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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1997
REGISTRATION NO. 333-29727
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VIASYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 36720 43-1777252
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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DAVID M. SINDELAR
CHIEF FINANCIAL OFFICER
101 SOUTH HANLEY ROAD, SUITE 400
ST. LOUIS, MISSOURI 63105
(314) 727-2087
(Name, address, including zip code, and telephone number, including
area code, of principal executive offices and agent for service)
Copies to:
JEREMY W. DICKENS
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT, SUITE 1300
DALLAS, TEXAS 75201
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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VIASYSTEMS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING THE LOCATION IN
THE PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-1
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<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
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1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................ Cover Page of Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges.... Summary; Summary -- The Company; Risk Factors;
Selected Financial Data
4. Use of Proceeds......................... Use of Proceeds
5. Determination of Offering Price......... Not Applicable
6. Dilution................................ Not Applicable
7. Selling Security Holders................ Not Applicable
8. Plan of Distribution.................... Front Cover Page of Prospectus; Summary; The Exchange
Offer and Plan of Distribution
9. Description of Securities to be
Registered............................ Description of the New Notes
10. Interests of Named Experts and Counsel.. Not Applicable
11. Information with Respect to the
Registrant............................ Cover Page of Registration Statement; Certain
Definitions, Industry Data and Financial
Information; Exchange Rates; Summary; Risk Factors;
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of Results of
Operations and Financial Condition; Business;
Management; Security Ownership of Certain
Beneficial Owners; Certain Transactions;
Description of Senior Credit Facilities; The
Exchange Offer; Description of the New Notes; Legal
Matters and Experts
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... Not Applicable
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1997
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OFFER TO EXCHANGE ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007
FOR
9 3/4% SENIOR SUBORDINATED NOTES DUE 2007 VIASYSTEMS, INC.
VIASYSTEMS, INC. [LOGO]
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Viasystems, Inc., a Delaware corporation (the "Company") hereby offers, upon the
terms and subject to the conditions set forth in this Prospectus and the letter
of transmittal accompanying this Prospectus (the "Letter of Transmittal," which
together constitute the "Exchange Offer"), to exchange $1,000 principal amount
of 9 3/4% Senior Subordinated Notes due 2007 (the "New Notes") issued by the
Company for each $1,000 principal amount of 9 3/4% Senior Subordinated Notes due
2007 (the "Old Notes") issued by the Company, of which an aggregate principal
amount of $400.0 million is outstanding. The form and terms of the New Notes are
identical to the form and terms of the Old Notes except that the New Notes have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and will not bear any legends restricting their transfer. The New Notes
will evidence the same debt as the Old Notes and will be issued pursuant to, and
entitled to the benefits of, the Indenture (as defined) governing the Old Notes.
The Exchange Offer is being made in order to satisfy certain contractual
obligations of the Company. See "The Exchange Offer" and "Description of New
Notes." The New Notes and the Old Notes are sometimes collectively referred to
herein as the "Notes".
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SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NEW NOTES.
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Interest on the New Notes is payable semi-annually on June 1 and December 1 of
each year, commencing on December 1, 1997. The New Notes will mature on June 1,
2007. Except as described below, the Company may not redeem the New Notes prior
to June 1, 2002. On and after such date, the Company may redeem the New Notes,
in whole or in part, at any time at the redemption prices set forth herein,
together with accrued and unpaid interest, if any, to the date of redemption. In
addition, at any time and from time to time prior to June 1, 2000, the Company
may, subject to certain requirements, redeem up to $140.0 million of the
aggregate principal amount of the New Notes with the net cash proceeds received
from one or more Equity Offerings (as defined), so long as a Public Market (as
defined) exists at the time of such redemption, at a redemption price equal to
109.75% of the principal amount to be redeemed, together with accrued and unpaid
interest, if any, to the date of redemption, provided that at least $200.0
million of the aggregate principal amount of New Notes remains outstanding
immediately after each such redemption. The New Notes will not be subject to any
sinking fund requirements. Upon the occurrence of a Change of Control (as
defined), (i) the Company will have the option, at any time on or prior to June
1, 2002, to redeem the New Notes, in whole but not in part, at a redemption
price equal to 100% of the principal amount thereof plus the Applicable Premium
(as defined), together with accrued and unpaid interest, if any, to the date of
redemption, and (ii) if the Company does not so redeem the New Notes or if such
Change of Control occurs after June 1, 2002, the Company will be required to
make an offer to repurchase the New Notes at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of repurchase. See "Description of New Notes."
The New Notes will be unsecured and will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Company. The New Notes will rank
pari passu with any future Senior Subordinated Indebtedness (as defined) of the
Company and will rank senior to all Subordinated Indebtedness (as defined) of
the Company. The Indenture under which the New Notes will be issued (the
"Indenture") will permit the Company and its Restricted Subsidiaries (as
defined) to incur additional indebtedness, including Senior Indebtedness,
subject to certain limitations. See "Description of New Notes." As of June 30,
1997, the aggregate principal amount of the Company's outstanding Senior
Indebtedness was approximately $484.8 million (excluding unused commitments) and
the Company had no Senior Subordinated Indebtedness, other than the New Notes,
and no Subordinated Indebtedness outstanding. See "Description of New
Notes -- Ranking and Subordination." At June 30, 1997, the New Notes effectively
ranked junior to approximately $680.7 million of accrued liabilities and
obligations of the Company's consolidated subsidiaries, including borrowings
under and guarantees in respect of the Senior Credit Facilities. See
"Description of New Notes -- Ranking and Subordination."
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The Company will accept for exchange any and all Old Notes validly tendered and
not withdrawn prior to 5:00 p.m., New York City time, on , 1997,
unless extended (as so extended, such time and date being the "Expiration
Date"). Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes pursuant to the Exchange Offer, where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Company
has agreed, for a period of 90 days after the Expiration Date, to make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
No public market existed for the Old Notes before the Exchange Offer. The
Company currently does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system, and no active public market for the New Notes is currently anticipated.
The Company will pay all the expenses incident to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange pursuant to the Exchange Offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
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AVAILABLE INFORMATION
As a result of the filing of its Registration Statement with the Commission
on Form S-1 under the Securities Act, with respect to the New Notes (the
"Registration Statement"), the Company will become subject to the informational
requirements of the Exchange Act, and in accordance therewith file reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information may be inspected and copied at
the public reference facilities of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60611, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
also be obtained at prescribed rates by writing to the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which have been omitted pursuant to the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document set forth all material elements of such
documents, but are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is hereby made to such exhibit for a more complete description of the
matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. Copies of the Registration Statement and the
exhibits thereto are on file with the Commission and may be examined without
charge at the public reference facilities of the Commission described above.
Copies of such materials can also be obtained at prescribed rates by writing to
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The reports, proxy statements and other
information may also be obtained from the web site that the Commission maintains
at http://www.sec.gov.
The Company is required by the Indenture to furnish the holders of the New
Notes with copies of the annual reports and of the information, documents and
other reports specified in Sections 13 and 15(d) of the Exchange Act, as long as
any New Notes are outstanding.
i
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CERTAIN DEFINITIONS AND INDUSTRY DATA
As used in this Prospectus, unless the context requires otherwise, (i)
"Viasystems Group" means Viasystems Group, Inc., which became the Company's
corporate parent in April 1997; (ii) "Circo Craft" means Circo Craft Co. Inc.
and its subsidiary, which Viasystems Group acquired in October 1996 and
contributed to the Company in April 1997; (iii) "Viasystems Technologies" means
Viasystems Technologies Corp. (which acquired substantially all of the assets of
the Interconnection Technologies Unit of the Microelectronics Group of Lucent
Technologies Inc. in December 1996), which Viasystems Group contributed to the
Company in April 1997; (iv) "Forward Group" means Forward Group PLC and its
subsidiaries, which Viasystems Group acquired and contributed to the Company in
April 1997; (v) "Chips" means Interconnection Systems (Holdings) Limited ("ISL")
and its subsidiaries, which were acquired by Chips Holdings, Inc. in April 1997
and acquired by the Company concurrently with the consummation of the Original
Offering; and (vi) the "Company" means Viasystems, Inc., a wholly-owned
subsidiary of Viasystems Group, and the businesses formerly conducted by Circo
Craft, Viasystems Technologies, Forward Group, Chips and any of their
predecessors. Each of Viasystems Group, Circo Craft, Viasystems Technologies,
Forward Group, and Chips are predecessors to Viasystems, Inc.
The Company relies on and refers to information it has received from
various industry analysts regarding the markets for its principal products,
printed circuit boards ("PCBs") and backpanel assemblies ("backpanels"). Such
information was available from a consistent source only for the United States
and European PCB markets and the North American and European backpanel markets.
ii
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
herein to the New Notes following the consummation of the Exchange Offer assume
that all outstanding Old Notes are tendered and exchanged for New Notes pursuant
to the Exchange Offer.
THE COMPANY
GENERAL
Management believes that the Company is the second largest manufacturer and
marketer of printed circuit boards ("PCBs"), and one of the largest
manufacturers and marketers of backpanel assemblies ("backpanels"), in the
world. PCBs are the basic platforms used to interconnect microprocessors,
integrated circuits and other components essential to the functioning of
virtually all electronic systems, ranging from sophisticated computers and
industrial products to basic household appliances. Backpanels are used in
electronic systems to distribute and ground power, to connect PCBs, power
supplies and other elements, and to relay information into and out of electronic
systems. The Company currently has 16 manufacturing facilities, strategically
located in North America, Europe, and South Africa.
The Company's principal executive offices are located at 101 South Hanley
Road, Suite 400, St. Louis, Missouri 63105 and its telephone number is (314)
727-2087.
OWNERSHIP AND MANAGEMENT
Hicks Must, Tate & Furst, Incorporated ("Hicks Muse") and Mills & Partners,
Inc. ("Mills & Partners") formed Viasystems Group in August 1996 to make
strategic acquisitions of PCB manufacturers and backpanel assemblers and to
integrate those acquisitions into a global enterprise that is the preferred
manufacturer and marketer of complex PCBs and backpanels.
Hicks Muse is a private investment firm with offices in Dallas, New York,
St. Louis and Mexico City that specializes in leveraged acquisitions,
recapitalizations and other principal investing activities.
With respect to the Company, Hicks Muse is combining its financial
expertise with the operating management experience of Mills & Partners.
Organized in 1985 by James N. Mills, Mills & Partners consists of a group of
senior operating executives who manage a portfolio of companies in a variety of
industries. Mills & Partners and Hicks Muse have established an exclusive
relationship to pursue leveraged acquisitions of diversified commercial and
industrial companies that Mills & Partners will manage.
RECENT HISTORY
In October 1996, Viasystems Group completed the acquisition of Circo Craft,
a rigid PCB manufacturer located in Canada, for a cash purchase price of
approximately $129.9 million. In connection with that transaction, Hicks Muse
and certain affiliates invested approximately $68.0 million in the common stock
of Viasystems Group.
In December 1996, Viasystems Technologies, a wholly owned subsidiary of
Viasystems Group, acquired substantially all the assets of the Interconnection
Technologies Unit of the Microelectronics Group (the "Lucent Division") of
Lucent Technologies, a rigid PCB manufacturer and backpanel assembler located in
the United States, for cash consideration of approximately $170.0 million, plus
the issuance of $30.0 million of preferred stock to Lucent Technologies. In
connection with that transaction, Hicks Muse and its affiliates invested
approximately $7.1 million of additional equity in Viasystems Group, consisting
entirely of preferred stock. In addition, simultaneously with the acquisition of
the Lucent Division, Hicks Muse and certain affiliates exchanged approximately
$38.0 million of the Viasystems Group common stock previously issued to them for
$38.0 million of
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Viasystems Group's preferred stock. The combination of Circo Craft and the
former Lucent Division created one of the largest independent manufacturers of
PCBs and backpanels in North America.
In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid
PCB manufacturer located in the United Kingdom, for a purchase price of
approximately $236.3 million (including the issuance of loan notes in the
principal amount of approximately $23.9 million to certain former shareholders
of the Forward Group (the "Forward Group Loan Notes")), which was funded with
$216.0 million of borrowings under a tender facility (the "Tender Facility") and
the proceeds from the issuance to Hicks Muse of $40.0 million of the preferred
stock of the acquiring entity. Subsequently, Viasystems Group acquired Forward
Group for cost, consisting of the assumption of the Tender Facility and the
Forward Group Loan Notes. In consideration for Hicks Muse's transfer of Forward
Group to Viasystems Group, Viasystems Group issued to Hicks Muse and certain of
its affiliates $40.0 million of Viasystems Group's preferred stock. Concurrently
with that transaction, Viasystems Group organized the Company as its direct
subsidiary and contributed to it the capital stock of Circo Craft, Viasystems
Technologies and Forward Group. The Company applied the proceeds from a
subordinated credit facility (the "Subordinated Credit Facility") to repay the
Tender Facility and to repay $20.0 million of existing indebtedness.
In April 1997, an affiliate of Hicks Muse ("Chips Holdings") acquired
Interconnection Systems (Holdings) Limited, a rigid PCB manufacturer located in
the United Kingdom (the "Chips Acquisition"). In connection with that
transaction, Hicks Muse and its affiliates invested $140.0 million in the equity
capital of Chips Holdings. Concurrently with the consummation of the Original
Offering, Viasystems Group acquired Chips Holdings (the "Chips Merger") in
consideration for the issuance to Hicks Muse and certain affiliates of
Viasystems Group common stock valued at $140.0 million. In connection with the
Chips Merger, Viasystems Group assumed approximately $437.5 million of loan
notes incurred to finance the Chips Acquisition (the "Chips Loan Notes" and,
together with the Forward Group Loan Notes, the "Loan Notes"). Concurrently with
the consummation of the Chips Merger, Hicks Muse and its affiliates exchanged
the $85.0 million liquidation preference of Viasystem Group's preferred stock
owned by them for an equivalent amount of Viasystem Group's common stock. See
"Security Ownership of Certain Beneficial Owners" and "Certain Transactions."
Following the Chips Merger, the Chips operating subsidiaries became
indirect wholly-owned subsidiaries of the Company. To facilitate the Chips
Merger, the Company negotiated an amendment to its existing credit agreement
(the "Senior Credit Facilities"). See "Capitalization" and "Description of
Senior Credit Facilities."
The Circo Craft acquisition, the Lucent Division acquisition, the Forward
Group acquisition, and the Chips Merger are collectively referred to as the
"Transactions." The foregoing transactions, excluding the acquisitions of Circo
Craft and the Lucent Division (both of which occurred in 1996), are collectively
referred to as the "1997 Transactions."
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THE EXCHANGE OFFER
The Exchange Offer......... $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, Old Notes representing $400
million aggregate principal amount are
outstanding. The terms of the New Notes and the
Old Notes are substantially identical in all
material respects, except that the New Notes will
be freely transferable by the holders thereof
except as otherwise provided herein. See
"Description of New Notes."
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to the Company, the
Company believes that New Notes issued pursuant
to the Exchange Offer in exchange for Old Notes
may be offered for resale, sold and otherwise
transferred by any registered person receiving
the New Notes, whether or not that person is the
registered holder (other than any such holder or
such other person that is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act or a broker dealer who purchases
such New Notes directly from the Company to
resell pursuant to Rule 144A or any other
available exception under the Securities Act or a
person participating in the distribution of the
New Notes), without compliance with the
registration and prospectus delivery provisions
of the Securities Act, provided that (i) the New
Notes are acquired in the ordinary course of
business of that holder or such other person,
(ii) neither the holder nor such other person is
engaging in or intends to engage in a
distribution of the New Notes, and (iii) neither
the holder nor such other person has an
arrangement or understanding with any person to
participate in the distribution of the New Notes.
See "The Exchange Offer -- Purpose and Effect."
Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where
those Old Notes were acquired by the
broker-dealer as a result of its market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of these New Notes.
See "Plan of Distribution."
Registration Rights
Agreement................ The Old Notes were sold by the Company on June 6,
1997, in a private placement in reliance on
Section 4(2) of the Securities Act and
immediately resold by the initial purchasers
thereof in reliance on Rule 144A under the
Securities Act (the "Original Offering"). In
connection with the sale, the Company entered
into an Exchange and Registration Rights
Agreement with the initial purchasers of the Old
Notes (the "Registration Rights Agreement")
requiring the Company to make the Exchange Offer.
The Registration Rights Agreement further
provides that the Company must use its reasonable
best efforts to (i) cause the Registration
Statement with respect to the Exchange Offer to
be declared effective on or before November 13,
1997 and (ii) consummate the Exchange Offer on or
before December 13, 1997. See "The Exchange
Offer -- Purpose and Effect."
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<PAGE> 9
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, , 1997, or such later
date and time to which it is extended by the
Company.
Withdrawal................. The tender of the Old Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the
Expiration Date. Any Old Notes not accepted for
exchange for any reason will be returned without
expense to the tendering holder thereof as
promptly as practicable after the expiration or
termination of the Exchange Offer.
Interest on the New
Notes and Old Notes...... Interest on each New Note will accrue from the date
of issuance of the Old Note for which the New
Note is exchanged or from the date of the last
periodic payment of interest on such Old Note,
whichever is later. No additional interest will
be paid on Old Notes tendered and accept for
exchange.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, certain of which may be waived by the
Company. See "The Exchange Offer -- Certain
Conditions to Exchange Offer."
Procedures for Tendering
Old Notes.................. Each holder of the Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a copy thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver the
Letter of Transmittal, or the copy, together with
the Old Notes and any other required
documentation, to the Exchange Agent (as defined)
at the address set forth herein. Persons holding
the Old Notes through the Depository Trust
Company ("DTC") and wishing to accept the
Exchange Offer must do so pursuant to the DTC's
Automated Tender Offer Program, by which each
tendering participant will agree to be bound by
the Letter of Transmittal. By executing or
agreeing to be bound by the Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) the New
Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business
of the person receiving such New Notes, whether
or not such person is the registered holder of
the Old Notes, (ii) neither the holder nor any
such other person is engaging in or intends to
engage in a distribution of such New Notes, (iii)
neither the holder nor any such other person has
an arrangement or understanding with any person
to participate in the distribution of such New
Notes, and (iv) neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 promulgated under the Securities Act, of
the Company. Pursuant to the Registration Rights
Agreement, the Company is required to file a
"shelf" registration statement for a continuous
offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes if (i)
because of any change in law or applicable
interpretations thereof by the staff of the
Commission, the Company determines that it is not
permitted to effect the Exchange Offer as
contemplated hereby, (ii) validly
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<PAGE> 10
tendered Old Notes are not exchanged for New
Notes by December 13, 1997, (iii) any holder of
Private Exchange Securities (as defined) so
requests within 60 days of the Exchange Offer,
(iv) any applicable law or interpretations do not
permit any holder of Old Notes to participate in
the Exchange Offer or (v) any holder of Old Notes
that participates in the Exchange Offer does not
receive freely transferable New Notes in exchange
for tendered securities.
Acceptance of Old Notes and
Delivery of New Notes.... The Company will accept for exchange any and all
Old Notes which are properly tendered (and not
withdrawn) in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date.
The New Notes issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer -- Terms
of the Exchange Offer."
Exchange Agent............. The Bank of New York is serving as Exchange Agent
(the "Exchange Agent") in connection with the
Exchange Offer.
Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer should
not be a taxable event for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Effect of Not Tendering.... Old Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the Exchange Offer, continue to be
subject to the existing restrictions upon
transfer thereof. The Company will have no
further obligation to provide for the
registration under the Securities Act of such Old
Notes.
5
<PAGE> 11
THE NEW NOTES
Issuer..................... Viasystems, Inc.
Securities Offered......... $400,000,000 aggregate principal amount of 9 3/4%
Senior Subordinated Notes due 2007.
Maturity................... June 1, 2007.
Interest Payment Dates..... Interest on the New Notes will be payable
semi-annually in arrears on June 1 and December 1
of each year, commencing December 1, 1997.
Sinking Fund............... None.
Optional Redemption........ Except as described below, the Company may not
redeem the New Notes prior to June 1, 2002. On and
after such date, the Company may redeem the New
Notes, in whole or in part, at the redemption
prices set forth herein, together with accrued and
unpaid interest, if any, to the date of redemption.
In addition, at any time and from time to time on
or prior to June 1, 2000, the Company may redeem up
to $140.0 million of the aggregate principal amount
of the New Notes with the net cash proceeds of one
or more Equity Offerings, so long as a Public
Market exists at the time of redemption, at a
redemption price equal to 109.75% of the principal
amount to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption,
provided that at least $200.0 million of the
aggregate principal amount of the New Notes remains
outstanding after each such redemption. See
"Description of New Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control, (i) the
Company will have the option, at any time on or
prior to June 1, 2002, to redeem the New Notes in
whole but not in part at a redemption price equal
to 100% of the principal amount thereof plus the
Applicable Premium, plus accrued and unpaid
interest, if any, to the date of redemption, and
(ii) if the Company does not so redeem the New
Notes or if such Change of Control occurs after
June 1, 2002, the Company will be required to make
an offer to repurchase the New Notes at a price
equal to 101% of the principal amount thereof,
together with accrued and unpaid interest, if any,
to the date of purchase. There can be no assurance
that sufficient funds will be available when
necessary to make any required repurchases. See
"Description of New Notes -- Change of Control."
Ranking.................... The New Notes will be unsecured and will be
subordinated in right of payment to all existing
and future Senior Indebtedness of the Company. The
New Notes will rank pari passu with any future
Senior Subordinated Indebtedness of the Company and
will rank senior to all Subordinated Indebtedness
of the Company. As of June 30, 1997, the aggregate
principal amount of the Company's outstanding
Senior Indebtedness was approximately $484.8
million (excluding unused commitments) and the
Company had no Senior Subordinated Indebtedness,
other than the Old Notes, and no Subordinated
Indebtedness outstanding. As of June 30, 1997, the
Old Notes ranked junior to approximately $680.7
million of accrued liabilities and obligations of
the Company's consolidated subsidiaries, including
borrowings under and guarantees in respect of the
Senior Credit Facilities. See "Description of New
Notes -- Ranking and Subordination."
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Restrictive Covenants...... The Indenture limits, among other things: (i) the
incurrence of additional indebtedness by the
Company and its Restricted Subsidiaries; (ii) the
payment of dividends on, and redemption of, capital
stock of the Company and its Restricted
Subsidiaries and the redemption of certain
subordinated obligations of the Company and its
Restricted Subsidiaries; (iii) investments; (iv)
sale of assets and Restricted Subsidiary stock; (v)
transactions with affiliates; and (vi)
consolidations, mergers and transfers of all or
substantially all of the Company's assets. The
Indenture also prohibits certain restrictions on
distributions from Restricted Subsidiaries;
however, all of these limitations and prohibitions
are subject to a number of important qualifications
and exceptions. See "Description of New
Notes -- Certain Covenants."
Use of Proceeds............ There will be no cash proceeds to the Company from
the Exchange Offer. The Company used the net
proceeds from the Original Offering: (i) to repay
the Subordinated Credit Facility; (ii) to repay
indebtedness under the Senior Credit Facilities;
and (iii) to pay related fees and expenses.
RISK FACTORS
The risk factors that an investor should consider include, but are not
limited to: (i) the substantial leverage; (ii) the Company's ability to service
its debt; (iii) the Company's restrictive debt covenants of the Indenture and
the Senior Credit facilities; (iv) the subordination of the Notes to Senior
Indebtedness of the Company; (v) the encumbrances that currently exist on
certain of the Company's assets; (vi) the Company's holding company structure;
(vii) lack of the Company's prior history of combined operations; (viii) the
ability of the Company to implement its operating and acquisition strategy; (ix)
the potential for fluctuations in the Company's operating results and
variability of customer orders; (x) the Company's reliance on Lucent
Technologies; (xi) the rapidly changing technological environment in which the
Company operates; (xii) the Company's dependence upon the electronics industry;
(xiii) the international nature of the Company's operations; (xiv) the Company's
ability to protect the proprietary rights to its intellectual property; (xv)
certain environmental matters; (xvi) industry competition; (xvii) the impact of
labor relations on the Company; (xviii) the existence of a group of stockholders
that effectively control the Company; (xix) certain ERISA considerations; (xx)
certain limitations on a change in control of the Company; and (xxi) the absence
of a public market for the Notes.
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<PAGE> 13
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before purchasing the Notes offered hereby.
SUBSTANTIAL LEVERAGE
The Company has indebtedness that is substantial in relation to its
stockholder's equity. As of June 30, 1997, the Company had approximately $884.8
million of indebtedness outstanding and there was approximately $149.6 million
available for future borrowings for general corporate purposes and working
capital needs and an additional $100.0 million available for future
acquisitions, subject to certain conditions under the Senior Credit Facilities.
See "Description of the Senior Credit Facilities." On a pro forma basis, after
giving effect to the 1997 transactions, the Original Offering and the Exchange
Offer, the Company's earnings would have been insufficient to cover fixed
charges by approximately $58.5 million and $28.4 million for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively. The
Company may incur additional indebtedness in the future, subject to certain
limitations to be contained in the Indenture and the Senior Credit Facilities,
and intends to do so in order to fund future acquisitions as part of its
business strategy. See "Description of New Notes" and "Description of Senior
Credit Facilities."
The Company's high degree of leverage could have several important
consequences to the holders of the New Notes, including, but not limited to, the
following: (i) the Company will have significant cash requirements to service
debt, reducing funds available for operations and future business opportunities
and increasing the Company's vulnerability to adverse general economic and
industry conditions and competition; (ii) the Company's ability to obtain
additional financing in the future for working capital, capital expenditures,
acquisitions, general corporate or other purposes, may be limited; (iii) the
Company's leveraged position and the covenants that will be contained in the
Indenture and the Senior Credit Facilities could limit the Company's ability to
compete, as well as its ability to expand, including through acquisitions, and
to make capital improvements; (iv) the Company may be more leveraged than
certain of its competitors, which may place the Company at a competitive
disadvantage; and (v) the Company's ability to refinance the New Notes in order
to pay the principal of the New Notes at maturity or upon a Change of Control
may be adversely affected.
A portion of the consolidated debt of the Company bears interest at
floating rates; therefore, the financial results of the Company are and will
continue to be affected by changes in prevailing interest rates. As of June 30,
1997, the Company had approximately $484.8 million of debt outstanding bearing
interest at floating interest rates. See "Description of Senior Credit
Facilities."
ABILITY TO SERVICE DEBT
The Company's ability to pay interest and principal upon the Senior Credit
Facilities, to pay interest on the Notes, and to satisfy its other debt
obligations will depend upon its future operating performance, which will be
affected by prevailing economic conditions and financial, business and other
factors, certain of which will be beyond its control. In addition, amounts owing
under the Senior Credit Facilities will become due prior to the maturity of the
Notes and such amounts may need to be refinanced. There can be no assurance that
future borrowings or equity refinancing will be available for the payment or
refinancing of the Company's indebtedness. Cash interest and debt repayments of
a total of approximately $52.7 million will be required to be paid from July 1,
1997 to December 31, 1997, based upon the amount of debt outstanding as of June
30, 1997. Cash interest and debt repayments of a total of approximately $86.7
million and $108.9 million will be required to be paid in 1998 and 1999,
respectively, based upon the amount of debt outstanding as of June 30, 1997.
Such amounts do not give consideration to any additional borrowings which may
from time to time be necessary, interest rate fluctuations, or payment of any
borrowings before maturity due to any reason. If the Company is unable to
service its indebtedness, however, whether in the ordinary course of business or
upon acceleration of such indebtedness, the Company will be forced to pursue one
or more alternative strategies, such as restructuring or refinancing its
indebtedness,
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<PAGE> 14
selling assets, reducing or delaying capital expenditures or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Liquidity and
Capital Resources" and "Description of Senior Credit Facilities."
RESTRICTIVE DEBT COVENANTS
The Indenture and the Senior Credit Facilities contain certain covenants
that restrict, among other things, the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make certain other restricted
payments, make investments, consummate certain asset sales, enter into certain
transactions with affiliates, impose restrictions on the ability of a subsidiary
to pay dividends or make certain payments to the Company, merge or consolidate
with any other person or sell, assign, transfer, lease, convey, or otherwise
dispose of all or substantially all of the assets of the Company. In addition,
the Senior Credit Facilities contain certain other and more restrictive
covenants including restrictions on prepaying indebtedness, such as the New
Notes, and will also require the Company to maintain specified financial ratios
and to satisfy certain financial condition tests. The Company's ability to meet
these financial ratio and financial condition tests can be affected by events
beyond its control and there can be no assurance that the Company will meet
those tests. A breach of any of these covenants could result in a default under
the Senior Credit Facilities or the Indenture. Upon the occurrence of an event
of default under the Senior Credit Facilities, including a default on certain
other Indebtedness, such as the Notes, the lenders thereunder could elect to
declare all amounts outstanding thereunder, together with accrued interest, to
be immediately due and payable. If the Company were unable to pay those amounts,
the lenders thereunder could proceed against the collateral granted to them to
secure that indebtedness. Substantially all the assets of the Company, including
the stock of certain of its subsidiaries, are pledged as collateral to secure
the Company's obligations under the Senior Credit Facilities. If the
indebtedness under the Senior Credit Facilities were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to repay
in full that indebtedness and the other indebtedness of the Company, including
the New Notes. In addition, if a default occurs with respect to Senior
Indebtedness, such as the Senior Credit Facilities, the subordination provisions
of such Senior Indebtedness would likely restrict payments to holders of New
Notes. The Indenture also provides that the failure of the Company or any
Restricted Subsidiary (as defined) to pay Indebtedness in a total amount in
excess of $20.0 million within any applicable grace period after the final
maturity of such Indebtedness, or the acceleration by the holders of such
Indebtedness, shall constitute an event of default under the Indenture, unless
such default on the Indebtedness is cured, including by way of repayment, or
such acceleration rescinded after a 10 day period. See "Description of New
Notes -- Certain Covenants," "-- Events of Default" and "Description of Senior
Credit Facilities."
SUBORDINATION OF NOTES TO SENIOR INDEBTEDNESS
The payment of principal, premium, if any, and interest on, and any other
amounts owing in respect of, the New Notes will be subordinated to the prior
payment in full in cash or cash equivalents of all existing and future Senior
Indebtedness of the Company. In the event of the bankruptcy, liquidation,
dissolution, reorganization or other winding-up of the Company, the assets of
the Company will be available to pay obligations on the New Notes only after all
Senior Indebtedness has been so paid in full; accordingly there may not be
sufficient assets remaining to pay amounts due on any or all of the New Notes
then outstanding. In addition, the Company may not pay principal of, premium, if
any, or interest on, or any other amounts owing in respect of the New Notes, or
purchase, redeem or otherwise retire the New Notes, in the event of any default
with respect to Senior Indebtedness, including Senior Indebtedness under the
Senior Credit Facilities. See "Description of Senior Credit Facilities."
9
<PAGE> 15
As of June 30, 1997, there was approximately $484.8 million of Senior
Indebtedness outstanding (represented by approximately $88.0 million of direct
borrowings by the Company under the Senior Credit Facilities, $319.3 million for
the Chips Reimbursement Obligation, $24.6 million of Forward Group Loan Notes
and $52.9 million of other indebtedness). In addition, there was approximately
$149.6 million available under the Senior Credit Facilities as of June 30, 1997
for general corporate purposes and working capital needs of the Company and its
subsidiaries and an additional $100.0 million available for future acquisitions,
all of which would be Senior Indebtedness if borrowed. Of the amount available
to be borrowed as of June 30, 1997 approximately $99.6 million was available for
borrowing by the Company's foreign subsidiaries. Additional Senior Indebtedness
may be incurred by the Company from time to time, subject to certain
restrictions. See "Description of New Notes -- Ranking and Subordination,"
"-- Certain Covenants," and "Description of the Senior Credit Facilities."
ENCUMBRANCES ON ASSETS TO SECURE SENIOR CREDIT FACILITIES
In addition to being subordinated to all existing and future Senior
Indebtedness of the Company, the New Notes will not be secured by any assets of
the Company or its subsidiaries; however, obligations under the Senior Credit
Facilities are secured by a pledge of all the capital stock of the Company's
direct U.S. subsidiaries, 65% of the voting stock of its direct foreign
subsidiaries and 100% of the preferred stock of its direct foreign subsidiaries,
and the tangible and intangible assets of the U.S. subsidiaries (including 65%
of the voting stock of their direct foreign subsidiaries) and certain foreign
subsidiaries (including Forward Group and Circo Craft) to secure their
respective obligations only, and will be guaranteed by Viasystems Group, with
such guaranty secured by a pledge of the capital stock of the Company. In
addition, the Company has guaranteed the obligations of its foreign subsidiaries
for borrowings under the Senior Credit Facilities and the Company's U.S.
subsidiaries have guaranteed the obligations of the Company under the Senior
Credit Facilities, including obligations arising under the Company's guarantees.
If the Company becomes insolvent or is liquidated, or if payment under any of
the Senior Credit Facilities is accelerated, the lenders under the Senior Credit
Facilities will be entitled to exercise the remedies available to a secured
lender under applicable law pursuant to the Senior Credit Facilities.
Accordingly, such lenders will have a prior claim with respect to such assets.
See "Description of Senior Credit Facilities."
HOLDING COMPANY STRUCTURE
The New Notes are effectively subordinated to the obligations of the
Company's subsidiaries, including the guarantee by its U.S. subsidiaries of
obligations of the Company under the Senior Credit Facilities, because the
Company is a holding company. In the event of an insolvency, liquidation or
other reorganization of any of the subsidiaries of the Company, the creditors of
the Company (including the holders of the New Notes), as well as shareholders of
the Company, will have no right to proceed against the assets of such
subsidiaries or to cause the liquidation or bankruptcy of such subsidiaries
under applicable bankruptcy laws. Creditors of such subsidiaries, including
lenders under the Senior Credit Facilities, would be entitled to payment in full
from such assets before the Company, as a shareholder, would be entitled to
receive any distribution therefrom. Except to the extent that the Company itself
may be a creditor with recognized claims against such subsidiaries, claims of
creditors of such subsidiaries will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the Company,
including claims under the New Notes. In addition, as a result of the Company
being a holding company, the Company's operating cash flow and its ability to
service its indebtedness, including the New Notes, is dependent upon the
operating cash flow of its subsidiaries and the payment of funds by such
subsidiaries to the Company in the form of loans, dividends or otherwise. At
June 30, 1997, the subsidiaries of the Company had aggregate liabilities,
including trade payables and accrued expenses, of $680.7 million, including
amounts borrowed under the Senior Credit Facilities and guarantees of borrowings
made by the Company under the Senior Credit Facilities. As of June 30,
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<PAGE> 16
1997 the Company's foreign subsidiaries had additional availability under the
Senior Credit Facilities of $99.6 million.
NO PRIOR HISTORY OF COMBINED OPERATIONS
Prior to their respective acquisitions, the operations of Circo Craft,
Viasystems Technologies, Forward Group and Chips were conducted as separate and
distinct businesses, each with its own management team, sales and administrative
personnel, and manufacturing facilities. The Company anticipates that the
current operating management of the various subsidiaries will continue to manage
their respective operations and that Mills & Partners will be responsible for
the overall management of the Company. There can be no assurance that the
Company can successfully integrate these operations. Moreover, the historical
financial information and results of operations presented herein may be of
limited utility in assessing the Company's historical and potential results of
operations as an independent, combined entity. Investors are advised to
carefully read "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the financial statements contained herein before
making an investment decision. See "Summary -- Transactions" and "Business."
ABILITY TO IMPLEMENT THE COMPANY'S OPERATING AND ACQUISITION STRATEGY
No assurances can be given that the Company or its management team will be
able to implement successfully the operating strategy described herein,
including the ability to identify, negotiate and consummate future acquisitions
on terms management considers favorable. No assurances can be given that the
Company will successfully implement its operating strategies in the future.
The Company may from time to time pursue the acquisitions of other
companies, assets or product lines that complement or expand its existing
business. Acquisitions involve a number of risks that could adversely affect the
Company's operating results, including the diversion of management's attention,
the costs of assimilating the operations and personnel of the acquired
companies, and the potential loss of employees of the acquired companies. No
assurance can be given that any acquisition by the Company will not materially
and adversely affect the Company or that any such acquisition will enhance the
Company's business.
The ability of the Company to implement its operating strategy and to
consummate future acquisitions will require significant additional debt and/or
equity capital, particularly in light of the Company's significant and ongoing
anticipated capital expenditures, and no assurance can be given as to whether,
and on what terms, such additional debt and/or equity capital will be available.
The Company has responded to a letter from the United Kingdom's Office of
Fair Trading ("OFT"), the governmental entity responsible for antitrust control
in the United Kingdom, requesting information regarding Chips and Forward Group
and their respective market shares in the United Kingdom to determine whether
the Fair Trading Act of 1973 applies to the Chips Acquisition. Although no
assurances can be given, the Company believes, after consultation with counsel,
that no adverse consequence will arise from such OFT inquiry.
FLUCTUATIONS IN OPERATING RESULTS; VARIABILITY OF ORDERS
The Company's operating results are affected by a number of factors,
including the timing of orders from and shipments to major customers, the volume
of orders relative to the Company's capacity, the timing of expenditures in
anticipation of future sales, pricing pressures, variations in product mix,
start-up expenses relating to new manufacturing facilities and economic
conditions in the electronics industry. Many of these factors are outside the
control of the Company. Because a significant portion of the Company's operating
expenses are fixed, even a relatively small revenue shortfall can have a
disproportionate effect on the Company's results of operations. Results of
operations in any period should not be considered indicative of the results to
be expected for any future period.
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<PAGE> 17
The level and timing of orders placed by the Company's customers vary due
to a number of factors, including customer attempts to manage inventory, changes
in the customers' manufacturing strategies and variation in demand for customer
products due to, among other things, technological change, new product
introductions, product life-cycles, competitive conditions or general economic
conditions. Because the Company generally does not obtain long-term purchase
orders or commitments from its customers, it must attempt to anticipate the
future volume of orders based on discussions with its customers. A substantial
portion of sales in a given quarter may depend on obtaining orders for products
to be manufactured and shipped in the same quarter in which those orders are
received. The Company relies on its estimate of anticipated future volumes when
making commitments regarding the level of business that it will seek and accept,
the mix of products that it intends to manufacture, the timing of production
schedules and the levels and utilization of personnel and other resources. A
variety of conditions, both specific to the individual customer and generally
affecting the customer's industry, may cause customers to cancel, reduce or
delay orders that were previously made or anticipated. A significant portion of
the Company's backlog at any time may be subject to cancellation or postponement
without penalty. The Company cannot assure the timely replacement of canceled,
delayed or reduced orders. Significant or numerous cancellations, reductions or
delays in orders by a customer or group of customers could materially adversely
affect the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Results of Operations and Financial
Condition."
CUSTOMER CONCENTRATION; RELIANCE ON LUCENT TECHNOLOGIES
Sales to Lucent Technologies by the Lucent Division for fiscal years 1994
and 1995 and by the Company on a pro forma basis for fiscal year 1996 were
$277.3 million, $283.0 million and $308.8 million, respectively. The Company
does not expect net sales to Lucent Technologies for fiscal year 1997 to
significantly diverge from net sales in fiscal year 1996. Lucent Technologies
produces telecommunications systems, including telecommunications switching,
transmission and wireless communications equipment, all of which utilize the
Company's products. Any adverse development or lack of success by Lucent
Technologies in any of these product areas could have a material adverse effect
on the Company's business and results of operations. See "Business -- Markets
and Customers."
The Company anticipates that Lucent Technologies will continue to be its
largest customer for at least the next few years, in part because of the
five-year supply agreement (the "Lucent Agreement") that the Company entered
with Lucent Technologies as of November 26, 1996, which agreement will be
renewed upon the satisfaction of certain performance requirements for two
additional one-year periods and thereafter on an ongoing basis until either
party terminates the agreement on 18 months' notice. No assurance can be given,
however, that the contract with Lucent Technologies will be renewed for
additional periods or extended or replaced upon its final expiration.
The Lucent Agreement requires that by January 1, 1999 the Company's prices
for the products supplied to Lucent Technologies shall be reduced to an agreed
upon benchmark standard. Effective January 1, 1997, the Company has reduced
prices on certain products supplied to Lucent Technologies pursuant to the
Lucent Agreement. The financial data for Viasystems Technologies included herein
reflects its results of operations while Viasystems Technologies was a captive
producer for Lucent Technologies. Historical results of Viasystems Technologies
may not be indicative of its results of operations as an independent entity. The
Lucent Agreement also requires Lucent Technologies to make minimum annual
purchases, subject to certain penalties for failing to satisfy such minimum
purchase amounts.
On a pro forma basis, Lucent Technologies accounted for approximately 35%
and the Company's five largest customers as a group accounted for approximately
53% of the Company's net sales for the fiscal year 1996. Although there is no
assurance the Company's principal customers will continue to purchase products
from the Company at past levels, the Company expects a significant portion of
its revenue will continue to be concentrated within a small number of
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customers. The loss of, or significant curtailment of purchases by, one or more
of these customers could have a material adverse effect on the Company. See
"Business -- Markets and Customers."
TECHNOLOGICAL CHANGE, PROCESS DEVELOPMENT AND PROCESS DISRUPTION
The market for the Company's products and services is characterized by
rapidly changing technology and continuing process development. The future
success of the Company's business will depend in large part upon its ability to
maintain and enhance its technological capabilities, develop and market products
and services that meet changing customer needs, and successfully anticipate or
respond to technological changes on a cost-effective and timely basis. Research
and development expenses are expected to increase as manufacturers make demands
for higher technology and smaller PCBs. In addition, the PCB and backpanel
industry could in the future encounter competition from new or revised
technologies that render existing electronic interconnect technology less
competitive or obsolete or technologies that may reduce the number of PCBs
required in electronic components. There can be no assurance that the Company
will effectively respond to the technological requirements of the changing
market. To the extent the Company determines that new technologies and equipment
are required to remain competitive, the development, acquisition and
implementation of such technologies and equipment are likely to continue to
require significant capital investment by the Company. There can be no assurance
that capital will be available for these purposes in the future or that
investments in new technologies will result in commercially viable technological
processes. Moreover, the Company's business involves highly complex
manufacturing processes that could in the future be subject to periodic failure
or disruption. Process disruptions can result in delays in certain product
shipments. There can be no assurance that failures or disruptions will not occur
in the future. The loss of revenue and earnings to the Company from such a
technological change, process development or process disruption, as well as any
disruption of the Company's operations resulting from a natural disaster such as
an earthquake, fire or flood, could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Industry -- Overview," "Business -- Business Strategy," "-- Products and
Services," and " -- Manufacturing."
DEPENDENCE ON ELECTRONICS INDUSTRY
The electronics industry, which encompasses the Company's principal
customers, is characterized by intense competition, relatively short product
life-cycles and significant fluctuations in product demand. In addition, the
electronics industry is generally subject to rapid technological change and
product obsolescence. Furthermore, the electronics industry is subject to
economic cycles and has in the past experienced, and is likely in the future to
experience, recessionary periods. A recession or any other event leading to
excess capacity or a downturn in the electronics industry would likely have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition," "Industry -- Overview" and
"Business -- Markets and Customers."
INTERNATIONAL OPERATIONS
A significant portion of the Company's operations are conducted in foreign
countries, and are subject to risks that are inherent in operating abroad,
including governmental regulation, changes in import duties, trade restrictions,
work stoppages, currency restrictions and other restraints and burdensome taxes.
On a pro forma basis, net sales from international operations during fiscal 1996
and the six months ended June 30, 1997 were approximately $331.6 million and
$281.9 million, or 60.9% and 62.5% of pro forma net sales, respectively.
The Company's operations worldwide and the products it sells are subject to
numerous governmental regulations and inspections. Although the Company believes
it is substantially in compliance with such regulations, changes in legislation
or regulations and actions by regulators, including changes in administration
and enforcement policies, may from time to time require operational improvements
or modifications at various locations or the payment of fines and penalties, or
both.
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<PAGE> 19
The Company is subject to a variety of governmental regulations in certain
countries where it markets its products, including import quotas and tariffs,
and taxes.
The Company's operations involve transactions in a variety of currencies.
The results of its operations may be significantly affected by fluctuations of
currency exchange rates. Such fluctuations are significant to the Company's
operations because many of its costs are incurred in currencies different from
those that are received from the sale of its products in foreign markets, and
there is normally a time lag between the incurrence of such costs and collection
of the related sales proceeds. The Company engages from time to time in various
hedging activities to minimize potential losses on cash flows originating in
foreign currencies.
INTELLECTUAL PROPERTY
The Company's success depends in part on proprietary technology and
manufacturing techniques. The Company has few patents for these proprietary
techniques and chooses to rely primarily on trade secret protection. Litigation
may be necessary to protect the Company's technology, to determine the validity
and scope of the proprietary rights of others or to defend against claims of
patent infringement. The Company is not aware of any pending or threatened
claims that affect any of the Company's intellectual property rights. If any
infringement claim is asserted against the Company, the Company may seek to
obtain a license of the other party's intellectual property rights. There is no
assurance that a license would be available on reasonable terms or at all.
Litigation with respect to patents or other intellectual property matters could
result in substantial costs and diversion of management and other resources and
could have a material adverse effect on the Company.
ENVIRONMENTAL MATTERS
The Company's operations are regulated under a number of federal, state,
local and foreign environmental laws and regulations, which govern, among other
things, the discharge of hazardous materials into the air and water as well as
the handling, storage and disposal of such materials. Compliance with these
environmental laws are major considerations for all PCB manufacturers because
metals and other hazardous materials are used in the manufacturing process. In
addition, because the Company is a generator of hazardous wastes, the Company,
along with any other person who arranges for the disposal of such wastes, may be
subject to potential financial exposure for costs associated with the
investigation and remediation of sites at which it has arranged for the disposal
of hazardous wastes, if such sites become contaminated. This is true even if the
Company fully complies with applicable environmental laws. In addition, it is
possible that in the future new or more stringent requirements could be imposed.
See "Business -- Environmental."
COMPETITION
The PCB and backpanel industries are highly fragmented and characterized by
intense competition. The Company believes that its major competitors are large
U.S. and international independent and captive producers that also manufacturer
multilayer PCBs and provide backpanels and other electronic assemblies. In
addition, OEMs with captive PCB and backpanel manufacturing operations may seek
orders in the open market to fill excess capacity, thereby increasing price
competition. Moreover, the Company may face additional competitive pressures as
a result of changes in technology. See "-- Technological Change, Process
Development and Process Disruption."
During periods of recession or economic slowdown in the electronics
industry and other periods when excess capacity exists, electronics OEMs become
more price sensitive, which could have a material adverse effect on PCB and
backpanel pricing. In addition, the Company believes that price competition from
PCB and backpanel manufacturers in Asia and other locations may play an
increasing role in the PCB and backpanel markets in which the Company competes.
Competition in
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the industry has also increased due to the consolidation trend in the industry,
which results in potentially better capitalized, and more effective competitors.
Price has become the most important competitive issue as: (i) competition from
Pacific Rim competitors has intensified; (ii) U.S. and European manufacturers
have shifted production overseas; (iii) the price of products in end-user
industries has declined; (iv) technology and material enhancements have improved
efficiencies and reduced production costs; and (v) improved quality control has
resulted in higher yields. The Company's basic interconnect technology is
generally not subject to significant proprietary protection, and companies with
significant resources or international operations may enter the market.
Increased competition could result in price reductions, reduced margins or loss
of market share, any of which could materially adversely affect the Company's
business, financial condition and results of operations.
LABOR RELATIONS
Approximately 35% of the Company's employees are unionized. Approximately
660 employees of the Company at Forward Group's United Kingdom facilities are
governed by a collective bargaining agreement that is terminable by either party
upon three months notice. Approximately 95 employees of the Company at Forward
Group's South Africa facility are governed by a collective bargaining agreement
that is negotiated annually. A prolonged dispute at one or more facilities could
have a material adverse effect on the Company.
CONTROLLING STOCKHOLDERS
100% of the common stock of the Company is owned by Viasystems Group, which
in turn is controlled by an affiliate of Hicks Muse. As a result, Hicks Muse
effectively will be able to elect all the members of the Board of Directors of
Viasystems Group and therefore direct the management and policies of the
Company. The interests of Hicks Muse and its affiliates as equity owners of
Viasystems Group may differ from the interests of holders of the Notes as
creditors of the Company. See "Summary -- Recent History," "Security Ownership
of Certain Beneficial Owners" and "Certain Transactions."
ERISA CONSIDERATIONS
The Hicks, Muse, Tate & Furst Equity Fund III, L.P. ("Fund III") is a
private investment fund which is managed by an affiliate of Hicks Muse and which
was formed for the principal purpose of making investments in companies. Fund
III currently owns at least 80% of the total outstanding common stock of
Viasystems Group and thereby indirectly possesses at least 80% of the total
combined voting power and total value of shares of all classes of stock of the
Company. Fund III also currently owns and may acquire at least 80% of the total
combined voting power or the total value of shares of all classes of stock of
other companies, some of which may sponsor or contribute to pension plans
subject to Title IV of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or Section 412 of the Internal Revenue Code of 1986, as
amended ("Code"). In accordance with the provisions of ERISA and the Code, the
Company is a member of a controlled group of corporations or a group of trades
or businesses under common control that includes Fund III ("Fund III ERISA
Group"), and each member of such group is jointly and severally liable for
certain unfunded pension liabilities and pension contributions which arise
during such member's inclusion within such group. While Hicks Muse expects each
member of the Fund III ERISA Group to satisfy its pension-related obligations
with respect to its employees to the fullest extent permitted by law, without
assistance from other members of the Fund III ERISA Group, there are no
assurances that an insolvency, bankruptcy or other condition would not occur at
one member of the Fund III ERISA Group which could result in a liability to
other members of the Fund III ERISA Group (including the Company). Hicks Muse is
not currently aware of any accrued and unpaid pension contribution, or
termination of or withdrawal from a pension plan subject to Title IV of ERISA or
Section 412 of the Code at any member of the Fund III ERISA Group which would
have a material adverse effect on the Company.
15
<PAGE> 21
LIMITATION ON CHANGE OF CONTROL
Upon a Change of Control, the Company may be required to offer to purchase
all of the New Notes then outstanding at 101% of their principal amount, plus
accrued interest to the date of repurchase. If a Change of Control were to
occur, there can be no assurance that the Company would have sufficient funds to
pay the purchase price for all of the New Notes that the Company might be
required to purchase. In the event that the Company were required to purchase
New Notes pursuant to a Change of Control Offer (as defined), the Company
expects that it would require third party financing; however, there can be no
assurance that the Company would be able to obtain such financing on favorable
terms, if at all. In addition, the Senior Credit Facilities restricts the
Company's ability to repurchase the New Notes, including pursuant to a Change of
Control Offer. A Change of Control will result in an event of default under the
Senior Credit Facilities and may cause the acceleration of other Senior
Indebtedness, if any, in which case the subordination provisions of the New
Notes would require payment in full of the Senior Credit Facilities and any such
Senior Indebtedness before repurchase of the Notes. See "Description of New
Notes -- Change of Control" and "Description of Senior Credit Facilities." The
inability to repay Senior Indebtedness, if accelerated, and to purchase all of
the tendered Notes, would constitute an event of default under the Indenture.
FRAUDULENT CONVEYANCE
The incurrence of indebtedness (such as the New Notes) in connection with
the Transactions and payments to consummate the Transactions with the proceeds
thereof are subject to review under relevant federal and state fraudulent
conveyance statutes in a bankruptcy or reorganization case or a lawsuit by or on
behalf of creditors of the Company. Under these statutes, if a court were to
find that obligations (such as the New Notes) were incurred with the intent of
hindering, delaying or defrauding present or future creditors or that the
Company received less than a reasonably equivalent value of fair consideration
for those obligations and, at the time of the occurrence of the obligations, the
obligor either: (i) was insolvent or rendered insolvent by reason thereof; (ii)
was engaged or was about to engage in a business or transaction for which its
remaining unencumbered assets constituted unreasonably small capital; or (iii)
intended to or believed that it would incur debts beyond its ability to pay such
debts as they matured or became due, such court could void the Company's
obligations under the New Notes, subordinate the New Notes to other indebtedness
of the Company or take other action detrimental to the holders of the New Notes.
Some courts have held that an obligor's purchase of its own capital stock does
not constitute reasonably equivalent value or fair consideration for
indebtedness incurred to finance that purchase.
The measure of insolvency for purposes of a fraudulent conveyance claim
will vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a particular time if the sum
of its debts at that time is greater than the then fair value of its assets or
if the fair saleable value of its assets at that time is less than the amount
that would be required to pay its probable liability on its existing debts as
they become absolute and mature. The Company believes that, after giving effect
to the Transactions, the Company will be: (i) neither insolvent nor rendered
insolvent by the incurrence of indebtedness in connection with the Transactions;
(ii) in possession of sufficient capital to run its business effectively; and
(iii) incurring debts within its ability to pay as the same mature or become
due.
There can be no assurance, however, as to what standard a court would apply
to evaluate the parties' intent or to determine whether the Company was
insolvent at the time of, or rendered insolvent upon consummation of, the
Transactions or that, regardless of the standard, a court would not determine
that the Company was insolvent at the time of, or rendered insolvent upon
consummation of, the Transactions.
ABSENCE OF PUBLIC MARKET FOR THE NEW NOTES
Prior to the Exchange Offer, there was no public market for the Old Notes.
The Company does not intend to apply for a listing of the New Notes, on a
securities exchange or on any automated
16
<PAGE> 22
dealer quotation system. There is currently no established market for the New
Notes and there can be no assurance as to the liquidity of markets that may
develop for the New Notes, the ability of the holders of the New Notes to sell
their New Notes or the prices at which such holders would be able to sell their
New Notes. If such markets were to exist, the New Notes could trade at prices
that may be lower than the initial market value thereof, depending upon many
factors, including prevailing interest rates and the markets for similar
securities.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
17
<PAGE> 23
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. The
Company used the net proceeds from the Original Offering (approximately $386.0
million), to (i) repay all amounts outstanding under the Tranche A Loan (as
defined) under the Senior Credit Facilities; (ii) repay a portion of the Tranche
C Loan (as defined) under the Senior Credit Facilities; (iii) repay all amounts
outstanding under the Canadian Term Loan (as defined) under the Senior Credit
Facilities; (iv) repay all amounts outstanding under the Chips Revolving Loan
(as defined); and (v) repay all amounts outstanding under the Subordinated
Credit Facility. See "Capitalization" and "Description of Senior Credit
Facilities."
Prior to its repayment, the Tranche A Loan matured on December 31, 2002,
and bore interest, at the Company's option, at a rate per annum equal to (i)
1.5% above the Alternate Base Rate, or (ii) 2.5% above the Eurocurrency Base
Rate. The Tranche C Loan matures on June 30, 2005 and bears interest, at the
Company's option, at a rate per annum equal to (i) 2.5% above the Alternate Base
Rate, or (ii) 3.5% above the Eurocurrency Base Rate. Prior to its repayment, the
Canadian Term Loan matured on December 31, 2002 and loans denominated in U.S.
dollars bore interest, at the Company's election, at either (i) the Eurocurrency
Base Rate (as defined in the Senior Credit Facility) plus 2.5% or (ii) the
Canadian Alternate Base Rate (as defined in the Senior Credit Facilities) plus
1.5%, and those loans denominated in Canadian dollars bore interest, at the
Company's option, at a rate per annum equal to (i) the Canadian Bankers
Acceptance Discount Rate plus 2.5%, or (ii) the Canadian Prime Rate (as defined)
plus 1.5%. Pursuant to the Senior Credit Facilities, the Chips Revolving Loan
will have a maturity date of November 30, 2002, and will bear interest at LIBOR
plus 2.5%. The Subordinated Credit Facility had an initial maturity date of
April 11, 1998. At May 30, 1997, the interest rate on such borrowings
(calculated as a fixed spread over a floating interest rate index) was 14.5% per
annum. See "Summary -- Recent History" and "Description of Senior Credit
Facilities."
18
<PAGE> 24
SELECTED FINANCIAL DATA
THE COMPANY
The selected information below for the period from inception (August 28,
1996) to December 31, 1996 presents financial information of Viasystems Group
for the period during which Circo Craft and Viasystems Technologies were
operated by Viasystems Group and prior to the formation of the Company and
Viasystems Group's contribution of its assets to the Company in April 1997. The
data for the period from inception (August 28, 1996) to December 31, 1996 has
been derived from the audited consolidated financial statements of Viasystems
Group. The selected information below for the six months ended June 30, 1997,
presents the financial information of Viasystems, Inc. and its subsidiaries
subsequent to the capital contribution by Viasystems Group and the financial
information of Viasystems Group and its subsidiaries prior to the capital
contribution to Viasystems, Inc. The data for the six months ended June 30,
1997, has been derived from the unaudited condensed consolidated financial
statements of Viasystems, Inc. In the opinion of management, the unaudited
condensed consolidated financial statements contain all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation. The
following information should be read in conjunction with the audited
consolidated financial statements of Viasystems Group and the notes thereto, the
unaudited condensed consolidated financial statements of Viasystems, Inc. and
the notes thereto, the "Unaudited Pro Forma Financial Information," and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
FROM INCEPTION
(AUGUST 28, SIX MONTHS
1996) TO ENDED
DECEMBER 31, JUNE 30,
1996 1997
---------------------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................... $ 50,400 $ 346,692
Cost of goods sold.......................................... 42,052 254,648
Selling, general and administrative expenses................ 3,844 31,851
Depreciation and amortization............................... 4,635 46,303
Write-off of acquired in-process research and
development(1)............................................ 50,800 294,500
-------- ----------
Operating loss............................................ (50,931) (280,610)
Interest expense............................................ 2,503 22,127
Amortization of deferred financing costs.................... 470 2,796
Other expense............................................... 262 70
-------- ----------
Loss before income taxes and extraordinary item........... (54,166) (305,603)
Provision (benefit) for income taxes........................ (5,424) 891
-------- ----------
Loss before extraordinary item............................ (48,742) (306,494)
Extraordinary loss, net of tax(2)........................... -- 7,796
-------- ----------
Net loss.................................................. $(48,742) $ (314,290)
======== ==========
OTHER DATA:
Adjusted EBITDA(3).......................................... $ 4,504 $ 60,193
Operating cash flows........................................ 1,662 22,057
Investing cash flows........................................ (286,286) (198,292)
Financing cash flows........................................ 300,713 212,386
Capital expenditures........................................ 3,563 42,388
Ratio of earnings to fixed charges(4)....................... N/A N/A
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................................... $ 16,117 $ 50,823
Working capital............................................. 44,938 90,245
Total assets................................................ 387,741 1,012,661
Total debt, including current maturities.................... 265,620 884,805
Stockholders' equity (deficit).............................. 54,973 (66,496)
</TABLE>
- ---------------
(1) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the acquisitions of Circo Craft, the
Lucent Division, Forward Group and Chips. The write-off relates to acquired
research and development for projects that do not have a future alternative
use. See "Notes to Consolidated Financial Statements" of Viasystems Group
and "Notes to Unaudited Condensed Consolidated Financial Statements" of
Viasystems, Inc.
(2) The Company recorded, as an extraordinary item, a one-time, non-cash
write-off of deferred financing fees of approximately $7,796, net of income
tax benefit of $4,332, related to deferred financing fees incurred on debt
retired before maturity with the proceeds of the Original Offering.
(3) Adjusted EBITDA is defined as operating income (loss) plus depreciation,
amortization and the non-cash charge relating to the write-off of acquired
in-process research and development. The Company believes that Adjusted
EBITDA provides additional information for determining its ability to meet
debt service requirements as revenues increase more than cash expenditures
for operating expenses. Adjusted EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations as
determined by GAAP. Adjusted EBITDA does not necessarily indicate whether
cash flow will be sufficient for cash requirements. The calculation of
Adjusted EBITDA does not include the commitments of the Company for capital
expenditures and payment of debt and should not be deemed to represent funds
available to the Company. Adjusted EBITDA, as presented, may not be
comparable to similarly-titled measures of other companies.
(4) For purposes of calculating the ratio of earnings to fixed charges,
"earnings" represent income (loss) before income taxes plus fixed charges.
"Fixed charges" consist of interest expense, amortization of deferred
financing costs and the component of rental expense that management believes
is representative of interest. Earnings were insufficient to cover fixed
charges by $54,166 for the period August 28, 1996 to December 31, 1996 and
$305,603 for the six months ended June 30, 1997.
19
<PAGE> 25
CIRCO CRAFT CO. INC.
The selected information below represents the financial information of
Circo Craft for the periods indicated. The data for the four fiscal years ended
December 31, 1995, and the nine months ended September 30, 1996 (the period
prior to the acquisition of Circo Craft by Viasystems Group), and the six months
ended June 30, 1996, set forth in Canadian GAAP in C$, has been derived from the
audited and unaudited condensed consolidated financial statements of Circo
Craft. In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation. The consolidated
financial statements of Circo Craft have been prepared in accordance with
Canadian GAAP, which differs in certain significant respects from U.S. GAAP (see
Note 12 to the consolidated financial statements of Circo Craft). The data set
forth in U.S. GAAP for the two years ended December 31, 1995, the nine months
ended September 30, 1996, and the six months ended June 30, 1996, has been
derived from the audited and unaudited condensed consolidated financial
statements of Circo Craft and adjusted for differences between Canadian GAAP and
U.S. GAAP and includes financial information for the nine months ended September
30, 1996, which has been translated for convenience to U.S.$ at an exchange rate
of C$1.36 = U.S.$1.00 (Source: The Wall Street Journal). The following
information should be read in conjunction with the audited and unaudited
condensed consolidated financial statements of Circo Craft and the notes
thereto, the "Unaudited Pro Forma Financial Information," and "Management's
Discussion and Analysis of Results of Operations and Financial Condition," all
included elsewhere herein.
