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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 29, 2002.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______ to ______
COMMISSION FILE NUMBER 333-21819
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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 whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X]
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. [X]
As of November 29, 2002, 600 shares of Common Stock of the Registrant
were outstanding. There is no public trading market for the Common Stock.
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 I"
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 is also a supplier to other Tier
I's. The Company operates a Design Center in Auburn Hills, Michigan to enhance
its conceptual design and development capabilities.
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 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 DaimlerChrysler 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 simultaneously 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 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/Functional 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.
CUSTOMERS
The Company's principal customers are Ford, Visteon, General Motors and
DaimlerChrysler for which it supplies components and subassemblies for a variety
of light duty trucks (including sport utility vehicles), minivans and passenger
cars. While the Company's products are generally used on a diverse group of over
90 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 approximate percentage of net sales to the principal customers of
the Company for the twelve-month period ended September 29, 2002 are shown
below:
Ford..................................................................... 35%
Visteon.................................................................. 10%
General Motors .......................................................... 30%
DaimlerChrysler.......................................................... 6%
Other Automotive......................................................... 17%
Non-Automotive........................................................... 2%
-----
Total.......................................................... 100%
=====
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.
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 for which the Company currently produces components for its OEM
customers:
Customer Model
- ----------------------------------------------------------------------------
General Motors-truck.......................................... Astro/Safari
Blazer/Bravada/Jimmy
Trailblazer/Envoy
Sonoma Pick-up/S10 Pick-up
GMC Sierra/Silverado
Venture/Silhouette/Trans Sport
Suburban
Tahoe
General Motors-car............................................ Seville
Aurora/Riviera
Cavalier/Sunbird/Sunfire
Corvette
Grand Prix/Cutlass
Intrigue
Lumina
Malibu
Monte Carlo
Park Avenue
Saturn/Z
Park Avenue
Bonneville
Regal
Impala
Ford-truck.................................................... Econoline
Expedition
Explorer
Escape/Tribute
F-Series Truck
Ranger
Windstar
Navigator
Ford-car...................................................... Continental
Contour/Mystique
Crown Victoria/Grand Marquis
Escort (US and Europe)
Focus
Mustang
Thunderbird /Lincoln LS
Taurus/Sable
Lincoln Town Car
Mercury Cougar
Jaguar X200/X400
DaimlerChrysler-truck......................................... Caravan/Voyager/Town & Country
Dakota
Grand Cherokee/Cherokee
Liberty
Ram Pick-up/Van
Durango
Wrangler
DaimlerChrysler-car........................................... Avenger/Sebring
Breeze/Cirrus/Stratus
Concord/Intrepid
LHS 300
Neon
Viper
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 has a Design Center in Auburn Hills,
Michigan 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 of reducing
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 ALIAS and
CATIA computer software and hardware 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 favoring 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 also
recently developed paint application technology utilizing innovative robotic
applications which has enabled the Company to reduce costs by improving cycle
times and reducing scrap.
The Company has been recognized as a quality supplier by its OEM
customers, and has received Ford's Q1 Award and DaimlerChrysler's Pentastar
Award. All of the Company's facilities are QS9000 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 80
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 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 Collins & Aikman, in instrument panel components; Magna International
Inc., Visteon, Meridian, Plastics Omnium, Venture Holdings Corporation and
Flex-N-Gate in exterior trim components; and 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. The
Company does, however, source raw material contracts based on a preferred
supplier list. To be "preferred" a supplier must be willing to sign a cost
management contract whereby assistance is extended to the Company in reducing
costs through piece price reductions, material substitution suggestions and
process improvement initiatives in lieu of annual percentage rebates based upon
calendar year purchases. 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.
EMPLOYEES
As of September 29, 2002, the Company's workforce included 3,595
employees, of which 610 were salaried workers, and 2,985 were hourly workers
including temporary and part-time employees. The Company has 279 hourly
employees represented by the Canadian Automobile Workers union at its
Leamington, Canada facility. The Company's three-year contract with the
bargaining unit for the Leamington facility expires January 15, 2004. 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. 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 compliance
with applicable Environmental Laws.
Item 2. Properties
The Company conducts molding, painting and assembly operations in
approximately 1.6 million square feet of space in a total of 16 manufacturing
locations. 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. Detail of each manufacturing location is
scheduled below:
LOCATION OWNED/LEASED SQUARE FOOTAGE
- --------- ------------ --------------
Circleville, OH Owned 71,300
Napoleon, OH Leased 150,000
Franklin, TN Owned 122,000
Kendallville, IN Owned 60,000
Byesville, OH Owned 160,000
Romulus, MI Leased 280,000
Leamington, Ontario, Canada Owned 200,000
New Hudson, MI Owned 57,900
Hartland, MI Owned 44,600
Fowlerville, MI Owned 65,000
Clarkston, MI Owned 21,600
Croswell, MI Leased 80,900
St. Clair, MI Leased 35,000
St. Clair, MI (currently vacant) Owned 29,100
Harlingen, TX Leased 42,900
McAllen, TX Leased 73,000
Port Huron, MI Leased 142,000
The Company's principal executive offices and design and engineering
staff are located in a 110,000 square foot building located in Auburn Hills,
Michigan that is 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 29, 2002, there were two holders of record of the Company's Common
Stock.
Item 6. Selected Financial Data
Summary Financial Data
(dollars in thousands)
The following table sets forth summary historical financial data of LDM
Technologies, Inc. for the fiscal years ended September 27, 1998, September 26,
1999, September 24, 2000, September 30, 2001 and September 29, 2002. 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.
SEPT. 27 SEPT. 26 SEPT. 24 SEPT. 30 SEPT. 29
1998 1999 2000 2001 2002
----------- ---------- ----------- ----------- -----------
Statement of operations
data
Net sales $ 438,960 $467,912 $ 451,979 $ 390,239 $ 390,926
Cost of sales 370,424 388,749 374,568 341,841 333,916
Gross margin 68,536 79,163 77,411 48,398 57,010
Selling, general and administrative
expenses 45,920 53,850 53,301 46,255 37,137
Interest expense 19,814 21,067 19,955 17,642 15,810
Impairment of long-lived assets 10,523
Gain on sale of LDM Germany 553
Net income (loss) (7,067) (761) (413) (9,410) 1,801
Other financial data
Cash flows from operating activities $ 19,547 $ 26,611 $ 31,985 $ 26,596 $ 16,422
EBITDA (a) 41,898 44,436 44,253 24,273 39,041
Depreciation and amortization 19,866 22,025 23,653 24,589 20,832
Capital expenditures 14,143 22,003 14,580 20,512 6,702
Ratio of EBITDA to interest expense 2.1 2.1 2.2 1.4 2.5
Ratio of debt to EBITDA 5.4 4.8 4.4 7.5 4.4
Balance sheet data
Cash $ 3,317 $ 4,317 $ 4,640 $ 2,320 $ 932
Total assets 327,651 312,143 297,723 262,312 257,487
Total debt 224,444 213,102 194,646 181,963 170,271
Stockholder's equity 13,358 12,920 13,940 2,796 4,597
(a) EBITDA is defined as income (loss) from continuing operations before the
effect of extraordinary items plus the following: interest, income taxes,
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 (loss) 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
accounting principles generally accepted in the United States and may not
be comparable to other similarly-titled measures of other companies. A
reconciliation of net income to EBITDA is as follows:
SEPT. 27 SEPT. 26 SEPT. 24 SEPT. 30 SEPT. 29
1998 1999 2000 2001 2002
--------- ---------- ---------- ---------- ----------
Net income (loss) $(7,067) $ (761) $ (413) $(9,410) $ 1,801
Add (deduct) the following:
Impairment of long-lived assets 10,523
Gain on sale of LDM Germany (553)
Provision for income taxes (538) 2,805 2,005 (6,906) 1,668
Interest expense 19,814 21,067 19,955 17,642 15,810
Depreciation and amortization* 19,166 21,325 22,706 23,500 19,762
------- ------- ------- ------- -------
EBITDA $41,898 $44,436 $44,253 $24,273 $39,041
======= ======= ======= ======= =======
*Excluding amortization of debt issue costs included in interest expense.
Item 7. 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 report, 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; and (vi) 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.
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 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.
In September 2000, the Company began making improvements to a leased
facility in Romulus, Michigan to ready itself for new programs that were to be
launched in mid-fiscal year 2001. Subsequent to the facility's completion, the
program launch dates were delayed by one year. The programs require large
injection molding machines as well as a paint line. The building and most
machinery and equipment have been leased. In fiscal year 2001, the new
facility's costs (primarily leases for building and machinery and equipment)
approximated $9.0 million. The facility had minimal revenues in fiscal 2001 to
offset fixed expenses. In fiscal year 2002, the new facility costs (net of
revenues) approximated $14.6 million which consisted of lease cost, equipment
testing and modification costs, workforce training cost and launch costs for new
programs. The facility had revenues of $31.9 million in fiscal 2002 to offset
fixed and start-up expenses. Programs launched from the new facility in March
and August of fiscal year 2002 will account for nearly $75 million in
incremental revenue on an annualized basis.
On February 11, 2002, the Company acquired certain assets and the
booked business of Security Plastics West, Ltd., located in McAllen, Texas, for
approximately $3.8 million. Assets purchased included accounts receivable of
approximately $1.9 million, inventory of approximately $1.0 million and
machinery and equipment of approximately $900 thousand. The acquisition was
funded through available borrowings on the Company's line of credit. Net sales
of approximately $7.9 million and gross margin of approximately $1.3 million,
related to the McAllen facility since the acquisition date, have been included
in the Company's results.
On September 30, 2001, the Company sold its ownership shares in LDM
Technologies GmbH (LDM Germany) for a minimal amount. The Company recognized a
pretax gain of $553,000 on the sale.
CRITICAL ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and in accordance with
the instructions to Form 10-K and Article 3 of Regulation S-X. The Company's
significant accounting policies are more fully described in Note 1 of the
consolidated financial statements and footnotes. Certain of the accounting
policies require the application of significant judgment by management in
selecting appropriate assumptions for calculating financial estimates. By their
nature, these judgments are subject to an inherent degree of uncertainty.
