Viasystems Group Inc (VIAS)
Q3 2010 Earnings Call
November 9, 2010 1:00 pm ET
Dee Johnson - VP IR and Communications
Dave Sindelar - Chief Executive Officer
Jerry Sax - Chief Financial Officer
Matt Sheerin - Stifel Nicolaus
Eric Reubel - MTR Securities
Nick Farwell - Arbor Group
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Good day, ladies and gentlemen, and welcome to Viasystems Group third quarter 2010 conference call. At this time, all participant lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to introduce Dee Johnson. Ms. Johnson, you may begin.
Thank you, [Theresa]. I'd like to welcome everyone to the Viasystems Group investor conference call for the third quarter of 2010. If you need a copy of today's earnings press release you'll find it at viasystems.com. We also have a few slides on the website.
Our presenters today are Viasystems' Chief Executive Officer, Dave Sindelar, and our Chief Financial Officer, Jerry Sax.
In the course of our discussion we are likely to make forward-looking statements. I wish to remind you that any forward-looking information that we provide is given in reliance upon the Safe Harbor provisions of the Securities Litigation Reform Act of 1995.
The comments we will make today are management's best judgment based on the information currently available. Our actual results could differ materially from any forward-looking statements that we might make. The company does not intend to update this information to reflect developments after today and disclaims any legal obligation to do so.
Please review today's press release and recent SEC filings such as the annual report on Form 10K filed on February 25 for more complete discussion of factors that could have an impact on a company's actual results.
Some of our discussion today will include non-GAAP measures, in particular, adjusted EBITDA and adjusted EPS. These are reconciled in our GAAP results in our slide presentation. Management believes these measures are useful for analytical purposes and to assist in comparing results over time and across companies but I remind you that they exclude certain material items that are not a replacement for the reported results under generally accepted accounting principles.
I will now turn the call over to our CEO, Dave Sindelar. Dave will begin with slide 4.
Thanks, Dee, and good morning, everybody, and thanks for joining us today. Our third quarter was an excellent quarter in every respect. It was a record quarter. Orders were strong, especially in July and August and we were able to take advantage of some drop-in orders in the electromechanical solutions business resulting in a standout revenue quarter for that segment.
The printed circuit board plants were operating at a utilization level in the mid-90s and their revenue performance was excellent as well. Consolidated organic revenue growth was 8% sequentially and 45% year-over-year compared with pro forma combined sales.
Continued high utilization contributed to cost absorptions and margin performance continued in the strong trend we saw in the second quarter with gross profit also growing 8% sequentially. Adjusted EBITDA margin was 16% and nicely ahead of our previously stated goal of 15%.
Earnings per share were $0.51. Jerry will cover the financial results in more depth a little later. Needless to say, we are very pleased with the results.
Towards the end of the third quarter, however, bookings began to taper off. In the telecom and computer datacom market, bookings slowed down in September and are continuing to lag the pace of the middle part of the year.
In addition, the fourth quarter will have fewer shipping days than the third quarter because of the PRC government mandated shutdowns on top of the normal holiday season. So we have a few reasons to believe that our fourth quarter sales will reflect a slight sequential decline from the third quarter; and as the volumes back off a little, I would not be surprised to see a slight negative impact on the margins in the fourth quarter. This doesn't take away from the very strong year we've had.
But the drop-in orders in the beginning to the end of the third quarter and fewer shipping days will make it difficult to repeat the third quarter performance.
As we anticipated during our last quarterly call, our integration work is now completed. We met the cost synergy goals we set for the merger with Merix which was an annual savings of $20 million. All the actions we contemplated are behind us now.
Some of the cost improvements for which we expected to incur CapEx were actually achieved by other means, so we are expecting no incremental impact from synergies in the fourth quarter. The business integration has gone very well. This, along with the economic recovery, has energized the organization and brought the best out of our people. I'm pleased with the results of the merger and I believe we can call this a successful transaction.
Turning to slide 5, I'd like to talk about sales by end market for the third quarter. The global automotive sector continued to be a great market for us with sales in the sector up 10% sequentially and 42% year-over-year. That's our sixth consecutive quarter of growth in the automotive sector and our sixth consecutive quarter of positive book to bill. This is a market that has continued to give us confidence or even a sense of urgency to expand our production capacity.