SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1996 Commission file number 33-56048
KEY PLASTICS, INC.
MICHIGAN 38-2653726
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21333 Haggerty Rd., Suite 200, Novi, MI 48375
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 449-6100
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 [ ]
As of November 12, 1996, 315,908 shares of the Company's Common
Stock were outstanding.
<PAGE>
PART I - Financial Information
Item 1.
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATION
(Unaudited)
For the For the
Three Months Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
---- ---- ---- ----
Net Sales $52,883,090 $38,014,242 $155,655,944 $137,275,170
Cost of Sales 43,090,480 31,613,844 125,419,015 110,448,610
---------- ---------- ----------- -----------
Gross Profit 9,792,610 6,400,398 30,236,929 26,826,560
Selling, general
& administrative
expenses 4,112,665 3,894,659 11,481,437 11,470,382
Amortization 160,203 159,078 480,609 477,234
--------- --------- ---------- ----------
Operating income 5,519,742 2,346,661 18,274,883 14,878,944
Interest expense, net 3,750,920 3,637,670 10,896,435 10,651,893
--------- --------- ---------- ---------
Net income $ 1,768,822 $(1,291,009) $ 7,378,448 $ 4,227,051
========= ========= ========== =========
Earnings per share $5.33 $(3.83) $22.20 $12.55
========= ========= ========== =========
See notes to condensed consolidated financial statements
<PAGE>
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept 30, Dec. 31,
1996 1995
-------- --------
ASSETS (Unaudited)
Current assets:
Accounts receivable, net $41,244,226 $29,706,392
Inventories 29,823,877 22,063,953
Prepaid expenses and other
current assets 2,067,258 1,169,835
---------- ----------
Total current assets 73,135,361 52,940,180
Property, plant and equipment,
net 78,614,896 68,183,780
Intangibles, net 2,696,188 2,844,297
Other assets 3,198,095 2,421,728
----------- -----------
Total assets $157,644,540 $126,389,985
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-
term debt $17,123,707 $17,172,590
Accounts payable 27,627,703 20,207,585
Accrued liabilities 13,477,552 6,006,572
---------- ----------
Total current liabilities 58,228,962 43,386,747
Capital lease obligations 2,222,304 2,669,133
Long-term debt 110,673,890 99,797,587
Other long-term liabilities 902,500 911,332
Shareholders' deficit:
Common stock, par value $.30
Authorized: 450,000
Issued and outstanding:
316,208 and 316,834, respectively 94,862 95,050
Additional paid-in capital 10,002,725 10,002,725
Accumulated deficit (24,480,703) (30,472,589)
---------- ----------
Total shareholders'
deficit (14,383,116) (20,374,814)
---------- -----------
Total liabilities and
shareholders' deficit $157,644,540 $126,389,985
=========== ===========
See notes to condensed consolidated financial statements
<PAGE>
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the nine months
ended September 30,
1996 1995
---- ----
Cash flows from operating
activities:
Net income $7,378,448 $4,227,051
--------- ---------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 5,779,654 5,181,485
Amortization 480,610 477,234
(Increase) Decrease in
assets:
Accounts receivable (11,376,470) 2,115,099
Inventories (7,672,876) 586,064
Other current assets (879,675) (375,879)
Increase (Decrease) in
liabilities:
Accounts payable 7,287,277 (9,425,561)
Accrued liabilities 7,385,326 3,355,473
---------- ----------
Total adjustments 1,003,846 1,913,915
---------- ----------
Net cash provided from
operating activities 8,382,294 6,140,966
---------- ----------
Cash flows from investing
activities:
Acquisitions of property,
plant and equipment (15,693,570) (9,290,270)
Increase in other assets (1,087,566) (802,499)
---------- ---------
Net cash used for investing
activities (16,781,136) (10,092,769)
---------- ----------
Cash flows from financing
activities:
Net borrowings under debt
agreements 12,748,538 12,542,216
Principal payments under
debt agreements (2,367,947) (4,503,537)
Dividend distributions (1,669,862) (4,025,190)
Other, net - (61,686)
--------- ---------
Net cash provided by
financing activities 8,710,729 3,951,803
--------- ---------
Effect of exchange rate
changes on cash (311,887) -
--------- ---------
Net increase in cash 0 0
Cash, beginning of period 0 0
--------- ---------
Cash, end of period $ 0 $ 0
========= =========
Supplemental disclosure of
cash flow information,
cash paid during the
period for interest $ 7,816,666 $ 7,706,714
========= =========
See notes to condensed consolidated financial statements
<PAGE>
KEY PLASTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation:
Information for the three and nine month periods ended
September 30, 1996 and 1995 is unaudited but includes all
adjustments, consisting of normal recurring adjustments,
which management of Key Plastics, Inc. (the "Company")
considers necessary for a fair presentation of the
consolidated financial position, results of operations and
cash flows. Certain information and footnotes necessary to
comply with generally accepted accounting principles have
been condensed or omitted.