GOODWILL
Goodwill totaled $50.2 million at September 29, 2002 and represented
approximately 19.5% of total assets. The majority of the goodwill resulted from
the acquisitions of Molmec, Inc. and Huron Plastics Group, Inc. which were
completed in fiscal year 1997 and fiscal year 1998, respectively. Effective
October 1, 2001, the Company elected to early adopt Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. Under the
new standard, goodwill is no longer amortized but is subject to annual
impairment tests in accordance with the Statement. Application of the
non-amortization provision of Statement No. 142 resulted in an increase of $4.6
million to pretax income for the year ended September 29, 2002. Under Statement
No. 142 the Company estimates the fair value of each of its reporting units with
goodwill. Estimated fair value was based upon discounted cash flows. The results
of the Company's Statement No. 142 analysis indicate that no reduction in
goodwill is required. Statement No. 142 requires the Company to perform
impairment tests of goodwill on an annual basis (or more frequently if
impairment indicators exist).
INCOME TAXES
The Company provides an estimate of actual current tax due together with an
assessment of temporary differences resulting from the treatment of items for
tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included within the balance sheets. Based on known and
projected earnings information and any tax planning strategies, the Company then
assesses the likelihood that the deferred tax assets will be recovered. To the
extent that the Company believes recovery is not likely, a valuation allowance
is established.
Significant management judgment is required in determining the provision for
income taxes, deferred tax assets and liabilities and any valuation allowance
recorded against net deferred tax assets. At September 29, 2002, the Company had
net deferred tax assets, after valuation allowances, of $1.0 million.
Deferred tax assets in Canada relate primarily to net operating loss
carryforwards (NOL's) for which the Company has recognized a valuation allowance
of $1.1 million.
In the United States realization of the deferred tax assets is dependent upon
future taxable income. Based on consideration of historical and future earnings
before income taxes, the Company believes it is more likely than not that the
deferred tax assets, beyond those specifically reserved, will be realized.
The Company evaluates its deferred taxes and related valuation allowances
quarterly. If at any time the Company believes that current or future taxable
income will not support the basis for recognizing the benefit of the deferred
tax assets, valuation allowances are provided accordingly.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE
Accounts receivable have been reduced by an allowance for amounts that may
become uncollectible in the future. This estimated allowance is based primarily
on management's evaluation of customer productivity reimbursement programs and
historical experience.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 29, 2002 COMPARED TO YEAR ENDED SEPTEMBER 30, 2001
NET SALES: Net sales for fiscal year 2002 were $390.9 million, a decrease of
$0.7 million, or 0.1%, from $390.2 million in fiscal year 2001. The unchanged
net sales resulted from the sale of LDM Germany, effective September 30, 2001
and the exit of certain unprofitable product lines in LDM Canada, offset by the
purchase of the McAllen, Texas facility, launch of new business from the
Company's facility in Romulus, Michigan and increased volumes on programs
serviced by LDM's domestic operations.
GROSS MARGIN: Gross margin was $57.0 million, or 14.6% of net sales, for fiscal
year 2002 compared to $48.4 million, or 12.4% of net sales, for fiscal year
2001. The increase in gross margin as a percentage of sales is the result of the
Company's sale of LDM Germany, the exit of certain unprofitable product lines in
LDM Canada, the launch of new business from the Company's facility in Romulus,
Michigan and operational improvements made in domestic facilities. Improvements
were partially offset by $1.1 million of employee severance costs incurred at
the Company's Canadian facility.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
year 2002 were $37.1 million, or 9.5% of net sales, compared to $46.3 million,
or 11.9% of net sales, for fiscal year 2001. The decrease is the result of cost
cutting efforts undertaken in mid-year 2001 to mitigate the potential effects of
an economic slowdown in the U.S. coupled with the effect of adopting Statement
of Financial Accounting Standards No. 142 (FAS 142). The adoption of FAS 142
resulted in no amortization of goodwill throughout fiscal year 2002. Goodwill
amortization in fiscal year 2001 was $4.6 million. These decreases were
partially offset by the reinstatement of certain employee benefits which had
been frozen throughout fiscal year 2001.
INTEREST EXPENSE: Interest expense was $15.8 million for fiscal year 2002,
compared to $17.6 million for fiscal year 2001. The decrease relates to
reduction of principal through debt repayments and a decrease in variable
interest rates.
EQUITY IN INCOME/LOSSES OF AFFILIATES: Equity in income of affiliates was $1.3
million for fiscal year 2002, compared to a loss of $0.1 million for fiscal year
2001. In 2001, the Company wrote off all remaining investments in the DBM joint
venture through equity losses as discussed in Note 2 of the consolidated
financial statements.
GAIN ON SALE OF LDM GERMANY: As previously discussed, on September 30, 2001,
the Company sold its ownership shares in LDM Germany for a minimal amount. As a
result, the Company recognized a gain of $553,000 on the sale in fiscal year
2001.
OTHER: Other loss was $1.4 million for fiscal year 2002, compared to a loss of
$1.6 million for fiscal year 2001. The loss, in both fiscal years, was due
primarily to the change in fair value of the Company's interest rate swap
arrangement. In 2002, partially offsetting the loss is the gain associated with
the Company repurchasing and retiring $3.6 million face value of its 10 3/4%
Senior Subordinated Notes, due 2007, for $2.8 million plus accrued interest.
INCOME TAXES: The provision for income taxes for fiscal year 2002 was $1.7
million with an effective tax rate of 48.1% as compared to a benefit of $6.9
million with an effective tax rate of 42.3% for fiscal year 2001. The effective
tax rates differ from statutory rates as a result of certain non-deductible
expenses, and for fiscal 2001 U.S. tax benefits of foreign losses. Also in 2002,
the Company's effective tax rate was impacted by two items that netted to an
insignificant amount. Both items related to the U.S. tax treatment of certain
foreign generated tax attributes.
YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO YEAR ENDED SEPTEMBER 24, 2000
NET SALES: Net sales for fiscal year 2001 were $390.2 million, a decrease of
$61.8 million, or 13.7%, from $452.0 million in fiscal year 2000. The sales
decrease is due to a softening of automotive builds in fiscal year 2001 and the
delay of new product launches into fiscal year 2002 which replace programs whose
product life cycle ended.
GROSS MARGIN: Gross margin was $48.4 million, or 12.4% of net sales, for fiscal
year 2001 compared to $77.4 million, or 17.1% of net sales, for fiscal year
2000.
Gross margin suffered as a percentage of sales as fixed costs of approximately
$9 million were carried in fiscal year 2001 related to the Romulus facility
whose launch of new product was delayed until fiscal year 2002 as previously
discussed. Taking this into account gross margin as a percentage of sales for
fiscal year 2001 would have been 14.6% of sales. The remainder of the decline
relates to softening automotive builds in fiscal year 2001, which created
unabsorbed fixed costs at other facilities, and inefficiencies experienced with
certain product lines at the Company's foreign subsidiaries.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
2001 were $46.3 million, or 11.9% of net sales, compared to $53.3 million, or
11.8% of net sales, for fiscal year 2000. The dollar decrease is the result of
cost cutting measures implemented during fiscal year 2001 to mitigate the effect
of reduced sales discussed above.
INTEREST EXPENSE: Interest expense was $17.6 million for fiscal year 2001,
compared to $20.0 million for fiscal year 2000. The decrease relates to
reduction of principal through debt repayments and a decrease in variable
interest rates.
EQUITY IN LOSSES OF AFFILIATES: Equity in losses of affiliates was $0.1 million
for fiscal year 2001, compared to $0.9 million for fiscal year 2000. In 2001,
the Company wrote off all remaining investments in its DBM joint venture through
equity losses.
GAIN ON SALE OF LDM GERMANY: On September 30, 2001, the Company sold its
ownership shares in LDM Germany for a minimal amount. As a result, the Company
recognized a gain of $553,000 on the sale.
OTHER: Other loss was $1.6 million for fiscal year 2001, compared to income of
$0.6 million for fiscal year 2000. The loss was due primarily to the change in
fair value of the Company's interest rate swap arrangement.
INCOME TAXES: The benefit for income taxes for fiscal year 2001 was $6.9 million
with an effective tax benefit rate of 42.3% as compared to $2.0 million with an
effective tax rate of 125.9% for fiscal year 2000. The effective tax rates
differ from statutory rates as a result of certain non-deductible expenses,
foreign tax in excess of foreign tax credits and foreign tax differences.
INVESTMENTS AND DIVESTITURES OF SUBSIDIARIES
PURCHASE OF OPERATING ASSETS IN MCALLEN, TEXAS: On February 11, 2002, the
Company acquired certain assets and the booked business of Security Plastics
West, Ltd., located in McAllen, Texas, for approximately $3.8 million. Assets
purchased included accounts receivable of approximately $1.9 million, inventory
of approximately $1.0 million and machinery and equipment of approximately $900
thousand. The acquisition was funded through available borrowings on the
Company's line of credit. Net sales of approximately $7.9 million and gross
margin of approximately $1.3 million, related to the McAllen facility since the
acquisition date, have been included in the Company's results.
SALE OF LDM GERMANY: On September 30, 2001, the Company sold its German
subsidiary. Proceeds from the sale were immaterial. As a result of the sale, the
Company recognized a gain of $553,000. Net sales and net loss for fiscal year
2001 of LDM Germany were $19.7 million and $2.3 million, respectively.
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. As of September 29, 2002 the Company had $150.2 million of
long-term debt outstanding and $31.5 million of borrowing availability under its
revolving credit facility.
Cash provided by operating activities in fiscal year 2002 was $16.4 million
compared to $26.6 million of cash provided by operating activities in the same
period in 2001. The decrease in cash provided by operating activities resulted
from the timing of customer payments related to the Company's year-end.
Approximately $15 million in customer receivable payments were received within
two days after the Company ended its 2002 fiscal year.
Capital expenditures for fiscal year 2002 were $6.7 million compared to $20.5
million for fiscal year 2001. Fiscal 2002 capital expenditures include machinery
and equipment purchased in relation to the McAllen, Texas facility and
maintenance capital expenditures throughout the remainder of the organization.
