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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended
September 30, 2004
[ ] TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
333-114467
(Commission File Number)
Viasystems, Inc.
(Exact name of
Registrant as specified in charter)
Delaware
(State or other
jurisdiction of incorporation or organization)
43-177252
(I.R.S.
Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 727-2087
(Address,
including zip code, and telephone number, including
area code, of registrant’s principal executive offices)
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO []
As of September 30, 2004, there were
1,000 shares of Viasystems, Inc.‘s Common Stock outstanding.
VIASYSTEMS, INC. &
SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
PART I — FINANCIAL
INFORMATION
Item 1. Financial Statements (unaudited)
Viasystems, Inc. & Subsidiaries
Consolidated
Balance Sheets as of December 31, 2003 and September 30,
2004........................................ 2
Consolidated
Statements of Operations for the three and nine months ended
September 30, 2003 and
2004................................................................................................................. 3
Consolidated
Statements of Cash Flows for the nine months ended
September 30, 2003 and
2004.................................................................................................................. 4
Notes
to Consolidated Financial Statements
................................................................................................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 15
Item 3. Quantitative and Qualitative Disclosures About Market
Risk.................................................................... 20
Item 4 Disclosure Controls and
Procedures......................................................................................................... 21
PART II — OTHER
INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................
................................................................... 22
SIGNATURES............................................................................................
..................................................... 23
VIASYSTEMS, INC. &
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
December 31, September 30,
2003 2004
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 62,676 $ 43,105
Accounts receivable, net................................................... 135,378 155,787
Inventories................................................................ 87,744 98,718
Prepaid expenses and other................................................. 38,293 38,114
------------- -------------
Total current assets.................................................... 324,091 335,724
Property, plant and equipment, net......................................... 219,765 227,288
Deferred financing costs, net.............................................. 8,806 7,765
Goodwill................................................................... 173,350 172,719
Intangible assets, net..................................................... 11,129 10,682
Other assets, net.......................................................... 20,417 14,012
------------- -------------
Total assets............................................................ $ 757,558 $ 768,190
============= =============
LIABILITIES AND
STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable........................................................... $ 141,542 $ 147,584
Accrued and other liabilities.............................................. 69,155 69,095
Income taxes payable....................................................... 589 555
Current maturities of long-term debt....................................... 943 1,023
----------- -----------
Total current liabilities............................................... 212,229 218,257
Deferred taxes............................................................. 18,650 19,493
Long-term debt, less current maturities.................................... 455,300 442,635
Other non-current liabilities.............................................. 5,676 5,378
----------- -----------
Total liabilities....................................................... 691,855 685,763
----------- -----------
Commitments and
contingencies
Stockholder's equity:
Common stock, par value $.01 per share, 1,000 shares authorized, issued, and
outstanding at December 31, 2003 and September 30, 2004................. -- --
Paid-in capital............................................................ 2,374,041 2,378,381
Accumulated deficit........................................................ (2,303,777) (2,288,181)
Accumulated other comprehensive loss....................................... (4,561) (7,773)
---------- -----------
Total stockholder's equity.............................................. 65,703 82,427
---------- -----------
Total liabilities and stockholder's equity.............................. $ 757,558 $ 768,190
========== ===========
See
accompanying notes to consolidated financial statements.
VIASYSTEMS, INC. &
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2004 2003 2004
---- ---- ---- ----
Net sales............................................ $ 186,504 $ 220,987 $ 547,607 $ 683,319
Operating expenses:
Cost of goods sold, exclusive of amounts shown
separately below............................. 149,172 181,989 433,288 552,802
Selling, general and administrative............. 15,290 18,976 48,625 59,417
Stock compensation expense...................... 152 830 1,231 2,493
Depreciation.................................... 17,251 11,998 48,816 35,532
Amortization.................................... 730 325 2,251 1,114
Restructuring and impairment, net............... 823 -- 823 (5,680)
Losses (gains) on dispositions of assets, net... -- -- 130 (465)
------------ ------------ ----------- -----------
Operating income..................................... 3,086 6,869 12,443 38,106
------------ ------------ ----------- -----------
Other expenses:
Interest expense, net........................... 7,361 9,522 22,209 28,380
Amortization of deferred financing costs........ -- 357 -- 1,017
Reorganization items:
Reorganization expenses (reversals).......... 1,216 26 54,729 (9,772)
Loss from debt forgiveness................... -- -- 1,517 --
Other expense, net.............................. 8,591 (822) 14,874 1,066
------------ ------------ ----------- -----------
Income (loss) before income taxes.................... (14,082) (2,214) (80,886) 17,415
Income taxes......................................... -- 396 -- 1,819
------------ ------------ ----------- -----------
Net (loss) income............................ $ (14,082) $ (2,610) $ (80,886) $ 15,596
============ ============ =========== ===========
See
accompanying notes to consolidated financial statements.
VIASYSTEMS, INC. &
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
September 30,
---------------------------
2003 2004
---------- ---------
Cash flows from operating activities:
Net (loss) income............................................................... $ (80,886) $ 15,596
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Non-cash stock compensation expense charges.................................. 1,231 2,493
Losses (gains) on disposition of assets, net................................. 130 (465)
Losses on sale of property, plant and equipment.............................. 6,678 594
Depreciation and amortization................................................ 51,067 36,646
Amortization of deferred financing costs..................................... -- 1,017
Loss from debt forgiveness................................................... 1,517 --
Write-off of non-cash items related to debt forgiveness...................... 54,729 --
Gain from sale of North Tyneside facility.................................... -- (9,798)
Deferred taxes............................................................... (3,666) (3,193)
Change in assets and liabilities:
Accounts receivable...................................................... (14,226) (20,254)
Inventories.............................................................. 1,932 (11,020)
Prepaid expenses and other............................................... (4,912) 16,203
Accounts payable and accrued and other liabilities....................... 15,562 9,120
Intercompany receivable with Viasystems Group, Inc....................... (3,789) 1,082
Income taxes payable..................................................... 1,265 645
--------- ---------
Net cash provided by operating activities........................... 26,632 38,666
--------- ---------
Cash flows from investing activities:
Sale of business............................................................. (138) --
Sale of property, plant and equipment........................................ 395 23
Capital expenditures......................................................... (28,876) (43,642)
--------- ---------
Net cash used in investing activities............................... (28,619) (43,619)
---------- ---------
Cash flows from financing activities:
Equity proceeds.............................................................. 102 --
Repayment of amounts due under long-term contractual obligations............. -- (12,732)
Repayment of amounts due under credit facilities............................. (18,744) --
Financing fees and other..................................................... -- 103
--------- ---------
Net cash used in financing activities............................... (18,642) (12,629)
--------- ---------
Effect of exchange rate changes on cash and cash equivalents....................... (3,632) (1,989)
--------- ---------
Net change in cash and cash equivalents............................................ (24,261) (19,571)
Cash and cash equivalents at beginning of the period............................... 83,060 62,676
--------- ---------
Cash and cash equivalents at end of the period..................................... $ 58,799 $ 43,105
========= =========
See
accompanying notes to consolidated financial statements.
