10-K 1 d95285e10-k.txt FORM 10-K FOR FISCAL YEAR END DECEMBER 31, 2001 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
333-29727 (Commission File Number) VIASYSTEMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 43-177752 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.)
101 SOUTH HANLEY ROAD ST. LOUIS, MISSOURI 63105 (314) 727-2087 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant. (The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such common equity, as of a specified date within 60 days prior to the date of filing.) NO ESTABLISHED PUBLISHED TRADING MARKET EXISTS FOR THE COMMON STOCK, PAR VALUE $.01 PER SHARE, OF VIASYSTEMS, INC. ALL OF THE 1,000 OUTSTANDING SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF VIASYSTEMS, INC. ARE HELD BY VIASYSTEMS GROUP, INC. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.
OUTSTANDING AT MARCH 28, CLASS 2002 ----- -------------- Common Stock 1,000
DOCUMENTS INCORPORATED BY REFERENCE: NONE THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PART I CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS Statements made in this Annual Report on Form 10-K ("Report") includes the use of "we" and "our", which, unless specified otherwise, refers collectively to Viasystems, Inc., and its subsidiaries. Additionally, reference to "Group" refers to Viasystems' holding company parent Viasystems Group, Inc. We have made forward-looking statements in this Report, including those made in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," that are based on our management's beliefs and assumptions and on information currently available to our management. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities and effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words "believes," "expects," "anticipates," "intends," "plans," "estimates" or other similar expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this Report. You should understand that many important factors could cause our results to differ materially from those expressed in forward-looking statements. These factors include, but are not limited to, fluctuations in our operating results and customer orders, our competitive environment, our reliance on our largest customers, risks associated with our international operations, our ability to protect our patents and trade secrets, environmental laws and regulations, our relationship with unionized employees, risks associated with our acquisition strategy, our substantial indebtedness and our ability to comply with the terms thereof, control by our largest stockholders and other factors. ITEM 1. BUSINESS GENERAL We are a leading, worldwide, independent provider of electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the telecommunications, networking, automotive, consumer, industrial and computer industries. We offer EMS solutions to OEMs that outsource the design and manufacture of their products. Our manufacturing services consist of the following: - the design and fabrication of printed circuit boards, in particular, highly complex, multi-layered printed circuit boards; - the manufacture of complex printed circuit board assemblies; - the manufacture of custom-designed backpanel assemblies; - the design and manufacture of wire harnesses and custom cable assemblies; - the design and manufacture of custom enclosures; - the procurement and management of materials; and - the assembly and testing of our customers' complete systems and products. Based on our complete offering we have many touch points with our customers, which allows us to become involved with our customers' new products. Such access not only allows us to design and manufacture our customers' products but also gives us a competitive advantage with respect to providing other assembly and testing services for such products. 1 Our customer base primarily consists of OEMs in the telecommunications, networking, automotive, consumer, industrial and computer industries. We currently are a supplier to over 250 OEMs, including the following industry leaders: Alcatel, Bosch, Cisco Systems, Delco/Delphi, General Electric, Harris, Intel, Lucent Technologies, Marconi Communications, Maytag, Nortel, Siemens and Sun Microsystems. The products we manufacture include, or can be found in, a wide array of products including switching and transmission equipment, wireless base stations, computers, workstations, servers and data networking equipment including hubs, routers and switches, automotive dash panels and control systems, and washers, dryers, and cooking systems. Our revenues for the year ended December 31, 2001, were approximately $1.2 billion. We operate 26 manufacturing facilities located in the United States, Canada, Mexico, the United Kingdom, France, Italy, the Netherlands and China. OUR DEVELOPMENT Viasystems is a wholly owned subsidiary of Group. Group was formed in 1996 by Hicks, Muse, Tate & Furst Incorporated under the name Circo Craft Holding Company to create a preferred global manufacturing provider to leading original equipment manufacturers through acquisitions of printed circuit board fabricators and backpanel assemblers. In August 1996, we changed our name to CC Canada Holding Company and then back to Circo Craft Holding Company in September 1996. We had no operations prior to our first acquisition in October 1996, when we changed our name to Circo Technologies, Inc. In January 1997, we changed our name to Viasystems Group, Inc. We have since broadened our focus to become a full-solution provider in the EMS industry. This change occurred as a result of our recognition that many of the next generation products in the telecommunications and networking industries require highly advanced printed circuit boards and backpanel assemblies. As a result, we made a strategic decision to capitalize on our capabilities and compete for the complete assembly of our customers' products that utilize our printed circuit boards and backpanels. A significant portion of our growth has been generated through 13 acquisitions since 1996. We have completed acquisitions of entire companies as well as acquisitions of captive manufacturing assets divested by OEM customers, including the acquisition of Chang Yuen, a manufacturer of custom metal enclosures located in the Peoples Republic of China and certain manufacturing assets of Metawave Communications Corporation, both completed during the year ended December 31, 2001. We are headquartered in St. Louis, Missouri. The mailing address for our headquarters is 101 South Hanley Road, Suite 400, St. Louis, Missouri 63105 and our telephone number at that location is (314) 727-2087. We can also be reached at our web site www.viasystems.com. MANUFACTURING SERVICES Our offering of manufacturing services includes the following: Design and Prototyping Services. We provide comprehensive front-end engineering services, including full enclosure design, circuit board layout and related design services leading to efficient manufacturing and delivery. We offer quick-turn prototyping, which is the rapid production of a new product sample. Our quick-turn prototype service allows us to provide small test quantities to our customers' product development groups. Our participation in product design and prototyping allows us to reduce our customers' manufacturing costs and their time-to-market and time-to-volume. These services enable us to strengthen our relationships with customers that require advanced engineering services. In addition, by working closely with customers throughout the development and manufacturing process, we gain insight into their future product requirements. Printed Circuit Board and Backpanel Fabrication. Printed circuit boards and backpanels are platforms that connect semiconductors and other electronic components. Backpanels connect printed circuit boards. We manufacture multi-layer printed circuit boards and backpanels on a low-volume, quick-turn basis, as well as on a high-volume production basis. In recent years, the trend in the 2 electronics industry has been to increase the speed and performance of components while reducing their size. Semiconductor designs are currently so complex that they often require printed circuit boards with many layers of narrow, tightly spaced wiring. These advancements in component technologies have driven the change in printed circuit board design to higher density printed circuits. Printed Circuit Board Assembly. Our manufacturing operations include the placement of electronic parts onto printed circuit boards as well as the manufacture of complete electronics products. As OEMs seek to provide greater functionality in smaller products, they require more sophisticated systems assembly technologies and processes. Our investment in advanced manufacturing equipment and our experience with the latest technologies enable us to offer a variety of complex systems assembly services. We offer testing of assembled printed circuit boards and testing of all of the functions of the completed product, and we work with our customers to develop product-specific test strategies. Our test capabilities include manufacturing defect analysis, in-circuit tests, functional tests and environmental stress tests of board or system assemblies. Custom Enclosures. We specialize in the manufacture of custom designed chassis and enclosures primarily used in the electronics, telecommunications, industrial and computer industries. As a fully integrated supply chain partner with expertise in design, rapid prototyping, manufacturing, packaging and logistics, we provide our customers with reduced manufacturing costs and shortened time to market throughout a product's life cycle. Custom metal enclosure fabrication takes place in four countries on three continents, central to our OEM customers' various points of manufacture. Wire Harnesses and Cable Assemblies. A wire harness and cable assembly is an assembly of wires with connectors and terminals attached to their ends that transmits electricity between two or more points. Our capability to provide wire harness and cable assembly components complements our vertically integrated approach to providing our OEM customers a complete EMS solution. We are one of the leading suppliers of wire harnesses and cable assemblies for use in household appliances. Due to the similarity in the process technology utilized in the manufacture of wire harnesses and cable assemblies for telecommunications and networking products and in the manufacture of wire harnesses for use in household appliances, we seek to leverage this expertise to enhance the value of the products and services we supply to our OEM customers in the telecommunications and networking industries. Full System Assembly and Test. We provide full system assembly services to OEMs. These services require sophisticated logistics capabilities and supply chain management capabilities to rapidly procure components, assemble products, perform complex testing and deliver products to end users around the world. Our full system assembly services involve combining custom metal enclosures and a wide range of subassemblies, including printed circuit board assembly. We also employ advanced test techniques to various subassemblies and final end products. Increasingly, OEMs require custom, build-to-order system solutions with very short lead times. We are focused on exploiting this trend through our advanced supply chain management capabilities. Packaging and Global Distribution. We offer our customers flexible, just-in-time and build-to-order delivery programs, allowing product shipments to be closely coordinated with customers' inventory requirements. Increasingly, we ship products directly into customers' distribution channels or directly to the end-user. After-Sales Support. We offer a wide range of after-sales support services. This support can be tailored to meet customer requirements, including field failure analysis, product upgrades, repair and engineering change management. Supply Chain Management. Effective management of the supply chain is critical to the success of OEMs as it directly impacts the time required to deliver product to market and the capital requirements associated with carrying inventory. Our global supply chain organization works with customers and suppliers to meet production requirements and procure materials. We utilize our enterprise resource planning systems to optimize inventory management. 3 WHERE YOU CAN FIND MORE INFORMATION Viasystems files annual, quarterly and special reports and other information with the Securities and Exchange Commission (the "SEC"). Any reports, statements or other information filed by us may be read and copied at the SEC's public reference room, at 450 Fifth Street NW, Washington, DC, as well as at public reference rooms in New York, NY and Chicago, IL. For further information on public reference rooms, call 1 (800) SEC-0330. Viasystems' filings are also available to the public from commercial retrieval services and at the Internet web site maintained by the SEC at http://www.SEC.gov. ITEM 2. PROPERTIES In addition to our executive offices in St. Louis, Missouri, as of December 31, 2001, we operate 26 principal manufacturing and research facilities, located in 8 different countries with a total area of approximately 6.3 million square feet, of which approximately 1.9 million square feet are leased. We believe our plants and equipment include state-of-the-art technology and are well maintained. We believe that our existing owned and leased facilities are adequate to meet our reasonably foreseeable requirements for at least the next two years. Some of our owned facilities are subject to mortgages under our senior credit facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements contained elsewhere in this Report.
SIZE TYPE OF DESCRIPTION OF LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED -------- ----------------- -------- -------------------------- UNITED STATES Bucyrus, Ohio................. 47,000 Leased Wire harness and cable assembly Columbus, Ohio................ 35,000 Leased Full system assembly Beaverton, Oregon............. 75,000 Leased Full system assembly Milford, Massachusetts........ 108,000 Leased Full system assembly San Jose, California.......... 60,000 Leased Full system assembly Mishawaka, Indiana............ 38,000 Owned Wire harness and cable assembly Milwaukee, Wisconsin.......... 305,000 Leased Custom metal enclosure fabrication Redmond, Washington........... 26,000 Leased Full system assembly CANADA Pointe-Claire (Montreal), Quebec...................... 168,000 Owned Printed circuit board fabrication Kirkland (Montreal), Quebec... 121,000 Owned Printed circuit board fabrication Granby (Montreal), Quebec..... 119,000 Owned Printed circuit board fabrication MEXICO Juarez, Mexico................ 51,000 Leased Backpanel assembly Juarez, Mexico................ 438,000 Leased Wire harness and cable assembly Chihuahua, Mexico............. 282,000 Owned Wire harness and cable assembly Chihuahua, Mexico............. 253,000 Leased Wire harness and cable assembly
4
SIZE TYPE OF DESCRIPTION OF LOCATION (APPROX. SQ. FT.) INTEREST PRODUCTS/SERVICES PROVIDED -------- ----------------- -------- -------------------------- EUROPE Echt, Netherlands............. 462,000 Owned Printed circuit board fabrication and backpanel assembly Rouen, France................. 344,000 Owned Full system assembly Terni, Italy.................. 234,000 Owned Custom metal enclosure fabrication and full system assembly Ballynahinch, Northern Ireland..................... 73,000 Owned Wire harness and cable assembly, power supplies and printed circuit board fabrication Coventry, England............. 219,000 Leased Custom metal and plastic enclosure fabrication and full system assembly ASIA Guangzhou, China.............. 2,000,000 Owned Printed circuit board fabrication and assembly Zhongshan, China.............. 318,000 Owned Printed circuit board fabrication Shanghai, China............... 229,000 Owned Backpanel assembly and custom metal enclosure fabrication Shenzhen, China............... 95,000 Leased Full system assembly ShiYan, China................. 176,000 Leased Full system assembly Qingdao, China................ 30,000 Leased Full system assembly
In addition to the facilities listed above, at December 31, 2001 we maintained several sales and marketing and other facilities located throughout North America, Europe, Asia and South America, all of which are leased. ITEM 3. LEGAL PROCEEDINGS Our operations have from time to time been involved in claims and litigation. The nature of our business is such that it is anticipated that we will be involved from time to time in claims and litigation in the ordinary course of our business. Based on experience with similar claims and litigation, we do not anticipate that these matters will have a material adverse effect on our business, results of operations, financial condition, prospects or ability to service debt. We anticipate that we may, from time to time, receive notifications alleging infringements of patents generally held by other manufacturers. Disputes over patent infringement are common in the electronics industry and typically begin with notices of the type described above. Although the ultimate resolution of any legal action and infringement notices described above cannot be predicted, we believe that the resolution, including any ultimate liability, will not have a material adverse effect on our business, results of operations, financial condition or ability to service debt. We are not currently involved in any patent infringement disputes and have not received any notices alleging infringement of patents, the unfavorable resolution of which we believe would be material. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Information required by this item has been omitted as the registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. 5 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. All of Viasystems' outstanding common stock is held by Group and, accordingly, there is no established public trading market for Viasystems' common stock. Viasystems has paid no dividends since inception, and its ability to pay dividends is limited by the terms of certain agreements related to its indebtedness. ITEM 6. SELECTED FINANCIAL DATA Information required by this item has been omitted as the registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain information required by this item has been omitted as the registrant meets the conditions of General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing with the reduced disclosure format. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis our management evaluates its estimates and judgements. Our management bases its estimates and judgements on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our management believes the following critical accounting policies, among others, affect our more significant judgements and estimates used in the preparation of our consolidated financial statements: Accounts Receivable. We perform ongoing credit evaluations of our customers and we adjust credit limits based upon each customer's payment history and current credit worthiness, as determined by credit information available at that time. We continuously monitor collections and payments from our customers and we maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. While such losses have historically been within our expectations and the provisions established, if the condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventories. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those historically experienced or projected by us, additional inventory write-downs may be required. Valuation of Goodwill and other Intangible Assets. We assess the impairment of goodwill and other identifiable intangible assets whenever events or changes in circumstances indicate that the carrying 6 value may not be recoverable. Factors we consider important which could trigger an impairment review include, but are not limited to, the following: significant underperformance relative to historical or projected future operating results; significant changes in the manner of our use of the acquired assets or the strategy for our overall business; significant negative industry or economic trends; significant decline in our stock price for a sustained period; and our market capitalization relative to net book value. When we determine that the carrying value of goodwill and other intangible assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment bases on a projected discounted cash flow method using a discount rate determined by us to be commensurate with the risk inherent in our current business model. During the year ended December 31, 2001 we recorded an impairment charge totaling $133.3 million, of which, $129.1 related to goodwill. In 2002, Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" became effective and as a result, we will cease to amortize goodwill, resulting in a decrease to annual amortization expense of approximately $16.6 million. In lieu of amortization, we are required to perform an initial impairment review of our goodwill in 2002 and an annual impairment review thereafter. We currently do not expect to record an impairment charge upon completion of the initial impairment review. