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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
333-29727
(Commission File Number)
VIASYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-177752
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
101 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63105
(314) 727-2087
(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: NONE
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 Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate 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. [ ]
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant. (The aggregate market value shall be
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such common equity, as of a specified date within 60
days prior to the date of filing.)
NO ESTABLISHED PUBLISHED TRADING MARKET EXISTS FOR THE COMMON STOCK, PAR
VALUE $.01 PER SHARE, OF VIASYSTEMS, INC. ALL OF THE 1,000 OUTSTANDING SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF VIASYSTEMS, INC. ARE HELD BY
VIASYSTEMS GROUP, INC.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
OUTSTANDING AT
MARCH 28,
CLASS 2002
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Common Stock 1,000
DOCUMENTS INCORPORATED BY REFERENCE: NONE
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
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PART I
CAUTIONARY STATEMENTS CONCERNING
FORWARD-LOOKING STATEMENTS
Statements made in this Annual Report on Form 10-K ("Report") includes the
use of "we" and "our", which, unless specified otherwise, refers collectively to
Viasystems, Inc., and its subsidiaries. Additionally, reference to "Group"
refers to Viasystems' holding company parent Viasystems Group, Inc.
We have made forward-looking statements in this Report, including those
made in the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations," that are based on our management's beliefs
and assumptions and on information currently available to our management.
Forward-looking statements include information concerning our possible or
assumed future results of operations, business strategies, financing plans,
competitive position, potential growth opportunities and effects of competition.
Forward-looking statements include all statements that are not historical facts
and can be identified by the use of forward-looking terminology such as the
words "believes," "expects," "anticipates," "intends," "plans," "estimates" or
other similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. You should not put undue reliance on any
forward-looking statements. We do not have any intention or obligation to update
forward-looking statements after we file this Report.
You should understand that many important factors could cause our results
to differ materially from those expressed in forward-looking statements. These
factors include, but are not limited to, fluctuations in our operating results
and customer orders, our competitive environment, our reliance on our largest
customers, risks associated with our international operations, our ability to
protect our patents and trade secrets, environmental laws and regulations, our
relationship with unionized employees, risks associated with our acquisition
strategy, our substantial indebtedness and our ability to comply with the terms
thereof, control by our largest stockholders and other factors.
ITEM 1. BUSINESS
GENERAL
We are a leading, worldwide, independent provider of electronics
manufacturing services, or EMS, to original equipment manufacturers, or OEMs,
primarily in the telecommunications, networking, automotive, consumer,
industrial and computer industries. We offer EMS solutions to OEMs that
outsource the design and manufacture of their products. Our manufacturing
services consist of the following:
- the design and fabrication of printed circuit boards, in particular,
highly complex, multi-layered printed circuit boards;
- the manufacture of complex printed circuit board assemblies;
- the manufacture of custom-designed backpanel assemblies;
- the design and manufacture of wire harnesses and custom cable assemblies;
- the design and manufacture of custom enclosures;
- the procurement and management of materials; and
- the assembly and testing of our customers' complete systems and products.
Based on our complete offering we have many touch points with our
customers, which allows us to become involved with our customers' new products.
Such access not only allows us to design and manufacture our customers' products
but also gives us a competitive advantage with respect to providing other
assembly and testing services for such products.
1
Our customer base primarily consists of OEMs in the telecommunications,
networking, automotive, consumer, industrial and computer industries. We
currently are a supplier to over 250 OEMs, including the following industry
leaders: Alcatel, Bosch, Cisco Systems, Delco/Delphi, General Electric, Harris,
Intel, Lucent Technologies, Marconi Communications, Maytag, Nortel, Siemens and
Sun Microsystems. The products we manufacture include, or can be found in, a
wide array of products including switching and transmission equipment, wireless
base stations, computers, workstations, servers and data networking equipment
including hubs, routers and switches, automotive dash panels and control
systems, and washers, dryers, and cooking systems.
Our revenues for the year ended December 31, 2001, were approximately $1.2
billion. We operate 26 manufacturing facilities located in the United States,
Canada, Mexico, the United Kingdom, France, Italy, the Netherlands and China.
OUR DEVELOPMENT
Viasystems is a wholly owned subsidiary of Group. Group was formed in 1996
by Hicks, Muse, Tate & Furst Incorporated under the name Circo Craft Holding
Company to create a preferred global manufacturing provider to leading original
equipment manufacturers through acquisitions of printed circuit board
fabricators and backpanel assemblers. In August 1996, we changed our name to CC
Canada Holding Company and then back to Circo Craft Holding Company in September
1996. We had no operations prior to our first acquisition in October 1996, when
we changed our name to Circo Technologies, Inc. In January 1997, we changed our
name to Viasystems Group, Inc.
We have since broadened our focus to become a full-solution provider in the
EMS industry. This change occurred as a result of our recognition that many of
the next generation products in the telecommunications and networking industries
require highly advanced printed circuit boards and backpanel assemblies. As a
result, we made a strategic decision to capitalize on our capabilities and
compete for the complete assembly of our customers' products that utilize our
printed circuit boards and backpanels.
A significant portion of our growth has been generated through 13
acquisitions since 1996. We have completed acquisitions of entire companies as
well as acquisitions of captive manufacturing assets divested by OEM customers,
including the acquisition of Chang Yuen, a manufacturer of custom metal
enclosures located in the Peoples Republic of China and certain manufacturing
assets of Metawave Communications Corporation, both completed during the year
ended December 31, 2001.
We are headquartered in St. Louis, Missouri. The mailing address for our
headquarters is 101 South Hanley Road, Suite 400, St. Louis, Missouri 63105 and
our telephone number at that location is (314) 727-2087. We can also be reached
at our web site www.viasystems.com.
MANUFACTURING SERVICES
Our offering of manufacturing services includes the following:
Design and Prototyping Services. We provide comprehensive front-end
engineering services, including full enclosure design, circuit board layout
and related design services leading to efficient manufacturing and
delivery. We offer quick-turn prototyping, which is the rapid production of
a new product sample. Our quick-turn prototype service allows us to provide
small test quantities to our customers' product development groups. Our
participation in product design and prototyping allows us to reduce our
customers' manufacturing costs and their time-to-market and time-to-volume.
These services enable us to strengthen our relationships with customers
that require advanced engineering services. In addition, by working closely
with customers throughout the development and manufacturing process, we
gain insight into their future product requirements.
Printed Circuit Board and Backpanel Fabrication. Printed circuit
boards and backpanels are platforms that connect semiconductors and other
electronic components. Backpanels connect printed circuit boards. We
manufacture multi-layer printed circuit boards and backpanels on a
low-volume, quick-turn basis, as well as on a high-volume production basis.
In recent years, the trend in the
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electronics industry has been to increase the speed and performance of
components while reducing their size. Semiconductor designs are currently
so complex that they often require printed circuit boards with many layers
of narrow, tightly spaced wiring. These advancements in component
technologies have driven the change in printed circuit board design to
higher density printed circuits.
Printed Circuit Board Assembly. Our manufacturing operations include
the placement of electronic parts onto printed circuit boards as well as
the manufacture of complete electronics products. As OEMs seek to provide
greater functionality in smaller products, they require more sophisticated
systems assembly technologies and processes. Our investment in advanced
manufacturing equipment and our experience with the latest technologies
enable us to offer a variety of complex systems assembly services. We offer
testing of assembled printed circuit boards and testing of all of the
functions of the completed product, and we work with our customers to
develop product-specific test strategies. Our test capabilities include
manufacturing defect analysis, in-circuit tests, functional tests and
environmental stress tests of board or system assemblies.
Custom Enclosures. We specialize in the manufacture of custom
designed chassis and enclosures primarily used in the electronics,
telecommunications, industrial and computer industries. As a fully
integrated supply chain partner with expertise in design, rapid
prototyping, manufacturing, packaging and logistics, we provide our
customers with reduced manufacturing costs and shortened time to market
throughout a product's life cycle. Custom metal enclosure fabrication takes
place in four countries on three continents, central to our OEM customers'
various points of manufacture.
Wire Harnesses and Cable Assemblies. A wire harness and cable
assembly is an assembly of wires with connectors and terminals attached to
their ends that transmits electricity between two or more points. Our
capability to provide wire harness and cable assembly components
complements our vertically integrated approach to providing our OEM
customers a complete EMS solution. We are one of the leading suppliers of
wire harnesses and cable assemblies for use in household appliances. Due to
the similarity in the process technology utilized in the manufacture of
wire harnesses and cable assemblies for telecommunications and networking
products and in the manufacture of wire harnesses for use in household
appliances, we seek to leverage this expertise to enhance the value of the
products and services we supply to our OEM customers in the
telecommunications and networking industries.
Full System Assembly and Test. We provide full system assembly
services to OEMs. These services require sophisticated logistics
capabilities and supply chain management capabilities to rapidly procure
components, assemble products, perform complex testing and deliver products
to end users around the world. Our full system assembly services involve
combining custom metal enclosures and a wide range of subassemblies,
including printed circuit board assembly. We also employ advanced test
techniques to various subassemblies and final end products. Increasingly,
OEMs require custom, build-to-order system solutions with very short lead
times. We are focused on exploiting this trend through our advanced supply
chain management capabilities.
Packaging and Global Distribution. We offer our customers flexible,
just-in-time and build-to-order delivery programs, allowing product
shipments to be closely coordinated with customers' inventory requirements.
Increasingly, we ship products directly into customers' distribution
channels or directly to the end-user.
After-Sales Support. We offer a wide range of after-sales support
services. This support can be tailored to meet customer requirements,
including field failure analysis, product upgrades, repair and engineering
change management.
Supply Chain Management. Effective management of the supply chain is
critical to the success of OEMs as it directly impacts the time required to
deliver product to market and the capital requirements associated with
carrying inventory. Our global supply chain organization works with
customers and suppliers to meet production requirements and procure
materials. We utilize our enterprise resource planning systems to optimize
inventory management.
3
WHERE YOU CAN FIND MORE INFORMATION
Viasystems files annual, quarterly and special reports and other
information with the Securities and Exchange Commission (the "SEC"). Any
reports, statements or other information filed by us may be read and copied at
the SEC's public reference room, at 450 Fifth Street NW, Washington, DC, as well
as at public reference rooms in New York, NY and Chicago, IL. For further
information on public reference rooms, call 1 (800) SEC-0330. Viasystems'
filings are also available to the public from commercial retrieval services and
at the Internet web site maintained by the SEC at http://www.SEC.gov.
ITEM 2. PROPERTIES
In addition to our executive offices in St. Louis, Missouri, as of December
31, 2001, we operate 26 principal manufacturing and research facilities, located
in 8 different countries with a total area of approximately 6.3 million square
feet, of which approximately 1.9 million square feet are leased. We believe our
plants and equipment include state-of-the-art technology and are well
maintained. We believe that our existing owned and leased facilities are
adequate to meet our reasonably foreseeable requirements for at least the next
two years.
Some of our owned facilities are subject to mortgages under our senior
credit facility. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and our consolidated financial statements
contained elsewhere in this Report.
SIZE TYPE OF DESCRIPTION OF
LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED
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UNITED STATES
Bucyrus, Ohio................. 47,000 Leased Wire harness and cable assembly
Columbus, Ohio................ 35,000 Leased Full system assembly
Beaverton, Oregon............. 75,000 Leased Full system assembly
Milford, Massachusetts........ 108,000 Leased Full system assembly
San Jose, California.......... 60,000 Leased Full system assembly
Mishawaka, Indiana............ 38,000 Owned Wire harness and cable assembly
Milwaukee, Wisconsin.......... 305,000 Leased Custom metal enclosure
fabrication
Redmond, Washington........... 26,000 Leased Full system assembly
CANADA
Pointe-Claire (Montreal),
Quebec...................... 168,000 Owned Printed circuit board
fabrication
Kirkland (Montreal), Quebec... 121,000 Owned Printed circuit board
fabrication
Granby (Montreal), Quebec..... 119,000 Owned Printed circuit board
fabrication
MEXICO
Juarez, Mexico................ 51,000 Leased Backpanel assembly
Juarez, Mexico................ 438,000 Leased Wire harness and cable assembly
Chihuahua, Mexico............. 282,000 Owned Wire harness and cable assembly
Chihuahua, Mexico............. 253,000 Leased Wire harness and cable assembly
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SIZE TYPE OF DESCRIPTION OF
LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED
- -------- ----------------- -------- --------------------------
EUROPE
Echt, Netherlands............. 462,000 Owned Printed circuit board
fabrication and backpanel
assembly
Rouen, France................. 344,000 Owned Full system assembly
Terni, Italy.................. 234,000 Owned Custom metal enclosure
fabrication and full system
assembly
Ballynahinch, Northern
Ireland..................... 73,000 Owned Wire harness and cable
assembly, power supplies and
printed circuit board
fabrication
Coventry, England............. 219,000 Leased Custom metal and plastic
enclosure fabrication and full
system assembly
ASIA
Guangzhou, China.............. 2,000,000 Owned Printed circuit board
fabrication and assembly
Zhongshan, China.............. 318,000 Owned Printed circuit board
fabrication
Shanghai, China............... 229,000 Owned Backpanel assembly and custom
metal enclosure fabrication
Shenzhen, China............... 95,000 Leased Full system assembly
ShiYan, China................. 176,000 Leased Full system assembly
Qingdao, China................ 30,000 Leased Full system assembly
In addition to the facilities listed above, at December 31, 2001 we
maintained several sales and marketing and other facilities located throughout
North America, Europe, Asia and South America, all of which are leased.
ITEM 3. LEGAL PROCEEDINGS
Our operations have from time to time been involved in claims and
litigation. The nature of our business is such that it is anticipated that we
will be involved from time to time in claims and litigation in the ordinary
course of our business. Based on experience with similar claims and litigation,
we do not anticipate that these matters will have a material adverse effect on
our business, results of operations, financial condition, prospects or ability
to service debt.
We anticipate that we may, from time to time, receive notifications
alleging infringements of patents generally held by other manufacturers.
Disputes over patent infringement are common in the electronics industry and
typically begin with notices of the type described above. Although the ultimate
resolution of any legal action and infringement notices described above cannot
be predicted, we believe that the resolution, including any ultimate liability,
will not have a material adverse effect on our business, results of operations,
financial condition or ability to service debt. We are not currently involved in
any patent infringement disputes and have not received any notices alleging
infringement of patents, the unfavorable resolution of which we believe would be
material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Information required by this item has been omitted as the registrant meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format.
5
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
All of Viasystems' outstanding common stock is held by Group and,
accordingly, there is no established public trading market for Viasystems'
common stock. Viasystems has paid no dividends since inception, and its ability
to pay dividends is limited by the terms of certain agreements related to its
indebtedness.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item has been omitted as the registrant meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain information required by this item has been omitted as the
registrant meets the conditions of General Instruction I(1)(a) and (b) of Form
10-K and is therefore filing with the reduced disclosure format.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires our
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis our management
evaluates its estimates and judgements. Our management bases its estimates and
judgements on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgements about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
Our management believes the following critical accounting policies, among
others, affect our more significant judgements and estimates used in the
preparation of our consolidated financial statements:
Accounts Receivable. We perform ongoing credit evaluations of our
customers and we adjust credit limits based upon each customer's payment
history and current credit worthiness, as determined by credit information
available at that time. We continuously monitor collections and payments
from our customers and we maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers to make
required payments. While such losses have historically been within our
expectations and the provisions established, if the condition of our
customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.
Inventories. We write down our inventory for estimated obsolescence
or unmarketable inventory equal to the difference between the cost of the
inventory and the estimated market value based upon assumptions about
future demand and market conditions. If actual future demand or market
conditions are less favorable than those historically experienced or
projected by us, additional inventory write-downs may be required.
Valuation of Goodwill and other Intangible Assets. We assess the
impairment of goodwill and other identifiable intangible assets whenever
events or changes in circumstances indicate that the carrying
6
value may not be recoverable. Factors we consider important which could
trigger an impairment review include, but are not limited to, the
following:
significant underperformance relative to historical or projected
future operating results;
significant changes in the manner of our use of the acquired assets or
the strategy for our overall business;
significant negative industry or economic trends; significant decline
in our stock price for a sustained period; and
our market capitalization relative to net book value.
When we determine that the carrying value of goodwill and other
intangible assets may not be recoverable based upon the existence of one or
more of the above indicators of impairment, we measure any impairment bases
on a projected discounted cash flow method using a discount rate determined
by us to be commensurate with the risk inherent in our current business
model. During the year ended December 31, 2001 we recorded an impairment
charge totaling $133.3 million, of which, $129.1 related to goodwill.
In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets" became effective and as a result, we
will cease to amortize goodwill, resulting in a decrease to annual
amortization expense of approximately $16.6 million. In lieu of
amortization, we are required to perform an initial impairment review of
our goodwill in 2002 and an annual impairment review thereafter. We
currently do not expect to record an impairment charge upon completion of
the initial impairment review. However, there can be no assurance that at
the time the review is completed a material impairment charge will not be
recorded.
Income Taxes. We record a valuation allowance to reduce our deferred
tax assets to the amount that we believe is more likely than not to be
realized. While we have considered future taxable income and ongoing
prudent, feasible tax planning strategies in assessing the need for the
valuation allowance, in the event we were to determine that we would not be
able to realize all or part of our net deferred tax assets in the future,
an adjustment to the net deferred tax assets would be charged to income in
the period such determination was made. Likewise, should we determine that
we would be able to realize our deferred tax assets in the future in excess
of its net recorded amount, an adjustment to the net deferred tax asset
would increase income in the period such determination was made.
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 2001
Net sales for the year ended December 31, 2001 were $1,206.5 million,
representing a $398.5 million, or 24.8%, decrease from the same period in 2000.
The decrease was primarily a result of continued weakness in printed circuit
board sales to key North American telecommunication and networking customers,
partially offset by the impact of acquisitions made in 2000 and 2001.