VIASYSTEMS, INC. &
SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(in thousands)
(Unaudited)
1. Basis of Presentation
Unaudited
Interim Consolidated Financial Statements
| |
The
unaudited interim consolidated financial statements of Viasystems, Inc.
(“Viasystems”) and its subsidiaries reflect all adjustments consisting only of
normal recurring adjustments that are, in the opinion of management, necessary for a fair
presentation of financial position and results of operations. The results for the three
and nine months ended September 30, 2004, are not necessarily indicative of the results
that may be expected for a full fiscal year. These financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto included
in Viasystems’ Registration Statement filed on Form S-4 with the Securities and
Exchange Commission (“SEC”). |
Nature
of Business
| |
Viasystems
is a leading worldwide provider of complex multi-layer printed circuit boards, wire
harnesses and electro-mechanical solutions. Its products are used in a wide range of
applications, including automotive dash panels and control modules, major household
appliances, data networking equipment, telecommunications switching equipment and complex
medical and technical instruments. |
Principles
of Consolidation
| |
The
accompanying consolidated financial statements include the accounts of Viasystems. All
intercompany balances and transactions have been eliminated in consolidation. |
Employee
Stock-Based Compensation
| |
SFAS
No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an
Amendment of FASB Statement No. 123, was issued to provide alternative methods of
transition of an entity that voluntarily adopts the fair value based method of accounting
for stock-based employee compensation. It also amends the disclosure provisions of SFAS
No. 123, Accounting for Stock-Based Compensation, to require prominent
disclosure about the effects on reported net income of an entity’s accounting policy
decisions with respect to the stock-based employee compensation and it amends Accounting
Principles Board Opinion (“APB”) No. 28, Interim Financial Reporting, to
require disclosure about those effects in interim financial information. |
| |
Viasystems
Group, Inc., the holding company parent of Viasystems (“Group” and, together
with Viasystems, the “Company”), maintains a stock option plan. The Company
records expenses attributable to Group’s stock option plan. In connection with
Group’s prepackaged plan of reorganization, Group terminated its 1997 and 2001 stock
option plans and adopted the 2003 stock option plan. The options issued under the 2003
stock option plan have a fixed exercise price and vest one-third at the grant date,
one-third on the 24-month anniversary of the grant date and one-third on the 36-month
anniversary of the grant date. As a result of the termination of the 1997 and 2001 stock
option plans and the adoption of the 2003 stock option plan, under provision of FIN No.
44, Accounting for Certain Transactions Involving Stock Compensation an
Interpretation of APB Opinion No. 25, certain options issued under the 2003 stock
option plan are treated as “variable” options. As a result, the Company recorded
non-cash compensation expense of $152 and $1,231 for the three and nine months ended
September 30, 2003, respectively. |
| |
Effective
January 1, 2004, the Company adopted the fair value recognition provisions of SFAS No.
123. Under the modified prospective transition method selected by the Company as
described in |
| |
SFAS
No. 148, compensation cost recognized for the three and nine months ended September 30,
2004 is the same as that which would have been recognized had the fair value method of
SFAS No. 123 been applied from its original effective date. |
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2003 2004 2003 2004
------------ ------------ ------------ ------------
Net income (loss), as reported.................. $ (14,082) $ (2,610) $ (80,886) $ 15,596
Add: Stock-based employee compensation
expense included in reported net (loss)
income, net of related tax effects..... 152 830 1,231 2,493
Less: Total stock-based employee compensation
expense determined under fair value
based method for all awards, net of
related tax effects.................... 836 830 15,091 2,493
------------- ------------ ------------- ------------
Pro forma net (loss) income..................... $ (14,766) $ (2,610) $ (94,746) $ 15,596
============= ============= ============= ============
2. Inventories
The
composition of inventories at September 30, 2004, is as follows:
Raw materials................................................................................... $ 33,913
Work in process................................................................................. 21,526
Finished goods.................................................................................. 43,279
------------
Total........................................................................................ $ 98,718
============
3. Long-term Debt
The composition
of long-term debt at September 30, 2004, is as follows:
Credit Agreement:
Term facilities........................................................................ $ 242,401
Revolver............................................................................... --
Senior Subordinated Notes due 2011......................................................... 200,000
Other debt and capital leases.............................................................. 1,257
------------
443,658
Less: current maturities................................................................... 1,023
------------
$ 442,635
============
Credit
Agreement
| |
On
January 31, 2003, Group, as guarantor, and Viasystems, as borrower, entered into a senior
credit facility (the “2003 Credit Agreement”). The 2003 Credit Agreement
provided for: (a) a $69,433 term loan facility (the “Tranche A Term Loan”); (b)
a $378,468 term loan facility (the “Tranche B Term Loan”); and (c) a $51,289
revolving credit facility (the “Revolving Loans”), which includes a $15,000
letter of credit sub-facility. The Company used the proceeds from the Senior Subordinated
Notes due 2011 to extinguish the Tranche A Term Loan and to pay down the 2003 Tranche B
Term Loan to $242,401. The remaining principal of the Tranche B Term Loan was to become
due and payable in 2008. |
| |
Current
borrowings under the Company’s 2003 Credit Agreement bear interest at floating rates, |
| |
which vary according to the interest option the Company selects. The Tranche B Term loan
bore interest, at the Company’s option, at the then effective base rate plus 4.25% or
the then effective euro currency base rate plus 5.25%. Revolving credit loans bear
interest, at the Company’s option, at the then effective base rate plus 3.50% or the
then effective euro currency base rate plus 4.50%. For the eight months ended September
30, 2003 and the nine months ended September 30, 2004, the weighted average interest rates
on outstanding borrowings under the 2003 Credit Agreement were 6.5% and 6.7%,
respectively. |
| |
On
October 7, 2004, Group, as guarantor, and Viasystems, as borrower, amended the 2003 Credit
Agreement to provide for a new $265,000 term loan facility (the “New Tranche B Term
Loan”). The Company used the proceeds from the New Tranche B Term Loan to extinguish
the original Tranche B Term Loan. Interest on the New Tranche B Term Loan will be payable
quarterly and will be determined, at the option of the Company, at the then effective base
rate plus 3.25% or the then effective euro currency rate plus 4.25%. Beginning in 2005,
principal payments will be payable quarterly in the amount of $2,650 per year until June
30, 2009 at which time the remaining $253,075 will become due and payable on September 30,
2009. |
| |
The
Company pays a commitment fee equal to 0.5% on the undrawn portion of the commitments in
respect of the Revolving Loans. |
| |
At
September 30, 2004, the Company had $50,084 of available borrowing capacity under its
revolving credit facility (with $13,795 of such $50,084 available for issuances of letters
of credit). |
Senior
Subordinated Notes due 2011
| |
In
December 2003, Viasystems completed an offering of $200,000 of 10 1/2% Senior Subordinated
Notes due 2011 (the “2011 Notes”). Viasystems filed a Registration Statement on
Form S-4 (Registration No. 333-114467) with respect to the registered exchange of the 2011
Notes, which became effective on July 14, 2004 and commenced an exchange offer on July 16,
2004. The exchange offer closed on August 16, 2004. |
| |
Interest
on the 2011 Notes is due semiannually on January 15 and July 15. The Company may redeem
the 2011 Notes at any time prior to January 15, 2008 at the redemption price of 100% plus
a “make-whole” premium (as defined). In the event of an Initial Public Offering
(as defined), 35% of the 2011 Notes may be redeemed at any time prior to January 15, 2007
at the redemption price of 110.5%, plus accrued and unpaid interest, if any, to the
redemption date. In the event of a Change in Control (as defined), the Company is required
to make an offer to purchase the 2011 Notes at a redemption price of 101%, plus accrued
and unpaid interest. |
Department
of Trade and Industry Notes
| |
In
conjunction with the Company’s pre-packaged plan of reorganization approved by the
Bankruptcy Court, a £12 million (approximately $18 million) loan guaranteed by the
Company was cancelled and in exchange the Department of Trade and Industry (the “DTI”)
received a note (the “DTI Note”) in an amount equal to £9 million.
