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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
1-14080
(Commission File Number)
BERG ELECTRONICS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
75-2451903
(I.R.S. Employer Identification No.)
101 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63105
(314) 726-1323
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $0.01 par value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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
registrants were required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of January 29, 1998, the aggregate market value of the registrant's
voting stock held by non-affiliates was approximately $571.8 million. As of
January 29, 1998, the number of outstanding shares of the registrant's Common
Stock, par value $.01 per share, was 39,099,791, and the number of outstanding
shares of the registrant's Class A Common Stock, par value $.01 per share, was
1,908,554. No established public trading market exists for the Registrant's
Class A Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Berg Electronics Corp.'s Proxy Statement for the 1998 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.
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PART I
ITEM 1. BUSINESS
Unless the context otherwise requires, references to the "Company" mean
Berg Electronics Corp. and its subsidiaries, including Berg Electronics Group,
Inc., a Delaware corporation ("Berg"), taken as a whole.
THE COMPANY
The Company is a leading global designer, manufacturer and marketer of
electronic connectors and cable assembly products for applications primarily in
the telecommunications, computer and industrial markets. Electronic connectors
are electro-mechanical devices that allow an electronic signal to pass from one
device to another. They are used to connect wires, cables, printed circuit
boards, flat cable and other electronic components to each other and to related
equipment. Connectors are found in virtually every electronic product including
computers, printers, disk drives, modems, VCRs, radios, medical instruments,
airplanes, appliances, cellular telephones, pagers and automobiles. The
Company's connectors and cable assemblies are used to conduct signals (primarily
data, video and voice) in a wide range of sophisticated electronic applications
including: (i) telecommunications products such as cellular phones, pagers, and
transmission and switching equipment; (ii) personal computing equipment and
peripherals such as notebook and desk top computers, printers, disk drives and
workstations; and (iii) large data processing equipment such as servers,
supercomputers, data communications systems, mainframe computers and
mini-computers.
While the Company's worldwide operations can be grouped into several
geographic regions, the Company operates in only one business
segment -- electrical and electronic connection devices. Within this business
segment, the Company primarily competes in the computer and telecommunications
markets, and to a lesser extent, in the industrial and instrumentation markets.
The Company believes it is one of the four largest electronic connector, socket
and cable assembly manufacturers in the world (with a market share of
approximately 3%), one of the world's top two manufacturers of connectors for
the telecommunications market (with a market share of approximately 4%), and one
of the world's top three connectors manufacturers for the computer market (with
a market share of approximately 5%).
The Company is a holding company that owns all of the outstanding capital
stock of Berg. The Company and Berg were incorporated in Delaware in November
1992 by an investor group led by Hicks, Muse, Tate & Furst Incorporated ("Hicks,
Muse") and Mills & Partners, Inc. to facilitate the acquisition of the Connector
Systems Business of the Electronics Division of E.I. du Pont de Nemours and
Company (the "Predecessor") in February 1993 (the "Initial Acquisition").
Subsequent to the Initial Acquisition, the Company has made seven strategic
acquisitions. The most significant of these were the acquisitions of the captive
Connector System Business of the Microelectronics division of AT&T Corp. (the
"Lucent Acquisition") in May 1994 and the captive connector business of Ericsson
Telecom AB located in Sweden (the "Ericsson Acquisition") in December 1996.
These acquisitions expanded significantly the Company's presence in the
telecommunications sector, broadened the Company's product lines and established
the Company as a preferred supplier with these two key customers. The other five
acquisitions expanded both the Company's customer base and its offerings of
cable assemblies (used in both telecommunications equipment and computers),
sockets (used in computers) and radio frequency and microwave connectors (used
in telecommunications and other equipment). These seven acquisitions were made
for consideration aggregating approximately $156.3 million (including fees and
expenses).
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MARKETS SERVED BY THE COMPANY
The Company's products are designed for use primarily in the
telecommunications and computer markets, and to a lesser extent, in the
industrial and instrumentation markets. The percentage of the Company's net
sales derived from each of these markets in 1997 is presented in the table
below.
<TABLE>
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MARKET % PRODUCT APPLICATIONS
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TELECOMMUNICATIONS.................... 54 Mobile communications: Microwave equipment, cellular
phones, hand-held radios, modems and pagers
Transmission and switching: Telephone switching
equipment
COMPUTER.............................. 37 High-end data processing: Supercomputers, servers, data
communications, mainframe computers, mini-computers and
related peripherals such as disk drives and tape drives
Personal computing: Notebook computers, desk top
computers, printers, disk drives and workstations
INDUSTRIAL AND INSTRUMENTATION........ 5 Process control equipment, medical equipment,
instrumentation and testing equipment
OTHER................................. 4 Military and aerospace equipment, specialized automotive
and consumer electronics
</TABLE>
PRODUCTS
The electronics industry generally classifies electronic package
interconnection into six levels, and products are classified in accordance with
the level that they serve. The Company manufactures more than 45,000 products
which are grouped into 25 product lines. The Company's products extend to each
of the six levels of interconnection.
Level 1. Level 1 refers to a direct attachment of a component part to a
printed circuit board ("PCB"), which does not involve a connector. The Company
assists customers in the design of discrete interconnect devices called
application-specific modules ("ASMs") for a wide range of applications that
contain active components such as microprocessor integrated circuits and passive
components such as capacitors or sockets. Some passive components and all active
components are acquired from vendors. In the process of manufacturing ASMs, the
Company attaches the active and passive components directly to the specific-
purpose PCBs, which are either produced by the Company or acquired from a
vendor.
Level 2. Level 2 connectors consist of on-board connecting devices,
generally known as sockets, that attach to PCBs and facilitate replacement of
expensive microprocessor integrated circuits on the PCB. Sockets, when applied,
are always utilized inside an electronic device or "box" and are required for a
wide range of applications. The Company believes that it has one of the
industry's broadest offerings in pin-grid array sockets which are used to
connect microprocessors to the PCB. The Company also has a broad product
offering of dual inline memory modules ("DIMM") which are used to connect memory
chips to the PCB. Examples of the Company's Level 2 connectors include Ball Grid
Array Small Outline DIMM and MEG-Array(TM) connectors.
Level 3. Level 3 connectors are used to connect or "stack" PCBs in either
parallel fashion or at 90 degree angles to one another, typically inside a
computer or telecommunications processing device. Level 3 PCB connectors are low
frequency signal conducting connectors usually associated with data
transmission. Historically, the Company's principal product offering has
consisted of this type of connector; many of the Company's Level 3 connectors
have become industry standards. The Company's broad product offering of Level 3
connectors ranges from its mature product lines, including the widely recognized
Fastech(R) (3.17mm spacing between contacts), BergStik(TM) (2.54mm), DUBOX(TM)
(2.54mm) and other 2.54mm interconnection product lines, to newer products which
include H.P.C.(TM) (2.54mm), Minitek(TM) (2mm), Metral(TM) (2mm), Rib-cage(TM)
(1.27mm), Conan(TM) (1mm), BergStak(TM) (0.8mm and 0.5mm), Micropax(TM) (0.64mm)
and MEG-Array(TM). The Company's newer generation Level 3 products allow the
Company to satisfy its customer
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demands for increasingly compact and high density products serving applications
such as compact mobile communications and computing devices. The Company
believes it is the world's second largest supplier of PCB connectors to the
telecommunications industry and the third largest supplier of PCB Connectors to
the computer industry. The Company's marketing and research will continue to
focus on improvements in density and miniaturization to meet the emerging PCB
connector needs of its customers.
Level 4. Level 4 connectors consist of devices that connect PCBs inside a
box. The Company's product offerings in this category include connectors used to
terminate discrete wire, planar cable and flexible printed circuits, such as
"quickie" insulation displacement connectors for terminating planar cable and
Reliflex(R), Duflex(TM) and 0.5mm flat printed circuit connectors for
terminating flat printed circuit cable.
Level 5. Level 5 connectors (also referred to as rectangular or
input/output connectors) consist of devices that connect cable to cable or wire
to wire, and are either located inside a box or provide an output connector from
the box to other equipment. Historically, the Company's sales in this category
have been generated primarily to meet the special requests of major customers.
Examples of such connectors include a flex cable assembly sold to Volkswagen for
use in its automatic gear box, and a wide range of radio frequency and coaxial
connectors used in the transmission of voice, video and data. The Company's
history of innovation in Level 5 includes its invention of the modular jack used
to connect telephone, computer and facsimile equipment. The Company's research
and development efforts relative to this product line have focused on the next
generation of input/output connectors that require smaller and more dense
connectors for a wide range of applications, such as universal serial bus
("USB"), very high density connector interface ("VHDCI"), and others such as the
Company's MetaGig product offering.
Level 6. Level 6 connectors or cable assemblies consist of an integrated
cable terminated with a connector at each end. Level 6 connectors such as the
SCSI cables manufactured by the Company connect two pieces of equipment. For
instance, the SCSI cable can be used to connect a printer to a personal
computer.
The Company's sales in 1997 in each category ranked in descending order by
dollar amount were: Level 3 (PCB to PCB or "board to board"), Level 4 (wire to
board), Level 6 (cable assemblies), Level 5 (wire to wire), Level 1 (ASMs) and
Level 2 (sockets).
NEW PRODUCT DEVELOPMENT
Approximately 35% of the Company's 1997 net sales were generated from
products developed by the Company within the past five years. Developing new
products requires substantial investments in research and development. The
Company targets research and development expenditures specifically to broaden
its product line and to expand its technical capabilities in order to meet its
customers' anticipated needs. In 1995, 1996 and 1997, the Company's research and
development expenditures were $39.1 million, $42.3 million and $46.8 million,
respectively. Of the $128.2 million invested in research and development during
the last three fiscal years, $79.3 million ($24.8 million, $26.1 million and
$28.4 million in 1995, 1996 and 1997, respectively) qualifies for creation and
application of new and improved products and processes as defined in SFAS No. 2,
"Accounting for Research and Development Costs."
The Company had approximately 400 full-time employees in fiscal 1997
engaged in research, development and engineering functions, primarily at its
United States, European and Asian research and development centers. In addition,
the Company has application engineers located at Lucent's Bell Laboratories
("Bell Labs"). Through its access to Bell Labs, the Company is not only able to
take advantage of the research capabilities of the Bell Labs facility, but is
also able to provide support to and work closely with Lucent's engineers in the
advancement of Lucent's telecommunications equipment.
To fill the needs of its customers, the Company's product engineers work
with certain customers' in-house technical staffs in the early stages of product
development to design, produce and manufacture special products to meet the
specifications of particular applications. The manufacture of special products
permits the Company, through its research and development activities, to make
technological advances to provide the customer with a design solution to fit
such customer's needs, to gain a marketing inroad with the customer
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with respect to the Company's complete product line and, in some cases, to
develop products that can be sold to additional customers in the future. The
Company presently has significant ongoing projects with a variety of key
customers in the computer and telecommunications industries.
An example of the Company's product and market development efforts includes
the Company's Metral(TM) connector, originally developed in conjunction with
Lucent and Ericsson Telecom AB of Sweden, which has become the industry standard
for a variety of telecommunications and computer applications. Other products
developed by the Company which have become industry standards include SPCI,
PCMCIA, BergStik(TM) and the modular jack.
SALES AND MARKETING
The Company places a high priority on identifying and responding to its
customers' requirements on a timely basis. In order to ensure that the Company
is best positioned to respond to these requirements, it has developed a sales
and marketing strategy that utilizes global account managers, a highly trained
Company-employed direct sales force, independent electronic component
distributors and independent manufacturers' representatives.
Through its global account managers and direct sales force, the Company is
able to develop strong ties to leading OEMs, or Original Equipment
Manufacturers, who must use connectors to complete the design and manufacture of
their products. These ties enable the Company to act as a partner in the design
and development of new products and applications for these customers. By
becoming a partner in the design and development of new products for its leading
customers, the Company believes it can enhance its relationship with these
customers, achieve preferred supplier status and be better positioned to
anticipate its customers' future needs. In addition, the Company has assigned
industry market managers to high growth subsegments within the
telecommunications and computer market segments. These managers will identify
and work with leading technology and emerging technology companies in order to
remain at the forefront of technological development and position itself to
supply the connector requirements of these companies.
In addition to its Company-employed sales staff, independent electronic
component distributors and independent manufacturers' representatives, the
Company utilizes a number of electronic and digital distribution techniques to
ensure easy access to, and ordering of, its products by the Company's customers.
Examples of such distribution techniques include automated access to Company
product information via facsimile, electronic publication of Company product
catalogues and access to Company product catalogues via the World Wide Web. By
accessing the Internet, the Company's customers' engineers are able to
electronically modify the Company's connector designs and send them via
electronic mail to the Company's engineers for further development.
CUSTOMERS
In 1997, the Company sold its connectors to over 25,000 customers
throughout the world, including substantially all computer and
telecommunications OEMs. As a result of the Lucent Acquisition, Lucent became
the largest customer of the Company. In connection with the Lucent Acquisition,
the Company entered into a five-year supply agreement with Lucent pursuant to
which the Company will supply on an exclusive basis all of the requirements for
connectors and related products for the business units and facilities of Lucent
that were previously supplied by the AT&T Connector Business, representing
substantially all of Lucent's North American switching and transmission
business. In 1997, sales to Lucent accounted for approximately 11% of the
Company's total sales. Consequently, developments adverse to Lucent, or its
products, or decreased levels of purchases by Lucent, could have a material
adverse effect on the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 hereof. Additional major customers of the Company include, among others,
Alcatel, Compaq, Ericsson, Hewlett-Packard, IBM, Motorola, NEC, Northern
Telecom, Philips, Quantum/MKE, SCI, Samsung, Seagate, Siemens GPT, Solectron,
Sun Microsystems, Viasystems and Western Digital.
There has been a trend on the part of OEM customers to reduce the number of
qualified suppliers to those companies that have a global presence, can meet
ever-increasing demand for quality and delivery
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standards, offer a broad product portfolio, provide design capability, and have
competitive prices. The Company has focused its global resources on adapting to
this environment. The Company has concentrated its efforts on service and
productivity improvements including advanced computer aided design and
manufacturing systems, and just-in-time inventory programs to increase product
quality and shorten product delivery schedules. The Company's strategy is to
provide the broadest selection of connectors in the product areas in which it
competes. The Company has achieved a preferred supplier designation from several
of its most important OEM customers in its chosen markets.
INTERNATIONAL OPERATIONS
Approximately 51% of the Company's 1997 sales originated outside of North
America, split approximately evenly between the Asia Pacific region and Europe.
In Asia, the Company has manufacturing, engineering and sales facilities in
Japan, Korea, Taiwan, the People's Republic of China and Singapore, a sales
office in Hong Kong, and a 40%-owned manufacturing and sales joint venture in
India. In Europe, the Company has manufacturing and engineering facilities in
France, The Netherlands, Ireland and Sweden, with sales offices in most major
European countries. The Company believes that its global presence is important
as it allows the Company to provide consistent, quality products on a timely
basis to its multinational customers' locations worldwide. See Note 14 of the
Company's Consolidated Financial Statements for geographic region information.
The Company is subject to risks generally associated with international
operations, including price and exchange controls, limitations on foreign
ownership and other restrictive actions. In addition, fluctuations in currency
exchange rates may affect the Company's results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 hereof.
RAW MATERIALS
The Company purchases a wide variety of raw materials for the manufacture
of its products, including precious metals such as gold and palladium used in
plating, copper alloys and brass used for contacts, and plastic resins used in
molding connector bodies and inserts. All raw materials are readily available
throughout the world and are purchased locally from a variety of suppliers. The
Company is not dependent upon any one source for raw materials.
Generally, the prices at which the Company purchases precious metals are
based upon market prices of such metals at the time of purchase. Precious metals
have historically been subject to price fluctuations. From time to time, the
Company engages in short-term hedging activities to reduce its exposure to
precious metals price fluctuations. Historically, such hedging operations have
not been material, and gains and losses from such operations have not been
significant. There can be no assurance that such hedging operations will
eliminate or substantially reduce such risk. In most cases, the Company is able
to pass on to its customers significant price fluctuations in the market prices
of precious metals. For the years ended December 31, 1995, 1996 and 1997 the
cost of gold and other precious metals accounted for approximately 10%, 10% and
13%, respectively, of the Company's cost of goods sold.
MANUFACTURING
The Company employs advanced manufacturing processes in order to
manufacture quality products for customers throughout the world. The Company's
historical emphasis on product development has been carried over to process
technology and has resulted in the development of production facilities equipped
with state-of-the-art manufacturing equipment including: high speed, selective
reel-to-reel precious metal plating equipment, with advanced on-line process
controls; proprietary high speed, flexible product assembly equipment; metal
stamping equipment; and plastic molding machines. In addition, the Company's
manufacturing operations are vertically integrated from the initial connector
design stage through manufacturing. Management believes that the vertical
integration allows the Company to reduce time to market and be more responsive
to customer needs.
