affect the Company's results of operations. The
Company has not experienced significant raw material shortages and does not
anticipate significant raw material shortages in the foreseeable future.
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EMPLOYEES
As of September 28, 1997, the Company's workforce included
approximately 2,665 employees, of which 471 were salaried workers, and 2,194
were hourly workers including temporary and part-time employees. The Company
has approximately 276 hourly employees represented by the Canadian Automobile
Workers union at its Leamington, Canada facility and approximately 161 hourly
employees represented by the United Auto Workers at its Como facility. The
Company's three-year contract with the bargaining unit for the Leamington
facility expires January 15, 1998. None of the Company's other employees are
subject to collective bargaining agreements. The Company has not experienced
any work stoppages and considers relations with its employees to be good.
ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to a wide
variety of international, federal, state and local laws and regulations,
including those governing the use, storage, handling, generation, treatment,
emission, release, discharge and disposal of certain materials, substances and
wastes, the remediation of contaminated soil and groundwater, and the health
and safety of employees (collectively, "Environmental Laws"). As such, the
nature of the Company's operations exposes it to the risk of claims with
respect to such matters and there can be no assurance that material costs or
liabilities will not be incurred in connection with such claims.
The Company has taken steps, including the installation of an
Environmental, Health and Safety group to reduce the environmental risks
associated with its operations and believes that it is currently in substantial
compliance with applicable Environmental Laws. See Item 7 - "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Environmental."
Item 2. Properties
The Company conducts molding, painting and assembly operations
in approximately 1.1 million square feet of space in a total of twelve
manufacturing locations including five plants located in Michigan (Clarkston,
Fowlerville, Hartland, New Hudson and Rochester Hills), two plants in Indiana
(Columbus and Kendallville), three plants in Ohio (Circleville, Napoleon and
Byesville), one plant in Tennessee (Franklin) and one plant in Canada
(Leamington, Ontario). Each of the Byesville, Franklin, Leamington, New
Hudson, Hartland, Fowlerville, Kendallville and Clarkston facilities are owned
by the Company. The Circleville, Napoleon and Rochester Hills facilities are
leased from unaffiliated parties. The Columbus facility is leased
from an affiliated party. The utilization and capacity of the Company's
facilities fluctuates based upon the mix of components the Company produces and
the vehicle models for which they are being produced.
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In October, 1996 the Company relocated its principal executive
offices and design and engineering staff from Troy, Michigan to Auburn Hills,
Michigan. The Auburn Hills offices are owned by the Company. The Company
believes that its facilities and equipment are in good condition and are
adequate for the Company's present and anticipated future operations.
Item 3. Legal Proceedings
There are no material legal proceedings pending against the
Company or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for the Registrant's Common Equity and Related Shareholder
Matters
There is no public trading market for the Company's Common Stock.
As of September 28, 1997, there were two holders of record of the Registrant's
Common Stock.
Item 6. Selected Financial Data
Summary Financial Data
(dollars in thousands)
The following table sets forth (i) summary historical financial data of LDM
Technologies, Inc. for the fiscal years ended September 26, 1993, September 25,
1994, September 24, 1995, September 29, 1996 and September 28, 1997 and (ii)
summary pro forma financial data giving effect to the Molmec Acquisition, the
issuance of Senior Subordinated Notes due 2007 and the Kendallville Acquisition
for the fiscal year ended September 28, 1997 as if each had occurred on
September 30, 1996. The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of LDM
presented elsewhere in this document.
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<TABLE>
<CAPTION>
Unaudited
Unaudited Audited Pro forma
--------- ------------------------------------------------- ---------
Sept. 26 Sept. 25 Sept. 24 Sept. 29 Sept. 28 Sept. 28
1993 1994 1995 1996 1997 1997(a)
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of operations
Data
Net sales (b) $ 110,251 $ 177,597 $ 220,991 $ 217,759 $ 293,020 $ 324,538
Cost of sales 90,674 151,692 182,408 182,896 240,929 262,831
Gross profit 19,577 25,905 38,583 34,863 52,091 61,707
Selling, general and
administrative
expenses 14,679 17,137 23,515 26,418 35,561 41,274
Operating profit 4,898 8,768 15,068 8,445 16,530 20,433
Interest expense 779 2,144 3,178 3,280 11,076 14,061
Income from
continuing operations,
before extraordinary
item [c] 3,026 2,570 6,248 1,173 3,063 3,614
Other financial data
Cash flows from operating
activities $ 349 $ 7,801 $ 14,788 $ 12,912 $ 9,336 $
EBITDA (d) 8,228 15,110 21,261 16,473 28,182 34,214
Depreciation and
amortization 3,810 6,593 6,778 8,006 11,955 14,038
Capital expenditures 6,465 29,023 15,150 20,286 12,776
Ratio of earnings to
fixed
charges(e) 5.3 3.5 3.9 1.9 1.4 1.4
Ratio of EBITDA to
interest expense 10.6 7.0 6.7 5.0 2.5 2.4
Ratio of debt to EBITDA 1.6 2.4 2.1 3.1 4.5 3.7
Balance sheet data
Cash $ 318 $ 976 $ 1,138 $ 2,122 $ 4,632 $ 4,632
Total assets 50,353 86,777 107,655 119,125 212,187 212,187
Total debt 12,971 36,489 44,936 51,786 126,770 126,770
Stockholder's equity 14,586 17,319 23,635 17,322 20,385 20,385
</TABLE>
(a) Gives pro forma effect to the Molmec Acquisition, the issuance of the 10
3/4% Senior Subordinated Notes due 2007 and the Kendallville Acquisition
in the manner described in the historical financial statements contained
in Item 14 of this document.
(b) The Company in 1993 acquired a 75% interest in GL Industries of Indiana,
Inc. (d/b/a Como Products), a manufacturer of consumer thermoplastic
components. Net sales of Como for fiscal years 1997, 1996, 1995 and 1994
were $23.3 million, $22.1 million, $31.8 million and $31.3 million,
respectively.
(c) During fiscal year ended September 26, 1993 LDM settled a lawsuit for
approximately $1.4 million relating to an acquisition made in 1988 and
the subsequent sale or transfer of certain of the acquired business
assets to LDM.
(d) EBITDA is defined as income from continuing operations before the effect
of extraordinary items plus the following: interest, income taxes,
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depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to incur and service
debt. EBITDA is not, and should not be used as, an indicator or
alternative to operating income, net income or cash flow as reflected in
the Consolidated Financial Statements, is not intended to represent funds
available for debt service, dividends, reinvestment or other discretionary
uses, is not a measure of financial performance under generally accepted
accounting principles, should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles and may not be compared to other
similarly-titled measures of other companies. A reconciliation of net
income to EBITDA is as follows:
<TABLE>
<CAPTION>
Unaudited
Unaudited Audited Pro forma
--------- ------------------------------------------------------ ---------
Sept. 26 Sept. 25 Sept. 24 Sept. 29 Sept. 28 Sept. 28
1993 1994 1995 1996 1997 1997(e)
-------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 3,026 $ 2,752 $ 6,334 $ 1,869 $ 3,063 $ 3,614
Add (deduct) the following:
Extraordinary Item - - - (754) - -
Discontinued operations - (182) (87) 58 - -
Provision for income
taxes 613 3,803 5,058 4,014 2,088 2,456
Interest expense 779 2,144 3,178 3,280 11,076 14,061
Depreciation and
amortization 3,810 6,593 6,778 8,006 11,955 14,083
--------- --------- ---------- --------- -------- ---------
EBITDA $ 8,228 $ 15,110 $ 21,261 $ 16,473 $ 28,182 $ 34,214
========= ========= ========== ========= ======== =========
</TABLE>
(e) For purposes of the ratio of earnings to fixed charges, (i) earnings
include income from continuing operations before the following: income
taxes, extraordinary items, minority interests, and fixed charges and
(ii) fixed charges include interest on all indebtedness, amortization of
deferred financing costs and portion of rental expense that the Company
believes to be representative of interest. The September 28, 1997 pro
forma ratio of earnings to fixed charges of 1.4 gives effect only to
the change in expense related to the replacement of the existing debt.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
LDM is a leading Tier I designer and manufacturer of highly engineered
plastic instrument panel and interior trim components, exterior trim components
and under the hood components supplied primarily to North American automotive
OEMs. LDM supplies components and subassemblies for a variety of light
duty trucks, sport utility vehicles, minivans and passenger cars. Automotive
products under development are assigned a selling price which is reevaluated
from time to time during the product development cycle. Prior to production,
the Company and the customer generally agree on a final price, which, in some
instances, may be subject to
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negotiated price reductions or increases over the term of the project.
Consequently, the Company's ability to improve operating performance is
generally dependent primarily on its ability to reduce costs and operate more
efficiently. Molds used in LDM's operations are requisitioned by LDM's
customers and are purchased from mold builders who design and construct the
molds under LDM supervision. Upon delivery and acceptance of the molds, title
is passed to customers and revenue is recognized. In addition to automotive
products, LDM's net sales include consumer product sales and mold sales.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED SEPTEMBER 28, 1997 COMPARED TO YEAR ENDED SEPTEMBER 29, 1996
NET SALES: Net sales for fiscal year 1997 were $293.0 million, an increase of
$75.2 million, or 34.5%, from $217.8 million in fiscal year 1996. For fiscal
year 1997, net sales, before intersegment elimination of $1.4 million, were
comprised of $243.3 million of automotive product sales, $19.2 million of
consumer and other product sales, and $31.9 million of mold sales.
Automotive product sales in fiscal year 1997 were $243.3 million, an
increase of $70.0 million, or 40.4%, from $173.3 million in fiscal year 1996.
The strong growth of automotive products sales was mainly attributable to
increased automotive product sales related to the Company's January 22, 1997
acquisition of Molmec, Inc., $54.0 million and the continued strength of the
Company's other production parts programs. Consumer and other product sales
were $19.2 million in fiscal year 1997, compared to $21.5 million in fiscal
year 1996. This decrease of $2.3 million, or 10.7%, is primarily the result of
lower sales of television cabinets due to the manufacturer's resourcing of
these products to local suppliers. Mold sales in fiscal year 1997 were $31.9
million, an increase of $6.6 million, or 26.1% from $25.3 million in fiscal
year 1996. 1997 mold sales were comprised of $27.9 million of automotive mold
sales and $4.0 million of consumer and other mold sales.
GROSS MARGIN: Gross margin was $52.1 million, or 17.8% of net sales, for fiscal
year 1997 compared to $34.9 million, or 16.0% of net sales, for fiscal year
1996. Fiscal year 1997 gross profits related to automotive product sales,
consumer and other sales and mold sales were $50.2 million, or 20.6% of net
automotive product sales, $0.4 million, or 2.0% of net consumer and other
product sales, and $1.5 million, or 4.7% of net mold sales, respectively. The
increase in total gross margin was primarily due to the additional gross margin
associated with Molmec product sales, $15.7 million, and improved profitability
of the Company's Canadian automotive operation, a $2.5 million increase versus
the prior year.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
1997 were $35.6 million, or 12.1% of net sales, compared to $26.4 million, or
12.1% of net sales, for fiscal year 1996.
INTEREST EXPENSE: Interest expense was $11.1 million for fiscal year 1997,
compared to $3.3 million for fiscal year 1996. The increased interest expense
was primarily due to the January
12
<PAGE> 14
1997 issuance of $110.0 million Senior Subordinated Notes related to the
acquisition of Molmec and the refinancing of the Company's existing debt.
INCOME TAXES: The provision for income taxes for fiscal year 1997 was $2.1
million with an effective tax rate of 41.7%, as compared to $4.0 million with
an effective tax rate of 78.6% for fiscal year 1996. The lower effective tax
rate is due to the Company's utilization of Canadian tax benefits not available
in the 1996 period and an Internal Revenue Service settlement of prior years
taxes in the 1996 fiscal year. See Note 10, "Income Taxes" in the Notes to
LDM's Consolidated Financial Statements.
ACQUISITION OF MOLMEC: On January 22, 1997, LDM acquired substantially all the
assets of Molmec for approximately $55.9 million in cash and the assumption of
certain liabilities including $4.6 million of indebtedness and $8.4 million of
current liabilities. Molmec is an industry leader in the design, manufacture
and integration of fluid and air management components and under the hood
assemblies.
SENIOR SUBORDINATED NOTES AND NEW SENIOR CREDIT FACILITY: In January of 1997,
LDM issued Senior Subordinated Notes in the aggregate principal amount of
$110.0 million bearing interest at 10.75% annually. The proceeds were
primarily used to fund the purchase of Molmec and to retire certain of LDM's
existing indebtedness. Also in January of 1997, LDM obtained a new senior
credit facility which provides available borrowings of up to $45.0 million
under revolving loans.
KENDALLVILLE ACQUISITION: On April 25, 1997, the Company acquired certain
assets of Aeroquip Corporation's Kendallville Indiana plant for $7.2 million in
cash. The Kendallville plant manufactures automotive air vents.
ACQUISITIONS SUBSEQUENT TO FISCAL YEAR END 1997
KENCO: On September 30, 1997 the Company acquired the entire outstanding stock
of Kenco Plastics, Inc. of Michigan, Kenco Plastics, Inc. of Kentucky and the
business and net tangible assets of Narens Design and Engineering, Inc.
(collectively referred to herein as "Kenco") for approximately $27.5 million in
cash, subject to certain adjustments. The acquisition was financed with
additional borrowings under the Company's Senior Credit Facility. Kenco designs
and manufactures a full range of blow molded plastic parts including HVAC
components, air induction components, functional components and fluid reservoirs
at six manufacturing locations located in Michigan, Kentucky and Tennessee.
Kenco's customers include Chrysler, Ford, General Motors, Mercedes, Mitsubishi
and Toyota. Kenco's net sales for the twelve month period ended September 28,
1997 were approximately $60.5 million.
BEIENHEIM: On November 25, 1997 the Company acquired substantially all of the
operating assets of Aeroquip-Vickers International GmbH., including the
manufacturing operation located in Beienheim Germany, for approximately $8.6
million in cash, and the assumption of approximately $2.5 million of
liabilities, subject to certain adjustments. The acquisition was made through
the Company's newly formed German subsidiary and was financed with additional
borrowings under the Company's Senior Credit Facility. The Beienheim facility
manufactures various interior trim components, exterior trim components and
under the hood components supplied primarily to European automotive OEMs.
Beienheim's customers include Ford, Opel and Audi. Net sales for the Beienheim
facility over the twelve month period ended September 28, 1997 were
approximately $33.0 million.
YEAR ENDED SEPTEMBER 29, 1996 COMPARED TO YEAR ENDED SEPTEMBER 24, 1995
NET SALES: Net sales for fiscal year 1996 were $217.8 million, a decrease of
$3.2 million, or 1.5% from $221.0 million in fiscal year 1995. For fiscal year
1996, net sales, before intersegment eliminations of $2.3 million, were
comprised of $173.3 million of automotive product sales, $21.5 million of
consumer and other product sales, and $25.3 million of mold sales.
Automotive product sales in fiscal year 1996 were $173.3 million, a
decrease of $10.5 million, or 1.5%, from $183.8 million in fiscal year 1995.
This decrease was principally due to LDM's ceasing production of certain
products related to the General Motors Blazer, the Ford Taurus/Sable and the
Volkswagen Golf/Jetta. The product produced for the Blazer is now being
produced internally by the customer. The Taurus/Sable product was redesigned
by the customer and awarded to another supplier. The Golf/Jetta production was
moved to a supplier closer to the customer's manufacturing location in Mexico.
The combined 1996 decrease in sales related to these three products was
approximately $30.0 million. The reductions in these programs were partially
offset by sales related to new programs launched in 1996. These new programs,
related to the Ford F-Series Truck and the Cadillac Deville/Concourse, provided
approximately $21.5 million of additional sales in 1996. Consumer and other
product sales were $21.5 million, a
13
<PAGE> 15
decrease of $9.2 million, or 29.9%, from $30.7 million in fiscal year 1995.
This decline was primarily attributable to a decline in television housing
sales to a television manufacturer due to adverse market conditions
and a decline in television housing sales to a television manufacturer
that resourced the product to a local supplier. Mold sales were $25.3 million,
an increase of $18.6 million, from $6.7 million in fiscal year 1995. The
increase in mold sales in fiscal year 1996 was principally due to new platform
launches associated with the Contour/Mystique, Sonoma/Blazer, Bravada, Cadillac
Deville/Concourse and Grand Prix/Cutlass.
GROSS MARGIN: Gross profit for fiscal year 1996 was $34.9 million, or 16.0% of
net sales, compared to $38.6 million, or 17.5% of net sales, for fiscal year
1995. Gross profit from automotive operations in the United States was $33.4
million, or 20.9% of net sales, for fiscal year 1996, compared to $30.4
million, or 19.7% of net sales, for fiscal year 1995. This increase was
principally due to favorable changes in material cost. The gain in the United
States was offset by a decrease in the gross profit of the Company's Canadian
automotive operations. Gross profit (loss) for the Company's Canadian
operations for fiscal year 1996 was ($0.2 million), or 0.5% of net sales,
compared to $4.0 million, or 11.5% of net sales for fiscal year 1995. This
decrease was driven by higher scrap and labor costs resulting from the launch
of products at the Company's Leamington, Ontario facility related to the
General Motors Grand Prix/Cutlass and Cadillac Deville/Concourse programs. The
higher scrap also caused a capacity shortage in certain tonnage machines
resulting in increased outsourcing costs. Gross profit from consumer and other
products was $1.6 million, or 7.3% of net sales, for fiscal year 1996, compared
to $4.2 million, or 13.1% of net sales, for fiscal year 1995. This decrease
was primarily attributable to a 29.9% decrease in consumer product sales during
this period. Gross margin on mold sales for fiscal year 1996 was $2.5 million,
or 9.8% of net mold sales, compared to $0.4 million, or 5.3% of net mold sales
for fiscal year 1995. The increase in gross margin was the result of more
effective management of the mold building process. Gross margin from mold
sales is included in the gross margin by segment reported above.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES: SG&A expenses for
fiscal year 1996 were $26.4 million, or 12.1% of net sales, compared to $23.5
million, or 10.6% of net sales for fiscal year 1995. The increase in SG&A
expenses as a percentage of net sales is primarily attributable to increased
design, engineering, and program management personnel costs.
INTEREST EXPENSE: Interest expense for fiscal year 1996 was $3.3 million, or
1.5% of net sales, compared to $3.2 million, or 1.4% of net sales, for fiscal
year 1995.
INCOME TAXES: The provision for income taxes for the fiscal year ended 1996
was $4.0 million with an effective tax rate of 78.6%, as compared to $5.1
million with an effective tax rate of 43.8% in fiscal year 1995. The increase
in the effective tax rate in fiscal year 1996 was the result of the Company not
utilizing Canadian net operating losses and an Internal Revenue Service
settlement of prior year taxes. See Note 10, "Income Taxes" in the Notes to
LDM's Consolidated Financial Statements.
14
<PAGE> 16
LIQUIDITY AND CAPITAL RESOURCES:
The Company's principal capital requirements are to fund working capital needs,
to meet required debt obligations, and to fund capital expenditures for facility
maintenance and expansion. The Company believes its future cash flow from
operations, combined with its revolving credit availability will be sufficient
to meet its planned debt service, capital requirements and internal growth
opportunities. Potential growth from acquisitions will be funded from a
variety of sources including cash flow from operations and permitted
additional indebtedness. As of September 28, 1997 the Company had $122.3
million of long-term debt outstanding and $25.1 million of borrowing
availability under its revolving credit facility.
Cash provided by operating activities in fiscal year 1997 was $9.3 million
compared to $12.9 million of cash provided by operating activities in the same
period in 1996. The decrease in cash provided by operating activities was
primarily the result of higher working capital requirements related to
increased sales volumes.
Capital expenditures for fiscal year 1997 were $12.8 million compared to $20.3
million for fiscal year 1996. Fiscal 1997 capital expenditures include several
injection molding machines, secondary equipment related to the F-Series Truck
program and expenditures related to the Auburn Hills Design Center. On May 13,
1997 the Company sold the Molmec Headquarters facility located in Walled Lake,
Michigan. The net proceed from the sale of this facility were approximately
$1.5 million.
The Company believes its capital expenditures (exclusive of any potential
acquisition) will be approximately $9.0 million to $13.5 million in each of the
fiscal years ended September 1998, 1999 and 2000. However, the Company's
capital expenditures may be greater than currently anticipated as the result of
new business opportunities.
