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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 28, 2003.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
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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 [ ] No [X]
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 December 5, 2003, 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 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, battery trays that integrate fluid reservoirs
as well as other engine compartment optimization opportunities.
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, assemblies, and modules including design, development, component
sourcing, manufacturing, quality assurance, testing, sequencing and delivery
to the customer's assembly plant.
Market-based Pricing. In an effort to reduce costs and to ensure the
affordability and competitiveness of their products, OEMs are sourcing
automotive components, systems, modules, and assemblies 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, modules, assemblies 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 registers, 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 and components 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 General Motors, Ford, Visteon 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 28, 2003 are shown below:
General Motors ....................................... 37%
Ford.................................................. 27%
Visteon............................................... 10%
DaimlerChrysler....................................... 8%
Other Automotive...................................... 16%
Non-Automotive........................................ 2%
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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
Blazor/Bravada/Jimmy
Trailblazer/Envoy/Rainier
Sonoma Pick-up/S10 Pick-up
GMC Sierra/Silverado
Chevy SSR
Suburban
Tahoe
General Motors-car........................ Seville
Cavalier/ Sunfire
Corvette
Grand Prix
Monte Carlo
Bonneville
Impala
Ford-truck................................ Econoline
Expedition
Explorer
Escape/Tribute
F-Series Truck
Ranger
Windstar
Navigator
Ford-car.................................. Continental
Crown Victoria/Grand Marquis
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....................... Breeze/Cirrus/Sebring
Concord/Intrepid
LHS 300
Neon
Pacifica
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,
IDEAS, CATIA, ICEM, PDGS, PRO-E and Unigrahpics 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 manufacturing program has focused on lean production
scheduling, materials management techniques and labor productivity improvements.
Lean 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 lean manufacturing, 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 customer demand 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., Collins & Aikman, Lear and Plastech in instrument panel components; Magna
International Inc., Visteon, Meridian, Plastics Omnium, Venture Holdings
Corporation, Flex-N-Gate and Plastech in exterior trim components; and Key
Plastics Inc., Automold and Collins & Aikman 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 28, 2003, the Company's workforce included 3,199 employees,
of which 587 were salaried workers, and 2,612 were hourly workers including
temporary and part-time employees. The Company has 201 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
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 28, 2003, 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 26, 1999, September 24,
2000, September 30, 2001, September 29, 2002 and September 28, 2003. 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. 26 SEPT. 24 SEPT. 30 SEPT. 29 SEPT. 28
1999 2000 2001 2002 2003
---------- ---------- ---------- ---------- ----------
Statement of operations
data
Net sales $ 467,912 $ 451,979 $ 390,239 $ 390,926 $ 425,016
Cost of sales 388,749 374,568 341,841 333,916 354,346
Gross margin 79,163 77,411 48,398 57,010 70,670
Selling, general and
administrative
expenses 53,850 53,301 46,255 37,137 42,011
Interest expense 21,067 19,955 17,642 15,810 14,748
Gain on sale of LDM Germany 553
Net income (loss) (761) (413) (9,410) 1,801 7,812
Net income (loss) as adjusted
for the effect of adopting
Financial Accounting
Standard No. 142 2,275 2,623 (6,374) 1,801 7,812
Other financial data
Cash flows from operating
activities $ 26,611 $ 31,985 $ 26,596 $ 16,422 $ 27,438
EBITDA (a) 44,436 44,253 24,273 39,041 48,224
Depreciation and
amortization 22,025 23,653 24,589 20,832 21,436
Capital expenditures 22,003 14,580 20,512 6,702 8,291
Ratio of EBITDA to
interest expense 2.1 2.2 1.4 2.5 3.3
Ratio of debt to EBITDA 4.8 4.4 7.5 4.4 3.1
Balance sheet data
Cash $ 4,317 $ 4,640 $ 2,320 $ 932 $ 578
Total assets 312,143 297,723 262,312 257,487 242,221
Total debt 213,102 194,646 181,963 170,271 149,715
Stockholder's equity 12,920 13,940 2,796 4,597 15,819
(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. 26 SEPT. 24 SEPT. 30 SEPT. 29 SEPT. 28
1999 2000 2001 2002 2003
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (761) $ (413) $ (9,410) $ 1,801 $ 7,812
Add (deduct) the following:
Gain on sale of LDM Germany (553)
Provision for income
taxes 2,805 2,005 (6,906) 1,668 5,407
Interest expense 21,067 19,955 17,642 15,810 14,748
Depreciation and
amortization* 21,325 22,706 23,500 19,762 20,257
---------- ---------- ---------- ---------- ----------
EBITDA $ 44,436 $ 44,253 $ 24,273 $ 39,041 $ 48,224
========== ========== ========== ========== ==========
*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 third party 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. Revenue from Romulus was $89.8 million for fiscal
year 2003.
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 28, 2003 and represented
approximately 20.7% 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 years ended September 28, 2003 and 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 28, 2003, the Company had
net deferred tax liabilities, after valuation allowances, of $2.6 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 $1.7 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.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS RECEIVABLE
Accounts receivable have been reduced by an allowance for amounts that may
become uncollectible in the future. The Company estimates its allowance for
doubtful accounts based on specific indentification of aged receivables and a
general reserve based on receivables aged past their due date. In addition, this
estimated allowance is based on management's evaluation of customer productivity
reimbursement programs and historical experience.
PENDING ACCOUNTING PRONOUNCMENTS
During fiscal year 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Statement 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, and FASB Interpretation 46,
Consolidation of Variable Interest Entities.
FASB Statement 150 requires that financial instruments, including common stock,
that are issued in the form of shares that are mandatorily redeemable on a fixed
or determinable date or upon an event certain to occur be classified as
liabilities. FASB Statement 150 is required to be adopted in the second quarter
of fiscal 2004 by the Company. As described in Note 11, upon the death of either
of the Company's shareholders, the Company is required to purchase the stock of
such shareholder. Under the current capital structure, upon adoption of FASB
Statement 150, the Company's stockholders' equity would be reclassed within the
liability section of the balance sheet as "shares subject to mandatory
redemption."
