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, 1997
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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 25, 1997
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<BTB>
Common Stock......................... 19,134,537
Class A Common Stock................. 1,384,291
BERG ELECTRONICS CORP. & SUBSIDIARIES
INDEX
<BTB>
PART I - FINANCIAL INFORMATION Page
----
Berg Electronics Corp. & Subsidiaries
Condensed Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996.................................................. 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1997 and 1996............................... 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996............................... 5
Notes to Condensed Consolidated Financial Statements................. 6
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 8
PART II - OTHER INFORMATION.............................................. 10
SIGNATURES............................................................... 12
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1997 1996
------------ ------------
<BTB>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents........................ $ 11,095 $ 8,999
Accounts receivable, net......................... 120,550 104,134
Inventories...................................... 93,785 91,823
Prepaid expenses and other....................... 16,160 13,935
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Total current assets........................... 241,590 218,891
Property, plant and equipment, net............... 253,227 259,905
Intangibles and other assets..................... 195,525 203,211
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Total assets................................... $ 690,342 $ 682,007
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations...... $ 33,912 $ 33,912
Accounts payable................................. 61,342 60,822
Accrued liabilities.............................. 84,577 82,997
------------ ------------
Total current liabilities...................... 179,831 177,731
Long-term obligations, less current maturities..... 334,987 324,646
Other long-term liabilities........................ 40,513 40,738
Stockholders' equity:
Contributed capital.............................. 116,512 116,504
Retained earnings................................ 28,482 19,836
Cumulative translation adjustments............... (9,983) 2,552
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Total stockholders' equity..................... 135,011 138,892
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Total liabilities and stockholders' equity..... $ 690,342 $ 682,007
============ ============
<FN>
See accompanying notes to the condensed consolidated financial statements.
</FN>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<BTB>
Three Months Ended
March 31,
---------------------
1997 1996
---------------------
Net sales............................................ $ 188,511 $ 180,118
Operating expenses:
Cost of goods sold................................. 120,619 118,204
Selling, general and administrative................ 42,024 41,214
Amortization and other............................. 4,276 3,243
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Operating income..................................... 21,592 17,457
Other income (expense):
Interest expense................................... (6,887) (7,830)
Amortization of deferred financing costs........... (759) (1,256)
Other, net......................................... 112 886
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Income before income tax provision and extraordinary
items.............................................. 14,058 9,257
Income tax provision................................. 5,412 3,702
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Income before extraordinary items.................... 8,646 5,555
Extraordinary items - losses on early extinguishment
of debt, net of income tax benefit of $12,443...... -- (18,664)
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Net income (loss).................................... 8,646 (13,109)
Preferred stock:
Accretion and dividends............................ -- (5,469)
Excess of fair value over book value of redemption
and purchase..................................... -- (21,866)
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Net income (loss) applicable to common shares........ $ 8,646 $(40,444)
========== =========
Net income (loss) per common share before
extraordinary items................................ $ 0.42 $ (1.40)
========== =========
Net income (loss) per common share................... $ 0.42 $ (2.61)
========== =========
<FN>
See accompanying notes to the condensed consolidated financial statements.
</FN>
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
---------------------
1997 1996
---------------------
<BTB>
Cash flows provided by (used in) operating
activities:
Net income (loss)..................................... $ 8,646 $ (13,109)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Extraordinary items............................... -- 31,107
Depreciation...................................... 11,740 11,433
Amortization and other non-cash charges........... 5,035 4,499
Change in assets and liabilities:
Accounts receivable............................. (20,472) (1,944)
Inventories..................................... (4,393) (17,397)
Prepaid expenses and other...................... (2,856) 3
Accounts payable................................ 1,817 (2,625)
Accrued and other liabilities................... 3,952 2,067
Other, net...................................... (183) (10,867)
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Net cash from operating activities...................... 3,286 3,167
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Cash flows provided by (used in) investing
activities:
Capital expenditures, net........................... (11,114) (16,336)
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Net cash from investing activities...................... (11,114) (16,336)
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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..... 38,500 246,877
Repayment of long-term obligations.................. (28,159) (233,270)
Financing costs..................................... -- (13,108)
Proceeds from issuance of common stock.............. 8 --
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Net cash from financing activities...................... 10,349 4,527
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Effect of exchange rate changes on cash................. (425) (116)
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Net change in cash and cash equivalents................. 2,096 (8,758)
Cash and cash equivalents at beginning of the period.... 8,999 19,601
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Cash and cash equivalents at end of the period.......... $ 11,095 $ 10,843
========== ===========
<FN>
See accompanying notes to the condensed consolidated financial statements.
