Viasystems Group, Inc. (NASDAQ:VIAS), a leading provider of complex multi-layer printed circuit boards and electro-mechanical solutions, today announced earnings for the fourth quarter ended December 31, 2010.

Highlights
  • Earnings per basic and diluted share were $0.44 for the quarter ended December 31, 2010, on approximately 20 million average shares outstanding.
  • Net sales were $243.9 million in the quarter, a year-over-year organic increase of 20.3% and a sequential decline of 6.0%.
  • Operating income in the quarter was $19.6 million or 8.1% of sales.
  • Adjusted EBITDA was $36.0 million or 14.8% of sales, compared with $18.6 million or 14.2% in the quarter ended December 31, 2009.
  • The book-to-bill ratio in the quarter was 1.09:1.

“Our results in the final quarter of 2010 reflect sustained strength of demand for our products,” commented David M. Sindelar, Chief Executive Officer. “Orders placed on our ten factories during the fourth quarter matched our record high bookings in the immediately preceding quarter and were about 10% ahead of the same period last year. Demand for automotive end-use products continued to follow an upward trend, while demand for telecommunications end-use products remained a bit softer than I would like to see.

“Sales from the same ten factories in the fourth quarter of 2010 increased by approximately 20% year over year,” continued Sindelar, “despite temporary reductions of our available productive capacities, which contributed to the 6% sequential quarterly decline in our sales. On top of the annual fourth quarter holiday downtimes, we battled mandated downtimes for some of our Chinese capacity as a result of the government’s limitations on use of energy and water during the Asian Games. We also experienced an unexpected reduction of our Printed Circuit Boards segment capacity during the fourth quarter while we assisted a customer with an investigation of an intermittent quality problem discovered in one of their end products.

“Looking ahead to the first quarter of 2011,” concluded Sindelar, “we expect continuing headwinds of increasing costs of copper and other materials and increasing Chinese labor costs to keep pressure on our margins. Our first quarter will again include capacity limitations during the annual Chinese New Year holidays. In addition, during a routine maintenance cycle, we discovered the need to rebuild one of our printed circuit board plating lines ahead of its normal cycle, leading to an unexpected limitation on total capacity for the early part of the first quarter. I am looking forward to a return to our full capacities in the second quarter in addition to some of our new Printed Circuit Boards segment capacity coming on-line beginning in the third quarter.”

Financial Results

The Company reported net sales of $243.9 million for the three months ended December 31, 2010, a 6.0% decrease compared with the three months ended September 30, 2010, and an 85.7% year-over-year increase compared with net sales during the fourth quarter of 2009. While the year-over-year increase is attributable in part to the acquisition of Merix Corporation in mid-February 2010, the improved market conditions resulted in 20.3% year-over-year organic growth. The sequential decline in sales was due in part to the holiday season reduction of customer delivery requirements, in part to a reduced number of production days available in the fourth quarter compared with the third quarter, and in part to an unplanned printed circuit board capacity limitation during an isolated quality review with a customer.

Cost of goods sold (excluding items shown separately in the income statement) as a percent of sales increased to 78.5% for the quarter ended December 31, 2010, compared to 76.4% in the immediately preceding quarter. While rising costs of materials, including copper-based products, continue to exert pressure on total manufacturing costs, the majority of the increase in total costs as a percent of sales related to inefficiencies caused by sustained fixed costs during unplanned reductions of our Printed Circuit Boards segment’s productive capacity during the quarter ended December 31, 2010.

Operating income was $19.6 million, or 8.1% of sales, for the three months ended December 31, 2010, compared with $25.8 million, or 9.9% of sales in the three months ended September 30, 2010, and $2.5 million or 1.9% of sales in the fourth quarter of 2009. An increase in manufacturing costs as a percent of sales was partially offset by a reduction of costs for selling, general and administrative activities in the quarter ended December 31, 2010, compared with the immediately preceding quarter.

Adjusted EBITDA was $36.0 million, or 14.8% of sales in the three months ended December 31, 2010, compared with $41.9 million or 16.2% of sales in the three months ended September 30, 2010, and $18.6 million or 14.2% of sales in the fourth quarter of 2009. A reconciliation of operating income to Adjusted EBITDA is provided at the end of this news release.

