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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, 2000
OR
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 14(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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001-15755
(Commission File Number)
VIASYSTEMS, INC.
(Exact name of Registrant as specified in charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
75-2668620
(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 [ ]
As of October 9, 2000, there were 1,000 shares of Viasystems, Inc.'s Common
Stock outstanding. Viasystems, Inc. meets the conditions set forth in General
Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this form with
the reduced disclosure format.
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VIASYSTEMS, INC. & SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Viasystems, Inc. & Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30, 2000............. 2
Condensed Consolidated Statements of Operations and Comprehensive Income for the
three and nine months ended September 30, 1999 and 2000...................................... 3
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 1999 and 2000.................................................................. 4
Notes to Condensed Consolidated Financial Statements............................................. 5
Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition....... 11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................................ 14
SIGNATURES............................................................................................. 15
</TABLE>
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VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 22,839 $ 51,453
Accounts receivable, net ........................................ 236,455 273,787
Inventories ..................................................... 176,125 202,950
Prepaid expenses and other ...................................... 51,010 88,359
----------- -----------
Total current assets ......................................... 486,429 616,549
Property, plant and equipment, net ................................... 482,144 427,067
Intangibles, net and other assets .................................... 340,653 360,993
----------- -----------
Total assets ................................................. $ 1,309,226 $ 1,404,609
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations ..................... $ 27,851 $ 17,533
Accounts payable ................................................ 187,632 197,795
Accrued and other liabilities ................................... 133,563 133,421
Income taxes payable ............................................ 25,163 21,114
----------- -----------
Total current liabilities .................................... 374,209 369,863
Long-term obligations, less current maturities .................. 1,334,672 984,689
Other long-term liabilities ..................................... 96,319 31,571
Stockholders' equity (deficit):
Common stock .................................................... -- --
Contributed capital ............................................. 706,125 1,502,922
Note due from affiliate ......................................... -- (114,814)
Accumulated deficit ............................................. (1,178,954) (1,328,556)
Accumulated other comprehensive loss ............................ (23,145) (41,066)
----------- -----------
Total stockholders' equity (deficit) ......................... (495,974) 18,486
----------- -----------
Total liabilities and stockholders' equity (deficit) ......... $ 1,309,226 $ 1,404,609
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ....................................................... $ 316,396 $ 406,504 $ 938,921 $ 1,149,373
Operating expenses:
Cost of goods sold .......................................... 245,695 308,855 709,482 881,554
Selling, general and administrative (including
one-time non-cash compensation charges of $104,351 in
March 2000) ................................................. 31,315 28,489 85,507 194,960
Depreciation ................................................ 31,108 23,114 83,543 74,892
Amortization ................................................ 17,722 11,259 42,939 35,554
Write-off of acquired in-process R&D ........................ 17,600 -- 17,600 --
----------- ----------- ----------- -----------
Operating income (loss) ................................ (27,044) 34,787 (150) (37,587)
Other expense (income):
Interest expense ............................................ 32,675 23,082 85,858 82,345
Amortization of deferred financing costs .................... 1,658 885 4,741 3,534
Other, net .................................................. 2,164 (379) 3,730 268
----------- ----------- ----------- -----------
Income (loss) before income taxes and cumulative effect of
a change in accounting principle and extraordinary item ..... (63,541) 11,199 (94,479) (123,734)
Provision (benefit) for income taxes ............................ (16,836) 1,680 (24,572) (5,328)
----------- ----------- ----------- -----------
Net income (loss) before cumulative effect of a change in
accounting principle and extraordinary item ................. (46,705) 9,519 (69,907) (118,406)
