<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 2000
REGISTRATION NO. 333-94321
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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VIASYSTEMS GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C> <C>
DELAWARE 3672 75-2668620
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
DAVID M. SINDELAR
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER
VIASYSTEMS GROUP, INC. VIASYSTEMS GROUP, INC.
101 SOUTH HANLEY ROAD, SUITE 400 101 SOUTH HANLEY ROAD, SUITE 400
ST. LOUIS, MISSOURI 63105 ST. LOUIS, MISSOURI 63105
(314) 727-2087 (314) 727-2087
(Address, Including Zip Code, and Telephone (Name, Address, Including Zip Code, and
Number, Including Area Code, of Registrant's Telephone Number, Including Area Code, of
Principal Executive Offices) Agent for Service)
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Copies to:
BRIAN W. DUWE, ESQ.
R. SCOTT COHEN, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM
WEIL, GOTSHAL & MANGES LLP (ILLINOIS)
100 CRESCENT COURT, SUITE 1300 333 WEST WACKER DRIVE, SUITE 2100
DALLAS, TEXAS 75201 CHICAGO, ILLINOIS 60606
(214) 746-7700 (312) 407-0700
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share.... 46,000,000 $19.00 $874,000,000 $230,736(3)
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</TABLE>
(1) Includes 6,000,000 shares which the underwriters have the option to purchase
solely to cover over-allotments.
(2) Estimated for the sole purpose of computing the registration fee pursuant to
Rule 457 under the Securities Act of 1933, as amended.
(3) $132,000 of the registration fee was paid on January 10, 2000 (based on a
maximum offering price of $500,000,000) in connection with the initial
filing of the registration statement. Accordingly, a registration fee of
$98,736 has been paid with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8, MAY
DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This registration statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of an
aggregate of 38,000,000 shares of common stock, including 6,000,000 shares the
underwriters have the option to purchase solely to cover over-allotments. The
second prospectus relates to a concurrent offering outside the United States and
Canada of an aggregate of 8,000,000 shares of common stock. The prospectuses for
each of the U.S. offering and the international offering will be identical with
the exception of an alternate front cover page for the international offering.
This alternate page appears in this registration statement immediately following
the complete prospectus for the U.S. offering.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued February 24, 2000
40,000,000 Shares
VIASYSTEMS LOGO
COMMON STOCK
------------------------
VIASYSTEMS GROUP, INC. IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $16 AND $19
PER SHARE.
------------------------
WE INTEND TO APPLY TO LIST OUR COMMON STOCK ON THE NEW YORK STOCK EXCHANGE UNDER
THE SYMBOL "VG."
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INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 11.
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PRICE $ A SHARE
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS VIASYSTEMS
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<S> <C> <C> <C>
Per Share...................... $ $ $
Total.......................... $ $ $
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Viasystems Group, Inc. has granted the underwriters the right to purchase up to
an additional 6,000,000 shares to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on
, 2000.
------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
WIT SOUNDVIEW
, 2000
<PAGE> 4
[PHOTOS OF PRINTED CIRCUIT BOARDS, BACKPANEL ASSEMBLIES AND WIRE HARNESSES AND
CABLE ASSEMBLIES]
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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Prospectus Summary................... 3
Risk Factors......................... 11
Special Note About Forward-Looking
Statements......................... 17
The Transactions..................... 18
Use of Proceeds...................... 19
Dividend Policy...................... 19
Dilution............................. 20
Capitalization....................... 21
Unaudited Pro Forma Financial
Information........................ 23
Selected Financial Data.............. 34
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................ 40
</TABLE>
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PAGE
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Business............................. 52
Management........................... 65
Principal Stockholders............... 73
Certain Transactions................. 75
Description of Indebtedness.......... 79
Description of Capital Stock......... 83
Shares Eligible for Future Sale...... 91
Important United States Federal Tax
Considerations for Non-United
States Holders..................... 92
Underwriters......................... 95
Legal Matters........................ 99
Experts.............................. 99
Additional Information............... 99
Index to Financial Statements........ F-1
</TABLE>
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Our principal executive offices are located at 101 South Hanley Road, Suite
400, St. Louis, Missouri 63105 and our telephone number at that address is (314)
727-2087.
Unless the context requires otherwise, "Viasystems," "we," "us," "our" and
similar terms refer to Viasystems Group, Inc., its consolidated subsidiaries and
the business conducted by its predecessor companies, after giving effect to the
transactions described under "The Transactions" elsewhere in this prospectus but
does not give effect to the acquisition of the business from Marconi
Communications, Inc. described under "Recent Events" elsewhere in this
prospectus. Unless we indicate otherwise, information in this prospectus assumes
the underwriters will not exercise their over-allotment option. The share and
per share information provided in this prospectus gives effect to a 1 for 6
reverse stock split, which will occur on the date of this prospectus, and,
unless otherwise indicated, assumes the issuance of 6,398,551 shares of common
stock upon the conversion of outstanding shares of class A common stock and
class A series II common stock based on an assumed initial public offering price
of $17.50 per share. We do not expect any holders of class A common stock or
class A series II common stock to convert their shares into common stock in
connection with this offering.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell shares of our common stock
and seeking offers to buy shares of our common stock, only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or any sale of the common stock.
UNTIL , 2000, 25 DAYS AFTER THE COMMENCEMENT OF THIS
OFFERING, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
2
<PAGE> 6
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company, the common stock being sold in this offering
and our financial statements and notes appearing elsewhere in this prospectus.
We are a leading worldwide independent provider of electronics
manufacturing services. Electronics manufacturing services include a wide
spectrum of services, ranging from the design, production and assembly of
electronic devices to testing and after-sales support. We serve primarily the
telecommunications and networking industries, which we believe to be the
fastest-growing customer segments of the $73 billion electronics manufacturing
services market. Our revenues for the year ended December 31, 1999 were
approximately $1 billion. We are a supplier to over 50 manufacturers of original
equipment, including industry leaders Alcatel, Cisco Systems, Delco, Ericsson,
General Electric, Intel, Lucent Technologies, Marconi Communications, Motorola,
Nortel, Siemens, Sun Microsystems and 3Com. We operate 20 manufacturing
facilities located in the United States, Canada, Mexico, the United Kingdom, the
Netherlands and China. These facilities are strategically located to take
advantage of low-cost manufacturing environments and to better serve the needs
of our customers.
We offer a wide range of products and services to original equipment
manufacturers of electronic products. Our original equipment manufacturer
customers typically use product components from one or more other companies to
build a product that they sell under their own brand name. Our products and
services consist of:
- the design and fabrication of printed circuit boards, in particular
highly complex multi-layered printed circuit boards;
- the manufacture of custom-designed backpanel assemblies, which are large
printed circuit boards into which electronic components, including other
printed circuit boards and integrated circuits, can be plugged;
- the manufacture of complex printed circuit board assemblies, which are
printed circuit boards to which electronic components, including
integrated circuits, capacitors, microprocessors and resistors, are
attached;
- the design and manufacture of wire harnesses, which are assemblies of
wires with connectors and terminals attached that transmit electricity
between two or more end points, and cable assemblies;
- the procurement and management of materials; and
- the assembly and testing of our customers' complete systems and products.
For the year ended December 31, 1999, approximately 35% of our revenues were
generated from value-added services, including the manufacture of
custom-designed backpanel assemblies, printed circuit board assemblies and wire
harnesses and cable assemblies, and 26% of our revenues were generated from the
fabrication of highly complex multi-layered printed circuit boards.
We believe that our leadership in the design and fabrication of highly
complex multi-layered printed circuit boards and custom-designed backpanel
assemblies is a competitive advantage. As a result, we gain early access to our
customers' new product designs, giving us the opportunity to use our printed
circuit board and backpanel capabilities to capture the full system assembly
business of our customers at the design stage of their product development
cycles. Our integrated manufacturing capabilities, including our ability to
manufacture wire harnesses and cable assemblies, enable us to provide a broad
array of services and offer more value to our customers.
We target leading original equipment manufacturers primarily in the
telecommunications and networking industries. We believe that these industries
represent a large and attractive market for electronics manufacturing services.
Networking companies were among the first communications equipment companies to
aggressively outsource much of their manufacturing to providers of electronics
manufacturing services.
3
<PAGE> 7
Telecommunications equipment companies have only recently begun to use providers
of electronics manufacturing services and we expect their use of electronics
manufacturing service providers to increase.
Approximately 55% of our revenues for the year ended December 31, 1999 were
from telecommunications and networking customers. The products we manufacture
for these customers include, or can be found in, a wide array of products
including switching and transmission equipment, wireless base stations,
workstations, servers and data networking equipment including hubs, routers and
switches. Given our strong relationships with leading original equipment
manufacturers in the telecommunications and networking industries, we believe we
are well positioned to participate in the outsourcing programs and asset
dispositions of those original equipment manufacturers.
Our principal competitive advantages are our advanced product capabilities,
strong customer relationships, global infrastructure, broad service offering,
supply chain management capabilities and experienced and successful management
team. These competitive advantages allow us to provide significant value to our
customers by reducing their new product development cycles, the amount of time
it takes to bring their product to market, the amount of time it takes to reach
desired volume levels of production and their overall manufacturing cost. We
believe we are the industry leader and have pioneered advances in the
manufacture of complex, technologically advanced multi-layered printed circuit
boards and custom-designed backpanel assemblies. In our state-of-the-art
manufacturing facilities, we currently produce commercial quantities of printed
circuit boards with up to 48 layers and circuit track widths as narrow as three
one-thousandths of an inch. We have the capability to produce printed circuit
boards with up to 60 layers and circuit track widths as narrow as two
one-thousandths of an inch. We have used these capabilities to participate in
the product design of many next generation products for major original equipment
manufacturers in the telecommunications and networking industries.
OUR STRATEGY
Our goal is to be the partner of choice to leading original equipment
manufacturers. Our strategy is to:
- focus on the high growth telecommunications and networking customer
segments;
- capitalize on our advanced printed circuit board and backpanel
capabilities to further expand into complete assembly and other
value-added services;
- take advantage of our ability to provide a full-service offering to, and
expand relationships with, our customers;
- concentrate on high value-added products and services;
- exploit our low-cost manufacturing locations to reduce our customers'
total costs;
- expand our manufacturing facilities geographically to better meet the
needs of our customers; and
- pursue acquisition opportunities.
OUR HISTORY
We were formed in 1996 by Hicks, Muse, Tate & Furst Incorporated and Mills
& Partners, Inc. to create a preferred global manufacturing provider to leading
original equipment manufacturers through acquisitions of printed circuit board
fabricators and backpanel assemblers. Since our formation, we have further
broadened our focus to become a leading full-solution provider in the
electronics manufacturing services industry. We have completed six acquisitions
and established operations at four newly created facilities, significantly
broadening our service offering capabilities, expanding our geographic reach and
building our customer base of leading original equipment manufacturers. Our
management team previously worked together at Berg Electronics, a leading
electronics manufacturing enterprise, where they worked directly with many of
the same original equipment manufacturer customers that are currently some of
our largest customers.
4
<PAGE> 8
THE TRANSACTIONS
In connection with the offering, we will complete several transactions,
including:
- the transfer of nine European printed circuit board manufacturing
facilities, consisting primarily of the operations formerly conducted by
Interconnection Systems Limited, Forward Group, Zincocelere and
Viasystems Sweden, to a new entity formed by our existing stockholders in
consideration for notes payable to us in the aggregate amount of $124
million; and
- the acquisition of the wire harness business of International Wire Group,
Inc., an entity controlled by affiliates of Hicks, Muse, Tate & Furst
Incorporated, for a cash purchase price of $210 million.
We are transferring the operations consisting primarily of the business
formerly conducted by Interconnection Systems Limited, Forward Group,
Zincocelere and Viasystems Sweden as part of our overall strategy to focus our
resources on value-added electronics manufacturing services for
telecommunications and networking customers. The acquisition of the wire harness
business allows us to provide our wire harnesses for products we manufacture to
our customers.
For the fiscal year ended December 31, 1999, the business we are
transferring had revenue of $364.2 million; operating income (loss), plus
depreciation, amortization and the non-cash charge relating to the impairment
loss, of $20.9 million; and a net loss before cumulative effect of a change in
accounting principle of $562.9 million. During the same period, the wire harness
business had revenue of $191.0 million; operating income (loss), plus
depreciation and amortization of $25.3 million; and income before cumulative
effect of a change in accounting principle of $5.0 million.
In connection with these transactions and concurrently with the offering,
we expect to refinance our existing senior credit facility with a new senior
credit facility.
For a more detailed description of these transactions, please see "The
Transactions" beginning on page 18.
RECENT EVENTS
On January 25, 2000, we entered into an agreement with Marconi
Communications, Inc. to acquire Marconi's network components and services
business for $115 million. This business has manufacturing facilities in Europe
and China, where it provides electronic manufacturing services primarily to
telecommunications customers, including Italtel, Lucent, Marconi, Nokia and
Siemens.
The network components and services business' products include integrated
enclosures, racks, sub-racks, cable assemblies and custom power supplies and,
through a joint venture, heat management systems. The core products of this line
are the enclosures, racks and sub-racks. These products are used primarily in
wireless base stations, telecommunications switching and transmission equipment,
cable TV infrastructure and precision control instrumentation.
For the twelve months ended December 31, 1999, the network components and
services business had revenues and operating income (loss), plus depreciation
and amortization of approximately $151.6 million and $10.6 million,
respectively. The network components and services business operates from
manufacturing facilities in England, Northern Ireland, Italy and China. In
addition the network components and services business' joint venture has
manufacturing facilities in Denmark and South Carolina.
While the acquisition of the network components and services business is
expected to close on March 30, 2000, we cannot assure you that the closing will
occur at, or subsequent to, that time. This offering is not dependent on the
closing of the acquisition.
5
<PAGE> 9
THE OFFERING
Common stock offered....... 40,000,000 shares(1)
Common stock offered in
United States offering... 32,000,000 shares
International offering... 8,000,000 shares
Common stock to be
outstanding after this
offering................. 118,001,272 shares(1)(2)
Over-allotment option...... 6,000,000 shares
Use of proceeds............ We intend to use the estimated net proceeds of
$658.5 million from the offering to fund the
acquisition of the wire harness business and to
repay a portion of our outstanding indebtedness.
See "Use of Proceeds."
Proposed New York Stock
Exchange symbol.......... VG
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(1) Excludes up to 6,000,000 shares that may be sold by us if the underwriters
exercise their over-allotment option.
(2) Excludes (a) 2,430,333 shares of common stock that are issuable upon the
exercise of our outstanding stock options that have been issued under our
management stock option plan with a weighted average exercise price of $6.99
per share, (b) 2,802,897 shares of common stock that are issuable upon the
exercise of our outstanding performance options with an exercise price of
$9.00 per share, (c) 16,666 shares of common stock that are issuable upon
the exercise of our outstanding stock options that have been issued to a
director with an exercise price of $6.00 per share, (d) 136,645 shares of
common stock that are issuable upon the exercise of our outstanding warrants
with an exercise price of $10.50 per share, (e) 2,134,000 shares of common
stock which will be issuable upon the exercise of stock options to be
granted to Hicks Muse with an exercise price equal to the initial public
offering price of our common stock and (f) 6,398,551 shares of common stock
that are issuable upon the conversion of our outstanding class A common
stock and class A series II common stock, based on an assumed initial public
offering price of $17.50 per share.
6
<PAGE> 10
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents summary historical consolidated financial data
of Viasystems Group, Inc. for the periods indicated. The financial data used in
the preparation of the summary historical consolidated financial data has been
derived from our audited financial statements for the periods indicated.
The following information should be read in conjunction with our
consolidated financial statements and the related notes, "Selected Financial
Data," and "Management's Discussion and Analysis of Results of Operations and
Financial Condition," all included elsewhere in this prospectus.
<TABLE>
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YEAR ENDED DECEMBER 31,
---------------------------------------------------
1997(1) 1998(2) 1999(3)
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(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 795,289 $ 1,031,928 $ 1,102,324
----------- ----------- -----------
Cost of goods sold................................... 554,097 723,741 816,370
Selling, general and administrative expenses......... 75,650 106,749 113,069
Depreciation and amortization........................ 110,037 166,606 174,322
Impairment loss(4)................................... -- -- 468,389
Write-off of acquired in-process research and
development(5).................................... 294,500 20,100 17,600
----------- ----------- -----------
Operating income (loss)........................... (238,995) 14,732 (487,426)
----------- ----------- -----------
Interest expense, net................................ 64,612 92,535 109,980
Amortization of deferred financing costs............. 6,629 9,354 6,619
Other expense........................................ 1,024 4,960 23,594
----------- ----------- -----------
Loss before income taxes, cumulative effect of a
change in accounting principle and extraordinary
item............................................ (311,260) (92,117) (627,619)
Provision (benefit) from income taxes................ 8,432 (7,334) (28,289)
----------- ----------- -----------
Loss before cumulative effect of change in
accounting principle and extraordinary item..... (319,692) (84,783) (599,330)
Cumulative effect -- write-off of start-up costs, net
of income tax benefit of $5,647................... -- -- 16,942
Extraordinary item -- loss on early extinguishment of
debt, net of income tax benefit of $4,332......... 7,796 -- --
----------- ----------- -----------
Net loss............................................. $ (327,488) $ (84,783) $ (616,272)
=========== =========== ===========
Basic net loss per weighted average common
share(6)........................................ $ (10.99) $ (1.62) $ (8.69)
=========== =========== ===========
Basic weighted average common shares(6)........... 26,507,409 48,205,838 62,123,268
Diluted net loss per weighted average common
share(6)........................................ $ (12.24) $ (1.82) $ (9.23)
=========== =========== ===========
Diluted weighted average common shares(6)......... 27,031,567 48,669,528 67,206,604
BALANCE SHEET DATA:
Cash and cash equivalents............................ $ 27,538 $ 9,335 $ 22,839
Working capital...................................... 16,659 19,538 99,066
Total assets......................................... 1,068,912 1,454,703 1,212,558
Total debt, including current maturities............. 847,375 1,134,495 1,362,212
Stockholders' deficit................................ (125,491) (150,519) (603,003)
</TABLE>
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(1) Amounts are derived from our audited historical financial statements for the
year ended December 31, 1997, and include the results of Forward Group and
Interconnection Systems Limited since the dates of acquisition in April
1997. See note 1 to our consolidated financial statements.
(2) Amounts are derived from our audited historical financial statements for the
year ended December 31, 1998 and include the results of the printed circuit
board production facility of Ericsson Telecom AB (Viasystems Sweden),
Mommers Print Service B.V. and Zincocelere S.p.A. since the dates of
acquisition in the first quarter of 1998. See note 1 to our consolidated
financial statements.
(3) Amounts are derived from our audited historical financial statements for the
year ended December 31, 1999, and include the results of the printed circuit
board manufacturing division of Termbray Industries International (Holdings)
Limited (Kalex) since the date of acquisition in August 1999 and PAGG
7
<PAGE> 11
Corporation since the date of acquisition in April 1999. See note 1 to our
consolidated financial statements.
(4) Represents an impairment loss related to the write-off of certain long-lived
assets in accordance with Statement of Financial Accounting Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." See note 3 to our consolidated financial
statements.
(5) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the purchase accounting for the
acquisition of Forward Group and Interconnection Systems Limited in 1997,
the Mommers and Zincocelere acquisitions in 1998 and the Kalex acquisition
in 1999. The write-off relates to acquired research and development for
projects that do not have a future alternative use. See note 1 to our
consolidated financial statements.
(6) Basic net loss per weighted average common share is computed by dividing the
net loss plus the charge for preferred stock dividends and accretion less
the loss attributable to class A common stock and class A series II common
stock by the weighted average common shares outstanding during the period.
Diluted net loss per weighted average common share is computed by dividing
the net loss plus the charge for preferred stock dividends and accretion by
the weighted average common shares outstanding during the period plus the
weighted average class A common stock and class A series II common stock on
an as if converted basis. Options and warrants were excluded from the
diluted calculation because their effect is anti-dilutive. For further
discussion of the calculation of basic and diluted loss per share, refer to
note 22 of our consolidated financial statements.
8
<PAGE> 12
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following table presents summary pro forma financial data for the
fiscal year ended December 31, 1999 giving effect to (1) the acquisitions we
completed in 1999, together with the transactions described under the heading
"The Transactions" contained elsewhere in this prospectus, and (2) the offering,
including the application of the net proceeds from the offering, in each case as
if those transactions had occurred at January 1, 1999 and as more fully
described under the heading "Unaudited Pro Forma Financial Information"
contained elsewhere in this prospectus. The pro forma balance sheet data as of
December 31, 1999 gives effect to (1) the transactions described under the
heading "The Transactions" contained elsewhere in this prospectus, and (2) the
offering, including the application of the net proceeds from the offering, in
each case, as if those transactions had occurred at the balance sheet date.
The summary pro forma financial data are not necessarily indicative of
either our future results of operations or the results of operations that would
have occurred if those events had been consummated on the indicated dates. The
following information should be read in conjunction with our consolidated
financial statements and the related notes, "Selected Financial Data,"
"Unaudited Pro Forma Financial Information," and "Management's Discussion and
Analysis of Results of Operations and Financial Condition," all included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMPLETED ACQUISITIONS,
COMPLETED ACQUISITIONS THE TRANSACTIONS
AND THE TRANSACTIONS AND THE OFFERING
----------------------- -----------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1999 1999(1)
----------------------- -----------------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $1,026,354 $ 1,026,354
Cost of goods sold.............................. 735,420 735,420
Selling, general and administrative expenses.... 82,393 82,393
Depreciation and amortization................... 124,044 124,044
Write-off of acquired in-process research and
development(2)............................... 17,600 17,600
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Operating income............................. 66,897 66,897
---------- ------------
Interest expense, net........................... 131,290 74,192
Amortization of deferred financing costs........ 6,461 2,680
Other expense (income).......................... 4,335 4,335
---------- ------------
Loss before income taxes and cumulative
effect of a change in accounting
principle.................................. (75,189) (14,310)
Benefit from income taxes....................... (34,728) (10,376)
---------- ------------
Loss before cumulative effect of a change in
accounting principle....................... (40,461) (3,934)
========== ============
Basic net loss per weighted average common
share before cumulative effect of a change
in accounting principle(3)................. $ (0.07)
============
Basic weighted average common shares(3)...... 102,123,268
Diluted net loss per weighted average common
share before cumulative effect of a change
in accounting principle(3)................. $ (0.08)
============
Diluted weighted average common shares(3).... 107,206,604
</TABLE>
9
<PAGE> 13
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA COMPLETED ACQUISITIONS,
COMPLETED ACQUISITIONS THE TRANSACTIONS AND
AND THE TRANSACTIONS THE OFFERING
----------------------- -----------------------
AS OF AS OF
DECEMBER 31, 1999 DECEMBER 31, 1999
----------------------- -----------------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 16,306 $ 16,306
Working capital.................................... 113,470 122,875
Total assets....................................... 1,049,633 1,047,147
Total debt, including current maturities........... 1,541,877 900,702
Stockholders' deficit.............................. (822,825) (176,231)
</TABLE>
- ------------
(1) Assuming the underwriters' over-allotment option is exercised in full,
interest expense, net, would be $66.3 million, net loss before cumulative
effect of a change in accounting principle would be $2.8 million, basic net
loss per weighted average common share before cumulative effect of a change
in accounting principle would be $(0.06) and diluted net loss per weighted
average common share before cumulative effect of a change in accounting
principle would be $(0.07).
(2) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the purchase accounting for the Kalex
acquisition in 1999. The write-off relates to acquired research and
development for projects that do not have a future alternative use. See note
1 to our consolidated financial statements.
(3) Basic net loss per weighted average common share before cumulative effect of
a change in accounting principle is computed by dividing the net loss before
cumulative effect of a change in accounting principle plus the charge for
preferred stock dividends and accretion less the loss attributable to class
A common stock and class A series II common stock by the weighted average
common shares outstanding during the period. Diluted net loss per weighted
average common share before cumulative effect of a change in accounting
principle is computed by dividing the net loss before cumulative effect of a
change in accounting principle plus the charge for preferred stock dividends
and accretion by the weighted average common shares outstanding during the
period plus the weighted average class A common stock and class A series II
common stock on an as if converted basis (assuming an initial public
offering price of $17.50 per share). The shares used in the computation of
net loss per share also include shares being sold in the offering that would
be required to retire the debt and fund the wire harness business
acquisition as more fully described under "Use of Proceeds." Options and
warrants were excluded from the diluted calculation because their effect is
antidilutive. For a further discussion of the methodology used to calculate
basic and diluted loss per share, refer to note 22 of our consolidated
financial statements.
10
<PAGE> 14
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing our
company. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.
Our business, financial conditions or results of operations could be
materially adversely affected by any of these risks. The trading price of our
common stock could decline due to any of these risks, and you may lose all or
part of your investment.
WE MAY EXPERIENCE FLUCTUATIONS IN OUR OPERATING RESULTS AND, BECAUSE MANY OF OUR
OPERATING COSTS ARE FIXED, EVEN SMALL REVENUE SHORTFALLS CAN HAVE A
DISPROPORTIONATE EFFECT ON OUR OPERATING RESULTS
Our operating results may vary significantly for a variety of reasons,
including:
- expenditures or write-offs related to acquisitions;
- start-up expenses relating to new manufacturing facilities;
- pricing pressures;
- timing of orders from and shipments to major customers;
- our capacity relative to the volume of orders;
- expenditures in anticipation of future sales;
- variations in product mix; and
- overall economic conditions in the electronics industry.
Historically, expenditures and write-offs related to acquisitions, start-up
expenses relating to new manufacturing facilities and pricing pressures have
caused fluctuations in our operating results. For example, in the fiscal year
ended December 31, 1999, we incurred $17.6 million of write-offs related to
acquisitions and $16.9 million of start-up expenses, net of tax benefit of $5.6
million. Because a significant portion of our operating expenses are fixed, even
a relatively small revenue shortfall can have a disproportionate effect on our
results of operations. Results of operations in any period should not be
considered indicative of the results to be expected for any future period.
A SIGNIFICANT PORTION OF OUR REVENUES ARE BASED ON SALES TO OUR LARGEST
CUSTOMERS; IF WE LOSE ANY OF THESE CUSTOMERS, OUR SALES COULD DECLINE
SIGNIFICANTLY
Lucent Technologies accounted for approximately 34% and 32%, General
Electric accounted for approximately 10% and 9% and our five largest customers
as a group accounted for approximately 60% and 55% of our net sales for the
calendar years 1998 and 1999, respectively. Although we cannot assure you that
our principal customers will continue to purchase products from us at past
levels, we expect a significant portion of our revenue will continue to be
concentrated within a small number of customers. In addition, we anticipate that
Lucent Technologies will continue to be our largest customer for at least the
next few years. The loss of, or significant curtailment of purchases by, Lucent
Technologies or General Electric or one or more of these principal customers
could have a material adverse effect on our revenues.
WE RELY HEAVILY ON THE TELECOMMUNICATIONS AND NETWORKING INDUSTRIES;
ACCORDINGLY, A DOWNTURN IN THESE INDUSTRIES WOULD LIKELY HAVE A MATERIAL ADVERSE
EFFECT ON OUR ABILITY TO FORECAST DEMAND AND PRODUCTION AND TO MEET DESIRED
SALES LEVELS
Our principal customers are in the telecommunications and networking
industries, which are characterized by intense competition, relatively short
product life cycles and significant fluctuations in product demand. In addition,
these industries are generally subject to rapid technological change and product
obsolescence. Furthermore, these industries are subject to economic cycles and
have in the past experienced, and are likely in the future to experience,
recessionary periods. A recession or any other event leading to excess capacity
or a
11
<PAGE> 15
downturn in the telecommunications and networking industries would likely have a
material adverse effect on our ability to forecast demand and production and to
meet desired sales levels.
WE ARE EXPANDING OUR BUSINESS INTO NEW PRODUCTS AND SERVICES AND MAY NOT BE ABLE
TO COMPETE EFFECTIVELY WITH OUR COMPETITORS WHO HAVE BEEN IN THESE BUSINESSES
LONGER THAN WE HAVE
The EMS industry is highly fragmented and characterized by intense
competition. As a result of our broadened focus in the EMS industry, we will be
competing with competitors that have substantially greater financial and
manufacturing resources than we have and who have been providing manufacturing
services longer than we have. As a participant in the EMS industry, we compete
on the basis of product quality, responsiveness to customers, manufacturing and
engineering technology and price. There can be no assurance that we will be able
to successfully compete on this basis with our more established competitors.
THE ELECTRONICS MANUFACTURING SERVICES INDUSTRY IS SUBJECT TO RAPID
TECHNOLOGICAL CHANGE; OUR FAILURE TO TIMELY OR ADEQUATELY RESPOND TO THOSE
CHANGES MAY RENDER OUR EXISTING TECHNOLOGY LESS COMPETITIVE OR OBSOLETE, AND OUR
OPERATING RESULTS MAY SUFFER
The market for our products and services is characterized by rapidly
changing technology and continuing process development. The future success of
our business will depend in large part upon our ability to maintain and enhance
our technological capabilities, develop and market products and services that
meet changing customer needs, and successfully anticipate or respond to
technological changes on a cost-effective and timely basis. Research and
development expenses are expected to increase as manufacturers make demands for
higher technology and more complex products. In addition, the electronics
manufacturing services industry could in the future encounter competition from
new or revised technologies that render existing technology less competitive or
obsolete. There can be no assurance that we will effectively respond to the
technological requirements of the changing market, including the need for
substantial additional capital expenditures that may be required as a result of
those changes and, as a result, our operating results may suffer.
IF WE DO NOT MANAGE EFFECTIVELY THE EXPANSION OF OUR OPERATIONS, OUR ABILITY TO
CONTROL BUSINESS OPERATIONS AND EXPENDITURES MAY BE LIMITED
We have grown rapidly in recent periods, and this growth may be difficult
to sustain. Internal growth and further expansion of our value-added electronics
manufacturing services offerings will require us to expand our existing
operations and relationships and to improve our operational and information
systems.
We plan to expand our manufacturing capacity and value-added electronics
manufacturing services offerings by expanding our facilities and by adding new
equipment. This expansion involves significant risks. For example:
- we may not be able to attract and retain the management personnel and
skilled employees necessary to support expanded operations;
- we may not efficiently and effectively integrate new operations, expand
existing operations and manage geographically dispersed operations;
- we may incur cost overruns;
- we may encounter construction delays, equipment delays or shortages,
labor shortages and disputes and production start-up problems that could
adversely affect our growth and our ability to meet customers' delivery
schedules; and
- we may not be able to obtain funds for this expansion on acceptable
terms.
In addition, we expect to incur new fixed operating expenses associated
with our expansion efforts, including increases in depreciation expense and
rental expense. If our revenues do not increase sufficiently to offset these
expenses, our operating results would be adversely affected.
12
<PAGE> 16
OUR ACQUISITION STRATEGY COULD FAIL OR PRESENT UNANTICIPATED PROBLEMS FOR OUR
BUSINESS IN THE FUTURE, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MAKE
ACQUIRED BUSINESSES PROFITABLE OR REALIZE ANTICIPATED BENEFITS OF THOSE
ACQUISITIONS
Our growth strategy includes acquiring complementary businesses. We cannot
assure you that we will be able to successfully identify suitable acquisition
opportunities or finance and complete any particular acquisition, combination or
other transaction on acceptable terms and prices. Furthermore, acquisitions
involve a number of risks and challenges, including:
- diversion of management's attention;
- the need to integrate acquired operations;
- potential loss of key employees and customers of the acquired companies;
- lack of experience operating in the geographic market of the acquired
business; and
- an increase in our expenses and working capital requirements.
Any of these and other factors could adversely affect our ability to
achieve anticipated levels of profitability at acquired operations or realize
other anticipated benefits of acquisitions.
THERE MAY BE SHORTAGES OF REQUIRED COMPONENTS WHICH WOULD CAUSE US TO CURTAIL
OUR MANUFACTURING OR INCUR HIGHER THAN EXPECTED COSTS
We purchase the components we use in producing printed circuit board and
backpanel assemblies and other electronics manufacturing services and we may be
required to bear the risk of component price fluctuations. In addition,
shortages of certain types of electronic components have occurred in the past
and may occur in the future. Component shortages or price fluctuations could
have an adverse effect on our results of operations. Due to the continued
increase of our contract manufacturing and assembly businesses as a percentage
of our net sales, component shortages and price fluctuations would adversely
affect our results of operations to a greater extent than in prior fiscal years.
WE WILL CONTINUE TO HAVE A SUBSTANTIAL AMOUNT OF DEBT AND THE ABILITY TO FURTHER
INCREASE OUR DEBT, WHICH COULD HAVE NEGATIVE CONSEQUENCES ON OUR BUSINESS IN THE
FUTURE
After the consummation of the Transactions and the application of net
proceeds that we receive, we will continue to have substantial indebtedness and
leverage. As of December 31, 1999, after giving effect to the foregoing:
- our total debt outstanding would have been approximately $900.7 million;
- our interest expense would have been approximately $74.2 million for the
year ended December 31, 1999; and
- our total stockholders' deficit would have been approximately $176.2
million.
Upon completion of the Transactions and the offering, we expect to have
approximately $175.0 million available for future borrowings under our new
senior credit facility that may be used for future acquisitions, including the
acquisition of the network components and services business from Marconi, and
capital expenditures.
Depending on our future performance, we and our subsidiaries will be
permitted to incur significant additional debt in the future. Our high level of
debt could have negative consequences. For example, it could:
- increase our vulnerability to adverse industry and general economic
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to make scheduled principal payments on our debt, thereby
reducing the availability of our cash flow for working capital, capital
investments, acquisitions and other business activities;
13
<PAGE> 17
- limit our ability to obtain additional financing to fund future working
capital, capital investments, acquisitions and other business activities;
- expose us to the risk of interest rate fluctuations to the extent we pay
interest at variable rates on our debt;
- limit our flexibility to plan for, and react to, changes in our business
and our industry; and
- place us at a competitive disadvantage relative to our less leveraged
competitors.
WE EXPECT FUTURE AMORTIZATION OF OUR INTANGIBLES TO CONTINUE TO HAVE A NEGATIVE
EFFECT ON OUR OPERATING RESULTS
In the past, we have experienced net losses as a result of significant
amortization and write-offs associated with our acquisitions. Since acquisitions
are expected to continue to be a focus of our growth strategy, we expect these
charges and expenses to have a negative impact on our results in the future. For
example, in 1999, we incurred $44.1 million in charges relating to the
amortization of goodwill from prior acquisitions.
A SIGNIFICANT PORTION OF OUR BUSINESS IS CONDUCTED IN FOREIGN COUNTRIES,
EXPOSING US TO ADDITIONAL RISKS THAT MAY NOT EXIST IN THE UNITED STATES
A significant portion of our operations is conducted in foreign countries
and is subject to risks that are inherent in operating abroad, including:
- inflation or changes in political and economic conditions;
- governmental regulation;
- changes in import duties;
- trade restrictions;
- work stoppages; and
- other restraints and burdensome taxes.
Historically, these risks have not had a material effect on our operations.
Net sales outside the United States during fiscal years 1998 and 1999 were
approximately $543.5 million and $608.7 million, or 56.8% and 59.3% of net
sales, respectively.
WE ARE SUBJECT TO CURRENCY FLUCTUATIONS WHICH MAY AFFECT OUR COST OF GOODS SOLD
AND OPERATING MARGINS
Approximately 3.5% of our business is conducted in the Euro. In addition,
approximately 27.0% of our costs, including payroll and rent, are denominated in
the Hong Kong dollar, the Chinese renminbi and the Mexican peso, as well as the
Euro. Changes in exchange rates between these and other currencies and the U.S.
dollar will affect our cost of goods sold and operating margins. Historically,
these currency fluctuations have not had a significant effect on our operating
results. We cannot predict the impact of future exchange rate fluctuations.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND WE
MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY DISPUTES WHICH MAY CAUSE US TO
INCUR SUBSTANTIAL COSTS
Our success depends in part on proprietary technology and manufacturing
techniques. We have few patents for these proprietary techniques and choose to
rely primarily on trade secret protection. Litigation may be necessary to
protect our technology, to determine the validity and scope of the proprietary
rights of others or to defend against claims of patent infringement. Litigation
with respect to patents or other intellectual property matters could result in
substantial costs and diversion of management and other resources and could have
a material adverse effect on us. If any infringement claim is asserted against
us, we may seek to obtain a
14
<PAGE> 18
license of the other party's intellectual property rights. We cannot assure you
that a license would be available on reasonable terms or at all.
WE ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS WHICH EXPOSE US TO
POTENTIAL FINANCIAL LIABILITY
Our operations are regulated under a number of federal, state, local and
foreign environmental laws and regulations, which govern, among other things,
the discharge of hazardous materials into the air and water as well as the
handling, storage and disposal of hazardous materials. Compliance with these
environmental laws are major considerations in the fabrication of printed
circuit boards because metals and other hazardous materials are used in the
manufacturing process. Various federal, state and local laws and regulations
impose liability on current or previous real property owners or operators for
the cost of investigating, cleaning up or removing contamination caused by
hazardous or toxic substances at the property. In addition, because we are a
generator of hazardous wastes, we, along with any other person who arranges for
the disposal of those wastes, may be subject to potential financial exposure for
costs associated with the investigation and remediation of sites at which it has
arranged for the disposal of hazardous wastes, if those sites become
contaminated. Liability may be imposed without regard to legality of the
original actions and without regard to whether we knew of, or were responsible
for, the presence of such hazardous or toxic substances, and we could be
responsible for payment of the full amount of the liability, whether or not any
other responsible party is also liable. In addition, it is possible that in the
future new or more stringent requirements could be imposed.
SOME OF OUR EMPLOYEES ARE UNIONIZED WHICH COULD RESULT IN LABOR DISPUTES THAT
COULD DIVERT MANAGEMENT RESOURCES AND INCREASE OUR LABOR COSTS
Approximately 9% of our employees are unionized, all at our Richmond,
Virginia facility. A prolonged dispute, work stoppage or strike at this facility
could have a material adverse effect on us, divert management resources or
increase our labor costs.
OUR DEBT INSTRUMENTS IMPOSE RESTRICTIONS ON US THAT MAY RESTRICT OUR ABILITY TO
OPERATE THE BUSINESS
The agreements governing our indebtedness contain covenants that restrict
our ability to, among other things, incur additional debt, pay dividends,
repurchase junior debt, make investments, enter into transactions with
affiliates, merge or consolidate with other entities and sell all or
substantially all of our assets. In addition, our new senior credit facility is
expected to contain other limitations and also require us to maintain specified
financial ratios. A breach of any of these provisions could result in a default
under our indebtedness, which would allow our lenders to declare all amounts
outstanding under the indebtedness immediately due and payable, in which case,
our assets might not be sufficient to repay those amounts. We may also be
prevented from taking advantage of business opportunities that arise because of
the limitations imposed on us by the restrictive covenants under our
indebtedness.
WE ARE CONTROLLED BY AFFILIATES OF HICKS MUSE, WHICH COULD RESULT IN ACTIONS OR
DECISIONS THAT ARE NOT CONSISTENT WITH THE INTERESTS OF OUR OTHER STOCKHOLDERS
Following the offering, approximately 67.9% of our common stock will
continue to be controlled by affiliates of Hicks, Muse, Tate & Furst
Incorporated. In addition, a stockholders agreement among us, affiliates of
Hicks Muse and other existing holders of our common stock, class A common stock
and class A Series II common stock provides that we and those stockholders have
agreed to take all actions necessary, including voting the shares held by those
stockholders, to elect the designees of Hicks Muse to our board of directors.
Accordingly, Hicks Muse controls the election of our board of directors and the
approval or disapproval of other matters requiring stockholder approval and, as
a result thereof, the direction of our management and policies. Using this
control, Hicks Muse may take actions or make decisions that are not in the best
interests of our other stockholders.
15
<PAGE> 19
WE MAY SUFFER YEAR 2000 RELATED FAILURES THAT COULD CAUSE OUR OPERATIONS TO BE
IMPAIRED
Many software applications, embedded computer chips and computer equipment
have been designed to determine the year based upon only the last two digits.
Accordingly, these systems may mistake the year 2000 for the year 1900,
resulting in miscalculations and potential system failures. We cannot be certain
that our efforts to address the year 2000 issue have been appropriate, adequate
or complete. We also depend on software and services from third parties that may
have failed to adequately address their year 2000 issues and, accordingly, cause
our production, shipment and financial operations to be materially impaired.
THERE MAY NOT BE AN ACTIVE MARKET FOR OUR COMMON STOCK, MAKING IT DIFFICULT FOR
YOU TO SELL YOUR STOCK
This is our initial public offering, which means that there is no current
market for our common stock. We cannot assure you that after this offering our
stock will be traded actively. An illiquid market for our stock may result in
price volatility and poor execution of buy and sell orders for investors. The
initial public offering price may bear no relationship to the price at which the
common stock will trade upon completion of this offering.
OUR STOCK PRICE MAY BE VOLATILE AND MAY DECREASE SIGNIFICANTLY
Historically, stock prices and trading volumes for newly public companies
fluctuate widely for a number of reasons, including reasons that may be
unrelated to their businesses or results of operations. This market volatility
could depress the price of our common stock without regard to our operating
performance. In addition, our operating results may be below the expectations of
public market analysts or investors. If this were to occur, the market price of
our common stock could decrease, perhaps significantly.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
The market price for our common stock could fall substantially if our
stockholders who hold restricted shares of common stock sell large amounts of
shares of common stock in the public market following this offering. These
sales, or the possibility that these sales may occur, could make it more
difficult for us to sell equity or equity related securities in the future.
These sales in the public market are limited by restrictions under federal
securities law and by lock-up agreements that we, our directors, officers and
substantially all of our existing stockholders have agreed to enter into with
the underwriters. With several exceptions, the lock-up agreements restrict us,
our directors and officers and those stockholders from selling or otherwise
disposing of any shares for a period of 180 days after the date of this
prospectus without the prior written consent of Morgan Stanley & Co.
Incorporated.
As of the date of this prospectus, we have 78,001,272 outstanding shares of
common stock, not including the shares of common stock being sold in the
offering. All of the shares outstanding before the offering are "restricted"
securities within the meaning of the federal securities laws and may not be
resold unless registered under the Securities Act of 1933 or sold pursuant to an
applicable exemption, including Rule 144. Following the offering, and in the
case of our directors, officers and stockholders who have entered into lock-up
agreements, the expiration of 180 days following the offering, all of those
78,001,272 shares will be eligible for sale in the public market under Rule 144,
subject, if applicable, to volume and manner of sale limitations imposed by Rule
144.
IT MAY BE DIFFICULT TO TAKE OVER OUR COMPANY, AND THAT COULD ADVERSELY AFFECT
THE PRICE OF OUR COMMON STOCK
Following the offering, affiliates of Hicks, Muse, Tate & Furst
Incorporated will control approximately 67.9% of our outstanding common stock.
Accordingly, Hicks Muse effectively controls the decision whether a change of
control will occur. Moreover, some provisions of our certificate of
incorporation, bylaws and Delaware law could make it more difficult for a third
party to acquire control of us, even if a change of control could be beneficial
to you. These provisions and controlling ownership by Hicks Muse could also
adversely affect our common stock price.
16
<PAGE> 20
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus, including the
section entitled "Management's Discussion and Analysis of Results of Operations
and Financial Condition" that are based on our management's beliefs and
assumptions and on information currently available to our 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 described herein, this offering, 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. You should not put undue reliance on any
forward-looking statements. We do not have any intention or obligation to update
forward-looking statements after we distribute this prospectus.
You should understand that many important factors could cause our results
to differ materially from those expressed in forward-looking statements. These
factors include 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, risks associated with our acquisition strategy, our substantial
indebtedness, control by our largest stockholders and risks associated with year
2000 systems failures.
17
<PAGE> 21
THE TRANSACTIONS
In connection with this offering, we will complete the following
transactions, referred to herein as the "Transactions":
TRANSFER OF NINE EUROPEAN PRINTED CIRCUIT BOARD MANUFACTURING FACILITIES
Concurrently with the consummation of this offering, we will transfer all
of the capital stock of our subsidiaries that own nine European printed circuit
board manufacturing facilities to our existing stockholders, which will not
include the stockholders who purchase common stock in the offering. We refer to
facilities to be transferred as the "Transferred Operations." The Transferred
Operations consist primarily of the operations formerly conducted by
Interconnection Systems Limited, Forward Group, Zincocelere and Viasystems
Sweden. The Transferred Operations are being transferred because:
- they do not provide value-added assembly services, such as backpanel and
printed circuit board assembly, manufacture of wire harness and cable
assemblies or the assembly and testing of complete systems or products;
- they do not produce complex higher technology products such as high layer
count printed circuit boards; or
- they supply products to other competing providers of electronics
manufacturing services.
As a result, the Transferred Operations do not provide services or
capabilities which will allow us to expand our relationships with our strategic
customers. Consequently, we believe that each of the Transferred Operations and
our remaining operations after the transfer will be better positioned to serve
its respective customers. The Transferred Operations will focus on the European
market for quick-turn and low-layer count printed circuit board fabrication. In
consideration for the Transferred Operations, we will receive notes payable to
us in the aggregate principal amount of $124 million. The notes will bear
interest at 9% per year, payable in kind by the issuance of additional notes,
and will mature in 10 years.
The Transferred Operations will enter into a contract manufacturing
agreement with us, whereby the Transferred Operations will continue to provide
manufacturing services to us from their facilities at North Tyneside in the
United Kingdom and Norrkoping, Sweden. Pursuant to the contract manufacturing
agreement, the Transferred Operations will supply us with our forecasted needs
for the specified manufacturing services at a price equal to our direct costs of
providing the services from one of our other facilities. The agreement provides
for a three year term and otherwise contains terms and conditions similar to our
agreements to provide similar manufacturing services to third parties. In
addition, we will have an option, exercisable by us at any time within two years
following the closing, to acquire the North Tyneside and Norrkoping facilities
for an amount equal to the book value of the facilities.
ACQUISITION OF THE WIRE HARNESS BUSINESS OF INTERNATIONAL WIRE GROUP
Immediately prior to the consummation of the offering, we will acquire for
$210 million in cash all of the outstanding shares of Wirekraft Industries,
Inc., a wholly-owned subsidiary of International Wire Group, Inc. A majority of
the common stock of International Wire is held by affiliates of Hicks, Muse,
Tate & Furst Incorporated. Wirekraft Industries manufactures and assembles wire
harness products, which are assemblies of wires with connectors and terminals
attached to their ends that transmit electricity between two or more end points.
The acquisition of the wire harness business of International Wire allows
us to increase our vertical integration by allowing us to provide our wire
harnesses to customers. By manufacturing wire harnesses and cable assemblies, we
are able to shorten our customers' product development cycles, lower their cost
and provide expertise not generally available from other EMS suppliers. In
addition, our vertical integration provides us with greater control over
quality, delivery and costs, and enables us to offer our customers a complete
EMS solution.
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<PAGE> 22
At the closing of the acquisition of the wire harness business, we will
enter into a supply agreement with International Wire whereby International Wire
will continue to supply insulated wire to us for use in the wire harness
business at market prices. The acquisition of the wire harness business will be
accounted for at historical cost, on a basis similar to a pooling of interests,
as Viasystems Group, Inc. and International Wire are under common control.
The closing of the purchase of the wire harness business is conditioned
upon the receipt by each of the boards of directors of Viasystems and
International Wire of opinions of financial advisors that the purchase price for
the wire harness business is fair, from a financial point of view, to the
respective parties.
USE OF PROCEEDS
The net proceeds to Viasystems from this offering are estimated to be
approximately $658.5 million, or approximately $757.7 million if the
underwriters' over-allotment option is exercised in full, after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by Viasystems. Viasystems intends to use the net proceeds to fund the
$210 million purchase price of the wire harness business and to repay
approximately $448.5 million in borrowings outstanding under our senior credit
facilities.
On December 31, 1999, the weighted average annual interest rate applicable
to our existing senior credit facility was approximately 8.5%. The outstanding
indebtedness under our existing senior credit facility was used in part to fund
the acquisition of the printed circuit board manufacturing business of Termbray
Industries International (Holdings) Limited in August 1999, to repay amounts
outstanding under the term loans and to cash collateralize future amounts due
under the term loans. Our senior credit facility is also used on an ongoing
basis for debt service requirements, working capital needs and capital
expenditures and may be used in the future to fund acquisitions of other
businesses. Our existing senior credit facility is scheduled to expire on June
30, 2005. Concurrently with the offering, we expect to refinance the remaining
amounts outstanding under our current senior credit facility with a new senior
credit facility.
The wire harness business is being acquired from International Wire, a
designer, manufacturer and marketer of wire products and wire harnesses
controlled by affiliates of Hicks, Muse, Tate & Furst Incorporated, for $210
million in cash. The purchase price was determined by senior management of
Viasystems and International Wire. In addition, each of the boards of directors
of Viasystems and International Wire are expected to receive opinions from
nationally recognized financial advisors that the purchase price is fair, from a
financial point of view, to each of the respective parties. The acquisition of
the wire harness business will be accounted for at historical cost, on a basis
similar to a pooling of interests, as Viasystems Group, Inc. and International
Wire are under common control.
The acquisition price for the network components and services business of
Marconi will be funded by amounts available under our new senior credit
facility. While this acquisition is expected to close on March 30, 2000, we
cannot assure you that the closing will occur at, or subsequent to, that time.
This offering is not dependent on the closing of the acquisition.
DIVIDEND POLICY
We do not currently anticipate paying cash dividends on our common stock in
the foreseeable future because we expect to retain our future earnings, if any,
for use in the operation and expansion of our business. Moreover, the indentures
governing our senior subordinated notes and our Series B preferred stock
restrict, and we anticipate that our new senior credit facility will restrict,
our ability to pay dividends on our common stock. Any payment of future
dividends will be at the discretion of our board of directors and will depend
upon, among other things, our earnings, financial condition, capital
requirements, level of indebtedness, contractual restrictions with respect to
the payment of dividends, and other considerations that our board of directors
deems relevant.
19
<PAGE> 23
DILUTION
Purchasers of the common stock offered by this prospectus will suffer an
immediate and substantial dilution in net tangible book value per share.
Dilution is the amount by which the initial public offering price paid by the
purchasers of common stock will exceed the net tangible book value per share of
common stock after the offering. The net tangible book value (deficit) per share
of common stock is determined by subtracting total liabilities from the total
book value of the tangible assets and dividing the difference by the number of
shares of common stock deemed to be outstanding on the date the book value is
determined. As of December 31, 1999, we had a pro forma tangible book value
(deficit) of $(1,143.1) million or $(13.54) per share after giving effect to the
1 for 6 reverse stock split, the assumed issuance of 6,398,551 shares of common
stock upon conversion of outstanding shares of class A common stock and class A
series II common stock, and the Transactions described elsewhere in this
prospectus, but excluding this offering. Assuming the sale of 40,000,000 shares
at an initial public offering price of $17.50 per share and deducting estimated
underwriting discounts and commissions and estimated offering expenses, our pro
forma tangible book value (deficit) as of December 31, 1999 would have been
$(490.0) million or $(3.94) per share. This represents an immediate increase in
pro forma net tangible book value to existing stockholders of $9.60 per share
and an immediate dilution to new investors of $21.44 per share. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $17.50
Pro forma net tangible book value (deficit) per share
before the offering.................................... $(13.54)
Increase in pro forma net tangible book value per share
resulting from the offering............................ 9.60
-------
Pro forma net tangible book value (deficit) per share after
the offering.............................................. $(3.94)
------
Dilution per share to new investors......................... $21.44
======
</TABLE>
The following table summarizes, on a pro forma, as adjusted basis as of
December 31, 1999, the differences between existing stockholders and the new
investors with respect to the number of shares of common stock purchased from
us, the total consideration paid and the average price per share paid before
deducting estimated underwriting discounts, commissions and offering expenses
payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- ------------------------ AVERAGE PRICE
NUMBER OF SHARES PERCENT AMOUNT PERCENT PER SHARE
---------------- ------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders............ 84,399,823 68% $ 514,784,000 42% $ 6.09
New Investors.................... 40,000,000 32 700,000,000 58 17.50
------------ --- -------------- ---
Total.................. 124,399,823 100% $1,214,784,000 100% $ 9.76
=== ============== ===
</TABLE>
As of February 22, 2000, there were outstanding options and warrants to
purchase an additional 5,386,541 shares of common stock at exercise prices
ranging from $6.00 to $10.50 per share. To the extent these options or warrants
are exercised, there will be further dilution to new investors.
20
<PAGE> 24
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis; and
- as adjusted to give effect to the Transactions and the offering,
including the application of the net proceeds of the offering, assuming
an initial public offering price of $17.50 per share.
The information set forth below should be read in conjunction with
"Selected Financial Data," "Unaudited Pro Forma Financial Information,"
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Consolidated Financial Statements of Viasystems and the notes
thereto, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------
AS ADJUSTED FOR
THE TRANSACTIONS
ACTUAL AND OFFERING
----------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 22,839 $ 16,306
=========== ==========
Long-term debt, including current portion:
Existing credit facility.................................. $ 530,853 $ --
New credit facility....................................... -- 69,343(1)
Loan notes................................................ 285,312 285,312
9 3/4% senior subordinated notes(2)....................... 503,865 503,865
Other(3).................................................. 42,182 42,182
----------- ----------
Total long-term debt............................... 1,362,212 900,702
----------- ----------
Series B preferred stock, $.01 par value, 6,000,000 shares
authorized, 1,521,890.17 shares issued and outstanding,
aggregate liquidation value $38,047(4).................... 41,273 41,273
Stockholders' equity:
Common stock, $.01 par value, 500,000,000 shares
authorized, 78,001,272 shares issued and outstanding
(actual)(5), 118,001,272 shares issued and outstanding
(as adjusted)(5)........................................ 780 1,180
Class A common stock, $.01 par value, 25,000,000 shares
authorized, 5,196,216 shares issued and
outstanding(6).......................................... 59 59
Class A series II common stock, $.01 par value, 25,000,000
shares authorized, 6,172,891 shares issued and
outstanding(6).......................................... 62 62
Additional paid-in capital................................ 496,688 970,275(7)
Accumulated deficit....................................... (1,077,285) (1,124,500)(8)
Treasury stock............................................ (162) (162)
Accumulated other comprehensive income.................... (23,145) (23,145)
----------- ----------
Total stockholders' equity (deficit)............... (603,003) (176,231)
----------- ----------
Total capitalization............................. $ 800,482 $ 765,744
=========== ==========
</TABLE>
- ------------
(1) The new senior credit facility is expected to provide for a seven year term
loan B facility in the amount of $150.0 million, a letter of credit
reimbursement facility in the amount of $303.1 million and a revolving
credit facility in the amount of $175.0 million. As of December 31, 1999, on
a pro forma basis after giving effect to the Transactions and the offering
and the use of net proceeds therefrom, we would have had $175.0 million of
available revolving borrowings under the new senior credit facility. Because
the term loan B facility requires us to make a single drawing of the $150.0
million facility, upon consummation of the offering the amount outstanding
under the new credit facility will be $150.0 million and our cash balance
will be $66.6 million.
(2) Includes unamortized premium of $3.9 million.
(3) Includes $12.1 million of capital lease obligations.
(4) Does not include 10,146 shares, $.254 million liquidation preference,
issuable to holders of series B preferred stock for the period from November
30, 1999 to December 31, 1999.
(5) Excludes (a) 2,430,333 shares of common stock that are issuable upon the
exercise of our outstanding stock options that have been issued under our
management stock option plan with a weighted average exercise price of $6.98
per share, (b) 2,802,897 shares of common stock that are issuable upon the
exercise of our outstanding performance options with an exercise price of
$9.00 per share, (c) 16,666 shares of common stock that are issuable upon
the exercise of our outstanding stock options that have been issued to a
director with an exercise price of $6.00 per share, (d) 136,645 shares of
common stock that are issuable upon the exercise of our outstanding warrants
with an exercise price of $10.50 per share, (e) 2,134,000 shares of common
stock which will be issuable upon the exercise of stock options to be
granted to Hicks Muse with an exercise price equal to the initial public
offering price of our common stock and (f) 6,398,551 shares of common stock
that are issuable upon the conversion of our outstanding class A common
stock and class A series II common stock, based on an assumed initial public
offering price of $17.50 per share.
21
<PAGE> 25
(6) Assumes that no shares of class A common stock and class A series II common
stock are converted into shares of common stock in connection with the
offering.
(7) Reflects an adjustment of $208.3 million related to the intercompany
accounts of the nine European manufacturing facilities being transferred
prior to the offering and a compensation charge of $23.8 million related to
performance options which will be amended and become exercisable in
connection with the offering.
(8) Reflects the write-off of (a) deferred financing costs previously
capitalized of $15.9 million (net of income tax benefit of $4.0 million) and
(b) the net adjustment of $148.4 million related to the acquisition of the
wire harness business of International Wire. Additionally, accumulated
deficit and additional paid in capital will be increased by $23.8 million as
a result of a charge related to performance options which will be amended in
connection with the offering and become exercisable and by $22.8 million as
a result of a charge related to the grant of the option to Hicks Muse in
connection with the termination of the monitoring and oversight agreement
and the financial advisory agreement.
22
<PAGE> 26
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") is based on our condensed consolidated financial
statements, the condensed financial statements of the Transferred Operations and
the condensed financial statements of the wire harness business of International
Wire, which we are acquiring prior to the offering and the condensed financial
statements of businesses acquired in 1999. The unaudited pro forma balance sheet
as of December 31, 1999 gives effect to the Transactions and the consummation of
the offering, as though each such transaction had occurred on December 31, 1999.
The unaudited pro forma statement of operations for the years ended December 31,
1997 and 1998 gives effect to the acquisition of the wire harness business of
International Wire as though the acquisition had occurred at January 1, 1997.
The unaudited pro forma statement of operations for the year ended December 31,
1999, gives effect to the acquisition of the wire harness business as though the
acquisition had occurred on January 1, 1997 and the acquisitions of PAGG
Corporation and Kalex (collectively, the "1999 Acquisitions"), the Transferred
Operations and the consummation of the offering, as though each such transaction
had occurred at January 1, 1999.
The pro forma financial information gives effect to pro forma adjustments
that are based upon available information and certain assumptions that we
believe are reasonable. The acquisition of the wire harness business will be
accounted for at historical cost, on a basis similar to a pooling of interest,
as Viasystems Group, Inc. and International Wire are under common control.
Viasystems Group, Inc.'s transfer of the Transferred Operations to a new entity
formed by our existing stockholders will be transferred at historical cost. The
pro forma financial information should be read in conjunction with our
historical financial statements and the related notes thereto, and "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
included elsewhere herein.
The pro forma financial information does not purport to be indicative of
the results that would have been obtained had those transactions been completed
as of the assumed dates and for the periods presented or that may be obtained in
the future.