Cost of goods sold for the year ended December 31, 2001 was $993.6 million,
or 82.4% of sales (excluding one-time write-offs of $49.3 million of inventory
related to the Restructuring), compared to $1,230.6 million, or 76.7% of sales,
for the year ended December 31, 2000. Cost of goods sold as a percent of net
sales increased as a result of a higher percentage of EMS sales in 2001, which
generally have lower margins than printed circuit board sales, and lower
absorption of our fixed overhead cost in our facilities throughout North
America, Europe and Asia due to lower demand from our key telecommunication and
networking customers.
Selling, general and administrative expenses for the year ended December
31, 2001 were $96.8 million, a decrease of $24.4 million, or 20.1%, versus the
comparable period in 2000 (excluding the non-cash compensation expense charge of
$104.4 million in March 2000). These costs decreased primarily due to cost
reductions related to the Restructuring and a reduction in expenses as a result
of the transfer of the operations formerly conducted by Forward Group Plc
("Forward"), Interconnection Systems (Holdings) Limited ("ISL"), Zincocelere
S.p.A. (Zincocelere") and the PCB production facility of Ericsson Telecom AB in
7
March 2000, partially offset by increases in general and administrative expenses
related to the acquisitions completed in 2000 and 2001.
In connection with Group's initial public offering in March 2000, Group
amended the terms of the performance stock options held by members of management
to eliminate the exercisability restrictions and variable exercise price terms.
The amended performance options have a fixed exercise price of $9.00 per share
and are immediately exercisable. As a result of these amendments, we recorded a
one-time, non-cash compensation expense charge of approximately $33.6 million
during the three months ended March 31, 2000.
Also in connection with Group's initial public offering in March 2000,
Group converted each 6 2/3 shares of class A common stock and class A series II
common stock into one share of common stock. This conversion eliminated the
variable terms of the class A common stock and class A series II common stock
and resulted in a one-time, non-cash compensation expense charge of
approximately $63.0 million recorded during the three months ended March 31,
2000. This charge reflects the difference between the cost of the class A common
stock and the class A series II common stock and the value of the common stock
into which it was convertible at March 23, 2000.
Additionally, in connection with Group's initial public offering in March
2000, Viasystems terminated the monitoring and oversight agreement and financial
advisory agreement with certain affiliates of Hicks, Muse, Tate & Furst
Incorporated (Hicks Muse, Tate & Furst Incorporated, its affiliates, and/or its
partners collectively or individually, "HMTF"). As consideration for such
termination, Group granted to HMTF options to purchase an aggregate of 2,134,000
shares of Group's common stock at an exercise price of $21.00 per share. The
option grant resulted in a net one-time, non-cash compensation expense charge of
approximately $7.8 million recorded during the three months ended March 31,
2000.
During the quarter ended December 31, 2001, we recorded non-cash asset
impairments totaling $141.1 million primarily related to the write-off of
long-lived assets in accordance with Statement of Financial Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("FAS 121"). Based on current business enterprise values using
common appraisal methods, the assessment identified impairments of long-lived
assets acquired pursuant to the acquisitions of Top Line Electronics
Corporation, Laughlin-Wilt Group, Inc. and the European and China network
components services operations of Marconi Communications Inc. The calculated
business enterprise values determined were compared to the net book values of
the related long-lived assets with the excess of net book value over the
business enterprise value representing the amount of the impairment loss. The
impairment loss for each group of assets, totaling $133.3 million, was first
charged against goodwill ($129.1 million) with the remaining amounts being
charged to property, plant and equipment ($4.2 million). The impairment resulted
from the economic downturn experienced during 2001, primarily related to our
telecommunication and networking customers. Through the third fiscal quarter of
2001, it was expected that the economic downturn impacting these assets was a
short-term inventory correction. However, in the fourth quarter it became clear
to management that the downturn impacting these assets was more severe and of a
long-term nature resulting in a significant decline in profitability that is not
expected to return in the near term.
During the year ended December 31, 2001, we recorded a series of
restructuring charges totaling $59.8 million. These charges were taken in light
of the economic downturn primarily related to our large telecommunication and
networking customers. During 2001 we began evaluating our cost position compared
to anticipated levels of business for 2001 and beyond and determined that plant
shutdowns, plant consolidations and downsizing were required to reduce costs to
more appropriate levels in line with current and expected customer demand. A
summary of the 2001 restructuring activity (the "Restructuring") by quarter is
as follows:
During the quarter ended March 31, 2001, we recorded a restructuring charge
of $12.0 million, primarily related to the phase one workforce reductions in our
Richmond, Virginia PCB fabrication facility as well as small workforce
reductions at certain other North American operations. The workforce reductions
impacted a total of 2,507 employees, of which 1,915 were regular, union
employees, 547 were regular, non-union employees and 45 were temporary/contract
employees. All of these employees were terminated by December 31, 2001.
8
During the quarter ended June 30, 2001, we recorded a restructuring charge
of $30.5 million, primarily related to the closure of our Richmond, Virginia and
San German, Puerto Rico PCB fabrication facilities as well as small workforce
reductions at certain other North American and European operations. The facility
closures and workforce reductions impacted a total of 1,613 employees, of which
1,228 were regular, union employees, 373 were regular, non-union employees and
12 were temporary/contract employees. All of these employees were terminated by
December 31, 2001.
During the quarter ended September 30, 2001, we recorded a restructuring
charge of $16.2 million, primarily related to the consolidation of our two San
Jose, California PCB assembly operations as well as headcount reductions at our
corporate offices. The consolidations and workforce reductions impacted a total
of 471 employees, of which 150 were regular, union employees, 315 were regular,
non-union employees and 6 were temporary/contract employees. All of these
employees were terminated by December 31, 2001.
During the quarter ended December 31, 2001, we recorded a restructuring
charge of $7.1 million, primarily related to workforce reductions at our
European PCB fabrication facility as well as small workforce reductions at other
European facilities. The workforce reductions impacted a total of 455 employees,
all of which were regular, non-union employees. All of these employees were
terminated by December 31, 2001.
Additionally, during the quarter ended December 31, 2001, we reversed $6.0
million of restructuring charges previously recorded. This reversal primarily
related to a change in our plan related to the consolidation of our two San
Jose, California PCB assembly operations. Initially, the plan included
consolidating the leased operation into the owned operation, resulting in a
restructuring charge related to the contractual obligation on the leased
facility. Subsequently, we amended our plan and made the decision to consolidate
the owned operation into the leased operation resulting in a reversal to the
restructuring charge related to the lease commitment.
In connection with the Restructuring, we also recorded impairment charges
totaling $82.7 million to write-down to fair value certain land and buildings as
well as machinery and equipment, office equipment and systems that were obsolete
or redundant due to the closure and consolidation of facilities pursuant to the
Restructuring. Included in the impairment charge were the following amounts: a
write-down of land, buildings and leasehold improvements totaling $25.4 million,
related to our Richmond, Virginia and San German, Puerto Rico PCB fabrication
facilities that were closed; a write-down of machinery and equipment totaling
$14.9 million, a write-down of office equipment totaling $37.7 million, and a
write-down of systems and construction in progress totaling $4.7 million, each
primarily related to obsolete or redundant assets at our Richmond, Virginia and
San German, Puerto Rico PCB fabrication facilities that were closed as well as
certain other North American and European operations that were consolidated.
At December 31, 2001, $17.7 million of the assets held for disposal had
been sold or otherwise disposed, leaving $16.3 million remaining on the books,
of which $13.0 million consisted of the land and building related to our
Richmond, Virginia PCB fabrication facility. We are actively marketing the land
and building for sale and expect to complete the disposal of the assets during
2002. The remaining $3.3 million of net book value of assets held for disposal
on the books at December 31, 2001 consists primarily of machinery and equipment
and office equipment related to redundant or obsolete assets at our Richmond,
Virginia and San German, Puerto Rico PCB fabrication facilities and are expected
to be disposed of during the next 18-24 months.
9
Below is a table summarizing restructuring and impairment activity for the
year ended December 31, 2001 ($ in 000's):
CUMULATIVE
THREE MONTHS ENDED DRAWDOWNS
--------------------------------------------------- -------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, CASH NON-CASH
2001 2001 2001 2001 REVERSALS TOTAL PAYMENTS CHARGES
--------- -------- ------------- ------------ --------- -------- -------- --------
Restructuring
Activities:
Personnel and
severance........ $11,755 $ 20,238 $ 6,505 $ 5,524 $ (170) $ 43,852 $36,282 $ --
Lease and other
contractual
Commitments...... 78 7,864 9,623 1,228 (5,836) 12,957 5,614 --
Other.............. 174 2,379 103 309 -- 2,965 2,810 --
Asset Impairments:
Held for
disposal..... -- 75,043 5,454 2,210 -- 82,707 -- 82,707
Held for use... -- -- -- 133,252 -- 133,252 -- 133,252
Other.......... -- -- -- 5,641 -- 5,641 -- 5,641
------- -------- ------- -------- ------- -------- ------- --------
Total restructuring
and impairment
charges............ $12,007 $105,524 $21,685 $148,164 $(6,006) $281,374 $44,706 $221,600
======= ======== ======= ======== ======= ======== ======= ========
BALANCE AT
DECEMBER 31,
2001
------------
Restructuring
Activities:
Personnel and
severance........ $ 7,570
Lease and other
contractual
Commitments...... 7,343
Other.............. 155
Asset Impairments:
Held for
disposal..... --
Held for use... --
Other.......... --
-------
Total restructuring
and impairment
charges............ $15,068
=======
The significant components of the restructuring charge recorded for lease
and other contractual commitments totaling approximately $13.0 million, are as
follows: $8.5 million for leased and other facility commitments; $3.2 million
for lease commitments on machinery and equipment; $1.2 million for waste water
project commitments; and $0.1 million for other commitments.
Also in connection with the Restructuring, we wrote-off inventory resulting
in a $49.3 million and $0.8 million charge to cost of goods sold during the
quarters ended June 30, 2001 and September 30, 2001, respectively. During the
quarter ended December 31, 2001, we reversed inventory write-offs previously
taken totaling $0.8 million. With respect to the inventory written-off during
the quarter ended June 30, 2001, we have disposed of $39.1 million of the
inventory and reversed the write-off and sold $1.0 million of the inventory,
resulting in a remaining balance of $9.1 million at December 31, 2001. We expect
to dispose of the remaining obsolete inventory during fiscal year 2002.
The restructuring and impairment charges were determined based on formal
plans approved by our management using the best information available to it at
the time. The amounts we may ultimately incur may change as the balance of the
plans are executed.
We continue to review our operations in light of the continued economic
downturn related to our telecommunication and networking customers. These
reviews could result in additional workforce reductions. The impact these
activities could have on our results of operations is not currently known.
European PCB Group (Cayman Islands), Ltd. ("European PCB Group") has
disposed of the operations formerly conducted by Forward and the PCB production
facility of Ericsson Telecom AB. In addition, an administrative receiver has
been appointed in respect of European PCB Group's ISL business. As a result, the
business formerly conducted by Zincocelere is the only material asset remaining
within European PCB Group. Accordingly, we compared the carrying amount of all
current amounts due from European PCB Group, including the PCB Group Notes, to
their undiscounted expected future cash flows. We have concluded that amounts
due from European PCB Group have been impaired. As a result, we recorded a
charge for the quarter ended September 30, 2001 totaling $144.1 million to
reflect the write-off of such amounts. This charge consisted of $127.6 million
related to the PCB Group Notes and $16.5 million related to trade receivables.
Depreciation and amortization decreased $18.6 million, from $144.9 million
for the year ended December 31, 2000, to $126.3 million for the same period of
2001, primarily due to a reduction in expenses as a result of the distribution
of the operations formerly conducted by Forward, ISL, Zincocelere and the PCB
production facility of Ericsson Telecom AB in March 2000 and due to a reduced
fixed asset base as a result of
10
the impairment of property and equipment held for disposal related to the
closure of our Richmond, Virginia and San German, Puerto Rico PCB facilities,
partially offset by the impact to depreciation of acquired fixed assets and to
amortization of acquired intangibles from the acquisitions completed in 2000 and
2001.
Other expense decreased $9.6 million, from $111.7 million for the year
ended December 31, 2000, to $102.1 million for the same period of 2001,
primarily due to reduced interest expense and amortization of deferred financing
costs related to the recapitalization in connection with Group's initial public
offering completed in March 2000 and reductions in market benchmark interest
rates realized during 2001, partially offset by higher interest margins charged
on borrowed funds under our senior secured credit facility resulting from
amendments to the credit agreement completed during 2001.
During the quarter ended March 31, 2000, we recorded, as an extraordinary
item, a one-time, non-cash write-off of deferred financing fees of approximately
$31.2 million, net of $0 income tax benefit, related to deferred financing fees
incurred on debt under our prior credit agreement, which was retired before
maturity with proceeds from Group's initial public offering.
RECENT EVENTS
As of March 27, 2002, HMTF has increased its investment in Viasystems
through open market purchases of $112.1 million of Viasystems' 9 3/4 senior
subordinated notes and $51.3 million of Viasystems' senior secured bank debt.
These purchases were made at a discount to the face amount.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets".
SFAS 141 supercedes Accounting Principles Board Opinion No. 16, "Business
Combinations". The most significant changes made by SFAS 141 are: (1) requiring
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001, (2) establishing specific criteria for the
recognition of intangible assets separately from goodwill, and (3) requiring
unallocated negative goodwill to be written off immediately as an extraordinary
gain (instead of being deferred and amortized). We are currently assessing the
impact of SFAS 141 on our operating results and financial condition.
SFAS 142 supercedes Accounting Principles Board Opinion No. 17, "Intangible
Assets". SFAS 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their acquisition (i.e., the post-acquisition accounting).
The provisions of SFAS 142 will be effective for fiscal years beginning after
December 15, 2001. The most significant changes made by SFAS 142 are: (1)
goodwill and indefinite lived intangible assets will no longer be amortized, (2)
goodwill will be tested for impairment at least annually at the reporting unit
level, (3) intangible assets deemed to have an indefinite life will be tested
for impairment at least annually, and (4) the amortization period of intangible
assets with finite lives will no longer be limited to forty years. Upon
implementation of SFAS 142, our amortization expense for fiscal year 2002 is
expected to decrease by approximately $16.6 million compared to fiscal year 2001
as a result of no longer amortizing goodwill. We currently do not expect to
record an impairment charge upon completion of the initial impairment review.
However, there can be no assurance that at the time the review is completed a
material impairment charge will not be recorded.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived
Assets". SFAS 144 supercedes Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-lived Assets and Assets to be
Disposed of" and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, "Reporting the Results of
Operations -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provision of SFAS 144 will be
11
effective for fiscal years beginning after December 15, 2001. The most
significant changes made by SFAS 144 are: (1) removes goodwill from its scope
and, therefore, eliminates the requirements of SFAS 121 to allocate goodwill to
long-lived assets to be tested for impairment, and (2) describes a
probability-weighted cash flow estimation approach to deal with situations in
which alternative course of action to recover the carrying amount of a
long-lived assets are under consideration or a range is estimated for the amount
of possible future cash flows. We currently do not expect the implementation of
SFAS 144 to have a material impact on our operating results and financial
condition. However, there can be no assurance that at the time the review is
completed a material impairment charge will not be recorded.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
At December 31, 2000 and 2001, approximately $488.6 and $448.4 million,
respectively, of our long-term debt, specifically borrowings outstanding under
our senior credit facility and the loan notes, bore interest at variable rates.
Accordingly, our earnings and cash flow are affected by changes in interest
rates. Assuming the current level of borrowings at variable rates and assuming a
two percentage point increase in the average interest rate under these
borrowings, it is estimated that our interest expense for the year ended
December 31, 2000 and 2001, would have increased by approximately $9.8 and $9.0
million, respectively. In the event of an adverse change in interest rates,
management would likely take actions that would mitigate our exposure to
interest rate risk; however, due to the uncertainty of the actions that would be
taken and their possible effects, this analysis assumes no such action. Further,
this analysis does not consider the effects of the change in the level of
overall economic activity that could exist in such an environment.
FOREIGN CURRENCY RISK
We conduct our business in various regions of the world, and export and
import products to and from several countries. Our operations may, therefore, be
subject to volatility because of currency fluctuations. Sales and expenses are
frequently denominated in local currencies, and results of operations may be
affected adversely as currency fluctuations affect our product prices and
operating costs or those of our competitors. From time to time, we enter into
foreign exchange forward contracts to minimize the short-term impact of foreign
currency fluctuations. We do not engage in hedging transactions for speculative
investment reasons. Our hedging operations historically have not been material
and gains or losses from these operations have not been material to our cash
flows, financial position or results from operations. There can be no assurance
that our hedging operations will eliminate or substantially reduce risks
associated with fluctuating currencies.
12
ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
VIASYSTEMS, INC. & SUBSIDIARIES
Report of Independent Accountants........................... 14
Consolidated Balance Sheets as of December 31, 2000 and
2001...................................................... 15
Consolidated Statements of Operations for the years ended
December 31, 1999, 2000 and 2001.......................... 16
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1999, 2000 and 2001...... 17
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 2000 and 2001.......................... 18
Notes to Consolidated Financial Statements.................. 19
Schedule II -- Valuation and Qualifying Accounts............ 46
13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Viasystems, Inc.:
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Viasystems, Inc. and its subsidiaries as of December 31, 2001 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedule listed in the accompanying index
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. These
financial statements and financial statement schedules are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, as a result of the dramatic downturn in telecom component
demand during 2001, and the Company's highly leveraged capital structure, the
Company will fail to satisfy at March 31, 2002 certain financial maintenance
covenants contained in its senior credit facility. The potential ramification
from the failure to satisfy these covenants raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 23. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 20 to the consolidated financial statements, in 1999
the Company changed its method of reporting costs of start-up activities.