CANADIAN GAAP
---------------
<TABLE>
<CAPTION>
SIX
NINE MONTHS MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED ENDED
-------------------------------------------- SEPTEMBER 30, JUNE 30,
1992 1993 1994(1) 1995(1) 1996 1996
-------- --------- --------- --------- ------------- ---------
(CANADIAN DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ C$94,010 C$106,244 C$151,825 C$185,156 C$129,633 C$ 85,304
Cost of goods sold....................... 74,200 88,788 124,929 148,788 101,532 67,900
Selling, general and administrative
expenses............................... 7,395 7,908 10,079 11,087 7,969 5,704
Depreciation and amortization............ 7,095 7,296 7,160 7,931 8,456 5,020
-------- --------- --------- --------- --------- ---------
Operating income....................... 5,320 2,252 9,657 17,350 11,676 6,680
Interest expense......................... 854 337 515 852 646 393
Other income............................. -- -- (195) (915) (880) (571)
Expenses related to sale(2).............. -- -- -- -- 5,907 --
-------- --------- --------- --------- --------- ---------
Income before income taxes............. 4,466 1,915 9,337 17,413 6,003 6,858
Provision for income taxes............... 1,429 1,854 2,719 5,564 3,847 2,934
-------- --------- --------- --------- --------- ---------
Net income before non controlling
interest............................. C$ 3,037 C$ 61 C$ 6,618 C$ 11,849 C$ 2,156 C$ 3,924
======== ========= ========= ========= ========= =========
OTHER DATA:
EBITDA(3)................................ C$12,415 C$ 9,548 C$ 16,817 C$ 25,281 C$ 20,132 C$ 11,700
Capital expenditures..................... 2,704 11,072 6,679 23,764 13,058 7,997
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents...................................... C$ 7,202 C$ 19,231 C$ 28,438
Working capital................................................ 34,260 40,057 41,909
Total assets................................................... 101,175 128,964 134,725
</TABLE>
20
<PAGE> 26
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
IN U.S. $
SIX FOR THE
FISCAL YEARS ENDED NINE MONTHS MONTHS NINE MONTHS
DECEMBER 31, ENDED ENDED ENDED
--------------------- SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
1994(1) 1995(1) 1996 1996 1996
--------- --------- ------------- --------- -------------
(CANADIAN AND U.S. DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................................ C$142,840 C$194,140 C$129,633 C$85,304 $ 95,318
Cost of goods sold............................... 122,513 148,788 101,532 67,900 74,656
Selling, general and administrative expenses..... 10,217 10,846 8,072 5,732 5,935
Depreciation and amortization.................... 7,160 7,931 8,456 5,020 6,218
--------- --------- --------- -------- --------
Operating income............................... 2,950 26,575 11,573 6,652 8,509
Interest expense................................. 515 852 646 393 475
Other income..................................... (195) (915) (880) (571) (647)
Expenses related to sale(2)...................... -- -- 5,907 -- 4,343
--------- --------- --------- -------- --------
Income before income taxes..................... 2,630 26,638 5,900 6,830 4,338
Provision for income taxes....................... 2,822 6,079 3,680 2,711 2,706
--------- --------- --------- -------- --------
Net income (loss) before non controlling
interest..................................... C$ (192) C$ 20,559 C$ 2,220 C$ 4,119 $ 1,632
========= ========= ========= ======== ========
OTHER DATA:
EBITDA(3)........................................ C$ 10,110 C$ 34,506 C$ 20,029 C$11,672 $ 14,727
Operating cash flows............................. 5,653 24,388 18,034 12,920 13,260
Investing cash flows............................. (7,392) (21,790) (14,444) (15,228) (10,621)
Financing cash flows............................. 5,737 9,300 1,222 (1,332) 899
Capital expenditures............................. 6,679 23,764 13,058 7,997 9,601
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents........................ C$ 4,703 C$ 16,600 C$ 21,411 $ 15,744
Working capital.................................. 25,276 40,057 41,909 30,815
Total assets..................................... 91,139 128,964 134,725 99,063
Total debt, including current maturities......... 14,101 15,998 17,563 12,914
</TABLE>
- ---------------
(1) Under Canadian GAAP in effect at the time, the Company recognized certain
revenues related to a gain on an out-of-court settlement in 1994. Under U.S.
GAAP, that gain would have been deferred and recognized in 1995.
(2) Represents non-recurring expenses incurred in connection with the sale of
Circo Craft to Viasystems Group which includes, among others, brokerage and
legal fees.
(3) EBITDA is defined as operating income plus depreciation and amortization.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements as revenues
increase more than cash expenditures for operating expenses. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. The calculation of EBITDA does not
include the commitments of the Company for capital expenditures and payment
of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies.
21
<PAGE> 27
VIASYSTEMS TECHNOLOGIES CORP.
The selected information below presents financial information of the Lucent
Division (renamed Viasystems Technologies) for the periods indicated. The
unaudited financial data for the fiscal years ended December 31, 1992 and 1993
and the six months ended June 30, 1996, has been derived from the unaudited
financial statements of Viasystems Technologies which, in the opinion of
management of the Company, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation. The data for the
fiscal years ended December 31, 1994 and 1995, and the eleven months ended
November 30, 1996 (the period prior to the acquisition of the Lucent Division by
Viasystems Technologies), has been derived from the audited statements of
operations of Viasystems Technologies. Presentation of balance sheet data for
Viasystems Technologies is not meaningful because such business was a division
of Lucent Technologies for the periods indicated. In addition, Viasystems
Technologies was a captive producer for Lucent Technologies and historical
financial results for Viasystems Technologies may not be indicative of its
results of operations as an independent entity. The following information should
be read in conjunction with the audited financial statement of Viasystems
Technologies and the notes thereto, the "Unaudited Pro Forma Financial
Information," and "Management's Discussion and Analysis of Results of Operations
and Financial Condition," all included elsewhere herein.
<TABLE>
<CAPTION>
SIX
ELEVEN MONTHS MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED ENDED
----------------------------------------- NOVEMBER 30, JUNE 30,
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- ------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $247,458 $262,364 $310,559 $325,047 $325,102 $171,299
Cost of goods sold.................. 205,175 217,277 238,623 274,824 244,313 129,897
Selling, general and administrative
expenses.......................... 29,525 24,259 42,930 42,445 34,792 20,565
Depreciation and amortization....... 17,405 17,606 16,111 16,378 18,317 10,527
-------- -------- -------- -------- -------- --------
Operating income (loss)........... (4,647) 3,222 12,895 (8,600) 27,680 10,310
Interest expense(1)................. -- -- 5 204 917 361
Other income........................ (191) (249) (75) (94) (228) (564)
-------- -------- -------- -------- -------- --------
Income (loss) before income
taxes........................... (4,456) 3,471 12,965 (8,710) 26,991 10,513
Provision (benefit) for income
taxes............................. (1,737) 1,319 4,927 (3,310) 10,257 4,205
-------- -------- -------- -------- -------- --------
Net income (loss)................. $ (2,719) $ 2,152 $ 8,038 $ (5,400) $ 16,734 $ 6,308
======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2)........................... $ 12,758 $ 20,828 $ 29,006 $ 7,778 $ 45,997 $ 20,837
Operating cash flows(3).............
Investing cash flows(3).............
Financing cash flows(3).............
Capital expenditures................ 11,804 9,823 16,884 22,173 16,485 8,100
</TABLE>
- ---------------
(1) Interest expense represents interest incurred on capital leases.
(2) EBITDA is defined as operating income (loss) plus depreciation and
amortization. The Company believes that EBITDA provides additional
information for determining its ability to meet debt service requirements as
revenues increase more than cash expenditures for operating expenses. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by generally accepted
accounting principles, and EBITDA does not necessarily indicate whether cash
flow will be sufficient for cash requirements. The calculation of EBITDA
does not include the commitments of the Company for capital expenditures and
payment of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies. Charges of $10,069, $8,896, $14,565, $18,987,
$7,900 and $6,388, net of estimated additional administrative costs to be
incurred, for fiscal years ended 1992, 1993, 1994, 1995, the eleven months
ended November 30, 1996 and the six months ended June 30, 1996,
respectively, incurred with respect to corporate allocations to the Lucent
Division by Lucent Technologies, which are not expected to be incurred by
the Company are included in the historical results of operations and have
not been eliminated to calculate EBITDA.
(3) Financial statements had not been previously prepared for the Lucent
Division. The data in the table above has been derived from financial
statements that present only assets purchased in the Lucent Division
acquisition and results of operations related to the Lucent Division. Any
computation of historical cash flow data for the Lucent Division would be
based on arbitrary assumptions of the financial information necessary to
prepare such data. As a result, the historical cash flow data of the Lucent
Division has not been prepared or presented.
22
<PAGE> 28
FORWARD GROUP PLC
The selected information below presents financial information of Forward
Group for the periods indicated. The data for the five fiscal years ended
January 31, 1997, set forth in U.K. GAAP in U.K.L, has been derived from the
audited consolidated financial statements of Forward Group. The data for the six
months ended June 30, 1996 and the three months ended March 31, 1997, has been
derived from the unaudited condensed consolidated financial statements of
Forward Group. In the opinion of management the unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation. The consolidated
financial statements of Forward Group have been prepared in accordance with U.K.
GAAP, which differs in certain significant respects from U.S. GAAP (see Note 25
to the consolidated financial statements of Forward Group included elsewhere
herein). The data set forth in U.S. GAAP for the three fiscal years ended
January 31, 1997 and for the six months ended June 30, 1996 and the three months
ended March 31, 1997, has been derived from the audited and unaudited condensed
financial statements of Forward Group and adjusted for differences between U.K.
GAAP and U.S. GAAP and includes financial information for the fiscal year ended
January 31, 1997, and the three months ended March 31, 1997, which has been
translated for convenience to U.S.$ at exchange rates of U.K.L.62=U.S. $1.00 and
U.K.L.61==U.S. $1.00, respectively (Source: The Wall Street Journal). The
following information should be read in conjunction with the audited and
unaudited condensed consolidated financial statements of Forward Group and the
notes thereto, the "Unaudited Pro Forma Financial Information," and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," all included elsewhere herein.
U.K. GAAP
----------
<TABLE>
<CAPTION>
SIX THREE
MONTHS MONTHS
FISCAL YEARS ENDED JANUARY 31, ENDED ENDED
------------------------------------------------------ JUNE 30, MARCH 31,
1993 1994 1995 1996 1997 1996 1997
-------- -------- -------- --------- --------- --------- ---------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales............................... L 12,459 L 20,663 L 23,819 L 66,839 L 105,029 L 49,899 L 25,287
Costs of goods sold..................... 6,868 11,505.. 17,032 49,850 79,030 36,826 18,938
Selling, general and administrative
expenses.............................. 3,290 5,856 3,179 6,425 11,189 3,919 2,271
Depreciation and amortization........... 914 1,143 1,215 2,701 4,694 1,979 1,265
Restructuring charges(1)................ -- -- -- 1,244 -- --
-------- -------- -------- --------- --------- --------- ---------
Operating income...................... 1,387 2,159 2,393 7,863 8,872 7,175 2,813
Interest expense........................ 213 208 228 412 996 354 381
Other income............................ (57) (75) (52) (113) (229) (121) (40)
Gain on disposal of discontinued
operation(2).......................... -- -- (1,503) -- -- -- --
Expense related to sale(3).............. -- -- -- -- -- 1,318
-------- -------- -------- --------- --------- --------- ---------
Income before income taxes............ 1,231 2,026 3,720 7,564 8,105 6,942 1,154
Provision for income taxes.............. 428 699 744 2,641 2,707 2,291 833
-------- -------- -------- --------- --------- --------- ---------
Net income............................ L 803 L 1,327 L 2,976 L 4,923 L 5,398 L 4,651 L 321
======== ======== ======== ========= ========= ========= =========
OTHER DATA:
EBITDA(4)............................... L 2,301 L 3,302 L 3,608 L 10,564 L 14,810 L 9,154 L 4,078
Capital expenditures.................... 1,423 3,050 2,724 4,678 11,841 7,292 1,494
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............... L 3 L 4 L 3 L 789 L -- L --
Working capital......................... (561) (94) 1,245 1,898 (3,074) (3,610)
Total assets............................ 8,997 13,968 15,589 51,124 60,282 63,721
</TABLE>
23
<PAGE> 29
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
IN US$
SIX THREE --------------------------
FISCAL YEARS ENDED MONTHS MONTHS FISCAL YEAR THREE MONTHS
JANUARY 31, ENDED ENDED ENDED ENDED
------------------------------- JUNE 30, MARCH 31, JANUARY 31, MARCH 31,
1995 1996 1997 1996 1997 1997 1997
-------- -------- --------- -------- --------- ----------- ------------
(POUNDS AND DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... L 23,819 L 66,839 L 105,029 L49,899 L 25,287 $ 169,402 $ 41,454
Costs of goods sold................ 17,032 49,850 79,030 36,826 18,938 127,468 31,046
Selling, general and administrative
expenses......................... 3,179 6,390 11,029 3,849 2,231 17,789 3,657
Depreciation and amortization...... 1,219 2,787 4,870 2,058 1,313 7,855 2,152
Restructuring charges(1)........... -- -- 1,244 -- -- 2,006 --
-------- -------- --------- -------- -------- --------- ---------
Operating income................. 2,389 7,812 8,856 7,166 2,805 14,284 4,599
Interest expense................... 228 412 996 354 381 1,606 625
Other income....................... (52) (113) (229) (121) (40) (369) (66)
Gain on disposal of discontinued
operation(2)..................... (1,523) -- -- -- -- -- --
Expense related to sale(3)......... -- -- -- -- 1,318 -- 2,161
-------- -------- --------- -------- -------- --------- ---------
Income before income taxes....... 3,736 7,513 8,089 6,933 1,146 13,047 1,879
Provision for income taxes......... 1,488 2,652 2,760 2,314 846 4,452 1,387
-------- -------- --------- -------- -------- --------- ---------
Net income....................... L 2,248 L 4,861 L 5,329 L 4,619 L 300 $ 8,595 $ 492
======== ======== ========= ======== ======== ========= =========
OTHER DATA:
Adjusted EBITDA(4)................. L 3,608 L 10,599 L 14,970 L 9,224 L 4,118 $ 24,145 $ 6,751
Operating cash flows............... 1,901 8,594 13,995 6,911 2,687 22,573 4,405
Investing cash flows............... 301 (12,045) (16,373) (13,244) (488) (26,408) (800)
Financing cash flows............... (2,203) 4,237 1,589 5,231 (2,199) 2,563 (3,604)
Capital expenditures............... 2,724 4,678 11,841 7,292 1,494 19,098 2,449
BALANCE SHEET DATA
(END OF PERIOD):
Cash and cash equivalents.......... L 3 L 789 L -- L -- $ -- $ --
Working capital.................... 1,534 2,553 (3,074) (3,610) (4,958) (5,917)
Total assets....................... 15,134 56,539 67,406 70,814 108,719 116,088
Total debt, including current
maturities....................... 1,746 7,879 15,535 18,295 25,056 29,992
</TABLE>
- ---------------
(1) Represents non-recurring restructuring charges related to the consolidation
and rationalization of several facilities at Forward Group.
(2) Represents the gain recognized from the sale of an unrelated business in
December 1994.
(3) Represents non-recurring expenses incurred in connection with the sale of
Forward Group which includes, among others, brokerage and legal fees.
(4) Adjusted EBITDA is defined as operating income plus depreciation,
amortization and the non-cash charges related to the restructuring of
facilities discussed in note (1) above in the amount of L1,244 and $2,006,
in U.K.L and U.S.$, respectively. The Company believes that Adjusted EBITDA
provides additional information for determining its ability to meet debt
service requirements as revenues increase more than cash expenditures for
operating expenses. Adjusted EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations as
determined by generally accepted accounting principles, and does not
necessarily indicate whether cash flow will be sufficient for cash
requirements. The calculation of Adjusted EBITDA does not include the
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company. Adjusted
EBITDA, as presented, may not be comparable to similarly-titled measures of
other companies.
24
<PAGE> 30
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED ("CHIPS")
The selected information below presents financial information of Chips as
of and for the periods indicated. The data as of and for the fiscal years ended
April 2, 1993, April 1, 1994, March 31, 1995, March 29, 1996, and April 4, 1997
set forth in U.K.L, has been derived from the audited consolidated financial
statements of Chips. The data for the six months ended June 29, 1996 and the
three months ended April 4, 1997, has been derived from the unaudited condensed
consolidated financial statements of Chips. In the opinion of management of the
Company, the unaudited condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation. The results for the three months ended March 29, 1996 (which
are included in the results for the six months ended June 29, 1996) and the
three months ended April 4, 1997, are included in the statement of operations
data for the fiscal years ended March 29, 1996 and April 4, 1997. The
consolidated financial statements of Chips have been prepared in accordance with
U.K. GAAP, which differs in certain significant respects from U.S. GAAP (see
Note 25 to the consolidated financial statements of Chips included elsewhere
herein). The data set forth in U.S. GAAP as of and for the fiscal years ended
March 31, 1995, March 29, 1996 and April 4, 1997, and for the six months ended
June 29, 1996, and the three months ended April 4, 1997, has been derived from
the audited and unaudited condensed consolidated financial statements of Chips
and adjusted for differences between U.K. GAAP and U.S. GAAP and includes
financial information for the fiscal year and three months ended April 4, 1997,
which has been translated for convenience to U.S.$ at an exchange rate of
U.K.L.61=U.S. $1.00 (Source: The Wall Street Journal). The following information
should be read in conjunction with the audited and unaudited condensed
consolidated financial statements of Chips and the notes thereto, the "Unaudited
Pro Forma Financial Information," and "Management's Discussion and Analysis of
Results of Operations and Financial Condition," all included elsewhere herein.
U.K. GAAP
----------
<TABLE>
<CAPTION>
SIX THREE
FISCAL YEARS ENDED MONTHS MONTHS
------------------------------------------------------- ENDED ENDED
APRIL 2, APRIL 1, MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1993 1994 1995 1996 1997 1996 1997
-------- -------- --------- --------- --------- --------- ---------
(POUNDS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................... L 36,750 L 51,852 L 70,805 L 104,611 L 141,643 L 61,834 L 38,266
Costs of goods sold.......................... 25,793 36,024 49,149 73,407 94,466 39,000 28,848
Selling, general and administrative
expenses................................... 4,207 6,264 6,242 7,522 10,514 4,399 1,895
Depreciation and amortization................ 3,198 6,561 10,822 17,302 19,123 8,971 5,050
-------- -------- --------- --------- --------- -------- ---------
Operating income........................... 3,552 3,003 4,592 6,380 17,540 9,464 2,473
Interest expense............................. 830 449 921 807 818 440 260
Other income................................. (27) (200) (109) -- (44) -- (44)
-------- -------- --------- --------- --------- -------- ---------
Income before income taxes................. 2,749 2,754 3,780 5,573 16,766 9,024 2,257
Provision for income taxes................... 997 1,488 2,539 4,422 6,874 4,083 668
-------- -------- --------- --------- --------- -------- ---------
Net income................................. L 1,752 L 1,266 L 1,241 L 1,151 L 9,892 L 4,941 L 1,589
======== ======== ========= ========= ========= ======== =========
OTHER DATA:
EBITDA(1).................................... L 6,750 L 9,564 L 15,414 L 23,682 L 36,663 L 18,435 L 7,523
Capital expenditures......................... 5,292 11,434 14,477 25,544 27,591 12,751 13,672
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents.................... L 33 L 27 L 2,087 L 2,636 L 26,244 L 26,244
Working capital.............................. 1,027 (2,948) (1,094) (5,851) 11,516 11,516
Total assets................................. 26,928 36,067 52,616 67,349 129,921 129,921
</TABLE>
25
<PAGE> 31
APPROXIMATE AMOUNTS IN U.S. GAAP
<TABLE>
<CAPTION>
IN U.S.$
SIX THREE --------------------------
FISCAL YEARS ENDED MONTHS MONTHS FISCAL YEAR THREE MONTHS
--------------------------------- ENDED ENDED ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4, APRIL 4, APRIL 4,
1995 1996 1997 1996 1997 1997 1997
--------- --------- --------- --------- --------- ----------- ------------
(POUNDS AND DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ L 70,805 L104,611 L 141,643 L 61,834 L 38,266 $232,202 $ 62,731
Costs of goods sold...................... 49,149 73,407 94,466 39,000 28,848 154,862 47,292
Selling, general and administrative
expenses............................... 6,112 7,464 10,437 4,358 1,877 17,110 3,077
Depreciation and amortization............ 9,124 15,752 17,522 8,184 4,650 28,725 7,623
-------- --------- --------- -------- --------- -------- --------
Operating income....................... 6,420 7,988 19,218 10,292 2,891 31,505 4,739
Interest expense......................... 921 807 818 440 260 1,341 426
Other income............................. (109) -- (44) -- (44) (72) (72)
-------- --------- --------- -------- --------- -------- --------
Income before income taxes............. 5,608 7,181 18,444 9,852 2,675 30,236 4,385
Provision for income taxes............... 2,080 2,584 6,112 3,633 351 10,020 576
-------- --------- --------- -------- --------- -------- --------
Net income............................. L 3,528 L 4,597 L 12,332 L 6,219 L 2,324 $ 20,216 $ 3,809
======== ========= ========= ======== ========= ======== ========
OTHER DATA:
EBITDA(1)................................ L 15,544 L 23,740 L 36,740 L 18,476 L 7,541 $ 60,230 $ 12,362
Operating cash flows..................... 10,763 18,670 27,826 13,550 8,243 45,616 13,513
Investing cash flows..................... (12,670) (16,816) (24,119) (5,870) (9,490) (39,539) (15,557)
Financing cash flows..................... 3,967 (1,305) 19,901 (2,333) 5,229 32,625 8,572
Capital expenditures..................... 14,477 25,544 27,591 12,751 13,672 45,231 22,413
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................ L 2,087 L 2,636 L 26,244 L 26,244 $ 43,023 $ 43,023
Working capital.......................... (677) (3,929) 14,276 14,276 23,403 23,403
Total assets............................. 45,397 62,893 105,452 105,452 172,872 172,872
Total debt, including current
maturities............................. 11,295 15,699 35,754 35,754 58,613 58,613
</TABLE>
- ---------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements as revenues
increase more than cash expenditures for operating expenses. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles, and EBITDA does not necessarily indicate whether cash flow will
be sufficient for cash requirements. The calculation of EBITDA does not
include the commitments of the Company for capital expenditures and payment
of debt and should not be deemed to represent funds available to the
Company. EBITDA, as presented, may not be comparable to similarly-titled
measures of other companies.
26
<PAGE> 32
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") of the Company is based on the audited and unaudited
condensed consolidated financial statements of Viasystems Group, the audited and
unaudited condensed consolidated financial statements of Circo Craft, the
audited and unaudited condensed financial statements of Viasystems Technologies,
the audited and unaudited condensed consolidated financial statements of Forward
Group, and the audited and unaudited condensed consolidated financial statements
of Chips, all included elsewhere herein. Due to the differing yearends of
Forward Group and Chips, compared to the Company, the results of Forward Group
for the month of January and Chips for the three months ended April 4, 1997 are
included in the unaudited pro forma statements of operations for both the year
ended December 31, 1996, and the six months ended June 30, 1997. In order to
present the Pro Forma Financial Information, certain financial information for
Circo Craft, Forward Group and Chips was translated from the local currency to
United States dollars at the exchange rate in effect as of the date of the
financial information based upon exchange rates published in The Wall Street
Journal. Such rates, in all cases, are not materially different from the
weighted average exchange rate for the period being translated. Circo Craft
financial information for the nine months ended September 30, 1996, was
translated at C$1.36=U.S.$1.00. Forward Group financial information for the year
ended January 31, 1997 and the three months ended March 31, 1997 were translated
at U.K. L.62=U.S.$1.00 and U.K. L.61= U.S.$1.00, respectively. Chips financial
information for the year and three months ended April 4, 1997, was translated at
U.K. L.61= U.S.$1.00. The Company does not represent that the Canadian dollar or
British pound sterling amounts shown herein could have been converted to United
States dollars at the quoted exchange rates. The Pro Forma Financial Information
gives effect to pro forma adjustments that are based upon available information
and certain assumptions that the Company believes are reasonable. The unaudited
pro forma statement of operations for the year ended December 31, 1996 gives
effect to the acquisitions of Circo Craft, Viasystems Technologies and Forward
Group, the Chips Merger and the consummation of the Original Offering and the
Exchange Offer, as though each such transaction had occurred at January 1, 1996.
The unaudited pro forma statement of operations for the six months ended June
30, 1997, gives effect to the 1997 Transactions, the consummation of the
Original Offering and the Exchange Offer, as though such transactions had
occurred at January 1, 1996. The financial data for Circo Craft, Forward Group
and Chips used in the preparation of the Pro Forma Financial Information has
been adjusted for the differences between Canadian GAAP or U.K. GAAP, as the
case may be, and U.S. GAAP (see notes to the consolidated financial statements
of Circo Craft, Forward Group and Chips, all included elsewhere herein).
The Pro Forma Financial Information does not purport to be indicative of
the results that would have been obtained had such transactions been completed
as of the assumed dates and for the periods presented or that may be obtained in
the future. The Pro Forma Financial Information should be read in conjunction
with the historical financial statements of Viasystems Group, Circo Craft,
Viasystems Technologies, Forward Group and Chips, and the related notes thereto,
all included elsewhere herein.
27
<PAGE> 33
VIASYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ORIGINAL
OFFERING
AND EXCHANGE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFER
COMBINED(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA(2)
------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales............................. $872,424 $ -- $872,424 $ -- $872,424
Costs of goods sold(3)................ 643,351 (13,474)(4) 629,877 -- 629,877
Selling, general and administrative
expenses(3)......................... 79,470 79,470 -- 79,470
Depreciation and amortization......... 65,750 64,208(5) 129,958 -- 129,958
Write-off of acquired in-process
research and development............ 50,800 (50,800)(6) -- -- --
Restructuring charges................. 2,006 -- 2,006 -- 2,006
-------- -------- -------- -------- --------
Operating income.................... 31,047 66 31,113 -- 31,113
Interest expense, net(7).............. 6,842 73,916(8) 80,758 505(9) 81,263
Amortization of deferred financing
costs............................... 470 7,552(10) 8,022 1,388(11) 9,410
Expenses related to sale.............. 4,343 (4,343)(12) -- -- --
Other income.......................... (1,054) -- (1,054) -- (1,054)
-------- -------- -------- -------- --------
Income (loss) before income taxes... 20,446 (77,059) (56,613) (1,893) (58,506)
Provision (benefit) for income
taxes............................... 22,011 (27,213)(13) (5,202) (757)(13) (5,959)
-------- -------- -------- -------- --------
Net income (loss)................ $ (1,565) $(49,846) $(51,411) $ (1,136) $(52,547)
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(14)......................... N/A
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
28
<PAGE> 34
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) The following combined historical operating data of Viasystems Group for the
period from inception (August 28, 1996) to December 31, 1996, Circo Craft
for the nine months ended September 30, 1996 (the period prior to the
acquisition of Circo Craft by Viasystems Group), Viasystems Technologies for
the eleven months ended November 30, 1996 (the period prior to the
acquisition of the Lucent Division by Viasystems Technologies), Forward
Group for the year ended January 31, 1997, and Chips for the year ended
April 4, 1997 was derived from the audited historical statements of
operations of Viasystems Group, Circo Craft, Viasystems Technologies,
Forward Group, and Chips all included elsewhere herein.
<TABLE>
<CAPTION>
VIASYSTEMS CIRCO VIASYSTEMS FORWARD COMBINED
GROUP CRAFT TECHNOLOGIES GROUP CHIPS HISTORICAL
---------- ------- ------------ -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales................ $ 50,400 $95,318 $325,102 $169,402 $232,202 $872,424
Costs of goods sold...... 42,052 74,656 244,313 127,468 154,862 643,351
Selling, general and
administrative
expenses............... 3,844 5,935 34,792 17,789 17,110 79,470
Depreciation and
amortization........... 4,635 6,218 18,317 7,855 28,725 65,750
Write-off of acquired in-
process research and
development............ 50,800 -- -- -- -- 50,800
Restructuring charges.... -- -- -- 2,006 -- 2,006
-------- ------- -------- -------- -------- --------
Operating income
(loss).............. (50,931) 8,509 27,680 14,284 31,505 31,047
Interest expense......... 2,503 475 917 1,606 1,341 6,842
Amortization of deferred
financing costs........ 470 -- -- -- -- 470
Expenses related to
sale................... -- 4,343 -- -- -- 4,343
Other expense (income)... 262 (647) (228) (369) (72) (1,054)
-------- ------- -------- -------- -------- --------
Income (loss) before
income taxes........ (54,166) 4,338 26,991 13,047 30,236 20,446
Provision (benefit) for
income taxes........... (5,424) 2,706 10,257 4,452 10,020 22,011
-------- ------- -------- -------- -------- --------
Net income (loss)... $(48,742) $ 1,632 $ 16,734 $ 8,595 $ 20,216 $ (1,565)
======== ======= ======== ======== ======== ========
</TABLE>
(2) The Unaudited Pro Forma Statement of Operations does not reflect the
following non-recurring charges which resulted from the 1997 Transactions
and the Original Offering. Such charges were recorded in the first and
second quarters of 1997. See "Management's Discussion and Analysis of
Results of Operations and Financial Condition".
(a) Write-off recorded as an Extraordinary Item in the second quarter of
1997 of $7,796, net of income tax benefit, related to debt financing
fees on debt retired before maturity with the proceeds of the Original
Offering.
(b) Write-off of $294,500 recorded in the second quarter of 1997 related to
acquired in-process research and development in the acquisitions of
Forward Group and Chips.
(c) Expenses of the seller of approximately $2,161 related to the
acquisition of Forward Group have been recorded by Forward Group as of
March 1997. See "Viasystems, Inc. Unaudited Pro Forma Statement of
Operations for the Six Months Ended June 30, 1997" and accompanying
notes thereto.
(3) Included in cost of goods sold and selling, general and administrative
expenses are $6,004 and $12,200, respectively of corporate allocations from
Lucent to Viasystems Technologies. Such allocations will not be incurred by
the Company on standalone basis, but have not been eliminated in the pro
forma statement of operations.
29
<PAGE> 35
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(4) Adjustment reflects the following:
<TABLE>
<S> <C>
(a) Effect on cost of goods sold as
a result of purchase accounting
adjustments.................... $ (1,844)
(b) Savings associated with the
change to certain benefits of
manufacturing personnel........ (11,630)
---------
Total......................... $ (13,474)
=========
</TABLE>
(5) Adjustment reflects the full year effect of the acquisitions of the Lucent
Division, Circo Craft, Forward Group and Chips.
(6) Adjustment reflects elimination of the write-off of acquired in-process
research and development as this item is not expected to have a continuing
impact on operations.
(7) Interest expense, net, is interest expense net of interest income. A
one-half of one percent change in interest rates would impact interest
expense by approximately $525 in the aggregate for borrowings under the
Tranche B Loan, the Tranche C Loan, and the Forward Group Loan Notes
remaining outstanding on a pro forma basis after giving effect to the
Transactions, the Original Offering and the Exchange Offer.
(8) Adjustment reflects the net impact to interest expense of the following
borrowings as if the Transactions had been consummated as of the beginning
of the period:
<TABLE>
<S> <C>
Senior Credit Facilities:
Chips Revolving Loan -- $41,587 at 8.0%................... $ 3,327
Canadian Revolving Loan -- $1,235 at 8.0%................. 99
Tranche A Loan -- $35,000 at 8.0%......................... 2,800
Tranche B Loan -- $55,000 at 8.5%......................... 4,675
Tranche C Loan -- $55,000 at 9.0%......................... 4,950
Canadian Term Loan -- $63,345 at 5.5%..................... 3,484
Chips Reimbursement Obligation(a)......................... 30,258
Forward Group Loan Notes -- $23,852 at 7.0%................. 1,669
Subordinated Credit Facility -- $216,000 at 12.1%........... 26,190
Other -- $41,324 at 8.0%.................................... 3,306
-------
80,758
Elimination of historical interest.......................... (6,842)
-------
$73,916
=======
</TABLE>
--------------------
(a) Interest on the Chips Reimbursement Obligation consists of:
<TABLE>
<S> <C>
Chips Loan Notes -- $437,500 at 6.2%................... $27,213
Letter of credit fee -- $346,463 at 2.5%............... 8,662
Letter of credit fee on the Cash Collateral
Reimbursement Account -- $118,250 at 0.25%............ 296
Less: Interest income on the Cash Collateral
Reimbursement Account -- $118,250 at 5.0%............. (5,913)
-------
$30,258
=======
</TABLE>
(9) Adjustment reflects the net impact to interest expense as a result of the
Original Offering and the Exchange Offer:
<TABLE>
<S> <C>
Issuance of Senior Subordinated Notes due 2007 -- $400,000
at 9.75%................................................ $ 39,000
Repayment of:
Chips Revolving Loan -- $41,587 at 8.0%.................. (3,327)
Canadian Revolving Loan -- $1,235 at 8.0%................ (99)
Tranche A Loan -- $35,000 at 8.0%........................ (2,800)
Tranche C Loan -- $28,833 at 9.0%........................ (2,595)
Canadian Term Loan -- $63,345 at 5.5%.................... (3,484)
Subordinated Credit Facility -- $216,000 at 12.1%........ (26,190)
--------
$ 505
========
</TABLE>
(10) Adjustment reflects the amortization of deferred financing costs associated
with the Transactions as if the Transactions had been consummated as of the
beginning of the period. These
30
<PAGE> 36
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
costs are amortized over the term of the related debt using the effective
interest method and the straight-line method, which approximates the
effective interest method.
(11) Adjustment reflects the amortization of deferred financing costs associated
with the Original Offering and the Exchange Offer as if the Original
Offering and the Exchange Offer had been consummated as of the beginning of
the period and the elimination of the amortization of the deferred
financing costs associated with debt which was repaid prior to maturity
with the proceeds of the Original Offering. Deferred financing costs are
amortized over the term of the related debt using the straight-line method,
which approximates the effective interest method.
(12) Adjustment reflects the elimination of expenses of Circo Craft related to
the acquisition of Circo Craft.
(13) Adjustments reflect the pro forma tax effect of the adjustments described
above based on effective tax rates of 40% for all entries impacting U.S.
pro forma results and 33% for all entries impacting non-U.S. pro forma
results.
(14) For purposes of calculating the ratio of earnings to fixed charges
available to cover fixed charges, "earnings" represent earnings before
income taxes plus fixed charges. "Fixed charges" consist of interest on all
indebtedness, amortization of deferred financing costs and the portion
(approximately 1/3) of rental expenses that management believes is
representative of the interest component of rent expense. Earnings on a pro
forma basis were insufficient to cover fixed charges by $58,506.
31
<PAGE> 37
VIASYSTEMS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ORIGINAL
OFFERING AND
EXCHANGE
HISTORICAL TRANSACTIONS TRANSACTIONS OFFER
COMBINED(1) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
----------- ------------ ------------ -------------- ---------
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 450,877 $ -- $450,877 $ -- $450,877
Costs of goods sold...................... 332,986 -- 332,986 -- 332,986
Selling, general and administrative
expenses............................... 38,585 -- 38,585 -- 38,585
Depreciation and amortization............ 56,078 6,591(2) 62,669 -- 62,669
Write-off of acquired in-process R&D..... 294,500 (294,500)(3) -- -- --
--------- -------- -------- ------- --------
Operating income (loss)................ (271,272) 287,909 16,637 -- 16,637
Interest expense, net(4)................. 23,178 17,518(5) 40,696 774(6) 41,470
Amortization of deferred financing
costs.................................. 2,796 1,013(7) 3,809 (144)(8) 3,665
Expenses related to sale................. 2,161 (2,161)(9) -- -- --
Other income............................. (68) -- (68) -- (68)
--------- -------- -------- ------- --------
Income (loss) before income taxes and
extraordinary item.................. (299,339) 271,539 (27,800) (630) (28,430)
Provision (benefit) for income taxes..... 2,854 (7,416)(10) (4,562) (252)(10) (4,814)
--------- -------- -------- ------- --------
Income (loss) before extraordinary
item................................ (302,193) 278,955 (23,238) (378) (23,616)
--------- -------- -------- ------- --------
Extraordinary loss, net of income tax
benefit................................ 7,796 -- 7,796 (7,796)(11) --
--------- -------- -------- ------- --------
Net income (loss).............. $(309,989) $278,955 $(31,034) $ 7,418 $(23,616)
========= ======== ======== ======= ========
Ratio of earnings to fixed charges(12)... N/A
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
32
<PAGE> 38
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(DOLLARS IN THOUSANDS)
(1) The following combined interim operating data of Viasystems, Inc. for the
six months ended June 30, 1997, Forward Group for the three month period
ended March 31, 1997, and of Chips for the three month period ended April 4,
1997 was derived from the unaudited interim statement of operations all
included elsewhere herein.
<TABLE>
<CAPTION>
VIASYSTEMS FORWARD COMBINED
INC. GROUP CHIPS HISTORICAL
---------- ------- ------- ----------
<S> <C> <C> <C> <C>
Net sales..................................... $ 346,692 $41,454 $62,731 $ 450,877
Costs of goods sold........................... 254,648 31,046 47,292 332,986
Selling, general and administrative
expenses.................................... 31,851 3,657 3,077 38,585
Depreciation and amortization................. 46,303 2,152 7,623 56,078
Write-off of acquired in-process R&D.......... 294,500 -- -- 294,500
--------- ------- ------- ---------
Operating income (loss)..................... (280,610) 4,599 4,739 (271,272)
--------- ------- ------- ---------
Interest expense.............................. 22,127 625 426 23,178
Amortization of deferred financing costs...... 2,796 -- -- 2,796
Expenses related to sale...................... -- 2,161 -- 2,161
Other expense (income)........................ 70 (66) (72) (68)
--------- ------- ------- ---------
Income (loss) before income taxes and
extraordinary item....................... (305,603) 1,879 4,385 (299,339)
Provision for income taxes.................... 891 1,387 576 2,854
--------- ------- ------- ---------
Income (loss) before extraordinary item..... (306,494) 492 3,809 (302,193)
--------- ------- ------- ---------
Extraordinary loss, net of income tax
benefit..................................... 7,796 -- -- 7,796
--------- ------- ------- ---------
Net income (loss)........................ $(314,290) $ 492 $ 3,809 $(309,989)
========= ======= ======= =========
</TABLE>
(2) Adjustment reflects the six month effect of the acquisitions of Forward
Group and Chips.
(3) Adjustment reflects elimination of the write-off of acquired in-process
research and development as this item is not expected to have a continuing
impact on operations.
(4) Interest expense, net, is interest expense net of interest income. A
one-half of one percent change in interest rates would impact interest
expense by approximately $282 in the aggregate for borrowings under the
Tranche B Loan, the Tranche C Loan, and the Forward Group Loan Notes
outstanding at June 30, 1997.
33
<PAGE> 39
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(5) Adjustment reflects the net impact to interest expense of the following
borrowings as if the 1997 Transactions had been consummated as of January
1, 1996:
<TABLE>
<S> <C>
Senior Credit Facilities:
Chips Revolving Loan -- $41,587 at 8.1%................... $ 1,678
Tranche A Loan -- $45,000 at 8.1%......................... 1,815
Tranche B Loan -- $55,000 at 8.6%......................... 2,356
Tranche C Loan -- $55,000 at 9.1%......................... 2,494
Canadian Term Loan -- $62,995 at 5.5%..................... 1,742
Chips Reimbursement Obligation(a)......................... 15,129
Forward Group Loan Notes -- $24,243 at 7.0%................. 857
Subordinated Credit Facility -- $216,000 at 11.6%........... 12,493
Other -- $53,312 at 8.0%.................................... 2,132
--------
40,696
Elimination of historical interest.......................... (23,178)
--------
$ 17,518
========
</TABLE>
- --------------------
(a) Interest on the Chips Reimbursement Obligation consists of:
<TABLE>
<S> <C>
Chips Loan Notes -- $437,500 at 6.2%.................... $13,606
Letter of credit fee -- $346,463 at 2.5%................ 4,331
Letter of credit fee on the Cash Collateral
Reimbursement Account -- $118,250 at 0.25%............. 148
Less: Interest income on the Cash Collateral
Reimbursement Account -- $118,250 at 5.0%.............. (2,956)
-------
$15,129
=======
</TABLE>
(6) Adjustment reflects the net impact to interest expense as a result of the
Original Offering and the Exchange Offer:
<TABLE>
<S> <C>
Senior Subordinated Notes due 2007 -- $400,000 at 9 3/4%.... $19,500
Senior Credit Facilities:
Tranche B Loan -- $55,000 at 8.6%......................... 2,356
Tranche C Loan -- $33,000 at 9.1%......................... 1,496
Chips Reimbursement Obligation(a)......................... 15,129
Forward Group Loan Notes -- $24,243 at 7.0%................. 857
Other -- $53,312 at 8.0%.................................... 2,132
-------
41,470
Elimination of Transactions Pro Forma interest.............. (40,696)
-------
$ 774
=======
</TABLE>
- --------------------
(a) Interest on the Chips Reimbursement Obligation consists of:
<TABLE>
<S> <C>
Chips Loan Notes -- $437,500 at 6.2%.................... $13,606
Letter of credit fee -- $346,463 at 2.5%................ 4,331
Letter of credit fee on the Cash Collateral
Reimbursement Account -- $118,250 at 0.25%............. 148
Less: Interest income on the Cash Collateral
Reimbursement Account -- $118,250 at 5.0%.............. (2,956)
-------
$15,129
=======
</TABLE>
34
<PAGE> 40
VIASYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(7) Adjustment reflects the amortization of deferred financing costs associated
with the 1997 Transactions as if the 1997 Transactions had been consummated
as of the beginning of the period. These costs are amortized over the term
of the related debt using the effective interest method and the
straight-line method, which approximates the effective interest method.
(8) Adjustment reflects the amortization of deferred financing costs associated
with the Original Offering and the Exchange Offer as if the Original
Offering and the Exchange Offer had been consummated as of the beginning of
the period and the elimination of the amortization of the deferred
financing costs associated with debt which was retired prior to maturity
with the proceeds of the Original Offering. Deferred financing costs are
amortized over the term of the related debt using the straight-line method,
which approximates the effective interest method.
(9) Adjustment reflects the elimination of expenses of Forward Group related to
the acquisition of Forward Group.
(10) Adjustments reflect the pro forma tax effect of the adjustments described
above based on effective tax rates of 40% for all entries impacting U.S.
pro forma results and 33% for all entries impacting non U.S. pro forma
results.
(11) Adjustment reflects elimination of the extraordinary item as this item is
not expected to have a continuing impact on operations.
(12) For purposes of calculating the ratio of earnings to fixed charges
available to cover fixed charges, "earnings" represent earnings before
income taxes plus fixed charges. "Fixed charges" consist of interest on all
indebtedness, amortization of deferred financing costs and the portion
(approximately 1/3) of rental expenses that management believes is
representative of the interest component of rent expense. Earnings on a pro
forma basis were insufficient to cover fixed charges by $28,430.
35
<PAGE> 41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
Hicks Muse and Mills & Partners formed Viasystems Group in August 1996 to
make strategic acquisitions of PCB manufacturers and backpanel assemblers and to
integrate those acquisitions into a global enterprise that is the preferred
manufacturer and marketer of PCBs and backpanels. In October 1996, Viasystems
Group completed the acquisition of Circo Craft, a rigid PCB manufacturer, for a
cash purchase price of approximately $129.9 million. In December 1996,
Viasystems Technologies, a wholly owned subsidiary of Viasystems Group, acquired
substantially all the assets of the Lucent Division, in a transaction valued at
$200.0 million. The combination of Circo Craft and the former Lucent Division
created one of the largest independent manufacturers of PCBs and backpanels in
North America. Prior to its acquisition by Viasystems Technologies, the Lucent
Division was a captive supplier of Lucent Technologies. Accordingly, its
historical results of operations are not indicative of the results of operations
to be expected for a stand-alone enterprise.
In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid
PCB manufacturer located in the United Kingdom, for a cash purchase price of
approximately $236.0 million. Subsequently, Viasystems Group acquired Forward
Group from the Hicks Muse affiliate. Concurrently with that transaction,
Viasystems Group organized the Company as its direct subsidiary and contributed
to it the capital stock of Circo Craft, Viasystems Technologies and Forward
Group.
In April 1997, Chips Holdings acquired Chips. Concurrently with the
consummation of the Original Offering, Viasystems Group acquired Chips in
consideration for the issuance to Hicks Muse and certain of its affiliates of
Viasystems Group's common stock valued at $140.0 million. In connection with the
Chips Merger, Viasystems Group assumed the Chips Loan Notes. Following the Chips
Merger, the Chips operating subsidiaries became indirect wholly-owned
subsidiaries of the Company. See "Summary -- Recent History."
Viasystems, Inc. is a wholly owned subsidiary of Viasystems Group.
Viasystems, Inc. was formed on April 2, 1997, as a subsidiary of Viasystems
Group. On April 10, 1997, Viasystems Group contributed to Viasystems, Inc. all
of the capital of its then existing subsidiaries -- Circo Craft, Viasystems
Technologies, and PCB Acquisition Limited (the acquisition parent of Forward
Group). Prior to the contribution of this capital by Viasystems Group,
Viasystems, Inc. had no operations of its own. The discussion included herein of
the Company represents the results of operations of Viasystems, Inc. and its
subsidiaries subsequent to the capital contribution by Viasystems Group and of
Viasystems Group and its subsidiaries prior to the capital contribution of such
subsidiaries to Viasystems, Inc.
Each of Viasystems Group, Circo Craft, Viasystems Technologies, Forward
Group and Chips are predecessors to Viasystems, Inc. A discussion of the results
of operations for each of the separate entities follows the discussion below
relating to the Company. The separate results of each entity are impacted by a
number of factors including target markets, customers, and local economics.
Differing demand for printed circuit boards in general and demand for different
technologies of printed circuit boards may not be consistent for each of the
predecessor entities acquired. The Company believes that the combination of the
predecessor entities will provide it with a significant advantage in managing
its operations to meet demand. The discussion of the results of operations of
the separate entities has been prepared based upon the results of each of
separate entity in accordance with the local GAAP of the entity and should be
read in conjunction with the "Selected Financial Data" of each of entity and the
financial statements and notes thereto of Viasystems Group, Circo Craft,
Viasystems Technologies, Forward Group, and Chips, all of which are included
elsewhere herein.
36
<PAGE> 42
THE COMPANY
Viasystems, Inc. is a wholly owned subsidiary of Viasystems Group.
Viasystems, Inc. was formed on April 2, 1997, as a subsidiary of Viasystems
Group. On April 10, 1997, Viasystems Group contributed to Viasystems, Inc. all
of the capital of its then existing subsidiaries -- Circo Craft, Viasystems
Technologies, and PCB Acquisition Limited (the acquisition parent of Forward
Group). Prior to the contribution of this capital by Viasystems Group,
Viasystems, Inc. had no operations of its own. The discussion included herein of
the Company represents the results of operations of Viasystems, Inc. and its
subsidiaries subsequent to the capital contribution by Viasystems Group and of
Viasystems Group and its subsidiaries prior to the capital contribution of such
subsidiaries to Viasystems, Inc.
The following table presents (i) statement of operations data of the
Company on a historical basis and expressed as a percentage of net sales and
(ii) specified other data.
<TABLE>
<CAPTION>
FROM INCEPTION
(AUGUST 28, 1996) SIX MONTHS ENDED
TO DECEMBER 31, JUNE 30,
1996 1997
----------------- -----------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................................... $ 50,400 100.0% $ 346,692 100.0%
Cost of goods sold............................. 42,052 83.4 254,648 73.5
Selling, general and administrative expenses... 3,844 7.6 31,851 9.2
Depreciation and amortization.................. 4,635 9.2 46,303 13.4
Write-off of acquired in-process research and
development(1)............................... 50,800 100.8 294,500 84.9
-------- ------ --------- -----
Operating loss............................... $(50,931) (101.1)% $(280,610) (80.9)%
======== ====== ========= =====
OTHER DATA:
Adjusted EBITDA(2)............................. $ 4,504 8.9% $ 60,193 17.4%
Operating cash flows........................... 1,662 22,057
Investing cash flows........................... (286,286) (198,292)
Financing cash flows........................... 300,713 212,386
</TABLE>
- ---------------
(1) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the acquisitions of Circo Craft, the
Lucent Division, Forward Group and Chips. The write-off related to acquired
research and development for projects that do not have a future alternatives
use. See "Notes to Consolidated Financial Statements" of Viasystems Group
and "Notes to Unaudited Condensed Consolidated Financial Statements" of
Viasystems, Inc.
(2) Adjusted EBITDA is defined as operating income (loss) plus depreciation,
amortization and the non-cash charge relating to the write-off of acquired
in-process research and development. The Company believes that Adjusted
EBITDA provides additional information for determining its ability to meet
debt service requirements as revenues increase more than cash expenditures
for operating expenses. Adjusted EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations as
determined by GAAP. Adjusted EBITDA does not necessarily indicate whether
cash flow will be sufficient for cash requirements. The calculation of
adjusted EBITDA does not include the commitments of the Company for capital
expenditures and payment of debt and should not be deemed to represent funds
available to the Company. Adjusted EBITDA, as presented, may not be
comparable to similarly-titled measures of other companies.
The Company's net sales for the period from inception (August 28, 1996) to
December 31, 1996 were $50.4 million and cost of goods sold were $42.1 million,
or 83.4% of net sales. Selling, general and administrative expenses for the same
period were $3.8 million, or 7.6% of net sales. During the period from inception
(August 28, 1996) to December 31, 1996, net cash provided by operating
activities was $1.7 million. For the same period, the Company used approximately
37
<PAGE> 43
$286.3 million in investing activities primarily for the acquisitions of Circo
Craft and the Lucent Division. The acquisitions were funded through the issuance
of $238.3 million of long-term obligations and the proceeds of $73.8 million of
equity offerings offset by $11.4 million of financing costs.
The Company's net sales for the six months ended June 30, 1997 were $346.7
million and cost of goods sold were $254.6 million, or 73.5% of net sales.
Selling, general and administrative expenses for the same period were $31.9
million, or 9.2% of net sales. During the six months ended June 30, 1997, net
cash from operations was $22.0 million. For the same period, the Company used
approximately $42.3 million for capital expenditures and used approximately
$155.9 million in investing activities primarily for the acquisitions of Forward
Group and Chips. The acquisitions were funded through the issuance of $187.1
million of long-term obligations and the proceeds of $59.8 million of equity
offerings offset by $34.5 million of financing costs.
The Company believes that the operating results of Viasystems, Inc. are not
comparable to the operating results expected to be achieved in the future due
to, among other things, the 1997 Transactions, the Original Offering and the
Exchange Offer. The Company believes that, due to the acquisitions, sales in
subsequent periods will increase from that reported for the period from
inception (August 28, 1996) to December 31, 1996, and for the six months ended
June 30, 1997.
CIRCO CRAFT
The following table presents, in accordance with Canadian GAAP unless
otherwise indicated, (i) statement of operations data of Circo Craft on a
historical basis and expressed as a percentage of net sales and (ii) specified
other data.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED SIX MONTHS
------------------------------------- SEPTEMBER 30, ENDED JUNE 30,
1994 1995 1996 1996
----------------- ----------------- ----------------- ----------------
(CANADIAN DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... C$151,825 100.0% C$185,156 100.0% C$129,633 100.0% C$85,304 100.0%
Cost of goods sold................ 124,929 82.3 148,788 80.4 101,532 78.3 67,900 79.6
Selling, general and
administrative expenses......... 10,079 6.6 11,087 6.0 7,969 6.1 5,704 6.7
Depreciation and amortization..... 7,160 4.7 7,931 4.3 8,456 6.5 5,020 5.9
--------- ----- --------- ----- --------- ----- -------- -----
Operating income.................. C$ 9,657 6.4% C$ 17,350 9.4% C$ 11,676 9.0% C$ 6,680 7.8%
========= ===== ========= ===== ========= ===== ======== =====
OTHER DATA:
EBITDA(1)......................... C$ 16,817 11.1% C$ 25,281 13.7% C$ 20,132 15.5% C$11,700 13.7%
Operating cash flows(2)........... 5,653 24,388 18,034 12,920
Investing cash flows(2)........... (7,392) (21,790) (14,444) (15,228)
Financing cash flows(2)........... 5,737 9,300 1,222 (1,332)
</TABLE>
- ---------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements as revenues
increase more than cash expenditures for operating expenses. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by GAAP and does not necessarily
indicate whether cash flow will be sufficient for cash requirements. The
calculation of EBITDA does not include the commitments of the Company for
capital expenditures and payment of debt and should not be deemed to
represent funds available to the Company. EBITDA, as presented may not be
comparable to similarly-titled measures of other companies.
(2) Cash flow data of Circo Craft has been presented in accordance with U.S.
GAAP since under Canadian GAAP, cash flows are not calculated. Instead,
under Canadian GAAP, companies are required to present changes in financial
position. See the "Consolidated Financial Statements" and notes thereto of
Circo Craft included elsewhere herein.
Six Months Ended June 30, 1996
Net sales for the six months ended June 30, 1996 were C$85.3 million and
cost of goods sold were C$67.9 million, or 79.6% of net sales. Selling, general
and administrative expenses for the
38
<PAGE> 44
same period were C$5.7 million, or 6.7% of net sales. During the six months
ended June 30, 1996, net cash provided by operating activities was C$12.9
million. For the same period, Circo Craft used C$15.2 million in investing
activities and approximately C$2.3 million in financing activities.
Nine Months Ended September 30, 1996 Compared to Fiscal 1995
Net sales and cost of goods sold for the nine months ended September 30,
1996, were C$129.6 million and C$101.5 million, respectively, compared to sales
and cost of goods sold for fiscal 1995 of C$185.2 million and C$148.8 million,
respectively. Net sales for the nine months ended September 30, 1996, were
approximately 70.0% of sales for fiscal 1995. In general, Circo Craft's sales
were lower during 1996 due to a shift in the product mix to lower layer count
products driven primarily by the demand of one of Circo Craft's customers in the
automotive industry. As a percentage of sales, cost of goods sold for the nine
months ended September 30, 1996, decreased to 78.3% from 80.4% for fiscal 1995
primarily as a result of cost savings achieved through improved production
processes. Selling, general and administrative expenses for the nine months
ended September 30, 1996, were C$8.0 million compared to selling, general and
administrative expenses for fiscal 1995 of C$11.1 million. Selling, general and
administrative expenses as a percentage of sales for the nine months ended
September 30, 1996, increased to 6.1% from 6.0% for fiscal 1995 primarily as a
result of the lower sales caused by the product mix shift discussed above.
Fiscal 1995 Compared to Fiscal 1994
Net sales and cost of goods sold for fiscal 1995 were C$185.2 million and
C$148.8 million, respectively, compared to sales and cost of goods sold for
fiscal 1994 of C$151.8 million and C$124.9 million, respectively. Sales during
fiscal 1995 increased over 1994 due to an increase in the volume and a shift in
the product mix to higher layer count products driven primarily by the demand of
one of Circo Craft's customers in the automotive industry. As a percentage of
sales, cost of goods sold for fiscal 1995 decreased to 80.4% from 82.3% for
fiscal 1994 primarily as a result of the shift in the product mix to higher
layer count products which generally have higher margins. Selling, general and
administrative expenses for fiscal 1995 were C$11.1 million compared to selling,
general and administrative expenses for fiscal 1994 of C$10.1 million. Selling,
general and administrative expenses as a percentage of sales for fiscal 1995
decreased to 6.0% from 6.6% for fiscal 1994 primarily as a result of the higher
sales caused by the increase in volume and product mix shift discussed above.
VIASYSTEMS TECHNOLOGIES
The following table presents (i) statement of operations data of Viasystems
Technologies on a historical basis and expressed as a percentage of net sales
and (ii) specified other data.
<TABLE>
<CAPTION>
ELEVEN MONTHS
FISCAL YEARS ENDED DECEMBER 31, ENDED SIX MONTHS
------------------------------------ NOVEMBER 30, ENDED JUNE 30,
1994 1995 1996 1996
---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $310,559 100.0% $325,047 100.0% $325,102 100.0% $171,299 100.0%
Cost of goods sold................... 238,623 76.8 274,824 84.5 244,313 75.1 129,897 75.8
Selling, general and administrative
expenses........................... 42,930 13.8 42,445 13.1 34,792 10.7 20,565 12.0
Depreciation and amortization........ 16,111 5.2 16,378 5.0 18,317 5.6 10,527 6.1
-------- ----- -------- ----- -------- ----- -------- -----
Operating income..................... $ 12,895 4.2% $ (8,600) (2.6)% $ 27,680 8.5% $ 10,310 6.0%
======== ===== ======== ===== ======== ===== ======== =====
OTHER DATA:
EBITDA(1)............................ $ 29,006 9.3% $ 7,778 2.4% $ 45,997 14.1% $ 20,837 12.2%
Operating cash flows(2)..............
Investing cash flows(2)..............
Financing cash flows(2)..............
</TABLE>
39
<PAGE> 45
- ---------------
(1) EBITDA is defined as operating income (loss) plus depreciation and
amortization. The Company believes that EBITDA provides additional
information for determining its ability to meet debt service requirements as
revenues increase more than cash expenditures for operating expenses. EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by GAAP and does not
necessarily indicate whether cash flow will be sufficient for cash
requirements. The calculation of EBITDA does not include the commitments of
the Company for capital expenditures and payment of debt and should not be
deemed to represent funds available to the Company. EBITDA, as presented may
not be comparable to similarly-titled measures of other companies. Charges
of $14,565, $18,987, $7,900 and $6,388, net of estimated additional
administrative costs to be incurred, for fiscal years ended 1994, 1995, the
eleven months ended November 30, 1996 and the six months ended June 30,
1996, respectively, incurred with respect to corporate allocations to the
Lucent Division by Lucent Technologies, which are not expected to be
incurred by the Company are included in the historical results of operations
and have not been eliminated to calculate EBITDA.
(2) Financial statements had not been previously prepared for the Lucent
Division. The data in the table above has been derived from financial
statements that present only assets purchased in the Lucent Division
acquisition and results of operations related to the Lucent Division. Any
computation of historical cash flow data for the Lucent Division would be
based on arbitrary assumptions of the financial information necessary to
prepare such data. As a result, the historical cash flow data of the Lucent
Division has not been prepared or presented.
Six Months Ended June 30, 1996
Net sales for the six months ended June 30, 1996 were $171.3 million and
cost of goods sold were $129.9 million, or 75.8% of net sales. Selling, general
and administrative expenses for the same period were $20.6 million, or 12.0% of
net sales.
Eleven Months Ended November 30, 1996 Compared to Fiscal 1995
Net sales and cost of goods sold for the eleven months ended November 30,
1996, were $325.1 million and $244.3 million, respectively, compared to sales
and cost of goods sold for fiscal 1995 of $325.0 million and $274.8 million,
respectively. Net sales for the eleven months ended November 30, 1996, were
approximately 100.0% of sales for fiscal 1995 as sales for Viasystems
Technologies increased during 1996 due to increased demand by Lucent
Technologies caused by the rapidly expanding telecommunications market. As a
percentage of sales, cost of goods sold for the eleven months ended November 30,
1996, decreased to 75.1% from 84.5% for fiscal 1995 primarily as a result of the
favorable impact of productivity improvements. Selling, general and
administrative expenses for the eleven months ended November 30, 1996, were
$34.8 million compared to selling, general and administrative expenses for
fiscal 1995 of $42.4 million. Selling, general and administrative expenses as a
percentage of sales for the eleven months ended November 30, 1996, decreased to
10.7% from 13.1% for fiscal 1995 as a result of decreased allocations from
Lucent Technologies.
Fiscal 1995 Compared to Fiscal 1994
Net sales and cost of goods sold for fiscal 1995 were $325.0 million and
$274.8 million, respectively, compared to sales and cost of goods sold for
fiscal 1994 of $310.6 million and $238.6 million, respectively. Sales during
fiscal 1995 increased over 1994 due to an increase in backpanel sales caused by
the rapidly expanding telecommunications market combined with a shift in the
product mix to higher layer count products, partially offset by a reduction in
prices across all product lines sold to Lucent Technologies. As a percentage of
sales, cost of goods sold for fiscal 1995 increased to 84.5% from 76.8% for
fiscal 1994 primarily as a result of the price declines to Lucent Technologies.
Selling, general and administrative expenses for fiscal 1995 were $42.4 million
compared to selling, general and administrative expenses for fiscal 1994 of
$42.9 million. Selling, general and administrative expenses as a percentage of
sales for fiscal 1995 decreased to 13.1% from 13.8% for fiscal 1994 as a result
of decrease in research and development costs, including those allocated from
Lucent Technologies, combined with higher sales as discussed above.
40
<PAGE> 46
FORWARD GROUP
The following table presents, in accordance with U.K. GAAP, (i) statement
of operations data of Forward Group on a historical basis and expressed as a
percentage of net sales and (ii) specified other data.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEARS ENDED JANUARY 31, SIX MONTHS ENDED
----------------------------------------------------- ENDED JUNE 30, MARCH 31,
1995 1996 1997 1996 1997
--------------- ---------------- ---------------- ---------------- ---------------
(POUNDS STERLING IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. L23,819 100.0% L 66,839 100.0% L105,029 100.0% L 49,899 100.0% L25,287 100.0%
Cost of goods sold........ 17,032 71.5 49,850 74.6 79,030 75.2 36,826 73.8 18,938 74.9
Selling, general and
administrative
expenses................ 3,179 13.3 6,425 9.6 11,189 10.7 3,919 7.9 2,271 9.0
Depreciation and
amortization............ 1,215 5.1 2,701 4.0 4,694 4.5 1,979 4.0 1,265 5.0
Restructuring charges..... -- 0.0 -- 0.0 1,244 1.2 -- 0.0 -- 0.0
------- ----- -------- ----- -------- ----- -------- ----- ------- -----
Operating income.......... L 2,393 10.0% L 7,863 11.8% L 8,872 8.4% L 7,175 14.4% L 2,813 11.1%
======= ===== ======== ===== ======== ===== ======== ===== ======= =====
OTHER DATA:
Adjusted EBITDA(1)........ L 3,608 15.1% L 10,564 15.8% L 14,810 14.1% L 9,154 18.3% L 4,078 16.1%
Operating cash
flows(2)................ 2,722 10,667 18,561 7,362 3,173
Investing cash flows(2)... 521 (12,045) (16,373) (13,244) (488)
Financing cash flows(2)... (879) 5,590 (3,045) (1,287) (836)
</TABLE>
- ---------------
(1) Adjusted EBITDA is defined as operating income plus depreciation,
amortization and the non-cash charges related to the restructuring of
facilities in the amount of L1,244 for the fiscal year 1997. The Company
believes that Adjusted EBITDA provides additional information for
determining its ability to meet debt service requirements as revenues
increase more than cash expenditures for operating expenses. Adjusted EBITDA
does not represent and should not be considered as an alternative to net
income or cash flow from operations as determined by GAAP and does not
necessarily indicate whether cash flow will be sufficient for cash
requirements. The calculation of Adjusted EBITDA does not include the
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company. Adjusted
EBITDA, as presented may not be comparable to similarly-titled measures of
other companies.
(2) Cash flow data of Forward Group has been presented in accordance with U.K.
GAAP. The U.S. GAAP amounts have been disclosed by Forward Group in Note 25
to the "Consolidated Financial Statements" of Forward Group included
elsewhere herein.
Three Months Ended March 31, 1997
Net sales for the three months ended March 31, 1997 were L25.3 million and
cost of goods sold were L18.9 million, or 74.9% of net sales. Selling, general
and administrative expenses for the same period were L2.3 million, or 9.0% of
net sales. During the three months ended March 31, 1997, net cash provided by
operating activities was L3.2 million. For the same period, Forward Group used
L.5 million for capital expenditures and used approximately L.8 million for
financing activities.
Six Months Ended June 30, 1996
Net sales for the six months ended June 30, 1996 were L49.9 million and
cost of goods sold were L36.8 million, or 73.8% of net sales. Selling, general
and administrative expenses for the same period were L3.9 million, or 7.9% of
net sales. During the six months ended June 30, 1996, net cash provided by
operating activities was L7.4 million. For the same period, Forward Group used
L4.1 million for capital expenditures, L9.2 million for acquisitions and repaid
approximately L1.3 million of loan obligations.
41
<PAGE> 47
Fiscal Year Ended January 31, 1997 Compared to Fiscal Year Ended January 31,
1996
Net sales and cost of goods sold for the fiscal year ended 1997 were L105.0
million and L79.0 million, respectively, compared to sales and cost of goods
sold for the fiscal year ended 1996 of L66.8 million and L49.9 million,
respectively. Sales during the fiscal year ended 1997 increased over the fiscal
year ended 1996 due primarily to the full year impact of the 1995 acquisition of
Exacta Circuits and three smaller companies in 1996. As a percentage of sales,
cost of goods sold for the fiscal year ended 1997 increased to 75.2% from 74.6%
for the fiscal year ended 1996 primarily as a result of the three smaller
acquisitions in 1996 which have products with lower margins. Selling, general
and administrative expenses for the fiscal year ended 1997 were L11.2 million
compared to selling, general and administrative expenses for the fiscal year
ended 1996 of L6.4 million. Selling, general and administrative expenses
increased in the fiscal year ended 1997 primarily due to the impact of the
acquisitions discussed above.