23
<PAGE> 27
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
"AS IF "AS IF ADJUSTMENTS
WIRE HARNESS POOLED" POOLED" FOR THE
COMPANY BUSINESS PRO FORMA COMPANY TRANSFERRED TRANSFERRED
HISTORICAL HISTORICAL(1) ADJUSTMENTS(2) HISTORICAL OPERATIONS(6) OPERATIONS
---------- ------------- ---------------- ---------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash..................... $ 22,839 $ -- $ -- $ 22,839 $ (6,533) $ --
Accounts receivable...... 220,619 15,836 -- 236,455 (78,159) --
Inventories.............. 155,818 20,307 -- 176,125 (40,970) --
Prepaid expenses &
other.................. 46,871 4,139 -- 51,010 (8,548) --
---------- -------- --------- ---------- --------- ---------
Total current
assets........... 446,147 40,282 -- 486,429 (134,210) --
Property, plant &
equipment, net........... 462,266 19,878 -- 482,144 (109,476) --
Deferred financing costs,
net...................... 41,751 2,115 (2,115)(3) 41,751 (1,088) --
Intangible assets, net..... 261,298 33,747 -- 295,045 (15,441) --
Other assets............... 1,096 4,098 -- 5,194 (715) --
---------- -------- --------- ---------- --------- ---------
Total assets....... $1,212,558 $100,120 $ (2,115) $1,310,563 $(260,930) $ --
========== ======== ========= ========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of
long-term
obligations............ $ 27,663 $ 188 $ (188)(3) $ 27,663 $ (16,210) $ --
Accounts payable......... 173,591 14,041 (195)(3) 187,437 (80,299) --
Accrued and other
liabilities............ 121,475 10,819 -- 132,294 (38,094) --
Income taxes payable..... 24,352 811 -- 25,163 795 --
---------- -------- --------- ---------- --------- ---------
Total current
liabilities...... 347,081 25,859 (383) 372,557 (133,808) --
Deferred taxes............. 23,887 4,463 -- 28,350 (6,462) --
Long-term obligations, less
current maturities....... 1,334,549 123 210,877(4) 1,545,549 (15,125) --
Other noncurrent
liabilities.............. 68,771 1,060 (1,060)(3) 68,771 (28,646) --
Intercompany............... -- 63,100 (63,100)(3) -- (208,338) 208,338(7)
Preferred Stock............ 41,273 -- -- 41,273 -- --
Stockholders' equity
(deficit)................ (603,003) 5,515 (148,449)(5) (745,937) 131,449 (208,338)(8)
---------- -------- --------- ---------- --------- ---------
Total liabilities
and stockholders'
equity
(deficit)........ $1,212,558 $100,120 $ (2,115) $1,310,563 $(260,930) $ --
========== ======== ========= ========== ========= =========
<CAPTION>
COMPANY
PRO FORMA
AFTER
GIVING
EFFECT TO
THE
DISPOSITION PRO FORMA
OF THE ADJUSTMENTS COMPANY
TRANSFERRED FOR THE PRO FORMA,
OPERATIONS OFFERING AS ADJUSTED
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash..................... $ 16,306 $ -- $ 16,306
Accounts receivable...... 158,296 -- 158,296
Inventories.............. 135,155 -- 135,155
Prepaid expenses &
other.................. 42,462 -- 42,462
---------- --------- ----------
Total current
assets........... 352,219 -- 352,219
Property, plant &
equipment, net........... 372,668 -- 372,668
Deferred financing costs,
net...................... 40,663 (6,455)(9) 34,208
Intangible assets, net..... 279,604 -- 279,604
Other assets............... 4,479 3,969(10) 8,448
---------- --------- ----------
Total assets....... $1,049,633 $ (2,486) $1,047,147
========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Current maturities of
long-term
obligations............ $ 11,453 $ (1,500)(11) $ 9,953
Accounts payable......... 107,138 -- 107,138
Accrued and other
liabilities............ 94,200 (7,905)(12) 86,295
Income taxes payable..... 25,958 -- 25,958
---------- --------- ----------
Total current
liabilities...... 238,749 (9,405) 229,344
Deferred taxes............. 21,888 -- 21,888
Long-term obligations, less
current maturities....... 1,530,424 (639,675)(13) 890,749
Other noncurrent
liabilities.............. 40,125 -- 40,125
Intercompany............... -- -- --
Preferred Stock............ 41,273 -- 41,273
Stockholders' equity
(deficit)................ (822,826) 646,594(14) (176,232)
---------- --------- ----------
Total liabilities
and stockholders'
equity
(deficit)........ $1,049,663 $ (2,486) $1,047,147
========== ========= ==========
</TABLE>
See accompanying notes to Unaudited Pro Forma Balance Sheet.
24
<PAGE> 28
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1999
(IN THOUSANDS)
(1) The detail of the historical financial data as of December 31, 1999 has
been obtained from the unaudited historical financial statement of the wire
harness business.
(2) The acquisition of the wire harness business will be accounted for at
historical cost, on a basis similar to a pooling of interests, as
Viasystems Group, Inc. and International Wire are under common control. The
excess of the consideration paid over historical cost of net assets
acquired, $148,449, has been reflected as a distribution to Viasystems
Group, Inc.'s stockholders.
(3) Adjustment reflects the elimination of assets not acquired and liabilities
not assumed.
(4) Adjustment reflects:
<TABLE>
<S> <C>
Borrowing for purchase of the wire harness business........ $210,000
Borrowings for payment of acquisition expenses............. 1,000
Repayment of historical debt of wire harness business...... (123)
--------
$210,877
========
</TABLE>
(5) Adjustment reflects the impact on stockholders' equity of the acquisition
of the wire harness business which is considered a distribution to
Viasystems Group, Inc.'s stockholders.
(6) Concurrently with the completion of the offering, we will complete a
transfer of the Transferred Operations to a new entity formed by our
existing stockholders. The financial information related to the Transferred
Operations has been derived from the unaudited historical financial
statements of the Transferred Operations as of December 31, 1999.
Viasystems will receive notes in the aggregate principal amount of $124,000
for the Transferred Operations. For financial reporting purposes, the note
will be deducted from stockholders' equity. Any difference at the date of
transfer between the net book value of the net assets transferred of the
Transferred Operations (($131,449) at December 31, 1999) and $124,000 will
be accounted for as a reduction or increase to additional paid in capital.
(7) Reflects the elimination of intercompany balances related to the
Transferred Operations.
(8) Adjustment reflects the effect on equity of intercompany balance not
transferred.
(9) Reflects the write-off of approximately $15,875 of previously capitalized
deferred financing costs related to the prior credit agreement, net of the
capitalization of approximately $9,420 of deferred financing costs related
to the new credit agreement.
(10) Reflects deferred taxes established as a result of items set forth in
footnote 14(b) below.
(11) Reflects the repayment of current maturities of indebtedness under the
existing credit agreement.
(12) Reflects the repayment of accrued interest on amounts repaid under the
existing credit agreement.
(13) Reflects the following:
<TABLE>
<S> <C>
Repayment of indebtedness from the acquisition of the wire
harness business.......................................... $(210,000)
Repayment of indebtedness under the existing credit
agreement................................................. (530,853)
Borrowings under the new credit agreement.................. 101,178
---------
$(639,675)
=========
</TABLE>
(14) Reflects the following:
<TABLE>
<S> <C>
(a) The estimated net proceeds of the offering............. $658,500
(b) Write-off of deferred financing costs previously
capitalized (net of income tax benefit of $3,969)...... (11,906)
--------
$646,594
========
</TABLE>
Additionally, accumulated deficit and additional paid in capital will be
increased by $23,825 as a result of a charge related to performance options
which will be amended in connection with the offering and become
exercisable and by $22.8 million as a result of a charge related to the
grant of the option to Hicks Muse in connection with the termination of the
monitoring and oversight agreement and the financial advisory agreement.
25
<PAGE> 29
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WIRE
HARNESS "AS IF POOLED" "AS IF POOLED" 1999
COMPANY BUSINESS PRO FORMA COMPANY TRANSFERRED ACQUISITIONS
HISTORICAL HISTORICAL(1) ADJUSTMENTS(2) HISTORICAL OPERATIONS(7) HISTORICAL(8)
----------- ------------- ---------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.................. $ 1,102,324 $191,046 -- $1,293,370 $(364,157) $97,141
Costs of goods sold........ 816,370 153,244 -- 969,614 (296,462) 62,268
Selling, general and
administrative expenses... 113,069 12,514 (6,300)(3) 119,283 (46,783) 9,893
Depreciation and
amortization.............. 174,322 8,466 -- 182,788 (84,705) 6,890
Impairment loss............ 468,389 -- -- 468,389 (468,389) --
Write-off of acquired
in-process research and
development............... 17,600 -- -- 17,600 -- --
----------- -------- -------- ---------- --------- -------
Operating income (loss).... (487,426) 16,822 6,300 (464,304) 532,182 18,090
Interest expense, net...... 109,980 7,842 12,108(4) 129,930 (8,018) 1,021
Amortization of deferred
financing costs........... 6,619 529 (529)(5) 6,619 (158) --
Other expense (income)..... 23,594 -- -- 23,594 (17,403) (1,856)
----------- -------- -------- ---------- --------- -------
Income (loss) before income
taxes and cumulative
effect of a change in
accounting principle...... (627,619) 8,451 (5,279) (624,447) 557,761 18,925
Provision (benefit) for
income taxes.............. (28,289) 3,407 (2,112)(6) (26,994) (5,143) 840
----------- -------- -------- ---------- --------- -------
Income (loss) before
cumulative effect of a
change in accounting
principle................. $ (599,330) $ 5,044 $ (3,167) $ (597,453) $ 562,904 $18,085
=========== ======== ======== ========== ========= =======
Basic net loss per weighted
average common share
before cumulative effect
of a change in accounting
principle(17)............. $ (8.46)
===========
Basic weighted average
common shares(17)......... 62,123,268
Diluted net loss per
weighted average common
share before cumulative
effect of a change in
accounting
principle(17)............. $ (8.98)
===========
Diluted weighted average
common shares(17)......... 67,206,604
<CAPTION>
COMPANY
PRO FORMA
AFTER GIVING
PRO FORMA EFFECT TO THE
ADJUSTMENTS DISPOSITION
FOR THE OF THE
TRANSFERRED TRANSFERRED
OPERATIONS OPERATIONS PRO FORMA
AND THE AND THE ADJUSTMENTS COMPANY
1999 1999 FOR THE PRO FORMA,
ACQUISITIONS ACQUISITIONS OFFERING(12) AS ADJUSTED
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.................. -- $1,026,354 -- $ 1,026,354
Costs of goods sold........ -- 735,420 -- 735,420
Selling, general and
administrative expenses... -- 82,393 -- 82,393
Depreciation and
amortization.............. 19,071(9) 124,044 -- 124,044
Impairment loss............ -- -- --
Write-off of acquired
in-process research and
development............... -- 17,600 -- 17,600
-------- ---------- ----------- ------------
Operating income (loss).... (19,071) 66,897 -- 66,897
Interest expense, net...... 8,357(10) 131,290 (57,098)(13) 74,192
Amortization of deferred
financing costs........... -- 6,461 (3,781)(14) 2,680
Other expense (income)..... -- 4,335 -- 4,335
-------- ---------- ----------- ------------
Income (loss) before income
taxes and cumulative
effect of a change in
accounting principle...... (27,428) (75,189) 60,879 (14,310)
Provision (benefit) for
income taxes.............. (3,432)(11) (34,728) 24,352(15) (10,376)
-------- ---------- ----------- ------------
Income (loss) before
cumulative effect of a
change in accounting
principle................. $(23,996) $ (40,461) $ 36,527 $ (3,934)
======== ========== =========== ============
Basic net loss per weighted
average common share
before cumulative effect
of a change in accounting
principle(17)............. $ (0.63) $ (0.07)
========== ============
Basic weighted average
common shares(17)......... 62,123,268 102,123,268
Diluted net loss per
weighted average common
share before cumulative
effect of a change in
accounting
principle(17)............. $ (0.67) $ (0.08)
========== ============
Diluted weighted average
common shares(17)......... 67,206,604 107,206,604
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
26
<PAGE> 30
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
(1) The detail of the historical financial data for the year ended December 31,
1999 has been obtained from the unaudited historical financial statement of
the wire harness business.
(2) The acquisition of the wire harness business will be accounted for at
historical cost, on a basis similar to a pooling of interests, as Viasystems
Group, Inc. and International Wire are under common control.
(3) Adjustment reflects the following:
<TABLE>
<S> <C>
Product liability claim(a).................................. $(3,000)
Corporate allocations(b).................................... (3,300)
-------
$(6,300)
=======
</TABLE>
(a) Amount represents the elimination of a charge related to a liability
not being assumed.
(b) Amount represents corporate allocations historically charged to the
wire harness business that will no longer be incurred upon completion
of the acquisition.
(4) Reflects the impact on interest expense of the additional borrowings as if
the acquisition of the wire harness business had been consummated as of the
beginning of the period calculated as follows:
<TABLE>
<S> <C>
Borrowings -- $210,000 at 9.5%.............................. $19,950
Elimination of historical interest of the wire harness
business.................................................. (7,842)
-------
$12,108
=======
</TABLE>
(5) Reflects the elimination of historical amortization of deferred financing
costs.
(6) Adjustment reflects the tax effect of the adjustments (3), (4) and (5)
above.
(7) Concurrently with the completion of the offering, we will complete a
transfer of the Transferred Operations to a new entity formed by our
existing stockholders. The financial information related to the Transferred
Operations has been derived from the unaudited historical financial
statements of the Transferred Operations for the year ended December 31,
1999. Viasystems will receive notes in the aggregate principal amount of
$124,000 for the Transferred Operations. For financial reporting purposes,
the note will be deducted from stockholders' equity.
27
<PAGE> 31
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
(8) The detail of the historical financial data from the 1999 Acquisitions for
the periods prior to acquisition by the Company during the year ended
December 31, 1999 has been obtained from the unaudited historical financial
statements of the respective companies below:
<TABLE>
<CAPTION>
1999
PAGG Kalex Acquisitions
Historical(a) Historical(b) Historical
------------- ------------- ------------
<S> <C> <C> <C>
Net sales............................................ $ 4,925 $92,216 $97,141
Costs of goods sold.................................. 4,644 57,624 62,268
Selling, general and administrative expenses......... 815 9,078 9,893
Depreciation and amortization........................ 439 6,451 6,890
------- ------- -------
Operating income (loss).............................. (973) 19,063 18,090
Interest expense, net................................ 256 765 1,021
Other expense (income)............................... 32 (1,888) (1,856)
------- ------- -------
Income (loss) before income taxes and cumulative
effect of a change in accounting principle......... (1,261) 20,186 18,925
Provision (benefit) for income taxes................. (161) 1,001 840
------- ------- -------
Income (loss) before cumulative effect of a change in
accounting principle............................... $(1,100) $19,185 $18,085
======= ======= =======
</TABLE>
(a) Amounts reflect the historical unaudited results of PAGG for the period
prior to its acquisition by Viasystems from January 1, 1999 to April
30, 1999.
(b) Amounts reflect the historical unaudited results of Kalex for the
period prior to its acquisition by Viasystems from January 1, 1999 to
July 31, 1999. The financial information for Kalex was translated at a
rate of HK$7.7536 = US$1.00, the average rate in effect for the
respective period.
(9) Adjustment reflects the effect of the amortization of acquired intangibles
and goodwill related to the 1999 Acquisitions. Amortization is computed
using systematic methods over the estimated useful lives ranging from 1 to
20 years.
(10) Reflects the net impact to interest expense of the following borrowings as
if the 1999 Acquisitions and the Transactions had been consummated as of
the beginning of the period.
<TABLE>
<S> <C>
Tranche C Term Loan -- $291,000 at 9.2%..................... $ 15,617
Interest income of cash collateral account -- $89,900 at
4.5%...................................................... (2,360)
US Revolver -- paydown $70,000 at 8.3%...................... (3,389)
Term Loan -- paydown $10,125 at 8.3%........................ (490)
--------
9,378
Eliminate historical interest of the 1999 Acquisitions...... (1,021)
--------
$ 8,357
========
</TABLE>
(11) Reflects the tax effect of adjustments (9) and (10) above.
(12) The pro forma income statement data does not reflect a noncash
extraordinary charge of approximately $15,875 (net of income tax benefit of
$3,969) for the write-off of previously capitalized debt issuance costs and
a compensation charge for performance options outstanding which will be
amended and become exercisable in connection with the offering.
28
<PAGE> 32
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS -- (CONTINUED)
(13) Reflects the following:
<TABLE>
<S> <C>
Estimated interest on the new credit facility at 8.0%....... $ 7,975
Elimination of interest under the borrowings for the
acquisition of the wire harness business at 9.5%.......... (19,950)
Elimination of interest under the existing credit agreement
at 8.5%................................................... (45,123)
--------
$(57,098)
========
</TABLE>
(14) Adjustment reflects $1,343 related to the amortization of deferred
financing costs associated with the refinancing of the existing senior
credit facility net of the elimination of $5,124 of historical amortization
of deferred financing fees associated with the existing credit facility.
(15) Adjustment reflects the pro forma tax effect of the adjustments related to
the offering described above.
(16) Assuming the underwriters' over-allotment option is exercised in full, then
interest expense (net) would be $66.3 million, loss before cumulative
effect of a change in accounting principle would be $2.8 million, basic net
loss per weighted average common share before cumulative effect of a change
in accounting principle would be $(0.06) and diluted net loss per weighted
average share before cumulative effect of a change in accounting principle
would be $(0.07).
(17) Basic net loss per weighted average common share before cumulative effect
of a change in accounting principle is computed by dividing the net loss
before cumulative effect of a change in accounting principle plus the
charge for preferred stock dividends and accretion less the loss
attributable to class A common stock and class A series II common stock by
the weighted average common shares outstanding during the period. Diluted
net loss per weighted average common share before cumulative effect of a
change in accounting principle is computed by dividing the net loss before
cumulative effect of a change in accounting principle plus the charge for
preferred stock dividends and accretion by the weighted average common
shares outstanding during the period plus the weighted average class A
common stock and class A series II common stock on an as if converted basis
(assuming an initial public offering price of $17.50 per share on a pro
forma basis). The shares used in the computation of net loss per share also
include shares being sold in the offering that would be required to retire
the debt and fund the acquisition of the wire harness business as more
fully described under "Use of Proceeds." Options and warrants were excluded
from the diluted calculation because their effect is antidilutive. For
further discussion of the methodology used to calculate the basic and
diluted loss per share, refer to note 22 of our consolidated financial
statements.
29
<PAGE> 33
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WIRE HARNESS "AS IF POOLED"
COMPANY BUSINESS COMPANY
HISTORICAL HISTORICAL(1) HISTORICAL
----------- ------------- ----------------
<S> <C> <C> <C>
Net sales............................................... $ 1,031,928 $170,393 $ 1,202,321
Costs of goods sold..................................... 723,741 133,201 856,942
Selling, general and administrative expenses............ 106,749 9,277 116,026
Depreciation and amortization........................... 166,606 6,968 173,574
Write-off of acquired in-process research and
development........................................... 20,100 -- 20,100
----------- -------- -----------
Operating income (loss)................................. 14,732 20,947 35,679
Interest expense, net................................... 92,535 8,510 101,045
Amortization of deferred financing costs................ 9,354 519 9,873
Other expense (income).................................. 4,960 4 4,964
----------- -------- -----------
Income (loss) before income taxes....................... (92,117) 11,914 (80,203)
Provision (benefit) for income taxes.................... (7,334) 5,042 (2,292)
----------- -------- -----------
Net income (loss)....................................... $ (84,783) $ 6,872 $ (77,911)
=========== ======== ===========
Basic net loss per weighted average common share(3)..... $ (1.62) $ (1.49)
=========== ===========
Basic weighted average common shares(3)................. 48,205,838 48,205,838
Diluted net loss per weighted average common share(3)... $ (1.82) $ (1.68)
=========== ===========
Diluted weighted average common shares(3)............... 48,669,528 48,669,528
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
30
<PAGE> 34
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) The detail of the historical financial data as for the year ending December
31, 1998 has been obtained from the unaudited historical financial
statement of the wire harness business.
(2) The acquisition of the wire harness business will be accounted for at
historical cost, on a basis similar to a pooling of interests, as
Viasystems Group, Inc. and International Wire are under common control.
(3) Basic net loss per weighted average common share is computed by dividing
the net loss plus the charge for preferred stock dividends and accretion
less the loss attributable to class A common stock and class A series II
common stock by the weighted average common shares outstanding during the
period. Diluted net loss per weighted average common share is computed by
dividing the net loss plus the charge for preferred stock dividends and
accretion by the weighted average common shares outstanding during the
period plus the weighted average class A common stock and class A series II
common stock on an as if converted basis (assuming an initial public
offering price of $17.50 per share on a pro forma basis). The shares used
in the computation of net loss per share also include shares being sold in
the offering that would be required to retire the debt and fund the
acquisition of the wire harness business as more fully described under "Use
of Proceeds." Options and warrants were excluded from the diluted
calculation because their effect is antidilutive. For further discussion of
the methodology used to calculate basic and diluted loss per share, refer
to note 22 of our consolidated financial statements.
31
<PAGE> 35
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
WIRE HARNESS "AS IF POOLED"
COMPANY BUSINESS COMPANY
HISTORICAL HISTORICAL(1) HISTORICAL
------------ ------------- --------------
<S> <C> <C> <C>
Net sales................................................... $ 795,289 $165,430 $ 960,719
Cost of goods sold.......................................... 554,097 130,680 684,777
Selling, general and administrative expenses................ 75,650 7,847 83,497
Depreciation and amortization............................... 110,037 6,811 116,848
Write-off of acquired in-process research and development... 294,500 -- 294,500
------------ -------- ------------
Operating income (loss)..................................... (238,995) 20,092 (218,903)
Interest expense, net....................................... 64,612 8,710 73,322
Amortization of deferred financing costs.................... 6,629 545 7,174
Other expense (income)...................................... 1,024 114 1,138
------------ -------- ------------
Income (loss) before income taxes and extraordinary item.... (311,260) 10,723 (300,537)
Provision (benefit) for income taxes........................ 8,432 4,558 12,990
------------ -------- ------------
Income (loss) before extraordinary item..................... $ (319,692) $ 6,165 $ (313,527)
============ ======== ============
Basic net loss per weighted average common share before
extraordinary item(3)..................................... $ (10.73) $ (10.52)
============ ============
Basic weighted average common shares(3)..................... 26,507,409 26,507,409
Diluted net loss per weighted average common share before
extraordinary item(3)..................................... $ (11.95) $ (11.72)
============ ============
Diluted weighted average common shares(3)................... 27,031,567 27,031,567
</TABLE>
See accompanying notes to Unaudited Pro Forma Statement of Operations.
32
<PAGE> 36
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) The detail of the historical financial information for the year ended
December 31, 1997 has been obtained from the unaudited historical financial
statement of the wire harness business.
(2) The wire harness acquisition is accounted for at historical cost, on a basis
similar to a pooling of interests, as Viasystems Group, Inc. and
International Wire are under common control.
(3) Basic net loss per weighted average common share is computed by dividing the
net loss plus the charge for preferred stock dividends and accretion less
the loss attributable to class A common stock and class A series II common
stock by the weighted average common shares outstanding during the period.
Diluted net loss per weighted average common share is computed by dividing
the net loss plus the charge for preferred stock dividends and accretion by
the weighted average common shares outstanding during the period plus the
weighted average class A common stock and class A series II common stock on
an as if converted basis (assuming an initial public offering price of
$17.50 per share on a pro forma basis). Options and warrants were excluded
from the diluted calculation because their effect is antidilutive. For
further discussion of the methodology used to calculated basic and diluted
loss per share, refer to note 22 of our consolidated financial statements.
33
<PAGE> 37
SELECTED FINANCIAL DATA
VIASYSTEMS GROUP, INC.
The selected financial and other data below for the period from inception,
August 28, 1996, to December 31, 1996 and for the years ended December 31, 1997,
1998 and 1999 presents consolidated financial information of Viasystems Group,
Inc. and subsidiaries and have been derived from our audited consolidated
financial statements. The following information should be read in conjunction
with our audited consolidated financial statements and the notes thereto and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," all included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FROM INCEPTION
(AUGUST 28,
1996) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------------------
1996 1997 1998 1999
-------------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................... $ 50,400 $ 795,289 $ 1,031,928 $ 1,102,324
Cost of goods sold...................... 42,052 554,097 723,741 816,370
Selling, general and administrative
expenses............................. 3,844 75,650 106,749 113,069
Depreciation............................ 4,102 51,884 104,831 114,753
Amortization of intangible assets....... 533 58,153 61,775 59,569
Impairment loss(1)...................... -- -- -- 468,389
Write-off of acquired in-process
research and development(2).......... 50,800 294,500 20,100 17,600
-------- ----------- ----------- -----------
Operating income (loss)................. (50,931) (238,995) 14,732 (487,426)
Interest expense........................ 2,503 64,612 92,535 109,980
Amortization of deferred financing
costs................................ 470 6,629 9,354 6,619
Other expense........................... 262 1,024 4,960 23,594
-------- ----------- ----------- -----------
Loss before income taxes, cumulative
effect of a change in accounting
principle, and extraordinary item.... (54,166) (311,260) (92,117) (627,619)
Provision (benefit) for income taxes.... (5,424) 8,432 (7,334) (28,289)
-------- ----------- ----------- -----------
Loss before, cumulative effect of a
change in accounting principle,
extraordinary item................... (48,742) (319,692) (84,783) (599,330)
Cumulative effect-write-off of start-up
costs, net of income tax benefit of
$5,647(3)............................ -- -- -- 16,942
Extraordinary loss, net of tax(4)....... -- 7,796 -- --
-------- ----------- ----------- -----------
Net loss................................ $(48,742) $ (327,488) $ (84,783) $ (616,272)
======== =========== =========== ===========
Basic net loss per weighted average
common
share(5)............................. $ (29.78) $ (10.99) $ (1.62) $ (8.69)
======== =========== =========== ===========
Basic weighted average common
shares(5)............................ 1,440,000 26,507,409 48,205,838 62,123,268
Diluted net loss per weighted average
common share(5)...................... $ (33.57) $ (12.24) $ (1.82) $ (9.23)
======== =========== =========== ===========
Diluted weighted average common
shares(5)............................ 1,451,955 27,031,567 48,669,528 67,206,604
BALANCE SHEET DATA:
Cash and cash equivalents............... $ 16,117 $ 27,538 $ 9,335 $ 22,839
Working capital......................... 44,938 16,659 19,538 99,066
Total assets............................ 387,741 1,068,912 1,454,703 1,212,558
Total debt, including current
maturities........................... 265,620 847,375 1,134,495 1,362,212
Stockholders' equity (deficit).......... 24,955 (125,491) (150,519) (603,003)
</TABLE>
34
<PAGE> 38
- ------------
(1) Represents an impairment loss related to the write-off of certain long-lived
assets in accordance with Statement of Financial Accounting Standards No.
121, "Accounting for the impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." See note 3 to our consolidated financial
statements.
(2) Represents charges relating to the write-off of acquired in-process research
and development costs associated with the acquisitions of Circo Craft and
the assets of the Interconnection Technologies Unit of the Microelectronics
Group (the "Lucent Division") of Lucent Technologies Inc. in 1996, Forward
and ISL in 1997, Mommers and Zincocelere in 1998 and Kalex in 1999. The
write-off relates to acquired research and development for projects that do
not have a future alternative use. See note 1 to our consolidated financial
statements included elsewhere herein.
(3) Represents the write-off of the net book value of start-up costs as of
January 1, 1999 related to the required adoption of the Financial Accounting
Standards Board's issuance of Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities," which requires costs of start-up activities
and organizational costs to be expensed as incurred effective January 1,
1999.
(4) We recorded, as an extraordinary item, a non-cash write-off of deferred
financing fees of approximately $7,796, net of income tax benefit of $4,332,
related to deferred financing fees incurred on debt retired before maturity.
(5) Basic net loss per weighted average common share is computed by dividing the
net loss plus the charge for preferred stock dividends and accretion less
the loss attributable to class A common stock and class A series II common
stock by the weighted average common shares outstanding during the period.
Diluted net loss per weighted average common share is computed by dividing
the net loss plus the charge for preferred stock dividends and accretion by
the weighted average common shares outstanding during the period plus the
weighted average class A common stock and class A series II common stock on
an as if converted basis. Options and warrants were excluded from the
diluted calculation because their effect is anti-dilutive. For further
discussion on the calculation of basic and diluted loss per share, refer to
note 22 of our consolidated financial statements.
35
<PAGE> 39
PREDECESSORS
Each of Circo Craft Co. Inc., Viasystems Technologies Corp., Forward Group
PLC and Interconnection Systems (Holdings) Limited are considered predecessors
to Viasystems Group, Inc. and, as such, the following selected financial data is
presented for each predecessor.
CIRCO CRAFT CO. INC.
The selected financial and other data below represents the financial
information of Circo Craft for the periods indicated. The data for the year
ended December 31, 1995 and the nine months ended September 30, 1996 (the period
prior to the acquisition of Circo Craft by Viasystems), set forth in Canadian
GAAP in Canadian dollars, has been derived from the audited consolidated
financial statements of Circo Craft. The consolidated financial statements of
Circo Craft have been prepared in accordance with Canadian GAAP, which differs
in certain significant respects from U.S. GAAP (see note 7 to the consolidated
financial statements of Circo Craft). The data set forth in U.S. GAAP for the
fiscal year ended December 31, 1995 and the nine months ended September 30,
1996, has been derived from the audited consolidated financial statements of
Circo Craft and adjusted for differences between Canadian GAAP and U.S. GAAP.
The following information should be read in conjunction with the audited
consolidated statements of earnings, retained earnings and changes in financial
position of Circo Craft and the notes thereto and "Management's Discussion and
Analysis of Results of Operations and Financial Condition," all included
elsewhere herein.
<TABLE>
<CAPTION>
APPROXIMATE AMOUNTS IN U.S.
CANADIAN GAAP GAAP
---------------------------- ----------------------------
FISCAL YEAR NINE MONTHS FISCAL YEAR NINE MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1995(1) 1996 1995(1) 1996
------------ ------------- ------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................... C$185,156 C$129,633 C$194,140 C$129,633
Cost of goods sold.......................... 148,788 101,532 148,788 101,532
Selling, general and administrative
expenses................................. 11,087 7,969 10,846 8,072
Depreciation and amortization............... 7,931 8,456 7,931 8,456
--------- --------- --------- ---------
Operating income......................... 17,350 11,676 26,575 11,573
Interest expense............................ 852 646 852 646
Other income................................ (915) (880) (915) (880)
Expenses related to sale(2)................. -- 5,907 -- 5,907
--------- --------- --------- ---------
Income before income taxes............... 17,413 6,003 26,638 5,900
Provision for income taxes.................. 5,564 3,847 6,079 3,680
--------- --------- --------- ---------
Net income before non-controlling
interest.......................... C$ 11,849 C$ 2,156 C$ 20,559 C$ 2,220
========= ========= ========= =========
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents................... C$ 19,231 C$ 28,438 C$ 16,600 C$ 21,411
Working capital............................. 40,057 41,909 40,057 41,909
Total assets................................ 128,964 134,725 128,964 134,725
Total debt, including current maturities.... 15,998 17,563
</TABLE>
- ------------
(1) Under Canadian GAAP in effect at the time, Circo Craft recognized certain
revenues related to a gain on an out-of-court settlement in 1994. Under U.S.
GAAP, that gain would have been deferred and recognized in 1995.
(2) Represents non-recurring expenses incurred in connection with the sale of
Circo Craft to Viasystems which includes, among others, brokerage and legal
fees.
36
<PAGE> 40
VIASYSTEMS TECHNOLOGIES CORP.
The selected financial and other data below presents financial information
of the Lucent Division (renamed Viasystems Technologies) for the periods
indicated. The data for the fiscal year ended December 31, 1995, and the eleven
months ended November 30, 1996 (the period prior to the acquisition of the
Lucent Division by Viasystems Technologies), has been derived from the audited
statements of operations of Viasystems Technologies. We have omitted balance
sheet data because we do not believe that the presentation of balance sheet data
for Viasystems Technologies is meaningful because such business was a division
of Lucent Technologies for the periods indicated. In addition, Viasystems
Technologies was a captive producer for Lucent Technologies and historical
financial results for Viasystems Technologies may not be indicative of its
results of operations as an independent entity. The following information should
be read in conjunction with the audited statements of operations of Viasystems
Technologies and the accompanying notes and "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
<TABLE>
<CAPTION>
ELEVEN
FISCAL YEAR MONTHS
ENDED ENDED
DECEMBER 31, NOVEMBER 30,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $325,047 $325,102
Cost of goods sold........................................ 274,824 244,313
Selling, general and administrative expenses.............. 42,445 34,792
Depreciation and amortization............................. 16,378 18,317
-------- --------
Operating income (loss)................................ (8,600) 27,680
Interest expense(1)....................................... 204 917
Other income.............................................. (94) (228)
-------- --------
Income (loss) before income taxes...................... (8,710) 26,991
Provision (benefit) for income taxes...................... (3,310) 10,257
-------- --------
Net income (loss)................................. $ (5,400) $ 16,734
======== ========
</TABLE>
- ------------
(1) Interest expense represents interest incurred on capital leases.
37
<PAGE> 41
FORWARD GROUP PLC
The selected financial and other data below presents financial information
of Forward for the periods indicated. The data for the two fiscal years ended
January 31, 1997, set forth in U.K. GAAP in U.K. pounds sterling, has been
derived from the audited consolidated financial statements of Forward. The
consolidated financial statements of Forward have been prepared in accordance
with U.K. GAAP, which differs in certain significant respects from U.S. GAAP
(see note 17 to the consolidated financial statements of Forward included
elsewhere herein). The data set forth in U.S. GAAP as of and for the two fiscal
years ended January 31, 1997, has been derived from the audited consolidated
financial statements of Forward and adjusted for differences between U.K. GAAP
and U.S. GAAP. The following information should be read in conjunction with the
audited consolidated financial statements of Forward and the accompanying notes
and "Management's Discussion and Analysis of Results of Operations and Financial
Condition."
<TABLE>
<CAPTION>
APPROXIMATE AMOUNTS
U.K. GAAP IN U.S. GAAP
FISCAL YEAR ENDED FISCAL YEAR ENDED
JANUARY 31, JANUARY 31,
------------------ --------------------
1996 1997 1996 1997
------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... L66,839 L105,029 L66,839 L105,029
Costs of goods sold................................ 49,850 79,030 49,850 79,030
Selling, general and administrative expenses....... 6,425 11,189 6,390 11,029
Depreciation and amortization...................... 2,701 4,694 2,787 4,870
Restructuring charges(1)........................... -- 1,244 -- 1,244
------- -------- ------- --------
Operating income................................ 7,863 8,872 7,812 8,856
Interest expense................................... 412 996 412 996
Other income....................................... (113) (229) (113) (229)
------- -------- ------- --------
Income before income taxes...................... 7,564 8,105 7,513 8,089
Provision for income taxes......................... 2,641 2,707 2,652 2,760
------- -------- ------- --------
Net income................................. L 4,923 L 5,398 L 4,861 L 5,329
======= ======== ======= ========
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents.......................... L 789 L -- L 789 L --
Working capital.................................... 1,898 (3,074) 2,553 (3,074)
Total assets....................................... 51,124 60,282 56,539 67,406
Total debt, including current maturities........... 7,879 15,535
</TABLE>
- ------------
(1) Represents non-recurring restructuring charges related to the consolidation
and rationalization of several facilities at Forward.
38
<PAGE> 42
INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED
The selected financial and other data below presents financial information
of ISL as of and for the periods indicated. The data as of and for the fiscal
years ended March 29, 1996, and April 4, 1997 set forth in U.K. GAAP in U.K.L,
has been derived from the audited consolidated financial statements of ISL. The
consolidated financial statements of ISL have been prepared in accordance with
U.K. GAAP, which differs in certain significant respects from U.S. GAAP (see
note 13 to the consolidated financial statements of ISL included elsewhere
herein). The data set forth in U.S. GAAP as of and for the fiscal years ended
March 29, 1996 and April 4, 1997, has been derived from the audited consolidated
financial statements of ISL and adjusted for differences between U.K. GAAP and
U.S. GAAP. The following information should be read in conjunction with the
audited consolidated financial statements of ISL and the accompanying notes and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
<TABLE>
<CAPTION>
APPROXIMATE AMOUNTS IN
U.K. GAAP U.S. GAAP
FISCAL YEAR ENDED FISCAL YEAR ENDED
--------------------- ----------------------
MARCH 29, APRIL 4, MARCH 29, APRIL 4,
1996 1997 1996 1997
--------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................................... L104,611 L141,643 L104,611 L141,643
Costs of goods sold............................... 73,407 94,466 73,407 94,466
Selling, general and administrative expenses...... 7,522 10,514 7,464 10,437
Depreciation and amortization..................... 17,302 26,771 15,752 17,522
-------- -------- -------- --------
Operating income.................................. 6,380 9,892 7,988 19,218
Interest expense.................................. 807 818 807 818
Other income...................................... -- (44) -- (44)
-------- -------- -------- --------
Income before income taxes........................ 5,573 9,118 7,181 18,444
Provision for income taxes........................ 4,422 6,874 2,584 6,112
-------- -------- -------- --------
Net income................................ L 1,151 L 2,244 L 4,597 L 12,332
======== ======== ======== ========
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents......................... L 2,636 L 26,244 L 2,636 L 26,244
Working capital................................... (5,851) 11,516 (3,929) 14,276
Total assets...................................... 67,349 129,921 62,893 105,452
Total debt, including current maturities.......... 15,699 35,754
</TABLE>
39
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
We are a leading worldwide independent provider of electronics
manufacturing services, or EMS. We serve primarily the telecommunications and
networking industries, which we believe to be the fastest-growing customer
segments of the $73 billion EMS market. Our revenues for the year ended December
31, 1999 were approximately $1 billion. We are a supplier to over 50 original
equipment manufacturers, or OEMs, including industry leaders Alcatel, Cisco
Systems, Delco, Ericsson, General Electric, Intel, Lucent Technologies, Marconi
Communications, Motorola, Nortel, Siemens, Sun Microsystems and 3Com. We operate
20 manufacturing facilities located in the United States, Canada, Mexico, the
United Kingdom, the Netherlands and China.
We offer a wide range of products and services to OEMs of electronic
products. Our products and services consist of the design and fabrication of
printed circuit boards, in particular highly complex multi-layered printed
circuit boards, the manufacture of custom-designed backpanel assemblies, the
manufacture of complex printed circuit board assemblies, the design and
manufacture of wire harnesses and cable assemblies, the procurement and
management of materials and the assembly and testing of our customers' complete
systems and products. For the year ended December 31, 1999, approximately 35% of
our revenues were generated from value-added services including the manufacture
of customer-designed backpanel assemblies, printed circuit board assemblies and
wire harnesses and cable assemblies, and 26% of our revenues were generated from
the fabrication of highly complex multi-layered printed circuit boards.
We were formed in 1996 by Hicks Muse and Mills & Partners to create a
preferred global manufacturing provider to leading OEMs through acquisitions of
printed circuit board fabricators and backpanel assemblers. Recently, we decided
to transfer nine of our European printed circuit board manufacturing facilities
in order to sharpen our focus on value-added services for our core
telecommunications and networking customers.
RECENT EVENTS
On January 25, 2000, we entered into an agreement with Marconi
Communications, Inc. to acquire Marconi's network components and services
business for $115 million. This business has manufacturing facilities in Europe
and China, where it provides electronic manufacturing services primarily to
telecommunications customers, including Italtel, Lucent, Marconi, Nokia and
Siemens.
The network components and services business' products include integrated
enclosures, racks, sub-racks, cable assemblies and custom power supplies and,
through a joint ventures heat management systems. The core products of this line
are the enclosures, racks and sub-racks. These products are used primarily in
wireless base stations, telecommunications switching and transmission equipment,
cable TV infrastructure and precision control instrumentation.
For the twelve months ended December 31, 1999, the network components and
services business had revenues and operating income (loss), plus depreciation
and amortization of approximately $151.6 million and $10.6 million,
respectively. The network components and services business operates from
manufacturing facilities in England, Northern Ireland, Italy and China. In
addition the network components and services business' joint venture has
manufacturing facilities in Denmark and South Carolina.
While the acquisition of the network components and services business is
expected to close on March 30, 2000, we cannot assure you that the closing will
occur at, or subsequent to, that time.
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ACQUISITIONS
A significant portion of our growth has been generated through acquisitions
completed since 1996. Giving effect to the Transactions, our business will
include six acquired businesses, including:
- the purchase of Circo Craft in Canada in October 1996 for $129.9 million
cash;
- the purchase of the Lucent Division in Richmond, Virginia in December
1996 for $170.0 million cash and $30.0 million series B preferred stock;
- the purchase of Mommers in the Netherlands in February 1998 for $59.4
million cash;
- the purchase of PAGG Corporation in Milford, Massachusetts in April 1999
for $9.3 million cash, plus the issuance of 273,224 shares of our common
stock, and warrants to purchase 136,645 shares of common stock;
- the purchase of Kalex in the People's Republic of China in August 1999
for $301.0 million cash; and
- the purchase of the wire harness business of International Wire, which
will occur immediately prior to the consummation of the offering, for
$210.0 million cash.
We continue to examine numerous acquisition opportunities in order to:
- diversify end-product programs with existing customers;
- locate manufacturing facilities close to OEMs or their end users;
- expand our capacity in selected geographic regions to take advantage of
existing infrastructure or low cost manufacturing;
- complement our service offerings; and
- diversify our customer base to serve a wide variety of end-markets with
new telecommunications and networking customers.
We routinely engage in discussions with respect to possible acquisitions.
Acquisitions considered by us could include a single facility, significant
multiple facilities or OEM asset acquisitions. There can be no assurance that
any of these discussions will result in a definitive purchase agreement and, if
they do, what the terms or timing of any agreement would be.
We expect each acquisition to be accretive to earnings and cash flow after
a transition period for each acquisition, generally approximately one year. The
initial margins from a newly acquired business or facility will likely be lower
than our current overall margins for several reasons:
- an acquired business or facility may be underutilized;
- existing business at a new or acquired business or facility may be lower
margin, such as printed circuit board assembly or system assembly;
- a newly acquired business or facility may be less efficient initially;
and
- we may accept lower initial margins on large-scale operations with
significant new customers.
The risks of lower margins frequently are mitigated during transition periods by
supply arrangements agreed to in connection with a particular acquisition. These
arrangements may include limited overhead contribution commitments, take or pay
arrangements or limited revenue or product volume guarantees to support the
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financial viability of the facility until it reaches self-sufficiency. We expect
that the results for an acquired business or facility will improve over the
transition period as we:
- increase capacity utilization and reduce cost;
- complete integration activities, including replacing third-party
suppliers of printed circuit boards, backpanel assemblies and wire
harnesses and cable assemblies with our own internal production of those
components;
- implement our processes and disciplines to reduce costs and obtain the
cost benefits of our procurement leverage; and
- introduce new business from the original customer and others.
GREENFIELD FACILITIES
Since our inception in 1996, we have opened four greenfield facilities in
the United States, Mexico, Europe and Asia. These facilities provide us with
operations in key geographic markets. The four greenfield facilities are:
- a 35,000 square foot facility opened September 1998 in Columbus, Ohio
providing full system assembly services;
- a 51,000 square foot facility opened August 1998 in Juarez, Mexico
providing backpanel assembly services;
- a 52,000 square foot facility opened June 1998 in Boldon, England
providing backpanel assembly and full system assembly services; and
- a 17,000 square foot facility opened November 1998 in Nantong, China
providing backpanel assembly services.
Consistent with our past practices and as a normal course of business, we will
continue to evaluate establishing new greenfield facilities particularly when
greenfield operations have the potential to enable us to increase our sales or
service to our existing customers, access new geographic markets or provide
favorable cost advantages.
HISTORICAL RESULTS OF OPERATIONS -- VIASYSTEMS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Net sales for the year ended December 31, 1999 were $1,102 million,
representing a $70.4 million, or 6.8% increase from the comparable period in
1998. Approximately $105.3 million of the increase was due primarily to the
acquisitions of Mommers and Zincocelere in 1998 and the acquisition of Kalex in
1999, offset by contractual price reductions of approximately $48.0 million and
other industry-wide pricing pressures.
Cost of goods sold for the year ended December 31, 1999 was $816.4 million,
or 74.1% of net sales compared to $723.7 million, or 70.1% of net sales for the
year ended December 31, 1998. Cost of goods sold as a percent of net sales
increased year over year as a result of the contractual and industry-wide
pricing pressures, partially offset by cost containment activities which
approximated $80.0 million in reduced material costs and improved plant
operating efficiencies.
Selling, general and administrative expenses for the year ended December
31, 1999 increased by $6.3 million versus the comparable period in 1998. These
costs increased primarily due to increases in general and administrative
expenses related to the Kalex Acquisition partially offset by cost containment
efforts made by the Company.
Other expense increased $33.3 million, from $106.9 million for the year
ended December 31, 1998 to $140.2 million in the same period of 1999, due
primarily to increased interest expense and amortization of deferred financing
costs related to the debt financing incurred to fund the acquisitions of Mommers
and
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Zincocelere in the first quarter of 1998 and Kalex in August 1999 and from the
loss on disposal of plant, property and equipment related to our Selkirk,
Scotland facility that was closed during 1999.
Depreciation and amortization increased $7.7 million, from $166.6 million
for the year ended December 31, 1998 to $174.3 million for the same period in
1999, primarily as a result of the impact to depreciation of acquired fixed
assets and to amortization of acquired intangibles from the acquisitions of
Mommers and Zincocelere in the first quarter of 1998 and the Kalex Acquisition
in August 1999.
During 1999, the Company recorded a non-cash impairment loss of $468.4
million related to the write-off of certain long-lived assets in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Based on current business enterprise values using common appraisal methods, the
assessment has identified impairment of long-lived assets acquired from the
Forward, ISL and Zincocelere acquisitions. The calculated business enterprise
values determined were compared to the net book value of the related long-lived
assets with the difference representing the amount of the impairment loss. The
impairment loss for each group of assets was first charged against goodwill with
any remaining amounts being charged to the other acquired intangibles and
property, plant and equipment, if necessary. The impairment resulted due to
significant changes in the markets served by the acquisitions that were not
anticipated at the time of each acquisition, most significantly a significant
decline in market pricing. The decline in market pricing was due to the
convergence of two factors: significant currency fluctuations and the emergence
of significant offshore competition from Asia Pacific. While the primary
currency for the acquisitions is the U.K. pound sterling, their competitors were
in Continental Europe and beginning to emerge from Asia Pacific. The currencies
for most of the Continental European and Asia Pacific countries declined
significantly against the U.K. pound sterling, which resulted in an improved
relative cost position for the competitors and reduced market pricing. This
decline in market pricing has resulted in a significant decline in profitability
that is not expected to return in the near term.
During 1999, the Company recorded a one-time non-cash cumulative effect of
a change in accounting principle of $16.9 million (net of $5.6 million income
tax benefit) related to the write-off of the net book value of start-up costs as
of January 1, 1999.
During 1998, the Company recorded a one-time non-cash write-off of $20.1
million related to in-process research and development acquired in the
acquisitions of Mommers and Zincocelere. During 1999, the Company recorded a
one-time non-cash write-off of $17.6 million related to in-process research and
development acquired in the Kalex acquisition.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net sales for the year ended December 31, 1998 were $1,031.9 million,
representing an increase of $236.6 million, or 29.8%, over the year ended
December 31, 1997. The increase was primarily attributable to the acquisitions
of Viasystems Sweden, Mommers and Zincocelere completed in the first quarter of
1998 and increased volume 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 and certain Asian currencies and contractual
price reductions.
Cost of goods sold for the year ended December 31, 1998 was $723.7 million,
or 70.1% of net sales, compared to $554.1 million, or 69.7% of net sales for the
year ended December 31, 1997. Cost of goods sold as a percent of net sales
increased as a result of product mix changes from the 1998 Acquisitions as well
as the above mentioned currency-related and contractual price reductions we
experienced. These factors were partially offset by cost containment and
reduction activities.
Selling, general and administrative expenses for the year ended December
31, 1998 increased by $31.1 million over selling, general and administrative
expenses for the year ended December 31, 1997. These costs increased primarily
due to the 1998 Acquisitions, increased sales and marketing expenses and
increases in administrative expenses at our Richmond, Virginia facility related
to the separation from Lucent Technologies.
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Depreciation and amortization for the year ended December 31, 1998
increased $56.6 million over the comparable period for 1997 primarily as a
result of the full year impact of the acquisitions of Forward and ISL in the
second quarter of 1997 and of the Ericsson facility, Mommers and Zincocelere in
the first quarter of 1998.
During the year ended December 31, 1998 we recorded a one-time non-cash
write-off of $20.1 million related to in-process research and development
acquired in the acquisitions of Mommers and Zincocelere. During the year ended
December 31, 1997, we recorded a similar charge of $294.5 million related to the
acquisitions of Forward and ISL.
Other expense increased $34.5 million, from $72.3 million for the year
ended December 31, 1997 to $106.8 million for the same period in 1998, due
primarily to increased interest expense and amortization of deferred financing
costs related to the debt financing incurred to fund the 1998 Acquisitions.
SUPPLEMENTAL PRO FORMA RESULTS OF OPERATION -- VIASYSTEMS
The following table presents supplemental pro forma financial data for the
fiscal years ended December 31, 1997, 1998 and 1999, giving effect to the
acquisitions we completed in 1997, 1998 and 1999, together with the
Transactions, in each case as if such acquisitions and Transactions had occurred
on January 1, 1997. The following table of supplemental pro forma financial data
is intended to be for informational purposes only and is not necessarily
indicative of either our financial position or results of operations in the
future, or what would have occurred had such acquisitions or the Transactions
occurred on January 1, 1997. This data has not been prepared in accordance with
generally accepted accounting principles.
We believe that supplemental pro forma financial information may be helpful
in understanding the past operations of our business excluding those operations
which will be transferred to a new entity formed by our existing stockholders
and including the operation of the wire harness business, which we will acquire
as part of the Transactions. The acquisition of the wire harness business will
be accounted at historical cost, on a basis similar to a pooling of interests,
as Viasystems Group, Inc. and International Wire are under common control. The
following information should be read in conjunction with our historical
consolidated financial statements and those of our predecessors, including the
related notes thereto.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA FOR THE COMPLETED
ACQUISITIONS AND THE TRANSACTIONS
--------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $931,361 $956,654 $1,026,354
Gross profit.............................................. 263,813 282,530 290,934
Operating expenses........................................ 79,004 85,290 82,393
Depreciation.............................................. 55,153 74,814 79,961
Amortization.............................................. 61,957 49,245 44,083
OTHER DATA:
Adjusted EBITDA(1)........................................ $184,809 $197,240 $ 208,541
</TABLE>
- ---------------
(1) Adjusted EBITDA is defined as operating income (loss) plus depreciation,
amortization and the non-cash charge relating to the write-off of acquired
in-process research and development. We believe that Adjusted EBITDA
enhances an understanding of our financial condition, results of operations
and cash flows by providing additional information for determining our
ability to meet debt service requirements. Adjusted EBITDA does not
represent and should not be considered as an alternative to operating
income, net income or cash flow from operations as determined by GAAP.
Adjusted EBITDA is not indicative of operating performance and does not
necessarily indicate whether cash flow will be sufficient for cash
requirements. Items excluded from the calculation of Adjusted EBITDA are
significant components in understanding and assessing our financial
performance. For example, the calculation of Adjusted EBITDA does not
include our commitments for capital expenditures and payment of debt and
should not
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<PAGE> 48
be deemed to represent funds available to us. Adjusted EBITDA, as presented,
may not be comparable to similarly-titled measures of other companies.
SUPPLEMENTAL PRO FORMA YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED
DECEMBER 31, 1999
Net sales for the year ended December 31, 1999 were $1.03 billion compared
to net sales of $956.7 million in the same period of 1998. This increase of
$69.7 million, or 7.3%, was due to significant volume growth of approximately
25.0%, spread across our service offerings, including printed circuit boards,
backpanel and printed circuit board assemblies, wire harnesses and system
assembly services. The printed circuit board fabrication growth occurred within
each of the various layer count products that we produce, with the most
significant growth in our higher layer count products. Partially offsetting this
volume growth were industry-wide price reductions as well as the price
reductions required by the Lucent supply agreement.
Cost of goods sold for the year ended December 31, 1999 was $735.4 million,
or 71.7% of net sales compared to $674.1 million, or 70.5% of net sales for the
year ended December 31, 1998. Cost of goods sold as a percent of net sales
increased year over year as a result of the contractual price reductions related
to the Lucent supply agreement and industry-wide price reductions partially
offset by incremental volume and the impact of company-wide cost reduction
activities.
Selling, general and administrative expenses for the year ended December
31, 1999 decreased by $2.9 million versus the comparable period in 1998. These
costs decreased primarily due to cost containment efforts that we initiated in
1999.
Depreciation and amortization for the year ended December 31, 1999,
decreased $100,000 over the comparable period in 1998 primarily as a result of
the increased capital investments.
SUPPLEMENTAL PRO FORMA YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED
DECEMBER 31, 1998
Net sales for the year ended December 31, 1998, were $956.7 million,
compared to net sales of $931.4 million for 1997. This increase of $25.3
million, or 2.7%, was due to volume growth of approximately 4.9%, spread across
our service offering, including printed circuit boards, backpanel and printed
circuit board assemblies, wire harnesses and system assembly services.
Additionally, we benefited from an improved printed circuit board product mix.
Partially offsetting this volume growth were contractual price reductions
related to the Lucent supply agreement and industry-wide price reductions.
Finally, a noncore portion of the wire harness business was sold during 1997,
which contributed approximately $6.1 million in net sales in 1997.
Cost of goods sold for the year ended December 31, 1998 was $674.1 million,
or 70.5% of net sales compared to $667.6 million, or 71.7% of net sales for the
year ended December 31, 1997. Cost of goods sold as a percent of net sales
decreased primarily as a result of the volume growth and cost reduction
activities of Viasystems, partially offset by contractual price reductions
related to the Lucent supply agreement and industry-wide price reductions.
Selling, general and administrative expenses for the year ended December
31, 1998 were $85.3 million, representing an increase of 8.0% over the year
ended December 31, 1997. This increase was due primarily to increased sales and
marketing expenses and increases in administrative expenses at our Richmond,
Virginia facility related to the separation from Lucent Technologies.
Depreciation and amortization for the year ended December 31, 1998
increased $6.9 million over 1997 as a result of the increased capital
investments.
LIQUIDITY AND CAPITAL RESOURCES -- VIASYSTEMS
We are a holding company that has no significant assets other than the
capital stock of Viasystems, Inc., and therefore, we rely on dividends and
distributions from Viasystems, Inc. as our sole source of cash. Our right to
participate in dividends or other distributions from Viasystems, Inc. is subject
to restrictions imposed by the terms of Viasystems, Inc.'s senior credit
facility and senior subordinated notes, as well as the prior rights of
Viasystems, Inc.'s creditors and other statutory restrictions.
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Net cash provided by operating activities was $31.6 million for the year
ended December 31, 1999 compared to net cash used in operating activities of
$43.8 million for the same period in 1998. The increase in net cash from
operating activities related primarily to timing of payments to certain vendors.
Net cash used in investing activities was $441.0 million for the year ended
December 31, 1999, compared to $276.0 million for the year ended December 31,
1998. The net cash used in investing activities for 1999 included $314.2 million
related to the acquisitions of Kalex and PAGG with the remainder related to
capital expenditures. In 1998, net cash used in investing activities included
$145.7 million related to the 1998 acquisitions with the remainder related to
capital expenditures.
In connection with our acquisition of Interconnection Systems Limited in
June 1997, we assumed approximately $437.5 million of loan notes, of which
$285.3 million were outstanding as of December 31, 1999. Our prior credit
facility contained a committed term loan facility that we could draw upon to
satisfy our remaining obligations under those loan notes. In June 1997, we also
completed a $400.0 million offering of Viasystems, Inc.'s 9 3/4% senior
subordinated notes due 2007. The net proceeds of that offering were used to
repay a bridge loan facility and approximately $171.9 million under our existing
credit facility.
In February 1998, Viasystems, Inc. issued an additional $100.0 million of
its 9 3/4% senior subordinated notes due 2007 at a price of 104.5% of their
principal amount, yielding approximately $101.0 million in proceeds. In
connection with this offering of senior subordinated notes, our existing credit
facilities were increased by $95.0 million, and an affiliate of Hicks Muse
purchased an additional $50.0 million of our common stock. The proceeds from
these financing activities were used to fund the acquisitions of Viasystems
Sweden, Mommers and Zincocelere and repay a portion of our revolving credit
facilities.
In connection with the acquisition of Kalex in August 1999, we entered into
a third amended and restated credit agreement with terms substantially similar
to the prior credit agreement. Our credit agreement was amended to, among other
things, establish an additional $291.0 million term loan facility, repay $10.1
million outstanding under the term loans available to refinance the loan notes
issued in connection with the acquisition of Interconnection Systems Limited in
1997, and collateralize future amounts due under the term loans with
approximately $89.9 million in cash. Additionally, we received an equity
contribution of $200.0 million.
As of December 31, 1999, our indebtedness consisted of amounts outstanding
under the existing senior credit facilities, the senior subordinated notes, the
loan notes, capital leases and other debt.
We anticipate that our primary uses of cash in 2000 will be:
- for capital expenditures for maintenance, replacement and acquisitions of
equipment, expansion of capacity, productivity improvements and product
and process technology development; and
- to pay interest on, and to repay principal of, indebtedness under our
senior credit facilities, the senior subordinated notes and our other
outstanding indebtedness as discussed in note 8 to our consolidated
financial statements set forth elsewhere herein.
We anticipate making capital expenditures of approximately $120.0 million
in 2000. In 2000, we will be obligated to make principal and interest payments
of approximately $75.0 million under our new senior credit facilities and the
senior subordinated notes.
We expect that our primary sources of cash will be cash from operating
activities and revolving borrowings under our senior credit facilities. In
connection with the offering, we expect to refinance our existing senior credit
facilities and our obligations under the loan notes with a new senior secured
credit facility. Our new credit facility is expected to consist of a $150.0
million term loan facility, $303.0 million letter of credit and term loan
reimbursement facility and $175.0 million of available revolving loans. As of
December 31, 1999, as adjusted for the offering and the Transactions, there
would have been no amounts outstanding under the revolving credit facilities
available under the new senior credit facilities, and approximately $175.0
million of available borrowing capacity thereunder, subject to limitations. We
anticipate that the cash flow from operations and additional funds available
under the revolving facilities of our new senior credit facilities will be
sufficient to meet our requirements for working capital, capital expenditures
and debt service and other operating cash requirements over the next 12 months.
Although we are not able to
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currently predict those needs in periods beyond 12 months, we believe our
current cash flow from operations and borrowings available under our new senior
credit facility will be sufficient to meet our capital requirements through
2001. Any future acquisitions would likely require external sources of debt
and/or equity financing. There can be no assurance that those funds would be
available on terms satisfactory to us, or at all. In addition, our future
operating performance and ability to meet our financial obligations will be
subject to future economic conditions and to financial, business and other
factors, many of which will be beyond our control.
Borrowings under our senior credit facilities are expected to bear interest
at floating rates and will require interest payments on varying dates depending
on the interest rate option we select. The senior subordinated notes bear
interest at the rate of 9 3/4% per annum, which is payable semiannually in
arrears.
The senior subordinated notes restrict us from, and the new senior credit
facilities are expected to restrict us from, among other things:
- incurring additional indebtedness;
- making capital expenditures in excess of $130.0 million for the fiscal
years ended 2000 and 2001 and $110.0 million for the fiscal years ended
2002, 2003 and 2004;
- creating liens upon its property, assets or revenues;
- disposing of assets;
- guaranteeing indebtedness;
- merging or selling substantially all of our assets;
- declaring and paying dividends;
- making investments and loans; and
- entering into transactions with affiliates, in each case with exceptions
customary for credit facilities such as the new senior credit facilities.
