VIASYSTEMS GROUP INC - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - VIASYSTEMS GROUP INC	Financial_Report.xls
EX-32.1 - EX-32.1 - VIASYSTEMS GROUP INC	d901735dex321.htm
EX-31.2 - EX-31.2 - VIASYSTEMS GROUP INC	d901735dex312.htm
EX-32.2 - EX-32.2 - VIASYSTEMS GROUP INC	d901735dex322.htm
EX-31.1 - EX-31.1 - VIASYSTEMS GROUP INC	d901735dex311.htm

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, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

001-15755

(Commission File Number)

LOGO

Viasystems Group, Inc.

(Exact name of Registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

75-2668620

(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. x YES ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x YES ¨ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ YES x NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May 4, 2015, there were 20,910,641 shares of Viasystems Group, Inc.’s Common Stock outstanding.

Introductory Note

On September 21, 2014, Viasystems Group, Inc. announced that it had entered into a merger agreement with TTM Technologies, Inc. (“TTM”) and a wholly owned subsidiary of TTM. Unless stated otherwise, all forward-looking information contained in this report does not take into account or give any effect to the impact of the proposed merger. For additional details regarding the proposed merger, see i) Note 2 to our unaudited condensed consolidated financial statements, “Merger Agreement with TTM Technologies, Inc.,” contained in Part I, Item 1, of this report and ii) “Recent Developments” contained in Part I, Item 2, of this report. Please also see “Rick Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 12, 2015.

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2015


		PAGE
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Viasystems Group, Inc. and Subsidiaries
	Condensed Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014		3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2015 and 2014		4
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014		5
	Notes to Unaudited Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25

Item 4.	Controls and Procedures		25

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		26

Item 6.	Exhibits		27

SIGNATURES			28

EXHIBIT INDEX			29

CERTIFICATIONS

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share amounts)


	March 31, 2015			December 31, 2014
		(Unaudited)
ASSETS

Current assets:
Cash and cash equivalents	$	81,632		$	71,964
Accounts receivable, net		219,865			215,784
Inventories		130,864			138,195
Prepaid expenses and other		31,671			38,694

Total current assets		464,032			464,637
Property, plant and equipment, net		409,559			415,607
Goodwill		151,283			151,283
Intangible assets, net		88,797			90,158
Deferred financing costs, net		12,356			13,115
Other assets		745			705

Total assets	$	1,126,772		$	1,135,505

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current maturities of long-term debt	$	1,134		$	1,093
Accounts payable		174,304			175,346
Accrued and other liabilities		99,649			99,757

Total current liabilities		275,087			276,196
Long-term debt, less current maturities		612,348			612,915
Other non-current liabilities		43,835			43,730

Total liabilities		931,270			932,841

Stockholders’ equity:
Common stock, par value $0.01 per share, 100,000,000 shares authorized, 20,903,142 and 20,921,111 shares issued and outstanding		209			209
Paid-in capital		2,402,145			2,401,505
Accumulated deficit		(2,217,765	)		(2,209,279	)
Accumulated other comprehensive income		6,986			6,475

Total Viasystems stockholders’ equity		191,575			198,910
Noncontrolling interest		3,927			3,754

Total stockholders’ equity		195,502			202,664

Total liabilities and stockholders’ equity	$	1,126,772		$	1,135,505

See accompanying notes to condensed consolidated financial statements.

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE (LOSS) INCOME

(dollars in thousands, except per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2015			2014
Net sales	$	304,628		$	295,912
Operating expenses:
Cost of goods sold, exclusive of items shown separately below		244,584			239,803
Selling, general and administrative		31,529			26,849
Depreciation		21,520			21,812
Amortization		1,379			1,680
Restructuring and impairment		—			273

Operating income		5,616			5,495
Other expense (income):
Interest expense, net		11,740			11,253
Amortization of deferred financing costs		759			655
Other, net		(1,527	)		(1,233	)

Loss before income taxes		(5,356	)		(5,180	)
Income taxes		2,957			4,177

Net loss	$	(8,313	)	$	(9,357	)

Less:
Net income attributable to noncontrolling interest	$	173		$	190

Net loss attributable to common stockholders	$	(8,486	)	$	(9,547	)

Basic loss per share	$	(0.40	)	$	(0.47	)

Diluted loss per share	$	(0.40	)	$	(0.47	)

Basic weighted average shares outstanding		21,001,444			20,268,717

Diluted weighted average shares outstanding		21,001,444			20,268,717

Comprehensive (loss) income:
Net loss	$	(8,313	)	$	(9,357	)
Change in derivatives, net of tax		511			(3,298	)

Comprehensive loss		(7,802	)		(12,655	)

Less:
Comprehensive income attributable to noncontrolling interests		173			190

Comprehensive loss attributable to common stockholders	$	(7,975	)	$	(12,845	)

See accompanying notes to condensed consolidated financial statements.

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(8,313	)	$	(9,357	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		22,899			23,492
Non-cash stock compensation expense		1,540			1,729
Amortization of deferred financing costs		759			655
(Gain) loss on disposition of assets, net		92			(1,070	)
Deferred income taxes		(431	)		(2,527	)
Non-cash impact of exchange rate changes		(309	)		(186	)
Amortization of original issue premium on long term debt		(173	)		—

Change in assets and liabilities:
Accounts receivable		(4,081	)		(10,379	)
Inventories		7,331			(3,187	)
Prepaid expenses and other		7,352			521
Accounts payable		(1,042	)		(26,774	)
Accrued and other liabilities		616			16,300

Net cash provided by (used in) operating activities		26,240			(10,783	)

Cash flows from investing activities:
Capital expenditures		(15,713	)		(14,999	)
Proceeds from disposals of property, plant and equipment		147			1,041

Net cash used in investing activities		(15,566	)		(13,958	)

Cash flows from financing activities:
Proceeds from borrowings under credit facilities and term loans		163			20,000
Repayments of borrowings under mortgages and credit facilities		(269	)		(10,328	)
Proceeds from exercise of stock options		215			—
Withholding taxes related to stock awards net share settlements		(1,115	)		(585	)
Financing and other fees		—			(19	)

Net cash (used in) provided by financing activities		(1,006	)		9,068

Net change in cash and cash equivalents		9,668			(15,673	)

Cash and cash equivalents, beginning of the period		71,964			54,738

Cash and cash equivalents, end of the period	$	81,632		$	39,065

Supplemental cash flow information:
Interest paid	$	176		$	386

Income taxes paid, net	$	6,802		$	4,226

See accompanying notes to condensed consolidated financial statements.

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

1. Basis of Presentation

Unaudited Interim Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements of Viasystems Group, Inc. and its subsidiaries (“Viasystems” or the “Company”) reflect all adjustments consisting only of normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows. The results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for a full fiscal year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission.

Nature of Business

Viasystems is a leading worldwide provider of complex multi-layer printed circuit boards (“PCBs”) and electro-mechanical solutions (“E-M Solutions”). The Company’s products are used in a wide range of applications including, for example, automotive engine controls and safety systems, data networking equipment, telecommunications switching equipment, complex medical, technical and industrial instruments, and flight control systems.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Viasystems Group, Inc. and its wholly-owned and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect i) the reported amounts of assets and liabilities, ii) the disclosure of contingent assets and liabilities at the date of the financial statements and iii) the reported amounts of revenues and expenses during the reporting period.

