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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 March 31, 2005


[ ]
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 March 31, 2005, 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
  
   
   
   
   
PART II - OTHER INFORMATION
  
   
   




VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)


 
 
    
December 31,
2004 
    
March 31,
2005
  
ASSETS
              
               
Current assets:
              
Cash and cash equivalents
  
$
112,891
  
$
65,038
  
Accounts receivable, net
    
140,618
    
157,730
  
Inventories
    
103,904
    
101,768
  
Prepaid expenses and other
    
14,807
    
21,340
  
Total current assets
    
372,220
    
345,876
  
Property, plant and equipment, net
    
233,764
    
243,534
  
Deferred financing costs, net
    
8,931
    
8,874
  
Goodwill
    
109,980
    
109,769
  
Intangible assets, net
    
9,985
    
9,727
  
Other assets, net
    
15,529
    
15,131
  
Total assets
  
$
750,409
  
$
732,911
  

LIABILITIES AND STOCKHOLDER’S EQUITY
              
               
Current liabilities:
              
Accounts payable
  
$
151,247
  
$
158,246
  
Accrued and other liabilities
    
68,542
    
61,191
  
Income taxes payable
    
4,937
    
8,126
  
Current maturities of long-term debt
    
2,929
    
2,906
  
Total current liabilities
    
227,655
    
230,469
  
Deferred taxes
    
2,321
    
2,452
  
Long-term debt, less current maturities
    
462,626
    
461,909
  
Other non-current liabilities
    
1,273
    
1,395
  
Total liabilities
    
693,875
    
696,225
  
               
Commitments and contingencies
              
               
Stockholder’s equity:
              
Common stock, par value $.01 per share, 1,000 shares authorized,
issued and outstanding
    
—
    
—
  
Paid-in capital
    
2,426,794
    
2,428,187
  
Accumulated deficit
    
(2,356,426
)
  
(2,377,941
)
Accumulated other comprehensive loss
    
(13,834
)
  
(13,560
)
Total stockholder’s equity
    
56,534
    
36,686
  
Total liabilities and stockholder’s equity
  
$
750,409
  
$
732,911
  

See accompanying notes to consolidated financial statements.

 
2

VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(Unaudited)

 

 
  
Three Months Ended
March 31, 
     
2004
    
2005
  
               
Net sales
  
$
226,062
  
$
230,190
  
Operating expenses:
              
Cost of goods sold
    
180,858
    
191,323
  
Selling, general and administrative
    
20,020
    
22,468
  
Stock compensation expense
    
846
    
1,393
  
Depreciation
    
11,761
    
12,835
  
Amortization
    
407
    
366
  
Restructuring and impairment charges
    
—
    
7,886
  
Gain on dispositions of assets, net
    
(465
)
  
—
  
Operating income (loss)
    
12,635
    
(6,081
)
Other expenses:
              
Interest expense, net
    
9,405
    
9,320
  
Amortization of deferred financing costs
    
318
    
406
  
Other expense, net
    
950
    
1,611
  
Income (loss) before income taxes
    
1,962
    
(17,418
)
Income taxes
    
—
    
4,098
  
Net income (loss)
  
$
1,962
  
$
(21,516
)
 
 
See accompanying notes to consolidated financial statements.

 
3


VIASYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

 
 
  
Three Months Ended
March 31, 
     
2004
   
2005
 
Cash flows from operating activities:
              
Net income (loss)
  
$
1,962
  
$
(21,516
)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
              
Impairment of assets
    
—
    
833
  
Non-cash stock compensation expense charges
    
846
    
1,393
  
Gain on disposition of assets, net
    
(465
)
  
—
  
Losses on sale of property, plant and equipment
    
541
    
49
  
Depreciation and amortization
    
12,168
    
13,201
  
Amortization of deferred financing costs
    
318
    
406
  
Deferred taxes
    
(2,189
)
  
566
  
Change in assets and liabilities:
              
Accounts receivable
    
(24,442
)
  
(17,401
)
Inventories
    
(11,050
)
  
1,773
  
Prepaid expenses and other
    
(3,841
)
  
(6,935
)
Accounts payable and accrued and other liabilities
    
20,509
    
301
  
Income taxes payable
    
778
    
3,211
  
Net cash used in operating activities
    
(4,865
)
  
(24,119
)
Cash flows from investing activities:
              
Sale of property, plant and equipment
    
23
    
—
  
Capital expenditures
    
(10,642
)
  
(24,294
)
Net cash used in investing activities
    
(10,619
)
  
(24,294
)
Cash flows from financing activities:
              
Repayment of amounts due under long-term contractual obligations
    
—
    
(731
)
Cash contribution from parent
    
1,847
    
—
  
Financing fees and other
    
(385
)
  
(300
)
Net cash provided by (used in) financing activities
    
1,462
    
(1,031
)
               
Effect of exchange rate changes on cash and cash equivalents
    
(14
)
  
1,591
  
Net change in cash and cash equivalents
    
(14,036
)
  
(47,853
)
               
Cash and cash equivalents at beginning of the period
    
62,676
    
112,891
  
Cash and cash equivalents at end of the period
  
$
48,640
  
$
65,038
  

See accompanying notes to consolidated financial statements.


