<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
--------------------------------------------------
OR
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 14 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------------- ---------------------
333-29727
(Commission File Number)
VIASYSTEMS, INC.
(Exact name of Registrant as specified in charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
43-1777252
(I.R.S. Employer Identification No.)
101 SOUTH HANLEY ROAD
ST. LOUIS, MO 63105
(314) 727-2087
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class August 12, 1998
------------------ ------------------
Viasystems, Inc.
Common Stock 1,000 shares
<PAGE> 2
VIASYSTEMS, INC. & SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
VIASYSTEMS, INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998............................... 2
Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 1997 and 1998.................................................................................... 3
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and 1998.................................................................................... 4
Notes to Condensed Consolidated Financial Statements.......................................................... 5
FORWARD GROUP PLC
Condensed Consolidated Profit and Loss Accounts for the three months ended
March 31, 1997............................................................................................ 10
Condensed Consolidated Statement of Cash Flows for the three months ended
March 31, 1997............................................................................................ 11
Notes to the Condensed Consolidated Financial Statements...................................................... 12
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
Condensed Consolidated Profit and Loss Accounts for the three months ended
April 4, 1997............................................................................................. 13
Condensed Consolidated Statement of Cash Flows for the three months ended
April 4, 1997............................................................................................. 14
Notes to the Condensed Consolidated Financial Statements...................................................... 15
Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 16
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K........................................................................... 19
SIGNATURES.......................................................................................................... 20
</TABLE>
<PAGE> 3
VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
------------ -----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................. $ 27,538 $ 20,313
Accounts receivable, net .................................. 113,269 174,643
Inventories, net .......................................... 84,631 107,062
Prepaid expenses and other ................................ 26,240 67,521
----------- -----------
Total current assets ................................... 251,678 369,539
Property, plant and equipment, net ........................ 448,128 570,158
Intangibles and other assets .............................. 369,106 450,885
----------- -----------
Total assets ........................................... $ 1,068,912 $ 1,390,582
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations ............... $ 31,363 $ 44,758
Accounts payable .......................................... 86,941 130,680
Accrued and other liabilities ............................. 85,860 170,024
Income taxes payable ...................................... 30,855 14,598
----------- -----------
Total current liabilities .................................... 235,019 360,060
Long-term obligations, less current maturities ............... 816,012 1,011,046
Other long-term liabilities .................................. 110,074 141,546
Stockholder's equity (deficit):
Contributed capital ....................................... 282,763 338,313
Accumulated deficit ....................................... (376,230) (462,981)
Cumulative translation adjustments ........................ 1,274 2,598
----------- -----------
Total stockholder's equity (deficit) ................... (92,193) (122,070)
----------- -----------
Total liabilities and stockholder's equity (deficit) ... $ 1,068,912 $ 1,390,582
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ....................................... $ 226,808 $ 261,872 $ 346,692 $ 504,318
Operating expenses:
Cost of goods sold ........................... 163,848 189,661 253,917 367,350
Selling, general and administrative .......... 21,426 28,699 32,582 56,408
Depreciation and amortization ................ 31,826 33,584 46,303 65,887
Write-off of acquired in-process R&D ......... 294,500 -- 294,500 62,000
--------- --------- --------- ---------
Operating income (loss) ................... (284,792) 9,928 (280,610) (47,327)
Other expense:
Interest expense ............................. 17,072 21,804 22,127 44,891
Amortization of deferred financing costs ..... 1,859 2,414 2,796 4,406
Other, net ................................... 122 1,729 70 2,157
--------- --------- --------- ---------
Loss before income tax provision and
extraordinary item ...................... (303,845) (16,019) (305,603) (98,781)
Provision (benefit) for income taxes ............ 296 (6,763) 891 (12,030)
