UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
DC 20549
  FORM
10-K
 (Mark
One)
 [X]
 ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF
THE SECURITIES EXCHANGE ACT OF 1934
  For the
fiscal year ended December 31, 2009
  or
 [  ]
 TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF
THE SECURITIES EXCHANGE ACT OF 1934
  001-15755
 (Commission
File Number)
  
   Viasystems
Group, Inc.
 (Exact
name of Registrant as Specified in Its Charter)
  Delaware
                75-2668620(State
      or Other Jurisdiction of Incorporation or Organization)
                (I.R.S.
      Employer Identification No.)
  101
South Hanley Road, Suite 400, St. Louis, Missouri  63105
 (314)
727-2087
 (Address,
including Zip Code, and telephone number, including area code, of Registrant's
Principal Executive Offices)
  Securities
registered pursuant to Section 12(b) of the Act:
  Title
of each
class                                         Name
of each exchange on which registered
 Common
Stock, $0.01 par
value                                                                                   The
NASDAQ Stock Market LLC
 
 Securities registered pursuant to Section 12(g) of the
Act: None
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  [   ]
Yes      [X] No
  Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  [   ]
Yes   [X] No
  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
by check mark whether the registrant has submitted electronically and posted on
its corporate web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files.  [  ]
Yes    [   ]  No
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [  ]
  Indicated
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
  Large
Accelerated Filer
[  ]             Accelerated
Filer
[  ]                      Non-Accelerated
Filer [X]          Smaller
Reporting Company [  ]
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  [  ]
Yes     [X] No
  As of June
30, 2009, the last business day of our most recently completed second fiscal
quarter, our common stock was not listed on any exchange or over-the-counter
market.  Our common stock began trading on The NASDAQ Stock Market LLC
on February 17, 2010.  As of February 24, 2010, we are in the process
of issuing our shares of common stock in connection with our recapitalization
(as described herein) and the Merix Acquisition (as described
herein).  As of February 24, 2010, the aggregate market value of the
voting stock held by non-affiliates was $32,021,876, based on the number of
shares held by non-affiliates of the registrant as of February 24, 2010,
and based on the reported last sale price of common stock on February 24,
2010.  After giving effect to the issuance of our common stock in
connection with our recapitalization and the Merix Acquisition, as of February
24, 2010, the aggregate market value of the voting stock held by non-affiliates
was approximately $96,711,913 based on the anticipated final number of shares
held by non-affiliates of the registrant and based on the reported last sale
price of common stock on February 24, 2010.  These calculations do not
reflect a determination that persons are affiliates for any other
purposes.
  As of
February 24, 2010, there were 17,035,287 shares of our common stock
outstanding.  After the issuance of our shares of common stock in
connection with our recapitalization and the Merix Acquisition, we anticipate
there will be approximately 20,000,000 shares of our common stock
outstanding.
  DOCUMENTS
INCORPORATED BY REFERENCE:
 Portions of the
registrant’s definitive Proxy Statement for its 2010 Annual Meeting of
Shareholders are incorporated herein by reference into Part III of this Annual
Report on Form 10-K.   Such Proxy Statement will be filed with
the U.S. Securities and Exchange Commission within 120 days after the end of the
fiscal year to which this report relates.
 
 
 VIASYSTEMS
GROUP, INC.
 FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 2009
 TABLE OF CONTENTS
 PagePART
      I
              Item 1.
              
              Business
              
              3Item 1A.
              
              Risk
      Factors
              
              14Item 1B.
              
              Unresolved Staff
      Comments
              
              29Item 2.
              
              Properties
              
              29Item 3.
              
              Legal
      Proceedings
              
              30Item 4.
              
              Submission of Matters to a Vote of Security
      Holders
              
              31PART
      II
              Item 5.
              
              Market for Registrant’s Common Equity, Related Stockholder
      Mattersand Issuer Purchases of
           Equity Securities
              
              31Item 6.
              
              Selected Financial
      Data
              
              32Item 7.
              
              Management’s Discussion and Analysis of Financial Condition
      and
                Results of
      Operations
              
              34Item 7A.
              
              Quantitative and Qualitative Disclosures About Market
      Risk
              
              51Item 8.
              
              Financial Statements and Supplementary
      Data
              
              52Report of Independent Registered Public Accounting
      Firm
              
              53Consolidated Balance
      Sheets
              
              54Consolidated Statements of
      Operations
              
              55Consolidated Statements of Stockholder’s Equity
      (Deficit)
                and
      Comprehensive Income
      (Loss)
              
              56Consolidated Statements of Cash
      Flows
              
              57Notes to Consolidated Financial
      Statements
              
              58Item 9.
              
              Changes in and Disagreements with Accountants on
      Accounting
                and Financial
      Disclosure
              
              82Item 9A.
              
              Controls and
      Procedures
              
              82Item 9B.
              
              Other
      Information
              
              85PART
      III
              Item 10.
              
              Directors, Executive Officers and Corporate
      Governance
              
              85Item 11.
              
              Executive Compensation
              
              85Item 12.
              
              Security Ownership of Certain Beneficial Owners and
      Management
                and Related
      Stockholder
      Matters
              
              85Item 13.
              
              Certain Relationships and Related Transactions,
      and
                Director
      Independence
              
              85PART
      IV
              Item 14.
              
              Principal Accountant Fees and
      Services
              
              85Item 15.
              
              Exhibits and Financial Statement
      Schedules
              
              85SIGNATURES
              
              
              86EXHIBIT INDEX
              
              
              87SUBSIDIARIES OF VIASYSTEMS GROUP, INC.
              
              90CERTIFICATIONS
              
              
              91
  Table of Contents
 2
 
 PART
I
 
 CAUTIONARY
STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
 
 Statements
made in this Annual Report on Form 10-K (this “Report”) include the use of the
terms “we” and “our” which unless specified otherwise refers collectively to
Viasystems Group, Inc. (“Viasystems”) and its subsidiaries.
 
 We have
made certain “forward-looking” statements in this Report under the protection of
the safe harbor of forward-looking statements within the meaning of the Private
Securities Litigation Act.  Such forward-looking statements include
those statements made in the sections titled “Risk Factors” and “Management's
Discussion and Analysis of Financial Condition and Results of Operations,” that
are based on our management's beliefs and assumptions and on information
currently available to our management. Forward-looking statements include
information concerning our possible or assumed future results of operations,
business strategies, financing plans, competitive position, potential growth
opportunities and effects of competition. Forward-looking statements include all
statements that are not historical facts and can be identified by the use of
forward-looking terminology such as the words “believes,” “expects,” “may,”
“anticipates,” “intends,” “plans,” “estimates” or the negative thereof or other
similar expressions or comparable terminology.
 
 Forward-looking
statements involve risks, uncertainties and assumptions and are not guarantees
of future events and results.  Actual results may differ materially
from anticipated results expressed or implied in these forward-looking
statements.  You should not put undue reliance on any forward-looking
statements.  We do not have any intention or obligation to update
forward-looking statements after we file this Report.
 
 You
should understand that many important factors could cause our results to differ
materially from those expressed in forward-looking statements.  These
factors include, but are not limited to, global economic conditions,
fluctuations in our operating results and customer orders, our competitive
environment, our reliance on our largest customers, risks associated with our
international operations, failure to realize the expected benefits of the
acquisition of Merix Corporation (“Merix”) and the incurrence of significant
related costs, our ability to protect our patents and trade secrets,
environmental laws and regulations, our substantial indebtedness and our ability
to comply with the terms thereof and being controlled by VG Holdings, LLC (“VG
Holdings”).  Please refer to the “Risk Factors” section of this Report
for the year ended December 31, 2009, for additional factors that
could materially affect our financial performance.
 