 
4


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 months ended March 31, 2005, 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’ annual report for the year ended December 31, 2004 filed on Form 10-K with the Securities and Exchange Commission (“SEC”).

Nature of Business
The Company is a leading worldwide provider of complex multi-layer printed circuit boards, wire harnesses and electro-mechanical solutions. The Company conducts its operations in two primary segments, (i) printed circuit board manufacturing and (ii) assembly. 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 
Statement of Financial Accounting Standards (“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 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.

 
5
 
 
2.  
Inventories

The composition of inventories at March 31, 2005, is as follows:
 

Raw materials
  
$
34,162
  
Work in process
    
26,730
  
Finished goods
    
40,876
  
Total
  
$
101,768
  
 
3.  
Long-term Debt

The composition of long-term debt at March 31, 2005, is as follows:

Credit Agreement:
        
Term facilities
  
$
264,338
  
Revolver
    
—
  
Senior Subordinated Notes due 2011
    
200,000
  
Other debt and capital leases
    
477
  
     
464,815
  
Less: current maturities
    
2,906
  
   
$
461,909
  

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 “Tranche A Term Loan”, a “Tranche B Term Loan” and 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 Tranche B Term Loan.

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 “Replacement Tranche B Term Loan”). The Company used the proceeds from the Replacement Tranche B Term Loan to extinguish the original Tranche B Term Loan.

Borrowings under the Replacement Tranche B Term Loan bear interest at floating rates, which vary according to the interest option selected by the Company. Base rate terms are described below:
 
 
Replacement
Tranche B
Term
Loan
The then effective base rate, plus
3.25%
The then effective euro currency base rate, plus
4.25%

For the three months ended March 31, 2004 and 2005, the weighted average interest rate on outstanding borrowings under the 2003 Credit Agreement was 6.5%
 
 
6
 
Revolving credit loans bear interest, at the Company’s option, at the then effective base rate plus 3.50% or the then effective eurocurrency base rate plus 4.50%. The Company pays a commitment fee equal to 0.5% on the undrawn portion of the commitments in respect of the Revolving Loans. The availability of borrowings under the Revolving Loans at March 31 is as follows:

     
2004
    
2005
  
Total available Revolver borrowing capacity
  
$
49,984
  
$
50,084
  
Balance of total available for Letters of Credit
  
$
13,695
  
$
13,795
  

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 reversal of reorganization expenses 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.


7

Balance Sheet as of December 31, 2004

 
     Viasystems, Inc.     
Total
Guarantor
    
Total Non-
Guarantor
    
Eliminations
    
Viasystems, Inc.
Consolidated
  
ASSETS
                                
Cash and cash equivalents
  
$
10
  
$
80,256
  
$
32,625
  
$
—
  
$
112,891
  
Accounts receivable
   
—
    
45,110
    
95,508
    
—
    
140,618
  
Inventories
    
—
    
42,548
    
61,356
    
—
    
103,904
  
Other current assets
    
(7,764
)
  
11,866
    
10,705
    
—
    
14,807
  
Total current assets
    
(7,754
)
  
179,780
    
200,194
    
—
    
372,220
  
Property, plant and equipment, net
    
245
    
5,681
    
227,838
    
—
    
233,764
  
Investment in subsidiaries
    
219,693
    
(260,414
)
  
—
    
40,721
    
—
  
Other assets
    
(21,797
)
  
72,845
    
93,377
    
—
    
144,425
  
Total assets
  
$
190,387
  
$
(2,108
)
$
521,409
  
$
40,721
  
$
750,409
  
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
                  
Current maturities of long-term debt
  
$
2,650
  
$
188
    
91
  
$
—
  
$
2,929
  
Accounts payable
    
—
    
35,617
    
115,630
    
—
    
151,247
  
Accrued and other liabilities
    
9,842
    
30,412
    
33,225
    
—
    
73,479
  
Total current liabilities
    
12,492
    
66,217
    
148,946
    
—
    
227,655
  
Long-term debt, less current maturities
    
462,350
    
185
    
91
    
—
    
462,626
  
Other non-current liabilities
    
(22,880
)
  
7,061
    
19,413
    
—
    
3,594
  
Intercompany (receivable)/ payable
    
(316,496
)
  
(319,023
)
  
635,519
    
—
    
—
  
Total liabilities
    
135,466
    
(245,560
)
  
803,969
    
—
    
693,875
  
Total paid in capital and accumulated earnings (deficit)
    
70,368
    
219,693
    
(260,414
)
  
40,721
    
70,368
  
Accumulated other comprehensive income (loss)
   
(15,447
)
  
23,759
    
(22,146
)
  
—
    
(13,834
)
Total liabilities and stockholder’s equity (deficit)
  