Interest on the DTI Note was payable semi-annually in cash on a current basis at an
annual interest rate of three percent for periods up to September 30, 2008 and at an
annual interest rate equal to the Bank of England Base Rate plus two percent for periods
thereafter. Principal on the DTI Note was payable from December 31, 2008 through December
31, 2010 (provided all amounts due and owing under the 2003 Credit Agreement were not paid in full
prior to October 1, 2008); provided, however, proceeds received by the DTI pursuant to
the liquidation of Viasystems Tyneside Limited (“VTL”) would reduce the
outstanding principal under the DTI Note. The outstanding balance of the DTI Note was
$12.5 million at December 31, 2003. In May 2004, the DTI |
| |
Note was discharged in full as a result of proceeds received by the DTI from the
liquidation of VTL, resulting in a gain
of $9,798. |
4. Guarantor Subsidiaries
| |
The
2011 Notes are fully and unconditionally (as well as jointly and severally) guaranteed on
an unsecured, senior subordinated basis by each subsidiary of Viasystems other than its
foreign subsidiaries. Each of the guarantor subsidiaries and non-guarantor subsidiaries is
wholly-owned by Viasystems. |
| |
The
following condensed consolidating financial information of Viasystems includes the
accounts of Viasystems, the combined accounts of the guarantor subsidiaries and the
combined accounts of the non-guarantor subsidiaries. Given the size of the non-guarantor
subsidiaries relative to Viasystems on a consolidated basis, separate financial statements
of the respective guarantor subsidiaries are not presented because management has
determined that such information is not material in assessing the guarantor subsidiaries. |
Balance
Sheet as of December 31, 2003
Total Total Non- Viasystems, Inc.
Viasystems, Inc. Guarantor Guarantor Eliminations Consolidated
---------------- ---------- ---------- ------------ ---------------
ASSETS
Cash....................................... $ 993 $ 38,236 $ 23,447 $ -- $ 62,676
Accounts receivables....................... -- 54,967 80,411 -- 135,378
Inventory.................................. -- 27,279 60,465 -- 87,744
Other current assets....................... 446 12,174 25,673 -- 38,293
--------------- -------- -------- ------- -------
Total current assets....................... 1,439 132,656 189,996 -- 324,091
Property, plant and equipment.............. -- 12,358 207,407 -- 219,765
Investment in subsidiary................... 341,638 (340,934) -- (704) --
Other assets............................... (34,320) 89,965 158,057 -- 213,702
--------------- -------- -------- ------- -------
Total assets............................... $ 308,757 $(105,955) $ 555,460 $ (704) $757,558
=============== ======== ======== ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current maturities of long-term debt...... $ -- $ 172 $ 771 $ -- $ 943
Accounts payable........................... -- 33,085 108,457 -- 141,542
Accrued and other liabilities.............. 5,314 38,763 25,667 -- 69,744
--------------- -------- -------- ------- -------
Total current liabilities.................. 5,314 72,020 134,895 -- 212,229
Long-term debt............................. 454,927 373 -- -- 455,300
Other non-current liabilities.............. (4,215) 6,374 24,629 -- 26,788
Intercompany (receivable)/payable.......... (203,724) (539,343) 743,067 -- --
Intercompany (receivable)/payable with 102 (2,564) -- -- (2,462)
--------------- -------- -------- ------- -------
Viasystems Group, Inc......................
Total liabilities.......................... 252,404 (463,140) 902,591 -- 691,855
Total paid in capital and accumulated 70,264 341,638 (340,934) (704) 70,264
earnings (deficit).........................
Accumulated other comprehensive income (loss) (13,911) 15,547 (6,197) -- (4,561)
--------------- -------- -------- ------- -------
Total liabilities and stockholder's equity
(deficit).................................. $ 308,757 $(105,955) $ 555,460 $ (704) $757,558
=============== ======== ======== ======= =======
Balance Sheet
as of September 30, 2004
Viasystems, Total Total Non- Viasystems, Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
--------------- ---------- ---------- ------------ --------------
ASSETS
Cash....................................... $ 329 $ 19,707 $ 23,069 $ -- $ 43,105
Accounts receivables....................... -- 52,808 102,979 -- 155,787
Inventory.................................. -- 32,012 66,706 -- 98,718
Other current assets....................... 1,111 12,799 24,204 -- 38,114
--------------- -------- -------- ------- -------
Total current assets....................... 1,440 117,326 216,958 -- 335,724
Property, plant and equipment.............. -- 12,013 215,275 -- 227,288
Investment in subsidiary................... 370,281 (395,784) -- 25,503 --
Other assets............................... (47,680) 85,817 167,041 -- 205,178
--------------- -------- -------- ------- -------
Total assets............................... $ 324,041 $(180,628) $ 599,274 $ 25,503 $768,190
=============== ======== ======== ======= =======
Current maturities of long-term debt....... $ -- $ 184 $ 839 $ -- $ 1,023
Accounts payable........................... -- 34,293 113,291 -- 147,584
Accrued and other liabilities...........`... 8,618 29,737 31,295 -- 69,650
--------------- -------- -------- ------- -------
Total current liabilities.................. 8,618 64,214 145,425 -- 218,257
Long-term debt............................. 442,401 234 -- -- 442,635
Other non-current liabilities.............. (3,551) 6,948 25,017 -- 28,414
Intercompany (receivable)/ payable......... (198,184) (638,257) 837,429 (988) --
Intercompany (receivable)/payable with
Viasystems Group, Inc -- (3,543) -- -- (3,543)
--------------- -------- --------- ------- -------
Total liabilities.......................... 249,284 (570,404) 1,007,871 (988) 685,763
Total paid in capital and accumulated 88,880 370,775 (395,946) 26,491 90,200
earnings (deficit).........................