</FN>
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
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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, 1997, 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, 1997 and 1996, is
approximately $7,000 and $4,700, respectively. Income taxes paid for the
three months ended March 31, 1997 and 1996, is approximately $500 and $300,
respectively.
2. INVENTORIES
The composition of inventories at March 31, 1997, is as follows:
<BTB>
Raw materials.................................................... $ 32,612
Work-in-process.................................................. 31,738
Finished goods................................................... 29,435
---------
Total.......................................................... $ 93,785
=========
The carrying value of inventories valued at LIFO, at March 31, 1997, is
approximately $41,700, and its current cost is approximately $33,900.
3. RECENT DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board adopted SFAS
No. 128, Earnings Per Share, which establishes standards for computing and
presenting earnings per share. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997. Early
adoption is not permitted. The effect of the adoption of SFAS No. 128
will have no impact on earnings per share for the quarters ended March 31,
1997 and 1996 as shown in the table below.
Three Months Ended
March 31,
----------------------------
1997 1996
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<BTB>
Basic Earnings (Loss) Per Share:
Income (loss) before extraordinary items........ $ 0.42 $ (1.40)
============= =============
Net income (loss)............................... $ 0.42 $ (2.61)
============= =============
Diluted Earnings (Loss) Per Share:
Income (loss) before extraordinary items........ $ 0.42 $ (1.40)
============= =============
Net income (loss)............................... $ 0.42 $ (2.61)
============= =============
Basic earnings (loss) per common share were computed by dividing net income
(loss) the weighted average number of shares of common stock outstanding during
the period. Diluted earnings (loss) per common share for the quarter ended
March 31, 1996, did not include the effect of conversions of options, as the
effect was antidilutive. For the quarter ended March 31, 1997, diluted earnings
per share were determined on the assumption that the options issued and
outstanding were exercised as of January 1, 1997. For the quarter ended March
31, 1996, basic and diluted loss per share for extraordinary items was
$(1.20).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
- -------------------------------------------------------------------------------
Net sales for the three months ended March 31, 1997 are $188.5 million,
representing a $8.4 million, or 4.7%, increase from the comparable period in
1996.
North American sales represented approximately 50% of consolidated sales and
decreased $4.9 million, or 4.9%, in the first quarter of 1997 compared to the
first quarter of 1996. This decrease is due primarily to the transfer of
certain customer programs to the Company's European and Asian sites in 1997
compared to U.S. sales sources for these programs in 1996. Increased sales as
a result of a $2.5 million further penetration of the U.S. distribution market
were offset by order delays in the telecom segment and weakness in the high
end data market.
Sales in Europe represented approximately 27% of consolidated sales for the
quarter ended March 31, 1997, and increased by $10.5 million, or 25.5%, due in
part to the acquisition of the captive connector business of Ericsson Telecom
AB on December 31, 1996, but also in part to greater demand for the company's
products in certain markets as a result of rebounding economies. These
increases were partially offset by unfavorable effects of currency changes
between years. Sales in Asia Pacific make up approximately 23% of
consolidated sales for the first quarter of 1997 and increased $2.8 million,
or 6.9% over the same quarter in the previous year. The improvement in Asia
Pacific is due primarily to increased demand for the Company's products in
major end-user markets (computers and telecommunications) and in part to
customers' shift of purchase of telecommunications products to local Asian
content products. These increases are partially offset by the unfavorable
effects of currency changes between years, primarily in Japan. Changing
currencies adversely impacted sales reported in both Europe and Asia, reducing
sales by approximately 7.7% on a combined basis, in the first quarter of 1997
compared to the first quarter of 1996.
Cost of goods sold increased to $120.6 million in the first quarter of 1997
from $118.2 million in the same quarter of 1996, a $2.4 million increase, and
improved to 64.0% of sales compared to 65.6% of sales in the first quarter of
1996. The increase in total costs is due primarily to the growth in total
product volume sold. The increase is partially offset by the favorable impact
of the stronger U.S. dollar against currencies in Europe and Asia. The
improvement in costs as a percent of sales is primarily a result of improved
product sales mix and the Company's cost reduction activities, and partially a
result of the spreading of fixed costs over a higher sales volume.