Certain items in the December 31, 1995 balance sheet have
been reclassified to conform to the current period
presentation.
Effective May 1, 1996, the Company acquired an injection
molding operation in the United Kingdom which primarily
services the automotive industry. The consolidated
financial statements include the results of operations and
cash flows for the United Kingdom operations from May 1,
1996 to September 30, 1996, as well as the financial
position at September 30, 1996.
These financial statements should be read in conjunction
with the Company's consolidated financial statements for the
year ended December 31, 1995 which contain a summary of the
Company's accounting principles and other information. The
results of operations for any interim period should not
necessarily be considered indicative of the results of
operations for a full year.
2. Inventories:
Inventories are stated at the lower of cost or market with
cost determined using the FIFO (first in, first out) method.
The components of inventories consisted of the following:
Sept. 30, Dec. 31,
1996 1995
--------- -------
Raw materials $ 8,978,030 $ 5,645,958
Work in progress 3,548,955 1,975,308
Finished goods 4,481,710 4,217,179
Customer Tooling 12,815,182 10,225,508
---------- ----------
$29,823,877 $22,063,953
========== ==========
3. Earnings Per Share:
Earnings per share amounts for the three and nine month periods
ended September 30, 1996 and 1995 are computed by using net income
divided by the weighted average number of shares of common and
common equivalent shares outstanding during the period under the
treasury stock method.
The weighted average number of shares used in computing
earnings per share are 332,105 and 336,709 for the three
months ended September 30, 1996 and 1995, respectively, and
332,355 and 336,709 for the nine months ended September 30,
1996 and 1995, respectively.
<PAGE>
The Company is closely-held and, accordingly, there is no
public market for the Company's common stock. For purposes
of computing the incremental common equivalent shares
outstanding under the treasury stock method, the Company
utilized management's estimate of fair value of the
Company's Common Stock.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KEY PLASTICS, INC.
FINANCIAL POSITION
Accounts Receivable increased by $11.5 million when comparing
balances at September 30, 1996 and December 31, 1995. $5.3 million is due
to increased parts shipments during the third quarter of 1996 when compared
to the fourth quarter of 1995. Additionally, the acquisition of the United
Kingdom operations resulted in an increase to Accounts Receivable of $6.2
million.
The increase in inventory of $7.8 million from December 31, 1995 to
September 30, 1996 was due principally to the acquisition of the United
Kingdom operations and the increase in the Customer Tooling inventory
related to the design and build of tooling for future programs.
Property, plant and equipment increased due to the aquisition of the
United Kingdom operations and purchases of additional capital items at other
operating locations, net of the increase in the depreciation reserve for the
nine month period.
Accrued liabilities increased when comparing September 30, 1996 to
December 31, 1995 largely due to the liabilities assumed with the United
Kingdom acquisition.
Long-term debt increased primarily as a result of the acquisition of
assets.
Available borrowings under the working capital line of credit were
$3.7 million at September 30, 1996. The Company believes its existing
sources of liquidity are adequate to meet its operating requirements in
fiscal 1996.