The Company believes its capital expenditures will be approximately $16 million
in the fiscal year ended September 2003. However, the Company's capital
expenditures may be greater or less than currently anticipated as the result of
new business opportunities or prevailing economic conditions.
On August 20, 2002, the Company repurchased and retired $3.6 million face value
of its 10 3/4% Senior Subordinated Notes, due 2007, for $2.8 million plus
accrued interest. The Company used available borrowings under its Senior Credit
Facility for the purchase. The gain on repurchase and retirement has been
included in Other income (expense) on the Statement of Operations.
The following information summarizes the Company's significant contractual cash
obligations and other commercial commitments at September 29, 2002:
CONTRACTUAL OBLIGATIONS PAYMENTS DUE BY PERIOD (000'S)
----------------------- ------------------------------
LESS THAN 1
-----------
TOTAL YEAR 1-3 YEARS 4 - 5 YEARS AFTER 5 YEARS
----- ---- --------- ----------- -------------
Long Term Debt $150,192 $11,305 $25,542 $107,675 $5,670
Lines of Credit 20,079 20,079
Operating Leases 39,422 11,256 18,165 8,298 1,703
-------- ------- ------- -------- ------
Total Contractual Cash Obligations $209,693 $22,561 $63,786 $115,973 $7,373
======== ======= ======= ======== ======
OTHER COMMERCIAL COMMITMENTS AMOUNT OF COMMITMENT EXPIRATION PER PERIOD (000'S)
---------------------------- --------------------------------------------------
TOTAL AMOUNTS LESS THAN 1
------------- -----------
COMMITTED YEAR 1 -- 3 YEARS OVER 5 YEARS
--------- ---- ------------ ------------
Unused Lines of Credit $27,299 $27,299
Standby Letters of Credit 15,622 14,173 - 1,449
------- ------- ------- ------
Total Commercial Commitments $42,921 $14,173 $27,299 $1,449
======= ======= ======= ======
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:
There are currently no material environmental issues related to the Company of
which management is aware.
MARKET RISK
FOREIGN CURRENCY RISK
QUANTITATIVE AND QUALITATIVE ANALYSIS
A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures its products in
the United States and Canada and sells the products in those markets as well. As
a result, the Company's financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in the foreign markets in which the Company distributes its products.
The Company's operating results are exposed to changes in exchange rates between
the U.S. dollar and the Canadian dollar.
In Canada the Company operates in both the U.S. and the Canadian dollar, and is
funded by a U.S. dollar loan from the parent Company. The Company's Canadian
operation's functional currency is the U.S. dollar. The Company is exposed to
exchange gains or losses on current assets and liabilities denominated in the
Canadian dollar.
As of September 29, 2002, the Company's net assets subject to foreign currency
translation risk is $1.5 million. The potential loss from a hypothetical 10%
adverse change in quoted foreign currency exchange rates would be approximately
$150 thousand.
INTEREST RATE RISK
DERIVATIVE FINANCIAL INSTRUMENTS
In May 2000 the Company entered into an interest rate swap agreement to manage
its exposure to fluctuations in interest rates. The swap was based on a notional
amount of $50 million. In November 2000 the Company entered into an interest
rate collar agreement with the bank counterparty. The collar was based on a
notional amount of $50 million.
In June 2001 the Company cancelled the interest rate swap entered into in May
2000 in exchange for entering into a new swap agreement. The new swap is also
based on a notional amount of $50 million. The Company pays to the bank
counterparty based on a rate of three-month LIBOR plus 5.30% through January
2007, except in circumstances described in the following paragraph. The Company
receives from the bank counterparty based on a rate of 10.75%. The swap is
cancelable by the bank counterparty in January 2004 and every six months
thereafter. Upon cancellation the Company is required to pay to or receive from
the bank counterparty the negative or positive value of the swap, respectively.
Also in June 2001 the Company replaced the interest rate collar agreement
entered into in November 2000 with a new interest rate collar through the bank
counterparty. The new collar is based on a notional amount of $50 million. Under
the new collar, through January 2004, if three-month LIBOR falls below 3.5% the
Company pays to the bank counterparty based on a fixed interest rate of 10.5%.
If three-month LIBOR exceeds 7.1%, the Company receives payment from the bank
counterparty based on the difference between effective three-month LIBOR and
7.1%. From January 2004 through January 2007, if three-month LIBOR falls below
4.75% the Company pays to the bank counterparty based on a the difference
between three-month LIBOR and 4.75%. If three-month LIBOR exceeds 7.1%, the
Company receives payment from the bank counterparty based on the difference
between effective three-month LIBOR and 7.1%. The new interest rate collar is
not cancellable until 2007.
As of September 29, 2002, the Company has recorded $3.1 million related to
revaluing this instrument on a mark-to-market basis. The liability is classified
with accrued liabilities on the balance sheet.
As a result of the above instruments, the Company has converted $50 million of
fixed rate borrowings (10.75%) to a variable rate of three-month LIBOR plus
5.3%, subject to a cap of 12.4% and a floor of 8.8%.
The Company paid an upfront premium of $200 thousand and forgave an interest
receivable payment related to the May 2000 interest rate swap agreement of
approximately $300 thousand due from the bank counterparty to initiate the
interest rate swap and collar changes in June 2001 described above.
QUALITATIVE AND QUANTITATIVE ANALYSIS
The Company's variable interest expense is sensitive to changes in the general
level of U.S. interest rates. Some of the Company's interest expense is fixed
through long-term borrowings to mitigate the impact of such potential exposure.
2003 2004 2005 2006 2007 Thereafter Total FMV
---- ---- ---- ---- ---- ---------- ----- ---
Fixed rate (maturity) - - - - $106,400* $106,400 $84,000
Fixed rate % (average) 10.75% 10.75%
Variable rate (maturity) $11,305 $8,324 $37,297 $615 660 $5,670 $ 63,871 $63,871
Variable rate % (future rates) 4.27% 4.27% 4.27% 4.27% 4.27% 4.27% 4.27%
*$50 million of such borrowings have been essentially converted to variable
interest rates through the derivative instruments previously discussed.
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 as of September 30, 2001 are as follows:
HAS SERVED
IN POSITION
NAME AGE POSITION SINCE
------------------------- --- -------- -----
Joe Balous............... 76 Co-Chairman of the Board 1985
Richard J. Nash*......... 57 Co-Chairman of the Board 1985
Alan C. Johnson*......... 55 President and Chief Executive Officer 2001
Gary E. Borushko......... 56 Chief Financial Officer 1987
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 except for the following.
- On November 27, 2001, Richard Nash resigned as Chief Executive
Officer and simultaneously became co-Chairman with Joe Balous.
Mssrs. Nash and Balous continue to take an active role in the day
to day operations of the Company.
- On November 27, 2001, the Company elected Alan Johnson as its
President and Chief Executive Officer. Mr. Johnson has a wealth of
experience in the automotive industry. In 2000 and 2001 he served
as Executive Vice President-Americas and Asia at Federal-Mogul
Corporation and prior thereto in 1999 and 2000 served as President
and Chief Operating Officer of Exide Corporation.
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 2002.
SUMMARY COMPENSATION TABLE
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION COMPENSATION
--------------------------------- ---- ----------- ----------- ----------------- --------------
Richard J. Nash 2002 $ 1,250,000 -- $ 49,898 (4) --
Co-Chairman 2001 $ 1,779,166 $ 250,000 $ 30,645 (4) $ 3,200 (1)
2000 956,711 1,679,880 61,963 (4) 3,200 (1)
Joe Balous 2002 $ 1,050,000 -- $ 28,872 (4) --
Co-Chairman 2001 -- -- $1,588,251 (2) --
2000 -- -- $1,800,310 (2) --
Alan C. Johnson 2002 $ 391,648 -- -- --
President and Chief Executive Officer 2001 -- -- -- --
2000 -- -- -- --
Gary E. Borushko 2002 $ 258,110 -- $ 20,000 (4) --
Chief Financial Officer 2001 $ 260,427 $ 220,000 $ 25,000 (4) --
2000 250,010 185,000 25,000 (4) --
Vincent P. Buscemi 2002 $ 190,635 -- $ 96,574 (3)(4) --
Group Vice President - Sales 2001 $ 187,500 $ 100,000 $ 107,306 (3)(4) --
2000 $ 190,998 $ 35,640 $ 96,000 (3) --
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.
(1) Represents contributions to the Company's 401 (k) plan.
(2) Consulting fees paid to a management company owned by Joe Balous.
(3) Represents sales commission paid to a company owned by such individual.
(4) Represents club dues and miscellaneous expenses included in employee's
W-2.
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.
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 $25.0 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. The Company maintains life insurance policies
of $17.0 million on the life of Mr. Nash and $25.0 million on the life of Mr.
Balous. The annual premiums for such policies of insurance are approximately
$1.3 million.
During fiscal year 2002, the Company acquired certain assets and the
booked business of Security Plastics West, Ltd., located in McAllen, Texas. As
part of the transaction the Company is leasing the building and real estate in
McAllen from a company majority owned by LDM's two shareholders. The leased
facility is 73,000 square feet and annual rentals approximate $300 thousand. The
lease has an initial term of 8 years with an option to renew at the end of the
initial lease term. In fiscal year 2002, the Company paid rentals for the
McAllen manufacturing facility of approximately $190 thousand.
In the past, the Company paid consulting fees to a management company
owned by Joe Balous. The nature of the services performed by Mr. Balous were
development of corporate policy and strategic planning, integration of recent
acquisitions, and overseeing facilities construction and leasehold improvements.
In fiscal year 2002, Mr. Balous became an employee of the Company to perform
similar services. As a result, the Company no longer pays consulting fees to the
management company.
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.
Item 14. Controls and Procedures.
Within the 90 days prior to the date of this report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the CEO and CFO, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the CEO and CFO, concluded that
the Company's disclosure controls and procedures are effective in causing the
material information required to be disclosed by the Company in the reports that
it files or submits under the Securities Act of 1934 to be recorded, processed,
summarized and reported, to the extent applicable, within the time periods
specified in the Securities and Exchange Commission's rules and forms. There
have been no significant changes in the Company's internal controls or in other
factors that could significantly affect internal controls subsequent to the date
the Company carried out its evaluation.
