SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 July 29, 1996
----------------------- --------------
<S> <C>
Common Stock 19,055,117
Class A Common Stock 1,420,787
</TABLE>
<PAGE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
INDEX
<CAPTION>
Page
----
<S> <C>
Berg Electronics Corp. & Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 1995
and June 30, 1996................................................... 3
Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 1995 and 1996......................... 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 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............................................... 10
SIGNATURES................................................................ 11
EXHIBIT 11 - COMPUTATION OF NET EARNINGS PER SHARE........................ 12
EXHIBIT 27a - FINANCIAL DATA SCHEDULE..................................... 13
</TABLE>
<PAGE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
December 31, June 30,
1995 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents..................... $ 19,601 $ 12,043
Accounts receivable, net ..................... 117,665 117,112
Inventories................................... 78,242 95,906
Prepaid expenses and other.................... 10,697 12,384
-------- --------
Total current assets........................ 226,205 237,445
Property, plant and equipment, net............ 230,753 232,324
Intangibles and other assets.................. 211,382 208,059
-------- --------
Total assets................................ $668,340 $677,828
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations... $ 32,798 $ 25,563
Accounts payable.............................. 73,299 70,445
Accrued liabilities........................... 76,306 82,470
-------- --------
Total current liabilities................... 182,403 178,478
Long-term obligations, less current maturities.. 305,373 331,287
Other long-term liabilities..................... 36,224 40,503
Stockholders' equity:
Contributed capital........................... 116,886 116,281
Retained earnings............................. 9,930 4,058
Cumulative translation adjustments............ 17,524 7,221
-------- --------
Total stockholders' equity.................. 144,340 127,560
-------- --------
Total liabilities and stockholders' equity.. $668,340 $677,828
======== ========
<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 Six Months Ended
June 30, June 30,
-------------------- --------------------
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales..................... $164,346 $178,063 $324,646 $358,181
Operating expenses:
Cost of goods sold.......... 106,440 116,132 212,256 234,336
Selling, general and
administrative............ 38,031 39,309 74,685 80,523
Amortization and other...... 3,383 3,249 6,700 6,492
--------- --------- --------- ---------
Operating income.............. 16,492 19,373 31,005 36,830
Other income (expense):
Interest expense............ (8,530) (6,818) (17,298) (14,648)
Amortization of deferred
financing costs........... (1,583) (716) (3,183) (1,972)
Other, net.................. (3,129) 639 (541) 1,525
--------- --------- --------- ---------
Income before income tax
provision and extraordinary
items....................... 3,250 12,478 9,983 21,735
Income tax provision.......... 1,035 4,866 3,728 8,568
--------- --------- --------- ---------
Income before extraordinary
items....................... 2,215 7,612 6,255 13,167
Extraordinary items - losses
on early extinguishment of
debt, net of income tax
benefit of $12,443.......... -- -- -- (18,664)
--------- --------- --------- ---------
Net income (loss)............. 2,215 7,612 6,255 (5,497)
Preferred stock:
Accretion and dividends..... (3,636) -- (7,178) (5,469)
Excess of fair value over
book value of redemption
and purchase................ -- -- -- (21,866)
--------- --------- --------- ---------
Net income (loss) applicable
to common shares............. $ (1,421) $ 7,612 $ (923) $(32,832)
========= ========= ========= =========
Net income (loss) per common
share before extraordinary
items....................... $ (0.11) $ 0.37 $ (0.07) $ (0.79)
========= ========= ========= =========
Net income (loss) per common
share....................... $ (0.11) $ 0.37 $ (0.07) $ (1.82)
========= ========= ========= =========
<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>
Six Months Ended
June 30,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income (loss).................................. $ 6,255 $ (5,497)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary item............................. -- 31,107
Depreciation................................... 20,158 22,872
Amortization and other non-cash charges ....... 9,883 8,464
Change in assets and liabilities:
Accounts receivable.......................... (20,532) (2,858)
Inventories.................................. (7,389) (18,903)
Prepaid expenses and other................... 2,373 (3,195)
Accounts payable............................. 13,014 1,560
Accrued and other liabilities................ (5,837) 2,844
Other, net................................... 158 (12,652)
--------- ----------
Net cash from operating activities................... 18,083 23,742
--------- ----------
Cash flows provided by (used in) investing
activities:
Capital expenditures, net........................ (14,090) (28,629)
--------- ----------
Net cash from investing activities............... (14,090) (28,629)
--------- ----------
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.. -- 364,831
Repayment of long-term obligations............... (6,879) (346,152)
Financing costs.................................. -- (25,208)
--------- ----------
Net cash from financing activities................... (6,879) (2,501)
--------- ----------
Effect of exchange rate changes on cash.............. 2,042 (170)
--------- ----------
Net change in cash and cash equivalents.............. (844) (7,558)
Cash and cash equivalents at beginning of the period. 11,981 19,601
--------- ----------
Cash and cash equivalents at end of the period....... $ 11,137 $ 12,043
========= ==========
<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 six months ended June 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 six months ended June 30, 1995 and 1996, is
approximately $17,300 and $14,500, respectively. Income taxes paid for
the six months ended June 30, 1995 and 1996, is approximately $2,500 and
$3,300, respectively.