RESULTS OF OPERATIONS
Below is a summary of period-to-period changes in the principal
items of the condensed statements of operations. This is followed by a
discussion and analysis of significant factors affecting the Company's
earnings for the period.
<PAGE>
Comparison of Results of Operations
Increase(Decrease) (Dollars in Thousands)
Three Months Ended Nine Months Ended
Sept. 30, 1996 vs. Sept. 30, 1996 vs.
Sept. 30, 1995 Sept. 30, 1995
------------------- ------------------
Net sales $14,869 39% $18,381 13%
Cost of sales 11,477 36% 14,970 14%
Selling, general,
and administrative
expenses 218 6% 11 -
Amortization
expenses 1 - 3 -
Interest Expense,
net 113 3% 245 2%
Net income $3,060 237% $3,151 75%
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended September 30, 1996 compared to three months ended
September 30, 1995. Net sales for the three month period ended September
30, 1996 were $52.9 million; an increase of approximately $14.9 million or
39% over the same period last year. The increase was primarily attributable
to a $17.8 million or 59.5% increase in the sale of injection molded parts
($7.6 million of which was due to the United Kingdom acquisition) net of a
$2.9 million decrease in tooling revenues. The non United Kingdom increase
in part sales of $10.2 million resulted from increases in the related
vehicle production by the Company's customers as well as increased sales
related to newly launched vehicle programs during the early part of 1996.
Gross profit increased $3.4 million in the third quarter of 1996
compared to the third quarter of 1995 as a result of the aforementioned
sales increase.
Selling, general and administrative expenses increased $.2 million
in the third quarter of 1996 as compared to the same period last year. The
increase is primarily due to costs incurred in the United Kingdom
operations.
Operating income increased by $3.1 million as a result of the
foregoing.
Interest expense increased because of higher average debt
outstanding offset by slightly lower interest rates.
Nine months ended September 30, 1996 compared to nine months ended
September 30, 1995. Net sales for the nine month period ended September 30,
1996 increased $18.4 million or 13.4% over the same period last year. The
increase was primarily attributable to a $21.4 million or 18.4% increase in
the sale of injection molded parts offset by a $3.0 million decline in
tooling revenues.
Gross profit increased by $3.4 million in the first nine months of
1996 compared to the same period in 1995 as a result of the aforementioned
sales increase.
Operating income increased by $3.4 million as a result of the
foregoing.
Interest expense increased for the reasons discussed in the three
month comparison above.
PART II. OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K.
(a) Exhibit
27 Financial Data Schedule (EDGAR
Version only)
(b) Reports on Form 8-k
None.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
KEY PLASTICS, INC.
By: /S/ E. R. Autry
____________________________
E.R. Autry
Vice President, Finance &
Procurement
(Principal Financial
Officer)
And: /S/ Bruce A. Weber
_____________________________
Bruce A. Weber
Corporate Controller
(Principal Accounting
Officer)
Dated: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary
financial information extracted from Key
Plastics, Inc.'s financial statements
for the period ended September 30, 1996
and is qualified in its entirety by
reference to such statements.
<MULTIPLIER> 1
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 41,244,226
<ALLOWANCES> 0
<INVENTORY> 29,823,877
<CURRENT-ASSETS> 73,135,361
<PP&E> 78,614,896
<DEPRECIATION> 0
<TOTAL-ASSETS> 157,644,540
<CURRENT-LIABILITIES> 58,228,962
<BONDS> 0
<COMMON> 94,862
0
0
<OTHER-SE> (14,477,978)
<TOTAL-LIABILITY-AND-EQUITY> 157,644,540
<SALES> 52,883,090
<TOTAL-REVENUES> 52,883,090
<CGS> 43,090,480
<TOTAL-COSTS> 43,090,480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,750,920
<INCOME-PRETAX> 1,768,822
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,768,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,768,822
<EPS-PRIMARY> 5.33
<EPS-DILUTED> 5.33
</TABLE>