Cumulative effect on prior years - write-off of start-up
costs, net of income tax benefit of $6,734 .................. -- -- 18,443 --
Extraordinary item - loss on early extinguishment of debt,
net of income tax benefit of $0 ............................. -- -- -- 31,196
----------- ----------- ----------- -----------
Net income (loss) ............................................... (46,705) 9,519 (88,350) (149,602)
Other comprehensive income (loss):
Foreign currency translation adjustments .................... 21,489 (13,539) (17,144) (17,921)
----------- ----------- ----------- -----------
Comprehensive loss .............................................. $ (25,216) $ (4,020) $ (105,494) $ (167,523)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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VIASYSTEMS, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------
1999 2000
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (88,350) $ (149,602)
Adjustments to reconcile net loss to net cash from operating activities:
Write-off of acquired in-process research and development .............. 17,600 --
Depreciation and amortization .......................................... 126,482 110,446
Amortization of deferred financing costs ............................... 4,741 3,534
Investment income earned from joint venture ............................ -- (1,421)
Cumulative effect of a change in accounting principle -
write-off of start-up costs ......................................... 25,177 --
Non-cash compensation charges .......................................... -- 104,351
Extraordinary item - loss on early extinguishment of debt .............. -- 31,196
Deferred taxes ......................................................... (31,355) (8,300)
Change in assets and liabilities, net of acquisitions:
Accounts receivable, net ............................................ (24,067) (91,690)
Inventories ......................................................... (7,993) (30,030)
Prepaid expenses and other .......................................... (1,973) (8,497)
Accounts payable and accrued and other liabilities .................. (16,659) 42,309
Income taxes payable ................................................ 1,358 (2,203)
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Net cash provided by operating activities ................................. 4,961 93
Cash flows from investing activities:
Acquisitions, net of cash acquired ..................................... (313,843) (355,908)
Capital expenditures ................................................... (87,034) (95,263)
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Net cash used in investing activities ..................................... (400,877) (451,171)
Cash flows from financing activities:
Equity proceeds, net ................................................... 198,077 864,834
Distribution to stockholders ........................................... -- (16,213)
Net borrowings (repayments) of term loans outstanding under the Third
Amended and Restated Credit Agreement, net of cash collateral ........ 264,875 (346,262)
Borrowings under the Credit Agreement .................................. -- 150,000
Net borrowings (repayments) of revolving loans under the Third Amended
and Restated Credit Agreement ........................................ 50,307 (139,501)
Chips Term Loan - cash collateral ...................................... (89,875) --
Net repayments of other long-term obligations .......................... (10,880) (13,387)
Financing costs ........................................................ (7,706) (19,692)
Net receipt from parent ................................................ 1,623 48
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Net cash provided by financing activities ................................. 406,421 479,827
Net effect of exchange rate changes on cash ............................... (839) (135)
----------- -----------
Net change in cash and cash equivalents ................................... 9,666 28,614
Cash and cash equivalents - beginning of the period ....................... 9,335 22,839
----------- -----------
Cash and cash equivalents - end of the period ............................. $ 19,001 $ 51,453
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
Unaudited Interim Condensed Consolidated Financial Statements
The unaudited interim condensed consolidated financial statements of
Viasystems, Inc. ("Viasystems") and its subsidiaries 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,
2000, 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
Viasystems' Form 10-K and other filings made with the Securities and Exchange
Commission.
Initial Public Offering
On March 24, 2000, Viasystems Group, Inc. ("Group" together with
Viasystems, the "Company"), the holding company parent of Viasystems, completed
an initial public offering of 44,000,000 shares of common stock at $21.00 per
share with net proceeds of $873,180. Viasystems used the proceeds contributed to
it from the offering to fund the acquisition of the Wire Harness Business, to
repay amounts outstanding under the Third Amended and Restated Credit Agreement
and for general corporate purposes.