--------- --------- --------- ---------
Loss before extraordinary item ............. (304,141) (9,256) (306,494) (86,751)
Extraordinary item - loss on early
extinguishment of debt, net of income
tax benefit of $4,332 ................... 7,796 -- 7,796 --
--------- --------- --------- ---------
Net loss ........................................ $(311,937) $ (9,256) $(314,290) $ (86,751)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1997 1998
--------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss ............................................................... $(314,290) $ (86,751)
Adjustments to reconcile net loss to net cash from operating activities:
Extraordinary Item .................................................. 12,128 --
Write-off of acquired in-process research and development ........... 294,500 62,000
Depreciation ........................................................ 24,758 35,747
Amortization of intangibles ......................................... 21,545 30,140
Amortization of deferred financing costs ............................ 2,796 4,406
Deferred taxes ...................................................... 341 (11,575)
Change in assets and liabilities, net of acquisitions:
Accounts receivable ............................................. (26,972) (15,092)
Inventories ..................................................... 3,833 (474)
Prepaid expenses and other ...................................... (1,548) (8,772)
Accounts payable ................................................ (1,813) (3,326)
Accrued and other liabilities ................................... 6,779 (40,157)
--------- ---------
Net cash from operating activities ..................................... 22,057 (33,854)
--------- ---------
Cash flows provided by (used in) investing activities:
Acquisitions, net of cash acquired .................................. (155,904) (145,464)
Capital expenditures ................................................ (42,388) (58,029)
--------- ---------
Net cash used in investing activities .................................. (198,292) (203,493)
--------- ---------
Cash flows provided by (used in) financing activities:
Equity proceeds ..................................................... 59,777 55,552
Proceeds from the issuance of Senior Subordinated Notes due 2007 .... 400,000 --
Proceeds from the issuance of Series B Senior Subordinated
Notes due 2007 .................................................. -- 104,500
Proceeds from the Subordinated Credit Facilities .................... 216,000 --
(Repayments) Borrowings under the Term Facilities ................... (151,464) 103,438
Net borrowings under the Revolvers .................................. -- 13,663
Repayment of the Subordinated Credit Facilities ..................... (216,000) --
Repayment of the Chips Loan Notes Liability ......................... -- (33,938)
Repayment of other long-term obligations ............................ (61,436) (934)
Financing costs ..................................................... (34,491) (12,271)
--------- ---------
Net cash used in financing activities .................................. 212,386 230,010
--------- ---------
Effect of exchange rate changes on cash ................................ (1,445) 112
--------- ---------
Net change in cash and cash equivalents ................................ 34,706 (7,225)
Cash and cash equivalents - beginning of the period .................... 16,117 27,538
--------- ---------
Cash and cash equivalents - end of the period .......................... $ 50,823 $ 20,313
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
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. ("Group"). Viasystems was formed on April 2, 1997, as a subsidiary
of Group. On April 10, 1997, Group 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 Group, 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 Group, and the
results of operations of Group 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 Group, and Group
and its subsidiaries prior to such contribution.
Unaudited Interim Condensed Consolidated Financial Statements
The unaudited interim condensed consolidated financial statements reflect
all adjustments consisting only of normal recurring adjustments that are, in the
opinion of management, necessary for a fair presentation of financial position
and results of operations. The results for the three and six months ended June
30, 1998, are not necessarily indicative of the results that may be expected for
a full fiscal year. These financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1997.
Statement of Cash Flows
Interest paid for the six months ended June 30, 1997 and 1998 was
approximately $14,388 and $44,578, respectively. Income taxes paid for the six
months ended June 30, 1997 and 1998 was approximately $604 and $16,186,
respectively.
Reclassifications
Certain reclassifications have been made to prior year information to
conform with the current year's presentation.
2. INVENTORIES
The composition of inventories at June 30, 1998, is as follows:
<TABLE>
<S> <C>
Raw materials ........... $ 34,418
Work-in-process ......... 31,699
Finished goods .......... 40,945
--------
Total ................... $107,062
========
</TABLE>
5
<PAGE> 7
3. ACQUISITIONS
In February 1998, the Company acquired all the outstanding shares of Print
Service Holding N.V., the parent holding company of Mommers Print Service B.V.
