<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 19, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 333-21819
LDM TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MICHIGAN 38-2690171
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (248) 858-2800
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days.
YES X NO
Number of shares of common stock outstanding as of January 28, 2000: 600
Total pages: 21
Listing of exhibits: 20
<PAGE> 2
LDM TECHNOLOGIES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
-------------
<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS (UNAUDITED)
Condensed Consolidated Balance Sheets, December 19, 1999 and
September 26, 1999 3
Condensed Consolidated Statements of Income, three months ended
December 19, 1999 and December 27, 1998 4
Condensed Consolidated Statements of Cash Flows, three months ended
December 19, 1999 and December 27, 1998 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS
OF OPERATIONS 14
PART II OTHER INFORMATION
Item 1 Legal Proceedings Not applicable
Item 2 Changes in Securities Not applicable
Item 3 Defaults upon Senior Securities Not applicable
Item 4 Submission of Matters to a Vote of Security Holders Not applicable
Item 5 Other Information Not applicable
Item 6 Exhibits and Reports on Form 8-K (a) Exhibit 27
Financial Data
Schedule
</TABLE>
Signature Page
<PAGE> 3
LDM TECHNOLOGIES, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 19, 1999 SEPTEMBER 26, 1999
(UNAUDITED) (NOTE)
---------------------- -----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $3,107 $4,317
Accounts Receivable 87,414 79,434
Raw materials 14,199 12,827
Work in process 2,073 1,872
Finished goods 5,150 6,084
Mold costs 14,698 12,706
Refundable income taxes 1,385
Deferred income taxes 2,157 1,947
Other current assets 2,098 1,960
---------------------- ----------------------
Total current assets 130,896 122,532
Net property, plant and equipment 108,681 121,116
Goodwill, net 58,483 59,688
Debt issue costs, net 5,050 5,126
Equity investments in affiliates 2,791 2,091
Note receivable from affiliate 2,518 895
Other assets 693 695
---------------------- ----------------------
Totals $309,112 $312,143
====================== ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan $39,034 $33,276
Accounts payable 52,755 55,120
Accrued liabilities 19,480 17,976
Accrued interest 5,584 3,599
Accrued compensation 8,149 7,988
Income taxes payable 69
Current maturities of long-term debt 11,564 11,564
---------------------- ----------------------
Total current liabilities 136,635 129,523
Long-term debt due after one year 156,747 168,262
Deferred income taxes 1,354 1,438
STOCKHOLDERS' EQUITY
Common Stock (par value $.10, issued
and outstanding 600 shares; authorized
100,000 shares)
Additional paid-in capital 94 94
Retained earnings 13,873 12,525
Accumulated other comprehensive income 409 301
---------------------- ----------------------
Total stockholders' equity 14,376 12,920
---------------------- ----------------------
Totals $309,112 $312,143
====================== ======================
</TABLE>
Note: The balance sheet at September 26, 1999 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Income
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
-------------------------------------------------------------
December 19, 1999 December 27, 1998
---------------------- --------------------
<S> <C> <C>
Revenues
Net product sales $118,929 $132,438
Net mold sales 6,467 5,658
---------------------- --------------------
125,396 138,096
Cost of Sales
Cost of product sales 96,038 106,760
Cost of mold sales 6,454 6,300
---------------------- --------------------
102,492 113,060
---------------------- --------------------
Gross Margin 22,904 25,036
Selling, general and administrative 15,354 15,620
expenses ---------------------- --------------------
Operating profit 7,550 9,416
Interest expense (4,653) (5,396)
Other income, net (292) (68)
---------------------- --------------------
Income before income taxes 2,605 3,952
Provision for income taxes 1,257 2,250
---------------------- --------------------
Net income $1,348 $1,702
====================== ====================
</TABLE>
See notes to condensed consolidated financial statements.
Total comprehensive income is not materially different from net income.