PART IV
Item 15. 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 are filed herewith:
Consolidated Balance Sheets at September 29, 2002 and September 30,
2001.
Consolidated Statements of Operations for each of the years in the
three-year period ended September 29, 2002.
Consolidated Statements of Stockholders' Equity for each of the years
in the three-year period ended September 29, 2002.
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended September 29, 2002.
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.
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).
The Exhibit marked with two asterisks below was filed as an Exhibit to
the Form 8-K of the Company dated September 30, 1997. The exhibits
marked with three asterisks below were filed as Exhibits to the Form
10-K of the Company dated December 27, 1999. The exhibits marked with
four asterisks below were filed as Exhibits to the Form 10-K of the
Company dated December 21, 2001. These are incorporated herein by
reference, the Exhibit numbers in brackets being those in such
Registration Statement, Form 10-K or 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]*
10.2 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].**
10.4 Asset Purchase Agreement between LDM Technologies, Inc. (a
Michigan corporation) and DBM Technologies, LLC (a Michigan
limited liability company) dated December 31, 1998.***
10.5 Asset Purchase Agreement between GL Industries, Inc. (an Indiana
corporation) and New GLI, Inc. (an Indiana corporation) dated
April 15, 1999.***
11 Amended and Restated Loan and Security Agreement dated as of March
23, 2001 by and between the Company, as Borrower, and Bank of
America N.A, as Agent for the Lenders****
12 Amended and Restated Term Loan and Security Agreement dated as of
March 23, 2001 by and between the Company, as Borrower, and Bank
of America N.A., as Agent for the Lenders****
13 Sale and Transfer Agreement of LDM Technologies GmbH by and
between the Company, as Seller, and Robert Horvath, as Buyer,
effective as of September 30, 2001****
14 Terms of Employment for Alan C. Johnson as President and Chief
Executive Officer of the Company, dated as of November 27,
2001****
21 Subsidiaries and Affiliates of the Company
99.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K dated
May 6, 2002, as to a Subordinated Bond Exchange Offer, Current Report of
Form 8-K dated June 12, 2002 as to Supplement No. 1 to the Subordinated
Bond Exchange Offer, Current Report on Form 8-K dated July 3, 2002 as to
Supplement No. 2 to the Subordinated Bond Exchange Offer, and Current
Report on Form 8-K dated July 31, 2002 as to termination of the
Subordinated Bond Exchange Offer.
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 sixth day of
December, 2002.
LDM TECHNOLOGIES, INC.
By: /s/ Alan C. Johnson
--------------------------
Alan C. Johnson
(Chief Executive Officer)
By: /s/ Gary E. Borushko
--------------------------
Gary E. Borushko
(Chief Financial Officer)
By: /s/ Brad N. Frederick
--------------------------
Brad N. Frederick
(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 10, 1997.
Signature Title
- --------- -----
/s/ Joe Balous Director
- ---------------------------
Joe Balous
/s/ Richard J. Nash Director
- ---------------------------
Richard J. Nash
CERTIFICATION
I, Alan C. Johnson certify that:
1. I have reviewed this annual report on Form 10-K of LDM Technologies,
Inc ("the registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a.) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b.) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c.) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
registrant's board of directors:
a.) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weakness in internal controls; and
b.) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The Company's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
By: /s/ A.C. Johnson
--------------------------
Alan C. Johnson
Chief Executive Officer
December 6, 2002
CERTIFICATION
I, Gary E. Borushko certify that:
1. I have reviewed this annual report on Form 10-K of LDM Technologies,
Inc ("the registrant");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
registrant's board of directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weakness in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The Company's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
By: /s/ G.E. Borushko
--------------------------
Gary E. Borushko
Chief Financial Officer
December 6, 2002
Report of Independent Auditors
Board of Directors of LDM Technologies, Inc.
We have audited the accompanying consolidated balance sheets of LDM
Technologies, Inc. as of September 29, 2002 and September 30, 2001, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 29, 2002. 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 auditing standards generally accepted
in the United States. 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 29, 2002 and September 30, 2001, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 29, 2002 in conformity with accounting principles generally
accepted in the United States.
As discussed in Note 1 to the financial statements, effective October 1, 2001,
the Company elected to early adopt Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets."
Detroit, Michigan /s/ ERNST & YOUNG LLP
November 12, 2002
LDM Technologies, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
SEPTEMBER 29, SEPTEMBER 30,
2002 2001
------------- -------------
ASSETS
Current assets:
Cash $ 932 $ 2,320
Accounts receivable 77,151 48,819
Inventories 15,966 16,681
Mold costs 5,138 19,588
Prepaid expenses 2,101 2,517
Refundable income tax 1,683
Deferred income taxes 3,433 2,612
---------- ----------
Total current assets 104,721 94,220
Net property, plant and equipment 91,497 104,526
Equity investments in affiliate 7,300 6,050
Goodwill 50,152 50,152
Debt issue costs, net of accumulated
amortization of $6,072 in 2002 and $5,005 in 2001 3,389 4,258
Deferred income taxes 1,715
Other 428 1,391
---------- ----------
Total assets $ 257,487 $ 262,312
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 54,714 $ 53,153
Accrued liabilities 19,861 21,587
Accrued compensation 5,542 2,813
Income taxes payable 78
Current maturities of long-term debt 11,305 8,735
---------- ----------
Total current liabilities 91,500 86,288
Lines of credit and revolving debt 20,079 18,181
Long-term debt due after one year 138,887 155,047
Deferred income taxes 2,424
Stockholders' equity:
Common stock ($.10 par value; 100,000 shares
authorized, 600 shares issued and outstanding)
Additional paid in capital 94 94
Retained earnings 4,503 2,702
---------- ----------
Total stockholders' equity 4,597 2,796
---------- ----------
Total liabilities and stockholders' equity $ 257,487 $ 262,312
========== ==========
See accompanying notes.
F2
LDM Technologies, Inc.
Consolidated Statements of Operations
(in thousands)
YEARS ENDED
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 24,
2002 2001 2000
-------------- -------------- --------------
Net sales $ 390,926 $ 390,239 $ 451,979
Cost of sales 333,916 341,841 374,568
------------ ------------ ------------
Gross margin 57,010 48,398 77,411
Selling, general and administrative expenses 37,137 46,255 53,301
Interest 15,810 17,642 19,955
Equity in losses (income) of affiliates, net (1,250) 104 891
Gain on sale of LDM Germany (553) -
International currency exchange (gains) losses 476 (368) 2,235
Other, net 1,368 1,634 (563)
------------ ------------ ------------
53,541 64,714 75,819
------------ ------------ ------------
Income (loss) before income taxes 3,469 (16,316) 1,592
Provision (credit) for income taxes 1,668 (6,906) 2,005
------------ ------------ ------------
Net income (loss) $ 1,801 $ (9,410) $ (413)
============ ============ ============
Effect of Adopting Financial Accounting Standard No. 142
Year Ended
--------------------------------------------------------
September 29, September 30, September 24,
2002 2001 2000
--------------------------------------------------------
Reported net income (loss) $ 1,801 $ (9,410) $ (413)
Add back: Goodwill amortization, net
of income taxes 3,036 3,036
--------------------------------------------------------
Adjusted net income (loss) $ 1,801 $ (6,374) $ 2,623
============ ============ ============
See accompanying notes.
F3
LDM Technologies, Inc.
Consolidated Statements of Stockholders' Equity
(in thousands except common shares and common stock)
ACCUMULATED
ADDITIONAL OTHER
COMMON COMMON PAID-IN RETAINED COMPREHENSIVE
SHARES STOCK CAPITAL EARNINGS INCOME (LOSS) TOTAL
------ ----- ------- -------- ------------- -----
(IN DOLLARS)
Balance at September 26, 1999 600 60 94 12,525 301 12,920
Comprehensive Income:
Net loss for 2000 (413) (413)
Currency translation
adjustment 1,433 1,433
--------
Comprehensive income 1,020
-------- ------ -------- -------- ---------- --------
Balance at September 24, 2000 600 60 94 12,112 1,734 13,940
Comprehensive Income:
Net loss for 2001 (9,410) (9,410)
Currency translation
adjustment (591) (591)
Sale of LDM Germany (1,143) (1,143)
--------
Comprehensive loss (11,144)
-------- ------ -------- -------- ---------- --------
Balance at September 30, 2001 600 60 94 2,702 - 2,796
Comprehensive Income:
Net income for 2002 1,801 1,801
-------- ------ -------- -------- ---------- --------
Balance at September 29, 2002 600 $ 60 $ 94 $ 4,503 $ - $ 4,597
======== ====== ======== ======== ========== ========
F4
LDM Technologies, Inc.
Consolidated Statements of Cash Flows
(in thousands)
YEARS ENDED
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 24,
2002 2001 2000
------------- ------------- -------------
OPERATING ACTIVITIES
Net income (loss) $ 1,801 $ (9,410) $ (413)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 20,832 24,589 23,653
International currency exchange (gains) losses 476 (368) 2,235
Equity in (income) losses of affiliates, net (1,250) 104 891
Gain on early repayment of notes (756)
Gain on sale of LDM Germany (553)
Loss on sale of property and equipment 1 73 239
Deferred income taxes 3,318 (5,726) 2,138
Changes in assets and liabilities
Accounts and notes receivable (28,808) 23,749 5,099
Inventory and mold costs 15,165 (5,699) (524)
Prepaid expenses 1,318 (171) (616)
Accounts payable and accrued liabilities 2,564 620 (1,031)
Income taxes refundable/payable 1,761 (612) 314
------------ ------------ ------------
Net cash provided by operating activities 16,422 26,596 31,985
INVESTING ACTIVITIES
Additions to property, plant and equipment (6,702) (20,512) (14,580)
Deposits for assets to be leased 4,791 (4,791)
Proceeds from disposal of property and equipment 26 475 8,270
Net disbursement to unconsolidated affiliate (1,924)
------------ ------------ ------------
Net cash used for investing activities (6,676) (15,246) (13,025)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt (net of debt
issuance costs of $198 in 2002, $987 in 2001,
and $181 in 2000) (198) 9,013 (181)
Payments on notes payable and long-term debt (12,834) (6,221) (19,823)
Net proceeds (repayments) from borrowings on line
of credit 1,898 (16,462) 1,367
------------ ------------ ------------
Net cash used in financing activities (11,134) (13,670) (18,637)
------------ ------------ ------------
Net increase (decrease) in cash (1,388) (2,320) 323
Cash at beginning of year 2,320 4,640 4,317
------------ ------------ ------------
Cash at end of year $ 932 $ 2,320 $ 4,640
============ ============ ============
See accompanying notes.