 Item 1.    Business
 
 Recent
Developments
 
 Listing
on NASDAQ
 
 On
February 17, 2010, our common stock was listed and began trading on The NASDAQ
Stock Market LLC (the “NASDAQ”) under the symbol VIAS.
 
 The
Merix Acquisition
 
 On
February 16, 2010, we acquired Merix in a transaction pursuant to which Merix
became a wholly owned subsidiary of Viasystems (the “Merix
Acquisition”).  Merix is a leading manufacturer of technologically
advanced, multi-layer printed circuit boards with operations in the United
States and China.  The consideration paid in the merger included
approximately $34.9 million of cash plus common stock of Viasystems representing
approximately 19.5% of our common stock, after giving effect to the
Recapitalization Agreement (as defined below).  Except as otherwise
indicated, the description of our business in Part I of this Report takes into
consideration the Merix Acquisition.
  Table of Contents
 3
 
 Recapitalization
Agreement
 
 In
connection with the Merix Acquisition, on February 11, 2010, pursuant to a
recapitalization agreement dated October 6, 2009, (the “Recapitalization
Agreement”), by and among Viasystems and affiliates of Hicks, Muse, Tate &
Furst, Incorporated (“HMTF”), affiliates of GSC Recovery II, L.P. (“GSC”) and
TCW Shared Opportunities Fund III, L.P. (the “Funds”), Viasystems and the Funds
approved the recapitalization of Viasystems such that (i) each outstanding share
of common stock of Viasystems was exchanged for 0.083647 shares of newly issued
common stock of Viasystems (the “Reverse Common Stock Split”), (ii) each
outstanding share of Class A Junior Preferred Stock of Viasystems was
reclassified as, and converted into, 8.478683 shares of newly issued common
stock of Viasystems and (iii) each outstanding share of Class B Senior Preferred
Stock of Viasystems was reclassified as, and converted into, 1.416566 shares of
newly issued common stock of Viasystems.
 
 Pursuant
to the Recapitalization Agreement, each outstanding option to purchase
Viasystems common stock under our 2003 Stock Option Plan was adjusted as
follows: (i) the current exercise price of each option was adjusted by dividing
that exercise price by 0.083647 and (ii) the number of shares of common stock
covered by each option was adjusted by multiplying that number of shares by
0.083647.
 
 In
accordance with the Securities and Exchange Commission’s (the “SEC”) Staff
Accounting Bulletin Topic 4.C, Changes in Capital Structure,
all common share information presented in this Report has been retroactively
adjusted to reflect the Reverse Common Stock Split.
 
 Pursuant
to the Recapitalization Agreement, we and the Funds agreed, concurrently with
the consummation of the Merix Acquisition, to (i) terminate the monitoring and
oversight agreement, dated as of January 31, 2003, among us and Hicks, Muse
& Co. Partners L.P., an affiliate of HMTF (“HM Co.”) in consideration for
the payment of a cash termination fee of approximately $4.4 million to HM
Co.
 
 As a
result of the completion of the recapitalization and the Merix Acquisition, (i)
the holders of our common stock prior to the recapitalization received
approximately 2,415,263 shares of newly issued common stock of Viasystems, (ii)
the holders of our Class A Junior Preferred Stock prior to the recapitalization
received approximately 7,658,226 shares of newly issued common stock of
Viasystems, (iii) the holders of our Class B Senior Preferred Stock prior to the
recapitalization received approximately 6,028,260 shares of newly issued common
stock of Viasystems, (iv) the holders of the Merix common stock prior to the
closing of the Merix Acquisition received approximately 2,500,000 shares of
newly issued common stock of Viasystems and (v) the holders of Merix convertible
notes prior to the closing of the Merix Acquisition received, in addition to a
cash payment of approximately $34.9 million, 1,398,251 shares of newly issued
common stock of Viasystems.  Our total issued and outstanding common
stock immediately after the closing of the Merix Acquisition was approximately
20,000,000 shares of common stock.
 
 New
Stockholder Agreement
 
 Pursuant
to the terms of the Recapitalization Agreement, in connection with the closing
of the Merix Acquisition, on February 11, 2010, Viasystems entered into a new
stockholder agreement (the “2010 Stockholder Agreement”), by and among
Viasystems and VG Holdings which was formed by the Funds and which holds
approximately 77.8% of the common stock of Viasystems.  Under the
terms of the 2010 Stockholder Agreement, VG Holdings has the right, subject to
certain reductions, to designate up to five of 12 directors to serve on the
board of directors of Viasystems.  Subject to certain exceptions, VG
Holdings agreed not to sell any Viasystems common stock held by VG Holdings for
180 days after the closing of the Merix Acquisition.  In addition, the
2010 Stockholder Agreement provides VG Holdings with certain registration rights
related to its shares of Viasystems common stock.  The 2010
Stockholder Agreement will terminate on February 11, 2020.
 
 2010
Credit Agreement
 
 Subsequent
to December 31, 2009, on February 16, 2010, we entered into a senior secured
revolving credit agreement (the “2010 Credit Agreement”), with Wachovia Bank,
National Association, which provides a secured revolving credit facility in an
aggregate principal amount of up to $75.0 million with an initial maturity of
four years.
The annual interest rates applicable to loans under the 2010 Credit Agreement
are, at our option, either the Base Rate or Eurodollar Rate (each as defined in
the 2010 Credit Agreement) plus, in each case, an applicable margin. The
applicable margin is tied to our Quarterly Average Excess Availability (as
defined in the 2010 Credit Agreement) and ranges from 2.00% to 2.50% for Base
Rate loans and 3.50% to 4.00% for Eurodollar Rate loans. In addition, we are
required to pay an Unused Line Fee and other fees as defined in the 2010 Credit
Agreement.
  Table of Contents
 4
 
 The 2010
Credit Agreement is guaranteed by and secured by substantially all of the assets
of our current and future domestic subsidiaries, subject to certain exceptions
as set forth in the 2010 Credit Agreement. The 2010 Credit Agreement contains
certain negative covenants restricting and limiting our ability to, among other
things:
 
 •incur debt, incur contingent obligations and issue certain types of
preferred stock;
 •create liens;
 •pay dividends, distributions or make other specified restricted
payments;
 •make certain investments and acquisitions;
 •enter into certain transactions with affiliates; and
 •merge or consolidate with any other entity or sell, assign, transfer,
lease, convey or otherwise dispose ofassets.
 
 The 2010
Credit Agreement includes a financial covenant requirement that, if the Excess
Availability (as defined in the 2010 Credit Agreement) is less than $15 million
then we must maintain, on a monthly basis, a minimum fixed charge coverage ratio
of 1.1.
 
 General
 
 We are a
leading worldwide provider of complex multi-layer printed circuit boards
(“PCBs”) and electromechanical solutions (“E-M Solutions”).  PCBs
serve as the “electronic backbone” of almost all electronic equipment, and our
E-M Solutions products and services integrate PCBs and other components into
finished or semi-finished electronic equipment, which include custom and
standard metal enclosures, metal cabinets, metal racks and sub-racks,
backplanes, cable assemblies and busbars.
 
 Prior to
the Merix Acquisition, we operated our business in two segments: Printed Circuit
Boards, which included our PCB products, and Assembly, which included our E-M
Solutions products and services. For the year ended December 31, 2009,
our Printed Circuit Boards segment accounted for approximately two-thirds of our
net sales, and our Assembly segment accounted for approximately one-third of our
net sales.  In connection with the Merix Acquisition, we are in the
process of reevaluating our reportable operating segments.
 