Accumulated other comprehensive income (loss) (14,123) 19,001 (12,651) -- (7,773)
--------------- -------- --------- ------- -------
Total liabilities and stockholder's equity
(deficit).................................. $ 324,041 $(180,628) $ 599,274 $ 25,503 $768,190
=============== ======== ======== ======= =======
Statement
of Operations for the three months ended September 30, 2003
Viasystems,
Viasystems, Total Total Non- Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
--------------- --------- --------- ------------ ------------
Net sales.................................. $ -- $ 82,026 $ 121,876 $(17,398) $186,504
Operating expenses:
Cost of goods sold, exclusive of amounts
shown separately below................. -- 73,936 92,634 (17,398) 149,172
Selling, general and administrative...... 168 5,794 9,328 -- 15,290
Stock compensation expense............... 152 -- -- -- 152
Depreciation............................. -- 854 16,397 -- 17,251
Amortization............................. 49 -- 681 -- 730
Restructuring and impairment, net........ -- -- 823 -- 823
Losses (gains) on disposition of assets, -- -- -- -- --
net.................................... --------------- -------- ------- ------- -------
Operating (loss) income.................... (369) 1,442 2,013 -- 3,086
Other expenses (income):
Interest expense, net.................... 5,606 (7,278) 9,033 -- 7,361
Amortization of deferred financing costs. -- -- -- -- --
Reorganization expenses (reversals)...... 1,216 -- -- -- 1,216
Loss from debt forgiveness............... -- -- -- -- --
Other expense (income), net.............. 7,695 (4,821) 5,717 -- 8,591
Equity in (loss) earnings of subsidiaries.. (1,249) (13,139) -- 14,388 --
--------------- -------- ------ ------- -------
Income (loss) before income taxes.......... (16,135) 402 (12,737) 14,388 (14,082)
Income (credit) tax........................ (2,053) 1,651 402 -- --
--------------- -------- ------- ------- -------
Net (loss) income.......................... $ (14,082) $ (1,249) $ (13,139) $ 14,388 $(14,082)
=============== ======== ======== ======= =======
Statement of
Operations for the three months ended September 30, 2004
Viasystems,
Viasystems, Total Total Non- Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
--------------- --------- --------- ------------ ------------
Net sales.................................. $ -- $ 100,199 $ 146,037 $(25,249) $220,987
Operating expenses:
Cost of goods sold, exclusive of amounts
shown separately below................. -- 88,808 118,430 (25,249) 181,989
Selling, general and administrative...... 264 7,950 10,762 -- 18,976
Stock compensation expense............... 830 -- -- -- 830
Depreciation............................. -- 405 11,593 -- 11,998
Amortization............................. -- -- 325 -- 325
Restructuring and impairment, net........ -- -- -- -- --
Losses (gains) on disposition of assets,
net.................................... -- -- -- -- --
-------------- -------- ------- ------ -------
Operating (loss) income.................... (1,094) 3,036 4,927 -- 6,869
Other expenses (income):
Interest expense, net.................... 7,528 (7,179) 9,173 -- 9,522
Amortization of deferred financing costs. 357 -- -- -- 357
Reorganization expenses (reversals)...... 26 -- -- -- 26
Loss from debt forgiveness............... -- -- -- -- --
Other expense (income), net.............. 1,556 (54,402) 52,024 -- (822)
Equity in (loss) earnings of subsidiaries.. 6,133 (55,250) -- 49,117 --
-------------- -------- ------- ------ ------
Income (loss) before income taxes.......... (4,428) 9,367 (56,270) 49,117 (2,214)
Income (credit) tax........................ (1,818) 3,234 (1,020) -- 396
-------------- -------- ------- ------ ------
Net (loss) income.......................... $ (2,610) $ 6,133 $ (55,250) $ 49,117 $ (2,610)
============== ======== ======== ======= =======
Statement
of Operations for the nine months ended September 30, 2003
Viasystems,
Viasystems, Total Total Non- Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
--------------- --------- --------- ------------ ------------
Net sales.................................. $ -- $ 234,135 $ 354,881 $(41,409) $547,607
Operating expenses:
Cost of goods sold, exclusive of amounts
shown separately below................. -- 208,100 266,597 (41,409) 433,288
Selling, general and administrative...... 168 18,669 29,788 -- 48,625
Stock compensation expense............... 1,231 -- -- -- 1,231
Depreciation............................. -- 2,329 46,487 -- 48,816
Amortization............................. 158 -- 2,093 -- 2,251
Restructuring and impairment, net........ -- -- 823 -- 823
Losses (gains) on disposition of assets,
net................................... -- 1,500 (1,370) -- 130
-------------- ------- ------ ------ -------
Operating (loss) income.................... (1,557) 3,537 10,463 -- 12,443
Other expenses (income):
Interest expense, net.................... 16,878 (21,826) 27,157 -- 22,209
Amortization of deferred financing costs. -- -- -- -- --
Reorganization expenses (reversals)...... 54,729 -- -- -- 54,729
Loss from debt forgiveness............... 1,517 -- -- -- 1,517
Other expense (income), net.............. 16,449 21,934 (23,509) -- 14,874
Equity in (loss) earnings of subsidiaries.. 18,440 3,834 -- (22,274) --
-------------- ------- ------ ------- -------
Income (loss) before income taxes.......... (72,690) 7,263 6,815 (22,274) (80,886)
Income tax (credit)........................ 8,196 (11,177) 2,981 -- --
-------------- ------- ------ ------- -------
Net (loss) income.......................... $ (80,886) $ 18,440 $ 3,834 $(22,274) $(80,886)
============== ======== ======== ======= =======
Statement of
Operations for the nine months ended September 30, 2004
Viasystems,
Viasystems, Total Total Non- Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
--------------- --------- --------- ------------ ------------
Net sales.................................. $ -- $ 309,498 $ 453,717 $(79,896) $683,319