2. ACQUISITIONS
In March 2000, the Company acquired all of the outstanding shares of
Wirekraft Industries, Inc. (the "Wire Harness Business"), a wholly owned
subsidiary of International Wire Group, Inc., an affiliate of Hicks, Muse, Tate
& Furst Incorporated ("HMTF") (the "Wire Harness Acquisition") for a cash
purchase price of $210,798. The Wire Harness Business manufactures and assembles
wire harness products. The Wire Harness Acquisition occurred immediately prior
to Group's initial public offering. Viasystems and International Wire Group,
Inc. are considered entities under common control. Accordingly, the acquisition
has been accounted for on an "as if pooling basis", with the excess purchase
price over book value acquired accounted for as a distribution to Group's
stockholders. Additionally, as the acquisition has been accounted for on an "as
if pooling basis", Viasystems' condensed consolidated financial statements have
been restated to reflect the acquisition as if it occurred at the beginning of
the first period presented. A reconciliation of the results of Viasystems before
the as if pooling of the Wire Harness Business results for the three and nine
months ended September 30, 1999 and the nine months ended September 30, 2000 to
the results in this Form 10-Q is as follows:
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<TABLE>
<CAPTION>
Nine Months Ended
Three September 30,
Months Ended --------------------------
September 30, 1999 1999 2000
------------------ ----------- -----------
<S> <C> <C> <C>
Net sales:
Before as if pooling ........... $ 270,096 $ 790,481 $ 1,099,517
Wire Harness Business .......... 46,300 148,440 49,856
--------------- ----------- -----------
$ 316,396 $ 938,921 $ 1,149,373
=============== =========== ===========
Net income (loss):
Before as if pooling ........... $ (48,186) $ (93,267) $ (153,532)
Wire Harness Business .......... 1,481 4,917 3,930
--------------- ----------- -----------
$ (46,705) $ (88,350) $ (149,602)
=============== =========== ===========
</TABLE>
In March 2000, the Company acquired Marconi Communications Inc.'s Network
Components & Services European and China operations ("NC&S"), for a purchase
price of approximately $117,595 (the "NC&S Acquisition"). The results of
operations of NC&S since acquisition are included in the results of operations
of Viasystems.
The NC&S 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
excess purchase price over fair values has been preliminarily 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......................................................... $ 71,321
Property, plant and equipment.......................................... 19,868
Goodwill............................................................... 68,968
Other non-current assets............................................... 12,632
Current liabilities.................................................... (52,233)
Non-current liabilities.................................................. (2,961)
-----------
Total............................................................... $ 117,595
===========
</TABLE>
In June 2000, the Company acquired Top Line Electronics Corporation ("Top
Line") by issuing 1,580,737 shares of Group's common stock (the "Top Line
Acquisition"), preliminarily valued at $23,294. The value was determined by
using a stock price calculated by averaging the daily stock price for a period
of time prior to and subsequent to the announcement date of the acquisition.
This is subject to the issuance of additional shares based on (i) the
performance of Top Line's business through July 31, 2000 and (ii) the price of
Group's common stock for the months of January and February 2001. Top Line,
located in San Jose, California, offers design and prototype services, PCB
assembly, and full system assembly and testing. The acquisition was accounted
for using the purchase method of accounting and, accordingly, the results of
operations of Top Line since acquisition are included in the results of
operations of Viasystems. The excess purchase price over fair values has been
preliminarily allocated to goodwill and is being amortized over its estimated
useful life of 20 years.
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Included below is unaudited pro forma financial data setting forth
condensed results of operations of Viasystems for the nine months ended
September 30, 1999 and 2000, as though the acquisitions of NC&S and Top Line had
occurred at January 1, 1999.
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------
1999 2000
-------------- ------------
<S> <C> <C>
Net sales......................................................... $ 1,105,460 $ 1,241,188
Net loss before extraordinary item................................ (98,209) (116,523)
Net loss.......................................................... (98,209) (147,719)
</TABLE>
On September 29, 2000, the Company acquired Lucent Technologies' Rouen
Global Provising Center ("Rouen") for a cash purchase price of approximately
$48,000 (the "Rouen Acquisition"). Rouen, located in Rouen, France, manufactures
network transmission and radio frequency equipment. Accordingly, the balance
sheet of Rouen is included in Viasystems' consolidated balance sheet. Rouen's
results of operations will be included in the fourth quarter results of
operations of Viasystems.