 The
components we manufacture include, or can be found in, a wide variety of
commercial products, including automotive engine controls, hybrid converters,
automotive electronics for navigation, safety, entertainment and anti-lock
braking systems, telecommunications switching equipment, data networking
equipment, computer storage equipment, electronic defense and aerospace systems,
wind and solar energy applications and several other complex industrial, medical
and technical instruments.  Our broad offering of E-M Solutions
products and services includes component fabrication, component integration, and
final system assembly and testing.  These services can be bundled with
our PCBs to provide an integrated solution to our customers.  Our net
sales for the year ended December 31, 2009, were derived from the
following end markets:
 
 •   Automotive
(38.4%);
 
 •   Industrial
& instrumentation, medical, consumer and other (26.1%);
 
 •   Telecommunications
(26.0%); and
 
 •   Computer
and data communications (9.5%).
  Table of Contents
 5
 
 During
2009, we were a supplier to over 125 original equipment manufactures (“OEMs”)
and contract electronic manufacturing services companies (“CEMs”) in our end
markets; and with the Merix Acquisition we have expanded our business with many
of these customers and established more than 700 new customer
relationships.  We target the sale of PCBs and E-M Solutions to global
OEMs. Our top OEM customers during 2009 included industry leaders such as
Alcatel-Lucent SA, Autoliv, Inc., Bosch Group, Continental AG, Delphi
Corporation, EMC Corporation, Ericsson AB, General Electric Company,
Hewlett-Packard Company, Hitachi, Ltd., Huawei Technologies Co. Ltd., Rockwell
Automation, Inc., Siemens AG, Sun Microsystems, Inc., Tellabs, Inc., TRW
Automotive Holdings Corp. and Xyratex Ltd.  With the Merix
Acquisition, our list of top OEM customers has grown to include Ciena
Corporation, Cisco Systems, Inc., Harris Communications, Motorola, Inc.,
Rockwell Collins and Silver Springs Network.  Our top CEM
relationships include industry-leading contract manufacturers such as Celestica,
Inc. and Jabil Circuits, Inc.
 
 As of
December 31, 2009, we had six manufacturing facilities, all of which
were located outside of the United States to take advantage of low-cost, high
quality manufacturing environments.  From the effective date of the
Merix Acquisition, we added four PCB manufacturing facilities, including two in
China focused on high-volume low-cost production and two in the United States
which, in addition to high-volume production, have a focus on quick-turn and
defense and aerospace production.  Our PCB products are produced in
our two domestic facilities, and four of our seven facilities in
China.  Our E-M Solutions products and services are provided from our
other three Chinese facilities and our one facility in Mexico.  In
addition to our manufacturing facilities, in order to support our customers’
local needs, we maintain engineering and customer service centers in Hong Kong,
China, The Netherlands, England, Canada, Mexico, and the United
States.  These engineering and customer service centers correspond
directly to the primary areas where we ship our products, as evidenced by the
fact that, for the twelve months ended December 31, 2009,
approximately 36.6%, 37.4% and 26.0% of our net sales were generated by
shipments to destinations in North America, Asia and Europe,
respectively.
 
 Table of Contents
 6
 
 Our
History
 
 We were
formed in 1996 under the name Circo Craft Holding Company. Circo Craft Holding
Company had no operations prior to our first acquisition in October 1996, when
we changed our name to Circo Technologies, Inc.  In January 1997, we
changed our name to Viasystems Group, Inc.
 
 From 1997
through 2001, we expanded rapidly through the acquisition of several businesses
throughout Europe, North America and China. During that time, we expanded our
business model to include full systems assemblies, wire harnesses and cable
assemblies to complement our original PCB and backpanel offerings.
 
 From 1999
to 2001, our business relied heavily on the telecommunications and networking
markets, as the majority of our customers were telecommunication and networking
OEMs.  In early 2001, the telecommunications and networking industries
began a significant business downturn caused by the decline in capital spending
related to those industries.  The decline in capital spending in the
telecommunications and networking industries was exacerbated by excess
inventories for those industries within the contract manufacturing supply
chain.
 
 From
April 2001 through 2005, we substantially restructured our operations and closed
or sold 24 under-performing or non-strategic facilities.  During that
time, we streamlined our business to focus on PCBs, E-M Solutions and wire
harnesses, and significantly diversified our end markets and customer
base.
 
 During
2006, we sold our wire harness business.  As a result of the disposal
of the wire harness operations and the restructuring activities early in that
decade, we positioned ourselves as a PCB and E-M Solutions manufacturer, with
manufacturing facilities located in low cost areas of the world, able to serve
our global customer base.
 
 From
November 2008, through the first half of 2009, in light of global economic
conditions and our ongoing efforts to align capacity, overhead costs and
operating expenses with market demand, we implemented a work force reduction of
approximately 27.0% across our global operations and closed our E-M Solutions
manufacturing facility in Milwaukee, Wisconsin, along with its satellite
final-assembly and distribution facility in Newberry, South
Carolina.
 
 Table of Contents
 7
 
 On
February 16, 2010, we consummated the Merix Acquisition which increased our PCB
manufacturing capacity by adding four additional PCB production facilities,
added North American PCB quick-turn service capability and added defense and
aerospace to our already diverse end-user markets.
 
 We are
headquartered in St. Louis, Missouri.  The mailing address for
our headquarters is 101 South Hanley Road, Suite 400, St. Louis,
Missouri 63105, and our telephone number at that location is
(314) 727-2087.  We can also be reached at our website,
www.viasystems.com.
 
 Our
Products
 
 Printed
Circuit Boards - PCBs serve as the foundation of almost all electronic
equipment, providing the circuitry and mounting surfaces necessary to
interconnect discrete electronic components, such as integrated circuits,
capacitors and resistors. PCBs consist of a pattern of electrical circuitry
etched from copper and laminated to a board made of insulating material, thereby
providing electrical interconnection between the components mounted onto
them.
 
 Electro-Mechanical
Solutions - E-M Solutions include a wide variety of products and services,
primarily including assembly of backplanes, custom and standard metal
enclosures, cabinets, racks and sub-racks, systems integration and assembly,
final product testing and fulfillment.
 
 During
2009, our PCB products were supplied from our Printed Circuit Boards segment and
our E-M Solutions products and services were supplied from our Assembly
segment.
 
 Our
Business Strategy
 
 Our
strategy is based on the following key goals and business drivers:
 
 Maintenance of Diverse End Market
and End Customer Mix– In
order to reduce our exposure to, and reliance on, unpredictable end markets and
to provide alternative growth paths, we have diversified our product offerings
into the automotive, telecommunications, industrial/instrumentation, medical and
consumer and computer / datacommunications markets.  Further, we have
pursued new substantial customers in each market.  With the Merix
Acquisition, we have diversified further and entered the defense and aerospace
end market.  We intend to continue to maintain our focus on a diverse
mix of customers and end markets.
 
 Enhancement of Our Strong Customer
Relationships–We are
focused on expanding our business with existing customers by leveraging our
history of producing quality products with a high level of customer service and
operational excellence, which provides us with the opportunity to bid for
additional programs from the strong position of a preferred
supplier.  In addition, we have good working relationships with
industry leading contract manufacturers such as Celestica, Inc. and Jabil
Circuit, Inc.  These relationships provide us access to additional PCB
and E-M Solutions opportunities and enable our partners to offer a fully
integrated product solution to their customers.  Our management team
has created a culture that is focused on providing our customers with
high-quality service and technical support, which is reflected in our continuing
ability to obtain new business and expand our current customer
relationships.
 
