SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
-------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------------- -----------------------
1-14080
(Commission File Number)
Berg Electronics Corp.
(Exact name of Registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2451903
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 726-1323
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Outstanding at
Class October 28, 1996
----------------------- ----------------
<S> <C>
Common Stock 19,093,609
Class A Common Stock 1,384,291
</TABLE>
<PAGE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
INDEX
<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION Page
----
Berg Electronics Corp. & Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 1995
and September 30, 1996............................................. 3
Condensed Consolidated Statements of Operations for the three
and nine months ended September 30, 1995 and 1996.................. 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1996........................... 5
Notes to Condensed Consolidated Financial Statements................. 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 8
PART II - OTHER INFORMATION.............................................. 11
SIGNATURES............................................................... 12
EXHIBIT 11 - COMPUTATION OF NET EARNINGS (LOSS) PER SHARE................ 13
EXHIBIT 27a - FINANCIAL DATA SCHEDULE.................................... 14
</TABLE>
<PAGE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31, September 30,
------------ -------------
<S> <C> <C>
1995 1996
------------ ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents....................... $ 19,601 $ 12,168
Accounts receivable, net........................ 117,665 110,947
Inventories..................................... 78,242 95,835
Prepaid expenses and other...................... 10,697 11,456
------------ ------------
Total current assets.......................... 226,205 230,406
Property, plant and equipment, net.............. 230,753 235,897
Intangibles and other assets.................... 211,382 207,729
------------ ------------
Total assets.................................. $ 668,340 $ 674,032
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations..... $ 32,798 $ 25,563
Accounts payable................................ 73,299 57,775
Accrued liabilities............................. 76,306 86,072
------------ ------------
Total current liabilities..................... 182,403 169,410
Long-term obligations, less current maturities.... 305,373 330,915
Other long-term liabilities....................... 36,224 40,067
Stockholders' equity:
Contributed capital............................. 116,886 116,335
Retained earnings............................... 9,930 10,618
Cumulative translation adjustments.............. 17,524 6,687
------------ ------------
Total stockholders' equity.................... 144,340 133,640
------------ ------------
Total liabilities and stockholders' equity.... $ 668,340 $ 674,032
============ ============
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales.......................... $170,829 $172,537 $495,475 $530,718
Operating expenses:
Cost of goods sold............... 115,531 112,201 327,787 346,537
Selling, general and
administrative................. 38,416 38,724 113,101 119,247
Amortization and other........... 3,303 3,240 10,003 9,732
--------- --------- --------- ---------
Operating income................... 13,579 18,372 44,584 55,202
Other income (expense):
Interest expense................. (8,939) (6,964) (26,237) (21,612)
Amortization of deferred
financing costs................ (1,558) (708) (4,741) (2,680)
Other, net....................... 1,948 (34) 1,407 1,491
--------- --------- --------- ---------
Income before income tax
provision and extraordinary
items............................ 5,030 10,666 15,013 32,401
Income tax provision............... 1,990 4,106 5,718 12,674
--------- --------- --------- ---------
Income before extraordinary
items............................ 3,040 6,560 9,295 19,727
Extraordinary items - losses on
early extinguishment of debt,
net of income tax benefit of
$12,443.......................... -- -- -- (18,664)
--------- --------- --------- ---------
Net income......................... 3,040 6,560 9,295 1,063
Preferred stock:
Accretion and dividends.......... (3,732) -- (10,910) (5,469)
Excess of fair value over
book value of redemption
and purchase................... -- -- -- (21,866)
--------- --------- --------- ---------
Net income (loss) applicable to
common shares.................... $ (692) $ 6,560 $ (1,615) $(26,272)
========= ========= ========= =========