2. INVENTORIES
<TABLE>
The composition of inventories at June 30, 1996, is as follows:
<CAPTION>
<S> <C>
Raw materials ............................................ $ 30,725
Work-in-process .......................................... 28,742
Finished goods ........................................... 36,439
--------
Total $ 95,906
========
</TABLE>
The carrying value of inventories valued at LIFO, at June 30, 1996, is
approximately $41,800 and its current cost is approximately $34,900.
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 (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 pursuance 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
=====================
Three Months Ended June 30, 1995 Compared to Three Months Ended June 30, 1996
- -----------------------------------------------------------------------------
Net sales for the three months ended June 30, 1996 were $178.1 million,
representing a $13.7 million, or 8.3%, increase from the comparable period in
1995.
North American sales increased $16.1 million, or 20.1%, in the second quarter
of 1996 compared to the second quarter of 1995. This increase is due
primarily to an approximate $8.8 million, or 38.3%, 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. Additionally, second quarter 1996 contained $3.2 million
of sales from Berg's RF/Coaxial Division, acquired in November 1995.
Sales in Europe decreased by $3.4 million, or 8.1%, primarily due to the
decline of sales in certain markets as a result of weak economies,
particularly in Germany. Sales in Asia Pacific increased $1.0 million, or
2.3%. The improvement in Asia Pacific was primarily due to increased demand
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 7.4% on a combined basis,
in the second quarter of 1996 compared to the second quarter of 1995.
Due primarily to increased sales volume, cost of goods sold increased by $9.7
million, or 9.1%, over the comparable period in 1995. Cost of goods sold as a
percent of sales increased to 65.2% from 64.8% in the second quarter of 1995,
reflecting continued price pressure, but improved from 65.6% in the first
quarter of 1996 as a result of improved product sales mix and the Company's
cost reduction activities.
Due primarily to increased sales volume, selling, general and administrative
expenses increased by $1.3 million, or 3.4%, over the comparable period in
1995, but as a percentage of sales decreased from 23.1% to 22.1% 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 $6.3 million, from $13.2 million in the second quarter
of 1995 to $6.9 million in the second quarter of 1996, due primarily to
reduced interest expense and deferred financing costs amortization in 1996,
due to the New Credit Facility entered into in February 1996 containing lower
interest rates and financing costs than the previous credit agreement.
Additionally, changing currencies resulted in currency gains in the second
quarter of 1996, compared to currency losses in the second quarter of 1995.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1996
- -------------------------------------------------------------------------
Net sales for the six months ended June 30, 1996 were $358.2 million,
representing a $33.5 million, or 10.3%, increase from the comparable period in
1995.
North American sales increased $30.2 million, or 18.4%, in the first six
months of 1996 compared to the comparable period in 1995. This increase is
due primarily to a $16.4 million, or 33.8%, 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.
Additionally, the first six months of 1996 contained $5.9 million of sales
from Berg's RF/Coaxial Division, acquired in November 1995.
Sales in Europe decreased by $2.7 million, or 3.3%, due primarily to the
decline of sales in certain markets as a result of weak economies,
particularly in Germany. Sales in Asia Pacific increased $6.0 million, or
7.6%. 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 3.7% on a combined basis in the first half of
1996 compared to the first half of 1995.
Due primarily to increased sales volume, cost of goods sold increased by $22.1
million, or 10.4%, 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 three consecutive quarters to
reach its current level of 65.4%.