 Expansion of Our Relationships with
Existing Customers Through Cross-Selling–Building on our broad product offering, we pursue cross-selling
opportunities with our existing base of customers.  We leverage our
PCB capabilities to provide our customers with an integrated manufacturing
solution that can range from fabrication of bare PCBs to final system assembly
and testing.  We intend to continue to leverage our customer
relationships to expand sales to our existing customers.
 Expansion of Our Quick-turn and
Premium Services Capabilities – With the
Merix Acquisition, we added a substantial North American quick-turn capability
to our existing Asia quick-turn operations.  The rapid manufacture, or
quick-turn, of custom PCBs at the prototyping and preproduction stages allow our
customers to more quickly develop and market sophisticated electronic
products.  We generally receive a premium over our standard volume
pricing for our quick-turn services.
 
 Table of Contents
 8
 
 Expansion of Our Manufacturing
Capabilities in Low Cost Locations–To meet
our customers' demands for high quality, low cost products and services, we have
invested and, as market conditions allow, will continue to invest in facilities
and equipment in low cost locations.  For the year ended December 31,
2009, prior to the Merix Acquisition, approximately 97.3% of our net sales were
generated from products produced in our operations in China and
Mexico.  We will continue to develop our best-in-class technology and
manufacturing processes in low cost manufacturing locations.  We
believe our ability to leverage our advanced technology and manufacturing
capabilities in low cost locations will enable us to grow our revenues, improve
our profitability and effectively meet our customers' requirements for high
quality, low cost products and services.
 
 Concentration on High Value-Added
Products and Services–We
focus on providing electro-mechanical manufacturing services to leading
designers and sellers of advanced electronics products that generally require
custom designed, more complex products and short lead-time manufacturing
services.  These products are typically lower volume, higher margin
products.  We differentiate ourselves from many of our global
competitors by not focusing on programs for high volume, low margin products
such as cell phone handsets, personal computers or peripherals and low-end
consumer electronics.
 
 A Focus on “Green” Technologies and
Practices– We are
focused on incorporating “green” technologies and practices into our operations
to reduce costs, mitigate potential liabilities, ensure a safe and healthy
workplace for our employees, and maintain our reputation as an environmentally
responsible neighbor to the communities where we operate.  We are also
focused on supporting our customers’ demands for “green” technology related
products, and to that end have developed an expertise in the fabrication and
assembly of wind power related technologies; and developed an expertise in our
PCB manufacturing process for “heavy copper” applications, which are necessary
to support hybrid electric automotive technologies.
 
 A Focus on Our Operational
Excellence–We
continuously implement strategic initiatives designed to improve product quality
while reducing manufacturing costs.  We continue to focus on
opportunities to improve operating income, including: (1) continued
implementation of advanced manufacturing techniques, including Lean and Six
Sigma initiatives; (2) efficient investment in new equipment and
technologies and the upgrading of existing equipment; and (3) continued
improvement of our internal control over and centralization of certain aspects
of our accounting and finance functions.  Our management team is
focused on maximizing our current asset base to improve our operational
efficiency while also adapting to the needs of our customers and the
market.
 
 Markets
and Customers
 
 During
2009, we provided products and services to more than 125 OEMs; and with the
Merix Acquisition we have increased our customer base to more than 800
OEMs.  We believe our position as a strategic supplier of PCBs and E-M
Solutions fosters close relationships with our customers.  These
relationships have resulted in additional growth opportunities as we have
expanded our capabilities and capacity to meet our customers’ wide range of
needs.
  Table of Contents
 9
 
 The
following table shows our net sales as a percentage of total net sales by the
principal end-user markets we serve:
 
 Year
      Ended December 31,Markets
              
              2009
              
              
              2008
              
              
              2007Automotive
              
              
              38.4
              %
              
              
              37.4
              %
              
              
              36.2
              %Industrial &
      Instrumentation, Medical, Consumer and Other
              
              
              26.1
              
              
              
              26.6
              
              
              
              22.3Telecommunications
              
              
              26.0
              
              
              
              25.9
              
              
              
              31.0Computer
      and Datacommunications
              
              
              9.5
              
              
              
              10.1
              
              
              
              10.5Total
      Net Sales
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100.0
              %
 
 Although
we seek to diversify our customer base, a small number of customers are
responsible for a significant portion of our net sales.  For the years
ended December 31, 2009, 2008 and 2007, sales to our ten largest
customers accounted for approximately 74.1%, 73.3%, and 76.2% of our net sales,
respectively.  We anticipate that this high concentration of sales
with our top customers will decrease as a result of the Merix
Acquisition.
 
 The table
below highlights individual end customers that directly and indirectly accounted
for more than 10% of our consolidated net sales prior to the Merix
Acquisition.
 
 Year
      Ended December 31,Customer
              
              2009
              
              
              2008
              
              
              2007Alcatel-Lucent
      SA
              
              
              14.2
              %
              
              
              16.3
              %
              
              
              20.2
              %Bosch
      Group
              
              
              13.7
              
              
              
              11.2
              
              
              
              10.7Continental
      AG (a)
              
              
              11.8
              
              
              
              13.4
              
              
              (b)General
      Electric Company
              
              
              11.4
              
              
              
              10.2
              
              
              (b)Siemens
      AG (a)
              
              (b)
              
              
              (b)
              
              
              
              12.4(a)
        In December 2007, Continental AG concluded the purchase of the
      automotive parts business unit of Siemens AG. Sales to that business unit
      in 2008 are included in the table for Continental AG. Sales to that
      business unit in 2007 are included in the table for Siemens AG. Through
      their other business units, Siemens AG remains our
    customer.(b)
        Represents less than ten percent of consolidated net
      sales.
 
 Sales to
Alcatel-Lucent SA, Siemens AG and General Electric Company occurred in both the
Printed Circuit Boards and Assembly segments. Sales to Continental AG and Bosch
Group occurred in the Printed Circuit Boards segment.
 
 Manufacturing
Services
 
 Our
offering of manufacturing services includes the following:
 
 Design and Prototyping
Services - We provide comprehensive front-end engineering services,
including custom enclosure design, circuit board layout and related design
services leading to efficient manufacturing and delivery.  We offer
quick-turn prototyping in Asia and the United States, which is the rapid
production of a new product sample. Our quick-turn prototype service allows us
to provide small test quantities to our customers’ product development
groups.  Our participation in product design and prototyping allows us
to reduce our customers’ manufacturing costs and their time-to-market and
time-to-volume.  These services enable us to strengthen our
relationships with customers that require advanced engineering
services.  In addition, by working closely with customers throughout
the development and manufacturing process, we often gain insight into their
future product requirements.  These services are not billed
separately, but instead are included in the determination of the product sales
price to be invoiced to the customer.
 
 PCB and Backpanel
Fabrication - PCBs are platforms that connect semiconductors and
other electronic components. Backpanels connect PCBs.  We manufacture
multi-layer PCBs and backpanels on a low-volume, quick-turn basis, as well as on
a high-volume production basis.  In recent years, the trend in the
electronics industry has been to increase the speed and performance of
electronic devices while reducing their size. Semiconductor designs are
currently so complex that they often require PCBs with many layers of narrow,
tightly
 spaced
wiring.  These advancements in component technologies have driven the
change in PCB design to higher densities.
 
 Table of Contents
 10
 
 Backpanel Assembly - We
provide backpanel assemblies, which are manufactured by mounting interconnect
devices, integrated circuits and other electronic components on a bare
backpanel.  This process differs from that used to provide PCB
assemblies primarily because of the larger size of the backpanel and the more
complex placement techniques that must be used with higher layer count
PCBs.  We also perform functional and in-circuit testing on assembled
backpanels.
 