$
190,387
  
$
(2,108
)
$
521,409
  
$
40,721
  
$
750,409
  


Balance Sheet as of March 31, 2005

 
     Viasystems, Inc.     
Total
Guarantor
    
Total Non-
Guarantor
    
Eliminations
    
Viasystems, Inc.
Consolidated
  
ASSETS
                                
Cash and cash equivalents
  
$
206
  
$
44,324
  
$
20,508
  
$
—
  
$
65,038
  
Accounts receivables
    
—
    
55,122
    
102,608
    
—
    
157,730
  
Inventories
    
—
    
33,820
    
67,948
    
—
    
101,768
  
Other current assets
    
(7,764
)
  
16,723
    
12,381
    
—
    
21,340
  
Total current assets
    
(7,558
)
  
149,989
    
203,445
    
—
    
345,876
  
Property, plant and equipment, net
    
238
    
5,709
    
237,587
    
—
    
243,534
  
Investment in subsidiaries
    
207,361
    
(285,305
)
  
—
    
77,944
    
—
  
Other assets
    
(21,750
)
  
69,456
    
95,795
    
—
    
143,501
  
Total assets
  
$
178,291
  
$
(60,151
)
$
536,827
  
$
77,944
  
$
732,911
  
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
                  
Current maturities of long-term debt
  
$
2,650
  
$
192
  
$
64
  
$
—
  
$
2,906
  
Accounts payable
    
—
    
32,987
    
125,259
    
—
    
158,246
  
Accrued and other liabilities
    
4,487
    
24,331
    
40,499
    
—
    
69,317
  
Total current liabilities
    
7,137
    
57,510
    
165,822
    
—
    
230,469
  
Long-term debt, less current maturities
    
461,688
    
135
    
86
    
—
    
461,909
  
Other non-current liabilities
    
(22,880
)
  
7,228
    
19,499
    
—
    
3,847
  
Intercompany (receivable)/ payable
    
(302,540
)
  
(356,091
)
  
658,631
    
—
    
—
  
Total liabilities
    
143,405
    
(291,218
)
  
844,038
    
—
    
696,225
  
Total paid in capital and accumulated earnings (deficit)
    
50,336
    
207,361
    
(285,305
)
  
77,944
    
50,336
  
Accumulated other comprehensive income (loss)
    
(15,450
)
  
23,706
    
(21,906
)
  
—
    
(13,650
)
Total liabilities and stockholder’s equity (deficit)
  
$
178,291
  
$
(60,151
)
$
536,827
  
$
77,944
  
$
732,911
  


Statement of Operations for the three months ended March 31, 2004

 
     Viasystems, Inc.     
Total
Guarantor
    
Total Non-
Guarantor
    
Eliminations
    
Viasystems, Inc.
Consolidated
  
Net sales
  
$
—
  
$
104,735
  
$
146,281
  
$
(24,954
)
$
226,062
  
Operating expenses:
                                
Cost of goods sold
    
—
    
93,330
    
112,482
    
(24,954
)
  
180,858
  
Selling, general and administrative
    
—
    
8,472
    
11,548
    
—
    
20,020
  
Stock compensation expense
    
846
    
—
    
—
    
—
    
846
  
Depreciation
    
—
    
377
    
11,384
    
—
    
11,761
  
Amortization
    
—
    
—
    
407
    
—
    
407
  
Restructuring and impairment charges
    
—
    
—
    
—
    
—
    
—
  
Gain on dispositions of assets
    
—
    
—
    
(465
)
  
—
    
(465
)
Operating (loss) income
    
(846
)
  
2,556
    
10,925
    
—
    
12,635
  
Other expenses (income):
                                
Interest expense
  
$
7,663
  
$
(7,144
)
$
8,886
  
$
—
  
$
9,405
  
Amortization of deferred financing costs
    
318
    
—
    
—
    
—
    
318
  
Other expense (income), net
    
153
    
(4,438
)
  
5,235
    
—
    
950
  
Equity earnings (loss) in subsidiaries
    
8,236
 
  
(3,619
)
  
—
    
(4,617
 )   
—
  
Income (loss) before income taxes
    
(744
)
  
10,519
    
(3,196
)
  
(4,617
)
  
1,962
  
Income (benefit) taxes
    
(2,706
)
  
2,283
    
423
    
—
    
—
  
Net income (loss)
  
$
1,962
  
$
8,236
  
$
(3,619
)
$
(4,617
)
$
1,962
  

 
 
8
 
Statement of Operations for the three months ended March 31, 2005

 
     Viasystems, Inc.     
Total
Guarantor
    
Total Non-
Guaranto
    
Eliminations
    
Viasystems, Inc.
Consolidated
  
Net sales
  
$
—
  
$
105,518
  
$
127,963
  
$
(3,291
)
$
230,190
  
Operating expenses:
                                
Cost of goods sold
   
—
    
91,583
    
103,031
    
(3,291
)
  