Fiscal Year Ended January 31, 1996 Compared to Fiscal Year Ended January 31,
1995
Net sales and cost of goods sold for the fiscal year ended 1996 were L66.8
million and L49.9 million, respectively, compared to sales and cost of goods
sold for the fiscal year ended 1995 of L23.8 million and L17.0 million,
respectively. Sales during the fiscal year ended 1996 increased over the fiscal
year ended 1995 due primarily to the acquisition of Exacta Circuits and market
share gains. As a percentage of sales, cost of goods sold for the fiscal year
ended 1996 increased to 74.6% from 71.5% for the fiscal year ended 1995
primarily due to the effect of the acquisition of Exacta Circuits. Selling,
general and administrative expenses for the fiscal year ended 1996 were L6.4
million compared to selling, general and administrative expenses for the fiscal
year ended 1995 of L3.2 million. Selling, general and administrative expenses as
a percentage of sales for the fiscal year ended 1996 decreased to 9.6% from
13.3% for the fiscal year ended 1995 as a result of the increase in sales which
was not accompanied by a corresponding increase in selling, general and
administrative expenses.
CHIPS
The following table presents, in accordance with U.K. GAAP (i) statement of
operations data of Chips on a historical basis and expressed as a percentage of
net sales and (ii) specified other data.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS THREE MONTHS
----------------------------------------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
--------------- ---------------- ---------------- --------------- ---------------
(POUNDS STERLING IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.................. L70,805 100.0% L104,611 100.0% L141,643 100.0% L61,834 100.0% L38,266 100.0%
Cost of goods sold......... 49,149 69.4 73,407 70.2 94,466 66.7 39,000 63.1 28,848 75.4
Selling, general and
administrative
expenses................. 6,242 8.8 7,522 7.2 10,514 7.4 4,399 7.1 1,895 5.0
Depreciation and
amortization............. 10,822 15.3 17,302 16.5 19,123 13.5 8,971 14.5 5,050 13.2
------- ----- -------- ----- -------- ----- ------- ----- ------- -----
Operating income........... L 4,592 6.5% L 6,380 6.1% L 17,540 12.4% L 9,464 15.3% L 2,473 6.5%
======= ===== ======== ===== ======== ===== ======= ===== ======= =====
OTHER DATA:
EBITDA(1).................. L15,414 21.8% L 23,682 22.6% L 36,663 25.9% L18,435 29.8% L 7,523 19.7%
Operating cash flows(2).... 13,784 22,757 33,842 16,007 12,430
Investing cash flows(2).... (12,670) (16,816) (24,119) (5,870) (9,490)
Financing cash flows(2).... 3,967 (1,305) 19,901 (2,333) 5,229
</TABLE>
- ---------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
The Company believes that EBITDA provides additional information for
determining its ability to meet debt service requirements as revenues
increase more than cash expenditures for operating ex-
42
<PAGE> 48
penses. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by GAAP
and does not necessarily indicate whether cash flow will be sufficient for
cash requirements. The calculation of EBITDA does not include the
commitments of the Company for capital expenditures and payment of debt and
should not be deemed to represent funds available to the Company. EBITDA, as
presented may not be comparable to similarly-titled measures of other
companies.
(2) Cash flow data of Chips has been presented in accordance with U.K. GAAP. The
U.S. GAAP amounts have been disclosed by Chips in Note 25 to the
"Consolidated Financial Statements of" Interconnection Systems (Holdings)
Limited included elsewhere herein.
Three Months Ended April 4, 1997
Net sales for the three months ended April 4, 1997 were L38.3 million and
cost of goods sold were L28.8 million, or 75.4% of net sales. Cost of goods sold
as a percentage of sales was abnormally high during the three months ended April
4, 1997, primarily due to a special write-off of certain boards which were
scrapped since the boards failed to meet customer specifications. The Company
does not believe that the cost of goods sold percentage incurred during the
three months ended April 4, 1997, is indicative of a future trend. Selling,
general and administrative expenses for the same period were L1.9 million, or
5.0% of net sales. During the three months ended April 4, 1997, net cash
provided by operating activities was L12.4 million. For the same period, Chips
used L9.5 million for capital expenditures and used approximately L5.2 million
for financing activities.
Six Months Ended June 30, 1996
Net sales for the six months ended June 30, 1996 were L61.8 million and
cost of goods sold were L39.0 million, or 63.1% of net sales. Selling, general
and administrative expenses for the same period were L4.4 million, or 7.1% of
net sales. During the six months ended June 30, 1996, net cash provided by
operating activities was L16.0 million. For the same period, Chips used L5.9
million for capital expenditures and repaid approximately L2.3 million of loan
obligations.
Fiscal Year Ended April 4, 1997 Compared to Fiscal Year Ended March 29, 1996
Net sales and cost of goods sold for the fiscal year ended 1997 were L141.6
million and L94.5 million, respectively, compared to sales and cost of goods
sold for the fiscal year ended 1996 of L104.6 million and L73.4 million,
respectively. Sales during the fiscal year ended 1997 increased over the fiscal
year ended 1996 due to increased demand for higher layer count PCBs for the
telecommunications and computer industries. As a percentage of sales, cost of
goods sold for the fiscal year ended 1997 decreased to 66.7% from 70.2% for the
fiscal year ended 1996 primarily as a result of improved absorption of costs due
to higher sales and productivity improvements achieved as a result of a number
of cost savings projects underway including projects to decrease the cost of
process materials and improve process automation. Selling, general and
administrative expenses for the fiscal year ended 1997 were L10.5 million
compared to selling, general and administrative expenses for the fiscal year
ended 1996 of L7.5 million. Selling, general and administrative expenses as a
percentage of sales for the fiscal year ended 1997 remained relatively
consistent at 7.4% compared to 7.2% for the fiscal year ended 1996.
Fiscal Year Ended March 29, 1996 Compared to Fiscal Year Ended March 31, 1995
Net sales and cost of goods sold for the fiscal year ended 1996 were L104.6
million and L73.4 million, respectively, compared to sales and cost of goods
sold for the fiscal year ended 1995 of L70.8 million and L49.1 million,
respectively. Sales during the fiscal year ended 1996 increased over the fiscal
year ended 1995 due to an increase in the volume and a shift in the product mix
to higher layer count products. As a percentage of sales, cost of goods sold for
the fiscal year ended 1996 increased to 70.2% from 69.4% for the fiscal year
ended 1995 primarily as a result of an
43
<PAGE> 49
increase in the complexity of the products being sold and slightly increasing
materials costs. Selling, general and administrative expenses for the fiscal
year ended 1996 were L7.5 million compared to selling, general and
administrative expenses for the fiscal year ended 1995 of L6.2 million. Selling,
general and administrative expenses as a percentage of sales for the fiscal year
ended 1996 decreased to 7.2% from 8.8% for the fiscal year ended 1995 primarily
as a result of scale efficiencies caused by the increase in sales.
LIQUIDITY AND CAPITAL RESOURCES
Following the consummation of the Chips Merger and the Original Offering,
the Company's principal liquidity requirements consist of debt service
requirements under the Senior Credit Facilities, the New Notes and other
outstanding indebtedness, and for working capital needs and capital
expenditures. In addition, the acquisition of other businesses by the Company in
the future likely would require external sources of debt and/or equity
financing.
After giving effect to the repayment of a portion of the Tranche C Loan and
all amounts outstanding under the Tranche A Loan, the Canadian Term Loan and the
Chips Revolving Loan, with a portion of the proceeds of the Original Offering,
the remaining Term Loans under the Senior Credit Facilities will require
periodic principal repayments in increasing amounts through the final maturity
of the Senior Credit Facilities in 2005. In addition, borrowings under the
Senior Credit Facilities bear interest at floating rates and will require
interest payments on varying dates depending on the interest rate option
selected by the Company. The Company has entered into interest rate hedge
agreements that provide a Eurocurrency Base Rate (as defined) ceiling until
March 10, 1998 of 7.0% per annum for up to $120.0 million of Term Loans for
which the Eurodollar Base Rate is in effect and a ceiling of 8.0% per annum
until March 11, 1999. See "Description of Senior Credit Facilities."
The New Notes will bear interest at the rate of 9 3/4% per annum, which
will be payable semiannually in arrears.
The Chips Loan Notes bear interest initially at the rate of approximately
6.2% per annum and thereafter at a varying discount to the Chase Manhattan
Bank's prime rate. The Company is liable for payment of interest on the Chips
Loan Notes through the Chips Reimbursement Obligation. The holders of the Chips
Loan Notes will receive payment for interest and principal in respect of the
Chips Loan Notes pursuant to "direct-pay" letters of credit issued by Chase
Manhattan Bank Delaware. Any such payments made pursuant to the "direct-pay"
letters of credit will be required to be reimbursed by the Company pursuant to
the Chips Reimbursement Obligation and Bisto pursuant to the Cash Collateral
Reimbursement Obligation. Pursuant to the terms of the Chips Reimbursement
Obligation and the Cash Collateral Reimbursement Obligation, the Company will be
responsible for (a) reimbursing Chase Manhattan Bank Delaware, the issuer under
the Letter of Credit securing the Chips Loan Notes, for drawings to pay (x)
$319.3 million of principal of the Chips Loan Notes and (y) interest on the
Chips Loan Notes less any portion of such interest actually paid by Bisto.
Accordingly, to the extent the interest income earned by Bisto on the $118.3
million of cash it holds is insufficient to fund interest on $118.3 million
principal amount of the Chips Loan Notes, the Company will be required pursuant
to the terms of the Chips Reimbursement Obligation to fund any such shortfall.
When principal is paid on the Chips Loan Notes pursuant to the "direct-pay"
letters of credit, the first $118.3 million of principal payments will be funded
by Bisto and the remainder will be funded by the Company. In order to fund such
principal, the Senior Credit Facilities contain a committed, unfunded term loan
facility that may be drawn upon by the Company so that it may satisfy its
reimbursement obligations in respect of the $319.3 million principal amount of
the Chips Loan Notes. See "Description of Senior Credit Facilities."
The Company estimates that in fiscal 1997, on a pro forma basis, it will
spend approximately $100.0 million on capital expenditures, primarily for the
expansion of capacity, productivity and process improvements and maintenance. Of
this amount, approximately $39.0 million will be spent on the construction of
the Company's new facility in Newcastle, England. The Company's fiscal 1997
capital expenditures are anticipated to include approximately $20.0 million for
maintenance, which
44
<PAGE> 50
the Company believes will provide it with the ability to maintain its existing
volume production levels. The Company's ability to make capital expenditures is
subject to restrictions in the Senior Credit Facilities. See "Description of
Senior Credit Facilities."
The Company expects that its primary sources of cash will be cash from
operating activities and revolving borrowings under the Senior Credit
Facilities. As of June 30, 1997, there were no amounts outstanding under the
Revolving Loans under the Senior Credit Facilities, and approximately $249.6
million ($100.0 million of which was only available for future acquisitions) of
available borrowing capacity thereunder, subject to certain limitations. The
Company believes that cash from operating activities and Revolving Loans will be
sufficient to fund its debt service requirements, working capital needs, and
capital expenditures for the foreseeable future, although no assurances can be
given in this regard. As noted above, future acquisitions, if any, may require
additional third party financing and there can be no assurance that such funds
would be available on terms satisfactory to the Company, if at all. In addition,
the Company's future operating performance and ability to meet its financial
obligations will be subject to future economic conditions and to financial,
business and other factors, many of which will be beyond the Company's control.
The Company estimates that the acquired developed technologies it has
capitalized will retain economic utility for 15 years, but that revenues
contributed by the acquired developed technologies may decrease 40%-45% through
five years and 70-80% through ten years. The Company also anticipates that these
technologies will be supplanted over time by new products and processes
developed through the successful completion of acquired research and development
efforts and new research and development efforts. The Company believes that
efforts to complete the acquired in-process research and development projects
will consist primarily of internal engineering costs over the next two to four
years. These costs are estimated to be approximately $40-$60 million. Such
estimate is subject to revision should there be changes in the operating
environment or the technical knowledge available within the industry or the
Company. The Company anticipates that cash generated from existing operations
will be sufficient to fund such expenditures. The Company, through its continued
investment in research and development, intends to achieve and sustain technical
superiority in the design and delivery of advanced printed circuit board
products, and believes, given its leadership position in the industry, that it
is well positioned to do so. The Company believes that the new product and
process technologies which result from ongoing research and development will
build on the existing core printed circuit board technology and contribute to an
anticipated growth in the Company's sales and anticipated improvements in the
Company's cost of production in the future.
While the core printed circuit board technology remains relatively
consistent, the Company's research and development projects aim to advance the
technical knowhow, further develop complete technological solutions, enhance the
conceptual formulation and design of possible technological alternatives, and
design and improve testing capabilities. As such, these research and development
projects bear a certain amount of risk. If these efforts are successful, they
will enable the Company to further penetrate existing markets, pursue sizable
new markets, and dramatically expand the business. If acceptable advancements
are not achieved, failed research and development projects could have a material
adverse effect on the Company's financial position or results of operations. The
Company is unable to accurately quantify the potential impact in the future of
the failure of any single project or multiple projects which were acquired as
in-process research and development in the acquisitions of Circo Craft,
Viasystems Technologies, Forward Group, and Chips. Although there can be no
guarantee that the acquired in-process research and development projects will
achieve technological feasibility, the Company believes that the likelihood of
development is reasonable for these projects. The Company does not believe that
it is subject to any greater risk of failure than its competitors, and, in fact,
believes that its size, access to financial resources, and relationships with
customers contribute to a reduction of that risk which gives the Company a
competitive technical advantage. See "Risk Factors -- Technological Change,
Process Development and Process Disruption."
45
<PAGE> 51
Although Adjusted EBITDA does not necessarily indicate whether cash flows
will be sufficient for cash requirements, the Company believes that Adjusted
EBITDA provides additional information for determining its ability to meet debt
service requirements as revenues increase more than cash expenditures for
operating expenses. The Company's Adjusted EBITDA for fiscal 1996, and the first
six months of 1997 was $4.5 million and $60.2 million, respectively. As a
percentage of sales, Adjusted EBITDA was 8.9% and 17.4%, respectively, for the
same periods. Adjusted EBITDA is also one of the financial measures in the
covenants to the Senior Credit Facilities.
INTERNATIONAL OPERATIONS
The Company conducts manufacturing operations in several foreign countries,
including Canada, the United Kingdom, Spain, and South Africa. The Company also
conducts sales and marketing operations in Canada, Mexico, England, Scotland,
Ireland, France, Germany, Spain, Netherlands, Sweden, Israel and South Africa.
Net sales on a pro forma basis from international operations during fiscal 1996
and the first fiscal quarter ended 1997 were approximately $531.6 million and
$142.0 million, or 60.9% and 63.4% of net sales, respectively.
The Company's international operations may be subject to volatility because
of currency fluctuations, inflation and changes in political and economic
conditions in these countries. Most of the net sales and costs and expenses of
the Company's operations in these countries are denominated in the local
currencies. The financial position and results of operations of the Company's
foreign subsidiaries are measured using the local currency as the functional
currency, although United States dollars would be used if any of these countries
were deemed hyperinflationary in accordance with Statement of Financial
Accounting Standards No. 52 ("FASB 52").
Assets and liabilities and statement of operations' accounts of the
Company's foreign subsidiaries are translated at the balance sheet date and
period-end exchange rate. Translation adjustments, which amounted to
approximately ($79,000) and $15.0 million at December 31, 1996 and June 30,
1997, respectively, arise from differences in exchange rates from period to
period and are included on the Company's balance sheet as a cumulative
translation adjustment.
Fluctuations in exchange rates, as well as higher inflation rates, may have
an adverse effect on the Company. The Company may periodically use foreign
currency forward option contracts to offset the effects of exchange rate
fluctuations on cash flows denominated in foreign currencies. The balance of
these contracts as of December 31, 1996 and June 30, 1997 was not material, and
the Company does not use derivative financial instruments for trading or
speculative purposes.
No country in which the Company has significant operations is deemed
hyperinflationary in accordance with FASB 52. Inventories in countries outside
the United States are primarily accounted for using the first-in first-out
(FIFO) basis and, therefore, the charge to cost of sales does not necessarily
reflect current cost. If the Company's operations were restated to reflect
higher cost of goods sold to replace existing inventories, the Company estimates
that reported income would not be significantly decreased.
The Company's financial performance in future periods may be adversely
impacted as a result of changes in the above factors which are largely beyond
the control of the Company. See "Risk Factors -- International Operations."
INFLATION
The Company does not believe that inflation has had a material impact on
its financial position or results of operations.
SEASONALITY
The Company does not believe that its results of operations fluctuate
materially due to seasonality.
46
<PAGE> 52
BUSINESS
GENERAL
The Company believes it is the second largest manufacturer and marketer of
PCBs, and one of the largest manufacturers and marketers of backpanels, in the
world. PCBs are the basic platforms used to interconnect microprocessors,
integrated circuits and other components essential to the functioning of
virtually all electronic systems, ranging from sophisticated computers and
industrial products to basic household appliances. Backpanels are used in
electronic systems to distribute and ground power, to connect PCBs, power
supplies and other elements, and to relay information into and out of electronic
systems. The Company supplies over 800 customers globally, serving, among
others, the telecommunications, computer, automotive, industrial and
instrumentation, military, and consumer electronics industries. The Company
currently has 16 manufacturing facilities, strategically located in North
America, Europe, and South Africa, including one of the world's largest PCB and
backpanel manufacturing plants.
PRODUCTS AND SERVICES
The Company's offering of products and services includes the following:
Design and Development. The Company provides design and engineering
assistance in the early stages of product development to assure that both
mechanical and electrical considerations are integrated to achieve a high
quality and cost-effective product. Through development groups located at
various facilities, the Company identifies, develops and markets new
technologies that it believes will benefit its customers. These development
groups work closely with customers during all stages of product life-cycles. For
instance, process design changes and refinements required for volume production
are identified and implemented prior to production. The Company also evaluates
customer designs in light of manufacturing considerations and, when appropriate,
recommends design changes to reduce manufacturing costs or lead times or to
increase manufacturing yields or the quality of finished PCBs.
Quick-Turnaround Prototype. Prototypes typically require lead times of
three to seven days, although lead times can be as short as 24 hours. The
Company provides quick-turnaround prototype services to customers to facilitate
their testing of products in development. Prototype development at the Company
has included multilayer PCBs of up to 24 layers, embedded discrete components,
and various high performance substrates for the high frequency microwave market.
Pre-Production. Pre-production is the manufacture of limited quantities of
PCBs and backpanels during the transition period from prototype to volume
production. Pre-production generally requires quick-turnaround delivery to
accommodate time-to-volume pressures or as a temporary solution for
unpredictable customer demands.
Medium to High Volume Production. Volume production is characterized by
longer lead times and increased emphasis on lower cost as the product moves to
full-scale commercial production. As customers increasingly demand a quick
transition from prototype to volume production, few independent manufacturers
can provide complex PCBs of 18 or more layers in the volume provided by the
Company's larger facilities. The Company operates nine facilities that have
medium and/or high volume PCB production capabilities.
Backpanels. Backpanels are generally larger and thicker PCBs on which
connectors, pins and other components are mounted to interconnect PCBs,
integrated circuits and other electronic components. The Company incorporates
its own PCBs in backpanels to provide customers with a high level of PCB
technology on a quick-turnaround and volume basis. Net sales of backpanels
accounted for, on a combined basis, approximately 22%, 18% and 17% of the
Company's combined net sales during fiscal 1994, 1995 and 1996, respectively.
47
<PAGE> 53
Specialty Production. The Company also manufactures the following specialty
products in quick-turnaround and medium to high volume quantities:
High-Performance PCBs. High-performance PCBs are used in electronic
products that require high frequency interconnect solutions, such as
cellular phone base stations and other telecommunications products, and are
manufactured using specialty materials with properties that address the
need for higher operating temperatures, higher frequencies and increased
density. The Company has the expertise and specialized engineering
processes required to manufacture high-performance PCBs with a broad range
of materials and technological requirements.
PCMCIA Products. Personal Computer Memory Card International Association
("PCMCIA") products are credit card-sized, plug-in PCBs, a significant
portion of which are memory and communication cards tailored to the mobile
computing market. PCMCIA production requires the ability to produce very
thin, dense packaging.
MANUFACTURING
The production of PCBs involves a variety of manufacturing disciplines,
including mechanical operations (such as lamination, drilling and routing),
chemical operations (such as copper deposition and etching), and graphics
operations (such as phototool generation, photoprinting and screen printing).
Much of the equipment is automated and highly specialized.
The Company's customers require that their suppliers be qualified under
various industry standards, for manufacture of PCBs, including Bellcore
standards for telecommunications products, and UL (Underwriters Laboratories)
standards for electronics. All of the Company's facilities are ISO-9002
registered. This registration facilitates worldwide acceptance of the Company's
products. ISO-9002 registration is based on successful implementation of certain
quality assurance requirements and includes ongoing monitoring of the Company's
business and periodic compliance audits conducted by an independent quality
assessor.
The Company's primary manufacturing processes are described below:
Drilling. Complex multilayer PCBs require large numbers of small (less than
0.019 inches) holes in order to interconnect the various PCB layers.
Automatic Plating. The Company has custom designed, computer controlled
plating lines that are capable of plating significant volumes of high quality
PCBs. The plating lines are installed above a special purpose basement where
chemicals are prepared and pumped to the manufacturing lines, chemical wastes
are pre-processed and water is pre-treated and recycled.
Automatic Optical Inspection ("AOI") and Electrical Test ("ET")
Equipment. Because defects in complex circuitry cannot be readily detected by
conventional visual inspection, sophisticated AOI and ET equipment is necessary
to improve yields and reduce the potential for customer returns.
Surface Mount Technology. The Company incorporates the use of surface mount
technology to achieve greater component packaging densities. Surface mount
technology allows components to be soldered to the surface of a PCB. The
traditional through-hole technique requires components to be affixed to PCBs by
inserting leads through the board. The use of surface mount technology has
facilitated several overall improvements in PCBs, including: (i) the
miniaturization of PCBs; (ii) end-user innovations using smaller and more
complex designs; and (iii) more reliable interconnection within the PCB.
MARKETS AND CUSTOMERS
The Company provides double-sided PCBs, multilayer PCBs and backpanels to
its diverse customer base. The Company's position as a strategic supplier of
prototype quick-turnaround and medium to high volume PCBs and backpanel assembly
fosters close relationships with customers.
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SALES AND MARKETING
The Company markets its products through its own sales and marketing
organization and manufacturers' representatives. This global sales organization
is structured to ensure geographic coverage and account coordination. As of
April 1, 1997, the Company employed 99 sales and marketing employees, of which
22 are direct sales representatives strategically located throughout 13
countries in North America, Europe, the Middle East and South Africa. The
Company is also represented by 19 manufacturers' representative organizations in
North America. The North American sales organization is divided into 5 regions
which are jointly serviced by direct sales representatives and manufacturers'
representatives. In Europe and South Africa, the Company's sales force is
focused by country and for the specialty products, by customer. North America,
Europe and South Africa each have a support staff of sales engineers, technical
service personnel and customer service organizations to ensure high-quality,
customer-focused service. The global marketing organization further supports the
sales organization through market research, market development and
communications.
The Company has a unique, long-term supplier relationship with Lucent
Technologies, one of the world's leading designers, developers and manufacturers
of telecommunications systems, software and products. To ensure itself a stable
and consistent supply of PCBs and backpanels in the future, Lucent Technologies
entered into a five-year supply agreement with the Company, through Viasystems
Technologies, pursuant to which substantial revenues may be derived. Sales to
Lucent Technologies by the Lucent Division for fiscal year 1994 and 1995 and by
the Company on a pro forma basis for fiscal year 1996 were $277.3 million,
$283.0 million and $308.8 million respectively. On a pro forma basis, Lucent
Technologies accounted for approximately 35% of the Company's net sales for the
fiscal year 1996. The Company does not expect net sales to Lucent Technologies
for fiscal year 1997 to significantly diverge from net sales in fiscal year
1996. The agreement contains automatic renewal provisions for two additional
one-year periods upon the Company's satisfaction of certain specified
performance requirements for cost, quality and service. Under the agreement
Lucent Technologies is required to purchase a minimum annual dollar volume of
PCBs and backpanels from the Company. Lucent Technologies is also required to
compensate the Company if Lucent Technologies fails to purchase such minimum
annual dollar volume. The agreement requires that by January 1, 1999 the
Company's prices for products supplied shall be reduced to an agreed upon
benchmark standard. See "Risk Factors -- Customer Concentration; Reliance on
Lucent Technologies." After the expiration of the two additional annual renewal
periods, the agreement continues to renew unless either party terminates the
agreement on 18 months' notice. Lucent Technologies has also designated the
Company as a preferred supplier and afforded it the right to bid for all of
Lucent Technologies' product requirements for which the Company demonstrates
capability.
SUPPLIER RELATIONSHIPS
The Company orders materials and supplies based on purchase orders received
and accepted and seeks to minimize its inventory of materials that are not
identified for use in filling specific orders. Certain raw materials used in the
Company's products consist mainly of inorganic chemicals, copper foil, copper
clad epoxy glass laminate, epoxy glass prepreg and dryfilm resist. Although the
Company uses a select group of suppliers, the materials used in manufacturing
PCBs are generally readily available in the open market. The Company works with
its suppliers to develop just-in-time supply systems which reduce inventory
carrying costs. The Company also maintains a Supplier Certification Program
which evaluates potential vendors on the basis of such factors as quality,
on-time delivery, cost, technical capability, and potential technical
advancement. In addition, the Company works closely with certain of its
suppliers to improve the raw materials used in PCB and backpanel production.
Although adequate amounts of raw materials have been available in the past,
there can be no assurances this will continue in the future. The Company
purchases significant quantities of pins and similar products from Berg
Electronics Corp., which is controlled by Hicks Muse and managed by Mills &
Partners. See "Certain Transactions."
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TECHNOLOGY, DEVELOPMENT AND PATENTS
The Company maintains a strong commitment to research and development,
focusing its efforts on enhancing existing product lines as well as developing
new products based on the Company's existing technologies and production
capabilities. The Company's research and development staff of over 650
experienced engineers, chemists and laboratory technicians works together with
the Company's sales staff to identify specific needs and develop innovative,
high performance solutions which satisfy those needs. This method of product
development allows the customer to become a member of the development team,
develops close ongoing working relationships between the Company and its
customers and, in many instances, permits the Company to gain an in-depth
understanding of its customers' businesses, thereby enabling it to better
anticipate and serve their needs. The Company also seeks to apply advancements
resulting from this process to other high-margin end user markets.
The Company has developed proprietary techniques and manufacturing
expertise, particularly in the area of complex multilayer PCBs. The Company has
received certain (U.S. and foreign) patents, including patents on advanced
registration and positioning techniques, solder leveling, drilling and pin
insertion, but chooses to rely primarily on trade secret protection. Although
such techniques and expertise are subject to misappropriation or obsolescence,
the Company intends to continue to develop improved methods, processes and
techniques as dictated by the technological needs of the business. See "Risk
Factors -- Intellectual Property."
COMPETITION
The PCB and backpanel industry is highly fragmented and characterized by
intense competition. The Company believes that its major competitors are the
independent and captive producers that manufacture multilayer PCBs and provide
backpanel and other electronic assemblies.
The demand for PCBs has continued to be affected by the development of
smaller, more powerful electronic components requiring less PCB area but a
higher layer count. Expansion of the Company's existing products or services
could expose the Company to new competition. Moreover, new developments in the
electronics industry could render existing technology obsolete or less
competitive and could potentially introduce new competition into the industry.
There can be no assurance that the Company will continue to compete successfully
against present and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company competes on the basis of product quality, timeliness of
delivery, price, customer technical support and its integrated offering from
development and design through volume production and backpanel assembly.
FACILITIES
In addition to its executive offices in St. Louis, Missouri, the Company
operates 16 principal manufacturing and research facilities located in six
different countries with a total area of approximately 2.2 million square feet.
The Company owns approximately 1.8 million square feet and leases approximately
400,000 square feet. The Company is currently constructing what it believes will
be, upon its completion, the largest PCB manufacturing facility in Europe. The
Company believes its plants and equipment include state-of-the-art technology
and to be well-maintained. Production facilities for certain of the Company's
products are operating at or near capacity.
All of the Company's owned facilities are subject to mortgages pursuant to
the Senior Credit Facilities.
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The Company's facilities are as follows:
<TABLE>
<CAPTION>
SIZE TYPE OF DESCRIPTION OF
LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED
-------- ----------------- -------- --------------------------
<S> <C> <C> <C>
UNITED STATES
Richmond, Virginia................ 700,000 Owned High volume PCBs and
backpanels
San German, Puerto Rico........... 185,000 Leased(1) High volume inner layer
and high density PCBs
CANADA
Kirkland, Quebec.................. 117,000 Owned High volume, high density
PCBs
Pointe-Claire, Quebec............. 160,000 Owned High volume inner layers
and prototype and
pre-production
Granby, Quebec.................... 103,000 Owned High volume, high density
PCBs
EUROPE
Tres Cantos, Spain................ 5,000 Leased(2) Backpanels
Galashiels, Scotland.............. 121,000 Owned High volume PCBs
Selkirk, Scotland................. 142,000 Owned/Leased(3) High volume complex PCBs
and quick-turnaround
Rugby, England.................... 36,000 Leased(4) Pre-production PCBs
Tamworth, England................. 62,000 Owned Prototype, quick-
turnaround complex PCBs
Telford, England.................. 44,000 Leased(5) Medium volume PCBs
Manchester, England............... 30,000 Owned Advanced prototype and
pre-production PCBs
Portsmouth, England............... 27,000 Leased(6) High reliability thick
film hybrids
South Shields, England............ 320,000 Owned High volume PCBs;
quick-turnaround
Newcastle, England................ 500,000 Under High volume PCBs
construction
SOUTH AFRICA
TI, Wilsonia, East London......... 82,000 Leased(7) Double-sided PCBs
Swift, Fort Jackson, East 22,000 Leased(7) Single-sided PCBs
London..........................
</TABLE>
- ---------------
(1) -- Lease expires December 31, 2002.
(2) -- Lease expires November 11, 1997.
(3) -- Lease portion of facility (approximately 30,000 sq. ft.) expires May 15,
2004 (includes options to renew through May 15, 2024 and to purchase).
(4) -- Lease expires June 24, 2009.
(5) -- Lease expires June 24, 2987 (999 year lease).
(6) -- Lease expires October 1, 2004.
(7) -- Leases expire March 31, 2000.
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LEGAL
The operations of the Company have from time to time been involved in
claims and litigation. The nature of the Company's business is such that it is
anticipated that the Company will be involved from time to time in claims and
litigation considered to be in the ordinary course of its business. Based on
experience with similar claims and litigation, the Company does not anticipate
that these matters will have a material adverse effect on the Company.
The Company anticipates that it may, from time to time, receive
notifications alleging infringements of patents generally held by other
manufacturers. Disputes over patent infringement are common in the electronics
industry and typically begin with notices of the type described above. Although
the ultimate resolution of the legal action and infringement notices described
above cannot be predicted, the Company believes that such resolution, including
any ultimate liability, will not have a material adverse effect on the Company.
ENVIRONMENTAL
Certain operations of the Company are subject to federal, state, local and
foreign environmental laws and regulations, which govern, among other things,
the discharge of pollutants into the air and water, as well as the handling and
disposal of solid and hazardous wastes. The Company believes that it is in
material compliance with applicable environmental laws and the costs of
compliance with such current or proposed environmental laws and regulations will
not have a material adverse effect on the Company. Further, the Company is not a
party to any claim or proceeding and is not aware of any threatened claim or
proceeding under environmental laws, that could, if adversely decided,
reasonably be expected to have a material adverse effect. Currently, remedial
activities are being undertaken at the Company's facilities in Virginia and
Puerto Rico. While the cost of such remediation could be material, the prior
owners are conducting the requisite remedial actions pursuant to governmental
orders and have agreed to indemnify the Company for costs associated with the
remediations. Accordingly, the Company does not believe that any of these
matters are reasonably likely to have a material adverse effect on the Company.
EMPLOYEES
As of August 1, 1997, the Company had approximately 7,300 employees.
Approximately 2,500 employees, or about 35%, are represented by various unions
pursuant to collective bargaining agreements. The Company has not experienced
any labor problems resulting in a work stoppage, and believes it has good
relations with its employees.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and positions of the respective directors and
executive officers of the Company. All directors hold office until the next
annual meeting of stockholders of the Company and until their successors are
duly elected and qualified.
<TABLE>
<S> <C> <C>
James N. Mills....................... 60 Chairman of the Board and Chief Executive Officer
of the Company and Viasystems Group
Thomas O. Hicks...................... 51 Director of the Company and Viasystems Group
Jack D. Furst........................ 38 Director of the Company and Viasystems Group
Richard W. Vieser.................... 70 Director of the Company and Viasystems Group
Kenneth F. Yontz..................... 52 Director of the Company and Viasystems Group
Robert N. Mills...................... 55 President, Chief Operating Officer and Director
of the Company and Viasystems Group
David M. Sindelar.................... 40 Senior Vice President, Chief Financial Officer of
the Company and Viasystems Group
Larry S. Bacon....................... 51 Senior Vice President, Human Resources of the
Company
W. Thomas McGhee..................... 61 Secretary and General Counsel of the Company
Gerald C. Nelson..................... 45 Executive Vice President -- Operations of the
Company
James G. Powers...................... 36 Vice President -- Finance of the Company
</TABLE>
James N. Mills has been Chairman of the Board and Chief Executive Officer
of Viasystems Group since January 1997 and the Chairman of the Board and Chief
Executive Officer of the Company since April 1997. Mr. Mills is the Chairman,
President and Chief Executive Officer of Mills & Partners. Mr. Mills is also
Chairman of the Board and Chief Executive Officer of Berg Electronics Corp.,
Chairman of the Board and sole director of Berg Electronics Group, Inc.,
Chairman of the Board and Chief Executive Officer of International Wire Holding
Company, International Wire Group, Inc., Crain Holdings Corp., Crain Industries,
Inc. and Copy USA Holdings Corp. Mr. Mills was Chairman of the Board and Chief
Executive Officer of Jackson Holding Company and Jackson Products, Inc. from
February 1993 through August 1995. Mr. Mills was Chairman of the Board and Chief
Executive Officer of Thermadyne Holdings Corporation from February 1989 through
February 1995. Mr. Mills was Executive Vice President of McGraw-Edison Company
from 1978 to 1985, and served as Industrial Group President and President of the
Bussman Division of the McGraw-Edison Company from 1980 to 1984. Mr. Mills also
serves as a director of Hat Brands Holding Corporation and Hat Brands, Inc.
Thomas O. Hicks has been a director of Viasystems Group since January 1997
and a director of the Company since May 1997. Mr. Hicks is Chairman of the Board
and Chief Executive Officer of Hicks Muse. From 1984 to May 1989, Mr. Hicks was
Co-Chairman of the Board and Co-Chief Executive Officer of Hicks & Haas
Incorporated, a Dallas-based private investment firm. Mr. Hicks serves as a
director of Berg Electronics Corp., Chancellor Broadcasting Company,
International Home Foods, Inc., D.A.C. Vision, Inc., Sybron International
Corporation, Capstar Broadcasting Partners, Inc., Cooperative Computing Holding
Company, Inc., and Neodata Corporation.
Jack D. Furst has been a director of Viasystems Group since August 1996 and
a director of the Company since May 1997. Mr. Furst is a Managing Director and
Principal of Hicks Muse and has held such position since 1989. Mr. Furst has
approximately 15 years of experience in leveraged acquisitions and private
investments. Mr. Furst is involved in all aspects of Hicks Muse's business and
has been actively involved in originating, structuring and monitoring its
investments. Mr. Furst is primarily responsible for managing the relationship
with Mills & Partners. Prior to joining Hicks Muse, Mr. Furst was a Vice
President and subsequently a Partner of Hicks & Haas, Incorporated, a
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Dallas-based private investment firm from 1987 to May 1989. From 1984 to 1986,
Mr. Furst was a merger and acquisition/corporate finance specialist for The
First Boston Corporation in New York. Before joining First Boston, Mr. Furst was
a financial consultant at Price Waterhouse. Mr. Furst serves on the board of
directors of Neodata Corporation, Desa Holdings Corporation, International Wire
Holding Company and Cooperative Computing, Inc.
Richard W. Vieser has been a director of Viasystems Group since January
1997 and a director of the Company since May 1997. Mr. Vieser is the retired
Chairman of the Board, Chief Executive Officer and President of Lear Siegler,
Inc. (a diversified manufacturing company), the former Chairman of the Board and
Chief Executive Officer of FL Industries, Inc. and FL Aerospace (also
diversified manufacturing companies), and the former President and Chief
Operating Officer of McGraw-Edison Co. He is also a director of Ceridian
Corporation (formerly Control Data Corporation), Berg Electronics Corp., Dresser
Industries, Inc. INDRESCO Inc., Sybron International Corporation and Varian
Associates, Inc.
Kenneth F. Yontz has been a director of Viasystems Group since January 1997
and a director of the Company since May 1997. Mr. Yontz is the Chairman,
President and Chief Executive Officer of Sybron International Corporation, a
manufacturer and marketer of laboratory apparatus products, dental sundry
supplies and orthodontic appliances. Mr. Yontz is also a director of Playtex
Products, Inc. and Berg Electronics Corp. Prior to joining Sybron, Mr. Yontz was
Group Vice President and Executive Vice President of the Allen-Bradley Company.
Mr. Yontz also held various managerial and professional positions with Chemetron
from 1974 to 1980 and at Ford Motor Company from 1966 to 1974.
Robert N. Mills has been a director of Viasystems Group since January 1997
and has been President, Chief Operating Officer since the Company's formation in
April 1997 and a director of the Company since May 1997. Mr. Mills is also Vice
Chairman of Berg Electronics Corp. and served as President of Berg Electronics
Corp. since June 1995, and as Chief Operating Officer of Berg Electronics Corp.
and as President and Chief Executive Officer of Berg Electronics Group since
March 1993. Mr. Mills served as a Vice President of the Berg Electronics Corp.
from March 1993 through June 1995, Mr. Mills is a Vice President of Mills &
Partners, Inc. Prior to joining Berg in March 1993, Mr. Mills was Vice President
of Thermadyne Industries, Inc. and President of Stoody Deloro Stellite and has
held such positions since February 1990 and July 1989, respectively. Prior
thereto, he served as President, Chief Operating Officer and Director of Tridex
Corporation from 1987 through 1989, and Vice President and General Manager of
Elco Corporation, a subsidiary of Wickes Manufacturing Company, from 1983
through 1987. Robert N. Mills is the brother of James N. Mills.
David M. Sindelar has been a Senior Vice President since January 1997 and
Chief Financial Officer of Viasystems Group since its inception and has been
Senior Vice President, Chief Financial Officer and Treasurer of the Company
since its formation in April 1997. Mr. Sindelar is also Senior Vice President
and Chief Financial Officer of Mills & Partners, Berg Electronics Corp.,
International Wire Holding Company, Crain Industries, Inc. and Crain Holdings
Corp. Mr. Sindelar was Senior Vice President and Chief Financial Officer of
Jackson Holding Company from February 1993 through August 1995. From 1987 to
February 1995, Mr. Sindelar held various other positions at Thermadyne Holdings
Corporation including Senior Vice President and Chief Financial Officer, Vice
President -- Corporate Controller and Controller. Mr. Sindelar was employed by
Arthur Andersen & Co. from 1979 to 1987.
Larry S. Bacon has been a Senior Vice President of Viasystems Group since
January 1997 and Senior Vice President of the Company since May, 1997. Mr. Bacon
is also Senior Vice President of Mills & Partners, Berg Electronics Corp., Crain
Industries, Inc., Crain Holdings Corp. and International Wire Holding Company.
Mr. Bacon was Senior Vice President of Jackson Holding Company from February
1993 through August 1995. Previously, Mr. Bacon was Senior Vice President --
Human Resources of Thermadyne Holdings Corporation from September 1987 until
February 1995.
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<PAGE> 60
Prior to that, he held a variety of senior human resources management positions
with Cooper Industries, McGraw-Edison Company and Hoechst Celanese.
W. Thomas McGhee has been Secretary and General Counsel of Viasystems Group
since January 1997 and has been Secretary of the Company since its formation in
April 1997. Mr. McGhee is also a partner of the law firm of Herzog, Crebs and
McGhee and has held that position since 1987. In addition, Mr. McGhee serves as
Secretary and General Counsel of International Wire Holding Company,
International Wire Group, Inc., Berg Electronics Corp., Crain Industries, Inc.
and Crain Holdings Corp.
Gerald C. Nelson is Executive Vice President, Operations of the Company and
has held that position since May, 1997. Prior to joining the Company, Mr. Nelson
held several executive positions, such as President of the Harness Division of
International Wire Group, Inc. and President and Chief Operating Officer of the
Wear Resistance Division of Thermadyne Industries, Inc.
James G. Powers has been a Vice President of Viasystems Group since April
1997 and a Vice President of the Company since its formation in April 1997.
Prior to joining the Company, Mr. Powers served as Vice President -- Finance of
Crain Industries, Inc. He also held various positions at Berg Electronics Corp.,
including Vice President -- Controller, from June 1993 to August 1995.
Previously, Mr. Powers was Controller of Moog Automotive, Inc. from 1991 through
1993 and was employed by Arthur Andersen & Co. from 1983 to 1991.
COMPENSATION OF DIRECTORS
The directors of Viasystems Group and the Company did not receive
compensation from either Viasystems Group or the Company for services rendered
in that capacity during the prior fiscal year. Directors who are officers,
employees or otherwise an affiliate of Viasystems Group or the Company are not
presently expected to receive compensation for their services as directors.
Directors of Viasystems Group and the Company are entitled to reimbursement of
their reasonable out-of-pocket expenses in connection with their travel to and
attendance at meetings of the board of directors or committees thereof. No
determination has yet been made with respect to annual fees or board attendance
fees, if any, to be paid to directors of Viasystems Group or the Company who are
not also officers, employees, or otherwise an affiliate of Viasystems Group or
the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The executive officers of Viasystems Group and the Company did not receive
any compensation from either Viasystems Group or the Company during the prior
fiscal year. Viasystems Group and the Company have entered into employment
agreements with Messrs. J. Mills, R. Mills, Sindelar and Nelson, and certain
other executive offices of Viasystems Group and the Company. The compensation to
be paid to the executive officers of Viasystems Group and the Company will be
determined by the terms of those agreements, the Chairman of the Board of
Viasystems Group and the Company, and the Board of Directors of Viasystems Group
and the Company.
EMPLOYMENT AGREEMENTS
James N. Mills Executive Employment Agreement. Mr. James N. Mills entered
into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. J. Mills will serve as the Chairman of the Board of Directors and
Chief Executive Officer of Viasystems Group through December 31, 2001, unless
terminated earlier as provided therein. Mr. J. Mills is required to devote such
time as is reasonably necessary to faithfully and adequately supervise the
overall executive management of Viasystems Group and its subsidiaries, both
direct and indirect. Subject to the foregoing limitation on his activities, Mr.
J. Mills is free to participate in other endeavors.
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The compensation provided to Mr. J. Mills under his executive employment
agreement includes an annual base salary of not less than $395,000, subject to
upward adjustment at the sole discretion of the Board of Directors of Viasystems
Group, and such benefits as are customarily accorded the executives of
Viasystems Group as long as the executive employment agreement is in force. In
addition, Mr. J. Mills is entitled to an annual bonus in an amount determined in
accordance with the Senior Executive Incentive Compensation Plan and
reimbursement for expenses to own and maintain an automobile.
Mr. J. Mills' executive employment agreement also provides that if Mr. J.
Mills' employment is terminated without cause, Mr. J. Mills will continue to
receive his then current salary, which shall not be less than $395,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.
Robert N. Mills Executive Employment Agreement. Mr. Robert N. Mills entered
into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. R. Mills will serve as the President and Chief Operating Officer
of Viasystems Group through December 31, 2001, unless terminated earlier as
provided therein. Mr. R. Mills is required to devote such time as is reasonably
necessary to faithfully and adequately supervise the overall financial
management of Viasystems Group and its subsidiaries, both direct and indirect.
Subject to the foregoing limitation on his activities, Mr. R. Mills is free to
participate in other endeavors.
The compensation provided to Mr. R. Mills under his executive employment
agreement includes an annual base salary of not less than $482,000, subject to
upward adjustment at the sole discretion of the Chairman of the Board of
Directors of Viasystems Group, and such benefits as are customarily accorded the
executives of Viasystems Group as long as the executive employment agreement is
in force. In addition, Mr. R. Mills is entitled to an annual bonus in an amount
determined in accordance with the Senior Executive Incentive Compensation Plan
and reimbursement for expenses to own and maintain an automobile.
Mr. R. Mills' executive employment agreement also provides that if Mr. R.
Mills' employment is terminated without cause, Mr. R. Mills will continue to
receive his then current salary, which shall not be less than $482,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.
David M. Sindelar Executive Employment Agreement. Mr. David M. Sindelar
entered into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. Sindelar will serve as the Senior Vice President and Chief
Financial Officer of Viasystems Group through December 31, 2001, unless
terminated earlier as provided therein. Mr. Sindelar is required to devote such
time as is reasonably necessary to faithfully and adequately supervise the
overall financial management of Viasystems Group and its subsidiaries, both
direct and indirect. Subject to the foregoing limitation on his activities, Mr.
Sindelar is free to participate in other business endeavors.
The compensation provided to Mr. Sindelar under his executive employment
agreement includes an annual base salary of not less than $168,200, subject to
upward adjustment at the sole
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discretion of the Chairman of the Board of Directors of Viasystems Group, and
such benefits as are customarily accorded the executives of Viasystems Group as
long as the executive employment agreement is in force. In addition, Mr.
Sindelar is entitled to an annual bonus in an amount determined in accordance
with the Senior Executive Incentive Compensation Plan and reimbursement for
expenses to own and maintain an automobile.
Mr. Sindelar's executive employment agreement also provides that if Mr.
Sindelar's employment is terminated without cause, Mr. Sindelar will continue to
receive his then current salary, which shall not be less than $168,200, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.
Gerald C. Nelson Executive Employment Agreement. Mr. Gerald C. Nelson
entered into an executive employment agreement with Viasystems Group, Viasystems
Technologies and Circo Craft as of January 1, 1997. Pursuant to his employment
agreement, Mr. Nelson will serve as the Senior Vice President -- Operations of
Viasystems Group through December 31, 2001, unless terminated earlier as
provided therein. Mr. Nelson is required to devote such time as is reasonably
necessary to faithfully and adequately supervise the operations of Viasystems
Group and its subsidiaries, both direct and indirect.
The compensation provided to Mr. Nelson under his executive employment
agreement includes an annual base salary of not less than $275,000, subject to
upward adjustment at the sole discretion of the Chairman of the Board of
Directors of Viasystems Group, and such benefits as are customarily accorded the
executive of Viasystems Group as long as the executive employment agreement is
in force. In addition, Mr. Nelson is entitled to an annual bonus in an amount
determined in accordance with the Senior Executive Incentive Compensation Plan
and reimbursement for expenses to own and maintain an automobile.
Mr. Nelson's executive employment agreement also provides that if Mr.
Nelson's employment is terminated without cause, Mr. Nelson will continue to
receive his then current salary, which shall not be less than $275,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon death or "total disability" (as defined
therein) and no further compensation shall be payable except that he or his
estate, heirs or beneficiaries, as applicable, shall receive his then current
salary for a period of 18 months, in addition to benefits otherwise specifically
provided for and medical benefits for his lifetime.
BENEFIT PLANS
Stock Option Plan
Viasystems Group has adopted the Viasystems Group, Inc. 1997 Stock Option
Plan (the "Stock Option Plan") pursuant to which incentive and non-qualified
stock options, stock appreciation rights, stock awards, performance awards and
stock units may be issued to such employees of Viasystems Group and any parent
or subsidiary corporation designated by the Board of Directors of Viasystems
Group. A total of 8,409,782 shares of Viasystems Group Common Stock will be
reserved for issuance under the Stock Option Plan, of which 7,420,386 of such
shares were reserved in connection with the Chips Merger and related
transactions. As of the date of this Prospectus, options to purchase an
aggregate of 605,000 shares of Viasystems Group Common Stock subject to the
terms and conditions of the Stock Option Plan are outstanding.
The Stock Option Plan provides that it is to be administered by a committee
of the Board of Directors of Viasystems Group or a subcommittee of such a
committee (the "Committee"). The
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Committee has the authority to grant to any participant one or more stock
options, and to establish the terms and conditions of such options, subject to
certain limitations specified in the Stock Option Plan. For example, the
per-share exercise price of each option must not be less than 100% of the fair
market value of the Viasystems Group Common Stock on the date such option is
granted, and no option may be exercisable later than ten years after the date of
grant. In the event of a change in control (as defined in the Stock Option
Plan), the Committee, in its discretion, may take such actions as it deems
appropriate with respect to outstanding awards, including, without limitation,
accelerating the exercisability or vesting of such awards.
The Stock Option Plan became effective as of February 4, 1997. Effective
concurrent with the consummation of the Chips Merger, the Stock Option Plan was
amended to increase the number of shares of Viasystems Group Common Stock
reserved for issuance under the Stock Option Plan. The Stock Option Plan, as
amended, is subject to stockholder approval and will terminate on February 4,
2007, unless sooner terminated by the Committee.
Performance Options
On November 26, 1996, Viasystems Group granted options (the "Performance
Options") to purchase 1,085,187 shares of Viasystems Group Common Stock. Messrs.
J. Mills and Sindelar were granted Performance Options to purchase 336,408 and
227,889 shares of Viasystems Group Common Stock, respectively, and Performance
Options to purchase the remaining 520,890 shares of Viasystems Group Common
Stock were granted to certain officers of the Company who are also affiliated
with Mills & Partners. Upon the consummation of the Original Offering,
Viasystems Group granted Performance Options to purchase 8,138,904 shares of
Viasystems Group Common Stock. Messrs. J. Mills and Sindelar were granted
Performance Options to purchase 2,132,392 and 1,318,501 shares of Viasystems
Group Common Stock, respectively, and Performance Options to purchase the
remaining 4,688,011 shares of Viasystems Group Common Stock were granted to
certain officers of the Company who are also affiliated with Mills & Partners.
Pursuant to the terms of the option agreements (the "Performance Option
Agreements") related to the Performance Options, the Performance Options will
become options to purchase an identical number of shares of Viasystems Group
Common Stock.
The Performance Options are exercisable only in the event that HM Fund III
has, as of the exercise date, realized an overall rate of return of at least 35%
per annum, compounded annually, on all equity funds invested by it in Viasystems
Group. Subject to the foregoing, the Performance Options are exercisable (i)
immediately prior to the consummation of a Liquidity Event (as hereinafter
defined), (ii) concurrently with the consummation of a Qualified IPO (as
hereinafter defined), or (iii) on the ten year anniversary of their grant. A
"Liquidity Event" generally means (i) one or more sales or other dispositions of
Viasystems Group Common Stock if, thereafter, the amount of Viasystems Group
Common Stock owned by HM Fund III is reduced by 50%, (ii) any merger,
consolidation or other business combination of Viasystems Group pursuant to
which any person or group acquires a majority of the common stock of the
resulting entity, or (iii) any sale of all or substantially all of the assets of
Viasystems Group. A "Qualified IPO" means a firm commitment underwritten public
offering of Viasystems Group Common Stock for gross proceeds of at least $50
million pursuant to an effective registration statement under the Securities
Act.
The exercise price for the Performance Options is initially equal to $1.00
per share and, effective each anniversary of the grant date, the per share
exercise price for the Performance Options is equal to the per share exercise
price for the prior year multiplied by 1.08. The exercise price of the
Performance Options and the number of shares of Viasystems Group Common Stock
for which the Performance Options are exercisable is subject to adjustment in
the event of certain fundamental changes in the capital structure of Viasystems
Group. All Performance Options terminate on the ten year anniversary of their
grant.
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<PAGE> 64
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
All the issued and outstanding shares of common stock of the Company are
held by Viasystems Group. The following table sets forth certain information
regarding the expected beneficial ownership of the voting securities of
Viasystems Group upon the consummation of the Transactions, by each person who
is expected to beneficially own more than 5% of any class of Viasystems Group
voting securities and by the directors and certain executive officers of
Viasystems Group, individually, and by the directors and executive officers of
Viasystems Group as a group, following the consummation of the Transactions. The
Viasystems Group Class A Common Stock votes together with the Viasystems Group
Common Stock as a single class and is entitled to one vote for each share.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------------
VIASYSTEMS GROUP
VIASYSTEMS GROUP CLASS A
COMMON STOCK COMMON STOCK(1)
------------------------ -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF PERCENT OF
SHARES CLASS SHARES CLASS TOTAL
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
5% STOCKHOLDERS:
HM Parties(2)........................... 255,000,004 99.9% -- -- 87.9%
c/o Hicks, Muse, Tate & Furst
Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
OFFICERS AND DIRECTORS:
James N. Mills(3)..................... 200,000 -- 34,835,832 100.0% 12.0%
Thomas O. Hicks(2).................... 255,000,004 99.9% -- -- 87.9%
Jack D. Furst(2)...................... 255,000,004 99.9% -- -- 87.9%
Richard W. Vieser(4).................. 500,000 * -- -- *
Kenneth F. Yontz...................... 400,000 * -- -- *
Robert N. Mills....................... -- -- 7,140,000 20.5% 2.5%
David M. Sindelar(5).................. -- -- 7,333,331 21.1% 2.5%
All executive officers and directors
as a group (11 persons)(6).......... 256,200,004 100.0% 34,835,832 100.0% 100.0%
</TABLE>
- ---------------
* Represents less than 1%.
(1) Viasystems Group Class A Common Stock is convertible into Viasystems Group
Common Stock (i) at the option of any holder thereof at any time, (ii) at
the option of Viasystems Group upon the occurrence of a Triggering Event (as
defined below), and (iii) automatically on September 30, 2006. A "Triggering
Event" means any sale of substantially all of the assets of Viasystems Group
or any merger, consolidation or other business combination of Viasystems
Group in which Hicks Muse and its affiliates cease to beneficially own,
directly or indirectly, at least 50% of the resulting entity. Each share of
Viasystems Group Class A Common Stock is convertible into a fraction of a
share of Viasystems Group Common Stock equal to the quotient of (i) the fair
market value of a share of Viasystems Group Common Stock at the time of
conversion less the sum of $.99 plus imputed interest thereon at a rate of
8% per annum, compounded annually, at the time of conversion, divided by
(ii) the fair market value of a share of Viasystems Group Common Stock at
the time of conversion. Because the fraction of a share of Viasystems Group
Common Stock into which Viasystems Group Class A Common Stock is convertible
is determinable only at the time of a conversion, shares of Viasystems Group
Common Stock that may be issuable upon conversion of Viasystems Group Class
A Common Stock are not included in the shares of Viasystems Group Common
Stock beneficially owned in the foregoing table.
(2) Includes (i) shares owned of record by Hicks, Muse, Tate & Furst Equity Fund
III, L.P. ("Fund III"), a limited partnership, of which the ultimate general
partner of Fund III is Hicks, Muse, Tate & Furst Fund III, Incorporated, an
affiliate of Hicks Muse; and (ii) shares owned of record by HM3 Coinvestors,
L.P., a limited partnership of which the ultimate general partner is
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<PAGE> 65
Fund III. Thomas O. Hicks is a controlling stockholder of Hicks Muse and
serves as Chairman of the Board, President, Chief Executive Officer, Chief
Operating Officer and Secretary of Hicks Muse. Accordingly, Mr. Hicks may be
deemed to be the beneficial owner of Viasystems Group Common Stock held by
Fund III and HM3 Coinvestors, L.P. John R. Muse, Charles W. Tate, Jack D.
Furst, Lawrence D. Stuart Jr., Michael J. Levitt and Alan B. Menkes are
officers, directors and minority stockholders of Hicks Muse and as such may
be deemed to share with Mr. Hicks the power to vote or dispose of Viasystems
Group Common Stock held by Fund III and HM3 Coinvestors, L.P. Each of
Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt and Menkes disclaims the
existence of a group and disclaims beneficial ownership of Viasystems Group
Common Stock not respectively owned of record by him.
(3) Includes shares of Viasystems Group Common Stock and Viasystems Group Class
A Common Stock held by James N. Mills and shares of Viasystems Group Common
Stock and Viasystems Group Class A Common Stock owned of record by certain
individuals, including Messrs. R. Mills and D. Sindelar, subject to an
irrevocable proxy in favor of Mr. Mills. See "Certain Transactions." Does
not include 2,468,800 shares of Viasystems Group Common Stock issuable to
Mr. Mills upon the exercise of Performance Options that are not currently
exercisable. See "Management -- Benefit Plans -- Stock Option Plan."
(4) Includes 100,000 shares of Viasystems Group Common Stock that may be
acquired by Mr. Vieser upon the exercise of options granted to him pursuant
to a stock option agreement with Viasystems Group.
(5) Does not include 1,546,390 shares of Viasystems Group Common Stock issuable
to Mr. Sindelar upon exercise of Performance Options that are not currently
exercisable. See "Management -- Benefit Plans -- Performance Options."
(6) Does not include 9,224,091 shares of Viasystems Group Common Stock issuable
to executive officers of Viasystems Group upon the exercise of Performance
Options that are not currently exercisable. See "Management -- Benefit
Plans -- Performance Options."
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<PAGE> 66
CERTAIN TRANSACTIONS
In April 1997, an affiliate of Hicks Muse acquired Forward Group, a rigid
PCB manufacturer located in the United Kingdom, for a purchase price of
approximately $236.0 million (including the issuance of the Forward Group Loan
Notes), which was funded with $216.0 million of borrowings under the Tender
Facility and the proceeds from the issuance to Hicks Muse of $40.0 million
initial liquidation preference of preferred stock. Subsequently, Viasystems
Group acquired Forward Group for cost, consisting of the assumption of the
Tender Facility and the issuance to Hicks Muse and certain affiliates of $40.0
million initial liquidation preference of Viasystem Group's preferred stock.
In April 1997, Chips Holdings acquired Chips, a rigid PCB manufacturer
located in the United Kingdom. In connection with such transaction, Hicks Muse
and its affiliates invested $140.0 million in the equity capital of Chips
Holdings. The Chips Merger was consummated concurrently with the consummation of
the Original Offering, in consideration for the issuance to Hicks Muse and
certain affiliates of common stock valued at $140.0 million. In addition, the
Company became the obligor on the Chips Reimbursement Obligation.
Viasystems Group and its subsidiaries have entered into a ten-year
agreement (the "Monitoring and Oversight Agreement") with an affiliate of Hicks
Muse ("Hicks Muse Partners") which was amended upon consummation of the
Transactions and pursuant to which Viasystems Group and its subsidiaries will
pay Hicks Muse Partners an annual fee payable quarterly for oversight and
monitoring services to the Company. The annual fee is adjustable on January 1 of
each calendar year to an amount equal to 0.2% of the budgeted consolidated
annual net sales of Viasystems Group and its subsidiaries for the then-current
fiscal year, but in no event less than $1,750,000 (the "Base Fee"). Upon the
acquisition by Viasystems Group or any of its subsidiaries of another entity or
business, the fee shall be adjusted prospectively in the same manner using the
pro forma combined budgeted consolidated annual net sales of Viasystems Group
and its subsidiaries. Thomas O. Hicks and Jack D. Furst, directors of Viasystems
Group and the Company, are each principals of Hicks Muse Partners. Hicks Muse
Partners is also entitled to reimbursement for any expenses incurred by it in
connection with rendering services allocable to the Company under the Monitoring
and Oversight Agreement. In addition, Viasystems Group and its subsidiaries,
jointly and severally, have agreed to indemnify Hicks Muse Partners, its
affiliates, and their respective directors, officers, controlling persons,
agents and employes from and against all claims, liabilities, losses, damages,
expenses and fees and disbursements of counsel related to or arising out of or
in connection with the services rendered by Hicks Muse Partners under the
Monitoring and Oversight Agreement and not resulting primarily from the bad
faith, gross negligence, or willful misconduct of Hicks Muse Partners. The
Monitoring and Oversight Agreement makes available the resources of Hicks Muse
Partners concerning a variety of financial and operational matters. The Company
does not believe that the services that have been and will continue to be
provided to the Company by Hicks Muse Partners could otherwise be obtained by
the Company without the addition of personnel or the engagement of outside
professional advisors. In the Company's opinion, the fees provided for under the
Monitoring and Oversight Agreement reasonably reflect the benefits received and
to be received by Viasystems Group, the Company and their respective
subsidiaries.
Chips Holdings and its subsidiaries entered into a ten-year agreement (the
"Chips Monitoring and Oversight Agreement") with Hicks Muse Partners pursuant to
which Chips and its subsidiaries agreed to pay Hicks Muse Partners an annual fee
on terms substantially similar to those under the Monitoring and Oversight
Agreement except that the Base Fee thereunder is $530,000. Upon consummation of
the Transactions, the Chips Monitoring and Oversight Agreement was terminated.
Viasystems Group and its subsidiaries entered into a ten-year agreement
(the "Financial Advisory Agreement"), pursuant to which Hicks Muse Partners is
entitled to receive a fee equal to 1.5% of the "transaction value" (as defined)
for each "add-on transaction" (as defined) in which Viasystems Group or any of
its subsidiaries is involved. In respect of the acquisitions to date, Hicks Muse
has received aggregate fees of approximately $4.9 million under the Financial
Advisory
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<PAGE> 67
Agreement. The term "transaction value" means the total value of the add-on
transaction including without limitation, the aggregate amount of the funds
required to complete the add-on transaction (excluding any fees payable pursuant
to the Financial Advisory Agreement), including the amount of any indebtedness,
preferred stock or similar terms assumed (or remaining outstanding). The term
"add-on transaction" means any future proposal for a tender offer, acquisition,
sale, merger, exchange offer, recapitalization, restructuring or other similar
transaction directly involving Viasystems Group or any of its subsidiaries or
any of their respective subsidiaries and any other person or entity. In
addition, Viasystems Group and its subsidiaries, jointly and severally, have
agreed to indemnify Hicks Muse Partners, its affiliates, and their respective
directors, officers, controlling persons, agents and employees from and against
all claims, liabilities, losses, damages, expenses and fees related to or
arising out of or in connection with the services rendered by Hicks Muse
Partners under the Financial Advisory Agreement and not resulting primarily from
the bad faith, gross negligence, or willful misconduct of Hicks Muse Partners.
The Financial Advisory Agreement makes available the resources of Hicks Muse
Partners concerning a variety of financial and operational matters. The Company
does not believe that the services that have been and will continue to be
provided by Hicks Muse Partners could otherwise be obtained by the Company
without the addition of personnel or the engagement of outside professional
advisors. In the Company's opinion, the fees provided for under the Financial
Advisory Agreement reasonably reflect the benefits received and to be received
by Viasystems Group, the Company and their respective subsidiaries. No fee will
be paid under the Financial Advisory Agreement in connection with the Chips
Merger.
Forward Group and its subsidiaries previously entered into a ten-year
agreement (the "Forward Group Financial Advisory Agreement"), pursuant to which
Hicks Muse Partners was entitled to receive certain fees on terms substantially
identical to those described in the Financial Advisory Agreement. In respect of
acquisitions to date, Hicks Muse Partners has received aggregate fees of
approximately $3.5 million under the Forward Group Financial Advisory Agreement.
Upon consummation of the acquisition of Forward Group, the Forward Group
Financial Advisory Agreement was terminated and no fees were paid in connection
with the Company's acquisition of the Forward Group.
Chips Holdings and its subsidiaries entered into a ten-year agreement (the
"Chips Financial Advisory Agreement"), pursuant to which Hicks Muse Partners is
entitled to receive certain fees on terms substantially identical to those fees
described in the Financial Advisory Agreement. In respect of the acquisitions to
date, Hicks Muse Partners has received aggregate fees of approximately $6.9
million under the Chips Financial Advisory Agreement. Upon consummation of the
Chips Merger, the Chips Financial Advisory Agreement was terminated and no fee
was paid in connection with the Chips Merger.