3. INVENTORIES
The composition of inventories at September 30, 2000, is as follows:
<TABLE>
<S> <C>
Raw materials........................................................................... $ 97,823
Work-in-process......................................................................... 46,842
Finished goods.......................................................................... 58,285
-----------
Total................................................................................... $ 202,950
===========
</TABLE>
4. LONG-TERM OBLIGATIONS
The composition of long-term obligations at September 30, 2000, is as
follows:
<TABLE>
<S> <C>
Credit Agreement:
Term facilities, net of cash collateral................................................ $ 150,000
Revolver............................................................................... 39,800
Senior Subordinated Notes due 2007......................................................... 400,000
Series B Senior Subordinated Notes due 2007................................................ 100,000
Series B Senior Subordinated Notes due 2007, premium....................................... 3,566
Chips Loan Notes........................................................................... 285,312
Other debt................................................................................. 23,544
-----------
1,002,222
Less: current maturities................................................................... 17,533
-----------
$ 984,689
===========
</TABLE>
Viasystems used a portion of the proceeds contributed to it from Group's
initial public offering to repay all amounts due under the Third Amended and
Restated Credit Agreement. At which time, Group as guarantor, and Viasystems and
certain subsidiaries, as borrowers, entered into a new senior credit agreement
(the "Credit Agreement"). The Credit Agreement provides for (i) a $300,000 term
loan facility consisting of (a) a $150,000 term loan (the "Term Loan B") and (b)
a second $150,000 term loan (the "Chips Term Loan B"), (ii) $153,100
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term loan facility (the "Chips Term Loan A" together with the Chips Term Loan B,
the "Chips Term Loan") and (iii) a $175,000 revolving loan (the "Revolver"). The
Chips Term Loan is an unfunded term loan facility that may be drawn upon by
Viasystems so that it may satisfy the loan notes issued in connection with the
acquisition of Interconnection Systems (Holdings) Limited ("ISL") (the "Chips
Loan Notes"). Borrowings under the Credit Agreement are collateralized by first
priority mortgages and liens on substantially all of the material assets of
Viasystems and its subsidiaries.
At September 30, 2000, Viasystems had $150,000 outstanding under the Term
Loan B and $150,000 under the Chips Term Loan B. The $150,000 outstanding under
the Chips Term Loan B has been fully cash collateralized. At September 30, 2000,
Viasystems had $39.8 million outstanding under the Revolver.
5. EXTRAORDINARY ITEM
During the nine months ended September 30, 2000, Viasystems recorded, as an
extraordinary item, a one-time, non-cash write-off of deferred financing fees of
approximately $31,196 (net of income tax benefit of $0) related to deferred
financing fees incurred on debt under the old credit agreement retired before
maturity with proceeds received by it from Group's initial public offering.
6. NON-CASH COMPENSATION EXPENSE AND OTHER CHARGES
In connection with Group's initial public offering, Group amended the terms
of the performance stock options held by members of management that eliminated
the exercisability restrictions and variable exercise price terms. The amended
performance options have a fixed exercise price and are immediately exercisable.
As a result of these amendments, Viasystems recorded a one-time non-cash
compensation expense charge of approximately $33,635 during the nine months
ended September 30, 2000.
Also in connection with the initial public offering, Group converted each
6 2/3 shares of class A common stock and class A series II common stock into one
share of common stock. This conversion eliminated the variable terms of the
class A and class A series II common stock and resulted in a one-time non-cash
compensation expense charge of approximately $62,945 recorded during the nine
months ended September 30, 2000.
Additionally, in connection with the initial public offering, Group
terminated the monitoring and oversight agreement and financial advisory
agreement with an affiliate of HMTF. As consideration for HMTF's willingness to
agree to such termination, Group granted to an affiliate of HMTF and partners of
HMTF options to purchase an aggregate 2,134,000 shares of Group's common stock
at an exercise price equal to $21.00 per share. The option grant resulted in a
net one-time non-cash compensation expense charge of approximately $7,771
recorded during the nine months ended September 30, 2000.
7. BUSINESS SEGMENT INFORMATION
Viasystems adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information," during fiscal year 1999. Viasystems' chief
operating decision-maker is the President/Chief Operating Officer. Based on the
evaluation of financial information by the President/Chief Operating Officer,
Viasystems operates in one business segment--the manufacture, testing, design
and servicing of a full spectrum of PCBs, custom backpanel interconnect devices,
wire harness and cable assemblies and electronic assembly services.