Estimates and assumptions are used in accounting for the following significant matters, among others:

•

allowances for doubtful accounts;

•

inventory valuation;

•

fair value of derivative instruments and related hedged items;

•

fair value of assets acquired and liabilities assumed in acquisitions;

•

useful lives of property, plant, equipment and intangible assets;

•

long-lived and intangible asset impairments;

•

restructuring charges;

•

warranty and product returns allowances;

•

deferred compensation agreements;

•

tax related items;

•

contingencies; and

•

fair value of awards granted under the Company’s stock-based compensation plans.

Actual results may differ from previously estimated amounts, and such differences may be material to the Company’s condensed consolidated financial statements. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the condensed consolidated financial statements in the period in which the revision is made. The Company does not consider as material any revisions made to estimates or assumptions during the periods presented in the accompanying condensed consolidated financial statements.

Cash and Cash Equivalents

The Company considers short-term highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Commitments and Contingencies

The Company is a party to contracts with third party consultants, independent contractors and other service providers in which the Company has agreed to indemnify such parties against certain liabilities in connection with their performance. Based on historical experience and the likelihood that such parties will assert a claim against the Company, in the opinion of the Company’s management, the ultimate liabilities resulting from such indemnification obligations will not have a material adverse effect on its business, financial condition, results of operations or cash flows.

The Company is a party to agreements with third parties in which the Company has agreed to indemnify such parties against certain liabilities in connection with claims by unrelated parties. At both March 31, 2015 and December 31, 2014, other non-current liabilities included $1,500 of accruals for potential claims in connection with such indemnities.

Viasystems’ certificate of incorporation provides that none of the directors and officers of the Company bear the risk of personal liability for monetary damages for breach of fiduciary duty as a director or officer, except in cases where the action involves a breach of the duty of loyalty, acts or omissions not in good faith or involving intentional misconduct or knowing violation of the law, the unlawful payment of dividends or repurchasing of capital stock, or transactions from which the director or officer derived improper personal benefits.

The Company is subject to various lawsuits and claims with respect to such matters as product liability, product development and other actions arising in the normal course of business. In the opinion of the Company’s management, the ultimate liabilities resulting from such lawsuits and claims will not have a material adverse effect on its business, financial condition, results of operations or cash flows.

Earnings or Loss Per Share

The Company computes basic earnings per share by dividing its net income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding during the period plus, to the extent they are dilutive, common equivalent shares (consisting primarily of employee stock options, unvested restricted stock awards and unvested performance share units). The potentially dilutive impact of the Company’s share-based compensation awards is determined using the treasury stock method.

The components used in the computation of basic and diluted loss per share attributable to common stockholders were as follows:


	Three Months Ended March 31,
	2015			2014
Net loss attributable to common stockholders	$	(8,486	)	$	(9,547	)

Basic weighted average shares outstanding		21,001,444			20,268,717
Dilutive effect of stock options		—			—
Dilutive effect of restricted stock awards		—			—
Dilutive effect of performance share units		—			—

Diluted weighted average shares outstanding		21,001,444			20,268,717

Basic loss per share	$	(0.40	)	$	(0.47	)

Diluted loss per share	$	(0.40	)	$	(0.47	)

For the three months ended March 31, 2015, the calculation of diluted weighted average shares outstanding excludes i) the effect of performance share units representing a maximum of 1,245,212 shares of common stock, ii) options to purchase 1,754,054 shares of common stock and iii) unvested restricted stock awards of 461,721. For the three months ended March 31, 2014, the calculation of diluted weighted average shares outstanding excludes i) the effect of performance share units representing a maximum of 1,384,555 shares of common stock, ii) options to purchase 1,848,625 shares of common stock, iii) unvested restricted stock awards of 512,652.

Noncontrolling Interest

The Company owns a majority interest in its subsidiary that operates a manufacturing facility in Huiyang, China, and a noncontrolling interest holder owns 5% of this subsidiary. Noncontrolling interest is reported as a component of equity, and net income attributable to the noncontrolling interest is reported as a reduction from net income to arrive at net income attributable to the Company’s common stockholders.

Recently Issued Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (the “FASB”) issued a new accounting standard that requires deferred financing costs related to a recognized debt liability be presented in the balance sheet as a reduction of the related liability rather than as an asset. The Company will adopt the new standard in 2016 and begin to reclassify the Company’s deferred financing costs on its balance sheet from an asset to a reduction of long-term debt. As of March 31, 2015 and December 31, 2014, the balance of the Company’s asset for deferred financing costs was $12,356 and $13,115, respectively.

In June 2014, the FASB issued a new accounting standard that changes the criteria companies must use for the recognition of revenue and will affect the Company’s measurement, recognition and disclosures concerning revenue once the new standard is adopted. The Company will adopt the new standard as of January 1, 2017. As of the date of this Report, the Company is still evaluating the potential impact this standard will have on its consolidated financial statements upon adoption.

2. Merger Agreement with TTM Technologies, Inc.

On September 21, 2014, the Company, TTM Technologies, Inc., a Delaware corporation (“TTM”), and Vector Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of TTM (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Merger Sub will, subject to the satisfaction or waiver of the conditions therein, merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of TTM (the “Merger”). The Merger Agreement was adopted by the Company’s stockholders on December 16, 2014. Selling, general and administrative costs for the three months ended March 31, 2015, include $3,288 of professional fees and other expenses related to the Merger.

Pursuant to the terms of the Merger Agreement and subject to the conditions therein, at the effective time of the Merger (the “Effective Time”), each share of the Company’s common stock issued and outstanding immediately prior to the Effective Time (other than shares (1) held in treasury of the Company, (2) owned by TTM or Merger Sub or (3) owned by stockholders who have perfected and not withdrawn a demand for appraisal rights under Delaware law) will be converted into the right to receive a combination of (a) 0.706 of validly issued, fully paid and nonassessable shares of TTM’s common stock (the “Stock Consideration”) and (b) $11.33 per share in cash (together with the Stock Consideration, the “Merger Consideration”). No fractional shares of TTM’s common stock will be issued in the Merger and the Company’s stockholders will receive cash in lieu of any fractional shares.

Pursuant to the terms of the Merger Agreement and subject to the conditions therein, at the Effective Time, the Company’s outstanding stock options will be cancelled and converted into the right to receive a combination of cash and stock with a combined value equal to the excess value, if any, of the Merger Consideration that would be delivered in respect of the number of shares of the Company’s common stock underlying such option over the exercise price for such option. The Company’s outstanding restricted stock awards will be converted into the Merger Consideration. The Company’s outstanding performance share units will vest based on the greater of 100% of the target payout and the payout that would have resulted based on the Company’s performance criteria, with each such vested performance share unit being exchanged for the Merger Consideration.

The completion of the Merger is subject to various closing conditions, including, among other things, i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR”), ii) the absence of any legal restraints or prohibitions on the consummation of the Merger and iii) receipt of approval of the Merger by the Committee on Foreign Investment in the United States (“CFIUS”). The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions), the other party having performed in all material respects its obligations under the Merger Agreement and the other party not having suffered a material adverse effect.

The Merger Agreement contains customary representations, warranties and covenants made by each of the Company and TTM, including, among other things, covenants and agreements to conduct their respective businesses in the ordinary course in all material respects during the period between the execution of the Merger Agreement and completion of the Merger and not to engage in certain kinds of transactions during this period.

The Merger Agreement contains certain termination rights for each of the Company and TTM, including the right of each party to terminate the Merger Agreement if the Merger has not been consummated by June 21, 2015, subject to a three-month extension to September 21, 2015 at the election of either party if, on such date (such date as the same may be extended, the “Outside Date”), the Merger has not yet received antitrust approval, CFIUS approval or certain specified legal restraints are in place but all other closing conditions have been satisfied.