Effective concurrent with the consummation of the Transactions, each
investor in any class of common stock of Viasystems Group entered into an
amended and restated stockholders agreement (the "Stockholders Agreement"). The
Stockholders Agreement, among other things, grants preemptive rights and certain
registration rights to the parties thereto and contains provisions requiring the
parties thereto to sell their shares of common stock in connection with certain
sales of Viasystems Group Common Stock by Fund III ("drag-along rights") and
granting the parties thereto the right to include a portion of their shares of
common stock in certain sales in which Fund III does not exercise its drag-along
rights ("tag-along rights"). All parties to the Stockholders Agreement agreed to
take all action within their respective power (including the voting of
Viasystems Group Common Stock and Viasystems Group Class A Common Stock) to
cause the Board of Directors of the Company to at all times be constituted by
the members designated by Fund III. The Stockholders Agreement contains an
irrevocable proxy pursuant to which all parties to the Stockholders Agreement
(other than the initial holders of Viasystems Group Class A Common Stock and
their transferees) grant to Fund III the power to vote all shares of Viasystems
Group Common Stock held by such parties on all matters submitted to the
Company's stockholders.
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<PAGE> 68
Further, the Stockholders Agreement contains an irrevocable proxy pursuant to
which the initial holders of Viasystems Group Class A Common Stock and their
transferees grant to James N. Mills (or to Fund III if Mr. Mills is no longer an
officer or director of Viasystems Group) the power to vote all shares of
Viasystems Group Class A Common Stock held by such parties on all matters
submitted to the Company's stockholders. The Stockholders Agreement terminates
on its tenth anniversary date, although the preemptive rights, drag-along rights
and tag-along rights contained therein terminate earlier upon the consummation
of a firm commitment underwritten public offering of Viasystems Group Common
Stock.
The Company purchases certain connectors and other products needed to
manufacture PCBs and backpanels from Berg. Prior to the Company's acquisition of
the Lucent Division, the Lucent Division purchased certain electronic
connections from Berg pursuant to a written supply contract (the "Berg Supply
Agreement"). Berg and the Company have agreed to continue to supply and purchase
products on the same terms and condition as set forth in the Berg Supply
Agreement. Berg is controlled by Hicks Muse, through its affiliates, and managed
by Mills and Partners. In addition, certain of the Company's directors and
executive officers have financial interests in Berg. In fiscal year 1996, the
Company and the Lucent Division collectively purchased approximately $38.8
million of product from Berg. In fiscal years 1994 and 1995, the Lucent Division
purchased $30.1 million and $37.1 million, respectively, of product from Berg.
The Company expects to continue to purchase product from Berg on terms and
conditions substantially similar to the terms and conditions of the Berg Supply
Agreement, which the Company believes to be comparable to the terms that would
be reached in an arm's-length transaction.
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DESCRIPTION OF SENIOR CREDIT FACILITIES
In connection with the consummation of the Chips Merger and the Original
Offering, the Senior Credit Facilities were amended and restated (the
"Amendments") as described below. The description set forth below sets forth all
material elements of the Senior Credit Facilities and the Amendments, but does
not purport to be complete and is qualified in its entirety by reference to
certain agreements setting forth the principal terms and conditions of the
Senior Credit Facilities, which are available upon request from the Company.
Capitalized terms used but not otherwise defined in this "Description of Senior
Credit Facilities" shall have the meaning to be ascribed to them in the Senior
Credit Facilities.
The Company, Circo Craft, PCB Investments PLC ("PCB Investments"), which is
the direct parent of Forward Group, Chips Acquisition Limited ("Chips Limited"),
which is the direct parent of Chips, Chips and Forward Group (collectively the
"Borrowers") entered into a Second Amended and Restated Credit Agreement (the
"Senior Credit Facilities") dated as of June 5, 1997 among Viasystems Group, as
Guarantor, the Borrowers, the several lenders party thereto, The Chase Manhattan
Bank of Canada ("Canadian Agent"), Chase Manhattan International Limited, and
The Chase Manhattan Bank, as Administrative Agent. The Senior Credit Facilities
includes (i) a $88.0 million term loan facility (the "U.S. Term Loan") and a
$150.0 million revolving credit facility (the "U.S. Revolving Loan" and together
with the U.S. Term Loan, the "U.S. Loans"); (ii) a U.S.$25.0 million revolving
credit facility (the "Canadian Revolving Loan"); (iii) a L32.0 million revolving
credit facility (the "Forward Group Revolving Loan") and a L27.6 million
revolving credit facility (the "Chips Revolving Loan", and together with the
Forward Group Revolving Loan, the "U.K. Revolving Loans", and together with the
U.S. Revolving Loan and the Canadian Revolving Loan, the "Revolving Loans") and
(iv) US$346.5 million Letter of Credit Facility in respect of the Chips Loan
Notes comprised of (i) a US$319.3 million term loan facility ("the Chips Term
Loans" and together with the US Term Loan, the "Term Loans") in respect of the
principal portion of the Chips Loan Notes (up to US$249.2 of which may be
converted to pounds sterling) and (ii) a US$27.2 million facility in respect of
interest on the Chips Loan Notes.
The U.S. Term Loan consists of two tranches: (i) $55.0 million of tranche B
term loans (the "Tranche B Loan") and (ii) $33.0 million of tranche C term loans
(the "Tranche C Loan"). The Tranche B Loan amortizes semi-annually over seven
years and Tranche C Loan amortizes semi-annually over eight years. The Chips
Term Loans amortize semi-annually over six years.
The Borrowers may use the Revolving Loans for letters of credit in an
amount not to exceed $15.0 million, in the case of both the U.S. Revolving Loan
and the Canadian Revolving Loan, and related letters of credit and bankers'
acceptances in an amount not to exceed L5.0 million in the case of the Forward
Group Revolving Loan and L10,000,000 in the case of the Chips Revolving Loan
(collectively, the "Accommodations"). L14.8 million of the Forward Group
Revolving Loan is available solely to finance obligations of PCB Investments in
respect of the Forward Group Loan Notes and $100.0 million of the U.S. Revolving
Loan is available solely to finance future acquisitions. The Revolving Loans and
the Accommodations are available until November 30, 2002.
The Borrowers may optionally prepay the Term Loans from time to time in
whole or in part, without premium or penalty. At the Borrowers' option,
Revolving Loans may be prepaid, and revolving credit commitments may be
permanently reduced, in whole or in part, at any time.
The Borrowers will be required to make mandatory prepayments of Term Loans,
in the amounts, at the times and subject to exceptions to be agreed upon, (a) in
respect of 75% of excess cash flow of the Company and its subsidiaries, and (b)
in respect of 100% of the net cash proceeds of certain dispositions of assets,
issuances of stock or incurrences of indebtedness by Viasystems Group, the
Company or any of their subsidiaries.
The obligations of the Borrowers under the Senior Credit Facilities are
unconditionally and irrevocably guaranteed by Viasystems Group. In addition, the
obligations of Forward Group, PCB Investments, Chips Limited, and Circo Craft
under their respective loans are unconditionally and
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<PAGE> 70
irrevocably guaranteed by the Company. The Domestic Subsidiaries (as defined in
the Credit Agreement) of the Company have also unconditionally and irrevocably
guaranteed the obligations of the Company for the U.S. Loans and its guarantees
of the other loans. In addition, to the extent permitted by applicable
contractual and legal provisions, the Borrowers and the Guarantors have granted
and/or pledged a first priority or equivalent security interests in all of their
respective tangible and intangible assets and the capital stock of, or other
equity interests in, each direct subsidiary (which is limited to 65% of the
voting capital stock of, or other equity interests in, each direct foreign
subsidiary of the Company).
The U.S. Loans bear interest, at the Company's election, at either: (i) the
Eurocurrency Base Rate plus (x) 2.5% in the case of the Chips Term Loan and U.S.
Revolving Loan, (y) 3.0% in the case of Tranche B Loan, or (z) 3.5% in the case
of Tranche C Loan; or (ii) the Alternate Base Rate plus (x) 1.5% in the case of
the Chips Term Loan or U.S. Revolving Loan, (y) 2.0% in the case of Tranche B
Loan, or (z) 2.5% in the case of Tranche C Loan. The Alternate Base Rate is the
highest of The Chase Manhattan Bank's Prime Rate, the Three-Month Secondary CD
Rate (as defined therein) plus 1.0%, and the Federal Funds Effective Rate (as
defined therein) plus 0.5%. The Canadian Revolving Loan denominated in US
dollars bears interest, at Circo Craft's election, at either (i) the
Eurocurrency Base Rate plus 2.5% or (ii) the Canadian Alternate Base Rate plus
1.5%. The Canadian Revolving Loan denominated in Canadian Dollars bears
interest, at Circo Craft's election either (i) the Canadian Bankers Acceptance
Discount Rate plus 2.5% or (ii) the Canadian Prime Rate plus 1.5%. The Canadian
Alternate Base Rate is equal to the higher of Canadian Agent's prime rate or the
Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.5%. The
U.K. Revolving Loans and any Chips Term Loans converted to pounds sterling bear
interest at the Eurocurrency Base Rate plus 2.5%.
The applicable margin with respect to extensions of credit under the
Canadian Revolving Loan is reduced by the amount of the applicable margin for
the Facility Fee (hereinafter described) thereunder. In addition, the applicable
margin with respect to the Chips Terms Loan and Revolving Loans and the Facility
Fee and Commitment Fee (hereinafter described) are eligible for certain
step-downs after January 1, 1998 based on a ratio of Consolidated Total Debt to
Consolidated EBITDA (each as defined in the Senior Credit Facilities).
The Borrowers pay a per annum fee equal to the applicable margin on their
respective Revolving Loans which bear interest at the Eurocurrency Base Rate, of
the average daily face amount of their respective outstanding Accommodations,
other than with respect to the Chips Letter of Credit, which fee is equal to the
applicable margin on the Chips Term Loan bearing interest at the Eurocurrency
Base Rate. Each of the Company, Chips Limited and Forward Group pay a Commitment
Fee equal to 0.5% on the undrawn portion of the commitments in respect of their
respective Revolving Loans and Circo Craft pays a Facility Fee equal to 0.5% on
the Canadian revolving credit commitment. In addition, US Borrower pays a fee of
0.25% per annum of Bisto's $118.3 million portion of the Chips Letter of Credit
to the extent not paid by Bisto.
The Senior Credit Facilities contain a number of covenants customary for
facilities similar to the Senior Credit Facilities that, among other things,
restrict the ability of the Company and its subsidiaries to incur additional
indebtedness (other than certain exceptions customary for facilities of this
type, including intercompany indebtedness (whether as the result of intercompany
asset transfers or otherwise), indebtedness existing on the date of the Senior
Credit Facilities with certain increases therein, purchase money and capital
lease indebtedness, seller unsecured indebtedness in connection with permitted
acquisitions or indebtedness assumed in connection with any permitted
acquisition, indebtedness of foreign subsidiaries that are not credit parties
for working capital purposes and under unsecured overdraft facilities,
indebtedness arising out of the sale of accounts receivable in a receivables
transaction permitted under the Senior Credit Facilities, unsecured senior
subordinated indebtedness in the amount of $400 million, indebtedness in the
amount of $5.0 million, indebtedness of Bisto in respect of reimbursement
obligations, indebtedness arising out of agreements with governmental
authorities of foreign countries or subdivisions thereof relating to the
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construction of plants and purchase and installation of equipment, indebtedness
in respect of the Loan Notes, additional indebtedness of the Company's indirect
Puerto Rican subsidiary not to exceed $3.0 million and additional indebtedness
of subsidiaries of Group not to exceed $35.0 million and certain other
exceptions, in each case upon the conditions set forth in the Senior Credit
Facilities), create liens on assets, incur guarantee obligations, enter into
mergers, consolidations or amalgamations or liquidate, wind up or dissolve,
dispose of assets, pay dividends, make capital expenditures in excess of $115
million in 1997, $100 million in 1998, $90 million in 1999 and thereafter
(provided that (i) the Company may make additional capital expenditures of up to
$16.0 million to build a facility in the United States, (ii) 100% of any amount
not used in a fiscal year may be carried forward into the next succeeding fiscal
year, and (iii) additional capital expenditures may be made with the Company's
share of excess cash flow to the extent such monies are not used to make
additional investments), make advances, loans, extensions of credit, capital
contributions to, or purchases of any stock, bonds, notes, debentures or other
securities, prepay certain indebtedness (including the New Notes) or amend other
debt instruments (including the Indenture), engage in certain transactions with
subsidiaries and affiliates, enter into sale and leaseback transactions, make
changes in their fiscal year, limit the ability of subsidiaries to incur, assume
or suffer to exist liens (other than certain exceptions customary for facilities
of this type, including liens granted in connection with the Senior Credit
Facilities, liens for taxes not yet due or which are being contested in
accordance with the provisions of the Senior Credit Facilities, carriers',
landlord's, warehousemen's, mechanics', materialmen's, repairmen's or similar
liens, deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, insurance contracts, surety and appeal bonds, performance
bonds and other obligations of similar nature, easements, rights-of-way, zoning
restrictions, restrictions and other similar encumbrances, liens existing on the
date of the Senior Credit Facilities, purchase money liens and in respect
capital expenditures, liens in favor of landlords, licenses, leases and
subleases permitted under the Credit Facilities, attachment or judgement Liens
not constituting an event of default, precautionary UCC filings with respect to
operating leases or consignment arrangements, liens in favor of banking
institutions, liens arising from the sale of accounts receivables in a
transaction permitted under the Senior Credit Facilities, liens on cash
collateral of Bisto, liens securing property financing by government grants
otherwise permitted under the Senior Credit Facilities, and other liens securing
obligations not exceeding $10.0 million, in each case upon the conditions set
forth in the Senior Credit Facilities), or pay dividends or make other
distributions or pay indebtedness owed to Viasystems Group or any of its
subsidiaries and otherwise restricts certain corporate activities. In addition,
under the Senior Credit Facilities, the Company is required to comply with
specified financial ratios and tests, including minimum interest coverage
(increasing from 1.75:1.00 in the second quarter of fiscal 1997 to 3.00:1.00
commencing with the first quarter of fiscal 2002 for the remainder of the term
of the loans) and maximum leverage ratios (decreasing from 5.75:1.00 in the
second quarter of fiscal 1997 to 4.00:1.00 commencing with the fourth quarter of
fiscal 2003 for the remainder of the term of the loans) and a trailing four
quarter minimum EBITDA test (increasing from $37.0 million in the second quarter
of fiscal 1997 to $250.0 million in the fourth quarter of fiscal 2003 for the
remainder of the term of the loans).
The Senior Credit Facilities also contain customary events of default
including failure to pay principal on any Loan or any Accommodation when due or
any interest or other amount that becomes due within five days after the due
date thereof, any representation or warranty made or deemed made is incorrect in
any material respect on or as of the date made or deemed made, the default in
the performance of certain negative covenants or a default in the performance of
certain other covenants or agreements for a period of thirty days, default in
other indebtedness or guarantee obligations with a principal amount in excess of
$5.0 million beyond the period of grace, certain insolvency events, certain
ERISA events, and other customary events of default for facilities similar to
the Senior Credit Facilities.
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<PAGE> 72
THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on June 2, 1997, in the Original
Offering. In connection with that placement, the Company entered into the
Registration Rights Agreement, which requires that the Company file the
Registration Statement under the Securities Act with respect to the New Notes
and, upon the effectiveness of that Registration Statement, offer to the holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, which will be issued without a restrictive legend
and which generally may be reoffered and resold by the holder without
registration under the Securities Act. The Registration Rights Agreement further
provides that the Company must use its reasonable best efforts to (i) cause the
Registration Statement with respect to the Exchange Offer to be declared
effective on or before November 13, 1997 and (ii) consummate the Exchange Offer
on or before December 13, 1997. Except as provided below, upon the completion of
the Exchange Offer, the Company's obligations with respect to the registration
of the Old Notes and the New Notes will terminate. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement, of
which this Prospectus is a part, and the summary herein of the material
provisions thereof does not purport to be complete and is qualified in its
entirety by reference thereto. As a result of the filing and the effectiveness
of the Registration Statement, certain liquidated damages provided for in the
Registration Rights Agreement will not become payable by the Company. Following
the completion of the Exchange Offer (except as set forth in the paragraph
immediately below), holders of Old Notes not tendered will not have any further
registration rights and those Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for the Old
Notes could be adversely affected upon completion of the Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving the New Notes, (ii) neither the holder nor any such other
person is engaging in or intends to engage in a distribution of the New Notes,
(iii) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the New
Notes, and (iv) neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 promulgated under the Securities Act, of the Company.
Pursuant to the Registration Rights Agreement, the Company is required to file a
"shelf" registration statement for a continuous offering pursuant to Rule 415
under the Securities Act in respect of the Old Notes if (i) because of any
change in law or applicable interpretations thereof by the staff of the
Commission, the Company determines that it is not permitted to effect the
Exchange Offer as contemplated hereby, (ii) validly tendered Old Notes are not
exchanged for New Notes by December 13, 1997, (iii) any holder of Private
Exchange Securities so requests within 60 days of the Exchange Offer, (iv) any
applicable law or interpretations do not permit any holder of Old Notes to
participate in the Exchange Offer, or (v) any holder of Old Notes that
participates in the Exchange Offer does not receive freely transferable New
Notes in exchange for tendered securities. In the event that the Company is
obligated to file a "shelf" registration statement, it will be required to keep
such "shelf" registration statement effective for at least two years. Other than
as set forth in this paragraph, no holder will have the right to participate in
the "shelf" registration statement nor otherwise to require that the Company
register such holder's shares of Old Notes under the Securities Act. See
"-- Procedures for Tendering."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third-parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the registered holder (other than any such holder or such other
person which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without
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<PAGE> 73
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the New Notes are acquired in the ordinary course
of business of the holder or such other person and neither the holder nor such
other person has an arrangement or understanding with any person to participate
in the distribution of such New Notes. Any holder who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New Notes cannot
rely on this interpretation by the Commission's staff and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Each broker-dealer that receives
New Notes for its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer (except as set forth in the
second paragraph under "-- Purpose and Effect" above), holders of Old Notes not
tendered will not have any further registration rights and those Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, the
liquidity of the market for a holder's Old Notes could be adversely affected
upon completion of the Exchange Offer if the holder does not participate in the
Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes except that the New Notes have been registered under
the Securities Act and will not bear legends restricting their transfer. The New
Notes will evidence the same debt as the Old Notes and will be issued pursuant
to, and entitled to the benefits of, the Indenture pursuant to which the Old
Notes were issued.
As of June 1, 1997, Old Notes representing $400.0 million aggregate
principal amount were outstanding and there was one registered holder, a nominee
of DTC. This Prospectus, together with the Letter of Transmittal, is being sent
to such registered Holder and to others believed to have beneficial interests in
the Old Notes. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered Old
Notes are not accepted for exchange because of an invalid tender, the occurrence
of certain other events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
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<PAGE> 74
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent and each registered
holder of any extension by oral or written notice prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth under "The Exchange Offer -- Conditions to Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer -- Book Entry Transfer," to tender
in the Exchange Offer a holder must complete, sign, and date the Letter of
Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal or copy to the Exchange Agent prior to the Expiration Date. In
addition, either (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal prior to the Expiration
Date, or (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if that procedure is available, into the
Exchange Agent's account at DTC (the "Book-Entry Transfer Facility") pursuant to
the procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. To be tendered
effectively, the Letter of Transmittal and other required documents must be
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" prior to the Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date
will constitute an agreement between that holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's own behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in the beneficial owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered ownership may take
considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless Old Notes tendered pursuant thereto
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<PAGE> 75
are tendered (i) by a registered holder who has not completed the box entitled
"Special Registration Instruction" or "Special Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of an Eligible Institution. If
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, the guarantee must be by any eligible
guarantor institution that is a member of or participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program, the Stock Exchange Medallion Program, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act
(an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, the Old Notes must be
endorsed or accompanied by a properly completed bond power, signed by the
registered holder as that registered holder's name appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities, or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent, nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer -- Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions, or
otherwise. The terms of any such purchases or offers could differ from the terms
of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the registered holder, (ii) neither the
holder nor any such other person is engaging in or intends to engage in a
distribution of such New Notes, (iii) neither the holder nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) neither the holder nor any such other
person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Company.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
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<PAGE> 76
Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal), and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged Old Notes will be returned without expense to the
tendering Holder thereof (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
nonexchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or copy thereof, with
any required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "The Exchange
Offer -- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in lieu of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and any other documents required by the Letter of Transmittal will be
deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all
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physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 pm., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
(for DTC participants) electronic ATOP transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth on the back cover page
of this Prospectus prior to 5:00 pm., New York City time, on the Expiration
Date. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify
the Old Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Old Notes), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee register the
transfer of such Old Notes into the name of the person withdrawing the tender,
and (iv) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form,
and eligibility (including time of receipt) of such notices will be determined
by the Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures under "The Exchange Offer -- Procedures for Tendering" at any
time on or prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA"). In any such event the Company is required to use every reasonable
effort to obtain the withdrawal of any stop order at the earliest possible time.
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EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. The Bank of New York has been appointed as Exchange Agent for the
Exchange Offer. Questions, requests for assistance and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery:
The Bank of New York The Bank of New York
101 Barclays Street 101 Barclays Street
Floor 7-E Corporate Trust Services Window
New York, New York 10286 Ground Level
New York, New York 10286
Attn: Reorganization Section
Attn: Reorganization Section
</TABLE>
By Facsimile (for Eligible Institutions):
(212) 815-6339
For Information or
Confirmation by Telephone:
(212) 815-6333
(Originals of all documents sent by facsimile should be sent promptly by
registered or certified mail, by hand, or by overnight delivery service.)
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$230,000, which includes fees and expenses of the Exchange Agent, accounting,
legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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DESCRIPTION OF NEW NOTES
GENERAL
The New Notes are to be issued under the Indenture, dated as of June 6,
1997 (the "Indenture"), between the Company and The Bank of New York, as Trustee
(the "Trustee"), a copy of which is available upon request to the Company. The
Old Notes were also issued under the Indenture. Upon the effectiveness of the
Exchange Offer, the Indenture will be subject to and governed by the TIA. The
following summary of certain provisions of the Indenture and the Notes sets
forth all material elements of such documents, but does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture (including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended) and the Notes. A copy of the Indenture has been filed as an exhibit
to the Company's registration statement on Form S-1 relating to the Exchange
Offer.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee in New York, New York), except
that, at the option of the Company, payment of interest may be made by check
mailed to the address of the holders as such address appears in the Note
Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF NOTES
The Notes will be unsecured, senior subordinated obligations of the
Company, limited to $400 million aggregate principal amount, and will mature on
June 1, 2007. Each Note will bear interest at 9.750% per annum from the date of
issuance, or from the most recent date to which interest has been paid or
provided for, payable semiannually on June 1 and December 1 of each year
commencing on December 1, 1997 to holders of record at the close of business on
the May 15 or November 15 immediately preceding the interest payment date.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option
of the Company prior to June 1, 2002. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
each holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date):
If redeemed during the 12-month period commencing on June 1 of the years
set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
------ ----------
<S> <C>
2002........................................................ 104.875%
2003........................................................ 103.250%
2004........................................................ 101.625%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, at any time and from time to time prior to June 1, 2000, the
Company may redeem in the aggregate up to $140.0 million of the Notes with the
net cash proceeds of one or more Equity Offerings by the Company or Viasystems
Group (to the extent, in the case of Viasystems Group, that the Net Cash
Proceeds thereof are contributed to the common or non-redeemable preferred
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equity capital of the Company) so long as there is a Public Market at the time
of such redemption, at a redemption price (expressed as a percentage of
principal amount) of 109.75%, plus accrued and unpaid interest, if any, to the
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date in
respect of then outstanding Notes); provided, however, that at least $200.0
million of the Notes must remain outstanding after each such redemption.
At any time on or prior to June 1, 2002, the Notes may also be redeemed as
a whole at the option of the Company upon the occurrence of a Change of Control,
upon not less than 30 nor more than 60 days prior notice (but in no event more
than 90 days after the occurrence of such Change of Control) mailed by
first-class mail to each holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued and unpaid interest, if any, to, the date of redemption (the
"Redemption Date") (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date in
respect of then outstanding Notes).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at June 1, 2002 (such redemption price being described under "-- Optional
Redemption") plus (2) all required interest payments due on such Note through
June 1, 2002, computed using a discount rate equal to the Treasury Rate plus 100
basis points, over (B) the principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to June 1, 2002; provided, however, that if the
period from the Redemption Date to June 1, 2002 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to June 1, 2002 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
Selection. In the case of any partial redemption, selection of the Notes
for redemption will be made by the Trustee on a pro rata basis, by lot or by
such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note.
RANKING AND SUBORDINATION
The payment of the principal of, premium (if any), and interest on the
Notes is subordinated in right of payment, as set forth in the Indenture, to the
payment when due of all Senior Indebtedness of the Company. However, payment
from the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "Defeasance" below is not subordinate to any
Senior Indebtedness or subject to the restrictions described herein. As of March
31, 1997, on a pro forma basis after giving effect to the 1997 Transactions, the
Original Offering and the Exchange Offer, there would have been approximately
$432.4 million of Senior Indebtedness outstanding. In addition, on the same pro
forma basis, there would have been approximately $146.5 million available under
the Senior Credit Facilities as of December 31, 1996 for the general corporate
purposes and
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working capital needs of the Company and an additional $100.0 million available
for future acquisitions, all of which would be Senior Indebtedness if borrowed.
Of the amount available to be borrowed as of March 31, 1997 on a pro forma
basis, approximately $96.5 million would have been available for borrowings by
the Company's Subsidiaries. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company may incur, under certain
circumstances the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "Certain
Covenants -- Limitation on Indebtedness" below.
"Senior Indebtedness" is defined, whether outstanding on the Issue Date or
thereafter issued, as the Bank Indebtedness and all other Indebtedness of the
Company, including interest and fees thereon, unless, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that the obligations in respect of such Indebtedness are not superior
in right of payment to the Notes; provided, however, that Senior Indebtedness
will not include (1) any obligation of the Company to any Subsidiary, (2) any
liability for Federal, state, foreign, local or other taxes owed or owing by the
Company, (3) any accounts payable or other liability to trade creditors arising
in the ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), or (4) any Indebtedness, Guarantee or obligation
of the Company that is expressly subordinate or junior in right of payment to
any other Indebtedness, Guarantee or obligation of the Company, including any
Senior Subordinated Indebtedness and any Subordinated Indebtedness.
The Notes are effectively subordinated to the obligations of the Company's
Subsidiaries, including the guarantee by its U.S. Subsidiaries of obligations
under the Senior Credit Facilities, because the Company is a holding company. In
the event of an insolvency, liquidation or other reorganization of any of the
Subsidiaries of the Company, the creditors of the Company (including the holders
of the Notes), as well as shareholders of the Company, will have no right to
proceed against the assets of such Subsidiaries or to cause the liquidation or
bankruptcy of such Subsidiaries under applicable bankruptcy laws. Creditors of
such Subsidiaries, including lenders under the Senior Credit Facilities, would
be entitled to payment in full from such assets before the Company, as a
shareholder, would be entitled to receive any distribution therefrom. Except to
the extent that the Company itself may be a creditor with recognized claims
against such Subsidiaries, claims of creditors of such Subsidiaries will have
priority with respect to the assets and earnings of such Subsidiaries over the
claims of creditors of the Company, including claims under the Notes.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank pari passu with all other Senior Subordinated
Indebtedness of the Company. The Company has agreed in the Indenture that it
will not incur, directly or indirectly, any Indebtedness that is subordinate or
junior in right of payment to Senior Indebtedness unless such Indebtedness is
Senior Subordinated Indebtedness or is contractually subordinated in right of
payment to Senior Subordinated Indebtedness. Unsecured Indebtedness is not
deemed to be subordinate or junior to Secured Indebtedness merely because it is
unsecured nor is any Indebtedness deemed to be subordinate or junior to other
Indebtedness merely because it matures after such other Indebtedness.
The Company may not pay principal of, premium (if any), or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase, redeem or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when
due or (ii) any other default on Senior Indebtedness occurs and the maturity of
such Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and any such acceleration has
been rescinded or such Senior Indebtedness has been paid in full. However, the
Company may pay the Notes without regard to the foregoing if the Company and the
Trustee receive written notice approving such payment from the Representative of
the Senior Indebtedness with respect to which either of the events set forth in
clause (i) or (ii) of the immediately preceding sentence has occurred and is
continuing. During the continuance of any default (other than a default
described in clause (i) or (ii) of the second
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preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes (except in (i) Capital Stock (other than Disqualified Stock) issued by the
Company to pay interest on the Notes or issued in exchange for the Notes, (ii)
in securities substantially identical to the Notes issued by the Company in
payment of interest thereon or (iii) in securities issued by the Company which
are subordinated to Senior Indebtedness at least to the same extent as the Notes
and having an Average Life at least equal to the remaining Average Life of the
Notes) for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of the holders of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice, (ii) because the default giving rise
to such Blockage Notice is no longer continuing or (iii) because such Designated
Senior Indebtedness has been repaid in full). Notwithstanding the provisions
described in the immediately preceding sentence, unless the holders of such
Designated Senior Indebtedness or the Representative of such holders have
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period; provided, that if a Blockage Notice is given by
holders of Designated Senior Indebtedness other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may deliver a subsequent Blockage Notice
during such 360-day period, but the total duration of all Payment Blockage
Periods during such 360-day period shall not exceed 179 days.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization or bankruptcy of or
similar proceeding relating to the Company or its property, the holders of
Senior Indebtedness will be entitled to receive payment in full of the Senior
Indebtedness before the holders of the Notes are entitled to receive any
payment, and until the Senior Indebtedness is paid in full, any payment or
distribution to which holders of the Notes would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness as their interests may appear.
If a distribution is made to holders of the Notes that, due to the
subordination provisions, should not have been made to them, such holders are
required to hold it in trust for the holders of Senior Indebtedness and pay it
over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company and the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of the subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each holder will have the right to require the Company to repurchase
all or any part of such holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
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record date to receive accrued and unpaid interest due on the relevant interest
payment date in respect of then outstanding Notes):
(i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of the Company and its Subsidiaries to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group")
(whether or not otherwise in compliance with the provisions of the
Indenture), other than to Hicks Muse, Mills & Partners, or any of their
Affiliates, officers and directors (the "Permitted Holders"); or
(ii) a majority of the Board of Directors of the Company shall consist
of Persons who are not Continuing Directors; or
(iii) the acquisition by any Person or Group (other than the Permitted
Holders or any direct or indirect Subsidiary of any Permitted Holder) of
the power, directly or indirectly, to vote or direct the voting of
securities having more than 50% of the ordinary voting power for the
election of directors of the Company.
Within 30 days following any Change of Control, unless the Company has
mailed a redemption notice with respect to all the outstanding Notes in
connection with such Change of Control, the Company shall mail a notice to each
holder with a copy to the Trustee stating: (1) that a Change of Control has
occurred and that such holder has the right to require the Company to purchase
such holder's Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on a record date to receive accrued
and unpaid interest on the relevant interest payment date in respect of the then
outstanding Notes); (2) the repurchase date (which shall be no earlier than 30
days nor later than 60 days from the date such notice is mailed); and (3) the
procedures determined by the Company, consistent with the Indenture, that a
holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. The
Company will also comply, to the extent applicable, with the requirements of the
applicable securities laws and regulations in connection with any offer made
pursuant to this covenant, including Rule 14e-1 under the Exchange Act. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Company and its Subsidiaries. With respect to the disposition of property or
assets, the phrase "all or substantially all" as used in the Indenture varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which is the choice of law under
the Indenture) and is subject to judicial interpretation. Accordingly, in
certain circumstances there may be a degree of uncertainty in ascertaining
whether a particular transaction would involve a disposition of "all or
substantially all" of the property or assets of a Person, and therefore it may
be unclear whether a Change of Control has occurred and whether the Company is
required to make an offer to repurchase the Notes as described above.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Credit Agreement. Future Senior
Indebtedness of the Company and future Indebtedness of its Subsidiaries may also
contain prohibitions of certain events that would constitute a Change of Control
or require such Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the holders of their right to require the Company to
repurchase the Notes could cause a default under Senior Indebtedness of the
Company, even if the Change of
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Control itself does not. Finally, the Company's ability to pay cash to the
holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any required repurchases. Even if sufficient
funds were otherwise available, the terms of the Bank Indebtedness will prohibit
the Company's prepayment of Notes prior to their scheduled maturity.
Consequently, if the Company is not able to prepay the Bank Indebtedness and any
other Senior Indebtedness containing similar restrictions or obtain requisite
consents, as described above, the Company will be unable to fulfill its
repurchase obligations if holders of Notes exercise their repurchase rights
following a Change of Control, thereby resulting in a default under the
Indenture.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness; provided, however, that the Company and
any of its Restricted Subsidiaries may incur Indebtedness if on the date thereof
the Consolidated Coverage Ratio would be greater than 2.00: 1.00, if such
Indebtedness is Incurred on or prior to December 31, 1999, and 2.25:1.00, if
such Indebtedness is Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may incur the following Indebtedness: (i) Indebtedness
Incurred pursuant to (A) the Credit Agreement (including, without limitation,
any renewal, extension, refunding, restructuring, replacement or refinancing
thereof referred to in clause (ii) of the definition thereof) or (B) any other
agreements or indentures governing Senior Indebtedness; provided, however, that
the aggregate principal amount of all Indebtedness Incurred pursuant to this
clause (i) does not exceed $710.0 million at any time outstanding, less the
aggregate principal amount thereof repaid with the net proceeds of Asset
Dispositions (to the extent, in the case of a repayment of revolving credit
Indebtedness, the commitment to advance the loans repaid has been terminated);
(ii) Indebtedness represented by Capitalized Lease Obligations, mortgage
financings or purchase money obligations, in each case Incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property used in a Related Business or Incurred to Refinance any
such purchase price or cost of construction or improvement, in each case
Incurred no later than 365 days after the date of such acquisition or the date
of completion of such construction or improvement; provided, however, that the
principal amount of any Indebtedness Incurred pursuant to this clause (ii) shall
not exceed $25.0 million at any time outstanding; (iii) Permitted Indebtedness;
and (iv) Indebtedness (other than Indebtedness described in clauses (i) - (iii))
in a principal amount which, when taken together with the principal amount of
all other Indebtedness Incurred pursuant to this clause (iv) and then
outstanding, will not exceed $75.0 million (it being understood that any
Indebtedness Incurred under this clause (iv) shall cease to be deemed Incurred
or outstanding for purposes of this clause (iv) (but shall be deemed to be
Incurred for purposes of paragraph (a)) from and after the first date on which
the Company or its Restricted Subsidiaries could have Incurred such Indebtedness
under the foregoing paragraph (a) without reliance upon this clause (iv)).
(c) In addition, the Company shall not Incur any Secured Indebtedness which
is not Senior Indebtedness unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
(d) The Company will not permit any Unrestricted Subsidiary to Incur any
Indebtedness other than Non-Recourse Debt; provided, however, if any such
Indebtedness ceases to be Non-Recourse Debt, such event shall be deemed to
constitute an Incurrence of Indebtedness by the Company or a Restricted
Subsidiary.
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(e) For purposes of determining compliance with any U.S. dollar-denominated
restriction on the Incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was Incurred, in the case of term debt, or first committed, in
the case of revolving credit debt; provided that (x) the U.S. dollar-equivalent
principal amount of any such Indebtedness outstanding or committed on the Issue
Date shall be calculated based on the relevant currency exchange rate in effect
on March 31, 1997, and (y) if such Indebtedness is Incurred to refinance other
indebtedness denominated in a foreign currency, and such refinancing would cause
the applicable U.S. dollar-denominated restriction to be exceeded if calculated
at the relevant currency exchange rate in effect on the date of such
refinancing, such U.S. dollar-denominated restriction shall be deemed not to
have been exceeded so long as the principal amount of such refinancing
Indebtedness does not exceed the principal amount of such Indebtedness being
refinanced. The principal amount of any Indebtedness incurred to refinance other
Indebtedness, if Incurred in a different currency from the Indebtedness being
refinanced, shall be calculated based on the currency exchange rate applicable
to the currencies in which such respective Indebtedness is denominated that is
in effect on the date of such refinancing.
Limitation on Layering. The Company shall not Incur any Indebtedness if
such Indebtedness is subordinate or junior in right of payment to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness.
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any of its Restricted Subsidiaries, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries)
except (A) dividends or distributions payable in its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to purchase such
Capital Stock (other than Disqualified Stock), and (B) dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company
(and if such Restricted Subsidiary is not a Wholly-Owned Subsidiary, to its
other holders of Capital Stock on a pro rata basis), (ii) purchase, redeem,
retire or otherwise acquire for value any Capital Stock of the Company held by
Persons other than a Restricted Subsidiary of the Company or any Capital Stock
of a Restricted Subsidiary of the Company held by Persons other than the Company
or another Restricted Subsidiary of the Company (in either case, other than in
exchange for its Capital Stock (other than Disqualified Stock) or to the extent
that after giving effect to such purchase, redemption, retirement or
acquisition, such Restricted Subsidiary would become a Wholly Owned Subsidiary),
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment, any Subordinated Indebtedness (other than the purchase, repurchase
or other acquisition of Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of purchase, repurchase or
acquisition) or (iv) make any Investment (other than a Permitted Investment) in
any Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being herein referred to
in clauses (i) through (iv) as a "Restricted Payment"), if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); or
(2) the Company is not able to incur an additional $1.00 of Indebtedness
pursuant to paragraph (a) under "Limitation on Indebtedness"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared or made subsequent to the Issue Date would exceed the sum of: (A) 50%
of the Consolidated Net Income accrued during the period (treated as one
accounting period) from the Issue Date to the end of the most recent fiscal
quarter ending prior to the date of such Restricted Payment as to which
financial results are available (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit); (B) the aggregate net
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proceeds received by the Company from the issue or sale of its Capital Stock
(other than Disqualified Stock) or other capital contributions subsequent to the
Issue Date (other than net proceeds received from an issuance or sale of such
Capital Stock to a Subsidiary of the Company or an employee stock ownership plan
or similar trust); provided, however, that the value of any non cash net
proceeds (which in each case shall be assets of the type used in a Related
Business or Capital Stock of a Person engaged in a Related Business) shall be as
determined by the Board of Directors in good faith, except that in the event the
value of any non cash net proceeds shall be $25 million or more, the value shall
be as determined in writing by an independent investment banking firm of
nationally recognized standing; (C) the aggregate Net Cash Proceeds received by
the Company from the issue or sale of its Capital Stock (other than Disqualified
Stock) to an employee stock ownership plan or similar trust subsequent to the
Issue Date; provided, however, that if such plan or trust Incurs any
Indebtedness to or Guaranteed by the Company or any of its Restricted
Subsidiaries to finance the acquisition of such Capital Stock, such aggregate
amount shall be limited to such Net Cash Proceeds less such Indebtedness
Incurred to or Guaranteed by the Company or any of its Restricted Subsidiaries
and any increase in the Consolidated Net Worth of the Company resulting from
principal repayments made by such plan or trust with respect to Indebtedness
Incurred by it to finance the purchase of such Capital Stock; (D) the amount by
which Indebtedness of the Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Restricted Subsidiary of the
Company) subsequent to the Issue Date of any Indebtedness of the Company for
Capital Stock (other than Disqualified Stock) of the Company (less the amount of
any cash, or other property, distributed by the Company upon such conversion or
exchange); (E) the amount equal to the net reduction in Investments (other than
Permitted Investments) made by the Company or any of its Restricted Subsidiaries
in any Person resulting from (i) repurchases or redemptions of such Investments
by such Person, proceeds realized upon the sale of such Investment to an
unaffiliated purchaser, and repayments of loans or advances or other transfers
of assets by such Person to the Company or any Restricted Subsidiary of the
Company or (ii) the redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of "Investment")
not to exceed, in the case of any Unrestricted Subsidiary, the amount of
Investments previously made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary, which amount was included in the calculation of the
amount of Restricted Payments; provided, however, that no amount shall be
included under this clause (E) to the extent it is already included in
Consolidated Net Income; (F) the aggregate Net Cash Proceeds received by a
Person in consideration for the issuance of such Person's Capital Stock (other
than Disqualified Stock) which are held by such Person at the time such Person
is merged with and into the Company in accordance with the "Merger and
Consolidation" covenant subsequent to the Issue Date; provided, however, that
concurrently with or immediately following such merger the Company uses an
amount equal to such Net Cash Proceeds to redeem or repurchase the Company's
Capital Stock; and (G) $5 million.
(b) The provisions of paragraph (a) shall not prohibit: (i) any purchase or
redemption of Capital Stock or Subordinated Indebtedness of the Company made by
exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan
or similar trust); provided, however, that (A) such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments and (B) the
Net Cash Proceeds from such sale shall be excluded from clause (3) (B) of
paragraph (a); (ii) any purchase or redemption of Subordinated Indebtedness of
the Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Subordinated Indebtedness of the Company; provided, however,
that such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments; (iii) any purchase or redemption of Subordinated
Indebtedness from Net Available Cash to the extent permitted under "Limitation
on Sales of Assets and Subsidiary Stock" below; provided, however, that such
purchase or redemption shall be excluded in the calculation of the amount of
Restricted Payments; (iv) dividends paid within 60 days after the date
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of declaration if at such date of declaration such dividend would have complied
with the requirements of paragraph (a) above; (v) payments of dividends on the
Company's common stock (or payments to Viasystems Group to pay dividends on its
common stock) after an initial public offering of common stock of the Company or
of Viasystems Group, as the case may be, in an annual amount not to exceed 6% of
the gross proceeds (before deducting underwriting discounts and commissions and
other fees and expenses of the offering) received by the Company from shares of
common stock sold for the account of the Company (and not for the account of any
stockholder) in such initial public offering or, in the case of an initial
public offering by Viasystems Group, 6% per annum of the amount contributed to
the common or non-redeemable preferred equity of the Company by Viasystems Group
from the Net Cash Proceeds of an initial public offering of common stock by
Viasystems Group; (vi) payments by the Company to repurchase (or to enable
Viasystems Group to repurchase) Capital Stock or other securities of the Company
or Viasystems Group from members of management of the Company in an aggregate
amount not to exceed $15 million; (vii) payments to enable the Company to redeem
or repurchase (or to enable Viasystems Group to redeem or repurchase) stock
purchase or similar rights granted by the Company or Viasystems Group with
respect to its Capital Stock in an aggregate amount not to exceed $1 million;
(viii) payments, not to exceed $200,000 in the aggregate, to enable the Company
or Viasystems Group to make cash payments to holders of its Capital Stock in
lieu of the issuance of fractional shares of its Capital Stock; (ix) payments
made pursuant to any merger, consolidation or sale of assets effected in
accordance with the "Merger and Consolidation" covenant; provided, however, that
no such payment may be made pursuant to this clause (ix) unless, after giving
effect to such transaction (and the incurrence of any Indebtedness in connection
therewith and the use of the proceeds thereof), the Company would be able to
Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Indebtedness" covenant such that, after
Incurring that $1.00 of additional Indebtedness, the Consolidated Coverage Ratio
would be greater than 3.5:1.00; and (x) payments by the Company to fund (A) out
of pocket expenses of Viasystems Group for administrative, legal and accounting
services provided by third parties, or to pay franchise fees and similar costs,
but not to exceed an aggregate amount of $1 million per annum, and (B) taxes of
Viasystems Group; provided, however, that in the case of clauses (v), (vi),
(vii), (viii) and (ix) no Default or Event of Default shall have occurred or be
continuing at the time of such payment or as a result thereof; provided further,
however, that for purposes of determining the aggregate amount expended for
Restricted Payments in accordance with clause (3) of the immediately preceding
paragraph (a), only the amounts expended under clauses (iv) through (ix) shall
be included.
Limitation on Restrictions on Distributions from Restricted Subsidiaries.
The Company shall not, and shall not permit any of its Restricted Subsidiaries
to, create or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any such Restricted Subsidiary to (i) pay
dividends or make any other distributions on its Capital Stock or pay any
Indebtedness or other obligation owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company; except: (a) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the Issue Date, including the Credit Agreement; (b)
any encumbrance or restriction with respect to such a Restricted Subsidiary
pursuant to an agreement relating to any Indebtedness or Preferred Stock issued
by such Restricted Subsidiary on or prior to the date on which such Restricted
Subsidiary was acquired by the Company and outstanding on such date (other than
Indebtedness or Preferred Stock issued as consideration in, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary of the Company or was acquired by the
Company); (c) any encumbrance or restriction with respect to such a Restricted
Subsidiary pursuant to an agreement evidencing Indebtedness Incurred without
violation of the Indenture or effecting a refinancing of Indebtedness issued
pursuant to an agreement referred to in clauses (a) or (b) or this clause (c) or
contained in any amendment to an agreement referred to in clauses (a) or (b) or
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this clause (c); provided, however, that the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in any of such agreement,
refinancing agreement or amendment, taken as a whole, are not materially less
favorable to the holders, as determined in good faith by the senior management
of the Company or Board of Directors of the Company, than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in agreements
in effect at, or entered into on, the Issue Date; (d) in the case of clause
(iii), any encumbrance or restriction (A) that restricts in a customary manner
the subletting, assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset, (B) by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture, (C) that is included in a licensing
agreement to the extent such restrictions limit the transfer of the property
subject to such licensing agreement or (D) arising or agreed to in the ordinary
course of business and that does not, individually or in the aggregate, detract
from the value of property or assets of the Company or any of its Subsidiaries
in any manner material to the Company or any such Restricted Subsidiary as
determined in good faith by senior management of the Company; (e) in the case of
clause (iii) above, restrictions contained in security agreements, mortgages or
similar documents securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements; (f) any restriction with respect to such a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition of all
or substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition; (g) encumbrances or
restrictions with respect to Indebtedness of Foreign Subsidiaries; provided that
(i) such encumbrances or restrictions do not limit in any manner the ability of
the Restricted Subsidiaries of the Company in existence on the Issue Date from
performing any of the acts referred to in clauses (i) through (iii) of this
covenant and (ii) the aggregate principal amount of the Indebtedness of the
Foreign Subsidiaries of the Company which includes such an encumbrance or
restriction does not exceed $50.0 million; and (h) encumbrances or restrictions
arising or existing by reason of applicable law.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any of its Restricted Subsidiaries to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value, as determined in good faith by the Company's senior management or
the Board of Directors (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition, (ii)
at least 75% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents and (iii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such Restricted Subsidiary, as the case may be) (A)
first, to the extent the Company or any Restricted Subsidiary elects (or is
required by the terms of any Senior Indebtedness), to prepay, repay or purchase
(x) Senior Indebtedness or (y) Indebtedness (other than Preferred Stock) of a
Wholly-Owned Subsidiary (in each case other than Indebtedness owed to the
Company) within 180 days from the later of the date of such Asset Disposition or
the receipt of such Net Available Cash; (B) second, within one year from the
receipt of such Net Available Cash, to the extent of the balance of such Net
Available Cash after application in accordance with clause (A), at the Company's
election either (x) to the investment in or acquisition of Additional Assets or
(y) to prepay, repay or purchase (1) Senior Indebtedness or (2) Indebtedness
(other than Preferred Stock) of a Wholly-Owned Subsidiary (in each case other
than Indebtedness owed to the Company); and (C) third, within 45 days after the
later of the application of Net Available Cash in accordance with clauses (A)
and (B) and the date that is one year from the receipt of such Net Available
Cash, to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B), to make an offer to purchase Notes and
other Senior Subordinated Indebtedness, to the extent required pursuant to the
terms thereof, pro rata at 100% of the tendered principal amount thereof (or
100% of the accreted value of such other Senior Subordinated Indebtedness so
tendered, if such Senior Subordinated Indebtedness was issued at a
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discount) plus accrued and unpaid interest, if any, thereon to the date of
purchase. The balance of such Net Available Cash after application in accordance
with clauses (A), (B) and (C) may be used by the Company in any manner not
otherwise prohibited under the Indenture. Notwithstanding anything herein to the
contrary, in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A), (B) or (C) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing
provisions, the Company and its Restricted Subsidiaries shall not be required to
apply any Net Available Cash in accordance herewith except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this covenant at any time exceed $15 million. The
Company shall not be required to make an offer for Notes pursuant to this
covenant if the Net Available Cash available therefor (after application of the
proceeds as provided in clauses (A) and (B)) is less than $25 million for any
particular Asset Disposition (which lesser amounts shall be carried forward for
purposes of determining whether an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Indebtedness of the Company or
Indebtedness of any Restricted Subsidiary of the Company and the release of the
Company or such Restricted Subsidiary from all liability on such Senior
Indebtedness or Indebtedness in connection with such Asset Disposition (in which
case the Company shall, without further action, be deemed to have applied such
assumed Indebtedness in accordance with clause (A) of the preceding paragraph)
and (y) securities received by the Company or any Restricted Subsidiary of the
Company from the transferee that are promptly converted by the Company or such
Restricted Subsidiary into cash.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
will be permitted to consummate an Asset Swap if (i) immediately after giving
effect to such Asset Swap, no Default or Event of Default shall have occurred or
be continuing, (ii) in the event such Asset Swap involves an aggregate amount in
excess of $10 million, the terms of such Asset Swap have been approved by a
majority of the members of the Board of Directors of the Company, and (iii) in
the event such Asset Swap involves an aggregate amount in excess of $50 million,
the Company has received a written opinion from an independent investment
banking firm of nationally recognized standing that such Asset Swap is fair to
the Company or such Restricted Subsidiary, as the case may be, from a financial
point of view.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a) (iii) (C), the Company will be required to purchase
Notes tendered pursuant to an offer by the Company for the Notes at a purchase
price of 100% of their principal amount plus accrued and unpaid interest, if
any, to the purchase date in accordance with the procedures (including prorating
in the event of oversubscription as well as proration required as a result of
tenders of other Senior Subordinated Indebtedness) set forth in the Indenture.
If the aggregate purchase price of the Notes tendered pursuant to the offer is
less than the Net Available Cash allotted to the purchase of the Notes, the
Company may use the remaining Net Available Cash for any purpose not prohibited
by the Indenture. Upon the consummation of the purchase of Notes properly
tendered in response to such offer to purchase, the amount of Net Available Cash
subject to future offers to purchase shall be deemed to be reset to zero.
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
Indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under the Indenture by virtue thereof.
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Limitation on Affiliate Transactions. (a) The Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, enter
into or conduct any transaction (including the purchase, sale, lease or exchange
of any property or the rendering of any service) with any Affiliate of the
Company other than a Wholly-Owned Subsidiary (an "Affiliate Transaction")
unless: (i) the terms of such Affiliate Transaction are no less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that could
be obtained at the time of such transaction in arm's-length dealings with a
Person who is not such an Affiliate; (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $5 million, the terms of
such transaction have been approved by a majority of the members of the Board of
Directors of the Company and by a majority of the disinterested members of such
Board, if any (and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (i) above); and (iii)
in the event such Affiliate Transaction involves an aggregate amount in excess
of $15 million, the Company has received a written opinion from an independent
investment banking firm of nationally recognized standing that such Affiliate
Transaction is fair to the Company or such Restricted Subsidiary, as the case
may be, from a financial point of view.
(b) The foregoing paragraph (a) shall not apply to (i) any Restricted
Payment permitted to be made pursuant to the covenant described under
"Limitation on Restricted Payments," (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors of the Company, (iii) loans or advances to
employees in the ordinary course of business of the Company or any of its
Restricted Subsidiaries, (iv) any transaction between Wholly-Owned Subsidiaries,
(v) indemnification agreements with, and the payment of fees and indemnities to,
directors, officers and employees of the Company and its Restricted
Subsidiaries, in each case in the ordinary course of business, (vi) transactions
pursuant to agreements as in existence on the Issue Date, (vii) any employment,
non-competition or confidentiality agreements entered into by the Company or any
of its Restricted Subsidiaries with its employees in the ordinary course of
business, (viii) payments made in connection with the Transactions as described
herein, including fees to Hicks Muse, (ix) the issuance of Capital Stock of the
Company (other than Disqualified Stock), (x) any obligations of the Company
pursuant to the Monitoring and Oversight Agreement and the Financial Advisory
Agreement, and (xi) transactions pursuant to supply or similar agreements
entered into in the ordinary course of business on customary terms that are not
less favorable to the Company than those that would have been obtained in a
comparable transaction with an unrelated Person, as determined in good faith by
senior management of the Company.
Limitation on Capital Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Capital Stock (other
than Preferred Stock) to any Person (other than to the Company or a Wholly-Owned
Subsidiary of the Company) or permit any Person (other than the Company or a
Wholly-Owned Subsidiary of the Company) to own any Capital Stock (other than
Preferred Stock) of a Restricted Subsidiary of the Company, if in either case as
a result thereof such Restricted Subsidiary would no longer be a Restricted
Subsidiary of the Company; provided, however, that this provision shall not
prohibit (x) the Company or any of its Restricted Subsidiaries from selling,
leasing or otherwise disposing of all of the Capital Stock of any Restricted
Subsidiary or (y) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary in compliance with the Indenture.
Reports. So long as any of the Notes are outstanding, the Company will
provide to the holders of Notes and file with the Commission, to the extent such
submissions are accepted for filing by the Commission, copies of the annual
reports and of the information, documents and other reports that the Company
would have been required to file with the Commission pursuant to Sections 13 or
15(d) of the Exchange Act regardless of whether the Company is then obligated to
file such reports.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting,
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surviving or transferee Person (the "Successor Company") shall be a corporation,
partnership, trust or limited liability company organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall expressly assume,
by supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of the Company under the Notes
and the Indenture; (ii) immediately after giving effect to such transaction (and
treating any Indebtedness that becomes an obligation of the Successor Company or
any Subsidiary of the Successor Company as a result of such transaction as
having been incurred by the Successor Company or such Restricted Subsidiary at
the time of such transaction), no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction, the Successor Company would be able to incur at least an additional
$1.00 of Indebtedness pursuant to paragraph (a) of "Limitation on Indebtedness";
and (iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but, in the
case of a lease of all or substantially all its assets, the Company will not be
released from the obligation to pay the principal of and interest on the Notes.
Notwithstanding the foregoing clauses (ii) and (iii), (1) any Restricted
Subsidiary of the Company may consolidate with, merge into or transfer all or
part of its properties and assets to the Company and (2) the Company may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due, continued for 30
days, whether or not such payment is prohibited by the provisions described
under "Ranking and Subordination" above, (ii) a default in the payment of
principal of any Note when due at its Stated Maturity, upon optional redemption,
upon required repurchase, upon declaration or otherwise, whether or not such
payment is prohibited by the provisions described under "Ranking and
Subordination" above, (iii) the failure by the Company to comply with its
obligations under "Certain Covenants -- Merger and Consolidation" above, (iv)
the failure by the Company to comply for 30 days after notice with any of its
obligations under the covenants described under "Change of Control" above or
under covenants described under "Certain Covenants" above (in each case, other
than a failure to purchase Notes which shall constitute an Event of Default
under clause (ii) above), other than "-- Merger and Consolidation," (v) the
failure by the Company to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Company or any
Restricted Subsidiary is not paid within any applicable grace period after final
maturity or is accelerated by the holders thereof because of a default and the
total amount of such Indebtedness unpaid or accelerated exceeds $20 million and
such default shall not have been cured, including by way of repayment, or such
acceleration rescinded after a 10 day period (the "cross acceleration
provision"), (vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Significant Subsidiary (the "bankruptcy provisions") or (viii)
any judgment or decree for the payment of money in excess of $20 million (to the
extent not covered by insurance) is rendered against the Company or a
Significant Subsidiary and such judgment or decree shall remain undischarged or
unstayed for a period of 60 days after such judgment becomes final and non-
appealable (the "judgment default provision"). However, a default under clauses
(iv) and (v) will not constitute an Event of Default until the Trustee or the
holders of 25% in principal amount of the outstanding Notes notify the Company
of the Default and the Company does not cure such Default within the time
specified in clauses (iv) and (v) hereof after receipt of such notice.
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If an Event of Default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued and unpaid interest, if any, on
all the Notes to be due and payable. Upon such a declaration, such principal and
accrued and unpaid interest shall be immediately due and payable. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of and accrued and unpaid
interest on all the Notes will become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any holders. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the holders unless such holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction that, in the opinion of the Trustee, is
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other holder or that would
involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the Default
within 90 days after it occurs. However, except in the case of a Default in the
payment of principal of, premium (if any) or interest on any Note, the Trustee
may withhold notice if and so long as its board of directors, a committee of its
board of directors or a committee of its trust officers in good faith determines
that withholding notice is in the interests of the Noteholders. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any events which would constitute certain Defaults.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the amount of
Notes whose holders must consent to an amendment, (ii) reduce the stated rate of
or extend the stated time for payment of interest on any Note, (iii) reduce the
principal of or extend the Stated Maturity of any Note, (iv) reduce the premium
payable upon the redemption or repurchase of any Note or change the time at
which any Note may be redeemed as described under "Optional Redemption" above,
(v) make any Note payable in money other than that stated in the Note, (vi)
impair the right of any
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holder to receive payment of principal of and interest on such holder's Notes on
or after the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such holder's Notes or (vii) make any change in
the amendment provisions which require each holder's consent or in the waiver
provisions.
Without the consent of any holder, the Company and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Company under the Indenture,
to provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
Guarantees with respect to the Notes, to secure the Notes, to add to the
covenants of the Company for the benefit of the holders or to surrender any
right or power conferred upon the Company, to make any other change that does
not adversely affect the rights of any holder or to comply with any requirement
of the Commission in connection with the qualification of the Indenture under
the Trust Indenture Act. However, no amendment may be made to the subordination
provisions of the Indenture that adversely affects the rights of any holder of
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
The consent of the holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under substantially
all its covenants in the Indenture including those covenants described under
"Certain Covenants" (other than "Merger and Consolidation"), the operation of
the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"Events of Default" above and the limitations contained in clauses (iii) and
(iv) under "Certain Covenants -- Merger and Consolidation" above ("covenant
defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "Events of Default" above or because
of the failure of the Company to comply with clause (iii) or (iv) under "Certain
Covenants -- Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to maturity or any redemption date specified by the
Company, as the case may be, and must comply with certain other conditions,
including delivery to the Trustee of an Opinion of Counsel to the effect that
holders of the Notes will not recognize income, gain or loss for Federal income
tax purposes as a result of such deposit and defeasance and will be subject to
Federal income tax on the same amount and in the same manner
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and at the same times as would have been the case if such deposit and defeasance
had not occurred (and, in the case of legal defeasance only, such Opinion of
Counsel must be based on a ruling of the Internal Revenue Service or other
change in applicable Federal income tax law).
CONCERNING THE TRUSTEE
The Bank of New York is the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of
a Person that becomes a Restricted Subsidiary as a result of the acquisition of
such Capital Stock by the Company or a Restricted Subsidiary of the Company;
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary of the Company; or (iv) Permitted Investments of
the type and in the amounts described in clause (viii) of the definition
thereof; provided, however, that, in the case of clauses (ii) and (iii), such
Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control," when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by the Company or any of its Restricted Subsidiaries (including
any disposition by means of a merger, consolidation or similar transaction)
other than (i) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) a
disposition of inventory in the ordinary course of business, (iii) a disposition
of obsolete or worn out equipment or equipment that is no longer useful in the
conduct of the business of the Company and its Restricted Subsidiaries and that
is disposed of in each case in the ordinary course of business, (iv)
dispositions of property for net proceeds which, when taken collectively with
the net proceeds of any other such dispositions under this clause (iv) that were
consummated since the beginning of the calendar year in which such disposition
is consummated, do not exceed 1.50% of the consolidated book value of the
Company's assets as of the most recent date prior to such disposition for which
a consolidated balance sheet of the Company has been regularly prepared, (v)
transactions permitted under "Certain Covenants -- Merger and Consolidation"
above, (vi) transactions permitted by the "Limitation on Restricted Payments"
covenant, and (vii) any transaction that constitutes a Change of Control.
"Asset Swap" means the execution of a definitive agreement, subject only to
customary closing conditions that the Company in good faith believes will be
satisfied, for a substantially concurrent purchase and sale, or exchange, of
Productive Assets between the Company or any of its Restricted Subsidiaries and
another Person or group of affiliated Persons; provided, however, that any
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amendment to or waiver of any closing condition that individually or in the
aggregate is material to the Asset Swap shall be deemed to be a new Asset Swap.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
indebtedness, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or redemption
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts, whether outstanding on the
Issue Date or thereafter incurred, payable or guaranteed by the Company under or
in respect of the Credit Agreement or any Interest Rate Agreement or Currency
Agreement with a holder of Bank Indebtedness and any related notes, collateral
documents, letters of credit and guarantees, including principal, premium (if
any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, without duplication, the following to the extent deducted
in calculating such Consolidated Net Income: (i) income tax expense, (ii)
Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization
expense, (v) exchange or translation losses on foreign currencies, and (vi) all
other non-cash items reducing Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of or reserve for cash disbursements
for any subsequent period prior to the Stated Maturity of the Notes) and less,
to the extent added in calculating Consolidated Net Income, (x) exchange or
translation gains on foreign currencies and (y) non-cash items (excluding such
non-cash items to the extent they represent an accrual for cash receipts
reasonably expected to be received prior to the Stated Maturity of the Notes),
in each case for such period. Notwithstanding the foregoing, the income tax
expense, depreciation expense and amortization expense of a Subsidiary of the
Company shall be included in Consolidated Cash Flow only to the extent (and in
the same proportion) that the net income of such Subsidiary was included in
calculating Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters: provided, however,
that (1) if the Company or any of its Restricted Subsidiaries has Incurred any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to
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calculate Consolidated Coverage Ratio is an incurrence of Indebtedness, or both,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving effect on a pro forma basis to (A) such Indebtedness
as if such Indebtedness had been Incurred on the first day of such period
(provided that if such Indebtedness is Incurred under a revolving credit
facility (or similar arrangement or under any predecessor revolving credit or
similar arrangement) only that portion of such Indebtedness that constitutes the
one year projected minimum balance of such Indebtedness (as determined in good
faith by senior management of the Company and assuming a constant level of
sales) shall be deemed outstanding for purposes of this calculation) and (B) the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (2) if since the beginning of such
period any Indebtedness of the Company or any of its Restricted Subsidiaries has
been repaid, repurchased, defeased or otherwise discharged (other than
Indebtedness under a revolving credit or similar arrangement unless such
revolving credit Indebtedness has been permanently repaid and has not been
replaced), Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Indebtedness had been repaid,
repurchased, defeased or otherwise discharged on the first day of such period,
(3) if since the beginning of such period the Company or any of its Restricted
Subsidiaries shall have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be (i) reduced by an amount equal to the Consolidated Interest
Expense attributable to any Indebtedness of the Company or any of its Restricted
Subsidiaries repaid, repurchased, defeased or otherwise discharged with respect
to the Company and its continuing Restricted Subsidiaries in connection with
such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary of the Company is sold, the Consolidated Interest Expense
for such period directly attributable to the Indebtedness of such Restricted
Subsidiary to the extent the Company and its continuing Restricted Subsidiaries
are no longer liable for such Indebtedness after such sale) and (ii) increased
by interest income attributable to the assets which are the subject of such
Asset Disposition for such period, (4) if since the beginning of such period the
Company or any of its Restricted Subsidiaries (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary of the Company (or any
Person which becomes a Restricted Subsidiary of the Company) or an acquisition
of assets, including any Investment in a Restricted Subsidiary of the Company or
any acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, or if the transaction giving rise to such
calculation is a transaction subject to the "Mergers and Consolidations"
covenant, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness and the use of the proceeds therefrom) as if such
Investment or acquisition occurred on the first day of such period and (5) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary of the Company or was merged with or into the Company or
any Restricted Subsidiary of the Company since the beginning of such period)
shall have made any Asset Disposition, Investment or acquisition of assets that
would have required an adjustment pursuant to clause (3) or (4) above if made by
the Company or a Restricted Subsidiary of the Company during such period,
Consolidated Cash Flow and Consolidated Interest Expense for such period shall
be calculated after giving pro forma effect thereto as if such Asset
Disposition, Investment or acquisition occurred on the first day of such period.