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded. Income Taxes. We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. While we have considered future taxable income and ongoing prudent, feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the net deferred tax assets would be charged to income in the period such determination was made. Likewise, should we determine that we would be able to realize our deferred tax assets in the future in excess of its net recorded amount, an adjustment to the net deferred tax asset would increase income in the period such determination was made. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 2001 Net sales for the year ended December 31, 2001 were $1,206.5 million, representing a $398.5 million, or 24.8%, decrease from the same period in 2000. The decrease was primarily a result of continued weakness in printed circuit board sales to key North American telecommunication and networking customers, partially offset by the impact of acquisitions made in 2000 and 2001. Cost of goods sold for the year ended December 31, 2001 was $993.6 million, or 82.4% of sales (excluding one-time write-offs of $49.3 million of inventory related to the Restructuring), compared to $1,230.6 million, or 76.7% of sales, for the year ended December 31, 2000. Cost of goods sold as a percent of net sales increased as a result of a higher percentage of EMS sales in 2001, which generally have lower margins than printed circuit board sales, and lower absorption of our fixed overhead cost in our facilities throughout North America, Europe and Asia due to lower demand from our key telecommunication and networking customers. Selling, general and administrative expenses for the year ended December 31, 2001 were $96.8 million, a decrease of $24.4 million, or 20.1%, versus the comparable period in 2000 (excluding the non-cash compensation expense charge of $104.4 million in March 2000). These costs decreased primarily due to cost reductions related to the Restructuring and a reduction in expenses as a result of the transfer of the operations formerly conducted by Forward Group Plc ("Forward"), Interconnection Systems (Holdings) Limited ("ISL"), Zincocelere S.p.A. (Zincocelere") and the PCB production facility of Ericsson Telecom AB in 7 March 2000, partially offset by increases in general and administrative expenses related to the acquisitions completed in 2000 and 2001. In connection with Group's initial public offering in March 2000, Group amended the terms of the performance stock options held by members of management to eliminate the exercisability restrictions and variable exercise price terms. The amended performance options have a fixed exercise price of $9.00 per share and are immediately exercisable. As a result of these amendments, we recorded a one-time, non-cash compensation expense charge of approximately $33.6 million during the three months ended March 31, 2000. Also in connection with Group's initial public offering in March 2000, Group converted each 6 2/3 shares of class A common stock and class A series II common stock into one share of common stock. This conversion eliminated the variable terms of the class A common stock and class A series II common stock and resulted in a one-time, non-cash compensation expense charge of approximately $63.0 million recorded during the three months ended March 31, 2000. This charge reflects the difference between the cost of the class A common stock and the class A series II common stock and the value of the common stock into which it was convertible at March 23, 2000. Additionally, in connection with Group's initial public offering in March 2000, Viasystems terminated the monitoring and oversight agreement and financial advisory agreement with certain affiliates of Hicks, Muse, Tate & Furst Incorporated (Hicks Muse, Tate & Furst Incorporated, its affiliates, and/or its partners collectively or individually, "HMTF"). As consideration for such termination, Group granted to HMTF options to purchase an aggregate of 2,134,000 shares of Group's common stock at an exercise price of $21.00 per share. The option grant resulted in a net one-time, non-cash compensation expense charge of approximately $7.8 million recorded during the three months ended March 31, 2000. During the quarter ended December 31, 2001, we recorded non-cash asset impairments totaling $141.1 million primarily related to the write-off of long-lived assets in accordance with Statement of Financial Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"). Based on current business enterprise values using common appraisal methods, the assessment identified impairments of long-lived assets acquired pursuant to the acquisitions of Top Line Electronics Corporation, Laughlin-Wilt Group, Inc. and the European and China network components services operations of Marconi Communications Inc. The calculated business enterprise values determined were compared to the net book values of the related long-lived assets with the excess of net book value over the business enterprise value representing the amount of the impairment loss. The impairment loss for each group of assets, totaling $133.3 million, was first charged against goodwill ($129.1 million) with the remaining amounts being charged to property, plant and equipment ($4.2 million). The impairment resulted from the economic downturn experienced during 2001, primarily related to our telecommunication and networking customers. Through the third fiscal quarter of 2001, it was expected that the economic downturn impacting these assets was a short-term inventory correction. However, in the fourth quarter it became clear to management that the downturn impacting these assets was more severe and of a long-term nature resulting in a significant decline in profitability that is not expected to return in the near term. During the year ended December 31, 2001, we recorded a series of restructuring charges totaling $59.8 million. These charges were taken in light of the economic downturn primarily related to our large telecommunication and networking customers. During 2001 we began evaluating our cost position compared to anticipated levels of business for 2001 and beyond and determined that plant shutdowns, plant consolidations and downsizing were required to reduce costs to more appropriate levels in line with current and expected customer demand. A summary of the 2001 restructuring activity (the "Restructuring") by quarter is as follows: During the quarter ended March 31, 2001, we recorded a restructuring charge of $12.0 million, primarily related to the phase one workforce reductions in our Richmond, Virginia PCB fabrication facility as well as small workforce reductions at certain other North American operations. The workforce reductions impacted a total of 2,507 employees, of which 1,915 were regular, union employees, 547 were regular, non-union employees and 45 were temporary/contract employees. All of these employees were terminated by December 31, 2001. 8 During the quarter ended June 30, 2001, we recorded a restructuring charge of $30.5 million, primarily related to the closure of our Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities as well as small workforce reductions at certain other North American and European operations. The facility closures and workforce reductions impacted a total of 1,613 employees, of which 1,228 were regular, union employees, 373 were regular, non-union employees and 12 were temporary/contract employees. All of these employees were terminated by December 31, 2001. During the quarter ended September 30, 2001, we recorded a restructuring charge of $16.2 million, primarily related to the consolidation of our two San Jose, California PCB assembly operations as well as headcount reductions at our corporate offices. The consolidations and workforce reductions impacted a total of 471 employees, of which 150 were regular, union employees, 315 were regular, non-union employees and 6 were temporary/contract employees. All of these employees were terminated by December 31, 2001. During the quarter ended December 31, 2001, we recorded a restructuring charge of $7.1 million, primarily related to workforce reductions at our European PCB fabrication facility as well as small workforce reductions at other European facilities. The workforce reductions impacted a total of 455 employees, all of which were regular, non-union employees. All of these employees were terminated by December 31, 2001. Additionally, during the quarter ended December 31, 2001, we reversed $6.0 million of restructuring charges previously recorded. This reversal primarily related to a change in our plan related to the consolidation of our two San Jose, California PCB assembly operations. Initially, the plan included consolidating the leased operation into the owned operation, resulting in a restructuring charge related to the contractual obligation on the leased facility. Subsequently, we amended our plan and made the decision to consolidate the owned operation into the leased operation resulting in a reversal to the restructuring charge related to the lease commitment. In connection with the Restructuring, we also recorded impairment charges totaling $82.7 million to write-down to fair value certain land and buildings as well as machinery and equipment, office equipment and systems that were obsolete or redundant due to the closure and consolidation of facilities pursuant to the Restructuring. Included in the impairment charge were the following amounts: a write-down of land, buildings and leasehold improvements totaling $25.4 million, related to our Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities that were closed; a write-down of machinery and equipment totaling $14.9 million, a write-down of office equipment totaling $37.7 million, and a write-down of systems and construction in progress totaling $4.7 million, each primarily related to obsolete or redundant assets at our Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities that were closed as well as certain other North American and European operations that were consolidated. At December 31, 2001, $17.7 million of the assets held for disposal had been sold or otherwise disposed, leaving $16.3 million remaining on the books, of which $13.0 million consisted of the land and building related to our Richmond, Virginia PCB fabrication facility. We are actively marketing the land and building for sale and expect to complete the disposal of the assets during 2002. The remaining $3.3 million of net book value of assets held for disposal on the books at December 31, 2001 consists primarily of machinery and equipment and office equipment related to redundant or obsolete assets at our Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities and are expected to be disposed of during the next 18-24 months. 9 Below is a table summarizing restructuring and impairment activity for the year ended December 31, 2001 ($ in 000's):
CUMULATIVE THREE MONTHS ENDED DRAWDOWNS --------------------------------------------------- ------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, CASH NON-CASH 2001 2001 2001 2001 REVERSALS TOTAL PAYMENTS CHARGES --------- -------- ------------- ------------ --------- -------- -------- -------- Restructuring Activities: Personnel and severance........ $11,755 $ 20,238 $ 6,505 $ 5,524 $ (170) $ 43,852 $36,282 $ -- Lease and other contractual Commitments...... 78 7,864 9,623 1,228 (5,836) 12,957 5,614 -- Other.............. 174 2,379 103 309 -- 2,965 2,810 -- Asset Impairments: Held for disposal..... -- 75,043 5,454 2,210 -- 82,707 -- 82,707 Held for use... -- -- -- 133,252 -- 133,252 -- 133,252 Other.......... -- -- -- 5,641 -- 5,641 -- 5,641 ------- -------- ------- -------- ------- -------- ------- -------- Total restructuring and impairment charges............ $12,007 $105,524 $21,685 $148,164 $(6,006) $281,374 $44,706 $221,600 ======= ======== ======= ======== ======= ======== ======= ======== BALANCE AT DECEMBER 31, 2001 ------------ Restructuring Activities: Personnel and severance........ $ 7,570 Lease and other contractual Commitments...... 7,343 Other.............. 155 Asset Impairments: Held for disposal..... -- Held for use... -- Other.......... -- ------- Total restructuring and impairment charges............ $15,068 =======
The significant components of the restructuring charge recorded for lease and other contractual commitments totaling approximately $13.0 million, are as follows: $8.5 million for leased and other facility commitments; $3.2 million for lease commitments on machinery and equipment; $1.2 million for waste water project commitments; and $0.1 million for other commitments. Also in connection with the Restructuring, we wrote-off inventory resulting in a $49.3 million and $0.8 million charge to cost of goods sold during the quarters ended June 30, 2001 and September 30, 2001, respectively. During the quarter ended December 31, 2001, we reversed inventory write-offs previously taken totaling $0.8 million. With respect to the inventory written-off during the quarter ended June 30, 2001, we have disposed of $39.1 million of the inventory and reversed the write-off and sold $1.0 million of the inventory, resulting in a remaining balance of $9.1 million at December 31, 2001. We expect to dispose of the remaining obsolete inventory during fiscal year 2002. The restructuring and impairment charges were determined based on formal plans approved by our management using the best information available to it at the time. The amounts we may ultimately incur may change as the balance of the plans are executed. We continue to review our operations in light of the continued economic downturn related to our telecommunication and networking customers. These reviews could result in additional workforce reductions. The impact these activities could have on our results of operations is not currently known. European PCB Group (Cayman Islands), Ltd. ("European PCB Group") has disposed of the operations formerly conducted by Forward and the PCB production facility of Ericsson Telecom AB. In addition, an administrative receiver has been appointed in respect of European PCB Group's ISL business. As a result, the business formerly conducted by Zincocelere is the only material asset remaining within European PCB Group. Accordingly, we compared the carrying amount of all current amounts due from European PCB Group, including the PCB Group Notes, to their undiscounted expected future cash flows. We have concluded that amounts due from European PCB Group have been impaired. As a result, we recorded a charge for the quarter ended September 30, 2001 totaling $144.1 million to reflect the write-off of such amounts. This charge consisted of $127.6 million related to the PCB Group Notes and $16.5 million related to trade receivables. Depreciation and amortization decreased $18.6 million, from $144.9 million for the year ended December 31, 2000, to $126.3 million for the same period of 2001, primarily due to a reduction in expenses as a result of the distribution of the operations formerly conducted by Forward, ISL, Zincocelere and the PCB production facility of Ericsson Telecom AB in March 2000 and due to a reduced fixed asset base as a result of 10 the impairment of property and equipment held for disposal related to the closure of our Richmond, Virginia and San German, Puerto Rico PCB facilities, partially offset by the impact to depreciation of acquired fixed assets and to amortization of acquired intangibles from the acquisitions completed in 2000 and 2001. Other expense decreased $9.6 million, from $111.7 million for the year ended December 31, 2000, to $102.1 million for the same period of 2001, primarily due to reduced interest expense and amortization of deferred financing costs related to the recapitalization in connection with Group's initial public offering completed in March 2000 and reductions in market benchmark interest rates realized during 2001, partially offset by higher interest margins charged on borrowed funds under our senior secured credit facility resulting from amendments to the credit agreement completed during 2001. During the quarter ended March 31, 2000, we recorded, as an extraordinary item, a one-time, non-cash write-off of deferred financing fees of approximately $31.2 million, net of $0 income tax benefit, related to deferred financing fees incurred on debt under our prior credit agreement, which was retired before maturity with proceeds from Group's initial public offering. RECENT EVENTS As of March 27, 2002, HMTF has increased its investment in Viasystems through open market purchases of $112.1 million of Viasystems' 9 3/4 senior subordinated notes and $51.3 million of Viasystems' senior secured bank debt. These purchases were made at a discount to the face amount. RECENT ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". SFAS 141 supercedes Accounting Principles Board Opinion No. 16, "Business Combinations". The most significant changes made by SFAS 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill, and (3) requiring unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). We are currently assessing the impact of SFAS 141 on our operating results and financial condition. SFAS 142 supercedes Accounting Principles Board Opinion No. 17, "Intangible Assets". SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS 142 are: (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. Upon implementation of SFAS 142, our amortization expense for fiscal year 2002 is expected to decrease by approximately $16.6 million compared to fiscal year 2001 as a result of no longer amortizing goodwill. We currently do not expect to record an impairment charge upon completion of the initial impairment review. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS 144 supercedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and Assets to be Disposed of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provision of SFAS 144 will be 11 effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS 144 are: (1) removes goodwill from its scope and, therefore, eliminates the requirements of SFAS 121 to allocate goodwill to long-lived assets to be tested for impairment, and (2) describes a probability-weighted cash flow estimation approach to deal with situations in which alternative course of action to recover the carrying amount of a long-lived assets are under consideration or a range is estimated for the amount of possible future cash flows. We currently do not expect the implementation of SFAS 144 to have a material impact on our operating results and financial condition. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK At December 31, 2000 and 2001, approximately $488.6 and $448.4 million, respectively, of our long-term debt, specifically borrowings outstanding under our senior credit facility and the loan notes, bore interest at variable rates. Accordingly, our earnings and cash flow are affected by changes in interest rates. Assuming the current level of borrowings at variable rates and assuming a two percentage point increase in the average interest rate under these borrowings, it is estimated that our interest expense for the year ended December 31, 2000 and 2001, would have increased by approximately $9.8 and $9.0 million, respectively. In the event of an adverse change in interest rates, management would likely take actions that would mitigate our exposure to interest rate risk; however, due to the uncertainty of the actions that would be taken and their possible effects, this analysis assumes no such action. Further, this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. FOREIGN CURRENCY RISK We conduct our business in various regions of the world, and export and import products to and from several countries. Our operations may, therefore, be subject to volatility because of currency fluctuations. Sales and expenses are frequently denominated in local currencies, and results of operations may be affected adversely as currency fluctuations affect our product prices and operating costs or those of our competitors. From time to time, we enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations. We do not engage in hedging transactions for speculative investment reasons. Our hedging operations historically have not been material and gains or losses from these operations have not been material to our cash flows, financial position or results from operations. There can be no assurance that our hedging operations will eliminate or substantially reduce risks associated with fluctuating currencies. 12 ITEM 8. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS AND SCHEDULE VIASYSTEMS, INC. & SUBSIDIARIES Report of Independent Accountants........................... 14 Consolidated Balance Sheets as of December 31, 2000 and 2001...................................................... 15 Consolidated Statements of Operations for the years ended December 31, 1999, 2000 and 2001.......................... 16 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999, 2000 and 2001...... 17 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 2000 and 2001.......................... 18 Notes to Consolidated Financial Statements.................. 19 Schedule II -- Valuation and Qualifying Accounts............ 46