The Merger Agreement also provides that the Company will be entitled to receive from TTM a termination fee of $40,000 in the event that the Merger Agreement is terminated due to a failure to obtain regulatory approval.

The Company cannot give any assurance that the Merger and the other related transactions will be completed or that, if completed, they will be exactly on the terms as set forth in the Merger Agreement and the other related transaction agreements.

3. Inventories

The composition of inventories is as follows:


	March 31, 2015		December 31, 2014
Raw materials	$	42,535	$	44,582
Work in process		41,946		41,517
Finished goods		46,383		52,096

Total	$	130,864	$	138,195

Inventories are stated at the lower of cost or market using the first-in, first-out (“FIFO”) and average cost methods.

4. Property, Plant and Equipment

The composition of property, plant and equipment is as follows:


	March 31, 2015			December 31, 2014
Land and buildings	$	165,683		$	162,230
Machinery, equipment and systems		634,448			632,527
Leasehold improvements		99,517			98,721
Construction in progress		10,068			9,496

		909,716			902,974
Less: Accumulated depreciation		(500,157	)		(487,367	)

Total	$	409,559		$	415,607

5. Credit Facilities and Long-term Debt

The composition of long-term debt is as follows:


	March 31, 2015			December 31, 2014
Senior Secured Notes due 2019	$	602,835		$	603,008
Senior Secured 2010 Credit Facility		—			—
North America Mortgage Loans		9,921			10,435
Capital leases and other		726			565

		613,482			614,008
Less: Current maturities		(1,134	)		(1,093	)

	$	612,348		$	612,915

As of March 31, 2015, unamortized premium included in the carrying balance of the Senior Secured Notes due 2019 was $2,835.

As of March 31, 2015, there were no amounts outstanding under the Company’s various credit facilities, the Company had issued letters of credit totaling $2,409, and approximately $110,803 of the credit facilities were unused and available.

6. Restructuring and Impairment

As of March 31, 2015, the reserve for restructuring charges included $220 and $1,568 related to i) the 2011 closure of its Huizhou Facility and ii) plant shutdowns and downsizings which occurred in 2001 through 2005 as a result of the economic downturn that began in 2000 (the “2001 Restructuring”), respectively.

The following tables summarize changes in the reserve for restructuring charges for the three months ended March 31, 2015 and 2014:


	Three Months Ended March 31, 2015
	Reserve at 12/31/14		Net Charges		Cash Payments			Adjustments			Reserve at 3/31/15
Restructuring Activities:
Personnel and severance	$	317	$	—	$	(11	)	$	—		$	306
Lease and other contractual commitments		1,513		—		(46	)		15	^(a)		1,482

Total restructuring charges	$	1,830	$	—	$	(57	)	$	15		$	1,788


	Three Months Ended March 31, 2014
	Reserve at 12/31/13		Net Charges		Cash Payments			Adjustments			Reserve at 3/31/14
Restructuring Activities:
Personnel and severance	$	1,587	$	—	$	—		$	—		$	1,587
Lease and other contractual commitments		1,240		273		(346	)		12	^(a)		1,179

Total restructuring charges	$	2,827	$	273	$	(346	)	$	12		$	2,766

(a)	Represents accretion of interest on discounted restructuring liabilities.

During the three months ended March 31, 2015, the Company incurred no restructuring charges. During the three months ended March 31, 2014, the Company incurred restructuring charges of $273 in its Printed Circuit Boards segment related to lease and moving costs for the relocation of its Anaheim, California manufacturing facility from a leased facility to a new facility owned by the Company.

7. Derivative Financial Instruments and Fair Value Measurements

Cash Flow Hedging Strategy

The Company uses foreign exchange forward contracts and cross-currency swaps that are designated and qualify as cash flow hedges to manage certain of its foreign exchange rate risks. The Company’s objective is to limit potential losses in earnings or cash flows from adverse foreign currency exchange rate movements. The Company’s foreign currency exposure arises from the transacting of business in currencies other than the U.S. dollar, primarily the Chinese Renminbi (“RMB”).

The Company enters into foreign exchange forward contracts and cross-currency swaps after considering estimated future use of foreign currencies, desired foreign exchange rate sensitivities and the foreign exchange rate environment. Prior to entering into a hedge transaction, the Company formally documents the relationship between hedging instruments to be used and the hedged items, as well as the risk management objective for undertaking the hedge transactions. The Company generally does not hedge its exposure to the exchange rate variability of future cash flows beyond the end of its next ensuing fiscal year.

The Company recognizes all such derivative contracts as either assets or liabilities in the balance sheet and measures those instruments at fair value through adjustments to other comprehensive income, current earnings, or both, as appropriate. Accumulated other comprehensive income as of March 31, 2015 and December 31, 2014, included net deferred loss on derivatives of $542 (net of taxes of $0) and $1,053 (net of taxes of $0), respectively, related to cash flow hedges.

The Company records deferred gains and losses related to cash flow hedges based on the fair value of open derivative contracts on the reporting date, as determined using a market approach and Level 2 inputs. Realized gains or losses from the settlement of foreign exchange forward contracts and cross-currency swaps are recognized in earnings in the same period the hedged foreign currency cash flow affects earnings. For the three months ended March 31, 2015 and 2014, a gain of $407 and a loss of $203 were recorded in cost of goods sold related to foreign currency cash flow hedges, respectively.

The following table summarizes the Company’s outstanding derivative contracts:


	March 31, 2015		December 31, 2014
Notional amount in thousands of Chinese RMB		1,350,000		1,800,000
Weighted average remaining maturity in months		4.6		6.1
Weighted average exchange rate per one U.S. Dollar		6.28		6.28

Fair Value of Measurements

The Company measures the fair value of assets and liabilities using a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 - observable inputs such as quoted prices in active markets; Level 2 - inputs, other than quoted market prices in active markets, which are observable, either directly or indirectly; and Level 3 - valuations derived from valuation techniques in which one or more significant inputs are unobservable. In addition, the Company may use various valuation techniques, including the market approach, using comparable market prices; the income approach, using present value of future income or cash flow; and the cost approach, using the replacement cost of assets.

Financial Instruments Measured on a Recurring Basis

The following table sets forth, as of March 31, 2015 and December 31, 2014, the hierarchy of the Company’s financial asset (liability) positions for which fair value is measured on a recurring basis:


	March 31, 2015
	Level 1		Level 2			Level 3		Balance Sheet Classification
Available - for - sale investments in Savings Restoration Plan	$	1,726	$	—		$	—	Prepaid expense and other
Cash flow hedges - deferred loss contracts		—		(542	)		—	Accrued and other liabilities

	$	1,726	$	(542	)	$	—


	December 31, 2014
	Level 1		Level 2			Level 3		Balance Sheet Classification
Available - for - sale investments in Savings Restoration Plan	$	1,429	$	—		$	—	Prepaid expense and other
Cash flow hedges - deferred loss contracts		—		(1,053	)		—	Accrued and other liabilities

	$	1,429	$	(1,053	)	$	—

The Company has a savings restoration plan (the “Savings Restoration Plan”) to provide additional benefits to certain domestic employees who, due to limitations imposed by the Internal Revenue Code, are not eligible to receive the full employer matching contribution to the Company’s defined contribution retirement savings plan. The Savings Restoration Plan also allows for the voluntary deferral of certain compensation by eligible employees. Available-for-sale investments in the Savings Restoration Plan consist of investments in money market accounts and mutual funds invested in a rabbi trust, and are valued based on quoted prices in active markets (Level 1).

