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 June 30,
1997
- -------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
----------------------
- -----------------------
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 July 25, 1997
Common Stock 19,151,080
Class A Common Stock 1,384,291
BERG ELECTRONICS CORP. & SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
Berg Electronics Corp. & Subsidiaries
Condensed Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996............................................... 4
Condensed Consolidated Statements of Operations for the three
and six months ended June 30, 1997 and 1996......................... 5
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996................................. 6
Notes to Condensed Consolidated Financial Statements.................. 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 9
PART II - OTHER INFORMATION............................................... 11
SIGNATURES................................................................ 12
EXHIBIT 10.1 - INCENTIVE COMPENSATION PLAN................................................................. 14
EXHIBIT 11 - COMPUTATION OF NET EARNINGS (LOSS) PER SHARE................. 17
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
1997 1996
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents..................... $ 12,273 $ 8,999
Accounts receivable, net ..................... 126,098 104,134
Inventories................................... 95,292 91,823
Prepaid expenses and other.................... 18,850 13,935
Total current assets........................ 252,513 218,891
Property, plant and equipment, net............ 258,119 259,905
Intangibles and other assets.................. 191,202 203,211
Total assets................................ $701,834 $682,007
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term obligations... $ 37,662 $ 33,912
Accounts payable.............................. 68,705 60,822
Accrued liabilities........................... 87,563 82,997
Total current liabilities................... 193,930 177,731
Long-term obligations, less current maturities.. 324,008 324,646
Other long-term liabilities..................... 40,450 40,738
Stockholders' equity:
Contributed capital........................... 116,583 116,504
Retained earnings............................. 38,327 19,836
Cumulative translation adjustments............ (11,464) 2,552
Total stockholders' equity.................. 143,446 138,892
Total liabilities and stockholders' equity.. $701,834 $682,007
[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 Six Months Ended
June 30,______ June 30,_______
1997___ 1996___ 1997___ 1996___
Net sales..................... $202,505 $178,063 $391,016 $358,181
Operating expenses:
Cost of goods sold.......... 130,722 116,132 251,341 234,336
Selling, general and
Administrative............ 43,253 39,309 85,277 80,523
Amortization and other...... 4,264 3,249 8,540 6,492
Operating income.............. 24,266 19,373 45,858 36,830
Other income (expense):
Interest expense............ (6,800) (6,818) (13,687) (14,648)
Amortization of deferred
Financing costs........... (759) (716) (1,518) (1,972)
Other, net.................. (572) 639 (460) 1,525
Income before income tax
Provision and extraordinary
items....................... 16,135 12,478 30,193 21,735
Income tax provision.......... 6,290 4,866 11,702 8,568
Income before extraordinary
items....................... 9,845 7,612 18,491 13,167
Extraordinary items - losses
on early extinguishment of
debt, net of income tax
benefit of $12,443.......... _____-- -- -- (18,664)
Net income (loss)............ 9,845 7,612 18,491 (5,497)
Preferred stock:
Accretion and dividends..... -- -- -- (5,469)
Excess of fair value over
book value of redemption
and purchase............... -- -- -- (21,866)
Net income (loss) applicable
to common shares............. $ 9,845 $ 7,612 $ 18,491 $(32,832)
Net income (loss) per common
share before extraordinary
items....................... $ 0.47 $ 0.37 $ 0.89 $ (0.79)
Net income (loss) per common
share....................... $ 0.47 $ 0.37 $ 0.89 $ (1.82)
[FN]
See accompanying notes to the condensed consolidated
financial statements.
BERG ELECTRONICS CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
June 30,
1997 1996
Cash flows provided by (used in) operating
activities:
Net income (loss).................................. $ 18,491 $ (5,497)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Extraordinary items............................ -- 31,107
Depreciation................................... 23,318 22,872
Amortization and other non-cash charges ....... 10,058 8,464
Change in assets and liabilities:
Accounts receivable.......................... (26,575) (2,858)
Inventories.................................. (5,966) (18,903)
Prepaid expenses and other................... (5,999) (3,195)
Accounts payable............................. 9,019 1,560
Accrued and other liabilities................ 7,351 2,844
Other, net................................... (1,098) (12,652)
Net cash from operating activities................... 28,599 23,742
Cash flows provided by (used in) investing
activities:
Capital expenditures, net........................ (27,853) (28,629)
Net cash from investing activities............... (27,853) (28,629)
Cash flows provided by (used in) financing
activities:
Proceeds from issuance of long-term obligations.. 69,833 364,831
Repayment of long-term obligations............... (67,127) (346,152)
Proceeds from issuance of common stock........... 79 --
Equity proceeds.................................. -- 147,033
Redemption and purchase of preferred stock....... -- (143,005)
Financing costs.................................. -- (25,208)
Net cash from financing activities................... 2,785 (2,501)
Effect of exchange rate changes on cash.............. (257) (170)
Net change in cash and cash equivalents.............. 3,274 (7,558)
Cash and cash equivalents at beginning of the period. 8,999 19,601
Cash and cash equivalents at end of the period....... $ 12,273 $ 12,043
[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
and six months ended June 30, 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 six months ended June 30,
1997 and 1996, is approximately $13,800 and
$14,500, respectively. Income taxes paid for the
six months ended June 30, 1997 and 1996, are
approximately $1,400 and $3,300, respectively.