NET OPERATING LOSS CARRYFORWARD
We estimate that for United States federal income tax purposes we will have
net operating loss carryforwards, or NOLs, amounting to approximately $545
million as of January 1, 2000. Such NOLs expire in 2018 through 2019 if not
utilized before then to offset taxable income. Section 382 of the Internal
Revenue Code of 1986, as amended, and regulations issued thereunder impose
limitations on the ability of corporations to use NOLs if the corporation
experiences more than a 50% change in ownership during certain periods. Changes
in ownership in future periods could substantially restrict our ability to
utilize our tax net operating loss carryforwards. We believe that no such
ownership change has occurred or will occur as a result of the offering. There
can be no assurances, however, that such an ownership change will not occur in
the future. In addition, as of January 1, 2000 we had NOLs of $11 million in the
People's Republic of China, $6 million in Puerto Rico, $55 million in the United
Kingdom, and $19 million in the Netherlands. The NOLs in the People's Republic
of China and Puerto Rico begin to expire in 2000, while the other NOLs carry
forward indefinitely.
EXTRAORDINARY ITEM AND NON-CASH COMPENSATION EXPENSE
In connection with this offering and the Transactions, we will repay our
existing senior credit facility. That repayment will result in the write-off of
deferred financing costs, which we expect will be reported as an extraordinary
item in the first quarter of fiscal year 2000. Had the offering and the
Transactions been completed at December 31, 1999, we would have recorded an
extraordinary charge of $15,875 (net of income tax benefit of $3,969) million
with respect to the write-off of these deferred financing costs.
Also in connection with this offering, we are amending the terms of our
performance stock options held by certain members of management to eliminate the
exercisability restrictions and variable exercise price
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<PAGE> 51
terms. The amended performance options will have a fixed exercise price and will
be immediately exercisable. As a result of these amendments, we expect to record
a one-time non-cash charge of $23.8 million, based on an initial public offering
price of $17.50, to compensation expense in the first quarter of fiscal year
2000.
In connection with this offering, we also expect to terminate the
Monitoring and Oversight Agreement and Financial Advisory Agreement. As
consideration for Hicks Muse's willingness to agree to such termination, we will
grant to Hicks Muse an option to purchase 2,134,000 shares of our common stock
at an exercise price equal to the initial public offering price of our common
stock. The grant is expected to result in charge of $22.8 million.
RECENT ACCOUNTING PRONOUNCEMENTS
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 require 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, 2000. We have not yet quantified the impacts of
adopting SFAS No. 133 on its consolidated financial statements nor have we
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.
YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs written using two
digits rather than four digits to define the applicable year. Any of our
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, produce invoices,
or engage in similar normal business activities.
In anticipation of the year 2000 issue, management implemented a
company-wide initiative to ensure that both its information technology systems
and non-information technology systems applications are capable of processing
data and transactions pertaining to the year 2000. The initiative utilized both
our own internal resources and external resources to identify and assess systems
and applications affected, to correct existing systems or to acquire replacement
systems, and to test the systems and applications for compliance with the
requirements for processing year 2000 information. Our information systems have
been either corrected in order to enable them to process year 2000 information
or, if necessary, were replaced with year 2000 compliant systems. We have, to
the best of our knowledge, achieved year 2000 readiness in mission critical
business applications, computers and communications, facilities and process
equipment, and do not anticipate any material disruption in our operations as
the result of any failure to be in compliance. However, there can be no
assurance that all issues were identified or that the remediation process will
be fully effective. We will capitalize and depreciate the cost of replacement
systems consistent with our existing capital expenditures policies. Costs
incurred to modify and maintain existing systems are expensed as incurred.
Management believes that a substantial portion of the costs for the new systems
and the modifications have not represented incremental costs, but rather
represent the reallocation of existing and planned information technology
resources. We estimate approximately $1.5 to $2.0 million has been spent to
remediate the year 2000 issue, and management expects that amounts required to
be expensed in future periods will not have a material effect on our financial
position or results of operations.
We have also evaluated the external risk associated with the year 2000
issue. All critical or significant suppliers were identified and surveyed
regarding their year 2000 readiness. Although we use a select group of
suppliers, the materials used in manufacturing printed circuit boards are
generally readily available in the open market. Therefore, we believe any costs
associated with the anticipated effect of third parties will be
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immaterial on our business, financial position or results of operations.
However, there can be no guarantee that any failures of third party systems
would not have a material adverse effect on us.
Since January 1, 2000, we have not experienced any significant year 2000
related failures and are not aware of any failures by our suppliers or other
third parties. However, year 2000 issues may still arise several months after
January 1, 2000, and if we have failed to identify and remediate year 2000
issues or key third parties who do business with us have failed to timely
remediate their year 2000 issues, it could cause systems failures or errors,
business interruptions and in a worst case scenario, the inability to engage in
normal business practices for an unknown length of time. Litigation could also
ensue. The effect on our business, financial condition, results of operations
and cash flows could be materially adverse.
IN-PROCESS RESEARCH AND DEVELOPMENT
1997 Acquisitions
Forward's and ISL's (the "1997 Acquisitions") in-process research and
development, or R&D value was comprised of numerous R&D projects. These R&D
projects targeted improvements in materials and processing to reduce printed
circuit board thickness, lines, spaces and vias for certain market applications
and improvements in registration which would allow for the increase in the
thickness of the printed circuit board backpanels for other market applications.
There were several in-process R&D projects focused on plating, including panel
plating, reverse pulse plating, direct metallization and immersion silver. In
addition, other in-process R&D projects were investigating laser technology,
sequential build up of printed circuit boards, the applicability of specialty
materials and the ability to build components into a printed circuit board.
Finally, the remaining in-process R&D projects targeted improvements in testing
procedures to allow for testing for the more complex technologies related to the
above-mentioned in-process R&D projects.
The in-process R&D projects from the 1997 Acquisitions can now be
classified into three categories: completed, abandoned or still in progress. We
were technologically successful on many of the in-process R&D projects, but
several were abandoned due to the unavailability of appropriate materials or
manufacturing equipment or the lack of market acceptance. The remaining, still
in progress, projects are primarily specialty materials projects, which have yet
to develop the market demand anticipated at the time of the 1997 Acquisitions.
We believe that efforts to complete the still in progress acquired in-process
R&D projects will consist primarily of internal engineering costs over the next
one to three years. These costs are estimated to be approximately $1 million.
The revenues derived from the in-process R&D projects from the 1997
Acquisitions are significantly lower than anticipated. This significant
shortfall was caused by the abandonment of certain projects, the lack of market
demand for others, and the general economic conditions of the printed circuit
board market served by the 1997 Acquisitions. The market served by the 1997
Acquisitions has experienced significant changes not anticipated at the time of
the acquisitions, most significantly a significant decline in market pricing.
The decline in market pricing was due to the convergence of two factors:
significant currency fluctuations and the emergence of significant offshore
competition from Asia Pacific. While the primary currency for the 1997
Acquisitions is the U.K. pound sterling, their competitors were in Continental
Europe and beginning to emerge from Asia Pacific. The currencies for most of the
Continental European and Asia Pacific countries declined significantly against
the U.K. pound sterling, which resulted in an improved relative cost position
for the competitors and reduced market pricing. The decline in market pricing
has resulted in a significant decline in profitability for the 1997
Acquisitions.
1998 Acquisitions
Mommers' in-process R&D value was comprised of several R&D projects. These
in-process R&D projects, like those of the 1997 Acquisitions, targeted
improvements in materials, processing and registration. Mommers' primary
in-process R&D projects were focused on developing the capability to produce
larger, thicker backpanels ranging from 48 to 60 layers and the development of
thin core technology. The remaining projects were related to the further
development of Mommers' high-density capabilities and the applicability of
specialty materials.
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We approached the development of thicker backpanels as the combination of
several projects: increasing board thickness, increasing the aspect ratio, which
is a measure of hole diameter to board thickness, improving drilling and plating
of higher aspect ratios and thicker boards, and increasing board size. Finally,
upon successful completion of these steps, we would need to invest in the
capital equipment necessary to produce the larger boards.
The thin core technology project targeted the reduction of insulating
material between two conductive layers of a printed circuit board, to produce
thin, lightweight printed circuit boards. The reason for this activity is to
address the electronics industry trend toward lighter and more densely populated
product offerings.
The primary in-process R&D projects from the Mommers acquisition can now be
classified as completed as the development of the capabilities for the larger,
thicker backpanels and the development of thin core technology have been
achieved. In 1999, the revenues derived from the Mommers in-process R&D
approximate the levels anticipated at the time of the acquisition. We are unable
to accurately quantify the potential impact in the future of the failure of any
single project or multiple projects, which were acquired as in-process R&D in
the acquisition. There can be no guarantee that the acquired in-process R&D
projects will result in future revenue growth, we believe that the likelihood is
reasonable for these projects.
Zincocelere's in-process R&D value was also comprised of several R&D
projects, which targeted improvements in materials, processing and registration.
Zincocelere's primary in-process R&D projects related to material processing and
developing a photo microvia process. In addition, Zincocelere was involved in
certain projects designed to reduce printed circuit board thickness, lines,
spaces and vias, and other projects designed to increase board thickness for
other applications.
The primary material-processing project underway at the time of the
acquisition was focused on finding solutions to the problem of thin copper foil
handling. This project was primarily related to the reduction of cost. We have
successfully completed this project.
The photo microvia process project under development at the time of the
acquisition has been abandoned at this site. The commercial viability of this
project for the customer base served by Zincocelere was limited and would have
required significantly more capital investment.
Most of the other in-process R&D projects related to the Zincocelere
acquisition have also been abandoned. The abandonment of most of Zincocelere's
in-process R&D projects combined with a significant reduction in market pricing
for lower technology printed circuit boards has resulted in less revenue than
anticipated at the date of the acquisition. The decline in market pricing has
resulted in a significant decline in profitability for the Zincocelere
acquisition.
1999 Acquisitions
Kalex's in-process R&D value is comprised of three primary projects
consisting of developing Rambus technology, increasing board layer count and
developing ball grid array substrates capability. At the acquisition date, R&D
programs ranged from 65% to 80% complete and total continuing R&D commitments to
complete the projects were expected to be $2.4 million. Since the date of the
acquisition we have completed the Rambus project and continued to pursue the
board layer count project and the ball grid array substrate project.
The Rambus project is expected to generate revenues in 2000 at levels
originally anticipated, assuming market acceptance of the technology. Rambus
technology is designed to improve the communication between current and next
generation fast central processing unit microchips and peripherals on the
motherboard. This requires motherboards with finer lines, much lower impedance,
and extremely small variance in specification tolerance. The applications for
Rambus technology are personal computers, workstations, mainframes, mobile
phones, communications equipment and network systems.
Because we have capabilities at most of our facilities to produce high
layer count printed circuit boards, the board layer count project has progressed
more quickly than originally anticipated and is nearing completion. The ball
grid array substrates project is designed to improve printed circuit board
density and performance. This project, to be successful, will require specific
machinery and precision tools, including
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unique drilling, routing, lamination, and etching equipment. We will further
evaluate this program before committing to such investment.
These estimates are subject to change, given the uncertainties of the
development process, and no assurance can be given that deviations from these
estimates will not occur.
CONVERSION TO THE EURO
On January 1, 1999, eleven participating countries of the European Union
converted to the Euro as their common national currency. The previous national
currencies of these countries will still be accepted as legal tender until at
least January 1, 2002. We do not expect the conversion to the Euro to have a
material effect on our results of operations, financial condition or cash flows.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
At December 31, 1999, approximately $816.2 million of our long-term debt,
specifically borrowings outstanding under our existing senior credit facility
and the loan notes, bear interest at variable rates. Accordingly, our earnings
and cash flow are affected by changes in interest rates. Assuming the current
level of borrowings at variable rates and assuming a change of twenty percent in
the end-of-period market rates under these borrowings, it is estimated that our
interest expense for the year ended December 31, 1999, would have increased by
approximately $15.2 million. In the event of an adverse change in interest
rates, management would likely take actions that would mitigate our exposure to
interest rate risk; however, due to the uncertainty of the actions that would be
taken and their possible effects, this analysis assumes no such action. Further,
this analysis does not consider the effects of the change in the level of
overall economic activity that could exist in such an environment.
FOREIGN CURRENCY RISK
We conduct our business in various regions of the world, and export and
import products to and from several countries. Our operations may, therefore, be
subject to volatility because of currency fluctuations, inflation and changes in
political and economic conditions in these countries. Sales and expenses are
frequently denominated in local currencies, and results of operations may be
affected adversely as currency fluctuations affect our product prices and
operating costs or those of our competitors. From time to time, we engage in
hedging operations, such as forward exchange contracts, to reduce our exposure
to foreign currency fluctuations. We do not engage in hedging transactions for
speculative investment reasons. Our hedging operations historically have not
been material and gains or losses from these operations have not been
significant. There can be no assurance that our hedging operations will
eliminate or substantially reduce risks associated with fluctuating currencies.
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BUSINESS
GENERAL
We are a leading worldwide independent provider of electronics
manufacturing services to OEMs primarily in the telecommunications and
networking industries. We offer our EMS solutions to OEMs that outsource the
design and manufacture of their products. Our products and services consist of
the manufacture of printed circuit board assemblies, in particular highly
complex multi-layered printed circuit boards, the manufacture of custom-designed
backpanel assemblies, the design and manufacture of wire harnesses and custom
cable assemblies, the procurement and management of materials and the assembly
and testing of our customers' complete systems and products. By manufacturing
highly complex multi-layered printed circuit boards and custom-designed
backpanel assemblies, we are able to gain early access to our customers' new
product designs. This access gives us an opportunity to use our printed circuit
board and backpanel capabilities to capture the full assembly of our customers'
products at the design stage of their product development cycle.
Our customer base primarily consists of OEMs in the telecommunications and
networking industries. We currently are a supplier to over 50 OEMs, including
industry leaders Alcatel, Cisco Systems, Delco, Ericsson, General Electric,
Intel, Lucent Technologies, Marconi Communications, Motorola, Nortel, Siemens,
Sun Microsystems and 3Com. For the year ended December 31, 1999, approximately
55% of our revenues were from telecommunications and networking customers. The
products we manufacture include, or can be found in, a wide array of products
such as switching and transmission equipment, wireless base stations,
workstations, servers and data networking equipment including hubs, routers and
switches.
Our revenues for the year ended December 31, 1999 were approximately $1
billion. We operate 20 manufacturing facilities located in the United States,
Canada, Mexico, the United Kingdom, the Netherlands and China.
ELECTRONICS MANUFACTURING SERVICES INDUSTRY
OVERVIEW
The EMS industry is comprised of companies that provide a range of
manufacturing services to OEMs. The industry is experiencing a rapid rate of
growth. Technology Forecasters, Inc. forecasts that the EMS industry will grow
annually at approximately 20% from 1998 through 2003, with total industry
revenue projected to be $149.4 billion by 2003. Additionally, Technology
Forecasters forecasts that the EMS providers with annual 1998 revenue of greater
than $500 million will have a growth rate of approximately 30% over the same
period. In addition, the EMS industry is highly fragmented, with only eight EMS
providers achieving total revenue in excess of $1 billion, and the ten largest
participants accounting for approximately 39% of total industry revenue in 1998,
based on estimates by Technology Forecasters.
EMS industry growth is being fueled by the growth of the overall
electronics industry and increased outsourcing of manufacturing and related
functions by electronics OEMs worldwide. This outsourcing trend is being fueled
by an increasing number of OEMs that are outsourcing a substantial portion of
their manufacturing in order to focus resources on core competencies, in certain
instances through the sale of manufacturing operations to EMS providers. We
believe that, as the trend to outsourcing continues, OEMs will increasingly
outsource more complex products and services. This trend will favor larger EMS
providers that have clear advantages of scale, geographic diversity, technology
and quality, and is expected to lead to a sustained period of consolidation in
the EMS industry.
We believe that the telecommunications and networking equipment industries
represent large and attractive markets for electronics manufacturing services.
The rapid growth of the Internet has changed the way that networks must be
constructed in order to handle the growing volume of both voice and data
traffic. This shift is causing network providers to make significant capital
expenditures to expand and upgrade the existing network infrastructure.
Networking companies such as Cisco, Bay Networks and Ascend Communications were
among the first communications equipment companies to aggressively outsource
much of their manufacturing to EMS providers. These companies set the standard
for the networking industry, demonstrating the benefits that can be realized
from an OEM model that relies heavily on the services of EMS providers.
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Telecommunications equipment companies have only recently begun to use EMS
providers. In part because of acquisitions such as Lucent's purchase of Ascend
and Nortel's acquisition of Bay Networks, telecommunications equipment vendors
have seen the success that the networking companies they acquired have achieved
through outsourcing. In addition, networking companies are increasingly offering
products that compete with those of telecommunications equipment vendors,
forcing telecommunications OEMs to react to and adopt the outsourcing practices
of their networking competitors to be able to compete effectively.
EVOLUTION OF EMS INDUSTRY
Historically, OEMs invested heavily in manufacturing assets and facilities
around the world to support the manufacture, service and distribution of their
products. In the early stages of the EMS industry, EMS companies acted as
subcontractors and performed simple, labor-intensive material assembly functions
to provide excess production capacity for OEMs during peak demand periods.
Accordingly, the relationship between OEMs and EMS providers tended to be
transactional in nature.
Significant advancements in manufacturing process technology in the 1980s,
such as surface mount technology, enabled EMS companies to provide cost savings
to OEMs while at the same time improving the quality of their products.
Furthermore, as the capabilities of EMS companies expanded, an increasing number
of OEMs adopted and increasingly relied upon manufacturing outsourcing
strategies. In recent years, large sophisticated EMS companies have further
expanded their capabilities to include services ranging from front-end design to
back-end full system assembly, product test, test development, order fulfillment
and distribution and after-sales support. Large EMS companies generally have a
lower cost structure, superior manufacturing technological expertise and more
advanced manufacturing processes relative to the OEM customers they serve.
By using EMS providers, OEMs are able to focus on their core competencies,
including product development, sales, marketing and customer service, while
leveraging the expertise of EMS providers for design, procurement, assembly and
test operations and supply chain management. As a result, larger, more
sophisticated EMS providers have established strong strategic relationships with
many of their OEM customers.
We believe that the principal reasons OEMs establish relationships with EMS
providers include the following:
Decrease Time-to-Market and Time-to-Volume. Electronics products are
experiencing shorter product life cycles, requiring OEMs to continually
reduce the time required to bring products to market. OEMs can
significantly shorten product development cycles and decrease
time-to-market by benefiting from the design and manufacturing expertise
and infrastructure of EMS providers. This includes capabilities relating to
design, quick-turn prototype development and rapid ramp-up of new products
to high volume production, combined with critical worldwide supply chain
management expertise.
Reduce Operating Costs and Invested Capital. As electronics products
have become more technologically advanced, manufacturing processes have
become increasingly automated, requiring greater levels of investment in
capital equipment. EMS companies provide OEMs access to advanced
manufacturing facilities, supply chain management and engineering
capabilities, additional capacity, greater production flexibility and
economies of scale without capital investment.
Focus Resources on Core Competencies. The electronics industry is
experiencing greater levels of competition and rapid technological change.
In this environment, many OEMs are seeking to focus on their core
competencies of product development, sales, marketing and customer service,
and to outsource design, manufacturing and related requirements to their
EMS providers.
Access Leading Manufacturing Technologies. Electronics products and
electronics manufacturing technology have become increasingly sophisticated
and complex, making it difficult for many OEMs to maintain the necessary
technological expertise and focus required to efficiently manufacture
products themselves. By working closely with EMS providers, OEMs gain
access to high quality manufacturing expertise and capabilities in the
areas of advanced process, interconnect and test technologies.
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Utilize EMS Companies' Procurement, Inventory Management and Logistics
Expertise. OEMs that manufacture internally are faced with greater
complexities in planning, procurement and inventory management due to
frequent design changes, short product life cycles and product demand
fluctuations. OEMs can address these complexities by outsourcing to EMS
providers that possess sophisticated supply chain management capabilities
and can use significant component procurement advantages to reduce product
costs.
Improve Access to Global Markets. OEMs are generally increasing their
international activities in an effort to expand their sales through access
to foreign markets. EMS companies with worldwide capabilities are able to
offer OEMs global manufacturing solutions to assist them in meeting local
content requirements, distributing products efficiently around the world
and reducing costs.
KEY SUCCESS FACTORS
We believe that the following are the key success factors for EMS providers
seeking to establish and expand relationships with leading OEMs:
Large-Scale and Flexible Production Capacity. Increasingly, leading
OEMs are seeking to outsource large-scale manufacturing programs.
Generally, those EMS providers that can meet the volume and time-to-market
requirements associated with these programs will be able to exploit these
opportunities. EMS providers must have sufficient scale and flexible
production capacity to be awarded large outsourcing programs, as OEMs often
seek partners with the resources to support simultaneous product launches
in multiple markets.
Broad Service Offering. In order to establish strategic relationships
with OEM customers that are seeking to reduce their number of suppliers,
EMS companies must be able to provide a broad portfolio of services. These
services include front-end product design and design for manufacturability,
component selection and procurement, quick-turn prototyping, product
testing, product assurance and failure analysis as well as back-end
functions such as full system assembly, order fulfillment, worldwide
distribution and after-sales support, including repair services.
Sophisticated Technological Capabilities. The desire of OEMs to
increase product performance, functionality and quality is driving a
requirement for increasingly complex printed circuit board fabrication,
assembly and test technologies. EMS providers that possess expertise in
manufacturing technology, and that continually innovate and develop
advanced fabrication, assembly and test techniques, provide a competitive
advantage to their OEM customers. We believe that as the trend to
outsourcing continues, OEMs will increasingly outsource more complex
products.
Global Supply Chain Management Skills. EMS providers must possess the
skills required to optimize many aspects of an OEM's global supply chain,
from managing a sophisticated supplier base, including component selection
and cost-effective procurement to inventory management and rapid product
distribution directly to end customers. EMS providers who lack the
sophisticated material resource planning and information technology systems
necessary to effectively optimize the supply chain will be at a significant
disadvantage in the marketplace.
Global Presence. EMS companies with global facilities can simplify and
shorten an OEM's supply chain and significantly reduce the time required to
bring products to market. Additionally, EMS providers are locating
facilities in lower-cost regions, including Mexico and Asia, in order to
complement their offerings by providing lower cost manufacturing solutions
for price-sensitive applications. As a result of these trends, many large
OEMs are beginning to work with a smaller number of EMS providers that, as
worldwide suppliers, can meet their needs in multiple geographic markets.
MARKET CONSOLIDATION
We believe that larger EMS providers that possess the foregoing attributes
are well positioned to take advantage of anticipated growth in the EMS industry.
Conversely, we believe that smaller providers who seek to serve leading OEMs are
disadvantaged due to lack of scale and difficulty in meeting OEM requirements
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relating to capacity, broad service offerings, technology, supply chain
management and global manufacturing capabilities.
The EMS industry has experienced an increase in large-scale acquisition
activity in recent years, primarily as a result of the sale of OEM facilities
and manufacturing operations to EMS providers. OEMs have tended to award these
opportunities to larger EMS providers that possess the capital, management
expertise and advanced systems required to acquire and integrate the acquired
businesses effectively. For the EMS provider, these acquisitions have been
driven by the need for additional capacity, a desire to enter new geographic or
product markets and services, or a desire to establish or further develop a
customer relationship with a particular OEM.
Given this environment, we believe that the EMS industry may experience
significant consolidation, driven by the continued trend among OEMs to outsource
large-volume programs to leading EMS providers, the continued disposition of OEM
manufacturing assets to these companies and acquisition activity among EMS
businesses themselves.
OUR STRATEGY
Our goal is to be the EMS full-solution partner of choice to leading OEMs
through leadership in technology, quality and supply chain management. To meet
this goal, we are implementing the following strategy which we believe will
allow us to achieve superior financial performance and enhance stockholder
value:
Focus on the High Growth Telecommunications and Networking Customer
Segments. We have focused our marketing efforts on the fast-growing
telecommunications and networking industries. Approximately 55% of our
revenues for the year ended December 31, 1999 were from telecommunications
and networking customers. Our sales efforts will focus on generating
revenue from new programs as well as diversifying our customer base in
these high growth segments by increasing our penetration of our existing
customer base and attracting new customers.
Capitalize on Our Advanced Printed Circuit Board and Backpanel
Capabilities. We believe we are the industry leader in the manufacture of
complex, technologically advanced multi-layer printed circuit boards and
custom-designed backpanel assemblies. Our state-of-the-art manufacturing
facilities allow us to efficiently produce commercial quantities of printed
circuit boards with up to 48 layers and circuit track widths as narrow as
three one-thousandths of an inch. We also have the capability to produce
printed circuit boards with up to 60 layers and circuit track widths as
narrow as two one-thousandths of an inch. We have pioneered advances in
some of the most significant areas of printed circuit board fabrication.
Because many of the next generation products in the telecommunications and
networking industries will require highly advanced printed circuit boards
and backpanel assemblies, we are well positioned to capitalize on our
capabilities in those areas to compete for the complete assembly of
customers' products that utilize our printed circuit boards and backpanels.
Currently, we are involved in the design of several new platforms for large
telecommunication OEMs where we are leveraging our printed circuit board
and backpanel capabilities to generate additional assembly revenues.
Take Advantage of Our Ability to Provide a Full-Service Offering to,
and Expand Relationships with, Our Customers. Building on our integrated
manufacturing capabilities, we can provide our customers with a broad range
of EMS solutions from fabrication of bare boards to final system assembly
and test. Our wire harness and cable assembly capabilities provide us with
further opportunities to sell these services to our existing OEM customers.
Our capability to manufacture a range of product components from printed
circuit boards to wire harnesses and cable assemblies used in final
assemblies, enables us to shorten our customers' product development cycles
and to lower their cost. In addition, our vertical integration provides us
with greater control over quality, delivery and cost, and enables us to
offer our customers a complete EMS solution. Each of the four greenfield
facilities (all of which are assembly facilities) we have opened since 1996
has been in response to the expansion of our relationships with existing
customers. We will continue to emphasize being a full-solution partner to
our existing customers.
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Concentrate on High Value-Added Products and Services. We focus on
providing EMS solutions to leading manufacturers of advanced electronic
products that generally require custom designed, more complex interconnect
products and short lead-time manufacturing services. These products are
typically lower-volume, higher-margin products.
Exploit our Low Cost Manufacturing Locations. By aggressively pursuing
the transfer of products and services from high cost areas to China and
Mexico, we have successfully reduced our customers' total cost, improved
our margins and freed up our capacity in other regions of the world to
focus on more technologically advanced products and services. Our Kalex
facilities in China and our wire harness and cable assembly facilities in
Mexico allow us to offer OEM customers a lower cost solution for printed
circuit board fabrication, wire harness and cable assembly as well as full
system assembly.
Expand Manufacturing Facilities Geographically. Since 1996, we have
significantly expanded our operations through acquisitions and the opening
of greenfield facilities. In order to increase our scale and expand our
capabilities, we have opened four greenfield facilities in the United
States, Mexico, Europe and Asia. These facilities provide us with
operations in key geographic markets for our existing customers as well as
the electronics industry in general. We will continue to pursue future
expansion opportunities.
Pursue Acquisition Opportunities. We continue to pursue business
acquisition opportunities in order to broaden our service offerings, gain
access to new geographic markets, implement our vertical integration
strategy and/or obtain facilities and equipment at a lower cost than
building or leasing them. We have acquired entire companies, such as Circo
Craft, Mommers, PAGG and Kalex. In addition, given our strong relationships
with leading OEMs in the telecommunications and networking segments, we
expect to proactively pursue acquisition opportunities from our OEM
customers that divest their captive manufacturing assets. Prior
acquisitions of this nature include the acquisition of the Richmond,
Virginia, operations of Lucent Technologies and the acquisition of the wire
harness assets of General Electric.
MARKETS AND CUSTOMERS
We provide EMS services to more than 50 OEMs. Our position as a strategic
supplier of EMS services, including printed circuit boards, backpanel assemblies
and wire harnesses and cable assemblies fosters close relationships with our
customers. These relationships result in additional growth opportunities as we
have expanded our capabilities and capacity to meet our customers' wide range of
needs.
The following table shows our net sales as a percentage by principal
end-user markets we serve:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
MARKETS 1997 1998 1999
- ------- ------ ------ ------
<S> <C> <C> <C>
Telecommunications and networking........................... 52.8% 52.7% 55.3%
Industrial/Consumer......................................... 22.2 22.0 22.4
Computer.................................................... 14.8 14.9 12.1
Automotive.................................................. 6.8 7.1 7.9
Other....................................................... 3.4 3.3 2.3
----- ----- -----
Total combined net sales.......................... 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
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The following table lists our telecommunications and networking customers
in alphabetical order and the end products for which we provide manufacturing
services.
<TABLE>
<CAPTION>
CUSTOMER END PRODUCT
- -------- -----------
<S> <C>
Alcatel.......................... Telecommunications switching and transmission
equipment, datacommunications networks, routing
and switching equipment, mobile phones
Cisco............................ Datacommunications high end routers, LAN/WAN,
routing and switching equipment
Ericsson......................... Telecommunications switching and transmission
equipment, mobile phones, datacommunications
routing and switching equipment
Lucent Technologies.............. Telecommunications switching and transmission
equipment, business communication systems,
datacommunications routing and switching
equipment
Marconi Communications........... Telecommunications optical transmission
equipment, WAN network switching equipment
Motorola......................... Telecommunications infrastructure equipment,
wireless datacommunications equipment, satellite
communication equipment
Newbridge........................ Datacommunications carrier switch routing
equipment, advanced enterprise networking
equipment
Nortel Networks.................. Telecommunications optical network equipment,
LAN/WAN routers, access switching equipment
Siemens.......................... Telecommunications switching equipment, LAN/WAN
network equipment, mobile switching equipment
3Com............................. Datacommunications hubs, routing and switching
equipment, modems, network interface cards
Tellabs.......................... Datacommunications routing and switching
equipment
</TABLE>
Other than Lucent Technologies, no customer accounted for more than 10% of
consolidated net sales for the year ended December 31, 1999.
PRODUCTS AND SERVICES
We believe that our ability to deliver a wide spectrum of services to our
OEM customers provides us with a competitive advantage over EMS providers
focused in few service areas. We offer a full range of manufacturing services,
including those depicted in the following diagram.
[SUPPLY CHAIN MANAGEMENT CHART]
Design and Prototyping Services. We provide comprehensive front-end
engineering services, including circuit board layout and design services for
efficient manufacturing and testing. We offer quick-turn prototyping, which is
the rapid production of a new product sample. Our quick-turn prototype service
allows us to provide small test quantities to our customers' product development
groups. Our participation in product
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design and prototyping allows us to reduce our customers' manufacturing costs
and their time-to-market and time-to-volume. These services enable us to
strengthen our relationships with customers that require advanced engineering
services. In addition, by working closely with customers throughout the
development and manufacturing process, we gain insight into their future product
requirements.
Printed Circuit Board and Backpanel Fabrication. Printed circuit boards and
backpanels are platforms that connect semiconductors and other electronic
components. Backpanels also connect printed circuit boards. We manufacture
multi-layer printed circuit boards and backpanels on a low-volume, quick-turn
basis, as well as on a high-volume production basis. In recent years, the trend
in the electronics industry has been to increase the speed and performance of
components while reducing their size. Semiconductor designs are currently so
complex that they often require printed circuit boards with many layers of
narrow, tightly spaced wiring. These advancements in component technologies have
driven the change in printed circuit board design to higher density printed
circuits. We have invested approximately $150 million in the last two years
primarily for the advanced engineering systems and process equipment needed to
meet these higher density requirements.
Systems Assembly and Test. Our manufacturing operations include the
placement of electronic parts onto printed circuit boards as well as the
manufacture of complete electronics products. As OEMs seek to provide greater
functionality in smaller products, they require more sophisticated systems
assembly technologies and processes. Our investment in advanced manufacturing
equipment and our experience with the latest technologies enable us to offer a
variety of complex systems assembly services. We offer testing of assembled
printed circuit boards and testing of all of the functions of the completed
product, and we work with our customers to develop product-specific test
strategies. Our test capabilities include manufacturing defect analysis,
in-circuit tests, functional tests and environmental stress tests of board or
system assemblies.
Wire Harnesses and Cable Assemblies. A wire harness and cable assembly is
an assembly of wires with connectors and terminals attached to their ends that
transmits electricity between two or more points. Our capability to provide wire
harness and cable assembly components complements our vertically integrated
approach to providing our OEM customers a complete EMS solution. Our acquisition
of the wire harness business makes us one of the leading suppliers of wire
harnesses and cable assemblies for use in household appliances. Due to the
similar process technology utilized in the manufacture of wire harnesses and
cable assemblies for telecommunications and networking products to that utilized
in the manufacture of wire harnesses for use in household appliances, we intend
to leverage this expertise to enhance the value of the products and services we
supply to our OEM customers in the telecommunications and networking industries.
Full System Assembly. We provide full system assembly services to OEMs.
These services require sophisticated logistics capabilities and supply chain
management capabilities to rapidly procure components, assemble products,
perform complex testing and deliver products to end users around the world. Our
full system assembly services involve combining a wide range of subassemblies,
including printed circuit board assembly, and employing advanced test techniques
to various subassemblies and final end products. Increasingly, OEMs require
custom build-to-order system solutions with very short lead times. We are
focused on exploiting this trend through our advanced supply chain management
capabilities.
Packaging and Global Distribution. We offer our customers flexible
just-in-time and build-to-order delivery programs, allowing product shipments to
be closely coordinated with customers' inventory requirements. Increasingly, we
ship products directly into customers' distribution channels or directly to the
end-user.
After-Sales Support. We offer a wide range of after-sales support services.
This support can be tailored to meet customer requirements, including field
failure analysis, product upgrades, repair and engineering change management.
Supply Chain Management. Effective management of the supply chain is
critical to the success of OEMs as it directly impacts the time required to
deliver product to market and the capital requirements associated with carrying
inventory. Our global supply chain organization works with customers and
suppliers to meet production requirements. We utilize our enterprise resource
planning systems to optimize inventory management.
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SALES AND MARKETING
We focus on developing close relationships with our customers at the
earliest development and design phases and continuing throughout all stages of
production. We identify, develop and market new technologies that benefit our
customers and position us as a preferred EMS provider.
We market our products through our own sales and marketing organization as
well as manufacturers' representatives. This global sales organization is
structured to ensure geographic coverage and account coordination. As of
December 31, 1999, we employed approximately 200 sales and marketing employees,
of which 75 are direct sales representatives strategically located throughout
fifteen countries in North America, Europe and Asia. The North American sales
organization is divided into five regions which are jointly serviced by direct
sales representatives and nineteen manufacturers' representatives. In Europe and
Asia, our sales force is focused by country and by customer. Each sales region
has a support staff of sales engineers, technical service personnel and customer
service organizations to ensure high-quality, customer-focused service. The
global marketing organization further supports the sales organization through
market research, market development and communications.
We have enhanced our global sales and marketing network in order to
leverage our increased EMS capabilities. For those customers with locations in
more than one region of the world, we offer consistently high-quality products
and services which can be delivered from our facility which best meets that
customer's requirements.
We have a unique, long-term supplier relationship with Lucent, one of the
world's leading designers, developers and manufacturers of telecommunications
systems, software and products. To ensure itself a stable and consistent supply
of printed circuit boards and backpanels in the future, Lucent entered into a
five-year supply agreement with us in November 1996. The agreement contains
automatic renewal provisions for two additional one-year periods upon our
satisfaction of certain specified performance requirements for cost, quality and
service. Under the agreement, Lucent is required to purchase a minimum annual
dollar volume of printed circuit boards and backpanels from us. Lucent is also
required to compensate us if they fail to purchase the minimum annual dollar
volume. As required by the agreement, our prices for products supplied were
reduced to market-based prices effective January 1, 1999. Additionally, either
party is permitted to undertake a formal study to reset the benchmark based upon
a variety of factors, including the prices charged by comparable industry
manufacturers for printed circuit boards and backpanels. Depending upon the
results of such benchmarking study, the prices we charge may be further
adjusted. After the expiration of the two additional annual renewal periods, the
agreement continues to renew unless either party terminates the agreement on 18
months' notice. Lucent has also designated us as a preferred supplier and
afforded us the right to bid for all of Lucent's product requirements for which
we demonstrate capability.
MANUFACTURING AND ENGINEERING
We produce highly complex, technologically advanced multi-layer and
low-layer printed circuit boards, backpanel assemblies, printed circuit board
assemblies, wire harnesses and custom cable assemblies and full systems that
meet increasingly tight tolerances and specifications demanded by OEMs.
Multi-layering, which involves placing multiple layers of electrical circuitry
on a single printed circuit board or backpanel, expands the number of circuits
and components that can be contained on the interconnect product and increases
the operating speed of the system by reducing the distance that electrical
signals must travel. Increasing the density of the circuitry in each layer is
accomplished by reducing the width of the circuit tracks and placing them closer
together on the printed circuit board or backpanel. Interconnect products having
narrow, closely spaced circuit tracks are known as fine line products. Today, we
and a few other industry leaders are capable of efficiently producing commercial
quantities of printed circuit boards with up to 48 layers and circuit track
widths as narrow as three one-thousandths of an inch. We have the capability to
produce printed circuit boards with up to 60 layers and circuit track widths as
narrow as two one-thousandths of an inch. The manufacture of complex multi-layer
interconnect products often requires the use of sophisticated circuit
interconnections between certain layers, called blind or buried vias, and
adherence to strict electrical characteristics to maintain consistent circuit
transmission speeds, referred to as controlled impedance. These technologies
require very
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tight lamination and etching tolerances and are especially critical for printed
circuit boards with ten or more layers.
The manufacture of printed circuit boards involves several steps: etching
the circuit image on copper-clad epoxy laminate, pressing the laminates together
to form a panel, drilling holes and depositing copper or other conductive
material to form the inter-layer electrical connections and, lastly, cutting the
panels to shape. Certain advanced interconnect products require additional
critical steps, including dry film imaging, photoimageable soldermask
processing, computer controlled drilling and routing, automated plating and
process controls and achievement of controlled impedance. Manufacture of printed
circuit boards used in backpanel assemblies requires specialized expertise and
equipment because of the larger size of the backpanel relative to other printed
circuit boards and the increased number of holes for component mounting.
The manufacture of printed circuit board assemblies involves the attachment
of various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors to printed circuit boards. The manufacture of
backpanel assemblies involves attachment of electronic components, including
printed circuit boards, integrated circuits and other components, to the
backpanel, which is a large printed circuit board. We use surface mount,
pin-through hole and press fit technologies in backpanel assembly. We also
assemble higher-level sub-systems and full systems incorporating printed circuit
boards and complex electromechanical components. We manufacture on a turnkey
basis, directly procuring some or all of the components necessary for
production.
We also provide computer-aided testing of printed circuit boards,
sub-systems and full systems, which contributes significantly to our ability to
deliver high quality products on a consistent basis. We test boards and system
level assemblies to verify that all components have been properly inserted and
that the electrical circuits are complete. Further functional tests determine if
the board or system assembly is performing to customer specifications.
QUALITY STANDARDS
All of our manufacturing facilities are certified under ISO 9002, a set of
standards published by the International Organization of Standardization and
used to document, implement and demonstrate quality management and assurance
systems in design and manufacturing. As part of the ISO 9002 certification
process, we developed a quality systems manual and an internal system of quality
controls and audits. Although ISO 9002 certification is of particular importance
to the companies doing business in the European Community, we believe that
United States electronics manufacturers are increasing their use of ISO 9002
registration as a criteria for suppliers.
In addition to ISO 9002 certification, we are BellCore, British Approval
Board for Telecommunications, or BABT, and Underwriters Laboratories, or UL,
compliant. These qualifications establish standards for quality, manufacturing
process control and manufacturing documentation and are required by many OEMs in
the electronics industry.
TECHNOLOGY DEVELOPMENT
Our close involvement with our customers at the early stages of their
product development cycles positions us at the leading edge of technical
innovation in the manufacturing of backpanel assemblies and printed circuit
boards. We selectively seek orders that require the use of state-of-the-art
manufacturing techniques or materials in order to further develop our
manufacturing expertise. We work closely with our customers and suppliers to
provide industry-leading solutions. Current areas of manufacturing process
development include reducing circuit widths and hole sizes, establishing new
standards for particle contamination and developing new manufacturing processes
for use with new materials and new surface mount connector and component
designs.
Recent developments in the electronics industry have necessitated
improvements in the types of laminate used in the manufacture of interconnect
products. New laminate materials may contain new chemical formulations to
achieve better control of flow, resin systems with high glass transition
temperatures, reduced
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surface imperfections and greatly improved dimensional stability. Future
generations of interconnect products will require ultra fine lines, multi-layers
of much greater complexity and thickness and extremely small holes in the range
of 4 to 10 one-thousandths of an inch. The materials designed to meet these
requirements, such as BT epoxy, cyanate esters, polyamide quartz and Kevlar
epoxy, are beginning to appear in the marketplace. Widespread commercial use of
these materials will depend upon statistical process control and improved
manufacturing procedures to achieve the required yields and quality.
We have developed expertise and techniques that we use in the manufacture
of printed circuit boards, backpanels and subsystems. We believe many of the
manufacturing processes related to the manufacture of printed circuit boards are
proprietary, including our ability to manufacture large perimeter, thick high
layer count backpanels. Generally, we rely on common law trade secret protection
and on confidentiality agreements with our employees to protect our expertise
and techniques. We own 13 and license 14 patents and believe that patents have
not historically constituted a significant form of intellectual property right
in our industry. Six patents expire within the next two years and the remainder
expire over the next 15 years. The expiration of any of these patents is not
expected to have a material adverse effect on our ability to operate.
SUPPLIER RELATIONSHIPS
We order materials and components based on purchase orders received and
accepted and seek to minimize our inventory of materials or components that are
not identified for use in filling specific orders. Materials and components we
use are readily available in the open market and to date we have not experienced
any significant shortages of such materials. We work with our suppliers to
develop just-in-time supply systems which reduce inventory carrying costs. We
also maintain a supplier certification program which evaluates potential vendors
on the basis of such factors as quality, on-time delivery, costs, technical
capability, and potential technical advancement.
COMPETITION
Significant competitive factors in the EMS industry include product
quality, responsiveness to customers, manufacturing and engineering technology
and price. We believe that competition in the market segments served by us is
based more on product quality and responsive customer service and support than
on price, in part because the cost of interconnect products manufactured by us
is usually low relative to the total cost of the equipment and the greater
importance of product reliability and prompt delivery to our customers. We
believe that our primary competitive strengths are our ability to provide
responsive, flexible, short lead-time manufacturing services, our engineering
and manufacturing expertise and our customer service support.
We believe that our breadth of service offering in the electronics
manufacturing services industry compares favorably to that of the other leading
EMS providers. The acquisition of the wire harness business allows us to
increase our service offerings, while the disposition of the transferred
operations does not affect our ability to provide a full range of services to
original equipment manufacturers.
We face intense competition from a number of established competitors in our
various product markets. We also face competition from OEMs who perform EMS
services internally. Certain of our competitors have greater financial and
manufacturing resources than we do, including significantly greater printed
circuit board assembly capacity. During periods of recession, our competitive
advantages may be of reduced importance.
In addition, captive interconnect product manufacturers may seek orders in
the open market to fill excess capacity, thereby increasing price competition.
Although we generally do not pursue high-volume, highly price sensitive
interconnect product business, we may be at a competitive disadvantage with
respect to price when compared to manufacturers with lower cost structures,
particularly those manufacturers with offshore facilities where labor and other
costs are lower.
INTERNATIONAL OPERATIONS
Approximately 59.3% of our sales for the year ended December 31, 1999
originated outside of the United States. As of December 31, 1999, we had
manufacturing facilities in the United Kingdom, Canada, Mexico,
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the Netherlands and China, and sales offices throughout Europe. We believe that
our global presence is important as it allows us to provide consistent, quality
products on a timely basis to our multinational customers worldwide.
We are subject to risks generally associated with international operations,
including price and exchange controls and other restrictive actions. In
addition, fluctuations in currency exchange rates may affect our results of
operations.
BACKLOG
We estimate that our backlog of unfilled orders on December 31, 1998 and
1999 was approximately $88.5 million and $139.6 million, respectively. The
increase in backlog in 1999 was due to increased demand from our OEM customers
for our printed circuit boards manufactured in Canada and the Netherlands.
Unfilled orders may be cancelled prior to delivery. Historically, such
cancellations have not been material. The backlog outstanding at any point in
time is not necessarily indicative of the level of business to be expected in
the ensuing period.
ENVIRONMENTAL
Some of our operations are subject to federal, state, local and foreign
environmental laws and regulations, which govern, among other things, the
discharge of pollutants into the air and water, as well as the handling and
disposal of solid and hazardous wastes. We believe that we are in material
compliance with applicable environmental laws and the costs of compliance with
such current or proposed environmental laws and regulations will not have a
material adverse effect on us. Further, we are not a party to any claim or
proceeding and we are not aware of any threatened claim or proceeding under
environmental laws that could, if adversely decided, reasonably be expected to
have a material adverse effect. Currently, remediation of contamination is being
undertaken at our facilities in Virginia and Puerto Rico. While the cost of such
remediation could be material, the prior owners are conducting the requisite
remedial actions pursuant to governmental orders and have agreed to indemnify us
for costs associated with the remediations. We believe that the prior owners of
those facilities are fully capable of performing and will perform under such
agreements. Accordingly, we do not believe that any of these matters are
reasonably likely to have a material adverse effect on our business, results of
operations, financial condition, prospects and ability to service debt.
EMPLOYEES
As of December 31, 1999, we had approximately 19,550 employees. Of these
employees, approximately 17,200 were involved in manufacturing, 1,350 worked in
engineering, 200 worked in sales and marketing, and 800 worked in accounting and
administrative capacities. Approximately 1,800 employees, or about 9%, were
represented by a union pursuant to a collective bargaining agreement. We have
not experienced any labor problems resulting in a work stoppage or work
slowdown, and believe we have good relations with our employees.
FACILITIES
In addition to our executive offices in St. Louis, Missouri, as of December
31, 1999, we operate 20 principal manufacturing and research facilities located
in six different countries with a total area of approximately 4,549,000 square
feet. We own approximately 3,774,000 square feet and lease approximately 775,000
square feet. We believe our plants and equipment include state-of-the-art
technology and are well maintained. Our principal circuit board manufacturing
facilities are operating at or near capacity.
Some of our owned facilities are subject to mortgages pursuant to our
existing senior credit facility and are expected to be similarly subject to
mortgages under our new senior credit facility. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and our consolidated
financial statements contained elsewhere in this prospectus.
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Our facilities at December 31, 1999, after giving effect to the
Transactions, were as follows:
<TABLE>
<CAPTION>
SIZE TYPE OF DESCRIPTION OF
LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED
- -------- -------------------- --------------- -------------------------------
<S> <C> <C> <C>
UNITED STATES
Richmond, Virginia....... 726,000 Owned Printed circuit board
fabrication, backpanel assembly
and full system assembly
Bucyrus, Ohio............ 47,000 Leased(1) Wire harness and cable assembly
El Paso, Texas........... 38,000 Leased(2) Wire harness and cable assembly
Mishawaka, Indiana....... 29,000 Owned Wire harness and cable assembly
San German, Puerto 199,000 Leased(3) Printed circuit board
Rico................... fabrication
Columbus, Ohio........... 35,000 Leased(4) Full system assembly
Milford, Massachusetts... 125,000 Leased(5) Full system assembly
CANADA
Kirkland, Quebec......... 115,000 Owned Printed circuit board
fabrication
Pointe-Claire, Quebec.... 168,000 Owned Printed circuit board
fabrication
Granby, Quebec........... 119,000 Owned Printed circuit board
fabrication
MEXICO
Juarez, Mexico........... 51,000 Leased(3) Backpanel assembly
Juarez, Mexico........... 120,000 Leased(6) Wire harness and cable assembly
Chihuahua, Mexico........ 100,000 Owned Wire harness and cable assembly
Chihuahua, Mexico........ 91,000 Leased(7) Wire harness and cable assembly
EUROPE
Boldon, England.......... 52,000 Leased(8) Backpanel assembly and full
system assembly
Echt, Netherlands........ 462,000 Owned Printed circuit board
fabrication and backpanel
assembly
ASIA
Guangzhou, China......... 1,665,000 Owned Printed circuit board
fabrication
Nantong, China........... 17,000 Leased(9) Backpanel assembly
Zhongshan, China......... 260,000 Owned Printed circuit board
fabrication
Guangzhou, China......... 130,000 Owned Laminate products
</TABLE>
- ------------
(1) Lease expires November 12, 2000.
(2) Lease expires March 31, 2002.
(3) Lease expires December 31, 2002.
(4) Lease expires February 1, 2002.
(5) Lease expires August 31, 2009.
(6) Lease expires July 31, 2002.
(7) Lease expires March 15, 2008.
(8) Lease expires June 21, 2019.
(9) Lease expires April 28, 2000.
In addition to the facilities listed above, at December 31, 1999 we
maintained several sales and marketing facilities located throughout North
America and Europe, all of which are leased.
LEGAL
Our operations have from time to time been involved in claims and
litigation. The nature of our business is such that it is anticipated that we
will be involved from time to time in claims and litigation in the ordinary
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course of our business. Based on experience with similar claims and litigation,
we do not anticipate that these matters will have a material adverse effect on
our business, results of operations, financial condition, prospects or ability
to service debt.
We anticipate that we may, from time to time, receive notifications
alleging infringements of patents generally held by other manufacturers.
Disputes over patent infringement are common in the electronics industry and
typically begin with notices of the type described above. Although the ultimate
resolution of the legal action and infringement notices described above cannot
be predicted, we believe that the resolution, including any ultimate liability,
will not have a material adverse effect on our business, results of operations,
financial condition, prospects or ability to service debt. We are not currently
involved in any patent infringement disputes and have not received any notices
alleging infringement of patents, the unfavorable resolution of which we believe
would be material.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and positions of our directors and executive
officers. All directors hold office until our next annual meeting of
stockholders and until their successors are duly elected and qualified.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
James N. Mills........... 62 Chairman of the Board and Chief Executive Officer
Thomas O. Hicks.......... 53 Director
Jack D. Furst............ 40 Director
Richard W. Vieser........ 72 Director
Kenneth F. Yontz......... 55 Director
Thomas H. O'Brien........ 63 Director Nominee
Alex J. Mandl............ 55 Director Nominee
Timothy L. Conlon........ 48 President, Chief Operating Officer and Director
David M. Sindelar........ 42 Senior Vice President and Chief Financial Officer
Barry L. Brigman......... 52 President -- Viasystems Americas
Steven S.L. Tang......... 44 President -- Viasystems Asia
James G. Powers.......... 38 Executive Vice President -- Operations
Dominic J. Pileggi....... 48 Executive Vice President -- Sales and Marketing
Joseph S. Catanzaro...... 47 Senior Vice President -- Finance
Jeffrey A. Bloch......... 42 Vice President -- Global Supply Management
</TABLE>
Prior to the offering, we will amend and restate our certificate of
incorporation to provide that our board of directors will be divided into three
classes. It is expected that Messrs. Vieser and Yontz will serve as Class I
directors, with terms expiring at the 2001 annual meeting of stockholders;
Messrs. Conlon and Furst will serve as Class II directors, with terms expiring
at the 2002 annual meeting of stockholders; and Messrs. Hicks and Mills will
serve as Class III directors, with terms expiring at the 2003 annual meeting of
stockholders. At each annual meeting of stockholders thereafter, directors in
the class to be elected at the meeting will be elected to three-year terms to
succeed those directors whose terms are expiring. These procedures could have
the effect of discouraging opposition to candidates nominated by management and
could provide management with a greater opportunity to oppose stockholder
nominees or proposals should they choose to do so. For a discussion of other
proposed charter and bylaw provisions that could have the effect of delaying a
change of control, see "Description of Capital Stock -- Special Provisions in
Our Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws."
In January 2000, the board of directors established an Audit Committee
comprised of Messrs. Vieser and Yontz, a Compensation Committee comprised of
Messrs. Hicks, Mills, Vieser and Yontz, and an Independent Compensation
Committee comprised of Messrs. Vieser and Yontz. The board of directors has
nominated two additional candidates to serve on the board of directors following
the offering. Messrs. O'Brien and Mandl will serve as Class I and Class II
directors, respectively. One of these additional directors is expected to meet
the independence requirements of The New York Stock Exchange relating to members
of the Audit Committee and will be appointed to the Audit Committee upon
election.
James N. Mills has been Chairman of the Board and Chief Executive Officer
of Viasystems since January 1997. Mr. Mills is also the Chairman of the Board
and Chief Executive Officer of Mills & Partners, International Wire Holding
Company, International Wire Group, Inc. and LLS Corp. Mr. Mills was Chairman of
the Board and Chief Executive Officer of Berg Electronics Corp. and Chairman of
the Board and sole director of Berg Electronics Group, Inc. from November 1992
through October 1998 and was Chairman of the Board and Chief Executive Officer
of Crain Holdings Corp. and Crain Industries, Inc. from August 1995 through
December 1997 and of Jackson Holding Company and Jackson Products, Inc. from
February 1993 through August 1995.
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Thomas O. Hicks has been a director of Viasystems since January 1997. Mr.
Hicks is Chairman of the Board and Chief Executive Officer of Hicks, Muse, Tate
& Furst Incorporated. From 1984 to May 1989, Mr. Hicks was Co-Chairman of the
Board and Co-Chief Executive Officer of Hicks & Haas Incorporated, a
Dallas-based private investment firm. Mr. Hicks serves as a director, Chairman
and Chief Executive Officer of AMFM Inc. and as a director of International Home
Foods, Inc., Sybron International Corporation, Home Interiors & Gifts, Inc., LIN
Holdings Corp., LIN Television Corporation, Regal Cinemas, Inc., Triton Energy
Limited, Mumm Perrier-Jouet, Teligent, Inc. and Cooperative Computing, Inc.
Jack D. Furst has been a director of Viasystems since August 1996. Mr.
Furst is a Partner of Hicks, Muse, Tate & Furst Incorporated and has held this
position since 1989. Mr. Furst has approximately 20 years of experience in
leveraged acquisitions and private investments. Mr. Furst is involved in all
aspects of Hicks Muse's business and has been actively involved in originating,
structuring and monitoring its investments. Mr. Furst is primarily responsible
for managing the relationship with Mills & Partners. Prior to joining Hicks
Muse, Mr. Furst was a Vice President and subsequently a Partner of Hicks & Haas
Incorporated, a Dallas-based private investment firm from 1987 to May 1989. From
1984 to 1986, Mr. Furst was a merger and acquisition/corporate finance
specialist for The First Boston Corporation in New York. Before joining First
Boston, Mr. Furst was a financial consultant at Price Waterhouse. Mr. Furst
serves on the board of directors of American Tower Corporation, Triton Energy
Limited, Home Interiors & Gifts, Inc., Hedstrom Holdings, Inc., International
Wire Holding Company, Cooperative Computing, Inc., LLS Corp. and Globix
Corporation.
Richard W. Vieser has been a director of Viasystems since January 1997. Mr.
Vieser is the retired Chairman of the Board, Chief Executive Officer and
President of Lear Siegler, Inc. (a diversified manufacturing company), the
former Chairman of the Board and Chief Executive Officer of FL Industries, Inc.
and FL Aerospace (also diversified manufacturing companies) and the former
President and Chief Operating Officer of McGraw-Edison Co. He is the Chairman of
the Board of Varian Medical Systems and is also a director of Harvard
Industries, Inc., International Wire Holding Company and Sybron International
Corporation.
Kenneth F. Yontz has been a director of Viasystems since January 1997. Mr.
Yontz is the Chairman, President and Chief Executive Officer of Sybron
International Corporation, a manufacturer and marketer of laboratory apparatus
products, dental sundry supplies and orthodontic appliances. Mr. Yontz is also a
director of Playtex Products, Inc. Prior to joining Sybron, Mr. Yontz was Group
Vice President and Executive Vice President of the Allen-Bradley Company. Mr.
Yontz also held various managerial and professional positions with Chemetron
from 1974 to 1980 and at Ford Motor Company from 1966 to 1974.
Thomas H. O'Brien has been nominated to become a director of Viasystems.
Mr. O'Brien is chairman and chief executive officer of PNC Bank Corp. and PNC
Bank, National Association and a member of PNC's Office of the Chairman. Mr.
O'Brien was appointed to the board of directors and elected vice chairman of PNC
in 1983, president and chief executive officer in 1985 and chairman in June
1988. Prior to his election as president and chief executive officer in 1985, he
was chairman and chief executive officer of Pittsburgh National Bank
(predecessor of PNC Bank). He joined Pittsburgh National Bank in 1962, was
elected vice president in 1967, senior vice president in 1973, executive vice
president in 1980, vice chairman of PNC Bank in 1983 and chairman of PNC Bank in
1993. Mr. O'Brien is also a director of Bell Atlantic Corp., BlackRock, Inc., US
Airways Group, Inc. and Hilb, Rogal & Hamilton Co.
Alex J. Mandl has been nominated to become a director of Viasystems. Mr.
Mandl has been Chairman and Chief Executive Officer of Teligent since September
1996. Prior to joining Teligent, Mr. Mandl served as President and Chief
Operating Officer of AT&T and Executive Vice President of AT&T and CEO of AT&T's
Communications Services Group from 1993 to 1995. As President and Chief
Operating Officer, Mr. Mandl oversaw AT&T's operations including its
long-distance, wireless and local communications services, in addition to its
credit card and Internet businesses. As Chief Financial Officer of AT&T from
1991 to 1993, Mr. Mandl directed AT&T's financial strategy, policy and
operations, and managed the acquisition of McCaw Cellular Communications, Inc.
Earlier, Mr. Mandl served as Chairman and CEO of Sea-Land Services, Inc., an
ocean transportation and distribution services company. Mr. Mandl also serves on
the boards of the
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Warner-Lambert Company, Dell Computer Corporation, Forstmann Little & Co. and
General Instrument Corp.
Timothy L. Conlon has been a director, President and Chief Operating
Officer of Viasystems since October 1998. Prior to joining Viasystems, Mr.
Conlon was employed as President and Chief Operating Officer of Berg Electronics
Corp. from January 1997 through October 1998. Mr. Conlon also served as
Executive Vice President and Chief Operating Officer of Berg Electronics Group,
Inc., a wholly owned subsidiary of Berg Electronics Corp., from October 1993
through January 1997. Prior to joining Berg Electronics Group, Inc., Mr. Conlon
was employed as President of the Cutting and Welding Division of Thermadyne
Industries, Inc. from April 1993 through October 1993. Prior to joining
Thermadyne Industries, Inc., Mr. Conlon spent nine years in the electronic
connector industry including serving as General Manager of the Information
Technologies and Spectra strip divisions of Amphenol Corporation from 1990
through July 1992 and President of Cambridge Products from 1988 through 1989.
David M. Sindelar has been a Senior Vice President of Viasystems since
January 1997 and Chief Financial Officer of Viasystems since its inception. Mr.
Sindelar is also President and Chief Operating Officer of Mills & Partners. Mr.
