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 June 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 August 13, 1996, 316,334 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)
<TABLE>
<CAPTION>
For the For the
Three Months Six Months
Ended June 30, Ended June 30,
-----------------------------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $57,476,280 $49,403,621 $102,772,854 $99,260,928
Cost of Sales 46,278,757 39,294,095 82,328,535 78,834,766
---------- ---------- ----------- ----------
Gross Profit 11,197,523 10,109,526 20,444,319 20,426,162
Selling, general
& administrative
expenses 4,124,735 3,733,816 7,368,772 7,575,723
Amortization 160,203 159,078 320,406 318,156
---------- ---------- ---------- ---------
Operating income 6,912,585 6,216,632 12,755,141 12,532,283
Interest expense, net 3,638,847 3,573,230 7,145,515 7,014,223
---------- ---------- ---------- ----------
Net income $ 3,273,738 $ 2,643,402 $ 5,609,626 $ 5,518,060
========== ========== ========== ==========
Earnings per share $9.87 $7.79 $16.91 $17.16
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31,
1996 1995
-------- --------
ASSETS (Unaudited)
Current assets:
Accounts receivable, net $42,806,047 $29,706,392
Inventories 26,329,899 22,063,953
Prepaid expenses and other
current assets 1,280,990 1,169,835
---------- ----------
Total current assets 70,416,936 52,940,180
Property, plant and equipment,
net 76,793,699 68,183,780
Intangibles, net 2,523,891 2,844,297
Other assets 3,069,377 2,421,728
---------- ----------
Total assets $152,803,903 $126,389,985
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-
term debt $17,123,707 $17,172,590
Accounts payable 23,054,249 20,207,585
Accrued liabilities 11,294,074 6,006,572
---------- ----------
Total current liabilities 51,472,030 43,386,747
Capital lease obligations 2,381,833 2,669,133
Long-term debt 113,325,547 99,797,587
Non-compete agreements,
shareholders 536,000 536,000
Post-retirement health care
benefits 370,900 375,332
Shareholders' deficit:
Common stock, par value $.30
Authorized: 450,000
Issued and outstanding:
316,334 95,050 95,050
Additional paid-in capital 10,002,725 10,002,725
Accumulated deficit (25,380,182) (30,472,589)
----------- -----------
Total shareholders'
deficit (15,282,407) (20,374,814)
------------ ------------
Total liabilities and
shareholders' deficit $152,803,903 $126,389,985
=========== ===========
See notes to condensed consolidated financial statements
<PAGE>
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
For the
six month
ended June 30,
----------------
1996 1995
---- ----
Cash flows from operating
activities:
Net income $5,609,626 $5,518,060
--------- ---------
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 4,111,729 3,439,243
Amortization 320,406 318,156
(Increase) Decrease in
assets:
Accounts receivable (7,613,878) 281,754
Inventories (564,380) 452,418
Other current assets 1,109,042 (503,855)
Increase (Decrease) in
liabilities:
Accounts payable (1,580,957) (10,847,967)
Accrued liabilities 1,653,609 405,417
---------- -----------
Total adjustments (2,564,429) (6,454,834)
---------- -----------
Net cash provided (used)
from operating activities 3,045,197 (936,774)
---------- -----------
Cash flows from investing
activities:
Acquisitions of property,
plant and equipment (12,721,648) (6,662,262)
Other investments (1,858,012)
(Increase) Decrease in
other assets (491,197) (35,000)
----------- ----------
Net cash used for investing
activities (15,070,857) (6,697,262)
----------- ----------
Cash flows from financing
activities:
Net borrowings under debt
agreements 12,932,147 14,527,573
Principal payments under
debt agreements (287,300) (2,872,890)
Decrease in shareholder
notes receivable 4,543
Dividend distributions (999,234) (4,025,190)
----------- ----------
Net cash provided by
financing activities 11,645,613 7,634,036
----------- ----------
Effect of exchange rate
changes on cash 380,047
Net increase in cash - -
Cash, beginning of period - -
Cash, end of period $ - $ -
========== ========
Supplemental disclosure of
cash flow information,
cash paid during the
period for interest $ 6,593,986 $6,664,958
========== =========
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 six month
periods ended June 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.