The Company is committed to the highest quality standards for its products,
a standard maintained in part by continuous improvements to its production
processes and upgrades to its manufacturing equipment.
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The Company was the first connector company to have its manufacturing and
engineering sites certified by the International Standards Organization ("ISO")
according to its 9000 series of quality standards. ISO 9000 series certification
constitutes an independent certification that the Company has systems in place
to ensure that products delivered by the Company will consistently meet customer
quality requirements. All of the Company's manufacturing and engineering sites
are ISO 9000 certified or are in the process of becoming ISO 9000 certified.
PATENTS AND TRADEMARKS
The Company has approximately 2,000 patents and pending patent applications
and approximately 310 trademarks and pending trademark applications worldwide.
While the Company considers its patents to be valuable assets, the Company does
not believe that its competitive position is dependent on patent protection or
that its operations are dependent on any individual patent or group of related
patents. However, in some instances, patents and patent protection may serve as
a barrier to entry in certain product lines. The Company's policy is to obtain
patents on its significant new products and enforce its patent rights.
COMPETITION
The electronic connector industry is highly fragmented, with more than
2,000 connector manufacturers competing worldwide. As a result, the Company
generally competes with different suppliers in each of the various categories of
the overall market in which the Company operates. The Company is generally among
the market share leaders within its targeted markets, where it competes
primarily on the basis of quality, reliability, reputation, design capability,
customer service, delivery time and price.
BACKLOG
The Company estimates that its backlog of unfilled orders on December 31,
1996, and December 31, 1997, was approximately $105.1 million and $90.8 million,
respectively. The decrease in backlog in 1997 from 1996 is primarily a result of
currency declines causing backlog in U.S. dollars to be lower in 1997 than 1996
and customers moving to demand/pull and consignment order patterns reducing open
orders at any one point in time. Unfilled orders may be cancelled prior to
published lead times; however, such cancellations historically have not been
material. Substantially all the backlog as of December 31, 1997 is expected to
be filled by June 30, 1998. The backlog outstanding at any point in time is not
necessarily indicative of the level of business to be expected in the ensuing
period.
EMPLOYEES
As of December 31, 1997, the Company had approximately 7,000 employees
worldwide, including approximately 2,200 temporary employees. Of these
employees, approximately 5,800 were engaged in manufacturing, approximately 400
were engaged in research and development and 800 were engaged in sales,
marketing and administrative functions. Most of the Company's employees located
in the United States are not represented by labor unions, while most of the
Company's employees engaged in manufacturing in Europe and Asia belong to work
councils or unions. The Company believes that it has a good relationship with
its employees, and has never experienced a work stoppage.
RECENT DEVELOPMENTS
Rights Plan
On December 22, 1997, the Company adopted a rights plan (the "Rights Plan")
designed to protect Company stockholders in the event of takeover action.
Pursuant to the Rights Plan, on January 8, 1998, the Company distributed one
right for each share of the Company's common stock, par value $0.01 (the "Common
Stock"), and Class A common stock, par value $0.01 (the "Class A Common Stock"),
to holders of record on that date. See Note 8 to the Consolidated Financial
Statements in Item 8 hereof for additional information on the Rights Plan.
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Secondary Offering
On October 29, 1997, the Company filed a Registration Statement on Form S-3
with the Securities and Exchange Commission, and as amended on November 13,
1997, to register 8,911,304 shares of its Common Stock on behalf of certain
selling stockholders (the "Secondary Offering"). Sales of shares under the
Secondary Offering are expected to be completed during 1998.
Stock Split
On October 20, 1997, the Company paid a 2-for-1 split on its Common Stock
and Class A Common Stock, effected as a 100% stock dividend to holders of record
on September 29, 1997 (the "1997 Stock Split"). See Note 2 in the Notes to the
Consolidated Financial Statements in Item 8 hereof.
New Credit Facility
On August 7, 1997, the Company entered into a new credit facility agreement
(the "Credit Facility") consisting of a $250.0 million term loan and a $300.0
million revolving credit loan. The refinancing resulted in an extraordinary
charge of $6.0 million of deferred financing costs, net of applicable income
taxes, during the year ended December 31, 1997. This write off, net of income
tax, is classified with other extraordinary items on the Consolidated Statement
of Operations appearing in Item 8 hereof. For further discussion of the Credit
Facility, see Note 7 to the Notes to the Consolidated Financial Statements
appearing in Item 8 hereof.
ITEM 2. PROPERTIES
In addition to its principal executive offices in St. Louis, Missouri, the
Company operates 23 principal manufacturing and research facilities and other
principal properties located in 13 different countries. The Company considers
its plants and equipment to be modern and well-maintained. Production facilities
for certain of the Company's products are operating at or near capacity.
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SIZE
(SQUARE TYPE OF
LOCATION FEET) INTEREST DESCRIPTION OF USE
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NORTH AMERICA
Huntingdon County, PA 200,000 Owned Precious metal plating, metal stamping, plastic
injection molding and connector assembly
Emigsville, PA 190,000 Owned Precious metal plating, metal stamping and
connector assembly
Valley Green, PA 148,000 Owned North American sales, marketing, engineering and
administrative headquarters, warehousing and
connector assembly
Clearfield, PA 146,000 Owned Metal stamping, plastic injection molding and
connector assembly
Juarez, Mexico 100,000 Leased High-labor content connector assembly, cable
assemblies and engineering
Hazelton, PA 65,000 Leased Cable assemblies
Gardena, CA 56,000 Leased Cable assemblies
Fremont, CA 50,000 Leased Design and manufacture of ASMs and related
interconnections; injection molding, connector
assembly and pick and place module assembly
Franklin, IN 46,000 Leased Design and manufacture of radio frequency and
microwave connectors, related components and
cable assemblies; administrative and marketing
support center
New Brunswick, NJ 16,000 Leased Manufacture of custom and standard application
sockets and related interconnections
EUROPE
Besancon, France 165,000 Owned Precious metal plating, metal stamping, plastic
injection molding and connector assembly
's-Hertogenbosch, The Netherlands 120,000 Owned European sales, marketing and engineering
headquarters; metal stamping, plastic injection
molding, connector assembly and cable assemblies
</TABLE>
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<TABLE>
<CAPTION>
SIZE
(SQUARE TYPE OF
LOCATION FEET) INTEREST DESCRIPTION OF USE
-------- ------- -------- ------------------
<S> <C> <C> <C>
Katrineholm, Sweden 97,000 Leased Precious metal plating, metal stamping, plastic
injection molding and connector assembly
Fermoy, Ireland 42,500 Leased Plastic injection molding and connector assembly
London, England 9,600 Leased Regional headquarters and administrative offices
ASIA
Chungli, Taiwan 125,000 Owned Precious metal plating, metal stamping,
injection and insert molding, connector assembly
and cable assemblies; approximately 55,000 sq.
ft. of this facility is leased to the
Predecessor
Nantong, The People's Republic of
China 72,000 Leased Connector assembly and cable assemblies
Jurong, Singapore 46,000 Leased Metal stamping, injection and insert molding,
connector assembly, and cable assemblies
Iwaki City, Japan 39,000 Owned Metal stamping, injection molding, connector
assembly and cable assemblies
Ichon, Korea 32,000 Owned Metal stamping, injection and insert molding,
connector assembly and cable assemblies
Tokyo, Japan 16,000 Leased Design center for Asia Pacific and
administrative, sales and marketing headquarters
for Japan
Ngee Ann City Building, Singapore 15,550 Leased Regional headquarters; sales and administrative
offices
Maduri, India 11,000 Owned By 40% owned joint venture; metal stamping,
Joint Venture molding and connector assembly
</TABLE>
In addition to the facilities listed above, the Company maintains 26 sales
and marketing facilities, all of which are leased, including five located in the
United States, three in India, two each in Japan and the People's Republic of
China and one each in Canada, Germany, Italy, Sweden, Finland, France, the
Netherlands, Spain, Switzerland, the United Kingdom, Singapore, Hong Kong,
Taiwan and Korea. The Company also maintains an engineering office in the United
States.
ITEM 3. LEGAL PROCEEDINGS
The operations of the Company have from time to time been involved in
claims and litigation. The nature of the Company's business is such that it is
anticipated that the Company will continue to be involved from time to time in
claims and litigation considered to be in the ordinary course of its business.
Based on experience with similar claims and litigation, the Company does not
anticipate that these matters will have a material adverse effect on the
Company.
The Company from time to time receives notifications alleging infringements
of patents generally held by other connector manufacturers. Disputes over patent
infringement are common in the connector industry and typically begin with such
notices. Although the ultimate resolution of such legal action and infringement
notices cannot be predicted, the Company believes that such resolution,
including any ultimate liability, will not have a material adverse effect on the
Company.
Certain operations of the Company 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. The Company believes that the costs of
compliance with such laws and regulations will not have a material adverse
effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth
quarter of 1997.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") under the trading symbol "BEI." The table below sets forth the high and
low sales prices per share for the Company's Common Stock on the NYSE during the
periods indicated. There is no established public trading market for the Class A
Common Stock. On December 31, 1997, there were approximately 286 holders of
record of Common Stock and 9 holders of record of Class A Common Stock.
<TABLE>
<CAPTION>
MARKET PRICE
-------------
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C>
Year Ended December 31, 1996:
March 1-March 31, 1996*................................... $13 $11 3/16
Second Quarter............................................ 14 5/16 11 3/8
Third Quarter............................................. 14 10 1/8
Fourth Quarter............................................ 16 1/4 12 9/16
Year Ended December 31, 1997:
First Quarter............................................. 15 15/16 13 5/8
Second Quarter............................................ 18 1/16 13 7/8
Third Quarter............................................. 26 7/8 17 15/16
Fourth Quarter............................................ 28 31/32 18 1/2
</TABLE>
- ---------------
* Prior to March 1, 1996, there was no established public trading market for the
Common Stock.
The Company has not paid any cash dividends on any class of its common
stock since its incorporation in November 1992 and has no current intention to
do so. In addition, the Credit Facility imposes restrictions on the ability of
the Company's operating subsidiary to make cash distributions on its capital
stock, which the Company expects would be the principal source of funds for any
cash dividends on the Common Stock. See Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical financial data of the
Company for the periods indicated. The historical financial data for the five
years ended December 31, 1997, have been derived from the Consolidated Financial
Statements of the Company audited by Arthur Andersen LLP. The following
information should be read in conjunction with the audited Consolidated
Financial Statements of the Company, including the related notes thereto,
included in Item 8 hereof, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" set forth in Item 7 hereof.
THE COMPANY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------
1993(1) 1994 1995 1996 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Net sales......................... $ 318,424 $ 526,250 $ 667,249 $ 704,669 $ 785,150
Cost of goods sold................ 195,319 343,858 442,276 455,869 505,706
Selling, general and
administrative expenses......... 83,947 128,865 154,756 157,682 169,936
Amortization of intangible
assets.......................... 5,945 9,603 11,182 12,011 15,409
Net periodic postretirement
benefits........................ 2,200 2,640 2,271 1,272 1,830
----------- ----------- ----------- ----------- -----------
Operating income.................. 31,013 41,284 56,764 77,835 92,269
Other income (expense):
Interest expense................ (18,948) (29,186) (34,609) (28,350) (26,755)
Amortization of deferred
financing costs............... (4,059) (5,859) (6,286) (3,388) (2,019)
Other, net...................... (597) (346) (738) 1,239 (1,185)
----------- ----------- ----------- ----------- -----------
Income before income taxes and
extraordinary items............. 7,409 5,893 15,131 47,336 62,310
Income tax provision.............. 3,680 2,871 5,802 18,391 24,120
----------- ----------- ----------- ----------- -----------
Income before extraordinary
items........................... 3,729 3,022 9,329 28,945 38,190
Extraordinary items(2)............ (1,900) -- -- (18,664) (5,964)
----------- ----------- ----------- ----------- -----------
Net income........................ 1,829 3,022 9,329 10,281 32,226
Preferred stock:
Accretion and dividends(3)...... (8,837) (13,287) (14,741) (5,469) --
Excess of fair value over book
value of redemption and
purchase(4)................... -- -- -- (21,866) --
----------- ----------- ----------- ----------- -----------
Net income (loss) applicable to
common shares................... $ (7,008) $ (10,265) $ (5,412) $ (17,054) $ 32,226
=========== =========== =========== =========== ===========
Diluted earnings (loss) per common
share(5)........................ $ (0.33) $ (0.39) $ (0.21) $ (0.44) $ 0.78
=========== =========== =========== =========== ===========
Diluted average common shares
outstanding(5).................. 20,975,348 25,995,252 25,978,648 38,773,287 41,396,543
OTHER DATA:
EBITDA (excluding PBC)(6)......... $ 55,589 $ 86,055 $ 112,978 $ 135,355 $ 157,086
Net cash from operating
activities...................... 57,627 50,933 67,763 69,211 107,762
Net cash from investing
activities...................... (407,858) (142,154) (56,421) (79,400) (85,010)
Net cash from financing
activities...................... 357,282 96,542 (4,478) (226) (16,478)
Depreciation...................... 16,431 32,528 42,761 44,237 47,578
Amortization of intangible
assets.......................... 5,945 9,603 11,182 12,011 15,409
BALANCE SHEET DATA:
Working capital................... $ 37,649 $ 51,807 $ 43,802 $ 41,160 $ 42,705
Total assets...................... 462,918 621,836 668,340 682,007 704,646
Long-term obligations (including
current maturities)............. 246,238 342,679 338,171 358,558 343,330
Total stockholders' equity........ 106,890 129,459 144,340 138,892 135,884
</TABLE>
(footnotes on next page)
11
<PAGE> 12
- ---------------
(1) The historical data for 1993 includes the results of operations of the
Company from March 1, 1993, through December 31, 1993. The Company had no
operations prior to the Initial Acquisition consummated on March 1, 1993.
Net sales and cost of inventory sold of the Predecessor for the period
January 1, 1993, through February 26, 1993, were $59,600 and $39,600,
respectively.
(2) Reflects (i) write-off of $1,900 (net of income tax of $1,100) in deferred
financing costs in 1993 relating to the early extinguishment of debt, (ii)
write-off of $8,071 (net of income tax of $5,381) in prepayment costs paid
in connection with the redemption of the 11 3/8% Guaranteed Senior
Subordinated Debentures Due 2003 of Berg (the "Debentures") in March and
April 1996, (iii) write-off of $10,593 (net of income tax of $7,062) in
deferred financing costs in March 1996 relating to the refinancing of the
Company's then existing credit facility and the redemption of the Debentures
and (iv) write-off of $5,964 (net of income tax of $3,734) in deferred
financing costs in August 1997 relating to the early extinguishment of the
Company's then existing credit facility ("the IPO Credit Facility").
(3) Consists of dividends on the Series B Preferred Stock, par value $0.01 per
share (the "Series B Preferred Stock"), and the Series E Preferred Stock,
par value $0.01 per share (the "Series E Preferred Stock"), of the Company,
plus accretion of original issue discount on the Series B Preferred Stock.
Dividends accrued on the Series B Preferred Stock at the rate of 8.0% per
annum per share and were paid in additional shares quarterly. Through the
February 1996 dividend payment date, the Company had issued additional
shares of Series B Preferred Stock in payment of each such quarterly
dividend and paid cash amounts in lieu of issuing fractional shares. Annual
accretion of original issue discount on the Series B Preferred Stock was
$1,500. Dividends accrued on the Series E Preferred Stock at the rate of
13.375% per annum per share and were paid in additional shares quarterly.
Through the February 1996 dividend payment date, the Company had issued
additional shares of Series E Preferred Stock in payment of each such
quarterly dividend and paid cash amounts in lieu of issuing fractional
shares. As part of the recapitalization (described in Note 1 to the
Consolidated Financial Statements in Item 8 hereof) all shares of Series B
Preferred Stock and Series E Preferred Stock were redeemed or purchased and
were canceled.
(4) Excess of fair value over book value of redemption and purchase of $21,866
represents premium paid in connection with the redemption and purchase and
cancellation of all of the outstanding shares of each of the Series B
Preferred Stock and Series E Preferred Stock in March 1996 and is a
reduction from net income to determine net loss applicable to common shares.
(5) Per share data is determined by dividing the weighted average number of
shares of Common Stock outstanding during the period into net income (loss)
applicable to common shares and has been adjusted to reflect the 1997 Stock
Split.
