<PAGE> 1
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 March 31, 1997 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 May 7, 1997, 320,908 shares of the Company's Common Stock were
outstanding.
<PAGE> 2
PART I - Financial Information
Item 1.
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Net Sales $ 66,742,306 $ 45,296,576
Cost of Sales 54,124,549 36,039,566
------------ ------------
Gross Profit 12,617,757 9,257,010
Selling, general & administrative
expenses 6,366,933 3,254,249
Amortization 195,223 160,203
------------ ------------
Operating income 6,055,601 5,842,558
Interest expense, net 4,978,017 3,506,668
------------ ------------
Net income before foreign taxes 1,077,584 2,335,890
------------ ------------
Foreign income taxes 149,000 --
Net income before extraordinary item 1,226,584 2,335,890
------------ ------------
Extraordinary item -- debt refinancing (5,470,960) --
------------ ------------
Net income (loss) $ (4,244,376) $ 2,335,890
============ ============
Earnings per share:
Net income before extraordinary item $3.67 $7.06
Net income (loss) $(12.69) $7.06
============ ============
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE> 3
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,966,040 $ --
Accounts receivable, net 57,197,022 43,131,344
Inventories 40,898,408 35,634,636
Prepaid expenses and other
current assets 4,222,348 2,075,589
------------ ------------
Total current assets 104,283,818 80,841,569
Property, plant and equipment, net 108,999,812 98,908,150
Intangibles, net 12,188,655 8,516,123
Other assets 4,971,240 4,938,500
------------ ------------
Total assets $230,443,525 $193,204,342
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-
term debt $ 5,703,006 $ 64,484,121
Accounts payable 34,365,050 35,706,663
Accrued liabilities 13,505,782 20,873,671
------------ ------------
Total current liabilities 53,573,838 121,064,455
Capital lease obligations 2,383,832 2,057,059
Long-term debt 189,747,970 82,520,618
Other long-term liabilities 2,600,779 3,124,779
Shareholders' deficit:
Common stock, par value $.30
Authorized: 450,000
Issued and outstanding:
320,908 and 315,908, respectively 96,274 94,772
Additional paid-in capital 12,458,894 9,786,603
Currency translation 199,300 259,300
Accumulated deficit (30,617,362) (25,703,244)
------------ ------------
Total shareholders' deficit (17,862,894) (15,562,569)
------------ ------------
Total liabilities and
shareholders' deficit $230,443,525 $193,204,342
============ ============
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE> 4
KEY PLASTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating
activities:
Net income before extraordinary item $ 1,226,584 $ 2,335,890
------------- -----------
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation & Amortization 3,227,565 2,098,119
(Increase) in assets:
Accounts receivable (14,065,678) (6,300,427)
Inventories (5,263,772) (216,319)
Other current assets (2,146,759) (504,688)
Increase (Decrease) in
liabilities:
Accounts payable (830,613) 947,361
Accrued liabilities (7,331,280) 2,743,731
------------- -----------
Total adjustments (26,431,537) (1,232,223)
------------- -----------
Net cash provided from
operating activities (25,193,953) 1,103,667
------------- -----------
Cash flows from investing
activities:
Acquisitions of property,
plant and equipment, net (3,240,680) (1,388,852)
Property, Plant and equipment from
acquired business (10,300,000) --
Increase in other assets (32,740) 4,772
------------- -----------
Net cash used for investing
activities (13,573,420) (1,384,080)
------------- -----------
Cash flows from financing
activities:
Net borrowings under debt
agreements 160,761,425 1,020,202
Shareholder capital contribution 2,672,424
Principal payments under
debt agreements (112,641,991) (143,650)
Dividend distributions (669,725) (596,139)
Debt refinancing cost (9,398,720) --
Net cash provided by
financing activities 40,723,413 280,413
------------- -----------
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C> <C>
Net increase in cash 1,966,040 --
Cash, beginning of period 0 --
---------- --------
Cash, end of period $1,966,040 $ 0
========== ========
Supplemental disclosure of
cash flow information,
cash paid during the
period for interest $7,718,933 $970,649
========== ========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 6
KEY PLASTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Financial Statement Presentation:
Information for the three month period ended March 31, 1997 and 1996 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, 1996 balance sheet have been
reclassified to conform to the current period presentation.
During March of 1997 the Company completed several actions to refinance
its existing debt and secure additional financing for the future,
including: (1) A tender offer for all of its $65.0 million, 14% Senior
Notes due 1999 [$40.1 million of the notes were tendered]; (2) A private
placement for $125.0 million, 10 1/4% New Senior Subordinated Notes due
2007; and (3) Entered into a new $140.0 million Senior Credit Facility.
On March 28, 1997, the Company acquired three injection molding and
assembly operations owned by Aeroquip Corporation, a subsidiary of
TRINOVA Corporation. Two of the acquired plants are located in Michigan
and the third is in Chihuahua, Mexico. The acquired business represents
an expansion of the Company's existing decorative bezel business. The
acquisition has been accounted for using the purchase method.
These financial statements should be read in conjunction with the
Company's consolidated financial statements for the year ended December
31, 1996 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.
6
<PAGE> 7
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:
<TABLE>
<CAPTION>
March 31, Dec. 31,
1997 1996
--------- --------
<S> <C> <C>
Raw materials $ 9,103,789 $ 7,859,701
Work in progress 2,193,482 2,584,080
Finished goods 7,790,689 7,586,917
Customer Tooling 21,810,448 17,603,938
----------- -----------
$40,898,408 $35,634,636
=========== ===========
</TABLE>
3. Earnings Per Share:
Earnings per share amounts for the three month periods ended March 31,
1997 and 1996 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 334,468 and 330,709 for the three months ended March 31, 1997
and 1996, 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.
