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 March 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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 April 30, 1998
<S> <C>
Common Stock 39,555,076
Class A Common Stock 1,908,554
</TABLE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
INDEX
<CAPTION>
PART I - FINANCIAL INFORMATION Page
<S> <C>
Berg Electronics Corp. & Subsidiaries
Condensed Consolidated Balance Sheets as of March 31,
1998 and 4
December 31, 1997
Condensed Consolidated Statements of Operations for the
three 5
months ended March 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows for the
three 6
months ended March 31, 1998 and 1997
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and 10
Results of Operations
PART II - OTHER INFORMATION 11
SIGNATURES 12
</TABLE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
March 31, December
31,
1998 1997
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,099 $ 11,994
Accounts receivable, net 127,466 118,331
Inventories 105,261 96,022
Prepaid expenses and other 19,871 16,890
Total current assets 263,697 243,237
Property, plant and equipment, net 293,552 285,767
Intangibles and other assets 185,491 175,642
Total assets $ 742,740 $ 704,646
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term $ 26,261 $ 26,786
obligations
Accounts payable 56,140 76,779
Accrued liabilities 98,463 96,967
Total current liabilities 180,864 200,532
Long-term obligations, less current 356,304 316,544
maturities
Other long-term liabilities 51,255 51,686
Stockholders' equity:
Contributed capital 127,318 116,973
Retained earnings 61,934 52,062
Cumulative translation adjustments (34,935) (33,151)
Total stockholders' equity 154,317 135,884
Total liabilities and stockholders' $ 742,740 $ 704,646
equity
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</FN></TABLE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net sales $190,081 $
188,511
Operating expenses:
Cost of goods sold 121,958
120,619
Selling, general and administrative 41,429
42,024
Amortization and other 4,438
4,276
Operating income 22,256
21,592
Other income (expense):
Interest expense (6,209)
(6,887)
Amortization of deferred financing costs (152)
(759)
Other, net 28
112
Income before income tax provision 15,923
14,058
Income tax provision 6,051
5,412
Net income $ 9,872 $
8,646
Net income per common share - basic and $ 0.24 $
diluted 0.21
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</FN></TABLE>
<TABLE>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income $ $
9,872 8,646
Adjustments to reconcile net income to
net cash
provided by (used in) operating
activities:
Depreciation
11,286 11,740
Amortization and other non-cash
charges 4,590 5,035
Change in assets and liabilities, net
of
acquisitions:
Accounts receivable
(6,615) (20,472)
Inventories
(7,543) (4,393)
Prepaid expenses and other
(2,060) (2,856)
Accounts payable
(23,368) 1,817
Accrued and other liabilities
(819) 3,952
Other, net
(1,009) (183)
Net cash from operating activities
(15,666) 3,286
Cash flows provided by (used in) investing
activities:
Acquisitions, net of cash of $2,568 and
$0,
respectively (13,391) --
Capital expenditures, net
(19,991) (11,114)
Net cash from investing activities
(33,382) (11,114)
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of long-term
obligations 63,000 38,500
Repayment of long-term obligations
(23,764) (28,159)
Equity proceeds
10,886 --
Costs of equity offering
(625) --
Proceeds from issuance of common stock
63 8
Net cash from financing activities
49,560 10,349
Effect of exchange rate changes on cash
(1,407) (425)
Net change in cash and cash equivalents
(895) 2,096
Cash and cash equivalents at beginning of
the period 11,994 8,999
Cash and cash equivalents at end of the $ $
period 11,099 11,095
<FN>
See accompanying notes to the condensed consolidated financial
statements.
</FN></TABLE>
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 months ended
March 31, 1998, are not necessarily indicative of the results
that may be expected for a full fiscal year. These financial
statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission for the year ended December
31, 1997.
Statement of Cash Flows
Interest paid during the three months ended March 31, 1998 and
1997, is approximately $6,300 and $7,000, respectively.
Income taxes paid during the three months ended March 31, 1998
and 1997, is approximately $800 and $500, respectively.