For purposes of this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
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forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term in excess of 12 months). Notwithstanding anything herein to the contrary,
if at the time the calculation of the Consolidated Coverage Ratio is to be made,
the Company does not have available consolidated financial statements reflecting
the ownership by the Company of each of Circo Craft, Viasystems Technologies (or
the assets acquired by it in the Lucent Transaction), Forward Group and Chips
for a period of at least four full fiscal quarters, all calculations required by
the Consolidated Coverage Ratio shall be prepared on a pro forma basis, as
though each such transaction (to the extent not otherwise reflected in the
consolidated financial statements of the Company) had occurred on the first day
of the four fiscal quarter period for which such calculation is being made.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its Restricted Subsidiaries, plus, to the extent not
included in such interest expense, (i) interest expense attributable to capital
leases, (ii) amortization of debt discount, (iii) capitalized interest, (iv)
non-cash interest expense, (v) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing, (vi)
interest actually paid by the Company or any such Restricted Subsidiary under
any Guarantee of Indebtedness or other obligation of any other Person, (vii) net
payments (whether positive or negative) pursuant to Interest Rate Agreements,
(viii) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company) in connection with
Indebtedness Incurred by such plan or trust and (ix) cash and Disqualified Stock
dividends in respect of all Preferred Stock of Restricted Subsidiaries and
Disqualified Stock of the Company held by Persons other than the Company or a
Wholly Owned Subsidiary and less (a) to the extent included in such interest
expense, the amortization of capitalized debt issuance costs and debt discount
solely to the extent relating to the issuance and sale of Indebtedness together
with any equity security as part of an investment unit and (b) interest income.
Notwithstanding the foregoing, the Consolidated Interest Expense with respect to
any Restricted Subsidiary of the Company, that was not a Wholly-Owned
Subsidiary, shall be included only to the extent (and in the same proportion)
that the net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Restricted Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income: (i) any net
income (loss) of any person acquired by the Company or any of its Restricted
Subsidiaries in a pooling of interests transaction for any period prior to the
date of such acquisition, (ii) any net income of any Restricted Subsidiary of
the Company if such Restricted Subsidiary is subject to restrictions, directly
or indirectly, on the payment of dividends or the making of distributions by
such Restricted Subsidiary, directly or indirectly, to the Company (other than
restrictions in effect on the Issue Date with respect to a Restricted Subsidiary
of the Company and other than restrictions that are created or exist in
compliance with the "Limitation on Restrictions on Distributions from Restricted
Subsidiaries" covenant (excluding clause (g) thereof from the operation of this
parenthetical)), (iii) any gain or loss realized upon the sale or other
disposition of any assets of the Company or its consolidated Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which are
not sold or otherwise disposed of in the ordinary course of business and any
gain or loss realized upon the sale or other disposition of any Capital Stock of
any Person, (iv) any extraordinary gain or loss, (v) the cumulative effect of a
change in accounting principles, (vi) restructuring charges or writeoffs
recorded within the one year period following the Issue Date in an aggregate
amount not to exceed $50 million, (vii) charges relating to the writeoff of
acquired in-process research and development expenses and other intangibles in
connection with the application of the purchase method of accounting to the net
assets of a Person acquired by the Company and its Restricted Subsidiaries and
charges relating to writeoff of intangible assets, (viii) the net income of any
Person, other than a Restricted Subsidiary, except to the extent of the
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lesser of (A) dividends or distributions paid to the Company or any of its
Restricted Subsidiaries by such Person and (B) the net income of such Person
(but in no event less than zero), and the net loss of such Person (other than an
Unrestricted Subsidiary) shall be included only to the extent of the aggregate
Investment of the Company or any of its Restricted Subsidiaries in such Person
and (ix) any non-cash expenses attributable to grants or exercises of employee
stock options. Notwithstanding the foregoing, for the purpose of the covenant
described under "Certain Covenants -- Limitation on Restricted Payments" only,
there shall be excluded from Consolidated Net Income any dividends, repayments
of loans or advances or other transfers of assets from Unrestricted Subsidiaries
to the Company or a Restricted Subsidiary to the extent such dividends,
repayments or transfers increase the amount of Restricted Payments permitted
under such covenant pursuant to clause (a)(3)(E) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 180 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the Board of Directors of the Company on the date of the
Indenture, (ii) was nominated for election or elected to the Board of Directors
of the Company with the affirmative vote of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election, or (iii) is a representative of a Permitted Holder.
"Credit Agreement" means (i) the Second Amended and Restated Credit
Agreement, dated as of June 5, 1997, among Viasystems Group, as Guarantor, the
Company, as US Borrower, Circo Craft Co. Inc., PCB Investments PLC, Forward
Group PLC, Chips Limited, Chips and the other Foreign Subsidiary Borrowers from
time to time parties thereto, The Chase Manhattan Bank of Canada, Chase
Manhattan International Limited and the other Foreign Agents from time to time
appointed thereunder, The Chase Manhattan Bank, as Administrative Agent, and the
lender parties thereto from time to time, as the same may be amended,
supplemented or otherwise modified from time to time, including amendments,
supplements or modifications relating to the addition or elimination of
Subsidiaries of the Company as borrowers or other credit parties thereunder, and
(ii) any renewal, extension, refunding, restructuring, replacement or
refinancing thereof (whether with the original Administrative Agent, Foreign
Agent(s) and Issuing Lender, and lenders or another administrative agent or
agents or one or more other lenders and whether provided under the original
Credit Agreement or one or more other credit or other agreements or indentures).
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to, at least $25
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by its terms (or by the terms of any security into which it
is convertible or for which it is
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exchangeable) or upon the happening of any event (i) matures (other than as a
result of a Change of Control) or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (ii) is convertible or exchangeable for
Indebtedness or Disqualified Stock (excluding capital stock which is convertible
or exchangeable solely at the option of the Company or a Restricted Subsidiary)
or (iii) is redeemable at the option of the holder thereof (other than as a
result of a Change of Control), in whole or in part, in each case on or prior to
the Stated Maturity of the Notes, provided, that only the portion of Capital
Stock which so matures or is mandatorily redeemable, is so convertible or
exchangeable or is so redeemable at the option of the holder thereof prior to
such Stated Maturity shall be deemed to be Disqualified Stock.
"Equity Offering" means an offering for cash by the Company or Viasystems
Group of its common stock, or options, warrants or rights with respect to its
common stock.
"Financial Advisory Agreement" means the Financial Advisory Agreement
between Hicks Muse Partners and the Company as in effect on the Issue Date.
"Foreign Subsidiaries" means a Restricted Subsidiary not organized or
existing under the laws of the United States, any state thereof, the District of
Columbia, or any territory thereof.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or the Commission or
in such other statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and computations based on GAAP
contained in the Indenture shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto) (other than
obligations with respect to letters of credit securing obligations (other than
obligations described in clauses (i), (ii) and (v)) entered into in the ordinary
course of business of such Person to the extent that such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following receipt by such Person of a
demand for reimbursement following payment on the letter of credit), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except trade payables and accrued expenses incurred in the
ordinary course
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of business), which purchase price is due more than six months after the date of
placing such property in service or taking delivery and title thereto or the
completion of such services, (v) all Capitalized Lease Obligations and all
Attributable Indebtedness of such Person, (vi) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person, (vii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, (viii) the amount of all obligations of such Person
with respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Restricted Subsidiary of the Company,
any Preferred Stock of such Restricted Subsidiary to the extent such obligation
arises on or before the Stated Maturity of the Notes (but excluding, in each
case, any accrued dividends) and (ix) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding principal amount of all unconditional obligations as described
above, as such amount would be reflected on a balance sheet prepared in
accordance with GAAP, and the maximum liability of such Person, upon the
occurrence of the contingency giving rise to the obligation, of any contingent
obligations described above at such date.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market
value of the net assets of such Restricted Subsidiary of the Company at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Unrestricted Subsidiary as
a Restricted Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive)
equal to (x) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Board of Directors and
evidenced by a resolution of such Board of Directors certified in an Officers'
Certificate to the Trustee.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Monitoring and Oversight and Agreement" means the Monitoring and Oversight
Agreement between Hicks Muse Partners and the Company as in effect on the Issue
Date.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets subject to such Asset Disposition) therefrom, in
each case net of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred,
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and all Federal, state, foreign and local taxes required to be paid or accrued
as a liability under GAAP in connection with such Asset Disposition, (ii) all
payments made on any Indebtedness which is secured by any assets subject to such
Asset Disposition, in accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds from such Asset
Disposition, (iii) all distributions and other payments required to be made to
any Person owning a beneficial interest in assets subject to sale or minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition, (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the assets disposed of in such Asset Disposition and retained by the
Company or any Restricted Subsidiary of the Company after such Asset Disposition
and (v) any portion of the purchase price from an Asset Disposition placed in
escrow (whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or otherwise in
connection with such Asset Disposition); provided, however, that upon the
termination of such escrow, Net Available Cash shall be increased by any portion
of funds therein released to the Company or any Restricted Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor or otherwise) and (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default under such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity.
"Permitted Indebtedness" means (i) Indebtedness of the Company owing to and
held by any Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary
owing to and held by the Company or any Wholly-Owned Subsidiary; provided,
however, that any subsequent issuance or transfer of any Capital Stock or any
other event which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly-Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the issuer thereof;
(ii) Indebtedness represented by (x) the Notes, (y) any Indebtedness (other than
the Indebtedness described in clauses (i), (ii) and (iv) of paragraph (b) of the
covenant described under "Limitation on Indebtedness" and other than
Indebtedness Incurred pursuant to clause (i) above or clauses (iv), (v), (vi) or
(vii) below) outstanding on the Issue Date and (z) any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (ii) or
Incurred pursuant to paragraph (a) of the covenant described under "Limitation
on Indebtedness"; (iii) (A) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on the date on which such Restricted Subsidiary was acquired by the
Company or its Restricted Subsidiaries (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Subsidiary or
was otherwise acquired by the Company); provided, however, that at the time such
Restricted Subsidiary is acquired by the Company, the Company would have been
able to Incur $1.00 of additional Indebtedness pursuant to paragraph (a) of the
covenant described under "Limitation on Indebtedness" above after giving effect
to the Incurrence of such Indebtedness pursuant to this clause (iii) and (B)
Refinancing Indebtedness Incurred by the Company or a
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Restricted Subsidiary in respect of Indebtedness Incurred by such Restricted
Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A) in respect of
performance bonds, bankers' acceptances and surety or appeal bonds provided by
the Company or any of its Restricted Subsidiaries to their customers in the
ordinary course of their business, (B) in respect of performance bonds or
similar obligations of the Company or any of its Restricted Subsidiaries for or
in connection with pledges, deposits or payments made or given in the ordinary
course of business in connection with or to secure statutory, regulatory or
similar obligations, including obligations under health, safety or environmental
obligations, (C) arising from Guarantees to suppliers, lessors, licensees,
contractors, franchisees or customers of obligations (other than Indebtedness)
incurred in the ordinary course of business and (D) under Currency Agreements
and Interest Rate Agreements; provided, however, that in the case of Currency
Agreements and Interest Rate Agreements, such Currency Agreements and Interest
Rate Agreements are entered into for bona fide hedging purposes of the Company
or its Restricted Subsidiaries (as determined in good faith by the Board of
Directors or senior management of the Company) and correspond in terms of
notional amount, duration, currencies and interest rates, as applicable, to
Indebtedness of the Company or its Restricted Subsidiaries Incurred without
violation of the Indenture or to business transactions of the Company or its
Restricted Subsidiaries on customary terms entered into in the ordinary course
of business; (v) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in each case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company (other than Guarantees
of Indebtedness or other obligations Incurred by any Person acquiring all or any
portion of such business assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition) in a principal amount not to exceed the
gross proceeds actually received by the Company or any of its Restricted
Subsidiaries in connection with such disposition, provided, however, that the
principal amount of any Indebtedness Incurred pursuant to this clause (v), when
taken together with all Indebtedness Incurred pursuant to this clause (v) and
then outstanding, shall not exceed $20.0 million; (vi) Indebtedness consisting
of (A) Guarantees by the Company or a Restricted Subsidiary of Indebtedness
Incurred by a Wholly-Owned Subsidiary without violation of the Indenture and (B)
Guarantees by a Restricted Subsidiary of Senior Indebtedness Incurred by the
Company without violation of the Indenture (so long as such Restricted
Subsidiary could have Incurred such Indebtedness directly without violation of
the Indenture); (vii) Indebtedness arising from agreements with governmental
agencies of any foreign country, or political subdivision or agency thereof,
relating to the construction of plants and the purchase and installation
(including related training costs) of equipment to be used in a Related
Business; provided that such Indebtedness (i) has a maturity in excess of ten
years and 91 days and (ii) in the aggregate does not exceed $50.0 million; and
(viii) Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument drawn against insufficient
funds in the ordinary course of business, provided that such Indebtedness is
extinguished promptly in accordance with customary practices.
"Permitted Investment" means an Investment by the Company or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Company;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Related Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Company or is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Company or a Wholly-Owned Subsidiary of the Company; provided,
however, that in each case such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
of its Restricted Subsidiaries, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to employees for purposes of purchasing the
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Company's common stock in an aggregate amount outstanding at any one time not to
exceed $10 million and other loans and advances to employees made in the
ordinary course of business consistent with past practices of the Company or
such Restricted Subsidiary; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any of its Restricted Subsidiaries or in satisfaction of judgments or
claims; (viii) a Person engaged in a Related Business or a loan or advance to
the Company the proceeds of which are used solely to make an investment in a
Person engaged in a Related Business or a Guarantee by the Company of
Indebtedness of any Person in which such Investment has been made; provided,
however, that no Permitted Investments may be made pursuant to this clause
(viii) to the extent the amount thereof would, when taken together with all
other Permitted Investments made pursuant to this clause (viii), exceed $50
million in the aggregate (plus, to the extent not previously reinvested, any
return of capital realized on Permitted Investments made pursuant to this clause
(viii), or any release or other cancellation of any Guarantee constituting such
Permitted Investment); (ix) Persons to the extent such Investment is received by
the Company or any Restricted Subsidiary as consideration for Asset Dispositions
effected in compliance with the covenant described under "Limitations on Sales
of Assets and Subsidiary Stock"; (x) prepayments and other credits to suppliers
made in the ordinary course of business consistent with the past practices of
the Company and its Restricted Subsidiaries; (xi) payments in respect of the
Chips Reimbursement Obligation as in effect on the Issue Date; and (xii)
Investments in connection with pledges, deposits, payments or performance bonds
made or given in the ordinary course of business in connection with or to secure
statutory, regulatory or similar obligations, including obligations under
health, safety or environmental obligations.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision hereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Productive Assets" means assets of a kind used or usable by the Company
and its Restricted Subsidiaries in the Company's business or any Related
Business.
A "Public Market" exists at any time with respect to the common stock of
the Company or Viasystems Group if (a) the common stock of the Company or
Viasystems Group, as the case may be, is then registered with the Securities and
Exchange Commission pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and traded either on a national securities
exchange or in the National Association of Securities Dealers Automated
Quotation System and (b) at least 15% of the total issued and outstanding common
stock of the Company or Viasystems Group, as the case may be, has been
distributed prior to such time by means of an effective registration statement
under the Securities Act of 1933, as amended.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinance") any Indebtedness existing on
the date of the Indenture or Incurred in compliance with the Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Restricted Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary) including Indebtedness
that refinances Refinancing Indebtedness, provided, however, that (i) the
Refinancing Indebtedness has a Stated Maturity no earlier than the earlier of
(A) the ninety-first day after the Stated Maturity of the Notes and (B) the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the lesser of (A) the Average Life of
the Notes and (B) the Average Life of the Indebtedness being
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refinanced, and (iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to (or 101% of, in the case of a refinancing of the Notes
in connection with a Change of Control) or less than the sum of the aggregate
principal amount (or if issued with original issue discount, the aggregate
accredited value) then outstanding of the Indebtedness being refinanced, plus
applicable premium and reasonable costs paid in connection with such
refinancing.
"Related Business" means any business which is the same as or related,
ancillary or complementary to any of the businesses of the Company and its
Restricted Subsidiaries on the date of the Indenture, as reasonably determined
by the Company's Board of Directors.
"Representative" means any trustee, agent or representative (if any) of an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Subsidiary leases it
from such Person.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien.
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes in right of payment and is not subordinated by
its terms in right of payment to any Indebtedness or other obligation of the
Company which is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Indebtedness" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Company.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities
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Act), (iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered into
with a bank meeting the qualifications described in clause (ii) above, (iv)
Investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard
and Poor's Ratings Group, (v) Investments in securities with maturities of six
months or less from the date of acquisition issued or fully guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. and
(vi) Investments in mutual funds whose investment guidelines restrict
substantially all of such funds' investments to those satisfying the provisions
of clauses (i) through (v) above.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any Restricted Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; provided,
however, that either (A) the Subsidiary to be so designated has total
consolidated assets of $10,000 or less or (B) if such Subsidiary has
consolidated assets greater than $10,000, then such designation would be
permitted under "Limitation on Restricted Payments." The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided,
however, that immediately after giving effect to such designation (x) the
Company could Incur $1.00 of additional Indebtedness under clause (a) of
"Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Company, at
least 99% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly-Owned Subsidiary; provided,
however, the Forward Group shall be deemed to be a Wholly-Owned Subsidiary of
the Company for all purposes of the Indenture unless the sale or issuance of
more than 1% of the Capital Stock thereof to a person other than another Wholly
Owned Subsidiary of the Company occurs.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one or more registered notes in global form without coupons (each a
"Global Note"). Each Global Note will be deposited on the date of the closing of
the sale of the Notes (the "Closing Date") with, or on behalf of, the Depository
Trust Company (the "Depository") and registered in the name of Cede & Co., as
nominee of the Depository, or will remain in the custody of the Trustee pursuant
to the FAST Balance Certificate Agreement between DTC and the Trustee.
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The Depository has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depository was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depository's Participants include securities
brokers and dealers, banks and trust companies, clearing corporations and
certain other organizations. Access to the Depository's system is also available
to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository will credit, on
its internal system, the principal amount of New Notes to the respective
accounts of Participants with an interest in such Global Notes and (ii)
ownership of the New Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depository
(with respect to the interest of Participants), the Participants and the
Indirect Participants. The laws of some states require that certain persons take
physical delivery in definitive form of securities that they own and that
security interests in negotiable instruments can only be perfected by delivery
of certificates representing the instruments. Consequently, the ability to
transfer New Notes or to pledge the New Notes as collateral will be limited to
such extent.
So long as the Depository or its nominee is the registered owner of the
Global Notes, the Depository or such nominee, as the case may be, will be
considered the sole owner or Holder of the New Notes represented by such Global
Notes for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in a Global Note will not be entitled to have New Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities (as defined
below), and will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to giving of any directions,
instruction or approval to the Trustee thereunder. As a result, the ability of a
person having a beneficial interest in New Notes represented by a Global Note to
pledge such interest to persons or entities that do not participate in the
Depository's system or to otherwise take action with respect to such interest,
may be affected by the lack of a physical certificate evidencing such interest.
Accordingly, each Holder of a beneficial interest in a Global Note must
rely on the procedures of the Depository and, if such Holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such Holder owns its interest, to exercise any rights of a Holder
under the Indenture or such Global Note. The Company understands that under
existing industry practice, in the event the Company requests any action of
Holders or an owner of a beneficial interest in a Global Note desires to take
any action that the Depository, as the Holder of such Global Note, is entitled
to take, the Depository would authorize the Participants to take such action and
the Participant would authorize such Holders owning through such Participants to
take such action or would otherwise act upon the instruction of such Holders.
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of New
Notes by the Depository, or for maintaining, supervising or reviewing any
records of the Depository relating to such Notes.
Payments with respect to the principal of, premium, if any, and interest on
any New Notes represented by a Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered Holder of the Global Notes representing such New Notes under
the Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the
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persons in whose names the New Notes, including the Global Notes, are registered
as the owners thereof for the purpose of receiving such payment and for any and
all other purposes whatsoever. Consequently, neither the Company nor the Trustee
has or will have any responsibility or liability for the payment of such amounts
to beneficial owners of New Notes (including principal, premium, if any, and
interest), or to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interest in the Global Notes as shown on the
records of the Depository. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is
no longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, or (iii) upon the occurrence of certain
other events, then, upon surrender by the Depository of its Global Notes,
securities in registered definitive form without coupons ("Certificated
Securities") will be issued to each person that the Depository identifies as the
beneficial owner of the Notes represented by the Global Notes. In addition,
subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Trustee, exchange such beneficial interest
for Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of such person or persons (or
the nominee of any thereof) and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related Notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from the Depository
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the New Notes to be issued).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does not
purport to be a complete analysis of all potential tax effects. The discussion
is based upon the Internal Revenue Code of 1986, as amended, Treasury
regulations, Internal Revenue Service rulings and pronouncements, and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the New Notes.
The description does not consider the effect of any applicable foreign, state,
local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a significant modification of the terms of the Old Notes
and, therefore, such exchange should not constitute an exchange for federal
income tax purposes. Accordingly, such exchange should have no federal income
tax consequences to holders of Old Notes.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes pursuant to the Exchange Offer, where such Old Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1997, all dealers effecting transactions in the New
Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any
broker-dealers and will indemnify holders of the Old Notes (including any
broker-dealers) against certain liabilities, including certain liabilities under
the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Weil, Gotshal & Manges LLP, Dallas, Texas and New York, New York.
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EXPERTS
The balance sheet of Viasystems, Inc. as of April 3, 1997, has been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent certified public accountants, St. Louis, Missouri, given on the
authority of that firm as experts in accounting and auditing. The consolidated
financial statements of Viasystems Group as of December 31, 1996, and for the
period from inception (August 28, 1996) to December 31, 1996, have been included
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
certified public accountants, St. Louis, Missouri, given on the authority of
that firm as experts in accounting and auditing. The consolidated financial
statements of Circo Craft as of September 30, 1996, and for the nine month
period ended September 30, 1996, have been included herein in reliance on the
report of Coopers & Lybrand, chartered accountants, Montreal, Quebec, given on
the authority of that firm as experts in accounting and auditing. The
consolidated financial statements of Circo Craft as of December 31, 1995, and
for the years ended December 31, 1994 and 1995, have been included herein in
reliance on the report of Deloitte & Touche, chartered accountants, Montreal,
Quebec, given on the authority of that firm as experts in accounting and
auditing. The statements of net assets sold of Viasystems Technologies (formerly
the Microelectronics Group, Interconnection Technologies Unit of Lucent
Technologies Inc.) as of December 31, 1995 and November 30, 1996, and the
statements of operations for the periods ended December 31, 1994 and 1995 and
the 11-month period ended November 30, 1996 have been included herein in
reliance on the report of Coopers & Lybrand L.L.P., independent certified public
accountants, St. Louis, Missouri, given on the authority of that firm as experts
in accounting and auditing. The consolidated financial statements of Forward
Group as of January 31, 1996 and 1997, and for the three years in the period
ended January 31, 1997, have been included herein in reliance on the report of
KPMG Audit Plc, chartered accountants and registered auditor, Birmingham,
England, given on the authority of that firm as experts in accounting and
auditing. The consolidated financial statements of Chips as of March 29, 1996
and April 4, 1997, and for the years ended March 31, 1995, March 29, 1996, and
April 4, 1997, have been included herein in reliance on the report of Ernst &
Young, chartered accountants, independent auditors, Newcastle upon Tyne,
England, given on the authority of that firm as experts in accounting and
auditing.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Subsequent to the acquisition of Circo Craft, the Company dismissed the
former accountants and on January 7, 1997, the Company named Coopers & Lybrand,
L.L.P., the accountants for Viasystems Group, Inc. and Viasystems, Inc., as the
auditor of Circo Craft. The former accountants report did not contain an adverse
opinion or disclaimer of opinion nor was it modified as to an uncertainty, audit
scope, or accounting principle. Such change to the accountant was approved by
the stockholder of Circo Craft. There was no disagreement with the former
accountant on any matter which, if not resolved to the satisfaction of the
former accountant, would have caused the former accountant to make reference to
the subject matter of the disagreement in connection with their reports.
The Company has informed KPMG Audit Plc, the accountants for Forward Group,
and Ernst & Young, the accountants for Chips, that they will be dismissed and
that Coopers & Lybrand, L.L.P. will be named as the auditor of Forward Group and
Chips. The reports of the accountants to be dismissed did not contain adverse
opinions or disclaimers of opinion nor were they modified as to an uncertainty,
audit scope, or accounting principle. There were no disagreements with the
accountants to be dismissed on any matter which, if not resolved to the
satisfaction of the accountants to be dismissed, would have caused the
accountant to make reference to the subject matter of the disagreement in
connection with their reports.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
VIASYSTEMS, INC.
Report of Independent Auditors.............................. F-2
Balance Sheet at April 3, 1997.............................. F-3
Notes to Financial Statement................................ F-4
VIASYSTEMS, INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheet as of June 30, 1997
(unaudited)............................................... F-6
Condensed Consolidated Statements of Operations for the six
months ended June 30, 1997 (unaudited).................... F-7
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 (unaudited).................... F-8
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-9
VIASYSTEMS GROUP, INC.
Report of Independent Auditors.............................. F-15
Consolidated Balance Sheet at December 31, 1996............. F-16
Consolidated Statement of Operations from inception (August
28, 1996) to December 31, 1996............................ F-17
Consolidated Statement of Stockholders' Equity from
inception (August 28, 1996) to December 31, 1996.......... F-18
Consolidated Statement of Cash Flows from inception (August
28, 1996) to December 31, 1996............................ F-19
Notes to Consolidated Financial Statements.................. F-20
CIRCO CRAFT CO. INC.
Auditors' Report............................................ F-32
Auditors' Report............................................ F-33
Consolidated Balance Sheets at December 31, 1995 and
September 30, 1996........................................ F-34
Consolidated Statements of Retained Earnings for the years
ended December 31, 1994 and 1995 and the nine month period
ended September 30, 1996 and for the six month period
ended June 30, 1996 (unaudited)........................... F-35
Consolidated Statements of Earnings for the years ended
December 31, 1994 and 1995 and the nine month period ended
September 30, 1996 and for the six month period ended June
30, 1996 (unaudited)...................................... F-36
Consolidated Statements of Changes in Financial Position for
the years ended December 31, 1994 and 1995 and the nine
month period ended September 30, 1996 and for the six
month period ended June 30, 1996 (unaudited).............. F-37
Notes to Consolidated Financial Statements.................. F-38
VIASYSTEMS TECHNOLOGIES CORP. (FORMERLY MICROELECTRONICS
GROUP, INTERCONNECTION TECHNOLOGIES UNIT OF LUCENT
TECHNOLOGIES INC.)
Report of Independent Auditors.............................. F-49
Statements of Net Assets sold at December 31, 1995 and
November 30, 1996......................................... F-50
Statements of Operations for the years ended December 31,
1994 and 1995, the eleven month period ended November 30,
1996 and for the period from January 1, 1996 through June
30, 1996 (unaudited)...................................... F-51
Notes to Financial Statements............................... F-52
FORWARD GROUP PLC
Report of Independent Auditors.............................. F-57
Consolidated Profit and Loss Accounts for the years ended
January 31, 1995, 1996 and 1997, the six months ended June
30, 1996 (unaudited) and the three months ended March 31,
1997 (unaudited).......................................... F-58
Consolidated Statements of Total Recognized Gains and Losses
for the years ended January 31, 1995, 1996, and 1997, the
six months ended June 30, 1996 (unaudited) and the three
months ended March 31, 1997 (unaudited)................... F-59
Consolidated Balance Sheets at January 31, 1996 and 1997 and
at March 31, 1997 (unaudited)............................. F-60
Consolidated Statements of Cash Flows for the years ended
January 31, 1995, 1996, and 1997, the six months ended
June 30, 1996 (unaudited) and the three months ended March
31, 1997 (unaudited)...................................... F-61
Notes to the Consolidated Financial Statements.............. F-62
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
Report of Independent Auditors.............................. F-88
Consolidated Profit and Loss Accounts for the years ended
March 31, 1995, March 29, 1996 and April 4, 1997, the six
months ended June 30, 1996 (unaudited) and the three
months ended April 4, 1997 (unaudited).................... F-89
Consolidated Statements of Total Recognized Gains and Losses
for the years ended March 31, 1995, March 29, 1996 and
April 4, 1997, the six months ended June 30, 1996
(unaudited) and the three months ended April 4, 1997
(unaudited)............................................... F-90
Consolidated Balance Sheets at March 29, 1996 and April 4,
1997...................................................... F-91
Consolidated Statements of Cash Flows for the years ended
March 31, 1995, March 29, 1996 and April 4, 1997, the six
months ended June 30, 1996 (unaudited) and the three
months ended April 4, 1997 (unaudited).................... F-92
Notes to the Consolidated Financial Statements.............. F-93
</TABLE>
F-1
<PAGE> 112
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Viasystems, Inc.:
We have audited the accompanying balance sheet of Viasystems, Inc. (a
Delaware corporation) as of April 3, 1997. This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion of this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Viasystems, Inc. as of April 3,
1997, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
June 18, 1997
F-2
<PAGE> 113
VIASYSTEMS, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
APRIL 3,
1997
--------
<S> <C>
Total assets................................................ $ --
=======
LIABILITIES AND STOCKHOLDER'S EQUITY
Total liabilities........................................... $ --
Stockholder's equity:
Common Stock, par value $.01 per share, 1,000 shares
authorized, issued and outstanding..................... 10
Paid in capital........................................... 990
Subscriptions receivable.................................. (1,000)
-------
Total stockholder's equity........................ --
-------
Total liabilities and stockholder's equity........ $ --
=======
</TABLE>
The accompanying notes are an integral part of the balance sheet.
F-3
<PAGE> 114
VIASYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. THE COMPANY
Viasystems, Inc. a Delaware corporation ("Viasystems"), was formed on April
2, 1997, as a subsidiary of Viasystems Group, Inc. On April 10, 1997, Viasystems
Group, Inc. contributed to Viasystems all of the capital of its then existing
subsidiaries -- Circo Craft Co. Inc., Viasystems Technologies Corp., and PCB
Acquisition Limited. Viasystems has no operations of its own. The balance sheet
sets forth the financial position of Viasystems before the contribution of the
capital of the subsidiaries of Viasystems Group, Inc. The fiscal year end of
Viasystems is December 31.
2. SUBSEQUENT EVENTS
On April 11, 1997, Viasystems acquired Forward Group PLC ("Forward
Acquisition"), a manufacturer of rigid printed circuit boards located in the
U.K. The purchase price of approximately $236,300 consisted of cash, notes
payable to certain of the Forward Group PLC stockholders, and assumed debt. The
Forward Acquisition and the related transaction fees and expenses were funded
with (i) $40,000 from the issuance of 1,600,000 shares of Series C Preferred
Stock of Viasystems Group, Inc. and (ii) $216,000 from a Subordinated Credit
Facility. The Subordinated Credit Facility was paid off with a subsequent debt
offering (see below). The Forward Acquisition will be accounted for using the
purchase method of accounting.
In connection with the Forward Acquisition, Viasystems entered into an
Amended and Restated Credit Agreement with terms substantially similar to the
Credit Agreements of Viasystems Group, Inc. The Amended and Restated Credit
Agreement provided for a U.K.L.32,000 (approximately US$51,500) Revolving
Facility to Forward Group PLC.
On April 11, 1997, Viasystems made an optional prepayment of $20,000 under
the Term A Loan outstanding under the Amended and Restated Credit Agreement.
In April 1997, Viasystems Group, Inc.'s stockholders and certain of its
affiliates formed Chips Holdings, Inc., to acquire Interconnection Systems
(Holdings) Limited ("ISL"), a manufacturer of rigid printed circuit boards
located in the U.K. On April 21, 1997, Chips Holdings, Inc. acquired ISL for
$437,500. The purchase price consisted entirely of notes payable to the former
stockholders of ISL. In connection with the transaction, these stockholders
invested $140,000 of equity capital in Chips Holdings, Inc. On June 6, 1997,
Chips Holdings, Inc. merged with Viasystems Group, Inc. and the subsidiaries of
Chips Holdings, Inc., including ISL, became subsidiaries of Viasystems and
certain of its subsidiaries in consideration for the issuance of 140,000,000
shares of Viasystems Group, Inc. common stock valued at $140,000 to Viasystems
Group, Inc.'s stockholders and certain of its affiliates. Viasystems Group, Inc.
assumed the $437,500 of notes payable which were incurred by Chips Holdings,
Inc. (the "Chips Loan Notes") to finance the ISL acquisition. The acquisition of
ISL by Chips Holdings, Inc. will be accounted for using the purchase method of
accounting. The merger of Chips Holdings, Inc. with Viasystems Group, Inc. will
be accounted for as a transfer of assets among companies under common control
and will be recorded at Chips Holdings, Inc.'s historical cost. Viasystems will
account for the acquisition of ISL as of the date of ISL's acquisition by Chips
Holdings, Inc.
The Chips Loan Notes mature on March 31, 2003 and bear interest, payable
quarterly, at approximately 6.22% per annum through April 1, 1998, with variable
rates thereafter discounted from the U.S. prime rate. The Chips Loan Notes may
be called by the holders on or after any interest payment date commencing April
1, 1998. The Chips Loan Notes are collateralized by letters of credit issued by
a bank. Such letters of credit are in turn collateralized in part by a fully
cash collateralized $118,300 reimbursement obligation of Bisto Funding, Inc., a
special purpose entity and sister Company of Viasystems, established as a
subsidiary of the Viasystems Group, Inc. in connection
F-4
<PAGE> 115
with the acquisition of ISL, with the remainder, including interest on the Chips
Loan Notes for one year, collateralized by a reimbursement obligation of
Viasystems.
On June 5, 1997 Viasystems Group, Inc. as guarantor, and Viasystems and
certain of its subsidiaries, as borrowers, entered into a Second Amended and
Restated Credit Agreement with terms substantially similar to the Credit
Agreements of Viasystems Group, Inc. The Second Amended and Restated Credit
Agreement provided for a U.K.L27,600 (approximately U.S.$44,400) Revolving
Facility and a $319,250 term loan facility to be drawn upon in the event the
Chips Loan Notes are called. On June 6, 1997, Viasystems completed an offering
of $400,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "Offering").
Viasystems used the net proceeds of the Offering to repay amounts totaling
approximately $171,600 principal amount outstanding under the Second Amended and
Restated Credit Agreement, plus interest, and to repay the $216,000 principal
amount outstanding under the Subordinated Credit Facility, plus interest.
F-5
<PAGE> 116
VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C>
Current assets:
Cash and cash equivalents............. $ 50,823
Accounts receivable, net.............. 133,545
Inventories........................... 67,123
Prepaid expenses and other............ 9,617
----------
Total current assets.......... 261,108
Property, plant and equipment, net.... 406,919
Intangibles and other assets.......... 344,634
----------
Total assets.................. $1,012,661
==========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term
obligations........................ $ 14,276
Accounts payable...................... 56,278
Accrued and other liabilities......... 88,089
Income taxes payable.................. 12,220
----------
Total current liabilities..... 170,863
Long-term obligations, less current
maturities............................ 870,529
Other long-term liabilities............. 37,765
Stockholder's equity (deficit):
Common stock, par value $.01 per
share, 1,000 shares authorized,
issued and outstanding............. --
Paid-in capital....................... 281,756
Accumulated deficit................... (363,032)
Cumulative translation adjustments.... 14,780
----------
Total stockholder's equity
(deficit)..................... (66,496)
----------
Total liabilities and
stockholder's equity
(deficit)..................... $1,012,661
==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-6
<PAGE> 117
VIASYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1997
----------
<S> <C>
Net sales................................................... $ 346,692
Operating expenses:
Cost of goods sold........................................ 254,648
Selling, general and administrative....................... 31,851
Depreciation and amortization............................. 46,303
Write-off of acquired in-process R&D...................... 294,500
---------
Operating loss.................................... (280,610)
Other expense:
Interest expense.......................................... 22,127
Amortization of deferred financing costs.................. 2,796
Other, net................................................ 70
---------
Loss before income tax provision and extraordinary
item.............................................. (305,603)
Provision for income taxes.................................. (891)
---------
Loss before extraordinary item.............................. (306,494)
Extraordinary item -- loss on early extinguishment of debt,
net of income tax benefit of $4,332....................... 7,796
---------
Net loss.................................................... $(314,290)
=========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-7
<PAGE> 118
VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30,
1997
----------
<S> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $(314,290)
Adjustments to reconcile net income to net cash provided
by (used in)
operating activities:
Extraordinary item..................................... 12,128
Write-off of acquired in-process R&D................... 294,500
Deferred taxes......................................... 341
Depreciation and amortization.......................... 46,303
Amortization of deferred financing costs............... 2,796
Change in assets and liabilities:
Accounts receivable.................................. (26,972)
Inventories.......................................... 3,833
Prepaid expenses and other........................... (1,548)
Accounts payable and accrued liabilities............. 7,439
Other liabilities.................................... (2,473)
---------
Net cash from operating activities.......................... 22,057
---------
Cash flows provided by (used in) investing activities:
Capital expenditures...................................... (42,388)
Acquisitions, net of cash acquired........................ (155,904)
---------
Net cash from investing activities.......................... (198,292)
---------
Cash flows provided by (used in) financing activities:
Equity proceeds........................................... 59,777
Proceeds from the issuance of Senior Subordinated Notes
due 2007............................................... 400,000
Proceeds from the Subordinated Credit Facility............ 216,000
Repayment of amounts outstanding under the Credit
Agreements and the Second Amended and Restated Credit
Agreement.............................................. (151,464)
Repayment of the Senior Credit Facility................... (216,000)
Repayment of other long-term obligations.................. (61,436)
Financing costs........................................... (34,491)
---------
Net cash from financing activities.......................... 212,386
---------
Effect of exchange rate changes on cash..................... (1,445)
---------
Net change in cash and cash equivalents..................... 34,706
Cash and cash equivalents at beginning of the period........ 16,117
---------
Cash and cash equivalents at end of period.................. $ 50,823
=========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
F-8
<PAGE> 119
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
Viasystems, Inc. ("Viasystems") is a wholly owned subsidiary of Viasystems
Group, Inc. Viasystems was formed on April 2, 1997, as a subsidiary of
Viasystems Group, Inc. On April 10, 1997, Viasystems Group, Inc. contributed to
Viasystems all of the capital of its then existing subsidiaries -- Circo Craft
Co. Inc. ("Circo Craft"), Viasystems Technologies Corp. ("Viasystems
Technologies"), and PCB Acquisition Limited. Prior to the contribution of this
capital by Viasystems Group, Inc., Viasystems had no operations of its own. The
unaudited interim condensed consolidated financial statements included herein
present the results of operations of Viasystems and its subsidiaries subsequent
to the capital contribution by Viasystems Group, Inc., and the results of
operations of Viasystems Group, Inc. and its subsidiaries prior to the capital
contribution of such subsidiaries to Viasystems. As used herein, the Company
refers to Viasystems subsequent to the capital contribution by Viasystems Group,
Inc. and Viasystems Group, Inc. prior to such capital contribution.
Unaudited Interim Condensed Consolidated Financial Statements
The unaudited interim condensed consolidated financial statements reflect
all adjustments consisting only of normal recurring adjustments which are, in
the opinion of management, necessary for a fair presentation of financial
position and results of operations. The results for the six months ended June
30, 1997, are not necessarily indicative of the results that may be expected for
a full fiscal year.
Statement of Cash Flows
Interest and income taxes paid for the six months ended June 30, 1997 was
approximately $14,388 and $1,709, respectively.
2. INVENTORIES
The composition of inventories at June 30, 1997, is as follows:
<TABLE>
<S> <C>
Raw materials............................................... $21,129
Work-in-process............................................. 26,442
Finished goods.............................................. 19,552
-------
Total....................................................... $67,123
=======
</TABLE>
3. ACQUISITIONS
On April 11, 1997, the Company acquired all of the outstanding stock of
Forward Group, PLC ("Forward"), a manufacturer of rigid printed circuit boards
located in the U.K. The purchase price of approximately $208,483 consisted of
cash and notes payable to certain Forward stockholders plus $5,585 of
acquisition fees and expenses (the "Forward Acquisition"). The Forward
Acquisition and related transaction fees and expenses were funded with (i)
$40,000 from the issuance of 1,600,000 shares of Series C Preferred Stock of
Viasystems Group, Inc. and (ii) $216,000 from a Subordinated Credit Facility.
The Subordinated Credit Facility was paid off with a subsequent debt offering
(see Note 5).
F-9
<PAGE> 120
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The Forward Acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been preliminarily allocated to
the assets and liabilities based on their estimated respective fair values.
Accordingly, the results of operations of Forward since its acquisition are
included in the results of operations of the Company. The Company has allocated
a significant portion of the purchase price, as described below, to intangible
assets, including approximately $97,800 of in-process research and development
("in-process R&D"). The portion of the purchase price allocated to in-process
R&D projects that did not have a future alternative use totaled $97,800 and was
charged to expense as of the acquisition date. The other acquired intangibles
include developed technology, assembled workforce, and customer list. These
intangibles are being amortized over their estimated useful lives of 1-15 years.
The remaining unidentified intangible asset has been allocated to goodwill and
is being amortized over its estimated useful life of 20 years.
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 45,040
Property, plant and equipment............................... 60,524
Developed technologies...................................... 34,800
Assembled workforce......................................... 6,600
Customer list............................................... 13,200
In-process R&D.............................................. 97,800
Goodwill.................................................... 25,808
Non-current assets.......................................... 5,660
Current liabilities......................................... (33,026)
Non-current liabilities..................................... (42,338)
--------
Total............................................. $214,068
========
</TABLE>
In connection with the Forward Acquisition, the Company entered into an
Amended and Restated Credit Agreement with terms substantially similar to the
Credit Agreements of Viasystems Group, Inc. The Amended and Restated Credit
Agreement provided for a U.K. L32,000 (approximately US $51,500) Revolving
Facility to Forward Group PLC.
On April 11, 1997, Viasystems made an optional prepayment of $20,000 under
the Term A Loan outstanding under the Amended and Restated Credit Agreement.
In April 1997, Viasystems Group, Inc.'s stockholders and certain of its
affiliates formed Chips Holding, Inc., to acquire Interconnection Systems
(Holdings) Limited ("ISL"), a manufacturer of rigid printed circuit boards
located in the U.K. On April 21, 1997, Chips Holdings, Inc. acquired ISL for
$437,500 plus $8,953 of acquisition fees and expenses (the "ISL Acquisition").
The purchase price consisted entirely of notes payable to the former
stockholders of ISL. In connection with the transaction, the stockholders of
Viasystems Group, Inc. invested $140,000 of equity capital in Chips Holdings,
Inc. On June 6, 1997, Chips Holdings, Inc. merged with Viasystems Group, Inc.
and the subsidiaries of Chips Holdings, Inc., including ISL, became subsidiaries
of Viasystems and certain of its subsidiaries in consideration for the issuance
to Viasystems Group, Inc.'s stockholders and certain of its affiliates of
140,000,000 shares of Viasystems Group, Inc. common stock valued at $140,000.
Viasystems Group, Inc. assumed the $437,500 of notes payable which were incurred
by Chips Holdings, Inc. (the "Chips Loan Notes") to finance the ISL acquisition.
F-10
<PAGE> 121
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The Chips Loan Notes mature on March 31, 2003 and bear interest, payable
quarterly, at approximately 6.22% per annum through April 1, 1998, with variable
rate thereafter discounted from the U.S. prime rate. The Chips Loan Notes may be
called by the holders on or after any interest payment date commencing April 1,
1998. The Chips Loan Notes have not been classified as current at June 30, 1997
since the Company has in place a facility to replace the Chips Loan Notes in the
event they are called (See Note 4). The Chips Loan Notes are collateralized by
letters of credit issued by banks. Such letters of credit are in turn
collateralized in part by a fully cash collateralized $118,500 reimbursement
obligation of Bisto Funding, Inc., a special purpose entity and sister company
of Viasystems established as a subsidiary of Viasystems Group, Inc. in
connection with the acquisition of ISL, with the remainder, including interest
on the Chips Loan Notes for one year, collateralized by a reimbursement
obligation of Viasystems.
The ISL Acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been preliminarily allocated to
the assets and liabilities based on their estimated respective fair values. The
Company has allocated a significant portion of the purchase price, as described
below, to intangible assets, including approximately $196,700 of in-process
research and development ("in-process R&D"). The portion of the purchase price
allocated to in-process R&D projects that did not have a future alternative use
totaled $196,700 and was charged to expense as of the acquisition date. The
other acquired intangibles include developed technology, assembled workforce,
and customer list. These intangibles are being amortized over their estimated
useful lives of 1-15 years. The remaining unidentified intangible asset has been
allocated to goodwill and is being amortized over its estimated useful life of
20 years.
The merger of Chips Holdings, Inc. with Viasystems Group, Inc. will be
accounted for as a transfer of assets among companies under common control and
will be recorded at Chips Holdings, Inc.'s historical cost. In the merger of
Chips Holdings, Inc. with Viasystems Group, Inc. ISL, and its subsidiaries
became wholly owned subsidiaries of Viasystems, and as such, Viasystems will
account for the acquisition of ISL as of the acquisition by Chips Holdings, Inc.
and the results of operations of ISL since the acquisition by Chips Holdings,
Inc. are included in the results of operations of the Company.
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 96,880
Property, plant and equipment............................... 114,983
Developed technologies...................................... 66,500
Assembled workforce......................................... 8,000
Customer list............................................... 17,900
In-process R&D.............................................. 196,700
Goodwill.................................................... 68,786
Non-current assets.......................................... 12,971
Current liabilities......................................... (68,285)
Non-current liabilities..................................... (67,982)
--------
Total............................................. $446,453
========
</TABLE>
The Company will evaluate the capacities and production capabilities of all
acquired entities to assess potential cost savings from consolidating those
facilities and optimize its global plant
F-11
<PAGE> 122
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
utilization by shifting production between facilities to most efficiently
satisfy particular customer orders.
The intangible assets acquired are being amortized using systematic methods
over the estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
LIFE METHOD
-------- ------------------------
<S> <C> <C>
Developed technologies......................... 15 years Double-declining balance
Assembled workforce............................ 1 year Straight-line
Customer list.................................. 3 years Straight-line
Goodwill....................................... 20 years Straight-line
</TABLE>
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the six months ended June 30,
1997, as though the Forward Acquisition and the ISL Acquisition and the related
financing had occurred at the beginning of the year. In preparing this data, the
financial data of Forward and ISL for the first fiscal quarter of 1997 has been
translated at an exchange rate of U.K. L 0.61 = U.S. $1.00, the exchange rate at
March 31, 1997, which is not materially different from the exchange rate for the
period.
<TABLE>
<S> <C>
Net sales................................................... $450,877
Net loss before extraordinary item.......................... (23,238)
Net loss.................................................... (31,034)
</TABLE>
4. LONG-TERM OBLIGATIONS
On June 5, 1997 Viasystems Group, Inc., as guarantor, and Viasystems and
certain of its subsidiaries, as borrowers, entered into a Second Amended and
Restated Credit Agreement with terms substantially similar to the Credit
Agreements of Viasystems Group, Inc. The Second Amended and Restated Credit
Agreement provides for (i) an $88,000 term loan facility (the "U.S. Term Loan")
and a $150,000 revolving credit facility (the "U.S. Revolving Loan" and together
with the U.S. Term Loan, the "U.S. Loans"); (ii) a U.S. $25,000 revolving credit
facility (the "Canadian Revolving Loan"), (iii) a L32,000 revolving credit
facility (the "Forward Group Revolving Loan") and a L27,600 revolving credit
facility (the "Chips Revolving Loan", and together with the Forward Group
Revolving Loan, the "U.K. Revolving Loans", and together with the U.S. Revolving
Loan and the Canadian Revolving Loan, the "Revolving Loans") and (iv) US$346,463
Letter of Credit Facility in respect of the Chips Loan Notes comprised of (a) a
US$319,250 term loan facility ("the Chips Term Loans" and together with the US
Term Loan, the "Term Loans") in respect of the principal portion of the Chips
Loan Notes and (b) a US$27,213 facility in respect of interest on the Chips Loan
Notes.
The U.S. Term Loan consists of two tranches: (i) $55.0 million of tranche B
term loans (the "Tranche B Loan") and (ii) $33.0 million of tranche C term loans
(the "Tranche C Loan"). The Tranche B Loan amortizes semiannually over eight
years and the Tranche C Loan is payable $1,500 on December 31, 2004 and $31,500
on June 30, 2,005. The Chips Term Loans, if drawn, amortize semi-annually over
six years.
The Company may use the Revolving Loans for letters of credit in an amount
not to exceed $15.0 million, in the case of both the U.S. Revolving Loan and the
Canadian Revolving Loan, and related letters of credit and bankers' acceptances
in an amount not to exceed L5.0 million in the case of the Forward Group
Revolving Loan and L10,000,000 in the case of the Chips Revolving Loan. L14.8
million of the Forward Group Revolving Loan is available solely to finance
obligations of
F-12
<PAGE> 123
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
PCB Investments in respect of the Forward Group Loan Notes and $100.0 million of
the U.S. Revolving Loan is available solely to finance future acquisitions.
The U.S. Loans bear interest, at the Company's election, at either: (i) the
Eurocurrency Base Rate plus (x) 2.5% in the case of the Chips Term Loan and U.S.
Revolving Loan, (y) 3.0% in the case of Tranche B Loan, or (z) 3.5% in the case
of Tranche C Loan; or (ii) the Alternate Base Rate plus (x) 1.5% in the case of
the Chips Term Loan or U.S. Revolving Loan, (y) 2.0% in the case of Tranche B
Loan, or (z) 2.5% in the case of Tranche C Loan. The Alternate Base Rate is the
highest of The Chase Manhattan Bank's Prime Rate, the Three-Month Secondary CD
Rate (as defined therein) plus 1.0%, and the Federal Funds Effective Rate (as
defined therein) plus 0.5%. The Canadian Revolving Loan denominated in US
dollars bears interest, at Circo Craft's election, at either (i) the
Eurocurrency Base Rate plus 2.5% or (ii) the Canadian Alternate Base Rate plus
1.5%. The Canadian Revolving Loan denominated in Canadian Dollars bears
interest, at Circo Craft's election either (i) the Canadian Bankers Acceptance
Discount Rate plus 2.5% or (ii) the Canadian Prime Rate plus 1.5%. The Canadian
Alternate Base Rate is equal to the higher of Canadian Agent's prime rate or the
Federal Funds Effective Rate (as defined in the Credit Agreement) plus 0.5%. The
U.K. Revolving Loans and any Chips Term Loans converted to pounds sterling bear
interest at the Eurocurrency Base Rate plus 2.5%.
The Company pays a per annum fee equal to the applicable margin on
Revolving Loans which bear interest at the Eurocurrency Base Rate, of the
average daily face amount of outstanding letters of credit, other than with
respect to the Chips Letter of Credit, which fee is equal to the applicable
margin on the Chips Term Loan bearing interest at the Eurocurrency Base Rate.
The Company pays a Commitment Fee equal to 0.5% on the undrawn portion of the
commitments in respect of Revolving Loans and a Facility Fee equal to 0.5% on
the Canadian revolving credit commitment. In addition, the Company pays a fee of
0.25% per annum of Bisto Funding Inc.'s $118,500 portion of the Chips Letter of
Credit to the extent not paid by Bisto Funding, Inc.
The Second Amended and Restated Credit Agreement contains a number of
covenants customary for similar facilities which, among other things, restrict
the ability of the Company and its subsidiaries to incur additional
indebtedness, create liens on or dispose of assets, enter into business
combinations, and pay dividends. In addition, the Second Amended and Restated
Credit Agreement contains financial covenants which require the Company to
maintain certain financial ratios and limit the Company's amount of capital
expenditures.
On June 6, 1997, Viasystems completed an offering of $400,000 of 9.75%
Senior Subordinated Notes due 2007 (the "Offering"). Interest on the Senior
Subordinated Notes is due semiannually. Viasystems used the net proceeds of the
offering to repay amounts totaling approximately $171,600 principal amount
previously outstanding under the Second Amended and Restated Credit Agreement,
plus interest, and to repay the $216,000 amount outstanding under the
Subordinated Credit Facility, plus interest.
F-13
<PAGE> 124
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The composition of long term obligations at June 30, 1997, is as follows:
<TABLE>
<CAPTION>
<S> <C>
Second Amended and Restated Credit Agreement:
Term Facilities........................................... $ 88,000
Senior Subordinated Notes due 2007.......................... 400,000
Chips Loan Notes............................................ 319,250
Forward Loan Notes.......................................... 24,243
Other debt.................................................. 53,312
--------
884,805
Less current maturities........................... (14,276)
--------
$870,529
========
</TABLE>
5. EXTRAORDINARY ITEM
The Company recorded, as an extraordinary item, a one-time, non-cash
write-off of deferred financing fees of approximately $7,796, net of income tax
benefit of $4,332, related to deferred financing fees incurred on debt retired
before maturity with the proceeds of the Offering.
F-14
<PAGE> 125
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of Viasystems Group, Inc.:
We have audited the accompanying consolidated balance sheet of Viasystems
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the period from inception (August 28, 1996) to December 31, 1996.
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides 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 Viasystems
Group, Inc. and subsidiaries as of December 31, 1996 and the consolidated
results of their operations and their cash flows for period from inception
(August 28, 1996) to December 31, 1996, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 28, 1997, except
for Note 18, for
which the date
is June 6, 1997
F-15
<PAGE> 126
VIASYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Current assets:
Cash and cash equivalents............. $ 16,117
Accounts receivable, less allowance
for doubtful accounts of $409...... 37,149
Inventories........................... 43,123
Prepaid expenses and other............ 7,333
--------
Total current assets.......... 103,722
Property, plant and equipment, net...... 208,748
Deferred financing costs, net........... 27,351
Intangible assets, net.................. 47,920
--------
Total assets.................. $387,741
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations........................ $ 10,804
Accounts payable...................... 5,185
Accrued and other liabilities......... 42,112
Income taxes payable.................. 683
--------
Total current liabilities..... 58,784
Deferred taxes.......................... 3,785
Long-term obligations, less current
maturities............................ 254,816
Other noncurrent liabilities............ 15,383
--------
Total liabilities............. 332,768
--------
Stockholders' Equity:
Series A preferred stock, $.01 par
value, 1,800,000 shares issued and
outstanding, including liquidation
preference of $45,000.............. 18
Series B preferred stock, $.01 par
value, 1,200,000 shares issued and
outstanding, including liquidation
preference of $30,000.............. 12
Common Stock, par value $.01 per
share, 90,000,000 shares
authorized, 30,000,004 shares
issued and outstanding............. 300
Class A common stock, par value $.01
per share, 10,000,000 shares
authorized 4,098,333 shares issued
and outstanding.................... 41
Paid in capital....................... 103,423
Accumulated deficit................... (48,742)
Cumulative translation adjustment..... (79)
--------
Total stockholders' equity....... 54,973
--------
Total liabilities and
stockholders' equity......... $387,741
========
</TABLE>
The accompanying notes are an integral part of the consolidated balance sheet.
F-16
<PAGE> 127
VIASYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 28, 1996) TO
DECEMBER 31, 1996
--------------------
<S> <C>
Net sales................................................... $ 50,400
Operating expenses:
Cost of goods sold........................................ 42,052
Selling, general and administrative....................... 3,844
Depreciation and amortization............................. 4,635
Write-off of acquired in-process research and
development............................................ 50,800
--------
Operating loss.............................................. (50,931)
Other expenses:
Interest expense.......................................... 2,503
Amortization of deferred financing costs.................. 470
Other expense............................................. 262
--------
Loss before income taxes.................................... (54,166)
Benefit for income taxes.................................... (5,424)
--------
Net loss.................................................... $(48,742)
========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-17
<PAGE> 128
VIASYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED COMMON PAID IN ACCUMULATED TRANSLATION
STOCK STOCK CAPITAL DEFICIT ADJUSTMENT TOTAL
--------- ------ -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at Inception (August 28,
1996)............................... $-- $ -- $ -- $ -- $ -- $ --
Issuance of 30,000,004 shares of
Common Stock...................... -- 300 29,700 -- -- 30,000
Issuance of 4,098,333 shares of
Class A Common Stock.............. -- 41 -- -- -- 41
Issuance of 1,800,000 shares of
Series A Preferred Stock.......... 18 -- 44,982 -- -- 45,000
Issuance of 1,200,000 shares of
Series B Preferred Stock.......... 12 -- 29,988 -- -- 30,000
Stock issuance costs................ -- -- (1,247) -- -- (1,247)
Net loss............................ -- -- -- (48,742) -- (48,742)
Cumulative translation adjustment... -- -- -- -- (79) (79)
--- ---- -------- -------- ---- --------
Balance at December 31, 1996.......... $30 $341 $103,423 $(48,742) $(79) $ 54,973
=== ==== ======== ======== ==== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-18
<PAGE> 129
VIASYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
(AUGUST 28, 1996) TO
DECEMBER 31, 1996
--------------------
<S> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $ (48,742)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Write-off of acquired in-process research and
development........................................... 50,800
Depreciation and amortization.......................... 4,635
Amortization of deferred financing costs............... 470
Deferred taxes......................................... (5,874)
Change in assets and liabilities, net of acquisitions:
Accounts receivable.................................. (15,469)
Inventories.......................................... 2,655
Prepaid expenses and other........................... (927)
Accounts payable..................................... 976
Accrued and other liabilities........................ 13,899
Income taxes payable................................. (761)
---------
Net cash from operating activities.......................... 1,662
---------
Cash flows provided by (used in) investing activities:
Acquisitions, net of cash acquired of $20,890............. (282,723)
Capital expenditures...................................... (3,563)
---------
Net cash used in investing activities....................... (286,286)
---------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of long-term obligations........... 238,283
Repayment of long-term obligations........................ --
Equity proceeds........................................... 73,794
Financing fees and other.................................. (11,364)
---------
Net cash from financing activities.......................... 300,713
---------
Effect of exchange rate changes on cash..................... 28
---------
Net change in cash and cash equivalents..................... 16,117
Cash and cash equivalents at inception...................... --
---------
Cash and cash equivalents at end of period.................. $ 16,117
=========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for
Interest............................................... $ 323
=========
Income taxes........................................... $ 1,184
=========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-19
<PAGE> 130
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. THE COMPANY
Viasystems Group, Inc. a Delaware corporation ("Viasystems Group"), was
formed on August 28, 1996. Viasystems Group, together with its subsidiaries, is
herein referred to as the Company. The Company was formed to make strategic
acquisitions of printed circuit board manufacturers and backpanel assemblers and
integrate those acquisitions as a global enterprise that is the preferred
manufacturer and marketer of complex printed circuit boards ("PCBs") and
backpanels. In connection therewith, as of December 31, 1996, the Company had
acquired Circo Craft Co. Inc. and the Microelectronics Group, Interconnection
Technologies Unit of Lucent Technologies Inc. (together, the "Acquisitions") as
described below. Prior to the Acquisitions, Viasystems Group had no operations
of its own other than those incident to the Acquisitions.
On October 1, 1996, the Company acquired all of the outstanding stock of
Circo Craft Co. Inc., a Quebec corporation and a rigid printed circuit board
manufacturer, for aggregate cash consideration of $129,850 plus acquisition fees
and expenses of $885 (the "Circo Craft Acquisition"). The operating results of
Circo Craft Co. Inc. are included in the consolidated financial statements of
Viasystems Group since the date of the Circo Craft Acquisition.
The Circo Craft Acquisition has been accounted for using the purchase
method of accounting whereby the total purchase price has been preliminarily
allocated to the assets and liabilities based on their estimated respective fair
values. The Company allocated a significant portion of the purchase price, as
described below, to intangible assets, including approximately $39,200 of in-
process research and development ("in-process R&D"). The portion of the purchase
price allocated to in-process R&D projects that did not have a future
alternative use totaled $39,200 and was charged to expense as of the acquisition
date. The in-process R&D projects relate primarily to developing significant
enhancements to the current product offering, as well as introducing advanced
new products. The incomplete projects include new connector functionality, chip
packaging solutions, component miniaturization, specialty drilling and surface
finishes. Given the uniqueness of the tasks and the technologies involved,
alternative future uses for these projects, apart from the objectives and
economics of the projects for which they are intended, do not exist. The Company
believes that the efforts to complete the acquired in-process R&D projects will
consist of internally-staffed engineering costs over the next two to four years.
The costs to complete the in-process R&D projects and to procure, develop and
test the required capital assets are anticipated to be significant. The other
acquired intangibles include developed technology, assembled workforce, and
customer list. These intangibles are being amortized over their estimated useful
lives of 1-15 years (see Note 2). The remaining unidentified intangible asset
has been allocated to goodwill and is being amortized over its estimated useful
life of 20 years.
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.......................... $ 52,846
Property, plant and equipment........... 50,710
Developed technologies.................. 13,400
Assembled workforce..................... 5,200
Customer list........................... 3,400
In-process R&D.......................... 39,200
Goodwill................................ 7,857
Non-current assets...................... 2,500
Current liabilities..................... (28,951)
Non-current liabilities................. (15,427)
--------
Total......................... $130,735
========
</TABLE>
F-20
<PAGE> 131
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
On December 1, 1996, the Company, through its newly formed subsidiary,
Viasystems Technologies Corp., acquired certain assets and assumed certain
liabilities of the Microelectronics Group, Interconnection Technologies Unit of
Lucent Technologies Inc., a rigid printed circuit board manufacturer and
backpanel assembler, (the "Lucent Division Acquisition") for an aggregate cash
consideration of $170,000 and 1,200,000 shares of preferred stock valued at
$30,000 plus acquisition fees and expenses of $1,969. The operating results of
Viasystems Technologies Corp. are included in the consolidated financial
statements since the date of the Lucent Division Acquisition.
The Lucent Division Acquisition was accounted for using the purchase method
of accounting whereby the total purchase price has been preliminarily allocated
to the assets and liabilities based on their estimated respective fair values.
The Company allocated a significant portion of the purchase price, as described
below, to intangible assets, including approximately $11,600 of in-process R&D.
The portion of the purchase price allocated to in-process R&D projects that did
not have a future alternative use totaled $11,600 and was charged to expense as
of the acquisition date. The in-process R&D projects relate primarily to
developing significant enhancements to the current product offering as well as
introducing advanced new products. The incomplete projects include new connector
functionality, chip packaging solutions, component miniaturization, specialty
drilling and surface finishes. Given the uniqueness of the tasks and the
technologies involved, alternative future uses for these projects, apart from
the objectives and economics of the projects for which they are intended, do not
exist. The Company believes that the efforts to complete the acquired in-process
R&D projects will consist of internally-staffed engineering costs over the next
two to four years. The costs to complete the in-process R&D projects and to
procure, develop and test the required capital assets are anticipated to be
significant. The other acquired intangibles include developed technology,
assembled workforce, and customer list. These intangibles are being amortized
over their estimated useful lives of 1-15 years (see Note 2).