Operating expenses:
Cost of goods sold, exclusive of amounts
shown separately below................. -- 275,497 357,201 (79,896) 552,802
Selling, general and administrative...... 282 24,996 34,139 -- 59,417
Stock compensation expense............... 2,493 -- -- -- 2,493
Depreciation............................. -- 1,180 34,352 -- 35,532
Amortization............................. -- -- 1,114 -- 1,114
Restructuring and impairment, net........ -- -- (5,680) -- (5,680)
Losses (gains) on disposition of assets,
net.................................... -- -- (465) -- (465)
-------------- ------- ------- ------ -------
Operating (loss) income.................... (2,775) 7,825 33,056 -- 38,106
Other expenses (income):
Interest expense, net.................... 22,714 (21,286) 26,952 -- 28,380
Amortization of deferred financing costs. 1,017 -- -- -- 1,017
Reorganization expenses (reversals)...... (9,772) -- -- -- (9,772)
Loss from debt forgiveness............... -- -- -- -- --
Other expense (income), net.............. 1,566 (62,314) 61,814 -- 1,066
Equity in (loss) earnings in subsidiaries.. 28,644 (54,850) -- 26,206 --
-------------- ------- ------- ------ -------
Income (loss) before income taxes.......... 10,344 36,575 (55,710) 26,206 17,415
Income taxes............................... (5,252) 7,931 (860) -- 1,819
-------------- -------- -------- ------- -------
Net (loss) income.......................... $ 15,596 $ 28,644 $ (54,850) $ 26,206 $ 15,596
============== ======== ======== ======= =======
Statement
of Cash Flows for the nine months ended September 30, 2003
Viasystems,
Viasystems, Total Total Non- Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
------------- --------- --------- ------------ ------------
Net cash provided by (used in) operating
activities.............................. $ (42,252) $ 38,219 $ 30,665 $ -- $ 26,632
Net cash provided by (used in) investing
activities.............................. -- (1,851) (26,768) -- (28,619)
Net cash provided by (used in) financing
activities.............................. (18,642) -- -- -- (18,642)
Effect of exchange rate changes on cash and
cash Equivalents........................ -- -- (3,632) -- (3,632)
------------- -------- ------- -------- -------
Net change in cash and cash equivalents... (60,894) 36,368 265 -- (24,261)
------------- -------- ------- -------- -------
Cash and cash equivalents at the beginning
of the period........................... 62,811 792 19,457 -- 83,060
------------- -------- ------- -------- -------
Cash and cash equivalents at the end of the
period.................................. $ 1,917 $ 37,160 $ 19,722 $ -- $ 58,799
============= ======== ======== ======== =======
Statement of
Cash Flows for the nine months ended September 30, 2004
Viasystems,
Viasystems, Total Total Non- Inc.
Inc. Guarantor Guarantor Eliminations Consolidated
--------------- ---------- --------- ------------ ------------
Net cash provided by (used in) operating
activities.............................. $ 12,065 $ (18,250) $ 44,851 $ -- $ 38,666
Net cash provided by (used in) investing
activites............................... -- (279) (43,340) -- (43,619)
Net cash provided by (used in) financing
activities.............................. (12,729) -- 100 -- (12,629)
Effect of exchange rate changes on cash and
cash Equivalents........................ -- -- (1,989) -- (1,989)
--------------- -------- -------- ------- -------
Net change in cash and cash equivalents... (664) (18,529) (378) -- (19,571)
=============== ======== ======== ======= =======
Cash and cash equivalents at the beginning
of the period........................... 993 38,236 23,447 -- 62,676
--------------- -------- -------- ------- -------
Cash and cash equivalents at the end of the
period.................................... $ 329 $ 19,707 $ 23,069 $ -- $ 43,105
=============== ======== ======== ======= =======
5. Restructuring and
Impairment Charges
| |
In
light of the economic downturn that began in 2000 and continued into early 2003 related to
many of the Company’s key telecommunication and networking customers, the Company
initiated restructuring activities during 2001 to adjust its cost position compared to
anticipated levels of business. The Company also reviewed the carrying value of the
related assets. These actions resulted in plant shutdowns and downsizings as well as asset
impairments. These actions continued through 2003. |
| |
There
were no charges incurred in the first six months of 2003. During the quarter ended
September 30, 2003 the Company recorded a restructuring charge of $786 related to the
downsizing of the Montreal, Quebec printed circuit board fabrication facilities. The
charge related to personnel and severance for 47 employees who were terminated during the
quarter. In addition, a $37 restructuring charge was recorded for the Coventry, United
Kingdom facility. |
| |
During
the first six months of 2004, the Company reversed a $85 restructuring accrual related to
a personnel accrual at its Canadian plant. In addition, the Company reversed a $6,069
restructuring accrual based on its release from an operating lease contract of a closed
business. These reversals were offset with a $484 restructuring accrual related to the
shutdown of the European EMS business in December of 2003. There were no charges incurred
in the quarter ended September 30, 2004. |
| |
Below
are tables summarizing restructuring and the related activity as of and for the nine
months ended September 30, 2003 and 2004: |
Nine Months Ended Cumulative
September 30, 2003 Drawdowns
-------------------------- -----------------------
Balance Balance
at Cash Non-Cash at
12/31/02 Charges Reversals Total Payments Charges 9/30/03
-------- ------- --------- ----- -------- -------- -------
Restructuring Activities:
Personnel and severance............. $10,460 $ 823 $ -- $ 823 $ (6,207) $ -- $ 5,076
Lease and other contractual 11,768 -- -- -- (1,902) -- 9,866
commitments..........................