Sindelar also serves as Senior Vice President and Chief Financial Officer of
International Wire Holding Company and LLS Corp. Mr. Sindelar was Senior Vice
President and Chief Financial Officer of Berg Electronics Corp. from March 1993
through October 1998 and of Crain Industries, Inc. and Crain Holdings Corp. from
August 1995 through December 1997 and of Jackson Holding Company from February
1993 through August 1995. Mr. Sindelar is a director of LLS Corp.
Barry L. Brigman joined Viasystems in January 1997 as President of
Viasystems Americas and is currently responsible for the overall operations of
Viasystems' facilities on the continent of North America. Prior to Viasystems,
Brigman was Senior Vice President and General Manager of Berg Electronics from
March 1993. Prior to 1993, Mr. Brigman held various management positions within
the fibers, medical and electronics groups of E.I. DuPont Company.
Steven S.L. Tang joined Viasystems in July 1999 as President -- Viasystems
Asia. Prior to coming to Viasystems, Mr. Tang served as a Managing Director for
the Asian division of Utilix Asia Limited, an Australian connector manufacturing
company, since 1995. Prior to 1995, Mr. Tang held various positions, all in
Asia, with companies such as Amphenol, Pace Inc., National Semiconductor and
Honeywell. Mr. Tang is a director of China Gateway Holdings, Inc.
James G. Powers has been a Vice President of Viasystems since January 1997,
serving as Executive Vice President -- Operations since June 1999, and as Senior
Vice President -- Finance from January 1997 until June 1999. Prior to joining
Viasystems, Mr. Powers served as Vice President -- Finance of Crain Industries,
Inc. He also held various positions at Berg Electronics Corp., including Vice
President -- Controller, from June 1993 to August 1995. Previously, Mr. Powers
was Controller of Moog Automotive, Inc. from 1991 through 1993 and was employed
by Arthur Andersen & Co. from 1983 to 1991.
Dominic J. Pileggi joined Viasystems in July 1998 as Executive Vice
President of Sales and Marketing. Mr. Pileggi is responsible for the global
marketing and sales organization of Viasystems. Mr. Pileggi has more than 20
years experience in global business operations, most recently serving as
President and Chief Executive Officer of Jordan Telecommunications Products, a
division of Jordan Industries, Inc. Mr. Pileggi was also president of the
electronics division and electrical division of Thomas & Betts.
Joseph S. Catanzaro was named Senior Vice President -- Finance of
Viasystems in June 1999. Mr. Catanzaro joined Viasystems in October 1998 in the
position of Vice President of Business Services, and continues to manage that
department along with his global financial responsibilities. Prior to
Viasystems, Mr. Catanzaro was Vice President of Finance at Berg Electronics from
April 1993 to October 1998.
Jeffrey A. Bloch joined Viasystems in April 1999 as Vice President of
Global Supply Management and is responsible for the company's global supply
chain and materials management. Mr. Bloch has more than 15 years experience in
global materials management, including key positions with Solectron and Intel.
From May 1997 until March 1999, Mr. Bloch was Vice President of Worldwide
Materials at GET Manufacturing
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<PAGE> 71
and prior to that time, from April 1995 until March 1997, Mr. Bloch served as
Director, Corporate Procurement, at Cirrus Logic.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of Viasystems receive no
compensation for their services as directors. Each director of Viasystems who is
not also an officer or employee of Viasystems receives an annual retainer of
$12,000 and a fee of $1,000 for each meeting of the board of directors at which
the director is present. Directors of Viasystems are reimbursed for their
reasonable out-of-pocket expenses in connection with their travel to and
attendance at the meetings of the board of directors or committees thereof.
Following the offering, we expect to evaluate the compensation structure for our
directors who are not officers or employees based upon an analysis of comparable
public companies and applicable published guidelines and policies and may
implement a new compensation structure at that time.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash and non-cash compensation earned
during the fiscal years ended December 31, 1997, 1998 and 1999 by the Chief
Executive Officer and the four other most highly compensated executive officers
of Viasystems.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION(1) SECURITIES
----------------------- UNDERLYING ALL OTHER
YEAR SALARY BONUS(2) OPTIONS(#)(3) COMPENSATION
---- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
James N. Mills, Chairman of the Board
and Chief Executive Officer.......... 1999 $685,000 $445,250 453,665(4) --
1998 685,000 342,500 133,886(4) --
1997 395,000 550,000 355,398(4) --
Timothy L. Conlon, President and Chief
Operating Officer.................... 1999 425,000 325,000 -- --
1998 88,542 34,815 -- $537,374(5)
1997 -- -- -- --
Barry Brigman, President -- Viasystems
Americas............................. 1999 341,300 205,000 125,000 --
1998 325,000 105,600 -- 155,369(6)
1997 310,000 201,500 125,000 66,285(6)
David M. Sindelar, Senior Vice
President and Chief Financial
Officer.............................. 1999 300,000 250,000 306,332(4) --
1998 230,000 92,000 80,833(4) --
1997 168,200 150,000 219,750(4) --
Dominic J. Pileggi, Executive Vice
President -- Sales and Marketing..... 1999 331,875 125,000 125,000 --
1998 189,583(7) 126,750 125,000 116,997(8)
</TABLE>
- ------------
(1) We provide a car allowance, reimbursement of club memberships and other
benefits to some executives. The aggregate incremental costs of these
benefits to us do not exceed the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for each executive.
(2) Bonuses were paid in 1998 for 1997, in 1999 for 1998 and in 2000 for 1999.
(3) Options were granted under the Viasystems Group, Inc. 1997 Stock Option
Plan, pursuant to which incentive and non-qualified stock options may be
issued to certain of Viasystems' or its subsidiaries' officers, key
employees and directors.
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<PAGE> 72
(4) Reflects amended performance options granted by Viasystems. See "Benefit
Plans -- Performance Options."
(5) Reflects amounts paid to Mr. Conlon to partially compensate him for his
voluntary termination of his employment contract with Berg Electronics Corp.
and forego compensation otherwise payable to him thereunder.
(6) Mr. Brigman received compensation in the form of reimbursement of relocation
expenses during 1997 and 1998.
(7) Mr. Pileggi commenced employment with Viasystems on June 1, 1998.
(8) Reflects relocation expenses paid to Mr. Pileggi in connection with his
relocation to St. Louis, Missouri.
The following table summarizes option grants made with respect to
Viasystems' common stock during fiscal year 1999 to the executive officers named
above:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED EXERCISE FOR OPTION TERM(2)
UNDERLYING TO EMPLOYEES PRICE ---------------------------
OPTIONS(#) IN FISCAL YEAR ($/SHARE) EXPIRATION DATE 5% 10%
---------- -------------- --------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James N. Mills(1).... 453,665 18.1% $9.00 8/5/09 $ --(3) $ --(3)
Timothy L. Conlon.... -- N/A N/A N/A N/A N/A
Barry L. Brigman..... 125,000 5.0 $7.32 9/1/09 $2,478,750 $4,242,500
David M.
Sindelar(1)........ 306,332 12.2 $9.00 8/5/09 --(3) --(3)
Dominic J. Pileggi... 125,000 5.0 $7.32 9/1/09 $2,478,750 $4,242,500
</TABLE>
- ------------
(1) Reflects amended performance options granted by Viasystems. See "Benefit
Plans -- Performance Options."
(2) The potential realizable value portion of the foregoing table illustrates
the value that might be realized upon exercise of the option immediately
prior to the expiration of its term, assuming the specified compound rules
of appreciation of common stock over the term of the options. Actual gains
on the exercise of the options are dependent on the future performance of
the common stock. There can be no assurance that the potential values
reflected in this table will be achieved. All amounts have been rounded to
the nearest whole dollar.
(3) The terms of the performance options held by Mr. Mills and Mr. Sindelar
would not have been exercisable based upon annual rates of stock
appreciation of 5% or 10% at the end of the last fiscal year. Pursuant to
the terms of the amended performance options, potential realizable value of
Mr. Mills' and Mr. Sindelar's amended performance options for an assumed
rate of stock price appreciation term of 5% and 10% would be $8,234,019 and
$14,635,232 for Mr. Mills, respectively, and $5,559,925 and $9,882,270 for
Mr. Sindelar, respectively.
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<PAGE> 73
The following table summarizes the number of options exercised during the
fiscal year ended December 31, 1999 for the above named executive officers and
the value of unexercised options as of December 31, 1999:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR END(#) FISCAL YEAR END(1)
------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C>
James N. Mills............................ --/1,099,018(2) --/--(3)
Timothy L. Conlon......................... --/-- --/--
Barry L. Brigman.......................... 50,000/200,000 $575,000/$2,389,500
David M. Sindelar......................... --/737,257(2) --/--(3)
Dominic J. Pileggi........................ 25,000/225,000 $254,500/$2,290,500
</TABLE>
- ------------
(1) Represents the difference between $17.50 per share, the assumed initial
public offering price of common stock, and the exercise price per share of
the options.
(2) In connection with this offering, we are amending the terms of the
performance options, the effect of which will make them exercisable.
(3) At fiscal year end, the value of performance options could not be calculated
due to exercisability restrictions and variable exercise prices. As a result
of the amendments to the performance options, those restrictions will be
eliminated and the exercise price fixed at $9.00 per share. As a result, the
value of Mr. Mills' and Mr. Sindelar's performance options at fiscal year
end would have been $9,341,653 and $6,266,684, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Compensation decisions are made by the entire board of directors. James N.
Mills served as both an executive officer and a director during 1999 and has
continued to serve in those capacities in 2000. Mr. Mills participated in
deliberations of the board of directors concerning compensation of executive
officers.
EMPLOYMENT AGREEMENTS
James N. Mills Executive Employment Agreement. Mr. James N. Mills entered
into an amended and restated executive employment agreement with Viasystems and
some of its subsidiaries as of February 16, 2000. Pursuant to his employment
agreement, Mr. Mills will serve as the Chairman of the board of directors and
Chief Executive Officer of Viasystems through March 31, 2005, unless terminated
earlier by Viasystems or Mr. Mills. Mr. Mills is required to devote the amount
of time reasonably necessary to faithfully and adequately supervise the overall
executive management of Viasystems and its subsidiaries, both direct and
indirect. Subject to the foregoing limitation on his activities, Mr. Mills is
free to participate in other endeavors.
The compensation provided to Mr. Mills under his executive employment
agreement includes an annual base salary of not less than $685,000, subject to
upward adjustment at the sole discretion of the board of directors of
Viasystems, as well as those benefits customarily accorded the executives of
Viasystems as long as the executive employment agreement is in force. In
addition, Mr. Mills is entitled to an annual bonus in an amount determined in
accordance with our incentive compensation plan for senior executives and
reimbursement for expenses to own and maintain an automobile.
Mr. Mills' executive employment agreement also provides that if Mr. Mills'
employment is terminated without cause, Mr. Mills will continue to receive his
then current salary, which shall not be less than $685,000, for the longer of
the remainder of the period the executive employment agreement is in force or a
period of one year following such termination. The executive employment
agreement terminates upon Mr. Mills' death or his inability to perform his
duties due to mental or physical incapacity for six consecutive months or any
one hundred working days out of a twelve month period, and no further
compensation shall be payable except
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<PAGE> 74
that he or his estate, heirs or beneficiaries, as applicable, shall receive his
then current salary for a period of 18 months, in addition to benefits otherwise
specifically provided for. The agreement also provides medical benefits for Mr.
Mills' and his spouse's lifetime.
Timothy L. Conlon Executive Employment Agreement. Mr. Timothy L. Conlon
entered into an amended and restated executive employment agreement with
Viasystems and some of its subsidiaries as of February 16, 2000. Pursuant to his
employment agreement, Mr. Conlon will serve as the President and Chief Operating
Officer of Viasystems through March 31, 2005, unless terminated earlier by
Viasystems or Mr. Conlon. Mr. Conlon is required to devote the amount of time
reasonably necessary to faithfully and adequately supervise the overall
financial management of Viasystems and its subsidiaries, both direct and
indirect. Subject to the foregoing limitation on his activities, Mr. Conlon is
free to participate in other endeavors.
The compensation provided to Mr. Conlon under his executive employment
agreement includes an annual base salary of not less than $500,000, subject to
upward adjustment at the sole discretion of the Chairman of the board of
directors of Viasystems, as well as those benefits customarily accorded the
executives of Viasystems as long as the executive employment agreement is in
force. In addition, Mr. Conlon is entitled to an annual bonus in an amount
determined in accordance with our incentive compensation plan for senior
executives and reimbursement for expenses to own and maintain an automobile.
Mr. Conlon's executive employment agreement also provides that if Mr.
Conlon's employment is terminated without cause, Mr. Conlon will continue to
receive his then current salary, which shall not be less than $500,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon Mr. Conlon's death or his inability to
perform his duties due to mental or physical incapacity for six consecutive
months or any one hundred working days out of a twelve month period, and no
further compensation shall be payable except that he or his estate, heirs or
beneficiaries, as applicable, shall receive his then current salary for a period
of 18 months, in addition to benefits otherwise specifically provided for. The
agreement also provides medical benefits for Mr. Conlon's and his spouse's
lifetime.
David M. Sindelar Executive Employment Agreement. Mr. David M. Sindelar
entered into an amended and restated executive employment agreement with
Viasystems and some of its subsidiaries as of February 16, 2000. Pursuant to his
employment agreement, Mr. Sindelar will serve as the Senior Vice President and
Chief Financial Officer of Viasystems through March 31, 2005, unless terminated
earlier by Viasystems or Mr. Sindelar. Mr. Sindelar is required to devote the
amount of time reasonably necessary to faithfully and adequately supervise the
overall financial management of Viasystems and its subsidiaries, both direct and
indirect. Subject to the foregoing limitation on his activities, Mr. Sindelar is
free to participate in other business endeavors.
The compensation provided to Mr. Sindelar under his executive employment
agreement includes an annual base salary of not less than $300,000, subject to
upward adjustment at the sole discretion of the Chairman of the board of
directors of Viasystems, as well as those benefits customarily accorded the
executives of Viasystems as long as the executive employment agreement is in
force. In addition, Mr. Sindelar is entitled to an annual bonus in an amount
determined in accordance with our incentive compensation plan for senior
executives and reimbursement for expenses to own and maintain an automobile.
Mr. Sindelar's executive employment agreement also provides that if Mr.
Sindelar's employment is terminated without cause, Mr. Sindelar will continue to
receive his then current salary, which shall not be less than $300,000, for the
longer of the remainder of the period the executive employment agreement is in
force or a period of one year following such termination. The executive
employment agreement terminates upon Mr. Sindelar's death or his inability to
perform his duties due to mental or physical incapacity for six consecutive
months or any one hundred working days out of a twelve month period, and no
further compensation shall be payable except that he or his estate, heirs or
beneficiaries, as applicable, shall receive his then current salary for a period
of 18 months, in addition to benefits otherwise specifically provided for. The
agreement also provides medical benefits for his and his spouse's lifetime.
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<PAGE> 75
BENEFIT PLANS
STOCK OPTION PLAN
Viasystems has adopted the Viasystems Group, Inc. 1997 Stock Option Plan
pursuant to which incentive and non-qualified stock options, stock appreciation
rights, stock awards, performance awards and stock units may be issued to
employees of Viasystems and any parent or subsidiary corporation designated by
the board of directors of Viasystems. It is expected that prior to the offering,
Viasystems will amend the stock option plan to increase the number of shares
issuable under the plan to a total of 4,404,613 shares of Viasystems common
stock. As of December 31, 1999, options to purchase an aggregate of 2,430,333
shares of common stock subject to the terms and conditions of the stock option
plan are outstanding.
The stock option plan provides that it is to be administered by a committee
of the board of directors of Viasystems or a subcommittee of such a committee.
The committee has the authority to grant to any participant one or more stock
options, and to establish the terms and conditions of such options, subject to
limitations specified in the stock option plan. For example, the per-share
exercise price of each option must not be less than 100% of the fair market
value of the Viasystems common stock on the date the option is granted, and no
option may be exercisable later than ten years after the date of grant. In the
event that any person other than Hicks, Muse, Tate & Furst Equity Fund III, L.P.
and/or Mills & Partners Inc. becomes the owner of a majority of the voting power
of the company or a majority of the board consists of directors who were not
directors at the time the plan was adopted or were not nominated or elected by
those directors, the committee, in its discretion, may take those actions it
deems appropriate with respect to outstanding awards, including, without
limitation, accelerating the exercisability or vesting of those awards.
Viasystems' stock option plan became effective as of February 4, 1997 and
has subsequently been amended to increase the number of shares eligible for
grant thereunder. The stock option plan, as amended, will terminate on February
4, 2007, unless sooner terminated by the committee.
PERFORMANCE OPTIONS
In addition to the options granted under the stock option plan, Viasystems
has granted performance options to purchase an aggregate of 2,802,897 shares of
common stock to certain officers of Viasystems also affiliated with Mills &
Partners.
Pursuant to the terms of the option agreements related to the performance
options, the performance options are exercisable only in the event that certain
affiliates of Hicks Muse have, as of the exercise date, realized an overall rate
of return of at least 35% per annum, compounded annually, on all equity funds
invested by it in Viasystems. In addition, the performance options are
exercisable upon the occurrence of certain liquidity events, including an
initial public offering of our common stock. The initial exercise prices of the
performance options were $6.00 and $7.32 per share, increasing by 8% annually.
In connection with this offering, we expect to amend the terms of the
performance options to eliminate the exercisability restrictions and variable
exercise price features. The amended performance options will have a fixed
exercise price of $9.00 per share and will be immediately exercisable for an
aggregate of 2,802,897 shares of common stock. As a result of the amendments, we
expect to record a one-time charge of $23.8 million, based on an assumed initial
public offering price of $17.50 per share, in non-cash compensation expense in
the first quarter of fiscal year 2000.
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<PAGE> 76
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of February 15, 1999, certain
information regarding the beneficial ownership of the voting securities of
Viasystems by each person who beneficially owned more than 5% of any class of
our voting securities and by the directors and certain executive officers of
Viasystems, individually, and by the directors and executive officers of
Viasystems as a group, in each case after giving effect to the 1 for 6 reverse
stock split and the offering.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)(2)
-------------------------------------------------------------------------
CLASS A SERIES II
COMMON STOCK CLASS A COMMON STOCK COMMON STOCK
----------------------- ---------------------- ----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF
SHARES CLASS SHARES CLASS SHARES CLASS
---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
5% STOCKHOLDERS:
HM Parties(3)................. 80,092,771 67.9% -- --% -- --%
c/o Hicks, Muse, Tate & Furst
Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
OFFICERS AND DIRECTORS:
James N. Mills(4)............. 7,564,235 6.0 5,196,216 100.0 6,172,891 100.0
Thomas O. Hicks(3)............ 80,092,771 67.9 -- -- -- --
Jack D. Furst(3).............. 80,092,771 67.9 -- -- -- --
Richard W. Vieser(5).......... 83,332 * -- -- -- --
Kenneth F. Yontz(6)........... 83,332 * -- -- -- --
Thomas H. O'Brien............. -- -- -- -- -- --
Alex J. Mandl................. -- -- -- -- -- --
Timothy L. Conlon(7).......... 1,230,083 1.1 132,737 2.6 2,105,158 34.1
David M. Sindelar(8).......... 2,125,814 1.8 1,301,267 25.0 1,148,270 18.6
Barry L. Brigman.............. 52,500 * -- -- -- --
Dominic J. Pileggi............ 25,000 * -- -- -- --
All executive officers and
directors as a group (15
persons)(9)................ 84,888,268 65.7% 5,196,216 100.0% 6,172,891 100.0%
</TABLE>
- ------------
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock and
options or warrants that are currently exercisable or exercisable within 60
days of February 15, 2000 are deemed to be outstanding and to be
beneficially owned by the person holding those options or warrants for the
purpose of computing the percentage ownership of that person, but are not
treated as outstanding for the purpose of computing the percentage ownership
of any other person.
(2) The class A common stock and class A series II common stock vote together
with the common stock as a single class and are entitled to one vote for
each share. Shares of class A common stock and class A series II common
stock are convertible into shares of common stock:
- at the option of any holder thereof at any time,
- at the option of Viasystems upon the occurrence of a Triggering Event, as
defined below, and
- automatically on September 30, 2006.
A "Triggering Event" means any sale of substantially all of the assets
of Viasystems or any merger, consolidation or other business combination of
Viasystems in which Hicks, Muse, Tate & Furst Incorporated and its
affiliates cease to beneficially own, directly or indirectly, at least 50%
of the resulting
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<PAGE> 77
entity. Each share of class A common stock and class A series II common
stock is convertible into a fraction of a share of common stock equal to:
(1) the fair market value of a share of common stock at the time of
conversion, minus the sum of $5.94 in the case of the class A common
stock, or $7.26 in the case of class A series II common stock, plus
imputed interest at a rate of 8% per annum, compounded annually, at the
time of conversion,
(2) divided by the fair market value of a share of common stock at
the time of conversion.
Because the fraction of a share of common stock into which class A
common stock and class A series II common stock is convertible can be
determined only at the time of a conversion, the following table reflects
the assumed issuance of 6,398,551 shares of common stock that may be
issuable upon conversion of class A common stock and class A series II
common stock based upon an initial public offering price of $17.50 per
share.
(3) These figures include shares of common stock owned of record by:
- Hicks, Muse, Tate & Furst Equity Fund III, L.P., a limited partnership,
of which the ultimate general partner is Hicks, Muse Fund III
Incorporated, an affiliate of Hicks, Muse, Tate & Furst Incorporated;
- HM3 Coinvestors, L.P., a limited partnership of which the ultimate
general partner is Hicks, Muse Fund III Incorporated;
- HMTF/Viasystems Partners, L.P., a limited partnership controlled by
affiliates of Hicks, Muse, Tate & Furst Incorporated;
- HMTF/Viasystems Investments, LLC, a limited liability company controlled
by affiliates of Hicks, Muse, Tate & Furst Incorporated and in which an
affiliate of Chase Securities Inc., one of the underwriters, holds an
approximate 25% membership interest, and an affiliate of Deutsche Bank
Securities Inc., one of the underwriters, holds a 5% membership interest;
and
- Other stockholders who own shares of common stock subject to an
irrevocable proxy in favor of Hicks, Muse, Tate & Furst Equity Fund III,
L.P. A total of 77,958,771 shares of common stock, including those shares
owned by HM3 Coinvestors, L.P., HMTF/Viasystems Partners, L.P.,
HMTF/Viasystems Investments, LLC, are subject to the proxy.
In addition, these figures include 2,134,000 shares of common stock
issuable upon exercise of an option held by Hicks, Muse & Co. Partners,
L.P., a limited partnership controlled by affiliates of Hicks, Muse, Tate &
Furst Incorporated.
Thomas O. Hicks is a controlling stockholder, Chairman of the Board
and Chief Executive Officer of Hicks, Muse, Tate & Furst Incorporated. Jack
D. Furst is an officer, director and minority stockholder of Hicks, Muse,
Tate & Furst Incorporated. Accordingly, Messrs. Hicks and Furst may be
deemed to be the beneficial owner of common stock held by Hicks, Muse, Tate
and Furst Equity Fund III, L.P., HM3 Coinvestors, L.P., HMTF/Viasystems
Partners, L.P. and HMTF/Viasystems Investments, LLC. John R. Muse, Charles
W. Tate, Lawrence D. Stuart, Jr., Michael J. Levitt, Dan H. Blanks and
David R. Deniger are also officers, directors and minority stockholders of
Hicks, Muse, Tate & Furst Incorporated and as such may be deemed to share
with Messrs. Hicks and Furst the power to vote or dispose of common stock
held by Hicks, Muse, Tate and Furst Equity Fund III, L.P., HM3 Coinvestors,
L.P., HMTF/Viasystems Partners, L.P. and HMTF/Viasystems Investments, LLC.
Each of Messrs. Hicks, Muse, Tate, Furst, Stuart, Levitt, Blanks and
Deniger disclaims the existence of a group and disclaims beneficial
ownership of common stock not owned of record by him.
(4) These figures include shares of common stock, class A common stock and class
A series II common stock held by James N. Mills and a limited partnership
controlled by Mr. Mills, as well as 7,863,657 shares of class A common stock
and class A series II common stock and 33,333 shares of common stock owned
of record by certain individuals, including Mr. Sindelar, subject to an
irrevocable proxy in favor of Mr. Mills. For more information on this proxy,
see the text under the heading "Certain Transactions." These figures also
include 1,099,018 shares of common stock issuable to Mr. Mills upon the
exercise of
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<PAGE> 78
amended performance options that are currently exercisable. For more
information on these amended performance options, see the text under the
heading "Management -- Benefit Plans -- Performance Options."
(5) These figures include 16,666 shares of common stock that may be acquired by
Mr. Vieser upon the exercise of options granted to him pursuant to a stock
option agreement with Viasystems.
(6) These figures include 33,333 shares of common stock owned of record by the
Kenneth F. Yontz 1997 Family Trust, a trust of which Mr. Yontz does not have
the power to vote or dispose of this stock. Mr. Yontz disclaims beneficial
ownership of common stock not owned of record by him.
(7) These figures include 1,233,333 shares of class A series II common stock
owned by a family limited partnership controlled by Mr. Conlon. Mr. Conlon
disclaims beneficial ownership of shares of class A series II common stock
not owned of record by him.
(8) These figures include:
- 33,332 shares of class A common stock and 100,000 shares of class A
series II common stock owned of record by two children's trusts, of which
Mr. Sindelar is a trustee having the power to vote and dispose of this
stock; and
- 1,267,934 shares of class A common stock and 1,048,270 shares of class A
series II common stock owned of record by The D&S Trust #2, of which Mr.
Sindelar's brother is the sole trustee. Mr. Sindelar disclaims beneficial
ownership of class A common stock and class A series II common stock not
owned of record by him.
These figures also include 737,257 shares of common stock issuable to
Mr. Sindelar upon exercise of amended performance options that are
exercisable within the next 60 days. For more information on these amended
performance options, see the text under the heading "Management -- Benefit
Plans -- Performance Options."
(9) Includes 196,666 shares issuable upon exercise of outstanding options issued
under Viasystems' stock option plan and to one of our directors that are
exercisable within 60 days of the date of this prospectus. Also includes
1,836,275 shares of common stock issuable to executive officers of
Viasystems upon the exercise of amended performance options, 2,134,000
shares of common stock issuable to an affiliate of Hicks, Muse, Tate & Furst
Incorporated upon exercise of an option, and 6,398,551 shares of common
stock issuable upon conversion of shares of class A common stock and class A
series II common stock.
CERTAIN TRANSACTIONS
MONITORING AND OVERSIGHT AGREEMENT; FINANCIAL ADVISORY AGREEMENT
In 1996, Viasystems and its subsidiaries entered into a ten-year monitoring
and oversight agreement with Hicks, Muse & Co. Partners, L.P., ("Hicks Muse
Partners"), an affiliate of Hicks, Muse, Tate & Furst Incorporated, as amended
from time to time. Under the monitoring and oversight agreement, Viasystems and
its subsidiaries are required to pay Hicks Muse Partners an annual fee payable
quarterly for oversight and monitoring services to Viasystems. The annual fee is
adjustable on January 1 of each calendar year to an amount equal to .2% of our
budgeted consolidated annual net sales for the then-current fiscal year, but in
no event less than the base fee of $1.75 million. For 1999, 1998 and 1997, we
paid an annual fee to Hicks Muse Partners of $1.8 million, $3.0 million and $1.7
million, respectively. Upon the acquisition by Viasystems or any of its
subsidiaries of another entity or business, the fee shall be adjusted
prospectively in the same manner using our pro forma combined budgeted
consolidated annual net sales. Thomas O. Hicks and Jack D. Furst, directors of
Viasystems, are each principals of Hicks Muse Partners. Hicks Muse Partners is
also entitled to reimbursement for any expenses incurred by it in connection
with rendering services allocable to Viasystems under the monitoring and
oversight agreement. In addition, Viasystems and its subsidiaries have agreed to
indemnify Hicks Muse Partners, its affiliates, and their respective directors,
officers, controlling persons, agents and employees from and against all claims,
liabilities, losses, damages, expenses and fees and disbursements of counsel
related to or arising out of or in connection with the services rendered by
Hicks
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Muse Partners under the monitoring and oversight agreement and not resulting
primarily from the bad faith, gross negligence, or willful misconduct of Hicks
Muse Partners. The monitoring and oversight agreement makes available the
resources of Hicks Muse Partners concerning a variety of financial and
operational matters. Historically, these services have been provided not only by
Messrs. Hicks and Furst, outside their scope of duties as our directors, but
also from numerous other employees of Hicks Muse Partners.
In 1996, Viasystems and its subsidiaries also entered into a ten-year
financial advisory agreement with Hicks Muse Partners, pursuant to which Hicks
Muse Partners is entitled to receive a fee equal to 1.5% of the "transaction
value" for each "add-on transaction" in which Viasystems or any of its
subsidiaries is involved. In respect of acquisitions to date, Hicks Muse
Partners has received aggregate fees of approximately $22.5 million under the
financial advisory agreement. In 1999, 1998 and 1997, we paid Hicks Muse
Partners $4.7 million, $5.0 million and $10.4 million, respectively. The term
"transaction value" means the total value of the add-on transaction including
without limitation, the aggregate amount of the funds required to complete the
add-on transaction, excluding any fees payable pursuant to the financial
advisory agreement, including the amount of any indebtedness, preferred stock or
similar terms assumed (or remaining outstanding). The term "add-on transaction"
means any future proposal for a tender offer, acquisition, sale, merger,
exchange offer, recapitalization, restructuring or other similar transaction
directly involving Viasystems or any of its subsidiaries or any of their
respective subsidiaries and any other person or entity. In addition, Viasystems
and its subsidiaries has agreed to indemnify Hicks Muse Partners, its
affiliates, and their respective directors, officers, controlling persons,
agents and employees from and against all claims, liabilities, losses, damages,
expenses and fees related to or arising out of or in connection with the
services rendered by Hicks Muse Partners under the financial advisory agreement
and not resulting primarily from the bad faith, gross negligence, or willful
misconduct of Hicks Muse Partners. The financial advisory agreement makes
available the resources of Hicks Muse Partners concerning a variety of financial
and operational matters. Historically, these services have been provided not
only by Messrs. Hicks and Furst, outside their scope of duties as our directors,
but also from numerous other employees of Hicks Muse Partners. Although Hicks
Muse Partners is contractually entitled to receive fees from both Viasystems and
International Wire in connection with the Transactions, Hicks Muse Partners has
agreed to waive any fee payable under the financial advisory agreement.
In connection with this offering, we expect to terminate the Monitoring and
Oversight Agreement and Financial Advisory Agreement. As consideration for Hicks
Muse's willingness to agree to such termination, we will grant to Hicks Muse an
option to purchase 2,134,000 shares of our common stock at an exercise price
equal to the initial public offering price of our common stock. The option shall
be exercisable for three years from the date of issue.
The options are designed to have a present value equal to $22.8 million,
the present value of the projected amount of fee income which Hicks Muse will
forego for the period through the stated expiration date of the agreements
(December 31, 2006) as a result of the termination of the agreements. The
present value of such options were calculated using the Black-Scholes option
pricing model.
STOCKHOLDERS AGREEMENT
Nearly all holders of all classes of common stock of Viasystems have
entered into an amended and restated stockholders agreement. The stockholders
agreement, among other things, grants registration rights to the parties
thereto. All parties to the stockholders agreement agreed to take all action
within their respective power, including the voting of common stock, class A
common stock and class A series II common stock, to cause the board of directors
of Viasystems to at all times be constituted by the members designated by an
affiliate of Hicks, Muse, Tate & Furst Incorporated. The stockholders agreement
contains an irrevocable proxy pursuant to which all parties to the stockholders
agreement, other than the initial holders of class A common stock, class A
series II common stock and their transferees, grant to an affiliate of Hicks,
Muse the power to vote all shares of common stock held by these parties on all
matters submitted to stockholders. Further, the
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stockholders agreement contains an irrevocable proxy pursuant to which the
initial holders of class A common stock, class A series II common stock and
their transferees grant to James N. Mills, or to an affiliate of Hicks, Muse if
Mr. Mills is no longer an officer or director of Viasystems, the power to vote
all shares of class A common stock and class A series II common stock held by
these parties on all matters submitted to stockholders. The stockholders
agreement was amended in November 1998 to provide that either James N. Mills and
David Sindelar or the beneficial owners of a majority of the outstanding shares
of class A common stock and class A series II common stock may waive preemptive
rights with respect to all shares of class A common stock and class A series II
common stock. The stockholders agreement terminates on its tenth anniversary
date.
WIRE HARNESS BUSINESS
Immediately prior to the consummation of the offering, Viasystems will
purchase the wire harness business for $210.0 million. International Wire is
controlled by affiliates of Hicks Muse which is also our controlling
stockholder. Mr. James N. Mills is Chairman of the Board and Chief Executive
Officer of each of Viasystems and International Wire. In addition Mr. David M.
Sindelar is Senior Vice President and Chief Financial Officer of both Viasystems
and International Wire, and Jack D. Furst and Richard W. Vieser are directors of
both companies. The closing of the purchase of the wire harness business is
conditioned upon the receipt by each of the boards of directors of Viasystems
and International Wire of opinions of financial advisors that the purchase price
for the wire harness business is fair, from a financial point of view, to the
respective parties. At the closing of the acquisition of the wire harness
business, we will enter into a supply agreement with International Wire whereby
International Wire will continue to supply insulated wire to us for use in the
wire harness business at market prices.
TRANSFERRED OPERATIONS
Concurrently with the consummation of the offering, we will transfer all of
the capital stock of our subsidiaries that own the Transferred Operations to our
existing stockholders, including affiliates of Hicks Muse and officers and
directors of Viasystems. In consideration for the Transferred Operations, we
will receive notes payable to us in the aggregate principal amount of $124
million. Following the completion of the transfer, the Transferred Operations
are expected to enter into a service and supply agreement with us, whereby the
Transferred Operations will continue to provide manufacturing services to us
from their facilities at North Tyneside in the United Kingdom and Norrkoping,
Sweden. We will also have an option to repurchase the North Tyneside and
Norrkoping, Sweden facilities for an amount equal to the net book value of the
facilities.
CHIPS HOLDING, INC.
In April 1997, our stockholders and certain affiliates formed Chips
Holding, Inc. to acquire Interconnection Systems Limited. On April 21, 1997,
Chips acquired Interconnection Systems Limited for $437,500,000 plus $8,953,000
of acquisition fees and expenses, payable in notes to the former stockholders of
Interconnection Systems Limited. In connection with the transaction, our
stockholders invested $140,000,000 of equity in Chips. On June 6, 1997, Chips
merged with Viasystems, and the subsidiaries of Chips became subsidiaries of
Viasystems, in consideration for the issuance to our stockholders and certain
affiliates of 23,333,333 shares of our common stock valued at $140,000,000. We
assumed the notes payable incurred by Chips to finance the acquisition of
Interconnection Systems Limited. The acquisition was consummated by Chips prior
to being acquired by Viasystems because of timing considerations relating to our
financing of the acquisition.
GENERAL
All future transactions, including loans, between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested directors.
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We believe that the terms of each of the transactions described in this
section were no less favorable to Viasystems than could have been obtained with
non-affiliated parties, but we have not independently verified the favorability
of those terms.
STOCK OPTIONS
Stock option grants to our executive officers are described in this
prospectus under the heading "Management -- Compensation of Executive Officers."
In addition, stock options were granted to each of Messrs. Vieser and Yontz on
February 4, 1997, to purchase 16,666 shares of common stock at an exercise price
of $6.00 per share.
COMMON STOCK
From March through June 1997, we sold an aggregate of 66,666 shares of
common stock to Mr. Vieser at a purchase price per share of $6.00 for cash
proceeds in the amount of $400,000.
From March through June 1997, we sold an aggregate of 66,666 shares of
common stock to Mr. Yontz at a purchase price per share of $6.00 for cash
proceeds in the amount of $400,000.
In June 1997, we sold an aggregate of 37,500,000 shares of common stock to
affiliates of Hicks, Muse, Tate & Furst Incorporated at a purchase price per
share of $6.00 for cash proceeds in the amount of $225,000,000.
In June 1997, we sold 33,333 shares of common stock to Mr. Mills at a
purchase price per share of $6.00 for cash proceeds in the amount of $200,000.
In April 1998, we sold an aggregate of 416,708 shares of common stock to a
partnership affiliated with Hicks, Muse, Tate & Furst Incorporated at a purchase
price per share of $6.00 for cash proceeds in the amount of $2,500,250.
In April 1998, we sold an aggregate of 6,830,601 shares of common stock to
affiliates of Hicks, Muse, Tate & Furst Incorporated at a purchase price per
share of $7.32 for cash proceeds in the amount of $50,000,000.
In July 1999, we sold 27,322,404 shares of common stock to an affiliate of
Hicks, Muse, Tate & Furst Incorporated at a purchase price per share of $7.32
for cash proceeds in the amount of $200,000,000.
CLASS A COMMON STOCK
In June 1997, we sold 1,817,083 shares of class A common stock to Mr. Mills
for a purchase price per share of $.06 for cash proceeds in the amount of
$109,024.99.
In June 1997, we sold 116,071 shares of class A common stock to Mr. Conlon
for a purchase price per share of $.06 for cash proceeds in the amount of
$6,964.29.
In June 1997, we sold 1,066,666 shares of class A common stock to Mr.
Sindelar for a purchase price per share of $.06 for cash proceeds in the amount
of $63,999.98.
In May 1998, we sold 31,921 shares of class A common stock to Mr. Mills for
a per share purchase price of $.06 for cash proceeds of $1,915.27.
In May 1998, we sold 18,333 shares of class A common stock to Mr. Sindelar
for a per share purchase price of $.06 for cash proceeds of $1,100.00.
CLASS A SERIES II COMMON STOCK
In May 1998, we sold 346,563 shares of class A series II common stock to
Mr. Mills for a per share purchase price of $.06 for cash proceeds of
$20,793.81.
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In May 1998, we sold 206,768 shares of class A series II common stock to
Mr. Sindelar for a per share purchase price of $.06 for cash proceeds of
$12,406.09.
In May 1998, we sold 14,657 shares of class A series II common stock to Mr.
Conlon for a per share purchase price of $.06 for cash proceeds of $879.46. In
November 1998, we sold 1,243,833 additional shares of class A series II common
stock to Mr. Conlon for a per share purchase price of $.06 for cash proceeds of
$74,630.00.
In August 1999, we sold an aggregate of 1,026,670 shares of class A series
II common stock to Mr. Mills for a per share purchase price of $.06 for cash
proceeds of $61,600.20.
In August 1999, we sold an aggregate of 100,000 shares of class A series II
common stock to trusts for the benefit of Mr. Sindelar's children. Those shares
were purchased at $.06 per share for cash proceeds of $6,000.00.
In August 1999, we sold 846,668 shares of class A series II common stock to
Mr. Conlon for a per share purchase price of $.06 for cash proceeds of
$50,800.13.
In August 1999, we sold 841,502 shares of class A series II common stock to
a trust for the benefit of Mr. Sindelar's children for cash proceeds of
$50,490.15. The purchase price per share was $.06.
DESCRIPTION OF INDEBTEDNESS
SENIOR CREDIT FACILITY
In connection with the offering and the Transactions, Viasystems, Inc. is
amending and restating its senior credit facility in its entirety. The material
terms of the new senior credit facility are expected to be substantially as set
forth below.
The new senior credit facility will include:
- a $150,000,000 term loan facility;
- a $175,000,000 revolving credit facility; and
- a letter of credit and term loan facility in the amount of $303,100,000
in respect of our obligations under the loan notes made in connection
with the acquisition of Interconnection Systems Limited.
The term loan facility amortizes semi-annually over seven years, commencing
September 30, 2000; and the letter of credit and term loan facility amortizes
semi-annually over two years, commencing September 30, 2003.
Viasystems, Inc. and its foreign subsidiaries who are parties to the senior
credit facility, or the borrowers, may use the revolving loans for letters of
credit in an amount not to exceed $40 million. Furthermore, up to an aggregate
principal amount of $75 million of the revolving loan will be available as a
multicurrency facility. Also, up to $10 million of the revolving facility will
be available for swingline loans.
The borrowers may optionally prepay the term loans from time to time in
whole or in part, without premium or penalty. At our option, the revolving loans
may be prepaid, and revolving credit commitments may be permanently reduced, in
whole or in part, at any time.
Viasystems, Inc. will be required to make mandatory prepayments of the term
loans, to cash collateralize the letter of credit term loan and to reduce the
revolving facility, in the amounts equal to (a) 50% of excess cash flow (subject
to certain grace periods) and (b) 100% of the net proceeds of dispositions by us
or any of our subsidiaries of material assets or incurrences of senior
indebtedness by us or any of our subsidiaries.
Viasystems, Inc.'s obligations under the new senior credit facilities are
unconditionally and irrevocably guaranteed by us and each existing and future
domestic subsidiary of Viasystems, Inc. In addition, the senior credit facility
is secured by a perfected first priority security interest in all of the capital
stock of
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Viasystems, Inc. and each of its direct and indirect subsidiaries and 65% of
each first tier foreign subsidiary of Viasystems, Inc., all intercompany notes
owning to Viasystems, Inc. or any of its subsidiaries, the notes issued in
connection with the disposition of the Transferred Operations and all other
tangible and intangible assets of Viasystems, Inc. and each guarantor.
The loans bear interest, at the borrower's election, at either:
- the highest of (A) the rate of interest publicly announced by The Chase
Manhattan Bank as its prime rate in effect, (B) the secondary market rate
for three-month certificates of deposit plus 1% and (C) the federal funds
effective rate from time to time plus .5%; or
- the rate for eurodollar (or Canadian, as applicable) deposits for a
period equal to one, two, three or six months, as selected by the
borrower plus the applicable percentage determined in accordance with the
senior credit facility.
The senior credit facility contains a number of covenants that, among other
things, restrict the ability of Viasystems, Inc. and its subsidiaries to:
- incur additional indebtedness;
- create liens on assets;
- incur guarantee obligations;
- enter into mergers, consolidations or amalgamations or liquidate, wind up
or dissolve;
- dispose of assets;
- pay dividends;
- make capital expenditures;
- make advances, loans, extensions of credit, capital contributions to, or
purchases of any stock, bonds, notes, debentures or other securities;
- engage in certain transactions with subsidiaries and affiliates; and
- enter into sale and leaseback transactions.
The senior credit facility also contains customary events of default
including:
- failure to pay principal on any loan when due or any interest or other
amount that becomes due within five days after the due date thereof;
- any representation or warranty made or deemed made is incorrect in any
material respect on or as of the date made or deemed made;
- the default in the performance of negative covenants or a default in the
performance of other covenants or agreements for a period of thirty days;
- default in other indebtedness or guarantee obligations with a principal
amount in excess of $20.0 million beyond the period of grace;
- events of insolvency;
- certain ERISA events; and
- other customary events of default for facilities similar to the senior
credit facility.
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SENIOR SUBORDINATED NOTES
Following completion of the offering and the application of the net
proceeds from the offering, Viasystems, Inc., a wholly-owned subsidiary of
Viasystems, will have an aggregate of $500 million of its 9 3/4% Senior
Subordinated Notes due 2007 and Series B 9 3/4% Senior Subordinated Notes due
2007 issued and outstanding. The following is a brief summary of the material
provisions of the notes.
The notes mature on June 1, 2007. Interest on the notes accrues at the rate
of 9 3/4% per annum and is payable semiannually. The notes are unsecured
obligations of Viasystems, Inc., ranking subordinate in right of payment to all
senior indebtedness, including the senior credit facility of Viasystems, Inc.,
on par with any future senior indebtedness that is subordinated in right of
payment to senior indebtedness of Viasystems, Inc., and senior to all
indebtedness of Viasystems, Inc. that is subordinate in right of payment to the
notes by written agreement.
Except as set forth below, the notes will not be redeemable at the option
of Viasystems, Inc. prior to June 1, 2002. On and after that date, the notes
will be redeemable at the following redemption prices (expressed in percentages
of principal amount) if redeemed during the twelve month period beginning on
June 1 of the years set forth below, plus, in each case, accrued and unpaid
interest to the redemption date:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------ ----------
<S> <C>
2002..................................................... 104.875%
2003..................................................... 103.250
2004..................................................... 101.625
2005 and thereafter...................................... 100.000
</TABLE>
In addition, at any time and from time to time prior to June 1, 2000,
Viasystems, Inc. may redeem in the aggregate up to $175.0 million of the notes
with the net cash proceeds of one or more equity offerings by Viasystems or
Viasystems, Inc. (to the extent, in the case of Viasystems, that the net cash
proceeds of the offering are contributed to the common or non-redeemable
preferred equity capital of Viasystems, Inc.) so long as there is a public
market at the time of such redemption, at a redemption price (expressed as a
percentage of principal amount) of 109.75%, plus accrued and unpaid interest, if
any, to the redemption date; provided, however, that at least $250.0 million
aggregate principal amount of the notes must remain outstanding after each
redemption.
At any time on or prior to June 1, 2002, the notes may also be redeemed as
a whole at the option of Viasystems, Inc. upon the occurrence of a change of
control, including upon a sale of substantially all of the assets of Viasystems,
Inc., the acquisition of a majority of the voting power of Viasystems, Inc. by
persons other than Hicks Muse, Mills & Partners or any of their affiliates, or a
change in the board composition so that a majority of the board consists of
directors who were not directors at the time the indentures were executed or
were not nominated or elected by those directors. The redemption price will be
equal to 100% of the principal amount of the notes, plus an applicable premium
(defined in the indentures) as of, and accrued and unpaid interest, if any, to,
the date of redemption.
The indentures governing the notes contain restrictive covenants which,
among other things, impose limitations (subject to exceptions) on Viasystems,
Inc. with respect to the following:
- the payment of dividends or other distributions on capital stock and the
purchase, redemption or retirement for value of shares of capital stock
or warrants, options or other securities convertible into capital stock;
- the repayment or redemption of subordinated indebtedness other than in
accordance with scheduled repayment;
- making investments, except for permitted investments;
- the incurrence of indebtedness, except for permitted indebtedness and
other indebtedness incurred after satisfying specified financial ratios;
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- the incurrence of indebtedness senior to the notes and subordinated to
its senior indebtedness;
- the restrictions of payments by subsidiaries to their respective parents;
- sales of assets and stock of its subsidiaries;
- the issuance of capital stock by any of its subsidiaries;
- transactions with stockholders and affiliates; and
- the merger or sale of all or substantially all of its assets.
Upon the occurrence of events of default specified in the indentures, the
trustee for the notes or the holders of at least 25% of the principal amount of
the outstanding notes may declare the principal amount then outstanding of, and
accrued but unpaid interest, if any, on, all of the notes to be due and payable.
Upon the happening of other events of default specified in the indentures, the
unpaid balance of an accrued but unpaid interest on all outstanding notes will
automatically become due and payable without any action by the trustee or the
holders of the notes.
Viasystems, Inc. may terminate most of its obligations under the notes
indentures at any time by irrevocably depositing in trust with the trustee money
or U.S. government obligations for the payment of principal, premium (if any),
and interest on the notes to maturity or any redemption date specified by
Viasystems, Inc., together with satisfying other conditions and obligations set
forth in the indentures.
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our
charter gives effect to the 1 for 6 reverse stock split that will be effected
prior to the offering and the other provisions of our amended and restated
certificate of incorporation, which is expected to be filed immediately prior to
the offering, as well as the issuance and sale of 40,000,000 shares of common
stock in this offering.
AUTHORIZED CAPITAL STOCK
Our authorized capital stock consists of:
- 60,000,000 shares of preferred stock, 6,000,000 shares of which have been
designated series B preferred stock, of which 1,521,890.18 shares are
outstanding;
- 500,000,000 shares of common stock, of which 118,001,272 shares are
outstanding;
- 25,000,000 shares of class A common stock, of which 5,196,216 shares are
outstanding; and
- 25,000,000 shares of class A series II common stock, of which 6,172,891
shares are outstanding.
STOCK RESERVED FOR ISSUANCE
No shares of series B preferred stock are reserved for issuance. 4,404,613
shares of common stock are reserved for issuance upon exercise of options
granted under our stock option plan. In addition, 2,802,897 shares of common
stock are reserved for issuance upon exercise of outstanding performance
options, and 16,666 shares are reserved for issuance upon exercise of an option
granted to one of our directors. 5,196,216 shares of common stock are reserved
for issuance upon conversion of outstanding shares of class A common stock and
6,172,891 shares of common stock are reserved for issuance upon conversion of
outstanding shares of class A series II common stock. 136,645 shares of common
stock are reserved for issuance upon exercise of outstanding warrants. No shares
of either class A common stock or class A series II common stock are reserved
for issuance.
PREFERRED STOCK
Our board is authorized without stockholder approval to issue preferred
stock in one or more classes or series and to designate for each class or series
the following:
- the terms and conditions of any voting, dividend and conversion or
exchange rights;
- the amount payable on the series upon redemption and upon our dissolution
or distribution of our assets; and
- the rights, qualifications, limitations or restrictions pertaining to the
class or series.
These rights and privileges could adversely affect your voting power, and our
board's authority to issue preferred stock without your approval could delay or
prevent a change in control of the company.
SERIES B PREFERRED STOCK
Dividends. The holders of series B preferred stock are entitled to be paid
cumulative dividends at a rate per annum equal to:
- $2.00 per whole share prior to November 30, 2004;
- $2.50 per whole share on and after November 30, 2004 and prior to
November 30, 2005;
- $3.00 per whole share on and after November 30, 2005 and prior to
November 30, 2006; and
- $3.50 per whole share on and after November 30, 2006, payable quarterly
on February 28, May 31, August 31, and November 30 in each year.
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On the first twenty payment dates, any dividend shall be payable either:
- in cash;
- by issuing a number of additional shares (or fractional shares) of series
B preferred stock in respect of each share (or fractional share) of
series B preferred stock then outstanding at the rate of 1/25th of a
whole share of series B preferred stock for each $1.00 of dividend
declared; or
- in any combination of the above.
However, upon the completion of this offering, all dividends on the series B
preferred stock will be payable in cash unless we are prohibited from using cash
under the terms of our existing credit arrangements, in which case the dividends
will be paid in shares of series B preferred stock. If dividends on the series B
preferred stock are not paid in full on any dividend payment date, the dividends
will accrue and cumulate.
So long as any shares of series B preferred stock remain outstanding, we will
not:
- pay any dividend (other than a dividend payable solely in junior
securities) on any junior securities;
- redeem or purchase any junior securities or parity stock (except in
exchange for junior securities);
- pay any monies or make available for a sinking fund for redemption or
purchase of any junior securities or parity stock;
unless, in each of the instances mentioned above, full dividends on all
outstanding shares of series B preferred stock for all past dividend periods are
paid, and the dividends on all outstanding shares of series B preferred stock
for the then current quarterly dividend period are paid or set aside for
payment.
So long as any series B preferred stock remains outstanding, we will not:
- pay cash dividends with respect to any junior securities or parity stock;
- redeem or purchase any junior securities or parity stock (except in
exchange for junior securities);
- pay any monies to or make available for a sinking fund for redemption or
purchase of any junior securities or parity stock;
unless, in each such instance, we have paid cash dividends on all outstanding
shares of series B preferred stock for the then current quarterly dividend
period.
We will not pay any dividend on any share of series B preferred stock for any
dividend period unless at the same time:
- we pay a like proportionate dividend for the same dividend period on all
shares of the series B preferred stock then outstanding and entitled to
receive the dividend; and
- we have paid on all shares ranking on parity with the series B preferred
stock, dividends ratably in proportion to the respective dividend rates
fixed for the series B preferred stock and any parity stock. We will pay
no dividend on the parity stock unless we have paid dividends on all
shares then outstanding of the series B preferred stock, for the same
dividend period ratably in proportion to the respective dividend rates
fixed for the series B preferred stock and the parity capital stock.
Ranking. The series B preferred stock ranks:
- senior to the common stock and any other class or series of capital stock
which provides that it ranks junior to the series B preferred stock or
which does not expressly provide for any ranking;
- on a parity with any class or series of capital stock which provides that
it ranks on a parity with the series B preferred stock; and
- junior to any class or series of capital stock which provides that it
ranks senior to the series B preferred stock.
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Liquidation. Subject to the rights of the holders of any class of capital
stock or series of capital stock ranking senior to the series B preferred stock,
in the event of any liquidation, dissolution or winding up, the holder of each
share of series B preferred stock will be entitled to receive a cash liquidation
payment equal to $25.00 per share plus a cash amount equal to all accumulated
and unpaid dividends before any distribution or payment shall be made to the
holders of any junior securities. If we lack sufficient funds to pay the full
amount owed to the holders of the series B preferred stock and the full amount
owed to the holders of any other class or series of capital stock ranking on a
parity with the series B preferred stock, we will distribute funds to the
holders of the series B preferred stock and the parity stock on a pro rata
basis.
Redemption. We can redeem, at any time, shares of series B preferred stock,
for cash at a redemption price of $25.00 per share plus an amount equal to all
accumulated and unpaid dividends on the shares. We must redeem within sixty
calendar days of a change of control, all outstanding shares of the series B
preferred stock at a redemption price, payable in cash, equal to the per share
liquidation preference of the shares, plus an amount equal to accumulated and
unpaid dividends on the shares to the date the shares are redeemed.
Notwithstanding, our obligation to redeem shares of the series B preferred stock
upon the occurrence of a change of control, is subject to any limitations under
our existing credit arrangements. A "change of control" will be deemed to occur
if Hicks, Muse, Tate & Furst Incorporated, Mills & Partners, Inc. and/or their
respective affiliates cease to have the power to vote or direct the voting of
securities having a majority interest for the election of our directors,
provided, that this event shall not be deemed a change of control if following
the consummation of this offering:
- Hicks, Muse, Tate & Furst Incorporated, Mills & Partners, Inc. and/or
their respective affiliates own greater than 20% of our outstanding
common stock; and
- (A) no "Person" or "group" (as those terms are used in Sections 13(d) and
14(d) of the Exchange Act), other than Hicks, Muse, Tate & Furst
Incorporated, Mills & Partners, Inc. and/or their respective affiliates,
is or becomes the "beneficial owner" (as defined in Rules 13(d)-3 and
13(d)-5 under the Exchange Act), directly or indirectly, of a greater
percentage of our voting stock than is owned by Hicks, Muse, Tate & Furst
Incorporated, Mills & Partners, Inc. and/or their respective affiliates,
or (B) our board consists of a majority of those directors serving on
November 26, 1996 and each other director whose nomination for election
is recommended by a majority of the then continuing directors or who
receives the vote of Hicks, Muse, Tate & Furst Incorporated, Mills &
Partners, Inc. and/or their respective affiliates in his or her election
by our shareholders.
In the event we merge or consolidate and are not the surviving entity and in
connection with the transaction we are not required to redeem the series B
preferred stock, the holders will be entitled to exchange their series B
preferred stock for securities of the surviving entity having economic terms
substantially similar to the series B preferred stock.
Any share of series B preferred stock which we redeem, repurchase or
reacquire will be retired.
Special Voting Rights to Elect Directors. If dividends on the series B
preferred stock remain unpaid for four consecutive quarterly periods, the
holders of series B preferred stock will be entitled to elect two directors.
Each share of series B preferred stock will be entitled to one vote. The holders
of series B preferred stock will retain this right until we pay all accumulated
dividends on the series B preferred stock in full or we redeem all the
outstanding series B preferred stock. In the event we pay all accumulated
dividends in full on the series B preferred stock or redeem in full the series B
preferred stock, the terms of the directors elected by the holders of the series
B preferred stock will terminate.
Certain Actions. So long as any shares of the series B preferred stock are
outstanding, we cannot, without the consent of at least a majority of the votes
of the shares of the series B preferred stock then outstanding:
- create, authorize or issue more than 10,000,000 shares of any class or
series of capital stock that ranks senior to the series B preferred
stock;
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- pay any dividend (other than a dividend payable solely in junior
securities) with respect to any junior securities or repurchase or redeem
for cash any junior securities; or
- amend any rights of the series B preferred stock so as to affect
adversely those rights.
The above provisions will not prohibit:
- the payment of any dividend within sixty days after the date of
declaration, if the payment would have complied with the above
provisions;
- the retirement of any of our shares capital stock, other than shares
issued to Hicks, Muse, Tate & Furst Incorporated, Mills & Partners, Inc.
and/or their respective affiliates on November 26, 1996, in exchange for,
or out of the net proceeds of the substantially concurrent sale of, other
shares of any of our capital stock;
- the acquisition or cancellation of capital stock in connection with any
merger, consolidation or transfer;
- any repurchase or redemption of capital stock or equity interest of any
of our subsidiaries held by any of our employees or employees of any of
our subsidiaries in connection with the termination of those employees,
to the extent that the aggregate amount of all such payments,
redemptions, and repurchases does not exceed $5,000,000; and
- cash payments to holders of junior securities in lieu of the issuance of
fractional shares.
COMMON STOCK, CLASS A COMMON STOCK, AND CLASS A SERIES II COMMON STOCK
General. Except as discussed below, all shares of common stock, class A
common stock and the class A series II common stock have identical rights and
privileges. There are currently 18 holders of our common stock.
Voting. Our common stock, class A common stock and class A series II common
stock are full voting stock entitled to one vote per share with respect to all
matters to be voted on by our stockholders. Except as expressly required by
Delaware law, our common stock, class A common stock and class A series II
common stock will vote together as a single class.
Dividends. Holders of common stock, class A common stock and the class A
series II common stock are entitled to participate ratably, on a share-for-share
basis as if all shares were of a single class, in:
- ordinary dividends payable in cash out of our current earnings; and
- dividends in shares of common stock, class A common stock or class A
series II common stock (or rights to subscribe for or purchase shares of
common stock, class A common stock and class A series II common stock, as
applicable, or securities or indebtedness convertible into shares of
common stock, class A common stock and class A series II common stock, as
applicable);
except that:
- dividends payable in shares of common stock (or rights to subscribe for
or purchase shares of common stock or securities or indebtedness
convertible into shares of common stock) will be paid only on shares of
common stock;
- dividends payable in shares of class A common stock (or rights to
subscribe for or purchase shares of class A common stock or securities or
indebtedness convertible into shares of class A common stock) will be
paid only on shares of class A common stock; and
- dividends payable in shares of class A series II common stock (or rights
to subscribe for or purchase shares of class A series II common stock or
securities or indebtedness convertible into shares of class A series II
common stock) will be paid only on shares of class A series II common
stock.
If we pay any dividend on the common stock other than the ratable dividend as
provided above, then the applicable "base price", as defined below, will be
reduced by the per share amount of the dividend.
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CONVERSION OF CLASS A COMMON STOCK AND THE CLASS A SERIES II COMMON STOCK
Conversion Rights. Holders of shares of class A common stock and class A
series II common stock may convert their shares into shares of common stock at
any time. In addition, shares of class A common stock:
- can be converted into shares of common stock at our option effective
immediately prior to the consummation of a "triggering event;" and
- will automatically be converted into shares of common stock on September
30, 2006.
Shares of class A series II common stock:
- can be converted into shares of common stock at our option effective
immediately prior to the consummation of a "triggering event;" and
- will automatically be converted into shares of common stock on April 30,
2008.
For purposes of any conversion, each share of class A common stock and
class A series II common stock will be convertible into a fraction of a share of
common stock equal to the quotient of (1) the excess, if any, of the fair value
of one share of common stock over the conversion price, as defined below,
divided by (2) the fair value of the common stock, all computed as of the close
of business on the date preceding the date of conversion. "Triggering event"
means mergers or business combinations in which we are not the surviving entity,
or any sale of all or substantially all of our assets; except that this term
does not include any transaction in which Hicks, Muse, Tate & Furst Incorporated
and/or its affiliates own beneficially in excess of 50% of the outstanding
capital stock of the surviving entity.