(6) Earnings before interest, taxes, depreciation and amortization ("EBITDA")
includes operating income adjusted to exclude depreciation, amortization of
intangible assets and noncash net periodic post-retirement benefit charges
("PBC"). The Company believes that EBITDA (excluding PBC) provides
additional information to assist investors in determining its ability to
meet future debt service requirements. However, EBITDA (excluding PBC) is
not a defined term under GAAP and is not indicative of operating income or
cash flows from operations as determined under GAAP.
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the audited
Consolidated Financial Statements and the notes thereto included in Item 8 of
this report.
Certain information presented herein includes "forward-looking statements"
within the meaning of the Reform Act. However, there can be no assurance that
the Company's actual results will not differ materially from its expectations.
The matters referred to in forward-looking statements may be affected by risks
and uncertainties affecting the Company's business.
OVERVIEW
The Company's net sales increases since 1993 have principally reflected
increased unit volumes. As new products gain market acceptance and their unit
volumes increase, these products have tended to experience downward price
pressure. The gross margin effect of this pressure has been historically
mitigated or eliminated by increased manufacturing efficiencies and economies of
scale associated with higher volume production of such products. In addition,
the pricing pressure experienced by the Company with respect to its mature
products has also been mitigated by the Company's frequent introduction of new
higher margin products. Subsequent to the Initial Acquisition, the Company has
completed seven strategic acquisitions that have broadened its product offerings
and enabled the Company to penetrate new markets.
Since the Initial Acquisition, the Company has devoted a significant
portion of its operating income to debt service. The Company's net income
applicable to common shares prior to its 1996 recapitalization had also been
reduced as a result of significant preferred stock requirements. As a result of
the Recapitalization (as defined in Note 1 in the Notes to the Consolidated
Financial Statements in Item 8 hereof), the debt service requirements relating
to the Debentures and the requirements relating to the Series B Preferred Stock
and Series E Preferred Stock have been eliminated. Nevertheless, debt service
expense remains significant.
The Company manufactures connectors in various regions of the world and
exports and imports these products to and from a large number of countries.
Sales and expenses are frequently denominated in local currencies. The Company's
net sales and net income may be affected as currency fluctuations affect the
Company's product prices and operating costs. The Company, from time to time,
engages in hedging operations, such as forward exchange contracts, to reduce its
exposure to foreign currency fluctuations. Such hedging operations historically
have not been material, and gains and losses from such operations have not been
significant. There can be no assurance that such hedging operations will
eliminate or substantially reduce such risk.
Demand for the Company's products has increased significantly since its
formation in 1993, and production equipment for certain of the Company's
products is operating at or near capacity. A significant portion of the
Company's planned capital expenditures in 1998 is directed toward expansion of
production capacity to meet increased demand. The Company anticipates making
total capital expenditures of approximately $90.0-100.0 million in 1998 for
facilities, equipment and information systems. In particular, the Company
anticipates increasing production capabilities in connection with the Company's
August 1997 agreement to supply high-density MEG-Array(TM) interconnect systems
for use in modular packaging of microprocessors to a leading producer of
microprocessors.
Management has implemented a Company-wide initiative to ensure that the
Company's information systems and systems applications are capable of processing
data and transactions pertaining to the year 2000. The initiative utilizes both
Company resources and external resources to identify systems and applications
effected, 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. The Company will capitalize and depreciate
replacement systems consistent with its existing capital expenditure policies,
and will report expenses as incurred for the costs of modification and
maintenance of existing systems. Management believes that a substantial portion
of the costs for the new systems and the modifications will not represent
incremental costs to the Company, but rather will represent the reallocation of
existing and planned
13
<PAGE> 14
information technology resources. The amounts expensed in 1997 were immaterial,
and management expects that amounts required to be expensed in future periods
will not have a material effect on its financial position or results of
operations.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997, COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales for the year ended December 31, 1997 were $785.2 million,
representing an $80.5 million, or 11.4%, increase over the year ended December
31, 1996. The increase was primarily attributable to growth in unit volumes,
partially offset by a decline in the average selling prices of the Company's
products. The increase was also due in part to the Ericsson Acquisition on
December 31, 1996.
North American sales were approximately $384.9 million for the year ended
December 31, 1997, representing a $2.9 million, or 0.8%, increase versus North
American sales for the year ended December 31, 1996. The increase reflects a
broadening customer base and strong demand in the telecom, mobile, datacom,
personal computer and networking markets, offset in part by weakness in demand
for the Company's high-end data processing products and in part by the transfer
of certain customer programs to the Company's European and Asia Pacific
locations in 1997 versus 1996.
Sales in Europe were approximately $216.8 million for the year ended
December 31, 1997, representing a $61.7 million, or 39.8%, increase over
European sales for the year ended December 31, 1996. The increase was due in
part to the Ericsson Acquisition, in part to greater demand for the Company's
products in most end-user (primarily telecom and mobile) and geographic markets,
and in part to the transfer of certain customer programs to European sources in
1997 versus U.S. sales sources for these programs in 1996. These increases were
partially offset by the unfavorable effects of currency changes between years in
most countries in the region. Sales in Asia Pacific were approximately $183.5
million for the year ended December 31, 1997, representing a $15.9 million, or
9.5%, increase versus sales in the region for the year ended December 31, 1996.
The improvement in Asia Pacific sales was primarily due to increased demand for
the Company's products in end-user markets (both computer and telecom) and in
part to the transfer of certain customer programs to Asia Pacific sources in
1997 versus U.S. sales sources for these programs in 1996. These increases were
partially offset by the unfavorable effects of changing currencies between
years, primarily in Japan early in the year and throughout the region during the
final months of 1997. Changing currencies adversely impacted sales reported in
both Europe and Asia Pacific, reducing reported growth by approximately 9.0%, on
a combined basis for the two regions, for 1997 versus 1996.
Due primarily to increased sales volumes, cost of goods sold for the year
ended December 31, 1997 increased by $49.8 million, or 10.9%, over cost of goods
sold for the year ended December 31, 1996. The increase was partially offset by
the favorable impact of the stronger U.S. dollar against currencies in Europe
and Asia Pacific. As a result of cost containment and reduction activities and
the spreading of fixed costs over higher sales, cost of goods sold as a percent
of net sales improved to 64.4% of net sales for the year ended December 31,
1997, compared to 64.7% for the year ended December 31, 1996.
Selling, general and administrative expenses and other operating expenses
for the year ended December 31, 1997 increased by $16.2 million, or 9.5%, over
selling, general and administrative expenses and other operating expenses for
the year ended December 31, 1996, but as percentage of sales improved to 23.8%
of 1997 sales from 24.3% of 1996 sales. The increase in costs was generally due
to increased sales volumes, partially offset by the favorable impact of the
stronger U.S. dollar against currencies in Europe and Asia Pacific. The decrease
in costs as a percent of sales was due in part to cost reduction and containment
activities and in part to the spreading of fixed costs over a higher sales
volumes.
Other expenses decreased $0.5 million, or 1.8%, for the year ended December
31, 1997, from $30.5 million in 1996, primarily as a result of reduced borrowing
costs under the Company's primary credit facility due to a refinancing in March
1996 and the subsequent replacement of that credit facility in August 1997.
14
<PAGE> 15
YEAR ENDED DECEMBER 31, 1996, COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 were $704.7 million,
representing a $37.4 million, or 5.6%, increase over the year ended December 31,
1995. In general, the Company's growth in net sales during 1996 was attributable
to growth in unit volume partially offset by a decline in the average prices of
the Company's products.
North American sales were $382.0 million for the year ended December 31,
1996, representing a $42.7 million, or 12.6%, increase versus North American
sales for the year ended December 31, 1995. This increase was due primarily to a
$27.2 million, or 26.6%, increase in telecommunications products sales resulting
from stronger demand than in the prior year for backplanes used in switching and
transmission equipment, which translated into strong demand for the Berg
connectors used in these applications.
Sales in Europe were $155.1 million for the year ended December 31, 1996,
representing a $4.4 million, or 2.8%, decrease from European sales for the year
ended December 31, 1995. This decrease was due primarily to the strengthening of
the U.S. dollar against certain European currencies. Sales in Asia Pacific
totalled $167.6 million for the year ended December 31, 1996, representing a
$0.9 million, or 0.5%, decrease from the year ended December 31, 1995. The
decrease in the Asia Pacific region was primarily due to the effects of the weak
Japanese yen versus the U.S. dollar, offset by 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 4.0% on a combined basis, for the year ended December 31, 1996
compared to the year ended December 31, 1995.
Due primarily to increased sales volume, cost of goods sold for the year
ended December 31, 1996 increased by $13.6 million, or 3.1%, over cost of goods
sold for the year ended December 31, 1995. As a result of cost containment and
reduction activities, cost of goods sold as a percentage of sales improved from
66.3% for the year December 31, 1995 to 64.7% for the year December 31, 1996.
Selling, general and administrative expenses for the year ended December
31, 1996 increased by $2.9 million, or 1.9%, over selling, general and
administrative expenses for the year ended December 31, 1995 due primarily to
increases in sales volume. However, these expenses as a percentage of sales
decreased from 23.2% for the year ended December 31, 1995 to 22.4% for the year
ended December 31, 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 $11.1 million, to $30.5 million for the year ended
December 31, 1996 from $41.6 million for the year ended December 31, 1995 due to
reduced interest expense and amortization of financing costs in 1996 as a result
of the redemption of the Debentures and as a result of the IPO Credit Facility
entered into in March 1996, which had lower interest rates and financing costs
than the previous credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $107.8 million for the year
ended December 31, 1997, which compared to $69.2 million provided by operating
activities for the comparable period in 1996. Net cash used in investing
activities was $85.0 million for the year ended December 31, 1997, compared to
net cash used of $79.4 million for the year ended December 31, 1996. The net
cash used in investing activities for the year ended December 31, 1997 consisted
of capital expenditures of $85.0 million while the net cash used in investing
activities during the year ended December 31, 1996, consisted of $61.6 million
for capital expenditures and $17.8 million for one acquisition. Net cash used in
financing activities was $16.5 million for the year ended December 31, 1997,
compared to $0.2 million used in financing activities for the comparable period
in 1996. The use of cash in 1997 represented debt repayments, net of borrowings,
and costs associated with refinancing the IPO Credit Facility. The use of cash
in financing activities in 1996 represented debt repayments, net of borrowings,
and the effects of the initial public offering, the redemption of the
Debentures, the Series B Preferred Stock and Series E Preferred Stock and costs
associated with refinancing the then existing credit facility.
15
<PAGE> 16
Net cash provided by operating activities was $69.2 million for the year
ended December 31, 1996, which compared to $67.8 million provided by operating
activities for the comparable period in 1995. Net cash used in investing
activities was $79.4 million for the year ended December 31, 1996, compared to
net cash used of $56.4 million for the year ended December 31, 1995. The net
cash used in investing activities for the year ended December 31, 1996,
consisted of $61.6 million for capital expenditures and $17.8 million for one
acquisition, while the net cash used in investing activities during the year
ended December 31, 1995 represented capital expenditures of $45.0 million and
one acquisition of $11.4 million. Net cash used in financing activities was $0.2
million for the year ended December 31, 1996, compared to $4.5 million used in
financing activities for the comparable period in 1995. The use of cash in
financing activities in 1996 represented debt repayments, net of borrowings, and
the effects of the initial public offering, the redemption of the Debentures,
the Series B Preferred Stock and Series E Preferred Stock and costs associated
with refinancing the then existing credit facility. The use of cash in financing
activities in 1995 represented debt repayments, net of borrowings.
The Company's EBITDA (excluding PBC) was $157.1 million, $135.4 million and
$113.0 million in 1997, 1996 and 1995, respectively. EBITDA (excluding PBC) is
not a defined term under GAAP and is not an alternative to operating income or
cash flow from operations as determined under GAAP. The Company believes that
EBITDA (excluding PBC) provides additional information to investors in
determining its ability to meet future debt service requirements; however,
EBITDA (excluding PBC) does not reflect cash available to fund cash
requirements. EBITDA (excluding PBC) is also one of the financial measures in
the covenants contained in the Credit Facility.
The Company anticipates that cash flow from operations and additional funds
available under the revolving facility in its Credit Facility will be sufficient
to meet its foreseeable requirements for working capital, capital expenditures
and other cash requirements.
The Company anticipates that its primary uses of cash in 1998 will be (i)
for capital expenditures for maintenance, replacement and acquisitions of
equipment, expansion of capacity, productivity improvements and product
development and (ii) to pay interest on, and to repay principal of, indebtedness
under the Credit Facility and other indebtedness of the Company as discussed in
Note 7 to the Notes to the Consolidated Financial Statements in Item 8 hereof.
The Company anticipates spending approximately $90.0-100.0 million in 1998 for
capital expenditures, principally related to capacity expansion, new product
development and productivity improvement projects. The Credit Facility contains
annual limits on the Company's capital expenditures. The Company believes that
such limits are sufficient to allow the Company to undertake all anticipated
capital projects. The Company will be obligated to make principal and interest
payments of approximately $45.0 million under the Credit Facility in 1998, which
the Company anticipates will be made from cash flow from operations.
On August 7, 1997, the Company entered into the new Credit Facility
consisting of a $250.0 million term loan and a $300.0 million revolving credit
loan, each of which is scheduled to mature on December 31, 2003. The Credit
Facility, compared to the IPO Credit Facility, affords the Company greater
financial flexibility through (i) lower borrowing costs, (ii) greater borrowing
capacity and (iii) less restrictive limitations on capital expenditures,
acquisitions and borrowings outside of the United States. At December 31, 1997,
the Company had approximately $195.0 million of borrowing capacity available
under the Credit Facility. The refinancing of the IPO Credit Facility with the
Credit Facility resulted in an extraordinary charge of $6.0 million of deferred
financing costs, net of applicable income taxes.
Borrowings under the Credit Facility bear interest at the option of the
Company, at a rate per annum equal to (i) the Agent's Alternate Base Rate (as
defined in the Credit Facility) or (ii) 0.75% plus the Eurodollar rate per
annum. Interest payment dates vary depending on the interest rate option
selected by the Company, but, generally, interest is payable quarterly.
The Credit Facility requires the Company to enter into additional interest
rate hedging arrangements to hedge against interest rate fluctuations. The costs
of such hedge agreements are amortized over their terms. The Company has entered
into an agreement which provides a ceiling on the LIBOR Rate (as defined in the
16
<PAGE> 17
Credit Facility) on $137.0 million of indebtedness until June 30, 1998. See Note
7 to the Consolidated Financial Statements in Item 8 hereof for further
information.
The Credit Facility restricts the Company from, among other things: (i)
incurring additional indebtedness (other than certain permitted indebtedness);
(ii) creating liens; (iii) guaranteeing indebtedness; (iv) merging or selling
substantially all of its assets; (v) declaring and paying certain dividends;
(vi) making certain investments and loans; and (vii) entering into certain
transactions with affiliates, in each case with certain exceptions customary for
credit facilities such as the Credit Facility.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 128, "Earnings Per Share," in 1997. See Note 2
to the Consolidated Financial Statements in Item 8 hereof. In 1998, the Company
will adopt SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information." The
Company does not expect adoption of these standards to have a material impact on
its Consolidated Financial Statements.
17
<PAGE> 18
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Berg Electronics Corp.