4
<PAGE> 5
LDM TECHNOLOGIES, INC.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited)
Three Months Ended
-----------------------------------------------
December 19, December 27,
1999 1998
------------------- ------------------
<S> <C> <C>
Net cash provided (used) by operating activities $(607) $6,439
Cash flows from investing activities
Additions to property, plant and equipment (2,482) (4,044)
Proceeds from disposal of property, plant and equipment 8,258
----------------- ----------------
Net cash provided (used) for investing activities 5,776 (4,044)
Cash flows from financing activities
Costs associated with debt acquisition (73) (68)
Advances to affiliates (549)
Payments on long-term debt (11,515) (2,996)
Net borrowings on line of credit 5,758 947
----------------- ----------------
Net cash used for financing activities (6,379) (2,117)
----------------- ----------------
Net cash change (1,210) 278
Cash at beginning of period 4,317 3,317
----------------- ----------------
Cash at end of period $3,107 $3,595
================= ================
Supplemental information
Depreciation and amortization $5,785 $5,129
================= ================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ending December 19,
1999 is not necessarily indicative of the results that may be expected for the
year ending September 24, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 26, 1999.
The Company closed its quarter ended December 19, 1999 one week early to allow
for Year 2000 testing. The quarter ended December 19, 1999 contains 12 weeks
versus a 13 week quarter for the preceding year. As a result, certain fixed
costs may appear higher as a percentage of sales in the quarter ended December
19, 1999 compared to the quarter ended December 27, 1998. The week ended
December 26, 1999 resulted in product sales of $6,754. Management estimates that
pretax income would have increased by 15% of such sales if this week would have
been included in the first quarter of the Company's fiscal year 2000.
2. Sale of Blowmolding Machinery and Equipment to DBM Technologies, LLC
Effective as of December 31, 1998, the Company entered into a joint venture (DBM
joint venture) that is 49% owned by the Company, and 51% owned by an independent
third party. The Company sold the Kenco business and most of its net current
assets to the joint venture at an amount equal to the net book value of the net
current assets. The sales price of the net current assets approximated $8.8
million.
The Company leased all machinery and equipment of the Kenco business to the
joint venture, and is subleasing to the joint venture all real properties in the
Kenco operations.
Under the terms of the agreement, the Company provided a subordinated $1.8
million loan to the joint venture and guaranteed $1.0 million of the joint
venture line of credit borrowings. As a result of those terms, and the
relatively small amount of equity contributed to the joint venture by the
independent third party, the Company retained substantially all of the risks of
ownership. The investment is treated as an equity investment for accounting
purposes, but the Company has recorded 100% of the joint venture losses as
equity losses.
On December 8, 1999, the Company sold all of the machinery and equipment of the
Kenco business to the joint venture for $10.3 million, the approximate net book
value of the machinery and equipment. Proceeds from the sale were comprised of
$8.3 million in cash and an additional $2.0 million subordinated note payable to
the Company from the joint venture.
As part of the transaction, the joint venture refinanced its line of credit
which released the Company from the $1 million guarantee discussed above.
The joint venture's new senior lender required the Company to subordinate all
amounts due from the joint venture at the time of refinancing. As a result, the
previous subordinated note payable to the Company was canceled and replaced with
a new subordinated note payable approximating $5.6 million. This amount is
comprised of the $2.0 million related to the machinery and equipment purchase,
$1.9 million related to the original subordinated note payable plus accrued
interest, and $1.7 million related to unpaid machinery and equipment rentals and
miscellaneous other unpaid trade amounts. The new subordinated note payable
bears interest at 9.5% and is payable in equal quarterly installments beginning
June 1, 2000 and shall be fully paid on or before December 8, 2004.
6
<PAGE> 7
LDM TECHNOLOGIES, INC.
Notes to Condensed Consolidated Financial Statements
3. Commitments and Contingencies
There have been no significant changes in commitments and contingencies from the
matters described in footnote 12 of the Company's consolidated financial
statements as of and for the fiscal year ended September 26, 1999.
5. Supplemental Guarantor Information
The $110 million 10 3/4% Senior Subordinated Notes due 2007, the Senior Credit
Facility, the standby letters of credit with respect to the $8.8 million
Multi-Option Adjustable Rate Notes and the $4.4 million Variable Rate Demand
Limited Obligation Revenue Bonds and the Senior Term and Capital Expenditures
Line of Credit are obligations of LDM Technologies, Inc. The obligations are
guaranteed fully, unconditionally and jointly and severally by LDM Technologies
Company and LDM Holding Canada, Inc. The non-guarantor subsidiaries are Como,
LDM Germany, LDM Mexico, and LDM Holding Mexico, Inc. LDM Mexico and Como are
currently inactive.