("Mommers"), a printed circuit board ("PCB") manufacturer located in The
Netherlands and specializing in the production of high-volume, medium to
high-complexity PCBs and backplanes, for a cash purchase price of approximately
$59,399, plus assumed obligations. Accordingly, the results of operations of
Mommers since its acquisition are included in the results of operations of the
Company.
The Mommers 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 portion of the purchase price, as described below, to
intangible assets, including 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 $20,000 and was charged to
expense as of the acquisition date. The other acquired intangibles include
developed technologies, 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 ..................... $ 25,428
Property, plant and equipment ...... 40,685
Acquired intangibles ............... 13,000
In-process R&D ..................... 20,000
Goodwill ........................... 1,383
Current liabilities ................ (30,378)
Non-current liabilities ............ (10,719)
--------
Total ..................... $ 59,399
========
</TABLE>
In March 1998, the Company acquired all the outstanding shares of
Zincocelere S.p.A. ("Zincocelere"), a PCB manufacturer located in northern Italy
and specializing in the production of high-volume medium- to high-complexity
PCBs, for a cash purchase price of approximately $85,012, plus assumed
obligations.
The Zincocelere 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 portion of the purchase price, as described
below, to intangible assets, including 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 $42,000 and was charged to expense as of the acquisition
date. The other acquired intangibles include developed technologies, 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.
6
<PAGE> 8
The total purchase price including fees and expenses has been preliminarily
allocated to the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets .............................. $ 60,193
Property, plant and equipment ............... 51,706
Acquired intangibles ........................ 21,000
In-process R&D .............................. 42,000
Goodwill .................................... 11,069
Current liabilities ......................... (58,846)
Non-current liabilities ..................... (42,110)
--------
Total .............................. $ 85,012
========
</TABLE>
The Mommers and Zincocelere acquisitions were funded by a February 1998
offering of $100,000 of 9 3/4% Series B Senior Subordinated Notes due 2007 (see
Note 4), a $70,000 term loan and an additional equity contribution of $50,000.
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 and 1998, as though the acquisition of a PCB production facility from
Ericsson Telecom AB ("Ericsson"), the Mommers and Zincocelere Acquisitions and
the related financings and equity contribution had occurred at January 1, 1997
and January 1, 1998, respectively. In preparing this data, the financial data of
the Ericsson facility, Mommers and Zincocelere for the six months ended June 30,
1997 has been translated at an exchange rate of Swedish Krona ("SEK")
7.730=U.S.$1.00 for the Ericsson facility, of Dutch Guilders ("NGL")
1.9613=U.S.$1.00 for Mommers and of Italian Lira ("ITL") 1,699.9=U.S.$1.00 for
Zincocelere. The financial data for the Ericsson facility, Mommers and
Zincocelere for January and February, 1998 has been translated at exchange rates
of SEK 8.0011=U.S.$1.00, NGL 2.0466=U.S.$1.00, and ITL 1,787=U.S.$1.00,
respectively. These exchange rates represent the rates in effect at June 30,
1997 and February 28, 1998, respectively, which are not materially different
from the average exchange rates for the respective periods.
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1997 1998
--------- ---------
<S> <C> <C>
Net sales ............................ $ 461,910 $ 539,983
Net loss before extraordinary item ... (318,895) (93,991)
Net loss ............................. (326,691) (93,991)
</TABLE>
7
<PAGE> 9
4. LONG-TERM OBLIGATIONS
On February 9, 1998, the Company completed the offering of $100,000
principal amount of 9 3/4% Series B Senior Subordinated Notes due 2007 (the
"1998 Offering") receiving net proceeds of $104,500. As a condition of the 1998
Offering, the Second Amended and Restated Credit Agreement (the "Credit
Agreement") was amended to, among other things, establish an additional $70,000
term loan and increase the U.S. Revolving Loan by $25,000. Additionally, Hicks,
Muse, Tate & Furst, Equity Fund III, L.P. and Affiliates contributed $50,000 of
equity to the Company.