Adjustments for Dividends on Converted Shares. We will pay any dividends
declared but not paid on the shares of class A common stock or class A series II
common stock prior to conversion into common stock, on the payment date to the
holders of the shares. However, the holders will not be entitled to receive the
corresponding dividends declared but not paid on the shares of common stock
issuable upon the conversion.
Adjustments for Stock Splits and Stock Dividends. We will treat the common
stock, class A common stock and class A series II common stock identically in
respect of any subdivisions or combinations. If we:
- subdivide the common stock, class A common stock and class A series II
common stock into a greater number of shares;
- combine the common stock, class A common stock and/or class A series II
common stock into a fewer number of shares; or
- pay to the holders of common stock, class A common stock or class A
series II common stock a dividend in common stock, class A common stock
or class A series II common stock, as applicable,
we shall adjust the applicable "base price" by multiplying the base price then
in effect times a fraction, (1) the numerator of which is the total number of
shares of class A common stock or class A series II common stock, as the case
may be, outstanding immediately before the subdivision, combination, or dividend
and (2) the denominator of which is the total number of shares of class A common
stock or class A series II common stock, as the case may be, outstanding
immediately after the subdivision, combination, or dividend. "Base price" means
$5.94 with respect to the class A common stock and $7.26 with respect to the
class A series II common stock. The "conversion price" means the Base Price plus
imputed interest at 8%, compounded annually. The adjusted base price will be
effective at the close of business on the effective date of the split or
combination or the record date for determination of the holders of common stock,
class A common stock or class A series II common stock entitled to the dividend.
Recapitalization, Consolidation, or Merger. In the event that we
recapitalize, consolidate or merge with or into any other corporation the terms
must provide:
- that the class A common stock and/or class A series II common stock
remain outstanding after the reorganization; and
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- for any change in the common stock, provision must be made as part of the
terms of the reorganization so that each holder of class A common stock
or class A series II common stock which will remain outstanding following
the reorganization will be entitled to receive, upon conversion of its
class A common stock or class A series II common stock and in lieu of
each share of common stock issuable to it upon conversion of its class A
common stock or class A series II common stock prior to such
reorganization, the same kind and amount of securities or assets as will
be distributable upon the reorganization with respect to one share of
common stock.
Reservation of Shares. We will reserve and keep available the number of
shares of common stock sufficient to effect the conversion of all outstanding
shares of class A common stock and class A series II common stock and will
increase our authorized but unissued shares of common stock if necessary for
that purpose.
Fractional Shares. In lieu of any fractional share of common stock that
otherwise would be issuable upon conversion of shares of class A common stock or
class A series II common stock, we will deliver to the holder of the shares
being converted an amount in cash equal to the fair value of the fractional
shares on the conversion date.
Retirement of Shares. We will not reissue shares of class A common stock
and class A series II common stock which have been converted into common stock,
repurchased or reacquired in any other manner.
Liquidation. Holders of our common stock, class A common stock and class A
series II common stock share ratably on a share-for-share basis in all
distributions of assets pursuant to any liquidation, dissolution, or winding-up
of the corporation.
SPECIAL PROVISIONS IN OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND
AMENDED AND RESTATED BYLAWS
Upon consummation of the offering, our amended and restated certificate of
incorporation and amended and restated bylaws will include provisions that could
have an anti-takeover effect. We intend these provisions to enhance the
likelihood of continuity and stability in the composition of our board and in
the policies formulated by our board. We also intend these provisions to help
ensure that our board, if confronted by a surprise proposal from a third party
which has acquired a block of our stock, will have sufficient time to review the
proposal and appropriate alternatives to the proposal and to act in what it
believes to be the stockholders' best interests.
Blank Check Preferred Stock. Our amended and restated certificate of
incorporation provides that our board may authorize the issuance of up to
60,000,000 shares of preferred stock in one or more series and may designate the
dividend rate, voting rights and other rights, preferences and restrictions of
each series. To date, 6,000,000 shares have been designated series B preferred
stock. We have no present intention to issue any additional shares of preferred
stock. We could, however, issue a series of preferred stock that could either
impede or facilitate the completion of a merger, tender offer or other takeover
attempt. Although our board is required to make any determination to issue stock
based on its judgment as to the best interests of our stockholders, our board
could act in a manner that would discourage an acquisition attempt or other
transaction that some, or a majority, of the stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then market price of their stock. Our board does not intend to
seek stockholder approval prior to any issuance of any preferred stock, unless
otherwise required by law or stock exchange rules.
Classified Board of Directors. Our amended and restated certificate of
incorporation will provide for a board divided into three classes of directors
serving staggered three-year terms. The classification of directors has the
effect of making it more difficult for stockholders to change the composition of
the board in a relatively short period of time. At least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in a
majority of the board.
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Number of Directors; Vacancies; Removal. Our amended and restated
certificate of incorporation will provide that the board must consist of at
least six and no more than nine members. Our amended and restated bylaws provide
that the board, acting by majority vote of the directors then in office, may
fill any newly created directorships or vacancies on the board. Moreover, under
the DGCL, in the case of a corporation having a classified board, stockholders
may remove a director only for cause. This provision, when coupled with the
provision of our amended and restated bylaws authorizing the board to fill
vacant directorships, will preclude a stockholder from removing incumbent
directors without cause and simultaneously gaining control of the board by
filling the vacancies created by the directors' removal with its own nominees.
Stockholder Action by Written Consent; Special Meetings. Our amended and
restated certificate of incorporation will prohibit action by stockholders by
written consent in lieu of a meeting. Our amended and restated bylaws will
provide that special meetings of stockholders may be called by a majority of the
board, the chairman of the board or any holder or holders of at least 50% of the
outstanding shares of our voting capital stock.
Advance Notice Requirements for Stockholder Proposals and Director
Nominees. Our amended and restated bylaws will establish an advance notice
procedure with regard to business proposed to be submitted by a stockholder at
any annual or special meeting of our stockholders, including the nomination of
candidates for election as directors. The procedure provides that a notice of
proposed stockholder business must be timely given in writing to our Secretary
prior to the meeting. In all cases, to be timely, notice relating to an annual
meeting must be received at our principal executive office not less than 60 days
nor more than 90 days before the first anniversary of the prior year's annual
meeting.
Notice to us from a stockholder who proposes to nominate a person at a
meeting for election as a director must contain all information relating to that
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act. The notice must also include the person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected.
The chairman of a meeting of stockholders may determine that a person was
not nominated in accordance with the nomination procedure, in which case the
person's nomination will be disregarded. If the chairman of a meeting of
stockholders determines that other business was not properly brought before the
meeting in accordance with our amended and restated bylaw procedures, the
business will not be conducted at the meeting. Nothing in the nomination
procedure or the business procedure will preclude discussion by any stockholder
of any nomination or business properly made or brought before the annual or any
other meeting in accordance with the above-mentioned procedures.
LIMITATIONS ON DIRECTOR LIABILITY
Our amended and restated certificate of incorporation also contains
provisions permitted under the DGCL regarding liability of directors. These
provisions eliminate the personal liability of directors for monetary damages
for any breach of their fiduciary duties as directors, except for:
- any breach of the duty of loyalty;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- liability under Section 174 of the DGCL regarding unlawful dividends,
stock repurchases or stock redemptions; or
- any transaction from which the director derived an improper personal
benefit.
These provisions do not eliminate a director's duty of care and do not affect
the availability of equitable remedies, including action to enjoin or rescind a
transaction involving a breach of fiduciary duty. Moreover, these provisions do
not apply to claims against a director for violation of certain laws, including
the federal securities laws. Our amended and restated certificate of
incorporation further provides that we must indemnify
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our directors and officers, and may indemnify any of our employees or agents, to
the fullest extent permitted by the DGCL. We believe these provisions assist us
in attracting and retaining qualified individuals to serve as directors and
officers.
DELAWARE TAKEOVER STATUTE
Section 203 of the DGCL prohibits persons deemed "interested stockholders"
from engaging in a "business combination" with a Delaware corporation for three
years following the date those persons become interested stockholders.
Interested stockholders generally include:
- persons who are the beneficial owners of 15% or more of our outstanding
voting stock; and
- persons who are our affiliates or associates and who hold 15% or more of
our outstanding voting stock at any time within three years before the
date on which the person's status as an interested stockholder is
determined.
Subject to statutory exceptions, a "business combination" includes, among other
things:
- mergers and consolidations;
- the sale, lease, exchange, mortgage, pledge, transfer or other
disposition of assets having an aggregate market value equal to 10% or
more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market
value of all our outstanding stock;
- transactions that result in our issuance or transfer of any of our stock
to the interested stockholder, except pursuant to exercises, exchanges,
conversions, distributions or offers to purchase with respect to
securities outstanding prior to the time that the interested stockholder
became an interested stockholder and that, generally, do not increase the
interested stockholder's proportionate share of any class or series of
our stock;
- any transaction involving us that has the effect of increasing the
proportionate share of our stock of any class or series, or securities
convertible into the stock of any class or series, that is owned directly
or indirectly by the interested stockholder; or
- any receipt by the interested stockholder of the benefit, except
proportionately as a stockholder, of any loans, advances, guarantees,
pledges or other financial benefits which we provided.
Section 203 does not apply to a business combination if:
- before a person becomes an interested stockholder, our board approves the
transaction in which the interested stockholder became an interested
stockholder or approves the business combination;
- upon consummation of the transaction that resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of our voting stock outstanding at the time
the transaction commences (other than certain excluded shares); or
- following a transaction in which the person became an interested
stockholder, the business combination is (a) approved by our board and
(b) authorized at a regular or special meeting of stockholders (and not
by written consent) by the affirmative vote of the holders of at least
two-thirds of our outstanding voting stock not owned by the interested
stockholder.
These provisions of Delaware law and our amended and restated certificate
of incorporation and amended and restated bylaws could discourage hostile
takeover attempts. As a consequence, they may also inhibit temporary
fluctuations in the market price of our common stock that often result from
actual or rumored hostile takeover attempts. These provisions may also have the
effect of preventing changes in our management. It is possible that these
provisions could make it more difficult to accomplish transactions which
stockholders may otherwise deem to be in their best interests.
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TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is Computershare
Investor Service, Inc., LLC.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants and shares issued upon conversion of class A common stock and Class
A series II common stock, in the public market after this offering could
adversely affect market prices prevailing from time to time and could impair our
ability to raise capital through the sale of our equity securities.
Upon completion of this offering, we will have outstanding 118,001,272
shares of common stock, assuming no exercise of the underwriters' over-allotment
option. Of these shares, 40,000,000 shares, or 46,000,000 shares if the
underwriters exercise their over-allotment option in full, of the common stock
sold in this offering will be freely tradable without restriction under the
Securities Act unless purchased by our affiliates as that term is defined in
Rule 144 under the Securities Act. The remaining 78,001,272 shares of common
stock outstanding and the shares of common stock issuable upon conversion of the
5,196,216 shares of outstanding class A common stock and 6,172,891 shares of
outstanding class A series II common stock will be restricted securities under
Rule 144 and may in the future be sold without registration under the Securities
Act to the extent permitted by Rule 144 or any other applicable exemption under
the Securities Act, subject in certain cases to the restrictions on transfer
contained in the lock-up agreements described in "Underwriters."
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
the holding period of any prior owner except an affiliate, would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately 1,180,012 shares immediately after this
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to the
sale.
Sales under Rule 144 also are subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been an affiliate of
Viasystems at any time during the three months preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is entitled
to sell those shares without complying with the manner of sale, public
information, volume limitation and notice provisions of Rule 144.
Rule 701 permits resales of shares in reliance on Rule 144 but without
compliance with specified restrictions of Rule 144. Any employee, officer or
director of or consultant to Viasystems who purchased his or her shares under a
written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period requirements of
Rule 144. Rule 701 further provides that non-affiliates may sell those shares in
reliance on Rule 144 without having to comply with the holding period, public
information, volume limitation or notice provisions of Rule 144. All holders of
Rule 701 shares are required to wait until 90 days after the date of this
prospectus before selling those shares.
Nearly all holders of all classes of common stock outstanding immediately
prior to this offering have entered into an amended and restated stockholders
agreement that grants certain registration rights to the parties thereto with
respect to outstanding shares of common stock and shares of common stock issued
upon exercise of outstanding options or warrants. Registration of shares of
common stock pursuant to these
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registration rights will result in those shares becoming freely tradable without
restriction under the Securities Act.
Following consummation of this offering we intend to file a registration
statement on Form S-8 under the Securities Act covering shares of common stock
reserved for issuance under our stock option plan and our performance option
agreements. Based on the number of shares that are expected to be reserved for
issuance under our stock option plan and amended performance options, that
registration statement would cover up to 7,207,510 shares issuable on exercise
of the options, of which 5,249,896 options will have been issued as of the date
of this offering. The registration statement on Form S-8 will automatically
become effective upon filing. Accordingly, subject to the exercise of those
options, shares registered under that registration statement will immediately be
available for sale in the open market, subject in certain cases to the
restrictions on transfer contained in the lock-up agreements described in
"Underwriters."
IMPORTANT UNITED STATES FEDERAL TAX CONSIDERATIONS FOR
NON-UNITED STATES HOLDERS
This is a general discussion of certain United States federal tax
consequences of the acquisition, ownership, and disposition of our common stock
by a holder that, for U.S. federal income tax purposes, is not a U.S. person as
we define that term below. A holder of our common stock who is not a U.S. person
is a non-U.S. holder. We assume in this discussion that you will hold our common
stock issued pursuant to the offering as a capital asset (generally, property
held for investment). We do not discuss all aspects of U.S. federal taxation
that may be important to you in light of your individual investment
circumstances, such as special tax rules that would apply to you, for example,
if you are a dealer in securities, financial institution, bank, insurance
company, tax-exempt organization, partnership or owner of more than 5% of our
common stock. In addition, this discussion does not apply to persons holding the
common stock through a partnership or other pass-through entity. Our discussion
is based on current provisions of the Internal Revenue Code of 1986, as amended,
Treasury regulations, judicial opinions, published positions of the U.S.
Internal Revenue Service and other applicable authorities, all as in effect on
the date of this prospectus and all of which are subject to differing
interpretations or change, possibly with retroactive effect. We have not sought,
and will not seek, any ruling from the IRS or opinion of counsel with respect to
the tax consequences discussed in this prospectus, and there can be no assurance
that the IRS will not take a position contrary to the tax consequences discussed
below or that any position taken by the IRS would not be sustained. We urge you
to consult your tax advisor about the U.S. federal tax consequences of
acquiring, holding, and disposing of our common stock, as well as any tax
consequences that may arise under the laws of any foreign, state, local, or
other taxing jurisdiction.
For purposes of this discussion, a U.S. person means any one of the
following:
- a citizen or resident of the U.S;
- a corporation, partnership, or other entity created or organized in the
U.S. or under the laws of the U.S. or of any political subdivision of the
U.S;
- an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
- a trust, the administration of which is subject to the primary
supervision of a U.S. court and that has one or more U.S. persons who
have the authority to control all substantial decisions of the trust.
DIVIDENDS
Dividends paid to a non-U.S. holder will generally be subject to
withholding of U.S. federal income tax at the rate of 30%. If, however, the
dividend is effectively connected with the conduct of a trade or business of the
U.S. by the non-U.S. holder, the dividend will be subject to U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally, and, for corporate holders under certain circumstances, the branch
profits tax. Non-U.S. holders should consult any applicable income tax treaties
that may provide for a reduction of, or exemption from, withholding taxes. For
purposes of determining whether tax is to be
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withheld at a reduced rate as specified by a treaty, we generally will presume
that dividends we pay on or before December 31, 2000, to an address in a foreign
country are paid to a resident of that country.
Under recently finalized Treasury regulations, which in general apply to
dividends that we pay after December 31, 2000, to obtain a reduced rate of
withholding under a treaty, a non-U.S. holder generally will be required to
provide certification as to that non-U.S. holder's entitlement to treaty
benefits. These regulations also provide special rules to determine whether, for
purposes of applying a treaty, dividends that we pay a non-U.S. holder that is
an entity should be treated as paid to holders of interests in that entity.
GAIN ON DISPOSITION
A non-U.S. holder will generally not be subject to United States federal
income tax, including by way of withholding, on gain recognized on a sale or
other disposition of our common stock unless any one of the following is true:
- the gain is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder;
- the non-U.S. holder is a nonresident alien individual present in the U.S.
for 183 or more days in the taxable year of the disposition and certain
other requirements are met;
- the non-U.S. holder is subject to tax pursuant to provisions of the U.S.
federal income tax law applicable to certain U.S. expatriates; or
- we are or have been during certain periods a "United States real property
holding corporation" for U.S. federal income tax purposes.
If we are or have been a United States real property holding corporation, a
non-U.S. holder will generally not be subject to U.S. federal income tax on gain
recognized on a sale or other disposition of our common stock provided that:
- the non-U.S. holder does not hold, and has not held during certain
periods, directly or indirectly, more than 5% of our outstanding common
stock; and
- our common stock is and continues to be regularly traded on an
established securities market for U.S. federal income tax purposes.
We believe that our common stock will be regularly traded on an established
securities market for this purpose in any year in which it is listed on The New
York Stock Exchange.
If we are or have been during certain periods a U.S. real property holding
corporation and the above exception does not apply, a non-U.S. holder will be
subject to U.S. federal income tax with respect to gain realized on any sale or
other disposition of our common stock as well as to a withholding tax, generally
at a rate of 10% of the proceeds. Any amount withheld pursuant to a withholding
tax will be creditable against a non-U.S. holder's U.S. federal income tax
liability.
Gain that is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder will be subject to the U.S. federal income
tax imposed on net income on the same basis that applies to U.S. persons
generally, and, for corporate holders under certain circumstances, the branch
profits tax, but will generally not be subject to withholding. Non-U.S. holders
should consult any applicable income tax treaties that may provide for different
rules.
UNITED STATES FEDERAL ESTATE TAXES
Our common stock that is owned or treated as owned by an individual who is
not a citizen or resident of the U.S., as specially defined for U.S. federal
estate tax purposes, on the date of that person's death will be included in his
or her estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
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<PAGE> 97
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, we must report annually to the IRS and to each non-U.S. holder
the amount of dividends that we paid to a holder, and the amount of tax that we
withheld on those dividends. This information may also be made available to the
tax authorities of a county in which the non-U.S. holder resides.
Under current U.S. Treasury regulations, certain U.S. information reporting
requirements and backup withholding tax will generally not apply to dividends
that we pay on our common stock to a non-U.S. holder at an address outside the
U.S. Payments of the proceeds of a sale or other taxable disposition of our
common stock by a U.S. office of a broker are subject to both backup withholding
at a rate of 31% and information reporting, unless the holder certifies as to
its non-U.S. holder status under penalties of perjury or otherwise establishes
an exemption. Information reporting requirements, but not backup withholding
tax, will also apply to payments of the proceeds of a sale or other taxable
disposition of our common stock by foreign offices of U.S. brokers or foreign
brokers with certain types of relationships to the U.S. unless the broker has
documentary evidence in its records that the holder is a non-U.S. holder and
certain other conditions are met or the holder otherwise established an
exemption.
Backup withholding is not an additional tax. Any amounts that we withhold
under the backup withholding rules will be refunded or credited against the
non-U.S. holder's U.S. federal income tax liability if certain required
information is furnished to the IRS.
The U.S. Treasury Department has promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general,
those regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. The final regulations are generally
effective for payments made after December 31, 2000, subject to transition
rules.
94
<PAGE> 98
UNDERWRITERS
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the U.S. underwriters named below,
for whom Morgan Stanley & Co. Incorporated, Credit Suisse First Boston
Corporation and Chase Securities Inc. are acting as U.S. representatives, and
the international underwriters named below for whom Morgan Stanley & Co.
International Limited, Credit Suisse First Boston (Europe) Limited and Chase
Securities Inc. are acting as international representatives, have severally
agreed to purchase, and Viasystems has agreed to sell to them, severally, the
number of shares indicated below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Credit Suisse First Boston Corporation....................
Chase Securities Inc......................................
Banc of America Securities LLC............................
Bear, Stearns & Co. Inc. .................................
Deutsche Bank Securities Inc. ............................
Goldman, Sachs & Co. .....................................
Salomon Smith Barney Inc. ................................
SoundView Technology Group, Inc. .........................
--------
Subtotal..................................................
--------
International Underwriters:
Morgan Stanley & Co. International Limited................
Credit Suisse First Boston (Europe) Limited...............
Chase Securities Inc......................................
Banc of America International Limited.....................
Bear, Stearns International Limited.......................
Deutsche Bank Securities Inc. ............................
Goldman Sachs International...............................
Salomon Brothers International Limited....................
SoundView Technology Group, Inc. .........................
--------
Subtotal..................................................
--------
Total.............................................
========
</TABLE>
The U.S. underwriters and the international underwriters are collectively
referred to as the underwriters, and the U.S. representatives and the
international representatives are collectively referred to as the
representatives. The underwriters are offering the shares of common stock
subject to their acceptance of the shares from us and subject to prior sale. The
underwriting agreement provides that the obligations of the several underwriters
to pay for and accept delivery of the shares of common stock offered by this
prospectus
95
<PAGE> 99
are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for all
of the shares of common stock offered by this prospectus, if any such shares are
taken. However, the underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option described below.
In the agreement between U.S. and international underwriters, sales may be
made between U.S. underwriters and international underwriters of any number of
shares as may be mutually agreed. The per share price of any shares sold by the
underwriters shall be the public offering price listed on the cover page of this
prospectus, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other underwriters or to certain dealers. After the initial
offering of the shares of common stock, the offering price and other selling
terms may from time to time be varied by the representatives.
Viasystems has granted to the U.S. underwriters an option, exercisable for
30 days from the date of this prospectus, to purchase up to an aggregate of
6,000,000 additional shares of common stock at the public offering price listed
on the cover page of this prospectus, less underwriting discounts and
commissions. The U.S. underwriters may exercise this option solely for the
purpose of covering over-allotments, if any, made in connection with the
offering of the shares of common stock offered by this prospectus. To the extent
this option is exercised, each U.S. underwriter will become obligated, subject
to limited conditions, to purchase about the same percentage of the additional
shares of common stock as the number listed next to the U.S. underwriter's name
in the preceding table bears to the total number of shares of common stock
listed next to the names of all U.S. underwriters in the preceding table.
The underwriters have informed Viasystems that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
At the request of Viasystems, the underwriters have reserved for sale, at
the initial public offering price, up to shares of common stock offered
by this prospectus to a limited number of our employees, business associates and
related persons. The number of shares available for sale to the general public
will be reduced to the extent that such persons purchase such reserved shares.
Any reserved shares not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares of common stock offered by
this prospectus.
Viasystems expects to file an application for the common stock to be quoted
on The New York Stock Exchange under the symbol "VG."
Each of Viasystems and the directors, officers and substantially all of the
other stockholders of Viasystems has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, it
will not, during the period ending 180 days after the date of this prospectus:
- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock,
whether any transaction described above is to be settled by delivery of common
stock or such other securities, in cash or otherwise.
96
<PAGE> 100
The restrictions described in this paragraph do not apply to:
- the sale of shares to the underwriters;
- the issuance by Viasystems of shares of common stock upon the exercise of
an option or a warrant or the conversion of a security outstanding on the
date of this prospectus of which the underwriters have been advised in
writing; or
- transactions by any person other than Viasystems relating to shares of
common stock or other securities acquired in open market transactions
after the completion of the offering of the shares.
- the transfer of shares by one of the foregoing persons as a bona fide
gift or as a distribution to its limited partners or stockholders if the
person receiving the shares as a bona fide gift or a distribution agrees
to be bound by the foregoing provisions.
In addition, the directors, officers and stockholders referred to above
have agreed that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, they will not, during the period
ending 180 days after the date of this prospectus, make any demand for, or
exercise any right with respect to, the registration of any shares of common
stock or any security convertible into or exercisable or exchangeable for common
stock.
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the common stock, the underwriters may bid for, and purchase, shares of
common stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an underwriter or a dealer for distributing the
common stock in the offering if the syndicate repurchases previously distributed
shares of common stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the common stock above independent market
levels. The underwriters are not required to engage in these activities and may
end any of these activities at any time.
Certain of the underwriters and their affiliates have provided, and may in
the future from time to time provide, investment banking and general financing
and banking services to Viasystems and its affiliates, including Hicks, Muse,
Tate & Furst Incorporated for which they have in the past received, and may in
the future receive, customary fees. Specifically, Morgan Stanley & Co.
Incorporated is providing a fairness opinion to the board of directors of
International Wire and Credit Suisse First Boston Corporation is providing a
fairness opinion to the board of directors of Viasystems in connection with the
acquisition of the wire harness business of International Wire by Viasystems. An
affiliate of Chase Securities Inc. acts as an agent and lender under Viasystems
current credit facility and will act in such capacities under Viasystems new
credit facility, and receives fees customary for performing those services. An
affiliate of Chase Securities Inc. holds approximately 25% of the ownership
interest, and an affiliate of Deutsche Bank Securities Inc. holds 5% of the
ownership interest, in HMTF/Viasystems Investments, LLC, which in turn
beneficially owns approximately 35% of the outstanding common stock of
Viasystems. In addition, affiliates of Credit Suisse First Boston Corporation
and Chase Securities Inc. are limited partners in the limited partnerships
through which Hicks Muse owns common stock in Viasystems.
Viasystems and the underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the shares of common stock offered
by this prospectus will be determined by negotiations between
97
<PAGE> 101
Viasystems and the representatives. Among the factors to be considered in
determining the initial public offering price will be:
- Viasystems' results of operations, current financial position and future
prospects;
- sales, earnings and certain of Viasystems' other financial and operating
information in recent periods; and
- the price-earnings ratios, price-sales ratios, market prices of
securities and financial and operating information of companies engaged
in activities similar to Viasystems.
The estimated initial public offering price range set forth on the cover
page of this preliminary prospectus is subject to change as a result of market
conditions and other factors.
98
<PAGE> 102
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Viasystems by Weil, Gotshal & Manges LLP, Dallas, Texas and New York,
New York. A number of partners of Weil, Gotshal & Manges LLP are investors in
limited partnerships that own an aggregate of 41,984 shares of our common stock
attributable to the gross investment by those partners. Certain legal matters in
connection with the offering will be passed upon for the underwriters by
Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, Illinois.
EXPERTS
The consolidated financial statements of Viasystems Group, Inc. and
Subsidiaries as of December 31, 1998 and 1999, and for each of the years in the
period ended December 31, 1999, included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in accounting and
auditing. The combined balance sheet of the Printed Circuit Board Division of
Termbray Industries International (Holdings) Limited as of March 31, 1999 and
the related combined statements of income, of cash flows and of changes in
divisional equity for the year ended March 31, 1999, included in this prospectus
have been so included in reliance on the report of PricewaterhouseCoopers,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Commission a Registration Statement on Form S-1
regarding this offering. This prospectus, which is part of the registration
statement, does not contain all of the information included in the registration
statement, and you should refer to the registration statement and its exhibits
to read that information. References in this prospectus to any of our contracts
or other documents are not necessarily complete, and you should refer to the
exhibits attached to the registration statement for copies of the actual
contract or document. You may read and copy the registration statement, the
related exhibits and the other material we file with the Commission at the
Commission's public reference room in Washington, D.C. and at the Commission's
regional offices in Chicago, Illinois and New York, New York. You can also
request copies of those documents, upon payment of a duplicating fee, by writing
to the Commission. Please call the Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. The Commission also
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file with the
Commission. The site's address is www.sec.gov. You may also request a copy of
these filings, at no cost, by writing or telephoning us as follows: 101 South
Hanley Road, Suite 400, St. Louis, Missouri 63105, Attention: Chief Financial
Officer.
99
<PAGE> 103
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statements of Operations and Comprehensive
Income for the years ended December 31, 1997, 1998 and
1999...................................................... F-4
Consolidated Statements of Stockholders' Deficit for the
years ended December 31, 1997, 1998 and 1999.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED -- THE
PCB DIVISION
Independent Auditors' Report................................ F-34
Combined Statement of Income for the year ended March 31,
1999...................................................... F-35
Combined Balance Sheet as of March 31, 1999................. F-36
Combined Statement of Changes in Divisional Equity for the
year ended March 31, 1999................................. F-37
Combined Statement of Cash Flows for the year ended March
31, 1999.................................................. F-38
Notes to the Combined Financial Statements.................. F-40
</TABLE>
F-1
<PAGE> 104
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders of Viasystems Group, Inc.:
The stock split described in Note 24 to the financial statements has not been
consummated at February 22, 2000. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the consolidated financial statements listed in the
accompanying index on page F-1 present fairly, in all material respects, the
financial position of Viasystems Group, Inc. and its subsidiaries at
December 31, 1998 and 1999, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the
United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of reporting costs of start-up activities."
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 23, 2000
F-2
<PAGE> 105
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 9,335 $ 22,839
Accounts receivable, less allowance for doubtful accounts
of $3,794 for 1998, $6,965 for 1999.................... 179,503 220,619
Inventories............................................... 130,661 155,818
Prepaid expenses and other................................ 44,612 46,871
---------- ----------
Total current assets.............................. 364,111 446,147
Property, plant and equipment, net.......................... 580,204 462,266
Deferred financing costs, net............................... 41,986 41,751
Intangible assets, net...................................... 421,747 261,298
Other assets................................................ 46,655 1,096
---------- ----------
Total assets...................................... $1,454,703 $1,212,558
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term obligations............... $ 54,534 $ 27,663
Accounts payable.......................................... 133,725 173,591
Accrued and other liabilities............................. 141,400 121,475
Income taxes payable...................................... 14,914 24,352
---------- ----------
Total current liabilities......................... 344,573 347,081
Deferred taxes.............................................. 77,214 23,887
Long-term obligations, less current maturities.............. 1,079,961 1,334,549
Other non-current liabilities............................... 66,441 68,771
---------- ----------
Total liabilities................................. 1,568,189 1,774,288
---------- ----------
Preferred Stock:
Series B preferred stock, par value $.01 per share,
6,000,000 shares authorized; 1,405,992 and 1,521,890
shares issued and outstanding, respectively, including
liquidation preferences of $25.00 per share............... 37,033 41,273
Stockholders' deficit
Common stock, par value $.01 per share, 600,000,000
shares authorized; 50,414,810 and 78,001,272 shares
issued and outstanding, respectively.................. 504 780
Class A common stock, par value $.01 per share,
50,000,000 shares authorized; 5,862,894 and 5,196,216
shares issued and outstanding, respectively........... 59 59
Series II Class A common stock, par value $.01 per
share, 50,000,000 shares authorized; 990,062 and
6,172,891 shares issued and outstanding,
respectively.......................................... 10 62
Paid in capital........................................ 300,801 496,688
Accumulated deficit.................................... (461,013) (1,077,285)
Treasury stock, at cost................................ -- (162)
Accumulated other comprehensive income................. 9,120 (23,145)
---------- ----------
Total stockholders' deficit....................... (150,519) (603,003)
---------- ----------
Total liabilities and stockholders' deficit....... $1,454,703 $1,212,558
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 106
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Net sales................................................ $ 795,289 $1,031,928 $1,102,324
Operating expenses:
Cost of goods sold..................................... 554,097 723,741 816,370
Selling, general and administrative.................... 75,650 106,749 113,069
Depreciation........................................... 51,884 104,831 114,753
Amortization of intangibles............................ 58,153 61,775 59,569
Impairment loss........................................ -- -- 468,389
Write-off of acquired in-process research and
development......................................... 294,500 20,100 17,600
--------- ---------- ----------
Operating income (loss).................................. (238,995) 14,732 (487,426)
--------- ---------- ----------
Other expenses:
Interest expense....................................... 64,612 92,535 109,980
Amortization of deferred financing costs............... 6,629 9,354 6,619
Other expense.......................................... 1,024 4,960 23,594
--------- ---------- ----------
Loss before income taxes, cumulative effect of a change
in accounting principle and extraordinary item......... (311,260) (92,117) (627,619)
Provision (benefit) for income taxes..................... 8,432 (7,334) (28,289)
--------- ---------- ----------
Loss before cumulative effect of a change in accounting
principle and extraordinary item....................... (319,692) (84,783) (599,330)
Cumulative effect -- write-off of start-up costs, net of
income tax benefit of $5,647........................... -- -- 16,942
Extraordinary item -- loss on early extinguishment of
debt, net of income tax benefit of $4,332.............. 7,796 -- --
--------- ---------- ----------
Net loss................................................. (327,488) (84,783) (616,272)
Other comprehensive income (loss):
Foreign currency translation adjustments............... 1,353 9,187 (32,858)
Minimum pension liability, net of income tax provision
(benefit) of $0, $575 and $(254), respectively...... -- (1,341) 593
--------- ---------- ----------
Comprehensive loss....................................... $(326,135) $ (76,937) $ (648,537)
========= ========== ==========
Basic loss per weighted average common share:
Before cumulative effect of a change in accounting
principle and extraordinary item.................... $ (10.73) $ (1.62) $ (8.46)
Cumulative effect...................................... -- -- (0.23)
Extraordinary item..................................... (0.26) -- --
--------- ---------- ----------
Net loss............................................... $ (10.99) $ (1.62) $ (8.69)
========= ========== ==========
Diluted loss per weighted average common share:
Before cumulative effect of a change in accounting
principle and extraordinary item.................... $ (11.95) $ (1.82) $ (8.98)
Cumulative effect...................................... -- -- (0.25)
Extraordinary item..................................... (0.29) -- --
--------- ---------- ----------
Net loss............................................ $ (12.24) $ (1.82) $ (9.23)
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 107
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ACCUMULATED
AND OTHER
COMPREHENSIVE
COMMON PAID IN ACCUMULATED TREASURY INCOME
STOCK CAPITAL DEFICIT STOCK (LOSS) TOTAL
------ -------- ----------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996......................... $ 57 $ 73,719 $ (48,742) $ -- $ (79) $ 24,955
Issuance of 37,745,833 shares of common stock...... 377 226,098 -- -- -- 226,475
Issuance of 5,122,917 shares of Class A common
stock............................................ 51 256 -- -- -- 307
Conversion of 1,800,000 shares of Series A
Preferred Stock into common stock................ -- (44,982) -- -- -- (44,982)
Issuance of 1,600,000 shares of Series C Preferred
Stock............................................ -- 39,984 -- -- 39,984
Conversion of 1,600,000 shares of Series C
Preferred Stock into common stock................ -- (39,984) -- -- (39,984)
Paid-in-kind dividends of 98,919 shares of Series B
Preferred Stock.................................. -- (3,298) -- -- -- (3,298)
Stock issuance costs............................... (2,813) -- (2,813)
Net loss........................................... -- -- (327,488) -- -- (327,488)
Foreign currency translation adjustment............ -- -- -- -- 1,353 1,353
------ -------- ----------- ----- -------- ---------
Balance at December 31, 1997......................... 485 248,980 (376,230) -- 1,274 (125,491)
Issuance of 7,668,976 shares of common
stock............................................ 77 55,505 -- -- -- 55,582
Issuance of 56,921 shares of Class A common
stock............................................ 1 2 -- -- -- 3
Issuance of 990,062 shares of Class A Series II
common stock..................................... 10 49 -- -- -- 59
Paid-in-kind dividends of 107,073 shares of Series
B Preferred Stock................................ -- (3,735) (3,735)
Net loss........................................... -- -- (84,783) -- -- (84,783)
Minimum pension liability.......................... -- -- -- -- (1,341) (1,341)
Foreign currency translation adjustment............ -- -- -- -- 9,187 9,187
------ -------- ----------- ----- -------- ---------
Balance at December 31, 1998......................... 573 300,801 (461,013) -- 9,120 (150,519)
Issuance of 27,603,129 shares of common stock...... 276 201,771 -- -- -- 202,047
Issuance of 5,182,829 shares of Class A Series II
common stock..................................... 52 259 -- -- -- 311
Repurchase of 16,667 shares of common
stock............................................ -- -- -- (122) -- (122)
Repurchase of 666,678 shares of Class A common
stock............................................ -- -- -- (40) -- (40)
Stock issuance costs............................... (1,903) -- (1,903)
Paid-in-kind dividends of 115,899 shares of Series
B Preferred Stock................................ -- (4,240) (4,240)
Net loss........................................... -- -- (616,272) -- -- (616,272)
Minimum pension liability.......................... -- -- -- -- 593 593
Foreign currency translation adjustment............ -- -- -- -- (32,858) (32,858)
------ -------- ----------- ----- -------- ---------
Balance at December 31, 1999......................... $ 901 $496,688 $(1,077,285) $(162) $(23,145) $(603,003)
====== ======== =========== ===== ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 108
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss.................................................. $(327,488) $ (84,783) $(616,272)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Write-off of acquired in-process research and
development........................................... 294,500 20,100 17,600
Impairment loss......................................... -- -- 468,389
Loss on disposal of plant, property and equipment....... -- -- 18,762
Cumulative effect of a change in accounting
principle -- write-off of start-up costs.............. -- -- 22,589
Extraordinary item -- loss on early extinguishment of
debt.................................................. 12,128 -- --
Depreciation and amortization of intangibles............ 110,037 166,606 174,322
Amortization of deferred financing costs................ 6,629 9,354 6,619
Deferred taxes.......................................... (15,109) (15,127) (38,205)
Change in assets and liabilities, net of acquisitions:
Accounts receivable................................... (8,050) (20,641) (15,494)
Inventories........................................... (15,979) (19,997) (13,829)
Prepaid expenses and other............................ (6,640) (22,693) 2,182
Accounts payable and accrued and other liabilities.... 38,539 (65,976) (2,033)
Income taxes payable.................................. 16,339 (10,678) 6,969
--------- --------- ---------
Net cash provided by (used in) operating
activities....................................... 104,906 (43,835) 31,599
--------- --------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired of $42,778 for 1997,
$3,738 for 1998 and $5,022 for 1999..................... (155,904) (145,665) (314,187)
Capital expenditures...................................... (117,163) (130,361) (126,856)
--------- --------- ---------
Net cash used in investing activities....................... (273,067) (276,026) (441,043)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term obligations under the
Credit Agreement........................................ -- 103,938 291,000
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 Facility............ 216,000 -- --
Net borrowings on Revolvers............................... -- 117,244 65,943
Repayment of amounts due under the Credit Agreement....... (151,964) (16,000) (26,125)
Repayment of amounts under the Chips Loan Notes
Liability............................................... -- (33,938) --
Repayment of the Subordinated Credit Facility............. (216,000) -- --
Chips Term Loans -- Cash collateral....................... -- -- (95,295)
Repayment of other long-term obligations.................. (90,187) (12,085) (5,509)
Equity proceeds........................................... 60,719 55,644 198,293
Financing fees and other.................................. (34,491) (15,773) (7,706)
--------- --------- ---------
Net cash provided by financing activities................... 184,077 303,530 420,601
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... (4,495) (1,872) 2,347
--------- --------- ---------
Net change in cash and cash equivalents..................... 11,421 (18,203) 13,504
Cash and cash equivalents at beginning of year.............. 16,117 27,538 9,335
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 27,538 $ 9,335 22,839
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 109
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION AND ACQUISITIONS
Viasystems Group, Inc., a Delaware corporation ("Group"), was formed on
August 28, 1996. Viasystems Group, together with its subsidiaries, is herein
referred to as the Company. The Company makes strategic acquisitions of
electronics manufacturing services ("EMS") and integrates those acquisitions as
a global enterprise that is the preferred provider of EMS solutions to original
equipment manufacturers of electronic products.
1997 ACQUISITIONS
On April 11, 1997, the Company acquired all of the outstanding stock of
Forward Group, PLC ("Forward"), a manufacturer of rigid PCBs located in the U.K.
The purchase price of approximately $208,483 consisted of cash and notes payable
to certain Forward stockholders plus $5,585 of acquisition fees and expenses
(the "Forward Acquisition"). The Forward Acquisition and related transaction
fees and expenses were funded with (i) $40,000 from the issuance of 1,600,000
shares of Series C Preferred Stock of Viasystems Group, Inc. and (ii) $216,000
from a Subordinated Credit Facility. The Subordinated Credit Facility was paid
off with a subsequent debt offering (see Note 9).
The Forward Acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been allocated to the assets and
liabilities based on their estimated respective fair values. Accordingly, the
results of operations of Forward since its acquisition are included in the
results of operations of the Company. The Company has allocated a significant
portion of the purchase price, as described below, to intangible assets,
including approximately $97,800 of in-process R&D valued using a discount rate
of 14.0%. The portion of the purchase price allocated to in-process research and
development ("in-process R&D") projects that did not have a future alternative
use and to which technological feasibility had not been established totaled
$97,800 and was charged to expense as of the acquisition date. The other
acquired intangibles include developed technology, assembled workforce, and
customer list. These intangibles are being amortized over their estimated useful
lives of 1-15 years. The remaining unidentified intangible asset has been
allocated to goodwill and is being amortized over its estimated useful life of
20 years (see Note 2).
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 57,034
Property, plant and equipment............................... 59,358
Developed technologies...................................... 34,800
Assembled workforce......................................... 6,600
Customer list............................................... 13,200
In-process R&D.............................................. 97,800
Goodwill.................................................... 82,240
Non-current assets.......................................... 5,660
Current liabilities......................................... (86,297)
Non-current liabilities..................................... (56,327)
--------
Total............................................. $214,068
========
</TABLE>
In April 1997, the Company's stockholders and certain of its affiliates
formed Chips Holding, Inc., to acquire Interconnection Systems (Holdings)
Limited ("ISL"), a manufacturer of rigid PCBs located in the U.K. On April 21,
1997, Chips Holdings, Inc. acquired ISL for $437,500 plus $8,953 of acquisition
fees and expenses (the "ISL Acquisition"). The purchase price consisted entirely
of notes payable to the former stockholders of ISL. In connection with the
transaction, the stockholders of the Company invested $140,000
F-7
<PAGE> 110
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of equity capital in Chips Holdings, Inc. On June 6, 1997, Chips Holdings, Inc.
merged with the Company and the subsidiaries of Chips Holdings, Inc., including
ISL, became subsidiaries of the Company and certain of its subsidiaries (the
"Chips Merger") in consideration for the issuance to the Company's stockholders
and certain of its affiliates of 23,333,333 shares of the Company common stock
valued at $140,000. The Company assumed the $437,500 of notes payable which were
incurred by Chips Holdings, Inc. (the "Chips Loan Notes") to finance the ISL
Acquisition (see Note 9).
The ISL Acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been allocated to the assets and
liabilities based on their estimated respective fair values. The Company has
allocated a significant portion of the purchase price, as described below, to
intangible assets, including approximately $196,700 of in-process R&D valued
using a discount rate of 14.0%. The portion of the purchase price allocated to
in-process R&D projects that did not have a future alternative use and to which
technological feasibility had not been established totaled $196,700 and was
charged to expense as of the acquisition date. The other acquired intangibles
include developed technology, assembled workforce, and customer list. These
intangibles are being amortized over their estimated useful lives of 1-15 years.
The remaining unidentified intangible asset has been allocated to goodwill and
is being amortized over its estimated useful life of 20 years (see Note 2).
The Chips Merger was accounted for as a transfer of assets among companies
under common control and was recorded at Chips Holdings, Inc.'s historical cost.
In the Chips Merger, ISL and its subsidiaries became wholly owned subsidiaries
of the Company, and as such, the Company will account for the acquisition of ISL
as of the acquisition by Chips Holdings, Inc. and the results of operations of
ISL since the acquisition by Chips Holdings, Inc. are included in the results of
operations of the Company.
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 98,357
Property, plant and equipment............................... 120,329
Developed technologies...................................... 66,500
Assembled workforce......................................... 8,000
Customer list............................................... 17,900
In-process R&D.............................................. 196,700
Goodwill.................................................... 114,042
Non-current assets.......................................... 12,971
Current liabilities......................................... (77,507)
Non-current liabilities..................................... (110,839)
---------
Total............................................. $ 446,453
=========
</TABLE>
Forward's and ISL's (the "1997 Acquisitions") in-process R&D value was
comprised of numerous research and development projects that were anticipated to
reach completion during 1998 and 1999. At the acquisition date, research and
development projects ranged in completion from 10% to 90% complete and total
continuing research and development commitments to complete the projects were
expected to be approximately $5,900. These estimates were subject to change,
given the uncertainties of the development process, and no assurance was given
that deviations from these estimates would not occur. The 1999 revenue derived
from the in-process R&D projects from the 1997 Acquisitions were significantly
lower than anticipated.
In connection with the acquisition of Forward and ISL the Company's
management assessed and evaluated the operations, employment levels and overall
strategic fit of each facility acquired. As a result of this assessment and
finalization of its plans, the Company recorded certain plant shutdown,
downsizing and consolidation accruals as part of the purchase price allocations
related to the 1997 Acquisitions.
F-8
<PAGE> 111
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accruals were established primarily to cover costs associated with the
closure of the Selkirk and Galashiels, Scotland facilities and to cover costs
associated with the closure of the Manchester, Rugby and Telford, England
facilities, each of which was acquired in the Forward Acquisition, and the
related severance of approximately 1,600 employees. The accruals cover shutdown
costs from the period of the plant closure to the date of disposal, including
personnel and severance related costs, lease commitment costs, equipment removal
and disposal costs, cleanup and restoration costs and idle plant costs.
As of December 31, 1999, plant shutdown and downsizing actions related to
the 1997 Acquisitions had resulted in the termination of approximately 1,150
employees.
Due to changes in circumstances, the original plan to close the Telford,
England facility was not executed. Therefore, the accrual established for this
plan of $3,920 was reversed against goodwill during 1999.
Details of accrued liabilities related to the 1997 Acquisitions follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
------ -------- --------
<S> <C> <C> <C>
Balance, beginning of year........................... $ -- $ 8,863 $ 35,046
Provisions (Reversals):
Personnel and severance costs...................... 4,000 22,115 (1,324)
Equipment removal and disposal..................... 3,300 7,357 (1,685)
Idle plant costs................................... -- 5,715 (695)
Cleanup and restoration............................ 1,000 3,519 (120)
Lease commitment costs............................. 563 1,906 (96)
------ -------- --------
Total...................................... 8,863 49,475 31,126
------ -------- --------
Costs incurred:
Personnel and severance costs...................... -- (9,979) (10,992)
Equipment removal and disposal..................... -- (1,638) (5,420)
Idle plant costs................................... -- (371) (1,178)
Cleanup and restoration............................ -- (2,441) (1,131)
Lease commitment costs............................. -- -- (494)
------ -------- --------
Total...................................... -- (14,429) (19,215)
------ -------- --------
Translation.......................................... -- -- (1,226)
------ -------- --------
Balance, end of year................................. $8,863 $ 35,046 $ 10,685
====== ======== ========
</TABLE>
All costs incurred related to the plant closure and downsizing accruals for
the 1997 Acquisitions were cash charges except for $2,783 which related to
non-cash charges for the disposition of certain assets. Of the remaining
$10,685, approximately $3,200 relates to deferred severance, settlement of
benefits and related legal costs. Approximately, $7,400 is expected to be used
in 2000 for remaining shutdown activities including disposition of the idle
Rugby, England and Galashiels, Scotland facilities, final removal of equipment
from the sites and settlement of the lease of the Rugby site.
1998 ACQUISITIONS
In January 1998, the Company acquired certain assets and assumed certain
liabilities of the 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
F-9
<PAGE> 112
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
backplanes, for a cash purchase price of approximately $59,399, plus assumed
obligations (the "Mommers Acquisition"). 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 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 valued using a discount rate of 13.0%. The
portion of the purchase price allocated to in-process R&D projects that did not
have a future alternative use and to which technological feasibility had not
been established totaled $5,300 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 (see Note 2).
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 24,634
Property, plant and equipment............................... 28,917
Acquired intangibles........................................ 13,000
In-process R&D.............................................. 5,300
Goodwill.................................................... 28,562
Current liabilities......................................... (29,468)
Non-current liabilities..................................... (11,546)
--------
Total............................................. $ 59,399
========
</TABLE>
Mommers in-process R&D value was comprised of several research and
development projects which were scheduled to reach completion beginning in 1999.
At the acquisition date, research and development projects ranged in completion
from 10% to 90% complete. As of December 31, 1999, the Mommers in-process R&D
projects were completed. These projects will require maintenance research and
development which are not expected to represent significant costs in 2000 and
beyond.
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").
The Zincocelere Acquisition has been accounted for using the purchase
method of accounting whereby the total purchase price has been 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 valued using a discount rate of
13.0%. The portion of the purchase price allocated to in-process R&D projects
that did not have a future alternative use and to which technological
feasibility had not been established totaled $14,800 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 (see Note 2).
F-10
<PAGE> 113
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 58,642
Property, plant and equipment............................... 51,620
Acquired intangibles........................................ 21,000
In-process R&D.............................................. 14,800
Goodwill.................................................... 37,680
Current liabilities......................................... (56,620)
Non-current liabilities..................................... (42,110)
--------
Total............................................. $ 85,012
========
</TABLE>
Zincocelere's in-process R&D value was comprised of numerous research and
development projects which were scheduled to reach completion during 1999 and
2000. At the acquisition date, research and development projects ranged in
completion from 10% to 90%. As of December 31, 1999, Zincocelere's in-process
R&D projects were substantially completed. These projects will require
maintenance research and development which are not expected to represent
significant costs in 2000 and beyond.
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, a
$70,000 term loan (see Note 9), and an additional equity contribution of
$50,000.
Mommers' and Zincocelere's (the "1998 Acquisitions") in-process R&D value
was comprised of numerous research and development projects which were scheduled
to reach completion during periods ranging from 1999 through 2001. These
projects will include the introduction of important new technology that will, if
successful, enable the advancement of the 1998 Acquisitions' PCB product line.
At the acquisition date, research and development projects ranged in completion
from 10% to 90% complete and total continuing research and development
commitments to complete the projects were expected to be approximately $15,000.
These estimates are subject to change, given the uncertainties of the
development process, and no assurance can be given that deviations from these
estimates will not occur.
The Company incurred significant charges in 1997 and 1998 related to
purchased in-process R&D costs. A portion of the purchase price for acquisitions
was attributed to the value of in-process R&D projects and was expensed in
accordance with Statement of Accounting Standards No. 2, "Accounting for
Research and Development Costs." The Company believes its accounting for
purchased in-process R&D was made in accordance with generally accepted
accounting principles and valuation practices at the time of the related
acquisitions.
In connection with the acquisitions of Mommers and Zincocelere the
Company's management assessed and evaluated the operations, employment levels
and overall strategic fit of each facility acquired. As a result of this
assessment and finalization of its plans, the Company recorded certain
downsizing and consolidation accruals as part of the purchase price allocations
related to the 1998 Acquisitions.
Accruals were established primarily to cover costs associated with
downsizing employment levels of the Echt, Netherlands facility by 150 employees
and costs associated with eliminating approximately 175 redundant administrative
functions related to the 1998 Acquisitions. The accruals cover costs associated
with downsizing, including personnel and severance related costs, lease
commitment costs and equipment removal and disposal costs.
As of December 31, 1999 plant downsizing actions related to the 1998
Acquisitions had resulted in the termination of approximately 90 employees.
F-11
<PAGE> 114
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Due to changes in circumstances, the original plan to eliminate
approximately 175 redundant administrative functions related to the 1998
Acquisitions was not executed. Therefore the accrual established for this plan
of $8,000 was reversed against goodwill during 1999.
Details of accrued liabilities related to the 1998 Acquisitions follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Balance, beginning of year.................................. $ -- $ 9,336
Provisions (Reversals):
Personnel and severance costs............................. 10,465 (7,000)
Equipment removal and disposal............................ 533 --
Lease commitment costs.................................... 1,000 (1,000)
------- -------
Total............................................. 11,998 1,336
Costs incurred:
Personnel and severance costs............................. (2,662) (340)
Equipment removal and disposal............................ -- --
Lease commitment costs.................................... -- --
------- -------
Total............................................. (2,662) (340)
------- -------
Translation................................................. -- --
------- -------
Balance, end of year........................................ $ 9,336 $ 996
======= =======
</TABLE>
All costs incurred related to the downsizing plan have been cash charges.
Of the $996 remaining accruals at December 31, 1999, approximately $460 will be
used during 2000 to cover continuing severance and related legal costs
associated with the downsizing, with the remainder to cover equipment removal
and disposition cost upon the final disposition of certain equipment.
1999 ACQUISITIONS
In August 1999, the Company acquired the printed circuit board ("PCB")
manufacturing division ("Kalex") of Termbray Industries International (Holdings)
Limited, a manufacturer of rigid PCBs located in the People's Republic of China,
for a net cash purchase price of approximately $301,000 plus acquisition costs
of approximately $8,500 (the "Kalex Acquisition"). Accordingly, the results of
operations of Kalex since acquisition are included in the results of operations
of the Company.
The Kalex Acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been 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 using a discount rate of 25.0%. The portion of
the purchase price allocated to in-process R&D projects that did not have future
alternative use totaled $17,600 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.
Kalex's in-process R&D value was comprised of numerous projects which were
scheduled to reach completion during periods ranging from October 1999 through
September 2000. At the acquisition date, research and development projects
ranged from 65% to 80% complete and total continuing research and development
commitments to complete the projects are expected to be approximately $2,400. As
of December 31, 1999, one of the projects was completed and the others were 65%
to 80% complete. These estimates are subject to change, given the uncertainties
of the development process, and no assurance can be
F-12
<PAGE> 115
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
given that deviations from these estimates will not occur. Additionally, these
projects will require maintenance research and development after they have
reached a state of technological and commercial feasibility. In addition to
usage of the companies' internal cash flows, Viasystems will likely provide a
substantial amount of funding to complete the company's programs. Remaining
development efforts for the in-process research and development programs are
complex and include the development of next-generation technological solutions.
As evidenced by their continued support for these projects, management
believes the Company is well positioned to successfully complete each of the
major in-process research and development programs. Management believes other
in-process projects are on track to be completed and will continue to bear
results in future periods. However, there is risk associated with the completion
of the projects and there is no assurance that each will meet with either
technological or commercial success. The substantial delay or outright failure
of the in-process research and development related to Kalex would impact the
Company's business, results of operations and cash flows.
Kalex's total revenues are projected to increase over the next ten years,
assuming the successful completion and market acceptance of the in-process
research and development programs. Estimated revenue from existing technologies
of Kalex are expected to slowly decline over the next six years as the
in-process technologies are completed and existing processes and know-how
approach obsolescence. The estimated revenues for in-process projects related to
Kalex are expected to peak in 2002, and thereafter decline as other new products
and technologies are expected to enter the market.
Kalex's manufacturing facilities are located in the People's Republic of
China. Manufacturing in the People's Republic of China entails political and
economic risks, including political instability, expropriation and currency
controls and fluctuations.
The total purchase price including fees and expenses has been allocated to
the acquired net assets as follows:
<TABLE>
<S> <C>
Current assets.............................................. $ 55,060
Property, plant and equipment............................... 98,326
Acquired intangibles........................................ 89,400
In-process R&D.............................................. 17,600
Goodwill.................................................... 91,123
Other non-current assets.................................... 112
Current liabilities......................................... (39,410)
Non-current liabilities..................................... (2,343)
--------
Total............................................. $309,868
========
</TABLE>
The Kalex Acquisition was funded with (i) and additional equity
contribution of $200,000 and (ii) a portion of a $291,000 term loan borrowing
under the Company's senior secured credit facility (see Note 9).
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the year ended December 31,
1998 and 1999, as though the Kalex Acquisition and the related financing and
equity contribution had occurred at January 1, 1998 and January 1, 1999,
respectively. In preparing this data, the financial data of Kalex for the year
ended March 31, 1998 has been translated at an exchange rate of Hong Kong
Dollars ("HK$")7.7490 = U.S.$1.00. The financial data of Kalex for the period
prior to acquisition by the Company from January through July 1999 has been
translated at an exchange rate
F-13
<PAGE> 116
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of HK$7.7536 = U.S.$1.00. These exchange rates represent the average rates in
effect for the respective periods.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1998 1999
---------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $1,205,032 $1,194,540
Net loss.................................................... (95,593) (622,221)
</TABLE>
In April 1999, the Company acquired all of the outstanding shares of PAGG
Corporation ("PAGG") located in Milford, Massachusetts, for a cash purchase
price of approximately $9,300 plus the issuance of 273,224 shares of the
Company's $0.01 per share common stock valued at $2,000 and the issuance of
136,645 warrants to purchase common stock with an exercise price of $10.50
expiring in 2004. Using the Black Scholes method, at the date of issuance, the
warrants have no value. PAGG operates multiple surface mount production lines
for printed circuit board and backplane assembly and has full box build
capabilities. The acquisition was accounted for as a purchase and, accordingly,
the results of operations of PAGG since acquisition are included in the results
of operations of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is a leading provider of electronic manufacturing services,
with facilities located in the United States, Canada, Mexico, the United
Kingdom, the Netherlands, Italy, Sweden, China and Puerto Rico. The Company's
customers include a diverse base of manufacturers in the telecommunications,
computer and automotive industries throughout North America and Europe.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
Local currencies have been designated as the functional currency for all
subsidiaries. Accordingly, assets and liabilities of foreign subsidiaries are
translated at the rates of exchange at the balance sheet date. Income and
expense items of these subsidiaries are translated at average monthly rates of
exchange. The resultant translation gains and losses are included as a component
of stockholders' equity on the consolidated balance sheet. See the consolidated
statements of operations and comprehensive income for the impact of such gains
and losses on the measurement of comprehensive income.
DERIVATIVE FINANCIAL INSTRUMENTS
From time to time, the Company engages in short-term hedging activities to
reduce its exposure to foreign currency fluctuations. Such hedging activities
are not material and gains and losses from such activities are not significant.
There can be no assurance that these hedging activities will eliminate or reduce
foreign currency risk.
INVENTORIES
Inventories are stated at the lower of cost (valued using the first-in,
first-out (FIFO) method) or market. Cost includes raw materials, labor and
manufacturing overhead.
F-14
<PAGE> 117
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Repairs and
maintenance which do not extend the useful life of an asset are charged to
expense as incurred. The useful lives of leasehold improvements are the lesser
of the remaining lease term or the useful life of the improvement. Depreciation
is computed using the straight-line method over the estimated useful lives of
the related assets as follows:
<TABLE>
<S> <C>
Building.................................................... 40 years
Leasehold improvements...................................... 10-12 years
Machinery, equipment, systems and other..................... 3-8 years
</TABLE>
DEFERRED FINANCING COSTS
Deferred financing costs, consisting of fees and other expenses associated
with debt financing, are amortized over the term of the related debt using the
straight-line method, which approximates the effective interest method.
INCOME TAXES
The Company accounts for certain items of income and expense in different
periods for financial reporting and income tax purposes. Provisions for deferred
income taxes are made in recognition of such temporary differences, where
applicable. A valuation allowance is established against deferred tax assets
unless the Company believes it is more likely than not that the benefit will be
realized.