The Company's liquidity is affected by both the cyclical nature of its business
and levels of net sales to its major customers. The Company's ability to meet
its working capital and capital expenditure requirements and debt obligations
will depend on its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. However, the Company believes that
its existing borrowing ability and cash flow from operations will be sufficient
to meet its liquidity requirements in the foreseeable future.
ENVIRONMENTAL:
The Company has been notified of violations of certain permitted air emission
levels for organic compounds at its Byesville and Circleville plant locations.
It is the Company's policy to accrue environmental expenses when it is both
probable that a liability has been incurred and the amount can be reasonably
estimated. On March 27, 1997, the Company settled an emission violation matter
related to its Byesville plant in the amount of $188,000. The Company had
accrued $150,000 as of September 29, 1996 for this settlement and accrued the
remaining $38,000 during the quarter ended March 30, 1997. The Company
believes that based upon available
15
<PAGE> 17
information, the ultimate liability with respect to the remaining outstanding
air emission issue will not exceed the recorded liability related to the
Circleville plant and that the ultimate resolution of these matters will not
have a material impact on the Company's financial position, results of
operations or liquidity.
The Company has been named as a Defendant in a lawsuit in connection with a
failed landfill in Byesville, Ohio. The lawsuit seeks contribution form the
Company as a potentially responsible party for allegedly generating waste that
was disposed of at the landfill. The Company has reached a tentative agreement
in principle with the United States Environmental Protection Agency (USEPA) to
settle this matter for a nominal amount. The Company has also received a
letter from a group of corporations which have entered into an agreement with
the USEPA to prepare a remedial design for curing a failed landfill site
in Circleville, Ohio. The Company was identified as a potentially responsible
party for alleged waste disposal at the Circleville landfill. The Company
believes that, based on the available information, the ultimate liability with
respect to these issues will not materially exceed $50,000 and has charged that
amount to expense in the quarter ended March 30, 1997.
YEAR 2000 COMPLIANCE
The information technology systems at LDM are not Year 2000 compliant. On or
before June 30, 1999, LDM will have purchased, implemented and tested new
information technology systems that are fully Year 2000 compliant. The
expenditure required to replace LDM's existing information technology systems
with Year 2000 compliance systems is estimated to be $1 to $3 million over the
next one and a half years.
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of
this Form 10-K. See Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
The names and ages of all executive officers and directors of the
Company are as follows:
<TABLE>
<CAPTION>
HAS SERVED
IN POSITION
NAME AGE POSITION SINCE
---- --- -------- -----------
<S> <C> <C> <C>
Joe Balous . . . . . . . . 72 Chairman of the Board, Secretary and Director 1985
Richard J. Nash . . . . . . 53 Chief Executive Officer and Director 1985
Robert C. Vamos . . . . . . 51 President 1997
Gary E. Borushko . . . . . 52 Chief Financial Officer 1987
</TABLE>
16
<PAGE> 18
<TABLE>
<S> <C> <C> <C>
Gordon F. Steil . . . . . . 48 Vice President of Engineering 1991
William Kessler . . . . . . 51 Vice President of Development 1993
Vincent P. Buscemi . . . . 49 Group Vice President - Sales 1991
Michael T. Heneka . . . . . 50 Group Vice President - Sales 1991
</TABLE>
Directors of the Company are elected each year at the Annual
Meeting of Stockholders to serve for the ensuing year or until their successors
are elected and qualified. The officers of the Company are elected each year
at the Annual Meeting of the Board of Directors to serve for the ensuing year
or until their successors are elected and qualified.
Each of the directors of the Company has had the same principal
occupation during the past five years.
All of the executive officers of the Company named above have held
various executive positions with the Company for more than five years except:
Mr. Vamos joined Molmec in 1992 as Vice President of Manufacturing and was
named President of Molmec in 1993. Prior to 1992, he held various
manufacturing management positions with the Budd Company. Upon LDM's
acquisition of Molmec in January 1997 he was named Executive Vice President of
Manufacturing of the Company and on September 2 , 1997 he was named to his
current position. Mr. Kessler joined the Company in 1993. Prior thereto he
was Vice President of Sales at Velcro Industries for 22 years.
Item 11. Executive Compensation
The following table sets forth the compensation paid to each of
the Company's five highest paid executive officers and significant employees
for fiscal year 1997.
SUMMARY COMPENSATION TABLE1(1)
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION COMPENSATION
---- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Richard J. Nash . . . . . . . . . . 1997 $ 550,000 $1,050,000 -- $3,562(2)
President and Chief Executive Officer 1996 550,000 750,000 -- 2,917(2)
1995 550,000 1,000,000 -- --
Joe Balous . . . . . . . . . . . . 1997 -- -- $1,420,000(3) --
Chairman of the Board and Secretary 1996 -- -- 1,395,000(3) --
1995 -- -- 1,185,000(3) --
Gary E. Borushko 1997 202,923 450,000 -- --
Chief Financial Officer 1996 180,000 -- -- --
1995 180,000 -- -- --
Vincent P. Buscemi . . . . . . . . 1997 45,000 9,000 376,692 --
Group Vice President - Sales 1996 -- -- 446,346(4) --
1995 -- -- 448,326(4) --
</TABLE>
17
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C> <C>
Michael T. Heneka . . . . . . . . . 1997 37,500 -- 352,302 --
Group Vice President -- Sales 1996 -- -- 419,398(4) --
1995 -- -- 336,481(4) --
</TABLE>
(1) This table does not include any value that might be attributable to
certain job related benefits, the amount of which for any executive
officer does not exceed the lesser of $50,000 or 5% of combined
salary and bonus for such executive officer.
(2) Represents contributions to the Company's 401 (k) plan.
(3) Consulting fees paid to a management company owned by Joe Balous.
(4) Represents sales commission paid to a company owned by such
individual.
The Company does not pay director fees to its two directors.
The Company does not have a Compensation Committee and Messrs.
Nash and Balous participate in all deliberations concerning executive
officer compensation.
Item 12 Security Ownership of Certain Beneficial Owners and Management
All of the outstanding capital stock of the Company is owned
beneficially and equally by Messrs. Richard J. Nash and Joe Balous.
Item 13. Certain Relationships and Related Transactions.
On April 22, 1996, the Company and its two stockholders entered
into a stock redemption agreement which provides that upon the death of either
stockholder, the Company is required to purchase, and their respective estates
are required to sell, all of the capital stock of the Company owned by such
stockholder, as the case may be, at a price equal to $33.0 million, which
amount would be payable upon receipt of the proceeds of life insurance policies
owned by the Company on each of the lives of the stockholders. Pursuant to the
terms of the stock redemption agreement, the Company is required to maintain
life insurance policies of $33.0 million and $28.0 million on the lives of Mr.
Nash and Mr. Balous, respectively. In March 1997, the Company purchased an
additional $5.0 million life insurance policy on the life of Mr. Balous to
fully fund the repurchase obligation for each stockholder. The annual premiums
for such policies of insurance are approximately $1,050,000.
Como, a 75% owned subsidiary of the Company, leases its general
office and plant facility and certain equipment from entities controlled by
such subsidiary's minority stockholder, Laurence M. Luke. Payments pursuant to
these leases were $502,000 during fiscal year 1997. Como also pays management
fees to Mr. Luke based on a percentage of sales. Such management fees were
$63,055 during fiscal year 1997.
During fiscal year 1997, the Company paid consulting fees of
$1,420,000 to a management company owned by Joe Balous. The nature of the
services performed by Mr. Balous are development of corporate policy and
strategic planning, integration of recent acquisitions, and overseeing
facilities construction and leasehold improvements. He had primary
responsibility for contract negotiations and construction of the Company's new
Auburn Hills office.
18
<PAGE> 20
The Company had in effect until June 30, 1997 Sales Representation
Agreements with sole proprietorships owned by Michael T. Heneka, Group Vice
President - Sales of the Company, and by Vincent P. Buscemi, Group Vice
President - Sales of the Company, which designated such persons as the
Company's exclusive sales representatives to represent it in sales to certain
customers and provided for monthly payments plus a commission on the net
billings to certain customers.
In September 1996 the Company entered into a five-year lease for
its Troy offices with Messrs. Nash and Balous and a relative of one of them.
Monthly rent expense pursuant to this lease was $15,000 per month. In July of
1997 the Company terminated the lease for the Troy offices and purchased Mr.
Nash's interest in the office for $714,000. The office is currently leased to
an unaffiliated person at a rental of $13,750 per month.
The terms of these leases are not the result of arms-length
bargaining; however, the Company believes that such leases and other
transactions described above are on terms no less favorable to the Company than
could be obtained if such leases, transportation or arrangements were
arms-length transactions with non-affiliated persons.
It is the Company's policy to continue future transactions with
its affiliates as long as the terms of such transactions are fair and
reasonable and no less favorable to the Company than could have been obtained
through arms-length negotiations with an independent third party.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following documents are filed as a part of this
report:
1. Financial Statements
The following consolidated financial statements of LDM
Technologies, Inc. and subsidiaries filed herewith.
Consolidated Balance Sheets at September 28, 1997 and September
29, 1996.
19
<PAGE> 21
Consolidated Statements of Income for each of the years in the
three year period ended September 28, 1997.
Consolidated Statements of Cash Flows for each of the years in the
three year period ended September 28, 1997.
Notes to Consolidated Financial Statements.
All Schedules have been omitted because they are not applicable or
are not required or the information to be set forth therein is
included in the Consolidated Financial Statements or Notes thereto.
20
<PAGE> 22
EXHIBITS
The Exhibits marked with one asterisk below were filed as Exhibits
to the Registration Statement of the Company on Form S-4 (No.
333-21819) and the Exhibit marked with two asterisks below was
filed as an Exhibit to the Form 8-K of the Company dated September
30, 1997, and are incorporated herein by reference, the Exhibit
numbers in brackets being those in such Registration Statement on
Form 8-K Report.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
3.1 Articles of Incorporation of LDM Technologies, Inc. (the
"Company"), as amended [3.1]*
3.2 By-laws of the Company [3.5]*
4.1 Indenture dated as of January 15, 1997 by and among the
Company, LDM Holdings, LDM Partnership, LDM Canada and
IBJ Schroder Bank & Trust Company, as Trustee [4.1]*
4.2 Form of 10 3/4% Senior Subordinated Note Due 2007, Series B
[4.2]* 4.3 Form of Guarantee [4.3]*
10.1(a) Loan and Security Agreement dated as of January 22, 1997
("Loan Agreement") by and between the Company, as Borrower, and
BankAmerica Business Credit, Inc. ("BankAmerica"), as Agent
for the Lenders [10.2]*
10.1(b) First Amendment to Loan Agreement dated May 1, 1997.
10.1(c) Amendment No. 2 and Affirmation of Guaranties to Loan
Agreement dated as of July 14, 1997.
10.1(d) Amendment No. 3 and Affirmation of Guaranties to Loan
Agreement dated as of September 30, 1997.
10.1(e) Amendment No. 4 and Affirmation of Guaranties to Loan
Agreement dated as of November 25, 1997.
10.2 Intellectual Property Security Agreement dated as of
January 22, 1997 made by the Company in favor of
BankAmerica, as Agent for Lenders [10.4]*
10.3 Stock Purchase Agreement among the Company and the various
stockholders of Kenco Plastics, Inc., a Michigan
corporation, and Kenco Plastics, Inc., a Kentucky
corporation, and Narens Design & Engineering Co., a Michigan
corporation, dated September 30, 1997 [1].**
12 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
27 Financial Data Schedule
21
<PAGE> 23
(b) Reports on Form 8-K. No reports on Form 8-K were filed
by the Registrant for the quarter ended September 29, 1997.
22
<PAGE> 24
Report of Independent Auditors
Board of Directors
LDM Technologies, Inc.
We have audited the accompanying consolidated balance sheets of LDM
Technologies, Inc. as of September 28, 1997 and September 29, 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended September 28, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of LDM Technologies,
Inc. at September 28, 1997 and September 29, 1996, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 28, 1997 in conformity with generally accepted accounting
principles.
Detroit, Michigan ERNST & YOUNG LLP
November 26, 1997
F-1
<PAGE> 25
LDM Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 4,632,204 $ 2,121,862
Accounts receivable 45,812,140 35,481,400
Inventories 15,048,043 11,833,202
Mold costs 13,825,884 7,128,974
Prepaid expenses 2,054,780 454,427
Refundable income tax 390,169 364,725
Deferred income taxes 4,627,000 828,500
----------------------------
Total current assets 86,390,220 58,213,090
Cash and equivalents restricted as to use - 658,018
Net property, plant and equipment 82,258,943 58,955,956
Goodwill, net of accumulated amortization of $1,668,446 36,790,968 -
Debt issue costs, net of accumulated amortization of
$599,172 in 1997 and $245,739 in 1996 5,732,858 399,240
Other 1,013,641 898,892
----------------------------
Total assets $212,186,630 $119,125,196
============================
</TABLE>
F-2
<PAGE> 26
LDM Technologies, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
----------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $3,529,689 $1,800,976
Lines of credit and revolving loan in default - 19,134,290
Accounts payable 28,152,353 30,834,395
Demand notes payable to shareholders 87,500 87,500
Accrued liabilities 15,662,166 7,597,886
Accrued compensation 4,616,091 4,201,751
Advance mold payments from customers 11,082,095 3,661,046
Income taxes payable 1,639,764 2,459,567
Current maturities of long-term debt 979,340 1,320,583
Long-term debt in default - 27,421,760
----------------------------
Total current liabilities 65,748,998 98,519,754
Long-term debt due after one year 122,260,891 2,020,845
Deferred income taxes 3,512,500 841,000
Minority interest 279,341 421,532
Stockholders' equity:
Common stock ($.10 par value; 100,000 shares
authorized, 600 shares issued and outstanding) 60 60
Additional paid in capital 94,072 94,072
Retained earnings 20,352,951 17,290,116
Currency translation adjustments (62,183) (62,183)
----------------------------
Total stockholders' equity 20,384,900 17,322,065
----------------------------
Total liabilities and stockholders' equity $212,186,630 $119,125,196
============================
</TABLE>
See accompanying notes.
F-3
<PAGE> 27
LDM Technologies, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 24,
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Net sales:
Product sales $261,102,429 $192,470,660 $214,289,121
Mold sales 31,917,332 25,288,234 6,702,224
--------------------------------------------
293,019,761 217,758,894 220,991,345
Cost of sales:
Product cost of sales 210,531,937 160,093,701 176,057,556
Mold cost of sales 30,397,588 22,802,654 6,350,269
--------------------------------------------
240,929,525 182,896,355 182,407,825
--------------------------------------------
Gross margin 52,090,236 34,862,539 38,583,520
Selling, general and administrative
expenses 35,561,182 26,418,453 23,514,930
--------------------------------------------
Operating profit 16,529,054 8,444,086 15,068,590
Other expenses:
Interest 11,076,165 3,279,904 3,177,826
Other, net 443,774 56,108 353,313
--------------------------------------------
11,519,939 3,336,012 3,531,139
--------------------------------------------
Income from continuing operations
before income taxes, minority interest
and extraordinary item 5,009,115 5,108,074 11,537,451
Provision for income taxes 2,088,471 4,013,745 5,058,205
--------------------------------------------
Income from continuing operations
before minority interest and
extraordinary item 2,920,644 1,094,329 6,479,246
Minority interest 142,191 79,078 (231,735)
--------------------------------------------
Income from continuing operations
before extraordinary item 3,062,835 1,173,407 6,247,511
Extraordinary item, gain on debt
refinancing, no income tax effect - 753,510 -
--------------------------------------------
Income from continuing operations 3,062,835 1,926,917 6,247,511
Income (loss) from discontinued
operations, net of income taxes
and minority interest - (57,610) 86,546
--------------------------------------------
Net income $ 3,062,835 $ 1,869,307 $ 6,334,057
============================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 28
LDM Technologies, Inc.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION
SHARES STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 25, 1994 700 $70 $109,751 $17,227,788 $(18,157) $17,319,452
Net income for 1995 - - - 6,334,057 - 6,334,057
Currency translation adjustment - - - - (18,495) (18,495)
-----------------------------------------------------------------
Balance at September 24, 1995 700 70 109,751 23,561,845 (36,652) 23,635,014
Redemption of a stockholder's
interest (100) (10) (15,679) (8,141,036) - (8,156,725)
Net income for 1996 - - - 1,869,307 - 1,869,307
Currency translation adjustment - - - - (25,531) (25,531)
-----------------------------------------------------------------
Balance at September 29, 1996 600 60 94,072 17,290,116 (62,183) 17,322,065
Net income for 1997 - - - 3,062,835 - 3,062,835
-----------------------------------------------------------------
Balance at September 28, 1997 600 $60 $94,072 $20,352,951 $(62,183) $20,384,900
=================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE> 29
LDM Technologies, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
SEPTEMBER 28, SEPTEMBER 29 SEPTEMBER 24,
1997 1996 1995
------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,062,835 $ 1,869,307 $ 6,334,057
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,955,318 8,005,518 6,777,781
Extraordinary gain on retirement of debt - (753,510) -
(Gain) loss on sale of property and equipment (155,545) 102,853 (39,318)
Deferred income taxes (1,127,000) 382,981 (612,211)
Other 453,149 (505,206) 526,540
Changes in assets and liabilities, net of the 1996 effect of the
distribution of IMCA and the effect of 1997 acquisitions:
Accounts and notes receivable (5,458,267) (7,379,182) (1,916,290)
Refundable income taxes - (364,725) -
Inventory and mold costs (4,954,299) (974,530) (1,258,995)
Prepaid expenses (1,493,386) (78,461) 59,861
Other assets 414,884 6,997 (224,050)
Accounts payable and accrued liabilities 7,356,770 12,247,032 5,253,495
Income taxes payable (718,315) 352,912 (112,952)
-----------------------------------------
Net cash provided by operating activities 9,336,144 12,911,986 14,787,918
INVESTING ACTIVITIES
Purchase of Molmec (net of $2,704,958 cash acquired) (53,197,708) - -
Additions to property, plant and equipment (12,775,603) (20,286,378) (15,149,972)
Purchase of Kendallville (7,158,703) - -
Proceeds from disposal of property and equipment 1,775,667 284,310 100,600
Cash and cash equivalents restricted for construction of new
corporate facility 658,018 6,685,534 (7,343,552)
Other (484,412) 1,246,889 (1,222,779)
-----------------------------------------
Net cash used for investing activities (71,182,741) (12,069,645) (23,615,703)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, (net of debt issuance
costs of $6,038,503 in 1997) 103,961,497 19,993,597 9,000,000
Payments on notes payable and long-term debt (22,198,981) (16,134,416) (3,529,752)
Net (repayments) proceeds from borrowings on line of credit (17,405,577) 832,776 3,831,837
Redemption of stockholder's interest - (4,712,968) -
Other - 162,683 (312,315)
-----------------------------------------
Net cash provided by financing activities 64,356,939 141,672 8,989,770
-----------------------------------------
Net increase in cash 2,510,342 984,013 161,985
Cash at beginning of year 2,121,862 1,137,849 975,864
-----------------------------------------
Cash at end of year $ 4,632,204 $ 2,121,862 $ 1,137,849
=========================================
Supplemental disclosure of cash flow information
Interest paid $ 7,919,320 $ 2,502,411 $ 2,931,301
Income taxes paid $ 3,996,264 $ 3,050,739 $ 5,328,489
Interest capitalized $ 311,578 $ 780,478 $ 161,770
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS
On September 29, 1996, LDM Technologies, Inc. issued a note payable to a former
shareholder in the amount of $3,000,000 as part of the consideration for the
redemption of LDM Technologies, Inc. common stock owned by that shareholder.
In connection with that transaction, the stock of IMCA was distributed to the
former shareholder.
See accompanying notes.
F-6
<PAGE> 30
LDM Technologies, Inc.
Notes to Consolidated Financial Statements
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of LDM Technologies,
Inc. (the "Company") and its subsidiaries, LDM Holdings, L.L.C., LDM Canada
Limited Partnership, LDM Holding Canada, Inc., LDM Holding Mexico, Inc.,
LDM Technologies Company ("LDM Canada"), LDM Technologies, S.de R.L. ("LDM
Mexico"), and G.L. Industries of Indiana, Inc. (d/b/a Como Products "Como"). All
subsidiaries are wholly owned with the exception of Como (75% owned) and LDM
Mexico (99% owned). As of September 28, 1997, the Company, LDM Canada and Como
are the only operating entities. All intercompany accounts and transactions
have been eliminated in consolidation.