Net income (loss) per common
share before extraordinary
items............................ $ (0.05) $ 0.32 $ (0.12) $ (0.40)
========= ========= ========= =========
Net income (loss) per common
share............................ $ (0.05) $ 0.32 $ (0.12) $ (1.40)
========= ========= ========= =========
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
----------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income.......................................... $ 9,295 $ 1,063
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Extraordinary item.............................. -- 31,107
Depreciation.................................... 31,608 33,590
Amortization and other non-cash charges......... 14,744 12,411
Change in assets and liabilities:
Accounts receivable........................... (27,675) 2,972
Inventories................................... (5,107) (18,871)
Prepaid expenses and other.................... 2,877 (3,312)
Accounts payable.............................. 11,096 (11,076)
Accrued and other liabilities................. 644 6,497
Other, net.................................... 1,176 (16,102)
---------- ----------
Net cash from operating activities.................... 38,658 38,279
---------- ----------
Cash flows provided by (used in) investing activities:
Capital expenditures, net........................... (23,160) (42,849)
---------- ----------
Net cash from investing activities.................. (23,160) (42,849)
---------- ----------
Cash flows provided by (used in) financing activities:
Equity proceeds..................................... -- 147,033
Redemption and purchase of preferred stock.......... -- (143,005)
Proceeds from issuance of long-term obligations..... -- 381,093
Repayment of long-term obligations.................. (15,283) (362,786)
Financing costs..................................... -- (25,208)
Proceeds from issuance of common stock.............. -- 54
---------- ----------
Net cash from financing activities.................... (15,283) (2,819)
---------- ----------
Effect of exchange rate changes on cash............... 486 (44)
---------- ----------
Net change in cash and cash equivalents............... 701 (7,433)
Cash and cash equivalents at beginning of the period.. 11,981 19,601
---------- ----------
Cash and cash equivalents at end of the period........ $ 12,682 $ 12,168
========== ==========
<FN>
See accompanying notes to the condensed consolidated financial statements
</TABLE>
<PAGE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
Unaudited Interim Condensed Consolidated Financial Statements
-------------------------------------------------------------
The unaudited interim condensed consolidated financial statements reflect
all adjustments consisting only of normal recurring adjustments which are,
in the opinion of management, necessary for a fair presentation of
financial position and results of operations. The results for the three
and nine months ended September 30, 1996, are not necessarily indicative
of the results that may be expected for a full fiscal year.
Statement of Cash Flows
-----------------------
Interest paid for the nine months ended September 30, 1995 and 1996, is
approximately $23,400 and $20,300, respectively. Income taxes paid for
the nine months ended September 30, 1995 and 1996, is approximately $3,100
and $3,700, respectively.
2. INVENTORIES
<TABLE>
The composition of inventories at September 30, 1996, is as follows:
<CAPTION>
<S> <C>
Raw materials.................................................. $ 35,240
Work-in-process................................................ 26,774
Finished goods................................................. 33,821
--------
Total $ 95,835
========
</TABLE>
The carrying value of inventories valued at LIFO, at September 30, 1996,
is approximately $44,900 and its current cost is approximately $37,700.
3. CURRENT EVENTS
On February 29, 1996, the Company entered into a new credit facility (the
"New Credit Facility") that, among other things, refinanced the Amended
and Restated Credit Agreement dated as of May 23, 1994. The refinancing
of the Amended Credit Agreement resulted in the write off of $12,755 of
deferred financing costs. This write off, net of income tax, is
classified with other extraordinary items on the condensed consolidated
statements of operations.
The New Credit Facility consists of a $350,000 term loan (the "New Term
Loan") and a $100,000 Revolving Credit Facility (the "New Revolving
Facility"). Mandatory principal payments are due in semi-annual
installments with a final installment due on December 31, 2002. Amounts
outstanding under the New Revolving Facility are due on December 31, 2002.