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.......................... $ 39,204
Property, plant and equipment........... 155,674
Developed technologies.................. 7,866
Assembled workforce..................... 5,810
Customer list........................... 5,099
In-process R&D.......................... 11,600
Non-current assets...................... 13,080
Current liabilities..................... (8,849)
Non-current liabilities................. (27,515)
--------
Total......................... $201,969
========
</TABLE>
The Company will evaluate the capacities and production capabilities of all
acquired entities, including those acquired subsequent to yearend (see Note 17),
to assess potential cost savings from consolidating its facilities and optimize
its global plant utilization by shifting production between facilities to most
efficiently satisfy particular customer orders.
F-21
<PAGE> 132
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the year ended December 31,
1996, as though the Acquisitions and related financing had occurred at the
beginning of the year. In preparing this data, the financial data of Circo Craft
Co. Inc. for the period from January 1, 1996 to the date of the Circo Craft
Acquisition has been translated at an exchange rate of Cdn$1.36 = U.S.$1.00, the
exchange rate at September 30, 1996, which is not materially different from the
average exchange rate for the period.
<TABLE>
<S> <C>
Net sales............................... $470,820
Net income.............................. 283
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Business
The Company is primarily involved in manufacturing and distributing
advanced PCBs and assembling backpanels at various facilities located in the
United States, Canada and Puerto Rico. The Company's customers include a
diversified base of manufacturers in the telecommunications, computer and
automotive industries throughout North America.
Principles of Consolidation
The consolidated financial statements include the accounts of Viasystems
Group and its wholly-owned subsidiaries, Circo Craft Co. Inc. ("Circo Craft")
and Viasystems Technologies Corp. ("Viasystems Technologies"). All material
intercompany balances and transactions have been eliminated in consolidation.
Foreign Currency Translation
Local currencies have been designated as the functional currency for all
subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are
translated at the rates of exchange at the balance sheet date. Income and
expense items of these subsidiaries are translated at average monthly rates of
exchange. The resultant translation gains and losses are included as a component
of stockholders' equity on the consolidated balance sheet.
Inventories
Inventories are stated at the lower of cost (valued using the first-in,
first-out (FIFO) method) or market. Cost includes raw materials, labor and
manufacturing overhead.
Property, Plant, and Equipment
Property, plant, and equipment are recorded at cost. Repairs and
maintenance which do not extend the useful life of an asset are charged to
expense as incurred. The useful lives of leasehold improvements are the lesser
of the remaining lease term or the useful life of the improvement. Depreciation,
which amounted to $4,102 for the period from inception (August 28, 1996) to
December 31, 1996, is computed using the straight-line method over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Building.................................................... 40 years
Leasehold improvements...................................... 10-12 years
Machinery and equipment..................................... 3-8 years
</TABLE>
F-22
<PAGE> 133
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Deferred Financing Costs
Deferred financing costs, consisting of fees and other expenses associated
with debt financings are amortized over the term of the related debt using the
effective interest method.
Intangible Assets
Intangible assets consist primarily of identifiable intangibles acquired in
the Acquisitions and goodwill arising from the excess of cost over the fair
value of net assets acquired. The Company assesses the recoverability of its
intangible assets based on its current and anticipated future undiscounted cash
flows. In addition, the Company's policy for the recognition and measurement of
any impairment of goodwill is to assess the current and anticipated future
discounted cash flows associated with the goodwill. An impairment of goodwill
occurs when the discounted cash flows (excluding interest) do not exceed the
carrying amount of goodwill. The amount of the impairment loss is the difference
between the amount of the goodwill and the discounted cash flows associated with
the goodwill. At December 31, 1996 the Company does not believe there has been
any impairment of its identified intangible assets or goodwill. Amortization of
intangible assets is computed using systematic methods over the estimated useful
lives of the related assets as follows:
<TABLE>
<CAPTION>
LIFE METHOD
-------- ------------------------
<S> <C> <C>
Developed technologies................ 15 years Double-declining balance
Assembled workforce................... 1 year Straight-line
Customer list......................... 3 years Straight-line
Goodwill.............................. 20 years Straight-line
</TABLE>
Research and Development
Expenditures for research and development activities relating to new
products and processes are charged to expense as incurred.
Revenue Recognition
Sales and related costs of goods sold are included in income when goods are
delivered to the customer in accordance with the delivery terms.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The fair market values of the financial instruments included in the
consolidated financial statements approximate the carrying values of those
instruments.
Statement of Cash Flows
For purposes of the Consolidated Statement of Cash Flows, the Company
considers investments purchased with an original maturity of three months or
less to be cash equivalents. In connection with the Viasystems Technologies
Acquisition, the Company issued $30,000 of Series B Preferred Stock as non-cash
consideration and received $2,802 of property, plant, and equipment paid for by
Lucent Technologies Inc.
F-23
<PAGE> 134
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. INVENTORIES
Inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
Raw materials........................... $12,829
Work in progress........................ 16,796
Finished goods.......................... 13,498
-------
Total......................... $43,123
=======
</TABLE>
4. DEFERRED FINANCING COSTS
In connection with the debt and equity financing used to fund the
Acquisitions, the Company incurred aggregate fees and expenses related to the
Term Notes and Revolver (see Note 9). Such costs are included in deferred
financing costs and are being amortized over the terms of the related
borrowings. Costs related to the issuance of common and preferred stock have
been deducted from the proceeds to reduce the carrying value of the common
stock.
5. INTANGIBLE ASSETS
Intangible assets are amortized using systematic methods over various
estimated useful lives (see Note 2). The composition of intangible assets at
December 31, 1996 is as follows:
<TABLE>
<S> <C>
Developed technologies...................................... $21,185
Assembled workforce......................................... 10,980
Customer list............................................... 8,479
Goodwill.................................................... 7,809
-------
48,453
Less: Accumulated amortization.............................. (533)
-------
Total............................................. $47,920
=======
</TABLE>
Goodwill represents the purchase price in excess of net tangible and
identified intangible assets acquired in acquisitions.
6. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31, 1996 is as
follows:
<TABLE>
<S> <C>
Land and buildings.......................................... $ 52,480
Machinery and equipment..................................... 144,455
Construction in progress.................................... 12,533
Leasehold improvements...................................... 3,368
--------
212,836
Less: Accumulated depreciation.............................. (4,088)
--------
Total............................................. $208,748
========
</TABLE>
F-24
<PAGE> 135
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. ACCRUED AND OTHER LIABILITIES
The composition of accrued and other liabilities at December 31, 1996, is
as follows:
<TABLE>
<S> <C>
Accrued payroll and related costs........................... $12,069
Accrued consulting fees..................................... 3,777
Accrued lease termination costs............................. 2,848
Accrued and other liabilities............................... 23,418
-------
Total............................................. $42,112
=======
</TABLE>
8. COMMITMENTS
The Company leases certain building and transportation and other equipment
under capital and operating leases. Included in property, plant, and equipment
as of December 31, 1996, is $17,083 of cost basis and $380 of accumulated
depreciation related to equipment held under capital leases. Total rental
expense under operating leases was $255 for the period from inception (August
28, 1996) to December 31, 1996. Future minimum lease payments under capital
leases and operating leases that have initial or remaining noncancelable lease
terms in excess of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, CAPITAL OPERATING
- ------------ ------- ---------
<S> <C> <C> <C>
1997........................................................... $ 6,384 $ 609
1998........................................................... 5,714 558
1999........................................................... 5,196 508
2000........................................................... 2,018 508
2001........................................................... -- 508
Thereafter..................................................... -- --
------- ------
Total................................................ 19,312 $2,691
======
Less: Amounts representing interest............................ 2,047
-------
Capital lease obligation (see Note 9)................ $17,265
=======
</TABLE>
In connection with the Lucent Division Acquisition, the Company entered
into a supply agreement with Lucent Technologies Inc. ("Lucent Technologies")
under which Lucent Technologies agreed to purchase certain increasing minimum
annual volumes from the Company at defined prices (see Note 12). Such agreement
also provides the Company with specified remedies against Lucent Technologies in
the event Lucent Technologies does not purchase the minimum annual volumes set
forth in the agreement.
9. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The benefit for income taxes for the period from inception (August
28, 1996) to December 31, 1996 consisted of the following:
<TABLE>
<S> <C>
Current:
Federal............................... $ --
State................................. --
Foreign............................... 170
Deferred:
Federal............................... (5,698)
Foreign............................... 104
--------
$ (5,424)
========
</TABLE>
F-25
<PAGE> 136
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<S> <C>
U.S. Federal statutory rate............. $(18,416)
Permanent items......................... 15,680
State taxes............................. (3,250)
Foreign................................. 213
Other................................... 349
--------
$ (5,424)
========
</TABLE>
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DATES OF DECEMBER 31,
ACQUISITION 1996
----------- ------------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not yet deductible.................... $ 10,112 $ 10,112
Net operating loss carryforwards.......................... 237 1,037
Other..................................................... 278 186
-------- --------
10,627 11,335
Valuation Allowance.................................... (237) (260)
-------- --------
10,390 11,075
-------- --------
Deferred tax liabilities:
Intangibles............................................... (10,112) (5,418)
Fixed Assets.............................................. (3,673) (3,505)
Other..................................................... (287) (239)
-------- --------
(14,072) (9,162)
-------- --------
Net deferred tax asset (liability).......................... $ (3,682) $ 1,913
======== ========
</TABLE>
Approximate domestic and foreign income before income tax provision for the
period from inception (August 28, 1996) to December 31, 1996, are as follows:
<TABLE>
<S> <C>
Domestic................................ $(14,426)
Foreign................................. (39,740)
</TABLE>
As of December 31, 1996, the Company has $1,942 of U.S. net operating loss
carryforwards which will expire in 2011, if not previously utilized, and $5,794
of Puerto Rican net operating loss carryforwards which will expire in 2001-2003,
if not previously utilized. At December 31, 1996, the Company has included a net
current deferred tax asset of $5,698 in prepaid expenses and other assets.
10. LONG-TERM OBLIGATIONS
In connection with the Circo Craft Acquisition, the Company entered into a
credit agreement with a financial institution. This agreement was replaced when
Circo Craft and Viasystems Technologies entered into two credit agreements with
certain financial institutions dated as of November 26, 1996 (the "Circo Credit
Agreement" and the "Viasystems Technologies Credit Agreement", respectively, and
together, the "Credit Agreements"). Borrowings under the Credit Agreements are
collateralized by first priority mortgages and liens on substantially all of the
material assets of the Company and its subsidiaries.
The Circo Credit Agreement consists of a Cdn$86,750 (approximately
US$65,000) Canadian term loan (the "Canadian Term Loan") and a US$25,000 (or the
Canadian dollar equivalent)
F-26
<PAGE> 137
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
revolving credit facility (the "Circo Revolver"). The Viasystems Technologies
Credit Agreement consists of a $65,000 term loan (the "Term A Loan"), a $55,000
term loan (the "Term B Loan"), a $55,000 term loan (the "Term C Loan"), and a
$50,000 revolving credit facility (the "Viasystems Technologies Revolver"). The
Canadian Term Loan, the Term A Loan, the Term B Loan, and the Term C Loan are
together herein referred to as the Term Facilities. The Circo Revolver and the
Viasystems Technologies Revolver are together herein referred to as the
"Revolvers". The Revolvers provide that up to $15,000 of such facilities may be
used for the issuance of letters of credit. At December 31, 1996, the Company
had no outstanding letters of credit. At December 31, 1996, there was $73,765 of
unused borrowing capacity under the Revolvers. The Credit Agreements contain
several financial covenants which, among other things, require the Company to
maintain certain financial ratios, restrict the Company's ability to incur
additional indebtedness, and limit the amount of capital expenditures. A
commitment fee of .5% on the unused portion of the Revolvers is payable
quarterly.
Mandatory principal payments of the Term Facilities are due in semi-annual
installments. The final installments on the Term A Loan and Canadian Term Loan
are due on December 31, 2002 at which time the Revolvers are also due. The final
installment on the Term B Loan is due on June 30, 2004. The final installment on
the Term C Loan is due on June 30, 2005. Beginning in fiscal year 1997, the
Credit Agreements require annual prepayments of the Term Facilities based on
"Excess Cash Flow" (as defined).
Borrowings under the Term A Loan, the Canadian Term Loan, and United States
dollar borrowings under the Revolvers bear interest, at the option of the
Company, at a rate per annum equal to (a) the Alternate Base Rate (as defined in
the Credit Agreements) plus 1.5% or (b) the Eurodollar Rate (as defined in the
Credit Agreements) plus 2.5%. Canadian dollar borrowings under the Revolver bear
interest, at the option of the Company, at a rate per annum equal to (a) the
Alternate Base Rate plus 1.0% or (b) the Eurodollar Rate plus 2.0%. Borrowings
under the Term B Loan bear interest, at the option of the Company, at a rate per
annum equal to (a) the Alternate Base Rate plus 2.0% or (b) the Eurodollar Rate
plus 3.0%. Borrowings under the Term C Loan bear interest , at the option of the
Company, at a rate per annum equal to (a) the Alternate Base Rate plus 2.5% or
(b) the Eurodollar Rate plus 3.5%. The Alternate Base Rate and Eurodollar Rate
margins are established quarterly based on formulas as defined in the Credit
Agreements. Interest payment dates vary depending on the interest rate option to
which the Term Facilities and the Revolvers are tied, but generally interest is
payable quarterly. At December 31, 1996 the weighted average interest rate on
outstanding borrowings is 7.68%.
The composition of long-term obligations at December 31, 1996 is as
follows:
<TABLE>
<S> <C>
Credit Agreements:
Term Facilities........................................... $238,345
Revolvers................................................. 1,235
Capital lease obligations (see Note 7)...................... 17,265
Other....................................................... 8,775
--------
265,620
Less current maturities........................... (10,804)
--------
$254,816
========
</TABLE>
F-27
<PAGE> 138
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The schedule of principal payments for long-term obligations at December
31, 1996 is as follows:
<TABLE>
<S> <C>
1997........................................................ $ 10,804
1998........................................................ 16,568
1999........................................................ 24,182
2000........................................................ 25,866
2001........................................................ 33,187
Thereafter.................................................. 155,013
--------
$265,620
========
</TABLE>
11. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product development and other actions arising in the normal
course of business. In the opinion of the Company's management, the ultimate
liabilities resulting from such lawsuits and claims will not have a material
adverse effect on the Company's financial condition and results of operations.
The Company believes it is in material compliance with applicable
environmental laws and regulations and that its environmental controls are
adequate to address existing regulatory requirements.
12. STOCKHOLDERS' EQUITY
The authorized capital stock of Viasystems Group consists of 90 million
shares of common stock, 10 million shares of Class A common stock and 30 million
shares of preferred stock, of which 8,000,000 shares are designated as Series A
Preferred Stock and 6,000,000 shares are designated as Series B Preferred Stock.
All authorized capital stock has a par value of $.01.
On October 1 and November 26, 1996, Viasystems Group issued an aggregate of
67,949,754 shares of common stock for total proceeds of $67,950 and issued an
aggregate of 4,098,333 shares of Class A common stock for total proceeds of $41.
On November 26, 1996, holders of 37,949,750 shares of common stock exchanged
such shares for 1,517,990 shares of Series A Preferred Stock ("Series A
Preferred"), and Viasystems Group issued an additional 282,010 shares of Series
A Preferred for total proceeds of $7,050. On December 1, 1996, and in connection
with the Lucent Division Acquisition, Viasystems Group issued 1,200,000 shares
of Series B Preferred Stock ("Series B Preferred") to Lucent for total
consideration of $30,000 (see Note 1).
The Class A common stock may be converted into shares of common stock at
the option of the holder at any time. In addition, the Class A common stock may
be converted into common stock at the option of the Company upon the occurrence
of a Triggering Event (as defined) or automatically on September 30, 2006. Such
conversion is based on a formula set forth in Viasystems Group's Certificate of
Incorporation.
Dividends are payable to holders of the common stock and the Class A common
stock in amounts as and when declared by Viasystems Group's board of directors,
subject to legally available funds and certain agreements. The common stock and
Class A common stock are entitled to one vote per share on all matters submitted
to a vote of stockholders.
Dividends on the Series A Preferred are cumulative and are payable at an
annual rate of $2.00 per share per annum prior to November 30, 2004, $2.50 per
share per annum from November 30,
F-28
<PAGE> 139
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2004 to November 30, 2005, $3.00 per share per annum from November 30, 2005 to
November 30, 2006, and $3.50 per share per annum on and after November 30, 2006.
Dividends are payable quarterly on February 28, May 31, August 31 and November
30 in each year, commencing on February 28, 1997. The Company may, at its
option, pay quarterly dividends on the Series A Preferred, if the Credit
Agreement prohibits the payment of cash dividends, until but excluding November
30, 2001, by issuing additional shares of Series A Preferred. Series A Preferred
has no provision for mandatory redemption. At the Company's option, the Series A
Preferred is redeemable on or any time after November 30, 2001, at specified
redemption values which reduce over time together with accrued and unpaid
dividends to the date of redemption.
Dividends on the Series B Preferred are cumulative and are payable at an
annual rate of $2.00 per share per annum prior to November 30, 2004, $2.50 per
share per annum from November 30, 2004 to November 30, 2005, $3.00 per share per
annum from November 30, 2005 to November 30, 2006, and $3.50 per share per annum
on and after November 30, 2006. Dividends are payable quarterly on February 28,
May 31, August 31 and November 30 in each year, commencing on February 28, 1997.
The Company may, at its option, pay quarterly dividends on the Series B
Preferred, if the Credit Agreement prohibits the payment of cash dividends, by
issuing additional shares of Series B Preferred. Except in the case of a Change
in Control (as defined), the Series B Preferred have no provisions for mandatory
redemption. At the Company's option, the Series B Preferred is redeemable at any
time, at $25 per share, together with accrued and unpaid dividends to the date
of redemption.
13. CONCENTRATION OF BUSINESS
During the period from inception (August 28, 1996) to December 31, 1996,
three customers accounted for 27%, 18%, and 11% of the Company's revenues,
respectively.
14. RELATED PARTY TRANSACTIONS
In connection with the Acquisitions and the related financing, the Company
entered into a Monitoring and Oversight Agreement ("Agreement") with Hicks, Muse
& Co. Partners L.P. ("Hicks, Muse") (a shareholder and affiliate of the Company)
pursuant to which the Company paid Hicks, Muse a cash fee of $5,013 as
compensation for financial advisory services. The fees have been allocated to
acquisition costs and the debt and equity securities issued in connection with
the Acquisition as deferred financing costs. The Agreement further provides that
the Company shall pay Hicks, Muse an annual fee of $750 for ten years of
monitoring and oversight services adjusted annually at the end of each fiscal
year to an amount equal to .2% of the budgeted consolidated net sales of the
Company, but in no event less than $750 annually. The obligation under the
Agreement and the related deferred financing costs have been recorded in the
consolidated balance sheet and will be amortized over the life of the agreement.
The Company purchased $1,307 of connectors from Berg Electronics Corp. (an
affiliate of the Company).
15. STOCK OPTION PLANS
On February 4, 1997, the Company adopted the Viasystems Group, Inc. 1997
Stock Option Plan (the "Plan"), pursuant to which incentive and non-qualified
stock options, stock appreciation rights, stock awards, performance awards, and
stock units (vesting stock awards) may be issued. The aggregate number of shares
of common stock that may be subject to options grants or other
F-29
<PAGE> 140
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
awards under the Plan is 989,386. As of December 31, 1996, no shares of common
stock are reserved for issuance and no options or other awards have been
granted.
The Company has also granted performance options ("the Performance
Options") to certain key executives. The Performance Options are exercisable
only on the occurrence of certain events. The exercise price for the Performance
Options is initially equal to $1.00 per share and, effective each anniversary of
the grant date, the per share exercise price for the Performance Options is
equal to the per share exercise price for the prior year multiplied by 1.08. The
Performance Options terminate on the tenth anniversary date of the date of
grant. In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the Company calculated the amount of
compensation cost of the Performance Options and found such amount to be
immaterial.
16. RETIREMENT PLAN
The Company has a defined contribution retirement savings plan (the "Plan")
covering substantially all domestic employees who meet certain eligibility
requirements as to age and length of service. The Plan incorporates the salary
deferral provision of Section 401 (k) of the Internal Revenue Code and employees
may defer up to 15% of compensation or the annual maximum limit prescribed by
the Internal Revenue Code. The Company contributes 1% of employees salaries to
the Plan and matches a percentage of the employees' deferrals. The Company may
also elect to contribute an additional profit-sharing contribution to the Plan
at the end of each year. The Company's contributions to the Plan were $0 for the
period from inception (August 28, 1996) to December 31, 1996.
17. POSTEMPLOYMENT AND POSTRETIREMENT BENEFITS
The Company does not offer any postemployment or postretirement benefits.
18. SUBSEQUENT EVENTS
On April 2, 1997, Viasystems Group formed a new wholly-owned subsidiary,
Viasystems, Inc., to which it contributed all assets and liabilities.
On April 11, 1997, the Company, through Viasystems, Inc., acquired Forward
Group PLC ("Forward Acquisition"), a manufacturer of rigid printed circuit
boards located in the U.K. The purchase price of approximately $236,300
consisted of cash, notes payable to certain of the Forward Group PLC
stockholders, and assumed debt. The Forward Acquisition and the related
transaction fees and expenses were funded with (i) $40,000 from the issuance of
1,600,000 shares of Series C Preferred Stock of the Company and (ii) $216,000
from a Subordinated Credit Facility. The Subordinated Credit Facility was repaid
with a subsequent debt offering (see below).
In connection with the Forward Acquisition, Viasystems, Inc. entered into
an Amended and Restated Credit Agreement with terms substantially similar to the
Credit Agreements. The Amended and Restated Credit Agreement provided for a
U.K.L.32,000 (approximately US$51,500) Revolving Facility to Forward Group PLC.
On April 11, 1997, the Company made an optional prepayment of $20,000 under
its Term A Loan.
In April 1997, the Company's stockholders and certain of its affiliates
formed Chips Holdings, Inc., to acquire Interconnection Systems (Holdings)
Limited ("ISL"), a manufacturer of rigid printed circuit boards located in the
U.K. In connection with the transaction, the Company's stockholders invested
$140,000 of equity capital in Chips Holdings, Inc. On June 6, 1997, Chips
F-30
<PAGE> 141
VIASYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Holdings, Inc. became subsidiaries of Viasystems Group and the subsidiaries of
Chips Holdings, Inc., including ISL, merged into Viasystems, Inc. and certain of
its subsidiaries in consideration for the issuance of $140,000 of Company common
stock to the Company's stockholders and certain of its affiliates. Concurrently,
the Company's Series A and Series C preferred stockholders received 85 million
shares of the Company's common stock in exchange for preferred stock owned by
them. The Company assumed approximately $437,500 of notes payable which were
incurred by Chips Holdings, Inc. (the "Chips Loan Notes") to finance the ISL
acquisition.
The Chips Loan Notes mature on March 31, 2003 and bear interest, payable
quarterly, at approximately 6.22% per annum through April 1, 1998, with variable
rates thereafter discounted from the U.S. prime rate. The Chips Loan Notes may
be called by the holders on or after any interest payment date commencing April
1, 1998. The Chips Loan Notes are collateralized by letters of credit issued by
a bank. Such letters of credit are in turn collateralized in part by a fully
cash collateralized $118,300 reimbursement obligation of Bisto Funding, Inc., a
special purpose entity established as a subsidiary of the Viasystems Group in
connection with the acquisition of ISL, with the remainder, including interest
on the Chips Loan Notes for one year, collateralized by a reimbursement
obligation of Viasystems, Inc.
On June 5, 1997, Viasystems Group, as guarantor, and Viasystems, Inc. and
certain of its subsidiaries, as borrowers, entered into a Second Amended and
Restated Credit Agreement with terms substantially similar to the Credit
Agreements. The Second Amended and Restated Credit Agreement provided for a
U.K.L27,600 (approximately U.S.$44,400) Revolving Facility and a $319,250 term
loan facility to be drawn upon in the event the Chips Loan Notes are called. On
June 6, 1997, Viasystems, Inc. completed an offering of $400,000 of 9 3/4%
Senior Subordinated Notes due 2007 (the "Offering"). Viasystems, Inc. used the
net proceeds of the Offering to repay amounts totaling approximately $171,600
principal amount outstanding under the Second Amended and Restated Credit
Agreement, plus interest, and to repay the $216,000 principal amount outstanding
under the Subordinated Credit Facility, plus interest.
In June 1997, the authorized common stock of the Company increased to 423
million shares of common stock and 47 million shares of Class A common stock.
Additionally, 8 million shares of preferred stock were designated as Series C
Preferred Stock.
F-31
<PAGE> 142
AUDITORS' REPORT
To The Directors of Circo Craft Co. Inc.
We have audited the consolidated balance sheet of Circo Craft Co. Inc. as
at September 30, 1996 and the consolidated statements of earnings, retained
earnings and changes in financial position for the nine-month period then ended.
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the company as at September 30,
1996 and the results of its operations and the changes in its financial position
for the nine-month period then ended in accordance with generally accepted
accounting principles in Canada.
Coopers & Lybrand
General Partnership
Chartered Accountants
Montreal, Quebec
December 20, 1996
F-32
<PAGE> 143
AUDITORS' REPORT
To the Directors of Circo Craft Co. Inc.
We have audited the consolidated balance sheet of Circo Craft Co. Inc. as at
December 31, 1995, and the consolidated statements of earnings, retained
earnings and changes in financial position for each of the years in the two-year
period ended December 31, 1995. 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 generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at December 31, 1995
and the results of its operations and the changes in its financial position for
each of the years in the two-year period ended December 31, 1995, in accordance
with generally accepted accounting principles in Canada.
Deloitte & Touche
Chartered Accountants
Montreal, Quebec
February 1, 1996
F-33
<PAGE> 144
CIRCO CRAFT CO. INC.
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN CANADIAN DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Current assets
Cash and short-term deposits.............................. 19,231 28,438
Accounts receivable....................................... 33,992 26,406
Inventories (note 2)...................................... 16,202 15,802
Prepaid expenses.......................................... 665 973
------- -------
Total current assets.............................. 70,090 71,619
Fixed assets (note 3)....................................... 58,874 63,106
------- -------
Total assets...................................... 128,964 134,725
======= =======
LIABILITIES
Current liabilities
Bank indebtedness (note 4(d) and (e))..................... 1,501 2,173
Accounts payable and accrued liabilities.................. 21,540 22,343
Income taxes.............................................. 3,369 1,977
Current portion of long-term debt (note 4)................ 3,623 3,217
------- -------
Total current liabilities......................... 30,033 29,710
Long-term debt (note 4)..................................... 10,874 12,173
Deferred income taxes....................................... 4,086 5,136
Non-controlling interest (notes 5 and 6(d))................. 2,286 --
------- -------
Total liabilities................................. 47,279 47,019
------- -------
SHAREHOLDERS' EQUITY
Capital stock (note 6)...................................... 37,776 41,823
Retained earnings........................................... 43,909 45,883
------- -------
Total shareholders' equity........................ 81,685 87,706
------- -------
Total liabilities and shareholders' equity........ 128,964 134,725
======= =======
</TABLE>
F-34
<PAGE> 145
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH SIX MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
--------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1996
------ ------ ------------- ------------
(THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Balance -- Beginning of period.................. 25,832 32,216 43,909 43,909
Net earnings for the period................... 6,384 11,693 1,974 3,847
------ ------ ------ ------
Balance -- End of period........................ 32,216 43,909 45,883 47,756
====== ====== ====== ======
</TABLE>
F-35
<PAGE> 146
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH SIX MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
----------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1996
------- ------- ------------- ------------
(THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales......................................... 151,825 185,156 129,633 85,304
Cost of sales including amortization of
deferred
start-up costs (1994 -- $2,416; 1995 and
1996 -- nil)............................. 124,929 148,788 101,532 67,900
------- ------- ------- ------
Operating margin.............................. 26,896 36,368 28,101 17,404
------- ------- ------- ------
Selling, general and administrative
expenses.................................... 10,079 11,087 7,969 5,704
------- ------- ------- ------
Other expenses (income)
Depreciation of fixed assets................ 7,160 7,931 8,456 5,020
Interest on long-term debt.................. 515 852 646 393
Interest income............................. (195) (915) (880) (571)
Expenses related to sale (note 14).......... -- -- 5,907 --
------- ------- ------- ------
7,480 7,868 14,129 4,842
------- ------- ------- ------
Earnings before income taxes and non-
controlling interest........................ 9,337 17,413 6,003 6,858
Provision for income taxes (note 8)........... 2,719 5,564 3,847 2,934
------- ------- ------- ------
Earnings before non-controlling interest...... 6,618 11,849 2,156 3,924
Non-controlling interest...................... 234 156 182 77
------- ------- ------- ------
Net earnings for the period................... 6,384 11,693 1,974 3,847
======= ======= ======= ======
</TABLE>
F-36
<PAGE> 147
CIRCO CRAFT CO. INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(EXPRESSED IN CANADIAN DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH SIX MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
----------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1996
------- ------- ------------- ------------
(THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities
Net earnings for the period................. 6,384 11,693 1,974 3,847
Non-cash items --
Depreciation of fixed assets........... 7,160 7,931 8,456 5,020
Amortization of deferred start-up
costs............................... 2,416 -- -- --
Deferred income taxes.................. (450) 800 1,050 840
Gain on sale of fixed assets........... (87) (397) (716) (582)
Non-controlling interest............... 234 156 182 77
------- ------- ------- ------
15,657 20,183 10,946 9,202
Cash provided by (used for) non-
cash operating working capital items..... (9,866) 3,964 7,191 3,746
------- ------- ------- ------
5,791 24,147 18,137 12,948
------- ------- ------- ------
Financing activities
Increase in long-term debt.................. 11,126 3,537 4,186 2,224
Repayment of long-term debt................. (2,523) (2,624) (3,187) (2,325)
Decrease in non-controlling interest........ (81) -- (2,608) --
Issue of common shares...................... 1 8,827 4,047 --
------- ------- ------- ------
8,523 9,740 2,438 (101)
------- ------- ------- ------
Investing activities
Acquisition of fixed assets................. (6,679) (23,764) (13,058) (7,997)
Proceeds from sale of fixed assets.......... 573 922 1,018 782
------- ------- ------- ------
(6,106) (22,842) (12,040) (7,215)
------- ------- ------- ------
Increase in cash.............................. 8,208 11,045 8,535 5,632
Cash -- beginning of period................... (1,523) 6,685 17,730 17,730
------- ------- ------- ------
Cash -- end of period......................... 6,685 17,730 26,265 23,362
======= ======= ======= ======
Represented by --
Cash and short-term deposits........... 7,202 19,231 28,438 25,577
Bank indebtedness...................... (517) (1,501) (2,173) (2,215)
------- ------- ------- ------
6,685 17,730 26,265 23,362
======= ======= ======= ======
</TABLE>
F-37
<PAGE> 148
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN CANADIAN DOLLARS)
1. ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and include the following
significant accounting policies:
Principles of Consolidation
The consolidated financial statements include the accounts of the company
and its wholly-owned subsidiary, Circo Caribe Corporation ("Circo Caribe"). All
significant intercompany balances and transactions have been eliminated on
consolidation.
Inventories
Inventories are valued at the lower of cost and market. Cost is determined
using the first-in, first-out method for raw materials. The cost of work in
process inventories and finished goods includes the cost of raw materials,
direct labour and applicable manufacturing overhead, excluding depreciation.
Market is defined as replacement cost for raw materials, and as net realizable
value for work in process and finished goods.
Fixed Assets and Depreciation
Fixed assets are recorded at cost less applicable investment tax credits,
government grants and accumulated depreciation. Assets acquired under capital
leases are included in fixed assets. Depreciation is computed using the
straight-line method at the following annual rates:
<TABLE>
<S> <C>
Buildings................................................... 2 1/2%
Machinery and equipment..................................... 15% -- 33 1/3%
Leasehold improvements...................................... 10%
</TABLE>
Deferred Start-Up Costs
In conjunction with the out-of-court settlement described in note 7,
deferred start-up costs were fully amortized in 1994.
Revenue Recognition
Sales and related cost of sales are included in income when goods are
delivered to the customer in accordance with the delivery terms.
Foreign Currency
Foreign currency transactions and balances including those of Circo Caribe,
an integrated foreign subsidiary, are translated using the temporal method.
Under this method, monetary assets and liabilities are translated into Canadian
dollars at exchange rates in effect as at the balance sheet date and
non-monetary assets and liabilities at the exchange rates prevailing when the
assets were acquired and liabilities incurred. Sales and expenses, with the
exception of depreciation and amortization, are translated at average monthly
rates. Depreciation and amortization are translated at the rates used in the
translation of the relevant asset accounts. Translation gains and losses are
included in determining net earnings in the period in which the exchange rate
changes except for gains and losses on long-term debt, which are deferred and
amortized over the remaining life of the debt.
F-38
<PAGE> 149
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Income Taxes
The company follows the tax allocation method in providing for income
taxes. Deferred income taxes result primarily from the difference between
capital cost allowance claimed for income tax purposes and depreciation recorded
for accounting purposes.
Interim Financial Presentation
The unaudited condensed consolidated statements of earnings, retained
earnings, and changes in financial position for the six months ended June 30,
1996, do not include all of the information required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
2. INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials............................................... 7,467 7,164
Work in process............................................. 6,830 5,681
Finished goods.............................................. 1,905 2,957
------ ------
16,202 15,802
====== ======
</TABLE>
3. FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------
ACCUMULATED
COST DEPRECIATION NET
------- ------------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Land........................................................ 1,127 -- 1,127
Buildings................................................... 24,562 6,534 18,028
Machinery and equipment..................................... 91,265 52,630 38,635
Leasehold improvements...................................... 637 120 517
Deposits on machinery and equipment......................... 567 -- 567
------- ------ ------
118,158 59,284 58,874
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------
ACCUMULATED
COST DEPRECIATION NET
------- ------------ ------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Land........................................................ 1,127 -- 1,127
Buildings................................................... 26,685 7,513 19,172
Machinery and equipment..................................... 99,408 57,884 41,524
Leasehold improvements...................................... 853 179 674
Deposits on machinery and equipment......................... 609 -- 609
------- ------ ------
128,682 65,576 63,106
======= ====== ======
</TABLE>
F-39
<PAGE> 150
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Machinery and equipment under capital leases had a cost of $8,664,000 and
accumulated depreciation of $1,532,000 as at September 30, 1996 (December 31,
1995 -- $8,000,000 and $1,762,000 respectively).
4. LONG-TERM DEBT
(a) Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
CANADA
Term loan under the Canada-Quebec
Subsidiary Agreement on Industrial
Development, non-interest bearing,
repayable in five annual
installments beginning in December
2000............................... 2,962 4,068
Obligations under capital leases
bearing interest at rates varying
from 7.4% to 8.5% repayable in
monthly installments to November
2000............................... 1,789 2,674
Other................................. 675 1,307
PUERTO RICO
Term loan of U.S. $2,400,000 payable
in remaining quarterly installments
of U.S. $200,000, bearing interest
at 1 1/4% over the bank's cost of
"936" funds (8.25% as at September
30, 1996), as defined, through July
1999, collateralized by specific
fixed assets for an amount of Cdn.
$5,400,000......................... 4,095 3,272
Term loan of U.S. $1,646,000 payable
in fifty-nine monthly installments
of U.S. $21,000 plus interest at a
variable rate tied to LIBOR, as
defined (7.75% as at September 30,
1996), plus a balloon payment of
U.S. $771,000, due on April 2000,
collateralized by machinery and
equipment of the subsidiary........ 2,503 2,244
Obligations under capital leases of
U.S. $1,339,000, bearing interest
at rates varying from 7.70% to
7.98%, repayable in monthly
installments to September 1999..... 2,197 1,825
Other................................. 276 --
------ ------
14,497 15,390
Less: Current portion......... 3,623 3,217
------ ------
10,874 12,173
====== ======
</TABLE>
(b) The estimated fair value of the long-term debt, including the
obligations under capital leases, approximates $13,600,000 as at September 30,
1996, based on discounted cash flows using interest rates available to the
company for debts with similar terms and maturities.
F-40
<PAGE> 151
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(c) Principal repayments over the next five twelve-month periods ending
September 30 are as follows:
<TABLE>
<CAPTION>
OBLIGATIONS
UNDER TERM LOAN
CAPITAL LEASES AND OTHER
-------------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
1997....................................................... 2,002 1,721
1998....................................................... 1,086 1,892
1999....................................................... 1,213 1,813
2000....................................................... 538 1,396
2001....................................................... 357 814
-----
Minimum lease payments..................................... 5,196
Less: Amount representing interest....................... 697
-----
4,499
Less: Current portion.................................... 1,496
-----
3,003
=====
</TABLE>
(d) Pursuant to an agreement with a chartered bank, the company has credit
facilities available up to $22,500,000. Under this agreement, the $7,500,000
operating loan which forms part of the credit facilities bears interest at the
prime rate. Also, a revolving term loan of $15,000,000 is for a two-year period
extendible annually for up to two additional one-year periods to be followed by
a reducing loan with a term of up to three years. The interest rate on the
revolving term loan is prime plus 1/4%. As at September 30, 1996, the company
has drawn $307,000 on the operating loan facility. Accounts receivable and
inventories have been pledged as collateral for these borrowings.
(e) Circo Caribe entered into a line of credit agreement with a financial
institution which provides borrowings up to a maximum of U.S. $2,000,000. The
interest rate is prime plus 1%. As at September 30, 1996, Circo Caribe has used
$1,369,000 of the line of credit. Accounts receivable and inventories of Circo
Caribe have been pledged as collateral for these borrowings.
5. NON-CONTROLLING INTEREST
The Economic Development Bank for Puerto Rico (EDB) subscribed to 150,000
Class A Preferred shares of Circo Caribe (EDB shares) for a total amount of U.S.
$1,500,000. The EDB shares have a par value of U.S. $10 per share and carry a
cumulative preferential annual dividend of 7.5% on the par value thereof,
payable on a semi-annual basis. EDB shares carry no voting rights.
6. CAPITAL STOCK
(a) As at September 30, 1996 and December 31, 1995, the authorized capital
stock consists of the following in an unlimited number:
First Preferred shares, without nominal or par value, issuable in
series
Second Preferred shares, without nominal or par value, issuable in
series
Common shares, without nominal or par value
The directors are responsible for defining the rights, privileges,
restrictions and conditions attached to each series of the First and Second
Preferred shares upon their issuance.
F-41
<PAGE> 152
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(b) The issued and paid capital stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
16,069,300 (December 31, 1995 -- 15,435,200) common
shares................................................ 37,776 41,823
1,200,000 Second Preferred shares, Series A (note
6(c))................................................. -- --
156,000 Second Preferred shares, Series B (note 6(c))... -- --
2,556,000 Second Preferred shares, Series C (note
6(c))................................................. -- --
------ ------
37,776 41,823
====== ======
</TABLE>
(c) The company issued Second Preferred shares, Series A, B and C in
connection with the financial assistance amounting to $1,200,000 in 1986,
$78,000 in 1988, $78,000 in 1990, $852,000 in 1991, $852,000 in 1992 and
$852,000 in 1993, received from the Government of Quebec for costs incurred in
the installation of facilities. Such shares are non-voting and are entitled to
receive, as and when declared, an aggregate non-cumulative preferential dividend
of $1 and upon liquidation, to receive an aggregate amount of $1. The company
issued such shares for the purposes of such financial assistance and will
repurchase such shares at their issue price of $1 per share upon request of the
holder thereof if the majority of the common shares or more than half of the
assets of the company are transferred, within five years following the granting
of such financial assistance, to an enterprise whose head office is not located
in the Province of Quebec or to an individual who does not reside therein unless
prior approval is obtained from the holder of such Preferred shares. The
proceeds from these issues were deducted from the cost of certain fixed assets.
Subsequent to September 30, 1996, pursuant to an agreement with the
Government of Quebec, the company repurchased and cancelled all of the issued
Second Preferred shares, Series A, B and C for a total cash consideration of
$752,400. As at September 30, 1996, the company recorded a provision for the
share repurchase as an increase to the cost of certain fixed assets, which had
been previously reduced upon receiving the Government of Quebec grant.
(d) On September 28, 1996, the company issued 317,100 common shares to the
Economic Development Bank for Puerto Rico in exchange for the 150,000 Class A
Preferred shares it previously held in Circo Caribe. The value attributed to the
common shares issued corresponds to the redemption price of the shares of Circo
Caribe received, which was $2,044,950 (U.S. $1,500,000).
(e) In 1995, the company established a Key Employee Stock Option Plan (the
"Plan"). The maximum number of common shares that may be issued under the Plan
shall not exceed 1,250,000 common shares. In 1996, the company issued 317,000
common shares for a total cash consideration of $2,002,225 upon exercise of
options granted in 1995 and 1996 under this Plan. There were no outstanding
options as at September 30, 1996.
(f) In 1995, the company issued 1,349,799 common shares (201 in 1994) at a
price of $6.50 per share for the exercise of warrants.
(g) In 1994, under the terms of specific employment contracts, the company
granted options to two officers to purchase from treasury a maximum of 150,000
common shares. During 1995, 12,500
F-42
<PAGE> 153
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
options were exercised at a price of $4.24 per share. Following the resignation
of these officers in 1995, the balance of unvested options expired.
7. SALES
In January 1995, the company reached an out-of-court settlement with a
competitor for an amount of $10,528,000. This amount was received in January
1995 and was presented as other receivable as at December 31, 1994. Sales of
Circo Caribe in 1994 include an amount of $5,614,000 net of related expenses of
$4,914,000 in connection with the settlement.
8. INCOME TAXES
(a) The company's provision for income taxes includes the following:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED
-------------- SEPTEMBER 30,
1994 1995 1996
----- ----- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Current..................................................... 3,169 4,764 2,797
Deferred.................................................... (450) 800 1,050
----- ----- -----
2,719 5,564 3,847
===== ===== =====
</TABLE>
(b) The company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
% % %
----- ----- -----
<S> <C> <C> <C>
Combined basic federal and provincial income tax rate....... 45.09 45.09 45.09
Increase (decrease) in income tax rate resulting from:
Active business income deduction.......................... (7.35) (7.35) (7.35)
Manufacturing and processing deduction.................... (7.00) (7.00) (7.00)
Non-deductible expenses................................... -- -- 12.82
Surtax.................................................... 0.84 1.07 1.12
Other..................................................... (1.58) 1.19 2.07
----- ----- -----
Combined Canadian rates..................................... 30.00 33.00 46.75
Unrecognized (recognized) income tax benefits of Circo
Caribe.................................................... (0.90) (1.05) 17.33
----- ----- -----
29.10 31.95 64.08
===== ===== =====
</TABLE>
(c) Circo Caribe obtained a fifteen-year tax exemption grant under the 1987
Puerto Rico Tax Incentives Act. The grant expires in December 2011 and provides
a 90% exemption on industrial development income and property taxes.
9. MAJOR CUSTOMERS
Approximately 26%, 19%, and 10%, respectively (1995 -- 19%, 15%, 14%, and
11%; 1994 -- 25%, 21%, and 13%) of the company's sales were to three unrelated
multinational corporations (four in 1995) which have multiple divisions
responsible for their own purchasing decisions.
F-43
<PAGE> 154
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
10. COMMITMENTS
Capital expenditures committed as at September 30, 1996 amount to
approximately $1,135,000 (December 31, 1995 -- $3,602,000; December 31,
1994 -- $2,012,000).
Circo Caribe leases its manufacturing facilities in Puerto Rico under an
operating lease with the Puerto Rico Industrial Development Corporation which
expires on December 31, 2002. Future lease payments will aggregate U.S.
$3,048,000, including the following amounts, over the next five years:
<TABLE>
<CAPTION>
(THOUSANDS OF
U.S. DOLLARS)
-------------
<S> <C>
1997.................................... 508
1998.................................... 508
1999.................................... 508
2000.................................... 508
2001.................................... 508
</TABLE>
11. BUSINESS AND GEOGRAPHIC SEGMENT
The company's operations are concentrated in the manufacturing of printed
circuits, with facilities located in Canada and Puerto Rico selling to a
diversified base of manufacturers in the telecommunications, computer,
automotive, and industrial electronics markets throughout North America.
Information concerning the company's business by geographic segment is as
follows:
<TABLE>
<CAPTION>
CANADA PUERTO RICO CONSOLIDATED
--------------------------------- ---------------------------------- ---------------------------------
YEAR ENDED NINE MONTH YEAR ENDED NINE MONTH YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED DECEMBER 31, PERIOD ENDED DECEMBER 31, PERIOD ENDED
----------------- SEPTEMBER 30, ------------------ SEPTEMBER 30, ----------------- SEPTEMBER 30,
1994 1995 1996 1994 1995 1996 1994 1995 1996
------- ------- ------------- ------- ------- ------------- ------- ------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales to external
customers........... 127,497 155,326 109,756 24,328(1) 29,830 19,877 151,825 185,156 129,633
======= ======= ======= ====== ====== ======= ======= ======= =======
Inter-segment sales.. -- -- 678 2,619 7,211 775 -- -- --
======= ======= ======= ====== ====== ======= ======= ======= =======
Earnings (loss)
before income taxes
and non-controlling
interest............ 9,032 16,859 8,228 305(2) 554 (2,225) 9,337 17,413 6,003
======= ======= ======= ====== ====== ======= ======= ======= =======
Identifiable
assets............ 74,613 109,623 116,735 26,700 19,341 17,990 101,313 128,964 134,725
======= ======= ======= ====== ====== ======= ======= ======= =======
</TABLE>
- ---------------
(1) Sales of 1994 include a net amount of $5,614,000 in connection with an
out-of-court settlement.
(2) In conjunction with the out-of-court settlement described in note 7,
deferred start-up costs were fully amortized in 1994. Amortization in 1994
amounted to $2,416,000.
Export sales amounted to approximately 66% (1995 and 1994 -- 73%) of the
company's total sales to external customers.
12. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada ("Canadian GAAP"). In certain
respects, Canadian GAAP differs from accounting principles generally accepted in
the United States ("U.S. GAAP").
F-44
<PAGE> 155
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Net Earnings and Shareholders' Equity
(a) The following summary sets out the material adjustments to the
company's reported net earnings and shareholders' equity which would be made in
order to conform to U.S. GAAP:
<TABLE>
<CAPTION>
NINE MONTH
YEAR ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
----------------- -------------
1994 1995 1996
------- ------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Net earnings for the period under Canadian GAAP..... 6,384 11,693 1,974
U.S. GAAP adjustments:
Contingent gain (note 12(b))...................... (8,984) 8,984 --
Start-up costs (note 12(c))....................... 2,416 -- --
Translation gains and losses (note 12(d))......... (138) 241 (103)
Income taxes (note 12(e))......................... (104) (515) 167
------- ------- ------
Net earnings (loss) for the period under U.S.
GAAP.............................................. (426) 20,403 2,038
======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
--------------- --------------- ---------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Shareholders' equity under Canadian
GAAP................................. 61,165 81,685 87,706
U.S. GAAP adjustments:
Contingent gain (note 12(b))......... (8,984) -- --
Translation gains and losses (note
12(d))............................ (138) 103 --
Income taxes (note 12(e))............ 61 (454) (287)
------- ------- ------
Shareholders' equity under U.S. GAAP... 52,104 81,334 87,419
======= ======= ======
</TABLE>
(b) Under Canadian GAAP in effect before April 1, 1996, contingent gains,
when confirmed, were treated as prior period adjustments and the effect of the
change was applied retroactively to the years to which they relate. Under U.S.
GAAP, contingent gains are recorded in the year the uncertainty as to the
likelihood or amount is resolved. Accordingly, the out-of-court settlement of
$10,528,000 described in note 7 would have been recorded in earnings in 1995
under U.S. GAAP net of related expenses of $1,544,000.
(c) Under Canadian GAAP, start-up costs can be deferred and amortized over
a reasonable period of time. Under U.S. GAAP, no start-up costs would have been
deferred and the $2,416,000 amortized in 1994 would have been expensed when
incurred, in 1993.
(d) Under Canadian GAAP, translation gains and losses arising on the
translation, at exchange rates prevailing at the balance sheet date, of
long-term debt denominated in foreign currency are deferred and amortized over
the remaining life of the related debt. Under U.S. GAAP, such gains and losses
are included in the statement of earnings in the period in which the exchange
rate changes.
(e) Under Canadian GAAP, the company follows the tax allocation method in
providing for income taxes while under U.S. GAAP the liability method would be
used. Under this method, deferred income taxes are calculated on the difference
between accounting and tax values of the assets and liabilities. The current tax
rate is used to calculate deferred income taxes at the balance sheet date.
Deferred tax assets arising from losses and temporary differences are subject to
a valuation allowance whenever it is more likely that the assets will not be
realized.
F-45
<PAGE> 156
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
(f) Under Canadian GAAP, share issue costs can be shown as a reduction of
retained earnings. Under U.S. GAAP, these costs must be shown as a reduction of
the capital stock. Accordingly, issue costs amounting to $772,000 incurred in
prior years would have been shown as a reduction of the capital stock under U.S.
GAAP.
(g) Under Canadian GAAP, costs of providing life insurance and health care
benefits to employees after retirement are recognized as incurred while under
U.S. GAAP these costs are accrued during the employees' years of active service.
This difference in GAAP would not result in a material change to the company's
consolidated financial statements.
Cash flows
(h) Under U.S. GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH SIX MONTH
DECEMBER 31, PERIOD ENDED PERIOD ENDED
----------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1996
------ ------- ------------- ------------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Net cash provided by operating
activities........................ 5,653 24,388 18,034 12,920
Net cash provided by financing
activities........................ 5,737 9,300 1,222 (1,332)
Net cash used in investing
activities........................ (7,392) (21,790) (14,444) (15,228)
------ ------- ------- -------
Net increase (decrease) in cash..... 3,998 11,898 4,812 (3,640)
------ ------- ------- -------
Cash at the end of the period....... 4,702 16,600 21,412 12,960
====== ======= ======= =======
</TABLE>
(i) Canadian GAAP allows the disclosure of a subtotal of the amount of cash
provided by operating activities before cash provided by non-cash operating
working capital items. U.S. GAAP requires a statement of cash flows without
subtotal.
(j) Under U.S. GAAP, the definition of cash in the statement of cash flows
would exclude short-term deposits with original maturities of three months or
more and bank indebtedness which amounted to $8,000,000 and $3,147,000,
respectively as at September 30, 1996 (December 31, 1995 $3,500,000 and
$2,370,000, respectively; December 31, 1994 $2,500,000 and $517,000,
respectively). Under U.S. GAAP, changes in short-term deposits with original
maturities of three months or more would be disclosed as an investing activity
and changes in bank indebtedness would be disclosed as a financing activity.
(k) Machinery and equipment financed through capital leases are included as
financing and investing activities in the consolidated statement of changes in
financial position under Canadian GAAP but would be excluded from a statement of
cash flows under U.S. GAAP. New capital leases amounted to $2,096,000,
$2,052,000 and $1,214,000 for the nine-month period ended September 30, 1996 and
for the years ended December 31, 1995 and 1994 respectively.
F-46
<PAGE> 157
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Other disclosure
(l) The disclosure of the following amounts is required under U.S. GAAP:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTH
DECEMBER 31, PERIOD ENDED
-------------- SEPTEMBER 30,
1994 1995 1996
----- ----- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Research and development expenses.................... 3,325 4,159 3,495
Payments under operating leases...................... 717 795 799
Payments under capital leases........................ 636 975 1,713
Interest paid........................................ 730 1,025 631
Income taxes paid.................................... 3,614 4,115 3,931
</TABLE>
(m) The company maintains defined contribution pension plans for certain
key employees. The plan allows for employee contributions for a maximum of
$11,500, subject to certain legal limitations, of which the company contributes
100%. Under both U.S. GAAP and Canadian GAAP, company contributions are expensed
when incurred. The company's contributions for the nine-month period ended
September 30, 1996 were $105,000 (years ended December 31, 1995 and 1994 $88,000
and $44,000 respectively).
(n) As at September 30, 1996, accounts receivable included short-term loans
to certain key employees of the company for the exercise of stock options
amounting to $1,987,000 which were entirely repaid in the following days.
(o) The company does not maintain a significant allowance for doubtful
accounts receivable because most of its accounts receivable are covered by an
insurance policy.
(p) As at September 30, 1996, Circo Caribe had net operating loss
carryforwards of approximately U.S. $5,400,000 which expire from 2000 to 2003.
Deferred income tax assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Tax benefit of net operating loss carryforwards......... 137 331
Less: Valuation allowance............................... (137) (331)
---- ----
-- --
==== ====
</TABLE>
13. CONVERSION OF CANADIAN GAAP AMOUNTS TO U.S. GAAP AMOUNTS IN U.S. DOLLARS
(UNAUDITED)
The following table sets forth in Canadian dollars the historical statement
of earnings of the company for the nine-month period ended September 30, 1996,
on a historical basis and adjusts the amounts to U.S. GAAP in Canadian dollars.
The Canadian dollar amounts are then translated to U.S. dollars based on a
translation rate of Canadian $1.36 = U.S.$1.00. Such amounts are shown
translated to U.S. dollars for convenience purposes only.
F-47
<PAGE> 158
CIRCO CRAFT CO. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN CANADIAN DOLLARS)
Consolidated Statement of Earnings (unaudited)
<TABLE>
<CAPTION>
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996
---------------------------------------------------------------------------
CANADIAN U.S. GAAP TRANSLATION U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP RATE U.S. $
---------- ---------------- ------------ ----------- ---------
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Sales................................... 129,633 -- 129,633 1.36 95,318
Cost of sales........................... 101,532 -- 101,532 1.36 74,656
------- ------- ------- -------
Operating margin........................ 28,101 -- 28,101 1.36 20,662
------- ------- ------- -------
Selling, general and administrative
expenses.............................. 7,969 103 8,072 1.36 5,935
------- ------- ------- -------
Other expenses (income)
Depreciation of fixed assets.......... 8,456 -- 8,456 1.36 6,218
Interest on long-term debt............ 646 -- 646 1.36 475
Interest income....................... (880) -- (880) 1.36 (647)
Expenses related to sale.............. 5,907 -- 5,907 1.36 4,343
------- ------- ------- -------
14,129 -- 14,129 1.36 10,389
------- ------- ------- -------
Earnings before income taxes and
non-controlling interest.............. 6,003 (103) 5,900 1.36 4,338
Provision for income taxes.............. 3,847 (167) 3,680 1.36 2,706
------- ------- ------- -------
Earnings before non-controlling
interest.............................. 2,156 64 2,220 1.36 1,632
Non-controlling interest................ 182 -- 182 1.36 134
------- ------- ------- -------
Net earnings for the period............. 1,974 64 2,038 1.36 1,498
======= ======= ======= =======
</TABLE>
14. SUBSEQUENT EVENT
On October 1, 1996, the company was acquired and, effective November 8,
1996, was amalgamated with its new parent company, HMTF Canada Acquisition Inc.
under the provisions of Part IA of the Companies Act (Quebec). Combined
operations have continued under the name of Circo Craft Co. Inc.
F-48
<PAGE> 159
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Lucent Technologies, Inc.
Berkeley Heights, New Jersey
and
The Board of Directors
Viasystems Group, Inc.
St. Louis, Missouri:
We have audited the accompanying statements of net assets sold to
Viasystems Technologies Corp. ("Viasystems Technologies") of the Interconnection
Business (the "Business") of the Microelectronics Group, Interconnection
Technologies Unit of Lucent Technologies Inc. ("Lucent") as of December 31, 1995
and November 30, 1996 and the statements of operations for each of the two years
ended December 31, 1995 and for the period January 1, 1996 through November 30,
1996. These statements are the responsibility of Lucent's management. Our
responsibility is to express an opinion on these statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the net
assets of the Business sold to Viasystems Technologies and the results of
operations of the Business pursuant to the acquisition agreement described in
Note 1, and are not intended to be a complete presentation of the Business'
financial position or cash flows.
In our opinion, the accompanying financial statements referred to above
present fairly, in all material respects, the net assets of the Business sold to
Viasystems Technologies as of December 31, 1995 and November 30, 1996 and the
statements of operations of the Business for each of the two years ended
December 31, 1995, and for the period January 1, 1996 through November 30, 1996,
sold pursuant to the acquisition agreement referred to in Note 1, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 21, 1997
F-49
<PAGE> 160
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
STATEMENTS OF NET ASSETS SOLD
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Inventories................................................. $ 37,172 $ 42,039
Property and equipment, net of accumulated depreciation and
amortization.............................................. 86,403 97,684
-------- --------
Total assets sold................................. 123,575 139,723
-------- --------
LIABILITIES
Current portion of capital lease obligations................ 3,523 4,200
Capital lease obligations................................... 8,075 10,235
-------- --------
Total liabilities assumed............................ 11,598 14,435
-------- --------
Net assets sold................................... $111,977 $125,288
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-50
<PAGE> 161
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
YEAR ENDED JANUARY 1, 1996 JANUARY 1, 1996
DECEMBER 31, THROUGH THROUGH
------------------- NOVEMBER 30, JUNE 30,
1994 1995 1996 1996
-------- -------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................ $310,559 $325,047 $325,102 $171,299
Operating expenses:
Cost of goods sold..................... 238,623 274,824 244,313 129,897
Selling, general and administrative.... 30,399 35,246 27,567 16,466
Research and development............... 12,531 7,199 7,225 4,099
Depreciation and amortization.......... 16,111 16,378 18,317 10,527
-------- -------- -------- --------
Operating income (loss)........ 12,895 (8,600) 27,680 10,310
Other income (expenses):
Other income........................... 75 94 228 564
Interest expense....................... (5) (204) (917) (361)
-------- -------- -------- --------
Income (loss) before income
taxes........................ 12,965 (8,710) 26,991 10,513
Provision (benefit) for income taxes..... 4,927 (3,310) 10,257 4,205
-------- -------- -------- --------
Net income (loss).............. $ 8,038 $ (5,400) $ 16,734 $ 6,308
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-51
<PAGE> 162
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BACKGROUND AND BASIS OF PRESENTATION:
Pursuant to an Acquisition Agreement (the "Agreement") dated November 26,
1996, between Viasystems Technologies Corp. ("Viasystems Technologies"), a
wholly owned subsidiary of Viasystems Group, Inc., and Lucent Technologies, Inc.
("Lucent"), Viasystems Technologies agreed to acquire certain assets and assume
certain liabilities from the Microelectronics Group, Interconnection
Technologies Unit (the "Business") of Lucent in exchange for consideration
totaling $200,000. The Business designs, manufactures and markets printed
circuit boards, backpanels and related products and components for the
telecommunications and computer-related markets. The effective date of the
Agreement is December 1, 1996.
The Business' financial statements are derived from the historical books
and records of the Microelectronics Group, Interconnection Technologies Unit of
Lucent and present assets sold and liabilities assumed and the results of
operations of the Business related to the acquisition by Viasystems
Technologies. The historical operating results may not be indicative of the
results after the acquisition by Viasystems Technologies. No statement of cash
flows has been presented since any computation of historical cash flow data for
the Business would be based on arbitrary assumptions of the financial
information necessary to prepare such data and, in the opinion of management,
would not be meaningful.
The Business' financial statements include allocations of certain expenses
that have historically been accounted for by Lucent based on allocation methods
that depend on the nature of the account. For those costs that are labor
intensive, such as research and development, allocations are made based on
forecasted head count percentages. Most other costs are allocated based on
forecasted sales. Many of the marketing and sales costs are negotiated each year
between the department providing the service and the individual business unit.
The percentage of the negotiated cost of the business unit to the total
negotiated cost for that service is applied to the actual cost each month and
allocated to the individual business units. A portion of the operating expenses
are incurred at the Richmond Works location, particularly product management,
transportation and local research and development. These expenses are allocated
to the Business using estimates calculated by the department's manager. Some
transportation expense is based on specific service contracts when they can be
identified.
Allocated expenses include certain direct and indirect selling, marketing,
and research and development costs from the Microelectronics Group and services
from Lucent. Services from Lucent represent the allocated costs for services
such as employee benefits, human resources, labor relations, corporate tax and
business planning and overhead expenses, public relations, legal services,
environmental management, data processing and training.
Lucent's management believes that these allocations are based on
assumptions that are reasonable under the circumstances. However, these
allocations are not necessarily indicative of the costs and expenses that would
have resulted if the Business had been operated as a separate entity.
F-52
<PAGE> 163
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The allocations and other components of cost of sales and selling, general
and administrative expenses are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
PERIOD FROM JANUARY 1,
YEAR ENDED JANUARY 1, 1996 1996
JUNE 30, THROUGH THROUGH
------------------- NOVEMBER 30, JUNE 30,
1994 1995 1996 1996
-------- -------- --------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Allocated cost of sales....................... $ 8,019 $ 8,878 $ 6,004 $ 3,807
Other cost of sales........................... 230,604 265,946 238,309 126,090
-------- -------- -------- --------
$238,623 $274,824 $244,313 $129,897
======== ======== ======== ========
Allocated selling expense..................... $ 4,477 $ 6,226 $ 3,494 $ 2,248
Other selling expense......................... 3,312 3,823 2,472 1,460
Allocated general and administrative.......... 12,373 14,187 8,706 5,485
Other general and administrative.............. 10,237 11,010 12,895 7,273
-------- -------- -------- --------
$ 30,399 $ 35,246 $ 27,567 $ 16,466
======== ======== ======== ========
Allocated research and development............ $ 2,176 $ -- $ -- $ --
Other research and development................ 10,355 7,199 7,225 4,099
-------- -------- -------- --------
$ 12,531 $ 7,199 $ 7,225 $ 4,099
======== ======== ======== ========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the report period. Actual results could differ from those estimates.
B. REVENUE RECOGNITION: Sales and related costs of goods sold are included
in income when goods are shipped to the customer.
C. INVENTORIES: Inventories are stated at the lower of cost or market. Cost
is determined on a first-in, first-out method (FIFO).
D. PROPERTY AND EQUIPMENT: The Business' investment in property and
equipment is stated at cost. Depreciation is calculated on a double-declining
method over the estimated useful lives of the assets. Property and equipment are
written off of the books and records when fully depreciated. Maintenance and
repair expenditures are charged to operations and cost of major renewals and
improvements are capitalized. Gains or losses on sales and retirements are
reflected in income.
E. INCOME TAXES: The Business is not a separate taxable entity for federal,
state, or local income tax purposes. The Business' operations are included in
the consolidated Lucent tax returns. Lucent has historically allocated income
taxes to the Business using an assumed statutory tax rate in effect without
consideration to segregating current and deferred income taxes. In addition, the
statutory tax rate has not been reduced for research and development or other
tax credits, if any, as these amounts cannot be separately determined for the
Business. Accordingly, the provision for income taxes is based on an assumed
combined federal and state statutory rate of 38% for each year presented, but
current and deferred portions of the provision have not been determined.
F-53
<PAGE> 164
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
F. RESEARCH AND DEVELOPMENT COSTS: Research and development costs are
charged to expense when incurred.
G. INTERIM FINANCIAL PRESENTATION: The unaudited condensed statements of
net assets sold and operations as of and for the three months ended March 31,
1996, do not include all of the information required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
considered necessary for a fair presentation have been included.