DESCRIPTION OF BUSINESS
The Company's domestic automotive operations are conducted through
divisions and, in Canada, through LDM Canada. Such operations principally
consist of manufacturing of molded plastic interior and exterior trim and under
the hood components for sale principally to several North American automobile
manufacturers and their suppliers. Como is a manufacturer of molded plastic
products for end-use application primarily in the consumer appliance, office
products, and commercial furniture markets.
DISCONTINUED OPERATIONS
On September 29, 1996, the Company contributed $4 million in cash to the capital
of its 83% owned subsidiary, Industrial Machining Corporation of Arkansas
("IMCA") and immediately exchanged its stock in IMCA plus $500,000 in cash and a
two year 6.5% interest bearing promissory note in the amount of $3 million for
all of the LDM stock held by the shareholder. The acquired stock was
immediately retired. No gain or loss was recorded and results of operation have
been classed as discontinued in the statement of income.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company operates with a 52/53 week fiscal year ending on the last
Sunday in September. The fiscal years ended September 28, 1997, September 29,
1996 and September 24, 1995 included 52, 53 and 52 weeks, respectively.
F-7
<PAGE> 31
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
At September 28, 1997, there were no restricted cash or cash
equivalents. At September 29, 1996, approximately $658,000 of cash and cash
equivalents were held by a trustee and were restricted to expenditures for
construction of a new corporate headquarters facility.
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories at September 28, 1997 and September 29, 1996
consist of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw materials and supplies $ 8,902,283 $ 7,713,312
Work-in-process 2,105,126 1,368,032
Finished goods 4,040,634 2,751,858
-------------------------
Total $15,048,043 $11,833,202
=========================
</TABLE>
MOLDS
Molds used in Company operations are requisitioned by the Company's
customers and are purchased from mold builders who design and
construct the molds under Company supervision. Upon delivery and
acceptance of the molds, title is passed to customers and revenue
is recognized.
F-8
<PAGE> 32
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION
Depreciation of property, plant and equipment is determined principally using
the straight-line method based upon the following estimated useful lives:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
LIFE (YEARS)
-----------------
<S> <C>
Buildings and improvements 10 - 20
Machinery and equipment 3 - 12
Transportation equipment 3 - 10
Furniture and fixtures 3 - 12
</TABLE>
Leasehold improvements are amortized using the straight-line method over the
useful life of the improvement or the term of the lease, whichever is less.
Goodwill is amortized over its estimated useful economic life of 15 years. Its
carrying value is reviewed if circumstances suggest that it may be impaired.
If this review indicates that goodwill will not be recoverable, as determined
based on the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value of the goodwill will be
reduced by the estimated shortfall of discounted cash flows.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its
fair value.
Short and long-term debt: The carrying amounts of the
Company's borrowings under its short-term revolving credit
agreements approximate their fair value. The Company's
Senior Subordinated Notes carry fixed interest rates. Smith
Barney currently makes a market for the Notes. As of
September 28, 1997, the average of the bid and asking price
was 108.25 giving a fair market value of $9.075 million
above stated value ($110 million). The remainder of the
Company's long-term debt carries variable interest rates
and, accordingly, the carrying amount approximates fair
value.
F-9
<PAGE> 33
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPACT OF ACCOUNTING STANDARDS ADOPTED IN THE FISCAL YEAR ENDING IN
SEPTEMBER, 1997
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment Long-lived Assets and for Long-lived Assets
to be Disposed Of, which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the asset's carrying amount. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company adopted
Statement 121 in the fiscal year ended September 1997 without material impact to
the financial condition or results of operations of the Company.
IMPACT OF ACCOUNTING STANDARDS TO BE ADOPTED SUBSEQUENT TO
SEPTEMBER, 1997
In June 1997, the Financial Accounting Standards Board issued Statement
No. 131, Disclosures about Segments of an Enterprise and Related Information,
which requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. At present the
Company is considering the impact of Statement 131 on its financial statements
and will adopt any necessary revisions to segmental analysis in the first
quarter of the fiscal year ending in September, 1998.
2. ACQUISITIONS
On November 4, 1996, the Company signed a definitive agreement to acquire
the business and certain net assets of Molmec, Inc. for $55.9 million in cash.
The acquisition was consummated on January 17, 1997. The fair value of the net
tangible assets acquired amounted to $19.1 million.
On May 1, 1997, the Company acquired the business and certain net assets
comprising the 'Kendallville' plant of Aeroquip Corporation for a consideration
of $7.2 million in cash. The fair value of the net tangible assets acquired
amounted to $5.5 million.
F-10
<PAGE> 34
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACQUISITIONS (CONTINUED)
A summary of the allocation of purchase price of each of the acquisitions is
given below:
<TABLE>
<CAPTION>
MOLMEC KENDALLVILLE
-------------------------
<S> <C> <C>
Current assets $14,890,667 $1,748,791
Net property, plant and equipment 17,237,541 3,837,463
Long term debt (4,583,894) -
Other liabilities (8,417,933) (110,680)
-------------------------
Net tangible assets 19,126,381 5,475,574
Goodwill 36,776,285 1,683,129
-------------------------
Cost $55,902,666 $7,158,703
=========================
</TABLE>
Both of the above acquisitions have been accounted for using the purchase
method. Accordingly, the assets acquired and the liabilities assumed have been
recorded at fair values and the excess of the purchase price over the net
tangible assets acquired recorded as an intangible asset to be amortized over 15
years.
The following unaudited pro forma condensed consolidated results of operations
of the Company, for the fiscal years ended September 28, 1997 and
September 29, 1996, gives effect to the above acquisitions and associated
financing as if such events had occurred on September 25, 1995. The unaudited
pro forma consolidated financial information does not purport to represent what
the Company's financial position or results of operations would actually have
been had the transactions occurred on September 24, 1995 or to project the
Company's financial position or results of operations for any future date or
period.
F-11
<PAGE> 35
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
2. ACQUISITIONS (CONTINUED)
<TABLE>
<CAPTION>
IN THOUSANDS YEAR ENDED YEAR ENDED
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
----------------------------
<S> <C> <C>
Net sales $324,538 $314,691
Cost of sales 262,831 258,917
----------------------------
Gross margin 61,707 55,774
Selling, general and administrative expenses 41,274 42,035
Other expenses, principally interest 14,505 13,324
----------------------------
Income from continuing operations before
income taxes, minority interests and
extraordinary item 5,928 415
Provision for income taxes 2,456 2,137
Income (loss) from continuing operations ----------------------------
before minority interest 3,472 (1,722)
Minority interest 142 79
----------------------------
Income (loss) from continuing operations $3,614 $(1,643)
</TABLE> ============================
3. FOREIGN OPERATIONS
LDM Canada was capitalized in November, 1993 with $1,350,000 of
equity and approximately $2,000,000 of intercompany loans. In
November, 1993, LDM Canada purchased the business and certain
assets of a Canadian plastics manufacturer for cash of
approximately $17,428,500, which was funded with corporate cash of
$4,563,897 and $12,864,603 of bank loans. In January, 1997, LDM
Canada was re-financed with inter company loans and additional
equity, which were funded with part of the proceeds of the Senior
Subordinated Notes, and existing loans were repaid.
In prior years, the Canadian dollar was considered to be the
functional currency for the Canadian operations. During the
current fiscal year, as a result of the U.S. dollar based
re-financing and the volume of U.S. dollar denominated sales and
operating costs, the Company determined that the functional
currency of LDM Canada should be the U.S. dollar. Accordingly long
lived assets and inter company debt has been translated at the
historical rate and exchange differences arising on translation
have been included in 1997 operations.
F-12
<PAGE> 36
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
3. FOREIGN OPERATIONS (CONTINUED)
The summarized financial position of LDM Canada at September 28,
1997 and September 29, 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
Current assets $24,998,244 $13,056,390
Property, plant and equipment 16,238,750 16,040,296
Intangible assets - 165,283
------------------------
Total assets $41,236,994 $29,261,969
========================
Current liabilities (exclusive of intercompany
payables) $18,182,220 $25,419,352
Noncurrent liabilities 1,713,628 2,407
Liabilities to LDM Technologies, Inc.:
Loans 15,408,825 3,908,825
Current trade payables and interest 2,085,924 654,327
Stockholder's equity (deficit) 3,846,397 (722,942)
------------------------
Total liabilities and stockholder's equity $41,236,994 $29,261,969
</TABLE> ========================
Sales and net income of LDM Canada, included in the Company's
consolidated financial statements are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Sales $45,461,786 $31,036,436 $33,777,902
Gross profit (loss) 2,325,689 (168,241) 4,008,490
Net income (loss) 63,033 (2,214,355) 165,263
</TABLE>
4. EXTRAORDINARY ITEM
During the year ended September 29, 1996, LDM Canada retired notes
payable to Barclays Bank of Canada and Gentra Canada, resulting in
a $753,510 extraordinary gain on extinguishment. Because of the
Canadian operating losses, there was no tax effect related to the
gain.
F-13
<PAGE> 37
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
5. PROPERTY, PLANT AND EQUIPMENT
At September 28, 1997 and September 29, 1996, property, plant and equipment
consists of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land, buildings and improvements $39,322,325 $27,657,829
Machinery and equipment 79,716,758 59,960,713
Transportation equipment 1,946,717 1,947,778
Furniture and fixtures 4,226,559 2,703,408
Construction in process 1,982,548 3,515,676
----------- -----------
Total, at cost 127,194,907 95,785,404
Less accumulated depreciation (44,935,964) (36,829,448)
----------- -----------
Net property, plant, and equipment $82,258,943 $58,955,956
=========== ===========
</TABLE>
6. LINES OF CREDIT AND REVOLVING DEBT
On January 22, 1997, the Company entered into a new five-year Senior Credit
Facility. At September 28, 1997, the Senior Credit Facility is secured by
substantially all of the assets of the Company and its guarantors (LDM
Holdings, L.L.C., LDM Canada Limited Partnership and LDM Technologies Company).
The Senior Credit Facility provides for advances up to (i) 85% of eligible
accounts receivable, and (ii) the lesser of $12 million or 60% of eligible
inventory, up to a maximum availability of $45 million. The Senior Credit
Facility provides for the issuance of commercial and stand-by letters of credit
up to a portion of the $45 million Senior Credit Facility. The Senior Credit
Facility bears interest at rates based upon a prime or LIBOR rate, in each case
plus an applicable basis point spread; and provides that the Company will pay
an issuance fee with respect to letters of credit based on a percentage of the
full amount of such letters of credit, and an unused line fee equal to a
percentage of the unused portion of the Senior Credit Facility. The Senior
Credit Facility contains customary covenants, including financial covenants
relating to, among other things, fixed charge coverage ratios, capital
expenditure limitations and profitability.
The Company had borrowings outstanding under the Senior Credit Facility at
September 28, 1997 of $1.7 million. Borrowings available under the line of
credit were $25.1 million at September 28, 1997. Subsequent to the year end
the maximum availability under the Senior Credit Facility was increased to $65
million.
F-14
<PAGE> 38
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
6. LINES OF CREDIT AND REVOLVING DEBT (CONTINUED)
Como has a line of credit with a bank in an amount not to exceed at any
time the lesser of $3.5 million or the sum of 80% of eligible accounts
receivable plus the lesser of 50% of eligible inventory or $1 million. The
outstanding balance on the line of credit was $1.7 million and $1.6 million at
September 28, 1997 and September 30, 1996, respectively. The line of credit
bears interest at the prime rate plus 0.5% (9% in 1997). The line of credit is
collateralized by substantially all the assets of Como and is guaranteed by LDM
Technologies, Inc. subject to a limit of $1 million. Additional borrowing
availability on the line of credit was approximately $750,000 at September 28,
1997. The original agreement expired in January 1997, has not been formally
replaced, and is currently operating on a day-by-day basis.
Como has borrowings under revolving debt of $180,000 due October 30, 1997,
collateralized by certain Company assets. Interest is payable monthly at a
variable rate (approximately 9.5% in 1997).
Summary of line of credit and revolving debt at September 28, 1997:
<TABLE>
<CAPTION>
SEPTEMBER 28, SEPTEMBER 29,
1997 1996
------------------------------
<S> <C> <C>
Borrowings under lines of credit:
LDM Technologies Inc $ 1,700,000 $ -
LDM Canada - In Default - 3,634,290
Como 1,649,689 1,620,976
------------------------------
3,349,689 5,255,266
Borrowings under revolving debt:
LDM Technologies, Inc. - In Default 1996 - 15,500,000
Como 180,000 180,000
------------------------------
$ 3,529,689 $20,935,266
==============================
</TABLE>
There were no borrowings in default at September 28, 1997. Borrowings in
default and not in default in aggregate for the year ended September 29, 1996
amounted to $19,134,290 and $1,800,976 respectively.
The weighted average interest rate on all short-term borrowings as of September
28, 1997 and September 29, 1996 was 8.66% and 7.91%, respectively.
F-15
<PAGE> 39
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
7. LONG-TERM DEBT
On January 22, 1997, the Company issued, in a private placement, 10 3/4%
Senior Subordinated Notes due 2007, Series A, with an aggregate principal
amount of $110 million. The net proceeds of the Offering, which amounted to
$104 million, were used to repay debt in default amounting to $27.3 million, to
repay a $2.7 million note payable to a former shareholder, to fund the $55.9
million acquisition of Molmec, to re-finance LDM Canada and for general
corporate purposes.
On April 29, 1997, the Company exchanged its 10 3/4% Senior
Subordinated Notes due 2007, Series A, for 10 3/4% Senior Subordinated Notes
due 2007, Series B ("the Notes"). The terms of the Series B Notes are
identical to those of the Series A Notes, except for certain transfer
restrictions and registration rights relating to the Series A Notes.
The Indenture under which the Notes were issued contains certain
covenants, including limitations on the following matters: (i) the incurrence
of additional indebtedness, (ii) the issuance of preferred stock by
subsidiaries, (iii) the creation of liens, (iv) restricted payments, (v) the
sales of assets and subsidiary stock, (vi) mergers and consolidations, (vii)
payment restrictions affecting subsidiaries and (viii) transactions with
affiliates.
Interest on the Notes is payable semi-annually at 10 3/4%. The Notes are
subject to redemption on or after January 15, 2002, at the option of the
Company, in whole or in part, at redemption prices ranging from 105.375% to
100% of the principal amount. Up to 25% of the Notes may be redeemed on or
before January 15, 2000, at 110.75% of the principal amount in the event of a
Public Equity Offering. At September 28, 1997, the Notes are guaranteed by
certain subsidiaries of the Company namely LDM Holdings, L.L.C., LDM Canada
Limited Partnership and LDM Canada but not by Como or LDM Mexico. Supplemental
financial information for the guarantor and non-guarantor subsidiaries is
disclosed in Note 14.
The notes rank subordinate in right of payment to all existing and future
Senior Debt.
The Company also obtained a replacement letter of credit with respect
to its $8.8 million Multi-Option Adjustable Rate Notes and on acquisition of
Molmec assumed Molmec's Variable Rate Demand Limited Obligation Revenue Bonds
with an aggregate principal amount of $4,415,000.
F-16
<PAGE> 40
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
7. LONG-TERM DEBT (CONTINUED)
Long-term debt at September 28, 1997 and September 29, 1996 consists of the
following:
<TABLE>
1997 1996
---- ----
<S> <C> <C>
Senior Subordinated Notes due 2007. $110,000,000 -
Multi-Option Adjustable Rate Notes, principal
payable in various annual installments
ranging from $240,000 to $780,000 through
April 1, 2015, plus interest payable monthly
at the higher of the 30 day commercial paper
rate or 90 day commercial paper rate (5.5% at
September 28, 1997). Borrowings are
collateralized by the corporate headquarters
facility which has a carrying value of
approximately $15,941,000 at September 28,
1997. 8,580,000 8,800,000
Variable Rate Demand Limited Obligation
Revenue Bonds, principal payable in various
annual installments through December 1, 2009,
ranging from $630,000 to $160,000, plus
variable interest (subject to a maximum of
12%), payable semi-annually (3.9% during the
year ended September 28, 1997),
collateralized by a letter of credit. 4,415,000 -
Other 245,231 341,428
Term loans payable to the Bank of Nova Scotia. - 9,640,649
Notes payable to Huntington National Bank - 8,981,111
Note payable to former shareholder - 3,000,000
--------------------------
Total $123,240,231 30,763,188
Current maturities of long-term debt (979,340) (1,320,583)
Long-term debt in default - (27,421,760)
--------------------------
Long-term debt due after one year $122,260,891 $2,020,845
===========================
</TABLE>
F-17
<PAGE> 41
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
7. LONG-TERM DEBT (CONTINUED)
LDM Technologies, Inc. has the option to convert the interest rate on
the Multi-Option Adjustable Rate Notes to the Six Month, One Year, Three Year,
Five Year, Seven Year, or the Fixed Interest Rates Modes.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
<S> <C>
1998 $ 979,340
1999 900,412
2000 920,479
2001 900,000
2002 950,000
Thereafter 118,590,000
------------
Total $123,240,231
============
</TABLE>
8. SEGMENT DATA FROM CONTINUING OPERATIONS
The Company currently operates in two principal industries; automotive
components and consumer products. Machined parts operations for marine outboard
engine manufacturers were discontinued in 1996. The Company's automotive
components include the design and manufacture of plastic injection molded
products for certain North American original equipment manufacturers of cars,
minivans and sport utility vehicles. The Company's products include exterior
and interior trim and under the hood components. The Company's consumer
products segment manufactures plastic molded products for the consumer
appliance, office products and commercial furniture markets.
F-18
<PAGE> 42
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
8. SEGMENT DATA FROM CONTINUING OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 24,
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Net sales:
Automotive products:
U.S. operations $225,744,979 $161,060,637 $154,592,897
Canadian operations 45,461,786 36,970,296 34,709,953
-------------------------------------------
271,206,765 198,030,933 189,302,850
Consumer and other non
automotive products--Como 23,245,813 22,058,056 31,845,361
Eliminations -- inter-segment
sales (1,432,817) (2,330,095) (156,866)
-------------------------------------------
Total $293,019,761 $217,758,894 $220,991,345
===========================================
Operating profit (loss):
Automotive products:
U.S. operations $ 16,635,433 $ 9,712,195 $ 10,254,006
Canadian operations 752,938 (1,444,962) 2,300,345
-------------------------------------------
17,388,371 8,267,233 12,554,351
Consumer and other non
automotive products--Como (859,317) 176,853 2,514,239
-------------------------------------------
Total 16,529,054 8,444,086 15,068,590
Corporate expenses, net 443,774 56,108 353,313
Interest expense 11,076,165 3,279,904 3,177,826
-------------------------------------------
Income from continuing
operations before taxes,
minority interest and
extraordinary item $ 5,009,115 $ 5,108,074 $ 11,537,451
===========================================
</TABLE>
F-19
<PAGE> 43
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
8. SEGMENT DATA FROM CONTINUING OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 24,
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Automotive products:
U.S. operations $163,576,672 $ 81,966,346 $ 75,402,101
Canadian operations 40,848,228 29,019,086 22,418,557
-----------------------------------------------------
204,424,900 110,985,432 97,820,658
Consumer and other non
automotive products--Como 7,761,730 8,139,764 8,493,987
-----------------------------------------------------
Total assets $212,186,630 $119,125,196 $106,314,645
=====================================================
Depreciation and amortization
expense:
Automotive products:
U.S. operations $ 9,054,516 $ 5,274,032 $ 4,583,521
Canadian operations 2,140,766 2,019,437 1,423,101
-----------------------------------------------------
11,195,282 7,293,469 6,006,622
Consumer and other non
automotive products--Como 760,036 614,952 671,775
Discontinued operations - 97,097 99,384
-----------------------------------------------------
Total depreciation and
amortization $ 11,955,318 $ 8,005,518 $ 6,777,781
=====================================================
Capital expenditures:
Automotive products:
U.S. operations $ 10,521,216 $ 17,294,489 $ 12,248,949
Canadian operations 2,174,169 2,502,058 2,219,873
-----------------------------------------------------
12,695,385 19,796,547 14,468,822
Consumer and other non
automotive products--Como 80,218 401,048 387,365
Discontinued operations - 88,783 293,785
-----------------------------------------------------
Total capital expenditures $ 12,775,603 $ 20,286,378 $ 15,149,972
=====================================================
</TABLE>
Headings above denoting U.S. operations and Canadian operations represent,
respectively, LDM Technologies, Inc. and LDM Canada.