13 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Viasystems, Inc.: In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Viasystems, Inc. and its subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, as a result of the dramatic downturn in telecom component demand during 2001, and the Company's highly leveraged capital structure, the Company will fail to satisfy at March 31, 2002 certain financial maintenance covenants contained in its senior credit facility. The potential ramification from the failure to satisfy these covenants raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 23. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. As discussed in Note 20 to the consolidated financial statements, in 1999 the Company changed its method of reporting costs of start-up activities. PRICEWATERHOUSECOOPERS LLP Fort Worth, Texas January 28, 2002, except for Recent Events in for Note 1 and Note 23 for which the date is March 29, 2002 14 VIASYSTEMS, INC. & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------------------- 2000 2001 -------------- -------------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS Current assets: Cash and cash equivalents................................. $ 45,676 $ 34,202 Accounts receivable, less allowance for doubtful accounts of $7,233 and $15,654, respectively.................... 320,561 157,443 Inventories............................................... 255,973 113,589 Prepaid expenses and other................................ 70,922 37,036 ----------- ----------- Total current assets.............................. 693,132 342,270 Property, plant and equipment, net.......................... 452,621 353,651 Deferred financing costs, net............................... 23,332 25,591 Intangible assets, net...................................... 419,236 247,944 Other assets................................................ 22,963 18,589 ----------- ----------- Total assets...................................... $ 1,611,284 $ 988,045 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Current maturities of long-term obligations............... $ 23,882 $ 3,215 Accounts payable.......................................... 293,696 125,897 Accrued and other liabilities............................. 112,200 90,502 Income taxes payable...................................... 3,595 602 ----------- ----------- Total current liabilities......................... 433,373 220,216 Deferred taxes.............................................. 17,343 17,019 Long-term obligations, less current maturities (includes $0 and $242.9 million face amount, held by related parties, respectively)............................................. 1,000,435 1,037,704 Other non-current liabilities............................... 24,201 23,430 Commitments and Contingencies Stockholders' equity (deficit) Common stock, par value $.01 per share, 1,000 shares issued and outstanding........................................... -- -- Contributed capital....................................... 1,602,641 1,634,512 Notes due from affiliates................................. (124,532) -- Accumulated deficit....................................... (1,314,938) (1,901,957) Accumulated other comprehensive loss...................... (27,239) (42,879) ----------- ----------- Total stockholders' equity (deficit).............. 135,932 (310,324) ----------- ----------- Total liabilities and stockholders' equity (deficit)....................................... $ 1,611,284 $ 988,045 =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 15 VIASYSTEMS, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, ------------------------------------------ 1999 2000 2001 ------------ ------------ ------------ (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales................................................ $1,293,370 $1,604,985 $1,206,536 Operating expenses: Cost of goods sold..................................... 969,614 1,230,552 1,042,886 Selling, general and administrative, including non-cash compensation expense charges of $110,070, $104,351 and $0 respectively................................. 232,653 225,611 96,838 Depreciation........................................... 118,873 98,457 79,718 Amortization........................................... 63,270 46,409 46,574 Write-off of amounts due from affiliates............... -- -- 144,099 Restructuring and impairment charges................... 468,389 -- 281,374 Write-off of acquired in-process research and development......................................... 17,600 -- -- ---------- ---------- ---------- Operating income (loss).................................. (577,029) 3,956 (484,953) ---------- ---------- ---------- Other expenses: Interest expense....................................... 117,822 105,514 97,174 Amortization of deferred financing costs............... 6,619 4,296 4,013 Other expense, net..................................... 23,594 1,857 879 ---------- ---------- ---------- Loss before income taxes, cumulative effect of a change in accounting principle and extraordinary item......... (725,064) (107,711) (587,019) Benefit for income taxes................................. (23,212) (2,923) -- ---------- ---------- ---------- Loss before cumulative effect of a change in accounting principle and extraordinary item....................... (701,852) (104,788) (587,019) Cumulative effect -- write-off of start-up costs, net of income tax benefit of $6,734........................... 18,443 -- -- Extraordinary item -- loss on early extinguishment of debt, net of income tax benefit of $0.................. -- 31,196 -- ---------- ---------- ---------- Net loss....................................... $ (720,295) $ (135,984) $ (587,019) ========== ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 16 VIASYSTEMS, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
ACCUMULATED AND OTHER NOTES DUE COMPREHENSIVE COMMON CONTRIBUTED FROM ACCUMULATED INCOME STOCK CAPITAL AFFILIATES DEFICIT (LOSS) TOTAL ------ ----------- ---------- ----------- ------------- --------- (IN THOUSANDS, EXCEPT SHARE AMOUNTS) BALANCE AT DECEMBER 31, 1998............ $ -- $ 395,994 $ -- $ (458,659) $ 9,120 $ (53,545) Comprehensive loss: Net loss.............................. -- -- -- (720,295) -- (720,295) Foreign currency translation adjustments......................... -- -- -- -- (32,858) (32,858) Minimum pension liability, net of income tax benefit of $254.......... -- -- -- -- 593 593 --------- Total comprehensive loss................ (752,560) --------- Capital contribution by Group to the Company............................... -- 200,293 -- -- -- 200,293 Net distribution prior to as-if pooling of Wire Harness Business.............. -- (232) -- -- -- (232) Non-cash compensation expense charge.... -- 110,070 -- -- -- 110,070 ----- ---------- --------- ----------- -------- --------- BALANCE AT DECEMBER 31, 1999............ -- 706,125 -- (1,178,954) (23,145) (495,974) Comprehensive loss: Net loss.............................. -- -- -- (135,984) -- (135,984) Foreign currency translation adjustments......................... -- -- -- -- (15,221) (15,221) --------- Total comprehensive loss................ (151,205) --------- Capital contribution by Group to the Company............................... -- 987,884 -- -- -- 987,884 As-if pooling of Wire Harness Business.............................. -- (210,798) -- -- -- (210,798) Net distribution to stockholders of European PCB Group.................... -- 51 -- -- 11,127 11,178 Issuance of Notes Due from Affiliates... -- -- (124,532) -- -- (124,532) Non-cash compensation expense charges... -- 119,379 -- -- -- 119,379 ----- ---------- --------- ----------- -------- --------- BALANCE AT DECEMBER 31, 2000............ -- 1,602,641 (124,532) (1,314,938) (27,239) 135,932 Comprehensive loss: Net loss.............................. -- -- -- (587,019) -- (587,019) Foreign currency translation adjustments......................... -- -- -- -- (15,640) (15,640) --------- Total comprehensive loss................ (602,659) --------- Capital contribution by Group to the Company............................... -- 31,871 -- -- -- 31,871 Paid-in-kind notes for interest on notes due from affiliates................... -- -- (3,079) -- -- (3,079) Write-off of notes due from affiliates............................ -- -- 127,611 -- -- 127,611 ----- ---------- --------- ----------- -------- --------- BALANCE AT DECEMBER 31, 2001............ $ -- $1,634,512 $ -- $(1,901,957) $(42,879) $(310,324) ===== ========== ========= =========== ======== =========
The accompanying notes are an integral part of the consolidated financial statements. 17 VIASYSTEMS, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, --------------------------------- 1999 2000 2001 --------- --------- --------- (IN THOUSANDS) Cash flows from operating activities: Net loss................................................ $(720,295) $(135,984) $(587,019) Adjustments to reconcile net loss to net cash provided by operating activities: Write-off of acquired in-process research and development........................................ 17,600 -- -- Impairment of assets................................. 468,389 -- 221,600 Write-off of amounts due from affiliates............. -- -- 144,099 Write-off of inventory............................... -- -- 49,333 Loss on disposal of plant, property and equipment.... 18,762 -- -- Cumulative effect of a change in accounting principle -- write-off of start-up costs........... 25,177 -- -- Extraordinary item -- loss on early extinguishment of debt............................................... -- 31,196 -- Non-cash compensation expense charge................. 110,070 104,351 -- Depreciation and amortization........................ 182,143 144,866 126,292 Amortization of deferred financing costs............. 6,619 4,296 4,013 Non-cash interest income............................. -- -- (3,079) Paid-in-kind interest on Senior Unsecured Notes...... -- -- 9,491 Joint venture (income) loss.......................... -- (3,209) 66 Deferred taxes....................................... (35,734) 745 785 Change in assets and liabilities, net of acquisitions: Accounts receivable................................ (15,023) (123,299) 141,990 Inventories........................................ (16,837) (60,479) 98,386 Prepaid expenses and other......................... (273) 11,407 31,733 Accounts payable and accrued and other liabilities..................................... (5,136) 58,021 (187,562) Income taxes payable............................... 7,702 (735) (2,208) --------- --------- --------- Net cash provided by operating activities....... 43,164 31,176 47,920 --------- --------- --------- Cash flows from investing activities: Acquisitions, net of cash acquired $5,022 for 1999, $8,035 for 2000 and $0 for 2001...................... (314,187) (360,313) (10,564) Capital expenditures.................................... (138,003) (136,882) (78,790) --------- --------- --------- Net cash used in investing activities........... (452,190) (497,195) (89,354) --------- --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term obligations under credit facilities.................................... 291,000 150,000 289,250 Net borrowings (payments) on revolvers.................. 65,943 (125,501) (43,200) Repayment of amounts due under credit facilities........ (26,125) (446,750) (1,000) Repayment of amounts due under the Chips Loan Notes..... -- -- (285,312) Chips Term Loans -- Cash collateral..................... (95,295) 99,988 -- Borrowings under the Senior Unsecured Notes............. -- -- 100,000 Repayment of other long-term and capital lease obligations.......................................... (5,509) (19,056) (22,102) Cash distribution to stockholders of European PCB Group................................................ -- (16,213) -- Net distribution prior to as-if pooling................. (232) -- -- Equity proceeds......................................... 198,455 865,543 -- Proceeds from exercise of stock options................. -- 536 149 Repurchase of common stock.............................. (162) -- -- Financing fees and other................................ (7,892) (18,527) (6,682) --------- --------- --------- Net cash provided by financing activities....... 420,183 490,020 31,103 --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents............................................. 2,347 (1,164) (1,143) --------- --------- --------- Net change in cash and cash equivalents................... 13,504 22,837 (11,474) Cash and cash equivalents at beginning of year............ 9,335 22,839 45,676 --------- --------- --------- Cash and cash equivalents at end of year.................. $ 22,839 $ 45,676 $ 34,202 ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 18 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION AND ACQUISITIONS Viasystems, Inc. ("Viasystems"), a wholly owned subsidiary of Viasystems Group, Inc. ("Group"), was formed on April 2, 1997. On April 10, 1997, Group contributed to Viasystems all of the capital of its then existing subsidiaries. Prior to the contribution of this capital by Group, Viasystems had no operations of its own. The consolidated financial statements included herein present the results of operations of Viasystems and its subsidiaries subsequent to the capital contribution by Group, and the results of operations of Group and its subsidiaries prior to the capital contribution of such subsidiaries to Viasystems. As used herein, the Company refers to Viasystems and its subsidiaries subsequent to the capital contribution by Group and to Group and its subsidiaries prior to such capital contribution. These financial statements have been adjusted to reflect the equity structure of Viasystems on a retroactive basis. The Company makes strategic acquisitions of electronics manufacturing services ("EMS") and integrates those acquisitions as a global enterprise that is the preferred provider of EMS solutions to original equipment manufacturers of electronic products. See 2000 Acquisitions regarding restatement of financial statements for "as-if pooling" related to the acquisition of Wirekraft Industries, Inc. RECENT EVENTS As a result of the dramatic downturn in telecom component demand during 2001 and the Company's highly leveraged capital structure, the Company expects to fail to satisfy certain financial maintenance covenants contained in its senior secured credit facility on March 31, 2002. In anticipation of this circumstance, the Company entered into an amendment to its credit agreement (See Note 23). TRANSFER TO STOCKHOLDERS On March 29, 2000, Group sold to European PCB Group (Cayman Islands), Ltd. ("European PCB Group"), a company owned by certain of Group's pre-IPO stockholders, all the capital stock of certain businesses in Europe. As a result and at such time, European PCB Group consisted primarily of the operations formerly conducted by Forward Group Plc, Zincocelere S.p.A. ("Zincocelere"), Interconnection Systems (Holdings) Limited ("ISL") and the PCB production facility of Ericsson Telecom AB. In consideration for the sale, European PCB Group delivered subordinated notes ("PCB Group Notes") payable to the Company for $124,532 in the aggregate, which have been classified as a component of stockholders' equity. The PCB Group Notes each have a 10-year term and bear interest at a rate of 9% per annum, payable in kind by the issuance of additional notes. During the quarter ended September 30, 2001, European PCB Group disposed of the operations formerly conducted by Forward Group Plc and the PCB production facility of Ericsson Telecom AB. In addition, in September 2001, an administrative receiver has been appointed in respect of European PCB Group's ISL business. As a result, the business formerly conducted by Zincocelere S.p.A. is the only material asset remaining within European PCB Group. Accordingly, the Company compared the carrying amount of all current amounts due from European PCB Group, including the PCB Group Notes to their undiscounted expected future cash flows. The Company concluded that amounts due from European PCB Group have been impaired. As a result, the Company recorded a charge for the quarter ended September 30, 2001, totaling $144,099 to reflect the write-off of such amounts. This charge consisted of $127,611 related to the PCB Group Notes and $16,488 related to trade receivables. In addition, the Company guaranteed approximately 12 million British Pounds (approximately $18.0 million) of an obligation with the Department of Trade and Industry (the "DTI") of the United Kingdom in respect of a grant provided to ISL. The grant is also secured by land and a building in North Tyneside owned by ISL which has an appraised value in excess of the grant obligation. Throughout the year, the Company has been engaged in discussions with the DTI regarding the guarantee and the grant. On January 31, 2002, the 19 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Company and European PCB Group entered into a settlement agreement with the DTI. Under the settlement agreement, the Company and European PCB Group jointly and severally agreed to pay 12.0 million British Pounds (approximately $18.0 million) in 9 installments beginning January 31, 2002 and ending on December 31, 2003. The first installment totaled 2.0 million British Pounds (approximately $3.0 million) and was paid on January 31, 2002, by European PCB Group with the remaining installments due periodically through December 31, 2003. The Company believes that European PCB Group has the ability and will continue to make the scheduled payments due under the settlement agreement. Furthermore, the Company believes that proceeds from the sale of the land and building in North Tyneside will be sufficient to satisfy all or substantially all amounts paid pursuant to the settlement agreement. European PCB Group has agreed to indemnify the Company in the event the Company is required to make any such payment. In addition, the Company has $9.8 million of letters of credit issued with respect to certain indebtedness of Zincocelere. The remaining obligation due by Zincocelere under the indebtedness totals approximately 7.2 million Euros (approximately $6.3 million). Historically, Zincocelere has made the scheduled payments under the indebtedness and the Company believes Zincocelere will continue to operate and make all future payments required under the indebtedness. 1999 ACQUISITIONS In August 1999, the Company acquired the printed circuit board ("PCB") manufacturing division ("Kalex") of Termbray Industries International (Holdings) Limited, a manufacturer of rigid PCBs located in the People's Republic of China, for a net cash purchase price of approximately $301,000 plus acquisition costs of approximately $8,500 (the "Kalex Acquisition"). Accordingly, the results of operations of Kalex since acquisition are included in the results of operations of the Company. The Kalex Acquisition has been accounted for using the purchase method of accounting whereby the total purchase price has been allocated to the assets and liabilities based on their estimated respective fair values. The Company has allocated a portion of the purchase price to intangible assets, including in process R&D using a discount rate of 25.0%. The portion of the purchase price allocated to in-process R&D projects that did not have future alternative use totaled $17,600 and was charged to expense as of the acquisition date. The other acquired intangibles include developed technologies, assembled workforce and customer list. These intangibles are being amortized over their estimated useful lives of 1-15 years. The remaining unidentified intangible asset has been allocated to goodwill and is being amortized over its estimated useful life of 20 years (see Note 2). Kalex's in-process R&D value was comprised of three primary projects consisting of developing Rambus technology, increasing board layer count and developing ball grid array substrates capability, which were scheduled to reach completion beginning in 1999. At the acquisition date, research and development projects ranged from 65% to 80% complete and total continuing research and development commitments to complete the projects are expected to be approximately $2,400. As of December 31, 2001, two of the projects were completed and the other continues to be evaluated. These projects will require maintenance research and development after they have reached a state of technological and commercial feasibility. In addition to usage of the companies' internal cash flows, the Company will likely provide a substantial amount of funding to complete the programs. Remaining development efforts for the in-process research and development programs are complex and include the development of next-generation technological solutions. The Kalex Acquisition was funded with: (a) an additional equity contribution of $200,000 and (b) a portion of a $291,000 term loan borrowing under a former credit facility. Kalex's manufacturing facilities are located in the People's Republic of China. Manufacturing in the People's Republic of China entails political and economic risks, including political instability, expropriation and currency controls and fluctuations. 20 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Included below is unaudited pro forma financial data setting forth condensed results of operations of the Company for the year ended December 31, 1998 and 1999, as though the Kalex Acquisition and the related financing and equity contribution had occurred at January 1, 1998.