Supplemental consolidating financial information of LDM Technologies, Inc., LDM
Canada (including the related holding company guarantors) and combined Como, LDM
Mexico, and LDM Germany (the "non-guarantor subsidiaries") is presented below
(in thousands). Investments in subsidiaries are presented on the equity method
of accounting. Separate financial statements of the guarantors are not provided
because management has concluded that the summarized financial information below
provides sufficient information to allow investors to separately determine the
nature of the assets held by and the operations of LDM Technologies, Inc., and
its guarantor and non-guarantor subsidiaries.
7
<PAGE> 8
LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of December 19, 1999 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
LDM
Technologies, LDM Nonguarantor Consolidating
Inc Canada Subsidiaries Entries Consolidated
------------ --------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 31 $ 3,076 $ 3,107
Accounts receivable 70,197 $ 13,886 3,331 87,414
Raw materials 10,891 1,936 1,372 14,199
Work in process 1,449 299 325 2,073
Finished goods 3,959 892 299 5,150
Mold costs 11,562 3,098 38 14,698
Deferred income taxes 2,157 2,157
Other current assets 1,819 264 15 2,098
--------- --------- --------- --------- ---------
Total current assets 102,065 20,375 8,456 130,896
Net property, plant and equipment 90,143 14,441 4,097 108,681
Investment in subsidiaries 8,637 $ (8,637)
Goodwill, net 58,483 58,483
Debt issue costs, net 5,050 5,050
Equity investments in affiliates 2,791 (15,818) 2,791
Notes receivable due from affiliates 18,336 2,518
Other assets 693 693
--------- --------- --------- --------- ---------
Totals $ 286,198 $ 34,816 $ 12,553 $ (24,455) $ 309,112
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan $ 39,034 $ 39,034
Accounts payable 37,424 $ 11,199 $ 4,239 $ (107) 52,755
Accrued liabilities 15,622 2,824 1,034 19,480
Accrued interest 5,584 5,584
Accrued compensation 6,092 387 1,670 8,149
Income taxes payable 69 69
Current maturities of long-term debt 11,564 11,564
--------- --------- --------- --------- ---------
115,389 14,410 6,943 (107) 136,635
Total current liabilities
Long-term debt due after one year 156,747 156,747
Deferred income taxes 117 1,237 1,354
Note payable to affiliates 10,532 11,068 (21,600)
STOCKHOLDERS' EQUITY
Common stock 5,850 2,944 (8,794)
Additional paid-in capital 94 94
Retained earnings 13,873 2,787 (8,833) 6,046 13,873
Accumulated other comprehensive income (22) 431 409
--------- --------- --------- ---------- ---------
Total stockholders' equity 13,945 8,637 5,458 (2,748) 14,376
--------- --------- --------- ---------- ---------
Totals $ 286,198 $ 34,816 $ 12,553 $ (24,455) $ 309,112
========= ========= ========= ========== =========
</TABLE>
8
<PAGE> 9
LDM TECHNOLOGIES, INC.