Operating profit is total revenue less operating expenses, excluding interest
expense and general corporate expenses. Identifiable assets by industry include
assets directly identified with those operations.
F-20
<PAGE> 44
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
8. SEGMENT DATA FROM CONTINUING OPERATIONS (CONTINUED)
During the years ended September 1997, 1996 and 1995, approximately
93%, 90% and 86% of consolidated sales were to customers in the
automotive industry. Following is a summary of customers that
accounted for more than 10% of consolidated net product sales:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 24,
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Ford Motor Company $114,446,000 $71,519,000 $60,925,000
General Motors Corporation 88,818,000 79,640,000 87,657,000
Volkswagen A.G 15,856,000 19,172,000 25,963,000
-------------------------------------------
</TABLE>
As of September 28, 1997, receivables from Ford Motor Company,
General Motors Corporation, and Volkswagen A.G. represented 50%,
30% and 2% of total accounts receivable, respectively, and at
September 29, 1996 receivables from said customers were 41%, 35%
and 2% of total accounts receivable, respectively.
9. RELATED PARTY TRANSACTIONS
Como leases its general office and plant facilities, in addition to
certain computer and manufacturing equipment, from corporations
whose directors and stockholders include Como's minority
stockholder. Lease rental payments made to these corporations for
1997, 1996, and 1995 were $502,000, $487,000, and $533,300,
respectively. Como also pays management fees to its minority
stockholder based on a percentage of sales. Selling, general and
administrative expenses include $63,055, $120,799, and $205,611 in
1997, 1996 and 1995, respectively, for management fees to the
minority stockholder.
Through July 15, 1997, the Company leased certain corporate
administrative facilities from its shareholders. Lease rental
payments were $110,000 for the year ended September 28, 1997
and $156,000 for each of its two years ended in September,
1996 and 1995. The Company also paid the repairs and
maintenance, insurance and property taxes on these facilities.
During July, 1997, the Company purchased a 50% interest in the
administrative facilities it previously leased from its
shareholders. The purchase price totaled $714,000.
The Company formerly purchased tooling services from a related
entity, which is owned by its stockholders. Such purchases totaled
approximately $1,376,000 for the fiscal year ended in 1995. No
such purchases were made in fiscal years ended in 1996 or 1997.
F-21
<PAGE> 45
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
10. INCOME TAXES
The Company's provision for income taxes for continuing operations for the
years ended September 28, 1997, September 29, 1996 and September 24, 1995 is
comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Domestic:
Federal:
Current $2,789,454 $2,770,364 $4,515,416
Deferred (262,483) 612,181 (693,716)
------------------------------------
2,526,971 3,382,545 3,821,700
State and local:
Current 405,600 840,400 1,138,960
Deferred (29,100) 16,800 (14,400)
------------------------------------
376,500 857,200 1,124,560
Foreign:
Current 20,417 20,000 16,120
Deferred (835,417) (246,000) 95,825
------------------------------------
(815,000) (226,000) 111,945
------------------------------------
Total income tax provision $2,088,471 $4,013,745 $5,058,205
====================================
</TABLE>
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and tax basis of the Company's assets and
liabilities. At September 28, 1997 and September 29, 1996 deferred tax assets
and liabilities are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
Deferred tax assets:
Canadian net operating loss carryovers $2,480,000 $2,528,000
Accounts receivable 139,000 69,700
Inventory 640,000 256,600
Other accrued liabilities 585,000 167,700
Employee benefits 783,000 334,500
---------------------------
Total deferred tax assets 4,627,000 3,356,500
Less valuation allowances for Canadian loss
carryovers - (728,000)
---------------------------
Total net deferred tax asset 4,627,000 2,628,500
Deferred tax liabilities:
Property, plant and equipment 3,512,500 2,641,000
---------------------------
Net deferred tax asset (liability) $1,114,500 $ (12,500)
===========================
</TABLE>
F-22
<PAGE> 46
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
10. INCOME TAXES (CONTINUED)
A reconciliation of the Company's income tax expense at the federal
statutory tax rate to the actual income tax expense follows:
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 24,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Tax at federal statutory rate of 34% $1,703,000 $1,736,745 $3,922,733
State and local taxes, net of
federal tax effect 248,500 565,762 742,210
Settlement of prior years' income
tax liabilities - 581,574 -
Nondeductible expenses 741,971 211,474 314,430
Reversal of valuation allowance for
Canadian loss carryovers (728,000) - -
Effect of unrealized Canadian tax
losses - 857,000 -
Other, net 123,000 61,190 78,832
----------------------------------------
Provision for income taxes $2,088,471 $4,013,745 $5,058,205
========================================
</TABLE>
For Canadian income tax purposes, approximately $7,294,000 of net
operating losses are available at September 28, 1997 for carryover
against taxable income in future years. These carryovers expire
$1,082,000 in 2002, $4,730,000 in 2003 and $1,482,000 in 2004. The
net operating loss carry forwards include timing differences,
principally tax depreciation in excess of financial statement
depreciation, of approximately $5,027,000, for which a $1,709,000
deferred tax liability has been recorded.
F-23
<PAGE> 47
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
11. RETIREMENT AND PROFIT SHARING PLANS
The Company provides defined contribution retirement plans to
substantially all employees of LDM Technologies, Inc. and Como.
Contributions by the Company are based on matching 50% of employees
contributions, up to a maximum of 3% of earnings. Costs under the
plans amounted to $296,410, $251,732, and $256,482 in 1997, 1996
and 1995, respectively.
12. COMMITMENTS AND CONTINGENCIES
LEASES AND PURCHASE COMMITMENTS
The Company leases certain of its facilities, furniture and
fixtures, and equipment. Rental expense, including short-term
cancelable leases, approximated $2,227,000, $1,865,000, and
$2,000,000 for the years ended September 28, 1997, September 29,
1996 and September 24, 1995, respectively. Future commitments under
noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
RELATED UNRELATED
FISCAL YEAR PARTIES PARTIES TOTAL
- ----------- ------------------------------------
<S> <C> <C> <C>
1998 $ 509,412 $1,846,979 $2,356,391
1999 509,412 1,710,384 2,219,796
2000 509,412 1,462,258 1,971,670
2001 509,412 1,203,884 1,713,296
2002 509,412 906,920 1,416,332
Thereafter 254,706 1,027,228 1,281,934
------------------------------------
Total $2,801,766 $8,157,653 $10,959,419
</TABLE> ====================================
F-24
<PAGE> 48
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
STOCK REDEMPTION AGREEMENT
The Company and its two shareholders are party to a binding stock redemption
agreement providing the following:
- Upon the death of each shareholder, the Company is
required to purchase and the shareholder's estate is
required to sell all of the shareholder's stock at a
price equal to $33,000,000. This amount is payable upon
receipt of the proceeds of the life insurance policies
owned by the Company on the shareholders life. Any
shortfall between the insurance proceeds and the amount
payable to the shareholder's estate will require funding
by the Company, subject to restrictions in the Company's
loan agreements.
- The Company is required to purchase and maintain
life insurance policies of $33,000,000 on the lives of
each of the shareholders for as long as the Stock
Redemption Agreement is in effect. The aggregate premium
for these policies presently approximates $1 million per
year. Further, the Company is prohibited from assigning,
pledging or borrowing against these life insurance
policies without the consent of the insured shareholder.
- The Agreement may be terminated by mutual agreement
of all parties or by any shareholder with respect to that
shareholder's stock only.
CONTINGENCIES
Environmental Matters
The Company has an outstanding notification of violation or possible
violation of certain permitted air emission levels for organic compounds at one
of its plants. It is the Company's policy to accrue environmental expenses when
it is both probable that a liability has been incurred and the amount can be
reasonably estimated. The Company believes that, based on available
information, the ultimate liability with respect to this case will not
materially exceed the recorded liability of $160,000; however, the ultimate
resolution of such matters cannot be predicted with certainty.
The Company settled on an emission violation at a second facility during fiscal
year 1997 for $188,000 of which $150,000 had been accrued in prior years
and $38,000 was expensed in the current year.
F-25
<PAGE> 49
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company previously received letters from a corporation and a group
of corporations, which have entered into agreements with the United States
Environmental Protection Agency ("USEPA") to prepare remedial designs for
curing two separate failed landfill sites. In each letter, the Company was
identified as a potentially responsible party for its alleged waste disposal at
such landfills. In the first case, a lawsuit was brought against the Company
for which the USEPA subsequently agreed to provide contribution protection on
payment of a nominal fee. Although subject to approval by the United States
Assistant General Attorney, the plaintiff has indicated they will dismiss the
lawsuit. In the second case, no lawsuit has yet been filed and the Company has
no reason to believe that any liability associated with the particular landfill
will materially exceed the recorded liability of $50,000; however the ultimate
outcome of such matters cannot be predicted with certainty.
LITIGATION
During 1996 the Company issued purchase orders for certain equipment amounting
to approximately $10 million. Subsequently the Company canceled the orders but
in the fourth quarter of 1997 was sued by the supplier for damages and for
specific performance under the contract. Based, in part, on the advice of
legal counsel, the Company believes it can settle this litigation for
approximately $1 million and has accrued this amount in the financial
statements for the year ended September 28, 1997.
The Company accrues contingent liabilities when it is probable that future
costs will be incurred and such costs can be reasonably estimated. Such
accruals are based on developments to date, the Company's estimates of the
outcomes of these matters and its experience in contesting, litigating and
settling other matters. As the scope of the liabilities becomes better defined,
there will be changes in the estimates of future costs; however the
Company does not believe any such charges will have a material effect on the
Company's future results of operations and financial condition or liquidity.
F-26
<PAGE> 50
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
13. SUBSEQUENT EVENTS (UNAUDITED)
BUSINESS ACQUISITIONS
On September 30, 1997, the Company acquired the entire voting stock of
Kenco Plastics, Inc. (Michigan) and Kenco Plastics, Inc. (Kentucky) and the
business and net tangible assets of Narens Design and Engineering, Inc. for
approximately $27.5 million in cash, subject to certain adjustments. The
acquisition was financed with additional borrowings under the existing Senior
Credit Facility.
On November 25, 1997, the Company acquired the business and certain assets
comprising the 'Beienheim' plant of Aeroquip Corporation for approximately
$8.6 million in cash, subject to certain adjustments. The acquisition was
financed with additional borrowings under the existing Senior Credit Facility.
A summary of the preliminary allocation of the purchase price of each of
the above acquisitions is as follows (amounts may be subject to change on
completion of the respective closing processes):
<TABLE>
<CAPTION>
IN THOUSANDS KENCO BEIENHEIM
------------------
<S> <C> <C>
Current assets $12,732 $5,643
Net property, plant and equipment 13,373 5,532
Other liabilities (6,705) (2,540)
------------------
Net tangible assets 19,400 8,635
Goodwill 8,100 -
------------------
Cost $27,500 $8,635
==================
</TABLE>
The acquisitions will be accounted for using the purchase method.
Accordingly, the assets acquired and the liabilities assumed will
be recorded at fair values and the excess of the purchase price
over the net assets acquired will be recorded as goodwill and
amortized over 15 years.
F-27
<PAGE> 51
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
13. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
The unaudited pro forma condensed consolidated results of operations of the
Company for the fiscal year ended September 28, 1997, shown below, gives effect
to the Molmec acquisition, the Kendallville acquisition, the Senior Credit
Facility and the Initial Offering and the Kenco and Beienheim acquisitions as
if such transactions had occurred on September 30, 1996. The unaudited pro
forma consolidated financial information relies on preliminary information
regarding the allocation of purchase price which may be subject to change when
finalized. The unaudited pro forma consolidated financial information does not
purport to represent what the Company's financial position or results of
operations would actually have been had the transactions occurred on the dates
indicated above or to project the Company's results of operations for any
future period.
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 28,
1997
-------------
(IN THOUSANDS)
<S> <C>
Net sales $416,520
Cost of sales 340,840
--------
Gross margin 75,680
Selling, general and administrative expenses 47,326
Other expenses, principally interest 17,681
--------
Income from continuing operations before income
taxes and minority interests 10,673
Provision for income taxes 4,762
--------
Income from continuing operations before minority
interest 5,911
Minority interest 142
--------
Income from continuing operations $ 6,053
========
</TABLE>
F-28
<PAGE> 52
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility, the standby letters of credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes and the $4.4 million Variable Rate Demand
Limited Obligation Revenue Bonds are obligations of LDM Technologies, Inc. The
obligations are guaranteed fully, unconditionally and jointly and severally by
LDM Canada and certain holding companies as described above. The non-guarantor
subsidiaries are Como and LDM Mexico.
Supplemental consolidating financial information of LDM Technologies, Inc., LDM
Canada (including the related holding company guarantors) and combined Como and
LDM Mexico (the "non-guarantor subsidiaries") is presented below. LDM Mexico
did not have any operations prior to 1996 and ceased operations during the
1997 fiscal year. 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 segment information in Note
8 and the summarized financial information below provide sufficient information
to allow investors to separately determine the nature of the assets held by and
the operations of LDM Technologies, Inc., and the guarantor and non-guarantor
subsidiaries.
F-29
<PAGE> 53
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 28, 1997
<TABLE>
<CAPTION>
UNCONSOLIDATED
-----------------------------------------
LDM NON-
TECHNOLOGIES, LDM GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
--------------------------------------------------------------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 11,600 $ 4,598,044 $ 22,560 $ 4,632,204
Accounts receivable 40,102,307 6,688,426 1,773,227 $ (2,751,820) 45,812,140
Note receivable affiliates 16,097,525 (16,097,525)
Inventories 10,893,566 2,113,707 2,040,770 15,048,043
Mold costs 3,887,517 8,901,850 1,036,517 13,825,884
Prepaid expenses 1,852,006 121,217 81,557 2,054,780
Refundable income taxes - 390,169 390,169
Deferred income taxes 1,851,700 2,575,000 200,300 4,627,000
------------------------------------------------------------------------
Total current assets 74,696,221 24,998,244 5,545,100 (18,849,345) 86,390,220
Net property, plant and equipment 64,072,964 16,238,750 1,947,229 82,258,943
Investment in subsidiaries 4,318,618 (4,318,618)
Goodwill 36,790,968 36,790,968
Debt issue costs 5,732,858 5,732,858
Other 679,703 333,938 1,013,641
------------------------------------------------------------------------
$186,291,332 $41,236,994 $7,826,267 $(23,167,963) $212,186,630
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $1,700,000 $1,829,689 $ 3,529,689
Accounts payable 21,261,752 $ 7,802,149 2,260,109 $ (3,171,657) 28,152,353
Accrued liabilities 12,791,577 2,069,662 800,927 15,662,166
Accrued compensation 3,894,803 286,156 435,132 4,616,091
Advance mold payments from customers 10,101,849 980,246 11,082,095
Income taxes payable 1,631,437 8,327 1,639,764
Note payable to affiliates 350,000 (262,500) 87,500
Current maturities of long-term debt 880,902 98,438 979,340
------------------------------------------------------------------------
Total current liabilities 42,160,471 20,268,143 6,754,541 (3,434,157) 65,748,998
Long-term debt due after one year 122,256,261 15,413,454 (15,408,824) 122,260,891
Deferred income taxes 1,489,700 1,709,000 313,800 3,512,500
Minority interests 279,341 279,341
Stockholders' equity:
Common stock 60 5,856,307 1,000 (5,857,307) 60
Additional paid-in capital 94,072 126,032 (126,032) 94,072
Retained earnings 20,290,768 (2,009,910) 630,894 1,441,199 20,352,951
Currency translation adjustments (62,183) (62,183)
------------------------------------------------------------------------
Total stockholders' equity 20,384,900 3,846,397 757,926 (4,604,323) 20,384,900
------------------------------------------------------------------------
Total liabilities and stockholders' equity $186,291,332 $41,236,994 $7,826,267 $(23,167,963) $212,186,630
========================================================================
</TABLE>
F-30
<PAGE> 54
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
UNCONSOLIDATED
----------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 9,000 $ 16,679 $ 2,096,183 $ 2,121,862
Accounts receivable 25,469,229 9,405,208 1,912,005 $ (1,305,042) 35,481,400
Note receivable affiliates 3,908,824 (3,908,824)
Inventories 7,056,362 3,017,494 1,759,346 11,833,202
Mold costs 4,284,317 398,630 2,446,027 7,128,974
Prepaid expenses 165,040 218,380 71,007 454,427
Refundable income taxes 364,725 364,725
Deferred income taxes 623,500 205,000 828,500
----------------------------------------------------------------------------
Total current assets 41,880,997 13,056,391 8,489,568 (5,213,866) 58,213,090
Cash and equivalents restricted to use 658,018 658,018
Net property, plant and equipment, at cost 40,440,309 16,040,296 2,475,351 58,955,956
Investment in subsidiaries 520,185 (520,185)
Debt issue costs 399,240 399,240
Other 148,273 165,283 585,336 898,892
----------------------------------------------------------------------------
$84,047,022 $29,261,970 $11,550,255 $ (5,734,051) $119,125,196
============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit and revolving loan $ 1,800,976 $ 1,800,976
Lines of credit and loans in default $15,500,000 $ 3,634,290 19,134,290
Accounts payable 18,151,697 11,896,488 2,091,252 $ (1,305,042) 30,834,395
Demand note payable to shareholders 87,500 87,500
Accrued liabilities 4,604,242 844,726 2,148,918 7,597,886
Accrued compensation 4,201,751 4,201,751
Advance mold payments 44,752 3,616,294 3,661,046
Income taxes payable 2,451,124 8,443 2,459,567
Note payable to affiliates 3,908,824 (3,908,824)
Current maturities of long-term debt 1,080,000 4,333 236,250 1,320,583
Long-term debt in default 17,781,111 9,640,649 27,421,760
----------------------------------------------------------------------------
Total current liabilities 63,857,425 29,982,505 9,893,690 (5,213,866) 98,519,754
Long-term debt due after one year 1,920,000 2,407 98,438 2,020,845
Deferred income taxes 526,000 315,000 841,000
Minority interests 421,532 421,532
Stockholders' equity:
Common stock 60 1,350,000 1,000 (1,351,000) 60
Additional paid-in capital 94,072 132,532 (132,532) 94,072
Retained earnings 17,290,116 (2,010,759) 1,109,595 901,164 17,290,116
Currency translation adjustments (62,183) (62,183) 62,183 (62,183)
----------------------------------------------------------------------------
Total stockholders' equity 17,322,065 (722,942) 1,243,127 (520,185) 17,322,065
----------------------------------------------------------------------------
Total liabilities and stockholders' equity $84,047,022 $29,261,970 $11,550,255 $ (5,734,051) $119,125,196
============================================================================
</TABLE>
F-31
<PAGE> 55
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 28, 1997
<TABLE>
<CAPTION>
UNCONSOLIDATED
-----------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Product sales $204,901,483 $38,426,722 $19,207,041 $(1,432,817) $261,102,429
Mold sales 20,843,496 7,035,064 4,038,772 31,917,332
---------------------------------------------------------------------
225,744,979 45,461,786 23,245,813 (1,432,817) 293,019,761
Cost of sales:
Product cost of sales 156,476,604 36,650,926 18,837,224 (1,432,817) 210,531,937
Mold cost of sales 20,425,268 6,485,171 3,487,149 30,397,588
---------------------------------------------------------------------
176,901,872 43,136,097 22,324,373 (1,432,817) 240,929,525
---------------------------------------------------------------------
Gross margin 48,843,107 2,325,689 921,440 52,090,236
Selling, general and administrative expenses 32,395,947 1,572,751 1,780,757 (188,273) 35,561,182
---------------------------------------------------------------------
Operating profit (loss) 16,447,160 752,938 (859,317) 188,273 16,529,054
Other expenses (income):
Equity in net loss of subsidiaries 722,319 (722,319) -
Interest 10,498,863 1,567,463 249,716 (1,239,877) 11,076,165
Other, net (914,035) (31,975) (38,366) 1,428,150 443,774
---------------------------------------------------------------------
10,307,147 1,535,488 211,350 (534,046) 11,519,939
---------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes and minority interest 6,140,013 (782,550) (1,070,667) 722,319 5,009,115
Provision for income taxes 3,281,554 (845,583) (347,500) 2,088,471
---------------------------------------------------------------------
Income (loss) from continuing operations
before minority interest 2,858,459 63,033 (723,167) 722,319 2,920,644
Minority interest loss 142,191 142,191
---------------------------------------------------------------------
Net income (loss) $ 3,000,650 $ 63,033 $ (723,167) $ 722,319 $ 3,062,835
=====================================================================
</TABLE>
F-32
<PAGE> 56
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 29, 1996
<TABLE>
<CAPTION>
UNCONSOLIDATED
-------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Product sales $142,228,576 $ 31,036,717 $21,535,462 $(2,330,095) $192,470,660
Mold sales 18,832,061 5,933,579 522,594 25,288,234
-------------------------------------------------------------------------
161,060,637 36,970,296 22,058,056 (2,330,095) 217,758,894
Cost of sales:
Product cost of sales 110,645,509 31,795,935 19,982,352 (2,330,095) 160,093,701
Mold cost of sales 16,980,752 5,342,609 479,293 22,802,654
-------------------------------------------------------------------------
127,626,261 37,138,544 20,461,645 (2,330,095) 182,896,355
-------------------------------------------------------------------------
Gross margin 33,434,376 (168,248) 1,596,411 34,862,539
Selling, general and administrative expenses 23,722,181 1,276,714 1,419,558 26,418,453
-------------------------------------------------------------------------
Operating profit (loss) 9,712,195 (1,444,962) 176,853 8,444,086
Other expenses (income):
Equity in net loss of subsidiaries 2,530,671 (2,530,671)
Interest 1,833,929 1,218,107 227,868 $(5,734,051) 3,279,904
Other, net (938,218) 531,026 463,300 56,108
-------------------------------------------------------------------------
3,426,382 1,749,133 691,168 (2,530,671) 3,336,012
-------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes, minority interest and
extraordinary item 6,285,813 (3,194,095) (514,315) 2,530,671 5,108,074
Provision for income taxes 4,437,974 (226,229) (198,000) 4,013,745
-------------------------------------------------------------------------
Income (loss) from continuing operations
before minority interest and extraordinary
item 1,847,839 (2,967,866) (316,315) 2,530,671 1,094,329
Minority interest loss 79,078 79,078
-------------------------------------------------------------------------
Income from continuing operations before
extraordinary item 1,926,917 (2,967,866) (316,315) 2,530,671 1,173,407
Loss from discontinued operations, net of
income taxes and minority interest (57,610) (57,610)
-------------------------------------------------------------------------
Income (loss) before extraordinary item 1,869,307 (2,967,866) (316,315) 2,530,671 1,115,797
Extraordinary item, no income tax effect 753,510 753,510
-------------------------------------------------------------------------
Net income (loss) $ 1,869,307 $(2,214,356) $(316,315) $2,530,671 $ 1,869,307
=========================================================================
</TABLE>
F-33
<PAGE> 57
LDM Technologies, Inc.
