SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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1-14080
(Commission File Number)
Berg Electronics Corp.
(Exact name of Registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation or organization)
75-2451903
(I.R.S. Employer Identification No.)
101 South Hanley Road
St. Louis, MO 63105
(314) 726-1323
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding at
Class April 30, 1996
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Berg Electronics Corp.
Common Stock 19,052,684
Class A Common Stock 1,420,787
BERG ELECTRONICS CORP. & SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
Berg Electronics Corp. & Subsidiaries
Condensed Consolidated Balance Sheets as of December 31, 1995 3
and March 31, 1996
Condensed Consolidated Statements of Operations for the three 4
months ended March 31, 1995 and 1996
Condensed Consolidated Statements of Cash Flows for the three 5
months ended March 31, 1995 and 1996
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition and Results 8
of Operations
PART II - OTHER INFORMATION 10
SIGNATURES 11
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, March 31,
1995 1996
----------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents..................... $ 19,601 $ 10,843
Accounts receivable, net ..................... 117,665 117,986
Inventories................................... 78,242 94,280
Prepaid expenses and other.................... 10,697 10,575
-------- ---------
Total current assets........................ 226,205 233,684
Property, plant and equipment, net............ 230,753 233,095
Intangibles and other assets.................. 211,382 212,307
-------- ---------
Total assets................................ $668,340 $679,086
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations... $ 32,798 $ 18,063
Accounts payable.............................. 73,299 69,989
Accrued liabilities........................... 76,306 91,369
-------- ---------
Total current liabilities................... 182,403 179,421
Long-term obligations, less current maturities.. 305,373 333,715
Other long-term liabilities..................... 36,224 40,689
Stockholders' equity:
Contributed capital........................... 116,886 116,281
Retained earnings (accumulated deficit)....... 9,930 (3,554)
Cumulative translation adjustments............ 17,524 12,534
-------- ---------
Total stockholders' equity.................. 144,340 125,261
-------- ---------
Total liabilities and stockholders' equity.. $668,340 $679,086
======== =========
<FN>
See accompanying notes to the condensed consolidated financial statements
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
1995 1996
------------ ------------
Net sales............................................ $ 160,300 $ 180,118
Operating expenses:
Cost of goods sold................................. 105,816 118,204
Selling, general and administrative................ 36,654 41,214
Amortization and other............................. 3,317 3,243
------------ ------------
Operating income..................................... 14,513 17,457
Other income (expense):
Interest expense................................... (8,768) (7,830)
Amortization of deferred financing costs........... (1,600) (1,256)
Other, net......................................... 2,588 886
------------ ------------
Income before income tax provision and extraordinary
items.............................................. 6,733 9,257
Income tax provision................................. 2,693 3,702
------------ ------------
Income before extraordinary items.................... 4,040 5,555
Extraordinary items - losses on early extinguishment
of debt, net of income tax benefit of $12,443...... -- (18,664)
------------ ------------
Net income (loss).................................... 4,040 (13,109)
Preferred stock:
Accretion and dividends............................ (3,542) (5,469)
Excess of fair value over book value of redemption
and purchase..................................... -- (21,866)
------------ ------------
Net income (loss) applicable to common shares........ $ 498 $ (40,444)
============ ============
Net income (loss) per common share before
extraordinary items................................ $ 0.04 $ (1.40)
============ ============
Net income (loss) per common share................... $ 0.04 $ (2.61)
============ ============
Average common shares outstanding.................... 12,988,771 15,510,324
============ ============
<FN>
See accompanying notes to the condensed consolidated financial statements
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1996
--------- ----------
Cash flows provided by (used in) operating
activities:
Net income (loss).................................. $ 4,040 $ (13,109)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary item............................. -- 31,107
Depreciation................................... 10,394 11,433
Amortization and other non-cash charges ....... 4,917 4,499
Change in assets and liabilities:
Accounts receivable.......................... (12,765) (1,944)
Inventories.................................. (5,373) (17,397)
Prepaid expenses and other................... 5,603 3
Accounts payable............................. 3,632 (2,625)
Accrued and other liabilities................ (1,029) 2,067