INTANGIBLE ASSETS
Intangible assets consist primarily of identifiable intangibles acquired
and goodwill arising from the excess of cost over the fair value of net assets
acquired. Amortization of intangible assets is computed using systematic methods
over the estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
LIFE METHOD
---- ------
<S> <C> <C>
Developed technologies............................ 15 years Double-declining balance
Assembled workforce............................... 1 year Straight-line
Customer list..................................... 3 years Straight-line
Goodwill.......................................... 20 years Straight-line
</TABLE>
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses the recoverability of its long-lived assets (including
intangible assets) based on their current and anticipated future undiscounted
cash flows. In addition, the Company's policy for the recognition and
measurement of any impairment of long-lived assets is to assess the current and
anticipated future cash flows associated with the impaired asset. An impairment
occurs when the cash flows (excluding interest) do not exceed the carrying
amount of the asset. The amount of the impairment loss is the difference between
the carrying amount of the asset and its estimated fair value.
REVENUE RECOGNITION
Sales and related costs of goods sold are included in income when goods are
shipped to the customer in accordance with the delivery terms.
F-15
<PAGE> 118
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ENVIRONMENTAL LIABILITIES AND EXPENDITURES
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. Accrued liabilities do not include claims
against third parties and are not discounted. Costs related to environmental
remediation are charged to expense. Other environmental costs are also charged
to expense unless they increase the value of the property and/or mitigate or
prevent contamination from future operations, in which event they are
capitalized.
STATEMENT OF CASH FLOWS
For purposes of the Consolidated Statement of Cash Flows, the Company
considers investments purchased with an original maturity of three months or
less to be cash equivalents.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair market value of the Senior Subordinated Notes due 2007 and the
Series B Senior Subordinated Notes due 2007 was $372,000 and $93,000,
respectively, at December 31, 1998 and was $220,000 and $55,000, respectively,
at December 31, 1999. The Company has estimated this fair value data by using
current market data. The fair market values of the other financial instruments
included in the consolidated financial statements approximate the carrying
values of those instruments.
NEW ACCOUNTING PRONOUNCEMENTS
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, 2000. 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.
NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN 1999
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 adopted SOP 98-5 in fiscal year 1999 and reported the
write off of the net book value of start-up costs as of January 1, 1999, of
$16,942 (net of income tax benefit of $5,647) as a cumulative effect of a change
in accounting principle.
F-16
<PAGE> 119
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. IMPAIRMENT LOSS
The Company has assessed the carrying value of long-lived assets, including
goodwill and other acquired intangibles in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." Based on current
business enterprise values using common appraisal methods, the assessment has
identified impairment of long-lived assets acquired from the Forward, ISL and
Zincocelere acquisitions. The calculated business enterprise values determined
were compared to the net book value of the related long-lived assets with the
difference representing the amount of the impairment loss. The impairment loss
for each group of assets was first charged against goodwill with any remaining
amounts being charged to the other acquired intangibles and property, plant and
equipment, if necessary. The impairment resulted due to significant changes in
the markets served by the acquisitions that were not anticipated at the time of
each acquisition, most significantly a significant decline in market pricing.
The decline in market pricing was due to the convergence of two factors:
significant currency fluctuations and the emergence of significant offshore
competition from Asia Pacific. While the primary currency for the acquisitions
is the U.K. pound sterling, their competitors were in Continental Europe and
beginning to emerge from Asia Pacific. The currencies for most of the
Continental European and Asia Pacific countries declined significantly against
the U.K. pound sterling, which resulted in an improved relative cost position
for the competitors and reduced market pricing. This decline in market pricing
has resulted in a significant decline in profitability that is not expected to
return in the near term.
In the fourth quarter of fiscal year 1999, the Company recorded a non-cash
impairment loss of $468,389 related to the write down of goodwill, other
acquired intangibles and property, plant and equipment of the three groups of
assets.
4. SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest for the years ended December 31, 1997, 1998 and
1999, was $59,956, $91,068 and $102,343, respectively. Cash paid for income
taxes for the years ended December 31, 1997 and 1998 was $4,742 and $20,951,
respectively. For the year ended December 31, 1999 net cash received for income
tax refunds was $2,701.
The purchase of the shares of Forward Group was partially funded through
the issuance of approximately $24,420 of notes payable to Forward Group's former
shareholders. The purchase of shares of ISL was entirely funded through the
issuance of approximately $437,500 of loan notes.
In 1997, the Company received a capital contribution of $118,250 which was
transferred to Bisto Funding, Inc. The capital contribution was recorded as a
reduction of the carrying amount of the notes payable to the former shareholders
of Interconnection Systems (Holdings) Limited (see Note 1). The notes payable
recorded by the Company are net of the $118,250 as Bisto Funding, Inc. is
contractually obligated to pay such amount to the note holders in the event the
notes payable are redeemed (see Note 9).
5. INVENTORIES
The composition of inventories is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Raw materials............................................... $ 48,497 $ 47,114
Work in process............................................. 39,688 38,688
Finished goods.............................................. 42,476 70,016
-------- --------
Total............................................. $130,661 $155,818
======== ========
</TABLE>
F-17
<PAGE> 120
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INTANGIBLE ASSETS
The composition of intangible assets is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
Developed technologies...................................... $ 139,220 $ 51,670
Assembled workforce......................................... 33,907 21,269
Customer list............................................... 55,300 82,072
Goodwill.................................................... 320,347 169,713
--------- ---------
548,774 324,724
Less: Accumulated amortization.............................. (127,027) (63,426)
--------- ---------
Total................................................. $ 421,747 $ 261,298
========= =========
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
--------- ---------
<S> <C> <C>
Land and buildings.......................................... $ 107,563 $ 183,212
Machinery, equipment, systems and other..................... 471,214 488,611
Construction in progress.................................... 132,037 31,860
Leasehold improvements...................................... 7,496 13,173
--------- ---------
718,310 716,856
Less: Accumulated depreciation.............................. (138,106) (254,590)
--------- ---------
Total................................................. $ 580,204 $ 462,266
========= =========
</TABLE>
8. ACCRUED AND OTHER LIABILITIES
The composition of accrued and other liabilities is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Accrued payroll and related costs........................... $ 30,596 $ 29,196
Accrued capital expenditures................................ 13,040 17,026
Plant shutdown, downsizing and consolidation accruals....... 44,382 11,680
Accrued interest............................................ 7,270 16,156
Accrued and other liabilities............................... 46,112 47,417
-------- --------
Total............................................. $141,400 $121,475
======== ========
</TABLE>
F-18
<PAGE> 121
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM OBLIGATIONS
The composition of long-term obligations is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Credit Agreements:
Term Facilities........................................... $ 175,438 $ 347,666
Revolvers................................................. 117,244 183,187
Senior Subordinated Notes Due 2007.......................... 400,000 400,000
Series B Senior Subordinated Notes Due 2007................. 100,000 100,000
Series B Senior Subordinated Notes Due 2007, Premium........ 4,211 3,865
Chips Loan Notes Liability.................................. 285,312 285,312
Capital lease obligations (see Note 10)..................... 22,166 8,051
Other....................................................... 30,124 34,131
---------- ----------
1,134,495 1,362,212
Less current maturities........................... (54,534) (27,663)
---------- ----------
$1,079,961 $1,334,549
========== ==========
</TABLE>
The schedule of principal payments for long-term obligations at December
31, 1999 is as follows:
<TABLE>
<S> <C>
2000........................................................ $ 27,663
2001........................................................ 48,844
2002........................................................ 156,936
2003........................................................ 239,611
2004........................................................ 75,647
Thereafter.................................................. 813,511
----------
$1,362,212
==========
</TABLE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
In connection with the Kalex Acquisition, the Company, as guarantor, and
certain of its subsidiaries, as borrowers, entered into a Third Amended and
Restated Credit Agreement (the "Credit Agreement") with terms substantially
similar to the Second Amended and Restated Credit Agreement. The Credit
Agreement was amended to, among other things, establish an additional $291,000
term loan facility (the "New Tranche C Term Loan"), repay $10,125 outstanding
under the Chips Term Loans and to cash collateralize future amounts due under
the Chips Term Loans by approximately $89,875.
The Credit Agreement provides for (i) a term loan facility (the "U.S. Term
Loan") and a $175,000 revolving credit facility (the "U.S. Revolving Loan" and
together with the U.S. Term Loan, the "U.S. Loans"); (ii) a U.S. $25,000
revolving credit facility (the "Canadian Revolving Loan"), (iii) a L32,000
revolving credit facility (the "English Revolving Loan") and a L27,600 revolving
credit facility (the "Chips Revolving Loan", and together with the Forward Group
Revolving Loan, the "U.K. Revolving Loans", and together with the U.S. Revolving
Loan and the Canadian Revolving Loan, the "Revolving Loans") and (iv)
U.S.$346,463 Letter of Credit Facility in respect of the Chips Loan Notes
comprised of (a) a U.S.$319,250 term loan facility ("the Chips Term Loan" and
together with the U.S. Term Loan, the "Term Loans") in respect of the principal
portion of the Chips Loan Notes and (b) a U.S.$27,213 facility in respect of
interest on the Chips Loan Notes. The Chips Term Loan is an unfunded term loan
facility that may be drawn upon by the Company so that it may satisfy the Chips
Loan Notes Liability. Borrowings under the
F-19
<PAGE> 122
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit Agreement are collateralized by first priority mortgages and liens on
substantially all of the material assets of the Company and its subsidiaries.
The U.S. Term Loan consists of three tranches: (i) $55,000 of tranche B
term loans (the "Tranche B Loan"), (ii) $33,000 of tranche C term loans (the
"Tranche C Loan"), (iii) $70,000 of Addition Term Loan, (iv) $291,000 New
Tranche C Term Loan. The Tranche B Loan amortizes semiannually over eight years,
the Tranche C Loan is payable $1,500 on December 31, 2004 and $31,500 on June
30, 2005, and the Additional Term Loan amortizes semiannually over 6.5 years.
The New Tranche C Term Loan and the Chips Term Loan amortize semi-annually over
six years.
At December 31, 1998, the Company had approximately $161,200 of available
borrowing capacity under the Revolving Loans, of which, approximately $59,900
was available solely for future acquisitions. At December 31, 1999, the Company
had approximately $77,830 of available borrowing capacity under the Revolving
Loans.
The U.S. Loans bear interest, at the Company's election, at either: (i) the
Eurocurrency Base Rate plus (a) 2.75% (2.5% at December 31, 1999) in the case of
the Chips Term Loan and U.S. Revolving Loan, (b) 3.25% (2.75% at December 31,
1999) in the case of the Additional Term Loan, (c) 3.25% (3.0% at December 31,
1999) in the case of Tranche B Loan, or (d) 3.75% (3.5% at December 31, 1999) in
the case of Tranche C Loan and the New Tranche C Term Loan; or (ii) the
Alternate Base Rate plus (a) 1.75% (1.5% at December 31, 1999) in the case of
the Chips Term Loan or U.S. Revolving Loan, (b) 2.25% (1.75% at December 31,
1999) in the case of the Additional Term Loan, (c) 2.25% (2.0% at December 31,
1999) in the case of Tranche B Loan, or (d) 2.75% (2.5% at December 31, 1999) in
the case of Tranche C Loan and the new Tranche C Term Loan. The Alternate Base
Rate is the highest of The Chase Manhattan Bank's Prime Rate, the Three-Month
Secondary CD Rate (as defined therein) plus 1.0%, and the Federal Funds
Effective Rate (as defined therein) plus 0.5%. The Canadian Revolving Loan
denominated in U.S. dollars bears interest, at Circo Craft's election, at either
(i) the Eurocurrency Base Rate plus 2.75% (2.5% at December 31, 1999) or (ii)
the Canadian Alternate Base Rate plus 1.75% (1.5% at December 31, 1999). The
Canadian Revolving Loan denominated in Canadian Dollars bears interest, at Circo
Craft's election either (i) the Canadian Bankers Acceptance Discount Rate plus
2.75% (2.5% at December 31, 1999) or (ii) the Canadian Prime Rate plus 1.75%
(1.5% at December 31, 1999). The Canadian Alternate Base Rate is equal to the
higher of Canadian Agent's prime rate or the Federal Funds Effective Rate (as
defined in the Credit Agreement) plus 0.5%. The U.K. Revolving Loans and any
Chips Term Loans converted to pounds sterling bear interest at the Eurocurrency
Base Rate plus 2.75% (2.5% at December 31, 1999). At December 31, 1998 and 1999
the weighted average interest rate on outstanding borrowings under the Credit
Agreement was 8.0% and 8.5%, respectively.
The Company pays a per annum fee equal to the applicable margin on
Revolving Loans which bear interest at the Eurocurrency Base Rate, of the
average daily face amount of outstanding letters of credit, other than with
respect to the Chips Letter of Credit, which fee is equal to the applicable
margin on the Chips Term Loan bearing interest at the Eurocurrency Base Rate.
The Company pays a Commitment Fee equal to 0.5% on the undrawn portion of the
commitments in respect of Revolving Loans and a Facility Fee equal to 0.5% on
the Canadian revolving credit commitment.
The Credit Agreement restricts the Company from, among other things: (i)
incurring additional indebtedness (other than permitted indebtedness); (ii)
creating liens; (iii) disposing of assets; (iv) guaranteeing indebtedness; (v)
merging or selling substantially all of its assets; (vi) declaring and paying
certain dividends; (vii) making certain investments and loans; and (viii)
entering into certain transactions with affiliates, in each case with certain
exceptions customary for credit facilities such as the Amended Senior Credit
Facilities. In addition, the Credit Agreement contains financial covenants which
require the Company to maintain certain financial ratios and limit the Company's
amount of capital expenditures.
F-20
<PAGE> 123
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SENIOR SUBORDINATED NOTES AND SERIES B SENIOR SUBORDINATED NOTES
In June 1997, Viasystems, Inc. (a wholly owned subsidiary of the Company)
completed an offering (the "1997 Offering") of $400,000 of 9 3/4% Senior
Subordinated Notes due 2007 (the "1997 Notes"). In February 1998, Viasystems,
Inc. completed the offering of an additional $100,000 of 9 3/4% Senior
Subordinated Notes due 2007 at a price of 104.5% (the "1998 Notes" and together
with the 1997 Notes, the "2007 Notes"). As a condition of the offering of the
1998 Notes, Hicks Muse contributed an additional $50,000 of equity to the
Company.
Interest on the 2007 Notes is due semiannually. The 2007 Notes may not be
redeemed prior to June 1, 2002, except in the event of a Change of Control (as
defined) or an Initial Public Offering (as defined) and at premium (as defined
in the Indenture). The 2007 Notes are redeemable, at the Company's option, at
the redemption prices of 104.875% at June 1, 2002, and at decreasing prices to
100% at June 1, 2005, and thereafter, plus accrued interest. In addition, prior
to June 1, 2001, the Company may redeem, within specified guidelines, up to
$175,000 of the 2007 Notes with proceeds of one or more Equity Offerings (as
defined) by Viasystems, Inc. or the Company at a redemption price of 109.75%
plus accrued interest.
CHIPS LOAN NOTES LIABILITY
In June 1997 and pursuant to the Chips Merger, the Company assumed the
$437,500 of Chips Loan Notes, and then entered into a reimbursement obligation
which requires it to pay a portion of the Chips Loan Notes in the event such
notes are called. The Chips Loan Notes mature on March 31, 2003 and bear
interest, payable quarterly, at approximately 6.22% per annum through April 1,
1998, with variable rate thereafter discounted from the U.S. prime rate. The
Chips Loan Notes may be called by the holders on or after any interest payment
date commencing April 1, 1998. The Chips Loan Notes are collateralized by
letters of credit which are in turn collateralized in part by a fully cash
collateralized $118,250 reimbursement obligation of Bisto Funding, Inc., a
special purpose entity established as a subsidiary of the Company in connection
with the acquisition of ISL, with the remainder, including interest on the Chips
Loan Notes for one year, collateralized by a reimbursement obligation of the
Company (the "Chips Reimbursement Obligation"). As such, the Company's liability
for principal under the Chips Loan Notes represents $319,250 (the "Chips Loan
Notes Liability"), or the amount achieved by netting the $118,250 of cash
collateral held by Bisto Funding, Inc. against the $437,500 of Chips Loan Notes.
To the extent the interest income earned by Bisto Funding, Inc. on the $118,250
of cash it holds is insufficient to fund interest on $118,250 of the principal
amount of the Chips Loan Notes, the Company will be required pursuant to the
terms of the Chips Reimbursement Obligation to fund any such shortfall. Upon
redemption of the Chips Loan Notes, the first $118,250 of principal payments
will be paid by Bisto Funding, Inc. and the remainder will be funded by the
Company in accordance with the Chips Reimbursement Obligation. Although the
Chips Loan Notes may be called by the holders on or after any interest payment
date commencing April 1, 1998, the Chips Loan Notes have not been classified as
current at December 31, 1998 and 1999, since the Company has in place a facility
to replace the Chips Loan Notes in the event they are called.
In April 1998 the holders of the Chips Loan Notes redeemed $152,200 of the
Chips Loan Notes. As such, $118,300 of cash held by Bisto Funding, Inc. was paid
to the holders of the Chips Loan Notes. The Company borrowed $33,900 of the
available Chips Term Loan to fund its portion of the payment of the Chips Loan
Notes.
SENIOR SUBORDINATED CREDIT AGREEMENT
In April 1997, the Company entered into a $216,000 Senior Subordinated
Credit Agreement (the "Subordinated Credit Facility"). The proceeds of the
Subordinated Credit Facility were used to repay $20,000 of term loans
outstanding under the Credit Agreement and to repay a tender facility used to
acquire Forward
F-21
<PAGE> 124
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Group. Amounts due under the Senior Subordinated Credit Facility were repaid
with proceeds from the 1997 Offering.
10. COMMITMENTS
The Company leases certain building and transportation and other equipment
under capital and operating leases. Included in property, plant, and equipment
as of December 31, 1998 and 1999, was $59,134 and $38,741, respectively, of cost
basis and $28,067 and $23,116, respectively, of accumulated depreciation related
to equipment held under capital leases. Total rental expense under operating
leases $3,005, $3,209 and $3,861 for the years ended December 31, 1997, 1998 and
1999, respectively. Future minimum lease payments under capital leases and
operating leases that have initial or remaining noncancelable lease terms in
excess of one year are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, CAPITAL OPERATING
- ------------ ------- ---------
<S> <C> <C>
2000..................................................... $ 6,737 $ 4,195
2001..................................................... 1,532 3,664
2002..................................................... 14 2,530
2003..................................................... 7 1,714
2004..................................................... 6 1,511
Thereafter............................................... 3 2,834
------- -------
Total............................................. 8,299 $16,448
=======
Less: Amounts representing interest...................... (248)
-------
Capital lease obligation (see Note 9)............. $ 8,051
=======
</TABLE>
11. OTHER NONCURRENT LIABILITIES
Included in other noncurrent liabilities are liabilities for monitoring and
oversight fees to Hicks, Muse & Co. Partners L.P. ("Hicks Muse"), a shareholder
and affiliate of the Company, (see Note 20) and deferred income related to
reimbursement agreements with two governmental agencies in the U.K. (the "U.K.
Agreements"). Pursuant to the U.K. Agreements, the agencies have provided funds
totaling approximately $27,200 as of December 31, 1999. Funds received by the
Company under the U.K. Agreements are not subject to repayment, provided that
the Company meets certain employment and capital expenditure requirements at its
manufacturing facilities. For the year ended March 31, 1999 the cumulative
minimum employment requirements were 1,350 employees and the capital expenditure
requirements were L27,000. For the year ended March 31, 2000, the cumulative
minimum employment requirements were 1,425 employees and the capital expenditure
requirements were L245,000. As the Company has met and management believes that
it will continue to meet these requirements, the Company is recognizing the
amounts to be received under the U.K. Agreements as a reduction of cost of sales
over the life of the U.K. Reimbursement Agreements and, as such, recognized a
reduction of cost of sales of approximately $3,134, $3,147 and $3,042 during the
years ended December 31, 1997, 1998 and 1999, respectively. In the event the
Company failed to achieve the cumulative minimum employment requirements and
capital expenditure requirements in the future, the agencies could require the
full amount of such funds to be repaid. However, since the Company has already
surpassed the employment requirements and the capital expenditure requirements
for the full term of the agreements, the Company believes it unlikely that such
funds would be required to be repaid.
F-22
<PAGE> 125
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The provision (benefit) for income taxes for the years ended
December 31, 1997, 1998 and 1999 consisted of the following:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal............................................ $ 3,990 $ 13,286 $ --
State.............................................. 920 279 --
Foreign............................................ 18,631 (5,772) 4,269
-------- -------- --------
23,541 7,793 4,269
-------- -------- --------
Deferred:
Federal............................................ (2,195) (2,552) --
State.............................................. (507) (35) --
Foreign............................................ (12,407) (12,540) (32,558)
-------- -------- --------
(15,109) (15,127) (32,558)
-------- -------- --------
$ 8,432 $ (7,334) $(28,289)
======== ======== ========
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<CAPTION>
1997 1998 1999
--------- -------- ---------
<S> <C> <C> <C>
U.S. Federal statutory rate........................ $(108,941) $(29,674) $(219,737)
Loss on investment in foreign subsidiaries......... -- -- (130,931)
Amortization of goodwill and write-off of acquired
in-process research and development costs........ 103,077 17,114 77,309
Change in the valuation allowance for deferred
tax assets....................................... -- -- 244,255
Federal taxes on undistributed foreign earnings
(loss)........................................... 6,634 -- (4,203)
Equity in earnings of affiliates not taxable due to
dividends received deduction..................... -- -- (1,400)
State taxes net of federal benefit................. 1,124 244 (1,956)
Foreign income and withholding taxes in excess of
U.S. statutory rate.............................. 6,456 5,020 8,055
Other.............................................. 82 (38) 319
--------- -------- ---------
$ 8,432 $ (7,334) $ (28,289)
========= ======== =========
</TABLE>
F-23
<PAGE> 126
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Fixed assets.............................................. $ -- $ 38,180
Accrued liabilities not yet deductible.................... 24,976 19,104
Net operating loss carryforwards.......................... 22,848 87,216
AMT credit carryforwards.................................. 3,594 326
Capital loss carryforwards................................ -- 126,391
Other..................................................... 3,423 9,799
-------- --------
54,841 281,016
Valuation allowance.................................... -- (244,255)
-------- --------
54,841 36,761
-------- --------
Deferred tax liabilities:
Intangibles............................................... (39,159) (11,911)
Fixed assets.............................................. (34,450) (8,217)
Other..................................................... (3,605) (3,759)
-------- --------
(77,214) (23,887)
-------- --------
Net deferred tax asset (liability)................ $(22,373) $ 12,874
======== ========
</TABLE>
The current deferred tax assets are included in prepaid expenses and other
and the long-term deferred tax assets, consisting of net operating loss
carryforwards, are in other assets in the Consolidated Balance Sheets.
The net change in valuation allowance for the year ended December 31, 1999
was an increase of $244,255. This valuation allowance has been provided for the
capital loss carryforward and those net operating loss carryforwards which are
estimated to expire before they are utilized. Because the capital loss
carryforward period is relatively short, a full valuation allowance has been
provided against the deferred tax asset.
Approximate domestic and foreign income (loss) before income tax provision
and extraordinary item are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Domestic........................................... $ 5,307 $ 1,792 $(75,563)
Foreign............................................ (316,567) (93,909) (552,056)
</TABLE>
As of December 31, 1999 the Company had the following net operating loss
carryforwards: $65,222 in the U.S., $46,658 in the U.K., $6,672 in Puerto Rico,
$10,844 in the People's Republic of China, $24,996 in the Netherlands, $2,517 in
Italy, and $3,041 in Sweden. The U.S. NOL's expire in 2018 through 2019 where
the NOLs in the People's Republic of China and Puerto Rico begin to expire in
2000. The other NOLs carryforward indefinitely. The U.S. also has a capital loss
carryforward of $360,000 that will expire in 2004. The Company has not
recognized and does not anticipate recognizing a deferred tax liability for
approximately $18,000 of undistributed earnings of its foreign subsidiaries
because the Company does not expect those earnings to reverse and become taxable
to the Company in the foreseeable future.
13. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product development and other actions arising in the normal
course of business. In the opinion of the Company's
F-24
<PAGE> 127
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management, the ultimate liabilities resulting from such lawsuits and claims
will not have a material adverse effect on the Company's financial condition and
results of operations and cash flows.
The Company believes it is in material compliance with applicable
environmental laws and regulations and that its environmental controls are
adequate to address existing regulatory requirements.
14. STOCKHOLDERS' EQUITY AND PREFERRED STOCK
The authorized capital stock of the Company at December 31, 1999 consists
of 600,000,000 shares of common stock, 50,000,000 shares of Class A common
stock, 50,000,000 shares of Class A Series II common stock and 60,000,000 shares
of preferred stock, of which 8,000,000 shares are designated as Series A
Preferred Stock and 6,000,000 shares are designated as Series B Preferred Stock.
All authorized capital stock has a par value of $.01.
The Class A and Class A Series II common stock may be converted into shares
of common stock at the option of the holder at any time. In addition, the Class
A and Class A Series II common stock may be converted into common stock at the
option of the Company upon the occurrence of a Triggering Event (as defined) or
automatically on September 30, 2006 for Class A common stock and April 30, 2006
for Class A Series II common stock. Such conversion is based on a formula set
forth in the Company's Certificate of Incorporation.
Activity for each class of common stock from December 31, 1996 through
December 31, 1999 is as follows:
<TABLE>
<CAPTION>
CLASS A CLASS A SERIES II
COMMON STOCK COMMON STOCK COMMON STOCK
------------------- ------------------ ------------------
SHARES AT PAR SHARES AT PAR SHARES AT PAR
---------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........ 5,000,001 $ 50 683,056 $ 7 -- $--
Issuance of common stock............ 37,745,833 377 -- -- -- --
Issuance of Class A common stock.... -- -- 5,122,917 51 -- --
---------- ---- --------- --- --------- ---
Balance at December 31, 1997........ 42,745,834 427 5,805,973 58 -- --
Issuance of common stock............ 7,668,976 77 -- -- -- --
Issuance of Class A common stock.... -- -- 56,921 1 -- --
Issuance of Class A Series II common
stock............................. -- -- -- -- 990,062 10
---------- ---- --------- --- --------- ---
Balance at December 31, 1998........ 50,414,810 504 5,862,894 59 990,062 10
Issuance of common stock............ 27,603,129 276 -- -- -- --
Issuance of Class A Series II common
stock............................. -- -- -- -- 5,182,829 52
Repurchase of common stock, at
cost.............................. (16,667) -- -- -- -- --
Repurchase of Class A common
stock............................. -- -- (666,678) -- -- --
---------- ---- --------- --- --------- ---
Balance at December 31, 1999........ 78,001,272 $780 5,196,216 $59 6,172,891 $62
========== ==== ========= === ========= ===
</TABLE>
Dividends are payable to holders of the common stock, Class A common stock
and Class A Series II common stock in amounts as declared by the Company's board
of directors, subject to legally available funds and certain agreements. The
common stock and Class A common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders.
F-25
<PAGE> 128
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Dividends on the Series B Preferred are cumulative and are payable at an
annual rate of $2.00 per share per annum prior to November 30, 2004, $2.50 per
share per annum from November 30, 2004 to November 30, 2005, $3.00 per share per
annum from November 30, 2005 to November 30, 2006, and $3.50 per share per annum
on and after November 30, 2006. Dividends are payable quarterly on February 28,
May 31, August 31 and November 30 in each year, commencing on February 28, 1997.
The discount on the stock, which represents the difference between the present
value of a perpetual dividend stream of $3.50 per year and the current
subscription price, is being accreted at the rate of 10.4% per year, over 10
years. Dividend cost associated with the preferred stock is increased for the
accretion of discounts. The Company may, at its option, pay quarterly dividends
on the Series B Preferred on the first twenty payment dates, if the Credit
Agreement prohibits the payment of cash dividends, by issuing a number of
additional shares (or fractional shares) of Series B Preferred in respect to
each such share (or fractional share) of Series B Preferred then outstanding at
the rate of one twenty-fifth of a whole share of Series B Preferred for each
$1.00 of dividend declared. Except in the case of a Change in Control (as
defined), which currently cannot occur without the consent of shareholders, the
Series B Preferred have no provisions for mandatory redemption. At the Company's
option, the Series B Preferred is redeemable at any time, at $25 per share,
together with accrued and unpaid dividends to the date of redemption.
15. BUSINESS SEGMENT INFORMATION
The Company operates in one product business segment -- the manufacture and
sale of PCBs, which are sold throughout many diverse markets.
The Company's operations are located worldwide and are analyzed by two
geographical segments. The accounting policies of the segments are the same as
those described in the "Summary of Significant Accounting Policies" (note 2).
Segment data includes intersegment revenues.
Pertinent financial data by major geographic segments is as follows:
<TABLE>
<CAPTION>
OPERATING TOTAL CAPITAL
NET SALES INCOME/(LOSS) ASSETS EXPENDITURES
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
NORTH AMERICA:
Year ended December 31, 1997............. $ 499,266 $ 50,495 $ 436,484 $ 42,276
Year ended December 31, 1998............. 521,920 65,226 509,059 52,350
Year ended December 31, 1999............. 578,526 16,497 521,818 39,441
EUROPE:
Year ended December 31, 1997............. $ 296,023 $(289,490) $ 632,428 $ 74,887
Year ended December 31, 1998............. 512,239 (50,494) 945,644 78,011
Year ended December 31, 1999............. 454,386 (496,239) 362,991 72,704
ASIA:
Year ended December 31, 1997............. $ -- $ -- $ -- $ --
Year ended December 31, 1998............. -- -- -- --
Year ended December 31, 1999............. 80,978 (7,684) 327,749 14,711
ELIMINATIONS
Year ended December 31, 1997............. $ -- $ -- $ -- $ --
Year ended December 31, 1998............. (2,231) -- -- --
Year ended December 31, 1999............. (11,566) -- -- --
TOTAL:
Year ended December 31, 1997............. $ 795,289 $(238,995) $1,068,912 $117,163
Year ended December 31, 1998............. 1,031,928 14,732 1,454,703 130,361
Year ended December 31, 1999............. 1,102,324 (487,426) 1,212,558 126,856
</TABLE>
F-26
<PAGE> 129
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Sales by country of destination are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1998 1999
-------- ---------- ----------
<S> <C> <C> <C>
United States..................................... $436,728 $ 453,583 $ 512,816
United Kingdom.................................... 138,274 189,103 153,083
Sweden............................................ 45,168 105,331 78,898
Canada............................................ 54,555 47,880 75,016
Other............................................. 120,564 236,031 282,511
-------- ---------- ----------
Total................................... $795,289 $1,031,928 $1,102,324
======== ========== ==========
</TABLE>
Long-lived assets by country are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1998 1999
---------- --------
<S> <C> <C>
United States............................................... $ 248,065 $210,886
United Kingdom.............................................. 575,171 65,522
China....................................................... -- 264,370
The Netherlands............................................. 66,275 59,156
Italy....................................................... 102,874 47,758
Canada...................................................... 84,171 105,279
Other....................................................... 14,036 12,440
---------- --------
Total............................................. $1,090,592 $766,411
========== ========
</TABLE>
16. CONCENTRATION OF BUSINESS
Sales to one customer were 39%, 32% and 30% of net revenues for the years
ended December 31, 1997, 1998 and 1999, respectively.
17. STOCK OPTION PLANS
On February 4, 1997, the Company adopted the 1997 Stock Option Plan (the
"Option Plan"), pursuant to which incentive and non-qualified stock options,
stock appreciation rights, stock awards, performance awards, and stock units
(vesting stock awards) may be issued. A total of 1,401,630 shares of the
Company's Common Stock will be reserved for issuance under the Option Plan. The
terms and vesting periods of the options granted are to be determined by the
board of directors. All options granted under the Option Plan to date have ten
year terms and vest over five year periods.
The Company has also granted performance options ("the Performance
Options") to certain key executives. The Performance Options are exercisable
only in the event that certain affiliates of Hicks Muse have, as of the exercise
date, realized an overall rate of return of at least 35% per annum, compounded
annually, on all equity funds invested by it in the Company. In addition, the
performance options are exercisable upon the occurrence of certain liquidity
events, including an initial public offering of the Company's common stock. The
exercise price for the Performance Options is initially equal to $6.00 per share
for grants made during 1997 and $7.32 per share for grants made during 1998 and
1999 and, effective each anniversary of the grant date, the per share exercise
price for the Performance Options is equal to the per share exercise price for
the prior year multiplied by 1.08. The Performance Options terminate on the
tenth anniversary date of the date of grant. Through December 31, 1999, no
compensation expense has been measured on the outstanding performance options as
achievement of the performance criteria has not been considered probable.
F-27
<PAGE> 130
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," the Company applies APB Opinion No.
25, "Accounting for Stock Issued to Employees," and related Interpretations in
accounting for the Option Plan. Had compensation cost for the Option Plan and
the Performance Options been determined based upon the fair value at the grant
date for awards under these plans consistent with the methodology prescribed
under Financial Accounting Standards No. 123, pro forma net loss for the years
ended December 31, 1997, 1998 and 1999, would have been $(327,588), $(84,961)
and $(617,531), respectively. Pro forma basic and diluted loss per weighted
average common share would have been $(10.98) and $(12.24) for December 31,
1997, $(1.62) and $(1.82) for December 31, 1998 and $(8.71) and $(9.25) for
December 31, 1999.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes method with the following assumptions: (i) no dividend yield;
(ii) risk free interest rate of 5.5%; (iii) expected life of 5 years; and (iv)
volatility factor of 60%.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts of compensation costs. Additional awards in future
years are anticipated.
Changes in the status of the Option Plan are summarized below:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE PRICE OPTIONS EXERCISE PRICE OPTIONS
PER SHARE OUTSTANDING PER SHARE VESTED
-------------- ----------- -------------- -------
<S> <C> <C> <C> <C>
December 31, 1996............................. $ -- -- $ -- --
Granted..................................... 6.00 871,667 -- --
Vested...................................... 6.00 -- 6.00 33,333
Forfeited................................... 6.00 (4,166) -- --
-------- -------
December 31, 1997............................. 6.00 867,501 6.00 33,333
Granted..................................... 7.32 514,167 -- --
Vested...................................... 6.00 -- 6.00 121,000
Forfeited................................... 6.12 (253,333) -- --
Exercised................................... 6.00 (2,500) 6.00 (2,500)
-------- -------
December 31, 1998............................. 6.60 1,125,835 6.00 151,833
Granted..................................... 7.32 1,521,665 -- --
Vested...................................... -- 6.49 203,500
Forfeited................................... 7.23 (209,667) -- --
Exercised................................... 6.30 (7,500) 6.30 (7,500)
-------- -------
December 31, 1999............................. $6.99 2,430,333 $6.30 347,833
</TABLE>
F-28
<PAGE> 131
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in the status of the Performance Options are summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE PRICE OPTIONS OPTIONS
PER SHARE OUTSTANDING VESTED
-------------- ----------- -------
<S> <C> <C> <C>
August 28, 1996 (inception)................................. $6.00 -- --
Granted................................................... 6.00 180,865 --
---------- --
December 31, 1996........................................... 6.00 180,865 --
Granted................................................... 6.00 1,356,484 --
Vested.................................................... -- -- --
Forfeited................................................. -- -- --
---------- --
December 31, 1997........................................... 6.00 1,537,349 --
Granted................................................... 7.32 277,220 --
Vested.................................................... -- --
Forfeited................................................. --
---------- --
December 31, 1998........................................... 6.66 1,814,569 --
Granted................................................... 7.32 988,328 --
Vested.................................................... -- -- --
Forfeited................................................. -- -- --
Exercised................................................. -- -- --
---------- --
December 31, 1999........................................... $7.26 2,802,897 --
===== ========== ==
</TABLE>
The weighted average grant-date fair value of options granted during 1997,
1998 and 1999 was $1.38, $1.74 and $1.74 per share, respectively. All options
outstanding under the Option Plan at December 31, 1999, have exercise prices
between $6.00 and $7.32 per share and have weighted average remaining
contractual lives of between 9 and 10 years.
Of the Performance Options outstanding at December 31, 1999, 180,865,
1,356,484, 1,537,349 and 1,814,569 have exercise prices of $7.56, $7.02, $7.92
and $7.32, respectively, and have a weighted average remaining contractual life
of approximately 9 years.
18. RETIREMENT PLANS
The Company has a defined contribution retirement savings plan (the "Plan")
covering substantially all domestic employees who meet certain eligibility
requirements as to age and length of service. The Plan incorporates the salary
deferral provision of Section 401(k) of the Internal Revenue Code and employees
may defer up to 15% of compensation or the annual maximum limit prescribed by
the Internal Revenue Code. The Company contributes 1% of employees salaries to
the Plan and matches a percentage of the employees' deferrals. The Company may
also elect to contribute an additional profit-sharing contribution to the Plan
at the end of each year. The Company's contributions to the Plan were $807,
$1,450 and $2,375 for the years ended December 31, 1997, 1998 and 1999,
respectively.
The Company and its subsidiaries have two defined benefit pension plans
covering certain groups of employees in foreign countries. The benefits are
based on years of services and final average salary. The Company's funding
policy is to make annual contributions to the extent such contributions are
actuarially determined.
F-29
<PAGE> 132
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of net pension expense are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Service cost (present value of benefits earned in the
year)................................................. $ 1,821 $ 2,896 $ 2,301
Interest cost on the projected benefit obligation....... 2,699 3,741 3,421
Expected return on assets............................... (6,970) (4,872) (4,780)
Net amortization and deferral........................... 4,016 -- 90
------- ------- -------
Net periodic pension costs.............................. $ 1,566 $ 1,765 $ 1,032
======= ======= =======
</TABLE>
The following table sets forth a reconciliation of the projected benefit
obligation:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Projected benefit obligation, beginning of year......... $ -- $54,469 $66,469
Acquisitions............................................ 44,977 -- --
Service cost (present value of benefits earned in the
year)................................................. 1,821 2,896 2,301
Interest cost on the projected benefit obligation....... 2,699 3,741 3,421
Plan participant's contributions........................ 1,347 2,031 1,587
Actuarial (gain)/loss................................... 4,165 3,915 (7,691)
Benefits paid........................................... (540) (980) (1,733)
Translation............................................. -- 397 (2,330)
------- ------- -------
Projected benefit obligation, end of year............... $54,469 $66,469 $62,024
======= ======= =======
</TABLE>
The following table sets forth a reconciliation of the plan assets:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Fair value of plan assets, beginning of year............. $ -- $53,434 $60,695
Acquisitions............................................. 43,675 -- --
Actual return on plan assets............................. 6,976 2,980 7,464
Employer contributions................................... 1,976 2,841 2,737
Plan participant's contributions......................... 1,347 2,031 1,587
Benefits paid............................................ (540) (980) (1,733)
Translation.............................................. -- 389 (2,128)
------- ------- -------
Fair value of plan assets, end of year................... $53,434 $60,695 $68,622
======= ======= =======
</TABLE>
The following table sets forth the plans' funded status and the amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Projected benefit obligation................................ $66,469 $62,024
Plan assets at fair value, primarily equity and fixed-income
securities................................................ 60,695 68,622
------- -------
Plan assets (less than) more than projected benefit
obligation................................................ (5,774) 6,598
Unrecognized net actuarial loss (gain)...................... 5,950 (4,724)
Adjustment required to recognize minimum liability.......... (1,916) (1,068)
------- -------
Net pension (liability) asset............................... $(1,740) $ 806
======= =======
</TABLE>
F-30
<PAGE> 133
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The principal assumptions used are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
PERCENT PERCENT PERCENT
------- ------- -------
<S> <C> <C> <C>
Weighted average discount rates............................. 6.75% 5.50% 5.75%
Long term rate of return on plan assets..................... 8.75% 8.00% 8.00%
Salary Growth............................................... 4.75% 4.25% 3.75%
Pension Increases........................................... 3.00% 2.50% 2.75%
</TABLE>
19. RESEARCH AND DEVELOPMENT
Research, development and engineering expenditures for the creation and
application of new products and processes were approximately $10,800, $13,400
and $14,400 for the years ended December 31, 1997, 1998 and 1999, respectively.
20. RELATED PARTY TRANSACTIONS
In connection with the Acquisitions and the related financing, the Company
entered into a Monitoring and Oversight Agreement and a Financial Advisory
Agreement (together herein defined as the "Agreements") with Hicks Muse (a
shareholder and affiliate of the Company) pursuant to which the Company paid
Hicks Muse a cash fee of $10,400, $2,463 and $4,684 for the years ended December
31, 1997, 1998 and 1999, respectively, as compensation for financial advisory
services. The fees have been allocated to acquisition costs and the debt and
equity securities issued in connection with the Acquisitions. The Agreements
further provide that the Company shall pay Hicks Muse an annual fee of $1,750
for ten years of monitoring and oversight services, adjusted annually at the end
of each fiscal year to an amount equal to .2% of the budgeted consolidated net
sales of the Company, but in no event less than $1,750 annually.
Pursuant to the Chips Merger, the Company assumed the $437,500 of Chips
Loan Notes, and the Company entered into a Reimbursement Obligation which
requires it to pay a portion of the principal and interest on the Chips Loan
Notes in the event such notes are called. In April 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 Fundings, 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's remaining portion of the Chips Loan Notes at December
31, 1999 is $285,312 (see Note 9).
21. EXTRAORDINARY ITEM
During the year ended December 31, 1997, the Company recorded, as an
extraordinary item, a one-time, non-cash write-off of deferred financing fees of
approximately $7,796, net of income tax benefit of $4,332, related to deferred
financing fees incurred on debt retired before maturity.
F-31
<PAGE> 134
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
22. EARNINGS PER SHARE
Basic earnings per common share amounts are computed using the weighted
average number of common shares outstanding during the year. Basic earnings per
weighted average common share are computed as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Loss before cumulative effect of a change in accounting
principle and extraordinary item....................... $ (319,692) $ (84,783) $ (599,330)
Plus paid-in-kind dividends and accretion on preferred
stock.................................................. (3,298) (3,735) (4,240)
Less loss attributable to Class A common shareholders.... 38,643 9,456 45,812
Less loss attributable to Class A Series II common
shareholders........................................... -- 1,040 32,398
---------- ---------- ----------
Loss available to common shareholders before cumulative
effect of a change in accounting principle and
extraordinary item..................................... $ (284,347) $ (78,022) $ (525,360)
========== ========== ==========
Basic weighted average common shares outstanding......... 26,507,409 48,205,838 62,123,268
========== ========== ==========
Basic loss per weighted average common share before
cumulative effect of a change in accounting principle
and extraordinary item................................. $ (10.73) $ (1.62) $ (8.46)
========== ========== ==========
Basic net loss per weighted average common share......... $ (10.99) $ (1.62) $ (8.69)
========== ========== ==========
</TABLE>
Losses attributable to Class A and Class A Series II are calculated on a
one to one basis using the weighted average shares outstanding before conversion
as these classes have identical rights and privileges with respect to dividends
and voting as the common shares.
Diluted earnings per weighted average common share are computed as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Loss before cumulative effect of a change in accounting
principle and extraordinary item....................... $ (319,692) $ (84,783) $ (599,330)
Plus paid-in-kind dividends and accretion on preferred
stock.................................................. (3,298) (3,735) (4,240)
---------- ---------- ----------
Loss available to common shareholders before cumulative
effect of a change on accounting principle and
extraordinary item..................................... $ (322,990) $ (88,518) $ (603,570)
========== ========== ==========
Weighted average common shares outstanding............... 26,507,409 48,205,838 62,123,268
Common shares assuming conversion of Class A and Class A
Series II.............................................. 524,158 463,690 5,083,336
---------- ---------- ----------
Diluted weighted average common shares outstanding....... 27,031,567 48,669,528 67,206,604
========== ========== ==========
Diluted loss per weighted average common share before
cumulative effect of a change in accounting principle
and extraordinary item................................. $ (11.95) $ (1.82) $ (8.98)
========== ========== ==========
Diluted net loss per weighted average common share....... $ (12.24) $ (1.82) $ (9.23)
========== ========== ==========
</TABLE>
Shares assumed in the conversion of Class A and Class A Series II are
calculated on an as if converted basis using the formula set forth in the
Company's Certificate of Incorporation, which yields a less than one to one
ratio.
F-32
<PAGE> 135
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a result of losses incurred for the years ended December 31, 1997, 1998,
and 1999, the following potentially dilutive securities were not included in
diluted earnings per share because their inclusion would be anti-dilutive:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
--------- ---------- ----------
<S> <C> <C> <C>
Performance options....................................... 1,537,349 1,814,569 2,802,900
Stock options............................................. 867,501 1,125,835 2,460,000
Stock warrants............................................ -- -- 136,645
</TABLE>
23. SUBSEQUENT EVENTS
The Company intends to effect a transfer to the Company's existing
stockholders of all of the capital stock of certain businesses ("NewCo") in
Europe. NewCo consists primarily of the operations formerly conducted by
Forward, Zincocelere, ISL and Viasystems Sweden. In consideration for the
transfer, NewCo will deliver notes payable to the Company for approximately
$124,000 in the aggregate, which will be classified as a component of
shareholders' equity. Any difference at the date of transfer between net book
value of NewCo ($(131,449) at December 31, 1999) and $124,000 will be accounted
for as a reduction or increase to additional paid in capital. The notes will
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 Company has signed a letter of intent to acquire all of the outstanding
shares of Wirekraft Industries, Inc., a wholly owned subsidiary of International
Wire Group, Inc., an affiliate of Hicks Muse, which manufactures and assembles
wire harness products. The purchase price is approximately $210,000 in cash.
These transactions are expected to occur immediately prior to the Company's
anticipated initial public offering. The Company and International Wire Group,
Inc. are considered entities under common control. Accordingly, the acquisition
will be accounted for on an "as if pooling", with the excess purchase price over
book value acquired being accounted for as a distribution to the Company's
shareholders.
On February 4, 2000, certain covenants of the Third Amended and Restated
Credit Agreement were amended.
On January 25, 2000, the Company entered into an agreement with Marconi
Communications, Inc. to acquire Marconi's network components & services business
for $115 million. This business has manufacturing facilities in Europe and
China, where it manufactures products designed primarily for telecommunications
customers, including Italtel, Lucent, Marconi, Nokia and Siemens.
24. STOCK SPLIT
Concurrent with the anticipated initial public offering, the Company will
declare a reverse stock split; Each share of common stock, Class A common stock,
and Class A Series II common stock will be converted into 1/6 of a share of each
respective class. All share and per share data have been restated in
anticipation of the reverse split, except for the par value which remains at
$0.01 per share.
F-33
<PAGE> 136
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Termbray Industries International (Holdings)
Limited.
We have audited the accompanying combined balance sheet of the Printed
Circuit Board Division of Termbray Industries International (Holdings) Limited
("PCB Division") as of 31st March 1999 and the related combined statements of
income, of cash flows and of changes in divisional equity for the year ended
31st March 1999, all expressed in Hong Kong Dollars. These combined financial
statements are the responsibility of the management of the PCB Division. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Hong Kong, which are substantially similar, in all material
respects, to those generally accepted in the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement. An audit
includes examining, on a test basis, evidence supporting amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements audited by us present
fairly, in all material respects, the financial position of the PCB Division at
31st March 1999, and the results of its operations and cash flows for the year
ended 31st March 1999, in conformity with accounting principles generally
accepted in Hong Kong.
Accounting principles generally accepted in Hong Kong vary in certain
significant respects from accounting principles generally accepted in the United
States. The application of the latter would have affected the determination of
the combined net income expressed in Hong Kong Dollars for the year ended 31st
March 1999 and the determination of combined divisional equity also expressed in
Hong Kong Dollars at 31st March 1999 to the extent summarised in note 18 to the
combined financial statements.
PricewaterhouseCoopers
Certified Public Accountants
Hong Kong, 24th September 1999
F-34
<PAGE> 137
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
COMBINED STATEMENT OF INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
NOTE HK$
---- ----------
<S> <C> <C>
Net sales................................................... 3 1,341,199
Cost of inventories sold.................................... (934,387)
---------
Gross profit................................................ 406,812
Operating expenses
Salaries and related costs................................ (35,278)
Sales and marketing expenses.............................. (31,259)
General and administrative expenses....................... (65,731)
---------
Income from operations...................................... 274,544
Bank interest income........................................ 4,607
Interest expense............................................ (28,577)
Other non-operating income.................................. 19,592
---------
Income before taxation...................................... 4 270,166
Provision for income taxes.................................. 5 (23,616)
---------
Net income.................................................. 246,550
=========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-35
<PAGE> 138
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
COMBINED BALANCE SHEET
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
31ST MARCH
1999
NOTE HK$
---- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. 65,808
Trade accounts receivable, net............................ 206,085
Inventories, net.......................................... 7 185,759
Prepaid expenses and other assets......................... 58,546
Due from former related companies......................... 8 174,099
---------
Total current assets.............................. 690,297
Fixed assets, net................................. 9 799,032
---------
Total assets...................................... 1,489,329
=========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Trade accounts payable.................................... 133,780
Bills payable............................................. 24,528
Other liabilities and accrued charges..................... 44,059
Current portion of long-term liabilities.................. 10 103,787
Bank loans and overdrafts................................. 42,024
Income taxes payable...................................... 5,943
---------
Total current liabilities......................... 354,121
Long-term liabilities
Long-term loans, net of current portion................... 10 34,899
Deferred taxation......................................... 11 22,503
---------
Total liabilities................................. 411,523
Shareholders' equity
Divisional capital........................................ 12 15,020
Retained profits.......................................... 13 1,062,786
---------
Total divisional equity........................... 1,077,806
---------
Total liabilities and divisional equity........... 1,489,329
=========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-36
<PAGE> 139
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
COMBINED STATEMENT OF CHANGES IN DIVISIONAL EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
ORDINARY SHARES NON-VOTING DEFERRED SHARES
------------------------- ---------------------------
NUMBER OF NUMBER OF TOTAL
SHARES AMOUNT SHARES AMOUNT RETAINED DIVISIONAL
OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING PROFITS EQUITY
----------- ----------- ------------ ------------ --------- ----------
HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C> <C>
Balance at 1st April
1998..................... 1,020,007 10,020 50,002 5,000 816,236 831,256
Net income................. -- -- -- -- 246,550 246,550
--------- ------ ------ ----- --------- ---------
Balance at 31st March
1999..................... 1,020,007 10,020 50,002 5,000 1,062,786 1,077,806
========= ====== ====== ===== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-37
<PAGE> 140
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
COMBINED STATEMENT OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
HK$
----------
<S> <C>
Cash flows from operating activities
Income before taxation.................................... 270,166
Depreciation of owned fixed assets........................ 66,473
Depreciation of leased fixed assets....................... 14,008
Interest expense.......................................... 20,588
Interest element of finance lease rental payments......... 7,990
Interest income........................................... (4,607)
Amortisation of pre-operating expenses.................... 1,194
Loss on disposal of fixed assets.......................... 194
Decrease in inventories................................... 56,042
Decrease in trade receivables, prepaid expenses and other
assets................................................. 32,853
Decrease in trade accounts and bills payable, other
liabilities and accrued charges........................ (54,740)
--------
Net cash inflow from operating activities................... 410,161
--------
Returns on investments and servicing of finance
Interest received......................................... 4,607
Interest paid............................................. (20,588)
Interest element of finance lease rental payments......... (7,990)
--------
Net cash outflow from returns on investments and servicing
of finance................................................ (23,971)
Taxation
Hong Kong profits tax paid.................................. (18,186)
--------
Taxation paid............................................... (18,186)
--------
Investing activities
Purchase of fixed assets.................................... (46,236)
Proceeds from sale of fixed assets........................ 1,974
--------
Net cash outflow from investing activities.................. (44,262)
--------
Net cash inflow before financing............................ 323,742
--------
Financing
Repayment of bank loans................................... (211,662)
Capital element of finance lease rental payments.......... (51,919)
Advances to former related companies...................... (56,415)
--------
Net cash outflow from financing............................. (319,996)
--------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-38
<PAGE> 141
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
COMBINED STATEMENT OF CASH FLOWS -- (CONTINUED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
----------
<S> <C>
Net cash outflow from financing............................. (319,996)
--------
Increase in cash and cash equivalents....................... 3,746
Cash and cash equivalents at beginning of the year.......... 20,038
--------
Cash and cash equivalents at end of the year................ 23,784
========
Analysis of the balances of cash and cash equivalents
Cash on hand and demand deposits with banks............... 65,808
Bank loans and overdrafts................................. (42,024)
--------
23,784
========
</TABLE>
Supplemental cash flows information:
<TABLE>
<CAPTION>
OBLIGATIONS UNDER
LONG TERM LOANS FINANCE LEASES
HK$'000 HK$'000
--------------- -----------------
<S> <C> <C>
Analysis of changes in financing during the year
Balance as at 1st April 1998......................... 283,448 118,819
Repayment during the year............................ (211,662) (51,919)
-------- -------
Balance as at 31st March 1999........................ 71,786 66,900
======== =======
</TABLE>
The statement of cash flows is prepared in accordance with Hong Kong Statement
of Standard Accounting Practice 15 "Cash Flow Statements" which differs in
certain respects from U.S. Statement of Financial Accounting Standard 95 ("SFAS
95") "Statement of Cash Flows." The principal differences are explained in note
18.
The accompanying notes are an integral part of these combined financial
statements.
F-39
<PAGE> 142
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
The Printed Circuit Board Division of Termbray Industries International
(Holdings) Limited (the "PCB Division") manufactures and sells laminates,
prepreg products and printed circuit boards. The combined financial statements
of the PCB Division for the year ended 31st March 1999 include the following
former subsidiaries (the "PCB subsidiaries") of Termbray Industries
International (Holdings) Limited ("Termbray"), all of which are private
companies (or, if incorporated outside Hong Kong, have substantially the same
characteristics as a private company):
<TABLE>
<CAPTION>
PARTICULARS OF
PLACE OF REGISTERED
INCORPORATION/ CAPITAL/ISSUED
NAME OF COMPANY OPERATION SHARE CAPITAL PRINCIPAL ACTIVITIES
- --------------- -------------- -------------- --------------------
<S> <C> <C> <C>
Guangzhou Kalex Laminate The People's Republic Registered capital of Dormant
Company Limited (iii) of China US$28,500,000
Guangzhou Termbray The People's Republic Registered capital of Manufacture and sales
Electronics Technology of China US$28,500,000 of mass lamination
Company Limited (ii) and prepreg
products
Guangzhou Termbray Circuit The People's Republic Registered capital of Manufacture and sales
Board Company Limited of China US$28,500,000 of printed circuit
(iv) boards
Kalex Circuit Board (Hong Hong Kong 1,000,000 ordinary Dormant
Kong) Limited shares of HK$10 each
Kalex Circuit Board (China) Hong Kong/The 2 ordinary shares of Manufacture and sales
Limited People's Republic HK$100 each and of printed circuit
of China 50,000 non-voting boards and
deferred shares of investment holding
HK$100 each
Kalex Circuit Board Hong Kong/The 600,000 ordinary Manufacture and sales
(Guangzhou) Limited (i) People's Republic shares of US$1 each of printed circuit
of China boards and
investment holding
Kalex Multi-Layer Printed Hong Kong 2 ordinary shares of Dormant
Circuit Board Company HK$1 each
Limited (ii)
Kalex Printed Circuit Board Hong Kong 10,000 ordinary shares Marketing and sales
Limited of HK$1 each of printed circuit
boards
Lee Lap & Sons Limited Hong Kong/The 2 ordinary shares of Manufacture and sales
People's Republic HK$1 each and 2 of printed circuit
of China non-voting deferred boards
shares of HK$1 each
</TABLE>
F-40
<PAGE> 143
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
PARTICULARS OF
PLACE OF REGISTERED
INCORPORATION/ CAPITAL/ISSUED
NAME OF COMPANY OPERATION SHARE CAPITAL PRINCIPAL ACTIVITIES
- --------------- -------------- -------------- --------------------
<S> <C> <C> <C>
Termbray Circuit Board Hong Kong 2 ordinary shares of Investment holding
Company Limited HK$1 each
Termbray Laminate Company Hong Kong/The 10,000 ordinary shares Manufacture and sales
Limited People's Republic of HK$1 each of mass lamination
of China and prepreg
products
Termbray Property (B.V.I.) The British Virgin 1 ordinary share of Property investment
Limited Islands US$1
</TABLE>
- ------------
(i) Directly held by Termbray Circuit Board Company Limited
(ii) Directly held by Kalex Circuit Board (China) Limited
(iii)Directly held by Termbray Laminate Company Limited
(iv) Indirectly held by Termbray Circuit Board Company Limited through Kalex
Circuit Board (Guangzhou) Limited
100% of the equity interest, direct or indirect, of the above companies is
attributable to the PCB Division.
The combined financial statements have been prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission of the United States (the "SEC") for inclusion in a registration
statement of public filing in the United States by Viasystems, Inc. They have
been prepared on a historical cost basis from the books and records of these
subsidiaries on the basis of established accounting methods, practices,
procedures and policies (see Note 2) and the accounting judgments and estimation
methodologies used by the management of the PCB Division.
The combined financial statements do not represent the combination of Hong
Kong statutory financial statements of the PCB subsidiaries as certain
reclassifications and changes in presentation have been made to the financial
statements in order to conform more closely to presentations customary in
filings with the SEC.
The combined financial statements have been prepared in accordance with
generally accepted accounting principles in Hong Kong and with accounting
standards issued by the Hong Kong Society of Accountants ("HKGAAP"). These
principles differ in certain significant respects from generally accepted
accounting principles in the United States of America ("USGAAP"). The effect of
these differences on net income and divisional equity is summarised in Note 18.
The combined statement of income includes all items of revenue and income
generated by the PCB Division, all items of expense directly incurred by it and
certain corporate expenses allocated from a subsidiary of Termbray outside the
PCB Division in the normal course of business. For additional information
concerning expenses allocated by the subsidiary of Termbray to the PCB Division,
see Note 16.
The debt of the PCB Division consists of obligations that are specifically
identifiable with associated capital expenditures of the PCB Division. No other
debt of Termbray (or related interest expense) has been allocated to the
Division. Because of the special purpose of the PCB Division's combined
financial statements and the significant related party transactions (as
described in Note 16), these combined financial statements may not necessarily
be indicative of the combined financial position, results of its operations or
cash flows that would have resulted if the Division had been operated as a
separate entity. Management believes that the
F-41
<PAGE> 144
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
accounting judgments, estimations and allocations made in preparing these
combined financial statements were reasonable.
All amounts are expressed in Hong Kong Dollars. Unless indicated otherwise,
amounts in Hong Kong Dollars have been rounded to the nearest thousand.
2. PRINCIPAL ACCOUNTING POLICIES
(a) BASIS OF COMBINATION
(i) The combined financial statements of the PCB Division include the
financial statements of the PCB subsidiaries as mentioned in Note 1
for the year ended 31st March 1999. All material intercompany
accounts and transactions among the companies included in the PCB
Division have been eliminated on combination.
(ii) Goodwill on consolidation or acquisition of a business, which
represents the excess of the cost of investment over the fair value
ascribed to the net underlying assets acquired, is charged against
reserves to the extent that such reserves are available and any
excess is charged against the statement of income in the year of
acquisition.
(b) FIXED ASSETS AND DEPRECIATION
The cost of an asset comprises its purchase price and any directly
attributable costs of bringing the asset to its present working condition and
location for its intended use. Expenditure incurred after the assets have been
put into operation, such as repairs and maintenance and overhaul costs, is
normally charged to the statement of income in the period in which it is
incurred. In situations where it can be clearly demonstrated that the
expenditure has resulted in an increase in the future economic benefits expected
to be obtained from the use of the assets, the expenditure is capitalised as an
additional cost of the assets.