Notes To Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 24, 1995
<TABLE>
UNCONSOLIDATED
---------------------------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA COMO ENTRIES CONSOLIDATED
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales:
Product sales $149,942,710 $33,777,902 $30,725,375 $ (156,866) $214,289,121
Mold sales 4,650,187 932,051 1,119,986 6,702,224
------------------------------------------------------------------------
154,592,897 34,709,953 31,845,361 (156,866) 220,991,345
Cost of sales:
Product cost of sales 119,669,153 29,884,687 26,660,582 (156,866) 176,057,556
Mold cost of sales 4,523,639 816,776 1,009,854 6,350,269
------------------------------------------------------------------------
124,192,792 30,701,463 27,670,436 (156,866) 182,407,825
------------------------------------------------------------------------
Gross margin 30,400,105 4,008,490 4,174,925 38,583,520
Selling, general and administrative expenses 20,146,099 1,708,145 1,660,686 23,514,930
------------------------------------------------------------------------
Operating profit 10,254,006 2,300,345 2,514,239 15,068,590
Other expenses (income):
Equity in net income of subsidiaries (1,093,454) 1,093,454
Interest 1,781,754 1,085,554 310,518 3,177,826
Other, net (1,206,305) 937,576 622,042 353,313
------------------------------------------------------------------------
(518,005) 2,023,130 932,560 1,093,454 3,531,139
------------------------------------------------------------------------
Income from continuing operations before
income taxes, and minority interest 10,772,011 277,215 1,581,679 (1,093,454) 11,537,451
Provision for income taxes 4,292,765 111,952 653,488 5,058,205
------------------------------------------------------------------------
Income from continuing operations before
minority interest 6,479,246 165,263 928,191 (1,093,454) 6,479,246
Minority interest income (231,735) (231,735)
------------------------------------------------------------------------
Income from continuing operations 6,247,511 165,263 928,191 (1,093,454) 6,247,511
Income from discontinued operations 86,546 86,546
------------------------------------------------------------------------
Net income $ 6,334,057 $ 165,263 $ 928,191 $(1,093,454) $6,334,057
========================================================================
</TABLE>
F-34
<PAGE> 58
LDM Technologies, Inc.
Notes To Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 28,1997
<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------------
LDM
TECHNOLOGIES, LDM NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 3,000,650 $ 63,033 $(723,167) $722,319 $ 3,062,835
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Equity in subsidiaries losses 722,319 (722,319)
Depreciation and amortization 9,054,516 2,140,766 760,036 11,955,318
(Gain) loss on sale of property and
equipment (151,253) (4,292) (155,545)
Deferred income taxes (264,500) (866,000) 3,500 (1,127,000)
Other 203,048 250,101 453,149
Changes in assets and liabilities, net of
the effect of the 1997 acquisitions
Accounts and notes receivable (8,222,482) 2,631,937 132,278 (5,458,267)
Inventory and mold costs 2,164,494 (7,027,546) (91,247) (4,954,299)
Prepaid expenses (1,572,758) 89,922 (10,550) (1,493,386)
Other assets 64,987 349,897 414,884
Accounts payable and accrued
liabilities 2,319,638 4,488,594 82,527 466,011 7,356,770
Income taxes payable (692,871) (25,444) (718,315)
------------------------------------------------------------------------
Net cash provided by operating
activities 6,625,788 2,120,704 123,641 466,011 9,336,144
INVESTING ACTIVITIES
Purchase of Molmec (net of $2,704,958 cash
received in acquisition) (53,197,708) (53,197,708)
Additions to property, plant and equipment (10,521,216) (2,174,169) (80,218) (12,775,603)
Purchase of Kendallville (7,158,703) (7,158,703)
Proceeds from disposal of property, and
equipment 1,768,667 7,000 1,775,667
Cash and cash equivalents restricted for
construction of new corporate facility 658,018 658,018
Disbursements to affiliates (12,587,352) 12,587,352
Payments from affiliates 1,553,363 (1,553,363)
Equity investment in affiliate (4,500,000) 4,500,000
Other (484,412) (484,412)
------------------------------------------------------------------------
Net cash (used for) provided by investing
activities (84,469,343) 2,325,831 (73,218) 11,033,989 (71,182,741)
FINANCING ACTIVITIES
Proceeds from issuance of long term debt 103,961,497 11,500,000 (11,500,000) 103,961,497
Payments on long-term debt (12,315,342) (9,647,389) (236,250) (22,198,981)
Net proceeds from Line of Credit/Revolver (13,800,000) (3,634,290) 28,713 (17,405,577)
------------------------------------------------------------------------
Net cash provided (used) by financing
activities 77,846,155 (1,781,679) (207,537) $(11,500,000) 64,356,939
------------------------------------------------------------------------
Net increase (decrease) in cash 2,600 2,664,856 (157,114) 2,510,342
Cash at beginning of year 9,000 1,933,188 179,674 2,121,862
------------------------------------------------------------------------
Cash at end of year $ 11,600 $ 4,598,044 $ 22,560 $ 4,632,204
=========================================================================
</TABLE>
F-35
<PAGE> 59
LDM Technologies, Inc.
Notes To Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 29,1996
<TABLE>
<CAPTION>
UNCONSOLIDATED
----------------------------------------------------
LDM
TECHNOLOGIES, ARROW NON-GUARANTOR CONSOLIDATING
INC. CANADA SUBSIDIARIES ENTRIES CONSOLIDATED
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $1,869,307 $(2,214,356) $(316,315) $2,530,671 $1,869,307
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity in subsidiaries losses 2,530,671 (2,530,671)
Depreciation and amortization 5,371,129 2,019,437 614,952 8,005,518
Extraordinary gain on retirement of debt (753,510) (753,510)
(Gain) loss on sale of property and
equipment 105,703 (2,850) 102,853
Deferred income taxes 521,000 (250,019) 112,000 382,981
Other (479,675) (25,531) (505,206)
Changes in assets and liabilities, net of
the effect of the distribution of IMCA:
Accounts and notes receivable (3,475,267) (5,717,553) 1,813,638 (7,379,182)
Refundable income taxes (364,725) (364,725)
Inventory and mold costs 1,968,402 (698,478) (2,244,454) (974,530)
Prepaid expenses (25,153) (40,738) (12,570) (78,461)
Other assets (221,238) 228,235 6,997
Accounts payable and accrued liabilities 3,582,795 6,266,630 2,397,607 12,247,032
Income taxes payable 353,075 (163) 352,912
----------------------------------------------------------------------------------
Net cash provided (used) by operating
activities 11,347,239 (432,536) 1,997,283 12,911,986
INVESTING ACTIVITIES
Additions to property, plant and equipment (17,383,272) (2,502,058) (401,048) (20,286,378)
Proceeds from disposal of property, and
equipment 269,310 15,000 284,310
Cash and cash equivalents restricted for
construction of new corporate facility 6,685,534 6,685,534
Other 1,228,892 17,997 1,246,889
---------------------------------------------------------------------------------
Net cash used for investing activities (9,199,536) (2,502,058) (368,051) (12,069,645)
FINANCING ACTIVITIES
Redemption of stockholder's interest,
including cash owned by IMCA of $212,968 (4,712,968) (4,712,968)
Proceeds from issuance of long term debt 18,804,916 1,188,681 19,993,597
Borrowings on line of credit:
Proceeds 12,099,999 4,387,482 1,815,540 18,303,021
Repayments (13,800,000) (2,679,830) (990,415) (17,470,245)
Payments on notes payable and long-term debt (15,734,104) (400,312) (16,134,416)
Other 156,183 6,500 162,683
----------------------------------------------------------------------------------
Net cash provided (used) by financing
activities (3,185,974) 2,896,333 431,313 141,672
----------------------------------------------------------------------------------
Net increase (decrease) in cash (1,038,271) (38,261) 2,060,545 984,013
Cash at beginning of year 1,047,271 54,940 35,638 1,137,849
----------------------------------------------------------------------------------
Cash at end of year $9,000 $16,679 $2,096,183 $2,121,862
==================================================================================
</TABLE>
F-36
<PAGE> 60
LDM Technologies, Inc.
Notes to Consolidated Financial Statements (Continued)
14. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 24, 1995
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------------------
LDM
TECHNOLOGIES, LDM DISCONTINUED CONSOLIDATING
INC. CANADA COMO OPERATIONS ENTRIES CONSOLIDATED
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 6,247,511 $ 165,263 $ 928,191 $ 86,546 $(1,093,454) $ 6,334,057
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in subsidiaries earnings (1,093,454) 1,093,454
Depreciation and amortization 4,583,521 1,423,101 671,775 99,384 6,777,781
Gain on sale of property and
equipment (20,686) (18,632) (39,318)
Deferred income taxes (516,211) (96,000) (612,211)
Other 526,540 526,540
Changes in assets and
liabilities:
Accounts and notes receivable (1,257,726) (1,287,494) 213,997 414,933 (1,916,290)
Inventory and mold costs (863,449) (1,276,853) 887,138 (5,831) (1,258,995)
Prepaid expenses 60,338 (47,902) 46,380 1,045 59,861
Other assets (224,050) (224,050)
Accounts payable and accrued
liabilities 2,538,443 3,432,094 (378,700) (338,342) 5,253,495
Income taxes payable (102,272) 64,394 (75,074) (112,952)
------------------------------------------------------------------------------------
Net cash provided by operating
activities 10,102,555 2,472,603 2,030,099 182,661 14,787,918
INVESTING ACTIVITIES
Additions to property, plant
and equipment (12,248,949) (2,219,873) (387,365) (293,785) (15,149,972)
Proceeds from disposal of
property and equipment 80,000 20,600 100,600
Cash and cash equivalents
restricted for construction of
new corporate facility (7,343,552) (7,343,552)
Other (605,460) (617,319) (1,222,779)
------------------------------------------------------------------------------------
Net cash used for investing
activities (20,117,961) (2,837,192) (366,765) (293,785) (23,615,703)
FINANCING ACTIVITIES
Proceeds from issuance of long
term debt 9,000,000 9,000,000
Borrowings on line of credit:
Proceeds 18,270,000 1,932,151 697,923 20,900,074
Repayments (14,630,000) (296,406) (2,141,831) (17,068,237)
Payments on notes payable and
long-term debt (1,764,650) (1,315,102) (450,000) (3,529,752)
Other (312,315) (312,315)
------------------------------------------------------------------------------------
Net cash provided (used) by
financing activities 10,563,035 320,643 (1,893,908) (8,989,770)
------------------------------------------------------------------------------------
Net increase (decrease) in cash 547,629 (43,946) (230,574) (111,124) 161,985
Cash at beginning of year 263,300 98,886 266,212 347,466 975,864
------------------------------------------------------------------------------------
Cash at end of year $ 810,929 $ 54,940 $35,638 $ 236,342 $ 1,137,849
====================================================================================
</TABLE>
F-37
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on the 10th day of
December 1997.
LDM TECHNOLOGIES, INC.
By: /s/ Richard J. Nash
-----------------------
Richard J. Nash
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Gary E. Borushko
--------------------
Gary E. Borushko
(Chief Financial Officer)
By: /s/ Joseph E. Blake
-------------------
Joseph E. Blake
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on December 10th, 1997.
Signature Title
--------- -----
/s/ Joe Balous Director
- -------------------
Joe Balous
/s/ Richard J. Nash Director
- -------------------
Richard J. Nash
<PAGE> 62
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
------- --- -----------
3.1 Articles of Incorporation of LDM Technologies, Inc.
(the "Company"), as amended [3.1]*
3.2 By-laws of the Company [3.5]*
4.1 Indenture dated as of January 15, 1997 by and among the
Company, LDM Holdings, LDM Partnership, LDM Canada and
IBJ Schroder Bank & Trust Company, as Trustee [4.1]*
4.2 Form of 10 3/4% Senior Subordinated Note Due 2007,
Series B [4.2]*
4.3 Form of Guarantee [4.3]*
10.1(a) Loan and Security Agreement dated as of January 22,
1997 ("Loan Agreement") by and between the Company, as
Borrower, and BankAmerica Business Credit, Inc.
("BankAmerica"), as Agent for the Lenders [10.2]*
10.1(b) First Amendment to Loan Agreement dated May 1, 1997.
10.1(c) Amendment No. 3 and Affirmation of Guaranties to Loan
Agreement dated as of July 14, 1997.
10.1(d) Amendment No. 3 and Affirmation of Guaranties to Loan
Agreement dated as of September 30, 1997.
10.1(e) Amendment No. 4 and Affirmation of Guaranties to Loan
Agreement dated as of November 25, 1997.
10.2 Intellectual Property Security Agreement dated as of
January 22, 1997 made by the Company in favor of
BankAmerica, as Agent for Lenders [10.4]*
10.3 Stock Purchase Agreement among the Company and the
various stockholders of Kenco Plastics, Inc., a
Michigan corporation, and Kenco Plastics, Inc., a
Kentucky corporation, and Narens Design & Engineering
Co., a Michigan corporation, dated September 30, 1997
[1].**
12 Statement of Ratio of Earnings to Fixed Charges
21 Subsidiaries and Affiliates of the Company
27 Financial Data Schedule
The Exhibits marked with one asterisk were filed as
Exhibits to the Registration Statement of the Company on Form
S-4 (No. 333-21819) and the Exhibit marked with two asterisks
was filed as an Exhibit to the Form 8-K of the Company
dated September 30, 1997, and are incorporated herein by
reference, the Exhibit numbers in brackets being those in such
Registration Statement on Form 8-K Report.
<PAGE> 1
[BANKAMERICA LETTERHEAD]
EXHIBIT 10.1(b)
May 1, 1997
LDM Technologies, Inc.
2500 Executive Hills Drive
Auburn Hills, MI 43216
Attention: Richard Nash
Chief Executive Officer
Re: $45,000,000 Loan and Security Agreement, dated as of
January 22, 1997, among LDM Technologies, Inc. (the
"Borrower"), the financial institutions from time to
time party thereto (the "Lenders"), and BankAmerica
Business Credit, Inc., as Agent (the "Agent") (as
amended through the date hereof, the "Loan and Security
Agreement")
Gentlemen:
Reference is hereby made to the provisions contained in Section
9.13(d)(iv) of the Loan and Security Agreement (the "Intercompany Loan Clause").
Capitalized terms used herein and not otherwise defined shall have the meaning
provided such term in the Loan and Security Agreement.
The undersigned Majority Banks hereby agree that, subject to the
limitations contained in clause (A) and (B) of the Intercompany Loan Clause,
the Borrower shall be permitted to make loans to LDM Canada pursuant to the
Intercompany Loan Clause without giving effect to the EBITDA limitation
contained in the proviso thereto.
This Letter Agreement shall become effective as of the date
hereof upon the execution and delivery hereof by the Borrower and the Majority
Lenders.
The execution, delivery and effectiveness of this Letter
Agreement shall not operate as a waiver of any right, power or remedy of the
Agent or any Lender under the Loan and Security Agreement or any other Loan
Document, nor constitute a waiver of any provision of the Loan Security
Agreement or any other Loan Document, except as specifically set forth herein.
<PAGE> 2
May 1, 1997
Page 2
THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS) OF THE
STATE OF ILLINOIS.
IN WITNESS WHEREOF, the parties have executed this Letter Agreement as
of the date and year first above written.
BANKAMERICA BUSINESS CREDIT, INC.
Individually as a Lender and as Agent
By: [SIG]
----------------------------------
Title: Vice President
AGREED AND ACCEPTED:
LDM TECHNOLOGIES, INC.
By: [SIG]
---------------------------------
Title: Director of Finance
<PAGE> 1
EXHIBIT 10.1(c)
AMENDMENT NO. 2 AND AFFIRMATION OF GUARANTIES
This Amendment No. 2 and Affirmation of Guaranties (this "Amendment") dated as
of July 14, 1997 is by and among LDM Technologies, Inc., a Michigan
("corporation ("Borrower"), and LDM Holding Canada, Inc. a Michigan corporation
("LDM Holding"), LDM Technologies Company, a Nova Scotia unlimited liability
company ("LDM Canda"), LDM Holdings, L.L.C., a Michigan limited liability
company ("LDM LLC"), and LDM Canada Limited Partnership, a Michigan limited
partnership ("LDM LP") (collectively, the "Guarantors"), and BankAmerica
Business Credit, Inc., a Delaware corporation, for itself as a Lender and as
Agent for the Lenders (in its capacities as Lender and as Agent, "Lender").
RECITALS:
WHEREAS, Borrower and Lender are parties to a Loan and Security
Agreement dated as of January 22, 1997, as amended and otherwise modified prior
to the date hereof (as so amended and modified, and as the same may be further
amended, restated, supplemented or otherwise modified, the "Loan Agreement"),
pursuant to which Lender has made and may hereafter make loans, advances and
other extensions of credit to Borrower;
WHEREAS, Borrower wishes to obtain, and Lender is willing to grant,
an amendment to the Loan Agreement as set forth herein, subject to the express
terms and conditions specified in this Amendment; and
WHEREAS, this Amendment shall constitute a Loan Document and these
Recitals shall be construed as part of this Amendment
NOW, THEREFORE, in consideration of the foregoing and the agreements,
premises and covenants set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined in
this Amendment shall have the meanings ascribed to them in the Loan Agreement.
2. Amendment to Loan Agreement. Effective as of June 27, 1997,
Section 9.23 of the Loan Agreement is hereby amended and restated to read in
its entirety as follows:
9.23 Capital Expenditures. Neither the Borrower nor any of
its Subsidiaries shall make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital
Expenditures by the Borrower and its Subsidiaries on a
consolidated basis would exceed the sum of $14,000,000 plus the
aggregate amount of all cash proceeds received by the Borrower
from its sale of its Molmec Division facility consisting of real
estate in Walled Lake, Michigan, during the 1997 Fiscal Year,
$15,000,000, during the 1999 Fiscal Year, and $9,000,000, during
each Fiscal Year thereafter.