Other, net................................... (469) (10,867)
--------- ----------
Net cash from operating activities................... 8,950 3,167
--------- ----------
Cash flows provided by (used in) investing
activities:
Capital expenditures, net........................ (6,030) (16,336)
--------- ----------
Net cash from investing activities............... (6,030) (16,336)
--------- ----------
Cash flows provided by (used in) financing
activities:
Equity proceeds.................................. -- 147,033
Redemption and purchase of preferred stock....... -- (143,005)
Proceeds from issuance of long-term obligations.. -- 246,877
Repayment of long-term obligations............... (4,476) (233,270)
Financing costs.................................. -- (13,108)
--------- ----------
Net cash from financing activities................... (4,476) 4,527
--------- ----------
Effect of exchange rate changes on cash.............. 1,180 (116)
--------- ----------
Net change in cash and cash equivalents.............. (376) (8,758)
Cash and cash equivalents at beginning of the period. 11,981 19,601
--------- ----------
Cash and cash equivalents at end of the period....... $ 11,605 $ 10,843
========= ==========
<FN>
See accompanying notes to the condensed consolidated financial statements
BERG ELECTRONICS CORP. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
1. BASIS OF PRESENTATION
Unaudited Interim Condensed Consolidated Financial Statements
The unaudited interim condensed consolidated financial statements reflect
all adjustments consisting only of normal recurring adjustments which are, in
the opinion of management, necessary for a fair presentation of financial
position and results of operations. The results for the three months ended
March 31, 1996, are not necessarily indicative of the results that may be
expected for a full fiscal year.
Statement of Cash Flows
Interest paid for the three months ended March 31, 1995 and 1996, is
approximately $6,500 and $4,700, respectively. Income taxes paid for the
three months ended March 31, 1995 and 1996, is approximately $300 and $300,
respectively.
2. INVENTORIES
The composition of inventories at March 31, 1996, is as follows:
Raw materials ............................................ $ 30,028
Work-in-process .......................................... 28,267
Finished goods ........................................... 35,985
---------
Total $ 94,280
=========
The carrying value of inventories valued at LIFO, at March 31, 1996, is
approximately $39,700 and its current cost is approximately $32,800.
3. CURRENT EVENTS
On February 29, 1996, the Company entered into a new credit facility (the
"New Credit Facility") that, among other things, refinanced the Amended and
Restated Credit Agreement dated as of May 23, 1994. The refinancing of the
Amended Credit Agreement resulted in the write off of $12,755 of deferred
financing costs. This write off, net of income tax, is classified with other
extraordinary items on the condensed consolidated statements of operations.
The New Credit Facility consists of a $350,000 term loan (the "New Term
Loan") and a $100,000 Revolving Credit Facility (the "New Revolving
Facility"). Mandatory principal payments are due in semi-annual installments
with a final installment due on December 31, 2002. Amounts outstanding under
the New Revolving Facility are due on December 31, 2002. Borrowings under the
Term Loan and the New Revolving Facility bear interest, at the option of the
Company, at a rate per annum equal to (i) 0.5% plus the Agent's Alternate
Base Rate (as defined in the New Credit Facility) or (ii) 1.50% plus the
Eurodollar rate per annum. Interest payment dates vary depending on the
interest rate option selected by the Company, but generally, interest is paid
quarterly. The commitment fee on the unused portion of the New Revolving
Facility is 0.375% per annum on the average daily available balance. The New
Credit Facility contains several financial covenants that, among other
things, require the Company to maintain certain financial ratios and restrict
the Company's ability to incur indebtedness, make capital expenditures and
pay dividends.
On March 6, 1996, Berg consummated the sale of 7,475,000 common shares in
its initial public offering. The Company received net proceeds of
approximately $147,033 from the offering.
On March 18, 1996, the Company redeemed 50% of the outstanding shares of
the Company's Series E Preferred Stock, par value $.01 per share, including
accrued and unpaid dividends and a redemption premium thereon for
approximately $44,253 (the "Series E Preferred Redemption"). On March 19,
1996, the Company purchased all of the outstanding shares of Series E
Preferred Stock not purchased by the Company pursuant to the Series E
Preferred Redemption for approximately $47,819. Also on March 19, 1996, the
Company redeemed all of the outstanding shares of the Company's Series B
Preferred Stock, par value $.01 per share, including accrued and unpaid
dividends thereon, for approximately $50,933. The excess, $21,866, of the
fair value of the consideration transferred to the holders of the Preferred
Stock over the carrying amount of the Preferred Stock is reflected as a
reduction from net income (loss) applicable to common shares in the condensed
consolidated statements of operations.