Report of Arthur Andersen LLP, Independent Public
Accountants............................................ 19
Consolidated Balance Sheets as of December 31, 1996 and
1997................................................... 20
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997....................... 21
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1996 and 1997........... 22
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997....................... 23
Notes to Consolidated Financial Statements................ 24
Schedule I -- Condensed Financial Information (Parent
Company Only).......................................... 38
Schedule II -- Valuation and Qualifying Accounts.......... 42
</TABLE>
18
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Berg Electronics Corp.:
We have audited the accompanying consolidated balance sheets of Berg
Electronics Corp. (a Delaware corporation) and subsidiaries as of December 31,
1996 and 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These consolidated financial statements and the
schedules referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Berg Electronics Corp. and
subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index to the
financial statements are presented for purposes of complying with the Securities
and Exchange Commission's rules and are not a part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly state, in all material respects, the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
January 27, 1998
19
<PAGE> 20
BERG ELECTRONICS CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents............. $ 8,999 $ 11,994
Accounts receivable, less allowance of
$3,703 and $3,657, respectively.... 104,134 118,331
Inventories........................... 91,823 96,022
Prepaid expenses and other............ 13,935 16,890
-------- --------
Total current assets.......... 218,891 243,237
-------- --------
Property, plant and equipment........... 259,905 285,767
Deferred financing costs................ 14,896 4,414
Intangible assets....................... 174,860 165,437
Other assets............................ 13,455 5,791
-------- --------
Total assets.................. $682,007 $704,646
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
obligations........................ $ 33,912 $ 26,786
Accounts payable...................... 60,822 76,779
Accrued payroll and payroll taxes..... 23,497 24,969
Accrued and other liabilities......... 47,168 56,882
Accrued interest...................... 3,746 2,328
Income taxes payable.................. 8,586 12,788
-------- --------
Total current liabilities..... 177,731 200,532
-------- --------
Long-term obligations, less current
maturities............................ 324,646 316,544
Other liabilities....................... 40,738 51,686
Stockholders' equity:
Common stock, par value $.01 per
share, 38,250,476 and 39,099,791
shares, respectively, issued and
outstanding........................ 382 391
Class A common stock, par value $.01
per share, 2,768,582 and 1,908,554
shares, respectively, issued and
outstanding........................ 28 19
Paid in capital......................... 116,094 116,563
Retained earnings....................... 19,836 52,062
Cumulative translation adjustments...... 2,552 (33,151)
-------- --------
Total stockholders' equity.... 138,892 135,884
-------- --------
Total liabilities and
stockholders' equity......... $682,007 $704,646
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
20
<PAGE> 21
BERG ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................... $ 667,249 $ 704,669 $ 785,150
Operating expenses:
Cost of goods sold.................... 442,276 455,869 505,706
Selling, general and administrative... 154,756 157,682 169,936
Amortization of intangible assets..... 11,182 12,011 15,409
Net periodic postretirement
benefits........................... 2,271 1,272 1,830
----------- ----------- -----------
Operating income........................ 56,764 77,835 92,269
Other income (expense):
Interest expense...................... (34,609) (28,350) (26,755)
Amortization of deferred financing
costs.............................. (6,286) (3,388) (2,019)
Other, net............................ (738) 1,239 (1,185)
----------- ----------- -----------
Income before income tax provision and
extraordinary items................... 15,131 47,336 62,310
Income tax provision.................... 5,802 18,391 24,120
----------- ----------- -----------
Income before extraordinary items....... 9,329 28,945 38,190
Extraordinary items -- loss on early
extinguishment of debt, net of income
tax of $0, $12,443 and $3,734,
respectively.......................... -- (18,664) (5,964)
----------- ----------- -----------
Net income.............................. 9,329 10,281 32,226
Preferred stock:
Accretion and dividends............... (14,741) (5,469) --
Excess of fair value over book value
of redemption and purchase......... -- (21,866) --
----------- ----------- -----------
Net income (loss) applicable to common
shares................................ $ (5,412) $ (17,054) $ 32,226
=========== =========== ===========
Earnings per common share -- basic
Income (loss) before extraordinary
items.............................. $ (0.21) $ 0.04 $ 0.93
=========== =========== ===========
Net income (loss)..................... $ (0.21) $ (0.44) $ 0.79
=========== =========== ===========
Earnings per common share -- diluted
Income (loss) before extraordinary
items.............................. $ (0.21) $ 0.04 $ 0.92
=========== =========== ===========
Net income (loss)..................... $ (0.21) $ (0.44) $ 0.78
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
21
<PAGE> 22
BERG ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED COMMON PAID IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL
--------- ------ --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994.............. $ 45 $260 $ 115,051 $ 2,101 $ 12,002 $ 129,459
Exercise of stock options............. 30 30
Preferred stock dividends............. 6 (6) --
Series B preferred stock accretion.... 1,500 (1,500) --
Change in cumulative translation
adjustments........................ 5,522 5,522
Net income............................ 9,329 9,329
---- ---- --------- ------- -------- ---------
Balance, December 31, 1995.............. $ 51 $260 $ 116,575 $ 9,930 $ 17,524 $ 144,340
Exercise of stock options............. 223 223
Preferred stock dividends............. 1 (1) --
Series B preferred stock accretion.... 375 (375) --
Preferred stock purchase and
redemption......................... (52) (142,953) (143,005)
Net proceeds from IPO................. 150 146,883 147,033
Costs of IPO.......................... (5,008) (5,008)
Change in cumulative translation
adjustments........................ (14,972) (14,972)
Net income............................ 10,281 10,281
---- ---- --------- ------- -------- ---------
Balance, December 31, 1996.............. $ -- $410 $ 116,094 $19,836 $ 2,552 $ 138,892
Exercise of stock options............. 197 197
Tax benefit upon exercise of stock
options............................ 272 272
Change in cumulative translation
adjustments........................ (35,703) (35,703)
Net income............................ 32,226 32,226
---- ---- --------- ------- -------- ---------
Balance, December 31, 1997.............. $ -- $410 $ 116,563 $52,062 $(33,151) $ 135,884
==== ==== ========= ======= ======== =========
</TABLE>
See accompanying notes to the consolidated financial statements.
22
<PAGE> 23
BERG ELECTRONICS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------------------
1995 1996 1997
------------ ------------ ---------
<S> <C> <C> <C>
Cash flows provided by (used in)
operating activities:
Net income............................ $ 9,329 $ 10,281 $ 32,226
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Extraordinary items................ -- 31,107 9,698
Depreciation....................... 42,761 44,237 47,578
Amortization and other non-cash
charges.......................... 19,739 16,671 19,258
Change in assets and liabilities,
net of acquisitions:
Accounts receivable.............. (24,226) 8,706 (26,670)
Inventories...................... (8,339) (10,982) (12,089)
Prepaid expenses and other....... 648 (5,873) (3,574)
Accounts payable................. 23,242 (7,610) 21,048
Accrued and other liabilities.... 4,944 (2,591) 12,686
Other, net....................... (335) (14,735) 7,601
--------- --------- ---------
Net cash from operating activities...... 67,763 69,211 107,762
--------- --------- ---------
Cash flows provided by (used in)
investing activities:
Acquisitions.......................... (11,375) (17,844) --
Capital expenditures, net............. (45,046) (61,556) (85,010)
--------- --------- ---------
Net cash from investing activities...... (56,421) (79,400) (85,010)
--------- --------- ---------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of long-term
obligations........................ 15,150 405,393 495,035
Repayment of long-term obligations.... (19,658) (384,662) (510,475)
Financing costs....................... -- (25,208) (1,235)
Proceeds from issuance of common
stock.............................. 30 223 197
Net proceeds from IPO................. -- 147,033 --
Redemption and purchase of preferred
stock.............................. -- (143,005) --
--------- --------- ---------
Net cash from financing activities...... (4,478) (226) (16,478)
--------- --------- ---------
Effect of exchange rate changes on
cash.................................. 756 (187) (3,279)
--------- --------- ---------
Net change in cash and cash
equivalents........................... 7,620 (10,602) 2,995
Cash and cash equivalents at beginning
of period............................. 11,981 19,601 8,999
--------- --------- ---------
Cash and cash equivalents at end of
period................................ $ 19,601 $ 8,999 $ 11,994
========= ========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
23
<PAGE> 24
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. THE COMPANY
Berg Electronics Corp., including its wholly-owned subsidiary Berg
Electronics Group, Inc. ("Berg"), (together, the "Company"), is a leading global
designer, manufacturer and marketer of electronic connectors and cable assembly
products for applications primarily in the computer, telecommunications and
industrial markets. Berg Electronics Corp., a Delaware corporation, was formed
on November 4, 1992, to participate in the Initial Acquisition (defined below).
The Company had no operations prior to the Initial Acquisition. The Company's
year end is December 31.
On February 26, 1993, the Company acquired certain assets and assumed
certain liabilities of the Connector Systems Business of the Electronics
Division of E.I. duPont de Nemours and Company (the "Predecessor") for a total
consideration of $385,057 (the "Initial Acquisition"), which included an
agreement not to compete, plus fees and expenses relating to the Initial
Acquisition and related financing. The results of operations of the Business
have been included in the consolidated financial statements since the date of
the Initial Acquisition.
Since the Initial Acquisition, the Company has made seven strategic
acquisitions. The largest of these occurred on May 23, 1994, when the Company
acquired certain assets and related liabilities of the Connector System Business
of the AT&T Microelectronics Division of AT&T Corp. (now Lucent Technologies,
Inc.) ("Lucent") for a total consideration of $84,500 (the "Lucent Acquisition")
which included fees and expenses relating to the Lucent Acquisition and related
financing.
During 1996, the Company implemented a recapitalization plan (the
"Recapitalization Plan"), among other things, to reduce interest expense and
preferred stock dividend requirements and to improve the Company's operating and
financial flexibility. The Recapitalization Plan included the redemption and
purchase of Series B Preferred Stock (as defined below) and Series E Preferred
Stock (as defined below), the redemption and purchase of the Debentures (as
defined below), the refinancing of the Amended and Restated Credit Agreement
dated as of May 23, 1994, with Chemical Bank, N.A., as Agent, and certain other
banks as parties thereto (the "Amended Credit Agreement"), the 1-for 4.11
reverse stock split effective February 2, 1996 and the initial public offering
of 14,950,000 shares of the Company's common stock, par value $0.01 per share
(together, the "Recapitalization").
During 1997, the Company entered into a new credit facility agreement (the
"Credit Facility") that was used to extinguish and replace the credit agreement
dated February 29, 1996, as amended December 18, 1996 (the "IPO Credit
Facility"). The Credit Facility reduces the Company's borrowing costs and
improves the Company's operating and financial flexibility. See Notes 6 and 7
herein for further discussion.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, except for the Company's interest in a joint
venture in India which is accounted for under the equity method and is
insignificant to the consolidated financial statements. All significant
intercompany accounts and transactions have been eliminated. In addition,
certain prior year amounts have been reclassified to conform to current year
presentation.
Revenue Recognition
Sales and related cost of goods sold are recognized when goods are shipped
to the customer or, in the case of consignment inventories at customer sites,
when the customer uses product from the consigned quantities.
24
<PAGE> 25
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Inventories
Certain U.S. inventories are valued at the lower of cost or market (LCM),
with cost being determined using the last-in, first-out (LIFO) method. Other
U.S. and non-U.S. inventories are valued at the LCM, with cost being determined
using the average cost method. Elements of cost in inventory include raw
materials, direct labor and manufacturing overhead. A portion of inventory is
financed at its fair market value and is included in inventories at its fair
market value. The related financing obligation is included in accounts payable.
Property, Plant and Equipment
Property, plant and equipment is stated at cost net of accumulated
depreciation. Depreciation is calculated using the straight-line method. The
average estimated useful lives utilized in calculating depreciation are as
follows: buildings -- 25 years; machinery and equipment -- 5 to 12 years; autos
and trucks -- 3 years; office furniture and fixtures -- 2 to 3 years.
Foreign Currency Translation
Local currencies have been designated as the functional currencies 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 or losses are included in the
component of stockholders' equity designated cumulative translation adjustments
on the Consolidated Balance Sheets.
Related Party Transactions
The Company has entered into an Amended and Restated Monitoring and
Oversight Agreement ("Agreement") with Hicks, Muse, Tate & Furst Incorporated
("Hicks, Muse") (an affiliate of the Company). The Agreement provides that the
Company shall pay Hicks, Muse an annual fee, for ten years, of the greater of
$700 or one-tenth of one percent (0.1%) of the previous year's net sales. In
addition, the Agreement entitles Hicks, Muse to an acquisition advisory fee
equal to 1.5% of the purchase price of any acquisition effected by the Company.
The Company sells certain connectors and other products needed to
manufacture printed circuit boards and back panel assemblies to Viasystems,
Inc., ("Viasystems"). Viasystems is controlled by Hicks, Muse, through its
affiliates, and managed by Mills & Partners, Inc. In addition, certain of the
Company's directors and executive officers have financial interests in
Viasystems. In 1997, the Company's sales to Viasystems were approximately
$41,000. The Company sells products to Viasystems on terms and conditions which
the Company believes to be comparable to terms that would be reached in an arm's
length transaction.
Net Income (Loss) per Common Share
On October 20, 1997, the Company completed a 2-for-1 split of its common
stock, par value $0.01 (the "Common Stock"), and Class A common stock, par value
$0.01 (the "Class A Common Stock"), effected as a 100% stock dividend to holders
of record on September 29, 1997. All share and per share data in the
accompanying Consolidated Financial Statements and these Notes to Consolidated
Financial Statements for all periods presented have been retroactively restated
to give effect to this split.
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share." All per
share amounts have been calculated in accordance with SFAS No. 128 using the
weighted average number of shares outstanding during each period, adjusted for
the impact of common stock equivalents using the treasury stock method when the
effect is dilutive. All per share data has been retroactively restated in
accordance with SFAS No. 128.
25
<PAGE> 26
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company
considers investments purchased with an original maturity of three months or
less to be cash equivalents. Interest and income taxes paid for the year ended
December 31, 1995, are approximately $36,300 and $3,200, respectively, for the
year ended December 31, 1996, are approximately $27,100 and $3,300,
respectively, and for the year ended December 31, 1997, are approximately
$28,200 and $4,000, respectively.
Fair Value of Financial Instruments
The fair market values of the financial instruments included in the
consolidated financial statements approximate the carrying values of the
financial instruments.
Estimates and Assumptions
The preparation of 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 financial
statements and the reported amounts of net sales and expenses during the
reporting period. Actual results could differ from those estimates.
3. INVENTORIES
The composition of inventories is as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Raw materials........................... $36,395 $28,414
Work-in-process......................... 23,810 31,536
Finished goods.......................... 31,618 36,072
------- -------
Total......................... $91,823 $96,022
======= =======
</TABLE>
The carrying value of inventories valued at LIFO, at December 31, 1996 and
1997, is approximately $43,200 and $46,900, respectively, and its current cost
is approximately $34,200 and $31,500, respectively.
4. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31 is as
follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Land and buildings...................... $ 89,553 $ 89,478
Machinery, equipment and other.......... 298,484 360,812
--------- ---------
388,037 450,290
Less: Accumulated depreciation.......... (128,132) (164,523)
--------- ---------
$ 259,905 $ 285,767
========= =========
</TABLE>
26
<PAGE> 27
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over various
estimated useful lives. The composition of intangible assets at December 31 is
as follows:
<TABLE>
<CAPTION>
AMOUNT
-------------------
1996 1997 LIFE
-------- -------- ----
<S> <C> <C> <C>
Goodwill................................................ $134,387 $134,387 40
Patented technology..................................... 42,618 46,228 5-17
Unpatented technology................................... 15,542 15,542 3-17
Covenants not to compete................................ 5,150 5,150 5
Software................................................ 3,400 3,400 5
Other................................................... 5,344 5,344 5-20
Supply agreement........................................ 6,800 6,800 10
-------- --------
213,241 216,851
Less: Accumulated amortization.......................... (38,381) (51,414)
-------- --------
$174,860 $165,437
======== ========
</TABLE>
Goodwill represents purchase price in excess of net tangible and identified
intangible assets acquired in acquisitions. The Company generally assesses the
recoverability of its intangible assets primarily based on its current and
anticipated future undiscounted cash flows. At December 31, 1997, the Company
does not believe there has been any impairment of its intangible assets.
6. DEFERRED FINANCING COSTS
At December 31, 1997, deferred financing costs consists of aggregate fees
and expenses of $5,235 incurred in connection with the Credit Facility dated
August 7, 1997, and other financing arrangements. These fees are being amortized
over the terms of the related borrowing and/or financial instrument on a
straight line basis.
7. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Credit Facility:
Term Loan................................................. $332,500 $237,500
Revolving Credit Loan..................................... 16,000 93,000
Other (Interest rates 1%-5%)................................ 10,058 12,830
-------- --------
$358,558 $343,330
Less: Current maturities.................................... (33,912) (26,786)
-------- --------
Total............................................. $324,646 $316,544
======== ========
</TABLE>
27
<PAGE> 28
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The schedule of principal payments on long-term obligations at December 31,
1997, is as follows:
<TABLE>
<S> <C>
1998........................................................ $ 26,786
1999........................................................ 32,535
2000........................................................ 44,962
2001........................................................ 50,891
2002........................................................ 57,160
Thereafter.................................................. 130,996
--------
Total............................................. $343,330
========
</TABLE>
EXISTING FINANCING
On August 7, 1997, the Company entered into a new credit facility agreement
that was used to replace the IPO Credit Facility. The refinancing resulted in
the write-off of $9,698 of deferred financing costs. This write-off, net of
income tax, is classified as an extraordinary item on the Consolidated
Statements of Operations for the year ended December 31, 1997.
The Credit Facility consists of a $250,000 term loan (the "Term Loan") and
a $300,000 revolving credit loan (the "Revolver"). Borrowings under the Credit
Facility are secured by first priority mortgages and liens on substantially all
of the material assets of the Company and its domestic subsidiaries and by
pledges of a portion of the capital stock of the foreign subsidiaries. As of
December 31, 1996 and 1997, the Company had approximately $10,000 and $11,200,
of standby letters of credit outstanding under the IPO Credit Facility and the
Revolver, respectively. The 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. The commitment fee on the unused portion of the
Revolver is 0.25% per annum on the average daily unused balance.