Borrowings under the Term Loan and the New Revolving Facility bear
interest, at the option of the Company, at a rate per annum equal to (i)
0.5% plus the Agent's Alternate Base Rate (as defined in the New Credit
Facility) or (ii) 1.50% plus the Eurodollar rate per annum. Interest
payment dates vary depending on the interest rate option selected by the
Company, but generally, interest is paid quarterly. The commitment fee
on the unused portion of the New Revolving Facility is 0.375% per annum
on the average daily available balance. The New Credit Facility contains
several financial covenants that, among other things, require the Company
to maintain certain financial ratios and restrict the Company's ability to
incur indebtedness, make capital expenditures and pay dividends.
On March 6, 1996, Berg consummated the sale of 7,475,000 common shares in
its initial public offering. The Company received net proceeds of
approximately $147,033 from the offering.
On March 18, 1996, the Company redeemed 50% of the outstanding shares of
the Company's Series E Preferred Stock, par value $.01 per share, including
accrued and unpaid dividends and a redemption premium thereon for
approximately $44,253 (the "Series E Preferred Redemption"). On March 19,
1996, the Company purchased all of the outstanding shares of Series E
Preferred Stock not purchased by the Company pursuant to the Series E
Preferred Redemption for approximately $47,819. Also on March 19, 1996,
the Company redeemed all of the outstanding shares of the Company's Series
B Preferred Stock, par value $.01 per share, including accrued and unpaid
dividends thereon, for approximately $50,933. The excess, $21,866, of the
fair value of the consideration transferred to the holders of the Preferred
Stock over the carrying amount of the Preferred Stock is reflected as a
reduction from net income to determine net income (loss) applicable to
common shares in the condensed consolidated statements of operations.
On April 8, 1996, Berg redeemed $30,000 aggregate principal amount of its
11 3/8% Guaranteed Senior Subordinated Debentures Due 2003 (the
"Debentures"), including accrued and unpaid interest and a redemption
premium thereon (the "Debenture Redemption") for approximately $34,487.
On April 9, 1996, Berg purchased all of the outstanding Debentures not
redeemed by Berg pursuant to the Debenture Redemption for approximately
$82,568. The redemption and purchase of the Debentures resulted in a
write off of $4,900 of deferred financing costs. This write off, net of
income tax, is classified with other extraordinary items on the condensed
consolidated statement of operations. Additionally, the redemption and
purchase premium and the related fees and expenses of the Debenture
Redemption and purchase, totaling $13,452, is classified with other
extraordinary items, net of tax, in the condensed consolidated statements
of operations.
On June 25, 1996, the Company entered into a memorandum of understanding
with Ericsson Telecom AB of Sweden (Ericsson) to acquire the connector
business of Ericsson. The Company expects to reach a definitive agreement
with Ericsson during the fourth quarter of 1996.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
=====================
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net sales for the three months ended September 30, 1996 were $172.5 million,
representing a $1.7 million, or 1.0%, increase from the comparable period in
1995.
North American sales represented approximately 54% of consolidated sales and
increased $7.9 million, or 9.3%, in the third quarter of 1996 compared to the
third quarter of 1995. This increase is due primarily to an approximate $6.9
million, or 26.2%, increase in telecommunications products sales due to
stronger demand than in the same period in the prior year for backplanes used
in switching and transmission equipment, translating into strong demand for
the Berg connectors used in these applications.
Sales in Europe represented approximately 22% of consolidated sales and
decreased by $1.5 million, or 3.7%, primarily due to unfavorable effects of
currency changes between years and in part due to weakness in certain markets
as a result of weak economies, particularly in Germany. Sales in Asia Pacific
decreased $4.7 million, or 10.2%. The decline in Asia Pacific was due in part
to unfavorable effects of currency changes between years and in part to
increased price pressures in the Company's major end-user markets (computers
and telecommunications), particularly in Japan. Changing currencies adversely
impacted sales recorded in Europe and Asia, reducing sales by approximately
4.7% on a combined basis, in the third quarter of 1996 compared to the third
quarter of 1995.