F5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
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 Canada, Inc., LDM
Technologies Company ("LDM Canada"), LDM Technologies, GmbH ("LDM Germany"), LDM
Holdings Mexico, Inc. and LDM Technologies, S.de R.L. ("LDM Mexico"). All
subsidiaries are wholly owned with the exception LDM Mexico (99% owned). As of
September 24, 2000, the Company, LDM Canada and LDM Germany were the only
subsidiaries which were still in operation. As of September 30, 2001, the
Company sold its shares in LDM Germany. As a result, for the year ended
September 30, 2001, LDM Germany is consolidated in the Statements of Operations
and Cash flows, but not the Balance Sheet. For the year ended September 29,
2002, the only remaining operating consolidated entities are LDM Technologies,
Inc. and LDM Canada.
Sunningdale Precision Industries Ltd ("Sunningdale") is a Singapore based
injection molder of which the Company owns 22%. DBM Technologies, LLC ("DBM") is
a minority owned blowmolding concern formed December 31, 1998, of which the
Company owns 49%. Sunningdale and DBM are accounted for under the equity method.
As of September 30, 2001 all investments and loans to DBM were written off the
Company's balance sheet through equity losses.
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, under-the-hood, and
powertrain components for sale principally to several North American automobile
manufacturers and their suppliers.
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 29, 2002 and September 24, 2000
included 52 weeks. The fiscal year ended September 30, 2001 included 53 weeks.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
RECLASSIFICATION
The Company incurs certain expenditures at its plant locations. In the past,
these expenditures have been classified as selling, general and administrative
expenses. The Company believes that these expenditures are more accurately
characterized as cost of sales expenses as they directly support manufacturing
activities within the manufacturing facilities. As a result, these expenses have
been reclassified from selling, general and administrative expenses to cost of
sales. There was no impact to net earnings or equity resulting from this
reclassification.
F6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
GOODWILL
Goodwill totaled $50.2 million at September 29, 2002 and represented
approximately 19.5% of total assets. The majority of the goodwill resulted from
the acquisitions of Molmec, Inc. and Huron Plastics Group, Inc. which were
completed in fiscal year 1997 and fiscal year 1998, respectively. Effective
October 1, 2001, the Company elected to early adopt Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. Under the
new standard, goodwill is no longer amortized but is subject to annual
impairment tests in accordance with the Statement. Application of the
non-amortization provision of Statement No. 142 resulted in an increase of $4.6
million to pretax income for the year ended September 29, 2002. Under Statement
No. 142 the Company estimates the fair value of each of its reporting units with
goodwill. Estimated fair value was based upon discounted cash flows. The results
of the Company's Statement No. 142 analysis indicate that no reduction in
goodwill is required. Statement No. 142 requires the Company to perform
impairment tests of goodwill on an annual basis (or more frequently if
impairment indicators exist).
DEBT EXTINGUISHMENT
The Company has adopted SFAS No. 145, "Rescission of FASB Statements No. 4, 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This
Statement, among other things, removes the requirement that gains and losses
from the extinguishment of debt be classified as extraordinary. See Note 7 for
the amount and classification of certain debt extinguishments in 2002.
FOREIGN CURRENCY TRANSLATION
As a result of a U.S. dollar based financing and the volume of U.S. dollar
denominated sales and operating costs, the Company has determined that the
functional currency of LDM Canada continues to be the U.S. dollar. Accordingly,
long lived assets and intercompany debt has been translated at the historical
rate and exchange differences arising on translation have been included in
operations. Through 2001 accumulated other comprehensive income consisted of
translation adjustments for LDM Germany (for which the local currency was the
functional currency).
RESEARCH AND DEVELOPMENT COSTS
The Company and its subsidiaries expense research and development costs as
incurred. Such amounts were $79, $1,319 and $526 for 2002, 2001 and 2000,
respectively.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a roll-forward of the Company's allowance for doubtful
accounts:
2002 2001 2000
---- ---- ----
Beginning allowance for doubtful accounts $574 $1,210 $ 2,998
Provision for bad debts 250
Uncollectible accounts written off (40) (636) (2,038)
--------------------------------
Ending allowance for doubtful accounts $534 $ 574 $ 1,210
================================
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories at September 29, 2002 and September 30, 2001
consist of the following:
2002 2001
---- ----
Raw materials and supplies $ 8,424 $ 9,163
Work-in-process 1,664 1,633
Finished goods 5,878 5,885
----------- ------------
Total $ 15,966 $ 16,681
=========================
F7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
PREPRODUCTION COSTS
Preproduction design and development costs are expensed as incurred except in
circumstances when contractual reimbursement arrangements exist.
REVENUE RECOGNITION
The Company and its consolidated subsidiaries recognize revenue when legal title
transfers to the customer, generally when goods are shipped to the customer.
Shipping and handling costs are included in cost of sales.
DEPRECIATION AND AMORTIZATION
Depreciation of property, plant and equipment is determined principally using
the straight-line method based upon the following estimated useful lives:
ESTIMATED USEFUL
LIFE (YEARS)
---------------------------------------------------
Buildings and improvements 10 - 20
Machinery and equipment 3 - 12
Transportation equipment 3 - 10
Furniture and fixtures 3 - 12
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.
IMPAIRMENT OF LONG-LIVED ASSETS
Impairment losses are recorded on long-lived assets used in operations when
indicators (i.e. recurring operating losses, negative cash flows, etc.) of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the asset's carrying amount. If so, impairment
losses are then determined by comparing estimated fair value or discounted cash
flows to the related asset's carrying amount.
FAIR VALUES OF 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. Salomon Smith
Barney, Inc. currently makes a market for the Notes. As of September 29, 2002,
the average of the bid and asking price was 79.0 resulting in a fair market
value of $84.1 million compared to the stated value of $106.4 million. The
remainder of the Company's long-term debt carries variable interest rates and,
accordingly, the carrying amount approximates fair value.
DERIVATIVE FINANCIAL INSTRUMENTS
In May 2000 the Company entered into an interest rate swap agreement to manage
its exposure to fluctuations in interest rates. The swap was based on a notional
amount of $50 million. In November 2000 the Company entered into an interest
rate collar agreement with the bank counterparty. The collar was based on a
notional amount of $50 million.
F8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
In June 2001 the Company cancelled the interest rate swap entered into in May
2000 in exchange for entering into a new swap agreement. The new swap is also
based on a notional amount of $50 million. The Company pays to the bank
counterparty based on a rate of three-month LIBOR plus 5.30% through January
2007, except in circumstances described in the following paragraph. The Company
receives from the bank counterparty based on a rate of 10.75%. The swap is
cancelable by the bank counterparty in January 2004 and every six months
thereafter. Upon cancellation the Company is required to pay to or receive from
the bank counterparty the negative or positive value of the swap, respectively.
Also in June 2001 the Company replaced the interest rate collar agreement
entered into in November 2000 with a new interest rate collar through the bank
counterparty. The new collar is based on a notional amount of $50 million. Under
the new collar, through January 2004, if three-month LIBOR falls below 3.5% the
Company pays to the bank counterparty based on a fixed interest rate of 10.5%.
If three-month LIBOR exceeds 7.1%, the Company receives payment from the bank
counterparty based on the difference between effective three-month LIBOR and
7.1%. From January 2004 through January 2007, if three-month LIBOR falls below
4.75% the Company pays to the bank counterparty based on a the difference
between three-month LIBOR and 4.75%. If three-month LIBOR exceeds 7.1%, the
Company receives payment from the bank counterparty based on the difference
between effective three-month LIBOR and 7.1%. The new interest rate collar is
not cancellable until 2007.
As a result of the above instruments, the Company has essentially converted $50
million of fixed rate borrowings (10.75%) to a variable rate of three-month
LIBOR plus 5.3%, subject to a cap of 12.4% and a floor of 8.8%.
The Company paid an upfront premium of $200 and forgave an interest receivable
payment related to the May 2000 interest rate swap agreement of approximately
$300 due from the bank counterparty to initiate the interest rate swap and
collar changes in June 2001 described above.
The Company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended ("FAS
133"), as of September 25, 2000. The effect upon adoption was not material.
Under FAS 133, fair values of the swap and the collar are reported on the
balance sheet with changes in fair value reported in the statement of
operations. Accordingly, the Company has reflected the fair value of these
derivatives as a liability of $3,149 at September 29, 2002 which is included as
a component of accrued liabilities. The change in fair value for the year ended
September 29, 2002 and September 30, 2001 resulted in an expense of $1,641 and
$2,045, respectively, which has been included as a component of other income
(expense), net.
2. ACQUISITION, JOINT VENTURE AND DIVESTITURE
On February 11, 2002, the Company acquired certain assets and the booked
business of Security Plastics West, Ltd., located in McAllen, Texas, for
approximately $3.8 million. Assets purchased included accounts receivable of
approximately $1.9 million, inventory of approximately $1.0 million and
machinery and equipment of approximately $900 thousand. The acquisition was
funded through available borrowings on the Company's line of credit. Net sales
of approximately $7.9 million and gross margin of approximately $1.3 million,
related to the McAllen facility since the acquisition date, have been included
in the Company's results.
On September 30, 2001, the Company sold its German subsidiary. Proceeds from the
sale were immaterial. As a result of the sale, the Company recognized a gain of
$553. Net sales and net loss for fiscal year 2001 were $19.7 million and $2.3
million, respectively. Net sales and net loss for fiscal year 2000 were $27.2
million and $4.8 million, respectively.
The Company owns 49% of DBM. On December 8, 1999, the Company sold certain
machinery and equipment, which previously had been leased by DBM, to DBM 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 DBM.
F9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
DBM's new senior lender required the Company to subordinate all amounts due from
DBM at the time of refinancing. As a result, a previous subordinated note
payable 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 over five years. As of September 29, 2002, no
such amounts have been paid. No interest income is being recognized for these
notes.