Condensed Consolidating Balance Sheet as of September 26, 1999 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
------------- ---------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 2,184 $ 2,133 4,317
Accounts receivable 60,613 $ 13,748 5,073 79,434
Raw materials 9,456 1,941 1,430 12,827
Work in process 1,336 240 296 1,872
Finished goods 4,977 692 415 6,084
Mold costs 10,193 2,379 134 12,706
Refundable income taxes 1,312 73 1,385
Deferred income taxes 1,947 1,947
Other current assets 1,817 143 1,960
--------- --------- --------- --------- ---------
Total current assets 93,835 19,216 9,481 122,532
Net property, plant and equipment, at cost 102,017 14,650 4,449 121,116
Investment in subsidiaries and affiliates 10,269 $ (8,178) 2,091
Note receivable affiliates 17,175 (16,280) 895
Goodwill 59,688 59,688
Debt issue costs 5,126 5,126
Other 695 695
--------- --------- --------- --------- ---------
Totals $ 288,805 $ 33,866 $ 13,930 ($ 24,458) $ 312,143
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Lines of credit and revolving loan $ 33,276 33,276
Accounts payable 39,231 $ 11,300 $ 4,635 ($ 46) 55,120
Accrued liabilities 14,004 2,420 1,552 17,976
Accrued interest 3,599 3,599
Accrued compensation 5,988 282 1,718 7,988
Current maturities of long-term debt 11,564 11,564
--------- --------- --------- --------- ---------
Total current liabilities 107,662 14,002 7,905 (46) 129,523
Long-term debt due after one year 168,262 10,532 10,897 (21,429) 168,262
Deferred income taxes 284 1,154 1,438
STOCKHOLDERS' EQUITY
Common stock 5,850 2,943 (8,793)
Additional paid-in capital 94 94
Retained earnings 12,525 2,328 (8,138) 5,810 12,525
Accumulated other comprehensive income (22) 323 301
--------- --------- --------- --------- ---------
Total stockholders' equity (loss) 12,597 8,178 (4,872) (2,983) 12,920
--------- --------- --------- --------- ---------
Total liabilities and stockholders' equity $ 288,805 $ 33,866 $ 13,930 ($ 24,458) $ 312,143
========= ========= ========= ========= =========
</TABLE>
9
<PAGE> 10
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Three
Months ended December 19, 1999 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
--------------- -------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net product sales $92,601 $18,340 $7,988 $118,929
Net mold sales 6,467 6,467
-------------- ------------- --------------- --------------- --------------
99,068 18,340 7,988 125,396
Cost of Sales
Cost of product sales 70,995 17,276 7,767 96,038
Cost of mold sales 6,454 6,454
-------------- ------------- --------------- --------------- --------------
77,449 17,276 7,767 102,492
-------------- ------------- --------------- --------------- --------------
Gross Margin 21,619 1,064 221 22,904
Selling, general and administrative
expenses 14,550 308 496 15,354
-------------- ------------- --------------- --------------- --------------
Operating profit (loss) 7,069 756 (275) 7,550
Interest expense (4,653) (274) (161) $435 (4,653)
Other income (expense), net 475 156 (259) (435) (63)
Equity in net loss of subsidiaries
and affiliates (465) 236 (229)
-------------- ------------- --------------- --------------- --------------
Income (loss) before income taxes 2,426 638 (695) 236 2,605
Provision for income taxes 1,078 179 1,257
-------------- ------------- --------------- --------------- --------------
Net income (loss) $1,348 $459 $(695) $236 $1,348
============== ============= =============== =============== ==============
</TABLE>
10
<PAGE> 11
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Operations for Three Months Ended
December 27, 1998 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
--------------- -------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues:
Net product sales $105,631 $15,544 $11,263 $132,438
Net mold sales 5,613 18 27 5,658
--------------- -------------- ---------------- ---------------- ---------------
111,244 15,562 11,290 138,096
Cost of Sales
Cost of product sales 80,593 14,302 11,865 106,760
Cost of mold sales 6,277 23 6,300
--------------- -------------- ---------------- ---------------- ---------------
86,870 14,302 11,888 113,060
--------------- -------------- ---------------- ---------------- ---------------
Gross Margin 24,374 1,260 (598) 25,036
Selling, general and administrative
expenses 14,366 283 971 15,620
--------------- -------------- ---------------- ---------------- ---------------
Operating profit (loss) 10,088 977 (1,569) 9,416
Interest expense (5,299) (304) (267) 474 (5,396)
Other income (expense), net 452 (83) 37 (474) (68)
Equity in net income of subsidiaries 201 (201)
--------------- -------------- ---------------- ---------------- ---------------
Income (loss) before income taxes 5,362 590 (1,799) (201) 3,952
Provision (credit) for income taxes 2,803 167 (720) 2,250
--------------- -------------- ---------------- ---------------- ---------------
Net income (loss) $2,559 $423 $(1,079) $(201) $1,702
=============== ============== ================ ================ ===============
</TABLE>
11
<PAGE> 12
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows for Three Months Ended
December 19, 1999 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
LDM
Technologies, LDM Nonguarantor
Inc. Canada Subsidiaries Consolidated
------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Net cash provided (used) by operating activities $(1,692) $313 $772 $(607)
Cash flows from investing activities
Additions to property, plant and equipment (2,169) (313) (2,482)
Proceeds from disposal of property, plant and equipment 8,258 8,258
------------- ---------- ------------- -------------
Net cash provided (used) by investing activities 6,089 (313) 5,776
Cash flows from financing activities
Borrowing (to)/from affiliates (720) 171 (549)
Costs associated with debt acquisition (73) (73)
Payments on long-term debt (11,515) (11,515)
Net proceeds from line of credit borrowings 5,758 5,758
------------- ---------- ------------- -------------
Net cash provided (used) by financing activities (6,550) 171 (6,379)
------------- ---------- ------------- -------------
Net cash change (2,153) 943 (1,210)
Cash at beginning of period 2,184 2,133 4,317
------------- ---------- ------------- -------------
Cash at end of period $31 $ $3,076 $3,107
============= ========== ============= =============
Supplemental information:
Depreciation and amortization $4,911 $522 $352 $5,785
============= ========== ============= =============
</TABLE>
12
<PAGE> 13
LDM TECHNOLOGIES, INC.