Mandatory principal payments under the Term Loan are due in semi-annual
installments beginning on December 31, 1997, and continuing until the final
payment is due on December 31, 2003. Amounts outstanding under the Revolver are
due December 31, 2003.
Borrowings under the Credit Facility bear interest, at the option of the
Company, at a rate per annum equal to (i) the Agent's Alternate Base Rate (as
defined in the Credit Facility) or (ii) 0.75% plus the Eurodollar rate per
annum. Interest payment dates vary depending on the interest rate option
selected by the Company, but generally, interest is payable quarterly.
The Credit Facility requires the Company to enter into interest rate
hedging arrangements to hedge against interest rate fluctuations. The Company
has entered into an agreement which provides a ceiling of 8.5% on the LIBOR rate
on $137,000 of indebtedness until June 30, 1998. The costs of the hedge
agreements are amortized over their terms.
Other long-term obligations primarily relate to mortgages on two recently
acquired production facilities.
PRIOR FINANCING
On February 29, 1996, the Company entered into the IPO Credit Facility that
among other things, refinanced the Amended Credit Agreement and 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 in the Consolidated Statement
of Operations for the year ended December 31, 1996.
11 3/8% Guaranteed Senior Subordinated Debentures due 2003 (the
"Debentures") were issued under an indenture, dated April 28, 1993 (the
"Indenture"). The Debentures represented unsecured general obligations of the
Company and were subordinate to all Senior Debt (as defined in the Indenture) of
the Company. On
28
<PAGE> 29
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
April 8, 1996, the Company redeemed $30,000 aggregate principal amount of
Debentures (the "Debenture Redemption") for approximately $34,487 including
accrued and unpaid interest and a redemption premium thereon, in accordance with
the terms of the Indenture dated as of October 29, 1993, as amended. On April 9,
1996, the Company purchased all of the outstanding Debentures not redeemed by
the Company pursuant to the Debenture Redemption for approximately $82,590. The
redemption and purchase of the Debentures resulted in the write off of $4,900 of
deferred financing costs. This write off, net of income tax, is classified with
other extraordinary items in the Consolidated Statement of Operations for the
year ended December 31, 1996. Additionally, the redemption and purchase premium
and the related fees and expenses of the Debenture Redemption and purchase,
totaling $13,452, are classified with other extraordinary items, net of income
tax, in the Consolidated Statement of Operations for the year ended December 31,
1996.
8. STOCKHOLDERS' EQUITY
At December 31, 1996 and 1997, the authorized capital stock of the Company
consisted of 60 million shares of Common Stock, 7 million shares of Class A
Common Stock and 28.5 million shares of preferred stock, of which 670,000 shares
were designated, in 1997, as Series A Junior Preferred Stock ("Series A
Preferred Stock").
The Class A Common Stock may be converted into shares of Common Stock at
the option of the holder at any time. In addition, shares of the Class A Common
Stock may be converted into Common Stock at the option of the Company upon the
occurrence of a Triggering Event (as defined) or on February 26, 2003. Such
conversion is based on a formula set forth in the Company's Certificate of
Incorporation.
Dividends are payable to holders of the Common Stock and Class A Common
Stock in amounts as and when declared by the Company's Board of Directors,
subject to legally available funds and certain agreements. The Common Stock and
the Class A Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders.
On December 22, 1997, the Company adopted a rights plan (the "Rights Plan")
and, pursuant to the Rights Plan, declared a dividend of one preferred stock
purchase right (the "Rights") on each outstanding share of Common Stock and each
outstanding share of Class A Common Stock. The dividend is payable to holders of
record as of January 8, 1998. Under certain conditions, each Right may be
exercised to purchase one one-hundredth ( 1/100) share of Series A Preferred
Stock at an exercise price of $115, subject to certain adjustments. The Rights
may only be exercised on the tenth day after a public announcement that a party
has acquired beneficial ownership of 15% or more of the Company's outstanding
voting stock or made an offer to acquire such beneficial ownership, subject to
certain exceptions. Prior to that time, the Rights are not transferable apart
from the Company's Common Stock or Class A Common Stock. The Rights, which do
not have voting rights, expire on December 21, 2007, and may be redeemed by the
Company at a price of $0.01 per Right at any time prior to their expiration or
prior to the tenth day after the acquisition of 15% of the Company's outstanding
voting stock (or at such later date as may be authorized by the Company's Board
of Directors).
In the event that the Company is acquired in a merger or other business
combination transaction, provision shall be made so that each holder of record
of a Right shall have the right to receive, upon exercise thereof at the then
current exercise price, that number of shares of common stock of the acquiring
company having a market value at the time of the transaction equal to two times
the exercise price of the Right. In addition, in the event that a party becomes
the beneficial owner of 15% or more of the Company's outstanding voting stock,
provision shall be made that each holder of record of a Right, other than the
acquiring person, will have the right to receive, upon payment of the exercise
price, that number of shares of the Company's preferred stock having a market
value at the time of the transaction equal to two times the exercise price (such
market value to be determined with reference to the market value of the
Company's Common Stock and Class A Common Stock as provided in the Rights Plan).
After a party acquires 15% beneficial ownership
29
<PAGE> 30
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
but before there has been a 50% acquisition, the Board of Directors has the
option to exchange one share of Common Stock for each then valid Right,
excluding Rights held by the acquiring party.
On October 29, 1997, the Company filed a Registration Statement on Form S-3
with the Securities and Exchange Commission, and as amended November 13, 1997,
to register 8,911,304 shares of its Common Stock on behalf of certain selling
stockholders. Sale of shares under this offering is expected to be completed
during 1998.
On March 6, 1996, the Company consummated the sale of 14,950,000 shares of
its Common Stock in its initial public offering. The Company received net
proceeds of approximately $147,033 from the offering.
In 1993, the Company adopted a qualified and non-qualified stock option
plan (the "Option Plan") which provided for the granting of up to 906,436 shares
of Common Stock to key officers and employees of the Company. In December 1997,
the Board of Directors approved an amendment to the Option Plan which provides
for granting an additional 1,500,000 shares of Common Stock. Under the Option
Plan, as amended, a total of 2,406,436 shares are provided for granting. The
amendment to the Option Plan is subject to shareholder approval at the Annual
Meeting in May 1998. Under the Option Plan, options granted approximate market
value of the Common Stock at the date of grant. Such options vest ratably over a
five-year period commencing on the first anniversary date after the date of
grant, and vested options are exercisable at the discretion of the committee
appointed to administer the Option Plan. Generally, an option may be exercised
only if the holder is an officer or employee of the Company at the time of
exercise. Options granted under the Option Plan are not transferable, except by
will and the laws of descent and distribution.
In accordance with SFAS 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.
Accordingly, no compensation cost has been recognized for the Option Plan. Had
compensation cost for the Option Plan been determined based upon the fair value
at the grant date for awards under those plans consistent with the methodology
prescribed under SFAS No. 123, the Company's net income, net income (loss)
applicable to common shares and diluted earnings (loss) per common share would
approximate the pro forma amounts below:
<TABLE>
<CAPTION>
1995 1996 1997
------- -------- --------
<S> <C> <C> <C> <C>
Net income.................................... As reported $ 9,329 $ 10,281 $ 32,226
Pro forma $ 9,302 $ 10,203 $ 32,137
Net income (loss) applicable to common As reported $(5,412) $(17,054) $ 32,226
shares...................................... Pro forma $(5,439) $(17,132) $ 32,137
Diluted earnings (loss) per common share...... As reported $ (0.21) $ (0.44) $ 0.78
Pro forma $ (0.21) $ (0.44) $ 0.78
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions in 1995,
1996 and 1997, respectively: (i) dividend yield of 0% in all years; (ii)
expected volatility of 30.0%, 30.0% and 37.5%; (iii) risk free interest rate
ranging from 5.9% to 7.5%, in 1995, 5.5% to 6.4% in 1996 and 5.7% to 6.5% in
1997; and (iv) expected life of 10 years.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1995. Additional awards in future years are anticipated.
30
<PAGE> 31
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Changes in the status of the Option Plan are summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE OPTIONS OPTIONS
PRICE PER SHARE OUTSTANDING VESTED
--------------- ----------- -------
<S> <C> <C> <C>
December 31, 1994............................... $ 2.54 664,232 108,514
Granted....................................... $ 9.66 82,726 --
Vested........................................ -- -- 121,168
Exercised..................................... $ 2.05 (14,598) (14,598)
Lapsed........................................ $ 2.05 (51,094) --
------ --------- -------
December 31, 1995............................... $ 3.45 681,266 215,084
Granted....................................... $11.93 88,660 --
Vested........................................ -- -- 159,584
Exercised..................................... $ 3.00 (40,872) (40,872)
Forfeited..................................... $ 9.66 (9,732) --
Lapsed........................................ $ 2.05 (17,544) (1,946)
------ --------- -------
December 31, 1996............................... $ 4.51 701,778 331,850
Granted....................................... $19.52 798,167 --
Vested........................................ -- -- 123,107
Exercised..................................... $ 3.70 (53,284) (53,284)
Lapsed........................................ $ 4.71 (13,138) --
------ --------- -------
December 31, 1997............................... $12.89 1,433,523 401,673
====== ========= =======
</TABLE>
The weighted average grant-date fair value of options granted during 1995,
1996 and 1997 was $5.54, $6.65 and $19.52 per share, respectively. The weighted
average exercise price of options vested at December 31, 1996 and 1997, is $2.85
and $3.82 per share, respectively. The table below summarizes options
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS EXERCISE WEIGHTED AVERAGE
OUTSTANDING PRICE LIFE REMAINING
- ----------- -------- ----------------
<C> <C> <S>
412,880.. $ 2.055 5.6 years
60,826... 4.705 6.6
121,650.. 9.66 7.7
40,000... 14.6875 9.0
203,732.. 14.625 9.1
56,000... 25.5625 9.8
538,435.. 20.75 10.0
</TABLE>
As discussed in Note 2 herein, the Company adopted SFAS No. 128 in 1997. In
accordance with SFAS No. 128, the following tables reconcile net income (loss)
and weighted average shares outstanding to the amounts used to calculate basic
and diluted earnings (loss) per share for each of the years ended December 31,
1995, 1996 and 1997.
<TABLE>
<CAPTION>
NET INCOME PER SHARE
(LOSS) SHARES AMOUNT
---------- ---------- ---------
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------
<S> <C> <C> <C>
BASIC AND DILUTED EARNINGS PER SHARE
Loss available to common stockholders............. $(5,412) 25,978,648 $(0.21)
======= ========== ======
</TABLE>
31
<PAGE> 32
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
NET INCOME PER SHARE
(LOSS) SHARES AMOUNT
---------- ---------- ---------
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------
<S> <C> <C> <C>
Net Loss.......................................... $(17,054) $(0.44)
Less: Extraordinary items......................... (18,664) (0.48)
-------- ------
BASIC EARNINGS PER SHARE
Income available to common stockholders........... 1,610 38,491,476 0.04
Assumed exercise of options (treasury method)..... -- 281,811 --
-------- ---------- ------
DILUTED EARNINGS PER SHARE
Income available to common stockholders........... $ 1,610 38,773,287 $ 0.04
======== ========== ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
-------------------------------------
<S> <C> <C> <C>
Net Income........................................ $ 32,226 $ 0.79
Less: Extraordinary item.......................... (5,964) (0.14)
-------- ------
BASIC EARNINGS PER SHARE
Income available to common stockholders........... 38,190 41,035,554 0.93
Assumed exercise of options (treasury method)..... -- 360,989 --
-------- ---------- ------
DILUTED EARNINGS PER SHARE
Income available to common stockholders........... $ 38,190 41,396,543 $ 0.92
======== ========== ======
</TABLE>
Basic earnings (loss) per common share was computed by dividing net income
(loss) by the weighted average shares of common stock outstanding during the
year. Diluted loss per share for 1995 did not include the effect of the assumed
exercise of options issued and outstanding as the effect was antidilutive.
Diluted earnings (loss) per common share for 1996 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 and 538,435 shares at $20.75 per
share were outstanding during the third and fourth quarters and the fourth
quarter, respectively, 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, which expire in
September 2007 and December 2007, respectively, were outstanding at December 31,
1997. For 1996 and 1997, diluted loss per common share for extraordinary items
was $(0.48) and $(0.14), respectively. As a result of adoption of SFAS No. 128,
the Company restated reported earnings (loss) per share for 1995 and 1996. This
accounting change had no impact on previously reported earnings per share data.
Dividends on the Company's Series B Preferred Stock, par value $0.01 per
share, ("Series B Preferred Stock") were payable at an annual rate of $2 per
annum per share. Dividends were payable quarterly on February 28, May 31, August
31, and November 30. The Company, at its option, could pay quarterly dividends
on the Series B Preferred Stock for any or all dividend payments until February
28, 1998, and if the Amended Credit Agreement prohibited the payment of cash
dividends, until February 28, 2000, by issuing additional shares of Series B
Preferred Stock, having a $25 per share liquidation value. Dividends for the
November 1993 and the February, May, August and November 1994 dividend dates
were paid by issuing 173,258 additional shares of Series B Preferred Stock in
1994. Dividends for the February, May, August and November 1995 dividend dates
were paid by issuing 151,502 additional shares of Series B Preferred Stock in
1995.
Dividends on the Series E Preferred Stock, par value $0.01 per share,
("Series E Preferred Stock") were payable at an annual rate of $3.34375 per
annum per share prior to May 1, 2005 and $3.6250 per share from and including
May 1, 2005 increasing quarterly by $.125 per share provided that in no event
shall the dividend rate exceed $5.00 per share. Dividends were payable quarterly
on February 1, May 1, August 1, and November 1 (each a "Dividend Payment Date").
The Company, at its option, could pay quarterly dividends on the Series E
Preferred Stock for any or all dividend payments prior to May 1, 1998, and if
the Amended
32
<PAGE> 33
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit Agreement prohibited the payment of cash dividends, prior to May 1, 2000,
by issuing additional shares of Series E Preferred Stock, which will be valued
at $25 per share. Dividends for the November 1993 and February, May, August and
November 1994 Dividend Payment Dates were paid by issuing 410,510 additional
shares of Series E Preferred Stock in 1994. Dividends for the February, May,
August and November 1995 Dividend Payment Dates were paid by issuing 378,135
additional shares of Series E Preferred Stock in 1995.
On March 18, 1996, the Company redeemed 50% of the outstanding shares of
the Series E Preferred Stock 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 including accrued and unpaid dividends thereon for
approximately $50,933.
9. INCOME TAXES
The provision for income taxes, excluding the effects of extraordinary
items, for the years ended December 31 consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ -------- -------
<S> <C> <C> <C>
Current:
Federal.............................................. $ -- $ -- $ 444
State................................................ 117 38 104
Foreign.............................................. 3,767 5,904 7,309
Deferred:
Federal.............................................. 554 7,710 10,226
State................................................ -- 1,205 1,308
Foreign.............................................. 1,364 3,534 4,729
------ -------- -------
5,802 18,391 24,120
Tax benefit in extraordinary items................... -- (12,443) (3,734)
------ -------- -------
Total expense................................ $5,802 $ 5,948 $20,386
====== ======== =======
</TABLE>
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
<TABLE>
<CAPTION>
1995 1996 1997
------ -------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate............................ $5,145 $ 16,094 $21,185
State taxes, net of Federal benefit.................... 117 215 1,549
Foreign taxes in excess of U.S. statutory rate......... 540 1,992 1,267
Other.................................................. -- 90 119
------ -------- -------
$5,802 $ 18,391 $24,120
====== ======== =======
</TABLE>
33
<PAGE> 34
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of significant temporary differences representing deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not yet deductible.................... $ 5,866 $ 7,997
Postretirement benefits................................... 9,685 10,293
Net operating losses carried forward...................... 24,394 9,361
Other..................................................... 749 2,116
-------- --------
40,694 29,767
-------- --------
Deferred tax liabilities:
Amortization.............................................. 23,258 22,413
Contingent bank loans..................................... 2,800 --
Depreciation.............................................. 7,495 12,750
LIFO inventory valuation.................................. 3,420 5,945
Other..................................................... 6,870 3,577
-------- --------
43,843 44,685
-------- --------
Net deferred tax liability.................................. $ (3,149) $(14,918)
======== ========
</TABLE>
The Company's net operating losses carried forward expire over varying
periods ranging from 5 to 15 years.
Domestic and foreign income before income tax provision for the years ended
December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
Domestic............................................... $ 701 $20,718 $30,626
Foreign................................................ 14,430 26,618 31,684
</TABLE>
The Company has not recognized a deferred tax liability for the
undistributed earnings of its foreign subsidiaries because the Company does not
expect those unremitted earnings to reverse and become taxable to the Company in
the foreseeable future.