<PAGE> 2
3. Warranties and Representations. Borrower and each Guarantor
hereby warrants and represents to Leader that:
(a) Authorization, etc. Each of Borrower and each Guarantor has
the power and authority to execute, deliver and perform this Amendment and the
Loan Agreement, as amended hereby, as applicable. Each of Borrower and each
Guarantor has taken all necessary action (including, without limitation,
obtaining approval of its stockholders if necessary) to authorize its
execution, delivery and performance of this Amendment and the Loan Agreement,
as amended hereby, as applicable. No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with Borrower's or any Guarantor's
execution, delivery and performance of this Amendment, except for those already
duly obtained. This Amendment has been duly executed and delivered by Borrower
and each Guarantor, and constitutes the legal, valid and binding obligation of
Borrower and such Guarantor, enforceable against it in accordance with its
terms without defense, setoff or counterclaim. Neither Borrower's nor any
Guarantor's execution, delivery and performance of this Amendment do or will
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the property of
Borrower or any of its Subsidiaries by reason of the terms of (a) any contract,
mortgage, Lien, lease, agreement, indenture or instrument to which Borrower or
any or its Subsidiaries is a party or which is binding upon it, (b) any
Requirement of Law applicable to Borrower or any of its Subsidiaries, or (c)
the certificate or articles of incorporation or by-laws, partnership agreement
or limited liability company agreement of Borrower or any of its Subsidiaries.
(b) Other Warranties and Representations. All of the warranties
and representations of Borrower and each Guarantor contained in the Loan
Agreement, the Guarantor Guarantees, and the other Loan Documents (including,
without limitation, this Amendment) are true and correct in a material respects
on and as of the date hereof (except those representations and warranties made
expressly as of a different date).
(c) No Default or Event of Default. No Default or Event of
Default has occurred and is continuing as of the date hereof.
(d) Conditions Precedent. Notwithstanding any other provision
contained in this Amendment or any other document, the effectiveness or this
Amendment is further expressly conditioned upon the satisfaction of each matter
set forth in this Section 4 on or prior to the date hereof, all in form and
substance acceptable to Lender in its sole and absolute discretion:
(a) Amendment. Lender shall have received a duly executed
original of this Amendment signed by Borrower and each Guarantor.
(b) Warranties and Representation. All of the warranties and
representations of Borrower and each Guarantor contained in the Loan Agreement,
the Guarantor Guarantees and the others Loan Documents (including, without
limitation, this Amendment) shall be true and correct in all material respects
on and as of the date hereof (except those representations and warranties made
expressly as of a different date).
2
<PAGE> 3
(c) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing as of the date hereof.
(d) No Litigation. No litigation, investigation, proceeding,
injunction, restraint or other action shall be pending or threatened against
Borrower or any Affiliate of Borrower, or any officer, director, or executive
of any thereof, which restrains, prevents or imposes adverse conditions upon,
or which otherwise relates to, the execution, delivery or performance of this
Amendment.
(e) Consents and Acknowledgments. Borrower shall have
obtained all consents, approvals and acknowledgments which may be required with
respect to the execution, delivery and performance of this Amendment.
(f) Fees, Costs and Expenses. Lender shall have received
payment of all fees, costs and expenses, including, without limitation,
reasonable attorneys' fees and expenses (including, without limitation, the
allocated costs and expenses of in-house counsel) and as otherwise due pursuant
to the Loan Agreement, incurred by Lender in connection herewith.
5. Further Assurances. Borrower hereby agrees, at its expense, to
duly execute, acknowledge and deliver to Lender all agreements, certificates,
instruments, opinions and other documents, and take all such actions, as Lender
may request in order to further effectuate the purposes of this Amendment and
to carry out the terms hereof.
6. No Novation; No Consent or Waiver. This Amendment is not, and
shall not be construed as, a novation, consent, waiver, release or modification
with respect to any of the terms, provisions, conditions, representations,
warranties, covenants, rights, powers or remedies set forth in the Loan
Agreement or any of the other Loan Documents, except for the specific instance
and purpose for which it is granted as expressly specified herein. Lender's
failure, at any time or times hereafter, to require strict performance by
Borrower of any provision or term of this Amendment shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance and
performance herewith. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Amendment shall be
deemed to have been suspended or waived by Lender unless such suspension or
waiver is (a) in writing and signed by Lender and (b) delivered to Borrower,
notwithstanding any prior practice of course of dealing, or any waiver,
forbearance or other similar agreement or understanding, whether any of the
foregoing were or are oral or written, by or between the parties hereto.
7. Documents Remain in Effect. Except as amended and modified by
this Amendment, the Loan Agreement and the other Loan Documents remain in full
force and effect, and Borrower and each Guarantor hereby ratify, adopt and
confirm their representations, warranties, agreements and covenants contained
in, and obligations and liabilities under, the Loan Agreement and the other
Loan Documents.
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8. Reference to Loan Agreement. On and after the effectiveness of
this Amendment, each reference in the Loan Agreement, as amended hereby, to
"this Agreement", "hereunder", "hereof", "herein" or words of like import, and
each reference to the "Loan Agreement" in any other Loan Document, or in any of
the other agreements, documents or other instruments executed and delivered
pursuant to the Loan Agreement, shall mean and be a reference to the Loan
Agreement, as amended hereby.
9. Incorporation of Loan Agreement. Article 15 of the Loan Agreement
is incorporated herein by reference with the same effect as if set forth in
full herein with only those modifications necessary to permit such Article to
refer to this Amendment.
10. Affirmation of Guaranties. Each of LDM Holding, LDM Canada, LDM
LLC and LDM LP (i) consents to and approves the execution and delivery of this
Amendment by the parties hereto, (ii) agrees that this Amendment does not and
shall not limit or diminish in any manner the obligations of the Guarantors
under their respective Guarantor Guarantees dated as of January 22, 1997, or
under any of the other documents executed and/or delivered by any of the
Guarantors in connection therewith, and agrees that such obligations of the
Guarantors would not be limited or diminished in any manner even if the
Guarantors had not executed this Amendment, (iii) agrees that this Amendment
shall not be construed as requiring the consent of the Guarantors in any other
circumstance, (iv) reaffirms its obligations under each of the Guarantor
Guarantees and such other related documents, and (v) agrees that the Guarantor
Guarantees and such other related documents remain in full force and effect and
are each hereby ratified and confirmed.
[signature page follows]
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<PAGE> 5
IN, WITNESS WHEREOF, this Amendment No. 2 and Affirmation of Guaranties
has been duly executed as of the date first written above.
LDM TECHNOLOGIES, INC.
By: Joe Balous
---------------------------------
Title: Chairman
------------------------------
BANKAMERICA BUSINESS CREDIT, INC,
as Lender and as Agent
By: [SIG]
---------------------------------
Title: Vice President
------------------------------
LDM HOLDING CANADA, INC,
By: Joe Balous
---------------------------------
Title: Chairman
------------------------------
LDM TECHNOLOGIES COMPANY
By: Joe Balous
---------------------------------
Title: Chairman
------------------------------
LDM HOLDINGS, L.L.C
By: LDM TECHNOLOGIES INC.,
its Member
By: Joe Balous
----------------------------
Title: Chairman
-------------------------
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LDM CANADA LIMITED PARTNERSHIP
By: LDM HOLDINGS, L.L.C.,
its General Partner
By: LDM TECHNOLOGIES, INC.,
its Member
By: Joe Balous
------------------------
Title: Chairman
---------------------
6
<PAGE> 1
EXHIBIT 10.1(d)
AMENDMENT NO. 3 AND AFFIRMATION OF GUARANTIES
This Amendment No. 3 and Affirmation of Guaranties (this "Amendment")
dated as of September 30, 1997 is by and among LDM Technologies, Inc., a
Michigan corporation ("Borrower"), and LDM Holding Canada Inc., a Michigan
corporation ("LDM Holding") and LDM Technologies Company, a Nova Scotia
unlimited liability company ("LDM Canada") (collectively, the "Guarantors"),
and BankAmerica Business Credit, Inc., a Delaware corporation, for itself as a
Lender and as Agent for the Lenders (in its capacities as Lender and as Agent,
"Lender").
RECITALS:
WHEREAS, Borrower and Lender are parties to a Loan and Security
Agreement dated as of January 22, 1997, as amended and otherwise modified prior
to the date hereof (as so amended and modified, and as the same may be further
amended, restated, supplemented or otherwise modified, the "Loan Agreement"),
pursuant to which Lender has made and may hereafter make loans, advances and
other extensions of credit to Borrower;
WHEREAS, Borrower wishes to obtain, and Lender is willing to grant, an
amendment to the Loan Agreement as set forth herein, subject to the express
terms and conditions specified in this Amendment; and
WHEREAS, this Amendment shall constitute a Loan Document, these
Recitals shall be construed as part of this Amendment and capitalized terms
used but not otherwise defined in this Amendment shall have the meanings
ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements,
promises and covenants set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Amendment of Loan Agreement.
(a) Section 1.1 of the Loan Agreement is hereby amended by adding the
following definitions in their proper alphabetical order:
"Appraisals" means those certain appraisals of the Equipment of
MB Valuation Services, Inc., copies of which have been delivered
to the Borrower and the Lender.
"Eligible Equipment" means all Equipment appraised pursuant to
the Appraisals.
"Eligible Equipment Value" means, as of any date of
determination an amount equal to the Permitted Percentage as set
forth on Exhibit G hereto as of such date of determination
of (a) the aggregate appraised orderly liquidation value of
Eligible Equipment as set forth in the Appraisals, less (b) such
reserves as Agent, in the exercise of its reasonable credit
judgment, may establish from time to time, less (c)
<PAGE> 2
the appraised orderly liquidation value of any such item of
Eligible Equipment as set forth in the Appraisals which was sold,
lost or otherwise disposed of since the date of the last
Borrowing Base Certificate.
"Kenco Acquistion" means the acquisition by the Borrower of all
of the outstanding capital stock of the Kenco Companies and
substantially all of the assets of Narens.
"Kenco Acquisition Agreement" means that certain Stock Purchase
Agreement dated as of September 30, 1997, between the Borrower and
the Kenco Companies, Narens and the parties indicated as
"stockholders" signatory thereto.
"Kenco Companies" means, collectively, Kenco Kentucky and Kenco
Michigan.
"Kenco Kentucky" means Kenco Plastics, Inc., a Kentucky
corporation.
"Kenco Michigan" means Kenco Plastics, Inc., a Michigan
corporation.
"Narens" means Narens Design & Engineering, Inc., a Michigan
corporation.
(b) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definitions of Borrowing Base," "Intercompany Loans," "Intercompany Note,"
"LDM Canada Borrowing Base," "Maximum Revolver Amount," "Permitted Liens," and
"Restricted Investment" and replacing such definitions with the following:
"Borrowing Base" means the sum of:
(a) up to eighty-five percent (85%) of the Net Amount of
Eligible Accounts of the Borrower; plus
(b) up to eighty-five percent (85%) of the Net Amount of
Eligible Tooling Receivables of Borrower; plus
(c) up to sixty percent (60%) of the book value of the
Borrower's Eligible Inventory (valued at the lower of cost
or market on a First-In First-Out basis); provided
that advances attributable to this clause (c) shall not
exceed $12,000,000; plus
(d) the Eligible Equipment Value of Borrower's Eligible
Equipment; less
(i) reserves established by the Borrower for accrued interest
on outstanding Revolving Loans;
(ii) a reserve established by the Borrower for customer deposits
reflected on the Borrower's books and records;
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<PAGE> 3
(iii) reserves established by the Borrower with respect to any
rebate arrangement between the Borrower or any of its
Subsidiaries and the Ford Motor Company or any of its
Affiliates; and
(iv) all other reserves which the Agent in its reasonable credit
judgment deems necessary to establish and maintain with
respect to the Borrower's account upon at least one (1)
Business Day's prior notice thereof to the Borrower,
including, without limitation, any amounts which the Agent
may need to pay for the account of the Borrower in order to
preserve the value of the Collateral and/or the priority of
the Agent's Lien in the Collateral consistent with the terms
of this Agreement and the other Loan Documents.
"Intercompany Loans" means the loans made by the Borrower to its
Subsidiaries in accordance with Section 9.13.
"Intercompany Note" means any demand note executed pursuant to
Section 9.13 to evidence an Intercompany Loan.
"LDM Canada Borrowing Base" means the sum of:
(a) up to eighty-five percent (85%) of the Net Amount of Eligible
Accounts of LDM Canada; plus
(b) up to eighty-five percent (85%) of the Net Amount of Eligible
Tooling Receivables of LDM Canada; plus
(c) up to sixty percent (60%) of the book value of LDM Canada's
Eligible Inventory (valued at the lower of cost or market on
a First-In First-Out basis); plus
(d) the Eligible Equipment Value of LDM Canada's Eligible
Equipment; less
(i) a reserve for customer deposits reflected on LDM Canada's
books and records;
(ii) reserves established by Agent for unpaid suppliers;
(iii) reserves established by Agent for goods and services, excise
and sales taxes; and
(iv) all other reserves which the Agent in its reasonable credit
judgment deems necessary to establish and maintain with
respect to LDM Canada's account upon at least one (1)
Business Day's prior notice thereof to LDM Canada, including,
without limitation, any amounts which the Agent may need to
pay
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<PAGE> 4
for the account of LDM Canada in order to preserve the value
of the Collateral and/or the priority of the Agent's Lien in
the Collateral consistent with the terms of this Agreement
and the other Loan Documents.
"Maximum Revolver Amount" means $65,000,000.
"Permitted Liens" means:
(a) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings and as to which
adequate financial reserves have been established on Borrower's books
and records and a stay of enforcement of any such Lien is in effect;
(b) the Agent's Liens;
(c) deposits under worker's compensation, unemployment
insurance, social security and other similar laws, or to secure the
performance of bids, tenders or contracts (other than for the repayment
of borrowed money) or to secure indemnity, performance or other similar
bonds for the performance of bids, tenders or contracts (other than for
the repayment of borrowed money) or to secure statutory obligations
(other than liens arising under ERISA or Environmental Liens) or
surety or appeal bonds, or to secure indemnity, performance or other
similar bonds in the ordinary course of business;
(d) Liens securing the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like Persons;
provided that the payment thereof is not at the time required by
Section 9.1;
(e) reservations, exceptions, encroachments, easements,
rights of way, covenants running with the land, and other similar title
exceptions or encumbrances affecting any Real Estate; provided that
they do not in the aggregate materially detract from the value of the
Real Estate or materially interfere with its use in the ordinary
conduct of the Borrower's business;
(f) judgment and other similar Liens arising in connection
with court proceedings; provide that (A) the existence of such Liens
is being contested in good faith and by proper proceedings diligently
pursued, (B) reserves or other appropriate provision, if any, as are
required by GAAP have been made therefor, (C) a stay of enforcement of
any such Liens is in effect, (D) the priority of any such Liens is
subordinate to that of the Agent's Liens, and (E) the existence of any
judgment or court proceedings upon which such Liens are based does not
otherwise constitute an Event of Default under this Agreement;
(g) Liens in existence on the Closing Date, after giving
effect to the initial
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<PAGE> 5
Borrowing, and listed on Schedule 9.19, and any extensions or renewals
thereof, provided that (x) the aggregate principal amount of the Debt,
if any, secured by such Lien does not increase from that amount
outstanding at the time of any such renewal or extension and (y) any
such renewal or extension does not encumber any additional assets or
properties of the Borrower or any of its Subsidiaries; and
(h) Liens securing Intercompany Notes in accordance with Section
9.13.
"Restricted Investment" means any acquisition of property by the
Borrower or LDM Canada in exchange for cash or other property, whether
in the form of an acquisition of stock, debt, or other indebtedness or
obligation, or the purchase or acquisition of any other property, or a
loan, advance, capital contribution, or subscription, except (A) the
Borrower may make Intercompany Loans to LDM Canada and the Kenco
Companies pursuant to Section 9.13, and (B) acquisitions of the
following: (a) Equipment to be used in the business of the Borrower or
LDM Canada so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder; (b) goods held for sale or lease or
to be used by the Borrower or LDM Canada in the ordinary course of
business; (c) current assets arising from the sale or lease of goods
or the rendition of services in the ordinary course of business of the
Borrower or LDM Canada; (d) direct obligations of the United States of
America, or any agency thereof, or obligations guaranteed by the
United States of America, provided that such obligations mature within
one year from the date of acquisition thereof, (e) certificates of
deposit maturing within one year from the date of acquisition,
bankers' acceptances, Eurodollar bank deposits, or overnight bank
deposits, in each case issued by, created by, or with a bank or trust
company organized under the laws of the United States or any state
thereof having capital and surplus aggregating at least $ 100,000,000;
(f) commercial paper given a rating of "A2" or better by Standard &
Poor's Corporation or "P2" or better by Moody's Investors Service,
Inc. and maturing not more than 90 days from the date of creation
thereof; (g) life insurance premiums of up to $1,500,000 per annum for
life insurance on the lives of the Borrower's principal stockholders;
(h) loans to employees outstanding as of the Closing Date; (i) loans
and advances in the ordinary course of business to officers, directors
and employees for business-related travel expenses, moving expenses
and other similar expenses in an aggregate principal amount not to
exceed $250,000 at any time; and (j) the conversion of all or portion
of the Closing Date Intercompany Note into equity interests of a
Guarantor (other than LDM Holding).
(c) Section 2.1 of the Loan Agreement is hereby amended by deleting it in
its entirety and replacing it with the following:
2.1 Total Facility. Subject to all of the terms and conditions
of this Agreement, the Lenders severally agree to make available a
total credit facility of up to $65,000,000 (the "Total Facility") for
the Borrower's use from time to time during the term of this
Agreement. The Total Facility shall be comprised of a revolving line
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<PAGE> 6
of credit consisting of revolving loans and letters of credit up to
the Maximum Revolver Amount, as described in Sections 2.2 and 2.4.
(d) Article 8 of the Loan Agreement is hereby amended by adding the
following subsection at the end thereof
8.35 Acquistion Agreement. As of September 30, 1997, the Borrower
has delivered to the Agent a complete and correct copy of the Kenco
Acquisition Agreement (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents
delivered pursuant thereto or in connection therewith). Neither the
Borrower nor any other party thereto is in default in the performance
or compliance with any provisions thereof. The Kenco Acquisition
Agreement is in compliance with applicable laws and the Kenco
Acquisition has been consummated in accordance with applicable laws
and regulations. The Kenco Acquisition Agreement is in full force and
effect as of September 30, 1997 and has not been terminated, rescinded
or withdrawn. All requisite approvals by Governmental Authorities
having jurisdiction over the Borrower or its Subsidiaries, and other
Persons referenced therein, with respect to the transactions
contemplated by the Kenco Acquisition Agreement, have been obtained,
and no such approvals impose any conditions to the consummation of the
transactions contemplated by the Kenco Acquisition Agreement or to
the conduct by the Borrower or any Subsidiary of its business
thereafter. To the best of Borrower's knowledge, none of the sellers'
representations or warranties in the Kenco Acquisition Agreement
contain any untrue statement of a material fact or omit any fact
necessary to make the facts therein not misleading. Each of the
representations or warranties given by the Borrower in the Kenco
Acquisition Agreement is true and correct in all material respects.
Notwithstanding anything contained in the Kenco Acquisition Agreement
to the contrary, such representations and warranties of the Borrower
are incorporated into this Agreement by this Section 8.35 and shall,
solely for purposes of this Agreement and the benefit of the Lenders,
survive both the consummation of the Kenco Acquisition and the
termination of the Kenco, Acquisition Agreement.