YEAR ENDED DECEMBER 31, ----------------------- 1998 1999 ---------- ---------- (UNAUDITED) Net sales................................................... $1,375,425 $1,385,586 Net loss.................................................... (91,456) (726,244)
In April 1999, the Company acquired all of the outstanding shares of PAGG Corporation ("PAGG") located in Milford, Massachusetts, for a cash purchase price of approximately $9,300 plus the issuance of 273,223 shares of the Company's $0.01 per share common stock valued at $2,000 and the issuance of 136,645 warrants to purchase common stock with an exercise price of $10.50 expiring in 2004. PAGG operates multiple surface mount production lines for printed circuit board and backplane assembly and has full box build capabilities. The acquisition was accounted for as a purchase and, accordingly, the results of operations of PAGG since acquisition are included in the results of operations of the Company. 2000 ACQUISITIONS In March 2000, the Company acquired all of the outstanding shares of Wirekraft Industries, Inc. (the "Wire Harness Business"), a wholly owned subsidiary of International Wire Group, Inc., an affiliate of Hicks, Muse, Tate & Furst Incorporated (Hicks, Muse, Tate: Furst Incorporated, its affiliates, and/or its partners collectively or individually "HMTF") (the "Wire Harness Acquisition") for a cash purchase price of $210,798. The Wire Harness Business manufactures and assembles wire harness products. The Wire Harness Acquisition occurred immediately prior to Group's initial public offering. The Company and International Wire Group, Inc. are considered entities under common control. Accordingly, the acquisition has been accounted for on an "as-if pooling basis," with the excess purchase price over book value acquired accounted for as a distribution to the Company's stockholders. Additionally, as the acquisition has been accounted for on an "as-if pooling basis," the Company's consolidated financial statements have been restated to reflect the acquisition as if it occurred at the beginning of the first period presented. A reconciliation of the results of the Company before the as if pooling of the Wire Harness Business results for the years ended December 31, 1999, and 2000 to the results in this Form 10-K is as follows:
1999 2000 ---------- ---------- Net sales: Before as-if pooling...................................... $1,102,324 $1,555,129 Wire Harness Business..................................... 191,046 49,856 ---------- ---------- $1,293,370 $1,604,985 ========== ========== Net income (loss): Before as-if pooling...................................... $ (726,342) $ (139,914) Wire Harness Business..................................... 6,047 3,930 ---------- ---------- $ (720,295) $ (135,984) ========== ==========
In March 2000, the Company acquired Marconi Communications Inc.'s Network Components & Services' European and China operations ("NC&S"), for a cash purchase price of approximately $112,450, plus assumed liabilities of approximately $5,145 (the "NC&S Acquisition"). NC&S is a business engaged in electronic manufacturing services, primarily to telecommunication customers. The results of operations of NC&S since its acquisition are included in the results of operations of the Company. The NC&S Acquisition 21 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) has been accounted for using the purchase method of accounting whereby the total purchase price has been preliminarily allocated to the assets and liabilities based on their estimated respective fair values. The excess purchase price over fair values has been allocated to goodwill and is being amortized over its estimated useful life of 20 years (see Note 2). In June 2000, the Company acquired Top Line Electronics Corporation ("Top Line") by issuing 2,681,835 shares of Group's common stock (the "Top Line Acquisition"). This was subject to the issuance of an additional 1,650,319 shares made during 2001 based on the price of Group's common stock for the months of January and February 2001. Top Line, located in San Jose, California, offers design and prototype services, PCB assembly, and full system assembly and testing. The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations of Top Line since acquisition are included in the results of operations of the Company. The excess purchase price over fair values has been allocated to goodwill and is being amortized over its estimated useful life of 20 years (see Note 2). In September 2000, the Company acquired Lucent Technologies' Rouen Global Provisioning Center ("Rouen") by making cash payments and accepting a non-interest bearing note from the seller (the "Rouen Acquisition"). Accordingly, the results of operations of Rouen since acquisition are included in the results of operations of the Company. Rouen, located in Rouen, France, manufactures network transmission and radio frequency equipment. The Rouen Acquisition has been accounted for using the purchase method of accounting, whereby the total purchase price has been allocated to the assets and liabilities based on their respective fair values. The Company has allocated a portion of the purchase price to a technology agreement, which is being amortized over its estimated useful life. The remaining unidentified intangible asset has been allocated to goodwill and is being amortized over its estimated useful life of 20 years (see Note 2). In November 2000, the Company acquired Laughlin-Wilt Group, Inc. ("Laughlin-Wilt"), by issuing 3,297,481 shares of Group's common stock (the "Laughlin-Wilt Acquisition"), a cash payment and acquiring debt. Laughlin-Wilt, located in Beaverton, Oregon and Orange County, California, offers design and prototype services for printed circuit boards, printed circuit board assembly, and full system assembly and testing. The acquisition was accounted for using the purchase method of accounting and, accordingly, the results of operations of Laughlin-Wilt since acquisition are included in the results of operations of the Company. The excess purchase price over fair values has been allocated to goodwill and is being amortized over its estimated useful life of 20 years (see Note 2). On December 22, 2000, the Company acquired Accutec ("Accutec") by issuing 976,150 shares of Group's common stock (the "Accutec Acquisition") and acquiring debt. Accutec, located in Milwaukee, Wisconsin, offers fabrication of custom metal enclosures. The acquisition was accounted for using the purchase method of accounting and, accordingly, the balance sheet of Accutec is included in the Company's consolidated balance sheet. Accutec's results of operations will be included in the first quarter 2001 results of the Company. The excess purchase price over fair values has been allocated to goodwill and is being amortized over its estimated useful life of 20 years. The Top Line, Rouen, Laughlin-Wilt and Accutec acquisitions were completed by issuing an aggregate of 6,955,466 shares of Group's common stock; making cash payments at closing totaling approximately $45,100; making cash payments in the future of approximately $8,800; receiving a non-interest bearing note from the seller for approximately $11,300 and acquiring debt of approximately $31,000. The common stock value was determined by using a stock price calculated by averaging the daily stock price for a few days before and after the measurement date. The aggregate value of the common stock was approximately $116,514. In connection with certain acquisitions, and in accordance with the contract terms, outstanding stock options held by employees of acquired companies became vested and converted to options for Group's common stock on the acquisition date. As these acquisitions were accounted for as purchases, the fair value of these options was included in the purchase price. 22 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Included below is unaudited pro forma financial data setting forth condensed results of operations of the Company for the years ended December 31, 1999 and 2000, as though the acquisitions of NC&S, Top Line, Rouen, Laughlin-Wilt and Accutec had occurred at January 1, 1999 and the transfer of the operations formerly conducted by Forward Group, PLC ("Forward"), Interconnection Systems (Holdings) Limited ("ISL"), Zincocelere S.p.A. ("Zincocelere") and the PCB production facility of Ericsson Telecom AB located in Sweden (the "Ericsson Facility") (see Note 23) had occurred at January 1, 1999.
YEAR ENDED DECEMBER 31, ----------------------- 1999 2000 ---------- ---------- (UNAUDITED) Net sales................................................... $1,319,134 $1,782,402 Net loss before extraordinary item and cumulative effect of a change in accounting principle.......................... (142,516) (84,478) Net loss.................................................... (146,096) (115,674) Basic net loss per share.................................... $ (2.11) $ (.97) Diluted net loss per share.................................. $ (2.24) $ (.98)
2001 ACQUISITIONS In April 2001, the Company acquired certain manufacturing assets of Metawave Communications Corporation ("Metawave") for a cash purchase price of approximately $7,964 (the "Metawave Acquisition"). Pursuant to a manufacturing agreement, the Company will use the acquired assets to manufacture smart antennas for the wireless communication industry that are marketed and sold by Metawave. In April 2001, the Company acquired Chang Yuen, a manufacturer of custom metal enclosures, located in the People's Republic of China, for a cash purchase price of $2,600 and by issuing an aggregate 535,905 shares of Group's common stock valued at $1,758. Each of the acquisitions completed during 2001 was accounting for using the purchase method of accounting and, accordingly, the results of operations related to the acquisitions are included in the results of operations of the Company subsequent to the closing date of each acquisition, respectively. The excess purchase price over the fair values of assets acquired in 2001 has been allocated to goodwill and is being amortized over its estimated useful life of 20 years. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS The Company is a leading provider of electronic manufacturing services, with facilities located in the United States, Canada, Mexico, the United Kingdom, France, the Netherlands, Italy and China. The Company's customers include a diverse base of manufacturers in the telecommunications and networking, computer, consumer and automotive industries primarily located throughout North America, China and Europe. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the accounts of the Company. All significant intercompany balances and transactions have been eliminated in consolidation. FOREIGN CURRENCY TRANSLATION Local currencies have been designated as the functional currency for most subsidiaries. Accordingly, assets and liabilities of most foreign subsidiaries are translated at the rates of exchange in effect at the balance 23 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) sheet date. Income and expense items of these subsidiaries are translated at average monthly rates of exchange. The resultant translation gains and losses are reported in other comprehensive income. Exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved are included in income. To date, the effect of such amounts on net income has not been material. DERIVATIVE FINANCIAL INSTRUMENTS From time to time, the Company enters into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations. Such transactions are not material and gains and losses from such activities are not significant. However, there can be no assurance that these activities will eliminate or reduce foreign currency risk. INVENTORIES Inventories are stated at the lower of cost (valued using the first-in, first-out (FIFO) or last-in, first-out (LIFO) method) or market. Cost includes raw materials, labor and manufacturing overhead. Had the first-in, first-out method been used to determine purchased inventory cost, inventories would have decreased by approximately $2,512 and $3,626 at December 31, 2000 and 2001, respectively. For the years ended December 31, 2000 and 2001, the percentage of inventory valued at LIFO was 10% and 23%, respectively. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are recorded at cost. Repairs and maintenance which do not extend the useful life of an asset are charged to expense as incurred. The useful lives of leasehold improvements are the lesser of the remaining lease term or the useful life of the improvement. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and any resulting gains or losses are included in the operations for the period. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows: Building.................................................... 39-50 years Leasehold improvements...................................... 10-12 years Machinery, equipment, systems and other..................... 3-10 years
DEFERRED FINANCING COSTS Deferred financing costs, consisting of fees and other expenses associated with debt financing, are amortized over the term of the related debt using the straight-line method, which approximates the effective interest method. INCOME TAXES The Company accounts for certain items of income and expense in different periods for financial reporting and income tax purposes. Provisions for deferred income taxes are made in recognition of such temporary differences, where applicable. A valuation allowance is established against deferred tax assets unless the Company believes it is more likely than not that the benefit will be realized. START-UP COSTS Start-up costs consist of salaries, personnel training cost and other expenses of opening new facilities and are expensed as incurred. 24 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) INTANGIBLE ASSETS Intangible assets consist primarily of identifiable intangibles acquired and goodwill arising from the excess of cost over the fair value of net assets acquired. Amortization of intangible assets is computed using systematic methods over the estimated useful lives of the related assets as follows:
LIFE METHOD ---- ------ Developed technologies.......................... 15 years Double-declining balance Assembled workforce............................. 1 year Straight-line Customer list................................... 3 years Straight-line Goodwill........................................ 20-40 years Straight-line
IMPAIRMENT OF LONG-LIVED ASSETS The Company assesses the recoverability of its long-lived assets (including intangible assets) based on their current and anticipated future undiscounted cash flows. In addition, the Company's policy for the recognition and measurement of any impairment of long-lived assets is to assess the current and anticipated future cash flows associated with the impaired asset. An impairment occurs when the cash flows (excluding interest) do not exceed the carrying amount of the asset. The amount of the impairment loss is the difference between the carrying amount of the asset and its estimated fair value. REVENUE RECOGNITION Sales and related costs of good sold are included in income when goods are shipped to the customer in accordance with the delivery terms, except in the case of vendor managed inventory arrangements, whereby sales and the related costs of goods sold are included in income when goods are taken into production by the customer. ENVIRONMENTAL COSTS Accruals for environmental matters are recorded in operating expenses when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accrued liabilities do not include claims against third parties and are not discounted. Costs related to environmental remediation are charged to expense. Other environmental costs are also charged to expense unless they increase the value of the property and/or mitigate or prevent contamination from future operations, in which event they are capitalized. CASH AND CASH EQUIVALENTS The Company considers investments purchased with an original maturity of three months or less to be cash equivalents. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 25 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) FAIR VALUE OF FINANCIAL INSTRUMENTS The fair market value of the Senior Subordinated Notes due 2007 and the Series B Senior Subordinated Notes due 2007 was $120,000 and $30,000, respectively, at December 31, 2001 and was $319,000 and $79,750, respectively, at December 31, 2000. The Company has estimated this fair value data by using current market data. The fair market values of the other financial instruments included in the consolidated financial statements approximate the carrying values of those instruments. NEW ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations", and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets". SFAS 141 supercedes Accounting Principles Board Opinion No. 16, "Business Combinations". The most significant changes made by SFAS 141 are: (1) requiring that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, (2) establishing specific criteria for the recognition of intangible assets separately from goodwill, and (3) requiring unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). The Company is currently assessing the impact of SFAS 141 on its results of operations and financial condition. SFAS 142 supercedes Accounting Principles Board Opinion No. 17, "Intangible Assets". SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS 142 are: (1) goodwill and indefinite lived intangible assets will no longer be amortized, (2) goodwill will be tested for impairment at least annually at the reporting unit level, (3) intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and (4) the amortization period of intangible assets with finite lives will no longer be limited to forty years. Upon implementation of SFAS 142, amortization expense for fiscal year 2002 is expected to decrease approximately $16,600 compared to fiscal year 2001, as a result of no longer amortizing goodwill. The Company currently does not expect to record an impairment charge upon completion of the initial impairment review. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-lived Assets". SFAS 144 supercedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and Assets to be Disposed of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. The provision of SFAS 144 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS 144 are: (1) removes goodwill from its scope and, therefore, eliminates the requirements of SFAS 121 to allocate goodwill to long-lived assets to be tested for impairment, and (2) describes a probability-weighted cash flow estimation approach to deal with situations in which alternative course of action to recover the carrying amount of a long-lived assets are under consideration or a range is estimated for the amount of possible future cash flows. The Company currently does not expect the implementation of SFAS 144 to have a material impact on its results of operations and financial condition. However, there can be no assurance that at the time the review is completed a material change will not be recorded. 26 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) RECLASSIFICATIONS Certain amounts in the consolidated financial statements for 1999 and 2000 have been reclassified to conform to the current year presentation. These reclassifications have no effect on total stockholders' equity (deficit) or net loss as previously reported. 