Due primarily to the increased sales volume, selling, general and
administrative expenses increased by $5.8 million, or 7.8%, over the
comparable period in 1995, but as a percentage of sales decreased from 23.0%
to 22.5% in the first half 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 $5.9 million, from $21.0 million in the first half of
1995 to $15.1 million in the first half of 1996 due to reduced interest
expense and amortization of financing costs in 1996 due to 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 $23.7 million for the six months
ended June 30, 1996, which compares to $18.1 million provided by operating
activities for the comparable period in 1995. This fluctuation is primarily
due to increased earnings, partially offset by the build up of inventory at
the Company's Kansas City facility to facilitate the move of the Kansas City
operations, which began in May 1996, to other Company facilities.
Net cash used in investing activities was $28.6 million for the six months
ended June 30, 1996, compared to net cash used of $14.1 million for the six
months ended June 30, 1995. The net cash used in investing activities for the
first six months of 1996 includes construction costs of the new Huntingdon
County facility, and for the first six months of 1995 and 1996, the remainder
represents capital expenditures.
Cash used by financing activities was $6.9 million for the six months ended
June 30, 1995, compared to $2.5 million for the comparable period in 1996.
The use of cash in 1995 represents debt repayments. The use of cash in 1996
represents proceeds from the Company's New Credit Facility and initial public
offering, offset by funds used to (i) repay the Amended Credit Agreement, (ii)
redeem and purchase all outstanding Preferred Stock, (iii) redeem and purchase
all outstanding Debentures and, (iv) pay financing costs related to the
aforementioned transactions. In addition, the Company borrowed $16.0 million
and repaid $8.0 million under the New Revolving Facility and borrowed $350
million and repaid $8.75 million under the New Term Loan. The Company has
borrowed $6.7 million in total, $2.9 million in 1996, and repaid $0.2 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: July 30, 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 Six Months Ended
June 30, June30,
-------------------------- ----------------------------
1995 1996 1995 1996
------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Net income (loss)
applicable to
common shares.... ($1,421,000) $ 7,612,000 ($923,000) ($32,832,000)
============= =========== ============ ==============
Average number of
common shares
outstanding...... 12,988,771 20,471,038 12,988,771 17,990,681
Assumed exercise of
options (treasury
stock method).... -- 292,449 -- --
------------- ----------- ------------ --------------
Shares for primary
computation...... 12,988,771 20,763,487 12,988,771 17,990,681
============= =========== ============ ==============
Net earnings (loss)
per share........ $ (0.11) $ 0.37 $ (0.07) $ (1.82)
============= =========== ============ ==============
</TABLE>
<TABLE>
Fully Diluted Earnings (Loss) per Share:
- ---------------------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30, June30,
-------------------------- ----------------------------
1995 1996 1995 1996
------------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Net income (loss)
applicable to
common shares.... ($1,421,000) $ 7,612,000 ($923,000) ($32,832,000)
============= =========== ============ ==============
Average number of
common shares
outstanding...... 12,988,771 20,471,038 12,988,771 17,990,681
Assumed exercise of
options (treasury
stock method).... -- 292,449 -- --
------------- ----------- ------------ --------------
Shares for fully
diluted
computation...... 12,988,771 20,763,487 12,988,771 17,990,681
============= =========== ============ ==============
Net earnings (loss)
per share........ $ (0.11) $ 0.37 $ (0.07) $ (1.82)
============= =========== ============ ==============
</TABLE>
<PAGE>
<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
<S> <C>
<CIK> 0000904900
<NAME> BERG ELECTRONICS CORP.
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,043
<SECURITIES> 0
<RECEIVABLES> 121,487
<ALLOWANCES> 4,375
<INVENTORY> 95,906
<CURRENT-ASSETS> 237,445
<PP&E> 343,550
<DEPRECIATION> 111,226
<TOTAL-ASSETS> 677,828
<CURRENT-LIABILITIES> 178,478
<BONDS> 331,287
0
0
<COMMON> 0
<OTHER-SE> 127,560
<TOTAL-LIABILITY-AND-EQUITY> 677,828
<SALES> 358,181
<TOTAL-REVENUES> 358,181
<CGS> 234,336
<TOTAL-COSTS> 234,336
<OTHER-EXPENSES> 636
<LOSS-PROVISION> 899
<INTEREST-EXPENSE> 16,620
<INCOME-PRETAX> 21,735
<INCOME-TAX> 8,568
<INCOME-CONTINUING> 13,167
<DISCONTINUED> 0
<EXTRAORDINARY> (18,664)
<CHANGES> 0
<NET-INCOME> (5,497)
<EPS-PRIMARY> (1.82)
<EPS-DILUTED> (1.82)
</TABLE>