(e) Section 9.13 of the Loan Agreement is hereby amended by deleting it in
its entirety and replacing it with the following:
9.13 Debt. Neither the Borrower nor any of its Subsidiaries shall
incur or maintain any Debt, other than: (a) the Obligations; (b) trade
payables and contractual obligations to suppliers and customers
incurred in the ordinary course of business; (c) Debt consisting of
Senior Subordinated Notes, provided that the aggregate principal
amount thereof shall not at any time exceed $110,000,000, (d) Debt
consisting of intercompany loans and advances made by the Borrower to
LDM Canada, provided that (i) LDM Canada shall have executed and
delivered to the Borrower, on the Closing Date, a demand note to
evidence any such Intercompany
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<PAGE> 7
Loan, which Intercompany Note shall be in form and substance
satisfactory to Agent, any security interests granted to the Borrower
on the assets of LDM Canada to secure the payments under its
Intercompany Note shall be assigned to the Agent pursuant to
documentation in form and substance acceptable to the Agent, and such
Intercompany Note shall be pledged to the Agent pursuant to the
Pledge Agreement as additional collateral security for the
Obligations, (ii) the Borrower shall record all such Intercompany
Loans on its books and records in a manner satisfactory to Agent,
(iii) at the time any such Intercompany Loans is made by the Borrower
and after giving effect thereto, each of the Borrower and LDM Canada
shall be Solvent, (iv) the aggregate outstanding principal amount of
Intercompany Loans shall not at any one time exceed $17,000,000,
consisting of the Closing Date Intercompany Loan and additional loans
not to exceed $1,000,000, plus an amount equal to the sum of (A) an
amount equal to the lesser of (x) $5,000,000 and (y) LDM Canada's
Borrowing Base, plus (B) $4,000,000, provided, however, that the
Intercompany Loans pursuant to clauses (A) and (B) above shall not
exceed in any fiscal quarter the amount of LDM Canada's EBITDA for
the immediately preceding fiscal quarter, (e) Debt consisting of
intercompany loans and advances made by the Borrower to the Kenco
Companies, provided that (i) such Kenco Company shall have executed
and delivered to the Borrower, on the initial date of such
Intercompany Loan, a demand note to evidence any such Intercompany
Loan, which Intercompany Note shall be in form and substance
satisfactory to Agent, and such Kenco Company shall have granted to
the Borrower security interests in the assets of such Kenco Company
to secure the payments under its Intercompany Note which security
interests shall be assigned to the Agent pursuant to documentation in
form and substance acceptable to the Agent, and such Intercompany
Note shall be pledged to the Agent pursuant to the Pledge Agreement
as additional collateral security for the Obligations, (ii) the
Borrower shall record all such Intercompany Loans on its books and
records in a manner satisfactory to Agent, (iii) at the time any such
Intercompany Loan is made by the Borrower and after giving effect
thereto, each of the Borrower and such Kenco Company shall be
Solvent, (iv) the aggregate outstanding principal amount of
Intercompany Loans shall not at any one time exceed $7,500,000, and
(v) at the time any such Intercompany Loan is made by the Borrower
and after giving effect thereto, no Default or Event of Default shall
have occurred and be continuing, and (f) other Debt existing on the
Closing Date and listed on Schedule 8.9 hereof, but without giving
effect to any extensions, renewals or refinancing thereof.
(f) Exbibit A to the Loan Agreement is hereby amended by deleting it in
its entirety and replacing it with the form set forth as Exhibit A hereto.
2. Consent. Notwithstanding anything contained in Sections 9.9, 9.10,
9.21(iv), 9.21(v) and 9.21(vi) of the Loan Agreement, the Lender hereby
consents to the execution of the Kenco Acquisition Agreement and the
consummation of the Kenco Acquisition..
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<PAGE> 8
3. Waiver. Notwithstanding any provision of the Loan Agreement to the
contrary, the Lenders hereby waive the requirement under the Agreement
regarding Post-Closing Matters dated as of January 22, 1997, that Borrower
deliver to Agent within sixty days after the Closing Date, the certificate(s),
if any, together with executed but undated stock powers, evidencing Borrower's
ownership interest in 65% of LDM Technologies S de R.L., an entity organized
under the laws of Mexico, and an executed Pledge Amendment. The foregoing
waiver is limited to the specific purpose for which it is granted and, except
as set forth in this Section 4, no such waiver shall be construed as a
consent, waiver or other modification with respect to any term, condition or
other provision of any Loan Document.
4. Warranties and Representations. Borrower and each Guarantor hereby
warrants and represents to Lender that:
(a) Authorization, etc. Each of Borrower and each Guarantor has the power
and authority to execute, deliver and perform this Amendment and the Loan
Agreement, as amended hereby, as applicable. Each of Borrower and each
Guarantor has taken all necessary action (including, without limitation,
obtaining approval of its stockholders if necessary) to authorize its
execution, delivery and performance of this Amendment and the Loan Agreement,
as amended hereby, as applicable. No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with Borrower's or any Guarantor's
execution, delivery and performance of this Amendment, except for those already
duly obtained. This Amendment has been duly executed and delivered by Borrower
and each Guarantor, and constitutes the legal, valid and binding obligation of
Borrower and such Guarantor, enforceable against it in accordance with its
terms without defense, setoff or counterclaim. Neither Borrower's nor any
Guarantor's execution, delivery and performance of this Amendment do or will
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the property of
Borrower or any of its Subsidiaries by reason of the terms of (a) any contract,
mortgage, Lien, lease, agreement, indenture or instrument to which Borrower or
any of its Subsidiaries is a party or which is binding upon it, (b) any
Requirement of Law applicable to Borrower or any of its Subsidiaries, or (c)
the certificate or articles of incorporation or by-laws, partnership agreement
or limited liability company agreement of Borrower or any of its Subsidiaries.
(b) Other Warranties and Representations. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, all of the
warranties and representations of Borrower and each Guarantor contained in the
Loan Agreement, the Guarantor Guarantees and the other Loan Documents
(including, without limitations, this Amendment) are true and correct in all
material respects on and as of the date hereof to the same extent as though
made on and as of the date hereof (except those representations and warranties
made expressly as of a different date).
(c) No Default or Event of Default. After giving effect to this Amendment
and the consent set forth in Section 2 hereof, no Default or Event of Default
has occurred and is continuing as of the date hereof.
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<PAGE> 9
5. Conditions Precedent. Notwithstanding any other provision contained in
this Amendment or any other document, the effectiveness of this
Amendment is further expressly conditioned upon the satisfaction of each
condition set forth in this Section 5 and the delivery of the following
documents to Lender on or prior to the date hereof (unless another date shall be
specified) and consummation of all of the transactions contemplated by each
such document, all in form and substance and manner acceptable to Lender in its
sole and absolute discretion:
(a) Amendment. Lender shall have received a duty executed original of
this Amendment signed by Borrower and each Guarantor.
(b) Warranties and Representations. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, all of the warranties
and representations of Borrower and each Guarantor contained in the Loan
Agreement, the Guarantor Guarantees and the other Loan Documents (including,
without limitation, this Amendment) shall be true and correct in all material
respects on and as of the date hereof to the same extent as though made on and
as of the date hereof (except those representations and warranties made
expressly as of a different date).
(c) No Default or Event of Default. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, no Default or Event
of Default shall have occurred and be continuing as of the date hereof.
(d) No Litigation. No litigation, investigation, proceeding,
injunction, restraint or other action shall be pending or threatened against
Borrower or any Affiliate of Borrower, or any officer, director, or executive
of any thereof, which restrains, prevents or imposes adverse conditions upon,
or which otherwise relates to, the execution, delivery or performance of this
Amendment or the Kenco Acquisition Agreement.
(e) Consents and Acknowledgments. Borrower shall have obtained all
consents, approvals and acknowledgments which may be required with respect to
the execution, delivery and performance of this Amendment and the Kenco
Acquisition Agreement.
(f) Fees, Costs and Expenses. Lender shall have received payment of all
fees, costs and expenses, including, without limitation, reasonable attorneys'
fees and expenses (including, without limitation, the allocated costs and
expenses of in-house counsel) invoiced to the Borrower and as otherwise due
pursuant to the Loan Agreement, incurred by Lender in connection herewith.
(g) Guarantor Guarantee. Each of the Kenco Companies shall have
executed a guaranty in favor of Lender, substantially in the form of Exhibit B
hereto.
(h) Schedules. To the extent necessary to reflect the Kenco
Acquisition, the Borrower shall have provided to Lender within ten days after
the date hereof revised Schedules to the Loan Documents and the items set
forth on the Schedules shall be satisfactory to the Lender.
(i) Kenco Acquisition. The Lender shall have received evidence
satisfactory to Lender
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<PAGE> 10
that the Borrower and the sellers under the Kenco Acquisition Agreement shall
have consummated the transactions contemplated by the Kenco Acquisition
Agreement in accordance with the terms set forth therein (which terms and
conditions shall be satisfactory to the Lender and its counsel in all
respects), and all documents required to be delivered pursuant to the Kenco
Acquisition Agreement shall have been executed and delivered by the Persons
specified therein, and the Borrower shall have furnished to the Agent a
certified copy of the Kenco Acquisition Agreement and all exhibits and
schedules thereto, as finally amended, and a certificate signed by the chairman
of the board of the Borrower certifying that (i) the transactions contemplated
by the Kenco Acquisition Agreement have been consummated in accordance with the
Kenco Acquisition Agreement and no term or condition of the Kenco Acquisition
Agreement has been amended, modified or waived except as set forth in the
certified copy of the Kenco Acquisition Agreement provided to the Lender, (ii)
any documents required to be filed to effect the Kenco Acquisition Agreement
have been filed in accordance with applicable law, and (iii) neither the
Borrower nor any of its Subsidiaries has failed to perform any material
obligation or covenant required by the Kenco Acquisition Agreement to be
performed or complied with by such Person on or before the date of consummation
of the Kenco Acquisition unless waived by the sellers thereunder, and the
substance of such certificate shall be true and correct, and the Lender shall
have received copies of the Kenco Acquisition Agreement and the other documents
required to be delivered pursuant to the Kenco Acquisition Agreement and all
consents, approvals or permits necessary or advisable to be obtained in
connection therewith, in form and substance satisfactory to the Lender and its
counsel.
(j) Resolutions. The Lender shall have received a certified copy of the
resolutions of the Borrower authorizing the execution and delivery of, and the
consummation of the transactions contemplated by, this Amendment and the Kenco
Acquisition Agreement and all other documents or instruments to be executed and
delivered in connection herewith and therewith and the performance of its
obligations hereunder and thereunder.
(k) Opinions. All opinions delivered in connection with the Kenco
Acquisition shall be addressed to the Lender and the Lenders or accompanied
by a written authorization from the Person delivering such opinion stating that
the Agent and the Lenders may rely on such document as though it were addressed
to them.
6. Further Assurances. Borrower hereby agrees, at its expense, to duly
execute, acknowledge and deliver to Lender all agreements, certificates,
instruments, opinions and other documents, and take all such actions, as Lender
may request in order to further effectuate the purposes of this Amendment and
to carry out the terms hereof.
7. No Novation; No Consent or Waiver. This Amendment is not, and shall not
be construed as, a novation, consent, waiver, release or modification with
respect to any of the terms, provisions, conditions, representations,
warranties, covenants, rights, powers or remedies set forth in the Loan
Agreement or any of the other Loan Documents, except for the specific instance
and purpose for which it is granted as expressly specified herein. Lender's
failure, at any time or times hereafter, to require strict performance by
Borrower of any provision or term of this Amendment shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance and
performance
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<PAGE> 11
herewith. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Amendment shall be deemed to have
been suspended or waived by Lender unless such suspension or waiver is (a) in
writing and signed by Lender and (b) delivered to Borrower, notwithstanding any
prior practice or course of dealing, or any waiver, forbearance or other
similar agreement or understanding, whether any of the foregoing were or are
oral or written, by or between the parties hereto.
8. Documents Remain in Effect. Except as amended and modified by this
Amendment, the Loan Agreement and the other Loan Documents remain in full force
and effect, and Borrower and each Guarantor hereby ratify, adopt and confirm
their representations, warranties, agreements and covenants contained in, and
obligations and liabilities under, the Loan Agreement and the other Loan
Documents.
9. Reference to Loan Agreement. On and after the effectiveness of this
Amendment, each reference in the Loan Agreement, as amended hereby, to "this
Agreement", "hereunder", "thereof", "herein" or words of like import, and each
reference to the "Loan Agreement" in any other Loan Document, or in any of the
other agreements, documents or other instruments executed and delivered
pursuant to the Loan Agreement, shall mean and be a reference to the Loan
Agreement, as amended hereby.
10. Incorporation of Loan Agreement. Article 15 of the Loan Agreement is
incorporated herein by reference with the same effect as if set forth in full
herein with only those modifications necessary to permit such Article to refer
to this Amendment.
11. Affirmation of Guaranties. Each of LDM Holding and LDM Canada (i)
consents to and approves the execution and delivery of this Amendment by the
parties hereto, (ii) agrees that this Amendment does not and shall not
limit or diminish in any manner the obligations of the Guarantors under their
respective Guarantor Guarantees dated as of January 22, 1997, or under any of
the other documents executed and/or delivered by any of the Guarantors in
connection therewith, and agrees that such obligations of the Guarantors would
not be limited or diminished in any manner even if the Guarantors had not
executed this Amendment, (iii) agrees that this Amendment shall not be
construed as requiring the consent of the Guarantors in any other circumstance,
(iv) reaffirms its obligations under each of the Guarantor Guarantees and such
other related documents, and (v) agrees that the Guarantor Guarantees and such
other related documents remain in full force and effect and are each hereby
ratified and confirmed.
12. Telecopied Counterparts. Delivery of an executed counterpart of a
signature page to this Amendment by telecopier shall be effective as delivery
of a manually executed counterpart of this Amendment.
[signature page follows]
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<PAGE> 12
IN WITNESS WHEREOF, this Amendment No. 3 and Affirmation of Guaranties has
been duly executed as of the date first written above.
LDM TECHNOLOGIES, INC.
By: Joe Balous
----------------------------
Title: CHAIRMAN OF THE BOARD
-------------------------
LDM HOLDING CANADA, INC.
By: Joe Balous
----------------------------
Title: CHAIRMAN OF THE BOARD
-------------------------
LDM TECHNOLOGIES COMPANY
By: Joe Balous
----------------------------
Title: CHAIRMAN OF THE BOARD
-------------------------
<PAGE> 13
BANKAMERICA BUSINESS CREDIT, INC.,
as Lender and as Agent
By: [SIG]
---------------------------
Title: SVP
------------------------
<PAGE> 14
EXHIBIT G
PERMITTED PERCENTAGE
80% from October 1, 1997-March 31, 1998. The Permitted Percentage shall reduce
by 1.2% as of the first day of each month thereafter (i.e., the Permitted
Percentage for April 1998 shall be 78.8%; the Permitted Percentage for May
shall be 77.6% etc.)
15
<PAGE> 1
EXHIBIT 10.1(e)
AMENDMENT NO, 4 AND AFFIRMATION OF GUARANTIES
This Amendment No. 4 and Affirmation of Guaranties (this "Amendment")
dated as of November 25, 1997 is by and among LDM Technologies, Inc., a
Michigan corporation ("Borrower"), and LDM Holding Canada, Inc., a Michigan
corporation ("LDM Holding"), LDM Technologies Company, a Nova Scotia unlimited
liability company ("LDM Canada"), Kenco Plastics, Inc., a Mchigan corporation
("Kenco Michigan"), and Kenco Plastics, Inc., a Kentucky Corporation
("Kenco Kentucky") (collectively, the "Guarantors"), and BankAmerica Business
Credit, Inc., a Delaware corporation, for itself as a Lender and as Agent for
the Lenders (in its capacities as Lender and as Agent, "Lender").
R E C I T A L S:
WHEREAS, Borrower and Lender are parties to a Loan and Security Agreement
dated as of January 22, 1997, as amended and otherwise modified prior to
the date hereof (as so amended and modified, and as the same may be
further amended, restated, supplemented or otherwise modified, the "Loan
Agreement"), pursuant to which Lender has made and may hereafter make loans,
advances and other extensions of credit to Borrower;
WHEREAS, Borrower wishes to obtain, and Lender is willing to grant, an
amendment to the Loan Agreement as set forth herein, subject to the express
terms and conditions specified in this amendment; and
WHEREAS, this Amendment shall constitute a Loan Document, these Recitals
shall be construed as part of this Amendment and capitalized terms used but not
otherwise defined in this Amendment shall have the meanings ascribed to them in
the Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements,
promises and covenants set forth below, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. Amendment of Loan Agreement.
(a) SECTION 1.1 OF THE LOAN AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING DEFINITIONS IN THEIR PROPER ALPHABETICAL ORDER:
"Aeroquip" means a division of Aeroquip-Vickers International
GmbH.
"Aeroquip Acquisition" means the acquisition by the Borrower
through its wholly-owned subsidiary LDM Germany of substantially
all of the assets of the Beinheim business of Aeroquip-Vickers
International GmbH.
<PAGE> 2
"Aeroquip Acquisition Agreement" means that certain Acquisition
Agreement dated as of November 12, 1997, between the Borrower
and Aeroquip-Vickers International GmbH.
"LDM Germany" means Anja Verwaltungsgesellischaft mbH, a
wholly-owned Subsidiary of the Borrower, which intends to
change its name to LDM Technologies GmbH.
(b) SECTION 1.1 OF THE LOAN AGREEMENT IS HEREBY FURTHER AMENDED BY
DELETING THE DEFINITION OF "INTERCOMPANY NOTE", "RESTRICTED INVESTMENT" AND
"REVOLVER AVAILABILITY" AND REPLACING SUCH DEFINITIONS WITH THE FOLLOWING:
"Intercompany Note" shall mean a demand note evidencing an
Intercompany Loan made by Borrower pursuant to Section 9.13(d),
such demand note to be in form and substance satisfactory to
Agent.
"Restricted Investment" means any acquisition of property by the
Borrower or LDM Canada in exchange for cash or other property,
whether in the form of an acquisition of stock, debt, or other
indebtedness or obligation, or the purchase or acquisition of any
other property, or a loan, advance, capital contribution, or
subscription, except (A) the Borrower may make intercompany loans
to (x) LDM Canada pursuant to Section 9.13(d)(I), (y) LDM Germany
pursuant to Section 9.13(d)(II), and (z) to the Kenco Companies
pursuant to Section 9.13(e), (B) the Borrower may make common
equity contributions to LDM Germany on or prior to November 25,
1997 in an aggregate amount of $2,140,000, and (C) acquisitions of
the following: (a) Equipment to be used in the business of the
Borrower or LDM Canada so long as the acquisition costs thereof
constitute Capital Expenditures permitted hereunder; (b) goods
held for sale or lease or to be used by the Borrower or LDM Canada
in the ordinary course of business; (c) current assets arising
from the sale or lease of goods or the rendition of services in
the ordinary course of business of the Borrower or LDM Canada;BB
(d) direct obligations of the United States of America, or any
agency thereof, or obligations guaranteed by the United States of
America, provided that such obligations mature within one year
from the date of acquisition thereof; (e) certificates of deposit
maturing within one year from the date of acquisition, bankers'
acceptances, Eurodollar bank deposits, or overnight bank deposits,
in each case issued by, created by, or with a bank or trust
company organized under the laws of the United States or any state
thereof having capital and surplus aggregating at least
$100,000,000; (f) commercial paper given a rating of "A2" or better
by Standard & Poor's Corporation or "P2" or better by Moody's
Investors Service, Inc. and maturing not more than 90 days from
the date of creation thereof; (g) life insurance premiums of up to
$1,500,000 per annum for life insurance on the lives of the
Borrower's principal stockholders; (h) loans to employees
outstanding as of the Closing Date; (i) loans and advances in the
ordinary of business to officers, directors and employees for
business-related travel expenses, moving expenses and other similar
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<PAGE> 3
expenses in an aggregate principal amount not to exceed $250,000
at any time; and (j) the conversion of all or portion of the
Closing Date Intercompany Note into equity interests of a
Guarantor (other than LDM Holding).
"Revolver Availability" means, at any time, the lesser of:
(A) the Maximum Revolving Amount at such time;
or
(B) the Borrower's Borrowing Base at such time plus the LDM Canada
Borrowing Base, less
(C) in each case, the sum of the following:
(i) the unpaid balance of Revolving Loans at such time;
(ii) the aggregate undrawn face amount of all outstanding
Letters of Credit which the Agent has caused to be issued
or obtained for the Borrower's account;
(iii) the aggregate amount of Pending Revolving Loans;
(iv) the aggregate amount of unpaid reimbursement
obligations in respect of Letters of Credit;
(v) reserves for accrued interest on the Obligations; and
(vi) the Environmental Compliance Reserve;
provided, however, that at no time shall Revolver Availability exceed the amount
of Senior Debt (as defined in the Indenture) attributable to this Agreement
permitted to be incurred pursuant to Section 4.03 of the Indenture.