PRICEWATERHOUSECOOPERS LLP
Fort Worth, Texas
January 28, 2002, except for Recent Events in for Note 1 and Note 23 for which
the date is March 29, 2002
14
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
-------------------------------
2000 2001
-------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 45,676 $ 34,202
Accounts receivable, less allowance for doubtful accounts
of $7,233 and $15,654, respectively.................... 320,561 157,443
Inventories............................................... 255,973 113,589
Prepaid expenses and other................................ 70,922 37,036
----------- -----------
Total current assets.............................. 693,132 342,270
Property, plant and equipment, net.......................... 452,621 353,651
Deferred financing costs, net............................... 23,332 25,591
Intangible assets, net...................................... 419,236 247,944
Other assets................................................ 22,963 18,589
----------- -----------
Total assets...................................... $ 1,611,284 $ 988,045
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term obligations............... $ 23,882 $ 3,215
Accounts payable.......................................... 293,696 125,897
Accrued and other liabilities............................. 112,200 90,502
Income taxes payable...................................... 3,595 602
----------- -----------
Total current liabilities......................... 433,373 220,216
Deferred taxes.............................................. 17,343 17,019
Long-term obligations, less current maturities (includes $0
and $242.9 million face amount, held by related parties,
respectively)............................................. 1,000,435 1,037,704
Other non-current liabilities............................... 24,201 23,430
Commitments and Contingencies
Stockholders' equity (deficit)
Common stock, par value $.01 per share, 1,000 shares issued
and outstanding........................................... -- --
Contributed capital....................................... 1,602,641 1,634,512
Notes due from affiliates................................. (124,532) --
Accumulated deficit....................................... (1,314,938) (1,901,957)
Accumulated other comprehensive loss...................... (27,239) (42,879)
----------- -----------
Total stockholders' equity (deficit).............. 135,932 (310,324)
----------- -----------
Total liabilities and stockholders' equity
(deficit)....................................... $ 1,611,284 $ 988,045
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
15
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
------------------------------------------
1999 2000 2001
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales................................................ $1,293,370 $1,604,985 $1,206,536
Operating expenses:
Cost of goods sold..................................... 969,614 1,230,552 1,042,886
Selling, general and administrative, including non-cash
compensation expense charges of $110,070, $104,351
and $0 respectively................................. 232,653 225,611 96,838
Depreciation........................................... 118,873 98,457 79,718
Amortization........................................... 63,270 46,409 46,574
Write-off of amounts due from affiliates............... -- -- 144,099
Restructuring and impairment charges................... 468,389 -- 281,374
Write-off of acquired in-process research and
development......................................... 17,600 -- --
---------- ---------- ----------
Operating income (loss).................................. (577,029) 3,956 (484,953)
---------- ---------- ----------
Other expenses:
Interest expense....................................... 117,822 105,514 97,174
Amortization of deferred financing costs............... 6,619 4,296 4,013
Other expense, net..................................... 23,594 1,857 879
---------- ---------- ----------
Loss before income taxes, cumulative effect of a change
in accounting principle and extraordinary item......... (725,064) (107,711) (587,019)
Benefit for income taxes................................. (23,212) (2,923) --
---------- ---------- ----------
Loss before cumulative effect of a change in accounting
principle and extraordinary item....................... (701,852) (104,788) (587,019)
Cumulative effect -- write-off of start-up costs, net of
income tax benefit of $6,734........................... 18,443 -- --
Extraordinary item -- loss on early extinguishment of
debt, net of income tax benefit of $0.................. -- 31,196 --
---------- ---------- ----------
Net loss....................................... $ (720,295) $ (135,984) $ (587,019)
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
16
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED
AND OTHER
NOTES DUE COMPREHENSIVE
COMMON CONTRIBUTED FROM ACCUMULATED INCOME
STOCK CAPITAL AFFILIATES DEFICIT (LOSS) TOTAL
------ ----------- ---------- ----------- ------------- ---------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
BALANCE AT DECEMBER 31, 1998............ $ -- $ 395,994 $ -- $ (458,659) $ 9,120 $ (53,545)
Comprehensive loss:
Net loss.............................. -- -- -- (720,295) -- (720,295)
Foreign currency translation
adjustments......................... -- -- -- -- (32,858) (32,858)
Minimum pension liability, net of
income tax benefit of $254.......... -- -- -- -- 593 593
---------
Total comprehensive loss................ (752,560)
---------
Capital contribution by Group to the
Company............................... -- 200,293 -- -- -- 200,293
Net distribution prior to as-if pooling
of Wire Harness Business.............. -- (232) -- -- -- (232)
Non-cash compensation expense charge.... -- 110,070 -- -- -- 110,070
----- ---------- --------- ----------- -------- ---------
BALANCE AT DECEMBER 31, 1999............ -- 706,125 -- (1,178,954) (23,145) (495,974)
Comprehensive loss:
Net loss.............................. -- -- -- (135,984) -- (135,984)
Foreign currency translation
adjustments......................... -- -- -- -- (15,221) (15,221)
---------
Total comprehensive loss................ (151,205)
---------
Capital contribution by Group to the
Company............................... -- 987,884 -- -- -- 987,884
As-if pooling of Wire Harness
Business.............................. -- (210,798) -- -- -- (210,798)
Net distribution to stockholders of
European PCB Group.................... -- 51 -- -- 11,127 11,178
Issuance of Notes Due from Affiliates... -- -- (124,532) -- -- (124,532)
Non-cash compensation expense charges... -- 119,379 -- -- -- 119,379
----- ---------- --------- ----------- -------- ---------
BALANCE AT DECEMBER 31, 2000............ -- 1,602,641 (124,532) (1,314,938) (27,239) 135,932
Comprehensive loss:
Net loss.............................. -- -- -- (587,019) -- (587,019)
Foreign currency translation
adjustments......................... -- -- -- -- (15,640) (15,640)
---------
Total comprehensive loss................ (602,659)
---------
Capital contribution by Group to the
Company............................... -- 31,871 -- -- -- 31,871
Paid-in-kind notes for interest on notes
due from affiliates................... -- -- (3,079) -- -- (3,079)
Write-off of notes due from
affiliates............................ -- -- 127,611 -- -- 127,611
----- ---------- --------- ----------- -------- ---------
BALANCE AT DECEMBER 31, 2001............ $ -- $1,634,512 $ -- $(1,901,957) $(42,879) $(310,324)
===== ========== ========= =========== ======== =========
The accompanying notes are an integral part of the consolidated financial
statements.
17
VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
---------------------------------
1999 2000 2001
--------- --------- ---------
(IN THOUSANDS)
Cash flows from operating activities:
Net loss................................................ $(720,295) $(135,984) $(587,019)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Write-off of acquired in-process research and
development........................................ 17,600 -- --
Impairment of assets................................. 468,389 -- 221,600
Write-off of amounts due from affiliates............. -- -- 144,099
Write-off of inventory............................... -- -- 49,333
Loss on disposal of plant, property and equipment.... 18,762 -- --
Cumulative effect of a change in accounting
principle -- write-off of start-up costs........... 25,177 -- --
Extraordinary item -- loss on early extinguishment of
debt............................................... -- 31,196 --
Non-cash compensation expense charge................. 110,070 104,351 --
Depreciation and amortization........................ 182,143 144,866 126,292
Amortization of deferred financing costs............. 6,619 4,296 4,013
Non-cash interest income............................. -- -- (3,079)
Paid-in-kind interest on Senior Unsecured Notes...... -- -- 9,491
Joint venture (income) loss.......................... -- (3,209) 66
Deferred taxes....................................... (35,734) 745 785
Change in assets and liabilities, net of
acquisitions:
Accounts receivable................................ (15,023) (123,299) 141,990
Inventories........................................ (16,837) (60,479) 98,386
Prepaid expenses and other......................... (273) 11,407 31,733
Accounts payable and accrued and other
liabilities..................................... (5,136) 58,021 (187,562)
Income taxes payable............................... 7,702 (735) (2,208)
--------- --------- ---------
Net cash provided by operating activities....... 43,164 31,176 47,920
--------- --------- ---------
Cash flows from investing activities:
Acquisitions, net of cash acquired $5,022 for 1999,
$8,035 for 2000 and $0 for 2001...................... (314,187) (360,313) (10,564)
Capital expenditures.................................... (138,003) (136,882) (78,790)
--------- --------- ---------
Net cash used in investing activities........... (452,190) (497,195) (89,354)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term obligations under
credit facilities.................................... 291,000 150,000 289,250
Net borrowings (payments) on revolvers.................. 65,943 (125,501) (43,200)
Repayment of amounts due under credit facilities........ (26,125) (446,750) (1,000)
Repayment of amounts due under the Chips Loan Notes..... -- -- (285,312)
Chips Term Loans -- Cash collateral..................... (95,295) 99,988 --
Borrowings under the Senior Unsecured Notes............. -- -- 100,000
Repayment of other long-term and capital lease
obligations.......................................... (5,509) (19,056) (22,102)
Cash distribution to stockholders of European PCB
Group................................................ -- (16,213) --
Net distribution prior to as-if pooling................. (232) -- --
Equity proceeds......................................... 198,455 865,543 --
Proceeds from exercise of stock options................. -- 536 149
Repurchase of common stock.............................. (162) -- --
Financing fees and other................................ (7,892) (18,527) (6,682)
--------- --------- ---------
Net cash provided by financing activities....... 420,183 490,020 31,103
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................. 2,347 (1,164) (1,143)
--------- --------- ---------
Net change in cash and cash equivalents................... 13,504 22,837 (11,474)
Cash and cash equivalents at beginning of year............ 9,335 22,839 45,676
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 22,839 $ 45,676 $ 34,202
========= ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
18
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION AND ACQUISITIONS
Viasystems, Inc. ("Viasystems"), a wholly owned subsidiary of Viasystems
Group, Inc. ("Group"), was formed on April 2, 1997. On April 10, 1997, Group
contributed to Viasystems all of the capital of its then existing subsidiaries.
Prior to the contribution of this capital by Group, Viasystems had no operations
of its own. The consolidated financial statements included herein present the
results of operations of Viasystems and its subsidiaries subsequent to the
capital contribution by Group, and the results of operations of Group and its
subsidiaries prior to the capital contribution of such subsidiaries to
Viasystems. As used herein, the Company refers to Viasystems and its
subsidiaries subsequent to the capital contribution by Group and to Group and
its subsidiaries prior to such capital contribution. These financial statements
have been adjusted to reflect the equity structure of Viasystems on a
retroactive basis. The Company makes strategic acquisitions of electronics
manufacturing services ("EMS") and integrates those acquisitions as a global
enterprise that is the preferred provider of EMS solutions to original equipment
manufacturers of electronic products. See 2000 Acquisitions regarding
restatement of financial statements for "as-if pooling" related to the
acquisition of Wirekraft Industries, Inc.
RECENT EVENTS
As a result of the dramatic downturn in telecom component demand during
2001 and the Company's highly leveraged capital structure, the Company expects
to fail to satisfy certain financial maintenance covenants contained in its
senior secured credit facility on March 31, 2002. In anticipation of this
circumstance, the Company entered into an amendment to its credit agreement (See
Note 23).
TRANSFER TO STOCKHOLDERS
On March 29, 2000, Group sold to European PCB Group (Cayman Islands), Ltd.
("European PCB Group"), a company owned by certain of Group's pre-IPO
stockholders, all the capital stock of certain businesses in Europe. As a result
and at such time, European PCB Group consisted primarily of the operations
formerly conducted by Forward Group Plc, Zincocelere S.p.A. ("Zincocelere"),
Interconnection Systems (Holdings) Limited ("ISL") and the PCB production
facility of Ericsson Telecom AB. In consideration for the sale, European PCB
Group delivered subordinated notes ("PCB Group Notes") payable to the Company
for $124,532 in the aggregate, which have been classified as a component of
stockholders' equity. The PCB Group Notes each have a 10-year term and bear
interest at a rate of 9% per annum, payable in kind by the issuance of
additional notes.
During the quarter ended September 30, 2001, European PCB Group disposed of
the operations formerly conducted by Forward Group Plc and the PCB production
facility of Ericsson Telecom AB. In addition, in September 2001, an
administrative receiver has been appointed in respect of European PCB Group's
ISL business. As a result, the business formerly conducted by Zincocelere S.p.A.
is the only material asset remaining within European PCB Group. Accordingly, the
Company compared the carrying amount of all current amounts due from European
PCB Group, including the PCB Group Notes to their undiscounted expected future
cash flows. The Company concluded that amounts due from European PCB Group have
been impaired. As a result, the Company recorded a charge for the quarter ended
September 30, 2001, totaling $144,099 to reflect the write-off of such amounts.
This charge consisted of $127,611 related to the PCB Group Notes and $16,488
related to trade receivables.
In addition, the Company guaranteed approximately 12 million British Pounds
(approximately $18.0 million) of an obligation with the Department of Trade and
Industry (the "DTI") of the United Kingdom in respect of a grant provided to
ISL. The grant is also secured by land and a building in North Tyneside owned by
ISL which has an appraised value in excess of the grant obligation. Throughout
the year, the Company has been engaged in discussions with the DTI regarding the
guarantee and the grant. On January 31, 2002, the
19
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company and European PCB Group entered into a settlement agreement with the DTI.
Under the settlement agreement, the Company and European PCB Group jointly and
severally agreed to pay 12.0 million British Pounds (approximately $18.0
million) in 9 installments beginning January 31, 2002 and ending on December 31,
2003. The first installment totaled 2.0 million British Pounds (approximately
$3.0 million) and was paid on January 31, 2002, by European PCB Group with the
remaining installments due periodically through December 31, 2003. The Company
believes that European PCB Group has the ability and will continue to make the
scheduled payments due under the settlement agreement. Furthermore, the Company
believes that proceeds from the sale of the land and building in North Tyneside
will be sufficient to satisfy all or substantially all amounts paid pursuant to
the settlement agreement. European PCB Group has agreed to indemnify the Company
in the event the Company is required to make any such payment.
In addition, the Company has $9.8 million of letters of credit issued with
respect to certain indebtedness of Zincocelere. The remaining obligation due by
Zincocelere under the indebtedness totals approximately 7.2 million Euros
(approximately $6.3 million). Historically, Zincocelere has made the scheduled
payments under the indebtedness and the Company believes Zincocelere will
continue to operate and make all future payments required under the
indebtedness.
1999 ACQUISITIONS
In August 1999, the Company acquired the printed circuit board ("PCB")
manufacturing division ("Kalex") of Termbray Industries International (Holdings)
Limited, a manufacturer of rigid PCBs located in the People's Republic of China,
for a net cash purchase price of approximately $301,000 plus acquisition costs
of approximately $8,500 (the "Kalex Acquisition"). Accordingly, the results of
operations of Kalex since acquisition are included in the results of operations
of the Company.
The Kalex Acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been allocated to the assets and
liabilities based on their estimated respective fair values. The Company has
allocated a portion of the purchase price to intangible assets, including in
process R&D using a discount rate of 25.0%. The portion of the purchase price
allocated to in-process R&D projects that did not have future alternative use
totaled $17,600 and was charged to expense as of the acquisition date. The other
acquired intangibles include developed technologies, assembled workforce and
customer list. These intangibles are being amortized over their estimated useful
lives of 1-15 years. The remaining unidentified intangible asset has been
allocated to goodwill and is being amortized over its estimated useful life of
20 years (see Note 2).
Kalex's in-process R&D value was comprised of three primary projects
consisting of developing Rambus technology, increasing board layer count and
developing ball grid array substrates capability, which were scheduled to reach
completion beginning in 1999. At the acquisition date, research and development
projects ranged from 65% to 80% complete and total continuing research and
development commitments to complete the projects are expected to be
approximately $2,400. As of December 31, 2001, two of the projects were
completed and the other continues to be evaluated. These projects will require
maintenance research and development after they have reached a state of
technological and commercial feasibility. In addition to usage of the companies'
internal cash flows, the Company will likely provide a substantial amount of
funding to complete the programs. Remaining development efforts for the
in-process research and development programs are complex and include the
development of next-generation technological solutions.
The Kalex Acquisition was funded with: (a) an additional equity
contribution of $200,000 and (b) a portion of a $291,000 term loan borrowing
under a former credit facility.
Kalex's manufacturing facilities are located in the People's Republic of
China. Manufacturing in the People's Republic of China entails political and
economic risks, including political instability, expropriation and currency
controls and fluctuations.
20
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the year ended December 31,
1998 and 1999, as though the Kalex Acquisition and the related financing and
equity contribution had occurred at January 1, 1998.
YEAR ENDED DECEMBER 31,
-----------------------
1998 1999
---------- ----------
(UNAUDITED)
Net sales................................................... $1,375,425 $1,385,586
Net loss.................................................... (91,456) (726,244)
In April 1999, the Company acquired all of the outstanding shares of PAGG
Corporation ("PAGG") located in Milford, Massachusetts, for a cash purchase
price of approximately $9,300 plus the issuance of 273,223 shares of the
Company's $0.01 per share common stock valued at $2,000 and the issuance of
136,645 warrants to purchase common stock with an exercise price of $10.50
expiring in 2004. PAGG operates multiple surface mount production lines for
printed circuit board and backplane assembly and has full box build
capabilities. The acquisition was accounted for as a purchase and, accordingly,
the results of operations of PAGG since acquisition are included in the results
of operations of the Company.
2000 ACQUISITIONS
In March 2000, the Company acquired all of the outstanding shares of
Wirekraft Industries, Inc. (the "Wire Harness Business"), a wholly owned
subsidiary of International Wire Group, Inc., an affiliate of Hicks, Muse, Tate
& Furst Incorporated (Hicks, Muse, Tate: Furst Incorporated, its affiliates,
and/or its partners collectively or individually "HMTF") (the "Wire Harness
Acquisition") for a cash purchase price of $210,798. The Wire Harness Business
manufactures and assembles wire harness products. The Wire Harness Acquisition
occurred immediately prior to Group's initial public offering. The Company and
International Wire Group, Inc. are considered entities under common control.