191,323
  
Selling, general and administrative
    
149
    
9,516
    
12,803
    
—
    
22,468
  
Stock compensation expense
    
1,393
    
—
    
—
    
—
    
1,393
  
Depreciation
    
—
    
426
    
12,409
    
—
    
12,835
  
Amortization
    
35
    
—
    
331
    
—
    
366
  
Restructuring and impairment charges, net
    
—
    
—
    
7,886
    
—
    
7,886
  
Operating (loss) income
    
(1,577
)
  
3,993
    
(8,497
)
  
—
    
(6,081
)
Other expenses (income):
                                
Interest expense, net
    
7,143
    
(5,140
)
  
7,317
    
—
    
9,320
  
Amortization of deferred financing costs
    
406
    
—
    
—
    
—
    
406
  
Other expense (income), net
    
—
    
(6,962
)
  
8,573
    
—
    
1,611
  
Equity earnings (loss) in subsidiaries
    
(12,390
)
  
(24,949
)
  
—
    
37,339
    
—
  
Income (loss) before income taxes
    
(21,516
)
  
(8,854
)
  
(24,387
)
  
37,339
    
(17,418
)
Income (benefit) taxes
    
—
    
3,536
    
562
    
—
    
4,098
  
Net (loss) income
  
$
(21,516
)
$
(12,390
)
$
(24,949
)
$
37,339
  
$
(21,516
)


Statement of Cash Flows for the three months ended March 31, 2004

 
     Viasystems, Inc.     
Total
Guarantor
    
Total Non-
Guarantor
    
Eliminations
    
Viasystems, Inc.
Consolidated
  
Net cash provided by (used in) operating activities
  
$
386
  
$
(12,399
)
$
7,148
  
$
—
  
$
(4,865
)
Net cash provided by (used in) investing activities
    
—
    
(16
)
  
(10,603
)
  
—
    
(10,619
)
Net cash provided by (used in) financing activities
    
1,462
    
—
    
—
    
—
    
1,462
  
Effect of exchange rate changes on cash and cash
Equivalents
    
—
    
—
    
(14
)
  
—
    
(14
)
Net change in cash and cash equivalents
    
1,848
    
(12,415
)
  
(3,469
)
  
—
    
(14,036
)
                                 
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
  
$
2,841
  
$
25,821
  
$
19,978
  
$
—
  
$
48,640
  


Statement of Cash Flows for the three months ended March 31, 2005

 
     Viasystems, Inc.     
Total
Guarantor
    
Total Non-
Guarantor
    
Eliminations
    
Viasystems, Inc.
Consolidated
  
Net cash provided by (used in) operating activities
  
$
196
  
$
(34,841
)
$
10,526
  
$
—
  
$
(24,119
)
Net cash provided by (used in) investing activities
    
—
    
(383
)
  
(23,911
)
  
—
    
(24,294
)
Net cash provided by (used in) financing activities
    
—
    
(708
)
  
(323
)
  
—
    
(1,031
)
Effect of exchange rate changes on cash and cash
Equivalents
    
—
    
—
    
1,591
    
—
    
1,591
  
Net change in cash and cash equivalents
    
196
    
(35,932
)
  
(12,117
)
  
—
    
(47,853
)
                                 
Cash and cash equivalents at the beginning of the period
    
10
    
80,256
    
32,625
    
—
    
112,891
  
Cash and cash equivalents at the end of the period
  
$
206
  
$
44,324
  
$
20,508
  
$
—
  
$
65,038
  


5.  
Restructuring and Impairment Charges

In light of the economic downturn that began in 2000 and continued into 2003 related to many of the Company’s key telecommunication and networking customers, and the shift in demand from high cost countries to low cost countries, the Company initiated restructuring activities 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 that continued into 2005.

On February 25, 2005, the Company announced the closure of three printed circuit board facilities located in Echt, the Netherlands and Montreal, Quebec. During the quarter ended March 31, 2005, the Company recorded a personnel restructuring charge of $2,651 related to the closure of the facility in Echt, the Netherlands. In addition, the Company recorded a personnel and restructuring charge of $4,280 related to the closure of the two facilities located in Montreal, Quebec.
 
 
9
 
In addition, during the quarter ended March 31, 2005, the Company recorded a restructuring charge of $955 related to the impairment of specific pieces of manufacturing equipment and for costs incurred with the early termination of outstanding contracts related to the two facilities in Montreal, Quebec. As of March 31, 2005, the Company was in the process of obtaining detailed third party appraisals of equipment located at all three printed circuit board facilities.
 
As a result of preparing the Montreal Canada facilities for closure, the Company wrote off inventory resulting in a $726 charge to cost of goods sold. The Company disposed of the inventory during the quarter.