FASB Interpretation 46 requires the consolidation of entities in which an
enterprise absorbs a majority of the entity's expected losses, receives a
majority of the entity's expected residual returns, or both, as a result of
ownership or contractual or other financial interests in the entity. Currently,
entities are generally consolidated by an enterprise when the enterprise has a
controlling financial interest through ownership of a majority voting interest
in the entity.
For transactions in place on January 31, 2003, FASB Interpretation 46 is
required to be adopted by the Company no later than the end of fiscal 2004. For
transactions entered into after January 31, 2003, FASB Interpretation 46 must be
applied immediately. The Company is in the process of evaluating the effects of
FASB Interpretation 46. Based upon the in process review, the Company believes
that its existing lease with a related party for the McAllen facility (see Note
8) and its 49% equity interest in as well as a subordinated note from DBM
Technologies, LLC (see Note 12) are within the scope of FASB Interpretation 46.
As currently structured, such entities likely require consolidation by the
Company upon adoption of FASB Interpretation 46. As of September 28, 2003, DBM
Technologies, LLC has third party assets and liabilities of approximately $26.1
million and $28.0 million, respectively. As of September 28, 2003, the Company's
non-cancellable lease payments for the McAllen facility approximate $2.1
million.
For transactions subsequent to January 31, 2003 the effects of FASB
Interpretation 46 are immaterial.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 28, 2003 COMPARED TO YEAR ENDED SEPTEMBER 29, 2002
NET SALES: Net sales for fiscal year 2003 were $425.0 million, an increase of
$34.1 million, or 8.7%, from net sales of $390.9 million in fiscal year 2002.
The increase in net sales is primarily due to the launch of new products from
the Company's facility in Romulus, Michigan in March and August of 2002, offset
by lower sales at other facilities due to reduced customer requirements in
fiscal year 2003. The Romulus facility reported $89.8 million in net sales for
fiscal year 2003 compared to $31.9 million for fiscal year 2002.
GROSS MARGIN: Gross margin was $70.7 million, or 16.6% of net sales, for fiscal
year 2003 compared to $57.0 million, or 14.6% of net sales, for fiscal year
2002. Gross margin improvement is the result of added sales at Romulus covering
the facility's fixed costs. This has been offset slightly by weaker results at
certain other facilities, as reduced sales (compared to the same period in the
previous year) have resulted in greater unabsorbed fixed costs at those certain
facilities.
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES: SG&A expenses for fiscal
year 2003 were $42.0 million, or 9.8% of net sales, compared to $37.1 million,
or 9.5% of net sales, for fiscal year 2002. These expenses have remained
virtually unchanged as a percentage of sales due to continued vigilance related
to hiring and discretionary spending.
INTEREST EXPENSE: Interest expense was $14.7 million for fiscal year 2003,
compared to $15.8 million for fiscal year 2002. 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 $0.3
million for fiscal year 2003, compared to $1.3 million for fiscal year 2002. On
July 31, 2003, an equity investee of the Company, Sunningdale Precision
Industries Pte. Ltd ("Sunningdale"), completed an initial public offering on the
Singapore Securities Exchange. Additional shares issued as part of the public
offering caused LDM's equity holdings to be diluted from ownership of 22% to 16%
of Sunningdale. LDM has no intention of increasing its equity position in
Sunningdale above that currently held. As a result of these changes, LDM does
not exercise significant influence over Sunningdale's operating and financial
policies. Accordingly, commencing July 31, 2003, the investment in Sunningdale
is treated as an available for sale security, with unrealized gains or losses in
market value recorded as a component of other comprehensive income in LDM's
stockholders' equity. As of September 28, 2003, the unrealized pretax gain on
the available for sale security was $5.8 million.
INTERNATIONAL CURRENCY EXCHANGE GAINS/LOSSES: Currency exchange gains were $0.7
million for fiscal year 2003, compared to currency exchange losses of $0.5
million for fiscal year 2002. This fluctuation is primarily attributable to the
impact of changes in the United States dollar : Canadian dollar exchange rate
applied to Canadian dollar denominated accounts receivable, accounts payable and
property, plant and equipment. As indicated in Note 1 of the financial
statements, the functional currency of LDM Canada is the United States dollar.
LOSS ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT: Fiscal year 2003 includes
$817 thousand for expense related to the disposal of certain property, plant and
equipment. This includes approximately $600 thousand of special purpose
equipment written off due to the elimination of certain parts by a customer and
approximately $200 thousand of unutilized general purpose equipment disposed of
to reduce warehousing costs.
OTHER: Other loss was $0.8 million for fiscal year 2003, compared to a loss of
$1.4 million for fiscal year 2002. 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 2003 was $5.4
million with an effective tax rate of 40.9% as compared to $1.7 million with an
effective tax rate of 48.1% for fiscal year 2002. The effective tax rates differ
from statutory rates as a result of certain non-deductible expenses. 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 29, 2002 COMPARED TO YEAR ENDED SEPTEMBER 30, 2001
NET SALES: Net sales for fiscal year 2002 were $390.9 million, an increase 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
Technologies, LLC 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.
INTERNATIONAL CURRENCY EXCHANGE GAINS/LOSSES: Currency exchange losses were $0.5
million for fiscal year 2002, compared to currency exchange gains of $0.4
million for fiscal year 2001. This fluctuation is primarily attributable to the
impact of changes in the United States dollar : Canadian dollar exchange rate
applied to certain Canadian dollar denominated accounts receivable, accounts
payable and property, plant and equipment. As indicated in Note 1 of the
financial statements, the functional currency of LDM Canada is the United States
dollar.
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.
INVESTMENTS AND DIVESTITURES
DILUTION OF INTEREST IN EQUITY INVESTEE: As previously discussed, Sunningdale
completed an initial public offering on the Singapore Securities Exchange.
Additional shares issued as part of the offering caused the Company's equity
holdings to be diluted from ownership of 22% to 16%.
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 related to the McAllen facility were $9.0
million and $7.9 million for fiscal 2003 and 2002, respectively.
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 28, 2003 the Company had $138.5 million of
long-term debt outstanding and $31.4 million of borrowing availability under its
revolving credit facility.