For the three months ended December 31, 2010, net income of $9.5 million, of which $8.9 million was attributable to common stockholders, resulted in $0.44 earnings per basic and diluted share.

Segment Information

Net sales and operating income in the Company’s Printed Circuit Boards segment for the fourth quarter were $196.7 million and $17.5 million, respectively, compared with sales and operating income of $208.9 million and $23.6 million, respectively, in the third quarter of 2010 and $100.6 million and $4.2 million, respectively, in the fourth quarter of 2009. During the fourth quarter in the Printed Circuit Boards segment, non-recurring proceeds from a business interruption insurance claim offset costs of materials scrapped following a product quality review. Compared with the immediately preceding quarter, segment revenues increased in only the military and aerospace end-user market.

Fourth quarter net sales and operating income of the Company’s Assembly segment were $47.2 million and $2.1 million, respectively, compared with third-quarter 2010 segment sales and operating income of $50.4 million and $2.2 million, respectively, and fourth-quarter 2009 segment sales and operating income of $30.8 million and $0.2 million, respectively. The change in segment revenue from the third quarter to the fourth quarter of 2010 was primarily attributable to lower demand in the telecommunications end-user market.

Cash and Working Capital

Cash and cash equivalents of $103.6 million at December 31, 2010, increased $18.1 million from the end of the prior quarter. Cash provided by operating activities of approximately $41.6 million during the three months ended December 31, 2010, was used to i) fund approximately $20.1 million of capital expenditures in the quarter; ii) reduce previously outstanding debt by approximately $1.0 million; and iii) make scheduled payments of $2.5 million on capital lease obligations. The Company’s working capital metrics at December 31, 2010, remained consistent with historical trends.

Pro Forma Combined Net Sales

Merix Corporation’s prior fiscal year ended on May 30, 2009. Pro forma combined net sales of $202.6 million for the three-month period ended December 31, 2009, is composed of Viasystems’ net sales for the three months ended December 31, 2009, plus Merix Corporation’s reported net sales for the three months ended November 28, 2009.

Use of Non-GAAP Financial Measures

In addition to condensed consolidated financial statements presented in accordance with U.S. GAAP, management uses certain non-GAAP financial measures, including “Adjusted EBITDA.”

Adjusted EBITDA is not a recognized financial measure under U.S. GAAP, and does not purport to be an alternative to operating income or an indicator of operating performance. Adjusted EBITDA is presented to enhance an understanding of operating results and is not intended to represent cash flows or results of operations. The Board of Directors and management use Adjusted EBITDA primarily as an additional measure of operating performance for matters including executive compensation and competitor comparisons. The use of this non-GAAP measure provides an indication of the Company’s ability to service debt, and management considers it an appropriate measure to use because of the Company’s highly leveraged position.

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

The Company uses Adjusted EBITDA to provide meaningful supplemental information regarding operating performance and profitability by excluding from EBITDA certain items that the Company believes are not indicative of its ongoing operating results or will not impact future operating cash flows, which include restructuring and impairment charges, stock compensation and costs associated with the acquisition of Merix.

Investor Conference Call

Viasystems will broadcast live via internet an investor conference call at 2:00 p.m. Eastern Time today, February 8, 2011. The live listen-only audio of the conference call will be available at http://investor.viasystems.com. The live conference call will be available by telephone for professional investors and analysts by dialing 877-640-9867 (toll-free) or 914-495-8546.

A telephonic replay of the conference call will be available for one week at 800-642-1687 or 706-645-9291. Replay listeners should enter the conference ID 39497868. The webcast replay will be available at http://investor.viasystems.com for an indefinite period.

Forward Looking Statements

Certain statements in this communication may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are made on the basis of the current beliefs, expectations and assumptions of the management of Viasystems regarding future events and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. Viasystems undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Actual results may differ materially from those expressed or implied. Such differences may result from a variety of factors, including but not limited to: legal or regulatory proceedings; any actions taken by the Company, including but not limited to, restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions); or developments beyond the Company’s control, including but not limited to, changes in domestic or global economic conditions, competitive conditions and consumer preferences, adverse weather conditions or natural disasters, health concerns, international, political or military developments, and technological developments. Additional factors that may cause results to differ materially from those described in the forward-looking statements are set forth under the heading “Item 1A. Risk Factors,” in the annual report on form 10-K filed by Viasystems with the SEC on February 25, 2010 and in Viasystems’ other filings made from time to time with the SEC and available at the SEC’s website, www.sec.gov.