As a result of the relatively small amount of equity contributed to DBM by the
majority 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 recorded 100% of the joint venture losses as equity
losses up to its investment and subordinated loan amounts. Such losses
recognized by the Company were $1,341 and $3,600 for 2001 and 2000, respectively
and have been reflected in the consolidated financial statements as a component
of Equity in losses of affiliates, net. As of September 30, 2001 the Company had
written off all investments in and receivables from DBM through equity losses.
Equity income was not recorded by the Company in fiscal 2002 due to DBM's
continued equity deficit.
3. SEGMENT AND CUSTOMER DATA
The Company operates in one industry; automotive components. The Company's
automotive components operations include the design and manufacture of plastic
injection molded products for certain original equipment manufacturers of cars,
minivans and sport utility vehicles. The Company's automotive products include
exterior and interior trim, under-the-hood components, and powertrain
components.
For the purpose of FAS 131, "Disclosures about Segments of an Enterprise and
Related Information," the Company is presented as one segment, automotive
components.
The following provides a summary of selected financial information by geographic
area:
SEPTEMBER 29, 2002
-----------------------------------------------
Long-Lived Net income
Revenues (a) Assets (loss)
-----------------------------------------------
United States $ 358,937 $ 81,313 $ 3,266
LDM Canada 31,989 10,184 (1,465)
-----------------------------------------------
Consolidated total $ 390,926 $ 91,497 $ 1,801
===============================================
SEPTEMBER 30, 2001
-----------------------------------------------
Long-Lived
Revenues (a) Assets Net loss
-----------------------------------------------
United States $ 312,925 $ 91,819 $ (2,359)
LDM Canada 57,590 12,707 (4,779)
LDM Germany 19,724 (2,272)
-----------------------------------------------
Consolidated total $ 390,239 $ 104,526 $ (9,410)
===============================================
SEPTEMBER 24, 2000
-----------------------------------------------
Long-Lived Net income
Revenues (a) Assets (loss)
-----------------------------------------------
United States $ 363,137 $ 90,201 $ 3,756
LDM Canada 61,580 13,356 654
LDM Germany 27,262 3,048 (4,823)
-----------------------------------------------
Consolidated total $ 451,979 $ 106,605 $ (413)
===============================================
(a) Revenues are attributed to countries based on point of manufacturing.
F10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
During the years ended September 2002, 2001, and 2000, approximately 98% 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 sales
as of each fiscal year end:
2002 2001 2000
-----------------------------------------------------
Ford Motor Company/Visteon $ 136,824 $ 165,730 $ 204,589
General Motors Corporation 117,278 135,504 135,837
Visteon 39,093
4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
2002 2001 2000
------------------ ------------------ -----------------
Interest paid $ 14,791 $ 17,625 $ 20,134
Income taxes refunded $ (3,411) $ (667) $ (372)
Interest capitalized $ 243 $ 737 $ 351
5. PROPERTY, PLANT AND EQUIPMENT
At September 29, 2002 and September 30, 2001, property, plant and equipment
consists of the following:
2002 2001
--------------- --------------
Land, buildings and improvements $ 55,357 $ 46,222
Machinery and equipment 142,300 133,563
Transportation equipment 2,729 2,377
Furniture and fixtures 5,950 6,236
Construction in process 273 11,717
--------------- --------------
Total, at cost 206,609 200,115
Less accumulated depreciation (115,112) (95,589)
-------------- --------------
Net property, plant and equipment $ 91,497 $ 104,526
============== ==============
Depreciation expense was $19,704, $18,870, and $18,287 for 2002, 2001 and 2000,
respectively.
6. LINES OF CREDIT AND REVOLVING DEBT
On March 23, 2001, the Company amended and restated its Senior Credit Facility
and Term Loan Facility. As part of the transaction, approximately $10 million of
additonal Term Loan financing was acquired. Proceeds from the Term Loan
financing were used to pay down amounts outstanding on its Senior Credit
Facility. The amended and restated Senior Credit Facility will expire on January
21, 2005. The Senior Credit Facility provides for the issuance of commercial and
stand-by letters of credit up to a portion of the $63,000 availability. The
Senior Credit Facility is subject to interest at a Base or LIBOR Rate plus a
variable margin as set forth in the loan agreement; 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 0.375% 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.
F11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
The Company had borrowings outstanding under the Senior Credit Facility at
September 29, 2002 and September 30, 2001 of $20,079 and $18,181, respectively.
Additional borrowings available under the Senior Credit Facility were $31,486
and $12,500 at September 29, 2002 and September 30, 2001, respectively. At
September 29, 2002, the Senior Credit Facility is secured by substantially all
of the assets of the Company and its guarantors (LDM Holding Canada, Inc. and
LDM Technologies Company).
The weighted average interest rate on all short-term borrowings as of September
29, 2002 and September 30, 2001 was 4.27% and 5.65%, respectively.
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
$110,000 (the "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. At September 29, 2002 the Notes are guaranteed by certain
subsidiaries of the Company, namely LDM Holding Canada, Inc. and LDM Canada, but
not by LDM Mexico. Supplemental financial information for the guarantor and
non-guarantor subsidiaries is disclosed in Note 13.
On August 20, 2002, the Company repurchased and retired $3.6 million face value
of the Notes for $2.8 million plus accrued interest. The Company used available
borrowings under its Senior Credit Facility for the purchase. The gain on
repurchase and retirement has been included in Other income (expense) on the
Statement of Operations.
The Notes rank subordinate in right of payment to all existing and future Senior
Debt.
The Company has a letter of credit that secures its $8,800 Multi-Option
Adjustable Rate Notes with an aggregate principal amount of $7,180 at September
29, 2002. The Company also issued a letter of credit on acquisition of Molmec to
back Molmec's Variable Rate Demand Limited Obligation Revenue Bonds with an
aggregate principal amount of $1,410 at September 29, 2002.
F12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
On March 23, 2001, the Company amended and restated its Term Loan Facility. The
initial balance of the amended and restated Term Loan Facility was $44,242. The
loan is repayable in monthly installments of $649, in addition to an annual
payment due the first day of the fourth month after the end of each fiscal year
of 50% of any excess cash flow (as defined in the loan agreement) for such
fiscal year. The amended and restated Term Loan Facility will expire on January
21, 2005. The Term Loan Facility is subject to interest at a Base or LIBOR Rate
plus a variable margin as set forth in the loan agreement.
At September 29, 2002, the Term Loan Facility is secured by substantially all of
the assets of the Company and its guarantors (LDM Holding Canada, Inc. and LDM
Canada).
The Company had borrowings outstanding under the Term Loan Facility of $35,202
and $44,242 at September 29, 2002 and September 30, 2001, respectively.
Long-term debt at September 29, 2002 and September 30, 2001 consists of the
following:
2002 2001
---- ----
Senior Subordinated Notes due 2007. $ 106,400 $ 110,000
Term Loan Facility, principal payable in monthly
installments of $649, plus interest at Base or
LIBOR plus margin (4.34% at September 29, 2002).
Balance repayable January 2005. 35,202 44,242
Multi-Option Adjustable Rate Notes, principal
payable in various annual installments ranging
from $320 to $780 through April 1, 2015, plus
interest payable monthly at the higher of the 30
day commercial paper rate or 90 day commercial
paper rate (1.95% at September 29, 2002).
Borrowings are collateralized by letter of credit
against the Senior Revolving Credit Facility 7,180 7,500
Variable Rate Demand Limited Obligation Revenue
Bonds, principal payable in various annual
installments through December 1, 2009, ranging
from $630 to $160, plus variable interest
(subject to a maximum of 12%), payable
semi-annually (1.84% at September 29, 2002),
collateralized by a letter of credit against
the Senior Revolving Credit Facility 1,410 2,040
--------- ---------
Total $ 150,192 $ 163,782
Current maturities of long-term debt (11,305) (8,735)
--------- ---------
Long-term debt due after one year $ 138,887 $ 155,047
========= =========
Annual maturities of long-term debt are as follows:
FISCAL YEAR
2003 $ 11,305
2004 8,325
2005 17,217
2006 615
2007 107,060
Thereafter 5,670
-------------
Total $ 150,192
=============
Debt issue costs are amortized over the term of the associated debt.
F13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
8. OTHER RELATED PARTY TRANSACTIONS
The Company had a consulting arrangement with a company owned by one of its
shareholders in which payments are made for consulting services rendered.
Amounts paid for these services are included in selling, general and
administrative expenses and were $1,588 and $1,800 for the fiscal years ended
September 30, 2001 and September 24, 2000, respectively. In fiscal year 2002, no
payments were made to this consulting company as the shareholder has become an
employee of the Company to provide the same services.
During fiscal year 2002, the Company acquired certain assets and the booked
business of Security Plastics West, Ltd., located in McAllen, Texas. As part of
the transaction the Company is leasing the building and real estate in McAllen
from a company majority owned by LDM's two shareholders. The leased facility is
73,000 square feet and annual rentals approximate $300. The lease has an initial
term of 8 years with an option to renew at the end of the initial lease term. In
fiscal year 2002, the Company paid rentals for the McAllen manufacturing
facility of approximately $190.
See discussion regarding stock redemption agreement in footnote 11.
9. INCOME TAXES
The Company's provision for income taxes for the years ended September 29, 2002,
September 30, 2001, and September 24, 2000 is comprised of the following:
2002 2001 2000
---- ---- ----
Domestic:
Federal:
Current $ (1,619) $ (976) $ (45)
Deferred 3,185 (4,125) 1,633
----------- ------------ -----------
1,566 (5,101) 1,588
State and local:
Current (31) (305) (88)
Deferred 133 (485) 360
----------- ------------ -----------
102 (790) 272
Foreign:
Current 101
Deferred (1,116) 145
----------- ------------ -----------
(1,015) 145
----------- ------------ -----------
Total income tax provision $ 1,668 $ (6,906) $ 2,005
=========== ============ ===========
F14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
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 29, 2002 and September 30, 2001 deferred tax assets and liabilities
are comprised of the following:
2002 2001
------------------------
Deferred tax assets:
Loss carryovers $1,332 $6,396
Alternative minimum tax credits 1,836 261
Capital loss carryovers 189 260
Goodwill 924 2,630
Accounts receivable 204 407
Inventory 695 914
Other accrued liabilities 1,566 660
Employee benefits 891 895
------------------------
Total deferred tax assets 7,637 12,423
Less valuation allowances (1,476) (978)
------------------------
Total net deferred tax asset 6,161 11,445
Deferred tax liabilities:
Property, plant and equipment 4,538 6,945
Investment in affiliates 614 173
------------------------
Total deferred tax liabilities 5,152 7,118
------------------------
Net deferred tax asset (liability) $1,009 $4,327
========================
As of September 24, 2000, the valuation allowance for deferred tax assets was
$344.