10. RETIREMENT BENEFITS
Pension coverage for employees of the Company's non-U.S. subsidiaries is
provided, to the extent deemed appropriate, through separate plans. Obligations
under such plans are systematically provided for by depositing funds with
trustees, under insurance policies or by book reserves. The Company has a
voluntary 401(k) savings plan designed to enhance the existing retirement
program covering eligible domestic employees. The costs of these plans recorded
in the Consolidated Financial Statements are approximately $3,500, $4,500 and
$3,600 and for 1995, 1996 and 1997, respectively.
The Company provides postretirement health care and other benefits to
qualifying domestic retirees. Most international employees are covered by
government sponsored programs and the cost to the Company is not significant.
The Company does not fund retiree health care benefits in advance and has the
right to modify these plans in the future.
34
<PAGE> 35
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic postretirement benefit cost (NPPBC) for the years ended
December 31 includes the following components:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost............................................. $1,037 $ 909 $1,277
Interest cost............................................ 1,455 951 1,118
Amortization of net gain................................. (221) (588) (565)
------ ------ ------
NPPBC.................................................... $2,271 $1,272 $1,830
====== ====== ======
</TABLE>
The plan's status at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Expected postretirement benefit obligation (EPBO)........... $29,719 $33,071
------- -------
Actuarial present value of benefit obligation:
Retirees.................................................. $ 515 $ 513
Fully eligible active participants........................ 3,649 4,708
Other active participants................................. 9,845 10,711
------- -------
Accumulated postretirement benefit obligation (APBO)........ 14,009 15,932
Plan assets................................................. -- --
------- -------
Unfunded APBO............................................... 14,009 15,932
Unrecognized net gain....................................... 11,477 11,124
------- -------
Accrued postretirement benefit cost......................... $25,486 27,056
======= =======
</TABLE>
The postretirement benefit obligation was determined by application of the
terms of the plan, together with relevant actuarial assumptions for active
employees. (The Predecessor retained the obligations for retirees at the Initial
Acquisition). Health care cost trends are projected at annual rates grading from
8.0% in 1997 down to 6.0% in 2010 and later for the 1996 calculation. Healthcare
cost trends are projected at annual rates grading from 8.5% in 1998 down to
5.75% in 2010 and later for the 1997 calculation. The effect of a 1% annual
increase in these assumed cost trend rates would increase the APBO at December
31, 1996 and 1997, by a total of $2,864 and $3,087, respectively, and the
service and interest cost components of the NPPBC for the year ended December
31, 1996 and 1997, by a total of $545 and $584, respectively. The assumed
discount rate used in determining the APBO was 8.0% and 7.75% in 1996 and 1997,
respectively. The assumed rate of increase in compensation levels used was 4.75%
in 1996 and 1997. As no assets have been segregated and restricted for payment
of postretirement benefits, the expected return on plan assets is $0. The
postretirement benefit accrual is included in other long-term liabilities on the
Consolidated Balance Sheets.
The Company does not provide any other significant postemployment benefits.
35
<PAGE> 36
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. COMMITMENTS
The Company leases certain buildings and transportation and other
equipment. Total rental expense under operating leases is $6,500, $5,800 and
$6,900 in 1995, 1996 and 1997, respectively. Future minimum lease payments under
capital and operating leases for years ending December 31 are:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
1998........................................................ $2,030 $6,500
1999........................................................ 1,020 5,000
2000........................................................ 1,000 3,600
2001........................................................ 20 2,900
2002........................................................ 20 2,300
Thereafter.................................................. 10 7,600
------
Total minimum lease payments.............................. 4,100
Less amount representing interest......................... 400
------
Present value of net minimum lease payments............... $3,700
======
</TABLE>
From time to time, the Company engages in short-term hedging activities to
reduce its exposure to precious metals price fluctuations and foreign currency
fluctuations. Such hedging activities are not material, and gains and losses
from such operations are not significant. There can be no assurance that these
hedging operations will eliminate or substantially reduce the risk.
12. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product liabilities, government regulations, and other
actions arising in the normal course of business. In the opinion of 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.
13. RESEARCH AND DEVELOPMENT
Research, development and engineering expenditures for the creation and
application of new products and processes were approximately $24,800, $26,100
and $28,400 in 1995, 1996 and 1997, respectively.
14. BUSINESS SEGMENT INFORMATION
The Company operates in one business segment -- electrical and electronic
connection devices -- which are sold throughout many diverse markets.
The Company's operations are worldwide and can be grouped into several
geographic regions. Operations outside the United States are conducted through
wholly owned subsidiaries of the Company that function within assigned,
principally national, markets. The subsidiaries manufacture regionally where
required by market conditions and/or customer demands, however substantial
interregion and intraregion sales occur.
36
<PAGE> 37
BERG ELECTRONICS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pertinent financial data by major geographic regions is as follows:
<TABLE>
<CAPTION>
INTERCOMPANY OPERATING
NET SALES SALES INCOME (LOSS) TOTAL ASSETS
--------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
North America: 1995..................... $339,248 $ 70,447 $34,872 $ 573,038
1996..................... 381,967 88,138 44,380 569,266
1997..................... 384,877 109,853 57,428 589,167
Europe: 1995..................... $159,501 $ 25,895 $ 7,562 $ 159,576
1996..................... 155,083 37,166 13,306 167,720
1997..................... 216,807 35,177 15,868 178,908
Asia/Pacific: 1995..................... $168,500 $ 44,559 $14,830 $ 146,562
1996..................... 167,619 35,700 20,149 155,357
1997..................... 183,466 44,650 18,973 146,427
Eliminations: 1995..................... $ -- $(140,901) $ (500) $(210,836)
1996..................... -- (161,004) -- (210,336)
1997..................... -- (189,680) -- (209,856)
Total: 1995..................... $667,249 $ -- $56,764 $ 668,340
1996..................... 704,669 -- 77,835 682,007
1997..................... 785,150 -- 92,269 704,646
</TABLE>
As a result of the Lucent Acquisition, Lucent became a significant customer
of the Company. In 1995, 1996 and 1997, sales to Lucent were approximately
$110,500, $124,700 and $87,700, respectively. The Company entered into a
five-year supply agreement with Lucent in connection with the Lucent Acquisition
and believes that Lucent will remain an important customer in the foreseeable
future.
15. UNAUDITED QUARTERLY DATA
<TABLE>
<CAPTION>
DILUTED EARNINGS
NET INCOME (LOSS) PER
(LOSS) BEFORE SHARE BEFORE
EXTRAORDINARY NET EXTRAORDINARY
NET SALES GROSS PROFIT ITEMS INCOME (LOSS) ITEMS
--------- ------------ ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter: 1995............... $160,300 $54,484 $ 4,040 $ 4,040 $ 0.01
1996............... 180,118 61,914 5,555 (13,109) (0.70)
1997............... 188,511 67,892 8,646 8,646 0.21
Second Quarter: 1995............... $164,346 $57,906 $ 2,215 $ 2,215 $(0.05)
1996............... 178,063 61,931 7,612 7,612 0.18
1997............... 202,505 71,783 9,845 9,845 0.23
Third Quarter: 1995............... $170,829 $55,298 $ 3,040 $ 3,040 $(0.02)
1996............... 172,537 60,336 6,560 6,560 0.16
1997............... 195,792 68,610 8,208 2,244 0.20
Fourth Quarter: 1995............... $171,774 $57,285 $ 34 $ 34 $(0.14)
1996............... 173,951 64,619 9,218 9,218 0.22
1997............... 198,342 71,159 11,491 11,491 0.28
</TABLE>
37
<PAGE> 38
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ -- $ --
-------- --------
Total current assets.............................. -- --
-------- --------
Investment in subsidiary.................................... 138,892 135,884
-------- --------
Total assets...................................... $138,892 $135,884
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to subsidiary......................................... $ -- $ --
-------- --------
Total current liabilities......................... -- --
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share, 38,250,476 and
39,099,791 shares, respectively, issued and
outstanding............................................ 382 391
Class A common stock, par value $.01 per share, 2,768,582
and 1,908,554 shares, respectively, issued and
outstanding............................................ 28 19
Paid in capital............................................. 116,094 116,563
Retained earnings........................................... 19,836 52,062
Cumulative translation adjustments.......................... 2,552 (33,151)
-------- --------
Total stockholders' equity........................ 138,892 135,884
-------- --------
Total liabilities and stockholders' equity........ $138,892 $135,884
======== ========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
38
<PAGE> 39
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Other income (expense):
Equity in earnings of subsidiary.................... $ 9,329 $ 10,281 $ 32,226
----------- ----------- -----------
Income before income tax provision.................... 9,329 10,281 32,226
Income tax provision.................................. -- -- --
----------- ----------- -----------
Net income............................................ 9,329 10,281 32,226
Preferred stock:
Accretion and dividends............................. (14,741) (5,469) --
Excess of fair value over book value of redemption
and purchase..................................... -- (21,866) --
----------- ----------- -----------
Net income (loss) applicable to common shares......... $ (5,412) $ (17,054) $ 32,226
=========== =========== ===========
Basic income (loss) per common share.................. $ (0.21) $ (0.44) $ 0.79
=========== =========== ===========
Diluted income (loss) per share....................... $ (0.21) $ (0.44) $ 0.78
=========== =========== ===========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
39
<PAGE> 40
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
PREFERRED COMMON PAID IN RETAINED TRANSLATION
STOCK STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
--------- ------ ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994...................... $45 $260 $115,051 $ 2,101 $ 12,002 $129,459
Exercise of stock options..................... 30 30
Preferred stock dividends..................... 6 (6) --
Series B preferred stock accretion............ 1,500 (1,500) --
Change in cumulative translation
adjustments................................ 5,522 5,522
Net income.................................... 9,329 9,329
--- ---- -------- ------- -------- --------
Balance, December 31, 1995...................... $51 $260 $116,575 $ 9,930 $ 17,524 $144,340
Exercise of stock options..................... 223 223
Preferred stock dividends..................... 1 (1) --
Series B preferred stock accretion............ 375 (375) --
Preferred stock purchase and redemption....... (52) (142,953) (143,005)
Net proceeds from IPO......................... 150 146,883 147,033
Costs of IPO.................................. (5,008) (5,008)
Change in cumulative translation
adjustments................................ (14,972) (14,972)
Net income.................................... 10,281 10,281
--- ---- -------- ------- -------- --------
Balance, December 31, 1996...................... $-- $410 $116,094 $19,836 $ 2,552 $138,892
Exercise of stock options..................... 197 197
Tax benefit upon exercise of stock options.... 272 272
Change in cumulative translation
adjustments................................ (35,703) (35,703)
Net income.................................... 32,226 32,226
--- ---- -------- ------- -------- --------
Balance, December 31, 1997...................... $-- $410 $116,563 $52,062 $(33,151) $135,884
=== ==== ======== ======= ======== ========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
40
<PAGE> 41
BERG ELECTRONICS CORP.
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION
(PARENT COMPANY ONLY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net income................................................ $ 9,329 $ 10,281 $ 32,226
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Undistributed earnings of subsidiary................. (9,329) (10,281) (32,226)
------- -------- --------
Net cash from operating activities.......................... -- -- --
------- -------- --------
Cash flows provided by (used in) investing activities:
Cash (contributed to) received from subsidiary............ (30) 757 (197)
------- -------- --------
Net cash from investing activities.......................... (30) 757 (197)
------- -------- --------
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock.................... 30 223 197
Preferred stock purchase and redemption................... -- (143,005) --
Net proceeds from IPO..................................... -- 147,033 --
Costs of IPO.............................................. -- (5,008) --
------- -------- --------
Net cash from financing activities.......................... 30 (757) 197
------- -------- --------
Net change in cash and cash equivalents..................... -- -- --
Cash and cash equivalents at beginning of period............ -- -- --
------- -------- --------
Cash and cash equivalents at end of period.................. $ -- $ -- $ --
======= ======== ========
</TABLE>
See notes to the consolidated financial statements of Berg Electronics Corp.
41
<PAGE> 42
BERG ELECTRONICS CORP.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31
(IN THOUSANDS)
<TABLE>
<CAPTION>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS-DEDUCTED BALANCE AT CHARGES TO ACCOUNTS BALANCE AT
FROM RECEIVABLES IN THE BEGINNING COSTS AND WRITTEN TRANSLATION END OF
BALANCE SHEET OF PERIOD ACQUISITIONS EXPENSES OFF ADJUSTMENTS PERIOD
- ----------------------- ---------- ------------ ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1995......................... $2,610 $ 50 $1,353 $ (983) $ 13 $3,043
====== ====== ====== ======= ===== ======
1996......................... $3,043 $ -- $1,883 $(1,170) $ (53) $3,703
====== ====== ====== ======= ===== ======
1997......................... $3,703 $ -- $ 904 $ (802) $(148) $3,657
====== ====== ====== ======= ===== ======
</TABLE>
42
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information contained under the captions "PROPOSAL FOR THE ELECTION OF
DIRECTORS" and "EXECUTIVE OFFICERS" in the 1998 Proxy Statement for the Annual
Meeting of Stockholders (the "1998 Proxy Statement") is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the caption "EXECUTIVE AND DIRECTOR
COMPENSATION" in the 1998 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained under the caption "VOTING SECURITIES OUTSTANDING
AND SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS" in the 1998
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the caption "RELATED PARTY TRANSACTIONS" in
the 1998 Proxy Statement is incorporated herein by reference.
43
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT
(1) and (2) Financial Statements and Financial Statement Schedules
See Index to Financial Statements and Schedules at Item 8 of this
report.
(3) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 -- 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)
3.2 -- Certificate of Amendment to Certificate of Incorporation,
dated February 29, 1996, of Berg Electronics Corp.(4)
3.3 -- Bylaws of Berg Electronics Corp.(1)
4.1 -- Certificate of Designations, Preferences and Rights of
Series A Junior Preferred Stock of Berg Electronics
Corp.*
10.1 -- Registration Rights Agreement, dated as of March 1, 1993,
by and among Berg Electronics Holdings Corp. and the
parties listed therein.(2)
10.2 -- Amended and Restated Lease Agreement, dated July 26 1993,
by and between Ronald S. Marsilio and Harbor Electronics,
Inc.(2)
10.3+ -- Berg Electronics, Inc. Pension and Retirement Plan.(2)
10.4+ -- Berg Electronics, Inc. Savings Plan.(2)
10.5+ -- Form of Berg Electronics Holdings Corp. 1993 Stock Option
Plan.(2)
10.6 -- Supply Contract between AT&T Corp. and Berg Electronics,
Inc., dated as of May 23, 1994, incorporated by reference
as an exhibit to the Asset Purchase Agreement, dated as
of May 23, 1994, between Berg Electronics, Inc. and AT&T
Corp. (exhibit 10.7 hereto).(3)
10.7 -- Asset Purchase Agreement, dated as of May 23, 1994,
between Berg Electronics, Inc. and AT&T Corp.(3)
10.8+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among James N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.9+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Robert N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.10+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among David M. Sindelar, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.11+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among W. Thomas McGhee, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.12+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Timothy L. Conlon, Berg
Electronics Corp. and Berg Electronics Group, Inc.(1)
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.13+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Larry S. Bacon, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.14 -- Amended and Restated Monitoring and Oversight Agreement,
dated as of March 6, 1996 by and among Berg Electronics
Corp., Berg Electronics Group, Inc. and Hicks, Muse, Tate
and Furst Incorporated.(4)
10.15 -- Form of Revolving Credit Note, dated March 6, 1996,
between Berg Electronics Group, Inc. and Chemical
Bank.(4)
10.16 -- Schedule of substantially identical Revolving Credit
Notes.(4)
10.17 -- Form of Term Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.18 -- Schedule of substantially identical Term Notes.(4)
10.19 -- Swing Line Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.20 -- Underwriting Agreement, dated March 1, 1996, among Berg
Electronics Corp., Berg Electronics Group, Inc. and the
underwriters named therein.(4)
10.21 -- Domestic Subsidiaries Guarantee, dated as of March 6,
1996, made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.(5)
10.22 -- Acknowledgement, Consent and Amendment, dated as of
February 29, 1996, to the documents listed on Schedule 1
thereto made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.(5)
10.23 -- First Amendment, dated as of December 18, 1996, to the
Credit Agreement among Berg Electronics Group, Inc., Berg
Electronics Corp., the banks and other financial
institutions from time to time parties thereto, and the
Chase Manhattan Bank (as successor by merger to Chemical
Bank).(5)
10.24 -- Supplement No. 1 to Note Pledge Agreement, dated as of
December 18, 1996, made by Berg Electronics Group, Inc.
in favor of the Chase Manhattan Bank (as successor by
merger to Chemical Bank).(5)
10.25+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among James N. Mills, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.26+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among David M. Sindelar, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.27+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among W. Thomas McGhee, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.28+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among Larry S. Bacon, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.29+ -- Amendment to the Amended and Restated Executive
Employment Agreement, dated as of January 1, 1997, by and
among Robert N. Mills, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.30+ -- Amendment to the Amended and Restated Executive
Employment Agreement, dated as of January 1, 1997, by and
among Timothy L. Conlon, Berg Electronics Corp., Berg
Electronics Group, Inc.(6)
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.31+ -- Berg Electronics Corp. 1997 Senior Executive Compensation
Plan.(7)
10.32 -- Amended and Restated Credit Agreement, dated as of August
7, 1997, among Berg Electronics Group, Inc., Berg
Electronics Corp., the banks and other financial
institutions from time to time parties thereto, and the
Chase Manhattan Bank, as Agent for the lenders.(8)
10.33+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
James N. Mills, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.(8)
10.34+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
Robert N. Mills, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.(8)
10.35+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
David M. Sindelar, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(8)
10.36+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among W.