Accordingly, the acquisition has been accounted for on an "as-if pooling basis,"
with the excess purchase price over book value acquired accounted for as a
distribution to the Company's stockholders. Additionally, as the acquisition has
been accounted for on an "as-if pooling basis," the Company's consolidated
financial statements have been restated to reflect the acquisition as if it
occurred at the beginning of the first period presented. A reconciliation of the
results of the Company before the as if pooling of the Wire Harness Business
results for the years ended December 31, 1999, and 2000 to the results in this
Form 10-K is as follows:
1999 2000
---------- ----------
Net sales:
Before as-if pooling...................................... $1,102,324 $1,555,129
Wire Harness Business..................................... 191,046 49,856
---------- ----------
$1,293,370 $1,604,985
========== ==========
Net income (loss):
Before as-if pooling...................................... $ (726,342) $ (139,914)
Wire Harness Business..................................... 6,047 3,930
---------- ----------
$ (720,295) $ (135,984)
========== ==========
In March 2000, the Company acquired Marconi Communications Inc.'s Network
Components & Services' European and China operations ("NC&S"), for a cash
purchase price of approximately $112,450, plus assumed liabilities of
approximately $5,145 (the "NC&S Acquisition"). NC&S is a business engaged in
electronic manufacturing services, primarily to telecommunication customers. The
results of operations of NC&S since its acquisition are included in the results
of operations of the Company. The NC&S Acquisition
21
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
has been accounted for using the purchase method of accounting whereby the total
purchase price has been preliminarily allocated to the assets and liabilities
based on their estimated respective fair values. The excess purchase price over
fair values has been allocated to goodwill and is being amortized over its
estimated useful life of 20 years (see Note 2).
In June 2000, the Company acquired Top Line Electronics Corporation ("Top
Line") by issuing 2,681,835 shares of Group's common stock (the "Top Line
Acquisition"). This was subject to the issuance of an additional 1,650,319
shares made during 2001 based on the price of Group's common stock for the
months of January and February 2001. Top Line, located in San Jose, California,
offers design and prototype services, PCB assembly, and full system assembly and
testing. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the results of operations of Top Line since
acquisition are included in the results of operations of the Company. The excess
purchase price over fair values has been allocated to goodwill and is being
amortized over its estimated useful life of 20 years (see Note 2).
In September 2000, the Company acquired Lucent Technologies' Rouen Global
Provisioning Center ("Rouen") by making cash payments and accepting a
non-interest bearing note from the seller (the "Rouen Acquisition").
Accordingly, the results of operations of Rouen since acquisition are included
in the results of operations of the Company. Rouen, located in Rouen, France,
manufactures network transmission and radio frequency equipment. The Rouen
Acquisition has been accounted for using the purchase method of accounting,
whereby the total purchase price has been allocated to the assets and
liabilities based on their respective fair values. The Company has allocated a
portion of the purchase price to a technology agreement, which is being
amortized over its estimated useful life. The remaining unidentified intangible
asset has been allocated to goodwill and is being amortized over its estimated
useful life of 20 years (see Note 2).
In November 2000, the Company acquired Laughlin-Wilt Group, Inc.
("Laughlin-Wilt"), by issuing 3,297,481 shares of Group's common stock (the
"Laughlin-Wilt Acquisition"), a cash payment and acquiring debt. Laughlin-Wilt,
located in Beaverton, Oregon and Orange County, California, offers design and
prototype services for printed circuit boards, printed circuit board assembly,
and full system assembly and testing. The acquisition was accounted for using
the purchase method of accounting and, accordingly, the results of operations of
Laughlin-Wilt since acquisition are included in the results of operations of the
Company. The excess purchase price over fair values has been allocated to
goodwill and is being amortized over its estimated useful life of 20 years (see
Note 2).
On December 22, 2000, the Company acquired Accutec ("Accutec") by issuing
976,150 shares of Group's common stock (the "Accutec Acquisition") and acquiring
debt. Accutec, located in Milwaukee, Wisconsin, offers fabrication of custom
metal enclosures. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the balance sheet of Accutec is included in the
Company's consolidated balance sheet. Accutec's results of operations will be
included in the first quarter 2001 results of the Company. The excess purchase
price over fair values has been allocated to goodwill and is being amortized
over its estimated useful life of 20 years.
The Top Line, Rouen, Laughlin-Wilt and Accutec acquisitions were completed
by issuing an aggregate of 6,955,466 shares of Group's common stock; making cash
payments at closing totaling approximately $45,100; making cash payments in the
future of approximately $8,800; receiving a non-interest bearing note from the
seller for approximately $11,300 and acquiring debt of approximately $31,000.
The common stock value was determined by using a stock price calculated by
averaging the daily stock price for a few days before and after the measurement
date. The aggregate value of the common stock was approximately $116,514. In
connection with certain acquisitions, and in accordance with the contract terms,
outstanding stock options held by employees of acquired companies became vested
and converted to options for Group's common stock on the acquisition date. As
these acquisitions were accounted for as purchases, the fair value of these
options was included in the purchase price.
22
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included below is unaudited pro forma financial data setting forth
condensed results of operations of the Company for the years ended December 31,
1999 and 2000, as though the acquisitions of NC&S, Top Line, Rouen,
Laughlin-Wilt and Accutec had occurred at January 1, 1999 and the transfer of
the operations formerly conducted by Forward Group, PLC ("Forward"),
Interconnection Systems (Holdings) Limited ("ISL"), Zincocelere S.p.A.
("Zincocelere") and the PCB production facility of Ericsson Telecom AB located
in Sweden (the "Ericsson Facility") (see Note 23) had occurred at January 1,
1999.
YEAR ENDED DECEMBER 31,
-----------------------
1999 2000
---------- ----------
(UNAUDITED)
Net sales................................................... $1,319,134 $1,782,402
Net loss before extraordinary item and cumulative effect of
a change in accounting principle.......................... (142,516) (84,478)
Net loss.................................................... (146,096) (115,674)
Basic net loss per share.................................... $ (2.11) $ (.97)
Diluted net loss per share.................................. $ (2.24) $ (.98)
2001 ACQUISITIONS
In April 2001, the Company acquired certain manufacturing assets of
Metawave Communications Corporation ("Metawave") for a cash purchase price of
approximately $7,964 (the "Metawave Acquisition"). Pursuant to a manufacturing
agreement, the Company will use the acquired assets to manufacture smart
antennas for the wireless communication industry that are marketed and sold by
Metawave.
In April 2001, the Company acquired Chang Yuen, a manufacturer of custom
metal enclosures, located in the People's Republic of China, for a cash purchase
price of $2,600 and by issuing an aggregate 535,905 shares of Group's common
stock valued at $1,758.
Each of the acquisitions completed during 2001 was accounting for using the
purchase method of accounting and, accordingly, the results of operations
related to the acquisitions are included in the results of operations of the
Company subsequent to the closing date of each acquisition, respectively. The
excess purchase price over the fair values of assets acquired in 2001 has been
allocated to goodwill and is being amortized over its estimated useful life of
20 years.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company is a leading provider of electronic manufacturing services,
with facilities located in the United States, Canada, Mexico, the United
Kingdom, France, the Netherlands, Italy and China. The Company's customers
include a diverse base of manufacturers in the telecommunications and
networking, computer, consumer and automotive industries primarily located
throughout North America, China and Europe.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company. All significant intercompany balances and transactions have been
eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION
Local currencies have been designated as the functional currency for most
subsidiaries. Accordingly, assets and liabilities of most foreign subsidiaries
are translated at the rates of exchange in effect at the balance
23
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
sheet date. Income and expense items of these subsidiaries are translated at
average monthly rates of exchange. The resultant translation gains and losses
are reported in other comprehensive income. Exchange gains and losses arising
from transactions denominated in a currency other than the functional currency
of the entity involved are included in income. To date, the effect of such
amounts on net income has not been material.
DERIVATIVE FINANCIAL INSTRUMENTS
From time to time, the Company enters into foreign exchange forward
contracts to minimize the short-term impact of foreign currency fluctuations.
Such transactions are not material and gains and losses from such activities are
not significant. However, there can be no assurance that these activities will
eliminate or reduce foreign currency risk.
INVENTORIES
Inventories are stated at the lower of cost (valued using the first-in,
first-out (FIFO) or last-in, first-out (LIFO) method) or market. Cost includes
raw materials, labor and manufacturing overhead. Had the first-in, first-out
method been used to determine purchased inventory cost, inventories would have
decreased by approximately $2,512 and $3,626 at December 31, 2000 and 2001,
respectively. For the years ended December 31, 2000 and 2001, the percentage of
inventory valued at LIFO was 10% and 23%, respectively.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Repairs and
maintenance which do not extend the useful life of an asset are charged to
expense as incurred. The useful lives of leasehold improvements are the lesser
of the remaining lease term or the useful life of the improvement. When assets
are retired or otherwise disposed of, their costs and related accumulated
depreciation are removed from the accounts and any resulting gains or losses are
included in the operations for the period. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets as
follows:
Building.................................................... 39-50 years
Leasehold improvements...................................... 10-12 years
Machinery, equipment, systems and other..................... 3-10 years
DEFERRED FINANCING COSTS
Deferred financing costs, consisting of fees and other expenses associated
with debt financing, are amortized over the term of the related debt using the
straight-line method, which approximates the effective interest method.
INCOME TAXES
The Company accounts for certain items of income and expense in different
periods for financial reporting and income tax purposes. Provisions for deferred
income taxes are made in recognition of such temporary differences, where
applicable. A valuation allowance is established against deferred tax assets
unless the Company believes it is more likely than not that the benefit will be
realized.
START-UP COSTS
Start-up costs consist of salaries, personnel training cost and other
expenses of opening new facilities and are expensed as incurred.
24
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets consist primarily of identifiable intangibles acquired
and goodwill arising from the excess of cost over the fair value of net assets
acquired. Amortization of intangible assets is computed using systematic methods
over the estimated useful lives of the related assets as follows:
LIFE METHOD
---- ------
Developed technologies.......................... 15 years Double-declining balance
Assembled workforce............................. 1 year Straight-line
Customer list................................... 3 years Straight-line
Goodwill........................................ 20-40 years Straight-line
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses the recoverability of its long-lived assets (including
intangible assets) based on their current and anticipated future undiscounted
cash flows. In addition, the Company's policy for the recognition and
measurement of any impairment of long-lived assets is to assess the current and
anticipated future cash flows associated with the impaired asset. An impairment
occurs when the cash flows (excluding interest) do not exceed the carrying
amount of the asset. The amount of the impairment loss is the difference between
the carrying amount of the asset and its estimated fair value.
REVENUE RECOGNITION
Sales and related costs of good sold are included in income when goods are
shipped to the customer in accordance with the delivery terms, except in the
case of vendor managed inventory arrangements, whereby sales and the related
costs of goods sold are included in income when goods are taken into production
by the customer.
ENVIRONMENTAL COSTS
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. Accrued liabilities do not include claims
against third parties and are not discounted. Costs related to environmental
remediation are charged to expense. Other environmental costs are also charged
to expense unless they increase the value of the property and/or mitigate or
prevent contamination from future operations, in which event they are
capitalized.
CASH AND CASH EQUIVALENTS
The Company considers investments purchased with an original maturity of
three months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
25
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair market value of the Senior Subordinated Notes due 2007 and the
Series B Senior Subordinated Notes due 2007 was $120,000 and $30,000,
respectively, at December 31, 2001 and was $319,000 and $79,750, respectively,
at December 31, 2000. The Company has estimated this fair value data by using
current market data. The fair market values of the other financial instruments
included in the consolidated financial statements approximate the carrying
values of those instruments.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets".
SFAS 141 supercedes Accounting Principles Board Opinion No. 16, "Business
Combinations". The most significant changes made by SFAS 141 are: (1) requiring
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001, (2) establishing specific criteria for the
recognition of intangible assets separately from goodwill, and (3) requiring
unallocated negative goodwill to be written off immediately as an extraordinary
gain (instead of being deferred and amortized). The Company is currently
assessing the impact of SFAS 141 on its results of operations and financial
condition.
SFAS 142 supercedes Accounting Principles Board Opinion No. 17, "Intangible
Assets". SFAS 142 primarily addresses the accounting for goodwill and intangible
assets subsequent to their acquisition (i.e., the post-acquisition accounting).
The provisions of SFAS 142 will be effective for fiscal years beginning after
December 15, 2001. The most significant changes made by SFAS 142 are: (1)
goodwill and indefinite lived intangible assets will no longer be amortized, (2)
goodwill will be tested for impairment at least annually at the reporting unit
level, (3) intangible assets deemed to have an indefinite life will be tested
for impairment at least annually, and (4) the amortization period of intangible
assets with finite lives will no longer be limited to forty years. Upon
implementation of SFAS 142, amortization expense for fiscal year 2002 is
expected to decrease approximately $16,600 compared to fiscal year 2001, as a
result of no longer amortizing goodwill. The Company currently does not expect
to record an impairment charge upon completion of the initial impairment review.
However, there can be no assurance that at the time the review is completed a
material impairment charge will not be recorded.
In August 2001, the FASB issued Statement of Financial Accounting Standards
No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived
Assets". SFAS 144 supercedes Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-lived Assets and Assets to be
Disposed of" and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, "Reporting the Results of
Operations -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS
144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provision of SFAS 144 will be
effective for fiscal years beginning after December 15, 2001. The most
significant changes made by SFAS 144 are: (1) removes goodwill from its scope
and, therefore, eliminates the requirements of SFAS 121 to allocate goodwill to
long-lived assets to be tested for impairment, and (2) describes a
probability-weighted cash flow estimation approach to deal with situations in
which alternative course of action to recover the carrying amount of a
long-lived assets are under consideration or a range is estimated for the amount
of possible future cash flows. The Company currently does not expect the
implementation of SFAS 144 to have a material impact on its results of
operations and financial condition. However, there can be no assurance that at
the time the review is completed a material change will not be recorded.
26
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 1999 and 2000
have been reclassified to conform to the current year presentation. These
reclassifications have no effect on total stockholders' equity (deficit) or net
loss as previously reported.
3. RESTRUCTURING AND IMPAIRMENT CHARGES
During the year ended December 31, 2001, the Company recorded a series of
restructuring charges totaling $59,774. These charges were taken in light of the
economic downturn primarily related to the Company's large telecommunication and
networking customers. During 2001, the Company began evaluating its cost
position compared to anticipated levels of business for 2001 and beyond and
determined that plant shutdowns, plant consolidations and downsizing were
required to reduce costs to more appropriate levels in line with current and
expected customer demand. A summary of the 2001 restructuring activity (the
"Restructuring") by quarter is as follows:
During the quarter ended March 31, 2001, the Company recorded a
restructuring charge of $12,007 primarily related to the phase one workforce
reductions in its Richmond, Virginia PCB fabrication facility as well as small
workforce reductions at certain other North American operations. The workforce
reductions impacted a total of 2,507 employees, of which 1,915 were regular,
union employees, 547 were regular, non-union employees and 45 were
temporary/contract employees. All of these employees were terminated by December
31, 2001.
During the quarter ended June 30, 2001, the Company recorded a
restructuring charge of $30,481, primarily related to the closure of its
Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities, as
well as small workforce reductions at certain other North American and European
operations. The facility closures and workforce reductions impacted a total of
1,613 employees, of which 1,228 were regular, union employees, 373 were regular,
non-union employees and 12 were temporary/contract employees. All of these
employees were terminated by December 31, 2001.
During the quarter ended September 30, 2001, the Company recorded a
restructuring charge of $16,231, primarily related to the consolidation of its
two San Jose, California PCB assembly operations as well as headcount reductions
at its corporate offices. The consolidation and workforce reductions impacted a
total of 471 employees, of which 150 were regular, union employees, 315 were
regular, non-union employees and 6 were temporary/contract employees. All of
these employees were terminated by December 31, 2001.
During the quarter ended December 31, 2001, the Company recorded a
restructuring charge of $7,061, primarily related to workforce reductions at its
European PCB fabrication facility as well as small workforce reductions at other
European facilities. The workforce reductions impacted a total of 455 employees,
all of which were regular, non-union employees. All of these employees were
terminated by December 31, 2001.
Additionally, during the quarter ended December 31, 2001, the Company
reversed $6,006 of restructuring charges previously recorded. This reversal
primarily related to a change in the Company's plan related to the consolidation
of its two San Jose, California PCB assembly operations. Initially, the plan
included consolidating the leased operation into the owned operation, resulting
in a restructuring charge related to the contractual obligation on the leased
facility. Subsequently, the Company amended its plan and made the decision to
consolidate the owned operations into the leased operations resulting in a
reversal to the restructuring charge related to the lease commitment.
27
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 ASSET IMPAIRMENTS
Assets Held for Use
The Company has assessed the carrying value of long-lived assets, including
goodwill and other acquired intangibles in accordance with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121").
Based on current business enterprise values using common appraisal methods, the
assessment identified impairment of long-lived assets acquired pursuant to the
Top Line, Laughlin-Wilt and NC&S acquisitions. The calculated business
enterprise values determined were compared to the net book values of the related
long-lived assets with the excess of net book value over the business enterprise
value representing the amount of the impairment loss. The impairment loss for
each group of assets totaling $133,252 was first charged against goodwill
($129,109) with the remaining amounts being charged to property, plant and
equipment ($4,143). The impairment resulted from the economic downturn
experienced during 2001, primarily related to the Company's telecommunication
and networking customers. Through the third fiscal quarter of 2001, it was
expected that the economic downturn impacting these assets was a short-term
inventory correction. However, in the fourth quarter it became clear to
management that the downturn impacting these assets was much more severe and of
a long-term nature resulting in a significant decline in profitability that is
not expected to return in the near term.
Assets Held for Disposal
In connection with the Restructuring, the Company also recorded impairment
charges totaling $82,707 to write-down to fair value certain land and buildings
as well as machinery and equipment, office equipment and systems that were made
obsolete or redundant due to the closure and consolidation of facilities
pursuant to the Restructuring. Included in the impairment charge were the
following amounts: a write-down of land, buildings and leasehold improvements
totaling $25,403, related to the Company's Richmond, Virginia and San German,
Puerto Rico PCB fabrication facilities that were closed; a write-down of
machinery and equipment totaling $14,880, a write-down of office equipment
totaling $37,688, and a write-down of systems and construction in progress
totaling $4,736, each primarily related to obsolete or redundant assets at the
Company's Richmond, Virginia and San German, Puerto Rico PCB fabrication
facilities that were closed as well as certain other North American and European
operations that were consolidated.