Cash proceeds from the sale of property, plant and equipment included
approximately $180 thousand related to the sale of special purpose and general
purpose machinery and equipment and approximately $600 thousand related to the
Company's sale of its owned facility in St. Clair Michigan. Proceeds from the
sale of the St. Clair facility approximated its net book value.
In August 2003, the Company received approximately $580 thousand from the sale
of 3.3 million shares of Sunningdale. The gain associated with the sale was $113
thousand, which has been included as a component of other expense. The Company
may not sell any of its remaining 49.8 million shares of Sunningdale until at
least January 2004.
Cash provided by operating activities in fiscal year 2003 was $27.4 million
compared to $16.4 million of cash provided by operating activities in fiscal
year 2002. The increase in cash provided by operating activities resulted
primarily from higher 2003 net earnings and the timing of a customer payment
related to the Company's fiscal 2002 year end. Approximately $15 million in
customer receivable payments were received in fiscal year 2003, within two days
after the Company ended its 2002 fiscal year.
Capital expenditures for fiscal year 2003 were $8.3 million compared to $6.7
million for fiscal year 2002. Fiscal 2003 capital expenditures include machinery
and equipment purchased to support the launch of new product and maintenance
capital expenditures throughout the remainder of the organization.
The Company believes its capital expenditures will be approximately $12 million
in the fiscal year ended September 2004. 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.
The following information summarizes the Company's significant contractual cash
obligations and other commercial commitments at September 28, 2003:
PAYMENTS DUE BY PERIOD (000'S)
------------------------------
LESS THAN 1
CONTRACTUAL OBLIGATIONS TOTAL YEAR 1-3 YEARS 4 - 5 YEARS AFTER 5 YEARS
----------------------- ----- ---- --------- ----------- -------------
Long Term Debt $ 138,521 $ 10,325 $ 15,466 $ 107,765 $ 4,965
Lines of Credit 11,194 11,194
Operating Leases 47,746 14,366 23,164 9,585 631
--------- --------- --------- --------- ---------
Total Contractual Cash Obligations $ 197,461 $ 24,691 $ 49,824 $ 117,350 $ 5,596
========= ========= ========= ========= =========
AMOUNT OF COMMITMENT EXPIRATION PER PERIOD (000'S)
--------------------------------------------------
OTHER COMMERCIAL TOTAL AMOUNTS LESS THAN 1
COMMITMENTS COMMITTED YEAR 1 - 3 YEARS OVER 5 YEARS
----------- --------- ---- ----------- ------------
Unused Lines of Credit $ 36,534 $ 36,534
Standby Letters of Credit 15,272 15,272
--------- ---------
Total Commercial Commitments $ 51,806 $ 51,806
========= =========
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
COMMODITY RISK
See discussion in Item 1 "Raw Materials."
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 28, 2003, the Company's net assets subject to foreign currency
translation risk is $3.6 million. The potential loss from a hypothetical 10%
adverse change in quoted foreign currency exchange rates would be approximately
$357 thousand.
As of September 29, 2002, the Company's net assets subject to foreign currency
translation risk was $1.5 million. The potential loss from a hypothetical 10%
adverse change in quoted foreign currency exchange rates would have been
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 fixed rate
of 5.45%. 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 28, 2003, the Company has recorded $4.2 million related to
revaluing this instrument on a mark-to-market basis. As of September 29, 2002,
the Company recorded $3.1 million related to revaluing this instrument on a
mark-to-market basis. The liability is classified within 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
(dollars in thousands).
AS OF SEPTEMBER 28, 2003
2004 2005 2006 2007 2008 Thereafter Total FMV
---- ---- ---- ---- ---- ---------- ----- ---
Fixed rate (maturity) - - - $106,400* $ 106,400 $106,400
Fixed rate % (average) 10.75% 10.75%
Variable rate (maturity) $ 10,325 $ 26,045 $ 615 $ 660 705 $ 4,965 $ 43,315 $ 43,315
Variable rate % (future rates) 3.45% 3.45% 3.45% 3.45% 3.45% 3.45% 3.45%
AS OF SEPTEMBER 29, 2002
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 15.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
Item 9a. Controls and Procedures
As of September 28, 2003, 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 reports 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 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 28, 2003 are as follows:
HAS SERVED
IN POSITION
NAME AGE POSITION SINCE
- ------------------------- --- -------- -----
Joe Balous............... 78 Co-Chairman of the Board 1985
Richard J. Nash*......... 59 Co-Chairman of the Board 1985
Alan C. Johnson*......... 55 President and Chief Executive Officer 2001
Gary E. Borushko......... 58 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 operation of the Company.
- On November 27, 2001, the Company's Board of Directors 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 2003.
SUMMARY COMPENSATION TABLE
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------------- ---- ----------- ----------- ------------ ------------
Richard J. Nash 2003 $ 2,378,222 $ 500,000 $ 25,006(1)(4) --
Co-Chairman 2002 $ 1,250,000 -- $ 49,898(4) --
2001 $ 1,779,166 $ 250,000 $ 30,645(4) $ 3,200(1)
Joe Balous 2003 $ 1,550,000 $ 500,000 $ 58,764(4) --
Co-Chairman 2002 $ 1,050,000 -- $ 28,872(4) --
2001 -- -- $ 1,588,251(2) --
Alan C. Johnson 2003 $ 460,800 -- $ 8,980(1)(4) --
President and Chief Executive Officer 2002 $ 391,648 -- -- --
2001 -- -- -- --
Gary E. Borushko 2003 $ 204,554 $ 200,000 $ 10,000(4) --
Chief Financial Officer 2002 $ 258,110 -- $ 20,000(4) --
2001 $ 260,427 $ 220,000 $ 25,000(4) --
Vincent P. Buscemi 2003 $ 190,700 $ 36,000 $ 72,690(3)(4) --
Group Vice President - Sales 2002 $ 190,635 -- $ 96,574(3)(4) --
2001 $ 187,500 $ 100,000 $ 107,306(3)(4) --
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 and
Related Stockholder Matters
All of the outstanding capital stock of the Company is owned beneficially
and equally by Messrs. Richard J. Nash and Joe Balous.
No securities are authorized for issuance under equity compensation plans.
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 2003, the Company paid rentals for the McAllen
manufacturing facility of approximately $300 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. Principal Accountant's Fees and Services.