On April 8, 1996, Berg redeemed $30,000 aggregate principal amount of its
11 3/8% Guaranteed Senior Subordinated Debentures Due 2003 (the
"Debentures"), including accrued and unpaid interest and a redemption premium
thereon (the "Debenture Redemption") for approximately $34,487. On April 9,
1996, Berg purchased all of the outstanding Debentures not redeemed by Berg
pursuance to the Debenture Redemption for approximately $82,568. The
redemption and purchase of the Debentures resulted in a write off of $4,900
of deferred financing costs. This write off, net of income tax, is
classified with other extraordinary items on the condensed consolidated
statement of operations. Additionally, the redemption and purchase premium
and the related fees and expenses of the Debenture Redemption and purchase,
totaling $13,452, is classified with other extraordinary items, net of tax,
in the condensed consolidated statements of operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995 Compared to Three Months Ended March 31,
1996
Net sales for the three months ended March 31, 1996 were $180.1 million,
representing a $19.8 million, or 12.4%, increase from the comparable period in
1995.
North American sales increased $14.1 million, or 16.7%, in the first quarter
of 1996 compared to the first quarter of 1995. This increase is due primarily
to a $7.3 million, or 28.8%, increase in certain telecommunications products
sales due to stronger demand than in the same period in the prior year for
backplanes, and switching and transmission equipment, translating into strong
demand for the Berg connectors used in these applications. Additionally,
first quarter 1996 contained $2.7 million of sales from Specialty Connector
Company, acquired in November 1995.
Sales in Europe increased by $.7 million, or 1.7%, due to the favorable impact
of the strengthening European currencies. Sales in Asia Pacific increased
$5.0 million, or 14.2%. The improvement in Asia Pacific was primarily due to
increased demand in the Company's major end-user markets (computers and
telecommunications), partially offset by the $.9 million unfavorable impact of
the weakening Asian currencies versus the U.S. dollar.
Cost of goods sold as a percent of sales decreased to 65.6% from 66.0%,
primarily due to cost reduction actions, including the reduction of labor
costs, the elimination of factory overhead and negotiated price reductions in
certain purchased materials.
Due primarily to the increased sales volume, selling, general and
administrative expenses increased by $4.6 million, or 12.4%, over the
comparable period in 1994 and remained unchanged as a percentage of sales at
22.9%.
Other expense grew $.4 million, from $7.8 million in the first quarter 1995 to
$8.2 million in the first quarter 1996 due to lower currency translation gains
partially offset by reduced interest expense in 1996 due to the New Credit
Facility entered into in February 1996 containing lower interest rates than
the previous credit agreement.
Liquidity and Capital Resources
Net cash provided by operating activities was $3.2 million for the three
months ended March 31, 1996, which compares to $9.0 million provided by
operating activities for the comparable period in 1995. This fluctuation is
primarily due to the build up of inventory at the Company's Kansas City
facility to facilitate the moving of the Kansas City operations, scheduled to
begin in May 1996, to the Company's new 200,000 square foot facility in
Huntingdon County, Pennsylvania.
Net cash used in investing activities was $16.3 million for the three months
ended March 31, 1996, compared to net cash used of $6.0 million for the three
months ended March 31, 1995. The net cash used in investing activities for the
first quarter 1996 includes construction costs of the new Huntingdon County
facility, and for the first quarters of 1995 and 1996, the remainder
represents capital expenditures.
Cash used by financing activities was $4.5 for the three months ended March
31, 1995, compared to $4.5 provided by financing activities for the comparable
period in 1996. The use of cash in 1995 represents debt repayments and the
source of cash in 1996 represents proceeds from the Company's New Credit
Facility and initial public offering, offset by funds used to (i) repay the
Amended Credit Agreement, (ii) redeem and purchase all outstanding Preferred
Stock and, (iii) pay financing costs related to the aforementioned
transactions.
PART II. OTHER INFORMATION
NONE
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BERG ELECTRONICS CORP.
Dated: April 30, 1996 By: /s/ JAMES N. MILLS
__________________________________
Name: James N. Mills
Title: Chairman of the Board and
Chief Executive Officer
By: /s/ DAVID M. SINDELAR
__________________________________
Name: David M. Sindelar
Title: Senior Vice President and
Chief Financial Officer