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 June
30, 1996, as well as the financial position
at June 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:
June 30, Dec. 31,
1996 1995
-------- -------
Raw materials $ 8,576,381 $ 5,645,958
Work in progress 3,215,104 1,975,308
Finished goods 4,131,574 4,217,179
Customer Tooling 10,406,840 10,225,508
---------- ----------
$26,329,899 $22,063,953
========== ==========
<PAGE>
3. Earnings Per Share:
Earnings per share amounts for the three and
six month periods ended June 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 331,735
and 339,144 for the three months ended June
30, 1996 and 1995, respectively, and 331,819
and 339,144 for the six months ended June
30, 1996 and 1995, respectively.
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.
<PAGE>
Item 2. MANAGEMENT's DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KEY PLASTICS, INC.
FINANCIAL POSITION
Accounts Receivable increased by $13.1 million
when comparing balances at June 30, 1996 and December
31, 1995. $4.6 million is due to increased parts
shipments during the second quarter of 1996 when
compared to the fourth quarter of 1995. Tooling revenue
also increased by $1.9 million when comparing the same
periods, reflecting the increase in tooling programs
experienced by the Company. Additionally, the
acquisition of the United Kingdom operations resulted in
an increase to Accounts Receivable of $6.6 million.
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 six month period.
Accrued liabilities increased when comparing June
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 $3.5 million at June 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.
Comparison of Results of Operations
Increase(Decrease) (Dollars in Thousands)
Three Months Ended Six Months Ended
June 30, 1996 vs. June 30, 1996 vs.
June 30, 1995 June 30, 1995
------------------- -----------------
Net sales $8,073 16% $3,512 4%
Cost of sales 6,985 18% 3,494 4%
Selling, general,
and administrative
expenses 391 10% (207) (3%)
Amortization
expenses 1 1% 2 1%
Interest Expense,
net 66 2% 131 2%
Net income 630 24% 92 2%
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended June 30, 1996 compared to three
months ended June 30, 1995. Net sales for the three
month period ended June 30, 1996 were $57.5 million; an
increase of approximately $8.1 million or 16% over the
same period last year. The increase was primarily
attributable to a $9.7 million or 24.3% increase in the
sale of injection molded parts ($7.2 million of which
was due to the United Kingdom acquisition) net of a $1.6
million decrease in tooling revenues. The non United
Kingdom increase in part sales of $2.5 million resulted
from increases in the related vehicle production by the
company's customers.
Gross profit increased $1.1 million in the second
quarter of 1996 compared to the second quarter of 1995
as a result of the aforementioned sales increase.
Selling, general and administrative expenses
increased $.4 million in the second quarter of 1996 as
compared to the same period last year. The increase is
primarily due to costs incurred in the United Kingdom
operations net of increases in royalty income.
Interest expense increased because of higher
average debt outstanding offset by slightly lower
interest rates.
Operating income increased by $.7 million as a
result of the foregoing.
Six months ended June 30, 1996 compared to six
months ended June 30, 1995. Net sales for the six month
period ended June 30, 1996 increased $3.5 million or
3.5% over the same period last year. The increase was
primarily attributable to a $3.5 million or 4.0%
increase in the sale of injection molded parts.
Gross profit increased slightly in the first half
of 1996 compared to the first half of 1995.
Selling, general and administrative expenses
decreased $.2 million in the first half of 1996 as
compared to 1995 primarily because increases in royalty
income offset the increase in costs due to the United
Kingdom acquisition.
Interest expense increased for the reasons
discussed in the three month comparison above.
Operating income increased by $.2 million as a
result of the foregoing.
<PAGE>
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/ Mark J. Abbo
-------------------------
Mark J. Abbo
Treasurer
(Principal Accounting
Officer)
Dated: August 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 42,806,047
<ALLOWANCES> 0
<INVENTORY> 26,329,899
<CURRENT-ASSETS> 70,416,936
<PP&E> 76,793,699
<DEPRECIATION> 0
<TOTAL-ASSETS> 152,803,903
<CURRENT-LIABILITIES> 51,472,030
<BONDS> 0
<COMMON> 95,050
0
0
<OTHER-SE> (15,377,457)
<TOTAL-LIABILITY-AND-EQUITY> 152,803,903
<SALES> 57,476,280
<TOTAL-REVENUES> 57,476,280
<CGS> 46,278,757
<TOTAL-COSTS> 46,278,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,638,847
<INCOME-PRETAX> 3,273,738
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,273,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,273,738
<EPS-PRIMARY> 9.87
<EPS-DILUTED> 9.87
</TABLE>