The Company records deferred gains and losses related to cash flow hedges based on the fair value of active derivative contracts on the reporting date, as determined using a market approach. As quoted prices in active markets are not available for identical contracts, Level 2 inputs are used to determine fair value. These inputs include quotes for similar but not identical derivative contracts, market interest rates that are corroborated with publicly available market information and third party credit ratings for the counter parties to the derivative contracts. When applicable, all such contracts covered by master netting agreements are reported net, with gross positive fair values netted with gross negative fair values by counterparty.

The Company did not have any transfers between levels during the three months ended March 31, 2015 and 2014.

Other Financial Instruments

In addition to cash flow hedges and available for sale investments in the Company’s Savings Restoration Plan, the Company’s financial instruments consist of cash equivalents, accounts receivable and long-term debt. For cash equivalents and accounts receivable, the carrying amounts approximate fair market value. The estimated fair values of the Company’s debt instruments as of March 31, 2015 and December 31, 2014, are as follows:


	March 31, 2015
	Fair Value		Carrying Amount		Balance Sheet Classification
Senior Secured Notes due 2019	$	631,500	$	602,835	Long-term debt, less current maturities
Senior Secured 2010 Credit Facility		—		—
North America Mortgage Loans		9,860		9,921	Long-term debt, including current maturities

	December 31, 2014
	Fair Value		Carrying Amount		Balance Sheet Classification
Senior Secured Notes due 2019	$	634,878	$	603,008	Long-term debt, less current maturities
Senior Secured 2010 Credit Facility		—		—
North America Mortgage Loans		10,288		10,435	Long-term debt, including current maturities

The Company determined the fair value of the Senior Secured Notes due 2019 using Level 1 inputs - quoted market prices for the notes. The Company determined the fair value of the North America Mortgage Loans using Level 2 inputs, and estimated the fair value based on discounted future cash flows using a discount rate that approximates the current effective borrowing rate for comparable loans.

8. Stock-based Compensation

Stock compensation expense recognized in the condensed consolidated statements of operations and comprehensive (loss) income was as follows:


	Three Months Ended March 31,
	2015		2014
Cost of goods sold	$	127	$	161
Selling, general and administrative		1,413		1,568

	$	1,540	$	1,729

Stock Options

The following table summarizes the stock option activity for the three months ended March 31, 2015 and 2014:


	2015					2014
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		1,770,720		$	23.40		1,869,124		$	24.73
Granted		—			—		—			—
Exercised		(15,166	)		14.23		—			—
Forfeited		(1,500	)		20.88		(20,499	)		19.70

Outstanding at March 31,		1,754,054		$	23.48		1,848,625		$	24.78

Options exercisable at March 31,		1,742,668		$	23.54		1,720,221		$	25.37

The following table summarizes information regarding outstanding stock options as of March 31, 2015:


	Outstanding						Exercisable
Exercise Price	Number of Options		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number of Options		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price
$ 12.66 to $15.30		111,415		3.31 years	$	14.83		100,029		3.15 years	$	14.90
$ 18.42 to $21.04		761,270		3.23 years		19.66		761,270		3.23 years		19.66
$ 21.88 to $24.00		840,594		2.09 years		21.89		840,594		2.09 years		21.89
$ 150.99		40,775		1.61 years		150.99		40,775		1.61 years		150.99

		1,754,054		2.65 years	$	23.48		1,742,668		2.64 years	$	23.54

Restricted Stock Awards

The following table summarizes restricted stock activity for the three months ended March 31, 2015 and 2014:


	2015					2014
	Shares			Weighted Average Grant Date Per Share Fair Value		Shares			Weighted Average Grant Date Per Share Fair Value
Nonvested at beginning of year		623,302		$	15.09		576,042		$	17.47
Granted		—			—		87,000			13.02
Vested		(158,081	)		18.42		(148,386	)		20.34
Forfeited		(3,500	)		13.02		(2,004	)		14.68

Nonvested at March 31,		461,721		$	13.97		512,652		$	15.89

As of the vesting date, the total fair value of restricted stock awards that vested during the three months ended March 31, 2015, was $2,618. On May 8, 2015, an additional 54,816 restricted stock awards are expected to vest in accordance with the terms of the original underlying grant agreements.

Performance Share Units

For performance share units with market conditions, such as those that include performance conditions related to attaining a specific stock price, the grant date fair value of awards is expensed ratably over the requisite service period. For performance share units without market conditions, the grant date fair value of awards is expensed ratably over the requisite service period based on the probability of achieving the performance objectives, with changes in expectations recognized as an adjustment to earnings in the period of the change. Performance share units vest only if performance objectives are achieved, and vested shares may range from zero to 200% of the original grant, depending upon the terms of the respective awards and the actual results compared with the performance objectives.

No performance share units were granted during the three months ended March 31, 2015. During the three months ended March 31, 2014, the Company granted performance share units with market conditions and a weighted average per share fair value of $14.88 estimated using the Monte Carlo simulation model.

The following table summarizes performance share unit activity for the three months ended March 31, 2015 and 2014:


	2015					2014
	Share Units			Weighted Average Grant Date Per Share Fair Value		Share Units		Weighted Average Grant Date Per Share Fair Value
Outstanding, beginning of year		799,251		$	15.84		558,113	$	16.26
Granted at target		—			—		241,138		14.88
Vested		(68,544	)		15.30		—		—
Forfeited		—			—		—		—

Outstanding, at March 31,		730,707		$	15.89		799,251	$	15.84

On February 7, 2015, 68,544 performance share units vested which, based upon the level of achievement attained, resulted in the issuance of 37,697 shares of common stock before share withholding for taxes.

9. Income Taxes

The Company’s income tax provision relates to i) taxes provided on its pre-tax earnings based on the effective tax rates in the jurisdictions where the income is earned and ii) other tax matters, including changes in tax-related contingencies and changes in the valuation allowance established for deferred tax assets. Taxes provided on pre-tax income relate primarily to the Company’s profitable operations in China. Because of substantial net operating loss carryforwards related to the U.S. and other tax jurisdictions, the Company has not recognized income tax benefits in those jurisdictions for these losses.

For the three months ended March 31, 2015, the Company’s tax provision includes net expense of $2,648 related to pre-tax earnings, and a net expense of $309 related to other tax matters, including reversals of $322 of uncertain tax positions due to the lapse of the applicable statute of limitations. For the three months ended March 31, 2014, the Company’s tax provision includes net expense of $3,533 related to pre-tax earnings, and a net expense of $644 related to other tax matters.

10. Business Segment Information

The Company operates in two segments: i) Printed Circuit Boards and ii) Assembly. The Printed Circuit Boards segment consists of printed circuit board manufacturing facilities located in the United States, Canada and China. These facilities manufacture double-sided and multi-layer printed circuit boards and backpanels. The Assembly segment consists of assembly operations including backpanel assembly, printed circuit board assembly, cable assembly, custom enclosure fabrication, and full system assembly and testing. The assembly operations are conducted in manufacturing facilities in China and Mexico. Assets and liabilities of the Company’s corporate headquarters, along with those of its closed printed circuit board and assembly operations, have not been allocated and remain in “Other” for purpose of segment disclosures. Operating expenses of the Company’s corporate headquarters are allocated to each segment based on a number of factors, including relative sales contributions. Expenses related to the Merger are reported in “Other” for purpose of segment disclosures.