 PCB Assembly - As a
complement to our E-M Solutions offering, we have the capability to manufacture
Printed Circuit Board assemblies (“PCBAs”). Generally, we do not produce PCBAs
separately, but rather integrate them with other components as part of a full
electro-mechanical solution.  In addition, we offer testing of PCBAs
and testing of all of the functions of the completed product, and we work with
our customers to develop product-specific test strategies. Our test capabilities
include in-circuit tests, functional tests, environmental stress tests of board
or system assemblies, and manufacturing defect analysis.
 
 Custom Metal Enclosure
Fabrication - We specialize in the manufacture of custom-designed
chassis and enclosures primarily used in the telecommunications, industrial,
medical, computer/datacommunications and wind power industries. As a fully
integrated supply chain partner with expertise in design, rapid prototyping,
manufacturing, packaging and logistics, we provide our customers with reduced
manufacturing costs and shortened time-to-market throughout a product’s life
cycle.
 
 Full System Assembly and
Test - We provide full system assembly services to customers from
our facilities in China and Mexico.  These services require
sophisticated logistics capabilities and supply chain management capabilities to
procure components rapidly, assemble products, perform complex testing and
deliver products to end users around the world.  Our full system
assembly services involve combining custom metal enclosures and a wide range of
subassemblies, including PCBAs.  We also apply advanced test
techniques to various subassemblies and final end
products.  Increasingly, customers require custom, build-to-order
system solutions with very short lead times.  We are focused on
supporting this trend by providing supply chain solutions designed to meet our
customers’ individual needs.
 
 Packaging and Global
Distribution - We offer our customers flexible, just-in-time and
build-to-order delivery programs, allowing product shipments to be closely
coordinated with our customers’ inventory requirements.  We are able
to ship products directly into customers’ distribution channels or directly to
the end-user. These services are not billed separately, but instead are included
in the determination of the product sales price to be invoiced to the
customer.
 
 After-Sales Support - We
offer a wide range of after-sales support tailored to meet customer
requirements, including product upgrades, engineering change management, field
failure analysis and repair.
 
 Supply Chain
Management - Effective management of the supply chain is critical to
the success of our customers as it directly impacts the time required to deliver
product to market and the capital requirements associated with carrying
inventory. Our global supply chain organization works with customers and
suppliers to meet production requirements and to procure materials. We utilize
our enterprise resource planning (“ERP”) systems to optimize inventory
management.
 
 Sales
and Marketing
 
 We focus
on developing close relationships with our customers at the earliest development
and design phases of products, and we continue to develop our relationship with
our customers throughout all stages of production. We identify, develop and
market new technologies that benefit our customers and position ourselves as a
preferred product or service provider.
  Table of Contents
 11
 
 We market
our products through our own sales and marketing organization and through
relationships with independent sales agents around the world. This global sales
organization is structured to ensure global account coverage by
industry-specific teams of account managers. As of February 16, 2010,
we employed approximately 237 sales and marketing employees, of which 86 are
account managers strategically located throughout North America, Europe and
Asia. In addition, we contract with independent sales agents strategically
around the world. Each industry marketing team shares support staff of sales
engineers, program managers, technical service personnel and customer service
organizations to ensure high-quality, customer-focused service. The global
marketing organization further supports the sales organization through market
research, market development and communications.
 
 Manufacturing
and Engineering
 
 We
produce highly complex, technologically advanced multi-layer and standard
technology PCBs, backpanel assemblies, PCBAs, custom enclosures and full systems
that meet increasingly narrow tolerances and specifications demanded by our
customers. Multi-layering, which involves placing multiple layers of electronic
circuitry on a single PCB or backpanel, expands the number of circuits, allows
for increasingly complex components to be connected to the interconnect product
and increases the operating speed of the system by reducing the distance that
electrical signals must travel. Increasing the density of the circuitry in each
layer is accomplished by reducing the width of the circuit tracks and placing
them closer together on the PCB or backpanel. Interconnect products having
narrow, closely spaced circuit tracks are known as fine line products. Today, we
are capable of producing commercial quantities of PCBs with 50+ layers and
circuit track widths as narrow as three one-thousandths of an inch. We also have
the capability to produce large format backpanels of up to 50 inches in
length and as thin as four tenths of an inch. We have developed heavy copper
capabilities of up to 12 ounces per square foot, to support high-power
applications. In addition, we have developed microwave and heatsink technologies
to support radio frequency (“RF”) applications. The manufacturing of complex
multi-layer interconnect products often requires the use of sophisticated
circuit interconnections between layers, called blind or buried vias, and the
ability to control the electrical properties (e.g., electrical impedance) of our
products very closely, which is key to transmission of high speed signals. These
technologies require very tight lamination and etching tolerances which are
especially critical for PCBs with ten or more layers. Our PCB operation is an
industry leader in performing extensive testing of various PCB designs,
materials and surface finishes for restriction of hazardous substances
compliance and compatibility.
 
 The
manufacturing of PCBs involves several steps: etching the circuit image on
copper-clad epoxy laminate and pressing the laminates together to form a panel;
drilling holes and depositing copper or other conductive material to form the
interlayer electrical connections; and cutting the panels to shape. Our advanced
interconnect products require critical process steps, such as dry film imaging,
optical aligned registration, photoimageable soldermask, computer controlled
drilling and routing, automated plating, and various surface finishes. Tight
process controls are required throughout the manufacturing process to achieve
critical electrical properties, such as controlled impedance. The manufacturing
of PCBs used in backpanel assemblies requires specialized expertise and
equipment because of the larger size and thickness of the backpanel relative to
other PCBs and the increased number of holes for component
mounting.
 
 The
manufacturing of PCB assemblies involves the attachment of various electronic
components, such as integrated circuits, capacitors, microprocessors and
resistors to PCBs. The manufacturing of backpanel assemblies involves attachment
of electronic components, including PCBs, integrated circuits and other
components, to the backpanel, which is a large PCB. We uses surface mount,
pin-through hole and press fit technologies in backpanel assembly. We also
assemble higher-level sub-systems and full systems incorporating PCBs and
complex electro-mechanical components.
 
 We also
provide computer-aided testing of PCBs, sub-systems and full systems, which
contributes significantly to our ability to consistently deliver high quality
products.  We test boards and system level assemblies to verify that
all components have been properly inserted and that electrical circuits are
complete.  Further functional tests determine whether the board or
system assembly is performing to customer specifications.
  Table of Contents
 12
 
 Quality
Standards
 
 Our
quality management systems are defect prevention based, customer focused and
compliant to international standards.  All of our facilities are
compliant or certified to the ISO 9001:2000, a globally accepted quality
management standard.  In addition to ISO 9001:2000, we have facilities
that are certified to QS 9000, TL 9000 and TS 16949 standards based on customer
requirements.  Our facility in Guangzhou has achieved ISO 17025
certification, our facility in Forest Grove, Oregon has achieved key military
certifications including MIL-PRF-3102 and International Traffic in Arms
Regulations (ITAR), and our facility in San Jose, California has achieved key
defense and aerospace certifications including MIL-PRF-55110 and
MIL-PRF-31032.
 
 Our
facilities and products are also compliant to industry and regulatory
requirements, including Bellcore and Underwriters Laboratories. These
requirements include quality, manufacturing process controls, manufacturing
documentation and supplier certification of raw materials.
 
 Supplier
Relationships
 
 We order
raw materials and components based on purchase orders, forecasts and demand
patterns of our customers and seek to minimize our inventory of materials or
components that are not identified for use in filling specific orders or
specific customer contracts. We continue to work with our suppliers to develop
just-in-time supply systems that reduce inventory carrying costs and contract
globally, where appropriate, to leverage our purchasing volumes. We also select
our suppliers and potential suppliers on the basis of quality, on-time delivery,
costs, technical capability, and potential technical advancement. While some of
our customer agreements may require certain components to be sourced from
specific vendors, the raw materials and component parts we use to manufacture
our products, including copper and laminate, are generally available from
multiple suppliers.
 