On April 24, 1998, the holders of the Chips Loan Notes redeemed $152,188 of
the Chips Loan Notes. As such, $118,250 of cash held by Bisto Funding, Inc. (a
sister company of Viasystems, Inc.) was paid to the holders of the Chips Loan
Notes. The remaining $33,938 was paid to the holders of the Chips Loan Notes by
the Company. The Company borrowed $33,938 of the available Chips Term Loan to
fund its portion of the payment of the Chips Loan Notes.
The composition of long-term obligations at June 30, 1998, is as follows:
<TABLE>
<S> <C>
Credit Agreement:
Term Facilities ..................................... $ 190,938
Revolvers ........................................... 13,663
Senior Subordinated Notes due 2007 ..................... 400,000
Series B Senior Subordinated Notes due 2007 ............ 100,000
Series B Senior Subordinated Notes due 2007, premium ... 4,378
Chips Loan Notes Liability ............................. 285,313
Other debt ............................................. 61,512
----------
1,055,804
Less: current maturities ............................... 44,758
----------
$1,011,046
==========
</TABLE>
5. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board ("FASB") adopted
Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and disclosure
of comprehensive income (loss) and its components. Effective January 1, 1998,
the Company adopted SFAS No. 130. For the three months ended June 30, 1997 and
1998, comprehensive loss was $(297,081) and $(14,022), respectively. For the six
months ended June 30, 1997 and 1998, comprehensive loss was $(299,431) and
$(85,427), respectively. The Company's other comprehensive income/loss consists
solely of foreign currency translation adjustments.
8
<PAGE> 10
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the SFAS adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value and
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allow a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999. The Company has not yet quantified the impacts of
adopting SFAS No. 133 on its consolidated financial statements nor has it
determined the timing or method of its adoption of SFAS No. 133. However, SFAS
No. 133 could increase volatility in earnings and other comprehensive income.
In April 1998, the FASB adopted Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities," which requires costs of
start-up activities and organization costs to be expensed as incurred. SOP 98-5
is effective for financial statements for fiscal years beginning after December
15, 1998. The Company will adopt SOP 98-5 in fiscal year 1999 and will report
the write off of the net book value of start-up costs as of January 1, 1999, as
a cumulative effect of a change in accounting principle.
In February 1998, the FASB adopted SFAS No. 132, "Employer's Disclosure
about Pensions and Other Post Retirement Benefits," which establishes reporting
requirements related to a business' pension and other post retirement benefits.
SFAS No. 132 is effective for fiscal years beginning after December 15, 1997,
and does not apply to interim financial statements in the year of adoption. The
Company will adopt SFAS No. 132 for the fiscal year ended December 31, 1998. The
Company does not expect SFAS No. 132 to have a significant impact on its
consolidated financial statements and the related disclosures.
In June 1997, the FASB adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which establishes reporting requirements
related to a business' operating segments, products and services, geographic
areas of operations and major customers. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997, and does not apply to interim financial
statements in the year of adoption. The Company will adopt SFAS No. 131 for the
fiscal year ended December 31, 1998. The Company does not expect SFAS No. 131 to
have a significant impact on its consolidated financial statements and the
related disclosures.
9
<PAGE> 11
FORWARD GROUP PLC
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months
ended
March 31,
1997
------------
<S> <C>
Turnover
Continuing operations ............................ L.25,287
--------
25,287
Operating profit
Continuing operations ............................ 2,853
--------
2,853
Expenses related to sale ......................... (1,318)
Net interest payable ............................. (381)
--------
Profit on ordinary activities before taxation ......... 1,154
Tax on profit on ordinary activities .................. (833)
--------
Profit for the financial period ....................... 321
--------
Retained profit for the financial period .............. L. 321
========
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of this Financial Statement.
