<PAGE> 1
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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 September 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 October 19, 1998
---------------- ----------------
Viasystems, Inc.
Common Stock 1,000 shares
<PAGE> 2
VIASYSTEMS, INC. & SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
<S> <C> <C>
VIASYSTEMS, INC. & SUBSIDIARIES
Condensed Consolidated Balance Sheets as of December 31, 1997 and September 30, 1998.......................... 2
Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 1997 and 1998............................................................................... 3
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 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............................................................................................ 9
Condensed Consolidated Statement of Cash Flows for the three months ended
March 31, 1997............................................................................................ 10
Notes to the Condensed Consolidated Financial Statements...................................................... 11
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
Condensed Consolidated Profit and Loss Accounts for the three months ended
April 4, 1997............................................................................................. 12
Condensed Consolidated Statement of Cash Flows for the three months ended
April 4, 1997............................................................................................. 13
Notes to the Condensed Consolidated Financial Statements...................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 15
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, September 30,
1997 1998
------------- -------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................. $ 27,538 $ 10,386
Accounts receivable, net.................................................. 113,269 188,264
Inventories, net.......................................................... 84,631 104,396
Prepaid expenses and other................................................ 26,240 64,709
------------- -------------
Total current assets................................................... 251,678 367,755
Property, plant and equipment, net........................................ 448,128 587,087
Intangibles and other assets.............................................. 369,106 445,660
------------- -------------
Total assets........................................................... $ 1,068,912 $ 1,400,502
============= =============
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations............................... $ 31,363 $ 43,658
Accounts payable.......................................................... 86,941 130,604
Accrued and other liabilities............................................. 85,860 165,580
Income taxes payable...................................................... 30,855 8,678
------------- -------------
Total current liabilities.................................................... 235,019 348,520
Long-term obligations, less current maturities............................... 816,012 1,021,961
Other long-term liabilities.................................................. 110,074 147,552
Stockholder's equity (deficit):
Contributed capital....................................................... 282,763 338,376
Accumulated deficit....................................................... (376,230) (478,714)
Cumulative translation adjustments........................................ 1,274 22,807
------------- -------------
Total stockholder's equity (deficit)................................... (92,193) (117,531)
------------- -------------
Total liabilities and stockholder's equity (deficit)................... $ 1,068,912 $ 1,400,502
============= =============
</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 Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1997 1998 1997 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales............................................ $ 216,828 $ 262,989 $ 563,520 $ 767,307
Operating expenses:
Cost of goods sold................................ 150,198 185,007 404,115 552,357
Selling, general and administrative............... 21,430 25,247 54,012 81,655
Depreciation and amortization..................... 26,860 43,265 73,163 109,152
Write-off of acquired in-process R&D.............. - - 294,500 62,000
----------- ----------- ------------- -----------
Operating income (loss)........................ 18,340 9,470 (262,270) (37,857)
Other expense:
Interest expense.................................. 21,441 23,382 43,568 68,273
Amortization of deferred financing costs.......... 1,871 2,383 4,667 6,789
Other, net........................................ 434 502 504 2,659
----------- ----------- ------------- -----------
Loss before income tax provision and
extraordinary item........................... (5,406) (16,797) (311,009) (115,578)
Provision (benefit) for income taxes................. 4,027 (1,064) 4,918 (13,094)
----------- ----------- ------------- -----------
Loss before extraordinary item.................. (9,433) (15,733) (315,927) (102,484)
Extraordinary item - loss on early
extinguishment of debt, net of income
tax benefit of $4,332........................ - - 7,796 -
----------- ----------- ------------- -----------
Net loss............................................. $ (9,433) $ (15,733) $ (323,723) $ (102,484)
=========== =========== ============= ===========
</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>
Nine Months Ended
September 30,
---------------------
1997 1998
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss $ (323,723) $ (102,484)
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.......................................................................... 36,514 59,125
Amortization of intangibles........................................................... 36,649 50,027
Amortization of deferred financing costs.............................................. 4,667 6,789
Deferred taxes........................................................................ (876) (10,709)
Change in assets and liabilities, net of acquisitions:
Accounts receivable............................................................... (34,022) (25,780)