2. INVENTORIES
The composition of inventories at June 30, 1997, is
as follows:
Raw materials ............................................ $ 31,314
Work-in-process .......................................... 31,700
Finished goods ........................................... 32,278
Total $ 95,292
The carrying value of inventories valued at LIFO,
at June 30, 1997, is approximately $39,500 and its
current cost is approximately $31,700.
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 not have a
significent impact on earnings per share for the
quarters and periods ended June 30, 1997 and 1996
as show in the tables below.
Three Months
Ended
June 30,
---------------------------
1997 1996
-------------- ------------
Basic Earnings Per Share:
Income before extraordinary items.......................................... $ 0.48 $ 0.37
Net income................................................................. $ 0.48 $ 0.37
Diluted Earnings Per Share:
Income before extraordinary items.......................................... $ 0.47 $ 0.37
Net income................................................................. $ 0.47 $ 0.37
Six Months
Ended
June 30,
---------------------------
1997 1996
-------------- ------------
Basic Earnings (Loss) Per Share:
Income (loss) before extraordinary items................................... $ 0.90 $ (0.79)
Net income (loss).......................................................... $ 0.90 $ (1.82)
Diluted Earnings (Loss) Per Share:
Income (loss) before extraordinary items................................... $ 0.89 $ (0.79)
Net income (loss).......................................................... $ 0.89 $ (1.82)
Basic earnings (loss) per common share were computed by
dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period.
Diluted earnings (loss) per common share for the quarter
ended June 30, 1996, included the effect of conversions of
options; for the six months ended June 30, 1996, diluted
earnings (loss) per common share did not include the effect
of conversions of options, as the effect was antidilutive.
For the quarter and six months ended June 30, 1997, diluted
earnings per share were determined on the assumption that
the options issued and outstanding were exercised as of the
beginning of the period. For the six months ended June 30,
1996, basic and diluted loss per share for extraordinary
items was $(1.04).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 Compared to Three Months
Ended June 30, 1996
Net sales for the three months ended June 30, 1997 were
$202.5 million, representing a $24.4 million, or 13.7%,
increase from the comparable period in 1996.
North American sales represented approximately 48% of
consolidated sales and increased $2.1 million, or 2.1%, in
the second quarter of 1997 compared to the second quarter of
1996. This increase was due primarily to strong mobile,
telecom, datacom and networking demand, and a broadening
customer base. The increase was offset somewhat by the
transfer of certain customer programs to the Company's
European and Asian locations in 1997, compared to U.S. sales
sources for these programs in 1996.
Sales in Europe represented approximately 29% of
consolidated sales for the quarter ended June 30, 1997, and
increased by $20.0 million, or 52.2%, due in part to the
acquisition of the captive connector business of Ericsson
Telecom AB on December 31, 1996, in part to greater demand
for the Company's products in most end-user and geographic
markets, and in part to the transfer of certain customer
programs to European sources in 1997 compared to U.S. sales
sources for these programs in 1996. These increases were
partially offset by unfavorable effects of currency changes
between years. Sales in Asia Pacific made up approximately
23% of consolidated sales for the second quarter of 1997 and
increased $2.4 million, or 5.5%, over the same quarter in
1996. The improvement in Asia Pacific was primarily due to
increased demand for the Company's products in end-user
markets (computers and telecommunications) and in part to
the transfer of certain customer programs to Asian sources
in 1997 compared to U.S. sales sources for these programs in
1996. These increases were partially offset by the
unfavorable effects of currency changes between years,
primarily in Japan and Korea. Changing currencies adversely
impacted sales reported in both Europe and Asia, reducing
sales in those regions by approximately 10.4% on a combined
basis, in the second quarter of 1997 compared to the second
quarter of 1996.
Due primarily to increased sales volume, cost of goods sold
increased by $14.6 million, or 12.6%, over the comparable
period in 1996. The increase was partially offset by the
favorable impact of the stronger U.S. dollar against
currencies in Europe and Asia. Cost of goods sold as a
percent of sales improved to 64.6% in the second quarter of
1997 from 65.2% in the second quarter of 1996, primarily as
a result of improved product sales mix and the Company's
cost reduction and containment activities, and partially as
a result of the spreading of fixed costs over a higher sales
volume.
Due primarily to increased sales volumes, selling, general
and administrative expenses for the three months ended June
30, 1997, increased by $3.9 million, or 10.0%, over the
comparable period in 1996, but as a percentage of sales
decreased from 22.1% to 21.4% due in part to cost reduction
and containment activities and also to the spreading of the
fixed components of such expenses over a higher sales volume.
Other expenses increased $1.2 million from $6.9 million in
the second quarter of 1996 to $8.1 million in the second
quarter of 1997, due primarily to currency gains in the
second quarter of 1996 that did not recur in 1997.