4. Accounting Changes:
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
Earnings per share, was issued by the Financial Accounting Standards
Board in February 1997. Adoption of SFAS 128, effective for periods
ending after December 31, 1997 is not expected to have a material effect
on reported earnings.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
KEY PLASTICS, INC.
FINANCIAL CONDITION
During March the following actions to refinance the Company's debt were
completed:
(1) A tender offer for all of its $65.0 million, 14% Senior Notes due
1999 [$40.1 million of the notes were tendered and repaid; $24.9
million remain outstanding];
(2) A private placement for $125.0 million, 10 1/4% New Senior
Subordinated Notes due 2007; and
(3) Entered into a new $140.0 million Senior Credit Facility; $33.0
million was outstanding against this facility as of March 31, 1997.
The proceeds of the private placement were principally used to
fund the tender and replace existing bank debt. Borrowings on the Senior Credit
Facility were for general corporate purposes, including an acquisition,
discussed more fully below. The net impact of these actions increased debt at
March 31, 1997 by $48.8 million from December 31, 1996.
The Company believes its existing sources of liquidity are
adequate to meet its operating requirements in fiscal 1997. At March 31, 1997
the Company had $43.5 million of availability under the Senior Credit Facility.
On March 28, 1997, the Company acquired three injection molding and
assembly operations owned by Aeroquip Corporation, a subsidiary of TRINOVA
Corporation. The acquired business represents an expansion of the Company's
existing decorative bezel business. The acquisition has been accounted for
using the purchase method.
Accounts receivable increased by $14.1 million comparing March 31,
1997 to December 31, 1996. $6.5 million is due to increased parts sales and
timing within the quarter. The acquisition of three Aeroquip factories added
$5.7 million of accounts receivable at March 31, 1997. Customer tooling related
receivables increased by $1.9 million over the prior quarter primarily as a
result of increased tooling programs.
The inventory increase of $5.3 million from December 31, 1996 to
March 31, 1997 was due in part to the inventory acquired from Aeroquip of $3.5
million and $1.8 million to increases in customer tooling inventory related
to the design and build of tooling for programs expected to launch in 1998.
Accrued liabilities decreased by $7.4 million from December 31,
1996 due primarily to the $5.9 million payout of all accrued interest for the
debt refinanced.
8
<PAGE> 9
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 Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997 vs.
March 31, 1996
--------------
<S> <C> <C>
Net sales $21.4 47.0%
Cost of sales 18.1 50.2%
Selling, general,
and administrative
expenses 3.1 95.6%
Amortization
expense -- --
Interest Expense, net 1.5 42.0%
Net income before extraordinary
item ($ 1.2) (47.5%)
</TABLE>
Net sales for the three month period ended March 31, 1997 were $66.7
million; an increase of approximately $21.4 million or 47% over the same period
last year. Approximately $15 million of the increase relates to the Company's
European subsidiaries, Key U.K. and Materias Plasticas (MaP) which were
acquired in 1996 (Key U.K. was acquired May 1, 1996 and a controlling interest
in MaP was acquired on November 1, 1996). Sales of injection molded parts and
assemblies in the Company's existing businesses was up $6.6 million or 17%
resulting from vehicle programs launched during 1996 and to increases in
related vehicle production by the Company's customers. First quarter revenues
related to customer tooling programs year-over-year were flat at about
$6.2 million.
Gross profit increased $3.4 million in the first quarter of 1997
compared to the first quarter of 1996 as a result of the aforementioned sales
increases. The degradation of the gross profit percentage of 1.5% from 1997 to
1996 is primarily attributable to operations in the United Kingdom where gross
profit margins are lower than other Company facilities.
9
<PAGE> 10
Selling, general and administrative expenses increased $3.1 million in
1997 as compared to the same period last year. Approximately $1.9 million of
the increase is due to costs incurred in facilities owned by the Company for
less than one year as of March 31, 1997, principally in Europe. The remainder
of the increase relates to staff and facility costs necessary to support the
Company's expansion.
Operating income increased by $.2 million as a result of the foregoing.
Interest expense in the first quarter of 1997 increased by about $1.5
million over the same 1996 period because of higher average debt outstanding.
The increase in debt stemmed primarily from acquisitions made during the course
of 1996 including Clearplas, Ltd. in the United Kingdom and Materias Plasticas,
S.A. in Portugal, and a plastic injection molding company in South Bend,
Indiana.
10
<PAGE> 11
PART II. -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
07 Financial Data Schedule (EDGAR
Version only)
(b) Reports on Form 8-K
None.
11
<PAGE> 12
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/ David M. Smith
---------------------------------
David M. Smith
Corporate Controller
(Principal Accounting Officer)
Dated: May 8, 1997
12
<PAGE> 13
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
27 Financial Data
Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,966
<SECURITIES> 0
<RECEIVABLES> 57,197
<ALLOWANCES> 0
<INVENTORY> 40,898
<CURRENT-ASSETS> 80,842
<PP&E> 109,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 230,444
<CURRENT-LIABILITIES> 53,574
<BONDS> 189,748
0
0
<COMMON> 96
<OTHER-SE> (17,863)
<TOTAL-LIABILITY-AND-EQUITY> 230,444
<SALES> 66,742
<TOTAL-REVENUES> 66,742
<CGS> 54,125
<TOTAL-COSTS> 54,125
<OTHER-EXPENSES> 6,562
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,978
<INCOME-PRETAX> 1,078
<INCOME-TAX> 149
<INCOME-CONTINUING> 1,227
<DISCONTINUED> 0
<EXTRAORDINARY> 5,471
<CHANGES> 0
<NET-INCOME> (4,244)
<EPS-PRIMARY> (12.69)
<EPS-DILUTED> 0
</TABLE>