Thomas McGhee, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.(8)
10.37+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
Larry S. Bacon, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.(8)
10.38+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
Timothy L. Conlon, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(8)
10.39 -- Rights Agreement by and between Berg Electronics Corp.
and Harris Trust and Savings Bank, as Rights Agent, dated
as of December 22, 1997.(9)
21.1 -- Subsidiaries of Registrant.(5)
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 Registration Statement of Berg
Electronics Holdings Corp. on Form S-1, Registration No. 33-62552, and
incorporated by reference herein.
(3) Filed previously as an exhibit to the Berg Electronics Holdings Corp. and
Berg Electronics, Inc. Form 8-K dated May 23, 1994 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, 1995, and incorporated by reference
herein.
(5) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-K for
the fiscal year ended December 31, 1996, and incorporated by reference
herein.
(6) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-Q and
10-Q/A for the quarter ended March 31, 1997, and incorporated by reference
herein.
(7) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-Q for
the quarter ended June 30, 1997, and incorporated by reference herein.
(8) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-Q for
the quarter ended September 30, 1997, and incorporated by reference herein.
(9) Filed previously as an exhibit to the Berg Electronics Corp. Form 8-K
filing, dated December 22, 1997.
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
(B) REPORTS ON FORM 8-K
Berg Electronics Corp. Form 8-K, dated December 22, 1997 -- Item 5 Other
Events.
46
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BERG ELECTRONICS CORP.
By /s/ JOSEPH S. CATANZARO
-----------------------------------
Joseph S. Catanzaro
Chief Accounting Officer
Date: February 2, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES N. MILLS Chairman of the Board of Directors February 2, 1998
- ----------------------------------------------------- and Chief Executive Officer
James N. Mills (Principal Executive Officer)
/s/ DAVID M. SINDELAR Senior Vice President and Chief February 2, 1998
- ----------------------------------------------------- Financial Officer (Principal
David M. Sindelar Financial Officer)
/s/ JOSEPH S. CATANZARO Chief Accounting Officer (Principal February 2, 1998
- ----------------------------------------------------- Accounting Officer)
Joseph S. Catanzaro
/s/ TIMOTHY L. CONLON Director February 2, 1998
- -----------------------------------------------------
Timothy L. Conlon
/s/ THOMAS O. HICKS Director February 2, 1998
- -----------------------------------------------------
Thomas O. Hicks
/s/ CHARLES W. TATE Director February 2, 1998
- -----------------------------------------------------
Charles W. Tate
/s/ RICHARD W. VIESER Director February 2, 1998
- -----------------------------------------------------
Richard W. Vieser
/s/ KENNETH F. YONTZ Director February 2, 1998
- -----------------------------------------------------
Kenneth F. Yontz
</TABLE>
47
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 -- 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)
3.2 -- Certificate of Amendment to Certificate of Incorporation,
dated February 29, 1996, of Berg Electronics Corp.(4)
3.3 -- Bylaws of Berg Electronics Corp.(1)
4.1 -- Certificate of Designations, Preferences and Rights of
Series A Junior Preferred Stock of Berg Electronics
Corp.*
10.1 -- Registration Rights Agreement, dated as of March 1, 1993,
by and among Berg Electronics Holdings Corp. and the
parties listed therein.(2)
10.2 -- Amended and Restated Lease Agreement, dated July 26 1993,
by and between Ronald S. Marsilio and Harbor Electronics,
Inc.(2)
10.3+ -- Berg Electronics, Inc. Pension and Retirement Plan.(2)
10.4+ -- Berg Electronics, Inc. Savings Plan.(2)
10.5+ -- Form of Berg Electronics Holdings Corp. 1993 Stock Option
Plan.(2)
10.6 -- Supply Contract between AT&T Corp. and Berg Electronics,
Inc., dated as of May 23, 1994, incorporated by reference
as an exhibit to the Asset Purchase Agreement, dated as
of May 23, 1994, between Berg Electronics, Inc. and AT&T
Corp. (exhibit 10.7 hereto).(3)
10.7 -- Asset Purchase Agreement, dated as of May 23, 1994,
between Berg Electronics, Inc. and AT&T Corp.(3)
10.8+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among James N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.9+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Robert N. Mills, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.10+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among David M. Sindelar, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.11+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among W. Thomas McGhee, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.12+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Timothy L. Conlon, Berg
Electronics Corp. and Berg Electronics Group, Inc.(1)
10.13+ -- Amended and Restated Employment Agreement, dated as of
February 1, 1996, by and among Larry S. Bacon, Berg
Electronics Corp., Berg Electronics Group, Inc. and
certain of its subsidiaries.(1)
10.14 -- Amended and Restated Monitoring and Oversight Agreement,
dated as of March 6, 1996 by and among Berg Electronics
Corp., Berg Electronics Group, Inc. and Hicks, Muse, Tate
and Furst Incorporated.(4)
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.15 -- Form of Revolving Credit Note, dated March 6, 1996,
between Berg Electronics Group, Inc. and Chemical
Bank.(4)
10.16 -- Schedule of substantially identical Revolving Credit
Notes.(4)
10.17 -- Form of Term Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.18 -- Schedule of substantially identical Term Notes.(4)
10.19 -- Swing Line Note, dated March 6, 1996, between Berg
Electronics Group, Inc. and Chemical Bank.(4)
10.20 -- Underwriting Agreement, dated March 1, 1996, among Berg
Electronics Corp., Berg Electronics Group, Inc. and the
underwriters named therein.(4)
10.21 -- Domestic Subsidiaries Guarantee, dated as of March 6,
1996, made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.(5)
10.22 -- Acknowledgement, Consent and Amendment, dated as of
February 29, 1996, to the documents listed on Schedule 1
thereto made by each of the corporations that are
signatories thereto in favor of Chemical Bank, as agent
for the lenders from time to time parties to the Credit
Agreement.(5)
10.23 -- First Amendment, dated as of December 18, 1996, to the
Credit Agreement among Berg Electronics Group, Inc., Berg
Electronics Corp., the banks and other financial
institutions from time to time parties thereto, and the
Chase Manhattan Bank (as successor by merger to Chemical
Bank).(5)
10.24 -- Supplement No. 1 to Note Pledge Agreement, dated as of
December 18, 1996, made by Berg Electronics Group, Inc.
in favor of the Chase Manhattan Bank (as successor by
merger to Chemical Bank).(5)
10.25+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among James N. Mills, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.26+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among David M. Sindelar, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.27+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among W. Thomas McGhee, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.28+ -- First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and
among Larry S. Bacon, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.29+ -- Amendment to the Amended and Restated Executive
Employment Agreement, dated as of January 1, 1997, by and
among Robert N. Mills, Berg Electronics Corp., Berg
Electronics Group, Inc. and certain of its
subsidiaries.(6)
10.30+ -- Amendment to the Amended and Restated Executive
Employment Agreement, dated as of January 1, 1997, by and
among Timothy L. Conlon, Berg Electronics Corp., Berg
Electronics Group, Inc.(6)
10.31+ -- Berg Electronics Corp. 1997 Senior Executive Compensation
Plan.(7)
10.32 -- Amended and Restated Credit Agreement, dated as of August
7, 1997, among Berg Electronics Group, Inc., Berg
Electronics Corp., the banks and other financial
institutions from time to time parties thereto, and the
Chase Manhattan Bank, as Agent for the lenders.(8)
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.33+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
James N. Mills, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.(8)
10.34+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
Robert N. Mills, Berg Electronics Corp., Bert Electronics
group, Inc. and certain of its subsidiaries.(8)
10.35+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
David M. Sindelar, Berg Electronics Corp., Bert
Electronics group, Inc. and certain of its
subsidiaries.(8)
10.36+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among W.
Thomas McGhee, Berg Electronics Corp., Bert Electronics
group, Inc. and certain of its subsidiaries.(8)
10.37+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
Larry S. Bacon, Berg Electronics Corp., Bert Electronics
group, Inc. and certain of its subsidiaries.(8)
10.38+ -- Second Amended and Restated Executive Employment
Agreement, dated as of November 1, 1997, by and among
Timothy L. Conlon, Berg Electronics Corp., Bert
Electronics group, Inc. and certain of its
subsidiaries.(8)
10.39 -- Rights Agreement by and between Berg Electronics Corp.
and Harris Trust and Savings Bank, as Rights Agent, dated
as of December 22, 1997.(9)
21.1 -- Subsidiaries of Registrant.(5)
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 Registration Statement of Berg
Electronics Holdings Corp. on Form S-1, Registration No. 33-62552, and
incorporated by reference herein.
(3) Filed previously as an exhibit to the Berg Electronics Holdings Corp. and
Berg Electronics, Inc. Form 8-K dated May 23, 1994 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, 1995, and incorporated by reference
herein.
(5) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-K for
the fiscal year ended December 31, 1996, and incorporated by reference
herein.
(6) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-Q and
10-Q/A for the quarter ended March 31, 1997, and incorporated by reference
herein.
(7) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-Q for
the quarter ended June 30, 1997, and incorporated by reference herein.
(8) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-Q for
the quarter ended September 30, 1997, and incorporated by reference herein.
(9) Filed previously as an exhibit to the Berg Electronics Corp. Form 8-K
filing, dated December 22, 1997.
* Filed herewith.
+ Indicates a management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A JUNIOR PREFERRED STOCK
OF
BERG ELECTRONICS CORP.
Pursuant to Section 151 of the
Delaware General Corporation Law
I, David M. Sindelar, a Senior Vice President of Berg
Electronics Corp., a corporation organized and existing under the Delaware
General Corporation Law (the "Company"), in accordance with the provisions of
Section 151 of such law, DO HEREBY CERTIFY that pursuant to the authority
conferred upon the Board of Directors by Article IV of the Certificate of
Incorporation of the Company, the Board of Directors on December 22, 1997
adopted the following resolution which creates a series of 670,000 shares of
Preferred Stock designated as Series A Junior Preferred Stock, as follows:
RESOLVED, that pursuant to Section 151 of the Delaware General
Corporation Law and the authority vested in the Board of Directors of the
Company in accordance with the provisions of ARTICLE IV of the Certificate of
Incorporation of the Company, a series of Preferred Stock of the Company be,
and hereby is, created, and the powers, designations, preferences and relative,
participating, optional or other special rights of the shares of such series,
and the
<PAGE> 2
qualifications, limitations or restrictions thereof, be, and hereby are, as
follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
670,000.
Section 2. Dividends and Distributions.
(A) Subject to the provisions for adjustment hereinafter set
forth, the holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, (i) cash dividends in an amount per share
(rounded to the nearest cent) equal to 100 times the aggregate per share amount
of all cash dividends declared or paid on the Common Stock, $0.01 par value per
share, of the Company (the "Common Stock") and on the Class A Common Stock,
$0.01 par value per share, of the Company (the "Class A Common Stock") and (ii)
a preferential cash dividend (the "Preferential Dividends"), if any, in
preference to the holders of each of the Common Stock and the Class A Common
Stock, on the first day of February, May, August and November of each year
(each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, payable in an amount
2
<PAGE> 3
(except in the case of the first Quarterly Dividend Payment if the date of the
first issuance of Series A Preferred Stock is a date other than a Quarterly
Dividend Payment date, in which case such payment shall be a prorated amount of
such amount) equal to $1.00 per share of Series A Preferred Stock less the per
share amount of all cash dividends declared on the Series A Preferred Stock
pursuant to clause (i) of this sentence since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred Stock. In the event the Company shall, at any time
after the issuance of any share or fraction of a share of Series A Preferred
Stock, make any distribution on the shares of Common Stock or Class A Common
Stock of the Company, whether by way of a dividend or a reclassification of
stock, a recapitalization, reorganization or partial liquidation of the Company
or otherwise, which is payable in cash or any debt security, debt instrument,
real or personal property or any other property (other than cash dividends
subject to the immediately preceding sentence, a distribution of shares of
Common Stock, Class A Common Stock, or other capital stock of the Company or a
distribution of rights or warrants to acquire any such share, including any
debt security convertible into or exchangeable for any such
3
<PAGE> 4
share, at a price less than the Fair Market Value (as hereinafter defined) of
such share), then, and in each such event, the Company shall simultaneously pay
on each then outstanding share of Series A Preferred Stock of the Company a
distribution, in like kind, of 100 times such distribution paid on a share of
Common Stock or Class A Common Stock, as the case may be (subject to the
provisions for adjustment hereinafter set forth). The dividends and
distributions on the Series A Preferred Stock to which holders thereof are
entitled pursuant to clause (i) of the first sentence of this paragraph and
pursuant to the second sentence of this paragraph are hereinafter referred to
as "Dividends" and the multiple of such cash and non-cash dividends on the
Common Stock or Class A Common Stock, as the case may be, applicable to the
determination of the Dividends, which shall be 100 initially but shall be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Dividend Multiple". In the event the Company shall at any time after
December 22, 1997 declare or pay any dividend or make any distribution on
Common Stock or Class A Common Stock payable in shares of Common Stock or Class
A Common Stock, or effect a subdivision or split or a combination,
consolidation or reverse split of the outstanding shares of Common Stock or
Class A Common Stock into a greater or lesser number of shares of Common Stock
or Class A Common
4
<PAGE> 5
Stock, then in each such case the Dividend Multiple thereafter applicable to
the determination of the amount of Dividends which holders of shares of Series
A Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied by a fraction the
numerator of which is the number of shares of Common Stock or Class A Common
Stock, as the case may be, outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock or Class A Common
Stock, respectively, that were outstanding immediately prior to such event.
(B) The Company shall declare each Dividend at the same time
it declares any cash or non-cash dividend or distribution on the Common Stock
or Class A Common Stock, as the case may be, in respect of which a Dividend is
required to be paid. No cash or non-cash dividend or distribution on the
Common Stock or Class A Common Stock in respect of which a Dividend is required
to be paid shall be paid or set aside for payment on the Common Stock or Class
A Common Stock unless a Dividend in respect of such dividend or distribution on
the Common Stock or Class A Common Stock shall be simultaneously paid, or set
aside for payment, on the Series A Preferred Stock.
(C) Preferential Dividends shall begin to accrue on
outstanding shares of Series A Preferred Stock from the
5
<PAGE> 6
Quarterly Dividend Payment Date next preceding the date of issuance of any
shares of Series A Preferred Stock. Accrued but unpaid Preferential Dividends
shall cumulate but shall not bear interest. Preferential Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the holders of the Common
Stock and the Class A Common Stock. The number of votes which a holder of
Series A Preferred Stock is entitled to cast, as the same may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple". In the event the Company shall at any time after December 22, 1997
declare or pay any dividend on Common Stock and Class A Common Stock payable in
shares of Common Stock and Class A Common Stock, respectively, or effect a
subdivision or split or a combination,
6
<PAGE> 7
consolidation or reverse split of the outstanding shares of Common Stock and
Class A Common Stock into a greater or lesser number of shares of Common Stock
and Class A Common Stock, respectively, then in each such case the Vote
Multiple thereafter applicable to the determination of the number of votes per
share to which holders of shares of Series A Preferred Stock shall be entitled
after such event shall be the Vote Multiple immediately prior to such event
multiplied by a fraction the numerator of which is the number of shares of
Common Stock and Class A Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock and Class
A Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate
of Incorporation or By-laws, the holders of shares of each of the Series A
Preferred Stock, the Common Stock and the Class A Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Company.