Cost of goods sold decreased by $3.3 million to 65.0% of sales from 67.6% of
sales in the third quarter of 1995, and improved from 65.2% of sales in the
second quarter of 1996 primarily as a result of improved product sales mix and
the Company's cost reduction activities. Cost of goods sold in the third
quarter of 1995 also included non-recurring costs in connection with the
combination of Berg's cable assembly manufacturing facilities.
Due primarily to increased sales volume, selling, general and administrative
expenses increased by $0.3 million, or .8%, over the comparable period in
1995, but as a percentage of sales decreased from 22.5% to 22.4% due in part
to cost reduction and containment activities and also to the spreading of the
fixed components of such expenses over a higher sales volume.
Other expense decreased $.8 million, from $8.5 million in the third quarter of
1995 to $7.7 million in the third quarter of 1996, due primarily to reduced
interest expense and deferred financing costs amortization in 1996, based on
the New Credit Facility entered into in February 1996 containing lower
interest rates and financing costs than the previous credit agreement.
Offsetting the improvement in financing costs, changing currencies resulted in
currency gains of only $.4 million in the third quarter of 1996, compared to
$2.6 million in the third quarter of 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Net sales for the nine months ended September 30, 1996 were $530.7 million,
representing a $35.2 million, or 7.1%, increase from the comparable period in
1995.
North American sales increased $38.2 million, or 15.3%, in the first nine
months of 1996 compared to the comparable period in 1995. This increase is
due primarily to a $23.3 million, or 31.1%, increase in telecommunications
products sales due to stronger demand than in the same period in the prior
year for backplanes, used in switching and transmission equipment, translating
into strong demand for the Berg connectors used in these applications.
Sales in Europe decreased by $4.2 million, or 3.4%, due primarily to the
decline of sales in certain markets as a result of weak economies,
particularly in Germany. Sales in Asia Pacific increased $1.2 million, or
1.0%. The improvement in Asia Pacific was primarily due to increased demand
in the Company's major end-user markets (computers and telecommunications).
Changing currencies adversely impacted sales recorded in Europe and Asia,
reducing sales by approximately 4.1% on a combined basis, in the first nine
months of 1996 compared to the first nine months of 1995.
Due primarily to increased sales volume, cost of goods sold increased by $18.8
million, or 5.7%, over the comparable period in 1995. As a result of cost
containment and reduction activities, cost of goods sold as a percent of sales
showed continued improvement in each of the last four consecutive quarters to
reach its current level of 65.3%.
Due primarily to the increased sales volume, selling, general and
administrative expenses increased by $6.1 million, or 5.4%, over the
comparable period in 1995, but as a percentage of sales decreased from 22.8%
to 22.5% in the first nine months of 1996 due in part to cost reduction and
containment activities and also to the spreading of the fixed components of
such expenses over a higher sales volume.
Other expense decreased $6.8 million, from $29.6 million in the first nine
months of 1995 to $22.8 million in the first nine months of 1996 due to
reduced interest expense and amortization of financing costs in 1996 based on
the New Credit Facility entered into in February 1996 containing lower
interest rates and financing costs than the previous credit agreement.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $38.3 million for the nine
months ended September 30, 1996, which compares to $38.7 million provided by
operating activities for the comparable period in 1995. This fluctuation is
primarily due to increased earnings, offset by the temporary build up of
inventory to facilitate the move of the Kansas City operations, which began in
May 1996 and continued through the third quarter, to other Company facilities.
Net cash used in investing activities was $42.8 million for the nine months
ended September 30, 1996, compared to net cash used of $23.2 million for the
nine months ended September 30, 1995. The net cash used in investing
activities for the first nine months of 1996 includes construction costs of
the new Huntingdon County facility, and, for the first nine months of 1995 and
1996, the remainder represents capital expenditures.