As of September 29, 2002 and September 30, 2001, the classification of net
deferred income taxes is summarized as follows:
SEPTEMBER 29, 2002
CURRENT LONG TERM TOTAL
------- --------- -----
Deferred tax assets $ 3,433 $ 2,728 $ 6,161
Deferred tax liabilities (5,152) (5,152)
---------- ----------- -----------
Net deferred tax assets (liabilities) $ 3,433 $ (2,424) $ 1,009
========== =========== ===========
SEPTEMBER 30, 2001
CURRENT LONG TERM TOTAL
------- --------- -----
Deferred tax assets $ 2,612 $ 8,833 $ 11,445
Deferred tax liabilities (7,118) (7,118)
---------- ----------- -----------
Net deferred tax assets $ 2,612 $ 1,715 $ 4,327
========== =========== ===========
F15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
A reconciliation of the Company's income tax expense at the federal statutory
tax rate to the actual income tax expense follows:
YEAR ENDED
SEPTEMBER 29, SEPTEMBER 30, SEPTEMBER 24,
2002 2001 2000
---------------- ---------------- ---------------
Tax at federal statutory rate of
34% $ 1,179 $ (5,560) $ 540
State and local taxes, net of
federal tax effect 67 (201) 179
Nondeductible expenses 531 765 1,130
Differences related to sale of LDM
Germany (859)
Foreign taxes (498) (1,649) 154
Deferred tax valuation allowance 498 634
Loss of foreign tax credits 767
Recognition of foreign generated
pass through differences (802)
Other, net (74) (36) 2
----------- ----------- ----------
Provision for income taxes $ 1,668 $ (6,906) $ 2,005
========== =========== ==========
For Canadian income tax purposes, approximately $5,009 of net operating losses
are available at September 29, 2002 for carryover against taxable income in
future years. These carryovers expire at various dates through 2009. As of
September 29, 2002 a valuation allowance of $1,132 was recorded related to the
Canadian net deferred tax asset.
For U.S. tax purposes, the alternative minimum tax credits do not expire.
10. RETIREMENT AND PROFIT SHARING PLANS
The Company provides defined contribution retirement plans to substantially all
employees of LDM Technologies, Inc. Contributions by the Company, which are
different for each individual plan, are based on matching 50% of employees'
contributions, up to a maximum range of 3-4 % of earnings or five hundred to one
thousand dollars. Costs under the plans amounted to $368 and $863 in 2001 and
2000, respectively. The Company suspended its 50% match of employee contribution
in 2001 to mitigate the effects of a softening automotive market. Management
intends to reinstate the Company match in fiscal year 2003 if favorable market
conditions are in place.
11. COMMITMENTS AND CONTINGENCIES
RESTRUCTURING
The Company incurred $1.1 million of expenses associated with employee severance
at LDM Canada during fiscal year 2002 that have been included as a component of
cost of goods sold. The employee severance relates to the downsizing of the
facility from three shifts to one shift as certain unprofitable product lines
were exited. The severence costs accrued relate to approximately 345 employees.
LEASES
The Company leases certain of its facilities, furniture and fixtures, and
equipment. Rental expense, including short-term cancelable leases, approximated
$13,295, $11,653 and $6,639 for the years ended September 29, 2002, September
30, 2001 and September 24, 2000, respectively. Future commitments under
noncancelable operating leases are as follows:
FISCAL YEAR
-----------
2003 11,256
2004 13,508
2005 4,657
2006 6,981
2007 1,317
Thereafter 1,703
------------
Total $ 39,422
============
F16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
STOCK REDEMPTION AGREEMENT
The Company and its two shareholders are party to a binding stock redemption
agreement. Upon the death of either 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 $25,000. This amount payable includes
the proceeds of the life insurance policies owned by the Company on the
shareholder's 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 maintains life insurance policies of $17.0 million on the life
of Mr. Nash and $25.0 million on the life of Mr. Balous. The annual premiums for
such policies of insurance are approximately $1.3 million. 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.
CONTINGENCIES
Environmental Matters
There are currently no material environmental issues related to the Company of
which management is aware.
LITIGATION
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
changes will have a material effect on the Company's future results of
operations and financial condition or liquidity.
12. UNCONSOLIDATED AFFILIATES
The Company has a less than fifty percent equity interest in DBM of which the
Company owns 49%, and Sunningdale of which the Company owns 22% as of September
30, 2001. These significant investments are accounted for under the equity
method. Equity earnings/loss are reported as equity in losses (income) of
affiliates, net on the operating statement, and as equity investments in
affiliates on the balance sheet. Financial information on the Company's
significant equity method investments, Sunningdale and DBM, is as follows:
2002
Sunningdale DBM
------------------------------------------
Current assets $ 33,818 $ 16,441
Noncurrent assets 15,659 8,347
Current liabilities 11,378 27,501
Noncurrent liabilities 5,153 5,622
Minority interest 159
Net sales 38,826 72,335
Earnings before interest and taxes 8,520 3,025
Net income 5,683 1,708
Percent of income/loss recognized 22% **
Amount included in Equity in losses of
affiliates, net $1,250
F17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
2001
Sunningdale DBM
------------------------------------
Current assets $ 33,540 $ 14,516
Noncurrent assets 15,385 9,358
Current liabilities 15,942 28,294
Noncurrent liabilities 5,800 5,622
Minority interest 199
Net sales 43,901 63,426
Earnings (loss) before interest and taxes 8,695 (2,581)
Net income (loss) 5,701 (4,367)
Percent of income/loss recognized 22% **
Amount included in Equity in losses of
affiliates, net $ 1,254 $ (1,358)
2000
Sunningdale DBM
-------------------------------------
Net sales 54,448 53,197
Earnings (loss) before interest and taxes 14,261 (1,606)
Net income (loss) 12,314 (3,600)
Percent of income/loss recognized 22% 100%*
Amount included in Equity in losses of
affiliates, net $ 2,709 $ (3,600)
** limited to investments in and receivables from DBM. Equity income in DBM was
not recorded by the Company in fiscal year 2002 due to DBM's continued equity
deficit. See also Note 2.
* See Note 2.
As of September 29, 2002, the cumulative amount of the equity earnings
recognized in operations and included in retained earnings was $6,563 for
Sunningdale and ($7,367) for DBM.
No other equity method investment was significant for 2001 or 2002.
13. 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, 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 Canada and
certain holding companies as described in note 7. Effective September 30, 2001
as discussed in Note 2, the Company sold its ownership shares in LDM Germany. As
of September 29, 2002 there are no non-guarantor subsidiaries remaining.
Supplemental consolidating financial information of LDM Technologies, Inc., LDM
Canada (including the related holding company guarantors) and LDM Germany (the
"non-guarantor subsidiaries") is presented below. 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 the guarantor and non-guarantor
subsidiaries.