Condensed Consolidating Statement of Cash Flows for Three Months Ended
December 27, 1998 (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
LDM
Technologies, LDM Nonguarantor Consolidating
Inc. Canada Subsidiaries Entries Consolidated
------------- ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities $ 4,663 $ 325 $ 1,451 $ 6,439
Cash flows from investing activities
Additions to property, plant and equipment (3,539) (119) (386) (4,044)
Disbursements on notes receivable to affiliates (204) $ 204
------- ------- ------- ------- -------
Net cash used for investing activities (3,743) (119) (386) 204 (4,044)
Cash flows from financing activities
Costs associated with debt acquisition (68) 2 202 (68)
Proceeds from long-term debt 204
Payments on long-term debt (2,996) (2,996)
Net proceeds (repayment) from online of credit
borrowings 1,501 (554) 947
------- ------ ------- ------- -------
Net cash provided (used) by financing activities (1,563) 2 (352) (204) (2,117)
------- ------- ------- ------- -------
Net cash change (643) 208 713 278
Cash at beginning of period 673 1,317 1,327 3,317
------- ------- ------- ------- -------
Cash at end of period $ 30 $ 1,525 $ 2,040 $ $ 3,595
======= ======= ======= ======= =======
Supplemental information:
Depreciation and amortization $ 4,228 $ 470 $ 431 $ $ 5,129
======= ======= ======= ======= =======
</TABLE>
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. When used in this section, the words
"anticipate,""believe,""estimate"and "expect"and similar expressions are
generally intended to identify forward-looking statements. Readers are cautioned
that any forward-looking statements, including statements regarding the intent,
belief or current expectations of the Company or its management, are not
guarantees of future performance and involve risks and uncertainties, and that
the actual results may differ materially from those in the forward-looking
statements as a result of various factors including, but not limited to: (i)
general economic conditions in the markets in which the Company operates; (ii)
fluctuations in worldwide or regional automobile and light and heavy truck
production; (iii) labor disputes involving the Company or its significant
customers; (iv) changes in practices and/or policies of the Company's
significant customers toward outsourcing automotive components and systems; (v)
foreign currency and exchange fluctuations; (vi) factors affecting the ability
of the Company or its key suppliers to resolve Year 2000 issues in a timely
manner; and (vii) other risks detailed from time to time in the Company's
filings with the Securities and Exchange Commission. The Company does not intend
to update these forward-looking statements.
OVERVIEW
The Company's financial results for the quarter ended December 19, 1999 continue
to reflect the positive impact of its strategic initiatives, which include
recent acquisitions and divestitures.
The Company closed its quarter ended December 19, 1999 one week early to allow
for Year 2000 testing. The quarter ended December 19, 1999 contains 12 weeks
versus a 13 weeks quarter for the preceding year. As a result, certain fixed
costs may appear higher as a percentage of sales in the quarter ended December
19, 1999 compared to the quarter ended December 27, 1998. The week ended
December 26, 1999 resulted in product sales of $6,754. Management estimates that
pretax income would have increased by 15% of such sales if this week would have
been included in the first quarter of the Company's fiscal year 2000.
RESULTS OF OPERATIONS
QUARTER ENDED DECEMBER 19, 1999 COMPARED TO THE QUARTER ENDED
DECEMBER 27, 1998
Net sales for the quarter ended December 19, 1999 ("first quarter 2000") were
$125.4 million, a decrease of $12.7 million or 9.2% from the quarter ended
December 27, 1998 ("first quarter 1999"). First quarter 2000 net sales were
comprised of approximately $118.9 million of automotive product sales and $6.5
million of tooling sales. The decline in net sales is primarily the result of
the sale of the Company's Kenco business and the current year 12 week quarter
discussed above.