Six Months Ended June 30, 1997 Compared to Six Months Ended
June 30, 1996
Net sales for the six months ended June 30, 1997 were $391.0
million, representing a $32.8 million, or 9.2%, increase
from the comparable period in 1996.
North American sales decreased $2.8 million, or 1.4%, in the
first six months of 1997 compared to the comparable period
in 1996. This decrease was 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 further
penetration of the U.S. distribution market were offset by
order delays in telecom segment and weakness in high-end
data market.
Sales in Europe increased by $30.5 million, or 38.3%, due in
part to the acquisition of the captive connector business of
Ericsson Telecom AB on December 31, 1996, in part to greater
demand for the Company's products in most end-user and
geographic markets, and in part to the transfer of certain
customer programs to European sources in 1997 compared to
U.S. sales sources for these programs in 1996. These
increases were partially offset by unfavorable effect of
currency changes between years. Sales in Asia Pacific
increased $5.2 million, or 6.2%. The improvement in Asia
Pacific was primarily due to increased demand in the
Company's major end-user markets (computers and
telecommunications) and in part to transfer of certain
customer programs to Asian sources in 1997 compared to U.S.
sales sources for these programs in 1996. Changing
currencies adversely impacted sales recorded in Europe and
Asia, reducing sales by approximately 9.1% on a combined
basis in the first half of 1997 compared to the first half
of 1996.
Due primarily to increased sales volume, cost of goods sold
increased by $17.0 million, or 7.3%, over the comparable
period in 1996. As a result of cost containment and
reduction activities and the spreading of fixed costs over
high sales volume, cost of goods sold as a percent of sales
improved to 64.3% in the first half of 1997 from 65.4% for
the comparable period in 1996.
Due primarily to increased sales volume, selling, general
and administrative expenses increased by $4.8 million, or
6.0%, over the comparable period in 1996, but as a
percentage of sales decreased from 22.5% to 21.8% in the
first half of 1997 due in part to cost reduction and
containment activities and also to the spreading of the
fixed components of such expenses over a higher sales volume.
Other expenses increased $0.6 million from $15.1 million in
the first half of 1996 to $15.7 million in the first half of
1997 due primarily to changing currencies resulting in $0.2
million in gains in the first half of 1997 as compared to
$2.5 million in gains in the first half of 1996 offset by
reduced interest expense and amortization of financing costs
in 1997 due to the credit facility (the "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 $28.6 million
for the six months ended June 30, 1997, which compared to
$23.7 million provided by operating activities for the
comparable period in 1996. This fluctuation was primarily
due to increased earnings.
Net cash used in investing activities was $27.9 million for
the six months ended June 30, 1997, compared to net cash
used of $28.6 million for the six months ended June 30,
1996. The net cash used in investing activities for the
first six months of 1996 included construction costs of the
Huntingdon County facility, and for the first six months of
1997 and 1996, the remainder represents capital expenditures.
Cash provided by financing activities was $2.8 million for
the six months ended June 30, 1997, compared to cash used by
financing activities $2.5 million for the comparable period
in 1996. The source of cash in 1997 represented net
borrowings under the Credit Facility. The use of cash in
1996 represented proceeds from the Company's Credit Facility
and initial public offering, offset by funds used to (i)
repay the Company's previous credit agreement, (ii) redeem
and purchase all outstanding Preferred Stock, (iii) redeem
and purchase all outstanding Debentures and, (iv) pay
financing costs related to the aforementioned transactions.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on
Monday, May 12, 1997.
(b) Not applicable.
(c) The following matters were submitted to and
approved by the stockholders:
(i) The Berg Electronics Corp. Senior
Executive Incentive Compensation Plan (the
"Incentive Compensation Plan") as prepared
and adopted by the Compensation Committee
of the Board of Directors. The votes were
cast as follows: For - 18,046,919;
Against - 86,094; Abstentions and broker
non-votes - 3,715.
(ii) The election of two class II
directors, Charles W. Tate and Timothy L.
Conlon, each for a three year term
expiring in the year 2000. For Charles W.
Tate, the votes were cast as follows: For
- 18,022,363, Against - 0; Abstentions and
broker non-votes - 114,365. For Timothy
L. Conlon, the votes were cast as
follows: For - 18,022,363, Against - 0;
Abstentions and broker non-votes - 114,365.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed as Part of this Report
Exhibit No.
Description of Exhibit
------------
3.1 Certificate of Elimination of Series B Preferred Stock and
Series D Preferred Stock of
Berg Electronics Corp., dated September 11, 1996.(3)
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** Berg Electronics Corp. 1997 Senior Executive Incentive
Compensation Plan.*
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.
(3) Filed previously as an exhibit to the Berg
Electronics Corp. Forms 10-Q and 10-Q/A for the
quarter ended March 31, 1997, and incorporated by
reference herein.
* Filed herewith.
** Indicates a management contract or compensatory
plan or arrangement.
(b) Reports on Form 8-K.
None
[/FN]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
.........
BERG ELECTRONICS CORP.
Dated: July 28, 1997 By:
/s/ JOSEPH S. CATANZARO
____________________________________
Name: Joseph
S. Catanzaro
Title: Chief
Accounting Officer