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Pertinent financial data by major geographic segments is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales:
North America ............. $ 182,866 $ 271,041 $ 574,951 $ 705,547
Europe .................... 105,377 70,592 339,809 273,980
Asia ...................... 31,298 71,846 33,281 186,594
Eliminations .............. (3,145) (6,975) (9,120) (16,748)
----------- ----------- ----------- -----------
Total ..................... $ 316,396 $ 406,504 $ 938,921 $ 1,149,373
=========== =========== =========== ===========
Operating income (loss):
North America ............. $ 9,138 $ 22,185 $ 62,218 $ (57,270)
Europe .................... (19,883) 2,234 (46,506) (3,985)
Asia ...................... (16,299) 10,368 (15,862) 23,668
Eliminations .............. -- -- -- --
----------- ----------- ----------- -----------
Total ..................... $ (27,044) $ 34,787 $ (150) $ (37,587)
=========== =========== =========== ===========
</TABLE>
8. TRANSFER TO STOCKHOLDERS
On March 29, 2000, Viasystems effected a transfer to Group, which in turn
transferred to European PCB Group (Caymans) Limited ("NewCo"), a company owned
by certain of Group's stockholders, of all the capital stock of certain
businesses in Europe. As a result, NewCo consists primarily of the operations
formerly conducted by Forward Group Plc ("Forward"), Zincocelere S.p.A.
("Zincocelere"), ISL and the PCB production facility of Ericsson Telecom AB
("Viasystems Sweden" or the "Ericsson Facility"). In consideration for the
transfer, NewCo delivered notes payable to Viasystems for approximately $124,000
in the aggregate, which have been classified as a component of stockholders'
equity. The notes each have a 10-year term and bear interest at a rate of 9% per
annum, payable in kind by the issuance of additional notes. The net assets
transferred totaled $97,141, net of cash.
9. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued 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. However, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" in June 1999, which defers the
effective date of SFAS No. 133 for one year, to fiscal years beginning after
June 15, 2000. Viasystems 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
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volatility in earnings and other comprehensive income. In December 1999, the
Commission issued Staff Accounting Bulletin No. 101 ("SAB No. 101"), "Revenue
Recognition in Financial Statements". At this time, the financial impact, if
any, of SAB No. 101, has not been quantified. In March 2000, the FASB issued
FASB Interpretation No. 44, an interpretation of APB Opinion No. 25. The
financial impact, if any, of FASB Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation", has not been quantified.
10. SUBSEQUENT EVENTS
On October 6, 2000, the Company entered into an agreement to acquire all of
the outstanding common stock of Laughlin-Wilt Group, Inc., a business engaged in
design and prototype services for printed circuit boards, printed circuit board
assembly, full system assembly and testing, in Beaverton, Oregon and Orange
County, California for approximately 3,600,000 shares of Group's common stock
and $9.0 million in cash, plus the assumption of outstanding indebtedness.
While the Laughlin-Wilt acquisition is expected to close in the fourth
quarter of 2000, the Company cannot be assured that the closing will occur at
that time or at all.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto included in
this Form 10-Q.
Viasystems has made forward-looking statements in this Form 10-Q, including
this section entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" that are based on management's beliefs and
assumptions and on information currently available to management.
Forward-looking statements include the information concerning our possible or
assumed future results of operations, business strategies, financing plans,
competitive position, potential growth opportunities, benefits resulting from
the transactions completed and the effects of competition. Forward-looking
statements include all statements that are not historical facts and can be
identified by the use of forward-looking terminology such as the words
"believes," "expects," "anticipates," "intends," "plans," "estimates," or other
similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. Undue reliance should not be put on any
forward-looking statements. Viasystems does not have any intention or obligation
to update forward-looking statements after distribution of this Form 10-Q.