Gross margin was $22.9 million or 18.3% of net sales for the first quarter 2000
compared with $25.0 million or 18.1% of net sales for the first quarter 1999.
First quarter 2000 gross margin related to automotive product sales was $22.9
million or 19.3% of net product sales compared to $25.3 million or 19.7% of net
product sales for the first quarter of 1999. The slight decline in gross margin
percentage related to product sales is the result of the 12 week quarter
discussed above.
Selling, General and Administrative (SG&A) expense for the first quarter 2000
was $15.4 million, or 12.3% of net sales compared to $15.6 million, or 11.3% of
net sales for the first quarter of 1999. The increase in first quarter 2000 as a
percentage of sales is the result of the 12 week quarter discussed above.
Interest expense for the first quarter 2000 was $4.7 million compared to $5.4
million for the first quarter 1999. The decrease in interest expense is
primarily due to scheduled debt repayments and debt repayment related to the
sale of the Company's blowmolding machinery and equipment.
14
<PAGE> 15
The provision for income taxes for the first quarter 2000 was $1.3 million. The
effective tax rate for the first quarter of 2000 was 48.3% compared to 56.9% for
the first quarter 1999. The high effective rates are due to certain
nondeductible expenses and foreign tax in excess of tax credits.
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 December 19, 1999, the Company had $156.7 million of
long-term debt outstanding, $50.6 million of revolving loans and current
maturities of long-term debt outstanding, and $16.0 million of borrowing
availability under its revolving credit facility.
Cash used by operating activities in first quarter 2000 was $0.6 million
compared to $6.4 million of cash provided by operating activities in the first
quarter 1999. The decrease is due to the timing of customer cash remittances as
they relate to the end of each fiscal quarter.
Capital expenditures for first quarter 2000 were $2.5 million compared to $4.0
million for first quarter 1999. The Company believes its capital expenditures
will be approximately $19.0 million in fiscal year 2000. The majority of the
Company's fiscal year 2000 capital expenditures will be used to facilitate new
programs launching in fiscal year 2000 and to increase painting capacity for
programs launching in fiscal year 2000 and 2001. However, the Company's capital
expenditures may be greater than currently anticipated as the result of new
business opportunities.
The Company's liquidity is affected by both the cyclical nature of its business
and levels of net sales to its major customers. The Company's ability to meet
its working capital and capital expenditure requirements and debt obligations
will depend on its future operating performance, which will be affected by
prevailing economic conditions and financial, business and other factors,
certain of which are beyond its control. However, the Company believes that its
existing borrowing ability and cash flow from operations will be sufficient to
meet its liquidity requirements in the foreseeable future.
YEAR 2000 COMPLIANCE:
GENERAL DESCRIPTION OF THE YEAR 2000 ISSUE AND THE NATURE AND EFFECTS OF THE
YEAR 2000 ON INFORMATION TECHNOLOGY (IT) AND NON-IT SYSTEMS
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00"as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
The Company determined that it was required to modify or replace significant
portions of its software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. The Company believes that
modifications or replacements of existing software and certain hardware have
mitigated the Year 2000 Issue. However, other matters related to the Year 2000
Issue could have a material impact on the operations of the Company.
The Company's plan to resolve the Year 2000 Issue involved the following four
phases: assessment, remediation, testing, and implementation. To date, the
Company has fully completed its assessment of all systems that could be
significantly affected by the Year 2000. The completed assessment indicated that
most of the Company's significant information technology systems could be
affected, particularly the
15
<PAGE> 16
general ledger, billing, and inventory systems. That assessment also indicated
that software and hardware (embedded chips) used in production and manufacturing
systems (hereafter also referred to as operating equipment) were at risk.
Affected systems include automated assembly lines and related robotic
technologies used in various aspects of the manufacturing process. In addition,
the Company has gathered information about the Year 2000 compliance status of
its significant suppliers and subcontractors and continues to monitor their
compliance.