About Viasystems

Viasystems Group, Inc. is a technology leader and a worldwide provider of complex multi-layer, printed circuit boards (PCBs) and electro-mechanical solutions (E-M Solutions). Its PCBs serve as the “electronic backbone” of electronic equipment, and its E-M Solutions products and services integrate PCBs and other components into electronic equipment, including metal enclosures, cabinets, racks and sub-racks, backplanes, cable assemblies and busbars. Viasystems’ 14,800 employees around the world serve more than 800 customers in the automotive, telecommunications, industrial & instrumentation, computer and datacommunications and military and aerospace end markets. For additional information about Viasystems, please visit the Company’s website at www.viasystems.com.
     

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

(Unaudited)
 
 

 

Three Months Ended

 

December 31, 2010

September 30, 2010

December 31, 2009
Net sales $ 243,874 $ 259,325 $ 131,362
Operating Expenses:
Cost of goods sold, exclusive of items shown separately 191,500 198,117 101,844
Selling, general and administrative 17,636 20,536 12,958
Depreciation 14,879 14,426 12,329
Amortization 443 447 291
Restructuring and impairment   (232 )   26     1,473  
Operating income 19,648 25,773 2,467
Other expense (income):
Interest expense, net 7,222 7,323 9,956
Amortization of deferred financing costs 503 512 407
Loss on early extinguishment of debt 1,628
Other, net   (205 )   1,033     3,023  
Income (loss) before taxes 12,128 16,905 (12,547 )
Income taxes   2,586     5,985     3,362  
Net income (loss) $ 9,542   $ 10,920   $ (15,909 )
Less:
Net income attributable to noncontrolling interest $ 661 $ 709 $
Accretion of Redeemable Class B Senior Convertible preferred stock           2,173  
Net income (loss) attributable to common stockholders $ 8,881   $ 10,211   $ (18,082 )
Basic earnings (loss) per share $ 0.44   $ 0.51   $ (7.49 )
Diluted earnings (loss) per share $ 0.44   $ 0.51   $ (7.49 )
Basic weighted average shares outstanding   19,979,992     19,979,015     2,415,266  
Diluted weighted average shares outstanding   20,022,994     19,979,260     2,415,266  
 

This information is intended to be reviewed in conjunction with the Company’s filings with the Securities and Exchange Commission.
 
 
   

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)
 
 

 

December 31, 2010

September 30, 2010

December 31, 2009
ASSETS

(unaudited)

(unaudited)

 
Current assets:
Cash and cash equivalents $ 103,599 $ 85,465 $ 108,993
Restricted cash 105,734
Accounts receivable, net 169,247 174,541 89,512
Inventories 94,877 94,051 49,197
Prepaid expenses and other   22,940     22,118     11,388  
Total current assets 390,663 376,175 364,824
Property, plant and equipment, net 273,113 266,186 199,044
Goodwill and other noncurrent assets   116,797     118,502     93,370  
Total assets $ 780,573   $ 760,863   $ 657,238  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 10,258 $ 13,657 $ 118,207
Accounts payable 162,322 164,079 90,661
Accrued and other liabilities   83,798     67,210     42,348  
Total current liabilities 256,378 244,946 251,216
Long-term debt, less current maturities 215,139 214,781 212,673
Other non-current liabilities 51,951 54,478 34,226
Mandatory redeemable Class A Junior preferred stock           118,836  
Total liabilities   523,468     514,205     616,951  
Redeemable Class B Senior Convertible preferred stock 98,327
Total stockholders’ equity (deficit)   257,105     246,658     (58,040 )
Total liabilities and stockholders’ equity (deficit) $ 780,573   $ 760,863   $ 657,238  
 

This information is intended to be reviewed in conjunctions with the Company’s filings with the Securities and Exchange Commission.
 