(C) In the event that the Preferential Dividends accrued on
the Series A Preferred Stock for four or more quarterly dividend periods,
whether consecutive or not, shall not have been declared and paid or
irrevocably set aside for payment, the holders of record of Preferred Stock
7
<PAGE> 8
of the Company of all series (including the Series A Preferred Stock), other
than any series in respect of which such right is expressly withheld by the
Restated Certificate of Incorporation or the authorizing resolutions included
in any Certificate of Designations therefor, shall have the right, at the next
meeting of stockholders called for the election of directors, to elect two
members to the Board of Directors, which directors shall be in addition to the
number required by the By-laws prior to such event, to serve until the next
Annual Meeting and until their successors are elected and qualified or their
earlier resignation, removal or incapacity or until such earlier time as all
accrued and unpaid Preferential Dividends upon the outstanding shares of Series
A Preferred Stock shall have been paid (or irrevocably set aside for payment)
in full. The holders of shares of Series A Preferred Stock shall continue to
have the right to elect directors as provided by the immediately preceding
sentence until all accrued and unpaid Preferential Dividends upon the
outstanding shares of Series A Preferred Stock shall have been paid (or set
aside for payment) in full. Such directors may be removed and replaced by such
stockholders, and vacancies in such directorships may be filled only by such
stockholders (or by the remaining director elected by such stockholders, if
there be one) in the manner permitted by law; provided, however, that any
8
<PAGE> 9
such action by stockholders shall be taken at a meeting of stockholders and
shall not be taken by written consent thereto.
(D) Except as otherwise required by the Certificate of
Incorporation or By-laws or set forth herein, holders of Series A Preferred
Stock shall have no other special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock and Class A Common Stock as set forth herein) for the taking of any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever Preferential Dividends or Dividends are in
arrears or the Company shall be in default of payment thereof, thereafter and
until all accrued and unpaid Preferential Dividends and Dividends, whether or
not declared, on shares of Series A Preferred Stock outstanding shall have been
paid or set irrevocably aside for payment in full, and in addition to any and
all other rights which any holder of shares of Series A Preferred Stock may
have in such circumstances, the Company shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration, any shares of stock ranking junior (either as to
dividends or upon liquidation,
9
<PAGE> 10
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity as to
dividends with the Series A Preferred Stock, unless dividends are paid
ratably on the Series A Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled if
the full dividends accrued thereon were to be paid;
(iii) except as permitted by subparagraph (iv) of this
paragraph 4(A), redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, provided that the Company may at any time
redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Company ranking junior
(both as to dividends and upon liquidation, dissolution or winding up)
to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on
a parity with the
10
<PAGE> 11
Series A Preferred Stock (either as to dividends or upon liquidation,
dissolution or winding up), except in accordance with a purchase offer
made to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Company shall not permit any Subsidiary (as
hereinafter defined) of the Company to purchase or otherwise acquire for
consideration any shares of stock of the Company unless the Company could,
under paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner. A "Subsidiary" of the Company shall
mean any corporation or other entity of which securities or other ownership
interests having ordinary voting power sufficient to elect a majority of the
board of directors of such corporation or other entity or other persons
performing similar functions are beneficially owned, directly or indirectly, by
the Company or by any corporation or other entity that is otherwise controlled
by the Company.
(C) The Company shall not issue any shares of Series A
Preferred Stock except upon exercise of Rights issued pursuant to that certain
Rights Agreement dated as of
11
<PAGE> 12
December 22, 1997 between the Company and Harris Trust and Savings Bank, as
Rights Agent, a copy of which is on file with the Secretary of the Company at
its principal executive office and shall be made available to stockholders of
record without charge upon written request therefor addressed to said
Secretary. Notwithstanding the foregoing sentence, nothing contained in the
provisions hereof shall prohibit or restrict the Company from issuing for any
purpose any series of Preferred Stock with rights and privileges similar to,
different from, or greater than, those of the Series A Preferred Stock.
Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Company in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares upon their retirement and cancellation shall become
authorized but unissued shares of Preferred Stock, without designation as to
series, and such shares may be reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
no distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation,
12
<PAGE> 13
dissolution or winding up) to the Series A Preferred Stock unless the holders
of shares of Series A Preferred Stock shall have received for each share of
Series A Preferred Stock, subject to adjustment as hereinafter provided, (A)
$11,500 plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment or, (B) if
greater than the amount specified in clause (i)(A) of this sentence, an amount
equal to 100 times the aggregate amount to be distributed per share to holders
of Common Stock or Class A Common Stock, as the same may be adjusted as
hereinafter provided and (ii) to the holders of stock ranking on a parity upon
liquidation, dissolution or winding up with the Series A Preferred Stock,
unless simultaneously therewith distributions are made ratably on the Series A
Preferred Stock and all other shares of such parity stock in proportion to the
total amounts to which the holders of shares of Series A Preferred Stock are
entitled under clause (i)(A) of this sentence and to which the holders of such
parity shares are entitled, in each case upon such liquidation, dissolution or
winding up. The amount to which holders of Series A Preferred Stock may be
entitled upon liquidation, dissolution or winding up of the Company pursuant to
clause (i)(B) of the foregoing sentence is hereinafter referred to as the
"Participating Liquidation
13
<PAGE> 14
Amount" and the multiple of the amount to be distributed to holders of shares
of Common Stock and Class A Common Stock upon the liquidation, dissolution or
winding up of the Company applicable pursuant to said clause to the
determination of the Participating Liquidation Amount, as said multiple may be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Liquidation Multiple". In the event the Company shall at any time
after December 22, 1997 declare or pay any dividend on Common Stock and Class A
Common Stock payable in shares of Common Stock and Class A Common Stock,
respectively, or effect a subdivision or split or a combination, consolidation
or reverse split of the outstanding shares of Common Stock and Class A Common
Stock into a greater or lesser number of shares of Common Stock and Class A
Common Stock, respectively, then, in each such case, the Liquidation Multiple
thereafter applicable to the determination of the Participating Liquidation
Amount to which holders of Series A Preferred Stock shall be entitled after
such event shall be the Liquidation Multiple applicable immediately prior to
such event multiplied by a fraction the numerator of which is the number of
shares of Common Stock and Class A Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
14
<PAGE> 15
and Class A Common Stock that were outstanding immediately prior to such event.
Section 7. Certain Reclassifications and Other Events.
(A) In the event that holders of shares of Common Stock or
Class A Common Stock of the Company receive after December 22, 1997 in respect
of their shares of Common Stock or Class A Common Stock, respectively, any
share of capital stock of the Company (other than any share of Common Stock or
Class A Common Stock of the Company), whether by way of reclassification,
recapitalization, reorganization, dividend or other distribution or otherwise
(a "Transaction"), then, and in each such event, the dividend rights, voting
rights and rights upon the liquidation, dissolution or winding up of the
Company of the shares of Series A Preferred Stock shall be adjusted so that
after such event the holders of Series A Preferred Stock shall be entitled, in
respect of each share of Series A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior
to such adjustment, to (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such Transaction multiplied by the
additional dividends which the holder of a share of Common Stock or Class A
Common Stock, as the case may be, shall be entitled to receive by virtue of the
receipt in the
15
<PAGE> 16
Transaction of such capital stock, (ii) such additional voting rights as equal
the Vote Multiple in effect immediately prior to such Transaction multiplied by
the additional voting rights which the holder of a share of Common Stock or
Class A Common Stock, as the case may be, shall be entitled to receive by
virtue of the receipt in the Transaction of such capital stock and (iii) such
additional distributions upon liquidation, dissolution or winding up of the
Company as equal the Liquidation Multiple in effect immediately prior to such
Transaction multiplied by the additional amount which the holder of a share of
Common Stock or Class A Common Stock, as the case may be, shall be entitled to
receive upon liquidation, dissolution or winding up of the Company by virtue of
the receipt in the Transaction of such capital stock, as the case may be, all
as provided by the terms of such capital stock.
(B) In the event that holders of shares of Common Stock or
Class A Common Stock of the Company receive after December 22, 1997 in respect
of their shares of Common Stock or Class A Common Stock any right or warrant to
purchase Common Stock or Class A Common Stock (including as such a right, for
all purposes of this paragraph, any security convertible into or exchangeable
for Common Stock or Class A Common Stock) at a purchase price per share less
than the Fair Market Value of a share of Common Stock or Class A
16
<PAGE> 17
Common Stock on the date of issuance of such right or warrant, then and in each
such event the dividend rights, voting rights and rights upon the liquidation,
dissolution or winding up of the Company of the shares of Series A Preferred
Stock shall each be adjusted so that after such event the Dividend Multiple,
the Vote Multiple and the Liquidation Multiple shall each be the product of the
Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the case
may be, in effect immediately prior to such event multiplied by a fraction the
numerator of which shall be the number of shares of Common Stock outstanding
immediately before such issuance of rights or warrants plus the maximum number
of shares of Common Stock which could be acquired upon exercise in full of all
such rights or warrants and the denominator of which shall be the number of
shares of Common Stock or Class A Common Stock, as the case may be, outstanding
immediately before such issuance of rights or warrants plus the number of
shares of Common Stock or Class A Common Stock, as the case may be, which could
be purchased, at the Fair Market Value of the Common Stock or Class A Common
Stock, as the case may be, at the time of such issuance, by the maximum
aggregate consideration payable upon exercise in full of all such rights or
warrants.
17
<PAGE> 18
(C) In the event that holders of shares of Common Stock or
Class A Common Stock of the Company receive after December 22, 1997 in respect
of their shares of Common Stock or Class A Common Stock any right or warrant to
purchase capital stock of the Company (other than shares of Common Stock or
Class A Common Stock, as the case may be), including as such a right, for all
purposes of this paragraph, any security convertible into or exchangeable for
capital stock of the Company (other than Common Stock or Class A Common Stock,
as the case may be), at a purchase price per share less than the Fair Market
Value of such shares of capital stock on the date of issuance of such right or
warrant, then and in each such event the dividend rights, voting rights and
rights upon liquidation, dissolution or winding up of the Company of the shares
of Series A Preferred Stock shall each be adjusted so that after such event
each holder of a share of Series A Preferred Stock shall be entitled, in
respect of each share of Series A Preferred Stock held, in addition to such
rights in respect thereof to which such holder was entitled immediately prior
to such event, to receive (i) such additional dividends as equal the Dividend
Multiple in effect immediately prior to such event multiplied, first, by the
additional dividends to which the holder of a share of Common Stock or Class A
Common Stock, as the case may be,
18
<PAGE> 19
shall be entitled upon exercise of such right or warrant by virtue of the
capital stock which could be acquired upon such exercise and multiplied again
by the Discount Fraction (as hereinafter defined) and (ii) such additional
voting rights as equal the Vote Multiple in effect immediately prior to such
event multiplied, first, by the additional voting rights to which the holder of
a share of Common Stock or Class A Common Stock, as the case may be, shall be
entitled upon exercise of such right or warrant by virtue of the capital stock
which could be acquired upon such exercise and multiplied again by the Discount
Fraction and (iii) such additional distributions upon liquidation, dissolution
or winding up of the Company as equal the Liquidation Multiple in effect
immediately prior to such event multiplied, first, by the additional amount
which the holder of a share of Common Stock or Class A Common Stock, as the
case may be, shall be entitled to receive upon liquidation, dissolution or
winding up of the Company upon exercise of such right or warrant by virtue of
the capital stock which could be acquired upon such exercise and multiplied
again by the Discount Fraction. For purposes of this paragraph, the "Discount
Fraction" shall be a fraction the numerator of which shall be the difference
between the Fair Market Value of a share of the capital stock subject to a
right or warrant distributed to holders of shares of Common Stock or
19
<PAGE> 20
Class A Common Stock, as the case may be, of the Company as contemplated by
this paragraph immediately after the distribution thereof and the purchase
price per share for such share of capital stock pursuant to such right or
warrant and the denominator of which shall be the Fair Market Value of a share
of such capital stock immediately after the distribution of such right or
warrant.
(D) For purposes of this Certificate of Designations, the
"Fair Market Value" of a share of capital stock of the Company (including a
share of Common Stock or Class A Common Stock) on any date shall be deemed to
be the average of the daily closing price per share thereof over the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that, in the event that such Fair Market
Value of any such share of capital stock is determined during a period which
includes any date that is within 30 Trading Days after (i) the ex-dividend date
for a dividend or distribution on stock payable in shares of such stock or
securities convertible into shares of such stock, or (ii) the effective date of
any subdivision, split, combination, consolidation, reverse stock split or
reclassification of such stock, then, and in each such case, the Fair Market
Value shall be appropriately adjusted by the Board of Directors of the Company
to take into account ex-dividend or post-effective date trading.
20
<PAGE> 21
The closing price for any day shall be the last sale price, regular way, or, in
case, no such sale takes place on such day, the average of the closing bid and
asked prices, regular way (in either case, as reported in the applicable
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange), or, if the shares are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
applicable transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares are listed or
admitted to trading or, if the shares are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in use, or if
on any such date the shares are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the shares selected by the Board of Directors
of the Company. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares are listed or admitted to
trading is open for the transaction of business or, if the shares are not
21
<PAGE> 22
listed or admitted to trading on any national securities exchange, on which the
New York Stock Exchange or such other national securities exchange as may be
selected by the Board of Directors of the Company is open. If the shares are
not publicly held or not so listed or traded on any day within the period of 30
Trading Days applicable to the determination of Fair Market Value thereof as
aforesaid, "Fair Market Value" shall mean the fair market value thereof per
share as determined in good faith by the Board of Directors of the Company. In
either case referred to in the foregoing sentence, the determination of Fair
Market Value shall be described in a statement filed with the Secretary of the
Company.
Section 8. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock or Class A Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then in
any such case each outstanding share of Series A Preferred Stock shall at the
same time be similarly exchanged for or changed into the aggregate amount of
stock, securities, cash and/or other property (payable in like kind), as the
case may be, for which or into which each share of Common Stock or Class A
Common Stock is changed or exchanged multiplied by the highest of the Vote
Multiple,
22
<PAGE> 23
the Dividend Multiple or the Liquidation Multiple in effect immediately prior
to such event.
Section 9. Effective Time of Adjustments.
(A) Adjustments to the Series A Preferred Stock required by
the provisions hereof shall be effective as of the time at which the event
requiring such adjustments occurs.
(B) The Company shall give prompt written notice to each
holder of a share of Series A Preferred Stock of the effect of any adjustment
to the voting rights, dividend rights or rights upon liquidation, dissolution
or winding up of the Company of such shares required by the provisions hereof.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment.
Section 10. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable at the option of the Company or any holder
thereof. Notwithstanding the foregoing sentence of this Section, the Company
may acquire shares of Series A Preferred Stock in any other manner permitted by
law, the provisions hereof and the Certificate of Incorporation of the Company.
Section 11. Ranking. Unless otherwise provided in the
Certificate of Incorporation of the Company or a
23
<PAGE> 24
Certificate of Designations relating to a subsequent series of preferred stock
of the Company, the Series A Preferred Stock shall rank junior to all other
series of the Company's preferred stock as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and senior to
the Common Stock.
Section 12. Amendment. The provisions hereof and the
Certificate of Incorporation of the Company shall not be amended in any manner
which would adversely affect the rights, privileges or powers of the Series A
Preferred Stock without, in addition to any other vote of stockholders required
by law, the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Preferred Stock, voting together as a single
class.
[THE REMAINDER OF THIS PAGE IS
INTENTIONALLY LEFT BLANK]
24
<PAGE> 25
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate of Designations and do affirm the foregoing as true under the
penalties of perjury this 29th day of December, 1997.
BERG ELECTRONICS CORP.
/s/ David M. Sindelar
------------------------------
David M. Sindelar
Senior Vice President
ATTEST:
/s/ David J. Webster
- ------------------------------
<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-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000904900
<NAME> BERG ELECTRONICS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 11,994
<SECURITIES> 0
<RECEIVABLES> 121,988
<ALLOWANCES> 3,657
<INVENTORY> 96,022
<CURRENT-ASSETS> 243,237
<PP&E> 450,290
<DEPRECIATION> 164,523
<TOTAL-ASSETS> 704,696
<CURRENT-LIABILITIES> 200,532
<BONDS> 316,544
0
0
<COMMON> 0
<OTHER-SE> 135,884
<TOTAL-LIABILITY-AND-EQUITY> 704,646
<SALES> 785,150
<TOTAL-REVENUES> 785,150
<CGS> 505,706
<TOTAL-COSTS> 505,706
<OTHER-EXPENSES> 1,185
<LOSS-PROVISION> 898
<INTEREST-EXPENSE> 28,774
<INCOME-PRETAX> 62,310
<INCOME-TAX> 24,120
<INCOME-CONTINUING> 38,190
<DISCONTINUED> 0
<EXTRAORDINARY> 5,964
<CHANGES> 0
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