F18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 29, 2002
LDM Consolidating
Technologies, Inc. LDM Canada Entries Consolidated
ASSETS
Current assets:
Cash $ 683 $ 249 $ 932
Accounts receivable 72,343 4,808 77,151
Inventories 13,742 2,224 15,966
Mold costs 5,073 65 5,138
Prepaid expenses 2,087 14 2,101
Deferred income taxes 3,386 47 3,433
--------- --------- --------- ---------
Total current assets 97,314 7,407 104,721
Net property, plant and equipment 81,313 10,184 91,497
Investment in subsidiaries and affiliates 9,887 $ (2,587) 7,300
Note receivable affiliates 9,242 (9,242)
Goodwill 50,152 50,152
Debt issue costs 3,389 3,389
Other 428 428
--------- --------- --------- ---------
$ 251,725 $ 17,591 $ (11,829) $ 257,487
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,204 $ 5,683 $ (173) $ 54,714
Accrued liabilities 19,861 19,861
Accrued compensation 5,290 252 5,542
Income taxes payable 78 78
Current maturities of long-term debt 11,305 11,305
--------- --------- --------- ---------
Total current liabilities 85,738 5,935 (173) 91,500
Lines of credit and revolving debt 20,079 20,079
Long-term debt due after one year 138,887 9,068 (9,068) 138,887
Deferred income taxes 2,424 2,424
Stockholders' equity:
Common stock 5,850 (5,850)
Additional paid-in capital 94 94
Retained earnings 4,503 (3,262) 3,262 4,503
--------- --------- --------- ---------
Total stockholders' equity 4,597 2,588 (2,588) 4,597
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 251,725 $ 17,591 $ (11,829) $ 257,487
========= ========= ========= =========
F19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 30, 2001
LDM Consolidating
Technologies, Inc. LDM Canada Entries Consolidated
ASSETS
Current assets:
Cash $ 23 $ 2,297 $ 2,320
Accounts receivable 41,426 7,393 48,819
Inventories 13,779 2,902 16,681
Mold costs 19,221 367 19,588
Prepaid expenses 2,462 55 2,517
Refundable income taxes 1,683 1,683
Deferred income taxes 2,565 47 2,612
--------- --------- --------- ---------
Total current assets 81,159 13,061 94,220
Net property, plant and equipment 91,819 12,707 104,526
Investment in subsidiaries and affiliates 10,102 $ (4,052) 6,050
Note receivable affiliates 10,685 (10,685)
Goodwill 50,152 50,152
Debt issue costs 4,258 4,258
Deferred income taxes 1,715 1,715
Other 1,391 1,391
--------- --------- --------- ---------
$ 251,281 $ 25,768 $ (14,737) $ 262,312
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,678 $ 9,028 $ (553) $ 53,153
Accrued liabilities 20,268 1,319 21,587
Accrued compensation 1,576 1,237 2,813
Current maturities of long-term debt 8,735 8,735
--------- --------- --------- ---------
Total current liabilities 75,257 11,584 (553) 86,288
Lines of credit and revolving debt 18,181 18,181
Long-term debt due after one year 155,047 10,131 (10,131) 155,047
Stockholders' equity:
Common stock 5,850 (5,850)
Additional paid-in capital 94 94
Retained earnings 2,702 (1,797) 1,797 2,702
--------- --------- --------- ---------
Total stockholders' equity 2,796 4,053 (4,053) 2,796
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 251,281 $ 25,768 $ (14,737) $ 262,312
========= ========= ========= =========
F20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 29, 2002
UNCONSOLIDATED
-----------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA ENTRIES CONSOLIDATED
------------- ---------- ------------- ------------
Net sales $ 358,937 $ 31,989 $ 390,926
Cost of sales 302,289 31,627 333,916
---------- ---------- -------- ---------
Gross margin 56,648 362 57,010
Selling, general and
administrative expenses 36,832 305 37,137
Interest 15,699 1,046 $ (935) 15,810
Equity in losses (income)
of subsidiaries and
affiliates, net 215 (1,465) (1,250)
International currency
exchange losses 476 476
Other, net 433 935 1,368
---------- ---------- -------- ---------
53,179 1,827 (1,465) 53,541
---------- ---------- -------- ---------
Income (loss) before
income taxes 3,469 (1,465) 1,465 3,469
---------- ---------- -------- ---------
Provision for income
taxes 1,668 1,668
---------- ---------- -------- ---------
Net loss $ 1,801 $ (1,465) $ 1,465 $ 1,801
========== ========== ======== =========
F21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2001
UNCONSOLIDATED
----------------------------------------------------
LDM
TECHNOLOGIES, LDM LDM CONSOLIDATING
INC. CANADA GERMANY ENTRIES CONSOLIDATED
------------------ ---------- ---------------- ------------------ -----------------
Net sales $ 312,925 $ 57,590 $ 19,724 $ 390,239
Cost of sales 258,414 61,393 22,034 341,841
------------ -------- ----------- ---------- ----------
Gross margin 54,511 (3,803) (2,310) 48,398
Selling, general and
administrative expenses 44,957 379 919 46,255
Interest 17,524 1,177 $ (1,059) 17,642
Equity in losses of
subsidiaries and
affiliates, net 6,602 (6,498) 104
International currency
exchange (gains) losses 497 (865) (368)
Gain on sale of LDM
Germany (553) (553)
Other, net 729 (62) (92) 1,059 1,634
------------ -------- ----------- ---------- ----------
69,259 1,991 (38) (6,498) 64,714
------------ -------- ----------- ---------- ----------
Loss before income
taxes (14,748) (5,794) (2,272) 6,498 (16,316)
Credit for income taxes (5,891) (1,015) (6,906)
------------ -------- ----------- ---------- ----------
Net loss $ (8,857) $ (4,779) $ (2,272) $ 6,498 $ (9,410)
============ ======== =========== ========== ==========
F22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 24, 2000
UNCONSOLIDATED
------------------------------------------------
LDM
TECHNOLOGIES, LDM LDM CONSOLIDATING
INC. CANADA GERMANY ENTRIES CONSOLIDATED
--------------- --------- ----------- ------------- -------------
Net sales $ 363,137 $ 61,580 $ 27,262 $ $ 451,979
Cost of sales 287,787 58,975 27,806 374,568
-------------- --------- ---------- --------- ---------
Gross margin 75,350 2,605 (544) 77,411
Selling, general and
administrative expenses 51,177 819 1,305 53,301
Interest 19,864 1,193 706 (1,808) 19,955
Equity in losses of
subsidiaries and
affiliates, net 5,060 (4,169) 891
International currency
exchange losses (gains) (33) 2,268 2,235
Other, net (2,198) (173) 1,808 (563)
-------------- --------- ---------- --------- ---------
73,903 1,806 4,279 (4,169) 75,819
-------------- --------- ---------- --------- ---------
Income (loss) before
income taxes 1,447 799 (4,823) 4,169 1,592
Provision for income
taxes 1,860 145 2,005
-------------- --------- ---------- --------- ---------
Net income (loss) $ (413) $ 654 $ (4,823) $ 4,169 $ (413)
============== ========= ========== ========= =========
F23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 29,2002
UNCONSOLIDATED
--------------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA ENTRIES CONSOLIDATED
----------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 1,801 $ (1,465) $ 1,465 $ 1,801
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity in subsidiaries' losses 1,465 (1,465)
Equity in losses of affiliates, net (1,250) (1,250)
Depreciation and amortization 18,608 2,224 20,832
Gain on early payment of notes (756) (756)
Currency exchange loss 476 476
Loss on sale of property,
plant and equipment 1 1
Deferred income taxes 3,318 3,318
Changes in assets and liabilities:
Accounts and notes receivable (30,917) 2,109 (28,808)
Inventory and mold costs 14,185 980 15,165
Prepaid expenses 1,277 41 1,318
Accounts payable and accrued
liabilities 7,833 (5,649) 380 2,564
Income taxes refundable/payable 1,761 1,761
----------------------------------------------------------------------
Net cash provided by (used in)
operating activities 17,326 (1,284) 380 16,422
INVESTING ACTIVITIES
Additions to property, plant and
equipment (7,001) 299 (6,702)
Proceeds from disposal of property,
and equipment 26 26
Disbursements to affiliates (1,063) 1,063
Payments from affiliates 1,443 (1,443)
----------------------------------------------------------------------
Net cash used for investing
activities (5,532) (764) (380) (6,676)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt (198) (198)
Payments on long-term debt (12,834) (12,834)
Net proceeds from Line of Credit/
Revolver 1,898 1,898
----------------------------------------------------------------------
Net cash used by financing activities (11,134) (11,134)
----------------------------------------------------------------------
Net increase (decrease) in cash 660 (2,048) (1,388)
Cash at beginning of year 23 2,297 2,320
----------------------------------------------------------------------
Cash at end of year $ 683 $ 249 $ $ 932
======================================================================
F24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2001
UNCONSOLIDATED
-----------------------------------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA LDM GERMANY ENTRIES CONSOLIDATED
-------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ (8,857) $ (4,779) $ (2,272) $ 6,498 $ (9.410)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity in subsidiaries' losses 6,498 (6,498)
Equity in losses of affiliates, net 104 104
Gain on sale of LDM Germany (553) (553)
Depreciation and amortization 21,660 2,106 823 24,589
Currency exchange (gain) loss 497 (865) (368)
Loss on sale of property and
equipment 73 73
Deferred income taxes (4,610) (1,116) (5,726)
Changes in assets and liabilities:
Accounts and notes receivable 22,712 507 530 23,749
Inventory and mold costs (10,409) 6,491 (1,781) (5,699)
Prepaid expenses (285) 192 (78) (171)
Accounts payable and
accrued liabilities (16) (2,365) 2,514 487 620
Refundable income taxes (612) (612)
------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 25,705 1,533 (1,129) 487 26,596
INVESTING ACTIVITIES
Additions to property, plant and
equipment (18,107) (1,457) (948) (20,512)
Deposits for leases to be reimbursed 4,791 4,791
Proceeds from disposal of property,
and equipment 475 475
Disbursements to affiliates (401) 401
Payments from affiliates 800 88 (888)
------------------------------------------------------------------------------------------
Net cash used for investing activities (12,041) (1,858) (860) (487) (15,246)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 9,013 9,013
Payments on long-term debt (6,221) (6,221)
Net proceeds from Line of Credit/
Revolver (16,462) (16,462)
------------------------------------------------------------------------------------------
Net cash used by financing activities (13,670) (13,670)
------------------------------------------------------------------------------------------
Net increase (decrease) in cash (6) (325) (1,989) (2,320)
Cash at beginning of year 29 2,622 1,989 4,640
------------------------------------------------------------------------------------------
Cash at end of year $ 23 $ 2,297 $ $ $ 2,320
==========================================================================================
F25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 24, 2000
UNCONSOLIDATED
-------------------------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA LDM GERMANY ENTRIES CONSOLIDATED
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OPERATING ACTIVITIES
Net income (loss) $ (413) $ 654 $ (4,823) $ 4,169 $ (413)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Equity in subsidiaries' losses 4,169 (4,169)
Equity in losses of affiliates, net 891 891
Depreciation and amortization 19,960 2,292 1,401 23,653
Currency exchange (gain) loss (33) 2,268 2,235
(Gain) loss on sale of property and
equipment 241 (2) 239
Deferred income taxes 1,993 145 2,138
Changes in assets and liabilities:
Accounts and notes receivable (3,525) 5,848 2,776 5,099
Inventory and mold costs 3,371 (4,508) 613 (524)
Prepaid expenses (569) (104) 57 (616)
Accounts payable and accrued
liabilities 3,738 (517) (3,186) (1,066) (1,031)
Refundable income taxes 241 73 314
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Net cash provided by (used in) operating
activities 30,097 3,848 (894) (1,066) 31,985
INVESTING ACTIVITIES
Additions to property, plant and
equipment (13,352) (1,228) (14,580)
Deposits for leases to be reimbursed (4,791) (4,791)
Equity contributed to affiliate (49) (49)
Proceeds from disposal of property,
plant, and equipment 8,268 2 8,270
Disbursements to affiliates (3,691) 1,816 (1,875)
Payments from affiliates 750 (750) -
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Net cash (used for) provided by
investing activities (13,615) (1,226) 750 1,066 (13,025)
FINANCING ACTIVITIES
Proceeds from issuance of long term debt (181) (181)
Payments on long-term debt (19,823) (19,823)
Net proceeds from Line of Credit/
Revolver 1,367 1,367
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Net cash used by financing activities (18,637) (18,637)
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Net increase (decrease) in cash (2,155) 2,622 (144) - 323
Cash at beginning of year 2,184 2,133 - 4,317
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Cash at end of year $ 29 $ 2,622 $ 1,989 $ - $ 4,640
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F26
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
21 Subsidiaries and Affiliates of the Company
99.1 CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.