3. RESTRUCTURING AND IMPAIRMENT CHARGES During the year ended December 31, 2001, the Company recorded a series of restructuring charges totaling $59,774. These charges were taken in light of the economic downturn primarily related to the Company's large telecommunication and networking customers. During 2001, the Company began evaluating its cost position compared to anticipated levels of business for 2001 and beyond and determined that plant shutdowns, plant consolidations and downsizing were required to reduce costs to more appropriate levels in line with current and expected customer demand. A summary of the 2001 restructuring activity (the "Restructuring") by quarter is as follows: During the quarter ended March 31, 2001, the Company recorded a restructuring charge of $12,007 primarily related to the phase one workforce reductions in its Richmond, Virginia PCB fabrication facility as well as small workforce reductions at certain other North American operations. The workforce reductions impacted a total of 2,507 employees, of which 1,915 were regular, union employees, 547 were regular, non-union employees and 45 were temporary/contract employees. All of these employees were terminated by December 31, 2001. During the quarter ended June 30, 2001, the Company recorded a restructuring charge of $30,481, primarily related to the closure of its Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities, as well as small workforce reductions at certain other North American and European operations. The facility closures and workforce reductions impacted a total of 1,613 employees, of which 1,228 were regular, union employees, 373 were regular, non-union employees and 12 were temporary/contract employees. All of these employees were terminated by December 31, 2001. During the quarter ended September 30, 2001, the Company recorded a restructuring charge of $16,231, primarily related to the consolidation of its two San Jose, California PCB assembly operations as well as headcount reductions at its corporate offices. The consolidation and workforce reductions impacted a total of 471 employees, of which 150 were regular, union employees, 315 were regular, non-union employees and 6 were temporary/contract employees. All of these employees were terminated by December 31, 2001. During the quarter ended December 31, 2001, the Company recorded a restructuring charge of $7,061, primarily related to workforce reductions at its European PCB fabrication facility as well as small workforce reductions at other European facilities. The workforce reductions impacted a total of 455 employees, all of which were regular, non-union employees. All of these employees were terminated by December 31, 2001. Additionally, during the quarter ended December 31, 2001, the Company reversed $6,006 of restructuring charges previously recorded. This reversal primarily related to a change in the Company's plan related to the consolidation of its two San Jose, California PCB assembly operations. Initially, the plan included consolidating the leased operation into the owned operation, resulting in a restructuring charge related to the contractual obligation on the leased facility. Subsequently, the Company amended its plan and made the decision to consolidate the owned operations into the leased operations resulting in a reversal to the restructuring charge related to the lease commitment. 27 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2001 ASSET IMPAIRMENTS Assets Held for Use The Company has assessed the carrying value of long-lived assets, including goodwill and other acquired intangibles in accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS 121"). Based on current business enterprise values using common appraisal methods, the assessment identified impairment of long-lived assets acquired pursuant to the Top Line, Laughlin-Wilt and NC&S acquisitions. The calculated business enterprise values determined were compared to the net book values of the related long-lived assets with the excess of net book value over the business enterprise value representing the amount of the impairment loss. The impairment loss for each group of assets totaling $133,252 was first charged against goodwill ($129,109) with the remaining amounts being charged to property, plant and equipment ($4,143). The impairment resulted from the economic downturn experienced during 2001, primarily related to the Company's telecommunication and networking customers. Through the third fiscal quarter of 2001, it was expected that the economic downturn impacting these assets was a short-term inventory correction. However, in the fourth quarter it became clear to management that the downturn impacting these assets was much more severe and of a long-term nature resulting in a significant decline in profitability that is not expected to return in the near term. Assets Held for Disposal In connection with the Restructuring, the Company also recorded impairment charges totaling $82,707 to write-down to fair value certain land and buildings as well as machinery and equipment, office equipment and systems that were made obsolete or redundant due to the closure and consolidation of facilities pursuant to the Restructuring. Included in the impairment charge were the following amounts: a write-down of land, buildings and leasehold improvements totaling $25,403, related to the Company's Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities that were closed; a write-down of machinery and equipment totaling $14,880, a write-down of office equipment totaling $37,688, and a write-down of systems and construction in progress totaling $4,736, each primarily related to obsolete or redundant assets at the Company's Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities that were closed as well as certain other North American and European operations that were consolidated. At December 31, 2001, $17,683 of the assets held for disposal had been sold or otherwise disposed, leaving $16,286 remaining on the books, of which $13,000 consists of the land and building related to the Company's Richmond, Virginia PCB fabrication facility. The Company is actively marketing the land and building for sale and expects to complete the disposal of these assets during 2002. The remaining $3,286 of net book value of assets held for disposal on the books at December 31, 2001 consists primarily of machinery and equipment and office equipment related to redundant or obsolete assets at our Richmond, Virginia and San German, Puerto Rico PCB fabrication facilities and are expected to be disposed of during the next 18-24 months. Additionally, the Company is holding for disposal certain property related to one of its San Jose, California facilities. As of December 31, 2001, this property had a net book value of approximately $5,833. The Company is actively marketing this property for sale and expects to complete the disposal of these assets during 2002. 1999 ASSET IMPAIRMENTS The Company has assessed the carrying value of long-lived assets, including goodwill and other acquired intangibles, in accordance with FAS 121. Based on current business enterprise values using common appraisal methods, the assessment identified impairment of long-lived assets acquired from the Forward, ISL and 28 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Zincocelere acquisitions. The calculated business enterprise values determined were compared to the net book value of the related long-lived assets with the difference representing the amount of the impairment loss. The impairment loss for each group of assets was first charged against goodwill with any remaining amounts being charged to the other acquired intangibles and property, plant and equipment, if necessary. The impairment resulted due to significant changes in the markets served by the acquisitions that were not anticipated at the time of each acquisition, most significantly a significant decline in market pricing. The decline in market pricing was due to the convergence of two factors: significant currency fluctuations and the emergence of significant offshore competition from Asia Pacific. While the primary currency for the acquisitions is the U.K. pound sterling, their competitors were in Continental Europe and beginning to emerge from Asia Pacific. The currencies for most of the Continental European and Asia Pacific countries declined significantly against the U.K. pound sterling, which resulted in an improved relative cost position for the competitors and reduced market pricing. This decline in market pricing resulted in a significant decline in profitability that is not expected to return in the near term. In the fourth quarter of fiscal year 1999, the Company recorded a non-cash impairment loss of $468,389 related to the write down of $206,335 related to goodwill, $65,877 related to developed technologies, $847 related to customer lists and $195,330 related to machinery and equipment used in the production of printed circuit boards of the three groups of assets. Below is a table summarizing restructuring and impairment activity for the year ended December 31, 2001:
CUMULATIVE THREE MONTHS ENDED DRAWDOWNS --------------------------------------------------- ------------------- MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, CASH NON-CASH 2001 2001 2001 2001 REVERSALS TOTAL PAYMENTS CHARGES --------- -------- ------------- ------------ --------- -------- -------- -------- Restructuring Activities: Personnel and severance..... $11,755 $ 20,238 $ 6,505 $ 5,524 $ (170) $ 43,852 $36,282 $ -- Lease and other contractual Commitments............... 78 7,864 9,623 1,228 (5,836) 12,957 5,614 -- Other....................... 174 2,379 103 309 -- 2,965 2,810 -- Asset Impairments: Held for disposal......... -- 75,043 5,454 2,210 -- 82,707 -- 82,707 Held for use.............. -- -- -- 133,252 -- 133,252 -- 133,252 Other..................... -- -- -- 5,641 -- 5,641 -- 5,641 ------- -------- ------- -------- ------- -------- ------- -------- Total restructuring and impairment charges.......... $12,007 $105,524 $21,685 $148,164 $(6,006) $281,374 $44,706 $221,600 ======= ======== ======= ======== ======= ======== ======= ======== BALANCE AT DECEMBER 31, 2001 ------------ Restructuring Activities: Personnel and severance..... $ 7,570 Lease and other contractual Commitments............... 7,343 Other....................... 155 Asset Impairments: Held for disposal......... -- Held for use.............. -- Other..................... -- ------- Total restructuring and impairment charges.......... $15,068 =======
The significant components of the restructuring charge recorded for lease and other contractual commitments totaling approximately $12,957, are as follows: $8,532 for leased and other facility commitments; $3,182 for lease commitments on machinery and equipment; $1,165 for waste water project commitments; and $78 for other commitments. Also in connection with the Restructuring, the Company wrote-off inventory resulting in a $49,290 and $824 charge to cost of goods sold during the quarters ended June 30, 2001 and September 30, 2001, respectively. During the quarter ended December 31, 2001, the Company reversed inventory write-offs previously taken totaling $781. With respect to the inventory written-off during the quarter ended June 30, 2001, the Company has disposed of $39,136 of the inventory and reversed the write-off and sold $1,021 of the inventory, resulting in a remaining balance of $9,133 at December 31, 2001. The Company expects to dispose of the remaining obsolete inventory during fiscal year 2002. 29 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The restructuring and impairment charges were determined based on formal plans approved by the Company's management using the best information available to it at the time. The amounts the Company may ultimately incur may change as the balance of the plans are executed. The Company continues to review it operations in light of the continued economic downturn related to its telecommunication and networking customers. These reviews could result in additional workforce reductions. The impact these activities could have on the Company's results of operations is not currently known. 4. DERIVATIVE FINANCIAL INSTRUMENTS On January 1, 2001, the Company implemented, on a prospective basis, Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137 and SFAS No. 138 (collectively, the "Statement"). The Statement requires all derivatives to be recognized in the statement of financial position at fair value, with changes in the fair value of derivative instruments to be recorded in current earnings or deferred in accumulated other comprehensive loss, depending on whether a derivative is designated as and is effective as a hedge and on the type of hedging transaction. The Company uses derivative instruments, primarily foreign exchange forward contracts, to manage certain of its foreign exchange rate risks. The Company's objective is to limit potential losses in earnings or cash flows from adverse foreign currency exchange rate movements. The Company's foreign currency exposures arise from transactions denominated in a currency other than an entity's functional currency, primarily anticipated sales of finished product and the settlement of payables. Generally, the Company applies hedge accounting as allowed by the Statement. At December 31, 2001, the Company only had derivatives which qualified as foreign currency cash flow hedges. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer intended to occur, and any previously deferred hedging gains or losses would be recorded to earnings immediately. Earnings impacts for all designated hedges are recorded in the condensed consolidated statement of operations generally on the same line item as the gain or loss on the item being hedged. The Company records all derivatives at fair value as assets or liabilities in the condensed consolidated balance sheet, with classification as current or long-term depending on the duration of the instrument. The Company had no transition adjustment as a result of adopting SFAS 133 on January 1, 2001, as the Company's derivative instruments were entered into during the first quarter 2001 or at year-end 2000. At December 31, 2001, the net deferred hedging gain in accumulated other comprehensive loss was $0 as the contracts entered into during 2001 had already expired. This entire gain resulting from these contracts totaling $3,135 was recognized in earnings during the year ended December 31, 2001, at the time the underlying hedged transactions were realized. There was no hedge ineffectiveness during the year ended December 31, 2001. 5. SUPPLEMENTAL CASH FLOW DISCLOSURE Cash paid for interest for the years ended December 31, 1999, 2000 and 2001, was $110,185, $106,676 and $94,270 respectively. For the years ended December 31, 1999 and 2000 net cash received from income tax refunds was $1,591 and $2,933. For the year ended December 31, 2001, net cash paid for income taxes was $1,423. In 1999, 2000 and 2001 some acquisitions were purchased or partially purchased by issuing 273,223, 6,955,466 and 2,186,155 shares, respectively of Group's common stock (see Note 1). 30 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. INVENTORIES The composition of inventories at December 31 is as follows:
2000 2001 -------- -------- Raw materials............................................... $126,091 $ 56,815 Work in process............................................. 61,879 27,085 Finished goods.............................................. 68,003 29,689 -------- -------- Total..................................................... $255,973 $113,589 ======== ========
7. INTANGIBLE ASSETS The composition of intangible assets at December 31 is as follows:
2000 2001 -------- --------- Developed technologies...................................... $ 44,925 $ 43,646 Assembled workforce......................................... 16,920 10,684 Customer list............................................... 70,466 70,240 Goodwill.................................................... 378,368 252,088 -------- --------- 510,679 376,658 Less: Accumulated amortization.............................. (91,443) (128,714) -------- --------- Total..................................................... $419,236 $ 247,944 ======== =========
8. PROPERTY, PLANT AND EQUIPMENT The composition of property, plant and equipment at December 31 is as follows:
2000 2001 --------- --------- Land and buildings.......................................... $ 134,723 $ 129,018 Machinery, equipment, systems and other..................... 519,573 463,709 Construction in progress.................................... 31,076 20,175 Leasehold improvements...................................... 17,636 18,618 --------- --------- 703,008 631,520 Less: Accumulated depreciation.............................. (250,387) (277,869) --------- --------- Total..................................................... $ 452,621 $ 353,651 ========= =========
9. ACCRUED AND OTHER LIABILITIES The composition of accrued and other liabilities at December 31 is as follows:
2000 2001 -------- ------- Accrued payroll and related costs........................... $ 44,378 $19,712 Accrued capital expenditures................................ 8,045 9,710 Plant shutdown, downsizing and consolidation accruals....... 206 15,068 Accrued interest............................................ 13,744 10,239 Accrued and other liabilities............................... 45,827 35,773 -------- ------- Total..................................................... $112,200 $90,502 ======== =======
31 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 10. LONG-TERM OBLIGATIONS The composition of long-term obligations at December 31 is as follows:
2000 2001 ---------- ---------- Credit Agreement: Term Facilities........................................... $ 149,500 $ 437,750 Revolvers................................................. 53,800 10,600 Senior Subordinated Notes Due 2007.......................... 400,000 400,000 Series B Senior Subordinated Notes Due 2007................. 100,000 100,000 Series B Senior Subordinated Notes Due 2007, Premium........ 3,466 3,041 Senior Unsecured Notes, including paid-in-kind interest of $6,422.................................................... -- 106,422 Senior Unsecured Notes, discount............................ -- (26,895) Chips Loan Notes............................................ 285,312 -- Capital lease obligations (see Note 11)..................... 6,499 4,228 Other....................................................... 25,740 5,773 ---------- ---------- 1,024,317 1,040,919 Less current maturities................................ (23,882) (3,215) ---------- ---------- $1,000,435 $1,037,704 ========== ==========
The schedule of principal payments for long-term obligations at December 31, 2001, is as follows: 2002........................................................ $ 3,215 2003........................................................ 27,477 2004........................................................ 52,447 2005........................................................ 68,515 2006........................................................ 2,299 Thereafter.................................................. 886,966 ---------- $1,040,919 ==========
CREDIT AGREEMENT In connection with the initial public offering, Group, as guarantor, and certain of its subsidiaries, as borrowers, entered into a new senior credit facility (the "Credit Agreement"). The material terms of the Credit Agreement are described below. The Credit Agreement provides for: (a) a $150,000 term loan facility (The "Tranche B Term Loan"), all of which was required to be drawn in a single draw at the closing of the Credit Agreement in March 2000; (b) a $175,000 revolving credit facility (the "Revolving Loans") of which $75,000 may be used for foreign currency loans in Euros, Pounds Sterling or Canadian Dollars; (c) up to $40,000 of the Revolving Loan may be used for letters of credit; and (d) a U.S. $303,100 letter of credit and term loan facility in respect of the obligations due under the loan notes made in connection with acquisition of ISL (the "Chips Loan Notes"). The letter of credit and term loan facility consists of two tranches: (i) a $153,100 tranche (the "Tranche A Chips Loan") and (ii) a $150,000 tranche (the "Tranche B Chips Loan"). The Tranche A Chips Loan amortizes semi-annually over two years, commencing September 30, 2003, the Tranche B Chips Loan amortizes semi-annually over three and one half years, commencing September 30, 32 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 2003, and the Tranche B Term Loan amortizes semi-annually over six and one half years, commencing September 30, 2000. The term loans bear interest, at the Company's election, at either (a) the Eurocurrency Rate (or Canadian, as applicable) plus (i) a percentage based on the rates of Consolidated Total Debt to Consolidated EBITDA (as defined herein) for the Revolving Loans and Tranche A Chips Loan (3.25% at December 31, 2001) or (ii) 3.75% for the Tranche B Loan and the Tranche B Chips Loan; or (b) the Base Rate plus (i) a percentage based on the rates of Consolidated Total Debt to Consolidated EBITDA (as defined herein) for the Revolving Loans and Tranche A Chips Loan (2.25% at December 31, 2001) or (ii) 2.75% for the Tranche B Loan and the Tranche B Chips Loan. The Base Rate is the highest of the Chase Manhattan Bank's Prime Rate, the secondary market rate for three-month certificates of deposit plus 1.00% and the Federal Funds Effective Rate (as defined therein) plus 0.5%. At December 31, 2000 and 2001, the weighted average interest rate on outstanding borrowings under the Company's credit facilities were 9.34% and 7.95%, respectively. The Company pays a per annum fee equal to one-eighth of one percent plus the applicable margin on Revolving Loans, the Tranche A Chips Loan or the Tranche B Chips Loan, as applicable, which bear interest at the Eurocurrency Base Rate, of the average daily face amount of outstanding letters of credit. The Company pays a commitment fee equal to 0.5% on the undrawn portion of the commitments in respect of the Revolving Loans. At December 31, 2000, the Company had approximately $99,755 of available borrowing capacity under its revolving credit facility. At December 31, 2001, the Company had approximately $128,900 of available borrowing capacity under the Revolving Loans. The borrowers may optionally prepay the term loans from time to time in whole or in part, without premium or penalty. At the