2. INVENTORIES
<TABLE>
The composition of inventories at March 31, 1998, is as
follows:
<CAPTION>
<S> <C>
Raw materials $ 33,784
Work-in-process 31,562
Finished goods 39,915
Total $105,261
</TABLE>
The carrying value of inventories valued at LIFO, at March 31,
1998, is approximately $49,400, and its current cost is
approximately $34,000.
3. EARNINGS PER SHARE
In accordance with SFAS No. 128, "Earnings Per Share," the
following table reconciles net income and weighted average
shares outstanding to the amounts used to calculate basic and
diluted earnings per share for each of the quarters ended
March 31, 1998 and 1997.
<TABLE><CAPTION>
Three Months Ended
March 31, 1998
Per Share
Net Income Shares Amount
<S> <C> <C> <C>
Basic Earnings Per Share
Income available to common
stockholders $ 9,87 $ 0.24
2 41,279,173
Assumed exercise of options
(treasury method) - --
- 462,440
Diluted Earnings Per Share
Income available to common
stockholders $ 9,87 $ 0.24
2 41,741,613
</TABLE>
<TABLE><CAPTION>
Three Months Ended
March 31, 1997
Per Share
Net Income Shares Amount
<S> <C> <C> <C>
Basic Earnings Per Share
Income available to common
stockholders $ 8,646 $ 0.21
41,019,280
Assumed exercise of options
(treasury method) --
-- 531,505
Diluted Earnings Per Share
Income available to common
stockholders $ 8, $ 0.21
646 41,550,785
</TABLE>
Basic earnings per common share was computed by dividing net income
by the weighted average shares of common stock outstanding during
the period. Diluted earnings per common share for each of the
quarters ended March 31, 1998 and 1997 were determined assuming the
options issued and outstanding were exercised as of the later of
January 1 of the respective year or the grant date. Options to
purchase 56,000 shares of Common Stock at $25.56 per share were
outstanding during the three months ended March 31, 1998, but were
not included in the computation of diluted earnings per share
because the exercise price of such options was greater than the
average market price of the Common Stock. These options expire in
September 2007.
4. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board (FASB)
adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," which establishes standards for
reporting and disclosure of comprehensive income and its
components. Effective January 1, 1998, the Company adopted SFAS
No. 130. For the periods ended March 31, 1998 and 1997,
comprehensive income (loss) was $8,088 and $(3,889), respectively.
The Company's other comprehensive income consists solely of
cumulative translation adjustments.
5. CURRENT EVENTS
On February 6, 1998, the Company completed a secondary offering, on
behalf of certain selling stockholders and the Company, to sell
10,325,028 shares of Common Stock at $25 per share.
6. NEW ACCOUNTING PRONOUNCEMENTS
In April 1998, the FASB adopted Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities," which requires
costs of start-up activities and organization costs to be expensed
as incurred. SOP 98-5 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company will
adopt SOP 98-5 in fiscal 1999 and does not expect adoption to have
a material impact on its Consolidated Financial Statements.
In February 1998, the FASB adopted SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits,"
which establishes reporting requirements related to a business'
pensions and other postretirement benefits. SFAS No. 132 is
effective for fiscal years beginning after December 15, 1997, and
does not apply to interim financial statements in the year of
adoption. The Company will adopt SFAS No. 132 for the fiscal year
ended December 31, 1998.
In June 1997, the FASB adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
establishes reporting requirements related to a business' operating
segments, products and services, geographic areas of operations and
major customers. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997, and does not apply to interim
financial statements in the year of adoption. The Company will
adopt SFAS No. 131 for the fiscal year ended December 31, 1998.
The Company does not expect SFAS No. 131 to have a significant
impact on its Consolidated Financial Statements and the related
disclosures.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared to Three Months Ended
March 31, 1997
Net sales for the three months ended March 31, 1998 are $190.1
million, representing a $1.6 million, or 0.8%, increase from the
comparable period in 1997. In local currencies, net sales increased
approximately 6%.