Other............................... 481 -- -- -- (481) -- --
------- ------- --------- ------- --------- ---------- ---------
Total restructuring and impairment
charges............................. $22,709 $ 823 $ -- $ 823 $ (8,590) $ -- $ 14,942
======= ======= ========= ======= ========= ========== =========
Nine Months Ended Cumulative
September 30, 2004 Drawdowns
------------------------- ------------------------
Balance Balance
at Cash Non-Cash at
12/31/03 Charges Reversals Total Payments Charges 9/30/04
-------- ------- --------- ----- -------- -------- -------
Restructuring Activities:
Personnel and severance............. $ 4,076 $ -- $ (85) $ (85) $ (1,337) $ -- $ 2,654
Lease and other contractual
commitments....................... 9,560 484 (6,069) (5,585) (1,435) -- 2,540
Other............................... 14 -- (10) (10) (4) -- --
------- ------- --------- ------- --------- ---------- ---------
Total restructuring and impairment
charges............................ $13,650 $ 484 $ (6,164) $(5,680) $ (2,776) $ -- $ 5,194
======= ======= ========== ======== ========= ========== =========
| |
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 is
executed. |
| |
In
October of 2004, the Company announced that it was realigning resources and the strategic
mission of the Echt, Netherlands facility. As a result, the Company will reduce the Echt
facility’s workforce by approximately 24% to create greater cost efficiencies. The
Company will incur a restructuring charge in the fourth quarter of approximately $2,500 to
$2,800. |
6. Derivative Financial
Instruments
| |
Viasystems
accounts for its derivatives under Statement of Financial Accounting Standards
(“SFAS”) No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities and SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. These Standards require
recognition of all derivatives as either assets or liabilities in the balance sheet and
require measurement of those instruments at fair value through adjustments to other
comprehensive income, current earnings, or both, as appropriate. |
| |
The
decision to enter into forward purchase contracts was made after considering the future
use of foreign currencies of Viasystems, the desired foreign exchange rate sensitivity and
by exchange rate levels. Prior to entering into a hedge transaction, Viasystems formally
documents the relationship between hedging instruments and hedged items, as well as the
risk management objective for undertaking the various hedge transactions. |
| |
The
following is a summary of Viasystems’ accounting policies for derivative instruments
and its activities under SFAS No. 149 and SFAS No. 133. |
Cash
Flow Hedges
| |
Viasystems
enters into foreign currency forward purchase contracts to convert floating exchange rates
into fixed rates. The forward agreements provide for Viasystems to pay a fixed U.S. dollar
amount to receive a fixed amount of foreign currency. Under the forward agreements
Viasystems is to pay U.S. dollars and receive foreign currency on an interval basis.
Amounts to be paid or received under these forward agreements are accounted for on a cash
basis and recognized in cost of goods sold and selling, general, and administrative when
the contracts are executed. |
| |
Cash
flow hedges are accounted for at fair value. The effective portion of the change in the
cash flow hedge’s gain or loss is reported as a component of other comprehensive
income net of taxes. The ineffective portion of the change in the cash flow hedge’s
gain or loss is recorded in earnings on each quarterly measurement date. At September 30,
2004, there was $472 in deferred gains, net of tax, related to cash flow hedges recorded
in other comprehensive income. All cash flow hedges were effective, therefore, no gain or
loss was recorded in earnings. |
| |
The
maximum term over which Viasystems is hedging its exposure to the variability of future
cash flows is less than one year. |
| |
The
following table summarizes Viasystems derivative instrument activity at September 30,
2004. |
Weighted Avg.
Remaining Average
Notional Maturity in Exchange
Amount Months Rate
------------ ------------- --------
Cash flow hedges:
Mexican Peso..................................... $ 5,673 1.5 11.5120
Canadian Dollar.................................. 7,200 1.5 1.3628
Euro............................................. 4,000 1.2 1.2584
------------ ------- --------
Total $ 16,873 1.4
============
Fair Value............................................ $ 472
============
7. Business Segment
Information
| |
The
Company operates in one product business segment—a worldwide vertically integrated
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. Segment data includes intersegment revenues. |
Pertinent
financial data by major geographic segments is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
Net Sales: 2003 2004 2003 2004
---------- --------- ----------- ----------
North America.......................... $ 104,684 $ 121,406 $ 291,433 $ 375,030
Europe................................. 14,228 8,709 49,956 35,525
Asia................................... 84,988 116,120 247,628 352,660
Eliminations........................... (17,396) (25,248) (41,410) (79,896)
---------- --------- ----------- ----------
Total............................... $ 186,504 $ 220,987 $ 547,607 $ 683,319
========== ========= =========== ==========
Operating Income (Loss):
North America.......................... $ (1,513) $ 4,498 $ (4,969) $ 10,934
Europe................................. (2,203) (5,231) (5,467) (4,651)
Asia................................... 6,802 7,602 22,879 31,823
---------- --------- ----------- ----------
Total............................... $ 3,086 $ 6,869 $ 12,443 $ 38,106
========== ========= =========== ==========
Net
sales by product offering are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
Net Sales: 2003 2004 2003 2004
---------- --------- ----------- ----------
Printed circuit boards................. $ 91,108 $ 103,003 $ 278,403 $ 313,566
Wire harness and electro-mechanical
solutions........................... 95,396 117,984 269,204 369,753
---------- --------- ----------- ----------
Total............................... $ 186,504 $ 220,987 $ 547,607 $ 683,319
========== ========= =========== ==========
8. Comprehensive Income
The components
of comprehensive income, net of tax, are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
2003 2004 2003 2004
---------- ---------- --------- ----------
Net (loss) income.......................... $ (14,082) $ (2,610) $ (80,886) $ 15,596
Gain on derivative instruments designated
and qualifying as foreign currency
cash flow hedging instruments....... -- 515 -- 472
Foreign currency translation adjustments 1,704 (1,116) 12,563 (3,684)
---------- ---------- --------- ----------
Comprehensive (loss) income......... $ (12,378) $ (3,211) $ (68,323) $ 12,384
========== ========== ========= ==========
9. New Accounting
Standards
| |
In
May 2004, the Emerging Issues Task Force (“EITF”) released Issue No. 03-06,
Participating Securities and the Two-Class Method under FASB Statement No.
128. EITF No. 03-06 provides guidance on the calculation and disclosure of earnings
per share. Specifically, EITF No. 03-06 requires that “earnings available to common
shareholders” be calculated including participating securities (e.g. preferred
stock). The adoption of EITF No. 03-06 is required for all financial periods beginning
after March 31, 2004. The results of adoption of EITF No. 03-06 had no impact on
Viasystems financial statements. |
10. Recent Events
| |
On
October 7, 2004, Group completed the sale of 5,555,555 additional shares of common stock.