(i) Leasehold land, buildings and improvements
Leasehold land, buildings and improvements are stated at cost less
accumulated amortization or depreciation and any provisions required
to reflect recoverable amount.
(ii) Amortization of leasehold land
Amortization of leasehold land is calculated to write off its cost on
the straight line basis over the unexpired period of the lease.
Leasehold land is not amortised until such land has been put into
operation.
(iii) Depreciation of leasehold buildings and improvements
Depreciation of leasehold buildings and improvements is calculated
to write off their costs on the straight line basis over the
unexpired periods of the leases or their expected useful lives,
whichever is shorter. The principal annual rates used for this
purpose are:
<TABLE>
<S> <C>
Leasehold buildings 4% or over the unexpired term of the land leases,
whichever is shorter
Leasehold improvements 10 - 25%
</TABLE>
(iv) Other tangible fixed assets
Other tangible fixed assets are stated at cost less accumulated
depreciation except machinery and equipment acquired before 31st
March 1987 which are stated at valuation less accumulated
F-42
<PAGE> 145
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
depreciation. No depreciation is provided on fixed assets under
construction until the assets are put into operation. Depreciation on
other tangible fixed assets is calculated to write off their costs on
the straight line basis over their expected useful lives. The
principal annual rates used for this purpose are:
<TABLE>
<S> <C>
Plant and machinery......................................... 10-25%
Furniture, fixtures and office equipment.................... 10-25%
Moulds, tools, equipment and motor vehicles................. 10-25%
</TABLE>
Advantage has been taken of the transitional relief provided by
paragraph 72 of Statement of Standard Accounting Practice 17
"Property, plant and equipment" issued by the Hong Kong Society of
Accountants from the requirement to make regular revaluations of the
PCB Division's machinery and equipment, which had been carried at
revalued amounts prior to 30th September, 1995, and accordingly no
further revaluation of such machinery and equipment is carried out.
A decrease in net carrying amount of an asset arising on revaluation
is charged to the statement of income to the extent that it exceeds
the surplus, if any, held in revaluation reserve relating to previous
revaluation of that particular asset.
(v) Impairment of fixed assets and other long lived assets
The carrying amounts of fixed assets are reviewed regularly to assess
whether their recoverable amounts have declined below their carrying
amounts, based on non-discounted future cash flows. When such a
decline has occurred, their carrying amounts are reduced to their
recoverable amounts. Recoverable amount is the amount which
management expects to recover from the future use of the asset,
including its residual value on disposal. The amount of any reduction
to recoverable amount is charged to the statement of income.
For purposes of the reconciliation of the PCB Division's financial
statements to US GAAP, where the recoverable amount of fixed and
other long lived assets is less than carrying value, an impairment
loss is recognized to write the assets down to their fair value. No
such impairment losses were required in the year ended 31st March
1999.
(vi) Costs of restoring and improving fixed assets
Major costs incurred in restoring fixed assets to their normal
working conditions are charged to the statement of income.
Improvements are capitalized and depreciated over their expected
useful lives.
(vii) Gain or loss on disposal of fixed assets
The gain or loss arising on disposal or retirement of an asset is
determined as the difference between the sale proceeds and the
carrying amount of the asset and is recognised in the statement of
income. On disposal of a revalued asset, the attributable
revaluation surplus not dealt with in retained profits in prior
years is transferred directly to retained profits.
(viii) Leased assets
Where assets are acquired through finance leases or hire purchase
contracts under which substantially all the risks and rewards of
ownership, other than legal title, are transferred to the company,
the assets are treated as if they had been purchased. An amount
equivalent to the cost is recorded as a fixed asset. The
corresponding lease commitments are shown as obligations under
finance leases and hire purchase contracts. Payments to the lessor
are treated as consisting of capital and interest elements. The
interest element is charged to the statement of income using the
F-43
<PAGE> 146
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
straight line method over the period of the lease. Assets held under
finance leases or hire purchase contracts are depreciated over the
shorter of lease periods or their estimated useful lives as in (iv)
above.
US GAAP requires interest on finance leases to be recognized so as
to ensure a constant periodic rate of interest on the remaining
balance of the obligation (the "interest method"). The difference
between the straight line method used by the company and the
interest method is not material.
All other leases are accounted for as operating leases (see note (h)
below).
(c) INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost,
which comprises all costs of purchase and, where applicable, costs of conversion
and other costs that have been incurred in bringing the raw material and work in
progress to their present location and condition, is calculated using the
first-in, first-out method. Net realisable value of finished goods represents
the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the
sale.
Consumable stores are stated at purchase cost less amount allocated to
production costs when such assets are consumed.
(d) FOREIGN CURRENCIES
Transactions in foreign currencies are translated into Hong Kong dollars at
the rates of exchange ruling at the transaction dates. Monetary assets and
liabilities denominated in currencies other than Hong Kong dollars are
re-translated into Hong Kong dollars at the rates of exchange ruling at the
balance sheet date. Exchange difference arising are dealt with in the statement
of income.
(e) DEFERRED TAXATION
Deferred taxation is accounted for at the current taxation rate in respect
of timing differences between profit as computed for taxation purposes and
profit as stated in the accounts to the extent that a liability or an asset is
expected to be payable or receivable in the foreseeable future. In determining
whether a liability is expected to be payable in the foreseeable future the
company assesses the effect of its capital expenditure and other plans. If these
plans indicate that sufficient accelerated tax allowances will be available to
offset the effect of the reversal of timing differences a deferred tax liability
is not established for such timing differences, in accordance with the
requirements of HKGAAP.
(f) CAPITALISATION OF BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, i.e. assets that necessarily take a substantial
period of time to get ready for their intended use or sale, are capitalised as
part of the cost of those assets. Capitalisation of such borrowing costs ceases
when the assets are substantially ready for their intended use or sale.
(g) USE OF ESTIMATES
The preparation of combined financial statements in conformity with HKGAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses reported during the period. Actual results could differ
from these estimates.
F-44
<PAGE> 147
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(h) OPERATING LEASES
Rentals payable under operating leases, where substantially all the risks
and rewards of ownership of the assets remain with the lessors, are charged to
the statement of income on a straight line basis over the term of the relevant
lease.
(i) CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent short term highly liquid investments
which are readily convertible into known amount of cash were within three months
of maturity when acquired; less advances from banks repayable within three
months from the date of the advance.
(j) REVENUE RECOGNITION
Income from processing services is recognised when the relevant services
are rendered.
Sales of goods are recognised when the goods are delivered and title has
passed.
Interest income from bank deposits is accrued on a time proportion basis,
by reference to the principal outstanding and at the interest rate applicable.
3. NET SALES
Net sales represents invoiced value of inventories sold less returns.
4. INCOME BEFORE TAXATION
<TABLE>
<CAPTION>
1999
HK$
-------
<S> <C>
Income before taxation is stated after crediting and
charging the following :
Crediting
Exchange gain.......................................... 6,321
Interest income from bank deposits..................... 4,607
=======
Charging
Cost of inventories sold............................... 934,387
Depreciation:
Owned fixed assets................................... 66,473
Leased fixed assets.................................. 14,008
Operating leases
Land and buildings................................... 932
Hire of plant & machinery............................ 65
Interest expense comprises:
Interest expense on bank loans and overdrafts........ 20,588
Interest element of finance lease rental payments.... 7,990
=======
</TABLE>
F-45
<PAGE> 148
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
1999
HK$
-------
<S> <C>
Hong Kong profits tax....................................... 17,310
Overseas taxation........................................... 2,375
-------
19,685
-------
Deferred tax (note 11)...................................... 3,931
-------
23,616
=======
</TABLE>
Hong Kong profits tax has been provided at the rate of 16.0% (1998: 16.5%)
on the estimated assessable profit for the year. Taxation on overseas profits
has been calculated on the estimated assessable profit for the year at the rates
of taxation prevailing in the countries in which the PCB Division operates.
6. TRADE ACCOUNTS RECEIVABLE, NET
<TABLE>
<CAPTION>
1999
HK$
-------
<S> <C>
Trade accounts receivable................................... 213,985
Less: provision for doubtful debts.......................... (7,900)
-------
206,085
=======
</TABLE>
7. INVENTORIES, NET
<TABLE>
<CAPTION>
1999
HK$
-------
<S> <C>
Inventories, net at 31st March 1999 consisted of the
following:
Raw materials and supplies................................ 71,999
Work in progress and finished goods....................... 80,844
Consumable stores......................................... 32,916
-------
185,759
=======
</TABLE>
Included in inventories, net at 31st March 1999 was an amount of HK$1,520
carried at net realisable value after making a provision for obsolete
inventories of HK$3,256.
8. DUE FROM FORMER RELATED COMPANIES
The amounts due from former related companies represent advances made to
certain subsidiaries of Termbray Industries International (Holdings) Limited
outside the PCB Division in order to finance the daily operations of these
companies. The amounts due from these former related companies are unsecured,
interest free and have no fixed terms of repayment.
F-46
<PAGE> 149
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. FIXED ASSETS
<TABLE>
<CAPTION>
LAND AND
LAND AND BUILDINGS FACTORIES,
BUILDINGS HELD UNDER STAFF QUARTERS
HELD UNDER MEDIUM TERM AND
MEDIUM TERM LEASES MACHINERY
LEASES IN OUTSIDE UNDER LEASEHOLD
HONG KONG HONG KONG CONSTRUCTION IMPROVEMENTS
HK$ HK$ HK$ HK$
----------- ----------- -------------- ------------
<S> <C> <C> <C> <C>
Cost or valuation
At 1st April 1998......................... 37,413 229,568 61,417 101,379
Additions................................. -- 3,821 11,354 263
Reclassification.......................... -- -- (17,545) 4,452
Disposals................................. -- -- -- (340)
------ ------- ------- -------
At 31st March 1999........................ 37,413 233,389 55,226 105,754
------ ------- ------- -------
Accumulated depreciation
At 1st April 1998......................... 3,061 10,648 -- 42,777
Charge for the year....................... 935 3,673 -- 8,059
Disposals................................. -- -- -- --
------ ------- ------- -------
At 31st March 1999........................ 3,996 14,321 -- 50,836
------ ------- ------- -------
Net book value
At 31st March 1999........................ 33,417 219,068 55,226 54,918
====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MOULDS,
FURNITURE, TOOLS,
FIXTURES EQUIPMENT
PLANT AND AND OFFICE AND MOTOR
MACHINERY EQUIPMENT VEHICLES TOTAL
HK$ HK$ HK$ HK$
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Cost or valuation
At 1st April 1998................................. 624,294 23,230 12,737 1,090,038
Additions......................................... 26,598 3,090 1,110 46,236
Reclassification.................................. 12,803 290 -- --
Disposals......................................... (1,662) -- (688) (2,690)
------- ------ ------ ---------
At 31st March 1999................................ 662,033 26,610 13,159 1,133,584
------- ------ ------ ---------
Accumulated depreciation
At 1st April 1998................................. 182,388 11,379 4,340 254,593
Charge for the year............................... 62,824 3,378 1,612 80,481
Disposals......................................... (40) -- (482) (522)
------- ------ ------ ---------
At 31st March 1999................................ 245,172 14,757 5,470 334,552
------- ------ ------ ---------
Net book value
At 31st March 1999................................ 416,861 11,853 7,689 799,032
======= ====== ====== =========
</TABLE>
- ------------
(a) Machinery and equipment with an aggregate carrying book value of
approximately HK$93,175 (1998: HK$140,430) as at the balance sheet date
were held under finance lease and hire purchase contracts.
(b) Included in the PCB Division's machinery and equipment were an amount of
HK$3,508 carried at valuation in 1987 with an aggregate depreciation of
HK$3,508 as at 31st March 1999 which would also have had no net carrying
value (1998: HK$ nil) had these assets been carried in the financial
statements at cost less aggregate depreciation.
F-47
<PAGE> 150
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
All other fixed assets were stated at cost less aggregate depreciation.
(c) Included in the PCB Division's factories, staff quarters and machinery
under construction is net interest capitalised of approximately HK$6.2
million. No interest was capitalised during the year.
10. LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
1999
HK$
-------
<S> <C>
Unsecured bank loans repayable:
Within one year........................................... 69,393
Within two to five years.................................. 2,393
-------
71,786
-------
Obligations under finance leases and hire purchase contracts
payable
Within one year........................................... 34,394
Within two to five years.................................. 32,506
-------
66,900
-------
138,686
Less: Current portion of long-term liabilities.............. 103,787
-------
34,899
=======
</TABLE>
11. DEFERRED TAXATION
<TABLE>
<CAPTION>
1999
HK$
------
<S> <C>
At 1st April 1998........................................... 18,572
Transfer from statement of income (note 5).................. 3,931
------
At 31st March 1999.......................................... 22,503
======
Provided in the financial statements in respect of:
Accelerated depreciation allowances....................... 26,648
Tax losses................................................ (4,145)
------
22,503
======
</TABLE>
The potential deferred taxation not provided for in the financial
statements amounts to:
<TABLE>
<CAPTION>
1999
HK$
------
<S> <C>
Accelerated depreciation allowances......................... 2,469
Tax losses.................................................. (1,574)
------
895
======
</TABLE>
F-48
<PAGE> 151
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
12. DIVISIONAL CAPITAL
Divisional capital represents the combination of the share capital of the
following former subsidiaries of Termbray.
<TABLE>
<CAPTION>
NAME OF COMPANY AUTHORISED CAPITAL 1999 HK$ ISSUED CAPITAL 1999 HK$
- --------------- ------------------ -------- -------------- --------
<S> <C> <C> <C> <C>
Kalex Circuit Board 10 ordinary shares 1,000 2 ordinary shares 200
(China) Limited of HK$100 each of HK$100 each
and 50,000 non- 5,000,000 and 50,000 non- 5,000,000
voting deferred voting deferred
shares of HK$100 shares of HK$100
each each
Kalex Circuit Board 1,000,000 ordinary 10,000,000 1,000,000 ordinary 10,000,000
(Hong Kong) Limited shares of HK$10 shares of HK$10
each each
Kalex Printed Circuit 10,000 ordinary 10,000 10,000 ordinary 10,000
Board Limited shares of HK$1 shares of HK$1
each each
Lee Lap & Sons Limited 9,998 ordinary 9,998 2 ordinary shares 2
shares of HK$1 of HK$1 each
each
and 2 non-voting 2 and 2 non-voting 2
deferred shares of deferred shares of
HK$1 each HK$1 each
Termbray Circuit Board 10,000 ordinary 10,000 2 ordinary shares 2
Company Limited shares of HK$1 of HK$1 each
each
Termbray Laminate 10,000 ordinary 10,000 10,000 ordinary 10,000
Company Limited shares of HK$1 shares of HK$1
each each
Termbray Property 50,000 ordinary 400,000 1 ordinary share 8
(B.V.I.) Limited shares of US$1 of US$1
------------- -------------
HK$15,441,000 HK$15,020,214
============= =============
</TABLE>
F-49
<PAGE> 152
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
13. RETAINED PROFITS
Retained profits of the PCB Division represents the combination of the
post-acquisition profits/(losses) of the following former subsidiaries of
Termbray attributable to the PCB Division:
<TABLE>
<CAPTION>
1999
HK$
---------
<S> <C>
Guangzhou Kalex Laminate Company Limited.................... (139)
Guangzhou Termbray Electronics Technology Company Limited... (11,978)
Guangzhou Termbray Circuit Board Company Limited............ (32,395)
Kalex Circuit Board (Hong Kong) Limited..................... 21,090
Kalex Circuit Board (China) Limited......................... 532,423
Kalex Circuit Board (Guangzhou) Limited..................... 47,753
Kalex Multi-Layer Printed Circuit Board Company Limited..... (1,112)
Kalex Printed Circuit Board Limited......................... 2,212
Lee Lap & Sons Limited...................................... 418,726
Termbray Circuit Board Company Limited...................... 1,020
Termbray Laminate Company Limited........................... 81,869
Termbray Property (B.V.I.) Limited.......................... 10,547
---------
1,070,016
Less: Goodwill previously written off against statement of
income.................................................... (7,230)
---------
1,062,786
=========
</TABLE>
14. COMMITMENTS
(a) CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
1999
HK$
------
<S> <C>
Contracted but not provided for
- purchase of fixed assets................................ 16,607
======
</TABLE>
(b) OPERATING LEASE COMMITMENTS
At 31st March 1999 the PCB Division had commitments to make payments in the
next twelve months under operating leases which expire as follows:
<TABLE>
<CAPTION>
1999
HK$
----
<S> <C>
Land and buildings
- Within one year......................................... 367
- In the second to fifth years inclusive.................. 114
---
481
===
</TABLE>
15. CONTINGENT LIABILITIES
During the year, certain PCB subsidiaries within the PCB Division purchased
production materials amounting to approximately HK$12 million from an outside
supplier. Such production materials acquired were subsequently found to be
defective and settlement of the purchases was therefore withheld by the
Division. Legal actions for settlement of the purchases together with interest
were taken by the supplier against these PCB subsidiaries. The Division also
instituted a legal action against such supplier claiming
F-50
<PAGE> 153
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
damages which may arise from the materials delivered by the supplier. While the
outcome of these proceedings cannot at present be estimated with certainty,
based on independent legal advice, management is of the opinion that the outcome
of these cases would not have a material adverse impact on the financial
position of the PCB Division, and that adequate disclosure having been made, no
provision has been made in the financial statements accordingly.
16. RELATED PARTY TRANSACTIONS
During the year, the PCB Division paid a management fee to a subsidiary of
Termbray Industries International (Holdings) Limited amounting to HK$24,802
based on terms agreed by the relevant parties. The management fee was charged by
the subsidiary of Termbray for the PCB Division's share of salaries and office
expenses and comprised:
- 95% of total office salaries based on human resources utilised
- 89% of total management salaries based on estimated management hours, and
- a pre-fixed percentage of 85% of the total office rental and
communications expenses.
17. APPROVAL OF FINANCIAL STATEMENTS
The financial statements of the PCB Division were approved by the board of
directors of Termbray Industries International (Holdings) Limited on 24th
September 1999.
F-51
<PAGE> 154
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
18. SUMMARY OF DIFFERENCES BETWEEN HKGAAP AND USGAAP
The combined financial statements of the PCB Division are prepared in
accordance with accounting principles generally accepted in Hong Kong
("HKGAAP"), which differ in certain significant respects from accounting
principles generally accepted in the United States of America ("USGAAP").
Differences between HKGAAP and USGAAP which have an effect on the net income,
total divisional equity and statement of cash flows of the Division are
summarized as follows:
(a) NET INCOME AND TOTAL DIVISIONAL EQUITY
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
NOTE HK$
---- ----------
<S> <C> <C>
Net income
As stated under HKGAAP.................................... 246,550
USGAAP adjustments:
Amortisation of goodwill............................... (i) (537)
Deferred tax liabilities............................... (ii) (7,169)
Capitalisation of interest costs....................... (iii) 5,769
---------
Net income under USGAAP..................................... 244,613
=========
Total divisional equity
As stated under HKGAAP.................................... 1,077,806
USGAAP adjustments:
Goodwill............................................... 10,738
Accumulated amortisation of goodwill................... (i) (3,982)
Deferred tax liabilities............................... (ii) (2,505)
Capitalisation of interest costs on assets under
construction.......................................... (iii) 5,769
---------
Total divisional equity under USGAAP.............. 1,087,826
=========
</TABLE>
(i) Amortisation of goodwill
Under HKGAAP, the PCB Division offsets goodwill on acquisition of a
business, which represents the excess of the cost of investment over
the fair value ascribed to the net underlying assets acquired, against
reserves to the extent that such reserves are available and any excess
is charged against the statement of income in the year of acquisition.
Under USGAAP, goodwill on acquisition of a business should be
capitalised and amortised. For such purpose, the goodwill is amortised
on a straight-line basis over 20 years.
(ii) Deferred tax liabilities
Under HKGAAP, deferred taxation is accounted for at the current
taxation rate in respect of timing differences between profit as
computed for taxation purposes and profit as stated in the accounts
to the extent that a liability or an asset is expected to be payable
or receivable in the foreseeable future.
Under USGAAP, the PCB Division is required to recognise deferred tax
assets and liabilities for the expected future tax consequences of
all events that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are
determined based on the temporary differences between the financial
reporting basis and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are
expected to reverse. Future tax benefits in respect of tax loss carry
forwards are also required to be recognized in
F-52
<PAGE> 155
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
full. A valuation allowance is required to be established in respect
of deferred tax assets to the extent that realisation of such
benefits is less likely than not.
Details of deferred income taxes under USGAAP are disclosed in Note
(b) below.
(iii) Under HKGAAP, borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets, i.e.
assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are capitalised as part of the
cost of those assets. Interest on borrowings not directly
attributable to the acquisition, construction or production of
qualifying assets is not capitalizable.
Under USGAAP, the PCB Division is required to include interest costs
as a component of the historical cost of any facilities constructed
for the division's own use. Capitalizable interest cost is interest
cost incurred that theoretically could have been avoided during the
period required to bring a qualifying asset to the condition and
location necessary for its intended use if expenditures for
qualifying assets had not been made.
(b) DEFERRED TAX
Under USGAAP, deferred tax liabilities and assets comprise the following:
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
HK$
----------
<S> <C>
Deferred tax liabilities
Accelerated depreciation.................................. 29,117
Deferred tax assets
Tax loss carry forward.................................... (5,719)
Valuation allowance....................................... 1,610
------
25,008
======
</TABLE>
As of 31st March 1999, the PCB Division had accumulated tax losses
amounting to $35,741 (the tax effect thereon is $5,719) which may be carried
forward and applied to reduce future taxable income which is earned in or
derived from Hong Kong. The tax losses have no expiry date. Realization of
deferred tax assets associated with tax loss carry forwards is dependent upon
generating sufficient taxable income. A valuation allowance has been established
against part of such tax losses since management believes it is more likely than
not that insufficient taxable income will be generated in the foreseeable future
to utilise part of the tax loss carry forwards.
Certain losses incurred by certain subsidiaries of the PCB Division located
in the People's Republic of China ("PRC") are not included on the basis that
these losses are considered likely to be utilised in the years in which the
profits of these subsidiaries are tax exempt, pursuant to the PRC tax law.
Accordingly, the PCB Division will derive no benefit in respect of these losses.
F-53
<PAGE> 156
TERMBRAY INDUSTRIES INTERNATIONAL (HOLDINGS) LIMITED
THE PCB DIVISION
NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in the valuation allowance consist of:
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
HK$
----------
<S> <C>
Balance at beginning of the year............................ --
-----
Additions to income tax expense............................. 1,610
-----
Balance at end of the year.................................. 1,610
=====
</TABLE>
(c) STATEMENT OF CHANGES IN DIVISIONAL EQUITY UNDER USGAAP
<TABLE>
<CAPTION>
ORDINARY SHARES NON-VOTING DEFERRED SHARES
------------------------- --------------------------------------------------
NUMBER OF NUMBER OF
SHARES AMOUNT SHARES AMOUNT TOTAL
OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING RETAINED DIVISIONAL
(NOTE 12) (NOTE 12) (NOTE 12) (NOTE 12) PROFITS EQUITY
----------- ----------- ----------- ----------- --------- ----------
HK$ HK$ HK$ HK$
<S> <C> <C> <C> <C> <C> <C>
Balance at 1st April
1998..................... 1,020,007 10,020 50,002 5,000 828,193 843,213
Net income................. -- -- -- -- 244,613 244,613
--------- ------ ------ ----- --------- ---------
Balance at 31st March
1999..................... 1,020,007 10,020 50,002 5,000 1,072,806 1,087,826
========= ====== ====== ===== ========= =========
</TABLE>
(d) STATEMENT OF CASH FLOWS
Under HKGAAP, cash flows are presented separately for operating activities;
returns on investments and servicing of finance; taxation; investing activities
and financing activities. Under USGAAP, however, only three categories of
activities are reported, being operating activities; investing activities and
financing activities. Cash flows from taxation, returns on investments and
servicing of finance would, with the exception of servicing of divisional
financing, be included as operating activities under USGAAP. The servicing of
divisional financing would be included as financing activities under USGAAP.
In addition, under USGAAP, cash and cash equivalents do not include bank
loans overdrafts repayable within three months from the date of the advance as
is the case under HKGAAP. For USGAAP purposes, the Division's cash and cash
equivalents would be adjusted as follows:
Under USGAAP, the following amounts would be reported:
<TABLE>
<CAPTION>
YEAR ENDED
31ST MARCH
1999
----------
HK$
<S> <C>
Net cash provided from operating activities................. 368,004
Net cash used in investing activities....................... (44,262)
Net cash used in financing activities....................... (325,122)
--------
Decrease in cash and cash equivalents....................... (1,380)
Cash and cash equivalents at the beginning of year.......... 67,188
--------
Cash and cash equivalents at the end of year................ 65,808
========
</TABLE>
F-54
<PAGE> 157
VIASYSTEMS LOGO
<PAGE> 158
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS (Subject to Completion)
Issued February 24, 2000
40,000,000 Shares
VIASYSTEMS LOGO
COMMON STOCK
------------------------
VIASYSTEMS GROUP, INC. IS OFFERING SHARES OF ITS COMMON STOCK. THIS IS OUR
INITIAL PUBLIC OFFERING AND NO PUBLIC MARKET CURRENTLY EXISTS FOR OUR SHARES. WE
ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE WILL BE BETWEEN $16 AND $19
PER SHARE.
------------------------
WE INTEND TO APPLY TO LIST OUR COMMON STOCK ON THE NEW YORK STOCK EXCHANGE UNDER
THE SYMBOL "VG."
------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 11.
------------------------
PRICE $ A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS VIASYSTEMS
------------ ------------- -----------
<S> <C> <C> <C>
Per Share...................... $ $ $
Total.......................... $ $ $
</TABLE>
Viasystems Group, Inc. has granted the underwriters the right to purchase up to
an additional 6,000,000 shares to cover over-allotments.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
Morgan Stanley & Co. International Limited expects to deliver the shares to
purchasers on , 2000.
------------------------
MORGAN STANLEY DEAN WITTER
CREDIT SUISSE FIRST BOSTON
CHASE H&Q
BANC OF AMERICA SECURITIES LLC
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
WIT SOUNDVIEW
, 2000
<PAGE> 159
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with the issuance and
distribution of securities being registered. All fees and expenses shall be paid
by the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $230,736
NASD Fee.................................................... 30,500
NYSE Listing Fee............................................ *
Printing and Engraving Expenses............................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Transfer Agent Fees and Expenses............................ *
Miscellaneous............................................... *
--------
Total............................................. $
========
</TABLE>
- ------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") provides that a corporation may indemnify any person, including officers
and directors, who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person was an officer, director,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
officer, director, employee or agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, for criminal proceedings, had no reasonable cause to believe that his
conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him
against the expenses which such officer or director actually or reasonably
incurred.
Article Ninth of the Registrant's Amended and Restated Certificate of
Incorporation provides that the Registrant shall indemnify each person who is or
was an officer or director of the Registrant to the fullest extent permitted
under the DGCL (including the right to be paid expenses incurred in
investigating or defending any such proceeding in advance of its final
disposition).
Article Tenth of the Registrant's Amended and Restated Certificate of
Incorporation provides that the Registrant's directors shall not be personally
liable to the Registrant and its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived an improper personal benefit.
The Registrant has purchased a directors' and officers' liability insurance
policy.
II-1
<PAGE> 160
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Note: All of the following share information gives effect to a 1 for 6
reverse stock split to be effected by the Registrant prior to the
offering.
(a) In March 1997, the Registrant issued 33,333 shares of its common stock,
$0.01 par value ("common stock"), to two of its directors for an aggregate
purchase price of $200,000. The securities were issued in private placements in
reliance on Section 4(2) of the Securities Act.
(b) In May 1997, the Registrant issued 16,666 shares of its common stock to
one of its directors for an aggregate purchase price of $100,000. The securities
were issued in a private placement in reliance on Section 4(2) of the Securities
Act.
(c) In June 1997, the Registrant issued 14,166,666 shares of its common
stock to the holders of its series A preferred stock in exchange for all of its
outstanding shares of series A preferred stock. The securities were issued in
reliance on Section 3(a)(9) of the Securities Act.
(d) In June 1997, the Registrant issued 23,333,333 shares of its common
stock to the holders of the series C preferred stock in exchange for all of
their outstanding shares of series C preferred stock in connection with the
merger of Chips Holdings, Inc. with the Registrant. The securities were issued
in reliance on Section 3(a)(9) of the Securities Act.
(e) In June 1997, the Registrant issued 195,833 shares of its common stock
to seven directors, officers and consultants of the Registrant for an aggregate
purchase price of $1,175,000. The securities were issued in private placements
in reliance on Section 4(2) of the Securities Act.
(f) In June 1997, the Registrant issued 5,122,916 shares of its class A
common stock, $.01 par value ("class A common stock"), to 11 of its officers for
an aggregate purchase price of $307,374.99. The securities were issued in a
private placement in reliance on Section 4(2) of the Securities Act.
(g) In April 1998, the Registrant issued 7,663,976 shares of its common
stock to two of its existing stockholders, an individual and a limited
partnership for an aggregate purchase price of $52,500,250. The securities were
issued in private placements in reliance on Section 4(2) of the Securities Act.
(h) In May 1998, the Registrant issued 56,921 shares of its class A common
stock to three of its officers for an aggregate purchase price of $3,415.22. The
securities were issued in a private placement in reliance on Section 4(2) of the
Securities Act.
In May 1998, the Registrant issued 990,061 shares of its class A series II
common stock, par value $.01 per share ("class A series II common stock") to 11
of its officers for an aggregate purchase price of $59,403.70. The securities
were issued in a private placement in reliance on Section 4(2) of the Securities
Act.
(i) In October 1998, the Registrant issued 2,500 shares of its common stock
to an employee upon exercise of a stock option for an exercise price of $6.00
per share. The securities were issued in a transaction exempt from Section 5 of
the Securities Act pursuant to Rule 701 under the Securities Act.
(j) In November 1998, the Registrant issued 1,243,833 shares of its class A
series II common stock to one of its officers for a purchase price of
$74,630.00. The securities were issued in a private placement in reliance on
Section 4(2) of the Securities Act.
(k) In December 1998, the Registrant issued 2,500 shares of its common
stock to an employee upon exercise of a stock option for an exercise price of
$6.00 per share. The securities were issued in a transaction exempt from Section
5 of the Securities Act pursuant to Rule 701 under the Securities Act.
(l) In February 1999, the Registrant issued 2,500 shares of its common
stock to an employee upon exercise of a stock option for an exercise price of
$6.00 per share. The securities were issued in a transaction exempt from Section
5 of the Securities Act pursuant to Rule 701 under the Securities Act.
II-2
<PAGE> 161
(m) In April 1999, the Registrant issued 273,224 shares of its common stock
to the two former stockholders of PAGG Corporation, which the Registrant
acquired in a stock purchase transaction in April 1999, as partial consideration
for the purchase price of such acquisition for an aggregate amount of
$2,000,000. The securities were issued in a private placement in reliance on
Section 4(2) of the Securities Act.
(n) In July 1999, the Registrant issued 27,322,404 shares of its common
stock to HMTF/Viasystems Investments, LLC for $200,000,000 in cash. The
securities were issued in a private placement in reliance on Section 4(2) of the
Securities Act.
(o) In August 1999, the Registrant issued 3,957,751 shares of its class A
series II common stock to 20 employees and their family members, including
trusts for the benefit of those family members for a purchase price of
$237,465.07. The securities were issued in a private placement in reliance on
Section 4(2) of the Securities Act.
(p) In September 1999, the Registrant issued 1,666 shares of its common
stock to an employee upon exercise of a stock option for an exercise price of
$7.32 per share. The securities were issued in a transaction exempt from Section
5 of the Securities Act pursuant to Rule 701 under the Securities Act.
(q) In October 1999, the Registrant issued 3,333 shares of its common stock
to an employee upon exercise of a stock option for an exercise price of $7.32
per share. The securities were issued in a transaction exempt from Section 5 of
the Securities Act pursuant to Rule 701 under the Securities Act.
The issuances of the securities described in Sections (a), (b), (e), (f),
(g), (h), (j), (m), (n) and (o) above were deemed to be exempt from registration
under the Securities Act of 1933, as amended, in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
The issuances of the securities described in (i), (k), (l), (p) and (q) above
were deemed to be exempt from registration under the Securities Act in reliance
on Rule 701 under the Securities Act as transactions by an issuer in
compensatory circumstances. The recipients of the above-described securities
represented their intention to acquire the securities for investment only and
not with a view for distribution thereof. Appropriate legends were affixed to
the stock certificates issued in such transactions. All recipients had adequate
access, through employment or other relationships, to information about
Viasystems.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 -- Form of Underwriting Agreement(2)
2.1 -- Securities Purchase Agreement, dated as of October 1,
1996, among Viasystems Group, Inc. (formerly known as
Circo Craft Holding Company) and certain Purchasers (as
defined therein)(3)
2.2 -- Acquisition Agreement, dated as of November 26, 1996,
among Lucent Technologies Inc., Viasystems Group, Inc.
(formerly known as Circo Technologies Group, Inc.)and
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.)(3)
2.3 -- Agreement and Plan of Merger, dated as of April 11, 1997
by and among Viasystems Group, Inc., HMTF Acquisition,
L.P., HMTF U.K. Acquisition Company, Hicks, Muse, Tate &
Furst Equity Fund III and HM3 Coinvestors, L.P.(3)
2.4 -- Agreement and Plan of Merger, dated as of June 5, 1997,
by and between Viasystems Group, Inc. and Chips Holdings,
Inc.(3)
2.5 -- Agreement and Plan of Merger, dated as of June 6, 1997,
by and between Viasystems, Inc. and Chips Acquisition,
Inc.(3)
</TABLE>
II-3
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.6 -- Acquisition Agreement, dated as of January 29, 1998,
among Viasystems B.V. and Print Service Holding N.V.(6)
2.7 -- Sale and Purchase Agreement, dated as of February 11,
1998, between Viasystems, S.r.l., as purchaser, European
Circuits SA and individuals named therein, as sellers(6)
2.8 -- Share Purchase Agreement, dated August 1, 1999, among
Termbray Electronics (B.V.I.) Limited, Termbray
Industries International (Holdings) Limited, Viasystems,
Inc. and Viasystems Group, Inc.(8)
2.9 -- Stock Purchase Agreement, dated , 2000, by and
among International Wire Group, Inc., Wirekraft
Industries, Inc. and Viasystems Group, Inc.(2)
2.10 -- Contract Manufacturing Agreement, dated , 2000,
by and between Mommers Print Service BV and Viasystems
Sweden AB(2)
2.11 -- Contract Manufacturing Agreement, dated , 2000,
by and between Mommers Print Service BV and Viasystems
Tyneside Limited(2)
2.12 -- Supply Agreement, dated as of , 2000, by and
between International Wire Group, Inc. and Wirekraft
Industries, Inc.(2)
3.1 -- Amended and Restated Certificate of Incorporation of
Viasystems Group, Inc.(2)
3.2 -- Amended and Restated Bylaws of Viasystems Group, Inc.(2)
4.1 -- Third Amended and Restated Credit Agreement, dated August
5, 1999, among Viasystems Group, Inc., Viasystems, Inc.,
the Foreign Subsidiary Borrowers parties thereto, the
lenders party thereto, The Chase Manhattan Bank of
Canada, Chase Manhattan International Limited, The Chase
Manhattan Bank and Chase Securities Inc.(8)
4.2 -- First Amendment, dated February 4, 2000, to the Third
Amended and Restated Credit Agreement, dated August 5,
1999, among Viasystems Group, Inc., Viasystems, Inc., the
Foreign Subsidiary Borrowers parties thereto, the lenders
party thereto, The Chase Manhattan Bank of Canada, Chase
Manhattan International Limited, The Chase Manhattan Bank
and Chase Securities Inc.(1)
4.3 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(3)
4.4 -- Form of New Note (included in Exhibit 4.3, Exhibit B)
4.5 -- Indenture, dated as of February 17, 1998, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(6)
4.6 -- Form of Exchange Note (included in Exhibit 4.5, Exhibit
B)
5.1 -- Opinion of Legality of Weil, Gotshal & Manges LLP(2)
10.1 -- Supply Agreement dated as of November 26, 1996, by and
between Lucent Technologies Inc. and Circo Craft
Technologies, Inc. (confidential treatment was granted
with respect to certain portions of this exhibit)(5)
10.2 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan(3)
10.3 -- Amended and Restated Stock Option Agreement dated as of
, 2000 between Viasystems Group, Inc.
and James N. Mills(2)
10.4 -- Amended and Restated Stock Option Agreement dated as of
, 2000 between Viasystems Group, Inc.
and David M. Sindelar(2)
10.5 -- Viasystems Group, Inc. Stock Option Agreement, dated as
of February 4, 1997, with Richard W. Vieser(4)
10.6 -- Viasystems Group, Inc. Stock Option Agreement, dated as
of February 4, 1997, with Kenneth F. Yontz(4)
</TABLE>
II-4
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.7 -- Third Amended and Restated Monitoring and Oversight
Agreement, dated as of June 6, 1997, among Viasystems
Group, Inc., Viasystems, Inc., Viasystems Technologies
Corp., Circo Craft Co. Inc., Viasystems International,
Inc., PCB Acquisition Limited, PCB Investments PLC, Chips
Acquisition Limited and Hicks, Muse & Co. Partners,
L.P.(4)
10.8 -- Third Amended and Restated Financial Advisory Agreement
dated as of June 6, 1997, among Viasystems Group, Inc.,
Viasystems, Inc., Viasystems Technologies Corp., Circo
Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments PLC, Chips
Acquisition Limited and Hicks, Muse & Co. Partners,
L.P.(4)
10.9 -- Amended and Restated Executive Employment Agreement,
dated as of February 16, 2000, by and among Viasystems
Group, Inc., Viasystems, Inc., Viasystems Technologies
Corp. LLC and James N. Mills(1)
10.10 -- Amended and Restated Executive Employment Agreement,
dated as of February 16, 2000, by and among Viasystems
Group, Inc., Viasystems, Inc., Viasystems Technologies
Corp. LLC and David M. Sindelar(1)
10.11 -- Agreement, dated as of December 30, 1996, between
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.) and the Communication Workers of
America(4)
10.12 -- Environmental, Health and Safety Agreement, dated as of
November 26, 1996, between Lucent Technologies and
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.)(3)
10.13 -- Amended and Restated Executive Employment Agreement,
dated as of February 16, 2000, by and among Viasystems
Group, Inc., Viasystems, Inc. and Viasystems Technologies
Corp. LLC and Timothy L. Conlon(1)
10.14 -- Amended and Restated Stockholders Agreement, dated as of
June 6, 1997, among Viasystems Group, Inc. and certain
stockholders of Viasystems Group, Inc.(2)
10.15 -- First Amendment to Amended and Restated Stockholders
Agreement, dated as of November 4, 1998, among Viasystems
Group, Inc. and certain stockholders of Viasystems Group,
Inc.(2)
10.16 -- Parts Sourcing Contract, dated as of December 2, 1994,
among Wirekraft Industries, Inc. and General Electric
Company (Confidential treatment has been granted with
respect to certain portions of this exhibit.)(9)
10.17 -- Agreement dated as of December 29, 1995 among Wirekraft
Industries, Inc. and General Electric Company
(Confidential treatment has been granted with respect to
certain portions of this exhibit.)(10)
10.18 -- Viasystems Group, Inc. 1999 Key Management Incentive
Compensation Plan(1)
21.1 -- Subsidiaries of Viasystems Group, Inc.(2)
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5.1)
23.2 -- Consent of PricewaterhouseCoopers LLP(1)
23.3 -- Consent of PricewaterhouseCoopers(1)
24.1 -- Power of Attorney*
27.1 -- Financial Data Schedule(1)
99.1 -- Consent of Director Nominee (Thomas H. O'Brien)
99.2 -- Consent of Director Nominee (Alex J. Mandl)
</TABLE>
II-5
<PAGE> 164
- ---------------
* Previously filed.
(1) Filed herewith.
(2) To be filed by amendment.
(3) Incorporated by reference to the Registration Statement of Viasystems, Inc.
on Form S-1. (File No. 333-29727).
(4) Incorporated by reference to Amendment No. 1 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(5) Incorporated by reference to Amendment No. 2 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(6) Incorporated by reference to Viasystems, Inc.'s 1997 Annual Report on Form
10-K.
(7) Incorporated by reference to Viasystems, Inc.'s 1998 Annual Report on Form
10-K.
(8) Incorporated by reference to the Form 8-K/A of Viasystems, Inc. filed on
October 15, 1999.
(9) Incorporated by reference to the Registration Statement of International
Wire Group, Inc. on Form S-1 (File No. 333-93970).
(10) Incorporated by reference to International Wire Group, Inc.'s 1995 Annual
Report on Form 10-K. (b) FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
PAGE NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
Report of Independent Public Accountants on Financial
S-1 Statement Schedule
S-2 Schedule II -- Valuation and Qualifying Accounts
</TABLE>
All other schedules are omitted because the required information is not
present or is not present in the amounts sufficient to require submission of the
schedules, or because the information required is included in the financial
statements and notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 165
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in St. Louis, Missouri, on February 24,
2000.
VIASYSTEMS GROUP, INC.
By: /s/ DAVID M. SINDELAR
-----------------------------------
David M. Sindelar
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board and February 24, 2000
- ----------------------------------------------------- Chief Executive Officer
James N. Mills (Principal Executive
Officer)
* President, Chief February 24, 2000
- ----------------------------------------------------- Operating Officer and a
Timothy L. Conlon Director
/s/ DAVID M. SINDELAR Senior Vice President and February 24, 2000
- ----------------------------------------------------- Chief Financial Officer
David M. Sindelar (Principal Financial
and Accounting Officer)
* Director February 24, 2000
- -----------------------------------------------------
Jack D. Furst
* Director February 24, 2000
- -----------------------------------------------------
Kenneth F. Yontz
* Director February 24, 2000
- -----------------------------------------------------
Thomas O. Hicks
* Director February 24, 2000
- -----------------------------------------------------
Richard W. Vieser
</TABLE>
*By: /s/ DAVID M. SINDELAR
-------------------------------
David M. Sindelar,
Attorney-in-fact
II-7
<PAGE> 166
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors of Viasystems Group, Inc.:
Our audits of the consolidated financial statements referred to in our
report dated February 23, 2000 appearing in this prospectus of Viasystems Group,
Inc. and its subsidiaries also included an audit of the financial statement
schedule listed in Item 16(b) of this prospectus. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 23, 2000
S-1
<PAGE> 167
SCHEDULE II
VIASYSTEMS GROUP, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL ACCOUNTS BALANCE AT CHARGES TO BALANCE AT
- -- DEDUCTED FROM RECEIVABLES IN BEGINNING COST AND ACCOUNTS TRANSLATION END OF
THE BALANCE SHEET OF PERIOD ACQUISITIONS EXPENSES WRITTEN OFF ADJUSTMENTS PERIOD
- ------------------------------- ------------ ------------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1997.... $ 409 $1,632 $7,176 $(7,636) $ 992 $2,573
====== ====== ====== ======= ===== ======
Year Ended December 31, 1998.... $2,573 $1,470 $ 158 $ (548) $ 141 $3,794
====== ====== ====== ======= ===== ======
Year Ended December 31, 1999.... $3,794 $2,632 $1,784 $ (990) $(255) $6,965
====== ====== ====== ======= ===== ======
</TABLE>
S-2
<PAGE> 168
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
1.1 -- Form of Underwriting Agreement(2)
2.1 -- Securities Purchase Agreement, dated as of October 1,
1996, among Viasystems Group, Inc. (formerly known as
Circo Craft Holding Company) and certain Purchasers (as
defined therein)(3)
2.2 -- Acquisition Agreement, dated as of November 26, 1996,
among Lucent Technologies Inc., Viasystems Group, Inc.
(formerly known as Circo Technologies Group, Inc.)and
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.)(3)
2.3 -- Agreement and Plan of Merger, dated as of April 11, 1997
by and among Viasystems Group, Inc., HMTF Acquisition,
L.P., HMTF U.K. Acquisition Company, Hicks, Muse, Tate &
Furst Equity Fund III and HM3 Coinvestors, L.P.(3)
2.4 -- Agreement and Plan of Merger, dated as of June 5, 1997,
by and between Viasystems Group, Inc. and Chips Holdings,
Inc.(3)
2.5 -- Agreement and Plan of Merger, dated as of June 6, 1997,
by and between Viasystems, Inc. and Chips Acquisition,
Inc.(3)
2.6 -- Acquisition Agreement, dated as of January 29, 1998,
among Viasystems B.V. and Print Service Holding N.V.(6)
2.7 -- Sale and Purchase Agreement, dated as of February 11,
1998, between Viasystems, S.r.l., as purchaser, European
Circuits SA and individuals named therein, as sellers(6)
2.8 -- Share Purchase Agreement, dated August 1, 1999, among
Termbray Electronics (B.V.I.) Limited, Termbray
Industries International (Holdings) Limited, Viasystems,
Inc. and Viasystems Group, Inc.(8)
2.9 -- Stock Purchase Agreement, dated , 2000, by and
among International Wire Group, Inc., Wirekraft
Industries, Inc. and Viasystems Group, Inc.(2)
2.10 -- Contract Manufacturing Agreement, dated , 2000,
by and between Mommers Print Service BV and Viasystems
Sweden AB(2)
2.11 -- Contract Manufacturing Agreement, dated , 2000,
by and between Mommers Print Service BV and Viasystems
Tyneside Limited(2)
2.12 -- Supply Agreement, dated as of , 2000, by and
between International Wire Group, Inc. and Wirekraft
Industries, Inc.(2)
3.1 -- Amended and Restated Certificate of Incorporation of
Viasystems Group, Inc.(2)
3.2 -- Amended and Restated Bylaws of Viasystems Group, Inc.(2)
4.1 -- Third Amended and Restated Credit Agreement, dated August
5, 1999, among Viasystems Group, Inc., Viasystems, Inc.,
the Foreign Subsidiary Borrowers parties thereto, the
lenders party thereto, The Chase Manhattan Bank of
Canada, Chase Manhattan International Limited, The Chase
Manhattan Bank and Chase Securities Inc.(8)
4.2 -- First Amendment, dated February 4, 2000, to the Third
Amended and Restated Credit Agreement, dated August 5,
1999, among Viasystems Group, Inc., Viasystems, Inc., the
Foreign Subsidiary Borrowers parties thereto, the lenders
party thereto, The Chase Manhattan Bank of Canada, Chase
Manhattan International Limited, The Chase Manhattan Bank
and Chase Securities Inc.(1)
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
4.3 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(3)
4.4 -- Form of New Note (included in Exhibit 4.3, Exhibit B)
4.5 -- Indenture, dated as of February 17, 1998, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(6)
4.6 -- Form of Exchange Note (included in Exhibit 4.5, Exhibit
B)
5.1 -- Opinion of Legality of Weil, Gotshal & Manges LLP(2)
10.1 -- Supply Agreement dated as of November 26, 1996, by and
between Lucent Technologies Inc. and Circo Craft
Technologies, Inc. (confidential treatment was granted
with respect to certain portions of this exhibit)(5)
10.2 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan(3)
10.3 -- Amended and Restated Stock Option Agreement dated as of
, 2000 between Viasystems Group, Inc.
and James N. Mills(2)
10.4 -- Amended and Restated Stock Option Agreement dated as of
, 2000 between Viasystems Group, Inc.
and David M. Sindelar(2)
10.5 -- Viasystems Group, Inc. Stock Option Agreement, dated as
of February 4, 1997, with Richard W. Vieser(4)
10.6 -- Viasystems Group, Inc. Stock Option Agreement, dated as
of February 4, 1997, with Kenneth F. Yontz(4)
10.7 -- Third Amended and Restated Monitoring and Oversight
Agreement, dated as of June 6, 1997, among Viasystems
Group, Inc., Viasystems, Inc., Viasystems Technologies
Corp., Circo Craft Co. Inc., Viasystems International,
Inc., PCB Acquisition Limited, PCB Investments PLC, Chips
Acquisition Limited and Hicks, Muse & Co. Partners,
L.P.(4)
10.8 -- Third Amended and Restated Financial Advisory Agreement
dated as of June 6, 1997, among Viasystems Group, Inc.,
Viasystems, Inc., Viasystems Technologies Corp., Circo
Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments PLC, Chips
Acquisition Limited and Hicks, Muse & Co. Partners,
L.P.(4)
10.9 -- Amended and Restated Executive Employment Agreement,
dated as of February 16, 2000, by and among Viasystems
Group, Inc., Viasystems, Inc., Viasystems Technologies
Corp. LLC and James N. Mills(1)
10.10 -- Amended and Restated Executive Employment Agreement,
dated as of February 16, 2000, by and among Viasystems
Group, Inc., Viasystems, Inc., Viasystems Technologies
Corp. LLC and David M. Sindelar(1)
10.11 -- Agreement, dated as of December 30, 1996, between
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.) and the Communication Workers of
America(4)
10.12 -- Environmental, Health and Safety Agreement, dated as of
November 26, 1996, between Lucent Technologies and
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.)(3)
10.13 -- Amended and Restated Executive Employment Agreement,
dated as of February 16, 2000, by and among Viasystems
Group, Inc., Viasystems, Inc. and Viasystems Technologies
Corp. LLC and Timothy L. Conlon(1)
10.14 -- Amended and Restated Stockholders Agreement, dated as of
June 6, 1997, among Viasystems Group, Inc. and certain
stockholders of Viasystems Group, Inc.(2)
</TABLE>
<PAGE> 170
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
10.15 -- First Amendment to Amended and Restated Stockholders
Agreement, dated as of November 4, 1998, among Viasystems
Group, Inc. and certain stockholders of Viasystems Group,
Inc.(2)
10.16 -- Parts Sourcing Contract, dated as of December 2, 1994,
among Wirekraft Industries, Inc. and General Electric
Company (Confidential treatment has been granted with
respect to certain portions of this exhibit.)(9)
10.17 -- Agreement dated as of December 29, 1995 among Wirekraft
Industries, Inc. and General Electric Company
(Confidential treatment has been granted with respect to
certain portions of this exhibit.)(10)
10.18 -- Viasystems Group, Inc. 1999 Key Management Incentive
Compensation Plan(1)
21.1 -- Subsidiaries of Viasystems Group, Inc.(2)
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the
opinion filed as Exhibit 5.1)
23.2 -- Consent of PricewaterhouseCoopers LLP(1)
23.3 -- Consent of PricewaterhouseCoopers(1)
24.1 -- Power of Attorney*
27.1 -- Financial Data Schedule(1)
99.1 -- Consent of Director Nominee (Thomas H. O'Brien)
99.2 -- Consent of Director Nominee (Alex J. Mandl)
</TABLE>
- ---------------
* Previously filed.
(1) Filed herewith.
(2) To be filed by amendment.
(3) Incorporated by reference to the Registration Statement of Viasystems, Inc.
on Form S-1. (File No. 333-29727)
(4) Incorporated by reference to Amendment No. 1 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(5) Incorporated by reference to Amendment No. 2 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(6) Incorporated by reference to Viasystems, Inc.'s 1997 Annual Report on Form
10-K.
(7) Incorporated by reference to Viasystems, Inc.'s 1998 Annual Report on Form
10-K.
(8) Incorporated by reference to the Form 8-K/A of Viasystems, Inc. filed on
October 15, 1999.
(9) Incorporated by reference to the Registration Statement of International
Wire Group, Inc. on Form S-1 (File No. 333-93970).
(10) Incorporated by reference to International Wire Group, Inc.'s 1995 Annual
Report on Form 10-K.
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
FIRST AMENDMENT
FIRST AMENDMENT, dated as of February 4, 2000 (this
"Amendment"), to the Third Amended and Restated Credit Agreement, dated as of
August 5, 1999 (as the same may be further amended, amended and restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among VIASYSTEMS GROUP, INC., a Delaware corporation ("Holdings"), VIASYSTEMS,
INC., a Delaware corporation (the "US Borrower"), VIASYSTEMS CANADA, INC. (f/k/a
CIRCO CRAFT CO. INC.), a Quebec corporation (the "Canadian Borrower"), PCB
INVESTMENTS PLC, a corporation organized under the laws of England and Wales
("English Bidco"), VIASYSTEMS HOLDINGS LIMITED (f/k/a FORWARD GROUP PLC), a
corporation organized under the laws of England and Wales (the "English
Borrower"), CHIPS ACQUISITION LIMITED, a private limited company organized under
the laws of England and Wales ("Chips Limited"), PRINT SERVICE HOLDING N.V., a
company organized under the laws of the Netherlands ("Print Service"),
VIASYSTEMS II LIMITED (f/k/a INTERCONNECTION SYSTEMS (HOLDINGS) LIMITED), a
private limited company organized under the laws of England and Wales ("ISL" and
together with the Canadian Borrower, English Bidco, the English Borrower, Chips
Limited, Print Service and any Future Foreign Subsidiary Borrower, the "Foreign
Subsidiary Borrowers"), the several banks and other financial institutions from
time to time parties thereto (the "Lenders"), THE CHASE MANHATTAN BANK OF CANADA
("Chase Canada"), as administrative agent for the Canadian Lenders (in such
capacity, the "Canadian Agent"), CHASE MANHATTAN INTERNATIONAL LIMITED, as
administrative agent for the English Lenders (in such capacity, the "English
Agent"), any Future Foreign Agent which may from time to time be appointed
thereunder and THE CHASE MANHATTAN BANK ("Chase"), as administrative agent for
the Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make, and have made, certain loans and other extensions of credit to
the Borrowers; and
WHEREAS, the Borrowers have requested, and upon the
effectiveness of this Amendment, the Lenders have agreed, that certain
provisions of the Credit Agreement be amended upon the terms and conditions set
forth below;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto hereby agree as follows:
SECTION 1. Defined Terms. Terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement. Unless otherwise indicated, all Section and subsection references are
to the Credit Agreement.
<PAGE> 2
2
SECTION 2. Amendment to Subsection 1.1 (Definitions).
Subsection 1.1 of the Credit Agreement is hereby amended by (a) deleting the
definition of "Permitted Acquisition" in its entirety and adding in lieu thereof
the following new definition:
"Permitted Acquisition" the acquisition by a Subsidiary
of Holdings (or by Holdings, provided that the resulting
assets are contributed to the US Borrower or a Subsidiary of
the US Borrower immediately upon such acquisition) of a
business related to Holdings' and its Subsidiaries' business
as approved by the board of directors of Holdings.
and (b) adding thereto the following new definition in its appropriate
alphabetical place:
"Permitted Holdings Subordinated Indebtedness":
Indebtedness of Holdings in an aggregate principal amount of
up to $150,000,000 (a) which is subordinated to the
obligations of Holdings under Section 11, (b) which has no
required payments of principal due prior to the final maturity
of the Loans, (c) the interest on which is payable in kind,
(d) the proceeds from which are used to make Permitted
Acquisitions, (e) which contains no maintenance financial
covenants and (f) the other terms and conditions of which are
reasonably satisfactory to the Administrative Agent.
SECTION 3. Amendment to Subsection 8.1(a) (Interest Coverage).
Subsection 8.1(a) of the Credit Agreement is hereby amended by deleting the
portion of the table appearing therein beginning with the first quarter
indicated below and ending with the last quarter indicated below and
substituting in lieu thereof the following portion of such table:
<TABLE>
<CAPTION>
Calendar Quarter Interest Coverage Ratio
---------------- -----------------------
<S> <C>
2000 1st 1.65 to 1.00
2nd 1.55 to 1.00
3rd 1.55 to 1.00
4th 1.60 to 1.00
</TABLE>
SECTION 4. Amendment of Subsection 8.1(c) (Consolidated Total
Debt to Consolidated EBITDA). Subsection 8.1(c) of the Credit Agreement is
hereby amended by deleting the portion of the table appearing therein beginning
with the first quarter indicated below and ending with the last quarter
indicated below and substituting in lieu thereof the following portion of such
table:
<TABLE>
<CAPTION>
Calendar Quarter Ratio
---------------- ------------
<S> <C>
1999 4th 6.15 to 1.00
2000 1st 6.90 to 1.00
2nd 6.90 to 1.00
3rd 6.50 to 1.00
4th 6.00 to 1.00
</TABLE>
<PAGE> 3
3
SECTION 5. Subsection 8.2 (Limitation on Indebtedness).
Subsection 8.2 of the Credit Agreement is hereby amended by adding thereto at
the end thereof the following paragraph (t):
"(t) Permitted Holdings Subordinated Indebtedness."
SECTION 6. Subsection 11.6 (Negative Covenants of Holdings).
Subsection 11.6 of the Credit Agreement is hereby amended by adding thereto at
the end thereof the following sentence:
"Notwithstanding the foregoing, Holdings may incur Permitted
Holdings Subordinated Indebtedness."
SECTION 7. Agreement Regarding Acquisition. In consideration
of the execution and delivery of this Amendment by the Required Lenders, the US
Borrower, each Foreign Subsidiary Borrower as to itself and its Subsidiaries,
and Holdings, each hereby agrees, that, for the period beginning on the date of
the effectiveness of this Amendment to and including the date of receipt by the
Lenders of the financial statements and related compliance certificates for
fiscal year 2000 required to be delivered by the US Borrower pursuant to
subsections 7.1(a) and 7.2, it will not engage in any of the transactions that
would otherwise be permitted under subsection 8.9(k), except for Permitted
Acquisitions under subsection 8.9(k) financed with the proceeds of Capital Stock
of Holdings or Permitted Holdings Subordinated Indebtedness issued subsequent to
the date of this Amendment.
SECTION 8. Representations and Warranties. After giving effect
to this Amendment, Holdings and the US Borrower (and each Foreign Subsidiary
Borrower, only as to itself, and its Subsidiaries) hereby confirm, reaffirm and
restate that the representations and warranties set forth in Section 5 of the
Credit Agreement are true in all material respects as if made on and as of the
date hereof except for any representation or warranty made as of the earlier
date, which representation or warranty shall have been true and correct in all
material respects as of such earlier date.
SECTION 9. Conditions to Effectiveness. This Amendment shall
become effective upon receipt by the Administrative Agent of:
(a) Amendment. Counterparts of this Amendment, duly executed
and delivered by Holdings, the US Borrower, the Foreign
Subsidiary Borrowers and the Required Lenders; and
<PAGE> 4
4
(b) Fees. Such amendment fees as shall have been agreed to by
Holdings, the US Borrower, Chase and CSI shall have been paid
to the Lenders approving this Amendment.
SECTION 10. Continuing Effect of Credit Agreement. Except as
expressly amended herein, the Credit Agreement shall continue to be, and shall
remain, in full force and effect in accordance with its terms.