Total assets by segment are as follows:


	March 31, 2015		December 31, 2014
Printed Circuit Boards	$	997,027	$	984,949
Assembly		86,574		95,478
Other		43,171		55,078

Total assets	$	1,126,772	$	1,135,505

Net sales and operating income (loss) by segment, together with a reconciliation to loss before income taxes, are as follows:


	Three Months Ended March 31,
	2015			2014
Net sales to external customers:
Printed Circuit Boards	$	265,787		$	253,265
Assembly		38,841			42,647

Total	$	304,628		$	295,912

Intersegment sales:
Printed Circuit Boards	$	3,634		$	2,570
Assembly		—			—

Total	$	3,634		$	2,570

Operating income (loss):
Printed Circuit Boards	$	10,545		$	9,386
Assembly		(1,641	)		(3,891	)
Other		(3,288	)		—

Total		5,616			5,495
Interest expense, net		11,740			11,253
Amortization of deferred financing costs		759			655
Other, net		(1,527	)		(1,233	)

Loss before income taxes	$	(5,356	)	$	(5,180	)

11. Accumulated Other Comprehensive Income

Changes in accumulated other comprehensive income, by component, for the three months ended March 31, 2015 and 2014, were as follows:


	2015								2014
	Cash Flow Hedges (see Note 7)			Foreign Currency Translation		Total			Cash Flow Hedges (see Note 7)			Foreign Currency Translation		Total
Accumulated other comprehensive (loss) income at beginning of year	$	(1,053	)	$	7,528	$	6,475		$	933		$	7,528	$	8,461

Other comprehensive (loss) income, net of tax and before reclassifications		918			—		918			(3,501	)		—		(3,501	)
Amounts reclassified from accumulated other comprehensive income, net of tax		(407	)		—		(407	)		203			—		203

Other comprehensive income (loss), net of tax,		511			—		511			(3,298	)		—		(3,298	)

Accumulated other comprehensive (loss) income at March 31,	$	(542	)	$	7,528	$	6,986		$	(2,365	)	$	7,528	$	5,163

Other comprehensive (loss) income for the three-month periods ended March 31, 2015 and 2014, was net of taxes of $0.

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 condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q (the “Report”).

We have made certain “forward-looking” statements in this Report under the protection of the safe harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Such forward-looking statements include those statements made in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities and effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believes,” “expects,” “may,” “anticipates,” “intends,” “plans,” “estimates” or the negative thereof or other similar expressions or comparable terminology.

Forward-looking statements involve risks, uncertainties and assumptions and are not guarantees of future events or results. Actual results may differ materially from anticipated results expressed or implied in these forward-looking statements. You should not put undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this Report, except to the extent required by law.

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 the ability of Viasystems to successfully complete the proposed merger with TTM Technologies, Inc. and the timing of the proposed merger; any actions taken by the company, including but not limited to, restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions); fluctuations in our operating results and customer orders; global economic conditions; declines in gross margin as a result of excess capacity; our significant reliance on net sales to our largest customers; fluctuations in our operating results; our history of losses; our reliance on the automotive and telecommunications industries; risks associated with the credit risk of our customers and suppliers; influence of significant stockholders; our significant foreign operations and risks relating to currency fluctuations; relations with and regulations imposed by the Chinese government, including power rationing; our dependence on the electronics industry, which is highly cyclical and subject to significant downturns in demand; shortages of, or price fluctuations with respect to, raw materials and increases in oil prices; our ability to compete in a highly competitive industry and to respond to rapid technological changes; reduction in, or cancellation of, customer orders; risks associated with manufacturing defective products and failure to meet quality control standards; uncertainty and adverse changes in the economy and financial markets; risks relating to success of printed circuit board manufacturers in Asia; failure to maintain good relations with our noncontrolling interest holder in China; failure to align manufacturing capacity with customer demand; damage to our manufacturing facilities or information systems; loss of key personnel and high employee turnover; risks associated with governmental and environmental regulation, including regulation associated with climate change and greenhouse gas emissions; our exposure to income tax fluctuations; failure to comply with, or expenses related to compliance with, export laws or other laws applicable to our foreign operations, including the Foreign Corrupt Practices Act; our ability to renew leases of our manufacturing facilities; risks associated with future merger-related and restructuring charges and risks relating to our substantial indebtedness. Please refer to the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2014, for additional factors that could materially affect our financial performance.

Recent Developments

Merger Agreement with TTM Technologies, Inc.

On September 21, 2014, our company, Viasystems Group, Inc. (the “Company”), TTM Technologies, Inc., a Delaware corporation (“TTM”), and Vector Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of TTM (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Merger Sub will, subject to the satisfaction or waiver of the conditions therein, merge with and into the Company, with the Company surviving the merger as a wholly owned subsidiary of TTM (the “Merger”). The Merger agreement was adopted by the Company’s stockholders on December 16, 2014.

The Merger Agreement also provides that the Company will be entitled to receive from TTM a termination fee of $40.0 million in the event that the Merger Agreement is terminated due to a failure to obtain regulatory approval.

The foregoing description of the Merger and the Merger Agreement is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 22, 2014, and which is incorporated by reference herein.

Company Overview

We are a leading worldwide provider of complex multi-layer rigid, flexible and rigid-flex printed circuit boards (“PCBs”) and electro-mechanical solutions (“E-M Solutions”). PCBs serve as the “electronic backbone” of almost all electronic equipment, and our E-M Solutions products and services integrate PCBs and other components into finished or semi-finished electronic equipment, which include custom and standard metal enclosures, metal cabinets, metal racks and sub-racks, backplanes, cable assemblies and busbars.

The products we manufacture include, or can be found in, a wide variety of commercial products, including automotive engine controls, hybrid converters, automotive electronics for navigation, safety, entertainment and anti-lock braking systems, telecommunications switching equipment, data networking equipment, computer storage equipment, semiconductor test equipment, wind and solar energy applications, off-shore drilling equipment, flight control systems, military communications applications and complex industrial, medical and other technical instruments.

We have fifteen manufacturing facilities, including eight in the United States and seven located outside of the United States that allow us to take advantage of low cost, high quality manufacturing environments, while serving a broad base of customers around the globe. Our PCB products are produced in our eight domestic facilities, three of our five facilities in China and our one facility in Canada. Our E-M Solutions products and services are provided from our other two facilities in China and our one facility in Mexico. In addition to our manufacturing facilities, in order to support our customers’ local needs, we maintain engineering and customer service centers in Hong Kong, China, the Netherlands, England, Canada, Mexico and the United States. We operate our business in two segments: Printed Circuit Boards, which includes our PCB products, and Assembly, which includes our E-M Solutions products and services.

We are a supplier to more than 1,000 original equipment manufacturers (“OEMs”) and contract electronic manufacturers (“CEMs”) in numerous end markets. Our OEM customers include industry leaders such as:


• Agilent Technologies, Inc.		• Huawei Technologies Co. Ltd.
• Alcatel-Lucent SA		• Infinera Corporation
• Autoliv, Inc.		• Intel Corporation
• BAE Systems, Inc.		• L-3 Communications Holdings, Inc.
• Robert Bosch GmbH		• Lear Corporation
• Broadcom Corporation		• NetApp, Inc.
• Ciena Corporation		• Q-Logic Corporation
• Cisco Systems, Inc.		• Qualcomm Incorporated
• Continental AG		• Raytheon Company
• Danahar Corporation		• Rockwell Automation, Inc.
• Deere & Company		• Rockwell Collins, Inc.
• Dell Inc.		• Teradyne, Inc.
• Ericsson AB		• Tesla Motors, Inc.