Selling, general and administrative expenses for the three months ended March
31, 1997 increased by $0.8 million, or 2.0%, over the comparable period in
1996, due primarily to increased sales volume and to the expansion of the
Company's operating locations. As a percentage of sales, these costs
decreased from 22.9% to 22.3%, due in part to cost reduction and containment
activities and in part to the spreading of the fixed components of such
expenses over a higher sales volume.
Other expense decreased $.7 million, from $8.2 million in the first quarter of
1996 to $7.5 million in the first quarter of 1997, due primarily to reduced
interest expense and deferred financing costs amortization in 1997, based on
the New Credit Facility entered into in February 1996 containing lower
interest rates and financing costs than the previous credit agreement.
Liquidity and Capital Resources
- -------------------------------
Net cash provided by operating activities was $3.3 million for the three
months ended March 31, 1997, which compares to $3.2 million provided by
operating activities for the comparable period in 1996. This fluctuation is
primarily due to increased earnings, offset by the increased working capital
requirements to support the increase in volume of sales in the first quarter
of 1997.
Net cash used in investing activities was $11.1 million for the three months
ended March 31, 1997, compared to net cash used of $16.3 million for the three
months ended March 31, 1996. The net cash used in investing activities for the
first three months of 1996 includes construction costs of the new Huntingdon
County facility, and, for the first three months of 1996 and 1997, the
remainder represents capital expenditures.
Cash provided by financing activities was $10.3 million for the three months
ended March 31, 1997, compared to $4.5 million for the comparable period in
1996. The source of cash in 1997 represents net borrowings under the New
Credit Facility. 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
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed as Part of this Report
Exhibit
No. Description of Exhibit
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<BTB>
3.1 Certificate of Elimination of Series B Preferred Stock and
Series D Preferred Stock of Berg Electronics Corp., dated
September 11, 1996.**
3.2 [Item intentionally omitted.]
3.3 Certificate of Incorporation of Berg Electronics Corp. (f/k/a Berg
Electronics Group, Inc.; f/k/a Berg Electronics Holdings Corp.; f/k/a
Berg CS Holdings, Inc.), together with amendments thereto. (1)
3.4 Certificate of Amendment to Certificate of Incorporation, dated
February 29, 1996, of Berg Electronics Corp. (2)
3.5 Bylaws of Berg Electronics Corp. (1)
10.1+ First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and among
James N. Mills, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.**
10.2+ First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and among
David M. Sindelar, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.**
10.3+ First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and among
W. Thomas McGhee, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.**
10.4+ First Amendment to the Amended and Restated Executive
Employment Agreement, dated as of August 5, 1996, by and among
Larry S. Bacon, Berg Electronics Corp., Berg Electronics
Group, Inc. and certain of its subsidiaries.**
10.5+ Amendment to the Amended and Restated Executive Employment
Agreement, dated as of January 1, 1997, by and among Robert N.
Mills, Berg Electronics Corp., Berg Electronics Group, Inc.
and certain of its subsidiaries.**
10.6+ Amendment to the Amended and Restated Executive Employment
Agreement, dated as of January 1, 1997, by and among Timothy
L. Conlon, Berg Electronics Corp.and Berg Electronics Group,
Inc.**
11.0 Computation of Net Earnings (Loss) Per Share.*
27.0 Financial Data Schedule.*
<FN>
(1) Filed previously as an exhibit to the Registration Statement of Berg
Electronics Corp. on Form S-1, Registration No. 33-98240, and incorporated
by reference herein.
(2) Filed previously as an exhibit to the Berg Electronics Corp. Form 10-K
for the fiscal year ended December 31, 1995, and incorporated by reference
herein.
* Filed herewith.
** To be filed in an amended 10-Q on or before May 15, 1997.
+ Indicates a management contract or compensatory plan or arrangement.
</FN>
SIGNATURES
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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 28, 1997 By: /s/ JOSEPH S. CATANZARO
_________________________________
Name : Joseph S. Catanzaro
Title: Chief Accounting Officer