Many important factors could cause our results to differ materially from
those expressed in forward-looking statements. These factors include, but are
not limited to, fluctuations in our operating results and customer orders, our
competitive environment, our reliance on our largest customers, risks associated
with our international operations, our ability to protect our patents and trade
secrets, environmental laws and regulations, our relationship with unionized
employees, risk associated with our acquisition strategy, our substantial
indebtedness, and control by Group's largest stockholders.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Net sales for the three months ended September 30, 2000, were $406.5
million, representing a $90.1 million, or 28.5% increase from the same period in
1999. The increase was primarily due to volume growth in the telecom/datacom
industry and a result of acquisitions completed in 1999 and 2000, partially
offset by the reduction in sales associated with the distribution of NewCo in
March 2000.
Cost of goods sold for the three months ended September 30, 2000, was
$308.9 million, or 76.0% of sales compared to $245.7 million, or 77.7% of sales
for the three months ended September 30, 1999. Cost of goods sold as a percent
of net sales decreased primarily as a result of the distribution of NewCo in
March 2000. This decrease was partially offset by a higher percentage of EMS
sales in 2000, which have lower margins.
Selling, general and administrative expenses for the three months ended
September 30, 2000, of $28.5 million decreased by $2.8 million versus the
comparable period in 1999. These costs decreased primarily due to a reduction in
selling, general and administrative expenses associated with the distribution of
NewCo in March 2000 and cost reduction activities undertaken by Viasystems,
partially offset by increases in general and administrative expenses related to
certain acquisitions completed in 1999 and 2000.
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Other expense decreased $12.9 million, from $36.5 million for the quarter
ended September 30, 1999 to $23.6 million for the same period of 2000, primarily
due to reduced interest expense related to the recapitalization in connection
with Group's initial public offering completed in March 2000.
Depreciation and amortization decreased $14.4 million, from $48.8 million
for the quarter ended September 30, 1999 to $34.4 million for the same period of
2000, primarily as a result of depreciation and amortization expense associated
with the distribution of NewCo in March 2000. This decrease was partially offset
by the impact to depreciation of acquired fixed assets and amortization of
acquired intangibles from certain acquisitions completed in 1999 and 2000.
During the three months ended September 30, 1999, Viasystems recorded a
one-time non-cash write-off of $17.6 million related to in-process research and
development acquired in the acquisition of the printed circuit board
manufacturing division ("Kalex") of Termbray Industries International (Holdings)
Limited.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Net sales for the nine months ended September 30, 2000, were $1.1 billion,
representing a $210.5 million, or 22.4% increase from the same period in 1999.
The increase was primarily due to volume growth in the telecom/datacom industry
and a result of acquisitions completed in 1999 and 2000, partially offset by the
reduction in sales associated with the distribution of NewCo in March 2000.
Cost of goods sold for the nine months ended September 30, 2000, was $881.6
million, or 76.7% of sales compared to $709.5 million, or 75.6% of sales for the
nine months ended September 30, 1999. Cost of goods sold as a percent of net
sales increased primarily due to costs incurred associated with the ramp-up of
higher technology PCBs and backpanels in North America and Europe, costs
associated with the start-up of the Chinese capacity expansion and a higher
percentage of EMS sales in 2000 which have lower margins.
Selling, general and administrative expenses (excluding one-time non-cash
charges of $104.4 million in March 2000, as described below) for the nine months
ended September 30, 2000, of $90.6 million increased by $5.1 million versus the
comparable period in 1999. These costs increased primarily due to increases in
general and administrative expenses related to certain acquisitions completed in
1999 and 2000. These increases were partially offset by a reduction in expenses
associated with the distribution of NewCo in March 2000 and cost containment
efforts resulting from headcount reductions made at our corporate offices in
1999.
In connection with the initial public offering in March 2000, Group amended
the terms of the performance stock options held by members of management that
eliminated the exercisability restrictions and variable exercise price terms.
The amended performance options have a fixed exercise price and are immediately
exercisable. As a result of these amendments, Viasystems recorded a one-time
non-cash compensation expense charge of approximately $33.6 million during the
nine months ended September 30, 2000.
Also in connection with Group's initial public offering in March 2000,
Group converted each 6 2/3 shares of class A common stock and class A series II
common stock into one share of common stock. This conversion eliminated the
variable terms of the class A and class A series II common stock and resulted in
a one-time non-cash compensation expense charge of approximately $63 million
recorded during the nine months ended September 30, 2000.