Company's option, the Revolving Loans may be prepaid, and revolving credit commitments may be permanently reduced, in whole or in part, at any time. The Company will be required to make mandatory prepayments of the term loans, to cash collateralize the letter of credit term loan and to reduce the revolving facility, in the amounts equal to (a) 50% of Excess Cash Flow (as defined), beginning in the earlier of (i) the fiscal year in which the letter of credit term loans exceed $270,000 and (ii) fiscal year 2002, but only if the leverage ratio exceeds 3 1/2 to 1 at such time, and (b) 100% of the net proceeds of dispositions by us or any of our subsidiaries of material assets or incurrences of indebtedness by us or any of our subsidiaries. Viasystems' obligations under the Credit Agreement are unconditionally and irrevocably guaranteed by Group and each existing and future domestic subsidiary of Viasystems. In addition, the Credit Agreement is secured by a perfected first priority security interest in all of the capital stock of Viasystems and each of its direct and indirect domestic subsidiaries and 65% of each first tier foreign subsidiary of Viasystems and its domestic subsidiaries, all intercompany notes owing to Viasystems or any of its domestic subsidiaries, the notes issued in connection with the transfer of the operations formerly conducted by ISL, Forward, Zincocelere and the Ericsson Facility and all other tangible and intangible assets of Viasystems and each guarantor. The Credit Agreement contains a number of covenants that, among other things, restrict the ability of Viasystems and its subsidiaries to: (a) incur additional indebtedness; (b) create liens on assets; (c) incur guarantee obligations; (d) enter into mergers, consolidations or amalgamations or liquidate, wind up or dissolve; (e) dispose of assets; (f) pay dividends, make payment on account of, or set apart assets for, a sinking or analogous fund or purchase, redeem, defease or retire capital stock; (g) make capital expenditures; (h) make amendments to the Lucent supply agreement which would have a material adverse effect on the lenders; (i) make optional repurchases of subordinated debt or preferred stock; (j) make advances, loans, 33 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) extensions of credit, capital contributions to, or purchases of any stock, bonds, notes, debentures or other securities; (k) engage in certain transactions with affiliates; and (l) enter into certain sale and leaseback transactions. The Credit Agreement also contains customary events of default including: (a) failure to pay principal on any loan when due or any interest or other amount that becomes due within five days after the due date thereof; (b) any representation or warranty made or deemed made is incorrect in any material respect on or as of the date made or deemed made; (c) the default in the performance of negative covenants or a default in the performance of other covenants or agreements for a period of thirty days; (d) default in other indebtedness or guarantee obligations with a principal amount in excess of $20,000 beyond the period of grace; (e) events of insolvency; (f) ERISA events; and (g) other customary events of default for facilities similar to the Credit Agreement. On April 23, 2001, the Company executed a first amendment to the Credit Agreement. Among other provisions, the amendment increases the interest margin charged on borrowed funds and amends financial condition covenants. On June 28, 2001, the Company executed a second amendment to the Credit Agreement. Among other provisions, the amendment amends certain financial condition covenants, reduces available borrowing capacity under the Revolving Loan to $150,000 until such time as the Company delivers a compliance certificate with respect to its financial statements for the fiscal quarter ended June 30, 2003, and permits the issuance of the senior unsecured notes to HMTF. The second amendment to the Credit Agreement became effective on July 19, 2001, in connection with the issuance of the senior unsecured notes to HMTF. SENIOR UNSECURED NOTES On July 19, 2001, Viasystems, Inc. issued to HMTF $100,000 of senior unsecured notes (the "Senior Unsecured Notes") and 10.0 million warrants to purchase shares of Group's common stock. The Senior Unsecured Notes bear interest at 14% per annum and mature on May 1, 2007. Interest is not payable currently, but rather will accrete semi-annually and be payable in full at maturity of the Senior Unsecured Notes. The warrants are immediately exercisable and have an exercise price of $.01 per share and terminate in 2011. The Company has allocated $29,964 of the proceeds from the Senior Unsecured Notes to paid-in-capital and $70,036 to debt, which represents the relative fair value of the securities at the time of issuance. The resulting debt discount of $29,964 is being amortized, using the effective interest method, over the life of the Senior Unsecured Notes. At December 31, 2001, the remaining unamortized discount was $26,895. The fair value of the warrants was determined using a Black Scholes model, assuming expected volatility of 116%, a risk-free rate of return of 3.0% and a dividend yield of 0%. SENIOR SUBORDINATED NOTES AND SERIES B SENIOR SUBORDINATED NOTES In June 1997, Viasystems completed an offering (the "1997 Offering") of $400,000 of 9 3/4% Senior Subordinated Notes due 2007 (the "1997 Notes"). In February 1998, Viasystems completed the offering of an additional $100,000 of 9 3/4% Series B Senior Subordinated Notes due 2007 at a price of 104.5% (the "1998 Notes" and together with the 1997 Notes, the "2007 Notes"). Interest on the 2007 Notes is due semiannually. The 2007 Notes may not be redeemed prior to June 1, 2002, except in the event of a Change of Control (as defined) or Initial Public Offering (as defined) and at premium (as defined in the Indenture). The 2007 Notes are redeemable, at the Company's option, at the redemption prices of 104.875% at June 1, 2002, and at decreasing prices to 100% at June 1, 2005, and thereafter, plus accrued interest. 34 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) CHIPS LOAN NOTES LIABILITY In June 1997, in connection with the acquisition of ISL, the Company assumed $437,500 of promissory notes (the "Chips Loan Notes"). The Chips Loan Notes mature on March 31, 2003 and bear interest, payable quarterly, at approximately 6.22% per annum through April 1, 1998, with a variable rate thereafter discounted from the U.S. prime rate. The Chips Loan Notes may be called by the holders on or after any interest payment date commencing April 1, 1998. In April 1998, the holders of the Chips Loan Notes redeemed approximately $152,200 of the Chips Loan Notes. As such, approximately $118,300 of cash held by Bisto Funding, Inc., a special purpose entity established as a subsidiary of Group in connection with the acquisition of ISL, was paid to the holders of the Chips Loan Notes. The Company borrowed approximately $33,900 from the available term loan facility in place to fund its portion of the payment of the Chips Loan Notes. In March 2000, when Viasystems entered into the Credit Agreement, a letter of credit and term loan facility in an aggregate amount of $303,100 was made available to Viasystems to satisfy the Chips Loan Notes obligation. On January 2, 2001, the holder of the Chips Loan Notes redeemed all the Chips Loan Notes. The Company paid this obligation plus the accrued quarterly interest owed by drawing on the Tranche B Chips letter of credit commitment for $150,000 and borrowing $139,250 under the Tranche A Chips Loan commitment. 11. COMMITMENTS The Company leases certain building and transportation and other equipment under capital and operating leases. Included in property, plant, and equipment as of December 31, 2000 and 2001, were $28,504 and $5,578, respectively, of cost basis and $16,267 and $906, respectively, of accumulated depreciation related to equipment held under capital leases. Total rental expense under operating leases was $5,145, $6,761 and $12,341 for the years ended December 31, 1999, 2000 and 2001, respectively. Future minimum lease payments under capital leases and operating leases that have initial or remaining noncancelable lease terms in excess of one year are as follows:
YEAR ENDING DECEMBER 31, CAPITAL OPERATING ------------------------ ------- --------- 2002........................................................ $1,361 $11,306 2003........................................................ 1,282 8,448 2004........................................................ 1,312 6,774 2005........................................................ 884 5,301 2006........................................................ 181 5,150 Thereafter.................................................. -- 18,278 ------ ------- Total..................................................... 5,020 $55,257 ======= Less: Amounts representing interest......................... (792) ------ Capital lease obligations (see Note 10)................... $4,228 ======
35 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. INCOME TAXES The Company accounts for income taxes in accordance with the provisions of SFAS No. 109. The benefit for income taxes for the years ended December 31, 1999, 2000 and 2001, consists of the following:
1999 2000 2001 -------- ------- ----- Current: Federal................................................ $ 1,592 $ -- $(900) State.................................................. 164 -- -- Foreign................................................ 5,120 (3,668) 115 -------- ------- ----- 6,876 (3,668) (785) -------- ------- ----- Deferred: Federal................................................ 2,065 -- -- State.................................................. 405 -- -- Foreign................................................ (32,558) 745 785 -------- ------- ----- (30,088) 745 785 -------- ------- ----- $(23,212) $(2,923) $ -- ======== ======= =====
Reconciliation between the statutory income tax rate and effective tax rate is summarized below:
1999 2000 2001 --------- -------- --------- U.S. Federal statutory rate........................ $(253,772) $(37,699) $(205,458) State taxes, net of Federal provision (benefit).... (1,325) (1,860) (7,558) Foreign taxes in excess of U.S. statutory rate..... 8,030 (31,233) (9,690) Interest deductible for tax, eliminated for book... -- (4,846) -- Amortization of goodwill and write-off of acquired in-process research and development costs........ 77,309 12,067 58,440 Non-cash compensation expense...................... 38,525 41,782 -- Loss on investment in foreign subsidiaries......... (130,931) (204,197) -- Change in the valuation allowance for deferred tax assets........................................... 244,255 230,967 128,000 Federal taxes on undistributed loss of foreign subsidiaries..................................... (4,203) (8,166) -- Cancellation of Indebtedness Income................ -- -- 32,360 Equity in earnings of affiliate not taxable due to dividends received deduction..................... (1,400) -- -- Other.............................................. 300 262 3,906 --------- -------- --------- $ (23,212) $ (2,923) $ -- ========= ======== =========
36 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The tax effects of significant temporary differences representing deferred tax assets and liabilities at December 31 are as follows:
2000 2001 --------- --------- Deferred tax assets: Accrued liabilities not yet deductible.................... $ 19,104 $ 20,127 Net operating loss carryforwards.......................... 278,646 360,512 AMT credit carryforwards.................................. 1,128 1,128 Fixed assets.............................................. -- 32,947 Capital loss carryforwards................................ 126,391 126,391 Other..................................................... -- 10,917 --------- --------- 425,269 552,022 Valuation allowance......................................... (398,417) (526,417) --------- --------- 26,852 25,605 --------- --------- Deferred tax liabilities: Intangibles............................................... (7,820) (8,256) Fixed assets.............................................. (9,522) (8,762) Other..................................................... (7,895) (7,894) --------- --------- (25,237) (24,912) --------- --------- Net deferred tax asset................................. $ 1,615 $ 693 ========= =========
The current deferred tax assets are included in prepaid expenses and other and the long-term deferred tax assets, consisting of net operating loss carryforwards, are in other assets in the consolidated balance sheets. The current deferred tax liabilities are included in accrued and other liabilities in the consolidated balance sheets. Approximate domestic and foreign income (loss) before income tax provision and extraordinary item are as follows:
YEAR ENDED DECEMBER 31, --------------------------------- 1999 2000 2001 --------- --------- --------- Domestic.......................................... $(175,511) $(144,982) $(400,828) Foreign........................................... (549,553) 37,271 (186,191)
As of December 31, 2001, the Company had the following net operating loss ("NOL") carryforwards: $867,096 in the U.S., $54,380 in Luxembourg, $481 in Puerto Rico, $16,970 in Canada, $28,572 in Hong Kong, $17,669 in the U.K., $6,488 in Italy, $29,057 in the Netherlands and $538 in Brazil. The U.S. NOLs expire in 2018 through 2021 and the Puerto Rico and Canada NOLs expire in 2008. All other NOLs carry forward indefinitely. The U.S. also has a capital loss carryforward of $126,391 that will expire in 2004 and Canada has an investment tax credit carryforward of $1,191 that will expire in 2010. The Company has not recognized and does not anticipate recognizing a deferred tax liability for approximately $146,345 of undistributed earnings of its foreign subsidiaries because the Company does not expect those earnings to reverse and become taxable to the Company in the foreseeable future. The Company has a tax holiday in China that allows a two-year tax exemption and three-year 50% reduction in the tax rate. The tax holiday began in 2001. If not for such tax holiday, the Company would have had $11,782 of income tax expense, based on the applicable rate of 27%. 37 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During 2001, the Company's NOLs were reduced by approximately $92,458 to reflect the offset against the NOLs of cancellation of indebtedness income the Company recognized as a result of open market purchases at a discount during 2001 by HMTF of Viasystems, Inc. indebtedness with an aggregate principal amount of $163,376. 13. CONTINGENCIES The Company is subject to various lawsuits and claims with respect to such matters as patents, product development and other actions arising in the normal course of business. In the opinion of the Company's management, the ultimate liabilities resulting from such lawsuits and claims will not have a material adverse effect on the Company's financial condition and results of operations and cash flows. The Company believes it is in material compliance with applicable environmental laws and regulations and that its environmental controls are adequate to address existing regulatory requirements. 14. BUSINESS SEGMENT INFORMATION The Company operates in one segment -- a worldwide independent provider of electronics manufacturing services, which are sold throughout many diverse markets. The Company's operations are located worldwide and are analyzed by three geographical segments. The accounting policies of the segments are the same as those described in the "Summary of Significant Accounting Policies" (Note 2). Segment data includes intersegment revenues. Pertinent financial data by major geographic segments is as follows:
OPERATING CAPITAL NET SALES INCOME/(LOSS) TOTAL ASSETS EXPENDITURES ---------- ------------- ------------ ------------ North America: Year ended December 31, 1999..... $ 769,572 $ (73,106) $ 618,486 $ 50,588 Year ended December 31, 2000..... 983,967 (35,367) 833,997 59,336 Year ended December 31, 2001..... 650,431 (376,055) 440,973 24,641 Europe: Year ended December 31, 1999..... $ 454,386 $(496,239) $ 362,991 $ 72,704 Year ended December 31, 2000..... 378,056 5,259 370,812 23,698 Year ended December 31, 2001..... 298,315 (112,416) 177,295 10,883 Asia: Year ended December 31, 1999..... $ 80,978 $ (7,684) $ 327,749 $ 14,711 Year ended December 31, 2000..... 266,601 34,064 406,475 53,848 Year ended December 31, 2001..... 277,116 3,518 369,777 43,266 Eliminations: Year ended December 31, 1999..... $ (11,566) $ -- $ -- $ -- Year ended December 31, 2000..... (23,639) -- -- -- Year ended December 31, 2001..... (19,326) -- -- -- Total: Year ended December 31, 1999..... $1,293,370 $(577,029) $1,309,226 $138,003 Year ended December 31, 2000..... 1,604,985 3,956 1,611,284 136,882 Year ended December 31, 2001..... 1,206,536 (484,953) 988,045 78,790
38 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Sales by country of destination are as follows:
YEAR ENDED DECEMBER 31, ------------------------------------ 1999 2000 2001 ---------- ---------- ---------- United States.................................... $ 703,862 $ 897,551 $ 619,009 United Kingdom................................... 153,083 163,072 79,517 Canada........................................... 75,016 115,922 66,442 France........................................... 54,162 60,782 113,234 Malaysia......................................... 12,750 53,701 53,155 China............................................ -- 34,701 54,399 Germany.......................................... 59,442 66,441 55,763 Sweden........................................... 78,898 22,732 2,348 Other............................................ 156,157 190,083 162,669 ---------- ---------- ---------- Total.................................. $1,293,370 $1,604,985 $1,206,536 ========== ========== ==========
Property, plant and equipment by country are as follows:
YEAR ENDED DECEMBER 31, ----------------------- 2000 2001 ---------- ---------- United States............................................... $171,819 $ 78,654 China....................................................... 138,074 162,706 Canada...................................................... 79,849 64,438 Other....................................................... 62,879 47,853 -------- -------- Total............................................. $452,621 $353,651 ======== ========
15. CONCENTRATION OF BUSINESS Sales to Lucent Technologies directly and through other contract electronic manufacturers were 26%, 21% and 21% of net revenues for the years ended December 31, 1999, 2000 and 2001, respectively. 16. STOCK OPTION PLANS Group has stock-based compensation plans under which outside directors and certain employees receive stock options and other equity-based awards. The plans provide for the grant of stock options, stock appreciation rights, performance awards, restricted stock awards and other stock unit awards. Stock options generally are granted with an exercise price equal to or above the market value of a share of common stock on the date of grant, have a life of 10 years and vest within 5 years from the date of grant. The total number of shares of common stock authorized for option grants under the plans was 13,696,012 shares at December 31, 2001. In connection with certain acquisitions, and in accordance with the contract terms, outstanding stock options held by employees of acquired companies became vested and converted to options to purchase Group's common stock on the acquisition date. As these acquisitions were accounted for as purchases, the fair value of these options was included in the purchase price. In connection with the issuance of the Senior Unsecured Notes, the Company issued to Hicks, Muse, Tate & Furst 10.0 million warrants to purchase shares of Group's common stock. The warrants are exercisable immediately and have an exercise price of $0.01 per share and terminate in 2011 (see Note 10). 39 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation," ("SFAS 123") and, as permitted under SFAS No. 123, applies Accounting Principles Board Opinion No. 25 ("ABP 25") and related interpretations in accounting for its plans. Had compensation costs for all other options and warrants been determined based upon the fair value at the grant date for awards under the plans consistent with the methodology prescribed under SFAS No. 123, the Company's net loss and loss per share would have been changed to the pro forma amounts indicated below:
YEAR ENDED DECEMBER 31, --------------------------------- 1999 2000 2001 --------- --------- --------- Net loss As reported..................................... $(720,295) $(135,984) $(587,019) Pro forma....................................... (721,554) (147,535) (623,506) Net loss per share -- basic As reported..................................... $ (10.14) $ (1.13) $ (4.21) Pro forma....................................... (10.16) (1.23) (4.47) Net loss per share -- diluted As reported..................................... $ (10.77) $ (1.14) $ (4.21) Pro forma....................................... (10.79) (1.24) (4.47)