10
<PAGE> 12
FORWARD GROUP PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1997
------------
<S> <C>
Net cash inflow from operating activities........................... L.3,173
Returns on investments and serving of finance
Interest received.............................................. 8
Interest paid.................................................. (332)
Dividends paid................................................. (552)
--------
Net cash outflow from returns on investments
and serving of finance......................................... (876)
UK tax paid ...................................................... (162)
Investing activities
Purchase of tangible fixed assets.............................. (488)
--------
Net cash (outflow) from
investing activities........................................... (488)
--------
Net cash inflow/(outflow) before financing.......................... 1,647
Financing
Issue of ordinary share capital................................ 78
Repayment of bank loan......................................... (180)
Capital element of hire purchase
and finance lease payments................................. (734)
--------
Net cash (outflow) from financing................................... (836)
--------
Net increase in cash and
cash equivalents............................................... L. 811
========
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of this Financial Statement.
11
<PAGE> 13
FORWARD GROUP PLC
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
(UNAUDITED)
1. BASIS OF PRESENTATION
Accounting convention
The financial statements are prepared in accordance with applicable United
Kingdom accounting standards.
Consolidated Financial Data
The consolidated financial statements for the three months ended March 31,
1997 are unaudited. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the results of operations have been included.
12
<PAGE> 14
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(EXPRESSED IN BRITISH POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months
ended
April 4,
1997
------------
<S> <C>
Turnover ............................... L.38,266
Cost of sales ..................... 33,711
--------
Gross profit ...................... 4,555
Distribution costs ................ 525
Administrative expenses ........... 1,557
--------
2,473
Other operating income ............ 44
--------
Operating profit ....................... 2,517
Interest receivable ............... 48
Interest payable .................. (308)
--------
Profit on ordinary activities
before taxation ................... 2,257
Tax on ordinary activities ........ 668
--------
Profit for the year after taxation ..... 1,589
Dividends ......................... 150
--------
Retained profit for the period ......... L. 1,439
========
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of this Financial Statement.
13
<PAGE> 15
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF BRITISH POUNDS STERLING)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months
Ended
April 4,
1997
------------
<S> <C>
Net cash inflow from operating activities ............. L.12,430
Returns on investments and servicing of finance
Interest paid .................................... (13)
Interest received ................................ 48
Dividends paid to parent company shareholders .... (150)
--------
Net cash outflow from returns on investments
and servicing of finance ......................... (115)
--------
Taxation
Corporation tax paid ............................. (4,072)
--------
Tax paid .............................................. (4,072)
--------
Investing activities:
Payments to acquire tangible fixed assets ........ (9,490)
--------
Net cash outflow from investing activities ............ (9,490)
--------
Net cash (outflow) before financing ................... (1,247)
========
Financing
New loans ........................................ (6,089)
Repayment of loans ............................... 529
Repayment of finance leases ...................... 331
--------
Net cash (inflow) from financing ...................... (5,229)
Increase in cash and cash equivalents ................. 3,982
--------
L.(1,247)
========
</TABLE>
The Notes to the Condensed Consolidated Financial Statements
are an integral part of this Financial Statement.
14
<PAGE> 16
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENT
(EXPRESSED IN BRITISH POUNDS STERLING)
(UNAUDITED)
1. BASIS OF PRESENTATION
Accounting convention
The financial statements are prepared in accordance with applicable United
Kingdom accounting standards.
Condensed Consolidated Financial Data
The condensed consolidated financial statements for the months ended April
4, 1997 are unaudited. However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of the results of operations have been included.
15
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The discussion included herein of the Company represents the results of
operations of Viasystems, Inc. and its subsidiaries subsequent to the capital
contribution by Group and of Group and its subsidiaries prior to the capital
contribution of such subsidiaries to Viasystems, Inc.
Each of Group, Circo Craft, Viasystems Technologies, Forward Group, PLC
("Forward") and Interconnection Systems (Holdings) Limited ("ISL") are
predecessors to Viasystems, Inc. A discussion of the results of operations for
Forward and ISL follows the discussion below relating to the Company. The
separate results of Forward and ISL are impacted by a number of factors
including target markets, customers, and local economics. Differing demand for
PCBs in general and demands for different technologies of PCBs 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 discussions
of the results of operations the Company, Forward and ISL have been prepared
based upon the results of each separate entity in accordance with the local GAAP
of the entity and should be read in conjunction with unaudited condensed
consolidated financial statements and notes thereto of Viasystems, Inc.,
Forward, and ISL, all of which are included elsewhere herein.