Below are tables summarizing restructuring and the related activity as of and for the three months ended March 31, 2004 and 2005:

 
        
Three Months Ended 
Cumulative
      
 
    
Balance
  
            March 31, 2004             
          Drawdowns         
  
Balance
  
 
    
at
      
Cash
    
Non-Cash
    
 at
  
 
     12/31/03    
Charges
    
Reversals
    
Total
    
Payments
    
Charges
    
3/31/04
  
Restructuring Activities:
                                            
Personnel and severance
  
$
4,076
  
$
—
  
$
—
  
$
—
  
$
(653
)
$
—
  
$
3,423
  
Lease and other contractual commitments
    
9,560
    
—
    
—
    
—
    
(237
)
  
—
    
9,323
  
Other
    
14
    
—
    
—
    
—
    
—
    
—
    
14
  
Total restructuring charges
  
$
13,650
  
$
—
  
$
—
  
$
—
  
$
(890
)
$
—
  
$
12,760
  

 
        
Three Months Ended 
Cumulative
      
 
     Balance   
             March 31, 2005             
           Drawdowns          
  
Balance
  
 
    
at
      
Cash
    
Non-Cash
    
 at
  
 
     12/31/04     
Charges
    
Reversals
   
Total
    
Payments
    
Charges
    
3/31/05
  
Restructuring Activities:
                                            
Personnel and severance
  
$
3,209
  
$
6,931
  
$
—
  
$
6,931
  
$
(3,642
)
$
—
  
$
6,498
  
Lease and other contractual commitments
    
1,647
    
122
    
—
    
122
    
(262
)
  
—
    
1,507
  
Asset impairments
    
—
    
833
    
—
    
833
    
—
    
(833
)
  
—
  
Total restructuring and impairment charges
  
$
4,856
  
$
7,886
  
$
—
  
$
7,886
  
$
(3,904
)
$
(833
)
$
8,005
  

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.  At the initial announcement of the closure of the western world printed circuit board facilities, the Company estimated that total closure costs would approximate $50,000 with $23,000 being related to headcount reduction costs and the remainder being related to asset impairments and other contractual commitments. Currently, the Company estimates that total closure costs will approximate $33,000 to $38,000 with $23,000 being related to headcount reduction costs and the remainder being related to other contractual commitments and closure costs.

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.
 
 
10
 
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 at each quarterly measurement date. At March 31, 2005, there was $113 of 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 March 31, 2005. 

 
 
    
Notional
Amount 
    
Weighted Avg.
Remaining
Maturity in
Months
    
Average
Exchange
Rate
  
Cash flow hedges:
                    
Mexican Peso
  
$
15,641
    
4.3
    
11.4270
  
                     
Deferred gains, net of tax
  
$
113
              
 
 
7.  
Business Segment Information

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance.
 
The Company has evaluated its operating segments based on the application of SFAS No. 131, and determined that there are four reportable segments: China Printed Circuit Boards, North American Printed Circuit Boards, European Printed Circuit Boards and Assembly with the remaining business segments classified as "other." Other consists of certain North American EMS operations. Following the planned closure of the North American and European Printed Circuit Board operations in 2005, the Company expects to have two continuing reportable segments - China Printed Circuit Boards and Assembly.
 
11
 
China Printed Circuit Boards consist of the Company's printed circuit board fabrication manufacturing facilities located within China. These facilities provide comprehensive front-end engineering services, including, circuit board layout and related design services leading to manufacturing of multi-layer printed circuit boards and backpanels.
 
The Company's western world printed circuit board fabrication manufacturing facilities - North American Printed Circuit Boards located in Montreal, Canada and European Printed Circuit Boards located in Echt, the Netherlands provide comprehensive front-end engineering services, including, circuit board layout and related design services leading to manufacturing of multi-layer printed circuit boards and backpanels. On February 25, 2005 the Company announced the closure of the facilities located in Echt, the Netherlands and Montreal, Canada.
 
The Assembly segment is composed of the assembly operations including wire harnesses and cable assemblies, backpanel assembly, printed circuit board assembly, custom enclosures and full system assembly and test. These assembly operations are conducted in facilities located in China and Mexico.
 
Following is the Company’s business segment information for the three months ended March 31, 2004 and 2005. Intersegment sales are fully eliminated in consolidation. General corporate operating expenses are allocated to each operating segment based on sales. The accounting policies of the segments are the same as those described in Note 1 of the audited consolidated financial statements included in Viasystems’ annual financial report for the year ended December 31, 2004 filed on Form 10-K. Segment data includes intersegment revenues and is eliminated in consolidation.
 
Net sales and operating income (loss) by segment:
 
 
  
Three Months Ended
March 31, 
Net Sales:
    
2004
    
2005
  
China Printed Circuit Boards
  
$
79,821
  
$
96,206
  
North American Printed Circuit Boards
    
16,371
    
13,602
  
European Printed Circuit Boards
    
15,360
    
6,268
  
Assembly
    
100,405
    
95,094
  
Other
    
26,462
    
23,599
  
Eliminations
    
(12,357
)
  
(4,579
)
Total
  
$
226,062
  
$
230,190
  
               
Operating Income (Loss):
              
China Printed Circuit Boards
  
$
10,186
  
$
4,124
  
North American Printed Circuit Boards
    
(2,615
)
  
(8,422
)
European Printed Circuit Boards
    
(2,234
)
  
(7,999
)
Assembly
    
8,207
    
8,053
  
Other
    
(909
)
  