Additionally, in connection with Group's initial public offering in March
2000, Group terminated the monitoring and oversight agreement and financial
advisory agreement with an affiliate of HMTF. As
12
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consideration for HMTF's willingness to agree to such termination, Group granted
to an affiliate of HMTF and partners of HMTF options to purchase an aggregate
2,134,000 shares of Group's common stock at an exercise price equal to $21.00
per share. The option grant resulted in a net one-time non-cash compensation
expense charge of approximately $7.8 million recorded during the nine months
ended September 30, 2000.
Other expense decreased $8.2 million, from $94.3 million for the nine
months ended September 30, 1999 to $86.1 million for the same period of 2000,
primarily due to the recapitalization completed in connection with Group's
initial public offering in March 2000.
Depreciation and amortization decreased $16.1 million, from $126.5 million
for the nine months ended September 30, 1999 to $110.4 million for the same
period of 2000, primarily as a result of depreciation and amortization expense
associated with the distribution of Newco in March 2000. This decrease was
offset by the impact to depreciation of acquired fixed assets and amortization
of acquired intangibles from certain acquisitions completed in 1999 and 2000.
During 1999, Viasystems recorded a one-time non-cash cumulative effect of a
change in accounting principle of $18.4 million (net of $6.7 million income tax
benefit) related to the write-off of the net book value of start-up costs as of
January 1, 1999.
During the nine months ended September 30, 1999, Viasystems recorded a
one-time non-cash write-off of $17.6 million related to in-process research and
development acquired in the acquisition of Kalex.
During the nine months ended September 30, 2000, Viasystems recorded, as an
extraordinary item, a one-time, non-cash write-off of deferred financing fees of
approximately $31.2 million (net of $0 income tax benefit) related to deferred
financing fees incurred on debt under the old credit agreement, which was
retired before maturity with proceeds from Group's initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
Viasystems expects that its principal liquidity requirements over the next
twelve months will be for debt service requirements, working capital needs and
capital expenditures. Viasystems expects its primary sources of cash during such
time will be cash on hand, cash from operating activities and Revolver
borrowings under the Credit Agreement, which Viasystems believes will be
sufficient to meet such liquidity needs during the next twelve months. However,
the potential for acquisitions of other businesses by the Company in the future
likely may require additional debt and/or equity financing.
Net cash provided by operating activities was $0.1 million for the nine
months ended September 30, 2000, compared to net cash provided by operating
activities of $5.0 million for the same period in 1999. The decrease in net cash
provided by operating activities relates primarily to the timing of receipts
from certain major customers and investments in inventories partially offset by
the timing of payments to vendors.
Net cash used in investing activities was $451.2 million for the nine
months ended September 30, 2000, compared to $400.9 million for the nine months
ended September 30, 1999. In 2000, net cash used in investing activities
included $355.9 million related to the acquisitions of the Wire Harness
Business, NC&S, Top Line and Rouen with the remainder related to capital
expenditures. The net cash used in investing activities for the nine months
ended September 30, 1999 included $313.8 million related to the acquisitions of
PAGG Corporation ("PAGG") and Kalex with the remainder used for capital
expenditures.
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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 Form
10-Q of the Registration Statement filed by
Viasystems 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
Viasystems on Form S-1, Registration No. 333-29727).
27.1 Financial Data Schedule of Viasystems, Inc.*
(b) Reports on Form 8-K
None.
----------
*Filed herewith
14
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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 23, 2000 By:
/s/ David M. Sindelar
------------------------------------
Name: David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
By:
/s/ Joseph S. Catanzaro
------------------------------------
Name: Joseph S. Catanzaro
Title: Senior Vice President - Finance
and Chief Accounting Officer
15
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Certificate of Incorporation of Viasystems, Inc. (incorporated by
reference to exhibit 3.1 to the Form 10-Q of the Registration
Statement filed by Viasystems 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 Viasystems on Form
S-1, Registration No. 333-29727).
27.1 Financial Data Schedule of Viasystems, Inc.*
</TABLE>
----------
* Filed herewith