Cash used by financing activities was $15.3 million for the nine months ended
September 30, 1995, compared to $2.8 million for the comparable period in
1996. The use of cash in 1995 represents debt repayments. The use of cash in
1996 represents funds used to (i) repay the Amended Credit Agreement, (ii)
redeem and purchase all outstanding Preferred Stock, (iii) redeem and purchase
all outstanding Debentures, (iv) pay financing costs related to the
aforementioned transactions, and (v) repay debt under the New Credit Facility,
offset by proceeds from the Company's New Credit Facility and initial public
offering. In addition, the Company has borrowed $9.5 million in total, $5.7
million in 1996, and repaid $0.4 million in 1996, of $13.0 million committed
loans related to construction of the Company's new facility in Huntingdon
County, Pennsylvania.
<PAGE>
PART II. OTHER INFORMATION
NONE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BERG ELECTRONICS CORP.
Dated: October 28, 1996 By: /s/ JAMES N. MILLS
_________________________________
Name : James N. Mills
Title: Chairman of the Board and
Chief Executive Officer
By: /s/ DAVID M. SINDELAR
________________________________
Name : David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer
<TABLE>
EXHIBIT 11
Berg Electronics Corp.
COMPUTATION OF NET EARNINGS (LOSS) PER SHARE
Primary Earnings (Loss) per Share:
- ---------------------------------
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1995 1996 1995 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net income (loss)
applicable to
common shares...... $ (692,000) $ 6,560,000 $(1,615,000) $(26,272,000)
============ ============ ============ =============
Average number of
common shares
outstanding........ 12,988,771 20,475,991 12,988,771 18,825,164
Assumed exercise of
options (treasury
stock method)...... -- 278,575 -- --
------------ ------------ ------------ -------------
Shares for primary
computation........ 12,988,771 20,754,566 12,988,771 18,825,164
============ ============ ============ =============
Net earnings (loss)
per share.......... $ (0.05) $ 0.32 $ (0.12) $ (1.40)
============ ============ ============ =============
</TABLE>
<TABLE>
Fully Diluted Earnings (Loss) per Share:
- ---------------------------------------
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
1995 1996 1995 1996
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net income (loss)
applicable to
common shares...... $ (692,000) $ 6,560,000 $(1,615,000) $(26,272,000)
============ ============ ============ =============
Average number of
common shares
outstanding........ 12,988,771 20,475,991 12,988,771 18,825,164
Assumed exercise of
options (treasury
stock method)...... -- 291,575 -- --
------------ ------------ ------------ -------------
Shares for fully
diluted
computation........ 12,988,771 20,767,566 12,988,771 18,825,164
============ ============ ============ =============
Net earnings (loss)
per share.......... $ (0.05) $ 0.32 $ (0.12) $ (1.40)
============ ============ ============ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<CIK> 0000904900
<NAME> BERG ELECTRONICS CORP.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,168
<SECURITIES> 0
<RECEIVABLES> 116,490
<ALLOWANCES> 5,543
<INVENTORY> 95,835
<CURRENT-ASSETS> 230,406
<PP&E> 355,818
<DEPRECIATION> 119,921
<TOTAL-ASSETS> 674,032
<CURRENT-LIABILITIES> 169,410
<BONDS> 330,915
0
0
<COMMON> 0
<OTHER-SE> 133,640
<TOTAL-LIABILITY-AND-EQUITY> 674,032
<SALES> 530,718
<TOTAL-REVENUES> 530,718
<CGS> 346,537
<TOTAL-COSTS> 346,537
<OTHER-EXPENSES> 954
<LOSS-PROVISION> 839
<INTEREST-EXPENSE> 24,292
<INCOME-PRETAX> 32,401
<INCOME-TAX> 12,674
<INCOME-CONTINUING> 19,727
<DISCONTINUED> 0
<EXTRAORDINARY> (18,664)
<CHANGES> 0
<NET-INCOME> 1,063
<EPS-PRIMARY> (1.40)
<EPS-DILUTED> (1.40)
</TABLE>