The fair value of stock options used to compute pro forma net loss and loss per share disclosure is the estimated fair value at grant date using the Black-Scholes option-pricing model with the following assumptions:
WEIGHTED AVERAGE ASSUMPTIONS 1999 2000 2001 ---------------------------- ---- ---- ---- Expected volatility......................................... 60% 60% 60% Risk-free interest rate..................................... 5.5% 5.5% 5.5% Dividend yield.............................................. 0.0% 0.0% 0.0% Expected holding period in years............................ 5 5 5
The weighted average fair value of stock options and warrants, calculated using the Black-Scholes option-pricing model, granted during the years ended December 31, 1999, 2000, and 2001 was $1.74, $10.12 and $3.07 respectively. 40 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Presented below is a summary of the status of the stock options and warrants and the related transactions for the years ended December 31, 1999, 2000 and 2001:
WEIGHTED AVERAGE EXERCISE SHARES PRICE PER SHARE ---------- ---------------- Options outstanding at December 31, 1998.................. 2,940,404 $6.64 Granted................................................. 2,509,993 7.32 Exercised............................................... (7,500) 6.30 Forfeited/expired....................................... (209,667) 7.23 ---------- Options outstanding at December 31, 1999.................. 5,233,230 6.81 Granted................................................. 3,525,259 14.66 Exercised............................................... (88,167) 6.07 Forfeited/expired....................................... (184,601) 12.39 ---------- Options outstanding at December 31, 2000.................. 8,485,721 12.65 Granted/assumed......................................... 12,167,238 1.35 Exercised............................................... (70,821) 2.11 Forfeited/expired....................................... (931,130) 8.58 ---------- Options outstanding at December 31, 2001.................. 19,651,008 $5.36 ========== =====
The following table summarizes the status of stock options and warrants outstanding and exercisable at December 31, 2001:
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE ----------------------------------------- -------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE REMAINING EXERCISE EXERCISE CONTRACTUAL LIFE PRICE PER PRICE PER RANGE OF EXERCISE PRICE PER SHARE SHARES (YEARS) SHARE SHARES SHARE --------------------------------- ---------- ---------------- --------- ------------ ----------- $ -- to $ 4.20.............. 12,135,169 9.5 $ 0.49 10,332,669 $ 0.09 $ 4.21 to $ 6.30.............. 469,282 5.9 5.46 296,944 5.78 $ 6.31 to $ 8.40.............. 1,420,828 7.4 7.28 745,990 7.24 $ 8.41 to $10.50.............. 1,821,494 8.2 9.11 1,821,494 9.11 $10.51 to $12.60.............. 912,901 9.0 11.00 4,180 11.00 $12.61 to $18.90.............. 147,500 8.9 17.44 29,500 17.44 $18.91 to $21.00.............. 2,743,834 8.3 21.00 2,266,825 21.00 ---------- ------ ---------- ------ Total.................... 19,651,008 $ 5.36 15,497,602 $ 4.68 ========== ====== ========== ======
17. RETIREMENT PLANS The Company has a defined contribution retirement savings plan (the "Plan") covering substantially all domestic employees who meet certain eligibility requirements as to age and length of service. The Plan incorporates the salary deferral provision of Section 401(k) of the Internal Revenue Code and employees may defer up to 15% of compensation or the annual maximum limit prescribed by the Internal Revenue Code. The Company contributes 1% of employees' salaries to the Plan and matches a percentage of the employees' deferrals. The Company may also elect to contribute an additional profit-sharing contribution to the Plan at the end of each year. The Company's contributions to the Plan were $2,627, $3,048 and $4,020 for the years ended December 31, 1999, 2000 and 2001, respectively. 41 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In prior years, the Company had two defined benefit pension plans covering certain groups of employees in foreign countries. The net periodic pension cost in 1999 was $1,032. These defined benefit plans were for employees of Forward and ISL, which were transferred to pre-IPO stockholders in March 2000 (see Note 1). 18. RESEARCH AND DEVELOPMENT Research, development and engineering expenditures for the creation and application of new products and processes were approximately $14,400, $12,048 and $9,210 for the years ended December 31, 1999, 2000, and 2001, respectively. 19. RELATED PARTY TRANSACTIONS In connection with the acquisitions and the related financing, the Company entered into a Monitoring and Oversight Agreement and a Financial Advisory Agreement (together herein defined as the "Agreements") with HMTF (a shareholder and affiliate of the Company) pursuant to which the Company paid HMTF a cash fee of $4,684, $714 and $0 for the years ended December 31, 1999, 2000 and 2001, respectively, as compensation for financial advisory services. In connection with the initial public offering, the Company terminated the Agreements and granted to HMTF options to purchase Group's stock (see Note 22). In March 2000, immediately prior to Group's initial public offering, Group transferred all of the capital stock of certain businesses in Europe to a new entity formed by Group's pre-IPO stockholders, European PCB Group (Cayman Islands), Ltd., a Cayman Islands exempted company ("European PCB Group"). These businesses now owned by European PCB Group consist primarily of the operations formerly conducted by Forward, Zincocelere, ISL and the Ericsson Facility. Subsequent to such transfer, the Company has continued to purchase and receive products and other services, on an arms-length basis, from European PCB Group. Messrs. David M. Sindelar, the Company's Chief Executive Officer and a director, Timothy L. Conlon, the Company's President, Chief Operating Officer and a director, and Richard W. Vieser and Kenneth F. Yontz, each directors, beneficially own equity interests in European PCB Group. In 2000, the Company purchased an aggregate of $24,004 of printed circuit boards and other products from European PCB Group and had sales of $17,829 to European PCB Group. In addition, the Company paid approximately $7,200 in sales-force fees and commissions to European PCB Group and received $2,172 in management fees from European PCB Group in fiscal year 2000. In 2001, the Company purchased an aggregate of $17,086 of printed circuit boards and other products from European PCB Group and had sales of $6,407 to European PCB Group. In addition, the Company paid approximately $4,400 in sales-force fees and commissions to European PCB Group and received $1,503 in management fees from European PCB Group in fiscal year 2001. Additionally, in conjunction with Group's initial public offering, the Company acquired all of the outstanding shares of the Wire Harness Business, a wholly owned subsidiary of International Wire Group, Inc., an affiliate of HMTF. The Wire Harness Business, in accordance with negotiated contract terms, purchased an aggregate of $25,982, $28,092 and $36,784 of product from International Wire Group, Inc. for fiscal years 1999, 2000 and 2001, respectively. 20. EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING During the year ended December 31, 2000, the Company recorded, as an extraordinary item, a one-time, non-cash write-off of deferred financing fees of approximately $31,196, net of income tax benefit of $0, related to deferred financing fees incurred on debt retired before maturity with proceeds from Group's initial public offering. In April 1998, the FASB adopted Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities," which requires costs of start-up activities and organization costs to be expensed as incurred. The Company adopted SOP 98-5 in fiscal year 1999 and reported the write-off of the net book value 42 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) of start-up costs as of January 1, 1999, of $18,443 (net of income tax benefit of $6,734) as a cumulative effect of a change in accounting principle. 21. NON-CASH COMPENSATION EXPENSE During the year ended December 31, 1999, the Company recorded a non-cash compensation expense charge of $110,070, which reflect the difference between the cost of the class A common stock and class A series II common stock and the value of the common stock that it is convertible into at that date. In connection with the initial public offering, Group amended the terms of the performance stock options held by members of management to eliminate the exercisability restrictions and variable exercise price terms. The amended performance options have a fixed exercise price of $9.00 per share and are immediately exercisable. As a result of these amendments, the Company recorded a one-time non-cash compensation expense charge of approximately $33,635 during the year ended December 31, 2000. Also in connection with the initial public offering, Group converted each 6 2/3 shares of class A common stock and class A series II common stock into one share of common stock. This conversion eliminated the variable terms of the class A and class A series II common stock and resulted in a one-time non-cash compensation expense charge of approximately $62,945 recorded during the year ended December 31, 2000. Additionally, in connection with the initial public offering, the Company terminated the Monitoring and Oversight Agreement and Financial Advisory Agreement with HMTF. As consideration for such termination, Group granted to HMTF, options to purchase an aggregate 2,134,000 shares of Group's common stock at an exercise price of $21.00 per share. The option grant resulted in a net one-time non-cash compensation expense charge of approximately $7,771 recorded during the year ended December 31, 2000. 22. INITIAL PUBLIC OFFERING On March 24, 2000, Group completed an initial public offering of 44,000,000 shares of common stock at $21.00 per share with net proceeds of $865,543. Group used the proceeds from the offering to fund the acquisition of the Wire Harness Business, to repay amounts outstanding under the existing credit facility and for general corporate purposes. 23. SUBSEQUENT EVENTS As a result of the dramatic downturn in telecom component demand during 2001 and the Company's highly leveraged capital structure, the Company expects to fail to satisfy certain financial maintenance covenants contained in its senior secured credit facility on March 31, 2002. In anticipation of this circumstance, the Company entered into an amendment to its credit agreement on March 29, 2002. The amendment provides that the Company's credit facility lenders will refrain from exercising any rights or remedies in respect of the Company's failure to comply prior to May 29, 2002. Under the terms of the amendment, the Company's revolving borrowings under the senior secured credit facility are limited to $100 million, unless its consolidated net sales for the preceding eight week period exceed specified thresholds, in which case its revolving loan availability is increased to $150 million. The amendment further increases the interest rates payable on these borrowings by .25% per annum, imposes additional financial and operating restrictions and provides for the grant of certain additional liens to secure these borrowings. A fee of approximately $1.5 million was paid to the Company's credit facility lenders in connection with the amendment. In light of these developments, the Company has retained Rothschild Inc. to assist the Company in evaluating several recapitalization alternatives in an effort to reduce debt and strengthen our balance sheet. 43 VIASYSTEMS, INC. & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of December 31, 2001, the Company had $34.2 million of cash and cash equivalents and its working capital was $122.1 million. Giving effect to the recent amendment to the Company's credit agreement, as of December 31, 2001, the Company would have had revolver availability under the senior secured credit facility of $78.9 million. These expectations, however, assume that the forbearance under the recent amendment to the Company's credit agreement will be extended in order to permit the Company to implement a restructuring or other plan. In the event that the Company is unable to enter into satisfactory arrangements with the lenders under its senior secured credit facility to extend such forbearance beyond May 29, 2002, up to $1 billion of indebtedness could become due and payable shortly thereafter. This indebtedness consists of term loans of $437.8 million and revolving loans of $10.6 million under the senior secured credit facility, $79.5 million (net of $26.6 million of unamortized discount) of senior unsecured notes, and $500 million principal amount of senior subordinated notes. Although there is no current default under the senior unsecured notes or the senior subordinated notes, a default would arise under these debt obligations in the event of an acceleration of the maturity of the senior secured credit facility indebtedness. In such event, the Company would not have sufficient liquidity to repay such indebtedness and the Company would not expect to be able to refinance such indebtedness. In addition, the Company's future operating performance and ability to meet its financial obligations will be subject to future economic conditions and to financial, business and other factors, many of which will be beyond its control. 44 VIASYSTEMS, INC. AND SUBSIDIARIES QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly financial information of Viasystems, Inc. and subsidiaries for 2000 and 2001. In March 2000, we acquired all of the outstanding shares of Wirekraft Industries, Inc. in a transaction between entities under common control, which was accounted for in a manner similar to a pooling of interest and thus the historical financial data of Viasystems and Wirekraft have been combined.
2000 2001 --------------------------------------------------- ----------- MARCH 31(1) JUNE 30 SEPTEMBER 30 DECEMBER 31 MARCH 31(2) ----------- -------- ------------ ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales............ $ 384,584 $358,285 $406,504 $455,612 $389,191 Gross margin......... 81,310 88,860 97,649 106,614 78,743 Income (loss) before extraordinary Item............... (130,709) 2,784 9,519 13,618 (18,736) Net income (loss).... (161,905) 2,784 9,519 13,618 (18,736) 2001 --------------------------------------------- JUNE 30(3) SEPTEMBER 30(4) DECEMBER 31(5) ---------- --------------- -------------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales............ $ 309,149 $ 268,108 $ 240,088 Gross margin......... 3,433 41,773 39,701 Income (loss) before extraordinary Item............... (184,541) (204,981) (178,761) Net income (loss).... (184,541) (204,981) (178,761)
--------------- (1) The quarter includes non-cash compensation charges totaling $104,351 and an extraordinary item of $31,196, net of tax benefit of $0. The non-cash compensation charges are: (i) $33,635 related to the amendment of terms of the performance stock options held by members of management that eliminated the exercisability restrictions and variable exercise terms; (ii) $62,945 related to the conversion of each 6 2/3 shares of class A common stock and class A series II common stock into one share of common stock; and (iii) $7,771 related to options granted to HMTF and partners of HMTF as consideration for the termination of certain agreements. The extraordinary item represents the non-cash write-off of deferred financing fees incurred on debt retired before maturity. (2) This quarter includes a restructuring charge of $12,007 for a restructuring plan implemented by the Company primarily related to headcount reductions in its North American operations. Refer to Note 3 of our consolidated financial statements contained in Part II, Item 8. (3) This quarter includes the following charges: (i) a restructuring charge of $30,481, (ii) an impairment charge on assets held for disposal of $75,043 and (iii) inventory write-offs of $49,290 all related to a restructuring plan implemented by the Company to restructure its North American operations, including the closure of two of its North American printed circuit board fabrication plants. Refer to Note 3 of our consolidated financial statements contained in Part II, Item 8. (4) This quarter includes the following charges: (i) a write-off of amounts due from affiliates of $144,099 related to amounts due from European PCB Group that have been permanently impaired, (ii) restructuring and impairment charges totaling, $21,685 primarily related to the consolidation of certain North American and European facilities as well as headcount reductions at its corporate offices and (iii) inventory write-offs of $824 related to the restructuring activities. Refer to Note 3 of our consolidated financial statements contained in Part II, Item 8. (5) This quarter includes the following charges: (i) restructuring and impairment charges totaling $148,164 and reversals of previously recorded impairment charges of $6,006 and (ii) a reversal of inventory write-offs previously taken totaling $781. Refer to Note 3 of our consolidated financial statements contained in Part II, Item 8. 45 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS Information required by this item has been omitted as the registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. ITEM 11. EXECUTIVE COMPENSATION Information required by this item has been omitted as the registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Information required by this item has been omitted as the registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by this item has been omitted as the registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)1. Financial Statements The information required by this item is included in Item 8 of Part II of this Form 10-K. 2. Financial Statement Schedule SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31 (IN THOUSANDS)
ALLOWANCE FOR DOUBTFUL ACCOUNTS -- BALANCE AT CHARGES TO BALANCE AT DEDUCTED FROM RECEIVABLES IN THE BEGINNING ACQUISITIONS/ COST AND ACCOUNTS TRANSLATION END OF BALANCE SHEET OF PERIOD (DISTRIBUTIONS) EXPENSES WRITTEN OFF ADJUSTMENTS PERIOD ---------------------------------- ---------- --------------- ---------- ----------- ----------- ---------- 1999.......................... $4,223 $2,632 $ 1,784 $ (973) $(255) $ 7,411 ====== ====== ======= ======= ===== ======= 2000.......................... $7,411 $ (327)(1) $ 564 $ (383) $ (32) $ 7,233 ====== ====== ======= ======= ===== ======= 2001.......................... $7,233 $ 302 $11,483 $(3,290) $ (74) $15,654 ====== ====== ======= ======= ===== =======
--------------- (1) Included in this figure is $(2,439) which was a reduction in the allowance for doubtful accounts as a result of the distribution of the operations formerly conducted by ISL, Forward, Zincocelere and Viasystems Sweden in March 2000. This reduction is offset by an increase in the allowance for doubtful accounts of $2,112 from the acquisitions completed in 2000. 46
VALUATION ALLOWANCE FOR DEFERRED TAX ASSETS -- DEDUCTED BALANCE AT CHARGES TO CHARGES TO BALANCE AT FROM DEFERRED TAXES IN THE BALANCE BEGINNING ACQUISITIONS/ COST AND EXTRAORDINARY TRANSLATION END OF SHEET OF PERIOD (DISTRIBUTIONS) EXPENSES ITEMS ADJUSTMENTS PERIOD ---------------------------------- ---------- --------------- ---------- ------------- ----------- ---------- 1999......................... $ 0 $ 0 $244,255 $ 0 $0 $244,255 ======== ======== ======== ======= == ======== 2000......................... $244,255 $(87,723)(2) $230,967 $10,918 $0 $398,417 ======== ======== ======== ======= == ======== 2001......................... $398,417 $ 0 $128,000 $ 0 $0 $526,417 ======== ======== ======== ======= == ========