At December 31, 2001, $17,683 of the assets held for disposal had been sold
or otherwise disposed, leaving $16,286 remaining on the books, of which $13,000
consists of the land and building related to the Company's Richmond, Virginia
PCB fabrication facility. The Company is actively marketing the land and
building for sale and expects to complete the disposal of these assets during
2002. The remaining $3,286 of net book value of assets held for disposal on the
books at December 31, 2001 consists primarily of machinery and equipment and
office equipment related to redundant or obsolete assets at our Richmond,
Virginia and San German, Puerto Rico PCB fabrication facilities and are expected
to be disposed of during the next 18-24 months.
Additionally, the Company is holding for disposal certain property related
to one of its San Jose, California facilities. As of December 31, 2001, this
property had a net book value of approximately $5,833. The Company is actively
marketing this property for sale and expects to complete the disposal of these
assets during 2002.
1999 ASSET IMPAIRMENTS
The Company has assessed the carrying value of long-lived assets, including
goodwill and other acquired intangibles, in accordance with FAS 121. Based on
current business enterprise values using common appraisal methods, the
assessment identified impairment of long-lived assets acquired from the Forward,
ISL and
28
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Zincocelere acquisitions. The calculated business enterprise values determined
were compared to the net book value of the related long-lived assets with the
difference representing the amount of the impairment loss. The impairment loss
for each group of assets was first charged against goodwill with any remaining
amounts being charged to the other acquired intangibles and property, plant and
equipment, if necessary. The impairment resulted due to significant changes in
the markets served by the acquisitions that were not anticipated at the time of
each acquisition, most significantly a significant decline in market pricing.
The decline in market pricing was due to the convergence of two factors:
significant currency fluctuations and the emergence of significant offshore
competition from Asia Pacific. While the primary currency for the acquisitions
is the U.K. pound sterling, their competitors were in Continental Europe and
beginning to emerge from Asia Pacific. The currencies for most of the
Continental European and Asia Pacific countries declined significantly against
the U.K. pound sterling, which resulted in an improved relative cost position
for the competitors and reduced market pricing. This decline in market pricing
resulted in a significant decline in profitability that is not expected to
return in the near term.
In the fourth quarter of fiscal year 1999, the Company recorded a non-cash
impairment loss of $468,389 related to the write down of $206,335 related to
goodwill, $65,877 related to developed technologies, $847 related to customer
lists and $195,330 related to machinery and equipment used in the production of
printed circuit boards of the three groups of assets.
Below is a table summarizing restructuring and impairment activity for the
year ended December 31, 2001:
CUMULATIVE
THREE MONTHS ENDED DRAWDOWNS
--------------------------------------------------- -------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, CASH NON-CASH
2001 2001 2001 2001 REVERSALS TOTAL PAYMENTS CHARGES
--------- -------- ------------- ------------ --------- -------- -------- --------
Restructuring Activities:
Personnel and severance..... $11,755 $ 20,238 $ 6,505 $ 5,524 $ (170) $ 43,852 $36,282 $ --
Lease and other contractual
Commitments............... 78 7,864 9,623 1,228 (5,836) 12,957 5,614 --
Other....................... 174 2,379 103 309 -- 2,965 2,810 --
Asset Impairments:
Held for disposal......... -- 75,043 5,454 2,210 -- 82,707 -- 82,707
Held for use.............. -- -- -- 133,252 -- 133,252 -- 133,252
Other..................... -- -- -- 5,641 -- 5,641 -- 5,641
------- -------- ------- -------- ------- -------- ------- --------
Total restructuring and
impairment charges.......... $12,007 $105,524 $21,685 $148,164 $(6,006) $281,374 $44,706 $221,600
======= ======== ======= ======== ======= ======== ======= ========
BALANCE AT
DECEMBER 31,
2001
------------
Restructuring Activities:
Personnel and severance..... $ 7,570
Lease and other contractual
Commitments............... 7,343
Other....................... 155
Asset Impairments:
Held for disposal......... --
Held for use.............. --
Other..................... --
-------
Total restructuring and
impairment charges.......... $15,068
=======
The significant components of the restructuring charge recorded for lease
and other contractual commitments totaling approximately $12,957, are as
follows: $8,532 for leased and other facility commitments; $3,182 for lease
commitments on machinery and equipment; $1,165 for waste water project
commitments; and $78 for other commitments.
Also in connection with the Restructuring, the Company wrote-off inventory
resulting in a $49,290 and $824 charge to cost of goods sold during the quarters
ended June 30, 2001 and September 30, 2001, respectively. During the quarter
ended December 31, 2001, the Company reversed inventory write-offs previously
taken totaling $781. With respect to the inventory written-off during the
quarter ended June 30, 2001, the Company has disposed of $39,136 of the
inventory and reversed the write-off and sold $1,021 of the inventory, resulting
in a remaining balance of $9,133 at December 31, 2001. The Company expects to
dispose of the remaining obsolete inventory during fiscal year 2002.
29
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The restructuring and impairment charges were determined based on formal
plans approved by the Company's management using the best information available
to it at the time. The amounts the Company may ultimately incur may change as
the balance of the plans are executed.
The Company continues to review it operations in light of the continued
economic downturn related to its telecommunication and networking customers.
These reviews could result in additional workforce reductions. The impact these
activities could have on the Company's results of operations is not currently
known.
4. DERIVATIVE FINANCIAL INSTRUMENTS
On January 1, 2001, the Company implemented, on a prospective basis,
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and
SFAS No. 138 (collectively, the "Statement"). The Statement requires all
derivatives to be recognized in the statement of financial position at fair
value, with changes in the fair value of derivative instruments to be recorded
in current earnings or deferred in accumulated other comprehensive loss,
depending on whether a derivative is designated as and is effective as a hedge
and on the type of hedging transaction.
The Company uses derivative instruments, primarily foreign exchange forward
contracts, to manage certain of its foreign exchange rate risks. The Company's
objective is to limit potential losses in earnings or cash flows from adverse
foreign currency exchange rate movements. The Company's foreign currency
exposures arise from transactions denominated in a currency other than an
entity's functional currency, primarily anticipated sales of finished product
and the settlement of payables.
Generally, the Company applies hedge accounting as allowed by the
Statement. At December 31, 2001, the Company only had derivatives which
qualified as foreign currency cash flow hedges. For hedged forecasted
transactions, hedge accounting is discontinued if the forecasted transaction is
no longer intended to occur, and any previously deferred hedging gains or losses
would be recorded to earnings immediately. Earnings impacts for all designated
hedges are recorded in the condensed consolidated statement of operations
generally on the same line item as the gain or loss on the item being hedged.
The Company records all derivatives at fair value as assets or liabilities in
the condensed consolidated balance sheet, with classification as current or
long-term depending on the duration of the instrument.
The Company had no transition adjustment as a result of adopting SFAS 133
on January 1, 2001, as the Company's derivative instruments were entered into
during the first quarter 2001 or at year-end 2000. At December 31, 2001, the net
deferred hedging gain in accumulated other comprehensive loss was $0 as the
contracts entered into during 2001 had already expired. This entire gain
resulting from these contracts totaling $3,135 was recognized in earnings during
the year ended December 31, 2001, at the time the underlying hedged transactions
were realized. There was no hedge ineffectiveness during the year ended December
31, 2001.
5. SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest for the years ended December 31, 1999, 2000 and
2001, was $110,185, $106,676 and $94,270 respectively. For the years ended
December 31, 1999 and 2000 net cash received from income tax refunds was $1,591
and $2,933. For the year ended December 31, 2001, net cash paid for income taxes
was $1,423.
In 1999, 2000 and 2001 some acquisitions were purchased or partially
purchased by issuing 273,223, 6,955,466 and 2,186,155 shares, respectively of
Group's common stock (see Note 1).
30
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. INVENTORIES
The composition of inventories at December 31 is as follows:
2000 2001
-------- --------
Raw materials............................................... $126,091 $ 56,815
Work in process............................................. 61,879 27,085
Finished goods.............................................. 68,003 29,689
-------- --------
Total..................................................... $255,973 $113,589
======== ========
7. INTANGIBLE ASSETS
The composition of intangible assets at December 31 is as follows:
2000 2001
-------- ---------
Developed technologies...................................... $ 44,925 $ 43,646
Assembled workforce......................................... 16,920 10,684
Customer list............................................... 70,466 70,240
Goodwill.................................................... 378,368 252,088
-------- ---------
510,679 376,658
Less: Accumulated amortization.............................. (91,443) (128,714)
-------- ---------
Total..................................................... $419,236 $ 247,944
======== =========
8. PROPERTY, PLANT AND EQUIPMENT
The composition of property, plant and equipment at December 31 is as
follows:
2000 2001
--------- ---------
Land and buildings.......................................... $ 134,723 $ 129,018
Machinery, equipment, systems and other..................... 519,573 463,709
Construction in progress.................................... 31,076 20,175
Leasehold improvements...................................... 17,636 18,618
--------- ---------
703,008 631,520
Less: Accumulated depreciation.............................. (250,387) (277,869)
--------- ---------
Total..................................................... $ 452,621 $ 353,651
========= =========
9. ACCRUED AND OTHER LIABILITIES
The composition of accrued and other liabilities at December 31 is as
follows:
2000 2001
-------- -------
Accrued payroll and related costs........................... $ 44,378 $19,712
Accrued capital expenditures................................ 8,045 9,710
Plant shutdown, downsizing and consolidation accruals....... 206 15,068
Accrued interest............................................ 13,744 10,239
Accrued and other liabilities............................... 45,827 35,773
-------- -------
Total..................................................... $112,200 $90,502
======== =======
31
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. LONG-TERM OBLIGATIONS
The composition of long-term obligations at December 31 is as follows:
2000 2001
---------- ----------
Credit Agreement:
Term Facilities........................................... $ 149,500 $ 437,750
Revolvers................................................. 53,800 10,600
Senior Subordinated Notes Due 2007.......................... 400,000 400,000
Series B Senior Subordinated Notes Due 2007................. 100,000 100,000
Series B Senior Subordinated Notes Due 2007, Premium........ 3,466 3,041
Senior Unsecured Notes, including paid-in-kind interest of
$6,422.................................................... -- 106,422
Senior Unsecured Notes, discount............................ -- (26,895)
Chips Loan Notes............................................ 285,312 --
Capital lease obligations (see Note 11)..................... 6,499 4,228
Other....................................................... 25,740 5,773
---------- ----------
1,024,317 1,040,919
Less current maturities................................ (23,882) (3,215)
---------- ----------
$1,000,435 $1,037,704
========== ==========
The schedule of principal payments for long-term obligations at December
31, 2001, is as follows:
2002........................................................ $ 3,215
2003........................................................ 27,477
2004........................................................ 52,447
2005........................................................ 68,515
2006........................................................ 2,299
Thereafter.................................................. 886,966
----------
$1,040,919
==========
CREDIT AGREEMENT
In connection with the initial public offering, Group, as guarantor, and
certain of its subsidiaries, as borrowers, entered into a new senior credit
facility (the "Credit Agreement"). The material terms of the Credit Agreement
are described below.
The Credit Agreement provides for: (a) a $150,000 term loan facility (The
"Tranche B Term Loan"), all of which was required to be drawn in a single draw
at the closing of the Credit Agreement in March 2000; (b) a $175,000 revolving
credit facility (the "Revolving Loans") of which $75,000 may be used for foreign
currency loans in Euros, Pounds Sterling or Canadian Dollars; (c) up to $40,000
of the Revolving Loan may be used for letters of credit; and (d) a U.S. $303,100
letter of credit and term loan facility in respect of the obligations due under
the loan notes made in connection with acquisition of ISL (the "Chips Loan
Notes"). The letter of credit and term loan facility consists of two tranches:
(i) a $153,100 tranche (the "Tranche A Chips Loan") and (ii) a $150,000 tranche
(the "Tranche B Chips Loan").
The Tranche A Chips Loan amortizes semi-annually over two years, commencing
September 30, 2003, the Tranche B Chips Loan amortizes semi-annually over three
and one half years, commencing September 30,
32
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2003, and the Tranche B Term Loan amortizes semi-annually over six and one half
years, commencing September 30, 2000.
The term loans bear interest, at the Company's election, at either (a) the
Eurocurrency Rate (or Canadian, as applicable) plus (i) a percentage based on
the rates of Consolidated Total Debt to Consolidated EBITDA (as defined herein)
for the Revolving Loans and Tranche A Chips Loan (3.25% at December 31, 2001) or
(ii) 3.75% for the Tranche B Loan and the Tranche B Chips Loan; or (b) the Base
Rate plus (i) a percentage based on the rates of Consolidated Total Debt to
Consolidated EBITDA (as defined herein) for the Revolving Loans and Tranche A
Chips Loan (2.25% at December 31, 2001) or (ii) 2.75% for the Tranche B Loan and
the Tranche B Chips Loan. The Base Rate is the highest of the Chase Manhattan
Bank's Prime Rate, the secondary market rate for three-month certificates of
deposit plus 1.00% and the Federal Funds Effective Rate (as defined therein)
plus 0.5%.
At December 31, 2000 and 2001, the weighted average interest rate on
outstanding borrowings under the Company's credit facilities were 9.34% and
7.95%, respectively.
The Company pays a per annum fee equal to one-eighth of one percent plus
the applicable margin on Revolving Loans, the Tranche A Chips Loan or the
Tranche B Chips Loan, as applicable, which bear interest at the Eurocurrency
Base Rate, of the average daily face amount of outstanding letters of credit.
The Company pays a commitment fee equal to 0.5% on the undrawn portion of the
commitments in respect of the Revolving Loans.
At December 31, 2000, the Company had approximately $99,755 of available
borrowing capacity under its revolving credit facility. At December 31, 2001,
the Company had approximately $128,900 of available borrowing capacity under the
Revolving Loans.
The borrowers may optionally prepay the term loans from time to time in
whole or in part, without premium or penalty. At the Company's option, the
Revolving Loans may be prepaid, and revolving credit commitments may be
permanently reduced, in whole or in part, at any time.
The Company will be required to make mandatory prepayments of the term
loans, to cash collateralize the letter of credit term loan and to reduce the
revolving facility, in the amounts equal to (a) 50% of Excess Cash Flow (as
defined), beginning in the earlier of (i) the fiscal year in which the letter of
credit term loans exceed $270,000 and (ii) fiscal year 2002, but only if the
leverage ratio exceeds 3 1/2 to 1 at such time, and (b) 100% of the net proceeds
of dispositions by us or any of our subsidiaries of material assets or
incurrences of indebtedness by us or any of our subsidiaries.
Viasystems' obligations under the Credit Agreement are unconditionally and
irrevocably guaranteed by Group and each existing and future domestic subsidiary
of Viasystems. In addition, the Credit Agreement is secured by a perfected first
priority security interest in all of the capital stock of Viasystems and each of
its direct and indirect domestic subsidiaries and 65% of each first tier foreign
subsidiary of Viasystems and its domestic subsidiaries, all intercompany notes
owing to Viasystems or any of its domestic subsidiaries, the notes issued in
connection with the transfer of the operations formerly conducted by ISL,
Forward, Zincocelere and the Ericsson Facility and all other tangible and
intangible assets of Viasystems and each guarantor.
The Credit Agreement contains a number of covenants that, among other
things, restrict the ability of Viasystems and its subsidiaries to: (a) incur
additional indebtedness; (b) create liens on assets; (c) incur guarantee
obligations; (d) enter into mergers, consolidations or amalgamations or
liquidate, wind up or dissolve; (e) dispose of assets; (f) pay dividends, make
payment on account of, or set apart assets for, a sinking or analogous fund or
purchase, redeem, defease or retire capital stock; (g) make capital
expenditures; (h) make amendments to the Lucent supply agreement which would
have a material adverse effect on the lenders; (i) make optional repurchases of
subordinated debt or preferred stock; (j) make advances, loans,
33
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
extensions of credit, capital contributions to, or purchases of any stock,
bonds, notes, debentures or other securities; (k) engage in certain transactions
with affiliates; and (l) enter into certain sale and leaseback transactions.
The Credit Agreement also contains customary events of default including:
(a) failure to pay principal on any loan when due or any interest or other
amount that becomes due within five days after the due date thereof; (b) any
representation or warranty made or deemed made is incorrect in any material
respect on or as of the date made or deemed made; (c) the default in the
performance of negative covenants or a default in the performance of other
covenants or agreements for a period of thirty days; (d) default in other
indebtedness or guarantee obligations with a principal amount in excess of
$20,000 beyond the period of grace; (e) events of insolvency; (f) ERISA events;
and (g) other customary events of default for facilities similar to the Credit
Agreement.
On April 23, 2001, the Company executed a first amendment to the Credit
Agreement. Among other provisions, the amendment increases the interest margin
charged on borrowed funds and amends financial condition covenants.
On June 28, 2001, the Company executed a second amendment to the Credit
Agreement. Among other provisions, the amendment amends certain financial
condition covenants, reduces available borrowing capacity under the Revolving
Loan to $150,000 until such time as the Company delivers a compliance
certificate with respect to its financial statements for the fiscal quarter
ended June 30, 2003, and permits the issuance of the senior unsecured notes to
HMTF. The second amendment to the Credit Agreement became effective on July 19,
2001, in connection with the issuance of the senior unsecured notes to HMTF.
SENIOR UNSECURED NOTES
On July 19, 2001, Viasystems, Inc. issued to HMTF $100,000 of senior
unsecured notes (the "Senior Unsecured Notes") and 10.0 million warrants to
purchase shares of Group's common stock. The Senior Unsecured Notes bear
interest at 14% per annum and mature on May 1, 2007. Interest is not payable
currently, but rather will accrete semi-annually and be payable in full at
maturity of the Senior Unsecured Notes. The warrants are immediately exercisable
and have an exercise price of $.01 per share and terminate in 2011. The Company
has allocated $29,964 of the proceeds from the Senior Unsecured Notes to
paid-in-capital and $70,036 to debt, which represents the relative fair value of
the securities at the time of issuance. The resulting debt discount of $29,964
is being amortized, using the effective interest method, over the life of the
Senior Unsecured Notes. At December 31, 2001, the remaining unamortized discount
was $26,895. The fair value of the warrants was determined using a Black Scholes
model, assuming expected volatility of 116%, a risk-free rate of return of 3.0%
and a dividend yield of 0%.