Audit Fees: Fees for audit services totaled approximately $230,000 in 2003 and
approximately $233,000 in 2002, including fees associated with the annual audit
and the reviews of the Company's quarterly reports on Form 10-Q.
Audit-Related Fees: Fees for audit-related service totaled approximately $75,000
in 2003 and approximately $135,000 in 2002. Audit related services principally
include due diligence in connection with proposed or consummated transactions
and accounting consultations.
Tax Fees: Fees for tax services, including tax compliance, tax advice and tax
planning, totaled approximately $182,000 in 2003 and $154,000 in 2002.
Other Fees: There were no other fees for all other services not included above.
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. Report of independent auditors
Financial Statements
The following consolidated financial statements of LDM Technologies,
Inc. and subsidiaries are filed herewith:
Consolidated Balance Sheets at September 28, 2003 and September 29,
2002.
Consolidated Statements of Operations for each of the years in the
three-year period ended September 28, 2003.
Consolidated Statements of Stockholders' Equity for each of the years
in the three-year period ended September 28, 2003.
Consolidated Statements of Cash Flows for each of the years in the
three-year period ended September 28, 2003.
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 Code of Ethics
15 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
31.1 Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer 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
August 15, 2003, as to an initial public stock offering of the Company's
equity investee, Sunningdale Precision Industries Pte. Ltd.
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 11th day of
December, 2003.
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/ Bradley N. Frederick
-------------------------
Bradley 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
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 28, 2003 and September 29, 2002, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended September 28, 2003. 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 28, 2003 and September 29, 2002, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended September 28, 2003 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 adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets."
Troy, Michigan /s/ ERNST & YOUNG LLP
November 7, 2003
LDM Technologies, Inc.
Consolidated Balance Sheets
(in thousands, except share and per share data)
SEPTEMBER 28, SEPTEMBER 29,
2003 2002
------------- -------------
ASSETS
Current assets:
Cash $ 578 $ 932
Accounts receivable 71,580 77,151
Inventories 17,116 15,966
Available for sale securities 12,900
Mold costs 3,679 5,138
Prepaid expenses 2,417 2,101
Income taxes refundable 1,006
Deferred income taxes 1,916 3,433
------------- -------------
Total current assets 111,192 104,721
Net property, plant and equipment 78,039 91,497
Equity investments in affiliate 7,300
Goodwill 50,152 50,152
Debt issue costs, net of accumulated amortization of
$7,251 in 2003 and $6,072 in 2002 2,533 3,389
Other 305 428
------------- -------------
Total assets $ 242,221 $ 257,487
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 46,857 $ 54,714
Accrued liabilities 12,624 11,217
Accrued compensation 6,761 5,542
Accrued mold costs 5,963 8,644
Income taxes payable 78
Current maturities of long-term debt 10,325 11,305
------------- -------------
Total current liabilities 82,530 91,500
Lines of credit and revolving debt 11,194 20,079
Long-term debt due after one year 128,196 138,887
Deferred income taxes 4,482 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 12,315 4,503
Accumulated other comprehensive income 3,410
------------- -------------
Total stockholders' equity 15,819 4,597
------------- -------------
Total liabilities and stockholders' equity $ 242,221 $ 257,487
============= =============
See accompanying notes.
F2
LDM Technologies, Inc.
Consolidated Statements of Operations
(in thousands)
YEARS ENDED
----------------------------------------------
SEPTEMBER SEPTEMBER SEPTEMBER 30,
28, 2003 29, 2002 2001
----------------------------------------------
Net sales $ 425,016 $ 390,926 $ 390,239
Cost of sales 354,346 333,916 341,841
----------------------------------------------
Gross margin 70,670 57,010 48,398
Selling, general and administrative
expenses 42,011 37,137 46,255
Loss on sale of property, plant and equipment 817 1 73
Interest 14,748 15,810 17,642
Equity in losses (income) of affiliates, net (300) (1,250) 104
Gain on sale of LDM Germany (553)
International currency exchange (gains) losses (666) 476 (368)
Other, net 841 1,367 1,561
----------------------------------------------
57,451 53,541 64,714
----------------------------------------------
Income (loss) before income taxes 13,219 3,469 (16,316)
Provision (credit) for income taxes 5,407 1,668 (6,906)
----------------------------------------------
Net income (loss) $ 7,812 $ 1,801 $ (9,410)
==============================================
Effect of Adopting Financial Accounting Standard No. 142
Years Ended
---------------------------------------------------------
September 28, September 29, September 30,
2003 2002 2001
---------------------------------------------------------
Reported net income (loss) $ 7,812 $ 1,801 $ (9,410)
Add back: Goodwill amortization, net of
income taxes 3,036
---------------------------------------------------------
Adjusted net income (loss) $ 7,812 $ 1,801 $ (6,374)
=========================================================
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 24, 2000 600 $ 60 $ 94 $ 12,112 $ 1,734 $ 13,940
Comprehensive Loss:
Net loss for fiscal 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 fiscal 2002 1,801 1,801
---------------------------------------------------------------------------------
Balance at September 29, 2002 600 60 94 4,503 - 4,597
Comprehensive Income:
Net income for fiscal 2003 7,812 7,812
Change in value of available for
sale securities 3,410 3,410
-----------
Comprehensive income 11,222
---------------------------------------------------------------------------------
Balance at September 28, 2003 600 $ 60 $ 94 $ 12,315 $ 3,410 $ 15,819
=================================================================================
F4
LDM Technologies, Inc.