--------------- (2) Included here is the reduction in the valuation allowance as a result of the distribution of the operations formerly conducted by ISL, Forward and Zincocelere. 3. Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Securities Purchase Agreement, dated as of October 1, 1996, among Viasystems Group, Inc. (formerly known as Circo Craft Holding Company) and certain Purchasers (as defined therein)(1) 2.2 -- Acquisition Agreement, dated as of November 26, 1996, among Lucent Technologies Inc., Viasystems Group, Inc. (formerly known as Circo Technologies Group, Inc.) and Viasystems, Inc. (formerly known as Circo Craft Technologies, Inc.)(1) 2.3 -- Agreement and Plan of Merger, dated as of April 11, 1997 by and among Viasystems Group, Inc., HMTF Acquisition, L.P., HMTF U.K. Acquisition Company, Hicks, Muse, Tate & Furst Equity Fund III and HM3 Coinvestors, L.P.(1) 2.4 -- Agreement and Plan of Merger, dated as of June 5, 1997, by and between Viasystems Group, Inc. and Chips Holdings, Inc.(1) 2.5 -- Agreement and Plan of Merger, dated as of June 6, 1997, by and between Viasystems, Inc. and Chips Acquisition, Inc.(1) 2.6 -- Acquisition Agreement, dated as of January 29, 1998, among Viasystems B.V. and Print Service Holding N.V.(4) 2.7 -- Sale and Purchase Agreement, dated as of February 11, 1998, between Viasystems, S.r.l., as purchaser, European Circuits SA and individuals named therein, as sellers(4) 2.8 -- Share Purchase Agreement, dated August 1, 1999, among Termbray Electronics (B.V.I.) Limited, Termbray Industries International (Holdings) Limited, Viasystems, Inc. and Viasystems Group, Inc.(6) 2.9 -- Stock Purchase Agreement, dated March 23, 2000, by and among International Wire Group, Inc., Wirekraft Industries, Inc. and Viasystems International, Inc.(13) 3.1 -- Amended and Restated Certificate of Incorporation of Viasystems Group, Inc.(12) 3.2 -- Amended and Restated Bylaws of Viasystems Group, Inc.(12) 4.1 -- Credit Agreement, dated as of March 29, 2000, among Viasystems Group, Inc., as Guarantor, Viasystems, Inc. as U.S. Borrower, Viasystems Canada, Inc. and Print Service Holding N.V., as Foreign Subsidiary Borrowers, The Several Banks and other Financial Institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent, Bank of America, N.A. as Syndication Agent, Bankers Trust Company, as Syndication Agent, and Chase Securities Inc., as Sole Book Manager and Sole Lead Arranger.(12) 4.2 -- Indenture, dated as of June 6, 1997, by and between Viasystems, Inc. and The Bank of New York, as Trustee(1) 4.3 -- Form of New Note (included in Exhibit 4.2, Exhibit B) 4.4 -- Indenture, dated as of February 17, 1998, by and between Viasystems, Inc. and The Bank of New York, as Trustee(4) 4.5 -- Form of Exchange Note (included in Exhibit 4.4, Exhibit B)
47
EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.6 -- First Amendment, dated April 23, 2001, to the Credit Agreement, Dated as of March 29, 2000, among Viasystems Group, Inc., as Guarantor, Viasystems, Inc., as U.S. Borrower, Viasystems Canada, Inc. and Print Service Holding N.V., as Foreign Subsidiary Borrowers, The Several Banks and other Financial Institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent, Bank of America, N.A. as Syndication Agent, Bankers Trust Company, as Syndication Agent, and Chase Securities Inc., as Sole Book Manager and Sole Lead Arranger.(14) 4.7 -- Second Amendment, dated as of June 28, 2001, to the Credit Agreement, dated as of March 29, 2000, as amended by the First Amendment dated as of April 23, 2001, among Viasystems Group, Inc., Viasystems, Inc., as U.S. Borrower, Viasystems Canada, Inc. And Print Service Holding N.V., as Foreign Subsidiary Borrowers, the several banks and other financial institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent.(15) 4.8 -- Form of Warrant Certificate dated as of July 19, 2001, issued in the denominations and to the investors listed on Annex A thereto.(15) 4.9 -- Form of 14% Senior Note due 2007 dated as of July 19, 2001, issued in the denominations and to the investors listed on Annex A thereto.(15) 4.10 -- Registration Rights Agreement dated as of July 19, 2001, by and among Viasystems Group, Inc. and the investors named herein.(15) 4.11 -- Third Amendment, dated as of March 29, 2002, to the Credit Agreement, dated as of March 29, 2000, as amended by the First Amendment dated as of April 23, 2001, and the Second Amendment dated as of June 28, 2001, among Viasystems Group, Inc., Viasystems, Inc. as U.S. Borrower, Viasystems Canada, Inc. and Print Service Holding N.V., as Foreign Subsidiary Borrowers, the several banks and other financial institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent.(16) 10.1 -- Supply Agreement dated as of November 26, 1996, by and between Lucent Technologies Inc. and Circo Craft Technologies, Inc. (confidential treatment was granted with respect to certain portions of this exhibit)(3) 10.2 -- Amended and Restated Viasystems Group, Inc. 1997 Stock Option Plan(2) 10.3 -- Form of Amended and Restated Stock Option Agreement dated as of March 30, 2000 between Viasystems Group, Inc. and James N. Mills(11) 10.4 -- Form of Amended and Restated Stock Option Agreement dated as of March 30, 2000 between Viasystems Group, Inc. and David M. Sindelar(11) 10.5 -- Viasystems Group, Inc. Stock Option Agreement, dated as of February 4, 1997, with Richard W. Vieser(2) 10.6 -- Viasystems Group, Inc. Stock Option Agreement, dated as of February 4, 1997, with Kenneth F. Yontz(4) 10.7 -- Third Amended and Restated Monitoring and Oversight Agreement, dated as of June 6, 1997, among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp., Circo Craft Co. Inc., Viasystems International, Inc., PCB Acquisition Limited, PCB Investments PLC, Chips Acquisition Limited and Hicks, Muse & Co. Partners, L.P.(2) 10.8 -- Third Amended and Restated Financial Advisory Agreement dated as of June 6, 1997, among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp., Circo Craft Co. Inc., Viasystems International, Inc., PCB Acquisition Limited, PCB Investments PLC, Chips Acquisition Limited and Hicks, Muse & Co. Partners, L.P.(2) 10.9 -- Amended and Restated Executive Employment Agreement, dated as of February 16, 2000, by and among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC and James N. Mills(9)
48
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.10 -- Amended and Restated Executive Employment Agreement, dated as of February 16, 2000, by and among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC and David M. Sindelar(9) 10.11 -- Agreement, dated as of December 30, 1996, between Viasystems, Inc. (formerly known as Circo Craft Technologies, Inc.) and the Communication Workers of America(2) 10.12 -- Environmental, Health and Safety Agreement, dated as of November 26, 1996, between Lucent Technologies and Viasystems, Inc. (formerly known as Circo Craft Technologies, Inc.)(1) 10.13 -- Amended and Restated Executive Employment Agreement, dated as of February 16, 2000, by and among Viasystems Group, Inc., Viasystems, Inc. and Viasystems Technologies Corp. LLC and Timothy L. Conlon(9) 10.14 -- Amended and Restated Stockholders Agreement, dated as of June 6, 1997,among Viasystems Group, Inc. and certain stockholders of Viasystems Group, Inc.(10) 10.15 -- First Amendment to Amended and Restated Stockholders Agreement, dated as of November 4, 1998, among Viasystems Group, Inc. and certain stockholders of Viasystems Group, Inc.(10) 10.16 -- Parts Sourcing Contract, dated as of December 2, 1994, among Wirekraft Industries, Inc. and General Electric Company (Confidential treatment has been granted with respect to certain portions of this exhibit.)(7) 10.17 -- Agreement dated as of December 29, 1995 among Wirekraft Industries, Inc. and General Electric Company (Confidential treatment has been granted with respect to certain portions of this exhibit.)(8) 10.18 -- Viasystems Group, Inc. 1999 Key Management Incentive Compensation Plan(10) 10.19 -- Contract Manufacturing Agreement, dated January 1, 2000, by and between Mommers Print Service BV and Viasystems Sweden AB(13) 10.20 -- Contract Manufacturing Agreement, dated January 1, 2000, by and between Mommers Print Service BV and Viasystems Tyneside Limited(13) 10.21 -- Supply Agreement, dated as of March 29, 2000, by and between International Wire Group, Inc. and Wirekraft Industries, Inc.(13) 10.22 -- Termination and Release Agreement, dated as of March 29, 2000, by and among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp., Viasystems Canada, Inc. (f/k/a Circo Craft Co. Inc.), PCB Investments Limited, Viasystems International, Inc., Viasystems Group Limited (f/k/a PCB Acquisition Limited), Chips Acquisition Limited, and Hicks, Muse & Co. Partners, L.P.(12)
--------------- (1) Incorporated by reference to the Registration Statement of Viasystems, Inc. on Form S-1. (File No. 333-29727). (2) Incorporated by reference to Amendment No. 1 to the Registration Statement of Viasystems, Inc. on Form S-1. (3) Incorporated by reference to Amendment No. 2 to the Registration Statement of Viasystems, Inc. on Form S-1. (4) Incorporated by reference to Viasystems, Inc.'s 1997 Annual Report on Form 10-K. (5) Incorporated by reference to Viasystems, Inc.'s 1998 Annual Report on Form 10-K. (6) Incorporated by reference to the Form 8-K/A of Viasystems, Inc. filed on October 15, 1999. (7) Incorporated by reference to the Registration Statement of International Wire Group, Inc. on Form S-1 (File No. 333-93970). (8) Incorporated by reference to International Wire Group, Inc.'s 1995 Annual Report on Form 10-K. (9) Incorporated by reference to Amendment No. 1 to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-94321). 49 (10) Incorporated by reference to Amendment No. 2 to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-94321). (11) Incorporated by reference to Amendment No. 3 to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-94321). (12) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on May 10, 2000. (13) Incorporated by reference to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-46780). (14) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on May 3, 2001. (15) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on July 30, 2001. (16) Incorporated by reference to Viasystems Group, Inc.'s 2001 Annual Report on Form 10-K. (b) Reports on Form 8-K No reports on Form 8-K were filed during the fourth quarter of 2001. 50 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VIASYSTEMS, INC. By /s/ JOSEPH S. CATANZARO ------------------------------------ Joseph S. Catanzaro Senior Vice President and Chief Financial Officer Date: March 29, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS O. HICKS Chairman of the Board of March 29, 2002 ----------------------------------------------------- Directors Thomas O. Hicks /s/ DAVID M. SINDELAR Chief Executive Officer and March 29, 2002 ----------------------------------------------------- Director David M. Sindelar /s/ TIMOTHY L. CONLON President, Chief Operating March 29, 2002 ----------------------------------------------------- Officer and Director Timothy L. Conlon /s/ JOSEPH S. CATANZARO Senior Vice President & Chief March 29, 2002 ----------------------------------------------------- Financial Officer Joseph S. Catanzaro /s/ JACK D. FURST Director March 29, 2002 ----------------------------------------------------- Jack D. Furst /s/ RICHARD W. VIESER Director March 29, 2002 ----------------------------------------------------- Richard W. Vieser /s/ KENNETH F. YONTZ Director March 29, 2002 ----------------------------------------------------- Kenneth F. Yontz
51 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- 2.1 -- Securities Purchase Agreement, dated as of October 1, 1996, among Viasystems Group, Inc. (formerly known as Circo Craft Holding Company) and certain Purchasers (as defined therein)(1) 2.2 -- Acquisition Agreement, dated as of November 26, 1996, among Lucent Technologies Inc., Viasystems Group, Inc. (formerly known as Circo Technologies Group, Inc.) and Viasystems, Inc. (formerly known as Circo Craft Technologies, Inc.)(1) 2.3 -- Agreement and Plan of Merger, dated as of April 11, 1997 by and among Viasystems Group, Inc., HMTF Acquisition, L.P., HMTF U.K. Acquisition Company, Hicks, Muse, Tate & Furst Equity Fund III and HM3 Coinvestors, L.P.(1) 2.4 -- Agreement and Plan of Merger, dated as of June 5, 1997, by and between Viasystems Group, Inc. and Chips Holdings, Inc.(1) 2.5 -- Agreement and Plan of Merger, dated as of June 6, 1997, by and between Viasystems, Inc. and Chips Acquisition, Inc.(1) 2.6 -- Acquisition Agreement, dated as of January 29, 1998, among Viasystems B.V. and Print Service Holding N.V.(4) 2.7 -- Sale and Purchase Agreement, dated as of February 11, 1998, between Viasystems, S.r.l., as purchaser, European Circuits SA and individuals named therein, as sellers(4) 2.8 -- Share Purchase Agreement, dated August 1, 1999, among Termbray Electronics (B.V.I.) Limited, Termbray Industries International (Holdings) Limited, Viasystems, Inc. and Viasystems Group, Inc.(6) 2.9 -- Stock Purchase Agreement, dated March 23, 2000, by and among International Wire Group, Inc., Wirekraft Industries, Inc. and Viasystems International, Inc.(13) 3.1 -- Amended and Restated Certificate of Incorporation of Viasystems Group, Inc.(12) 3.2 -- Amended and Restated Bylaws of Viasystems Group, Inc.(12) 4.1 -- Credit Agreement, dated as of March 29, 2000, among Viasystems Group, Inc., as Guarantor, Viasystems, Inc. as U.S. Borrower, Viasystems Canada, Inc. and Print Service Holding N.V., as Foreign Subsidiary Borrowers, The Several Banks and other Financial Institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent, Bank of America, N.A. as Syndication Agent, Bankers Trust Company, as Syndication Agent, and Chase Securities Inc., as Sole Book Manager and Sole Lead Arranger.(12) 4.2 -- Indenture, dated as of June 6, 1997, by and between Viasystems, Inc. and The Bank of New York, as Trustee(1) 4.3 -- Form of New Note (included in Exhibit 4.2, Exhibit B) 4.4 -- Indenture, dated as of February 17, 1998, by and between Viasystems, Inc. and The Bank of New York, as Trustee(4) 4.5 -- Form of Exchange Note (included in Exhibit 4.4, Exhibit B) 4.6 -- First Amendment, dated April 23, 2001, to the Credit Agreement, Dated as of March 29, 2000, among Viasystems Group, Inc., as Guarantor, Viasystems, Inc., as U.S. Borrower, Viasystems Canada, Inc. and Print Service Holding N.V., as Foreign Subsidiary Borrowers, The Several Banks and other Financial Institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent, Bank of America, N.A. as Syndication Agent, Bankers Trust Company, as Syndication Agent, and Chase Securities Inc., as Sole Book Manager and Sole Lead Arranger.(14)
EXHIBIT NUMBER DESCRIPTION ------- ----------- 4.7 -- Second Amendment, dated as of June 28, 2001, to the Credit Agreement, dated as of March 29, 2000, as amended by the First Amendment dated as of April 23, 2001, among Viasystems Group, Inc., Viasystems, Inc., as U.S. Borrower, Viasystems Canada, Inc. And Print Service Holding N.V., as Foreign Subsidiary Borrowers, the several banks and other financial institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent.(15) 4.8 -- Form of Warrant Certificate dated as of July 19, 2001, issued in the denominations and to the investors listed on Annex A thereto.(15) 4.9 -- Form of 14% Senior Note due 2007 dated as of July 19, 2001, issued in the denominations and to the investors listed on Annex A thereto.(15) 4.10 -- Registration Rights Agreement dated as of July 19, 2001, by and among Viasystems Group, Inc. and the investors named herein. (15) 4.11 -- Third Amendment, dated as of March 29, 2002, to the Credit Agreement, dated as of March 29, 2000, as amended by the First Amendment dated as of April 23, 2001, and the Second Amendment dated as of June 28, 2001, among Viasystems Group, Inc., Viasystems, Inc. as U.S. Borrower, Viasystems Canada, Inc. and Print Service Holding N.V., as Foreign Subsidiary Borrowers, the several banks and other financial institutions parties thereto, The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, Chase Manhattan Bank International Limited, as Multicurrency Administrative Agent, and The Chase Manhattan Bank, as Administrative Agent.(16) 10.1 -- Supply Agreement dated as of November 26, 1996, by and between Lucent Technologies Inc. and Circo Craft Technologies, Inc. (confidential treatment was granted with respect to certain portions of this exhibit)(3) 10.2 -- Amended and Restated Viasystems Group, Inc. 1997 Stock Option Plan(1) 10.3 -- Form of Amended and Restated Stock Option Agreement dated as of March 30, 2000 between Viasystems Group, Inc. and James N. Mills(11) 10.4 -- Form of Amended and Restated Stock Option Agreement dated as of March 30, 2000 between Viasystems Group, Inc. and David M. Sindelar(11) 10.5 -- Viasystems Group, Inc. Stock Option Agreement, dated as of February 4, 1997, with Richard W. Vieser(2) 10.6 -- Viasystems Group, Inc. Stock Option Agreement, dated as of February 4, 1997, with Kenneth F. Yontz(2) 10.7 -- Third Amended and Restated Monitoring and Oversight Agreement, dated as of June 6, 1997, among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp., Circo Craft Co. Inc., Viasystems International, Inc., PCB Acquisition Limited, PCB Investments PLC, Chips Acquisition Limited and Hicks, Muse & Co. Partners, L.P.(2) 10.8 -- Third Amended and Restated Financial Advisory Agreement dated as of June 6, 1997, among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp., Circo Craft Co. Inc., Viasystems International, Inc., PCB Acquisition Limited, PCB Investments PLC, Chips Acquisition Limited and Hicks, Muse & Co. Partners, L.P.(2) 10.9 -- Amended and Restated Executive Employment Agreement, dated as of February 16, 2000, by and among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC and James N. Mills(9) 10.10 -- Amended and Restated Executive Employment Agreement, dated as of February 16, 2000, by and among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC and David M. Sindelar(9) 10.11 -- Agreement, dated as of December 30, 1996, between Viasystems, Inc. (formerly known as Circo Craft Technologies, Inc.) and the Communication Workers of America(2) 10.12 -- Environmental, Health and Safety Agreement, dated as of November 26, 1996, between Lucent Technologies and Viasystems, Inc. (formerly known as Circo Craft Technologies, Inc.)(1)
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.13 -- Amended and Restated Executive Employment Agreement, dated as of February 16, 2000, by and among Viasystems Group, Inc., Viasystems, Inc. and Viasystems Technologies Corp. LLC and Timothy L. Conlon(9) 10.14 -- Amended and Restated Stockholders Agreement, dated as of June 6, 1997,among Viasystems Group, Inc. and certain stockholders of Viasystems Group, Inc.(10) 10.15 -- First Amendment to Amended and Restated Stockholders Agreement, dated as of November 4, 1998, among Viasystems Group, Inc. and certain stockholders of Viasystems Group, Inc.(10) 10.16 -- Parts Sourcing Contract, dated as of December 2, 1994, among Wirekraft Industries, Inc. and General Electric Company (Confidential treatment has been granted with respect to certain portions of this exhibit.)(7) 10.17 -- Agreement dated as of December 29, 1995 among Wirekraft Industries, Inc. and General Electric Company (Confidential treatment has been granted with respect to certain portions of this exhibit.)(8) 10.18 -- Viasystems Group, Inc. 1999 Key Management Incentive Compensation Plan(11) 10.19 -- Contract Manufacturing Agreement, dated January 1, 2000, by and between Mommers Print Service BV and Viasystems Sweden AB(13) 10.20 -- Contract Manufacturing Agreement, dated January 1, 2000, by and between Mommers Print Service BV and Viasystems Tyneside Limited(13) 10.21 -- Supply Agreement, dated as of March 29, 2000, by and between International Wire Group, Inc. and Wirekraft Industries, Inc.(13) 10.22 -- Termination and Release Agreement, dated as of March 29, 2000, by and among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies Corp., Viasystems Canada, Inc. (f/k/a Circo Craft Co. Inc.), PCB Investments Limited, Viasystems International, Inc., Viasystems Group Limited (f/k/a PCB Acquisition Limited), Chips Acquisition Limited, and Hicks, Muse & Co. Partners, L.P.(12)
--------------- (1) Incorporated by reference to the Registration Statement of Viasystems, Inc. on Form S-1. (File No. 333-29727). (2) Incorporated by reference to Amendment No. 1 to the Registration Statement of Viasystems, Inc. on Form S-1. (3) Incorporated by reference to Amendment No. 2 to the Registration Statement of Viasystems, Inc. on Form S-1. (4) Incorporated by reference to Viasystems, Inc.'s 1997 Annual Report on Form 10-K. (5) Incorporated by reference to Viasystems, Inc.'s 1998 Annual Report on Form 10-K. (6) Incorporated by reference to the Form 8-K/A of Viasystems, Inc. filed on October 15, 1999. (7) Incorporated by reference to the Registration Statement of International Wire Group, Inc. on Form S-1 (File No. 333-93970). (8) Incorporated by reference to International Wire Group, Inc.'s 1995 Annual Report on Form 10-K. (9) Incorporated by reference to Amendment No. 1 to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-94321). (10) Incorporated by reference to Amendment No. 2 to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-94321). (11) Incorporated by reference to Amendment No. 3 to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-94321). (12) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on May 10, 2000. (13) Incorporated by reference to Viasystems Group, Inc.'s Registration Statement on Form S-1 (File No. 333-46780). (14) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on May 3, 2001. (15) Incorporated by reference to Viasystems Group, Inc.'s Form 10-Q filed on July 30, 2001. (16) Incorporated by reference to Viasystems Group, Inc.'s 2001 Annual Report on Form 10-K.