(1,837
)
Total
  
$
12,635
  
$
(6,081
)


Net sales by product offering are as follows:
 
 
  
Three Months Ended
March 31, 
Net Sales:
    
2004
    
2005
  
Printed circuit boards
  
$
103,464
  
$
112,453
  
Wire harness and electro-mechanical solutions
    
122,598
    
117,737
  
Total
  
$
226,062
  
$
230,190
  
 
 
12
 
8.  
Comprehensive Income

The components of comprehensive income, net of tax, are as follows:
 
 
  
Three Months Ended
March 31, 
     
2004
    
2005
  
Net income (loss)
  
$
1,962
  
$
(21,516
)
Loss (gain) on derivative instruments designated and
qualifying as foreign currency cash flow hedging
instruments
    
(389
)
  
113
  
Foreign currency translation adjustments
    
(2,535
)
  
152
  
Comprehensive loss
  
$
(962
)
$
(21,251
)

9.  
New Accounting Standards

In March 2005, the FASB issued Staff Position (“FSP”) No. FIN 46(R)-5. FSP No. FIN 46(R)-5 addresses whether a reporting enterprise should consider whether it holds an implicit variable interest in a variable interest entity (“VIE”) or potential VIE when specific conditions exist. The Company does not have interests in structures commonly referred to as VIEs. Adoption of FSP No. FIN46(R)-5 is required for all fiscal years beginning after June 15, 2005, with early adoption permitted. Adoption of FSP No. FIN 46(R)-5 will not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107. SAB No. 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) (revised 2004), Share-Based Payment and certain SEC rules and regulations. In particular, SAB No. 107 provides guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity status, valuation methods, the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense and non-GAAP financial measures. The Company adopted the provisions of SFAS No. 123 on January 1, 2004. Adoption of SAB No. 107 is required for all fiscal years beginning after December 15, 2005, with early adoption permitted. The Company does not expect the adoption of SFAS No. 123(R) or SAB No. 107 to have a material impact on its financial position, results of operations or cash flows.



 
13
 

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 (“PCBs”), wire harnesses and electro-mechanical solutions (“EMS”). We conduct our operations in two primary segments (i) printed circuit board manufacturing and (ii) assembly. The products we manufacture include, or can be found in, a wide array of products including automotive dash panels and control modules, major household appliances, data networking equipment, telecommunications switching equipment and a variety of complex medical and technical instruments. We have 16 facilities strategically located in five countries around the world. We have chosen sites in China and Mexico to take advantage of low cost, high quality manufacturing environments. Approximately 94% of our employees are located in six facilities in China and five 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, EMC, 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.


14
 
Results of Operations

Three Months Ended March 31, 2005 Compared to the Three Months Ended March 31, 2004

Net sales for the three months ended March 31, 2005 were $230.2 million, representing a $4.1 million, or 1.8% increase from the same period in 2004. The increase was a result of the installation of additional capacity and increased market share with select customers in our China printed circuit board operations.

Sales from our China printed circuit board operations increased by approximately $16.4 million, or 20.6%, as a result of greater product demand and the installation of additional capacity. Sales from our North American printed circuit board operations decreased by approximately $2.8 million, or 17.1%. Sales from our European printed circuit board operations decreased by approximately $9.1 million, or 59.1%. Decreases in sales from our North American and European printed circuit board operations (or the western world printed circuit board facilities) are attributable to the transition of business to our China printed circuit board facilities and the announced closure of our western world printed circuit board facilities. On February 25, 2005, we announced our intent to close our North American and European printed circuit board facilities in Echt, the Netherlands and Canada. Sales of our assembly services and products decreased by approximately $5.3 million, or 5.3%, due to the delay of customer programs in our electro-mechanical solution facilities. The future mix of business is dependent on available capacity, demand for our customer’s end products and individual program wins across all customers.

In the first quarter of 2005, sales from our western world printed circuit board operations totaled $18.2 million compared to $28.3 million for the same period in 2004, representing a decrease of $10.1 million, or 35.7%. Had we excluded these facilities from sales in both the first quarters of 2004 and 2005, we would have reported net sales of $197.8 million and $211.9 million, respectively. Excluding the western world printed circuit board operations, sales increased $14.2 million, or 7.1% in the first quarter of 2005 compared to the same period of 2004.

Cost of goods sold for the three months ended March 31, 2005 was $191.3 million, or 83.1% of net sales compared to $180.9 million or 80.0% of net sales for the three months ended March 31, 2004. Cost of goods sold as a percent of net sales increased as a result of higher material costs and lower volume in our North American and European printed circuit board operations.  Included in cost of goods sold for the three months ended March 31, 2005 is $0.7 million of inventory that was impaired due to the planned closure of the printed circuit board facilities located in Canada.

Selling, general and administrative expenses increased $2.5 million, from $20.0 million for the three months ended March 31, 2004, to $22.5 million for the three months ended March 31, 2005. The increase is attributable 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 $0.6 million from $0.8 million for the three months ended March 31, 2004 to $1.4 million for the three months ended March 31, 2005. The increase is attributable to the vesting schedule of outstanding options.