STATUS OF PROGRESS IN BECOMING YEAR 2000 COMPLIANT, INCLUDING TIMETABLE FOR
COMPLETION OF EACH REMAINING PHASE
For its information technology exposures, the Company has completed all phases
and has fully implemented Year 2000 compliant hardware and software. The Company
has also completed all phases and has upgraded all operating equipment to be
Year 2000 compliant.
NATURE AND LEVEL OF IMPORTANCE OF THIRD PARTIES AND THEIR EXPOSURE TO THE YEAR
2000
The Company's accounts receivable system interfaces directly with significant
customers. The Company has worked with these customers to ensure that the
Company's systems that interface directly with third parties are Year 2000
compliant. We understand that these key customers are in the process of making
their accounts payable systems Year 2000 compliant. Each customer queried
believed that its payable system would be Year 2000 compliant by the end of
1999.
The Company has queried its significant suppliers and subcontractors that do not
share information systems with the Company (external agents). To date, the
Company is not aware of any external agent with a Year 2000 issue that would
materially impact the Company's results of operations, liquidity, or capital
resources. However, the Company has no means of ensuring that external agents
are Year 2000 ready. The inability of external agents to complete their Year
2000 resolution process in a timely fashion could materially impact the Company.
The effect of non-compliance by external agents is not determinable.
COST
The Company has utilized both internal and external resources to reprogram, or
replace, test, and implement the software and operating equipment for Year 2000
modifications. The total cost of the Year 2000 project approximated $7 million,
and was funded through operating cash flows. The total expenditures were
comprised of $4 million of new hardware, software, and operating equipment which
was capitalized, and the remaining $3 million relates to repairs and
implementation costs which were expensed as incurred. Such expenditures were
incurred during the Company's 1998 and 1999 fiscal years.
RISKS
Management of the Company believes it completed an effective program to resolve
the Year 2000 Issue in a timely manner. As noted above, the Company has
completed all necessary phases of the Year 2000 program. Disruptions in the
economy generally resulting from the Year 2000 Issue could also materially
adversely affect the Company. The amount of potential liability and lost revenue
cannot be reasonably estimated at this time.
CONTINGENCY PLAN
The Company had contingency plans for certain critical applications. These
contingency plans involved, among other actions, manual workarounds, increasing
inventories, and adjusting staffing strategies.
16
<PAGE> 17
YEAR 2000 DISCLOSURE CHART
<TABLE>
<CAPTION>
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Information Technology 100% complete 100% complete 100% complete 100% complete
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Operating Equipment with 100% complete 100% complete 100% complete 100% complete
Embedded Chips or Software
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Products 100% complete 100% complete 100% complete 100% complete
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
Third Party 100% complete 100% complete 100% complete 100% complete
Implement
contingency plans or
other alternatives
as necessary,
December 1999
- ----------------------------- -------------------- ---------------------- --------------------- ----------------------
</TABLE>
POST YEAR 2000 ISSUES
As of the date of this filing, the Company has not experienced any disruptions
in its operations and has been able to process transactions and engage in normal
business activities. No issues have been encountered or are anticipated that
would have a material impact on the Company.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
LDM TECHNOLOGIES, INC.
By: /s/ Gary E. Borushko
-----------------------------
Gary E. Borushko
Chief Financial Officer
By: /s/ Bradley N. Frederick
-----------------------------
Bradley N. Frederick
Director of Finance
Chief Accounting Officer
Dated: February 2, 2000
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT NO DESCRIPTION
------------------- -----------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-24-2000
<PERIOD-START> SEP-27-1999
<PERIOD-END> DEC-19-1999
<CASH> 3,107
<SECURITIES> 0
<RECEIVABLES> 87,414
<ALLOWANCES> 2,699
<INVENTORY> 21,422
<CURRENT-ASSETS> 130,896
<PP&E> 176,137
<DEPRECIATION> 67,456
<TOTAL-ASSETS> 309,112
<CURRENT-LIABILITIES> 136,635
<BONDS> 156,747
0
0
<COMMON> 0
<OTHER-SE> 14,376
<TOTAL-LIABILITY-AND-EQUITY> 309,112
<SALES> 125,396
<TOTAL-REVENUES> 125,396
<CGS> 102,492
<TOTAL-COSTS> 102,492
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,653
<INCOME-PRETAX> 2,605
<INCOME-TAX> 1,257
<INCOME-CONTINUING> 1,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,348
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