• General Electric Company		• TRW Automotive Holdings Corp.
• Gerber Scientifics, Inc.		• United Technologies Corporation
• Harris Communications

In addition, we have good working relationships with industry-leading CEMs and we supply PCBs and E-M Solutions products to them as well. These customers include:


• Benchmark Electronics, Inc.		• Foxconn Technology Group
• Celestica, Inc.		• Jabil Circuit, Inc.
• Flextronics International Ltd.		• Plexus Corp.

Results of Operations

Three Months Ended March 31, 2015, Compared with the Three Months Ended March 31, 2014

Net Sales. Net sales for the three months ended March 31, 2015, were $304.6 million, a $8.7 million, or 2.9%, increase from net sales during the same period in 2014.

Net sales by end market for the three months ended March 31, 2015 and 2014, were as follows:


End Market (dollars in millions)	2015		2014
Automotive	$	103.2	$	93.2
Industrial & Instrumentation		68.4		73.2
Computer and Datacommunications		49.9		46.9
Telecommunications		49.1		51.7
Military and Aerospace		34.0		30.9

Total Net Sales	$	304.6	$	295.9

Our net sales of products for use in the automotive end market increased by approximately $10.0 million, or 10.7%, during the three months ended March 31, 2015, compared with the same period in 2014. The increase was primarily a result of increased sales volume of approximately 10.8% in our Printed Circuit Boards segment driven by i) additional capacity we added during 2014 to our principal automotive manufacturing facility in China and ii) increased customer demand as result of greater demand for electric vehicles and the expanding electronic content of motor vehicles in general.

Net sales of products ultimately used in the industrial & instrumentation end market for the three months ended March 31, 2015, decreased by approximately $4.8 million, or 6.5%, compared with the same period in 2014. The decrease in net sales was driven primarily by decreased demand for wind power, automated test equipment and elevator controls related programs, partially offset by increased demand and market share gains in certain medical equipment programs.

During the first quarter of 2015, net sales of our products for use in the computer and datacommunications end market increased by approximately $3.0 million, or 6.4%, as compared with the same period in the prior year. The increase was primarily a result of i) increased sales volume of approximately 2.9% in our Printed Circuit Boards segment driven by new program wins for data center related programs and ii) product mix, partially offset by iii) lower order volume from one customer as they await the consummation of our proposed merger with TTM.

Net sales of products ultimately used in the telecommunications end market decreased by approximately $2.6 million, or 4.9%, for the quarter ended March 31, 2015, as compared with the quarter ended March 31, 2014. The sales decrease was primarily as a result of i) the loss of certain programs due to price competiveness and ii) reduced demand from one customer as they work through a business combination, partially offset by iii) increased demand from a customer whose products support the 4G LTE build-out in China and iv) new program wins related to a customer’s 100Gbps Ethernet products.

Net sales to the military and aerospace end market increased by $3.1 million, or 9.9%, to $34.0 million for the quarter ended March 31, 2015, as compared with the quarter ended March 31, 2014. The sales increase was primarily a result of i) increased sales to a customer who outsourced their internal production of PCBs to us and ii) new program wins related to a customer’s advanced radar system products, partially offset by iii) reduced demand for certain programs as a result reduced demand for our customers’ end products.

Net sales by segment for the three months ended March 31, 2015 and 2014, were as follows:


Segment (dollars in millions)	2015			2014
Printed Circuit Boards	$	269.4		$	255.9
Assembly		38.8			42.6
Eliminations		(3.6	)		(2.6	)

Total Net Sales	$	304.6		$	295.9

Printed Circuit Boards segment net sales, including intersegment sales, for the three months ended March 31, 2015, increased by $13.5 million, or 5.3%, to $269.4 million. The increase was a result of increases in net sales in the automotive, and military and aerospace end markets, partially offset by decreases in sales in the industrial & instrumentation, computer and datacommunications, and telecommunications end markets.

Assembly segment net sales decreased by $3.8 million, or 8.9%, to $38.8 million for the three months ended March 31, 2015, compared with the first quarter of 2014. The decrease was the result of reduced demand across all but our computer and datacommunications end markets.

Cost of Goods Sold. Cost of goods sold, exclusive of items shown separately in the condensed consolidated statement of operations and comprehensive (loss) income for the three months ended March 31, 2015, was $244.6 million, or 80.3%, of consolidated net sales. This represents a 0.7 percentage point improvement from the 81.0% of consolidated net sales for the first quarter of 2014.

The costs of materials, labor and overhead in our Printed Circuit Boards segment can be impacted by trends in global commodities prices and currency exchange rates, as well as other cost trends which can impact minimum wage rates, electricity and diesel fuel costs in China. Economies of scale can help to offset any adverse trends in these costs. Cost of goods sold in our Assembly segment relates primarily to component materials costs. As a result, trends in sales volume for the segment drive similar trends in cost of goods sold.

Selling, General and Administrative Costs. Selling, general and administrative costs increased by $4.7 million, or 17.4%, to $31.5 million for the three months ended March 31, 2015, compared to the same period in the prior year. The increase in selling, general and administrative costs is primarily due to i) $3.3 million of professional fees and other costs associated with the Merger and ii) costs associated with management meetings held during the first quarter of 2015 which were not held in 2014.

Depreciation. Depreciation expense for the three months ended March 31, 2015, was $21.5 million, including $20.6 million related to our Printed Circuit Boards segment and $0.9 million related to our Assembly segment. Depreciation expense was substantially unchanged in our Printed Circuit Boards segment compared with the same period in the prior year as our base of depreciable assets remained relatively constant. In our Assembly segment, depreciation expense declined by approximately $0.3 million as a result of reduced capital spending and asset impairments recognized in 2014.

Restructuring and Impairment. During the three months ended March 31, 2015, we incurred no restructuring changes. During the three months ended March 31, 2014, we incurred restructuring charges of $0.3 million in our Printed Circuit Boards segment related to lease and moving costs for the relocation of our Anaheim, California PCB manufacturing facility from a leased facility to a new facility we own.

Operating Income. Operating income of $5.6 million for the three months ended March 31, 2015, represents an increase of $0.1 million compared to operating income of $5.5 million for the three months ended March 31, 2014. The primary sources of operating income (loss) for the three months ended March 31, 2015 and 2014, were as follows:


Source (dollars in millions)	2015			2014
Printed Circuit Boards segment	$	10.5		$	9.4
Assembly segment		(1.6	)		(3.9	)
Other		(3.3	)		—

Operating income	$	5.6		$	5.5

Operating income from our Printed Circuit Boards segment increased by $1.1 million to $10.5 million for the three months ended March 31, 2015, compared to $9.4 million for the same period in the prior year. The increase is primarily the result of increased net sales and lower costs of goods sold relative to net sales, partially offset by increased selling, general and administrative costs.

The operating loss in our Assembly segment was $1.6 million for the three months ended March 31, 2015, compared with a loss of $3.9 million in the first quarter of 2014. The improvement is primarily the result of lower cost of goods sold relative to net sales and lower depreciation expense during the first quarter of 2015, as compared to the same period in the prior year.

The operating loss in “Other” relates to professional fees and other costs related to the Merger.

Adjusted EBITDA. We measure our performance primarily through our operating income. In addition to our consolidated financial statements presented in accordance with U.S. GAAP, management uses certain non-U.S. GAAP financial measures, including “Adjusted EBITDA.” Adjusted EBITDA is not a recognized financial measure under U.S. GAAP, and does not purport to be an alternative to operating income or an indicator of operating performance. Adjusted EBITDA is presented to enhance an understanding of our operating results and is not intended to represent cash flows or results of operations.