Depreciation and amortization increased $1.0 million, from $12.2 million for the three months ended March 31, 2004 to $13.2 million for the three months ended March 31, 2005. The increase is attributable to additional capital investment in property, plant and equipment in our China printed circuit board facilities over recent periods.

15
 
Restructuring and impairment expenses totaled $7.9 million for the three months ended March 31, 2005. We have provided a more detailed analysis of these activities in the section below entitled “Restructuring and Impairment Charges”.

Operating income of $12.6 million for the three months ended March 31, 2004 decreased $18.7 million to an operating loss of $6.1 million for the three months ended March 31, 2005. This decrease was the result of $7.9 million restructuring and impairment charges recognized at our western world printed circuit board facilities as well as the increase in raw material prices, which began in the second half of last year. In addition, our selling general and administrative expenses increased due to the overall growth of the Company and increased depreciation expense related to the additions of equipment in China.

Had we excluded the results of our western world printed circuit board facilities, operating income would have been $17.4 million and $10.3 million for the three months ended March 31, 2004 and 2005, respectively.

Income taxes for the three months ended March 31, 2005 were $4.1 million compared to no provision for the same period in 2004. The increase relates to certain tax holidays expiring in China and our most significant profit generating segments being located in this tax jurisdiction.

Restructuring and Impairment Charges

In February of 2005, we announced our intention to close all of our printed circuit board manufacturing facilities located in Echt, the Netherlands and Montreal, Quebec.  At our initial announcement of the closure of our western world printed circuit board facilities, we estimated that total closure costs would approximate $50.0 million with $23.0 million being related to headcount reduction costs and the remainder being related to asset impairments and other contractual commitments. Currently, we estimate that total closure costs will approximate $33.0 to $38.0 million with $23.0 million being related to headcount reduction costs and the remainder being related to other contractual commitments and closure costs.

During the quarter ended March 31, 2005, we recorded a personnel and restructuring charge of $2.7 million and $4.3 million related to the closure of the facilities in Echt, the Netherlands and Montreal, Quebec, respectively. In addition, during the quarter ended March 31, 2005, the Company recorded a restructuring charge of $0.9 million related to the impairment a specific pieces of manufacturing equipment and for costs incurred with the early termination of outstanding contracts related to the closure of the two facilities in Montreal, Quebec.
 
As a result of preparing the Montreal Canada facilities for closure, we wrote off inventory resulting in a $0.7 million charge to cost of goods sold. We disposed of the inventory during the quarter.
 
We recorded no restructuring or impairment charges during the quarter ended March 31, 2004.

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.

 
16
 
Net cash used in operating activities was $24.1 million for the three months ended March 31, 2005, compared to $4.9 million used for the three months ended March 31, 2005. Changes in cash flow were principally a result of decreased 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 $24.3 million for the three months ended March 31, 2005, compared to $10.6 million for the three months ended March 31, 2004. The increase in 2005 is attributable to the Company’s capital expansion in China. Specifically, cash used for capital expenditures during the three months ended March 31, 2005 was $24.3 million compared to $10.6 million for the same period in 2004.

Net cash used in financing activities was $1.0 million for the three months ended March 31, 2005, compared to net cash provided of $1.5 million for the same period in 2004. The net cash used in financing activities for the three months ended March 31, 2005 related principally to the payment of amounts due under the 2003 Credit Agreement.

Our 2003 Credit Agreement contains material financial covenants based on “Consolidated EBITDA”, which we refer herein as Adjusted EBITDA. These financial covenants require us to comply with certain ratios calculated using Adjusted EBITDA. In particular, these financial covenants currently require us not to:

·  
exceed a maximum leverage ratio based on Adjusted EBITDA; and
·  
fall below a minimum interest coverage ratio based on Adjusted EBITDA.

Our leverage ratio and interest coverage ratio are calculated each fiscal quarter based on the latest twelve month financial data. The 2003 Credit Agreement is a material component of our capitalization.

We believe our results of operations will be sufficient to satisfy the terms and conditions of the 2003 Credit Agreement for the next two years. The failure to satisfy the requirements of the covenants in our 2003 Credit Agreement that are based on Adjusted EBITDA could result in an event of default under the 2003 Credit Agreement and the acceleration of the indebtedness thereunder. Our ability to satisfy the terms and conditions will depend on the demand for our products, as well as general economic, financial, competitive and other factors, many of which are beyond our control.