As a result of the offering, Group received gross proceeds of approximately $50 million
that were net of fees and expenses and contributed to Viasystems. Such net proceeds of the
offering will be utilized for general working capital purposes and the expansion of
Viasystems’ printed circuit board operations in China. |
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
| |
The
following discussion should be read in conjunction with the unaudited consolidated
financial statements and the notes thereto included in this information statement. |
| |
We
have made forward-looking statements in this analysis that are based on our
management’s beliefs and assumptions and on information currently available
to our management. Forward-looking statements include the information concerning our
possible or assumed future results of operations, business strategies, financing
plans, competitive position, potential growth opportunities, and the 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
information statement. |
| |
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,
unexpected decreases in demand or increases in our inventory levels, 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, 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. |
General
| |
We
are a leading worldwide provider of complex multi-layer printed circuit boards, wire
harnesses and electro-mechanical solutions. Our products are used in a wide range of
applications, including automotive dash panels and control modules, major household
appliances, data networking equipment, telecommunications switching equipment and complex
medical and technical instruments. We have 15 facilities in five countries around the
world, which are strategically located to maximize the benefits delivered to our customers
and to optimize our operations. Our facilities in North America and Europe offer
technologically advanced products and services, while our facilities in China and Mexico
offer high-quality, high-volume production at low costs. We employ best practices among
our globally integrated facilities to actively migrate technology from North America and
Europe to China and Mexico. Approximately 91% of our employees are located in six
facilities in China and four facilities in Mexico. |
| |
We
are a supplier to over 200 original equipment manufacturers, or OEMs, in numerous end
markets, including industry leaders Alcatel SA, Bosch Group, Cisco Systems, Inc., Delphi
Corp., Electrolux AB, General Electric Company, Huawei Technologies, Lucent Technologies,
Inc., Maytag Corporation, Siemens AG, Sun Microsystems, Inc. and Whirlpool Corporation. We
are also a supplier to electronic manufacturing services, or EMS, providers and have
developed strategic alliances with leaders such as Celestica, Inc. and Solectron
Corporation to supply them with our products. |
Results of Operations
Three Months Ended
September 30, 2004 Compared to the Three Months Ended September 30, 2003
| |
Net
sales for the three months ended September 30, 2004, were $221.0 million, representing a
$34.5 million, or 18.5% increase from the same period in 2003. The increase was primarily
a result of an overall market recovery and increased market share with select customers.
Sales of printed circuit boards increased by approximately $11.9 million, or 13.1%, as a
result of greater product demand and the installation of additional capacity. Sales of
wire harnesses and electro-mechanical solutions for the three months ended September 30,
2004 increased from the same period in 2003 by approximately $22.6 million, or 23.7%, due
to greater product demand and additional program wins. The future mix of business is
dependent on available capacity, demand for our customer’s end products and
individual program wins across all customers. |
| |
Cost
of goods sold for the three months ended September 30, 2004, was $182.0 million, or 82.4%
of net sales compared to $149.2 million, or 80.0% of net sales, for the three months ended
September 30, 2003. Cost of goods sold as a percent of net sales increased as a result of
higher material costs within each of our product lines and lower volume in our western
world printed circuit board facilities. In addition, the change in mix between our
electro-mechanical solutions and printed circuit board businesses also influenced the
relative increase in costs of goods sold. This increase in costs of goods sold was driven
by the fact that our printed circuit board operations traditionally produce higher
margins. |
| |
Selling,
general and administrative expenses increased $3.7 million, from $15.3 million for the
three months ended September 30, 2003 to $19.0 million for the three months ended
September 30, 2004. These costs increased due to increased sales volume, changes in
foreign exchange rates, inflation, and our preparation for Sabanes-Oxley Section 404
compliance. |
| |
Stock
compensation expense (non-cash) increased $0.6 million from $0.2 million for the three
months ended September 30, 2003 to $0.8 million for the three months ended September 30,
2004. The difference in the expense recognized is attributable to the adoption of SFAS No.
123 on January 1, 2004. Prior to the adoption of SFAS No. 123, options were expensed under
the guidelines of FIN No. 44. |
| |
Depreciation
and amortization decreased $5.7 million, from $18.0 million for the three months ended
September 30, 2003, to $12.3 million for the three months ended September 30, 2004. These
costs decreased due to a reduced fixed asset base as a result of the 2003 impairment of
property and equipment at our Canadian and European printed circuit board facilities as
well as at our North American electro-mechanical solutions facilities. The decreases were
further driven by decreases in amortization of intangibles related to the 2003 impairment
of developed technologies at our Canadian and European printed circuit board facilities. |
| |
Income
taxes for the three months ended September 30, 2004 were $0.4 million, representing a $0.4
million increase from the same period in 2003. The increase relates to certain tax
holidays expiring in China and the recording of a valuation allowance on the Hong Kong net
operating loss that may not be realizable. |
Nine Months Ended
September 30, 2004 Compared to the Nine Months Ended September 30, 2003
| |
Net
sales for the nine months ended September 30, 2004, were $683.3 million, representing a
$135.7 million, or 24.8% increase from the same period in 2003. The increase was primarily
a result of an overall market recovery and increased market share with select customers.
Sale of printed circuit boards increased by approximately $35.2 million, or 12.6%, as a
result of greater product demand and the installation of additional capacity. Sales of
wire harnesses and electro-mechanical solutions for the nine months ended September 30,
2004 increased from the same period in 2003 by approximately $100.6 million, or 37.4%, due
to greater product demand and additional program wins. The future mix of business is
dependent on available capacity, demand for our customer’s end products and
individual program wins across all customers. |
| |
Cost
of goods sold for the nine months ended September 30, 2004, was $552.8 million, or 80.9%
of net sales compared to $433.3 million, or 79.1% of net sales, for the nine months ended
September 30, 2003. Cost of goods sold as a percent of net sales increased as a result of
higher material costs within each of our product lines and lower volume in our western
world PCB facilities. In addition, the change in mix between our electro-mechanical
solutions and printed circuit board businesses also influenced the relative increase in
costs of goods sold. This increase in cost of goods sold was driven by the fact that our
printed circuit board operations traditionally produce higher margins. |
| |
Selling,
general and administrative expenses increased $10.8 million, from $48.6 million for the
nine months ended September 30, 2003 to $59.4 million for the nine months ended September
30, 2004. These costs increased due to increased sales volume, changes in foreign exchange
rates, inflation, audit expenses, and our preparation for Sarbanes-Oxley Section 404
compliance. |
| |
Stock
compensation expense (non-cash) increased $1.3 million from $1.2 million for the nine
months ended September 30, 2003 to $2.5 million for the nine months ended September 30,