SENIOR SUBORDINATED NOTES AND SERIES B SENIOR SUBORDINATED NOTES
In June 1997, Viasystems completed an offering (the "1997 Offering") of
$400,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "1997 Notes"). In
February 1998, Viasystems completed the offering of an additional $100,000 of
9 3/4% Series B Senior Subordinated Notes due 2007 at a price of 104.5% (the
"1998 Notes" and together with the 1997 Notes, the "2007 Notes").
Interest on the 2007 Notes is due semiannually. The 2007 Notes may not be
redeemed prior to June 1, 2002, except in the event of a Change of Control (as
defined) or Initial Public Offering (as defined) and at premium (as defined in
the Indenture). The 2007 Notes are redeemable, at the Company's option, at the
redemption prices of 104.875% at June 1, 2002, and at decreasing prices to 100%
at June 1, 2005, and thereafter, plus accrued interest.
34
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CHIPS LOAN NOTES LIABILITY
In June 1997, in connection with the acquisition of ISL, the Company
assumed $437,500 of promissory notes (the "Chips Loan Notes"). The Chips Loan
Notes mature on March 31, 2003 and bear interest, payable quarterly, at
approximately 6.22% per annum through April 1, 1998, with a variable rate
thereafter discounted from the U.S. prime rate. The Chips Loan Notes may be
called by the holders on or after any interest payment date commencing April 1,
1998.
In April 1998, the holders of the Chips Loan Notes redeemed approximately
$152,200 of the Chips Loan Notes. As such, approximately $118,300 of cash held
by Bisto Funding, Inc., a special purpose entity established as a subsidiary of
Group in connection with the acquisition of ISL, was paid to the holders of the
Chips Loan Notes. The Company borrowed approximately $33,900 from the available
term loan facility in place to fund its portion of the payment of the Chips Loan
Notes.
In March 2000, when Viasystems entered into the Credit Agreement, a letter
of credit and term loan facility in an aggregate amount of $303,100 was made
available to Viasystems to satisfy the Chips Loan Notes obligation. On January
2, 2001, the holder of the Chips Loan Notes redeemed all the Chips Loan Notes.
The Company paid this obligation plus the accrued quarterly interest owed by
drawing on the Tranche B Chips letter of credit commitment for $150,000 and
borrowing $139,250 under the Tranche A Chips Loan commitment.
11. COMMITMENTS
The Company leases certain building and transportation and other equipment
under capital and operating leases. Included in property, plant, and equipment
as of December 31, 2000 and 2001, were $28,504 and $5,578, respectively, of cost
basis and $16,267 and $906, respectively, of accumulated depreciation related to
equipment held under capital leases. Total rental expense under operating leases
was $5,145, $6,761 and $12,341 for the years ended December 31, 1999, 2000 and
2001, respectively. Future minimum lease payments under capital leases and
operating leases that have initial or remaining noncancelable lease terms in
excess of one year are as follows:
YEAR ENDING DECEMBER 31, CAPITAL OPERATING
- ------------------------ ------- ---------
2002........................................................ $1,361 $11,306
2003........................................................ 1,282 8,448
2004........................................................ 1,312 6,774
2005........................................................ 884 5,301
2006........................................................ 181 5,150
Thereafter.................................................. -- 18,278
------ -------
Total..................................................... 5,020 $55,257
=======
Less: Amounts representing interest......................... (792)
------
Capital lease obligations (see Note 10)................... $4,228
======
35
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109. The benefit for income taxes for the years ended December 31,
1999, 2000 and 2001, consists of the following:
1999 2000 2001
-------- ------- -----
Current:
Federal................................................ $ 1,592 $ -- $(900)
State.................................................. 164 -- --
Foreign................................................ 5,120 (3,668) 115
-------- ------- -----
6,876 (3,668) (785)
-------- ------- -----
Deferred:
Federal................................................ 2,065 -- --
State.................................................. 405 -- --
Foreign................................................ (32,558) 745 785
-------- ------- -----
(30,088) 745 785
-------- ------- -----
$(23,212) $(2,923) $ --
======== ======= =====
Reconciliation between the statutory income tax rate and effective tax rate
is summarized below:
1999 2000 2001
--------- -------- ---------
U.S. Federal statutory rate........................ $(253,772) $(37,699) $(205,458)
State taxes, net of Federal provision (benefit).... (1,325) (1,860) (7,558)
Foreign taxes in excess of U.S. statutory rate..... 8,030 (31,233) (9,690)
Interest deductible for tax, eliminated for book... -- (4,846) --
Amortization of goodwill and write-off of acquired
in-process research and development costs........ 77,309 12,067 58,440
Non-cash compensation expense...................... 38,525 41,782 --
Loss on investment in foreign subsidiaries......... (130,931) (204,197) --
Change in the valuation allowance for deferred tax
assets........................................... 244,255 230,967 128,000
Federal taxes on undistributed loss of foreign
subsidiaries..................................... (4,203) (8,166) --
Cancellation of Indebtedness Income................ -- -- 32,360
Equity in earnings of affiliate not taxable due to
dividends received deduction..................... (1,400) -- --
Other.............................................. 300 262 3,906
--------- -------- ---------
$ (23,212) $ (2,923) $ --
========= ======== =========
36
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of significant temporary differences representing deferred
tax assets and liabilities at December 31 are as follows:
2000 2001
--------- ---------
Deferred tax assets:
Accrued liabilities not yet deductible.................... $ 19,104 $ 20,127
Net operating loss carryforwards.......................... 278,646 360,512
AMT credit carryforwards.................................. 1,128 1,128
Fixed assets.............................................. -- 32,947
Capital loss carryforwards................................ 126,391 126,391
Other..................................................... -- 10,917
--------- ---------
425,269 552,022
Valuation allowance......................................... (398,417) (526,417)
--------- ---------
26,852 25,605
--------- ---------
Deferred tax liabilities:
Intangibles............................................... (7,820) (8,256)
Fixed assets.............................................. (9,522) (8,762)
Other..................................................... (7,895) (7,894)
--------- ---------
(25,237) (24,912)
--------- ---------
Net deferred tax asset................................. $ 1,615 $ 693
========= =========
The current deferred tax assets are included in prepaid expenses and other
and the long-term deferred tax assets, consisting of net operating loss
carryforwards, are in other assets in the consolidated balance sheets. The
current deferred tax liabilities are included in accrued and other liabilities
in the consolidated balance sheets.
Approximate domestic and foreign income (loss) before income tax provision
and extraordinary item are as follows:
YEAR ENDED DECEMBER 31,
---------------------------------
1999 2000 2001
--------- --------- ---------
Domestic.......................................... $(175,511) $(144,982) $(400,828)
Foreign........................................... (549,553) 37,271 (186,191)
As of December 31, 2001, the Company had the following net operating loss
("NOL") carryforwards: $867,096 in the U.S., $54,380 in Luxembourg, $481 in
Puerto Rico, $16,970 in Canada, $28,572 in Hong Kong, $17,669 in the U.K.,
$6,488 in Italy, $29,057 in the Netherlands and $538 in Brazil. The U.S. NOLs
expire in 2018 through 2021 and the Puerto Rico and Canada NOLs expire in 2008.
All other NOLs carry forward indefinitely. The U.S. also has a capital loss
carryforward of $126,391 that will expire in 2004 and Canada has an investment
tax credit carryforward of $1,191 that will expire in 2010. The Company has not
recognized and does not anticipate recognizing a deferred tax liability for
approximately $146,345 of undistributed earnings of its foreign subsidiaries
because the Company does not expect those earnings to reverse and become taxable
to the Company in the foreseeable future.
The Company has a tax holiday in China that allows a two-year tax exemption
and three-year 50% reduction in the tax rate. The tax holiday began in 2001. If
not for such tax holiday, the Company would have had $11,782 of income tax
expense, based on the applicable rate of 27%.
37
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 2001, the Company's NOLs were reduced by approximately $92,458 to
reflect the offset against the NOLs of cancellation of indebtedness income the
Company recognized as a result of open market purchases at a discount during
2001 by HMTF of Viasystems, Inc. indebtedness with an aggregate principal amount
of $163,376.
13. CONTINGENCIES
The Company is subject to various lawsuits and claims with respect to such
matters as patents, product development and other actions arising in the normal
course of business. In the opinion of the Company's management, the ultimate
liabilities resulting from such lawsuits and claims will not have a material
adverse effect on the Company's financial condition and results of operations
and cash flows.
The Company believes it is in material compliance with applicable
environmental laws and regulations and that its environmental controls are
adequate to address existing regulatory requirements.
14. BUSINESS SEGMENT INFORMATION
The Company operates in one segment -- a worldwide independent provider of
electronics manufacturing services, which are sold throughout many diverse
markets.
The Company's operations are located worldwide and are analyzed by three
geographical segments. The accounting policies of the segments are the same as
those described in the "Summary of Significant Accounting Policies" (Note 2).
Segment data includes intersegment revenues.
Pertinent financial data by major geographic segments is as follows:
OPERATING CAPITAL
NET SALES INCOME/(LOSS) TOTAL ASSETS EXPENDITURES
---------- ------------- ------------ ------------
North America:
Year ended December 31, 1999..... $ 769,572 $ (73,106) $ 618,486 $ 50,588
Year ended December 31, 2000..... 983,967 (35,367) 833,997 59,336
Year ended December 31, 2001..... 650,431 (376,055) 440,973 24,641
Europe:
Year ended December 31, 1999..... $ 454,386 $(496,239) $ 362,991 $ 72,704
Year ended December 31, 2000..... 378,056 5,259 370,812 23,698
Year ended December 31, 2001..... 298,315 (112,416) 177,295 10,883
Asia:
Year ended December 31, 1999..... $ 80,978 $ (7,684) $ 327,749 $ 14,711
Year ended December 31, 2000..... 266,601 34,064 406,475 53,848
Year ended December 31, 2001..... 277,116 3,518 369,777 43,266
Eliminations:
Year ended December 31, 1999..... $ (11,566) $ -- $ -- $ --
Year ended December 31, 2000..... (23,639) -- -- --
Year ended December 31, 2001..... (19,326) -- -- --
Total:
Year ended December 31, 1999..... $1,293,370 $(577,029) $1,309,226 $138,003
Year ended December 31, 2000..... 1,604,985 3,956 1,611,284 136,882
Year ended December 31, 2001..... 1,206,536 (484,953) 988,045 78,790
38
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Sales by country of destination are as follows:
YEAR ENDED DECEMBER 31,
------------------------------------
1999 2000 2001
---------- ---------- ----------
United States.................................... $ 703,862 $ 897,551 $ 619,009
United Kingdom................................... 153,083 163,072 79,517
Canada........................................... 75,016 115,922 66,442
France........................................... 54,162 60,782 113,234
Malaysia......................................... 12,750 53,701 53,155
China............................................ -- 34,701 54,399
Germany.......................................... 59,442 66,441 55,763
Sweden........................................... 78,898 22,732 2,348
Other............................................ 156,157 190,083 162,669
---------- ---------- ----------
Total.................................. $1,293,370 $1,604,985 $1,206,536
========== ========== ==========
Property, plant and equipment by country are as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2000 2001
---------- ----------
United States............................................... $171,819 $ 78,654
China....................................................... 138,074 162,706
Canada...................................................... 79,849 64,438
Other....................................................... 62,879 47,853
-------- --------
Total............................................. $452,621 $353,651
======== ========
15. CONCENTRATION OF BUSINESS
Sales to Lucent Technologies directly and through other contract electronic
manufacturers were 26%, 21% and 21% of net revenues for the years ended December
31, 1999, 2000 and 2001, respectively.
16. STOCK OPTION PLANS
Group has stock-based compensation plans under which outside directors and
certain employees receive stock options and other equity-based awards. The plans
provide for the grant of stock options, stock appreciation rights, performance
awards, restricted stock awards and other stock unit awards.
Stock options generally are granted with an exercise price equal to or
above the market value of a share of common stock on the date of grant, have a
life of 10 years and vest within 5 years from the date of grant. The total
number of shares of common stock authorized for option grants under the plans
was 13,696,012 shares at December 31, 2001.
In connection with certain acquisitions, and in accordance with the
contract terms, outstanding stock options held by employees of acquired
companies became vested and converted to options to purchase Group's common
stock on the acquisition date. As these acquisitions were accounted for as
purchases, the fair value of these options was included in the purchase price.
In connection with the issuance of the Senior Unsecured Notes, the Company
issued to Hicks, Muse, Tate & Furst 10.0 million warrants to purchase shares of
Group's common stock. The warrants are exercisable immediately and have an
exercise price of $0.01 per share and terminate in 2011 (see Note 10).
39
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123") and, as permitted under
SFAS No. 123, applies Accounting Principles Board Opinion No. 25 ("ABP 25") and
related interpretations in accounting for its plans. Had compensation costs for
all other options and warrants been determined based upon the fair value at the
grant date for awards under the plans consistent with the methodology prescribed
under SFAS No. 123, the Company's net loss and loss per share would have been
changed to the pro forma amounts indicated below:
YEAR ENDED DECEMBER 31,
---------------------------------
1999 2000 2001
--------- --------- ---------
Net loss
As reported..................................... $(720,295) $(135,984) $(587,019)
Pro forma....................................... (721,554) (147,535) (623,506)
Net loss per share -- basic
As reported..................................... $ (10.14) $ (1.13) $ (4.21)
Pro forma....................................... (10.16) (1.23) (4.47)
Net loss per share -- diluted
As reported..................................... $ (10.77) $ (1.14) $ (4.21)
Pro forma....................................... (10.79) (1.24) (4.47)
The fair value of stock options used to compute pro forma net loss and loss
per share disclosure is the estimated fair value at grant date using the
Black-Scholes option-pricing model with the following assumptions:
WEIGHTED AVERAGE ASSUMPTIONS 1999 2000 2001
- ---------------------------- ---- ---- ----
Expected volatility......................................... 60% 60% 60%
Risk-free interest rate..................................... 5.5% 5.5% 5.5%
Dividend yield.............................................. 0.0% 0.0% 0.0%
Expected holding period in years............................ 5 5 5
The weighted average fair value of stock options and warrants, calculated
using the Black-Scholes option-pricing model, granted during the years ended
December 31, 1999, 2000, and 2001 was $1.74, $10.12 and $3.07 respectively.
40
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Presented below is a summary of the status of the stock options and
warrants and the related transactions for the years ended December 31, 1999,
2000 and 2001:
WEIGHTED
AVERAGE EXERCISE
SHARES PRICE PER SHARE
---------- ----------------
Options outstanding at December 31, 1998.................. 2,940,404 $6.64
Granted................................................. 2,509,993 7.32
Exercised............................................... (7,500) 6.30
Forfeited/expired....................................... (209,667) 7.23
----------
Options outstanding at December 31, 1999.................. 5,233,230 6.81
Granted................................................. 3,525,259 14.66
Exercised............................................... (88,167) 6.07
Forfeited/expired....................................... (184,601) 12.39
----------
Options outstanding at December 31, 2000.................. 8,485,721 12.65
Granted/assumed......................................... 12,167,238 1.35
Exercised............................................... (70,821) 2.11
Forfeited/expired....................................... (931,130) 8.58
----------
Options outstanding at December 31, 2001.................. 19,651,008 $5.36
========== =====
The following table summarizes the status of stock options and warrants
outstanding and exercisable at December 31, 2001:
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
----------------------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
REMAINING EXERCISE EXERCISE
CONTRACTUAL LIFE PRICE PER PRICE PER
RANGE OF EXERCISE PRICE PER SHARE SHARES (YEARS) SHARE SHARES SHARE
- --------------------------------- ---------- ---------------- --------- ------------ -----------
$ -- to $ 4.20.............. 12,135,169 9.5 $ 0.49 10,332,669 $ 0.09
$ 4.21 to $ 6.30.............. 469,282 5.9 5.46 296,944 5.78
$ 6.31 to $ 8.40.............. 1,420,828 7.4 7.28 745,990 7.24
$ 8.41 to $10.50.............. 1,821,494 8.2 9.11 1,821,494 9.11
$10.51 to $12.60.............. 912,901 9.0 11.00 4,180 11.00
$12.61 to $18.90.............. 147,500 8.9 17.44 29,500 17.44
$18.91 to $21.00.............. 2,743,834 8.3 21.00 2,266,825 21.00
---------- ------ ---------- ------
Total.................... 19,651,008 $ 5.36 15,497,602 $ 4.68
========== ====== ========== ======
17. RETIREMENT PLANS
The Company has a defined contribution retirement savings plan (the "Plan")
covering substantially all domestic employees who meet certain eligibility
requirements as to age and length of service. The Plan incorporates the salary
deferral provision of Section 401(k) of the Internal Revenue Code and employees
may defer up to 15% of compensation or the annual maximum limit prescribed by
the Internal Revenue Code. The Company contributes 1% of employees' salaries to
the Plan and matches a percentage of the employees' deferrals. The Company may
also elect to contribute an additional profit-sharing contribution to the Plan
at the end of each year. The Company's contributions to the Plan were $2,627,
$3,048 and $4,020 for the years ended December 31, 1999, 2000 and 2001,
respectively.
41
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In prior years, the Company had two defined benefit pension plans covering
certain groups of employees in foreign countries. The net periodic pension cost
in 1999 was $1,032. These defined benefit plans were for employees of Forward
and ISL, which were transferred to pre-IPO stockholders in March 2000 (see Note
1).
18. RESEARCH AND DEVELOPMENT
Research, development and engineering expenditures for the creation and
application of new products and processes were approximately $14,400, $12,048
and $9,210 for the years ended December 31, 1999, 2000, and 2001, respectively.
19. RELATED PARTY TRANSACTIONS
In connection with the acquisitions and the related financing, the Company
entered into a Monitoring and Oversight Agreement and a Financial Advisory
Agreement (together herein defined as the "Agreements") with HMTF (a shareholder
and affiliate of the Company) pursuant to which the Company paid HMTF a cash fee
of $4,684, $714 and $0 for the years ended December 31, 1999, 2000 and 2001,
respectively, as compensation for financial advisory services. In connection
with the initial public offering, the Company terminated the Agreements and
granted to HMTF options to purchase Group's stock (see Note 22).