In April 22, 2005 we executed a fourth amendment of our 2003 Credit Agreement dated January 31, 2003. This amendment, among other items, provides an add-back of up to $26.1 million of cash restructuring charges in the definition of EBITDA. In addition, the amendment allows us to exclude the operating results of Echt and Canada from our covenant calculations. The reconciliation of Adjusted EBITDA to operating income for the three-month periods ended March 31, 2004 and 2005 based upon our covenant calculations is as follows:

 

17

 

 
 
 
    
Three Months
Ended
March 31,
2004 
    
Three Months
Ended
March 31,
2005
  
 
     (in thousands)     
(in thousands
)
               
Net income (loss), as reported
  
$
1,962
  
$
(21,516
)
Operating loss for Echt and Canada
    
4,849
    
16,421
  
Interest Expense, net
    
9,405
    
9,320
  
Taxes
    
—
    
4,098
  
Depreciation (a)
    
9,513
    
11,077
  
Amortization (a)
    
723
    
739
  
EBITDA
   
26,452
    
20,139
  
Stock compensation expense
    
846
    
1,393
  
Restructuring and impairment charges (b)
    
—
    
—
  
Gain on dispositions of assets, net
    
(465
)
  
—
  
Other (c and d, respectively)
    
1,832
    
1,221
  
Adjusted EBITDA (e)
  
$
28,665
  
$
22,753
  

(a)  
Depreciation and amortization attributable to Echt and Canada were $2.2 million and $1.8 million for the three-month periods ended March 31, 2004 and 2005, respectively. These amounts are included in this adjusted EBITDA reconciliation in the “Operating loss for Echt and Canada” line item.
(b)  
Restructuring and impairment expenses of $7.9 million attributable to Echt and Canada for the three-month period ended March 31, 2005, 2005 are included in this adjustment EBITDA reconciliation in the “Operating loss for Echt and Canada” line item.
(c)  
Represents $0.1 million related to franchise tax expense, $0.3 related to foreign currency translation expense and $1.4 million related to various other charges, net.
(d)  
Represents $0.1 million related to franchise expense, $0.3 related to foreign currency translation expense and $0.8 million related to various other charges, net.
(e)  
As described above, our covenants allow us to exclude the operating results of Echt and Canada from our adjusted EBITDA calculation. Had we included the operating results of Echt and Canada in the calculations, adjusted EBITDA would have been $24.7 million and $15.9 million for the three month periods ended March 31, 2004 and 2005, respectively.

New Accounting Standards

In March 2005, the FASB issued Staff Position (“FSP”) No. FIN 46(R)-5. FSP No. FIN 46(R)-5 addresses whether a reporting enterprise should consider whether it holds an implicit variable interest in a variable interest entity (“VIE”) or potential VIE when specific conditions exist. The Company does not have interests in structures commonly referred to as VIEs. Adoption of FSP No. FIN46(R)-5 is required for all fiscal years beginning after June 15, 2005, with early adoption permitted. Adoption of FSP No. FIN 46(R)-5 will not have an impact on our consolidated financial position, results of operations or cash flows.

In March 2005, the SEC issued Staff Accounting Bulletin (“SAB”) No. 107. SAB No. 107 expresses views of the staff regarding the interaction between SFAS No. 123(R) (revised 2004), Share-Based Payment and certain SEC rules and regulations. In particular, SAB No. 107 provides guidance related to share-based payment transactions with non-employees, the transition from nonpublic to public entity status, valuation methods, the accounting for certain redeemable financial instruments issued under share-based payment arrangements, the classification of compensation expense and non-GAAP financial measures. We adopted the provisions of SFAS No. 123 on January 1, 2004. Adoption of SAB No. 107 is required for all fiscal years beginning after December 15, 2005, with
 
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early adoption permitted. We do not expect the adoption of SFAS No. 123(R) or SAB 107 to have a material impact on our financial position, results of operations or cash flows.
 
Item 3: Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

At March 31, 2005, approximately $264.3 million of our long-term debt, specifically borrowings outstanding under Viasystems’ 2003 Credit Agreement 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 three months ended March 31, 2005, would have increased by approximately $1.3 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 March 31, 2005 there were foreign currency hedge instruments outstanding for the Mexican Peso.


 
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Item 4: Disclosure Controls and Procedures
 
As of March 31, 2005, 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 March 31, 2005, 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.


 
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PART II. OTHER INFORMATION

Item 6: Exhibits and Reports on Form 8-K

 
(a)
Exhibits
       
   
31.1*
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. § 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. § 1350, as adopted pursuant to section § 906 of the Sarbanes-Oxley Act of 2002.
       
 
(b)
Reports on Form 8-K
       
   
Filed February 14, 2005 as required by item 5.02. We announced the retirement of Mr. Thomas Hicks from our board of directors and the addition of Mr. Jack Furst.
     
   
Filed February 25, 2005 as required by items 2.05 and 9.01. We announced our continued expansion in China and the closure of the three printed circuit board facilities located in Echt, the Netherlands and Montreal, Quebec.
     
   
Filed March 24, 2005 as required by items 1.01, 2.05, 4.02 and 9.01. We announced the amendment to our credit agreement, management’s cost estimate to close the three western world printed circuit board facilities and the restatement of our previously issued financial statements as of and for the three and six months ended June 30, 2004 and the three and nine months ended September 30, 2004.



______________

* Filed Herewith.

 
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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 May 11, 2005.

 
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

 
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