(d) ARTICLE 8 OF THE LOAN AGREEMENT IS HEREBY AMENDED BY ADDING
THE FOLLOWING SUBSECTION AT THE END THEREOF:
8.36 Aeroquip Acquistion Agreement. As of November 25, 1997, the
Borrower has delivered to the Agent a complete and correct copy of the Aeroquip
Acquisition Agreement (including all schedules, exhibits, amendments,
supplements, modifications, assignments and all other documents delivered
pursuant thereto or in connection therewith). Neither the Borrower nor any
other party thereto is in default in the performance or compliance with any
provisions thereof. The Aeroquip Acquisition Agreement is in compliance with
applicable laws and the Acquisition has been consummated in accordance with
applicable laws and regulations. The
3
<PAGE> 4
Aeroquip Acquisition Agreement is in full force and effect as of November 25,
1997 and has not been terminated, rescinded or withdrawn. All requisite
approvals by Governmental Authorities having jurisdiction over the Borrower or
its Subsidiaries, and other Persons referenced therein, with respect to the
transactions contemplated by the Aeroquip Acquisition Agreement, have been
obtained, and no such approvals impose any conditions to the consummation of
the transactions contemplated by the Aeroquip Acquisition Agreement or to the
conduct by the Borrower or any Subsidiary of its business thereafter. To the
best of Borrower's knowledge, none of the sellers' representations or
warranties in the Aeroquip Acquisition Agreement contain any untrue statement
of a material fact or omit any fact necessary to make the facts therein not
misleading. Each of the representations or warranties given by the Borrower in
the Aeroquip Acquisition Agreement is true and correct in all material
respects. Notwithstanding anything contained in the Aeroquip Acquisition
Agreement to the contrary, such representations and warranties of the Borrower
are incorporated into this Agreement by this Section 8.36 and shall, solely for
purposes of this Agreement and the benefit of the Lenders, survive both the
consummation of the Aeroquip Acquisition and the termination of the Aeroquip
Acquisition Agreement.
(e) SECTION 9.12 OF THE LOAN AGREEMENT IS HEREBY AMENDED BY ADDING
THE FOLLOWING IMMEDIATELY AFTER THE DOLLAR AMOUNT $"1,000,000" APPEARING THERE-
IN:
and the Kenco Companies shall be permitted to issue subordinated
Guaranties pursuant to Section 4.19 of the Indenture.
(f) SECTION 9.13 OF THE LOAN AGREEMENT IS HEREBY AMENDED BY (W)
DELETING CLAUSE (D) CONTAINED THEREIN IN ITS ENTIRETY AND REPLACING IT WITH THE
FOLLOWING NEW CLAUSE (D):
(d) Debt consisting of intercompany loans and advances
("Intercompany Loans") made by the Borrower to (I) LDM
Canada, provided that (i) LDM Canada shall have executed
and delivered to the Borrower, on the Closing Date, an
Intercompany Note to evidence any such Intercompany Loan,
any security interests granted to the Borrower on the
assets of LDM Canada to secure the payments under
its Intercompany Note shall be assigned to the Agent
pursuant to documentation in form and substance acceptable
to the Agent, and such Intercompany Note shall be pledged
to the Agent pursuant to the Pledge Agreement as additional
collateral security for the Obligations, (ii) the Borrower
shall record all such Intercompany Loans on its books and
records in a manner satisfactory to Agent, (iii) at the time
any such Intercompany Loans is made by the Borrower and
after giving effect thereto, each of the Borrower and LDM
Canada shall be Solvent, (iv) the aggregate outstanding
principal amount of Intercompany Loans under this clause
(I) shall not at any one time exceed $17,000,000,
consisting of the Closing Date Intercompany Loan and
additional loans not to exceed $1,000,000, plus an amount
equal to the sum of (A) an amount equal to the lesser of
(x) $5,000,000 and (y) LDM Canada's Borrowing Base, plus
(B) $4,000,000, provided, however, that the Intercompany
Loans pursuant to clauses (A) and
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<PAGE> 5
(B) above shall not exceed in any fiscal quarter the amount
of LDM Canada's EBITDA for the immediately preceding
fiscal quarter and (II) LDM Germany, provided that (i) LDM
Germany shall have executed and delivered to the Borrower
an Intercompany Note to evidence any such Intercompany
Loan, and such Intercompany Note shall conform to the
requirements of a loan to an Unleveraged Wholly Owned
Restricted Subsidiary (as defined in the Indenture)
pursuant to the terms and conditions contained in the
Indenture, (ii) the Borrower shall record all such
Intercompany Loans on its books and records in a manner
satisfactory to Agent, (iii) at the time any such
Intercompany Loan is made by the Borrower and after giving
effect thereto, each of the Borrower and LDM Germany shall
be Solvent and (iv) the aggregate outstanding principal
amount of Intercompany Loans under this clause (II) shall
not at any one time exceed $10,160,000, consisting of a
$6,400,000 loan to be made on November 25, 1997 and
additional loans not to exceed $3,760,000,;
(x) DELETING THE WORD "AND" APPEARING AT THE END OF CLAUSE (e) APPEARING
THEREIN, (y) DELETING THE "." AT THE END OF CLAUSE (f) APPEARING THEREIN AND
REPLACING IT WITH "," AND (z) INSERTING THE FOLLOWING IMMEDIATELY AFTER CLAUSE
(f) APPEARING THEREIN:
and (g) Guaranties permitted pursuant to Section 9.12.
(g) SECTION 10.2 OF THE LOAN AGREEMENT IS HEREBY AMENDED BY (I)
DELETING THE PERIOD APPEARING AT THE END OF CLAUSE (B) CONTAINED THEREIN
AND REPLACING IT WITH "; AND ", AND (II) INSERTING THE FOLLOWING NEW CLAUSE (C)
THERETO:
(c) so long as any Senior Subordinated Notes remain outstanding,
at the time of each Borrowing and/or issuance of any Letter of Credit where,
after giving effect to such Borrowing and/or issuance, the aggregate principal
amount of outstanding Loans and the aggregate undrawn amount of all Letters of
Credit would be in excess of $45,000,000, the Lenders shall have received a
certificate, in form and substance satisfactory to the Agent, establishing to
the satisfaction of the Agent that the amount of Loans and/or Letters of
Credit, as the case may be, requested pursuant to the respective
Borrowing and/or issuance, as the case may be, are permitted to be incurred
without causing a violation of Section 4.03 of the Indenture.
2. Consent. Notwithstanding anything contained in Sections 9.9 and
9.21(i), (iii), (iv) and (v) of the Loan Agreement, the Lender hereby consents
to the formation of LDM Germany as a wholly-owned Subsidiary of the Borrower,
the execution, delivery and performance by LDM Germany of the Aeroquip Agreement
and the consummation of the Aeroquip Acquisition.
3. Warranties and Representations. Borrower and each Guarantor hereby
warrants and represents to Lender that:
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<PAGE> 6
(a) Authorization, etc. Each of Borrower and each Guarantor has the
power and authority to execute, deliver and perform this Amendment and the Loan
Agreement, as amended hereby, as applicable. Each of Borrower and each
Guarantor has taken all necessary action (including, without limitation,
obtaining approval of its stockholders if necessary) to authorize its
execution, delivery and performance of this Amendment and the Loan Agreement,
as amended hereby, as applicable. No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with Borrower's or any Guarantor's
execution, delivery and performance of this Amendment, except for those already
duly obtained. This Amendment has been duly executed and delivered by Borrower
and each Guarantor, and constitutes the legal, valid and binding obligation of
Borrower and such Guarantor, enforceable against it in accordance with its
terms without defense, setoff or counterclaim. Neither Borrower's nor any
Guarantor's execution, delivery and performance of this Amendment do or will
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the property of
Borrower or any of its Subsidiaries by reason of the terms of (a) any contract,
mortgage, Lien, lease, agreement, indenture or instrument to which Borrower or
any of its Subsidiaries is a party or which is binding upon it, (b) any
Requirement of Law applicable to Borrower or any of its Subsidiaries, or (c)
the certificate or articles of incorporation or by-laws, partnership agreement
or limited liability company agreement of Borrower or any of its Subsidiaries.
(b) Other Warranties and Representations. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, all of the warranties
and representations of Borrower and each Guarantor contained in the Loan
Agreement, the Guarantor Guarantees and the other Loan Documents (including,
without limitations, this Amendment) are true and correct in all material
respects on and as of the date hereof to the same extent as though made on and
as of the date hereof (except those representations and warranties made
expressly as of a different date).
(c) No Default or Event of Default. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, no Default or Event
of Default has occurred and is continuing as of the date hereof or would
result after giving effect to the Aeroquip Acquisition.
4. Conditions Precedent. Notwithstanding any other provision contained
in this Amendment or any other document, the effectiveness of this Amendment is
further expressly conditioned upon the satisfaction of each condition set
forth in this Section 4 and the delivery of the following documents to Lender
on or prior to the date hereof (unless another date shall be specified) and
consummation of all of the transactions contemplated by each such document, all
in form and substance and manner acceptable to Lender in its sole and absolute
discretion:
(a) Amendment. Lender shall have received a duly executed original
of this Amendment signed by Borrower and each Guarantor.
(b) Warranties and Representations. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, all of the
warranties and representations of Borrower and each Guarantor contained in the
Loan Agreement, the Guarantor Guarantees and the other Loan
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<PAGE> 7
Documents (including, without limitation, this Amendment) shall be true and
correct in all material respects on and as of the date hereof to the same
extent as though made on and as of the date hereof (except those
representations and warranties made expressly as of a different date).
(c) No Default or Event of Default. After giving effect to this
Amendment and the consent set forth in Section 2 hereof, no Default or
Event of Default shall have occurred and be continuing as of the date hereof or
would result after giving effect to the Aeroquip Acquisition.
(d) No Litigation. No litigation, investigation, proceeding,
injunction, restraint or other action shall be pending or threatened against
Borrower or any Affiliate of Borrower, or any officer, director, or
executive of any thereof, which restrains, prevents or imposes adverse
conditions upon, or which otherwise relates to, the execution, delivery or
performance of this Amendment or the Aeroquip Acquisition Agreement.
(e) Consents and Acknowledgments. Borrower shall have obtained all
consents, approvals and acknowledgments which may be required with respect
to the execution, delivery and performance of this Amendment and the Aeroquip
Acquisition Agreement.
(f) Fees, Costs and Expenses. Lender shall have received payment of
all fees, costs and including, without limitation, reasonable attorneys' fees
and expenses (including, without limitation, the allocated costs and
expenses of in-house counsel) invoiced to the Borrower and as otherwise due
pursuant to the Loan Agreement, incurred by Lender in connection herewith.
(g) Schedules. To the extent necessary to reflect the Aeroquip
Acquisition, the Borrower shall have provided to Lender within ten days after
the date hereof revised Schedules to the Loan Documents and the items set forth
on the Schedules shall be satisfactory to the Lender.
(h) Aeroguip Acquisition. The Lender shall have received evidence
satisfactory to Lender that the Borrower and the sellers under the Aeroquip
Acquisition Agreement shall have consummated the transactions contemplated by
the Aeroquip Acquisition Agreement in accordance with the terms set forth
therein (which terms and conditions shall be satisfactory to the Lender and
its counsel in all respects), and all documents required to be delivered
pursuant to the Aeroquip Acquisition Agreement shall have been executed and
delivered by the Persons specified therein, and the Borrower shall have
furnished to the Agent a certified copy of the Aeroquip Acquisition Agreement
and all exhibits and schedules thereto, as finally amended, and a certificate
signed by the chairman of the board of the Borrower certifying that (i) the
transactions contemplated by the Aeroquip Acquisition Agreement have been
consummated in accordance with the Aeroquip Acquisition Agreement and no term
or condition of the Aeroquip Acquisition Agreement has been amended, modified
or waived except as set forth in the certified copy of the Aeroquip Acquisition
Agreement provided to the Lender, (ii) any documents required to be filed to
effect the Aeroquip Acquisition Agreement have been filed in accordance with
applicable law, and (iii) neither the Borrower nor any of its Subsidiaries has
failed to perform any material obligation or covenant required by the Aeroquip
Acquisition Agreement to be performed or complied with by such Person on or
before the date of consummation of the Aeroquip Acquisition unless waived by
the sellers
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<PAGE> 8
thereunder, and the substance of such certificate shall be true and correct,
and the Lender shall have received copies of the Aeroquip Acquisition
Agreement and the other documents required to be delivered pursuant to the
Aeroquip Acquisition Agreement and all consents, approvals or permits necessary
or advisable to be obtained in connection therewith, in form and substance
satisfactory to the Lender and its counsel.
(i) Resolutions. The Lender shall have received a certified copy of
the resolutions of the Borrower authorizing the execution and delivery of, and
the consummation of the transactions contemplated by, this Amendment and
the Aeraquip Acquisition Agreement and all other documents or instruments to be
executed and delivered in connection herewith and therewith and the performance
of its obligations hereunder and thereunder,
(j) Opinions. All opinions delivered in connection with the Aeroquip
Acquisition shall be addressed to the Agent and the Lenders or accompanied by a
written authorization from the Person delivering such opinion stating that the
Agent and the Lenders may rely on such document as though it were addressed to
them. The Borrower shall also deliver to the Agent an opinion of Dickinson,
Wright, Moon, Van Dusen & Freeman, addressed to the Agent and the Lenders, with
respect to the Borrower's continuing compliance with the Indenture after giving
effect to this Amendment, the formation of, and capitalization of, LDM Germany
and the Aeroquip Acquisition, such opinion to be in form and substance
satisfactory to the Agent.
(k) Indenture Guaranty. Borrower shall have delivered to Agent
evidence that the Kenco Companies have delivered the subordinated guarantee
required by Section 4.19 of the Indenture.
(1) Amendment Fee. Borrower shall have paid to BABC an amendment fee
in the amount of $25,000, such fee to be earned, and due and payable, on the
date Borrower executes this Amendment.
5. Further Assurances. Borrower hereby agrees, at its expense, to duly
execute, acknowledge and deliver to Lender all agreements, certificates,
instruments, opinions and other documents, and take all such actions, as Lender
may request in order to further effectuate the purposes of this Amendment and
to carry out the terms hereof.
6. No Novation, No Consent or Waiver. This Amendment is not, and shall
not be construed as, a novation, consent, waiver, release or modification with
respect to any of the terms, provisions, conditions, representations,
warranties, covenants, rights, powers or remedies set forth in the Loan
Agreement or any of the other Loan Documents, except for the specific instance
and purpose for which it is granted as expressly specified herein. Lender's
failure, at any time or times hereafter, to require strict performance by
Borrower of any provision or term of this Amendment shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance and
performance herewith. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Amendment shall be
deemed to have been suspended or waived by under unless such suspension or
waiver is (a) in writing and signed by Lender and (b) delivered to Borrower,
notwithstanding any prior practice or course of dealing, or any waiver,
forbearance or
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<PAGE> 9
other similar agreement or understanding, whether any of the foregoing were or
are oral or written, by or between the parties hereto.
7. Documents Remain in Effect. Except as amended and modified by this
Amendment, the Loan Agreement and the other Loan Documents remain in full force
and effect, and Borrower and each Guarantor hereby ratify, adopt and
confirm their representations, warranties, agreements and covenants contained
in, and obligations and liabilities under, the Loan Agreement and the other
Loan Documents.
8. Reference to Loan Agreement. On and after the effectiveness of this
Amendment, each reference in the Loan Agreement, as amended hereby, to "this
Agreement", "hereunder", "hereof", "herein" or words of like import, and
each reference to the "Loan Agreement" in any other Loan Document, or in any of
the other agreements, documents or other instruments executed and delivered
pursuant to the Loan Agreement, shall mean and be a reference to the Loan
Agreement, as amended hereby.
9. Incorporation of Loan Agreement. Article 15 of the Loan Agreement is
incorporated herein by reference with the same effect as if set forth in full
herein with only those modifications necessary to permit such Article to refer
to this Amendment.
10. Affirmation of Guaranties. Each of LDM Holding, LDM Canada, Kenco
Michigan, and Kenco Kentucky (i) consents to and approves the execution and
delivery of this Amendment by the parties hereto, (ii) agrees that this
Amendment does not and shall not limit or diminish in any manner the
obligations of the Guarantors under their respective Guarantor Guarantees, or
under any of the other documents executed and/or delivered by any of the
Guarantors in connection therewith, and agrees that such obligations of the
Guarantors would not be limited or diminished in any manner even if the
Guarantors had not executed this Amendment, (iii) agrees that this Amendment
shall not be construed as requiring the consent of the Guarantors in any other
circumstance, (iv) reaffirms its obligations under each of the Guarantor
Guarantees and such other related documents, and (v) agrees that the Guarantor
Guarantees and such other related documents remain in full force and effect and
are each hereby ratified and confirmed.
11. Facsimile Transmission Counterparts. Delivery of an executed
counterpart of a signature page to this Amendment by facsimile transmission
shall be effective as delivery of a manually executed counterpart of this
Amendment.
[signature page follows]
9
<PAGE> 10
IN WITNESS WHEREOF, this Amendment No. 4 and Affirmation of Guaranties
has been duly executed as of the date first written above.
LDM TECHNOLOGIES, INC.
By: [SIG]
---------------------------
Title: CEO
------------------------
LDM HOLDING CANADA, INC.
By: [SIG]
---------------------------
Title: CEO
------------------------
LDM TECHNOLOGIES COMPANY
By: [SIG]
---------------------------
Title: CEO
------------------------
KENCO PLASTICS, INC., a Kentucky corporation
By: [SIG]
---------------------------
Title: CEO
------------------------
KENCO PLASTICS, INC., a Michigan corporation
By: [SIG]
---------------------------
Title: CEO
------------------------
S-1
<PAGE> 11
BANKAMERICA BUSINESS CREDIT, INC.,
as Lender and as Agent
By:
-------------------------------
Title:
----------------------------
S-2
<PAGE> 1
EXHIBIT 12
LDM Technologies, Inc.
Computation of Ratio of Earnings to Fixed Charges
(thousands of dollars, except ratios)
<TABLE>
<CAPTION>
Years ended September
--------------------------------------------------------------
Audited Pro Forma
1993 1994 1995 1996 1997 1997
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed charges:
Income from continuing operations before income
taxes, minority interest and extraordinary item $ 4,490 $ 6,559 $11,537 $ 5,108 $ 5,009 $ 5,928
Interest, including amortization of debt issuance cost 779 2,144 3,340 4,060 11,076 14,061
Less, interest capitalized during the year (162) (780) (312) (312)
Amortization of capitalized interest 16 84 84
Portion of operating lease rentals deemed to be interest 275 450 650 600 701 739
--------------------------------------------------------------
Total earnings available for fixed charges: $ 5,544 $ 9,153 $15,365 $ 9,004 $16,558 $20,500
==============================================================
Fixed charges:
Interest, including amortization of debt issuance cost $ 779 $ 2,144 $ 3,340 $ 4,060 $11,076 $14,061
Portion of operating lease rentals deemed to be interest 275 450 650 600 701 739
--------------------------------------------------------------
Total fixed charges $ 1,054 $ 2,594 $ 3,990 $ 4,660 $11,777 $14,800
==============================================================
Ratio of earnings to fixed charges 5.3 3.5 3.9 1.9 1.4 1.4
==============================================================
</TABLE>
<PAGE> 1
EXHIBIT 21
LDM TECHNOLOGIES, INC.
AFFILIATES AND SUBSIDIARIES
LDM Technologies, Inc., a Michigan corporation
LDM Holding Mexico, Inc., a Michigan corporation
LDM Technologies S. de R.L., a Mexican limited liability company
GL Industries of Indiana, Inc., an Indiana corporation
Kenco Plastics, Inc., a Michigan corporation
Kenco Plastics, Inc., a Kentucky corporation
LDM Holding Canada, Inc., a Michigan corporation
LDM Technologies Company, a Nova Scotia unlimited liability company
LDM Technologies GmbH, a German limited liability company
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 4,632
<SECURITIES> 0
<RECEIVABLES> 45,812
<ALLOWANCES> 141
<INVENTORY> 15,048
<CURRENT-ASSETS> 86,390
<PP&E> 127,195
<DEPRECIATION> 44,936
<TOTAL-ASSETS> 212,187
<CURRENT-LIABILITIES> 65,749
<BONDS> 122,261
0
0
<COMMON> 0
<OTHER-SE> 20,385
<TOTAL-LIABILITY-AND-EQUITY> 212,187
<SALES> 293,020
<TOTAL-REVENUES> 293,020
<CGS> 240,930
<TOTAL-COSTS> 240,930
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,076
<INCOME-PRETAX> 5,009
<INCOME-TAX> 2,088
<INCOME-CONTINUING> 2,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,063
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