 Competition
 
 Our
industry is highly competitive, and we believe our markets are highly
fragmented. We face competition from numerous local, regional and large
international providers of PCBs and E-M Solutions. Our primary direct
competitors are Compeq Manufacturing Co. Ltd., Flextronics Corporation, Gold
Circuit Electronics Ltd., Kingboard Chemical Holdings Ltd., LG Corp., Nanya
Technology Corp., Sanmina-SCI Corp. and TTM Technologies, Inc.  Some
of our primary competitors may be less leveraged, may have greater access to
financial or other resources or may have lower cost operations, allowing them to
be better able to withstand adverse market conditions.  We believe
that competition in the markets we serve is based on product quality, responsive
customer service and support and price, in part, because the cost of many of the
products we manufacture are usually low relative to the total cost of our
customer’s end-products and because product reliability and prompt delivery are
of greater importance to our customers.
  International
Operations
 
 As of
December 31, 2009, we had six manufacturing facilities located outside the
United States, with sales offices in Canada, Mexico, Asia, and throughout
Europe.  As of February 16, 2010, the effective date of the Merix
Acquisition, we added two additional manufacturing facilities located outside
the United States.  Our international operations produce products in
China and Mexico that accounted for approximately 90.2% and 7.1% of our net
sales, respectively, for the year ended December 31, 2009, and 86.7% and
7.0% of our 2008 net sales, respectively.  The remaining 2.7% and
6.3% of net sales for the years ended December 31, 2009 and 2008,
respectively, are from products produced in now closed facilities in the United
States.  Approximately 68.7% and 21.5% of our net sales for the year
ended December 31, 2009, and 66.1% and 20.6% of our 2008 net sales
were from products produced in China by our Printed Circuit Boards and Assembly
business segments, respectively.  We believe that our global presence
is important as it allows us to provide consistent, quality products on a cost
effective and timely basis to our multinational customers
worldwide.  We rely heavily on our international operations and are
subject to risks generally associated with operating in foreign countries,
including price and exchange controls, fluctuations in currency exchange rates
and other restrictive actions that could have a material affect on our results
of operations, financial condition and cash flows.
 
 Table of Contents
 13
 
 Environmental
 
 Some of
our operations are subject to federal, state, local and foreign environmental
laws and regulations, which govern, among other things, the discharge of
pollutants into the air, ground and water, as well as the handling, storage,
manufacturing and disposal of, or exposure to, solid and hazardous wastes, and
occupational safety and health. We believe that we are in material compliance
with applicable environmental laws, and the costs of compliance with such
current or proposed environmental laws and regulations will not have a material
adverse effect on us. All of our manufacturing sites in China are certified to
ISO 14001 standards for environmental quality compliance. Further, we are not a
party to any current claim or proceeding, and we are not aware of any threatened
claim or proceeding under environmental laws that could, if adversely decided,
reasonably be expected to have a material adverse effect on us. Accordingly, we
do not believe that any of these matters are reasonably likely to have a
material adverse effect on our business, results of operations, financial
condition, prospects and ability to service debt. However, there can be no
assurance that any material environmental liability will not arise in the
future, such as due to a change in the law or the discovery of currently unknown
conditions.
 
 Employees
 
 As of
February 16, 2010, we had 13,783 employees. Of these employees,
11,888 were involved in manufacturing, 1,134 in engineering, 237 in sales and
marketing and 524 in accounting and administrative capacities. No employees were
represented by a union pursuant to a collective bargaining agreement. We have
not experienced any labor problems resulting in a work stoppage or work
slowdown, and we believe we have good relations with our employees.
 
 Intellectual
Property
 
 We have
developed expertise and techniques that we use in the manufacturing of PCBs and
E-M Solutions products. Research, development and engineering expenditures for
the creation and application of new products and processes were approximately
$1.2 million, $2.2 million and $3.4 million for the years ended
December 31, 2009, 2008 and 2007, respectively. We believe many of our
processes related to the manufacturing of PCBs are proprietary, including our
ability to manufacture large perimeter, thick, high-layer-count backpanels.
Generally, we rely on common law trade secret protection and on confidentiality
agreements with our employees and customers to protect our secrets and
techniques. We own 45 patents (including pending patents), including 6 which
were obtained in connection with the Merix Acquisition, but believe that patents
have not historically constituted a significant form of intellectual property
rights in our industry. Our patents begin to expire in three years. The
expiration of any of these patents is not expected to have a material adverse
effect on our ability to operate.
 
 Backlog
 
 We
estimate that our backlog of unfilled orders as of December 31, 2009,
was approximately $97.8 million, compared with $78.0 million at
December 31, 2008. Because unfilled orders may be cancelled prior to
delivery, the backlog outstanding at any point in time is not necessarily
indicative of the level of business to be expected in the ensuing
periods.
 
 Segments
 
 Prior to
the Merix Acquisition, we operated our business in two segments: Printed Circuit
Boards, which included our PCB products, and Assembly, which included our E-M
Solutions products and services.  For the year ended
December 31, 2009, our Printed Circuit Board segment accounted for
approximately two-thirds of our net sales, and our Assembly segment accounted
for approximately one-third of our net sales.  In connection with the
Merix Acquisition, we are in the process of reevaluating our reportable
operating segments.  See Note 15 in the accompany notes to
consolidated financial statements for further information regarding our segments
for fiscal years 2009, 2008 and 2007.
 
 Table of Contents
 14
 
 Financial
Information and Geographical Areas
 
 See Note
15 in the accompanying notes to the consolidated financial statements for
financial information about geographical areas for fiscal years 2009, 2008 and
2007.
 
 Available
Information
 
 Our
principal executive offices are located at 101 South Hanley Road,
Suite 400, St. Louis, Missouri 63105 and our telephone number is
(314) 727-2087. Our website address is www.viasystems.com. Our annual,
quarterly and current reports on Forms 10-K, 10-Q or 8-K, respectively, and
all amendments thereto filed or furnished pursuant to Section 13(a) or
15(d) of the Exchange Act, can be accessed, free of charge, at our website as
soon as practicable after such reports are filed with the
SEC.  Information contained on our website does not constitute, and
shall not be deemed to constitute, part of this report and shall not be deemed
to be incorporated by reference into this report.
 
 You may read and copy any materials we
file with the SEC at the SEC’s Public Reference Room at 100 F Street,
NE, Washington, DC 20549.  You may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition,
the SEC maintains an internet site, http://www.sec.gov, from which you can
access our annual, quarterly and current reports on Forms 10-K, 10-Q and
8-K, respectively, our proxy statements, and all amendments to these materials
after such reports and amendments are filed with the SEC.
 
 Item 1A.    Risk Factors
 
 Investing
in our securities involves a high degree of risk. If any of the following risks
impact our business, the market price of our shares of common stock and other
securities could decline and investors could lose all or part of their
investment.  In addition, the following risk factors and uncertainties
could cause our actual results to differ materially from those projected in our
forward-looking statements, whether made in this Report or the other documents
we file with the SEC, or in our annual or quarterly reports to stockholders,
future press releases, or orally, whether in presentations, responses to
questions or otherwise.
 