North American sales represented approximately 50.2% of
consolidated sales and increased $1.7 million, or 1.8%, in the
first quarter of 1998 compared to the first quarter of 1997. This
increase is due primarily to the strong sales in telecom
infrastructure programs which continue to be offset by softness in
the high-end computer sector. Growth in North America continues at
a modest pace due to the continued shift of certain customer
programs to the Company's European and Asian sites and the related
migration of customer direct sales from North America to those
regions.
Sales in Europe represented approximately 30.0% of consolidated
sales for the quarter ended March 31, 1998, and increased by $5.2
million, or 10.1%, due in part to program specific design wins in
the telecom and computer sectors and in part to a stronger economy
in Europe. These increases were partially offset by unfavorable
effects of currency changes between years and by program specific
softness in cellular handset products. Sales in Asia Pacific made
up approximately 19.8% of consolidated sales for the first quarter
of 1998 and decreased $5.3 million, or 12.3% versus the same
quarter in the previous year, primarily due to the unfavorable
effects of currency changes between years, especially in Japan and
Korea, in part to softness in the hard disk drive market resulting
from inventory overhang and in part to a weaker Korean economy.
Changing currencies adversely impacted sales reported in both
Europe and Asia, reducing sales by approximately 11% on a combined
basis, in the first quarter of 1998 compared to the first quarter
of 1997.
Cost of goods sold increased to $122.0 million, or 64.2% of sales,
in the first quarter of 1998 from $120.6 million, or 64.0% of
sales, in the same quarter of 1997, a $1.4 million increase. The
increase is due primarily to the growth in total product volume
sold and in part to the increased cost of palladium used in the
Company's plating process. The increase is partially offset by the
favorable impact of the stronger U.S. dollar against currencies in
Europe and Asia.
Selling, general and administrative expenses for the three months
ended March 31, 1998 decreased by $0.6 million, or 1.4%, versus the
comparable period in 1997. As a percentage of sales, these costs
decreased from 22.3% to 21.8%, due in part to cost containment
activities and in part to the favorable impact of the stronger U.S.
dollar against currencies in Europe and Asia Pacific, offset by
planned incremental spending related to the MEG-ArrayT connector
system program.
Other expense decreased $1.2 million, from $7.5 million in the
first quarter of 1997 to $6.3 million in the first quarter of 1998,
due primarily to reduced interest expense and deferred financing
costs amortization, based on the Credit Facility entered into in
August 1997 containing lower interest rates and financing costs
than the previous credit agreement.
Liquidity and Capital Resources
Net cash used in operating activities was $15.7 million for the
three months ended March 31, 1998, which compares to $3.3 million
provided by operating activities for the comparable period in 1997.
This fluctuation is primarily due to the settlement of a financing
obligation, included in accounts payable at year end, related to a
portion of the Company's inventory and in part to the timing of
the Company's payments to vendors at year end due to holiday timing
at the end of 1997 versus 1996.
Net cash used in investing activities was $33.4 million for the
three months ended March 31, 1998, compared to net cash used of
$11.1 million for the three months ended March 31, 1997. The net
cash used in investing activities for the first three months of
1998 in part consists of costs of the acquisition of the operations
of the Kinloch Group, Ltd, in Glasgow, Scotland, and in part
capital expenditures. Net cash used for investing activities in
the first quarter of 1997 represents capital expenditures. The
increase in capital expenditures in the first quarter of 1998
versus 1997 was primarily due to the MEG-ArrayT program.
Cash provided by financing activities was $49.6 million for the
three months ended March 31, 1998, compared to $10.3 million for
the comparable period in 1997. The source of cash in 1998
represents $10.3 million net proceeds from the issuance of Common
Stock in connection with the secondary offering completed on
February 6, 1998, and the remainder represents net borrowings under
the Credit Facility. The source of cash in 1997 represents net
borrowings under the then-existing credit facility.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed as Part of this Report
<TABLE><CAPTION>
Exhib
it Description of Exhibit
No.
<S> <C>
3.1 Certificate of Elimination of Series B Preferred
Stock and
Series D Preferred Stock of Berg Electronics
Corp., dated
September 11, 1996.(3)
3.2 (Item intentionally omitted.)