 
     

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(dollars in thousands)

(Unaudited)
 
 

 

Year Ended

 

Nine Months Ended

 

Year Ended

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009
Net cash provided by operating activities $ 74,940   $ 33,336   $ 47,578  
 
Cash flows from investing activities:
Capital expenditures (57,010 ) (36,873 ) (21,925 )
Acquisition of Merix (35,326 ) (35,326 )
Cash acquired in acquisition of Merix 13,667 13,667
Proceeds from disposals of property   9,893     9,769     4,352  
Net cash used in investing activities   (68,776 )   (48,763 )   (17,573 )
 
Cash flows from financing activities:
Proceeds from issuance of 12% Senior Secured Notes 211,792
Repayment of 10.5% Senior Subordinated Notes (105,904 ) (105,904 ) (95,065 )
Change in restricted cash 105,734 105,734 (105,734 )
Borrowings under credit facilities 10,000 10,000 10,000
Repayments of borrowings under credit facilities (15,200 ) (14,200 ) (15,500 )
Repayments of capital lease obligations (2,597 ) (139 ) (2,119 )
Financing and other fees (2,293 ) (2,294 ) (7,439 )
Distribution to noncontrolling interest (783 ) (783 )
Repayments of 2013 Notes   (515 )   (515 )    
Net cash used in financing activities   (11,558 )   (8,101 )   (4,065 )
 
Net change in cash and cash equivalents (5,394 ) (23,528 ) 25,940
 
Beginning cash   108,993     108,993     83,053  
Ending cash $ 103,599   $ 85,465   $ 108,993  
 

This information is intended to be reviewed in conjunction with the Company’s filings with the Securities and Exchange Commission.
 
 
           

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

NET SALES AND BALANCE SHEET STATISTICS

(dollars in millions)

(Unaudited)
 
 

 

Three Months Ended

 

December 31, 2010

 

September 30, 2010

 

December 31, 2009
Net sales by segment
Printed Circuit Boards (a) $ 196.7 81 % $ 208.9 81 % $ 100.6 77 %
Assembly   47.2   19 %   50.4   19 %   30.8   23 %

 

$

243.9

 

100

%

 

$

259.3

 

100

%

 

$

131.4

 

100

%
 

(a)  Excludes $71.3 of net sales reported by Merix Corporation during the three months ended November 28, 2009, prior to Viasystems’ acquisition of Merix in February 2010.
   

 

Percentage of Net Sales

Net Sales Increase

 

Three Months Ended

Sequential:
 

Year/Year:

 

Dec. 31,
 

Sept. 30,
 

Dec. 31,

4Q10 vs

4Q10 vs

 

2010

2010

2009

3Q10

4Q09
Pro forma combined net sales by end market  
Automotive 36 % 35 % 36 % (4 %) 19 %
Telecommunications 23 % 24 % 24 % (11 %) 17 %
Industrial & Instrumentation 24 % 24 % 21 % (8 %) 33 %
Computer and Datacommunications 13 % 13 % 14 % (3 %) 15 %
Military and Aerospace   4 % 4 % 5 % 6 % 2 %

 
 

100

%

100

%

100

%

(6

%)

 

20

%
                                                           

 

4Q10

 

3Q10

 

2Q10

 

1Q10

4Q09
Working capital metrics
Days’ sales outstanding 62.5 60.6 62.0 61.0 61.3
Inventory turns 8.1 8.4 8.8 9.7 8.3
Days’ payables outstanding 76.3 74.6 75.8 71.5 80.1
Cash cycle (days) 30.8 28.8 27.5 26.7 24.7
 
 
     

VIASYSTEMS GROUP, INC. AND SUBSIDIARIES

SUPPLEMENTAL INFORMATION

RECONCILIATION OF OPERATING INCOME

TO ADJUSTED EBITDA

(dollars in millions)

(Unaudited)

 
 

 

Three Months Ended

 

December 31, 2010

 

September 30, 2010

December 31, 2009
Operating income $ 19.6 $ 25.8 $ 2.5
Add-back:
Depreciation and amortization 15.3 14.9 12.6
Restructuring and impairment (0.2 ) 1.5
Non-cash stock compensation expense 1.3 1.2 0.2
Costs relating to the Merix acquisition           1.8  
Adjusted EBITDA $ 36.0   $ 41.9   $ 18.6  
 

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