 Our
business, financial condition, operating results and cash flows can be impacted
by a number of risks and uncertainties, including but not limited to those set
forth below, any one of which could cause our actual results to vary materially
from recent results or from our anticipated future results.  Although
the risks described below are the risks that we believe are material, there also
may be risks of which we are currently unaware, or that we currently regard as
immaterial based on the information available to us that later may prove to be
material.  You should be aware that the occurrence of the events
described in these risk factors and elsewhere in this Report and in our other
filings with the SEC could have a material adverse effect on our business,
financial condition, operating results and cash flows.  Actual
results, therefore, may materially differ from anticipated results described in
these forward-looking statements.
  During periods of
excess global PCB manufacturing capacity, our gross margins may fall and/or
we may have to incur restructuring charges if we choose to reduce
the capacity of or close any of our facilities.
 
 When we
experience excess capacity, our sales revenues may not fully cover our fixed
overhead expenses, and our gross margins will fall.  If we conclude we
have significant, long-term excess capacity, we may decide to permanently close
or scale down our facilities and lay off some of our
employees.  Closures or lay-offs could result in our recording
restructuring charges such as severance, other exit costs and asset
impairments.
 
 Table of Contents
 15
 
 A significant
portion of our net sales is based on transactions with our largest
customers; if we lose any of these customers, our sales could
decline significantly.
 
 For the
years ended December 31, 2009, 2008 and 2007, sales to our ten largest
customers accounted for approximately 74.1%, 73.3% and 76.2% of our net sales,
respectively.  Four of our customers, Alcatel-Lucent SA, Bosch Group,
General Electric Company and Continental AG, each individually accounted for
over 10% of our net sales for the years ended December 31, 2009 and
2008.
 
 Although
we cannot assure you that our principal customers will continue to purchase our
products at past levels, we expect a significant portion of our net sales will
continue to be concentrated within a small number of customers.  The
loss of, or significant curtailment of purchases by, any of our principal
customers could have a material adverse effect on our financial condition,
operating results and cash flows.
 
 We may experience
fluctuations in operating results, and because many of our operating
costs are fixed, even small revenue shortfalls or increased expenses can have
a disproportionate effect on operating results.
 
 Our
operating results may vary significantly for a variety of reasons,
including:
 
 •      overall
economic conditions in the electronics industry and global economy;
 
 •      pricing
pressures;
 
 •      timing
of orders from and shipments to major customers;
 
 •      our
capacity relative to the volume of orders;
 
 •      expenditures
in anticipation of future sales;
 
 •      expenditures
or write-offs related to acquisitions;
 
 •      expenditures
or write-offs related to restructuring activities;
 
 •      start-up
expenses relating to new manufacturing facilities; and
 
 •      variations
in product mix.
 
 Our
historical results of operations may not be indicative of the results to be
expected for any future period as a result of unanticipated revenue shortfalls
or increased expenses.
  We
have a history of losses and may not be profitable in the future.
 
 We have a
history of losses and cannot assure you that we will achieve sustained
profitability in the near future.  For the years ended
December 31, 2009, 2008, 2006, and 2005, we incurred losses from continuing
operations of $54.7 million, $15.5 million, $25.6 million, and
$114.5 million, respectively.  If we cannot improve our
profitability, the value of our enterprise may decline.
 
 We rely on the
automotive industry for a significant portion of sales. Accordingly, the
economic downturn in this industry has had, and may continue to have, a material
adverse affect on our ability to forecast demand and production to
meet desired sales levels.
 
 The
economic downturn in the automotive industry has had, and may continue to have,
a material adverse effect on our ability to forecast demand and production and
to meet desired sales levels.  A significant portion of our sales are
to customers within the automotive industry.  For the years ending
December 31, 2009, 2008, and 2007, sales to customers in the automotive
industry represented approximately 38.4%, 37.4%, and 36.2% of our net
sales,
 respectively.  If
the destabilization of the automotive industry or a market shift away from our
automotive customers continues, it may have an adverse effect on our financial
condition, operating results and cash flows.
 
 Table of Contents
 16
 
 We rely on the
telecommunications and networking industries for a significant
portion of sales. Accordingly, the economic downturn in these industries
has had,
and may continue to have, a material adverse effect on our ability to forecast
demand and production and to meet desired sales levels.
 
 A large
percentage of our business is conducted with customers who are in the
telecommunications and networking industries.  For the years ending
December 31, 2009, 2008, and 2007, sales to customers in the
telecommunications and networking industries represented approximately 26.0%,
25.9%, and 31.0% of our net sales, respectively.  These industries are
characterized by intense competition, relatively short product life cycles and
significant fluctuations in product demand.  These industries are
heavily dependent on the end markets they serve and therefore can be affected by
the demand patterns of those markets.  If the weakness in these
industries continues, it would likely have a material adverse effect on our
financial condition, operating results and cash flows.
 
 Our exposure to
the credit risk of our customers and suppliers may adversely affect our
financial results.
 
 We sell
our products to customers that have in the past experienced, and may in the
future experience, financial difficulties, particularly in light of the recent
global economic downturn. If our customers experience financial difficulties, we
could have difficulty recovering amounts owed from these customers. While we
perform credit evaluations and adjust credit limits based upon each customer’s
payment history and credit worthiness, such programs may not be effective in
reducing our exposure to credit risk. We evaluate the collectibility of accounts
receivable, and based on this evaluation make adjustments to the allowance for
doubtful accounts for expected losses. Actual bad debt write-offs may differ
from our estimates, which may have a material adverse effect on our financial
condition, operating results and cash flows.
 
 Our
suppliers may also experience financial difficulties, which could result in our
having difficulty sourcing the materials and components we use in producing our
products and providing our services.  If we encounter such
difficulties, we may not be able to produce our products for customers in a
timely fashion which could have an adverse effect on our financial condition,
operating results and cash flows.
 
 We are influenced
by our significant stockholders, whose interests may be
different than our other stockholders.
 
 Approximately
77.8% of our common stock is owned by VG Holdings.  In addition, the
2010 Stockholders Agreement among us and VG Holdings provides we will use
commercially reasonable efforts to cause the election of five of the twelve
designees of VG Holdings to our board of directors, with the number of designees
subject to reduction pursuant to the terms of the 2010 Stockholder
Agreement.  Accordingly, VG Holdings effectively controls the election
of a majority of our board of directors and the approval or disapproval of
certain other matters requiring stockholder approval and, as a result, have
significant influence over the direction of our management and
policies.  Using this influence, VG Holdings may take actions or make
decisions that are not in the same interests of our other
stockholders.  In addition, owners of VG Holdings are in the business
of making investments in companies and may from time to time acquire and hold
interests in businesses that compete directly or indirectly with us or otherwise
have business objectives that are not aligned with our business
objectives.
 
 Table of Contents
 17
 
 We
are a “controlled company” within the meaning of the NASDAQ rules. As a result,
we qualify for, and may avail ourselves of, certain exemptions from the NASDAQ
corporate gover­nance requirements.
 
 The
Funds, through VG Holdings, indirectly own a majority of our outstanding common
stock. As a result, we are a “controlled company” under the rules of the NASDAQ.
As a “controlled company” under NASDAQ rules, we may elect not to comply with
certain NASDAQ corporate governance requirements, including (i) that a majority
of our board of directors consist of “independent directors,” as defined under
the rules of the NASDAQ, (ii) that we have a nominating committee that is
composed entirely of independent directors and (iii) that we have a compensation
committee that is composed entirely of independent
directors.  Accordingly, our stockholders may not have the same
protections afforded to stockholders of companies that are subject to all of the
NASDAQ corporate governance requirements as long as we are a “controlled
company.”  We currently have not availed ourselves to the controlled
company exception under NASDAQ rules.
 