Our board of directors, lenders and management use Adjusted EBITDA primarily as an additional measure of operating performance for matters including executive compensation and competitor comparisons. In addition, the use of this non-U.S. GAAP measure provides an indication of our ability to service debt, and we consider it an appropriate measure to use because of our highly leveraged position.

Adjusted EBITDA has certain material limitations, primarily due to the exclusion of certain amounts that are material to our consolidated results of operations, such as interest expense, income tax expense and depreciation and amortization. In addition, Adjusted EBITDA may differ from the Adjusted EBITDA calculations of other companies in our industry, limiting its usefulness as a comparative measure.

We use Adjusted EBITDA to provide meaningful supplemental information regarding our operating performance and profitability by excluding from EBITDA certain items that we believe are not indicative of our ongoing operating results or will not impact future operating cash flows, as follows:

•

Costs Relating to the Merger – professional fees and other non-recurring costs and expenses associated with the Merger. We exclude these costs and expenses because they are not representative of our customary operating expenses.

•

Stock Compensation – non-cash charges associated with recognizing the fair value of stock options and other equity awards granted to employees and directors. We exclude these charges to more clearly reflect comparable year-over-year cash operating performance.

•

Restructuring and Impairment Charges – which consist primarily of facility closures and other headcount reductions. We exclude these restructuring and impairment charges to more clearly reflect our ongoing operating performance.

Reconciliations of operating income to Adjusted EBITDA for the three months ended March 31, 2015 and 2014, were as follows:


	Three Months Ended March 31,
Source (dollars in millions)	2015		2014
Operating income	$	5.6	$	5.5
Add-back:
Depreciation and Amortization		22.9		23.5
Costs relating to the Merger		3.3		—
Non-cash stock compensation expense		1.5		1.7
Restructuring and impairment		—		0.3

Adjusted EBITDA	$	33.3	$	31.0

Adjusted EBITDA increased by $2.3 million, or 7.4%, as compared to the same period in the prior year primarily as a result of higher sales levels and lower cost of goods sold relative to net sales levels, partially offset by higher selling, general and administrative costs.

Interest Expense, Net. Interest expense, net of interest income, was $11.7 million and $11.3 million for the three months ended March 31, 2015 and March 31, 2014, respectively. The increase in interest expense, net of interest income, is primarily due to the issuance during April 2014 of an additional $50.0 million aggregate principal amount of our 7.875% Senior Secured Notes due 2019.

Income Taxes. Our income tax provision relates to i) taxes provided on our pre-tax earnings based on the effective tax rates in the jurisdictions where the income is earned and ii) other tax matters, including changes in tax-related contingencies and changes in the valuation allowance established for deferred tax assets. Taxes provided on pre-tax income relate primarily to our profitable operations in China. Because of substantial net operating loss carryforwards related to the U.S. and other tax jurisdictions, we have not recognized income tax benefits in those jurisdictions for those losses. For the three months ended March 31, 2015, our tax provision included net expense of $2.7 million related to our pre-tax earnings and $0.3 million related to other tax matters. For the three months ended March 31, 2014, our tax provision includes net expense of $3.5 million related to pre-tax earnings and a net expense of $0.7 million related to other tax matters. We estimate approximately $3.7 million of our liabilities for uncertain tax positions could be resolved during the remainder of 2015.

Liquidity and Capital Resources

Liquidity

We had cash and cash equivalents at March 31, 2015 and December 31, 2014, of $81.6 million and $72.0 million, respectively, of which $59.6 million and $42.9 million, respectively, were held outside the United States. At March 31, 2015, we had no outstanding borrowings and had outstanding letters of credit of $2.4 million under various credit facilities. Approximately $110.8 million of our credit facilities were unused and available. The agreements underlying our credit facilities include restrictive and financial covenants and, as of March 31, 2015, we were in compliance with these covenants.

Liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and some of which arise from fluctuations related to global economics and markets. Cash balances are generated and held in many locations throughout the world. We permanently reinvest the earnings of our foreign subsidiaries outside the United States, and our current plans do not demonstrate a need to repatriate them to fund our United States operations. If these funds were to be needed for our operations in the United States, we would be required to record and pay significant taxes to repatriate these funds.

We believe that cash flow from operations, availability on credit facilities and available cash on hand will be sufficient to fund our recurring capital expenditure requirements and other currently anticipated cash needs for the next twelve months. Our ability to meet our cash needs through cash generated by our operating activities 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. We cannot be assured however, that our business will generate sufficient cash flow from operations, that currently anticipated cost savings and operating improvements will be realized on schedule, that future borrowings will be available to us under our credit facilities or that we will be able to raise third party financing in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness.

Our principal liquidity requirements over the next twelve months will be for i) $23.6 million semi-annual interest payments required in connection with the 2019 Notes, payable in May and November each year ii) capital expenditure needs of our continuing operations, iii) working capital needs, iv) debt service requirements in connection with our credit facilities and other debt and v) costs associated with The Merger. In addition, the potential for acquisitions of other businesses in the future may require additional debt or equity financing.

Cash Flow

Net cash provided by operating activities for the three months ended March 31, 2015 was $26.2 million and net cash used in operating activities for the three months ended March 31, 2014 was $10.8 million. The increase in net cash from operating activities is primarily due to a lower net loss and changes in working capital. The changes in working capital during the first quarter of 2015, as compared with the changes in working capital during the first quarter of 2014, primarily relate to i) a use of cash during the first quarter of 2014 to reduce accounts payable levels to be in-line with our normal metrics, ii) a reduction of inventory levels during the first quarter of 2015 from year-end 2014 levels, which had been built up to meet our customer’s needs during the Chinese New Year holiday and iii) an increase in inventory levels during the first quarter of 2014 to support customer demand.

Net cash used in investing activities was $15.6 million and $14.0 million for the three months ended March 31, 2015 and 2014, respectively, which primarily related to capital expenditures. Our Printed Circuit Boards segment is a capital-intensive business that requires annual spending to keep pace with customer demands for new technologies, cost reductions, and product quality standards. The spending required to meet our customers’ requirements is incremental to recurring repair and replacement capital expenditures required to maintain our existing production capacities and capabilities. Total capital expenditures by our Printed Circuit Boards segment for the three months ended March 31, 2015 and 2014, were $14.9 million and $14.4 million, respectively. Given the uncertainty about global economic conditions, we have and will continue to focus on managing capital expenditures to respond to changes in demand or other economic conditions.

Net cash used in financing activities was $1.0 million for the three months ended March 31, 2015, which primarily related to withholding taxes paid in connection with net share settlements of stock awards. Net cash provided by financing activities was $9.1 million for the three months ended March 31, 2014, which primarily related to $10.0 million of net borrowings on credit facilities in China, partially offset by scheduled repayments of our North America mortgage loans.

Seasonality of Business

As a manufacturer of electronic components, orders for our products generally correspond to the production schedules of our customers. We have historically experienced reduced sales orders in both of our segments during the first quarter of each year for our products we ship to customers in China. We attribute this decline to shutdowns of our customers’ manufacturing facilities surrounding the Chinese New Year public holidays which normally occur in January or February of each year. In addition, we have historically experienced

lower sales orders in both of our segments during the fourth quarter of each year for the products that we ship to customers in North America and Europe. We attribute this decline to shutdowns of our customers’ manufacturing facilities which are often scheduled during the winter holidays.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

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 are primarily denominated in U.S. dollars, while expenses are frequently denominated in local currencies, and results of operations may be adversely affected 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 and cross-currency swaps to minimize the short-term impact of foreign currency fluctuations. We do not engage in hedging transactions for speculative investment reasons. Gains or losses from our hedging activities have not historically 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, 2015, there were foreign currency hedge instruments outstanding with a nominal value of approximately 1.4 billion Chinese RMB related to our operations in China.