2004. The difference in the expense recognized is attributable to the adoption of SFAS No.
123 on January 1, 2004. Prior to the adoption of SFAS No. 123, options were expensed under
the guidelines of FIN No. 44. |
| |
Depreciation
and amortization decreased $14.5 million, from $51.1 million for the nine months ended
September 30, 2003, to $36.6 million for the nine months ended September 30, 2004. These
costs decreased due to a reduced fixed asset base as a result of the 2003 impairment of
property and equipment at our Canadian and European printed circuit board facilities as
well as at our North American electro-mechanical solutions facilities. The decreases were
further driven by decreases in amortization of intangibles related to prior year
impairment of developed technologies at our Canadian and European printed circuit board
facilities. |
| |
During
the quarter ended June 30, 2004, we reversed a $0.1 million restructuring accrual related
to a personnel accrual at our Canadian plant. In addition, we reversed a $6.1 million
restructuring accrual based on our release from an operating lease contract for a closed
business. These reversals were offset with a $0.5 million restructuring accrual related to
the shutdown of its European EMS business in December of 2003. |
| |
Income
taxes for the nine months ended September 30, 2004 were $1.8 million representing a $1.8
million increase from the same period in 2003. The increase relates to certain tax
holidays expiring in China and the recording of a valuation allowance on the Hong Kong net
operating loss that may not be realizable. |
| |
On
October 22, 2004 President Bush signed the American Jobs Creations Act of 2004 (the “Act”),
which includes numerous provisions that may effect business practices and accounting for
income |
| |
taxes. Since the Act was enacted in October, any effects from
the law itself would not be reflected in the Company’s income tax provision until the
4th quarter. Management is currently evaluating what, if any, effects the Act
may have on the Company. |
Liquidity and Capital
Resources
| |
Our
principal liquidity requirements will be for debt service requirements, working capital
needs and cash expenditures associated with capital expenditures. In addition, the
potential for acquisitions of other businesses by us in the future likely may require
additional debt and/or equity financing. |
| |
Net
cash provided by operating activities was $38.7 million for the nine months ended
September 30, 2004, compared to $26.6 million provided for the nine months ended September
30, 2003. Changes in cash flow were principally a result of increased net income. Timing
of receipts from certain customers, inventory management and payment to vendors also
influenced the cash balances. |
| |
Net
cash used in investing activities was $43.6 million for the nine months ended September
30, 2004, compared to $28.6 million for the nine months ended September 30, 2003. The
increase in 2004 is attributable to the Company’s capital expansion in China.
Specifically, cash used for capital expenditures during the nine months ended September
30, 2004 was $43.6 million compared to $28.9 million for the same period in 2003. |
| |
Net
cash used in financing activities was $12.6 million for the nine months ended September
30, 2004 compared to $18.6 million for the same period in 2003. The net cash used in
financing activities for the nine months ended September 30, 2004 related principally to
the full payment of $12.7 million to the United Kingdom Department of Trade and Industry
(“DTI”). The net cash payments used in financing activities for the nine months
ended September 30, 2003 related principally to payments of term loans under our senior
secured credit facility. |
New Accounting Standards
| |
In
May 2004, the Emerging Issues Task Force (“EITF”) released Issue No. 03-06,
Participating Securities and the Two-Class Method under FASB Statement No.
128. EITF No. 03-06 provides guidance on the calculation and disclosure of earnings
per share. Specifically, EITF No. 03-06 requires that “earnings available to common
shareholders” be calculated including participating securities (e.g. preferred
stock). The adoption of EITF No. 03-06 is required for all financial periods beginning
after March 31, 2004. The results of adoption of EITF No. 03-06 had no impact on our
financial statements. |
Recent Events
| |
On
October 7, 2004, Group, as guarantor, and Viasystems, as borrower, amended the 2003 Credit
Agreement to provide for a new $265 million term loan facility (the “New Tranche B
Term Loan”). We used the proceeds from the New Tranche B Term Loan to extinguish the
original Tranche B Term Loan. Interest on the New Tranche B Term Loan will be payable
quarterly and will be determined at the then effective base rate plus 4.25%. Beginning in
2005, principal payments will be payable quarterly in the amount of $2.7 million per year
until September 30, 2009 at which time the remaining $253.1 million will become due and
payable. |
| |
In
addition, on October 7, 2004, Group completed the sale of 5,555,555 additional shares of
common stock. As a result of the offering, Group received gross proceeds of approximately
$50 million that were net of fees and expenses and contributed to Viasystems. Such net
proceeds of the offering will be utilized for general working capital purposes and in the
expansion of our printed circuit board operations in China. |
| |
In
October of 2004, we announced that we were realigning resources and the strategic mission
of the Echt, Netherlands facility. As a result, we will reduce the Echt facility workforce
by approximately 24% to create greater cost efficiencies. We will incur a restructuring
charge in the fourth quarter of approximately $2.5 million to $2.8 million. |
Item 3: Quantitative and
Qualitative Disclosures About Market Risk
Interest Rate Risk
| |
At
September 30, 2004, approximately $242.4 million of our long-term debt, specifically
borrowings outstanding under Viasystems’ senior secured credit facility 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 nine months ended September 30, 2004, would
have increased by approximately $3.6 million. 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. At
September 30, 2004 there were foreign currency hedge instruments outstanding for the
Mexican Peso, Canadian Dollar and Euro. |
Item 4: Disclosure
Controls and Procedures
| |
As
of September 30, 2004, under the supervision and with the participation of the
Company’s Chief Executive Officer (CEO) and the Chief Financial Officer (CFO),
management has evaluated the effectiveness of the design and operation of the
Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.
Based on that evaluation, the CEO and CFO, concluded that the Company’s disclosure
controls and procedures were effective as of September 30, 2004, to ensure that
information required to be disclosed in the Company’s periodic SEC filings is
processed, recorded, summarized and reported when required. |
| |
There
were no changes in the Company’s internal controls over financial reporting that
occurred during the fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the Company’s control over financial reporting. |
PART II. OTHER
INFORMATION
Item 6. Exhibits and
Reports on Form 8-K
(a)
Exhibits
| |
31.1 |
|
Chief
Executive Officer's Certification required by Rule 13(a)-14(a). |
| |
31.2 |
|
Chief
Financial Officer's Certification required by Rule 13(a)-14(a). |
| |
32.1 |
|
Chief
Executive Officer Certification pursuant to 18 U.S.C.ss.1350, as adopted pursuant to
section § 906 of the Sarbanes-Oxley Act of 2002 |
| |
32.2 |
|
Chief
Financial Officer Certification pursuant to 18 U.S.C.ss.1350, as adopted pursuant to
section § 906 of the Sarbanes-Oxley Act of 2002 |
(b) Reports on Form 8-K
| |
Filed
September 10, 2004 as required by items 8.01 & 9.01. We announced the offering to
holders of our shares of common stock and class B senior convertible preferred stock the
right to subscribe for and to purchase an aggregate of 5,555,555 additional shares of
common stock. |
| |
Filed
October 12, 2004 as required by items 8.01 & 9.01. We announced the completion of the
sale of 5,555,555 additional shares of common stock. |
| |
Filed
November 4, 2004 as required by items 2.05 & 9.01. We announced the realignment of
resources and strategic mission of our high-technology printed circuit board facility in
our Echt, Netherlands facility. |
_________________
* Filed Herewith.
SIGNATURES
Pursuant to the requirements of the
Securities and Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, hereunto duly authorized, in the
City of Clayton, State of Missouri on the day of November 12, 2004.
VIASYSTEMS, INC.
By: /s/ David M. Sindelar
____________________________
Name: David M. Sindelar
Title: Chief Executive Officer
By: /s/ Joseph S. Catanzaro
___________________________
Name: Joseph S. Catanzaro
Title: Senior Vice President &
Chief Financial Officer