Consolidated Statements of Cash Flows
(in thousands)
YEARS ENDED
-----------------------------------------------
SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 30,
2003 2002 2001
-----------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 7,812 $ 1,801 $ (9,410)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 21,436 20,832 24,589
International currency exchange (gains) losses (666) 476 (368)
Equity in (income) losses of affiliates, net (300) (1,250) 104
Gain on sale of available for sale securities (113)
Gain on early repayment of notes (756)
Gain on sale of LDM Germany (553)
Loss on sale of property and equipment 817 1 73
Deferred income taxes 1,215 3,318 (5,726)
Changes in assets and liabilities
Accounts and notes receivable 5,570 (28,808) 23,749
Inventory and mold costs 309 15,165 (5,699)
Prepaid expenses (313) 1,318 (171)
Accounts payable, accrued liabilities and other (7,245) 2,564 620
Income taxes refundable/payable (1,084) 1,761 (612)
-----------------------------------------------
Net cash provided by operating activities 27,438 16,422 26,596
INVESTING ACTIVITIES
Additions to property, plant and equipment (8,291) (6,702) (20,512)
Deposits for assets to be leased 4,791
Proceeds from sale of available for sale securities 583
Proceeds from disposal of property and equipment 795 26 475
-----------------------------------------------
Net cash used for investing activities (6,913) (6,676) (15,246)
FINANCING ACTIVITIES
Proceeds from issuance/modification of long-term debt (net of issue/
modification costs of $323 in 2003, $198 in 2002, and $987 in 2001) (323) (198) 9,013
Payments on notes payable and long-term debt (11,671) (12,834) (6,221)
Net proceeds (repayments) from borrowings on lines of credit (8,885) 1,898 (16,462)
-----------------------------------------------
Net cash used in financing activities (20,879) (11,134) (13,670)
-----------------------------------------------
Net decrease in cash (354) (1,388) (2,320)
Cash at beginning of period 932 2,320 4,640
-----------------------------------------------
Cash at end of period $ 578 $ 932 $ 2,320
===============================================
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. For the years ended September 29, 2002 and September 28, 2003,
the only remaining operating consolidated entities are LDM Technologies, Inc.
and LDM Canada.
The Company also has less than 50% ownership interests in DBM Technologies, LLC
("DBM") and Sunningdale Precision Industries Pte. Ltd ("Sunningdale"). See Note
12 to the financial statements for additional information on these investments.
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 28, 2003 and September 29, 2002
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.
F6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
GOODWILL
Goodwill totaled $50.2 million at September 28, 2003 and September 29, 2002 and
represented approximately 20.7% and 19.5% of total assets, respectively. 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 adopted
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 years ended September 29,
2002 and September 28, 2003. 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,
exchange differences arising on translation have been included in operations.
Through 2001, the then existing 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 $68, $79 and $1,319 for 2003, 2002 and 2001,
respectively.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The following is a roll-forward of the Company's allowance for doubtful
accounts:
2003 2002 2001
---- ---- ----
Beginning allowance for doubtful accounts $ 534 $ 574 $ 1,210
Uncollectible accounts written off (15) (40) (636)
----------------------------------------------
Ending allowance for doubtful accounts $ 519 $ 534 $ 574
==============================================
The Company estimates its allowance for doubtful accounts based on specific
identification of aged receivables and a general reserve based on receivables
aged past their due date. In addition, this estimated allowance is based on
management's evaluation of customer productivity reimbursement programs and
historical experience.
Accounts are written off when all possible efforts for collection have been
exhausted without success.
F7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
INVENTORIES
Inventories are stated at the lower of cost or market using the first-in,
first-out method. Inventories at September 28, 2003 and September 29, 2002
consist of the following:
2003 2002
------------- -------------
Raw materials and supplies $ 8,158 $ 8,424
Work-in-process 1,513 1,664
Finished goods 7,445 5,878
-------------------------------
Total $ 17,116 $ 15,966
===============================
PREPRODUCTION COSTS
Preproduction design and development costs are expensed as incurred except in
circumstances when contractual reimbursement arrangements exist. All amounts at
September 28, 2003 and September 29, 2002 included in the balance sheet caption
"Mold costs" are customer owned pursuant to agreements that provide for
contractual reimbursement.
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
Shipping and handling costs are included as a component of 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 28, 2003,
the average of the bid and asking price was 100 resulting in fair value
approximating 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.
F8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
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 fixed rate of 5.45%.
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 up-front 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 $4,164 at September 28, 2003 which is included as
a component of accrued liabilities. The change in fair value for the year ended
September 28, 2003, September 29, 2002 and September 30, 2001 resulted in an
expense of $994 and $1,641 and $2,045, respectively, which has been included as
a component of other income (expense), net.
PENDING ACCOUNTING PRONOUNCEMENTS
During fiscal year 2003, the Financial Accounting Standards Board ("FASB")
issued FASB Statement 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity, and FASB Interpretation 46,
Consolidation of Variable Interest Entities.
FASB Statement 150 requires that financial instruments, including common stock,
that are issued in the form of shares that are mandatorily redeemable on a fixed
or determinable date or upon an event certain to occur be classified as
liabilities. FASB Statement 150 is required to be adopted in the second quarter
of fiscal 2004 by the Company. As described in Note 11, upon the death of either
of the Company's shareholders, the Company is required to purchase the stock of
such shareholder. Under the current capital structure, upon adoption of FASB
Statement 150, the Company's stockholders' equity would be reclassed within the
liability section of the balance sheet as "shares subject to mandatory
redemption."
F9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
FASB Interpretation 46 requires the consolidation of entities in which an
enterprise absorbs a majority of the entity's expected losses, receives a
majority of the entity's expected residual returns, or both, as a result of
ownership or contractual or other financial interests in the entity. Currently,
entities are generally consolidated by an enterprise when the enterprise has a
controlling financial interest through ownership of a majority voting interest
in the entity.
For transactions in place on January 31, 2003, FASB Interpretation 46 is
required to be adopted by the Company no later than the end of fiscal 2004. For
transactions entered into after January 31, 2003, FASB Interpretation 46 must be
applied immediately. The Company is in the process of evaluating the effects of
FASB Interpretation 46. Based upon the in process review, the Company believes
that its existing lease with a related party for the McAllen facility (see Note
8) and its 49% interest in and subordinated note from DBM (Note 12) are within
the scope of FASB Interpretation 46. As currently structured, such entities
likely require consolidation by the Company upon adoption of FASB Interpretation
46. As of September 28, 2003, DBM has third party assets and liabilities of
approximately $26.1 million and $28.0 million, respectively. As of September 28,
2003, the Company's non-cancellable lease payments for the McAllen facility
approximate $2.1 million.
For transactions entered into subsequent to January 31, 2003, the effects of
FASB Interpretation 46 are immaterial.
2. ACQUISITION 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.
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.