In March 2000, immediately prior to Group's initial public offering, Group
transferred all of the capital stock of certain businesses in Europe to a new
entity formed by Group's pre-IPO stockholders, European PCB Group (Cayman
Islands), Ltd., a Cayman Islands exempted company ("European PCB Group"). These
businesses now owned by European PCB Group consist primarily of the operations
formerly conducted by Forward, Zincocelere, ISL and the Ericsson Facility.
Subsequent to such transfer, the Company has continued to purchase and receive
products and other services, on an arms-length basis, from European PCB Group.
Messrs. David M. Sindelar, the Company's Chief Executive Officer and a director,
Timothy L. Conlon, the Company's President, Chief Operating Officer and a
director, and Richard W. Vieser and Kenneth F. Yontz, each directors,
beneficially own equity interests in European PCB Group. In 2000, the Company
purchased an aggregate of $24,004 of printed circuit boards and other products
from European PCB Group and had sales of $17,829 to European PCB Group. In
addition, the Company paid approximately $7,200 in sales-force fees and
commissions to European PCB Group and received $2,172 in management fees from
European PCB Group in fiscal year 2000. In 2001, the Company purchased an
aggregate of $17,086 of printed circuit boards and other products from European
PCB Group and had sales of $6,407 to European PCB Group. In addition, the
Company paid approximately $4,400 in sales-force fees and commissions to
European PCB Group and received $1,503 in management fees from European PCB
Group in fiscal year 2001.
Additionally, in conjunction with Group's initial public offering, the
Company acquired all of the outstanding shares of the Wire Harness Business, a
wholly owned subsidiary of International Wire Group, Inc., an affiliate of HMTF.
The Wire Harness Business, in accordance with negotiated contract terms,
purchased an aggregate of $25,982, $28,092 and $36,784 of product from
International Wire Group, Inc. for fiscal years 1999, 2000 and 2001,
respectively.
20. EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING
During the year ended December 31, 2000, the Company recorded, as an
extraordinary item, a one-time, non-cash write-off of deferred financing fees of
approximately $31,196, net of income tax benefit of $0, related to deferred
financing fees incurred on debt retired before maturity with proceeds from
Group's initial public offering.
In April 1998, the FASB adopted Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-Up Activities," which requires costs of
start-up activities and organization costs to be expensed as incurred. The
Company adopted SOP 98-5 in fiscal year 1999 and reported the write-off of the
net book value
42
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of start-up costs as of January 1, 1999, of $18,443 (net of income tax benefit
of $6,734) as a cumulative effect of a change in accounting principle.
21. NON-CASH COMPENSATION EXPENSE
During the year ended December 31, 1999, the Company recorded a non-cash
compensation expense charge of $110,070, which reflect the difference between
the cost of the class A common stock and class A series II common stock and the
value of the common stock that it is convertible into at that date.
In connection with the initial public offering, Group amended the terms of
the performance stock options held by members of management to eliminate the
exercisability restrictions and variable exercise price terms. The amended
performance options have a fixed exercise price of $9.00 per share and are
immediately exercisable. As a result of these amendments, the Company recorded a
one-time non-cash compensation expense charge of approximately $33,635 during
the year ended December 31, 2000.
Also in connection with the initial public offering, Group converted each
6 2/3 shares of class A common stock and class A series II common stock into one
share of common stock. This conversion eliminated the variable terms of the
class A and class A series II common stock and resulted in a one-time non-cash
compensation expense charge of approximately $62,945 recorded during the year
ended December 31, 2000.
Additionally, in connection with the initial public offering, the Company
terminated the Monitoring and Oversight Agreement and Financial Advisory
Agreement with HMTF. As consideration for such termination, Group granted to
HMTF, options to purchase an aggregate 2,134,000 shares of Group's common stock
at an exercise price of $21.00 per share. The option grant resulted in a net
one-time non-cash compensation expense charge of approximately $7,771 recorded
during the year ended December 31, 2000.
22. INITIAL PUBLIC OFFERING
On March 24, 2000, Group completed an initial public offering of 44,000,000
shares of common stock at $21.00 per share with net proceeds of $865,543. Group
used the proceeds from the offering to fund the acquisition of the Wire Harness
Business, to repay amounts outstanding under the existing credit facility and
for general corporate purposes.
23. SUBSEQUENT EVENTS
As a result of the dramatic downturn in telecom component demand during
2001 and the Company's highly leveraged capital structure, the Company expects
to fail to satisfy certain financial maintenance covenants contained in its
senior secured credit facility on March 31, 2002. In anticipation of this
circumstance, the Company entered into an amendment to its credit agreement on
March 29, 2002. The amendment provides that the Company's credit facility
lenders will refrain from exercising any rights or remedies in respect of the
Company's failure to comply prior to May 29, 2002. Under the terms of the
amendment, the Company's revolving borrowings under the senior secured credit
facility are limited to $100 million, unless its consolidated net sales for the
preceding eight week period exceed specified thresholds, in which case its
revolving loan availability is increased to $150 million. The amendment further
increases the interest rates payable on these borrowings by .25% per annum,
imposes additional financial and operating restrictions and provides for the
grant of certain additional liens to secure these borrowings. A fee of
approximately $1.5 million was paid to the Company's credit facility lenders in
connection with the amendment.
In light of these developments, the Company has retained Rothschild Inc. to
assist the Company in evaluating several recapitalization alternatives in an
effort to reduce debt and strengthen our balance sheet.
43
VIASYSTEMS, INC. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 2001, the Company had $34.2 million of cash and cash
equivalents and its working capital was $122.1 million. Giving effect to the
recent amendment to the Company's credit agreement, as of December 31, 2001, the
Company would have had revolver availability under the senior secured credit
facility of $78.9 million.
These expectations, however, assume that the forbearance under the recent
amendment to the Company's credit agreement will be extended in order to permit
the Company to implement a restructuring or other plan. In the event that the
Company is unable to enter into satisfactory arrangements with the lenders under
its senior secured credit facility to extend such forbearance beyond May 29,
2002, up to $1 billion of indebtedness could become due and payable shortly
thereafter. This indebtedness consists of term loans of $437.8 million and
revolving loans of $10.6 million under the senior secured credit facility, $79.5
million (net of $26.6 million of unamortized discount) of senior unsecured
notes, and $500 million principal amount of senior subordinated notes. Although
there is no current default under the senior unsecured notes or the senior
subordinated notes, a default would arise under these debt obligations in the
event of an acceleration of the maturity of the senior secured credit facility
indebtedness. In such event, the Company would not have sufficient liquidity to
repay such indebtedness and the Company would not expect to be able to refinance
such indebtedness. In addition, the Company's future operating performance and
ability to meet its financial obligations will be subject to future economic
conditions and to financial, business and other factors, many of which will be
beyond its control.
44
VIASYSTEMS, INC. AND SUBSIDIARIES
QUARTERLY RESULTS OF OPERATIONS
(UNAUDITED)
The following is a summary of unaudited quarterly financial information of
Viasystems, Inc. and subsidiaries for 2000 and 2001. In March 2000, we acquired
all of the outstanding shares of Wirekraft Industries, Inc. in a transaction
between entities under common control, which was accounted for in a manner
similar to a pooling of interest and thus the historical financial data of
Viasystems and Wirekraft have been combined.
2000 2001
--------------------------------------------------- -----------
MARCH 31(1) JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31(2)
----------- -------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales............ $ 384,584 $358,285 $406,504 $455,612 $389,191
Gross margin......... 81,310 88,860 97,649 106,614 78,743
Income (loss) before
extraordinary
Item............... (130,709) 2,784 9,519 13,618 (18,736)
Net income (loss).... (161,905) 2,784 9,519 13,618 (18,736)
2001
---------------------------------------------
JUNE 30(3) SEPTEMBER 30(4) DECEMBER 31(5)
---------- --------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales............ $ 309,149 $ 268,108 $ 240,088
Gross margin......... 3,433 41,773 39,701
Income (loss) before
extraordinary
Item............... (184,541) (204,981) (178,761)
Net income (loss).... (184,541) (204,981) (178,761)
- ---------------
(1) The quarter includes non-cash compensation charges totaling $104,351 and an
extraordinary item of $31,196, net of tax benefit of $0. The non-cash
compensation charges are: (i) $33,635 related to the amendment of terms of
the performance stock options held by members of management that eliminated
the exercisability restrictions and variable exercise terms; (ii) $62,945
related to the conversion of each 6 2/3 shares of class A common stock and
class A series II common stock into one share of common stock; and (iii)
$7,771 related to options granted to HMTF and partners of HMTF as
consideration for the termination of certain agreements. The extraordinary
item represents the non-cash write-off of deferred financing fees incurred
on debt retired before maturity.
(2) This quarter includes a restructuring charge of $12,007 for a restructuring
plan implemented by the Company primarily related to headcount reductions in
its North American operations. Refer to Note 3 of our consolidated financial
statements contained in Part II, Item 8.
(3) This quarter includes the following charges: (i) a restructuring charge of
$30,481, (ii) an impairment charge on assets held for disposal of $75,043
and (iii) inventory write-offs of $49,290 all related to a restructuring
plan implemented by the Company to restructure its North American
operations, including the closure of two of its North American printed
circuit board fabrication plants. Refer to Note 3 of our consolidated
financial statements contained in Part II, Item 8.
(4) This quarter includes the following charges: (i) a write-off of amounts due
from affiliates of $144,099 related to amounts due from European PCB Group
that have been permanently impaired, (ii) restructuring and impairment
charges totaling, $21,685 primarily related to the consolidation of certain
North American and European facilities as well as headcount reductions at
its corporate offices and (iii) inventory write-offs of $824 related to the
restructuring activities. Refer to Note 3 of our consolidated financial
statements contained in Part II, Item 8.
(5) This quarter includes the following charges: (i) restructuring and
impairment charges totaling $148,164 and reversals of previously recorded
impairment charges of $6,006 and (ii) a reversal of inventory write-offs
previously taken totaling $781. Refer to Note 3 of our consolidated
financial statements contained in Part II, Item 8.
45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL
DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information required by this item has been omitted as the registrant meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item has been omitted as the registrant meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Information required by this item has been omitted as the registrant meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item has been omitted as the registrant meets
the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and
is therefore filing this form with the reduced disclosure format.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements
The information required by this item is included in Item 8 of Part II of
this Form 10-K.
2. Financial Statement Schedule
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31
(IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS -- BALANCE AT CHARGES TO BALANCE AT
DEDUCTED FROM RECEIVABLES IN THE BEGINNING ACQUISITIONS/ COST AND ACCOUNTS TRANSLATION END OF
BALANCE SHEET OF PERIOD (DISTRIBUTIONS) EXPENSES WRITTEN OFF ADJUSTMENTS PERIOD
- ---------------------------------- ---------- --------------- ---------- ----------- ----------- ----------
1999.......................... $4,223 $2,632 $ 1,784 $ (973) $(255) $ 7,411
====== ====== ======= ======= ===== =======
2000.......................... $7,411 $ (327)(1) $ 564 $ (383) $ (32) $ 7,233
====== ====== ======= ======= ===== =======
2001.......................... $7,233 $ 302 $11,483 $(3,290) $ (74) $15,654
====== ====== ======= ======= ===== =======
- ---------------
(1) Included in this figure is $(2,439) which was a reduction in the allowance
for doubtful accounts as a result of the distribution of the operations
formerly conducted by ISL, Forward, Zincocelere and Viasystems Sweden in
March 2000. This reduction is offset by an increase in the allowance for
doubtful accounts of $2,112 from the acquisitions completed in 2000.
46
VALUATION ALLOWANCE FOR
DEFERRED TAX ASSETS -- DEDUCTED BALANCE AT CHARGES TO CHARGES TO BALANCE AT
FROM DEFERRED TAXES IN THE BALANCE BEGINNING ACQUISITIONS/ COST AND EXTRAORDINARY TRANSLATION END OF
SHEET OF PERIOD (DISTRIBUTIONS) EXPENSES ITEMS ADJUSTMENTS PERIOD
- ---------------------------------- ---------- --------------- ---------- ------------- ----------- ----------
1999......................... $ 0 $ 0 $244,255 $ 0 $0 $244,255
======== ======== ======== ======= == ========
2000......................... $244,255 $(87,723)(2) $230,967 $10,918 $0 $398,417
======== ======== ======== ======= == ========
2001......................... $398,417 $ 0 $128,000 $ 0 $0 $526,417
======== ======== ======== ======= == ========
- ---------------
(2) Included here is the reduction in the valuation allowance as a result of the
distribution of the operations formerly conducted by ISL, Forward and
Zincocelere.
3. Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Securities Purchase Agreement, dated as of October 1, 1996,
among Viasystems Group, Inc. (formerly known as Circo Craft
Holding Company) and certain Purchasers (as defined
therein)(1)
2.2 -- Acquisition Agreement, dated as of November 26, 1996, among
Lucent Technologies Inc., Viasystems Group, Inc. (formerly
known as Circo Technologies Group, Inc.) and Viasystems,
Inc. (formerly known as Circo Craft Technologies, Inc.)(1)
2.3 -- Agreement and Plan of Merger, dated as of April 11, 1997 by
and among Viasystems Group, Inc., HMTF Acquisition, L.P.,
HMTF U.K. Acquisition Company, Hicks, Muse, Tate & Furst
Equity Fund III and HM3 Coinvestors, L.P.(1)
2.4 -- Agreement and Plan of Merger, dated as of June 5, 1997, by
and between Viasystems Group, Inc. and Chips Holdings,
Inc.(1)
2.5 -- Agreement and Plan of Merger, dated as of June 6, 1997, by
and between Viasystems, Inc. and Chips Acquisition, Inc.(1)
2.6 -- Acquisition Agreement, dated as of January 29, 1998, among
Viasystems B.V. and Print Service Holding N.V.(4)
2.7 -- Sale and Purchase Agreement, dated as of February 11, 1998,
between Viasystems, S.r.l., as purchaser, European Circuits
SA and individuals named therein, as sellers(4)
2.8 -- Share Purchase Agreement, dated August 1, 1999, among
Termbray Electronics (B.V.I.) Limited, Termbray Industries
International (Holdings) Limited, Viasystems, Inc. and
Viasystems Group, Inc.(6)
2.9 -- Stock Purchase Agreement, dated March 23, 2000, by and among
International Wire Group, Inc., Wirekraft Industries, Inc.
and Viasystems International, Inc.(13)
3.1 -- Amended and Restated Certificate of Incorporation of
Viasystems Group, Inc.(12)
3.2 -- Amended and Restated Bylaws of Viasystems Group, Inc.(12)
4.1 -- Credit Agreement, dated as of March 29, 2000, among
Viasystems Group, Inc., as Guarantor, Viasystems, Inc. as
U.S. Borrower, Viasystems Canada, Inc. and Print Service
Holding N.V., as Foreign Subsidiary Borrowers, The Several
Banks and other Financial Institutions parties thereto, The
Chase Manhattan Bank of Canada, as Canadian Administrative
Agent, Chase Manhattan Bank International Limited, as
Multicurrency Administrative Agent, and The Chase Manhattan
Bank, as Administrative Agent, Bank of America, N.A. as
Syndication Agent, Bankers Trust Company, as Syndication
Agent, and Chase Securities Inc., as Sole Book Manager and
Sole Lead Arranger.(12)
4.2 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(1)
4.3 -- Form of New Note (included in Exhibit 4.2, Exhibit B)
4.4 -- Indenture, dated as of February 17, 1998, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(4)
4.5 -- Form of Exchange Note (included in Exhibit 4.4, Exhibit B)
47
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.6 -- First Amendment, dated April 23, 2001, to the Credit
Agreement, Dated as of March 29, 2000, among Viasystems
Group, Inc., as Guarantor, Viasystems, Inc., as U.S.