SECTION 11. Governing Law; Counterparts. THIS AMENDMENT AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
This Amendment may be executed by the parties hereto in any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. The execution and delivery of this
Amendment by any Lender shall be binding upon each of its successors and assigns
(including Transferees of its commitments and Loans in whole or in part prior to
effectiveness hereof) and binding in respect of all of its commitments and
Loans, including any acquired subsequent to its execution and delivery hereof
and prior to the effectiveness hereof.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
VIASYSTEMS GROUP, INC.,
as Guarantor
By: /s/ DAVID M. SINDELAR
---------------------
Name: David M. Sindelar
Title:
BORROWERS
VIASYSTEMS, INC.,
as US Borrower
By: /s/ DAVID M. SINDELAR
----------------------
Name: David M. Sindelar
Title:
VIASYSTEMS CANADA, INC.,
as Canadian Borrower
By: /s/ DAVID M. SINDELAR
----------------------
Name: David M. Sindelar
Title:
PCB INVESTMENTS PLC,
as English Bidco
By: /s/ DAVID M. SINDELAR
---------------------
Name: David M. Sindelar
Title:
<PAGE> 6
VIASYSTEMS HOLDINGS LIMITED,
as English Borrower
By: /s/ DAVID M. SINDELAR
---------------------
Name: David M. Sindelar
Title:
CHIPS ACQUISITION LIMITED,
as a Foreign Subsidiary Borrower
By: /s/ DAVID M. SINDELAR
---------------------
Name: David M. Sindelar
Title:
PRINT SERVICE HOLDING N.V.,
as a Foreign Subsidiary Borrower
By: /s/ DAVID M. SINDELAR
---------------------
Name: David M. Sindelar
Title:
VIASYSTEMS II LIMITED,
as a Foreign Subsidiary Borrower
By: /s/ DAVID M. SINDELAR
---------------------
Name: David M. Sindelar
Title:
<PAGE> 7
AGENTS
THE CHASE MANHATTAN BANK,
as Administrative Agent and Collateral
Agent, and as a Lender
By: /s/ ROBERT ANASTASIO
------------------------------
Name: Robert Anastasio
Title: Vice President
THE CHASE MANHATTAN BANK
OF CANADA, as Canadian Agent,
and as a Canadian Lender
By: /s/ CHRISTINE CHAN
------------------------------
Name: Christine Chan
Title: Vice President
By: /s/ CHARLES D. RITCHIE
------------------------------
Name: Charles D. Ritchie
Title: Vice President
CHASE MANHATTAN INTERNATIONAL
LIMITED, as English Agent
By: /s/ STEPHEN CLARKE
------------------------------
Name: Stephen Clarke
Title: Senior Vice President
By: /s/ STEPHEN HURFORD
------------------------------
Name: Stephen Hurford
Title: Vice President
CHASE MANHATTAN BANK DELAWARE,
as a US Issuing Lender
By: /s/ MICHAEL P. HANDAGO
------------------------------
Name: Michael P. Handago
Title: Vice President
<PAGE> 8
US LENDERS
ABN AMRO BANK N.V.
By: /s/ KEVIN F. MALONE
------------------------------
Its: Group Vice President
-----------------------------
By: /s/ JAMES E. DAVIS
------------------------------
Its: Group Vice President
-----------------------------
ALLSTATE LIFE INSURANCE
COMPANY
By: /s/ DANIEL C. LEMBACH
------------------------------
Name: Daniel C. Lembach
Title: Authorized Signatory
By: /s/ PATRICIA W. WILSON
------------------------------
Name: Patricia W. Wilson
Title: Authorized Signatory
ALLSTATE INSURANCE COMPANY
By: /s/ DANIEL C. LEMBACH
------------------------------
Name: Daniel C. Lembach
Title: Authorized Signatory
By: /s/ PATRICIA W. WILSON
------------------------------
Name: Patricia W. Wilson
Title: Authorized Signatory
AMARA-1 FINANCE LTD.
By:
------------------------------
Name:
Title:
AMARA-2 FINANCE LTD.
By:
------------------------------
Name:
Title:
<PAGE> 9
ARAB BANKING CORPORATION (B.S.C.)
By: /s/ STEPHEN A. PLAUCHE
------------------------------
Name: Stephen A. Plauche
Title: Vice President
ARES III CLO LTD.
By: /s/ DAVID A. SACHS
------------------------------
Name: David A. Sachs
Title: Vice President
ARES LEVERAGED INVESTMENT FUND II, L.P.
By: /s/ DAVID A. SACHS
------------------------------
Name: David A. Sachs
Title: Vice President
ARES LEVERAGED INVESTMENT FUND, LP
By: /s/ DAVID A. SACHS
------------------------------
Name: David A. Sachs
Title: Vice President
BANK OF MONTREAL
By: /s/ THOMAS E. MCGRAW
------------------------------
Name: Thomas E. McGraw
Title: Director
THE BANK OF NEW YORK
By: /s/ MICHAEL B. SCADUTO
------------------------------
Name: Michael B. Scaduto
Title: Vice President
<PAGE> 10
THE BANK OF NOVA SCOTIA
By:
------------------------------
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
By: /s/ HIDEKAZU KOJIMA
------------------------------
Name: Hidekazu Kojima
Title: Attorney-in-Fact
By:
------------------------------
Name:
Title:
BANK ONE, NA, FORMERLY FIRST NATIONAL
BANK OF CHICAGO
By: /s/ DENNIS SALETTA
------------------------------
Name: Dennis Saletta
Title: First Vice President
BANKBOSTON, N.A.
By: /s/ MARIE C. DUPREY
------------------------------
Name: Marie C. Duprey
Title: Vice President
BANKERS TRUST COMPANY
By: /s/ SUSAN LE FEVRE
------------------------------
Name: Susan Le Fevre
Title: Director
<PAGE> 11
BANQUE NATIONALE DE PARIS,
NEW YORK BRANCH
By: /s/ FRANCOIS FAHY
------------------------------
Name: Francois Fahy
Title: Vice President
By: /s/ RICHARD L. STED
------------------------------
Name: Richard L. Sted
Title: Senior Vice President
BHF BANK
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
BHF (USA) CAPITAL CORPORATION
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Assistant Vice President
By: /s/ RICHARD CAMERON
------------------------------
Name: Richard Cameron
Title: Associate
<PAGE> 12
BALANCED HIGH-YIELD FUND I LIMITED
BY: BHF (USA) CAPITAL CORPORATION,
acting as attorney-in-fact
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Assistant Vice President
By:
------------------------------
Name:
Title:
BALANCED HIGH-YIELD FUND II LIMITED
BY: BHF (USA) CAPITAL CORPORATION,
acting as attorney-in-fact
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Assistant Vice President
By: /s/ RICHARD CAMERON
------------------------------
Name: Richard Cameron
Title: Associate
BOEING CAPITAL CORPORATION
By: /s/ DAVID A. NELSON
------------------------------
Name: David A. Nelson
Title: Special Credits Officer
CARLYLE HIGH YIELD PARTNERS II, LTD.
By: /s/ LINDA PACE
------------------------------
Name: Linda Pace
Title: VP
<PAGE> 13
CARLYLE HIGH YIELD PARTNERS, L.P.
By: /s/ LINDA PACE
------------------------------
Name: Linda Pace
Title: Vice President
CERES FINANCE LTD.
By:
------------------------------
Name:
Title:
CIBC, INC.
By: /s/ CEDRIC M. HENLEY
------------------------------
Name: Cedric M. Henley
Title: Director
CIBC World Markets Corp., AS AGENT
CITIBANK, N.A.
By: /s/ [ILLEGIBLE]
------------------------------
Name:
Title: VP
CRESCENT/MACH I PARTNERS, L.P.,
By: TCW Asset Management Company,
Its Investment Manager
By: /s/ JONATHAN R. INSULL
------------------------------
Name: Jonathan R. Insull
Title: Vice President
<PAGE> 14
THE CHASE MANHATTAN BANK,
on behalf of PIMCO LANGDALE LLC
By:
------------------------------
Name:
Title:
CYPRESSTREE SENIOR FLOATING RATE FUND
By: CypressTree Investment Management
Company, Inc. as Portfolio Manager
By: /s/ JONATHAN D. SHARKEY
------------------------------
Name: Jonathan D. Sharkey
Title: Principal
DEBT STRATEGIES FUND,INC.
By: /s/ JOSEPH MORONEY
------------------------------
Name: Joseph Moroney
Title: Authorized Signatory
DLJ CAPITAL FUNDING, INC.
By:
------------------------------
Name:
Title:
<PAGE> 15
EATON VANCE INSTITUTIONAL SENIOR
LOAN FUND
By: /s/ PAYSON F. SWAFFIELD
------------------------------
Name: Payson F. Swaffield
Title: Vice President
EATON VANCE SENIOR INCOME TRUST
By:
------------------------------
Name:
Title:
FIRST DOMINION FUNDING I
By: /s/ ANDREW MARSHALE
------------------------------
Name: Andrew Marshale
Title: Authorized Signator
FIRST DOMINION FUNDING III
By: /s/ ANDREW MARSHALE
------------------------------
Name: Andrew Marshale
Title: Authorized Signator
FIRST UNION NATIONAL BANK N.C.
By: /s/ CHARLES B. EDMONDSON
------------------------------
Name: Charles B. Edmondson
Title: Assistant Vice President
<PAGE> 16
BANK OF AMERICA, NATIONAL
ASSOCIATION
By:
------------------------------
Name:
Title:
FRANKLIN FLOATING RATE TRUST
By: /s/ CHAUNCEY LUFKIN
------------------------------
Name: Chauncey Lufkin
Title: Vice President
FREMONT INVESTMENT & LOAN
By: /s/ [ILLEGIBLE]
------------------------------
Name:
Title:
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ HIROSHI NAGAMINE
------------------------------
Name: Hiroshi Nagamine
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ GREGORY HONG
------------------------------
Name: Gregory Hong
Title: Duly Authorized Signatory
<PAGE> 17
GENERAL MOTORS EMPLOYEE GLOBAL
GROUP PENSION TRUST
By:
------------------------------
Name:
Title:
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By: /s/ STEPHEN J. McGUINNESS
------------------------------
Name: Stephen J. McGuinness
Title: Authorized Signatory
HIGHLAND LEGACY LIMITED
By: /s/ MARK K. OKADA
------------------------------
Name: Mark K. Okada
Title: Executive Vice President
INDOSUEZ CAPITAL FUNDING III, LIMITED
BY: INDOSUEZ CAPITAL,
as Portfolio Advisor
By: /s/ MELISSA MARANO
------------------------------
Name: Melissa Marano
Title: Vice President
<PAGE> 18
THE INDUSTRIAL BANK OF
JAPAN, LIMITED
By: /s/ J. KENNETH BIEGEN
------------------------------
Name: J. Kenneth Biegen
Title: Senior Vice President
KEMPER FLOATING RATE FUND
By: /s/ MARK E. WITTNEBEL
------------------------------
Name: Mark E. Wittnebel
Title: Senior Vice President
KZH SOLEIL LLC
(formerly known as KZH Holding
Corporation)
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH CRESCENT LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH CRESCENT 3 LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
<PAGE> 19
KZH CYPRESSTREE-1 LLC
By:
------------------------------
Name:
Title:
KZH HIGHLAND-2 LLC
By: /s/ PETER CHIN
------------------------------
Name: Peter Chin
Title: Authorized Agent
KZH PAMCO LLC
By: /s/ PETER CHIN
------------------------------
Name: Peter Chin
Title: Authorized Agent
KZH SHENKMAN LLC
By:
------------------------------
Name:
Title:
KZH CRESCENT 2 LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH-ING-3 LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
<PAGE> 20
KZH SOLEIL-2 LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH STERLING LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH RIVERSIDE LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH III LLC
By: /s/ SUSAN LEE
------------------------------
Name: Susan Lee
Title: Authorized Agent
KZH IV LLC
By:
------------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.
By:
------------------------------
Name:
Title:
<PAGE> 21
THE LONG TERM CREDIT BANK
OF JAPAN, LIMITED
By:
------------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: /s/ JOSEPH MORONEY
------------------------------
Name: Joseph Moroney
Title: Authorized Signatory
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO
By: /s/ JOSEPH MORONEY
------------------------------
Name: Joseph Moroney
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/ JOSEPH MORONEY
------------------------------
Name: Joseph Moroney
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
By: /s/ JOSEPH MORONEY
------------------------------
Name: James Moroney
Title: Authorized Signatory
<PAGE> 22
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By: /s/ TOSHIHIRO HAYASHI
------------------------------
Name: Toshihiro Hayashi
Title: Senior Vice President
ML CBO IV (CAYMAN) LTD.
By: /s/ MARK K. OKADA CFA
------------------------------
Name: Mark K. Okada CFA
Title: Executive Vice President
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By: /s/ PETER GEWIRTZ
------------------------------
Name: Peter Gewirtz
Title: Vice President
NATEXIS BANQUE BFCE, FORMERLY
BANQUE FRANCAISE DU
COMMERCE EXTERIEUR
By: /s/ FRANK H. MADDEN, JR.
------------------------------
Name: Frank H. Madden, Jr.
Title: Vice President & Group Manager
By: /s/ GARY KANIA
------------------------------
Name: Gary Kania
Title: Vice President
<PAGE> 23
NATIONAL BANK OF CANADA
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Vice President
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Group Vice President
NATIONAL WESTMINSTER
BANK PLC
By: /s/ ANDREW S. WEINBERG
------------------------------
Name: Andrew S. Weinberg
Title: Senior Vice President
By:
------------------------------
Name:
Title:
NORTH AMERICAN SENIOR FLOATING RATE
FUND
By: Cypress Tree Investment Management
Company, Inc.
as Portfolio Manager
By: /s/ JONATHAN D. SHARKEY
------------------------------
Name: Jonathan D. Sharkey
Title: Principal
NORTHWOODS CAPITAL, LIMITED
By: [ILLEGIBLE] & Co., L.P.
as Collateral Manager
By: /s/ [ILLEGIBLE]
-----------------------
Name:
Title:
<PAGE> 24
NUVEEN SENIOR INCOME FUND
By: /s/ LISA M. MINCHESKI
---------------------
Name: Lisa M. Mincheski
Title: Managing Director
OCTAGON CREDIT INVESTORS
By:
--------------------------
Name:
Title:
OCTAGON INVESTMENT PARTNERS II, LLC
By: /s/ MICHAEL R. [ILLEGIBLE]
--------------------------
Name: Michael R. [Illegible]
Title: Portfolio Manager
OCTAGON LOAN TRUST
By: Octagon Credit Investors, as Manager
By:/s/ MICHAEL R. [ILLEGIBLE]
---------------------------
Name: Michael R. [Illegible]
Title: Portfolio Manager
OLYMPIC FUNDING TRUST, SERIES 1999-1
By: /s/ KELLY C. WALKER
---------------------------
Name: Kelly C. Walker
Title: Authorized Agent
<PAGE> 25
ORIX USA CORPORATION
By: /s/ HIROYUKI MIYAUCHI
-----------------------------
Name: Hiroyuki Miyauchi
Title: Executive Vice President
PAM CAPITAL FUNDING LP
By: /s/ MARK K. OKADA
-----------------------------
Name: Mark K. Okada, CFA
Title: Executive Vice President
Highland Capital Management L.P.
PAMCO CAYMAN LTD.
By: Highland Capital Management L.P.,
as Collateral Manager
By: /s/ MARK K. OKADA
-----------------------------
Name: Mark K. Okada, CFA
Title: Executive Vice President
Highland Capital Management L.P.
PILGRIM CLO 1999-1 LTD.
By: Pilgrim Investments, Inc.,
as its investment manager
By: /s/ CHARLES E. LEMIEUX, CFA
-----------------------------
Name: Charles E. LeMieux, CFA
Title: Assistant Vice President
PILGRIM PRIME RATE TRUST
By: Pilgrim Investments, Inc.,
as its investment manager
By: /s/ CHARLES E. LeMIEUX
-----------------------------
Name: Charles E. LeMieux, CFA
Title: Assistant Vice President
SCOTIALOAN COMPANY
By:
------------------------------
Name:
Title:
<PAGE> 26
PROTECTIVE LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
ROYAL BANK OF CANADA
By: /s/ STEVEN YOON
------------------------------
Name: Steven Yoon
Title: Director
THE SAKURA BANK, LIMITED
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Senior Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research
as Investment Advisor
By: /s/ PAYSON F. SWAFFIELD
------------------------------
Name: Payson F. Swaffield
Title: Vice President
STANFIELD CLO, LTD.
By: Stanfield Capital Partners LLC
as its Collateral Manager
By: /s/ GREGORY L. SMITH
------------------------------
Name: Gregory L. Smith
Title: Partner
<PAGE> 27
SEQUILS I, LTD.
By: TCW Advisors, Inc. as its
Collateral Manager
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
STRATA FUNDING LTD.
By:
------------------------------
Name:
Title:
SUMITOMO BANK, LIMITED
By:
------------------------------
Name:
Title:
SUNAMERICA LIFE INSURANCE COMPANY
By:
------------------------------
Name:
Title:
<PAGE> 28
TCW LEVERAGED INCOME TRUST II, L.P.
By: TCW Advisers (Bermuda), Ltd.,
as General Partner
By: /s/ MARK L. GOLD
------------------------------
Name: Mark L. Gold
Title: Managing Director
By: TCW Investment Management Company,
as Investment Adviser
By: /s/ JONATHAN R. INSULL
------------------------------
Name: Jonathan R. Insull
Title: Vice President
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisers (Bermuda), Ltd.,
as General Partner
By: /s/ MARK L. GOLD
------------------------------
Name: Mark L. Gold
Title: Managing Director
By: TCW Investment Management Company,
as Investment Adviser
By: /s/ JONATHAN R. INSULL
------------------------------
Name: Jonathan R. Insull
Title: Vice President
<PAGE> 29
TORONTO DOMINION (TEXAS), INC.
By: /s/ ALVA J. JONES
------------------------------
Name: Alva J. Jones
Title: Vice President
UNITED OF OMAHA LIFE INSURANCE COMPANY
By: TCW Asset Management Company,
its Investment Advisor
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
VAN KAMPEN PRIME RATE
INCOME TRUST
By: /s/ DARVIN D. PIERCE
------------------------------
Name: Darvin D. Pierce
Title: Vice President
VAN KAMPEN SENIOR
INCOME TRUST
By: /s/ DARVIN D. PIERCE
------------------------------
Name: Darvin D. Pierce
Title: Vice President
<PAGE> 30
CANADIAN LENDERS
BANK OF MONTREAL
By:
------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
BANK OF TOKYO-MITSUBISHI
(CANADA)
By: /s/ AMOS W. SIMPSON
------------------------------
Name: Amos W. Simpson
Title: Vice President and
General Manager
BT BANK OF CANADA
By:
------------------------------
Name:
Title:
BANQUE NATIONALE DE PARIS (CANADA)
By: /s/ PARTICIA BENTOLILA
------------------------------
Name: Patricia Bentolila
Title: Manager
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Senior Vice President
Corporate and Structured Finance
<PAGE> 31
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Executive Director
CITIBANK CANADA
By: /s/ ADAM SHEPHERD
------------------------------
Name: Adam Shepherd
Title: Vice President
DEUTSCHE BANK CANADA
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Credit Account Manager
FIRST CHICAGO NBD BANK, CANADA
By:
------------------------------
Name:
Title:
FUJI BANK CANADA
By:
------------------------------
Name:
Title:
<PAGE> 32
GOLDMAN SACHS CANADA CREDIT PARTNERS
By: /s/ STEPHEN J. MCGUINNESS
------------------------------
Name: STEPHEN J. McGUINNESS
Title: Authorized Signatory
NATIONAL BANK OF CANADA
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
ROYAL BANK OF CANADA
By:
------------------------------
Name:
Title:
THE SAKURA BANK (CANADA)
By: /s/ E.R. LANGLEY
------------------------------
Name: Elwood Langley
Title: Vice President
<PAGE> 33
ENGLISH LENDERS
ABN AMRO BANK N.V.
By: /s/ KEVIN F. MALONE
------------------------------
Name: Kevin F. Malone
Title: Group Vice President
ABN AMRO BANK N.V.
By: /s/ JAMES E. DAVIS
------------------------------
Name: James E. Davis
Title: Group Vice President
THE CHASE MANHATTAN BANK
By:
------------------------------
Name:
Title:
BHF-BANK AKTIENGESELLSCHAFT
By:
------------------------------
Name:
Title:
BHF (USA) CAPITAL CORPORATION
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
<PAGE> 34
BALANCED HIGH-YIELD FUND I LIMITED
BY: BHF (USA) CAPITAL CORPORATION,
acting as attorney-in-fact
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
BANK OF MONTREAL
By:
------------------------------
Name:
Title:
THE BANK OF NEW YORK
By: /s/ MICHAEL B. SCADUTO
------------------------------
Name: Michael B. Scaduto
Title: Vice President
THE BANK OF NOVA SCOTIA
By:
------------------------------
Name:
Title:
BANK ONE, CANADA
By: /s/ DENNIS SALETTA
------------------------------
Name: Dennis Saletta
Title: First Vice President
<PAGE> 35
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: /s/ HIDEKAZU KOJIMA
------------------------------
Name: Hidekazu Kojima
Title: Vice President
BANQUE NATIONALE DE PARIS, LONDON
BRANCH
By: /s/ R. HITE
------------------------------
Name: R. Hite
Title: Head of International Desk
By: /s/ C. PENNEY
------------------------------
Name: C. Penney
Title: Manager
CIBC WOOD GUNDY PLC
By:
------------------------------
Name:
Title:
CITIBANK, N.A.
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: VP
BANKBOSTON, N.A.
By: /s/ MARIE C. DUPREY
------------------------------
Name: Marie C. Duprey
Title: Vice President
<PAGE> 36
CREDIT AGRICOLE INDOSUEZ
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
Title: Vice President
Senior Relationship Manager
By: /s/ SARAH U. JOHNSTON
------------------------------
Name: Sarah U. Johnston
Title: Vice President
Senior Relationship Manager
FIRST NATIONAL BANK OF BOSTON
By:
------------------------------
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
------------------------------
Name:
Title:
GOLDMAN SACHS CREDIT PARTNERS L.P.
By: /s/ STEPHEN J. MCGUINNESS
------------------------------
Name: Stephen J. McGuinness
Title: Authorized Signatory
INDUSTRIAL BANK OF JAPAN, LTD.
By:
------------------------------
Name:
Title:
<PAGE> 37
THE LONG TERM CREDIT BANK OF JAPAN,
LIMITED
By:
------------------------------
Name:
Title:
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By:
------------------------------
Name:
Title:
NATEXIS BANQUE BFCE, FORMERLY
BANQUE FRANCAISE DU
COMMERCE EXTERIEUR
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
NATIONAL WESTMINSTER
BANK PLC
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
<PAGE> 38
ROYAL BANK OF CANADA
By:
------------------------------
Name:
Title:
SAKURA BANK, LIMITED LONDON BRANCH
By:/s/ KIYOTAKE TSUJI
------------------------------
Name: Kiyotake Tsuji
Title: Assistant General Manager
SUMITOMO BANK, LIMITED
By:
------------------------------
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.9
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 16th day of February,
2000 by and among Viasystems Group, Inc. ("Viasystems"), Viasystems, Inc.
("Inc.") and Viasystems Technologies Corp. LLC ("LLC" and, together with
Viasystems and Inc. "Employer"), and James N. Mills ("Employee").
W I T N E S S E T H :
WHEREAS, Employer and Employee entered into an Employment Agreement as
of January 1, 1997 and desire to amend and restate the terms of such Agreement
as set forth herein;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the Chairman of the Board of
Directors and Chief Executive Officer of Viasystems (the "Position"), and
Employee agrees to be employed by Employer in such Position, for a period ending
on March 31, 2005, unless terminated earlier as provided herein (the "Employment
Period"). In the event that termination (as hereinafter provided) has not
occurred prior to the last day of the Employment Period, unless either party
shall have given written notice to the contrary at least ninety (90) days prior
to the end of the Employment Period, the Employment Period shall annually renew
for one (1) year periods until terminated.
(b) Duties. Employee in the Position shall be subject to the direction
and supervision of the Board of Directors of Viasystems (the "Board") and shall
have those duties and responsibilities which are assigned to Employee during the
Employment Period by the Board consistent with the Position, provided that the
Board shall not assign any greater duties or responsibilities to the Employee
than are necessary to the Employee's faithful and adequate supervision of the
overall executive management of Viasystems and its subsidiaries, both direct and
indirect. Subject to the Employee's faithful and adequate supervision of the
overall executive management of Viasystems, the Employee shall be free to
participate in other endeavors. Employee agrees to perform faithfully the duties
assigned to Employee to the best of Employee's ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment Period
a salary as basic compensation for the services to be rendered by Employee
hereunder. The initial amount of such salary shall be Six Hundred Eighty-Five
Thousand Dollars ($685,000) per annum. Such salary shall be reviewed by the
Board and may be increased
<PAGE> 2
in the Board's sole discretion but may not be reduced. Such salary shall accrue
and be payable in accordance with the payroll practices of Employer in effect
from time to time. All such payments shall be subject to deduction and
withholding authorized or required by applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible to
receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be entitled
to such other benefits as are customarily accorded the executives of Employer,
including without limitation, group life, hospitalization and other insurance
and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or Employee's
spouse, whether or not the Employment Period or this Agreement has terminated
for any reason, Employer shall provide health coverage to Employee and/or
Employee's spouse at least equal to the health coverage granted to Employee on
the date hereof at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best
efforts to obtain and to maintain a policy of insurance on directors and
officers of Employer in amounts to be determined by Employer, in its reasonable
judgement based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate automatically
upon the death or total disability of Employee. For the purpose of this
Agreement "total disability" shall be deemed to have occurred if Employee shall
have been unable to perform the Employee's duties of employment due to mental or
physical incapacity for a period of six (6) consecutive months or for any one
hundred (100) working days out of a twelve (12) consecutive month period.
(b) Cause. Employer may terminate the employment of Employee under this
Agreement for Cause. For the purpose of this Agreement, "Cause" shall be deemed
to be fraud, dishonesty, unauthorized use of any of Employer's trade secrets or
confidential information.
(c) Without Cause. Employer may terminate the employment of Employee
under this Agreement without Cause, subject to the continuing rights of Employee
pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further
-2-
<PAGE> 3
compensation pursuant to Sections 2(a) and 2(b) shall be payable to Employee
except that Employee or Employee's estate, heirs or beneficiaries, as
applicable, shall be entitled, in addition to any other benefits specifically
provided to them or Employee under any benefit plan, to receive Employee's then
current salary for a period of eighteen (18) months from the date the Employment
Period terminates.
(b) Termination for Cause or Voluntary Termination by Employee. If the
employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation pursuant
to Section 2(a), 2(b) and 2(c) shall be paid to Employee after the date of
termination.
(c) Termination Without Cause. If the employment of Employee under this
Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder (which shall not be less than the amount specified in the second
sentence of Section 2(a) above), for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment Period,
and shall further be entitled to continue to receive the benefits to which
Employee would otherwise be entitled pursuant to Sections 2(b), 2(c) and 2(d)
above and reimbursement for expenses incurred by Employee to own and maintain an
automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense account
reports, Employer shall reimburse Employee for all reasonable travel and
entertainment expenses incurred by Employee in the course of his employment with
Employer. During the term hereof, Employee will be reimbursed by Employer for
expenses incurred by Employee to own and maintain an automobile.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto except that this Agreement and all of the provisions hereof may
be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of this
Agreement, Employee will not directly or indirectly reveal, divulge, disclose or
communicate to any person or entity, other than authorized officers, directors
and employees of the Employer, in any manner whatsoever, any Confidential
Information (as hereinafter defined) of Employer without the prior written
consent of the Board.
-3-
<PAGE> 4
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally known in
the business in which Employer is or may be engaged. However, Confidential
Information shall not include under any circumstances any information with
respect to the foregoing matters which is (i) available to the public from a
source other than Employee, (ii) released in writing by Employer to the public
or to persons who are not under a similar obligation of confidentiality to
Employer and who are not parties to this Agreement, (iii) obtained by Employee
from a third party not under a similar obligation of confidentiality to
Employer, (iv) required to be disclosed by any court process or any government
or agency or department of any government, or (v) the subject of a written
waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee
will surrender to Employer all Confidential Information, including without
limitation, all lists, charts, schedules, reports, financial statements, books
and records of the Employer, and all copies thereof, and all other property
belonging to the Employer but Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any proper
purpose as determined in the reasonable judgment of Employer.
8. NO VIOLATION. Employee hereby represents and warrants to Employer that the
execution, delivery and performance of this Agreement or the passage of time, or
both, will conflict with, result in a default, right to accelerate or loss of
rights under any provision of any agreement or understanding to which the
Employee or, to the best knowledge of Employee, any of Employee's affiliates are
a party or by which Employee, or to the best knowledge of Employee, Employee's
affiliates may be bound or affected.
9. CAPTIONS. The captions, headings and arrangements used in this Agreement are
for convenience only and do not in any way affect, limit or amplify the
provisions hereof.
10. NOTICES. All notices required or permitted to be given hereunder shall be in
writing and shall be deemed delivered, whether or not actually received, two
days after deposited in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the party to whom notice
is being given at the specified address or at such other address as such party
may designate by notice:
Employer: Viasystems Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Board of Directors
Employee: James N. Mills
151 North Bemiston
St. Louis, Missouri 63105
-4-
<PAGE> 5
11. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
12. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, if any, relating to the subject matter
hereof. This Agreement may be amended in whole or in part only by an instrument
in writing setting forth the particulars of such amendment and duly executed by
an officer of Employer expressly authorized by the Board to do so and by
Employee.
13. WAIVER. No delay or omission by any party hereto to exercise any right or
power hereunder shall impair such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies provided
for in this Agreement shall be cumulative and in addition to and not in lieu of
any other remedies available to any party at law, in equity or otherwise.
14. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced according to
the laws of the State of Missouri.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
VIASYSTEMS GROUP, INC.
By: /s/ DAVID M. SINDELAR /s/ JAMES N. MILLS
-------------------------------------- --------------------------------
David M. Sindelar James N. Mills
Senior Vice President - Finance
VIASYSTEMS, INC.
By: /s/ DAVID M. SINDELAR
--------------------------------------
David M. Sindelar
Senior Vice President - Finance
VIASYSTEMS TECHNOLOGIES CORP. LLC
By: /s/ DAVID M. SINDELAR
--------------------------------------
David M. Sindelar
Senior Vice President - Finance
-6-
<PAGE> 1
EXHIBIT 10.10
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement is made and entered into as of the 16th day of February,
2000 by and among Viasystems Group, Inc. ("Viasystems"), Viasystems, Inc.
("Inc.") and Viasystems Technologies Corp. LLC ("LLC" and, together with
Viasystems and Inc. "Employer"), and David M. Sindelar ("Employee").
W I T N E S S E T H :
WHEREAS, Employer and Employee entered into an Employment Agreement as
of January 1, 1997 and desire to amend and restate the terms of such Agreement
as set forth herein;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the Senior Vice President -
Finance of Viasystems (the "Position"), and Employee agrees to be employed by
Employer in such Position, for a period ending on March 31, 2005, unless
terminated earlier as provided herein (the "Employment Period"). In the event
that termination (as hereinafter provided) has not occurred prior to the last
day of the Employment Period, unless either party shall have given written
notice to the contrary at least ninety (90) days prior to the end of the
Employment Period, the Employment Period shall annually renew for one (1) year
periods until terminated.
(b) Duties. Employee in the Position shall be subject to the direction and
supervision of the Chairman of the Board of Directors of Viasystems (the
"Chairman") and shall have those duties and responsibilities which are assigned
to Employee during the Employment Period by the Chairman consistent with the
Position, provided that the Chairman shall not assign any greater duties or
responsibilities to the Employee than are necessary to the Employee's faithful
and adequate supervision of the overall financial management of Viasystems and
its subsidiaries, both direct and indirect. Subject to the Employee's faithful
and adequate supervision of the overall financial management of Viasystems, the
Employee shall be free to participate in other endeavors. Employee agrees to
perform faithfully the duties assigned to Employee to the best of Employee's
ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment Period a
salary as basic compensation for the services to be rendered by Employee
hereunder. The initial amount of such salary shall be Three Hundred Thousand
Dollars ($300,000) per annum. Such salary shall be reviewed by the Chairman and
may be increased in the
<PAGE> 2
Chairman's sole discretion but may not be reduced. Such salary shall accrue
and be payable in accordance with the payroll practices of Employer in effect
from time to time. All such payments shall be subject to deduction and
withholding authorized or required by applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible to
receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan.
(c) Benefits. During the Employment Period, Employee shall be entitled to
such other benefits as are customarily accorded the executives of Employer,
including without limitation, group life, hospitalization and other insurance
and vacations.
(d) Medical Benefits. During the lifetime of Employee and/or Employee's
spouse, whether or not the Employment Period or this Agreement has terminated
for any reason, Employer shall provide health coverage to Employee and/or
Employee's spouse at least equal to the health coverage granted to Employee on
the date hereof at no cost to Employee and/or Employee's spouse.
(e) Directors and Officers Insurance. Employer will use its best efforts to
obtain and to maintain a policy of insurance on directors and officers of
Employer in amounts to be determined by Employer, in its reasonable judgement
based upon companies similarly situated.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate automatically upon
the death or total disability of Employee. For the purpose of this Agreement
"total disability" shall be deemed to have occurred if Employee shall have been
unable to perform the Employee's duties of employment due to mental or physical
incapacity for a period of six (6) consecutive months or for any one hundred
(100) working days out of a twelve (12) consecutive month period.
(b) Cause. Employer may terminate the employment of Employee under this
Agreement for Cause. For the purpose of this Agreement, "Cause" shall be deemed
to be fraud, dishonesty, unauthorized use of any of Employer's trade secrets or
confidential information.
(c) Without Cause. Employer may terminate the employment of Employee under
this Agreement without Cause, subject to the continuing rights of Employee
pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated pursuant to
the provisions of Section 3(a) above, this Agreement shall terminate, and no
further
-2-
<PAGE> 3
compensation pursuant to Sections 2(a) and 2(b) shall be payable to Employee
except that Employee or Employee's estate, heirs or beneficiaries, as
applicable, shall be entitled, in addition to any other benefits specifically
provided to them or Employee under any benefit plan, to receive Employee's then
current salary for a period of eighteen (18) months from the date the Employment
Period terminates.
(b) Termination for Cause or Voluntary Termination by Employee. If the
employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation pursuant
to Section 2(a), 2(b) and 2(c) shall be paid to Employee after the date of
termination.
(c) Termination Without Cause. If the employment of Employee under this
Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder (which shall not be less than the amount specified in the second
sentence of Section 2(a) above), for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment Period,
and shall further be entitled to continue to receive the benefits to which
Employee would otherwise be entitled pursuant to Sections 2(b), 2(c) and 2(d)
above and reimbursement for expenses incurred by Employee to own and maintain an
automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel and
entertainment expenses incurred by Employee in the course of his employment with
Employer. During the term hereof, Employee will be reimbursed by Employer for
expenses incurred by Employee to own and maintain an automobile.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto except that this Agreement and all of the provisions hereof may
be assigned by Employer to any successor to all or substantially all of its
assets (by merger or otherwise) and may otherwise be assigned upon the prior
written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time thereafter,
irrespective of the time, manner or cause of the termination of this Agreement,
Employee will not directly or indirectly reveal, divulge, disclose or
communicate to any person or entity, other than authorized officers, directors
and employees of the Employer, in any manner whatsoever, any Confidential
Information (as hereinafter defined) of Employer without the prior written
consent of the Chairman.
-3-
<PAGE> 4
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally known in
the business in which Employer is or may be engaged. However, Confidential
Information shall not include under any circumstances any information with
respect to the foregoing matters which is (i) available to the public from a
source other than Employee, (ii) released in writing by Employer to the public
or to persons who are not under a similar obligation of confidentiality to
Employer and who are not parties to this Agreement, (iii) obtained by Employee
from a third party not under a similar obligation of confidentiality to
Employer, (iv) required to be disclosed by any court process or any government
or agency or department of any government, or (v) the subject of a written
waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee will
surrender to Employer all Confidential Information, including without
limitation, all lists, charts, schedules, reports, financial statements, books
and records of the Employer, and all copies thereof, and all other property
belonging to the Employer but Employee shall be accorded reasonable access to
such Confidential Information subsequent to the Employment Period for any proper
purpose as determined in the reasonable judgment of Employer.
8. NO VIOLATION. Employee hereby represents and warrants to Employer that the
execution, delivery and performance of this Agreement or the passage of time, or
both, will conflict with, result in a default, right to accelerate or loss of
rights under any provision of any agreement or understanding to which the
Employee or, to the best knowledge of Employee, any of Employee's affiliates are
a party or by which Employee, or to the best knowledge of Employee, Employee's
affiliates may be bound or affected.
9. CAPTIONS. The captions, headings and arrangements used in this Agreement
are for convenience only and do not in any way affect, limit or amplify the
provisions hereof.
10. NOTICES. All notices required or permitted to be given hereunder shall be
in writing and shall be deemed delivered, whether or not actually received, two
days after deposited in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the party to whom notice
is being given at the specified address or at such other address as such party
may designate by notice:
Employer: Viasystems Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Chairman
Employee: David M. Sindelar
10630 Ballantrae
St. Louis, Missouri 63131
-4-
<PAGE> 5
11. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
12. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, if any, relating to the subject matter
hereof. This Agreement may be amended in whole or in part only by an instrument
in writing setting forth the particulars of such amendment and duly executed by
an officer of Employer expressly authorized by the Chairman to do so and by
Employee.
13. WAIVER. No delay or omission by any party hereto to exercise any right or
power hereunder shall impair such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies provided
for in this Agreement shall be cumulative and in addition to and not in lieu of
any other remedies available to any party at law, in equity or otherwise.
14. COUNTERPARTS. This Agreement may be executed in multiple counterparts, each
of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
15. GOVERNING LAW. This Agreement shall be construed and enforced according to
the laws of the State of Missouri.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
VIASYSTEMS GROUP, INC.
By: /s/ JAMES N. MILLS /s/ DAVID M. SINDELAR
------------------------------- -------------------------------
James N. Mills, Chairman and David M. Sindelar
Chief Executive Officer
VIASYSTEMS, INC.
By: /s/ JAMES N. MILLS
-------------------------------
James N. Mills, Chairman and
Chief Executive Officer
VIASYSTEMS TECHNOLOGIES CORP. LLC
By: /s/ JAMES N. MILLS
-------------------------------
James N. Mills, Chairman and
Chief Executive Officer
-6-
<PAGE> 1
EXHIBIT 10.13
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
This agreement is made and entered into as of the 16th day of February,
2000 by and among Viasystems Group, Inc. ("Corporation"), Viasystems, Inc.
("Viasystems") and Viasystems Technologies Corp. LLC ("Technologies" and,
together with Corporation and Viasystems "Employer"), and Timothy L. Conlon
("Employee").
W I T N E S S E T H :
WHEREAS, Employer and Employee entered into an Employment Agreement as
of October 16, 1998 and desire to amend and restate the terms of such Agreement
as set forth herein;
NOW, THEREFORE, Employee and Employer, in consideration of the
agreements, covenants and conditions herein contained, hereby agree as follows:
1. BASIC EMPLOYMENT PROVISIONS.
(a) Employment and Term. Employer hereby agrees to employ Employee
(hereinafter referred to as the "Employment") as the President and Chief
Operating Officer of the Corporation (the "Position"), and Employee agrees to be
employed by Employer in such Position, for a period ending on March 31, 2005,
unless terminated earlier as provided herein (the "Employment Period"). In the
event that termination (as hereinafter provided) has not occurred prior to the
last day of the Employment Period, unless either party shall have given written
notice to the contrary at least ninety (90) days prior to the end of the
Employment Period, the Employment Period shall annually renew for one (1) year
periods until terminated.
(b) Duties. Employee in the Position shall be subject to the direction
and supervision of the Chairman of the Board of Directors of the Corporation or
his designee (the "Chairman") and shall have those duties and responsibilities
which are assigned to Employee during the Employment Period by the Chairman
consistent with the Position, provided that the Chairman shall not assign any
greater duties or responsibilities to the Employee than are necessary to the
Employee's faithful and adequate supervision of the operations of the
Corporation and its subsidiaries, both direct and indirect. Employee agrees to
perform faithfully the duties assigned to Employee to the best of Employee's
ability.
2. COMPENSATION.
(a) Salary. Employer shall pay to Employee during the Employment Period
a salary as basic compensation for the services to be rendered by Employee
hereunder. The initial amount of such salary shall be Five Hundred Thousand
Dollars ($500,000) per annum. Such salary shall be reviewed by the Chairman and
may be increased in the
<PAGE> 2
Chairman's sole discretion but may not be reduced. Such salary shall accrue and
be payable in accordance with the payroll practices of Employer in effect from
time to time. All such payments shall be subject to deduction and withholding
authorized by Employee or required by applicable law.
(b) Bonus. During the Employment Period, Employee shall be eligible to
receive an annual bonus (payable by the Employer) in an amount in accordance
with the Senior Executive Incentive Compensation Plan or any new plan adopted by
Employer applicable to other senior executives.
(c) Benefits. During the Employment Period, Employee shall be entitled
to such other benefits as are customarily accorded the executives of Employer,
including without limitation, group life, hospitalization and other insurance,
vacation pay, reimbursement for the cost of state and federal income tax
preparation by the Employer's consulting tax accountant and lunch in the
executive dining room at Employer's cost.
(d) Medical Benefits. During the lifetime of Employee and/or Employee's
surviving spouse, in the event the Employment Period has terminated for any
reason, Employer shall provide health coverage at least equal to and on the same
terms as the health coverage granted to other executives of Employer at no cost
to Employee or to Employee's surviving spouse. Employee shall be enrolled in the
Executive Medical Supplement Plan, so long as other executives are enrolled in
such plan. In addition, Employer shall provide an annual executive physical to
Employee at Employer's expense.
(e) Club Dues. During the Employment Period, Employer will reimburse
Employee for the cost of joining and remaining a member of a country club
reasonably acceptable to Employer, excluding personal charges at such country
club, and for the dues and fees for the Saint Louis Club.
3. TERMINATION.
(a) Death or Disability. This Agreement shall terminate automatically
upon the death or total disability of Employee. For the purpose of this
Agreement "total disability" shall be deemed to have occurred if Employee shall
have been unable to perform the Employee's duties of the Position due to mental
or physical incapacity for a period of six (6) consecutive months or for any one
hundred (100) working days out of a twelve (12) consecutive month period.
(b) Cause. Employer may terminate the employment of Employee under this
Agreement for Cause. For the purpose of this Agreement, "Cause" shall be deemed
to be fraud, dishonesty, competition with Employer, unauthorized use of any of
Employer's trade secrets or confidential information or failure to properly
perform the duties assigned to Employee, in the reasonable judgment of Employer.
-2-
<PAGE> 3
(c) Without Cause. Employer may terminate the employment of Employee
under this Agreement without Cause, subject to the continuing rights of Employee
pursuant to Section 4(c) below.
4. COMPENSATION UPON TERMINATION.
(a) Death or Disability. If the Employment Period is terminated
pursuant to the provisions of Section 3(a) above, this Agreement shall
terminate, and no further compensation shall be payable to Employee except that
Employee or Employee's estate, heirs or beneficiaries, as applicable, shall be
entitled, in addition to any other benefits specifically provided to them or
Employee under any benefit plan, to receive Employee's then current salary for a
period of eighteen (18) months from the date the Employment Period terminates
and Employee and/or Employee's surviving spouse shall continue to receive the
medical benefits provided in Section 2(d).
(b) Termination for Cause or Voluntary Termination by Employee. If the
employment of Employee under this Agreement is terminated for Cause or if
Employee voluntarily terminates his employment, no further compensation shall be
paid to Employee after the date of termination but Employee and Employee's
surviving spouse shall be entitled medical benefits provided in Section 2(d)
above.
(c) Termination Without Cause. If the employment of Employee under this
Agreement is terminated pursuant to Section 3(c) above, Employee shall be
entitled to continue to receive from Employer Employee's then current salary
hereunder [which shall not be less than the amount specified in the second
sentence of Section 2(a) above] for the remainder of the Employment Period or
for one (1) year, whichever is longer, such amount to continue to be paid in
accordance with the payroll practices of Employer through the Employment Period,
and shall further be entitled to continue to receive the benefits to which
Employee and Employee's surviving spouse would otherwise be entitled pursuant to
Sections 2(c) and 2(d) above and reimbursement for expenses incurred by Employee
to own and maintain an automobile as contemplated by Section 5 below.
5. EXPENSE REIMBURSEMENT. Upon submission of properly documented expense
account reports, Employer shall reimburse Employee for all reasonable travel and
entertainment expenses incurred by Employee in the course of his employment with
Employer. Employer shall pay Employee an auto allowance in an amount sufficient
so that, after the effect of federal and state income taxes, Employee shall net
One Thousand Dollars ($1,000.00) per month.
6. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto except that this Agreement and all of the provisions hereof may
be assigned by Employer to any successor to all or substantially all
-3-
<PAGE> 4
of their assets (by merger or otherwise) and may otherwise be assigned upon the
prior written consent of Employee.
7. CONFIDENTIAL INFORMATION.
(a) Non-Disclosure. During the Employment Period or at any time
thereafter, irrespective of the time, manner or cause of the termination of this
Agreement, Employee will not directly or indirectly reveal, divulge, disclose or
communicate to any person or entity, other than authorized officers, directors
and employees of the Employer, in any manner whatsoever, any Confidential
Information (as hereinafter defined) of Employer without the prior written
consent of the Chief Executive Officer.
(b) Definition. As used herein, "Confidential Information" means
information disclosed to or known by Employee as a direct or indirect
consequence of or through the Employment about Employer, or its respective
businesses, products and practices which information is not generally known in
the business in which Employer is or may be engaged. However, Confidential
Information shall not include under any circumstances any information with
respect to the foregoing matters which is (i) available to the public from a
source other than Employee, (ii) released in writing by Employer to the public
or to persons who are not under a similar obligation of confidentiality to
Employer and who are not parties to this Agreement, (iii) obtained by Employee
from a third party not under a similar obligation of confidentiality to
Employer, (iv) required to be disclosed by any court process or any government
or agency or department of any government, or (v) the subject of a written
waiver executed by either Employer for the benefit of Employee.
(c) Return of Property. Upon termination of the Employment, Employee
will surrender to Employer all recorded Confidential Information whether in hard
copy or electronically stored, including without limitation, all lists, charts,
schedules, reports, financial statements, books and records of the Employer, and
all copies thereof, and all other property belonging to the Employer but
Employee shall be accorded reasonable access to such Confidential Information
subsequent to the Employment Period for any proper purpose as determined in the
reasonable judgment of Employer.
8. AGREEMENT NOT TO COMPETE.
(a) Termination for Cause or Voluntary Termination. In the event that
the Employee is terminated for Cause or voluntarily terminates his employment
with Employer prior to the expiration of the term of this Agreement, Employee
hereby agrees that for a period of one (1) year following such termination,
neither he nor any affiliate shall, either in his own behalf or as a partner,
officer, director, employee, agent or shareholder [other than as the holder of
less than 5% of the outstanding capital stock of any corporation with a class of
equity security registered under Section 12(b) or Section 12(g) of the
Securities Exchange Act of 1934, as amended] engage in, invest in or render
services to any person or entity engaged in the businesses in which Employer is
then engaged and situated within the United States of America. Nothing contained
in this Section 8(a) shall be construed
-4-
<PAGE> 5
as restricting the Employee's right to sell or otherwise dispose of any business
or investments owned or operated by Employee as of the date hereof.
(b) Termination Without Cause or For Disability. In the event that the
employment of Employee is terminated by Employer without Cause or as a result of
the total disability of Employee, Employee hereby agrees that during the period
that Employee accepts payments from the Employer pursuant to Section 4(a) or
Section 4(c) above, as applicable, but not including medical benefits pursuant
to Section 2(d), neither Employee nor any affiliate shall, either in Employee's
own behalf or as a partner, officer, director, employee, agent or shareholder
[other than as the holder of less that 5% of the outstanding capital stock of
any corporation with a class of equity security registered under Section 12(b)
or Section 12(g) of the Securities Exchange Act of 1934, as amended] engage in,
invest in or render services to any person or entity engaged in the businesses
in which Employer or any subsidiary of Employers is then engaged and situated
within the United States of America. Nothing contained in this Section 8(b)
shall be construed as restricting the Employee's right to sell or otherwise
dispose of any business or investments owned or operated by Employee as of the
date hereof. In the event of Employee's violation of the provisions of Section
8(b), the right of Employee to receive any further payment pursuant to Sections
4(a) or 4(c) above, as applicable, but not as to medical benefits pursuant to
Section 2(d), shall immediately terminate and the Employer shall be entitled to
secure reimbursement from Employee for all payments made to Employee under
Section 4(a) or 4(c) subsequent to the date of any such violation. The parties
hereto hereby acknowledge and agree that the provisions of the immediately
preceding sentence shall be the sole and exclusive remedy of the Employer in
respect of any violation of this Section 8(b).
9. Agreement not to Solicit Employees. Employee agrees that, for a period
of three (3) years following the termination of the Employment Period, neither
Employee nor any affiliate shall, on behalf of any business engaged in a
business competitive with Employer, solicit or induce, or in any manner attempt
to solicit or induce, any person employed by, or any agent of, Employer to
terminate Employee's employment or agency, as the case may be, with Employer.
10. No Violation. Employee hereby represents and warrants to Employer that
neither the execution, delivery and performance of this Agreement or the passage
of time, nor both, will conflict with, result in a default, right to accelerate
or loss of rights under any provision of any agreement or understanding to which
the Employee or, to the best knowledge of Employee, any of Employee's affiliates
are a party or by which Employee, or to the best knowledge of Employee,
Employee's affiliates may be bound or affected.
11. Captions. The captions, headings and arrangements used in this
Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
12. Notices. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed delivered, whether or not actually received,
two days after deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt
-5-
<PAGE> 6
requested, addressed to the party to whom notice is being given at the specified
address or at such other address as such party may designate by notice:
Employer: Viasystems Group, Inc.
101 South Hanley Road
St. Louis, Missouri 63105
Attn: Chairman
Employee: Timothy L. Conlon
12720 Topping Acres Drive
St. Louis, Missouri 63131
13. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provisions
shall be fully severable, and this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never comprised a part
of this Agreement; the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance of this Agreement. In lieu of each
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible and be legal,
valid and enforceable.
14. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, if any, relating to the
subject matter hereof. This Agreement may be amended in whole or in part only by
an instrument in writing setting forth the particulars of such amendment and
duly executed by an officer of Employer expressly authorized by the Chairman to
do so and by Employee.
15. WAIVER. No delay or omission by any party hereto to exercise any right
or power hereunder shall impair such right or power or be construed as a waiver
thereof. A waiver by any of the parties hereto of any of the covenants to be
performed by any other party or any breach thereof shall not be construed to be
a waiver of any succeeding breach thereof or of any other covenant herein
contained. Except as otherwise expressly set forth herein, all remedies provided
for in this Agreement shall be cumulative and in addition to and not in lieu of
any other remedies available to any party at law, in equity or otherwise.
16. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall constitute an original, and all of which together shall
constitute one and the same agreement.
17. GOVERNING LAW. This Agreement shall be construed and enforced according
to the laws of the State of Missouri.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
VIASYSTEMS GROUP, INC.
By: /s/ DAVID M. SINDELAR /s/ TIMOTHY L. CONLON
---------------------------------- ------------------------------
David M. Sindelar, Timothy L. Conlon
Senior Vice President
VIASYSTEMS, INC.
By: /s/ DAVID M. SINDELAR
----------------------------------
David M. Sindelar,
Senior Vice President
VIASYSTEMS TECHNOLOGIES CORP. LLC
By: /s/ DAVID M. SINDELAR
----------------------------------
David M. Sindelar,
Senior Vice President
-7-
<PAGE> 1
EXHIBIT 10.18
VIASYSTEMS GROUP, INC.
1999 KEY MANAGEMENT INCENTIVE COMPENSATION PLAN
PURPOSE
The Viasystems Group, Inc. Key Management Incentive Compensation Plan is
designed to motivate and encourage the attainment of corporate objectives by
rewarding those in a position to make a significant contribution to growth in
Sales, EBITDA and Cash Flow for the accomplishment of these objectives.
PARTICIPANTS
Plan participants and level of participation are listed on Exhibit I.
Participation level is expressed as a percentage of base earnings.
Plan participation is contingent upon having executed and on file the Company's
Intellectual Property, Confidentiality and Non-Competition agreements. This
applies only to those whose participation level is 10% or greater.
For plan purposes, base earnings will be equal to base salary as of January 1,
1999, plus the prorated amount of any base salary increases that are implemented
during 1999.
DETERMINATION OF INCENTIVE AWARDS
Providing the participant has performed at a competent level during 1999, at the
sole discretion of the President with the approval of the Chairman of the Board,
the minimum award will be equal to 70% of the participant's maximum award
opportunity, but only if the Company has achieved its Profit Plan. Any award
beyond this level will be discretionary, based on the discretion of the
President with the approval of the Chairman. Discretionary awards will be based
on the participant's performance in his/her position and overall contribution to
the organization during the plan year.
If the Company fails to achieve the 1999 Profit Plan, all management incentive
awards are discretionary, based on the discretion of the President with the
approval of the Chairman and are limited to the maximum participation level
assigned herein to the participant or the maximum award level established by the
Chairman.
If the Company achieves the Profit Plan, the President may identify and
recommend selected participants for a special "President's Award" for
exceptional performance during the plan year. The award is limited to an
additional 50% of the employee's participation level.
<PAGE> 2
PAYMENT OF INCENTIVE AWARDS
All incentive awards will be paid by the direction of the President with the
approval of the Chairman and will be distributed as soon as possible after the
end of the year -- normally, no later than early March. Except for retirement,
death or disability, an eligible participant must be an active employee on the
Company payroll at the time the award is distributed to receive an award. The
right to an incentive award does not accrue during the year or at year end. No
checks will be drawn except against the approved list of payment signed by the
President and the Chairman.
LEGAL STATUS AND PLAN ADMINISTRATION
This plan shall be subject to all provisions of law from time to time applicable
thereto. Neither the plan nor the rules may be construed to give rise to a
contract for the retention of any employee by the Company, nor shall an employee
have any right whatsoever against the Company or its subsidiaries, the
Directors, the Officers, or any other employee, other than the right to receive
payment, if any, in accordance with the terms and conditions of the plan and
rules thereunder.
The plan will be administered by the President with the approval of the
Chairman. The President may amend or terminate the plan at any time; provided,
however, that no amendment shall decrease the maximum annual awards allowed
under the plan and no amendment or termination of the plan shall adversely
affect any award previously granted a participant under a prior year's plan.
/S/ TIMOTHY L. CONLON
---------------------------------
Timothy L. Conlon
President & COO
/S/ JAMES N. MILLS
---------------------------------
James N. Mills
Chairman & CEO
Page 2
<PAGE> 3
VIASYSTEMS GROUP, INC.
1999 KEY MANAGEMENT INCENTIVE COMPENSATION PLAN
ADMINISTRATIVE RULES
The following rules have been established to facilitate administration and to
insure fairness in the administration of the plan.
RULE 1 - COMPANY PERFORMANCE
No incentive compensation shall be due unless the Company meets or exceeds the
Profit Plan for the plan year.
RULE 2 - PARTICIPANTS
All proposed changes to the participant list or award opportunity during the
plan year must be submitted to the Senior Vice President, Human Resources in
writing including a description and justification for the change, addition or
deletion, the individual's name, service date, current monthly base salary and
effective date. No change, addition or deletion to the participant list will be
made without the approval of the President.
RULE 3 - GOVERNMENTAL REGULATIONS
Any incentive payout under the terms of this plan will be limited by any
governmental regulations that apply and are in effect at the time of the
incentive payout.
RULE 4 - PAYMENT OF AWARDS
In order to receive an award, an eligible employee must be an active working
employee and on the Company payroll on the day the awards are paid, except in
the event of retirement, disability or death during the plan year.
President's Awards will be limited to 5% of the participant population and will
be approved providing the Company achieves its Profit Plan. The maximum award
will be limited to 50% of the participant's bonus opportunity.
RULE 5 - TERMINATION OF EMPLOYMENT
Termination of employment during the plan year or prior to the payment of any
awards for any reason, other than retirement, death or disability, will remove
the individual as a participant, and shall result in the forfeiture of the right
to any award which might later be payable.
RULE 6 - RETIREMENT, DEATH OR DISABILITY
A participant who retires, dies or is judged disabled during the year will be
entitled to an award prorated to the date of such event. Illness of two months
or less will not affect the determination of an individual's award; however,
where illness involves more than two months, the award payment will be prorated
to cover only the portion of the year actually worked. If an employee is judged
disabled for the purpose of administering other Company benefit programs, s/he
will be judged disabled for the purpose of this plan.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated February 23, 2000 relating to the financial statements and
financial statement schedule of Viasystems Group, Inc. and its subsidiaries,
which appear in such Registration Statement. We also consent to the references
to us under the headings "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 23, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated September 24, 1999 relating to the financial statements of the
Printed Circuit Board Division of Termbray Industries International (Holdings)
Limited, which appears in such Registration Statement. We also consent to the
references to us under the headings "Experts" in such Registration Statement.
PricewaterhouseCoopers
Hong Kong
February 23, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,839
<SECURITIES> 0
<RECEIVABLES> 227,584
<ALLOWANCES> 6,965
<INVENTORY> 155,818
<CURRENT-ASSETS> 446,147
<PP&E> 716,856<F1>
<DEPRECIATION> (254,590)
<TOTAL-ASSETS> 1,212,558
<CURRENT-LIABILITIES> 347,081
<BONDS> 0
41,273
0
<COMMON> 0
<OTHER-SE> (603,003)
<TOTAL-LIABILITY-AND-EQUITY> 1,212,558
<SALES> 1,102,324
<TOTAL-REVENUES> 1,102,324
<CGS> 816,370
<TOTAL-COSTS> 816,370
<OTHER-EXPENSES> 773,380<F2>
<LOSS-PROVISION> 1,784
<INTEREST-EXPENSE> 116,599
<INCOME-PRETAX> (627,619)
<INCOME-TAX> (28,289)
<INCOME-CONTINUING> (599,330)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 16,942
<NET-INCOME> (616,272)
<EPS-BASIC> 0
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES AN IMPAIRMENT CHARGE OF $195,208 RELATED TO THE WRITE-OFF ON CERTAIN
IMPAIRED LONG-LIVED ASSETS. SEE (F2).
<F2>INCLUDES A CHARGE OF $17,600 RELATING TO THE WRITE-OFF OF ACQUIRED IN-PROCESS
RESEARCH AND DEVELOPMENT COSTS ASSOCIATED WITH THE ACQUISITION OF KALEX. THE
WRITE-OFF RELATES TO ACQUIRED RESEARCH AND DEVELOPMENT PROJECTS THAT DO NOT HAVE
A FUTURE ALTERNATIVE USE. ALSO INCLUDES A CHARGE OF $468,389 RELATED TO AN
IMPAIRMENT LOSS FROM THE WRITE-OFF OF CERTAIN LONG-LIVED ASSETS IN ACCORDANCE
WITH STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 "ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF."
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
Consent of Person Nominated to Become a Director
I, Thomas H. O'Brien, hereby consent to the use, in the Registration
Statement on Form S-1 of Viasystems Group, Inc., a Delaware corporation (the
"Company"), to which this Consent is filed as an exhibit, of my name as a person
nominated to become a director of the Company.
February 22, 2000 /s/ THOMAS H. O'BRIEN
------------------------------
Thomas H. O'Brien
<PAGE> 1
EXHIBIT 99.2
Consent of Person Nominated to Become a Director
I, Alex J. Mandl, hereby consent to the use, in the Registration
Statement on Form S-1 of Viasystems Group, Inc., a Delaware corporation (the
"Company"), to which this Consent is filed as an exhibit, of my name as a person
nominated to become a director of the Company.
February 22, 2000 /s/ ALEX J. MANDL
------------------------------
Alex J. Mandl