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 meets the aggregation criteria of FAS 131, and
therefore has a single operating segment, automotive components.
The following provides a summary of selected financial information by geographic
area:
SEPTEMBER 28, 2003
-------------------------------------------------------
Revenues (a) Long-Lived Assets Net income (loss)
-------------------------------------------------------
United States $ 390,602 $ 69,893 $ 8,715
LDM Canada 34,414 8,146 (903)
-------------------------------------------------------
Consolidated total $ 425,016 $ 78,039 $ 7,812
=======================================================
F10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
SEPTEMBER 29, 2002
-------------------------------------------------------
Revenues (a) Long-Lived Assets Net income (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
-------------------------------------------------------
Revenues (a) Long-Lived 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)
=======================================================
(a) Revenues are attributed to countries based on point of manufacturing.
During the years ended September 2003, 2002, and 2001, approximately 98% of
consolidated sales were to customers in the automotive industry. Following is a
summary of the four largest customers measured by consolidated net sales for
each fiscal year end:
2003 2002 2001
----------------------------------------------
Ford Motor Company $ 114,243 $ 136,824 $ 128,901
General Motors Corporation 159,157 117,278 135,504
Visteon 44,420 39,093 36,829
DaimlerChrysler 35,773 22,478 20,841
4. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
2003 2002 2001
----------------------------------------------
Interest paid $ 13,593 $ 14,791 $ 17,625
Income taxes paid (refunded) 5,267 (3,411) (667)
Interest capitalized 73 243 737
5. PROPERTY, PLANT AND EQUIPMENT
At September 28, 2003 and September 29, 2002, property, plant and equipment
consists of the following:
2003 2002
------------- -------------
Land, buildings and improvements $ 55,200 $ 55,357
Machinery and equipment 142,551 142,300
Transportation equipment 2,700 2,729
Furniture and fixtures 5,968 5,950
Construction in process 4,019 273
------------- -------------
Total, at cost 210,438 206,609
Less accumulated depreciation (132,399) (115,112)
------------- -------------
Net property, plant and equipment $ 78,039 $ 91,497
============= =============
Depreciation expense was $20,137, $19,704, and $18,870 for 2003, 2002 and 2001,
respectively.
F11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
During fiscal 2003, the Company wrote off approximately $600 of special purpose
equipment due to the loss of future sales caused by the elimination of certain
parts it produced. The parts elimination was caused by a design change initiated
by a customer. Annual sales related to the eliminated product approximated $5
million in fiscal 2002.
Due to recent production cuts announced by its customers and to eliminate future
storage costs, the Company also, during fiscal 2003, disposed of certain
machinery and equipment stored in offsite facilities. The loss on disposal of
this general purpose equipment approximated $200.
The Company received proceeds of approximately $180 related to the disposition
of special purpose and general purpose equipment described above.
The Company also received cash proceeds in fiscal 2003 of approximately $600
related to the sale of its owned facility in St. Clair, Michigan. Proceeds from
the sale of the St. Clair facility approximated net book value.
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
additional 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.
The Company had borrowings outstanding under the Senior Credit Facility at
September 28, 2003 and September 29, 2002 of $11,194 and $20,079, respectively.
Additional borrowings available under the Senior Credit Facility were $31,396
and $31,486 at September 28, 2003 and September 29, 2002, respectively. At
September 28, 2003, 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
28, 2003 and September 29, 2002 was 3.45% and 4.27%, 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 28, 2003 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
Statements of Operations.
F12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
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 $6,820 at September
28, 2003. 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 $1,250 at September 28, 2003.
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 28, 2003, 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).
Long-term debt at September 28, 2003 and September 29, 2002 consists of the
following:
2003 2002
---- ----
Senior Subordinated Notes due 2007. $ 106,400 $ 106,400
Term Loan Facility, principal payable in monthly
installments of $649, plus interest at Base or
LIBOR plus margin (3.75% at September 28,
2003). Balance repayable January 2005. 24,051 35,202
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 (1.22% at September 28, 2003).
Borrowings are collateralized by letter of credit
against the Senior Revolving Credit Facility 6,820 7,180
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 (0.82% at September 28, 2003),
collaterized by a letter of credit against
the Senior Revolving Credit Facility 1,250 1,410
------------- -------------
Total 138,521 150,192
Current maturities of long-term debt (10,325) (11,305)
------------- -------------
Long-term debt due after one year $ 128,196 $ 138,887
============= =============
F13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
Annual maturities of long-term debt are as follows:
FISCAL YEAR
2004 $ 10,325
2005 14,851
2006 615
2007 107,060
2008 705
Thereafter 4,965
------------
Total $ 138,521
============
Debt issue costs are amortized over the term of the associated debt.
8. OTHER RELATED PARTY TRANSACTIONS
The Company had a consulting arrangement with a company owned by one of its
shareholders in which payments were made for consulting services rendered.
Amounts paid for these services are included in selling, general and
administrative expenses and were $1,588 for the fiscal year ended September 30,
2001. In fiscal years 2003 and 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 2003, the Company paid rentals for the McAllen manufacturing
facility of approximately $300. 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 28, 2003,
September 29, 2002, and September 30, 2001 is comprised of the following:
2003 2002 2001
----------------------------------------------
Domestic:
Federal:
Current $ 3,778 $ (1,619) $ (976)
Deferred 1,096 3,185 (4,125)
----------------------------------------------
4,874 1,566 (5,101)
State and local:
Current 405 (31) (305)
Deferred 128 133 (485)
----------------------------------------------
533 102 (790)
Foreign:
Current 101
Deferred (1,116)
----------------------------------------------
(1,015)
----------------------------------------------
Total income tax provision $ 5,407 $ 1,668 $ (6,906)
==============================================
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 28, 2003 and September 29, 2002 deferred tax assets and liabilities
are comprised of the following:
2003 2002
-------------------------------
Deferred tax assets:
Loss carryovers $ 1,864 $ 1,332
Alternative minimum tax credits 1,234 1,836
Capital loss carryovers 189
Goodwill 924
Accounts receivable 197 204
Inventory 778 695
Other accrued liabilities 2,233 1,566
Employee benefits 1,074 891
-------------------------------
Total deferred tax assets 7,380 7,637
Less valuation allowances (1,863) (1,476)
-------------------------------
Total net deferred tax asset 5,517 6,161
Deferred tax liabilities:
Property, plant and equipment 4,762 4,538
Available for sale securities 2,360
Goodwill 761
Investment in affiliates 200 614
-------------------------------
Total deferred tax liabilities 8,083 5,152
-------------------------------
Net deferred tax asset (liability) $ (2,566) $ 1,009
===============================
As of September 30, 2001, the valuation allowance for deferred tax assets was
$978.