Inventories....................................................................... 1,944 3,581
Prepaid expenses and other........................................................ (2,225) (9,551)
Accounts payable.................................................................. 8,593 (3,402)
Accrued and other liabilities..................................................... (3,322) (56,168)
----------- ----------
Net cash provided by (used in) operating activities...................................... 30,827 (26,572)
----------- ----------
Cash flows provided by (used in) investing activities:
Acquisitions, net of cash acquired.................................................... (155,904) (145,464)
Capital expenditures.................................................................. (69,994) (86,416)
----------- ----------
Net cash used in investing activities.................................................... (225,898) (231,880)
------------ ----------
Cash flows provided by (used in) financing activities:
Equity proceeds....................................................................... 60,701 55,616
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.................................................... - 29,260
Repayment of the Subordinated Credit Facilities....................................... (216,000) -
Repayment of the Chips Loan Notes Liability........................................... - (33,938)
Repayment of other long-term obligations.............................................. (66,875) (7,817)
Financing costs....................................................................... (34,491) (12,271)
----------- ----------
Net cash provided by financing activities................................................ 207,871 238,788
----------- ----------
Effect of exchange rate changes on cash.................................................. 2,413 2,512
----------- ----------
Net change in cash and cash equivalents.................................................. 15,213 (17,152)
Cash and cash equivalents - beginning of the period...................................... 16,117 27,538
----------- ----------
Cash and cash equivalents - end of the period............................................ $ 31,330 $ 10,386
=========== ==========
</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 nine months ended
September 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 nine months ended September 30, 1997 and 1998 was
approximately $30,913 and $55,803, respectively. Income taxes paid for the nine
months ended September 30, 1997 and 1998 was approximately $1,463 and $20,176,
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 September 30, 1998, is as follows:
<TABLE>
<S> <C>
Raw materials........................................................................... $ 35,733
Work-in-process......................................................................... 33,949
Finished goods.......................................................................... 34,714
-----------
Total................................................................................... $ 104,396
===========
</TABLE>
5
<PAGE> 7
3. ACQUISITIONS
On January 30, 1998, the Company acquired certain assets and assumed
certain liabilities of the printed circuit board ("PCB") PCB production facility
of Ericsson Telecom AB ("Ericsson") located in Sweden (the "Ericsson Facility"),
for a cash purchase price of approximately $7,000. In addition, the Company and
Ericsson signed a three-year supply agreement whereby Ericsson committed to
purchase 40% of its PCB requirements from the Company. 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 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. 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. Accordingly,
the results of operations of the Ericsson Facility, Mommers and Zincocelere
since their acquisitions are included in the results of operations of the
Company.
The Company will evaluate the capacities and production capabilities of the
plants acquired in the Ericsson, Mommers and Zincocelere acquisitions to assess
the potential costs saving from consolidating those facilities with other
Viasystems facilities to optimize its global plant utilization by shifting
production between facilities to most efficiently satisfy particular customer
needs. Any cost adjustments with such activities will be accrued and allocated
to the purchase price of the respective acquisition.
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the nine months ended
September 30, 1997 and 1998, as though the acquisitions of the Ericsson
Facility, Mommers and Zincocelere 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 nine months ended September 30, 1997 has been translated at
an exchange rate of Swedish Krona ("SEK") 7.5923=U.S.$1.00 for the Ericsson
facility, of Dutch Guilders ("NGL") 1.9908=U.S.$1.00 for Mommers and of Italian
Lira ("ITL") 1,728.8=U.S.$1.00 for Zincocelere, which represent the exchange
rates in effect at September 30, 1997. 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 1,787.0=U.S.$1.00, respectively, which represent the exchange rates in
effect at February 28, 1998. The exchange rates used to translate financial data
for pro forma purposes are not materially different from the average exchange
rates for the respective periods.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1997 1998
---- ----
<S> <C> <C>
Net sales..................................................................... $ 734,057 $ 802,972
Net loss before extraordinary item............................................ (333,158) (109,734)
Net loss...................................................................... (340,954) (109,734)
</TABLE>
6
<PAGE> 8
In connection with the April 11, 1997, acquisition of Forward Group PLC
(the "Forward Acquisition"), the Company performed a strategic review of Forward
Group PLC's existing operations. Based on this review, the Company contemplated
consolidating and closing certain operations and manufacturing facilities
acquired in the Forward Acquisition. The Company finalized its initial plan and
adjusted its accrual for severance and other employee related termination costs
and plant disposition related costs associated with these actions. Activities to
discontinue certain operations and close certain facilities have been completed.