Borrower, Viasystems Canada, Inc. and Print Service Holding
N.V., as Foreign Subsidiary Borrowers, The Several Banks and
other Financial Institutions parties thereto, The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent,
Chase Manhattan Bank International Limited, as Multicurrency
Administrative Agent, and The Chase Manhattan Bank, as
Administrative Agent, Bank of America, N.A. as Syndication
Agent, Bankers Trust Company, as Syndication Agent, and
Chase Securities Inc., as Sole Book Manager and Sole Lead
Arranger.(14)
4.7 -- Second Amendment, dated as of June 28, 2001, to the Credit
Agreement, dated as of March 29, 2000, as amended by the
First Amendment dated as of April 23, 2001, among Viasystems
Group, Inc., Viasystems, Inc., as U.S. Borrower, Viasystems
Canada, Inc. And Print Service Holding N.V., as Foreign
Subsidiary Borrowers, the several banks and other financial
institutions parties thereto, The Chase Manhattan Bank of
Canada, as Canadian Administrative Agent, Chase Manhattan
Bank International Limited, as Multicurrency Administrative
Agent, and The Chase Manhattan Bank, as Administrative
Agent.(15)
4.8 -- Form of Warrant Certificate dated as of July 19, 2001,
issued in the denominations and to the investors listed on
Annex A thereto.(15)
4.9 -- Form of 14% Senior Note due 2007 dated as of July 19, 2001,
issued in the denominations and to the investors listed on
Annex A thereto.(15)
4.10 -- Registration Rights Agreement dated as of July 19, 2001, by
and among Viasystems Group, Inc. and the investors named
herein.(15)
4.11 -- Third Amendment, dated as of March 29, 2002, to the Credit
Agreement, dated as of March 29, 2000, as amended by the
First Amendment dated as of April 23, 2001, and the Second
Amendment dated as of June 28, 2001, among Viasystems Group,
Inc., Viasystems, Inc. as U.S. Borrower, Viasystems Canada,
Inc. and Print Service Holding N.V., as Foreign Subsidiary
Borrowers, the several banks and other financial
institutions parties thereto, The Chase Manhattan Bank of
Canada, as Canadian Administrative Agent, Chase Manhattan
Bank International Limited, as Multicurrency Administrative
Agent, and The Chase Manhattan Bank, as Administrative
Agent.(16)
10.1 -- Supply Agreement dated as of November 26, 1996, by and
between Lucent Technologies Inc. and Circo Craft
Technologies, Inc. (confidential treatment was granted with
respect to certain portions of this exhibit)(3)
10.2 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan(2)
10.3 -- Form of Amended and Restated Stock Option Agreement dated as
of March 30, 2000 between Viasystems Group, Inc. and James
N. Mills(11)
10.4 -- Form of Amended and Restated Stock Option Agreement dated as
of March 30, 2000 between Viasystems Group, Inc. and David
M. Sindelar(11)
10.5 -- Viasystems Group, Inc. Stock Option Agreement, dated as of
February 4, 1997, with Richard W. Vieser(2)
10.6 -- Viasystems Group, Inc. Stock Option Agreement, dated as of
February 4, 1997, with Kenneth F. Yontz(4)
10.7 -- Third Amended and Restated Monitoring and Oversight
Agreement, dated as of June 6, 1997, among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp., Circo
Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments PLC, Chips Acquisition
Limited and Hicks, Muse & Co. Partners, L.P.(2)
10.8 -- Third Amended and Restated Financial Advisory Agreement
dated as of June 6, 1997, among Viasystems Group, Inc.,
Viasystems, Inc., Viasystems Technologies Corp., Circo Craft
Co. Inc., Viasystems International, Inc., PCB Acquisition
Limited, PCB Investments PLC, Chips Acquisition Limited and
Hicks, Muse & Co. Partners, L.P.(2)
10.9 -- Amended and Restated Executive Employment Agreement, dated
as of February 16, 2000, by and among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC
and James N. Mills(9)
48
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.10 -- Amended and Restated Executive Employment Agreement, dated
as of February 16, 2000, by and among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC
and David M. Sindelar(9)
10.11 -- Agreement, dated as of December 30, 1996, between
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.) and the Communication Workers of
America(2)
10.12 -- Environmental, Health and Safety Agreement, dated as of
November 26, 1996, between Lucent Technologies and
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.)(1)
10.13 -- Amended and Restated Executive Employment Agreement, dated
as of February 16, 2000, by and among Viasystems Group,
Inc., Viasystems, Inc. and Viasystems Technologies Corp. LLC
and Timothy L. Conlon(9)
10.14 -- Amended and Restated Stockholders Agreement, dated as of
June 6, 1997,among Viasystems Group, Inc. and certain
stockholders of Viasystems Group, Inc.(10)
10.15 -- First Amendment to Amended and Restated Stockholders
Agreement, dated as of November 4, 1998, among Viasystems
Group, Inc. and certain stockholders of Viasystems Group,
Inc.(10)
10.16 -- Parts Sourcing Contract, dated as of December 2, 1994, among
Wirekraft Industries, Inc. and General Electric Company
(Confidential treatment has been granted with respect to
certain portions of this exhibit.)(7)
10.17 -- Agreement dated as of December 29, 1995 among Wirekraft
Industries, Inc. and General Electric Company (Confidential
treatment has been granted with respect to certain portions
of this exhibit.)(8)
10.18 -- Viasystems Group, Inc. 1999 Key Management Incentive
Compensation Plan(10)
10.19 -- Contract Manufacturing Agreement, dated January 1, 2000, by
and between Mommers Print Service BV and Viasystems Sweden
AB(13)
10.20 -- Contract Manufacturing Agreement, dated January 1, 2000, by
and between Mommers Print Service BV and Viasystems Tyneside
Limited(13)
10.21 -- Supply Agreement, dated as of March 29, 2000, by and between
International Wire Group, Inc. and Wirekraft Industries,
Inc.(13)
10.22 -- Termination and Release Agreement, dated as of March 29,
2000, by and among Viasystems Group, Inc., Viasystems, Inc.,
Viasystems Technologies Corp., Viasystems Canada, Inc.
(f/k/a Circo Craft Co. Inc.), PCB Investments Limited,
Viasystems International, Inc., Viasystems Group Limited
(f/k/a PCB Acquisition Limited), Chips Acquisition Limited,
and Hicks, Muse & Co. Partners, L.P.(12)
- ---------------
(1) Incorporated by reference to the Registration Statement of Viasystems, Inc.
on Form S-1. (File No. 333-29727).
(2) Incorporated by reference to Amendment No. 1 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(3) Incorporated by reference to Amendment No. 2 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(4) Incorporated by reference to Viasystems, Inc.'s 1997 Annual Report on Form
10-K.
(5) Incorporated by reference to Viasystems, Inc.'s 1998 Annual Report on Form
10-K.
(6) Incorporated by reference to the Form 8-K/A of Viasystems, Inc. filed on
October 15, 1999.
(7) Incorporated by reference to the Registration Statement of International
Wire Group, Inc. on Form S-1 (File No. 333-93970).
(8) Incorporated by reference to International Wire Group, Inc.'s 1995 Annual
Report on Form 10-K.
(9) Incorporated by reference to Amendment No. 1 to Viasystems Group, Inc.'s
Registration Statement on Form S-1 (File No. 333-94321).
49
(10) Incorporated by reference to Amendment No. 2 to Viasystems Group, Inc.'s
Registration Statement on Form S-1 (File No. 333-94321).
(11) Incorporated by reference to Amendment No. 3 to Viasystems Group, Inc.'s
Registration Statement on Form S-1 (File No. 333-94321).
(12) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on
May 10, 2000.
(13) Incorporated by reference to Viasystems Group, Inc.'s Registration
Statement on Form S-1 (File No. 333-46780).
(14) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on
May 3, 2001.
(15) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on
July 30, 2001.
(16) Incorporated by reference to Viasystems Group, Inc.'s 2001 Annual Report on
Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 2001.
50
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.
VIASYSTEMS, INC.
By /s/ JOSEPH S. CATANZARO
------------------------------------
Joseph S. Catanzaro
Senior Vice President
and Chief Financial Officer
Date: March 29, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been duly signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ THOMAS O. HICKS Chairman of the Board of March 29, 2002
- ----------------------------------------------------- Directors
Thomas O. Hicks
/s/ DAVID M. SINDELAR Chief Executive Officer and March 29, 2002
- ----------------------------------------------------- Director
David M. Sindelar
/s/ TIMOTHY L. CONLON President, Chief Operating March 29, 2002
- ----------------------------------------------------- Officer and Director
Timothy L. Conlon
/s/ JOSEPH S. CATANZARO Senior Vice President & Chief March 29, 2002
- ----------------------------------------------------- Financial Officer
Joseph S. Catanzaro
/s/ JACK D. FURST Director March 29, 2002
- -----------------------------------------------------
Jack D. Furst
/s/ RICHARD W. VIESER Director March 29, 2002
- -----------------------------------------------------
Richard W. Vieser
/s/ KENNETH F. YONTZ Director March 29, 2002
- -----------------------------------------------------
Kenneth F. Yontz
51
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
2.1 -- Securities Purchase Agreement, dated as of October 1, 1996,
among Viasystems Group, Inc. (formerly known as Circo Craft
Holding Company) and certain Purchasers (as defined
therein)(1)
2.2 -- Acquisition Agreement, dated as of November 26, 1996, among
Lucent Technologies Inc., Viasystems Group, Inc. (formerly
known as Circo Technologies Group, Inc.) and Viasystems,
Inc. (formerly known as Circo Craft Technologies, Inc.)(1)
2.3 -- Agreement and Plan of Merger, dated as of April 11, 1997 by
and among Viasystems Group, Inc., HMTF Acquisition, L.P.,
HMTF U.K. Acquisition Company, Hicks, Muse, Tate & Furst
Equity Fund III and HM3 Coinvestors, L.P.(1)
2.4 -- Agreement and Plan of Merger, dated as of June 5, 1997, by
and between Viasystems Group, Inc. and Chips Holdings,
Inc.(1)
2.5 -- Agreement and Plan of Merger, dated as of June 6, 1997, by
and between Viasystems, Inc. and Chips Acquisition, Inc.(1)
2.6 -- Acquisition Agreement, dated as of January 29, 1998, among
Viasystems B.V. and Print Service Holding N.V.(4)
2.7 -- Sale and Purchase Agreement, dated as of February 11, 1998,
between Viasystems, S.r.l., as purchaser, European Circuits
SA and individuals named therein, as sellers(4)
2.8 -- Share Purchase Agreement, dated August 1, 1999, among
Termbray Electronics (B.V.I.) Limited, Termbray Industries
International (Holdings) Limited, Viasystems, Inc. and
Viasystems Group, Inc.(6)
2.9 -- Stock Purchase Agreement, dated March 23, 2000, by and among
International Wire Group, Inc., Wirekraft Industries, Inc.
and Viasystems International, Inc.(13)
3.1 -- Amended and Restated Certificate of Incorporation of
Viasystems Group, Inc.(12)
3.2 -- Amended and Restated Bylaws of Viasystems Group, Inc.(12)
4.1 -- Credit Agreement, dated as of March 29, 2000, among
Viasystems Group, Inc., as Guarantor, Viasystems, Inc. as
U.S. Borrower, Viasystems Canada, Inc. and Print Service
Holding N.V., as Foreign Subsidiary Borrowers, The Several
Banks and other Financial Institutions parties thereto, The
Chase Manhattan Bank of Canada, as Canadian Administrative
Agent, Chase Manhattan Bank International Limited, as
Multicurrency Administrative Agent, and The Chase Manhattan
Bank, as Administrative Agent, Bank of America, N.A. as
Syndication Agent, Bankers Trust Company, as Syndication
Agent, and Chase Securities Inc., as Sole Book Manager and
Sole Lead Arranger.(12)
4.2 -- Indenture, dated as of June 6, 1997, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(1)
4.3 -- Form of New Note (included in Exhibit 4.2, Exhibit B)
4.4 -- Indenture, dated as of February 17, 1998, by and between
Viasystems, Inc. and The Bank of New York, as Trustee(4)
4.5 -- Form of Exchange Note (included in Exhibit 4.4, Exhibit B)
4.6 -- First Amendment, dated April 23, 2001, to the Credit
Agreement, Dated as of March 29, 2000, among Viasystems
Group, Inc., as Guarantor, Viasystems, Inc., as U.S.
Borrower, Viasystems Canada, Inc. and Print Service Holding
N.V., as Foreign Subsidiary Borrowers, The Several Banks and
other Financial Institutions parties thereto, The Chase
Manhattan Bank of Canada, as Canadian Administrative Agent,
Chase Manhattan Bank International Limited, as Multicurrency
Administrative Agent, and The Chase Manhattan Bank, as
Administrative Agent, Bank of America, N.A. as Syndication
Agent, Bankers Trust Company, as Syndication Agent, and
Chase Securities Inc., as Sole Book Manager and Sole Lead
Arranger.(14)
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.7 -- Second Amendment, dated as of June 28, 2001, to the Credit
Agreement, dated as of March 29, 2000, as amended by the
First Amendment dated as of April 23, 2001, among Viasystems
Group, Inc., Viasystems, Inc., as U.S. Borrower, Viasystems
Canada, Inc. And Print Service Holding N.V., as Foreign
Subsidiary Borrowers, the several banks and other financial
institutions parties thereto, The Chase Manhattan Bank of
Canada, as Canadian Administrative Agent, Chase Manhattan
Bank International Limited, as Multicurrency Administrative
Agent, and The Chase Manhattan Bank, as Administrative
Agent.(15)
4.8 -- Form of Warrant Certificate dated as of July 19, 2001,
issued in the denominations and to the investors listed on
Annex A thereto.(15)
4.9 -- Form of 14% Senior Note due 2007 dated as of July 19, 2001,
issued in the denominations and to the investors listed on
Annex A thereto.(15)
4.10 -- Registration Rights Agreement dated as of July 19, 2001, by
and among Viasystems Group, Inc. and the investors named
herein. (15)
4.11 -- Third Amendment, dated as of March 29, 2002, to the Credit
Agreement, dated as of March 29, 2000, as amended by the
First Amendment dated as of April 23, 2001, and the Second
Amendment dated as of June 28, 2001, among Viasystems Group,
Inc., Viasystems, Inc. as U.S. Borrower, Viasystems Canada,
Inc. and Print Service Holding N.V., as Foreign Subsidiary
Borrowers, the several banks and other financial
institutions parties thereto, The Chase Manhattan Bank of
Canada, as Canadian Administrative Agent, Chase Manhattan
Bank International Limited, as Multicurrency Administrative
Agent, and The Chase Manhattan Bank, as Administrative
Agent.(16)
10.1 -- Supply Agreement dated as of November 26, 1996, by and
between Lucent Technologies Inc. and Circo Craft
Technologies, Inc. (confidential treatment was granted with
respect to certain portions of this exhibit)(3)
10.2 -- Amended and Restated Viasystems Group, Inc. 1997 Stock
Option Plan(1)
10.3 -- Form of Amended and Restated Stock Option Agreement dated as
of March 30, 2000 between Viasystems Group, Inc. and James
N. Mills(11)
10.4 -- Form of Amended and Restated Stock Option Agreement dated as
of March 30, 2000 between Viasystems Group, Inc. and David
M. Sindelar(11)
10.5 -- Viasystems Group, Inc. Stock Option Agreement, dated as of
February 4, 1997, with Richard W. Vieser(2)
10.6 -- Viasystems Group, Inc. Stock Option Agreement, dated as of
February 4, 1997, with Kenneth F. Yontz(2)
10.7 -- Third Amended and Restated Monitoring and Oversight
Agreement, dated as of June 6, 1997, among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp., Circo
Craft Co. Inc., Viasystems International, Inc., PCB
Acquisition Limited, PCB Investments PLC, Chips Acquisition
Limited and Hicks, Muse & Co. Partners, L.P.(2)
10.8 -- Third Amended and Restated Financial Advisory Agreement
dated as of June 6, 1997, among Viasystems Group, Inc.,
Viasystems, Inc., Viasystems Technologies Corp., Circo Craft
Co. Inc., Viasystems International, Inc., PCB Acquisition
Limited, PCB Investments PLC, Chips Acquisition Limited and
Hicks, Muse & Co. Partners, L.P.(2)
10.9 -- Amended and Restated Executive Employment Agreement, dated
as of February 16, 2000, by and among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC
and James N. Mills(9)
10.10 -- Amended and Restated Executive Employment Agreement, dated
as of February 16, 2000, by and among Viasystems Group,
Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC
and David M. Sindelar(9)
10.11 -- Agreement, dated as of December 30, 1996, between
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.) and the Communication Workers of
America(2)
10.12 -- Environmental, Health and Safety Agreement, dated as of
November 26, 1996, between Lucent Technologies and
Viasystems, Inc. (formerly known as Circo Craft
Technologies, Inc.)(1)
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.13 -- Amended and Restated Executive Employment Agreement, dated
as of February 16, 2000, by and among Viasystems Group,
Inc., Viasystems, Inc. and Viasystems Technologies Corp. LLC
and Timothy L. Conlon(9)
10.14 -- Amended and Restated Stockholders Agreement, dated as of
June 6, 1997,among Viasystems Group, Inc. and certain
stockholders of Viasystems Group, Inc.(10)
10.15 -- First Amendment to Amended and Restated Stockholders
Agreement, dated as of November 4, 1998, among Viasystems
Group, Inc. and certain stockholders of Viasystems Group,
Inc.(10)
10.16 -- Parts Sourcing Contract, dated as of December 2, 1994, among
Wirekraft Industries, Inc. and General Electric Company
(Confidential treatment has been granted with respect to
certain portions of this exhibit.)(7)
10.17 -- Agreement dated as of December 29, 1995 among Wirekraft
Industries, Inc. and General Electric Company (Confidential
treatment has been granted with respect to certain portions
of this exhibit.)(8)
10.18 -- Viasystems Group, Inc. 1999 Key Management Incentive
Compensation Plan(11)
10.19 -- Contract Manufacturing Agreement, dated January 1, 2000, by
and between Mommers Print Service BV and Viasystems Sweden
AB(13)
10.20 -- Contract Manufacturing Agreement, dated January 1, 2000, by
and between Mommers Print Service BV and Viasystems Tyneside
Limited(13)
10.21 -- Supply Agreement, dated as of March 29, 2000, by and between
International Wire Group, Inc. and Wirekraft Industries,
Inc.(13)
10.22 -- Termination and Release Agreement, dated as of March 29,
2000, by and among Viasystems Group, Inc., Viasystems, Inc.,
Viasystems Technologies Corp., Viasystems Canada, Inc.
(f/k/a Circo Craft Co. Inc.), PCB Investments Limited,
Viasystems International, Inc., Viasystems Group Limited
(f/k/a PCB Acquisition Limited), Chips Acquisition Limited,
and Hicks, Muse & Co. Partners, L.P.(12)
- ---------------
(1) Incorporated by reference to the Registration Statement of Viasystems, Inc.
on Form S-1. (File No. 333-29727).
(2) Incorporated by reference to Amendment No. 1 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(3) Incorporated by reference to Amendment No. 2 to the Registration Statement
of Viasystems, Inc. on Form S-1.
(4) Incorporated by reference to Viasystems, Inc.'s 1997 Annual Report on Form
10-K.
(5) Incorporated by reference to Viasystems, Inc.'s 1998 Annual Report on Form
10-K.
(6) Incorporated by reference to the Form 8-K/A of Viasystems, Inc. filed on
October 15, 1999.
(7) Incorporated by reference to the Registration Statement of International
Wire Group, Inc. on Form S-1 (File No. 333-93970).
(8) Incorporated by reference to International Wire Group, Inc.'s 1995 Annual
Report on Form 10-K.
(9) Incorporated by reference to Amendment No. 1 to Viasystems Group, Inc.'s
Registration Statement on Form S-1 (File No. 333-94321).
(10) Incorporated by reference to Amendment No. 2 to Viasystems Group, Inc.'s
Registration Statement on Form S-1 (File No. 333-94321).
(11) Incorporated by reference to Amendment No. 3 to Viasystems Group, Inc.'s
Registration Statement on Form S-1 (File No. 333-94321).
(12) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on
May 10, 2000.
(13) Incorporated by reference to Viasystems Group, Inc.'s Registration
Statement on Form S-1 (File No. 333-46780).
(14) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on
May 3, 2001.
(15) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on
July 30, 2001.
(16) Incorporated by reference to Viasystems Group, Inc.'s 2001 Annual Report on
Form 10-K.