As of September 28, 2003 and September 29, 2002, the classification of net
deferred income taxes is summarized as follows:
SEPTEMBER 28, 2003
CURRENT LONG TERM TOTAL
------- --------- -----
Deferred tax assets $ 4,296 $ 1,221 $ 5,517
Deferred tax liabilities (2,380) (5,703) (8,083)
----------------------------------------------
Net deferred tax assets (liabilities) $ 1,916 $ (4,482) $ (2,566)
==============================================
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
==============================================
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 28, SEPTEMBER 29, SEPTEMBER 30,
2003 2002 2001
------------- ------------- -------------
Tax at federal statutory rate of 34% $ 4,494 $ 1,179 $ (5,560)
State and local taxes, net of
federal tax effect 267 67 (201)
Nondeductible expenses 475 531 765
Differences related to sale of LDM
Germany (859)
Foreign taxes (387) (498) (1,649)
Deferred tax valuation allowance 387 498 634
Loss of foreign tax credits 767
Recognition of foreign generated
pass-through differences (802)
Other, net 171 (74) (36)
-----------------------------------------------
Provision for income taxes $ 5,407 $ 1,668 $ (6,906)
===============================================
For Canadian income tax purposes, approximately $4,407 of net operating losses
are available at September 28, 2003 for carryover against taxable income in
future years. These carryovers expire at various dates through 2009. As of
September 28, 2003 a valuation allowance of $1,674 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 $633 and $368 in 2003 and
2001, respectively. The Company suspended its 50% match of employee contribution
in mid-2001 to mitigate the effects of a softening automotive market. Management
reinstated the Company match in fiscal year 2003.
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 sales. 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. Certain of these leases contain renewal or purchase options. Rental
expense, including short-term cancelable leases, approximated $13,786, $13,295
and $11,653 for the years ended September 28, 2003, September 29, 2002 and
September 30, 2001, respectively. Future commitments under noncancelable
operating leases are as follows:
FISCAL YEAR
-----------
2004 $ 14,366
2005 12,430
2006 10,734
2007 5,848
2008 3,584
Thereafter 784
-----------
Total $ 47,746
===========
F16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
STOCK REDEMPTION AGREEMENT
The Company and its two shareholders are parties to a binding stock redemption
agreement which may be terminated by mutual agreement of the parties. 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 million, subject to subsequent adjustment. This amount
payable includes the proceeds of the life insurance policies owned by the
Company on each 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
one shareholder and $25.0 million on the life of the other shareholder. 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.
CONTINGENCIES
Environmental Matters and Other Contingencies
There are currently no material environmental issues related to the Company of
which management is aware.
The Company is periodically subject to audit examinations by the Internal
Revenue Service.
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 AND AVAILABLE FOR SALE SECURITIES
Sunningdale is a Singapore based injection molder of which the Company owned
22%. Sunningdale had been accounted for under the equity method. On July 31,
2003, Sunningdale completed an initial public offering on the Singapore
Securities Exchange. Additional shares issued as part of the public offering
caused LDM's equity holdings to be diluted from ownership of 22% to 16% of
Sunningdale. LDM has no intention of increasing its equity position in
Sunningdale above that currently held. As a result of these changes, LDM does
not exercise significant influence over Sunningdale's operating and financial
policies. Accordingly, commencing July 31, 2003, this investment in Sunningdale
is treated as an available for sale security, with unrealized gains or losses in
market value recorded as a component of other comprehensive income in LDM's
stockholders' equity. As of September 28, 2003, the unrealized pretax gain on
the available for sale security was $5,770 ($3,410 net of tax).
In August 2003, the Company received approximately $583 from the sale of 3.3
million shares of Sunningdale. The gain associated with this sale was $113,
which is included as a component of other expense. The Company may not sell any
of its remaining 49.8 million shares of Sunningdale until at least January 2004.
F17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
DBM Technologies, LLC ("DBM") is a minority owned blowmolding concern formed
December 31, 1998, of which the Company owns 49%. 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 $1,358 for
2001 which has 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 years
2003 and 2002 due to DBM's continued equity deficit.
The Company also has a subordinated note receivable from DBM aggregating an
initial December 1999 principal balance of $5.6 million. The note receivable
from DBM bears interest at 9.5% and is payable in equal quarterly installments
over five years. As of September 28, 2003, no such amounts have been paid. No
interest income is being recognized on this note.
Required summarized financial information on the Company's significant equity
method investments, Sunningdale (for 2002 and 2001) and DBM (for 2001), is as
follows:
2002
Sunningdale
-----------
Current assets $ 33,818
Noncurrent assets 15,659
Current liabilities 11,378
Noncurrent liabilities 5,153
Minority interest 159
Net sales 38,826
Earnings before interest and taxes 8,520
Net income 5,683
Percent of income/loss recognized 22%
Amount included in Equity in income/losses of affiliates, net $ 1,250
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 income/losses of affiliates, net $ 1,254 $ (1,358)
** limited to investments in and receivables from DBM. Equity income in DBM
was not recorded by the Company in fiscal years 2003 and 2002 due to DBM's
continued equity deficit. See also Note 2.
As of September 29, 2003, the cumulative amount of the equity earnings
recognized in operations and included in retained earnings was $6,863 for
Sunningdale and ($7,367) for DBM.
No other equity method investment was significant for 2002 or 2003.
F18
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.
Subsequent to September 30, 2001, 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.