Activities are underway to close the remaining facilities contemplated by the
accrual. These activities are expected to be completed by the end of the second
quarter of fiscal year 1999.
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.
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 September 30, 1997
and 1998, comprehensive income (loss) was $(30,602) and $4,476, respectively.
For the nine months ended September 30, 1997 and 1998, comprehensive loss was
$(330,033) and $(80,951), respectively. The Company's other comprehensive
income/loss consists solely of foreign currency translation adjustments.
6. NEW ACCOUNTING PRONOUNCEMENTS
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 ending 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.
7
<PAGE> 9
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 ending 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 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 June 1998, the FASB 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.
8
<PAGE> 10
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............................................................................... (pound) 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.................................................................(pound) 321
==============
</TABLE>
The Notes to the Condensed Consolidated
Financial Statements are an integral part of
this Financial Statement.
9
<PAGE> 11
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................................................................(pound) 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....................................................................................(pound) 811
=============
</TABLE>
The Notes to the Condensed Consolidated
Financial Statements are an integral part of
this Financial Statement.
10
<PAGE> 12
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.
11
<PAGE> 13
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 ...............................................................................................(pound) 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..........................................................................(pound) 1,439
===============
</TABLE>
The Notes to the Condensed Consolidated
Financial Statements are an integral part of
this Financial Statement.
12
<PAGE> 14
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................................................................(pound)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
----------
(pound) (1,247)
===============
</TABLE>
The Notes to the Condensed Consolidated
Financial Statements are an integral part of
this Financial Statement.
13
<PAGE> 15
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.
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Information set forth in this 10-Q regarding expected or possible future
events, including statements of the plans and objectives of management for
future growth, operations, products and services and statements related to
future economic performance, is forward-looking and subject to risks and
uncertainties. For those statements, the Company claims protection of the safe
harbor for forward-looking statements provided for by Section 27A of the
Securities Act of 1933, as amended.
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 September 30, 1997 Compared to Three Months Ended September
30, 1998
Net sales for the three months ended September 30, 1998, were $263.0
million, representing a $46.2 million, or 21.3% increase from the comparable
period in 1997. The increase is due primarily to the acquisitions of the
Ericsson facility, Mommers and Zincocelere completed in the first quarter of
1998 (the "1998 Acquisitions") and volume growth 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 and ISL in the second quarter of 1997 and the Ericsson facility, Mommers
and Zincocelere are collectively herein referred to as the Acquisitions.
Cost of goods sold for the three months ended September 30, 1998, was
$185.0 million, or 70.3% of sales compared to $150.2 million, or 69.3% of sales
for the three months ended September 30, 1997. Cost of goods sold increased as a
percent of sales year over year as a result of product mix changes from the 1998
Acquisitions as well as the above mentioned currency-related price reductions
experienced by the Company partially offset by cost containment activities.
15
<PAGE> 17
Selling, general and administrative expenses for the three months ended
September 30, 1998, increased by $3.8 million versus the comparable period in
1997. These costs increased primarily due to the 1998 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 $2.6 million, from $23.7 million in the third
quarter of 1997 to $26.3 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 1998 Acquisitions.
Depreciation and amortization increased $16.4 million for the three months
ended September 30, 1998, primarily as a result of the impact to depreciation of
acquired fixed assets and to amortization of acquired intangibles from the 1998
Acquisitions.
Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 30,
1998
Net sales for the nine months ended September 30, 1998, were $767.3
million, representing a $203.8 million, or 36.2% increase from the comparable
period in 1997. The increase is due primarily to the Acquisitions and volume
growth 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 nine months ended September 30, 1998, was $552.4
million, or 72.0% of sales compared to $404.1 million, or 71.7% of sales for the
nine months ended September 30, 1997. Cost of goods sold increased as a percent
of sales as a result of product mix changes from the 1998 Acquisitions as well
as the above mentioned currency-related price reductions experienced by the
Company partially offset by cost containment activities.
Selling, general and administrative expenses for the nine months ended
September 30, 1998, increased by $27.7 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 $29.0 million, from $48.7 million for the nine
months ended September 30, 1997 to $77.7 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 $36.0 million for the nine months
ended September 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 nine months 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
nine months of 1998, the Company recorded a similar charge of $62.0 million
related to the acquisitions of Mommers and Zincocelere.
16
<PAGE> 18
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 debt and equity offerings
completed 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 nine months ended September 30, 1998.
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 $26.6 million for the nine months
ended September 30, 1998, compared to net cash provided by operating activities
of $30.8 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 $231.9 million for the nine
months ended September 30, 1998, compared to $225.9 million for the nine months
ended September 30, 1997. The net cash used in investing activities for the
first nine months of 1998 included $145.5 million 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.
17
<PAGE> 19
YEAR 2000 UPDATE
The Company's efforts to make all of its systems Year 2000 compliant
address both hardware and software concerns. The Company's Year 2000 compliance
initiative is divided into 5 major business sections - Business Systems and
Application, Information Systems Hardware, Process Equipment, Facility Equipment
and Third Party Suppliers and Customers. The Company has formed project teams to
manage the effort and convert and test all systems for compliance
A significant component of the Company's efforts to become Year 2000
compliant began when, in order to improve access to business information through
common, integrated computing systems around the world, the Company began a
worldwide business systems installation project using a software platform from
Oracle Corporation ("Oracle"). The primary Oracle and other business systems on
which much of the Company's operations will be conducted are either already Year
2000 compliant or scheduled for Year 2000 compliance before the third quarter of
1999. At September 30, 1998, the awareness, inventory and assessment phases of
each section of the Company's Year 2000 compliance efforts either have been
completed or are nearing completion. Year 2000 compliance of the Company's
inventoried items in its business sections vary by site, however, the Company
expects all the remaining material inventoried items to become Year 2000
compliant before the end of the third fiscal quarter of 1999. The Company's
historical costs specifically to remediate Year 2000 issues are not material.
Such costs are anticipated to total approximately $2.0 million.
The failure to correct a material Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem as well as the uncertainty of
third-party suppliers and customers becoming Year 2000 compliant, the Company is
unable at this time to determine if consequences of Year 2000 failures, both
internal and external, will have a material impact on the Company's results of
operations, liquidity and financial condition. The Company believes that its
Year 2000 compliance efforts should reduce the likelihood of a material and
adverse impact to normal operations.
18
<PAGE> 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 nine
months ended September 30, 1998.
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: October 20, 1998 By: /s/ David M. Sindelar
-----------------------------------
Name: David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibits No. Description
----------- -----------
<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.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 10,386
<SECURITIES> 0
<RECEIVABLES> 191,610
<ALLOWANCES> 3,346
<INVENTORY> 104,396
<CURRENT-ASSETS> 367,755
<PP&E> 702,197
<DEPRECIATION> 115,110
<TOTAL-ASSETS> 1,400,502
<CURRENT-LIABILITIES> 348,520
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (117,531)
<TOTAL-LIABILITY-AND-EQUITY> 1,400,502
<SALES> 767,307
<TOTAL-REVENUES> 767,307
<CGS> 552,357
<TOTAL-COSTS> 552,357
<OTHER-EXPENSES> 252,807<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,062
<INCOME-PRETAX> (115,578)
<INCOME-TAX> (13,094)
<INCOME-CONTINUING> (102,484)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (102,484)
<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>