RESULTS OF OPERATIONS
THE COMPANY
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1998
Net sales for the three months ended June 30, 1998, were $261.9 million,
representing a $35.1 million, or 15.5% increase from the comparable period in
1997. The increase is due primarily to the acquisitions of Forward and ISL
completed during the second quarter of 1997 and the acquisitions of the
Ericsson facility, Mommers and Zincocelere completed in the first quarter of
1998 partially offset by typical, industry-wide pricing pressures as well as
the negative impact of the stronger U.K. pound as it relates to continental
European currencies. The acquisitions of Forward, ISL, the Ericsson facility,
Mommers and Zincocelere are collectively herein referred to as the
Acquisitions.
Cost of goods sold for the three months ended June 30, 1998, was $189.7
million, or 72.4% of sales compared to $163.8 million, or 72.2% of sales for the
three months ended June 30, 1997. Cost of goods sold as a percent of sales
remained relatively constant year over year as cost containment offset the
above mentioned price reductions experienced by the Company.
Selling, general and administrative expenses for the three months ended
June 30, 1998, increased by $7.3 million versus the comparable period in 1997.
These costs increased primarily due to the Acquisitions, the implementation of
the Company's sales and marketing plan and planned increases in administrative
expenses at the Company's Richmond facility related to the separation from
Lucent Technologies.
Other expense increased $6.8 million, from $19.1 million in the second
quarter of 1997 to $25.9 million in the same period of 1998, due primarily to
increased interest expense and amortization of deferred financing costs related
to the debt financing incurred to fund the Acquisitions.
16
<PAGE> 18
During the first half of 1997, the Company recorded a one-time non-cash
write-off of $294.5 million related to in-process research and development
acquired in the acquisitions of Forward and ISL.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1998
Net sales for the six months ended June 30, 1998, were $504.3 million,
representing a $157.6 million, or 45.5% increase from the comparable period in
1997. The increase is due primarily to the Acquisitions partially offset by
typical, industry-wide pricing pressures as well as the negative impact of the
stronger U.K. pound as it relates to continental European currencies.
Cost of goods sold for the six months ended June 30, 1998, was $367.4
million, or 72.9% of sales compared to $253.9 million, or 73.2% of sales for the
six months ended June 30, 1997. Cost of goods sold as a percent of sales
decreased primarily due to the success of cost containment activities in excess
of the above mentioned price reductions experienced by the Company.
Selling, general and administrative expenses for the six months ended June
30, 1998, increased by $23.8 million versus the comparable period in 1997. These
costs increased primarily due to the Acquisitions, the implementation of the
Company's sales and marketing plan, and planned increases in administrative
expenses at the Company's Richmond facility related to the separation from
Lucent Technologies.
Other expense increased $26.5 million, from $25.0 million for the six
months ended June 30, 1997 to $51.5 million in the same period of 1998, due
primarily to increased interest expense and amortization of deferred financing
costs related to the debt financing incurred to fund the Acquisitions.
Depreciation and amortization increased $19.6 million for the six months
ended June 30, 1998, primarily as a result of the impact to depreciation of
acquired fixed assets and to amortization of acquired intangibles from the
acquisitions of Forward and ISL in the second quarter of 1997 and of Mommers and
Zincocelere in the first quarter of 1998.
During the first half of 1997, the Company recorded a one-time non-cash
write-off of $294.5 million related to in-process research and development
acquired in the acquisitions of Forward and ISL. During the first half of 1998,
the Company recorded a similar charge of $62.0 million related to the
acquisitions of Mommers and Zincocelere.
The Company believes that the operating results of Viasystems are not
comparable to the operating results expected to be achieved in the future due
to, among other things, the Acquisitions and the completed debt and equity
offerings in the first fiscal quarter of 1998. The Company believes that, due to
the Acquisitions, sales in subsequent periods will increase from that reported
for the six months ended June 30, 1998.