3. INVENTORIES:
The components of inventories are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Finished goods.............................................. $14,890 $19,020
Work-in-process and raw materials........................... 22,282 23,019
------- -------
$37,172 $42,039
======= =======
</TABLE>
4. PROPERTY AND EQUIPMENT:
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
<S> <C> <C>
Land and improvements....................................... $ 4,219 $ 4,219
Buildings and improvements.................................. 40,247 40,429
Equipment................................................... 155,960 159,776
Tools, furniture and fixtures............................... 9,248 9,308
Leased equipment............................................ 12,366 18,390
-------- --------
222,040 232,122
Less accumulated depreciation and amortization.............. 147,331 147,408
-------- --------
74,709 84,714
Construction in progress.................................... 11,694 12,970
-------- --------
$ 86,403 $ 97,684
======== ========
</TABLE>
F-54
<PAGE> 165
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
5. CAPITAL LEASE OBLIGATION:
The Business entered into various equipment leases under an arrangement
which is accounted for as a capital lease. At December 31, 1995 and November 30
1996, the Business recorded equipment totaling $12,366 and $18,390,
respectively, acquired under capital leases. Accumulated amortization on such
equipment at December 31, 1995 and November 30, 1996 totaled $882 and $3,660,
respectively. Minimum future rental payments under all capital leases as of
December 1, 1996, are as follows:
<TABLE>
<S> <C>
1996 (one month)............................................ $ 423
1997........................................................ 5,077
1998........................................................ 4,917
1999........................................................ 4,314
2000........................................................ 1,479
-------
Total minimum lease payments...................... 16,210
Less -- Imputed interest.................................... (1,775)
-------
Present value of minimum lease payments............ 14,435
Current portion of obligations under capital leases......... 4,200
-------
$10,235
=======
</TABLE>
6. TRANSACTIONS WITH AFFILIATES:
The Business through the normal course of business, conducts transactions
with Lucent and its affiliates. In addition to the various allocated costs and
expenses described in Note 1, the majority of the Business' net sales is with
Lucent affiliated entities.
The Business' sales to Lucent and its affiliates were $277,288, $282,971
and $295,189 for the years ended December 31, 1994 and 1995, and for the period
January 1, 1996 through November 30, 1996, respectively.
The cost of sales related to the sales to Lucent and its affiliates were
$213,397, $239,624 and $232,276 for the years ended 1994 and 1995, and for the
period January 1, 1996 through November 30, 1996, respectively.
The Business purchases electric and electronic converters from Lucent's
affiliated entity, which was sold to Berg Electronics Corp. on May 22, 1994. The
Business's purchases were $9,713 for the period January 1, 1994 through May 22,
1994.
Receipts, disbursements and the net cash position of the Business have been
managed by the Microelectronics Group through a centralized treasury system.
Accordingly, both cash generated by and cash requirements of the Business flow
through the Microelectronics Group. There is no direct interest cost allocation
to the Business with respect to borrowings, if any, and, accordingly, the
Statements of Operations do not include any financing costs.
7. EMPLOYEE BENEFIT PLANS:
A. PENSION PLANS: The Business participates in noncontributory defined
benefit plans sponsored by Lucent covering substantially all employees. Benefits
for management employees are principally based on career average pay. Benefits
for occupational employees are not directly pay-
F-55
<PAGE> 166
MICROELECTRONICS GROUP, INTERCONNECTION TECHNOLOGIES UNIT
OF LUCENT TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
related. Information required pursuant to SFAS No. 87, Employer's Accounting for
Pensions, including the funded status of the plans is not available for the
Business as a separate entity.
Pension contributions are principally determined using the aggregate cost
method and are primarily made to trust funds held for the sole benefit of plan
participants. Pension cost is computed using the projected unit credit method
and an assumed long-term rate of return on plan assets of 9% in 1994, 1995 and
1996, respectively.
Based on the latest actuarial valuations of the Lucent plans, the fair
value of the net assets available for plan benefits exceeds the projected
benefit obligation at December 31, 1995. The projected benefit obligation was
determined using weighted average discount rates of 7% for December 31, 1995,
and an assumed rate of increase in future compensation levels of 5%. Plan assets
consist primarily of listed stocks (including Lucent common stock), corporate
and governmental debt, real estate investments, and cash and cash equivalents.
B. SAVINGS PLANS: The Business participates in savings plans sponsored by
Lucent covering the majority of employees. The plans allow employees to
contribute a portion of their pre-tax and/or after-tax income in accordance with
specified guidelines. Lucent matches a percentage of the employee contributions
up to certain limits.
C. POSTRETIREMENT BENEFIT PLANS: The Business participates in benefit plans
for retirees, which include health care benefits, life insurance coverage and
telephone concessions sponsored by Lucent. Lucent adopted SFAS No. 106,
Employers' Accounting for Postretirement Benefits Other than Pensions, effective
January 1, 1993. This Standard requires that estimated future retiree benefits
be accrued for during the years the employees are working and accumulating these
benefits. Information required pursuant to SFAS No. 106, including the net
periodic postretirement benefit cost and information on the funded status of the
plan, is not available for the Business as a separate entity.
At December 31, 1995 the accumulated postretirement benefit obligation,
exceeded the plan assets at fair value. The postretirement benefit obligation
was determined using a weighted average discount rate of 7.0%, an expected
long-term rate of return on plan assets of 9.0% and assumed a rate of increase
in the per capita cost of covered healthcare benefits of 6.1%.
Plan assets consist primarily of listed stocks, corporate and governmental
debt, cash and cash equivalents and life insurance contracts.
The costs of these plans were allocated to the Business on the basis of
salaries, the majority of which are included in cost of sales. Benefit costs
included in cost of sales were approximately $6,600, $7,300 and $6,200 for the
years ended December 31, 1994 and 1995, and for the period January 1, 1996
through November 30, 1996, respectively.
8. COMMITMENTS:
In conjunction with the Agreement, Lucent and Viasystems Technologies have
entered into certain contractual arrangements whereby Lucent has agreed to
provide to Viasystems Technologies manufacturing, labor and support services.
Lucent and Viasystems Technologies have also entered into a supply agreement
effective through December 31, 2001, which shall extend through December 31,
2003 in the event Viasystems Technologies has in all material respects satisfied
the Performance Metrics (as defined) of the supply agreement. Such agreement
shall continue thereafter until terminated by either party upon eighteen months
prior written notice.
F-56
<PAGE> 167
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Forward Group PLC
We have audited the accompanying consolidated balance sheets of Forward
Group PLC and its subsidiaries at 31 January 1996 and 1997 and the related
consolidated profit and loss accounts and cash flow statements for each of the
years in the three-year period ended 31 January 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom and the United States of America. 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 assessing the 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 aforementioned consolidated financial statements
present fairly, in all material respects, the financial position of Forward
Group PLC and its subsidiaries at 31 January 1996 and 1997 and the results of
their operations and their cash flows for each of the years in the three-year
period ended 31 January 1997 in conformity with generally accepted accounting
principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in
certain significant respects from generally accepted accounting principles in
the United States of America. Application of generally accepted accounting
principles in the United States of America would have affected the profit for
the financial year for each of the years in the three-year period ended 31
January 1997 and equity shareholders' funds at 31 January 1996 and 1997 to the
extent summarised in Note 25 to the consolidated financial statements.
KPMG Audit Plc
Chartered Accountants
Birmingham, England
7 April 1997
F-57
<PAGE> 168
FORWARD GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SIX THREE
MONTHS MONTHS
YEARS ENDED 31 JANUARY ENDED ENDED
------------------------- JUNE 30, MARCH 31,
1995 1996 1997 1996 1997
NOTE (L000) (L000) (L000) (L000) (L000)
---- ------ ------ ------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Turnover
Continuing operations.......................... 2 21,471 66,839 97,001 49,199 25,287
Acquisitions................................... 2 -- -- 8,028 700 --
Discontinued operations........................ 2 2,348 -- -- -- --
------ ------ ------- ------ ------
23,819 66,839 105,029 49,899 25,287
------ ------ ------- ------ ------
Operating profit
Continuing operations.......................... 3 2,154 7,976 8,079 7,247 2,853
Acquisitions................................... 3 -- -- 1,022 49 --
Discontinued operations........................ 3 291 -- -- -- --
------ ------ ------- ------ ------
2,445 7,976 9,101 7,296 2,853
Profit on disposal of discontinued
operations................................... 11 1,503 -- -- -- --
Expenses related to sale....................... -- -- -- -- (1,318)
Net interest payable........................... 5 (228) (412) (996) (354) (381)
------ ------ ------- ------ ------
Profit on ordinary activities before taxation.... 6 3,720 7,564 8,105 6,942 1,154
Tax on profit on ordinary activities............. 8 (744) (2,641) (2,707) (2,291) (833)
------ ------ ------- ------ ------
Profit for the financial period.................. 2,976 4,923 5,398 4,651 321
Dividends........................................ 9 (494) (1,089) (552) -- --
------ ------ ------- ------ ------
Retained profit for the financial period......... 18 2,482 3,834 4,846 4,651 321
====== ====== ======= ====== ======
</TABLE>
The results on a historical cost basis are not materially different to
those reported above.
A reconciliation of the movement in shareholders' funds is shown in note
19.
F-58
<PAGE> 169
FORWARD GROUP PLC
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEARS ENDED 31 JANUARY ENDED ENDED
------------------------ JUNE 30, MARCH 31,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
------ ------ ------ ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Profit for the financial period............. 2,976 4,923 5,398 4,651 321
Currency translation adjustment............. -- -- (22) -- 5
----- ----- ----- ----- ---
2,976 4,923 5,376 4,651 326
===== ===== ===== ===== ===
</TABLE>
F-59
<PAGE> 170
FORWARD GROUP PLC
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
31 JANUARY
------------------ 31 MARCH
1996 1997 1997
NOTE (L000) (L000) (L000)
---- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fixed assets
Tangible assets................................. 10 27,028 36,407 36,707
Current assets
Stocks.......................................... 12 5,476 6,586 7,285
Debtors......................................... 13 17,831 17,289 19,729
Cash at bank and in hand........................ 789 -- --
------- ------- -------
24,096 23,875 27,014
Creditors: amounts falling due within one year.... 14 (22,198) (26,949) (30,624)
------- ------- -------
Net current assets/(liabilities).................. 1,898 (3,074) (3,610)
------- ------- -------
Total assets less current liabilities............. 28,926 33,333 33,097
Creditors: amounts falling due after more than one
year............................................ 15 (5,698) (6,574) (6,417)
Provisions for liabilities and charges............ 16 (2,723) (2,616) (2,616)
------- ------- -------
Net assets........................................ 20,505 24,143 24,064
======= ======= =======
Capital and reserves
Called up share capital......................... 17 679 2,754 2,762
Shares to be issued............................. 17 3 -- --
Share premium account........................... 18 8,840 6,837 6,908
Merger reserve.................................. 18 65 -- --
Revaluation reserve............................. 18 578 566 564
Profit and loss account......................... 18 10,340 13,986 13,830
------- ------- -------
Equity shareholders' funds........................ 20,505 24,143 24,064
======= ======= =======
</TABLE>
F-60
<PAGE> 171
FORWARD GROUP PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEARS ENDED 31 JANUARY ENDED ENDED
---------------------------- JUNE 30, MARCH 31,
1995 1996 1997 1996 1997
NOTE (L000) (L000) (L000) (L000) (L000)
---- ------ ------- ------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net cash inflow from
operating activities....... 20a 2,722 10,667 18,561 7,362 3,173
Returns on investments and
servicing of finance
Interest received.......... 4 61 85 50 8
Interest paid.............. (257) (464) (1,018) (392) (332)
Dividends paid............. (453) (722) (1,207) (435) (552)
------ ------- ------- ------- -------
Net cash outflow from returns
on investments and
servicing of finance....... (706) (1,125) (2,140) (777) (876)
UK tax paid.................. (568) (1,670) (3,633) (109) (162)
Investing activities
Purchase of tangible fixed
assets.................. 20f (2,120) (4,153) (7,624) (4,060) (488)
Acquisition of businesses
(net of cash and cash
equivalents acquired)... 20d -- (8,191) (9,184) (9,184) --
Sale of tangible fixed
assets.................. 151 299 435 -- --
Disposal of business (net
of cash and cash
equivalents disposed
of)..................... 20e 2,490 -- -- -- --
------ ------- ------- ------- -------
Net cash inflow/(outflow)
from investing
activities................. 521 (12,045) (16,373) (13,244) (488)
------ ------- ------- ------- -------
Net cash inflow/(outflow)
before financing........... 1,969 (4,173) (3,585) (6,768) 1,647
Financing
Issue of Ordinary share
capital................. 10 7,550 92 -- 78
Capitalisation issue
expenses................ -- -- (24) -- --
Repayment of bank loan..... -- (790) (720) (360) (180)
Capital element of hire
purchase and finance
lease payments.......... (669) (1,170) (2,393) (927) (734)
Payment of contingent
consideration........... (220) -- -- -- --
------ ------- ------- ------- -------
Net cash (outflow)/inflow
from financing............. 20b (879) 5,590 (3,045) (1,287) (836)
------ ------- ------- ------- -------
Net increase/(decrease) in
cash and cash equivalents.. 20c 1,090 1,417 (6,630) (8,055) 811
====== ======= ======= ======= =======
</TABLE>
F-61
<PAGE> 172
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN BRITISH POUNDS STERLING)
1. GENERAL
As used in the consolidated financial statements and related notes, the
term "Company" refers to Forward Group PLC and the term "Group" refers to
Forward Group PLC and its subsidiary undertakings as set out in note 24.
PRINCIPAL ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered material in relation to the consolidated
financial statements of Forward Group PLC:
Basis of preparation
The consolidated financial statements have been prepared under the
historical cost convention, modified to include the revaluation of certain
freehold property, and in accordance with applicable Accounting Standards.
Basis of consolidation
The consolidated financial statements incorporate the financial statements
of Forward Group PLC and all of its subsidiary undertakings made up to 31
January 1997 under the acquisition method of accounting. The results of
companies or businesses acquired or disposed of during the year are included
from the date of acquisition or up to the date of disposal. Internal sales and
profits are eliminated on consolidation. Goodwill arising on acquisitions is
written off directly against reserves on acquisition. Goodwill previously
written off to reserves in respect of businesses disposed of during the year is
included in the calculation of any profit or loss on sale.
Turnover
Turnover represents the amounts (excluding value added tax) derived from
the provision of goods to third party customers and is recognized when goods are
shipped and title has passed.
Government revenue grants
Government revenue grants are recognised in the profit and loss account in
the period during which the expenditure to which they relate is incurred.
Stocks and work in progress
Stocks and work in progress are valued on a first in, first out basis at
the lower of cost and net realisable value. Cost comprises materials, labour and
an appropriate proportion of production overheads.
F-62
<PAGE> 173
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Depreciation
Depreciation is provided so as to write off the cost or valuation,
including commissioning costs, of tangible fixed assets to their estimated
residual value on a straight line basis, at the following annual rates:
<TABLE>
<S> <C>
Freehold buildings.......................................... 2.5%
Plant and machinery......................................... 10% -- 20%
Fixtures, fittings, tools and equipment..................... 10% -- 25%
Motor vehicles.............................................. 25%
</TABLE>
Freehold land is not depreciated.
Research and development
Expenditure on research and development is expensed in the year in which it
is incurred.
Deferred taxation
Deferred taxation is provided using the liability method in respect of the
taxation effect of all timing differences to the extent that it is probable that
liabilities will crystallise or assets be realised in the foreseeable future.
Hire purchase and leased assets
Assets held under hire purchase or finance lease contracts are capitalised
and included in tangible fixed assets at their fair value. Each asset is
depreciated over the shorter of the contract term or its estimated useful life.
Obligations relating to such contracts, net of finance charges in respect of
future periods, are included as appropriate under creditors. Finance charges are
allocated to accounting periods over the period of the lease to produce a
constant rate of return on the outstanding balance. Rentals under operating
leases are charged to the profit and loss account on a straight-line basis over
the life of the lease.
Pensions
The Group operates both a defined contribution pension scheme and a defined
benefit pension scheme. The Group's contributions to the defined contribution
scheme are charged against profits on an accruals basis in the year to which
they relate. Contributions to the defined benefit scheme are charged against
profits so as to spread the cost of pensions over employees' working lives. The
funds of both schemes are administered by trustees and are independent of the
Group's finances.
Foreign exchange
Transactions denominated in foreign currencies are translated at the rate
of exchange ruling on the day the transaction occurs or at the contracted rate
if the transaction is covered by a forward exchange contract.
Foreign currency monetary assets and liabilities in the balance sheet are
translated into sterling at the rates of exchange ruling at the end of the year
or, if appropriate, at the forward contract rate. Any resulting exchange gains
or losses are taken to the profit and loss account.
The assets and liabilities of overseas subsidiary undertakings are
translated at the closing exchange rate. The profit and loss accounts of those
undertakings are translated using the average
F-63
<PAGE> 174
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
rate of exchange during the year. Net exchange differences arising on
translation are taken to reserves.
2. SEGMENTAL ANALYSIS
Turnover is analysed by geographical destination as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ -------
<S> <C> <C> <C>
United Kingdom........................................ 22,569 40,263 55,848
Rest of Europe........................................ 1,250 25,200 42,364
Rest of the world..................................... -- 1,376 6,817
------ ------ -------
23,819 66,839 105,029
====== ====== =======
</TABLE>
The Group's turnover, profit before taxation and net assets now relate to
only one business segment, the electronics division. In 1995 the amounts shown
in the consolidated profit and loss account as discontinued operations for
turnover and operating profit related to a former specialist chemicals division.
In the opinion of the Directors an analysis of turnover, profit before
taxation and net assets by geographical area of operation would be seriously
prejudicial to the interests of the Group and therefore as permitted under
SSAP25 no disclosure is made.
3. OPERATING PROFIT
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
OPERATIONS OPERATIONS TOTAL
1995 (L000) (L000) (L000)
---- ---------- ------------ -------
<S> <C> <C> <C>
Turnover.......................................... 21,471 2,348 23,819
Cost of sales..................................... (16,907) (1,112) (18,019)
------- ------ -------
Gross profit...................................... 4,564 1,236 5,800
Selling, general and administrative expenses...... (2,462) (945) (3,407)
Other income...................................... 52 -- 52
------- ------ -------
Operating profit.................................. 2,154 291 2,445
======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
CONTINUING
OPERATIONS
1996 (L000)
---- ----------
<S> <C>
Turnover.................................................... 66,839
Cost of sales............................................... (52,251)
-------
Gross profit................................................ 14,588
Selling, general and administrative expenses................ (6,725)
Other income................................................ 113
-------
Operating profit............................................ 7,976
=======
</TABLE>
F-64
<PAGE> 175
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
CONTINUING
OPERATIONS ACQUISITIONS TOTAL
1997 (L000) (L000) (L000)
---- ---------- ------------ -------
<S> <C> <C> <C>
Turnover......................................... 97,001 8,028 105,029
Cost of sales.................................... (78,339) (5,916) (84,255)
------- ------ -------
Gross profit..................................... 18,662 2,112 20,774
Selling, general and administrative expenses..... (10,780) (1,122) (11,902)
Other income..................................... 197 32 229
------- ------ -------
Operating profit................................. 8,079 1,022 9,101
======= ====== =======
</TABLE>
Included in the above for 1997 are the following exceptional charges
relating to the restructuring of continuing operations and acquired businesses:
<TABLE>
<CAPTION>
CONTINUING
OPERATIONS ACQUISITIONS TOTAL
(L000) (L000) (L000)
---------- ------------ ------
<S> <C> <C> <C>
Cost of sales........................................ 546 433 979
Selling, general and administrative expenses......... 168 97 265
--- --- -----
714 530 1,244
=== === =====
</TABLE>
Acquisitions in 1997 comprise the former GEC-Marconi hybrid business,
Manchester Circuits Limited and TI Technologies (Pty) Limited.
Discontinued operations comprise the specialist chemicals business disposed
of on 16 December 1994.
4. STAFF NUMBERS AND COSTS
The average number of persons employed by the Group (including executive
Directors) during the year, analysed by category, was as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ----- -----
<S> <C> <C> <C>
Sales....................................................... 22 32 51
Administration.............................................. 38 49 80
Production.................................................. 398 933 1,642
--- ----- -----
458 1,014 1,773
=== ===== =====
Employees at end of year.................................... 435 1,454 1,874
--- ----- -----
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Wages and salaries....................................... 6,647 18,215 30,503
Social security costs.................................... 662 1,755 2,916
Other pension costs...................................... 212 745 1,239
----- ------ ------
7,521 20,715 34,658
===== ====== ======
</TABLE>
F-65
<PAGE> 176
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
5. NET INTEREST PAYABLE
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Bank loan and overdrafts................................... 152 216 609
Hire purchase and finance lease contracts.................. 80 257 472
--- --- -----
Interest payable and similar charges....................... 232 473 1,081
Interest receivable and similar income..................... (4) (61) (85)
--- --- -----
228 412 996
=== === =====
</TABLE>
6. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit on ordinary activities before taxation is stated after
charging/(crediting):
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Directors' emoluments (see note 7):
As Directors............................................. 35 33 86
Remuneration as executives............................... 222 333 333
--- --- ---
257 366 419
Compensation for loss of office.......................... -- 81 --
Grants receivable.......................................... (15) (21) (19)
Property rental income..................................... (37) (88) (87)
Auditors' remuneration..................................... 40 75 84
Research and development expenditure....................... 245 507 764
Payments under operating leases:
Plant and equipment...................................... 22 113 245
Other assets............................................. 210 187 324
=== === ===
</TABLE>
In addition, KPMG Audit Plc and its associates received L97,000 (1996:
L91,000; 1995: L22,000) in respect of other services provided during the year.
7. DIRECTORS' EMOLUMENTS
(a) Remuneration
The emoluments of the Chairman, excluding pension contributions, were
L97,000 (1996: L95,000; 1995: L74,000). The emoluments of the highest paid
Director, excluding pension contributions, were L136,000. In 1995 and 1996 the
Chairman was also the highest paid director.
F-66
<PAGE> 177
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The emoluments of the Directors, excluding pension contributions, were
within the following ranges:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
L5,001 - L10,000.................................. -- 1 --
L10,001 - L15,000.................................. -- 2 --
L15,001 - L20,000.................................. 2 -- 1
L20,001 - L25,000.................................. -- -- 1
L25,001 - L30,000.................................. -- 2 --
L40,001 - L45,000.................................. -- -- 1
L55,001 - L60,000.................................. 1 -- --
L60,001 - L65,000.................................. 1 -- --
L70,001 - L75,000.................................. 1 1 --
L75,001 - L80,000.................................. -- 1 --
L95,001 - L100,000................................. -- 1 1
L100,001 - L105,000................................. -- -- 1
L135,001 - L140,000................................. -- -- 1
== == ==
</TABLE>
(b) Share options over Ordinary shares
<TABLE>
<CAPTION>
AT NUMBER OF OPTIONS AT
1 FEBRUARY -------------------- 31 JANUARY EXERCISE NORMAL
1996 GRANTED EXERCISED 1997 PRICE EXERCISE PERIOD
----------- ------- --------- ----------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
DA Bumpsteed......... 100,000 -- -- 100,000 88.75p 06.07.98 - 05.07.05
=======
MJ Glanfield......... 80,000 -- (80,000) -- 56.25p 31.05.96 - 30.05.03
20,000 -- -- 20,000 61.75p 24.02.98 - 23.02.05
-- 20,000 -- 20,000 180p 13.02.99 - 12.02.06
-------
40,000
=======
</TABLE>
The figures shown as at 1 February 1996 have been restated to reflect the 3
for 1 capitalisation issue.
The closing price of the Company's Ordinary shares on the London Stock
Exchange on 31 January 1997 was 171.5p. The range during the period was 103.5p
to 289.5p.
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
The charge for taxation all arises in
the UK and comprises:
Corporation tax on profit for the year
at 33% (1996: 33%; 1995: 33%)......... 603 2,486 2,556
Deferred taxation....................... 141 202 439
Prior year adjustments in respect of:
Corporation tax....................... -- (111) (281)
Deferred taxation..................... -- 64 (7)
--- ------ ------
744 2,641 2,707
=== ====== ======
</TABLE>
The 1997 current year charge includes the effect of tax losses which have
not been relieved.
F-67
<PAGE> 178
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
In 1995 no tax charge arose on the sale of the specialist chemicals
business.
9. DIVIDENDS
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Interim dividend paid................... 206 434 552
Proposed final dividend................. 288 655 --
--- ------ ---
494 1,089 552
=== ====== ===
</TABLE>
10. TANGIBLE ASSETS
<TABLE>
<CAPTION>
FREEHOLD LAND AND
BUILDINGS FIXTURES,
------------------ PLANT FITTINGS,
AT AT AND TOOLS AND MOTOR
VALUATION COST MACHINERY EQUIPMENT VEHICLES TOTAL
(L000) (L000) (L000) (L000) (L000) (L000)
--------- ------ --------- --------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Cost or valuation
At beginning of year.................. 1,400 5,277 26,594 1,347 717 35,335
Additions............................. -- 890 9,430 1,130 391 11,841
Transfers............................. -- -- 295 (315) 20 --
Acquisitions of businesses............ -- 710 1,644 84 85 2,523
Disposals............................. -- (4) (279) (108) (322) (713)
Translation adjustment................ -- -- (18) (1) -- (19)
----- ------ ------ ----- ---- ------
At end of year........................ 1,400 6,873 37,666 2,137 891 48,967
===== ====== ====== ===== ==== ======
Depreciation
At beginning of year.................. 195 247 7,073 540 252 8,307
Charged in year....................... 32 128 4,086 237 211 4,694
Transfers............................. -- -- 68 (68) -- --
Disposals............................. -- (1) (238) (25) (183) (447)
Translation adjustment................ -- -- 5 1 -- 6
----- ------ ------ ----- ---- ------
At end of year........................ 227 374 10,994 685 280 12,560
----- ------ ------ ----- ---- ------
Net book value
At end of year........................ 1,173 6,499 26,672 1,452 611 36,407
===== ====== ====== ===== ==== ======
At beginning of year.................. 1,205 5,030 19,521 807 465 27,028
===== ====== ====== ===== ==== ======
</TABLE>
On 25 January 1990 the freehold property then owned at Tamworth was valued
at open market value on the basis of existing use at L1,400,000. The historical
cost of tangible fixed assets included at a valuation at the end of the year was
L874,000 (1996: L874,000). Accumulated historical cost depreciation was L258,000
(1996: L246,000).
The net book value of Group tangible fixed assets includes L10,412,000
(1996: L7,302,000) in respect of assets held under hire purchase or finance
lease contracts, after charging depreciation for the year of L1,286,000 (1996:
L538,000) and L1,439,000 (1996: L1,439,000) of freehold land which is not
depreciated.
Plant and machinery includes L1,143,000 (1996: L992,000) of assets which
are under the course of construction.
F-68
<PAGE> 179
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
11. INVESTMENTS
(a) Sale of business -- year ended 31 January 1995
On 16 December 1994 the Group sold the business, assets and certain
liabilities of Chemical Express Limited and its subsidiary undertakings for a
wholly cash consideration of L2,962,000.
The following table sets out the effect of the sale on the Group's
consolidated balance sheet:
<TABLE>
<CAPTION>
1995
(L000)
------
<S> <C>
Tangible fixed assets................... (100)
Stocks.................................. (230)
Debtors................................. (567)
Cash.................................... (214)
Creditors............................... 482
------
Net assets sold......................... (629)
Goodwill reinstated on sale of business
previously written off to reserves.... (572)
Associated costs of sale................ (258)
Cash consideration...................... 2,962
------
Profit on sale.......................... 1,503
======
</TABLE>
F-69
<PAGE> 180
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
(b) Acquisition of businesses -- year ended 31 January 1996
On 13 March 1995, Technograph Microcircuits Limited purchased the former
Ferranti International plc Hybrids Manufacturing and Test Division for a cash
consideration of L10,000. Goodwill arising on this acquisition of L67,000 has
been written off against merger reserve.
On 21 June 1995 the Group acquired the entire issued share capital of
Exacta Circuits Limited for a total consideration of up to L16,000,000, together
with acquisition costs of L766,000.
<TABLE>
<CAPTION>
BOOK ACQUISITION FAIR
VALUE ADJUSTMENTS VALUE
(L000) (L000) (L000)
------- ----------- -------
<S> <C> <C> <C>
Assets
Tangible fixed assets........................... 16,673 -- 16,673
Stocks.......................................... 2,211 -- 2,211
Debtors......................................... 11,867 (92) 11,775
Cash............................................ 8 -- 8
------- ------ -------
30,759 (92) 30,667
======= ====== =======
Liabilities
Bank overdraft.................................. (285) -- (285)
Bank loan....................................... (4,030) -- (4,030)
Taxation........................................ (2,665) -- (2,665)
Finance lease contracts......................... (4,016) -- (4,016)
Other creditors................................. (6,590) -- (6,590)
Provisions...................................... (655) (1,445) (2,100)
------- ------ -------
(18,241) (1,445) (19,686)
======= ====== =======
Net assets acquired............................. 12,518 (1,537) 10,981
======= ======
Goodwill written off against merger reserve..... 5,785
-------
16,766
=======
</TABLE>
The acquisition adjustments reflect an assessment of the fair value of
debtors compared to book value together with recognition of the proceeds
receivable in respect of Exacta Circuits Limited's unexercised share options
(see below) and an adjustment to align Exacta Circuits Limited's accounting
policy on deferred taxation with that of the Group.
<TABLE>
<CAPTION>
(L000)
------
<S> <C>
The consideration was satisfied by:
Shares issued and to be issued for
non-cash consideration:
Nominal value......................... 122
Fair value in excess of nominal
value.............................. 5,917
------
6,039
Cash element of consideration including
costs of acquisition.................. 7,904
Deferred consideration:
Share options......................... 323
Contingent............................ 2,500
------
16,766
======
</TABLE>
F-70
<PAGE> 181
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
On 27 February 1996, 30,966 Ordinary shares in Exacta Circuits Limited were
issued under that company's share option scheme, which was then wound up. These
shares were immediately acquired by the Company under the terms of the June 1995
Sale and Purchase Agreement. Included in the above consideration are 63,593
Ordinary shares in the Company issued for a non-cash consideration of L157,000
together with cash of L323,000.
The payment of L2,500,000 deferred consideration was made on 21 June 1996
to the vendors of Exacta Circuits Limited. It was contingent on a target profit
before taxation of L5,500,000 being achieved for the calendar year 1995. This
target was achieved.
(c) Acquisition of businesses -- year ended 31 January 1997
On 26 March 1996 Technograph Microcircuits Limited acquired GEC-Marconi's
hybrid business for a total cash consideration of L2,726,000.
On 7 May 1996 the Company acquired the entire issued share capital of
Manchester Circuits Limited for a total consideration of L830,000.
On 27 June 1996 the Company acquired the entire issued share capital of TI
Technologies (Pty) Limited (based in South Africa) for an initial consideration
of L510,000. Further consideration, which has not been provided for, of up to
L501,000 may become payable upon certain profit targets being achieved in the 22
months ending on 31 January 1998.
The fair values of the assets and liabilities acquired as a result of the
above are as follows:
<TABLE>
<CAPTION>
GEC- TI
MARCONI MANCHESTER TECHNOLOGIES
HYBRID CIRCUITS (PTY)
BUSINESS LIMITED LIMITED TOTAL
(L000) (L000) (L000) (L000)
----------- ---------- ------------ ------
<S> <C> <C> <C> <C>
Fixed assets............................ 123 2,098 302 2,523
Stocks.................................. 1,525 387 652 2,564
Debtors................................. 463 955 873 2,291
Cash in hand............................ -- -- 15 15
Creditors............................... (431) (960) (1,190) (2,581)
Bank loans and overdrafts............... -- (1,645) (698) (2,343)
Taxation................................ 113 (11) -- 102
Hire purchase obligations............... -- (424) -- (424)
Deferred tax............................ 83 (35) -- 48
----- ------ ------ ------
Fair value of net assets acquired....... 1,876 365 (46) 2,195
===== ====== ====== ======
</TABLE>
Fair values are after taking account of adjustments of L755,000 to reflect
an assessment of the differences between the book values and fair values of
assets acquired, L97,000 of alignments to accord with group accounting policies
and the recognition of unprovided liabilities of L265,000 at the relevant dates
of acquisition.
Following the triennial valuation of the Exacta Circuits Pension Plan on 5
April 1996 the provision at 31 January 1996 has been released resulting in an
adjustment to the provisional assessment of fair values made at the date of
acquisition.
F-71
<PAGE> 182
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Goodwill written off in the year comprises:
<TABLE>
<CAPTION>
(L000)
------
<S> <C>
Fair value of net assets acquired........................... 2,195
Consideration............................................... 4,225
-----
Goodwill arising on current year acquisitions............... 2,030
Revision to provisional fair value assessment made in
respect of the acquisition of Exacta Circuits Limited..... (584)
-----
1,446
=====
The consideration was satisfied by:
Shares issued for non-cash consideration:
Nominal value............................................. 1
Fair value in excess of nominal value..................... 191
-----
192
Cash consideration.......................................... 3,874
Costs of acquisition........................................ 159
-----
4,225
=====
</TABLE>
The following table, which is presented for the purposes of disclosure
under US GAAP in accordance with the requirements of Accounting Principles Board
Opinion No. 16 "Business Combinations" ("APB 16"), reflects the unaudited pro
forma combined results of operations of the Group, together with the companies
and businesses acquired during the years ended 31 January 1996 and 1997 on the
basis that the acquisitions had taken place on 1 February 1995:
<TABLE>
<CAPTION>
1996 1997
------- -------
(L000) (L000)
(UNAUDITED)
<S> <C> <C>
Turnover.................................................... 103,007 107,617
Profit on ordinary activities after taxation................ 7,553 5,161
</TABLE>
The following table, which is presented for the purposes of disclosure
under US GAAP in accordance with the requirements of APB 16, reflects the
unaudited pro forma combined results of continuing operations of the Group,
together with the companies and businesses acquired during the years ended 31
January 1996 and 1995 on the basis that the acquisitions had taken place on 1
February 1994:
<TABLE>
<CAPTION>
1995 1996
------ ------
(L000) (L000)
(UNAUDITED)
<S> <C> <C>
Turnover.................................................... 68,211 90,845
Profit on ordinary activities after taxation................ 3,927 7,425
</TABLE>
These unaudited pro forma combined results have been prepared for
comparative purposes only. In management's opinion the unaudited pro forma
results of operations are not indicative of the actual results that would have
occurred had the acquisitions been consummated at the beginning of the years
presented or of future operations of the combined companies under the ownership
and management of the Company.
F-72
<PAGE> 183
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
12. STOCKS
<TABLE>
<CAPTION>
31 MARCH
1996 1997 1997
(L000) (L000) (L000)
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials and consumables........... 1,689 3,233 3,120
Work in progress........................ 2,611 2,465 3,519
Finished goods and goods for resale..... 1,176 888 646
----- ----- -----
5,476 6,586 7,285
===== ===== =====
</TABLE>
13. DEBTORS
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Trade debtors........................... 16,267 16,368
Other debtors........................... 1,144 454
Prepayments and accrued income.......... 420 467
------ ------
17,831 17,289
====== ======
</TABLE>
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Bank overdrafts......................... -- 5,841
Bank loan............................... 720 720
Obligations under hire purchase and
finance lease contracts............... 1,461 2,400
Payments on account..................... 112 --
Trade creditors......................... 8,832 10,884
Deferred consideration.................. 2,823 --
Corporation tax and Advance Corporation
Tax payable........................... 4,164 2,540
Other taxes and social security......... 1,222 1,448
Other creditors......................... 142 278
Accruals and deferred income............ 2,067 2,838
Dividends............................... 655 --
------ ------
22,198 26,949
====== ======
</TABLE>
The bank overdrafts and loan are secured by charges over the Group's
assets.
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Bank loan................................................... 2,520 1,800
Obligations under hire purchase and finance lease
contracts................................................. 3,178 4,774
----- -----
5,698 6,574
===== =====
Bank loan and overdrafts are repayable as follows:
Within one year............................................. 720 6,561
Between one and two years................................... 720 720
Between two and five years.................................. 1,800 1,080
----- -----
3,240 8,361
===== =====
</TABLE>
F-73
<PAGE> 184
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Obligations under hire purchase and finance lease contracts are payable as
follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Within one year............................................. 1,461 2,400
Between one and two years................................... 1,377 4,498
Between two and five years.................................. 1,801 276
----- -----
4,639 7,174
===== =====
</TABLE>
16. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Deferred taxation........................................... 2,068 2,616
Pension provision........................................... 655 --
----- -----
2,723 2,616
===== =====
</TABLE>
(a) Deferred taxation
Deferred taxation is provided using the liability method at a rate of 33%
(1996: 33%) as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Accelerated capital allowances.............................. 1,996 2,413
Short term timing differences............................... 236 203
----- -----
2,232 2,616
Less: ACT recoverable....................................... (164) --
----- -----
2,068 2,616
===== =====
</TABLE>
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
At beginning of year........................................ 449 2,068
Charged to profit and loss account.......................... 266 432
Arising on purchase of businesses........................... 1,445 (48)
Movement in Advance Corporation Tax......................... (92) 164
----- -----
At end of year.............................................. 2,068 2,616
===== =====
</TABLE>
F-74
<PAGE> 185
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Unprovided deferred taxation in respect of deferred capital gains amounted
to L744,000 (1996: L744,000).
(b) Pension provision
The pension provision arose during the year ended 31 January 1996 as a
result of the acquisition of Exacta Circuits Limited. This was subsequently
released during the year ended 31 January 1997 as a result of the reassessment
of provisional fair values referred to in notes 11 and 22.
17. SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1997
--------------- ----------------
(L000) (L000) (L000) (L000)
------ ------ ------ ------
<S> <C> <C> <C> <C>
Authorised:
Ordinary shares of 5p each....................... 19,000 950 72,900 3,645
====== === ====== =====
Allotted, called up and fully paid:
Ordinary shares of 5p each....................... 13,577 679 55,088 2,754
====== === ====== =====
Shares to be issued:
Ordinary shares of 5p each....................... 64 3 -- --
====== === ====== =====
</TABLE>
On 19 June 1995 the Company's authorised share capital was increased by the
creation of an additional 8,000,000 Ordinary shares of 5p each.
On 21 June 1995 2,785,961 Ordinary shares with a nominal value of L139,298
were issued for a cash consideration of L2.70 per share pursuant to a placing
and open offer, raising L7,522,000.
On the same date the Company issued 2,381,662 Ordinary shares with a
nominal value of L119,083 as part consideration for the 839,506 ordinary L1
shares representing the whole of the issued share capital of Exacta Circuits
Limited.
On 13 March 1996 the Company issued 63,593 Ordinary shares for a non-cash
consideration of L157,000 as part of the arrangements regarding the purchase of
the remaining shares under option in Exacta Circuits Limited.
On 20 May 1996 the Company issued 17,597 Ordinary shares in connection with
the acquisition of Manchester Circuits Limited for a non-cash consideration of
L134,000.
On 27 June 1996 the Company issued 5,658 Ordinary shares in connection with
the acquisition of TI Technologies (Pty) Limited for a non-cash consideration of
L59,000.
On 28 June 1996 the Company's authorised share capital was increased by the
creation of an additional 53,900,000 Ordinary shares of 5p each.
On 28 June 1996 the Company authorised a 3 for 1 capitalisation issue
resulting in 40,991,664 new shares being allotted and distributed.
During the year ended 31 January 1997, and following the capitalisation
issue, the Company issued 432,400 Ordinary shares with an aggregate nominal
value of L21,620 under the terms of the Forward Group Share Option Scheme for a
total cash consideration of L92,000.
F-75
<PAGE> 186
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
At the end of the year options over 810,000 Ordinary shares have been
granted and remain outstanding. These options, which also reflect the
capitalisation issue referred to above, are exercisable as follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES EXERCISE PRICE EXERCISE PERIOD
- --------- -------------- ---------------
<C> <C> <C>
140,000 51.5p 1996/2003
40,000 47p 1997/2004
280,000 61.75p 1998/2005
260,000 88.75p 1998/2005
20,000 180p 1999/2006
70,000 107p 1999/2006
-------
810,000
=======
</TABLE>
18. RESERVES
<TABLE>
<CAPTION>
SHARE PROFIT
PREMIUM MERGER REVALUATION AND LOSS
ACCOUNT RESERVE RESERVE ACCOUNT TOTAL
(L000) (L000) (L000) (L000) (L000)
------- ------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
At 1 February 1995................. 1,438 -- 591 6,493 8,522
Retained profit for the financial
year............................. -- -- -- 3,834 3,834
Issue of shares (net of
expenses)........................ 7,402 5,917 -- -- 13,319
Goodwill written off on acquisition
of businesses (note 11).......... -- (5,852) -- -- (5,852)
Transfer........................... -- -- (13) 13 --
------ ------ --- ------ ------
At 31 January 1996................. 8,840 65 578 10,340 19,823
Retained profit for the financial
year............................. -- -- -- 4,846 4,846
Capitalisation issue (including
expenses of L24,000)............. (2,073) -- -- -- (2,073)
Issue of shares.................... 70 191 -- -- 261
Goodwill written off on acquisition
of businesses (note 11).......... -- (256) -- (1,190) (1,446)
Currency translation adjustment.... -- -- -- (22) (22)
Transfer........................... -- -- (12) 12 --
------ ------ --- ------ ------
At 31 January 1997................. 6,837 -- 566 13,986 21,389
====== ====== === ====== ======
</TABLE>
At the end of the year cumulative goodwill written off against reserves in
respect of the acquisition of businesses amounted to L7,447,000 (1996:
L6,001,000).
F-76
<PAGE> 187
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
19. RECONCILIATION OF MOVEMENT IN CONSOLIDATED EQUITY SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Profit for the financial year........................... 2,976 4,923 5,398
Dividends............................................... (494) (1,089) (552)
----- ------ ------
2,482 3,834 4,846
Issue of shares......................................... 10 13,432 284
Shares to be issued..................................... -- 157 --
Expenses of capitalisation issue........................ -- -- (24)
Goodwill written off.................................... -- (5,852) (1,446)
Goodwill reinstated on sale of business................. 572 -- --
Currency translation adjustment......................... -- -- (22)
----- ------ ------
Net increase in equity shareholders' funds.............. 3,064 11,571 3,638
At beginning of year.................................... 5,870 8,934 20,505
----- ------ ------
At end of year.......................................... 8,934 20,505 24,143
===== ====== ======
</TABLE>
20. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
1995 1996 1997
(L000) (L000) (L000)
------ ------ ------
<S> <C> <C> <C>
Operating profit....................................... 2,445 7,976 9,101
Depreciation........................................... 1,215 2,701 4,694
Profit on sale of tangible fixed assets................ (55) (15) (169)
------ ------ ------
3,605 10,662 13,626
Movements in working capital:
(Increase)/decrease in stocks.......................... (266) (1,552) 1,454
(Increase)/decrease in debtors......................... (840) (778) 2,837
Increase in creditors.................................. 223 2,335 644
------ ------ ------
(883) 5 4,935
------ ------ ------
Net cash inflow from operating activities.............. 2,722 10,667 18,561
====== ====== ======
</TABLE>
(b) Analysis of changes in financing during the year
<TABLE>
<CAPTION>
SHARE HIRE
CAPITAL AND PURCHASE CONTINGENT
PREMIUM OBLIGATIONS CONSIDERATION
(L000) (L000) (L000)
----------- ----------- -------------
<S> <C> <C> <C>
1995
At beginning of year............................. 1,840 1,150 220
Net cash flows on financing...................... 10 (669) (220)
Inception of hire purchase contracts............. -- 594 --
Currency adjustment.............................. -- 40 --
----- ------ -----
1,850 1,115 --
===== ====== =====
</TABLE>
F-77
<PAGE> 188
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SHARE HIRE
CAPITAL AND PURCHASE BANK
PREMIUM OBLIGATIONS LOAN
(L000) (L000) (L000)
----------- ----------- -------------
<S> <C> <C> <C>
1996
At beginning of year............................. 1,850 1,115 --
Acquisition of businesses........................ -- 4,016 4,030
Net cash flows on financing...................... 7,550 (1,170) (790)
Issues of shares for non-cash consideration...... 119 -- --
Shares to be issued.............................. 3 -- --
Inception of hire purchase contracts............. -- 658 --
Currency adjustment.............................. -- 20 --
----- ------ -----
9,522 4,639 3,240
===== ====== =====
</TABLE>
<TABLE>
<CAPTION>
SHARE HIRE
CAPITAL AND PURCHASE BANK
PREMIUM OBLIGATIONS LOAN
(L000) (L000) (L000)
----------- ----------- ------
<S> <C> <C> <C>
1997
At beginning of year.................................. 9,522 4,639 3,240
Acquisition of businesses............................. -- 424 --
Net cash flows on financing........................... 68 (2,393) (720)
Issues of shares for non-cash consideration........... 1 -- --
Inception of hire purchase contracts.................. -- 4,548 --
Currency adjustment................................... -- (44) --
----- ------ -----
9,591 7,174 2,520
===== ====== =====
</TABLE>
(c) Analysis of cash and cash equivalents
<TABLE>
<CAPTION>
CHANGE CHANGE CHANGE
1994 IN YEAR 1995 IN YEAR 1996 IN YEAR 1997
(L000) (L000) (L000) (L000) (L000) (L000) (L000)
------ ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand.............. 4 (1) 3 786 789 (789) --
Bank overdrafts....................... (1,722) 1,091 (631) 631 -- (5,841) (5,841)
------ ------ ---- ----- ---- ------ ------
(1,718) 1,090 (628) 1,417 789 (6,630) (5,841)
====== ====== ==== ===== ==== ====== ======
</TABLE>
F-78
<PAGE> 189
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
(d) Acquisition of businesses
The investing cash flows arising in respect of acquisitions during the year
ended 31 January 1996 were as follows:
<TABLE>
<CAPTION>
1996
(L000)
------
<S> <C>
Ferranti International plc Hybrids Manufacturing and Test
Division
Cash consideration........................................ 10
Exacta Circuits Limited
Cash consideration including costs of acquisition......... 7,904
Overdraft................................................. 285
Cash balances............................................. (8)
-----
8,191
=====
</TABLE>
The investing cash flows arising in respect of acquisitions during the year
ended 31 January 1997 were as follows:
<TABLE>
<CAPTION>
1997
(L000)
------
<S> <C>
Exacta Circuits Limited
Deferred cash consideration............................... 2,823
GEC-Marconi's hybrid business
Cash consideration including costs of acquisition......... 2,756
Manchester Circuits Limited
Cash consideration including costs of acquisition......... 759
Overdraft................................................. 1,645
TI Technologies (Pty) Limited
Cash consideration including costs of acquisition......... 518
Overdraft................................................. 698
Cash balances............................................. (15)
-----
9,184
=====
</TABLE>
Further information on the acquisitions is given in note 11.
(e) Disposal of business
The divesting cash flows arising in respect of the disposal of the
specialist chemicals business in the year ended 31 January 1995 were as follows:
<TABLE>
<CAPTION>
1995
(L000)
------
<S> <C>
Cash consideration.......................................... 2,962
Cash and bank balances...................................... (214)
Associated costs of sale.................................... (258)
-----
2,490
=====
</TABLE>
(f) Major non-cash transactions
Fixed asset additions of L4,548,000 (1996: L658,000; 1995: L594,000) were
financed by hire purchase borrowings.
F-79
<PAGE> 190
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
21. COMMITMENTS
Capital commitments for which no provision has been made in these financial
statements, are as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Contracted but not provided for............................. 2,596 830
===== ===
</TABLE>
Annual commitments under operating leases are as follows:
<TABLE>
<CAPTION>
LAND AND BUILDINGS OTHER
------------------ ----------------
1996 1997 1996 1997
(L000) (L000) (L000) (L000)
------- ------- ------ ------
<S> <C> <C> <C> <C>
Expiring within one year........................ -- 8 25 61
Expiring between two and five years............. 7 30 252 180
Expiring in more than five years................ 206 344 -- --
</TABLE>
22. PENSIONS
Exacta Circuits Limited operates a funded defined benefit pension scheme
covering substantially all of its employees. Employer contributions are
determined by a qualified actuary on the basis of triennial valuations using the
projected unit method.
The most recent full valuation by William M Mercer Limited was as at 5
April 1996. The assumptions which have the most significant effect on the result
of the valuation are those relating to the rate of return on investments and the
rates of increase in salaries and pensions. It was assumed that the investment
returns would be 9% per annum, that salary increases would average 7% per annum,
that present and future pensions would increase at rates of between 3% and 4.5%
per annum and that equity dividend growth would average 5% per annum. The
valuation showed that the market value of the scheme's assets at that date was
L17,593,000 and that the actuarial value of assets represented 110% of the
benefits that has accrued to members, after allowing for expected future
increases in earnings. Group contributions to the scheme in the year were
L955,000 (1996: L492,000).
As part of its provisional review of the fair value of the net assets of
Exacta Circuits Limited the Group took actuarial advice regarding the current
position of the pension scheme. This highlighted uncertainty concerning the
impact of equalisation of retirement ages. In view of this uncertainty, the
SSAP24 provision of Exacta Circuits Limited of L655,000 at the date of
acquisition was replaced by a provision of the same amount. Following the
valuation as at 5 April 1996 the provision was released.
In addition, the Group made contributions of L284,000 (1996: L253,000)
during the year to several defined contribution schemes.
F-80
<PAGE> 191
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
SFAS NO 87 DISCLOSURES (UNAUDITED)
For the purpose of the disclosure in accordance with US GAAP, the pension
cost of the Exacta Circuits Limited pension scheme has been restated in the
following tables, in accordance with the requirements of SFAS No 87. The funded
status of the scheme, under SFAS No 87 is as follows:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Projected benefit obligations............................... 16,582 19,380
Plan assets at fair value................................... 16,804 19,864
------ ------
Projected benefit obligations less than plan assets......... (222) (484)
Unrecognised net gain....................................... 997 1,099
------ ------
Accrued pension at end of year.............................. 775 615
====== ======
</TABLE>
Plan assets consist primarily of investments in UK and overseas equity and
fixed interest securities. The principal assumptions used for SFAS No 87
purposes were as follows:
<TABLE>
<CAPTION>
PER CENT
--------
<S> <C>
Discount rate............................................... 8.5
Long term rate of increase in remuneration.................. 6.5
Long term rate of increase in pensions...................... 3.5
</TABLE>
The net periodic pension cost for the pension scheme under SFAS No 87
comprised:
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
------ ------
<S> <C> <C>
Service cost -- present value of benefits earned in the
year...................................................... 796 1,476
Interest cost on projected benefit obligations.............. 736 1,397
Actual return on assets..................................... (1,746) (1,893)
Net amortization and deferral............................... 953 328
Contributions by employees.................................. (282) (513)
------ ------
Net periodic pension cost................................... 457 795
====== ======
</TABLE>
23. POST BALANCE SHEET EVENT
On 26 March 1997 the Recommended Cash Offer for Forward Group PLC by Hicks,
Muse, Tate and Furst Equity Fund III, L.P. was declared unconditional in all
respects and, in due course, the Company will become a wholly owned subsidiary
of PCB Investments plc.
F-81
<PAGE> 192
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
24. SUBSIDIARY UNDERTAKINGS
The Company has the following trading subsidiary undertakings:
<TABLE>
<CAPTION>
COUNTRY OF
PRINCIPAL CLASS OF
COMPANY OPERATION SHARE HOLDING PRINCIPAL ACTIVITY
------- ---------- -------- ------- ------------------
<S> <C> <C> <C> <C>
Forward Circuits Limited England L1 100% Manufacture of printed circuit
Ordinary boards
Exacta Circuits Limited Scotland L1 100% Manufacture of printed circuit
Ordinary boards
Technograph Microcircuits England L1 100% Manufacture of ceramic based
Limited Ordinary microcircuits
Forward Circuits England L1 100% International trading in
International Limited Ordinary printed circuit boards
Manchester Circuits Limited England L1 100% Manufacture of printed circuit
Ordinary boards
L1 100%
Preferred
Ordinary
L1 100%
Cumulative
redeemable
preference
TI Technologies (Pty) Limited South Africa R1 100% Manufacture of printed circuit
Ordinary boards
Swift International (Pty) South Africa R1 100% Manufacture of printed circuit
Limited Ordinary boards
Exacta Circuits (France) SARL France FF 100 100% Sale of printed circuit boards
Ordinary in France
</TABLE>
25. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES
OF AMERICA GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The Group's consolidated financial statements are prepared in conformity
with generally accepted accounting principles applicable in the United Kingdom
(UK GAAP), which differ in certain significant respects from those applicable in
the United States of America (US GAAP). These differences, together with the
approximate effects of the adjustments on net profit and equity shareholders'
funds, relate principally to the items set out below:
(a) Goodwill: Under UK GAAP, goodwill arising from acquisitions is
written off against equity shareholders' funds. Upon the subsequent
disposal of the business, goodwill previously written off is reinstated and
considered in the calculation of the gain or loss on disposal. Under US
GAAP, goodwill is capitalised and amortised over its estimated useful life.
For the purpose of calculating the amortisation of goodwill a life of 40
years has been assumed. Upon the subsequent disposal of the business,
unamortised goodwill is considered in the calculation of the gain or loss
on disposal.
(b) Dividends: Under UK GAAP, proposed dividends on ordinary shares,
as recommended by the Directors, are deducted from equity shareholders'
funds and shown as a liability in the
F-82
<PAGE> 193
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
balance sheet at the end of the period to which they relate. Under US GAAP,
such dividends are deducted from equity shareholders' funds at the date of
declaration of the dividend.
(c) Deferred taxation: UK GAAP requires that no provision for deferred
taxation should be made if there is reasonable evidence that such taxation
will not be payable in the foreseeable future. Under US GAAP, deferred
taxation is recognised under the full liability method which permits
deferred tax assets to be recognised if their realisation is considered
more likely than not.
Deferred taxation also arises in relation to the tax effect of other
US GAAP differences.
(d) Revaluation of properties: UK GAAP allows periodic revaluations of
freehold land and buildings and the related depreciation is calculated on
the revalued amounts. The surplus on revaluation of property is credited
directly to equity shareholders' funds. Under US GAAP, such revaluations
are not permitted and depreciation is provided on the original cost.
(e) Pension costs: Under UK GAAP, the expected cost of pensions is
charged to the profit and loss account so as to spread the cost of pensions
over the expected service lives of employees. Surpluses arising from the
actuarial valuation are similarly spread. Under US GAAP, costs and
surpluses are also spread over the expected service lives but based on
prescribed actuarial assumptions, allocation of costs and valuation
methods, which differ from those used for UK GAAP.
(f) Cash flows: The principal difference between UK GAAP and US GAAP
is in respect of classification. Under UK GAAP, the Group presents its cash
flows for operating activities, returns on investments and servicing of
finance, taxation, investing activities, and financing activities. US GAAP
requires only three categories of cash flow activities which are operating,
investing and financing.
Cash flows arising from taxation and returns on investments and
servicing of finance under UK GAAP would, with the exception of dividends
paid, be included as operating activities under US GAAP; dividend payments
would be included as a financing activity under US GAAP. In addition, under
UK GAAP, cash and cash equivalents include short term borrowings which
under US GAAP would be presented as financing activities.
F-83
<PAGE> 194
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Under US GAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED 31 JANUARY ENDED ENDED
-------------------------- 30 JUNE 31 MARCH
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
------ ------- ------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating
activities............................ 1,901 8,594 13,995 6,911 2,687
Net cash provided by/(used in) investing
activities............................ 301 (12,045) (16,373) (13,244) (488)
Net cash (used in)/provided by financing
activities............................ (2,203) 4,237 1,589 5,231 (2,199)
------ ------- ------- ------- ------
Net (decrease)/increase in cash and cash
equivalents........................... (1) 786 (789) (1,102) --
====== ======= ======= ======= ======
Cash and cash equivalents under US
GAAP.................................. 3 789 -- -- --
====== ======= ======= ======= ======
</TABLE>
(g) Current assets and liabilities: Current assets and liabilities
under UK GAAP include amounts which fall due after more than one year.
Under US GAAP such assets would be classified as non-current assets.
Provisions for liabilities and other charges under UK GAAP include amounts
due within one year which would be classified as current liabilities under
US GAAP.
Approximate effects on net profit of differences between UK and US GAAP:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED 31 JANUARY ENDED ENDED
-------------------------- 30 JUNE 31 MARCH
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
------ ------ ------ ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net profit in conformity with
UK GAAP..................... 2,976 4,923 5,398 4,651 321
Adjustments:
Goodwill.................... (17) (99) (188) (85) (51)
Profit on disposal of
businesses............... 20 -- -- -- --
Revaluation of properties... 13 13 12 6 3
Pension cost................ -- 35 160 70 40
Tax effect of US GAAP
adjustments.............. (744) (11) (53) (23) (13)
----- ----- ----- ----- ---
Net profit in conformity with
US GAAP..................... 2,248 4,861 5,329 4,619 300
===== ===== ===== ===== ===
</TABLE>
F-84
<PAGE> 195
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Approximate effects on equity shareholders' funds of differences between UK
and US GAAP:
<TABLE>
<CAPTION>
AT 31 JANUARY
---------------- AT 31 MARCH
1996 1997 1997
(L000) (L000) (L000)
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Equity shareholders' funds in conformity with UK
GAAP.............................................. 20,505 24,143 24,064
Adjustments:
Goodwill.......................................... 5,993 7,690 7,656
Dividends......................................... 655 -- --
Deferred taxation................................. (744) (744) (744)
Revaluation of properties......................... (578) (566) (564)
Pension cost...................................... (120) (615) (588)
Tax effect of US GAAP adjustments................. 40 203 194
------ ------ ------
Equity shareholders' funds in conformity with US
GAAP.............................................. 25,751 30,111 30,018
====== ====== ======
</TABLE>
26. CONVERSION OF U.K. GAAP AMOUNTS TO U.S. GAAP AMOUNTS IN U.S. DOLLARS
(UNAUDITED)
The following tables set forth in U.K.L the balance sheet and profit and
loss account of the Group as of and for the year ended January 31, 1997 and as
of and for the three months ended March 31, 1997, on a historical basis and
adjusts the amounts to U.S. GAAP in U.K.L. based solely on those adjustments
shown in Note 25. The U.K.L amounts are then translated to U.S.$ based on a
translation rate of U.K.L.62=U.S.$1.00 at January 31, 1997 and
U.K.L.61=U.S.$1.00 at March 31, 1997. Such amounts are shown translated to U.S.$
for convenience purposes only. The U.S. GAAP amounts do not constitute financial
information presented in conformity with U.S. GAAP as differences in
presentation and classification exist. Furthermore, disclosures required under
U.S. GAAP have not been provided.
Consolidated profit and loss account (unaudited)
<TABLE>
<CAPTION>
YEAR ENDED 31 JANUARY 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover
Continuing operations................. 97,001 -- 97,001 .62 156,453
Acquisitions.......................... 8,028 -- 8,028 .62 12,949
------- --- ------- -------
105,029 -- 105,029 .62 169,402
------- --- ------- -------
Operating profit........................
Continuing operations................. 8,079 (16) 8,063 .62 13,005
Acquisitions.......................... 1,022 -- 1,022 .62 1,648
------- --- ------- -------
9,101 (16) 9,085 .62 14,653
Net interest payable.................. (996) -- (996) .62 (1,606)
------- --- ------- -------
Profit on ordinary activities before
taxation.............................. 8,105 (16) 8,089 .62 13,047
Tax on profit on ordinary activities.... (2,707) (53) (2,760) .62 (4,452)
------- --- ------- -------
Profit for the financial year........... 5,398 (69) 5,329 .62 8,595
======= === ======= =======
</TABLE>
F-85
<PAGE> 196
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
THREE MONTHS ENDED 31 MARCH 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover
Continuing operations................. 25,287 -- 25,287 .61 41,454
Acquisitions.......................... -- -- -- .61 --
------- --- ------- -------
25,287 -- 25,287 .61 41,454
------- --- ------- -------
Operating profit........................
Continuing operations................. 2,853 (8) 2,845 .61 4,665
Acquisitions.......................... -- -- -- .61 --
------- --- ------- -------
2,853 (8) 2,845 .61 4,665
Expenses related to sale.............. (1,318) -- (1,318) .61 (2,161)
Net interest payable.................. (381) -- (381) .61 (625)
------- --- ------- -------
Profit on ordinary activities before
taxation.............................. 1,154 (8) 1,146 .61 1,879
Tax on profit on ordinary activities.... (833) (13) (846) .61 (1,387)
------- --- ------- -------
Profit for the financial period......... 321 (21) 300 .61 492
======= === ======= =======
</TABLE>
Consolidated balance sheet (unaudited)
<TABLE>
<CAPTION>
31 JANUARY 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets..................... -- 7,690 7,690 .62 12,403
Tangible assets....................... 36,407 (566) 35,841 .62 57,808
------- ------- ------- -------
36,407 7,124 43,531 .62 70,211
------- ------- ------- -------
Current assets
Stocks................................ 6,586 -- 6,586 .62 10,623
Debtors............................... 17,289 -- 17,289 .62 27,885
------- ------- ------- -------
23,875 -- 23,875 .62 38,508
Creditors: amounts falling due within
one year.............................. (26,949) -- (26,949) .62 (43,466)
------- ------- ------- -------
Net current liabilities................. (3,074) -- (3,074) .62 (4,958)
------- ------- ------- -------
Total assets less current liabilities... 33,333 7,124 40,457 .62 65,253
Creditors: amounts falling due after
more than one year.................... (6,574) -- (6,574) .62 (10,603)
Provisions for liabilities and
charges............................... (2,616) (1,156) (3,772) .62 (6,084)
------- ------- ------- -------
Net assets.............................. 24,143 5,968 30,111 .62 48,566
======= ======= ======= =======
Capital and reserves
Called up share capital............... 2,754 -- 2,754 .62 4,442
Share premium account................. 6,837 -- 6,837 .62 11,027
Revaluation reserve................... 566 (566) -- .62 --
Profit and loss account............... 13,986 6,534 20,520 .62 33,097
------- ------- ------- -------
Equity shareholders' funds.............. 24,143 5,968 30,111 .62 48,566
======= ======= ======= =======
</TABLE>
F-86
<PAGE> 197
FORWARD GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
31 MARCH 1997
--------------------------------------------------------------
U.S. GAAP
U.K. GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
--------- ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets.................... -- 7,656 7,656 .61 12,551
Tangible assets...................... 36,707 (564) 36,143 .61 59,251
------- ------ ------- -------
36,707 7,092 43,799 .61 71,802
------- ------ ------- -------
Current assets
Stocks............................... 7,285 -- 7,285 .61 11,943
Debtors.............................. 19,729 -- 19,729 .61 32,343
------- ------ ------- -------
27,014 -- 27,014 .61 44,286
Creditors: amounts falling due within
one year............................. (30,624) -- (30,624) .61 (50,203)
------- ------ ------- -------
Net current liabilities................ (3,610) -- (3,610) .61 (5,917)
------- ------ ------- -------
Total assets less current
liabilities.......................... 33,097 7,092 40,189 .61 65,885
Creditors: amounts falling due after
more than one year................... (6,417) -- (6,417) .61 (10,520)
Provisions for liabilities and
charges.............................. (2,616) (1,138) (3,754) .61 (6,154)
------- ------ ------- -------
Net assets............................. 24,064 5,954 30,018 .61 49,211
======= ====== ======= =======
Capital and reserves
Called up share capital.............. 2,762 -- 2,762 .61 4,528
Share premium account................ 6,908 -- 6,908 .61 11,325
Revaluation reserve.................. 564 (564) -- .61 --
Profit and loss account.............. 13,830 6,518 20,348 .61 33,358
------- ------ ------- -------
Equity shareholders' funds............. 24,064 5,954 30,018 .61 49,211
======= ====== ======= =======
</TABLE>
27. COMPANIES ACT 1985
These consolidated financial statements do not comprise the Company's
statutory accounts within the meaning of Section 240 of the Companies Act 1985
of Great Britain. Statutory accounts have been prepared for each of the years
ended 31 January 1997, 1996 and 1995, on which the auditors' reports were
unqualified. The statutory accounts for the years ended 31 January 1996 and 1995
have been delivered to the Registrar of Companies for England and Wales. Those
for the year ended 31 January 1997 have not yet been so delivered.