3.3 Certificate of Incorporation of Berg Electronics
Corp. f/k/a Berg Electronics Group, Inc.; f/k/a/
Berg Electronics Holdings Corp.; f/k/a Berg CS
Holdings, Inc. together with amendments
thereto.(1)
3.4 Certificate of Amendment to Certificate of
Incorporation, dated February 29, 1996, of Berg
Electronics Corp.(2)
3.5 Bylaws of Berg Electronics Corp.(1)
4.1 Certificate of Designations, Preferences and
Rights of Series A Junior Preferred Stock of Berg
Electronics Corp.(4)
27.0 Financial Data Schedule.*
</TABLE>
(1) Filed previously as an exhibit to the Registration Statement
of Berg Electronics Corp. on Form S-1, Registration No. 33-98240,
and incorporated by reference herein.
(2) Filed previously as an exhibit to the Berg Electronics Corp.
Form 10-K for the fiscal year ended December 31, 1995, and
incorporated by reference herein.
(3) Filed previously as an exhibit to the Berg Electronics Corp.
Forms 10-Q and 10-QA for the quarter ended March 31, 1997, and
incorporated by reference herein.
(4) Filed previously as an exhibit to the Berg Electronics Corp.
Form 10-K for the fiscal year ended December 31, 1997, and
incororated by reference herein.
* Filed herewith.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
BERG ELECTRONICS CORP.
Dated: May 1, 1998 By: /s/ JOSEPH S. CATANZARO
____________________________________
Name: Joseph S.
Catanzaro
Title: Chief
Accounting Officer
EXHIBIT INDEX
<TABLE><CAPTION>
Exhib
it Description of Exhibit
No.
<S> <C>
3.1 Certificate of Elimination of Series B Preferred
Stock and
Series D Preferred Stock of Berg Electronics
Corp., dated
September 11, 1996.(3)
3.2 (Item intentionally omitted.)
3.3 Certificate of Incorporation of Berg Electronics
Corp. f/k/a Berg Electronics Group, Inc.; f/k/a/
Berg Electronics Holdings Corp.; f/k/a Berg CS
Holdings, Inc. together with amendments
thereto.(1)
3.4 Certificate of Amendment to Certificate of
Incorporation, dated February 29, 1996, of Berg
Electronics Corp.(2)
3.5 Bylaws of Berg Electronics Corp.(1)
4.1 Certificate of Designations, Preferences and
Rights of Series A Junior Preferred Stock of Berg
Electronics Corp.(4)
27.0 Financial Data Schedule.*
<FN>
(1) Filed previously as an exhibit to the Registration Statement
of Berg Electronics Corp. on Form S-1, Registration No. 33-98240,
and incorporated by reference herein.
(2) Filed previously as an exhibit to the Berg Electronics Corp.
Form 10-K for the fiscal year ended December 31, 1995, and
incorporated by reference herein.
(3) Filed previously as an exhibit to the Berg Electronics Corp.
Forms 10-Q and 10-QA for the quarter ended March 31, 1997, and
incorporated by reference herein.
(4) Filed previously as an exhibit to the Berg Electronics Corp.
Form 10-K for the fiscal year ended December 31, 1997, and
incororated by reference herein.
* Filed herewith.
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 11,099
<SECURITIES> 0
<RECEIVABLES> 131,399
<ALLOWANCES> 3,933
<INVENTORY> 105,261
<CURRENT-ASSETS> 263,697
<PP&E> 471,286
<DEPRECIATION> 177,734
<TOTAL-ASSETS> 742,740
<CURRENT-LIABILITIES> 180,864
<BONDS> 382,565
0
0
<COMMON> 0
<OTHER-SE> 154,317
<TOTAL-LIABILITY-AND-EQUITY> 742,740
<SALES> 190,081
<TOTAL-REVENUES> 190,081
<CGS> 121,958
<TOTAL-COSTS> 121,958
<OTHER-EXPENSES> 530
<LOSS-PROVISION> 276
<INTEREST-EXPENSE> 6,209
<INCOME-PRETAX> 15,923
<INCOME-TAX> 6,051
<INCOME-CONTINUING> 9,872
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,872
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