17
<PAGE> 19
FORWARD
Three Months Ended March 31, 1997
Net sales for the three months ended March 31, 1997 were (pound)25.3
million and cost of goods sold were (pound)18.9 million, or 74.9% of net sales.
Selling, general and administrative expenses for the same period were (pound)2.3
million, or 9.0% of net sales.
ISL
Three Months Ended April 4, 1997
Net sales for the three months ended April 4, 1997 were (pound)38.3 million
and cost of goods sold were (pound)28.8 million, or 75.4% of net sales. Selling,
general and administrative expenses for the same period were (pound)1.9 million,
or 5.0% of net sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements will be for debt service
requirements, working capital needs and capital expenditures. In addition, the
potential for acquisitions of other businesses by the Company in the future
likely may require external sources of debt and/or equity financing.
Net cash used in operating activities was $33.9 million for the six months
ended June 30, 1998, compared to net cash provided by operating activities of
$22.1 million for the same period in 1997. The decrease in net cash provided by
operating activities relates primarily to increases in cash paid for interest
and taxes during 1998 and timing of receipts from a major customer.
Net cash used in investing activities was $202.5 million for the six months
ended June 30, 1998, compared to $198.3 million for the six months ended June
30, 1997. The net cash used in investing activities for the first six months of
1998 included $145.5 related to the acquisitions of the Ericsson facility,
Mommers and Zincocelere and the remainder related to capital expenditures. In
1997, net cash used in investing activities included $155.9 million related to
the Forward and ISL acquisitions with the remainder related to capital
expenditures.
During 1998, the acquisitions of Mommers and Zincocelere were funded
primarily through the proceeds from the offering of $100.0 million principal
amount of 9 3/4% Series B Senior Subordinated Notes due 2007, an equity
contribution of $50.0 million and additional term loan borrowings of $70.0
million. The acquisition of the Ericsson facility was funded from cash provided
by operations. During 1997, the Company used the proceeds from an offering of
$400.0 million of 9 3/4% Senior Subordinated Notes due 2007 and an equity
contribution of approximately $60.0 million to purchase Forward and ISL, to
repay amounts outstanding under the Term Facilities and to pay financing costs.
18
<PAGE> 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C> <C>
3.1 - Certificate of Incorporation of Viasystems, Inc.
(incorporated by reference to exhibit 3.1 to the
Registration Statement filed by the Company on
Form S-1, Registration No. 333-29727).
3.2 - Bylaws of Viasystems, Inc. (incorporated by
reference to exhibit 3.2 to the Registration
Statement filed by the Company on Form S-1).
27.1 - Financial data schedule of Viasystems, Inc.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three or six
months ended June 30, 1998.
</TABLE>
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VIASYSTEMS, INC.
Dated: August 14, 1998 By:
/s/ David M. Sindelar
-----------------------------
Name: David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
20
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 20,313
<SECURITIES> 0
<RECEIVABLES> 177,729
<ALLOWANCES> 3,086
<INVENTORY> 107,062
<CURRENT-ASSETS> 355,607
<PP&E> 661,891
<DEPRECIATION> 91,733
<TOTAL-ASSETS> 1,390,582
<CURRENT-LIABILITIES> 360,060
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (122,070)
<TOTAL-LIABILITY-AND-EQUITY> 1,390,582
<SALES> 504,318
<TOTAL-REVENUES> 504,318
<CGS> 367,350
<TOTAL-COSTS> 367,350
<OTHER-EXPENSES> 184,295<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,297
<INCOME-PRETAX> (98,781)
<INCOME-TAX> (12,030)
<INCOME-CONTINUING> (86,751)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,751)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES CHARGES OF $62,000 RELATING TO THE WRITE-OFF OF ACQUIRED IN-PROCESS
RESEARCH AND DEVELOPMENT COSTS ASSOCIATED WITH THE ACQUISITIONS OF MOMMERS AND
ZINCOCELERE, THE WRITE-OFF RELATES TO ACQUIRED RESEARCH AND DEVELOPMENT
PROJECTS THAT DO NOT HAVE A FUTURE ALTERNATIVE USE.
</FN>
</TABLE>