F-87
<PAGE> 198
REPORT OF INDEPENDENT AUDITORS
To: The Directors
Interconnection Systems (Holdings) Limited
We have audited the consolidated balance sheets of Interconnection Systems
(Holdings) Limited as at March 29, 1996 and April 4, 1997 and the related
consolidated profit and loss accounts and statements of total recognized gains
and losses and cash flows for the years ended March 31, 1995, March 29, 1996 and
April 4, 1997. 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 United Kingdom auditing
standards which do not differ in any significant respect from United States
generally accepted auditing standards. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Interconnection Systems (Holdings) Limited as at March 29, 1996 and April 4,
1997, and the consolidated results of its operations and its consolidated cash
flows for the years ended March 31, 1995, March 29, 1996 and April 4, 1997 in
conformity with accounting principles generally accepted in the United Kingdom
which differ in certain respects from those followed in the United States (see
Note 25 of the Notes to the Consolidated Financial Statements).
Ernst & Young
Chartered Accountants
Newcastle upon Tyne, England
May 27, 1997
F-88
<PAGE> 199
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SIX THREE
YEAR ENDED MONTHS MONTHS
-------------------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
NOTES (L000) (L000) (L000) (L000) (L000)
----- --------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Turnover................................ 2 70,805 104,611 141,643 61,834 38,266
Cost of sales......................... 59,433 90,170 112,980 47,702 33,711
------ ------- ------- ------ ------
Gross profit.......................... 11,372 14,441 28,663 14,132 4,555
Distribution costs.................... 1,042 1,148 1,632 669 525
Administrative expenses............... 5,738 6,913 9,491 3,999 1,557
------ ------- ------- ------ ------
4,592 6,380 17,540 9,464 2,473
Other operating income................ 109 -- 44 -- 44
------ ------- ------- ------ ------
Operating profit........................ 3 4,701 6,380 17,584 9,464 2,517
Interest receivable................... 6 -- -- 414 -- 48
Interest payable...................... 7 (921) (807) (1,232) (440) (308)
------ ------- ------- ------ ------
Profit on ordinary activities before
taxation.............................. 3,780 5,573 16,766 9,024 2,257
Tax on profit on ordinary
activities......................... 8 2,539 4,422 6,874 4,083 668
------ ------- ------- ------ ------
Profit for the year after taxation*..... 1,241 1,151 9,892 4,941 1,589
Dividends............................. 9 94 500 450 200 150
------ ------- ------- ------ ------
Retained profit for the period.......... 20 1,147 651 9,442 4,741 1,439
====== ======= ======= ====== ======
</TABLE>
* A summary of the significant adjustments to profit for the years that
would be required if United States generally accepted accounting principles had
been applied instead of those generally accepted in the United Kingdom is set
forth in Note 25 of the Notes to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
SIX THREE
YEAR ENDED MONTHS MONTHS
-------------------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
--------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Note of historical cost profits
Reported profit on ordinary activities before
taxation................................... 3,780 5,573 16,766 9,024 2,257
Depreciation charged during the period in
respect of the excess of valuation over
historical cost of revalued assets......... 1,581 1,449 1,500 737 375
------ ------- ------ ------ ------
Historical cost profit on ordinary activities
before taxation............................ 5,361 7,022 18,266 9,761 2,632
====== ======= ====== ====== ======
Historical cost profit on ordinary activities
after taxation and dividends............... 2,728 2,100 10,942 5,478 1,814
====== ======= ====== ====== ======
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of
these Financial Statements.
F-89
<PAGE> 200
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------- SIX MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
NOTES (L000) (L000) (L000) (L000) (L000)
----- --------- --------- -------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Profit on ordinary activities after
taxation......................... 1,241 1,151 9,892 4,941 1,589
Unrealized surplus on revaluation
of freehold land and buildings... 10 315 -- (1,564) -- (1,564)
Unrealized surplus on revaluation
of plant and machinery........... 10 5,727 -- 23,743 -- 23,743
----- ----- ------ ----- ------
Total recognized gains and losses
relating to the period........... 7,283 1,151 32,071 4,941 23,768
===== ===== ====== ===== ======
</TABLE>
The Notes to the Consolidated Financial Statements are an integral part of these
Financial Statements.
F-90
<PAGE> 201
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
NOTES (L000) (L000)
----- --------- --------
<S> <C> <C> <C>
Fixed assets
Tangible assets........................................... 10 39,895 70,542
------- -------
Current assets
Stocks.................................................... 11 7,447 9,132
Debtors................................................... 12 17,371 24,003
Cash at bank and in hand.................................. 13 2,636 26,244
------- -------
27,454 59,379
Creditors: amounts falling due within one year.............. 14 (33,305) (47,863)
------- -------
Net current (liabilities)/assets............................ (5,851) 11,516
------- -------
Total assets less current liabilities....................... 34,044 82,058
Creditors: amounts falling due after more than one year
Loans..................................................... 16 9,430 27,336
Obligations under finance leases.......................... 15 4,116 3,203
Accruals and deferred income
Deferred Government grants................................ 18 600 --
------- -------
19,898 51,519
======= =======
Capital and reserves*
Called up share capital................................... 19 -- --
Share premium account..................................... 20 4,650 4,650
Revaluation reserve....................................... 20 5,685 26,364
Other reserves............................................ 20 216 216
Profit and loss account................................... 20 9,347 20,289
------- -------
19,898 51,519
======= =======
</TABLE>
*A summary of the significant adjustments to capital and reserves that
would be required if United States generally accepted accounting principles had
been applied instead of those generally accepted in the United Kingdom is set
forth in Note 25 of the Notes to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these
Financial Statements.
F-91
<PAGE> 202
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
<TABLE>
<CAPTION>
SIX THREE
YEAR ENDED MONTHS MONTHS
-------------------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
NOTES (L000) (L000) (L000) (L000) (L000)
----- --------- --------- -------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net cash inflow from operating activities... 3(b) 13,784 22,757 33,842 16,007 12,430
------- ------- ------- ------- -------
Returns on investments and servicing of
finance
Interest paid............................. (875) (776) (1,077) (305) (13)
Interest received......................... -- -- 414 -- 48
Dividends paid to parent company
shareholders............................ (94) (500) (450) (200) (150)
------- ------- ------- ------- -------
Net cash outflow from returns on investments
and servicing of
finance................................... (969) (1,276) (1,113) (505) (115)
------- ------- ------- ------- -------
Taxation
Corporation tax paid...................... (658) (2,811) (4,903) (1,952) (4,072)
------- ------- ------- ------- -------
Tax paid.................................... (658) (2,811) (4,903) (1,952) (4,072)
------- ------- ------- ------- -------
Management of liquid resources
Investment in term deposit................ -- -- (16,000) -- --
------- ------- ------- ------- -------
Net cash outflow from management of liquid
resources................................. -- -- (16,000) -- --
------- ------- ------- ------- -------
Investing activities
Payments to acquire tangible fixed
assets.................................. (12,659) (16,816) (24,119) (5,870) (9,490)
Purchase of shares in Interconnection
Systems Limited......................... (11) -- -- -- --
------- ------- ------- ------- -------
Net cash outflow from investing
activities................................ (12,670) (16,816) (24,119) (5,870) (9,490)
------- ------- ------- ------- -------
Net cash inflow/(outflow) before
financing................................. (513) 1,854 (12,293) 7,680 (1,247)
======= ======= ======= ======= =======
Financing
New loans................................. 16 (5,000) -- (22,089) (14) (6,089)
Repayment of loans........................ 16 2,283 682 1,183 590 529
Repayment of finance leases............... 15 -- 623 1,005 1,757 331
Receipt of government grants.............. 18 (1,250) -- -- -- --
------- ------- ------- ------- -------
Net cash outflow/(inflow) from financing.... (3,967) 1,305 (19,901) 2,333 (5,229)
Increase in cash and cash
equivalents............................... 13 3,454 549 7,608 5,347 3,982
------- ------- ------- ------- -------
(513) 1,854 (12,293) 7,680 (1,247)
======= ======= ======= ======= =======
</TABLE>
The significant differences between the cash flow statement presented above
and that required under United States generally accepted accounting principles
are described in Note 25 of the Notes to the Consolidated Financial Statements.
The Notes to the Consolidated Financial Statements are an integral part of these
Financial Statements.
F-92
<PAGE> 203
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN BRITISH POUNDS STERLING)
1. ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared under the historical cost convention
modified to include the revaluation of certain tangible fixed assets.
The financial statements are prepared in accordance with applicable United
Kingdom accounting standards.
Basis of consolidation
The consolidated financial statements consolidate the accounts of
Interconnection Systems (Holdings) Limited (the "Company") and its subsidiary
undertaking Interconnection Systems Limited (together the "Group"). They do not
include the financial statements of Interconnection Systems Sales Limited as, in
the opinion of the directors, it would be of no real value to the Company's
members in view of the insignificant amounts involved. Interconnection Systems
Sales Limited has not traded since incorporation. The accounting period for both
companies comprises 52 weeks ending on the Friday nearest to March 31.
Periodically a 53 week period will be necessary to realign the accounting period
with the calendar.
Revenue Recognition
Revenue is recognized in the period in which goods are dispatched to
customers.
Goodwill
Goodwill, both positive and negative, arising on the acquisition of
Interconnection Systems Limited has been taken directly to reserves under "Other
reserves".
Depreciation
Depreciation is provided on all tangible fixed assets, at rates calculated
to write off the cost or valuation of each asset evenly over its expected useful
life, as follows:
<TABLE>
<S> <C>
Freehold buildings -- over 40 years
Plant and machinery -- over 2 to 10 years
Fixtures and fittings -- over 3 to 10 years
</TABLE>
The part of the annual depreciation charge on revalued assets which relates
to the surplus over cost is transferred from the revaluation reserve to retained
profits.
Stocks
Stocks are stated at the lower of cost and net realizable value as follows:
Costs incurred in bringing each product to its present location and
condition:
<TABLE>
<S> <C>
Raw materials -- purchase cost on a first-in, first-out
basis
Work in progress and finished goods -- cost of direct materials and labor plus
attributable overheads based on a normal
level of activity
</TABLE>
F-93
<PAGE> 204
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Net realizable value is based on estimated selling price less further costs
expected to be incurred to completion and disposal.
Finance leases
Assets held under finance leases are capitalized in the balance sheet and
are depreciated over their useful lives. The interest element of rental
obligations is charged to the profit and loss account over the period of the
lease in accordance with Statement of Standard Accounting Practice 21.
Research and development
Research and development expenditure is written off as incurred.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet
date. All differences are taken to the profit and loss account.
Deferred taxation
Deferred taxation is provided using the liability method on all timing
differences to the extent that they are expected to reverse in the future
without being replaced, calculated at the rate at which it is estimated that
taxation will be payable.
Pensions
Interconnection Systems Limited operates a defined benefit pension scheme
which is funded by the payment of contributions to a separately administered
fund.
Contributions to the fund are charged to the profit and loss account so as
to spread the cost of pensions over the employees' working lives.
Future variations in pension cost, which are identified as a result of an
actuarial valuation, will be amortised over the expected remaining lives of
current employees in the scheme. Differences between the amounts funded and the
amounts charged to the profit and loss account will be treated as either
provisions or prepayments in the balance sheet.
Condensed Consolidated Financial Data
The condensed consolidated profit and loss account and statements of total
recognized gains and losses and cash flows for the six month period ended June
29, 1996 and the three month period ended April 4, 1997 are unaudited. However,
in the opinion of management, all adjustments (consisting only of normal
recurring adjustments) considered necessary for a fair presentation of the
financial position and results of operations have been included.
2. TURNOVER
Turnover represents the net invoiced sales, excluding value added tax, of
goods sold during the period.
The Company's operations are all located in the United Kingdom and its
turnover and pre-tax profit is attributable to one continuing activity, the
manufacture of printed circuit boards.
F-94
<PAGE> 205
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
An analysis of turnover by geographical market is given below:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
United Kingdom......................................... 42,525 55,236 61,209
Belgium................................................ 9,187 11,539 16,915
Germany................................................ 6,756 10,931 19,524
Sweden................................................. 978 8,065 21,630
Other Continental Europe............................... 11,359 18,840 22,365
------ ------- -------
70,805 104,611 141,643
====== ======= =======
</TABLE>
Of the total turnover, 16.3% related to one customer (1996: 17.3%; 1995:
23.9%) and 15.8% to another (1996: 11.5%; 1995: 14.0%).
3. OPERATING PROFIT
(a) This is stated after charging/(crediting):
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Directors' remuneration (see note 4)................. 24 42 192
Auditors' remuneration for audit services............ 27 31 35
Auditors' remuneration for non audit services........ 23 63 75
Depreciation of tangible fixed assets................ 10,822 17,302 19,123
Exceptional depreciation charge...................... -- -- --
Research and development expenditure................. 769 549 475
Exchange gains....................................... 451 41 (431)
Hire of plant and machinery.......................... 45 42 18
Regional Selective Assistance........................ (600) (600) (600)
====== ====== ======
</TABLE>
(b) Reconciliation of operating profit to net cash inflow from operating
activities
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Operating profit..................................... 4,701 6,380 17,584
Depreciation......................................... 10,822 17,302 19,123
Loss on disposal of tangible fixed assets............ -- -- --
Government grants released........................... (600) (600) (600)
Increase in debtors.................................. (3,754) (2,691) (6,632)
Increase in stocks................................... (1,037) (3,301) (1,685)
Increase in creditors................................ 3,652 5,667 6,052
------ ------ ------
Net cash inflow from operating activities............ 13,784 22,757 33,842
====== ====== ======
</TABLE>
F-95
<PAGE> 206
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
4. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Fees................................................. -- -- --
Other emoluments (including pension contributions)... 24 42 192
------ ------ -------
24 42 192
====== ====== =======
Emoluments of the chairman (excluding pension
contributions) were:............................... 23,814 23,547 9,078
====== ====== =======
Emoluments of the highest paid director (excluding
pension contributions) were:....................... 23,814 23,547 181,413
====== ====== =======
</TABLE>
Directors emoluments (excluding pension contributions) fell within the
following ranges:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
--------- --------- --------
<S> <C> <C> <C>
LNil -- L5,000 1 1 --
L5,001 -- L10,000 -- -- 1
L15,001 -- L20,000 -- 1 --
L20,001 -- L25,000 1 1 --
L180,001 -- L185,000 -- -- 1
</TABLE>
5. STAFF COSTS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Wages and salaries....................................... 14,121 19,320 26,429
Social security costs.................................... 1,284 1,706 2,185
Other pension costs...................................... 183 232 212
------ ------ ------
15,588 21,258 28,826
====== ====== ======
</TABLE>
The average weekly number of employees during the period was made up as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
--------- --------- --------
<S> <C> <C> <C>
Sales and administration................................. 67 78 67
Manufacturing............................................ 789 1,050 1,332
------ ------ -----
856 1,128 1,399
====== ====== =====
</TABLE>
F-96
<PAGE> 207
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
6. INTEREST RECEIVABLE
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Bank deposit interest.................................. -- -- 414
===== ===== =====
</TABLE>
7. INTEREST PAYABLE
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Bank overdraft........................................... 171 141 10
Other loans wholly repayable within five years (net of
rebate)................................................ 476 389 478
Other loans not wholly repayable within five years....... 72 77 544
Loan stock............................................... 200 200 200
Other interest........................................... 2 -- --
------ ------ ------
921 807 1,232
====== ====== ======
</TABLE>
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
The taxation charge is made up as follows:
Based on the profit for the period
Corporation tax at 33%................................. 2,613 4,422 6,463
Deferred taxation...................................... (93) -- --
----- ----- -----
2,520 4,422 6,463
Corporation tax under/(over) provided in previous
periods.............................................. 19 -- 411
----- ----- -----
2,539 4,422 6,874
===== ===== =====
</TABLE>
If full recognition had been made in respect of deferred taxation for the
period in respect of capital allowances in advance of depreciation and other
timing differences the taxation charge would have decreased by L2,252,930 (1996:
decreased by L1,466,000; 1995: increased by L392,000).
9. DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Ordinary-- interim paid................................ 94 500 450
-- final proposed............................. -- -- --
----- ----- -----
94 500 450
===== ===== =====
</TABLE>
F-97
<PAGE> 208
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
10. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
PLANT AND
MACHINERY
FREEHOLD LAND AND FIXTURES
AND BUILDINGS AND FITTINGS TOTAL
(L000) (L000) (L000)
------------- ------------ -------
<S> <C> <C> <C>
Cost or valuation:
At April 2, 1994................................ 3,804 33,511 37,315
Additions....................................... 1,771 12,706 14,477
Revaluation..................................... 136 -- 136
------ ------- -------
At March 31, 1995............................... 5,711 46,217 51,928
Additions....................................... 2,710 22,834 25,544
------ ------- -------
At March 29, 1996............................... 8,421 69,051 77,472
Additions....................................... 8,605 18,986 27,591
Revaluation..................................... (1,957) -- (1,957)
Reclassification................................ (960) 960 --
------ ------- -------
At April 4, 1997................................ 14,109 88,997 103,106
------ ------- -------
Depreciation:
At April 2, 1994................................ 120 15,240 15,360
Provided during the period...................... 113 10,709 10,822
Revaluation..................................... (179) (5,728) (5,907)
------ ------- -------
At March 31, 1995............................... 54 20,221 20,275
Provided during the period...................... 947 16,355 17,302
------ ------- -------
At March 29, 1996............................... 1,001 36,576 37,577
Provided during the period...................... 352 18,771 19,123
Revaluation..................................... (393) (23,743) (24,136)
Reclassification................................ (960) 960 --
------ ------- -------
At April 4, 1997................................ -- 32,564 32,564
------ ------- -------
Net book value
At March 31, 1995............................... 5,657 25,996 31,653
====== ======= =======
At March 29, 1996............................... 7,420 32,475 39,895
====== ======= =======
At April 4, 1997................................ 14,109 56,433 70,542
====== ======= =======
</TABLE>
F-98
<PAGE> 209
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The historical cost of assets included at valuation is as follows:
<TABLE>
<CAPTION>
PLANT AND
MACHINERY
FREEHOLD LAND AND FIXTURES
AND BUILDINGS AND FITTINGS TOTAL
(L000) (L000) (L000)
------------- ------------ ------
<S> <C> <C> <C>
Historical cost:
At April 1, 1994................................ 1,914 1,141 3,055
Historical cost of assets revalued in period.... 1,771 38,284 40,055
----- ------ ------
At March 31, 1995 and March 29, 1996............ 3,685 39,425 43,110
Historical cost of additions revalued in
period........................................ 2,796 40,684 43,480
----- ------ ------
At April 4, 1997................................ 6,481 80,109 86,590
===== ====== ======
Depreciation based on cost:
At April 1, 1994................................ 90 152 242
Provided during period.......................... 70 9,171 9,241
Depreciation on prior year asset additions
revalued in period............................ -- 9,108 9,108
----- ------ ------
At March 31, 1995............................... 160 18,431 18,591
Provided during the period...................... 83 6,504 6,587
----- ------ ------
At March 29, 1996............................... 243 24,935 25,178
Provided during the period...................... 131 17,474 17,605
Depreciation on prior year asset additions
revalued in period............................ 48 8,258 8,306
----- ------ ------
At April 4, 1997................................ 422 50,667 51,089
===== ====== ======
</TABLE>
Included in the valuation of freehold land and buildings is land valued at
L670,000 which is not depreciated.
The net book value within plant and machinery and fixtures and fittings in
respect of assets held under finance leases and hire purchase contracts is as
follows:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Plant and machinery......................................... 4,230 2,936
===== =====
Fixtures and fittings....................................... -- --
===== =====
</TABLE>
The freehold land and buildings and all of the plant and machinery and
fixtures and fittings were revalued for existing use at depreciated replacement
cost on November 1, 1994 by Weatherall, Green & Smith (Chartered Surveyors). The
freehold land and buildings valuation of L5,600,000 resulted in a valuation
surplus of L315,000. The plant and machinery and fixtures and fittings valuation
of L28,271,000 resulted in a valuation surplus of L5,727,000.
The freehold land and buildings and all of the plant and machinery and
fixtures and fittings at the South Shields plant excluding computer software
were revalued for existing use at depreciated replacement cost on April 1, 1997
by Weatherall, Green & Smith (Chartered Surveyors). The South Shields freehold
land and buildings valuation of L6,550,000 resulted in a valuation deficit of
L1,564,000. The South Shields plant and machinery and fixtures and fittings
valuation of
F-99
<PAGE> 210
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
L53,685,975 resulted in a valuation surplus of L23,743,000. If the revalued
assets were sold at their valuation a taxation liability of L8,720,000 would
arise.
11. STOCKS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Raw materials and consumables............................... 3,966 5,401
Work in progress............................................ 1,842 2,492
Finished goods for resale................................... 1,639 1,239
------ ------
7,447 9,132
====== ======
</TABLE>
12. DEBTORS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Trade debtors............................................... 17,109 20,910
Other debtors............................................... 57 2,499
Prepayments and accrued income.............................. 205 594
------ ------
17,371 24,003
====== ======
</TABLE>
13. CASH AND CASH EQUIVALENTS
Analysis of balances as shown in the consolidated balance sheet and changes
during the periods:
<TABLE>
<CAPTION>
CHANGE
1994 1995 IN PERIOD
YEAR ENDED MARCH 31, 1995 (L000) (L000) (L000)
------------------------- ------ ------ ---------
<S> <C> <C> <C>
Cash at bank and in hand................................. 27 2,087 2,060
Bank overdraft........................................... (1,394) -- 1,394
------ ------ -----
(1,367) 2,087 3,454
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
CHANGE
1995 1996 IN PERIOD
YEAR ENDED MARCH 29, 1996 (L000) (L000) (L000)
------------------------- ------ ------ ---------
<S> <C> <C> <C>
Cash at bank and in hand................................. 2,087 2,636 549
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
CHANGE
1996 1997 IN PERIOD
YEAR ENDED APRIL 4, 1997 (L000) (L000) (L000)
------------------------ ------ ------ ---------
<S> <C> <C> <C>
Cash at bank and in hand.................................. 2,636 10,244 7,608
Short-term deposits....................................... -- 16,000 16,000
----- ------ ------
2,636 26,244 23,608
===== ====== ======
</TABLE>
Included within liquid resources are term deposits of less than one year.
F-100
<PAGE> 211
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Current installment due on loan (note 16)................... 1,183 4,183
Trade creditors............................................. 15,179 21,021
Amounts under finance leases (note 15)...................... 970 1,032
Current corporation tax..................................... 5,262 7,233
Other taxes and social security costs....................... 578 702
Other creditors............................................. 453 361
Accruals.................................................... 9,680 13,331
------ ------
33,305 47,863
====== ======
</TABLE>
15. OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Amounts payable:
Within one year........................................... 1,254 1,371
In two to five years...................................... 4,804 3,654
------ ------
6,058 5,025
Less: finance charges allocated to future periods........... 972 790
------ ------
5,086 4,235
====== ======
Finance leases and hire purchase contracts are analyzed as
follows:
Current obligations (note 14)............................. 970 1,032
Noncurrent obligations.................................... 4,116 3,203
------ ------
5,086 4,235
====== ======
</TABLE>
Analysis of changes in finance leases and hire purchase contracts:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Opening balance............................................. -- 5,086
Inception of finance lease contracts........................ 5,709 154
Capital element on finance lease rental payments............ (623) (1,005)
----- ------
Closing balance............................................. 5,086 4,235
===== ======
</TABLE>
F-101
<PAGE> 212
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
16. LOANS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
GROUP (L000) (L000)
----- --------- --------
<S> <C> <C>
Wholly repayable within five years:
Bank loan Bank of Scotland(1)............................. 4,500 3,500
Loan stock................................................ 2,000 2,000
European Coal and Steel Community (ECSC) loan(1).......... 250 125
European Coal and Steel Community (ECSC) loan(2).......... 3,000 3,000
European Coal and Steel Community (ECSC) loan(3).......... -- 6,000
Not wholly repayable within five years:
Medium term loan at 1.75% over Libor per annum repayable
in 80 quarterly installments of L14,375 from June 28,
1991................................................... 863 805
Bank loan Barclays repayable in 10 six monthly
installments of L450,000 commencing July 31, 1999...... -- 6,500
Bank loan Bank of Scotland(2) repayable in 10 six monthly
installments of L450,000 commencing July 31, 1999...... -- 6,500
DTI loan at variable interest rates repayable in one
installment on April 15, 2016.......................... -- 2,431
English Partnerships loan at variable interest rates
repayable in one installment on September 30, 2016..... -- 658
------ ------
10,613 31,519
Less: included in current liabilities (see note 14)......... (1,183) (4,183)
------ ------
9,430 27,336
====== ======
For loans not wholly repayable within five years the amounts
repayable by installments are:
Within five years......................................... 288 8,090
After five years.......................................... 575 8,804
------ ------
863 16,894
====== ======
</TABLE>
<TABLE>
<CAPTION>
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Loans are repayable as follows:
Amounts falling due: --
Within one year........................................... 1,183 4,183
Between one and two years................................. 6,183 3,058
Between two and five years................................ 2,672 15,474
In five years or more..................................... 575 8,804
------ ------
10,613 31,519
====== ======
</TABLE>
The first ECSC loan is secured by a first fixed charge over Interconnection
Systems Limited's tangible fixed assets and book debts and a floating charge
over its other assets.
The second ECSC loan is secured by chattel mortgages over Interconnection
Systems Limited's plant and machinery, assignment of the book debts insurance
policy and assignment of key persons' life policies.
The first Bank of Scotland loan is secured by a fixed and floating charge
over all of Interconnection Systems Limited's assets.
F-102
<PAGE> 213
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
The medium term loan is secured by a fixed charge over Interconnection
Systems Limited's freehold land and buildings.
The second Bank of Scotland loan, the Barclays loan and the third ECSC loan
are secured by a first charge over the assets of Interconnection Systems Limited
excluding the property at Balliol Business Park and excluding assets acquired
under finance leases, and a second charge over the property at Balliol Business
Park.
The DTI loan and the English Partnerships' loan are secured by a first
charge over the property at Balliol Business Park.
The loan stock is unsecured. The loan stock holders have indicated that
redemption will not be sought before April 5, 1998.
An analysis of changes in loan financing is as follows:
<TABLE>
<CAPTION>
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Opening balance...................................... 8,578 11,295 10,613
New loans raised..................................... 5,000 -- 22,089
Repayment of loans................................... (2,283) (682) (1,183)
------ ------ ------
Closing balance...................................... 11,295 10,613 31,519
====== ====== ======
</TABLE>
17. DEFERRED TAXATION
Deferred taxation provided in the financial statements and the amounts not
provided are as follows:
<TABLE>
<CAPTION>
PROVIDED NOT PROVIDED
-------------------- --------------------
MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1996 1997 1996 1997
(L000) (L000) (L000) (L000)
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Capital allowances in advance of depreciation......... -- -- (837) 725
Other timing differences.............................. -- -- (629) (2,978)
Taxation on valuation surplus......................... -- -- 2,137 8,720
----- ----- ----- ------
-- -- 671 6,467
===== ===== ===== ======
</TABLE>
The directors consider that the valuation surplus will not be realized in
the foreseeable future and therefore no provision for deferred tax on the
valuation surplus has been made.
18. DEFERRED GOVERNMENT GRANTS
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Opening balance.......................................... 550 1,200 600
Received in the period................................... 1,250 -- --
Released during the period............................... (600) (600) (600)
----- ----- ----
Closing balance.......................................... 1,200 600 --
===== ===== ====
</TABLE>
F-103
<PAGE> 214
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
19. SHARE CAPITAL
The authorised and allotted, called up and fully paid share capital at
April 1, 1994, March 31, 1995, March 29, 1996 and April 4, 1997 was L200,
consisting of 200 ordinary shares of L1 each.
20. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENTS ON RESERVES
<TABLE>
<CAPTION>
SHARE PROFIT AND
SHARE PREMIUM REVALUATION OTHER LOSS
CAPITAL ACCOUNT RESERVE RESERVE ACCOUNT TOTAL
(L000) (L000) (L000) (L000) (L000) (L000)
------- ------- ----------- ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
At April 2, 1994........................ -- 4,650 2,673 227 4,519 12,069
Revaluation during the period........... -- -- 6,042 -- -- 6,042
Transfer to retained profits............ -- -- (1,581) -- 1,581 --
Retained profit for the period.......... -- -- -- -- 1,147 1,147
Arising on acquisition.................. -- -- -- (11) -- (11)
----- ----- ------ ----- ------ ------
At March 31, 1995....................... -- 4,650 7,134 216 7,247 19,247
Transfer to retained profits............ -- -- (1,449) -- 1,449 --
Retained profit for the period.......... -- -- -- -- 651 651
----- ----- ------ ----- ------ ------
At March 29, 1996....................... -- 4,650 5,685 216 9,347 19,898
Revaluation during the period........... -- -- 22,179 -- -- 22,179
Transfer to retained profits............ -- -- (1,500) -- 1,500 --
Retained profit for the period.......... -- -- -- -- 9,442 9,442
----- ----- ------ ----- ------ ------
At April 4, 1997........................ -- 4,650 26,364 216 20,289 51,519
===== ===== ====== ===== ====== ======
</TABLE>
21. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Contracted for but not provided......... -- --
===== ======
Authorized but not contracted for....... 7,069 32,429
===== ======
</TABLE>
22. PENSION COMMITMENTS
Interconnection Systems Limited operates a defined benefit pension scheme
which is funded by the payment of contributions to a separately administered
fund.
The contributions to the scheme are determined on behalf of the company
with the advice of an independent qualified actuary on the basis of a triennial
valuation using the Projected Unit Method. The most recent valuation was carried
out as at January 1, 1996. The actuary's valuation used the following main
assumptions:
<TABLE>
<S> <C>
Long term investment return................................. 8.5% per annum
Increase in pensionable salaries............................ 6.5% per annum
Increase in pensions in payment............................. 3.0% per annum
</TABLE>
This valuation showed that the market value of the Scheme's assets at
January 1, 1996 amounted to L5,660,314 and the actuarial value was sufficient to
cover 103% of the benefits that had accrued to members after projecting
pensionable salaries to the assumed date of retirement or death.
F-104
<PAGE> 215
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Included within accruals under "Creditors -- amounts falling due within one
year" is a pension scheme accrual of L515,877 (1996 -- L402,327).
The net periodic pension cost for each fiscal year is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
L L L
--------- ----------- --------
<S> <C> <C> <C>
Service cost....................................... 168 176 263
Interest cost...................................... 291 385 443
Actual return on plan assets....................... 228 (830) (509)
Net amortization and deferral...................... (689) 375 (57)
---- ---- ----
Net periodic pension cost.......................... (2) 106 140
==== ==== ====
</TABLE>
23. DIRECTORS' INTERESTS
I H Bradbury has an interest in payments of L389,933 (1996 -- L383,640;
1995 -- L382,800) made by Interconnection Systems Limited to Interconnection
Systems (Holdings) Limited in the period ended 4 April 1997 in respect of
consultancy services provided to Interconnection Systems Limited by I H
Bradbury.
In addition, the company purchased a property during the year at its market
value of L145,000 from T P Robinson, a director of Interconnection Systems
Limited and Interconnection Systems (Holdings) Limited.
24. COMPANIES ACT 1985
These financial statements do not comprise the Company's statutory accounts
within the meaning of section 240 of the Companies Act 1985 of Great Britain.
Statutory accounts for the years ended March 29, 1996 and March 31, 1995, have
been, and for the year ended April 4, 1997, will be, delivered to the Registrar
of Companies for England and Wales. The auditors' reports on these accounts were
unqualified.
25. DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The Group's consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United Kingdom ("UK GAAP")
which differ from United States generally accepted accounting principles ("US
GAAP"). The significant differences as they apply to the Group are summarized
below.
Pension costs
The Group provides for the cost of retirement benefits based upon
consistent percentages of employees' pensionable pay as recommended by
independent qualified actuaries. US GAAP require that the projected benefit
obligation (pension liability) be matched against the fair value of the plan's
assets and be adjusted to reflect any unrecognized obligations or assets in
determining the pension cost or credit for the year. For the purposes of the
reconciliations below, US GAAP have been adopted as of April 1, 1994. The
Company has not implemented FAS 87 as of the effective date specified in the
standard for a foreign plan (fiscal years beginning after December 15, 1988) due
to the unavailability of actuarial data. A portion of the transition liability
at April 1, 1994 has been
F-105
<PAGE> 216
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
allocated to shareholders' funds based on a ratio of 5/15, being the number of
years elapsed between the effective date of FAS 87 and April 1, 1994 over the 15
year period being used to amortize the transition liability.
Summary of principal assumptions made by the actuary:
<TABLE>
<CAPTION>
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
% % %
--------- --------- --------
<S> <C> <C> <C>
Discount rate.................................... 8.0% 9.0% 8.5%
Salary growth.................................... 6.0 7.0 6.5
Long-term return on assets....................... 9.0 9.0 9.0
Pension increases................................ 3.0 3.0 3.0
</TABLE>
The following table details the funded status of the plan under US GAAP:
<TABLE>
<CAPTION>
MARCH 29, APRIL 4,
1996 1997
(L000) (L000)
--------- --------
<S> <C> <C>
Vested benefit obligation............... 4,650 5,800
Accrued benefit obligation.............. 4,650 5,800
Projected benefit obligation............ 5,206 6,520
Assets at market value.................. 5,660 6,368
Funded status........................... 454 (152)
Unrecognized transition asset........... (452) (395)
Other unrecognised net loss............. 275 787
Prepaid pension cost.................... 277 240
</TABLE>
Amounts funded to the pension are primarily invested in equity and fixed
income securities.
Goodwill and negative goodwill
Under UK GAAP, goodwill and negative goodwill arising on acquisitions is
set off against or credited to shareholders' funds in the year of acquisition.
Under US GAAP, such goodwill would be capitalized and amortized over its
estimated useful life which in the case of the acquisition of Interconnection
Systems Limited is estimated to be 10 years. Under US GAAP, negative goodwill
would be eliminated by reducing the value of the interest in the noncurrent
assets acquired.
Accordingly, under US GAAP the carrying value of the additional 20%
interest in the tangible fixed assets of Interconnection Systems Limited
acquired in 1994 would have been reduced by L1,067,000 and subsequent
depreciation would have been reduced by L201,000 per annum.
Revaluation of fixed assets
Under UK GAAP, the Group's tangible fixed assets are carried at valuations
and depreciation is computed based on the revalued amounts. Under US GAAP, such
revaluations are not permitted and all tangible assets would be carried at cost
subject to any impairment write down and the depreciation charge would be based
on such carrying amount. The gain or loss arising on the disposal of tangible
assets under US GAAP would differ from that arising under UK GAAP by the amount
of the revaluation gain thus realized, which in the years ended March 31, 1995,
March 29, 1996 and April 4, 1997 is not material.
F-106
<PAGE> 217
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Deferred taxation
Under UK GAAP, deferred taxation is provided using the liability method on
all timing differences to the extent that they are expected to reverse in the
future without being replaced, calculated at the rate at which it is estimated
that taxation will be payable. Under US GAAP, deferred taxation would be
computed on all temporary differences between the tax and book bases of assets
and liabilities which will result in taxable or tax deductible amounts in future
years. Deferred taxation assets would be recognized to the extent that it is
more likely than not that they will be realized.
Deferred taxation also arises in relation to the tax effect of other UK
GAAP to US GAAP adjustments.
Approximate effects on net income of differences between UK GAAP and US
GAAP:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS THREE MONTHS
-------------------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4 JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
--------- --------- -------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Profit for the year as reported in the
consolidated profit and loss account...... 1,241 1,151 9,892 4,941 1,589
Pension costs............................... 130 58 77 41 19
Amortization of Goodwill.................... (84) (84) (84) (42) (21)
Depreciation of tangible fixed assets....... 1,782 1,634 1,685 829 421
Deferred taxation -- methodology............ 501 1,858 787 464 322
-- on adjustments........ (42) (20) (25) (14) (6)
------ ------ ------ ------ ------
Net income for the year as adjusted to
accord with US GAAP......................... 3,528 4,597 12,332 6,219 2,324
====== ====== ====== ====== ======
</TABLE>
Approximate effects on shareholders' funds of differences between UK GAAP
and US GAAP:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------
MARCH 31, MARCH 29, APRIL 4,
1995 1996 1997
(L000) (L000) (L000)
--------- --------- --------
<S> <C> <C> <C>
Shareholders' funds as reported in the consolidated
balance sheet........................................ 19,247 19,898 51,519
Intangible fixed assets -- goodwill:
Cost................................................. 840 840 840
Amortization......................................... (388) (472) (556)
Tangible fixed assets:
Cost................................................. (3,875) (4,076) (2,304)
Amortization......................................... (4,125) (2,491) (24,942)
Current assets/liabilities:
Pension costs........................................ 621 679 756
Deferred taxation -- methodology..................... -- 1,466 2,253
-- on adjustments............... -- (224) (249)
Provisions for liabilities and charges:
Deferred taxation -- methodology..................... (392) -- --
-- on adjustments............... (204) -- --
------ ------ -------
Shareholders' equity as adjusted to accord with US
GAAP................................................. 11,724 15,620 27,317
====== ====== =======
</TABLE>
F-107
<PAGE> 218
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Consolidated statement of cash flows
The consolidated statement of cash flows prepared under UK GAAP presents
substantially the same information as that required under US GAAP. The
statements differ however with regard to the classification of items within the
statements and as regards the definition of cash and cash equivalents.
Under US GAAP, cash and cash equivalents would not include bank overdrafts.
Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, investing activities
and financing. US GAAP require only three categories of cash flow activity to be
reported; operating, investing and financing. Cash flows from taxation and
returns on investments and servicing of finance shown under UK GAAP would be
included as operating activities under US GAAP.
The categories of cash flow activity under US GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
SIX THREE
YEAR ENDED MONTHS MONTHS
-------------------------------- ENDED ENDED
MARCH 31, MARCH 29, APRIL 4, JUNE 29, APRIL 4,
1995 1996 1997 1996 1997
(L000) (L000) (L000) (L000) (L000)
--------- --------- -------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash inflow from operating
activities..................... 10,763 18,670 27,826 13,550 8,243
Cash outflow on investing
activities..................... (12,670) (16,816) (24,119) (5,870) (9,490)
Cash (outflow)/inflow from
financing activities........... 3,967 (1,305) 19,901 (2,333) 5,229
------- ------- ------- ------ -------
Increase in cash and cash
equivalents.................... 2,060 549 23,608 5,347 3,982
Cash and cash equivalents:
Opening balance................ 27 2,087 2,636 -- 22,262
------- ------- ------- ------ -------
Closing balance................ 2,087 2,636 26,244 5,347 26,244
======= ======= ======= ====== =======
</TABLE>
F-108
<PAGE> 219
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
26. CONVERSION OF UK GAAP AMOUNTS TO US GAAP AMOUNTS IN US DOLLARS (UNAUDITED)
The following tables set forth in UKL the historical balance sheet and
profit and loss accounts of the Company as of and for the year ended April 4,
1997, on a historical basis and adjusts the amounts to US GAAP in UKL. The UKL
amounts are then translated to US$ based on a translation rate of UKL.61 =
US$1.00. Such amounts are shown translated to U.S.$ for convenience purposes
only.
Consolidated profit and loss account (unaudited)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 4, 1997
----------------------------------------------------------------
U.K. U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover.................................... 141,643 -- 141,643 .61 232,202
Cost of sales............................. 112,980 (1,685) 111,295 .61 182,451
------- ------ ------- -------
Gross profit.............................. 28,663 1,685 30,348 .61 49,751
Distribution costs........................ 1,632 7 1,639 .61 2,687
Administrative expenses................... 9,491 -- 9,491 .61 15,559
Other operating income.................... (44) -- (44) .61 (72)
------- ------ ------- -------
Operating profit............................ 17,584 1,678 19,262 .61 31,577
Interest receivable....................... 414 -- 414 .61 679
Interest payable.......................... (1,232) -- (1,232) .61 (2,020)
------- ------ ------- -------
Profit on ordinary activities before
taxation.................................. 16,766 1,678 18,444 .61 30,236
Tax on profit on ordinary activities...... 6,874 (762) 6,112 .61 10,020
------- ------ ------- -------
Profit on ordinary activities after
taxation.................................. 9,892 2,440 12,332 .61 20,216
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 4, 1997 (UNAUDITED)
----------------------------------------------------------------
U.K. U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Turnover.................................... 38,266 -- 38,266 0.61 62,731
Cost of sales............................. 33,711 (408) 33,303 0.61 54,595
------- ----- ------- -------
Gross profit.............................. 4,555 408 4,963 0.61 8,136
Distribution costs........................ 525 -- 525 0.61 862
Administrative expenses................... 1,557 (11) 1,546 0.61 2,535
Other operating income.................... (44) -- (44) 0.61 (72)
------- ----- ------- -------
Operating profit............................ 2,517 419 2,936 0.61 4,811
Interest receivable....................... 48 -- 48 0.61 79
Interest payable.......................... (308) -- (308) 0.61 (505)
------- ----- ------- -------
Profit on ordinary activities before
taxation.................................. 2,257 419 2,676 0.61 4,385
Tax on profit on ordinary activities...... 668 (316) 352 0.61 576
------- ----- ------- -------
Profit on ordinary activities after
taxation.................................. 1,589 735 2,324 0.61 3,809
======= ===== ======= =======
</TABLE>
F-109
<PAGE> 220
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(EXPRESSED IN BRITISH POUNDS STERLING)
Consolidated balance sheet (unaudited)
<TABLE>
<CAPTION>
APRIL 4, 1997
----------------------------------------------------------------
U.K. U.S. GAAP
GAAP ADJUSTMENTS U.S. GAAP TRANSLATION U.S. GAAP
(L000) (L000) (L000) RATE (U.S.$000)
---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Fixed assets
Intangible assets......................... -- 284 284 .61 466
Tangible assets........................... 70,542 (27,246) 43,296 .61 70,977
------ ------- ------ -------
70,542 (26,962) 43,580 .61 71,443
Current assets
Stocks.................................... 9,132 -- 9,132 .61 14,970
Debtors................................... 24,003 2,493 26,496 .61 43,436
Cash at bank and in hand.................. 26,244 -- 26,244 .61 43,023
------ ------- ------ -------
59,379 2,493 61,872 .61 101,429
Creditors: amounts falling due within one
year...................................... 47,863 (267) 47,596 .61 78,026
------ ------- ------ -------
Net current assets.......................... 11,516 2,760 14,276 .61 23,403
------ ------- ------ -------
Total assets less current liabilities....... 82,058 (24,202) 57,856 .61 94,846
Creditors: amounts falling due after more
than one year
Loans..................................... 27,336 -- 27,336 .61 44,813
Obligations under finance leases.......... 3,203 -- 3,203 .61 5,251
Accruals and deferred income
Deferred Government grants................ -- -- -- .61 --
------ ------- ------ -------
51,519 (24,202) 27,317 .61 44,782
====== ======= ====== =======
Capital and reserves*
Called up share capital................... -- -- -- .61 --
Share premium account..................... 4,650 -- 4,650 .61 7,623
Revaluation reserve....................... 26,364 (26,364) -- .61 --
Other reserves............................ 216 (216) -- .61 --
Profit and loss account................... 20,289 2,378 22,667 .61 37,159
------ ------- ------ -------
51,519 (24,202) 27,317 .61 44,782
====== ======= ====== =======
</TABLE>
F-110
<PAGE> 221
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE NEW NOTES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE NEW NOTES BY ANYONE IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF THE NEW NOTES
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS NOT
BEEN A CHANGE IN FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
- ------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information.......................... i
Certain Definitions and Industry Data.......... ii
Summary........................................ 1
Risk Factors................................... 8
Use of Proceeds................................ 18
Selected Financial Data........................ 19
Unaudited Pro Forma Financial Information...... 27
Management's Discussion and Analysis of Results
of Operations and Financial Condition........ 36
Business....................................... 47
Management..................................... 53
Security Ownership of Certain Beneficial
Owners....................................... 59
Certain Transactions........................... 61
Description of Senior Credit Facilities........ 64
The Exchange Offer............................. 67
Description of New Notes....................... 74
Certain Federal Income Tax Considerations...... 103
Plan of Distribution........................... 104
Legal Matters.................................. 104
Experts........................................ 105
Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure....... 105
Index to Financial Statements.................. F-1
</TABLE>
- ------------------------------------------------------------
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
OFFER TO EXCHANGE ALL OUTSTANDING
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2007 FOR
9 3/4% SENIOR SUBORDINATED NOTES
DUE 2007
[VIASYSTEMS, INC. LOGO]
------------------------
PROSPECTUS
------------------------
, 1997
<PAGE> 222
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the securities
being registered are estimated (other than with respect to the SEC registration
fee) to be as follows:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $121,212.12
Printing and Engraving Expenses............................. $ 200,000
Accounting Fees and Expenses................................ $ 150,000
Legal Fees and Expenses..................................... $ 65,000
Miscellaneous............................................... $ 100,000
-----------
Total............................................. $636,212.12
===========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation of Viasystems, Inc. ("the Registrant")
provides for the mandatory indemnification of the directors and officers to the
fullest extent permitted by the General Corporation Law of the State of Delaware
(the "Delaware Code"). Pursuant to Section 145 of the Delaware Code, the
Registrant has the discretionary power to indemnify its present and former
directors and officers against expenses actually and reasonably incurred by them
in connection with any suit (other than an action by or in the right of the
Registrant) to which such directors and officers were, are, or are threatened to
be made, a party by reason of their serving in such positions, so long as they
acted in good faith and in a manner they reasonably believed to be in, or not
opposed to, the best interest of the corporation for which they served in such
positions, and with respect to any criminal action, they had no reasonable cause
to believe their conduct was unlawful.
Under the Delaware Code, a corporation may also indemnify any person who
was or is a party to an action brought by or in the right of the Registrant, but
only for actual or reasonable defense and settlement expenses and not for any
satisfaction of a judgment or settlement of the claim itself, and with the
further limitation that in such actions no indemnification shall be made in the
event of any adjudication that such director or officer is liable to the
corporation unless the court, upon application, finds that in light of all the
circumstances such person is fairly and reasonably entitled to indemnity for
such expenses. The Delaware Code further provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements, vote
of stockholders or disinterested directors, or otherwise.
The above discussion of the Certificate of Incorporation of the Registrant
and of Section 145 of the Delaware Code is not intended to be exhaustive and is
qualified in its entirety by such Certificate of Incorporation and the Delaware
Code.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in this Item 14, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
II-1
<PAGE> 223
whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On April 11, 1997, the Registrant issued 1,000 shares of its common stock,
par value $.01 per share, to Viasystems Group, Inc. in a private transaction for
a cash purchase price of $1,000 in reliance on the exemption, set forth in
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
from the registration requirement set forth in Section 5 of the Securities Act.
On June 6, 1997, the Registrant sold $400,000,000 aggregate principal
amount of its 9 3/4% Senior Subordinated Notes due 2007 (the "Old Notes") in a
private placement in reliance on Section 4(2) under the Securities Act, at a
price equal to 100% of the stated principal amount of such Old Notes.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
2.1 -- Securities Purchase Agreement dated as of October 1,
1996, among Circo Craft Holding Company and certain
Purchasers (defined therein)(1)
2.2 -- Acquisition Agreement, dated November 26, 1996, among
Lucent Technologies Inc., Circo Technologies Group, Inc.
and Circo Craft Technologies, Inc.(1)
2.3 -- Agreement and Plan of Merger dated as of April 11, 1997,
by and among Viasystems Group, Inc., HMTF Acquisition,
L.P., HMTF U.K. Acquisition Company, Hicks, Muse, Tate &
Furst Equity Fund III, and HM3 Coinvesters, L.P.(1)
2.4 -- Agreement and Plan of Merger dated as of June 6, 1997, by
and between Viasystems Group, Inc. and Chips Holdings,
Inc.(1)
2.5 -- Agreement and Plan of Merger dated as of June 6, 1997, by
and between Viasystems, Inc. and Chips Acquisition,
Inc.(1)
3.1 -- Certificate of Incorporation of Viasystems, Inc.(1)
3.2 -- Bylaws of Viasystems, Inc.(1)
4.1 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee.(1)
4.2 -- Form of the Old Note (included in Exhibit 4.1, Exhibit
A)(1)
4.3 -- Form of the New Note (included in Exhibit 4.1, Exhibit
B)(1)
4.4 -- Second Amended and Restated Credit Agreement dated as of
June 5, 1997 among Viasystems Group, Inc., Viasystems,
Inc., Circo Craft Co. Inc., PCB Investments PLC, Forward
Group PLC, Chips Acquisition Limited and Interconnection
Systems (Holdings) Limited; and The Chase Manhattan Bank
of Canada, and Chase Manhattan International Limited and
The Chase Manhattan Bank.(1)
4.5 -- Amended and Restated Guarantee and Collateral Agreement
dated as of April 11, 1997(1)
4.6 -- Supplement to Guarantee and Collateral Agreement dated as
of June 5, 1997(1)
5.1 -- Opinion of Legality of Weil, Gotshal & Manges LLP(1)
10.1 -- Supply Agreement dated as of November 26, 1996, by and
between Lucent Technologies Inc. and Circo Craft
Technologies, Inc. (confidential treatment will be sought
with respect to certain portions of this exhibit)(1)
10.2 -- [Intentionally omitted.]
</TABLE>
II-2
<PAGE> 224
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
10.3 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan(1)
10.4 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and James N.
Mills(1)
10.5 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and David M.
Sindelar(1)
10.6 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and Larry S.
Bacon(1)
10.7 -- Amended and Restated Stock Option Agreement dated as of
November 26, 1996 between Circo Technologies Group, Inc.,
formerly Circo Craft Holding Company and W. Thomas
McGhee(1)
10.8 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and James N. Mills(1)
10.9 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and David M. Sindelar(1)
10.10 -- Stock Option Agreement dated as of June 6, 1997 between
Viasystems Group, Inc. and Larry S. Bacon(1)
10.11 -- Stock Option Agreement dated as of June 6 1997 between
Viasystems Group, Inc. and W. Thomas McGhee(1)
10.12 -- Viasystems Group, Inc. Stock Option Agreement dated as of
February 4, 1997, with Richard W. Vieser(1)
10.13 -- Viasystems Group, Inc. Stock Option Agreement dated as of
February 4, 1997, with Kenneth F. Yontz(1)
10.14 -- Third Amended and Restated Monitoring and Oversight
Agreement, dated June 6, 1997, among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp.,
Circo Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments plc, Chips
Acquisition Limited and Hicks, Muse & Co. Partners,
L.P.(1)
10.15 -- Third Amended and Restated Financial Advisory Agreement,
dated June 6, 1997, among Viasystems Group, Inc.,
Viasystems, Inc., Viasystems Technologies Corp., Circo
Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments plc, Chips
Acquisition Limited and Hicks, Muse & Co. Partners,
L.P.(1)
10.16 -- Purchase Agreement, dated as of June 2, 1997, by and
among Viasystems, Inc. and Chase Securities Inc., NatWest
Capital Markets Limited and Schroder Wertheim & Co.
Incorporated(1)
10.17 -- Exchange and Registration Rights Agreements, dated as of
June 6, 1997, by and among Viasystems, Inc. and Chase
Securities, Inc., NatWest Capital Markets Limited and
Schroder Wertheim & Co. Incorporated(1)
10.18 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and James N. Mills(1)
10.19 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and David M. Sindelar(1)
10.20 -- Executive Employment Agreement dated as of January 1,
1997, by and among Circo Technologies Group, Inc., Circo
Craft Technologies, Inc. and Robert N. Mills(1)
</TABLE>
II-3
<PAGE> 225
<TABLE>
<C> <S>
10.21 -- Executive Employment Agreement dated as of January 1, 1997, by and among Circo Technologies Group,
Inc., Circo Craft Technologies, Inc. and Larry S. Bacon(1)
10.22 -- Executive Employment Agreement dated as of January 1, 1997, by and among Circo Technologies Group,
Inc., Circo Craft Technologies, Inc. and W. Thomas McGhee(1)
10.23 -- Executive Employment Agreement dated as of January 1, 1997, by and among Circo Technologies Group,
Inc., Circo Craft Technologies, Inc. and Gerald C. Nelson(1)
10.24 -- Agreement dated as of December 30, 1996, between Circo Craft Technologies, Inc. and the
Communication Workers of America(1)
10.25 -- Environmental, Health and Safety Agreement, dated as of November 26, 1996, between Lucent
Technologies and Circo Craft Technologies, Inc.(1)
12.1 -- Computation of Ratio of Earnings to Fixed Charges.*
16.1 -- Letter from Deloitte & Touche regarding change in certifying accountant for Circo Craft(1)
16.2 -- Letter from KPMG Audit Plc regarding change in auditors*
16.3 -- Letter from Ernst & Young regarding change in auditors*
21.1 -- Subsidiaries of Viasystems, Inc.(1)
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the opinion filed as Exhibit 5.1 to this
Registration Statement)(1)
23.2 -- Consent of Coopers & Lybrand L.L.P., independent accountants*
23.3 -- Consent of Coopers & Lybrand L.L.P., independent accountants*
23.4 -- Consent of Coopers & Lybrand, chartered accountants*
23.5 -- Consent of Deloitte & Touche, chartered accountants*
23.6 -- Consent of Coopers & Lybrand L.L.P., independent accountants*
23.7 -- Consent of KPMG Audit Plc, independent auditors*
23.8 -- Consent of Ernst & Young, independent auditors*
24.1 -- Powers of Attorney (see pages II-4 of this Registration Statement)
25.1 -- Statement of Eligibility and Qualification of The Bank of New York, as Trustee under the Indenture
filed as Exhibit 4.1 on Form T-1(1)
27.1 -- Financial Data Schedule*
99.1 -- Form of Letter of Transmittal(1)
99.2 -- Form of Notice of Guaranteed Delivery(1)
</TABLE>
- ---------------
(1) Previously filed.
* Filed herewith.
(b) Financial Statement Schedules:
The following financial statement schedule is included in this Registration
Statement:
S-1 Report of Independent Public Accountants on Financial Statement
Schedule
S-2 Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not
present or is not present in the amounts sufficient to require submission of the
schedules, or because the information required is included in the financial
statements and notes thereto.
II-4
<PAGE> 226
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(h) See Item 14.
II-5
<PAGE> 227
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of St.
Louis, State of Missouri, on November 11, 1997.
VIASYSTEMS, INC.
By: /s/ JAMES N. MILLS
----------------------------------
James N. Mills
Chairman of the Board of Directors
and Chief Executive Officer
Each person whose signature to this Registration Statement appears below
hereby appoints James N. Mills and David M. Sindelar, and each of them
individually, any one of whom may act without the joinder of the other, as his
agent and attorney-in-fact to sign on his behalf individually and in the
capacity stated below and to file all pre- and post-effective amendments to this
Registration Statement, which may make such changes and additions to this
Registration Statement as such agent and attorney-in-fact may deem necessary or
appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES N. MILLS Chairman of the Board of November 11, 1997
- ----------------------------------------------------- Directors and Chief
James N. Mills Executive Officer
(Principal Executive
Officer)
* Chief Financial Officer November 11, 1997
- ----------------------------------------------------- (Principal Accounting
David M. Sindelar and Financial Officer)
* President, Chief Operating November 11, 1997
- ----------------------------------------------------- Officer and Director
Robert N. Mills
* Director November 11, 1997
- -----------------------------------------------------
Thomas O. Hicks
* Director November 11, 1997
- -----------------------------------------------------
Jack D. Furst
* Director November 11, 1997
- -----------------------------------------------------
Richard W. Vieser
* Director November 11, 1997
- -----------------------------------------------------
Kenneth F. Yontz
*By: /s/ JAMES N. MILLS
------------------------------------------------
James N. Mills
Attorney-In-Fact
</TABLE>
II-6
<PAGE> 228
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Viasystems Group, Inc.:
In connection with our audit of the consolidated financial statements of
Viasystems Group, Inc. and subsidiaries as of December 31, 1996, and for the
period from inception (August 28, 1996) to December 31, 1996, which financial
statements are included in the Registration Statement on Form S-1, we have also
audited the financial statement schedule included herein.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, present fairly, in
all material respects, the information required to be included herein.
Coopers & Lybrand L.L.P.
St. Louis, Missouri
February 28, 1997
S-1
<PAGE> 229
VIASYSTEM GROUP, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts... -- 17 392(a) --(b) 409
Reserve for excess and obsolete
inventory....................... -- 0 3,620(a) (363)(b) 3,257
</TABLE>
- ---------------
(a) Allowance of acquired company at acquisition date.
(b) Write-offs, net of recoveries.
S-2
<PAGE> 230
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
12.1 -- Computation of Ratio of Earnings to Fixed Charges
16.2 -- Letter from KPMG Audit plc regarding change in auditors
16.3 -- Letter from Ernst and Young regarding change in auditors
23.2 -- Consent of Coopers & Lybrand L.L.P., independent
accountants
23.3 -- Consent of Coopers & Lybrand L.L.P., independent
accountants
23.4 -- Consent of Coopers & Lybrand, chartered accountants
23.5 -- Consent of Deloitte & Touche, chartered accountants
23.6 -- Consent of Coopers & Lybrand L.L.P., independent
accountants
23.7 -- Consent of KPMG Audit Plc, independent auditors
23.8 -- Consent of Ernst & Young, independent auditors
27.1 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 12.1
VIASYSTEMS GROUP, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
---------------------- ----------------------
DEC. 1996 JUNE 1997 DEC. 1996 JUNE 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before taxes and
extraordinary item....................... $(54,166) $(305,603) $(58,506) $(28,430)
Fixed charges
Interest expense......................... 2,503 22,127 77,597 41,470
Amortization of deferred financing
costs................................. 470 2,796 9,410 3,665
1/3 of rent expense...................... 83 260 1,140 437
-------- --------- -------- --------
Earnings................................... (51,110) (280,420) 29,641 17,142
Fixed charges.............................. 3,056 25,183 88,147 45,572
-------- --------- -------- --------
Ratio of earnings to fixed charges......... N/A N/A N/A N/A
======== ========= ======== ========
Deficiency of earnings to cover fixed
charges.................................. $(54,166) $(305,603) $(58,506) $(28,430)
======== ========= ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 16.2
[KPMG AUDIT PLC LETTERHEAD]
Securities and Exchange Commission
450 5th Street NW
Washington, DC 20549
United States of America
31 October 1997
Dear Sirs
We have read the statements made by Viasystems, Inc. which we understand will
be filed with the Securities and Exchange Commission pursuant to Item 304 of
Regulation S-K, as part of that company's Form S-1 for the month of October
1997. We agree with the statements concerning our Firm in such Form S-1.
Yours faithfully
/s/ KPMG AUDIT PLC
KPMG Audit Plc
<PAGE> 1
EXHIBIT 16.3
[ERNST & YOUNG LETTERHEAD]
31 October 1997
Securities and Exchange Commission
450 5th Street N.W.
Washington, D.C. 20549
Dear Sirs:
We have read the statements pertaining to our firm made by Viasystems, Inc., in
its Registration Statement on form S-1 (No. 333-29727) under the caption
"Changes in and disagreements with accountants and financial disclosure" and
are in agreement therewith.
Yours faithfully
/s/ ERNST & YOUNG
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated June 18, 1997, on our audit of the balance sheet of Viasystems,
Inc. We also consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
November 12, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 28, 1997, except for Note 18, for which the date is
June 6, 1997, on our audit of the financial statements and financial statement
schedule of Viasystems Group, Inc. We also consent to the reference to our firm
under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
November 12, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF CHARTERED ACCOUNTANTS
We hereby consent to the use in the Registration Statement of Viasystems,
Inc. on Form S-1 of our report dated December 20, 1996, relating to the
consolidated balance sheet of Circo Craft Co. Inc. as at September 30, 1996, and
the consolidated statements of earnings, retained earnings, and changes in
financial position for the nine-month period then ended, included in the
Prospectus, which is part of the Registration Statement, and to the reference to
our firm under the heading "Experts".
Coopers & Lybrand
General Partnership
Chartered Accountants
Montreal, Quebec
November 12, 1997
<PAGE> 1
EXHIBIT 23.5
CONSENT OF CHARTERED ACCOUNTANTS
The Directors
Circo Craft Co. Inc.
We hereby consent to the use in the Registration Statement of Viasystems,
Inc. on Form S-1 of our report dated February 1, 1996 relating to the
consolidated balance sheet of Circo Craft Co. Inc. as at December 31, 1995 and
the consolidated statements of earnings, retained earnings and changes in
financial position for each of the years in the two-year period ended December
31, 1995 included in the Prospectus, which is part of the Registration
Statement, and to the references to us under the heading "Experts" in such
Prospectus.
Deloitte & Touche
Chartered Accountants
Montreal, Quebec
November 11, 1997
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated February 21, 1997, on our audit of the statements of net assets
sold to Viasystems Technologies Corp. of the Interconnection Business of the
Microelectronics Group, Interconnection Technologies Unit of Lucent Technologies
Inc. and the related statements of operations. We also consent to the reference
to our firm under the caption "Experts."
Coopers & Lybrand L.L.P.
St. Louis, Missouri
November 12, 1997
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Forward Group PLC:
We consent to the use of our report dated 7 April 1997 on the consolidated
financial statements of Forward Group PLC as of 31 January 1997 and 1996 and for
each of the years in the three-year period ended 31 January 1997 included
therein, and to the reference to our firm under the heading "Experts" in this
registration statement on Form S-1.
KPMG Audit Plc
Chartered Accountants
Birmingham, England
November 11, 1997
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated May 27, 1997, with respect to the consolidated
financial statements of Interconnection Systems (Holdings) Limited in Amendment
No. 3 to the Registration Statement (Form S-1 No. 333-29727) and related
Prospectus of Viasystems, Inc. for the registration of $400,000,000 9 3/4%
Senior Subordinated Notes due 2007.
ERNST & YOUNG
Chartered Accountants
Newcastle upon Tyne, England
November 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
VIASYSTEMS GROUP, INC. AUDITED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR
THE PERIOD ENDED DECEMBER 31, 1996 AND THE VIASYSTEMS, INC. UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30,
1997, BOTH INCLUDED IN THE VIASYSTEMS, INC. S-1.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> AUG-28-1996 JAN-1-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 16,117 50,823
<SECURITIES> 0 0
<RECEIVABLES> 37,164 133,546
<ALLOWANCES> 15 0
<INVENTORY> 43,123 67,123
<CURRENT-ASSETS> 103,722 261,108
<PP&E> 212,836 447,413
<DEPRECIATION> 4,088 40,494
<TOTAL-ASSETS> 387,741 1,012,661
<CURRENT-LIABILITIES> 58,784 170,863
<BONDS> 0 0
0 0
30 0
<COMMON> 341 0
<OTHER-SE> 54,602 (66,496)
<TOTAL-LIABILITY-AND-EQUITY> 387,741 1,012,661
<SALES> 50,400 346,692
<TOTAL-REVENUES> 50,400 346,692
<CGS> 42,052 254,648
<TOTAL-COSTS> 42,052 254,648
<OTHER-EXPENSES> 59,279<F1> 372,654<F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,973 24,923
<INCOME-PRETAX> (54,166) (305,603)
<INCOME-TAX> (5,242) 891
<INCOME-CONTINUING> (48,742) (306,494)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 7,796
<CHANGES> 0 0
<NET-INCOME> (48,742) (314,290)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1>Includes charges of $50,800 relating to the write-off of acquired in-process
R&D costs associated with the acquisitions of Circo Craft and the Lucent
Division. The write-off relates to acquired in-process R&D for projects that do
not have a future alternative use.
<F2>Includes charges of $294,500 relating to the write-off of acquired
in-process R&D costs associated with the acquisitions of Forward Group and ISL.
The write-off relates to acquired in-process R&D for projects that do not have a
future alternative use.
</FN>
</TABLE>