F19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN 000'S, UNLESS OTHERWISE NOTED)
13. SUPPLEMENTAL GUARANTOR INFORMATION (CONTINUED)
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 28, 2003
LDM Consolidating
Technologies, Inc. LDM Canada Entries Consolidated
------------------ -------------- -------------- --------------
ASSETS
Current assets:
Cash $ 112 $ 466 $ 578
Accounts receivable 63,690 7,890 71,580
Inventories 15,305 1,811 17,116
Available for sale securities 12,900 12,900
Mold costs 3,653 26 3,679
Prepaid expenses 2,312 105 2,417
Income taxes refundable 1,006 1,006
Deferred income taxes 1,861 55 1,916
------------------ -------------- -------------- --------------
Total current assets 100,839 10,353 111,192
Net property, plant and equipment 69,893 8,146 78,039
Investment in subsidiaries and affiliates 1,685 $ (1,685)
Note receivable affiliates 10,377 45 (10,422)
Goodwill 50,152 50,152
Debt issue costs 2,533 2,533
Other 305 305
------------------ -------------- -------------- --------------
$ 235,784 $ 18,544 $ (12,107) $ 242,221
================== ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,011 $ 6,200 $ (354) $ 46,857
Accrued liabilities 12,380 244 12,624
Accrued compensation 6,454 307 6,761
Accrued mold costs 5,923 40 5,963
Current maturities of long-term debt 10,325 10,325
------------------ -------------- -------------- --------------
Total current liabilities 76,093 6,791 (354) 82,530
Lines of credit and revolving debt 11,194 11,194
Long-term debt due after one year 128,196 10,068 (10,068) 128,196
Deferred income taxes 4,482 4,482
Stockholders' equity:
Common stock 5,850 (5,850)
Additional paid-in capital 94 94
Retained earnings (accumulated deficit) 12,315 (4,165) 4,165 12,315
Accumulated other comprehensive income 3,410 3,410
------------------ -------------- -------------- --------------
Total stockholders' equity 15,819 1,685 (1,685) 15,819
------------------ -------------- -------------- --------------
Total liabilities and stockholders' equity $ 235,784 $ 18,544 $ (12,107) $ 242,221
================== ============== ============== ==============
F20
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 9,887 $ (2,587) 7,300
affiliates
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 11,217 11,217
Accrued compensation 5,290 252 5,542
Accrued mold costs 8,644 8,644
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 (accumulated
deficit) 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
=============== ============== =============== ===========
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 28, 2003
UNCONSOLIDATED
-------------------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA ENTRIES CONSOLIDATED
-------------- --------------- ------------- -------------
Net sales $ 390,602 $ 34,414 $425,016
Cost of sales 319,767 34,579 354,346
-------------- --------------- ------- --------
Gross margin 70,835 (165) 70,670
Selling, general and
administrative expenses 41,723 288 42,011
Loss on sale of property,
plant and equipment 817 817
Interest 14,616 1,144 $(1,012) 14,748
Equity in losses (income)
of subsidiaries and
affiliates, net 603 (903) (300)
International currency
exchange gains (666) (666)
Other, net (143) (28) 1,012 841
-------------- --------------- ------- --------
57,616 738 (903) 57,451
-------------- --------------- ------- --------
Income (loss) before
income taxes 13,219 (903) 903 13,219
Provision for income
taxes 5,407 5,407
-------------- --------------- ------- --------
Net income (loss) $ 7,812 $ (903) $ 903 $ 7,812
============== =============== ======= ========
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 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
Loss on sale of property,
plant and equipment 1 1
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 432 935 1,367
-------------- --------------- ------- --------
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 income (loss) $ 1,801 $ (1,465) $ 1,465 $ 1,801
============== =============== ======= ========
F23
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 CONSOLIDATING
INC. CANADA LDM 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
Loss on sale of property,
plant and equipment 73 73
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 656 (62) (92) 1,059 1,561
-------------- --------- ------- -------- --------
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)
============== ========= ======= ======== ========
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 28, 2003
UNCONSOLIDATED
------------------------------------
LDM
TECHNOLOGIES, LDM CONSOLIDATING
INC. CANADA ENTRIES CONSOLIDATED
--------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 7,812 $ (903) $ 903 $ 7,812
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Equity in subsidiaries' losses 903 (903)
Equity in losses of
affiliates, net (300) (300)
Depreciation and amortization 18,559 2,877 21,436
Currency exchange gain (666) (666)
Gain on sale of available for
sale securities (113) (113)
Loss on sale of property,
plant and equipment 817 817
Deferred income taxes 1,223 (8) 1,215
Changes in assets and liabilities:
Accounts and notes
receivable 8,652 (3,082) 5,570
Inventory and mold costs (143) 452 309
Prepaid expenses (222) (91) (313)
Accounts payable and
accrued liabilities (8,587) 1,522 (180) (7,245)
Income taxes payable (1,084) (1,084)
--------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 27,517 101 (180) 27,438
INVESTING ACTIVITIES
Additions to property, plant and
equipment (7,452) (839) (8,291)
Proceeds from sale of available for
sale securities 583 583
Proceeds from disposal of property
and equipment 795 795
Disbursements to affiliates (1,135) 1,135
Payments from affiliates 955 (955)
--------------------------------------------------------------------------
Net cash used for investing
activities (7,209) 116 180 (6,913)
FINANCING ACTIVITIES
Debt modification costs (323) (323)
Payments on long-term debt (11,671) (11,671)
Net proceeds from Line of Credit/
Revolver (8,885) (8,885)
--------------------------------------------------------------------------
Net cash used by financing
activities (20,879) (20,879)
--------------------------------------------------------------------------
Net increase (decrease) in cash (571) 217 (354)
Cash at beginning of period 683 249 932
--------------------------------------------------------------------------
Cash at end of period $ 112 $ 466 $ $ 578
==========================================================================
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 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 period 23 2,297 2,320
--------------------------------------------------------------------------
Cash at end of period $ 683 $ 249 $ $ 932
==========================================================================
F26
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 period 29 2,622 1,989 4,640
----------------------------------------------------------------------------
Cash at end of period $ 23 $ 2,297 $ $ $ 2,320
============================================================================
F27
EXHIBIT INDEX
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 Code of Ethics
15 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
31.1 Certification of the Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(a) Reports on Form 8-K. The Company filed a Current Report on Form 8-K dated
August 15, 2003, as to an initial public stock offering of the Company's
equity investee, Sunningdale Precision Industries Pte. Ltd.