Item 4.

Controls and Procedures

As of March 31, 2015, under the supervision, and with the participation of our Chief Executive Officer and the Chief Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2015, to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (a) is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission’s rules and forms and (b) is accumulated and communicated to our management, including the principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(d) of the Exchange Act, management, including our Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, there were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

We are presently involved in various legal proceedings arising in the ordinary course of our business operations, including employment matters and contract claims. We believe that any liability with respect to these proceedings will not be material in the aggregate to our consolidated financial position, results of operations or cash flows.

Litigation Relating to the TTM Merger

Since the public announcement on September 22, 2014, of the proposed Merger with TTM, we, the Company’s board of directors, TTM and Merger Sub, have been named as defendants in two putative class action complaints challenging the Merger. The first lawsuit, filed on September 30, 2014, in the Circuit Court of St. Louis County, Missouri (the “Missouri Lawsuit”), and the second lawsuit, filed on October 13, 2014, in the Court of Chancery of the State of Delaware (the “Delaware Lawsuit” and, together with the Missouri Lawsuit, the “Lawsuits”), generally allege, among other things, that the Merger fails to properly value our company, and that the individual defendants breached their fiduciary duties in approving the merger agreement and that those breaches were aided and abetted by TTM, Merger Sub and the Company.

The Delaware Lawsuit specifically alleges, among other allegations, that (1) the Company’s board of directors breached its fiduciary duties by: (a) agreeing to the Merger for grossly inadequate consideration, (b) agreeing to lock up the Merger with deal protection devices that prevent other bidders from making a successful competing offer for Viasystems, and (c) participating in a transaction where the loyalties of the Company’s board of directors and management are divided; (2) the Voting Agreements prevent the Company’s stockholders from providing a meaningful vote on the proposal to adopt the Merger; and (3) that those breaches of fiduciary duties were aided and abetted by TTM, Merger Sub, and the Company.

Further, the Missouri Lawsuit specifically alleges, among other allegations, that (1) the Merger is the result of an unfair and flawed process because TTM’s financial advisor conspired with the Company’s two largest stockholders and their affiliates to sell the Company to TTM without the knowledge of the Company’s board of directors; (2) the Merger is unfair because it undervalues Viasystems; (3) the Company’s board of directors and the Company’s management have a conflict of interest due to the cash pool bonus and change in control payments to be made to certain executive officers and key employees if the Merger is consummated; (4) the Merger is unfair because the Merger Agreement contains preclusive deal protection devices that prevent other bidders from making a successful competing offer for Viasystems and prevent the Company’s stockholders from providing a meaningful vote on the proposal to adopt the Merger Agreement; and (5) the definitive Proxy Statement/Prospectus mailed on or about November 10, 2014 to the Company’s stockholders of record as of November 6, 2014 (the “Proxy Statement”) failed to provide the Company’s stockholders with material information regarding the Merger. The Lawsuits seek, among other things, injunctive relief to enjoin the defendants from completing the Merger on the agreed-upon terms, rescinding, to the extent already implemented, the Merger Agreement or any of the terms therein, costs and disbursements and attorneys’ and experts’ fees and costs, as well as other equitable relief as the court deems proper. Viasystems believes the Lawsuits are without merit.

On December 8, 2014, the parties to the Missouri Lawsuit agreed in principle to resolve all claims against the Company, the members of the Company’s board of directors, TTM, and Merger Sub. The agreement contemplated a release and settlement by the Company’s stockholders of all claims against the Company, the members of the Company’s board of directors, TTM, and Merger Sub, and in exchange Viasystems would promptly make certain agreed-upon supplemental disclosures regarding the Merger that the plaintiff in the Missouri Lawsuit alleged were material to the Company’s stockholders considering whether to vote to adopt the Merger Agreement. On December 9, 2014, in accordance with the parties’ agreement, Viasystems filed with the SEC on Form 8-K the agreed-upon supplemental disclosures regarding the Merger (the “Supplemental Disclosures”).

On January 6, 2015, the parties entered into a Memorandum of Understanding, documenting the agreement-in-principle for the settlement of the Missouri Lawsuit. The settlement will not affect the merger consideration to be received by the Company’s stockholders pursuant to the Merger Agreement. There can be no assurance that the parties will ultimately enter into a definitive settlement agreement, or that the court will approve the settlement even if the parties were to enter into such definitive settlement agreement. In the event that the parties enter into a definitive settlement agreement, a hearing will be scheduled, following notice to the Company’s stockholders, at which the court will consider the fairness, reasonableness, and adequacy of the settlement. If the settlement is finally approved by the court, it will resolve and release all claims in all actions (including the Delaware Lawsuit) that were or could have been brought challenging or otherwise relating to any aspect of the Merger, the Merger Agreement, and any disclosure made in connection therewith. The defendants to the Lawsuits deny all fault or liability, and deny that they have committed any of the unlawful or wrongful acts alleged in the Lawsuits or otherwise in relation to the Merger, the Merger Agreement, or any of the events/actions related thereto, and specifically deny that any further disclosure was required to supplement the Proxy Statement under any applicable rule, statute, regulation or law. The Company agreed to provide the Supplemental Disclosures solely to minimize the cost of defending the Lawsuits and to permit the stockholder vote on the Merger Agreement to proceed without delay.

Item 6.

Exhibits

(a)

Exhibits

The information required by this item is included in the exhibit index that follows the signature page of this Form 10-Q.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 6, 2015.


VIASYSTEMS GROUP, INC.

By:		/s/ David M. Sindelar
Name:		David M. Sindelar
Title:		Chief Executive Officer (Principal Executive Officer)

By:		/s/ Gerald G. Sax
Name:		Gerald G. Sax
Title:		Senior Vice President & Chief Financial Officer (Principal Financial Officer)

By:		/s/ Christopher R. Isaak
Name:		Christopher R. Isaak
Title:		Vice President, Corporate Controller & Chief Accounting Officer (Principal Accounting Officer)

EXHIBIT INDEX

These exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K.


Exhibit No.		Description

2.1	(1) (2)	Agreement and Plan of Merger by and among Viasystems Group, Inc., TTM and Merger Sub, dated as of September 21, 2014.

3.1	(3)	Third Amended and Restated Certificate of Incorporation of Viasystems Group, Inc.

3.2	(3)	Second Amended and Restated Bylaws of Viasystems Group, Inc.

31.1	(4)	Chief Executive Officer’s Certification required by Rule 13(a)-14(a) of the Securities Exchange Act of 1934, as amended.

31.2	(4)	Chief Financial Officer’s Certification required by Rule 13(a)-14(a) of the Securities Exchange Act of 1934, as amended.

32.1	(4)	Chief Executive Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.

32.2	(4)	Chief Financial Officer Certification pursuant to 18 U.S.C. § 1350, as adopted pursuant § 906 of the Sarbanes-Oxley Act of 2002.

101	(4)	The following materials from Viasystems Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): i) Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2015 and 2014, ii) Condensed Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014, iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014, and iv) Notes to Condensed, Consolidated Financial Statements.

(1)	Incorporated by reference to Form 8-K of Viasystems Group, Inc. filed on September 22, 2014.

(2)	Certain schedules and exhibits have been omitted and Viasystems Group, Inc. agrees to furnish supplementally to the SEC a copy of any omitted exhibits upon request.

(3)	Incorporated by reference to Form 8-K of Viasystems Group, Inc. filed on February 17, 2010.

(4)	Filed herewith.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company