 Accordingly,
the Funds, through VG Holdings, will effectively control the election of a
substantial percentage of our board of directors and the approval or disapproval
of certain other matters requiring stockholder approval and, as a result, have
significant influence over the direction of our management and
policies.
  A significant
portion of our manufacturing activities are conducted in foreign
countries, exposing us to
additional risks that may not exist in the United States.
 
 International
manufacturing operations represent a majority of our business. Sales outside the
United States represent a significant portion of our net sales, and we expect
net sales outside the United States to continue to represent a significant
portion of our total net sales.  Outside of the United States, we
operate manufacturing facilities in Mexico and China.
 
 Our
international manufacturing operations are subject to a number of potential
risks. Such risks include, among others:
 
 •      inflation
or changes in political and economic conditions;
 
 •      unstable
regulatory environments;
 
 •      changes
in import and export duties;
 
 •      domestic
and foreign customs and tariffs;
 
 •      potentially
adverse tax consequences;
 
 •      trade
restrictions;
 
 •      restrictions
on the transfer of funds into or out of a country;
 
 •      labor
unrest;
 
 •      logistical
and communications challenges;
 
 •      difficulties
associated with managing a large organization spread throughout various
countries;
 
 •      differing
protection of intellectual property and trade secrets; and
 
 •      other
restraints and burdensome taxes.
 
 These
factors may have an adverse effect on our international operations or on the
ability of our international operations to repatriate earnings
to us.
 
 Table of Contents
 18
 
 We are subject to
currency fluctuations, which may affect our cost of goods sold and
operating margins.
 
 A
significant portion of our costs, including payroll and rent, are denominated in
foreign currencies, particularly the Chinese Renminbi
(“RMB”).  Changes in exchange rates between other currencies and the
U.S. dollar will affect our cost of goods sold and operating margins and
could have a material adverse effect on our financial condition, operating
results and cash flows.
 
 We lease land for
all of our owned and leased Chinese manufacturing facilities from
the Chinese government under land use rights agreements that may be terminated by the
Chinese government.
 
 We lease
the land where our Chinese manufacturing facilities are located from the Chinese
government through land use rights agreements.  Although we believe
our relationship with the Chinese government is sound, if the Chinese government
decided to terminate our land use rights agreements, our assets could become
impaired, and our ability to meet our customers’ orders could be
impacted.  This could have a material adverse effect on our financial
condition, operating results and cash flows.
 
 Electrical power
shortages in certain areas of southern China have, in the past, caused the
government to impose a power rationing program, and additional or
extended power rationings
could adversely affect our Chinese operations.
 
 In early
2008, certain areas of Southern China faced electrical power constraints, which
resulted from extreme winter weather in the area.  In order to address
the power constraints, the Southern China Province Government initiated a power
rationing plan.  The power rationing program was terminated in May
2008.  Although power rationing did not impact our Asia operations
during the winter of 2008-2009, we may experience issues in the future with
obtaining power or other key services due to infrastructure weaknesses in China
that may impair our ability to compete effectively as well as adversely affect
our financial condition, operating results and cash flows.
 
 We are dependent
upon the electronics industry, which is highly cyclical and suffers
significant downturns in demand, resulting in excess manufacturing
capacity and increased
price competition.
 
 The
electronics industry, on which a substantial portion of our business depends, is
cyclical and subject to significant downturns characterized by diminished
product demand, rapid declines in average selling prices and
over-capacity.  This industry has experienced periods characterized by
relatively low demand and price depression and is likely to experience
recessionary periods in the future.  Economic conditions affecting the
electronics industry in general, or specific customers in particular, have
adversely affected our operating results in the past and may do so in the
future.  Over the past year, the global economy has been greatly
impacted by the global recessionary conditions linked to rising default levels
in the U.S. home mortgage sector, volatile fuel prices, and a changing
political and economic landscape.  These factors have contributed to
historically low consumer confidence levels, resulting in a significantly
intensified downturn in demand for products incorporating PCBs and E-M
Solutions, which has in turn adversely affected our operating results in 2008
and 2009.
 
 The
electronics industry is characterized by intense competition, rapid
technological change, relatively short product life cycles and pricing and
profitability pressures.  These factors adversely affect our customers
and we suffer similar effects.  Our customers are primarily
high-technology equipment manufacturers in the communications and networking,
computing and peripherals, test, industrial and medical and automotive markets
of the electronics industry.  Due to the uncertainty in the markets
served by most of our customers, we cannot accurately predict our future
financial results or accurately anticipate future orders.  At any
time, our customers can discontinue or modify products containing components we
manufacture, adjust the timing of orders and shipments or affect our mix of
consolidated net sales, any of which could have a material adverse effect on our
financial condition, operating results and cash flows.
  Table of Contents
 19
 
 There may be
shortages of, or price fluctuations with respect to, raw materials or
components,
which would cause us to curtail our manufacturing or incur higher than expected
costs.
 
 We
purchase the raw materials and components we use in producing our products and
providing our services, and we may be required to bear the risk of raw material
or component price fluctuations.  In addition, shortages of raw
materials such as laminates, a principal raw material used in our PCB
operations, have occurred in the past and may occur in the future. Raw material
or component shortages or price fluctuations such as these could have a material
adverse effect on financial condition, operating results and cash
flows.  In addition, if we experience a shortage of materials or
components, we may not be able to produce products for our customers in a timely
fashion.
 
 The PCB and
electronic manufacturing services (“EMS”) industries are highly competitive, and
we may not be able to compete effectively in one or both of them.
 
 The PCB
industry is highly competitive, with multiple global competitors and hundreds of
regional and local manufacturers.  The EMS industry is also highly
competitive, with competitors on the global, regional and local levels and
relatively low barriers to entry.  In both of these industries, we
could experience increased future competition resulting in price reductions,
reduced margins or loss of market share. Any of these could have an adverse
effect on our financial condition, operating results and cash
flows.  In addition, some of our principal competitors may be less
leveraged, may have greater access to financial or other resources, may have
lower cost operations and may be better able to withstand adverse market
conditions.
 
 We generally do
not obtain long-term volume purchase commitments from customers and
therefore, cancellations, reductions in production quantities and delays in
production by our customers could adversely affect our operating results.
 
 For many
of our customers, we do not have firm long-term purchase commitments, but rather
conduct business on a purchase order basis.  Customers may cancel
their orders, reduce production quantities or delay production at any time for a
number of reasons.  Many of our customers have, over the past several
years, experienced significant decreases in demand for their products and
services.  The uncertain economic conditions in the global economy and
in several of the markets in which our customers operate have in the past
prompted some of our customers to cancel orders, delay the delivery of some of
the products that we manufacture and place purchase orders for fewer products
than we previously anticipated.  Even when our customers are
contractually obligated to purchase products, we may be unable or, for other
business reasons, choose not to enforce our contractual rights. Cancellations,
reductions or delays of orders by customers could:
 
 •      adversely
affect our operating results by reducing the volume of products that we
manufacture for our customers;
 
 •      delay
or eliminate recoupment of our expenditures for inventory purchased in
preparation for customer orders; and
 
 •      lower
our asset utilization, which would result in lower gross margins.
 
 Our products and
the manufacturing processes we use to produce them are often highly
complex and therefore may at times contain manufacturing defects, which
may subject
us to product liability and warranty claims.
 
 We face
an inherent business risk of exposure to warranty and product liability claims
in the event that our products, particularly those supplied to the automotive
industry, fail to perform as expected or such failure results, or is alleged to
result, in bodily injury and/or property damage.  If we were to
manufacture and deliver products to our customers that contain defects, whether
caused by a design, manufacturing or component failure, or by deficiencies in
the manufacturing processes, it may result in delayed shipments to customers and
reduced or cancelled customer orders.  In addition, if any of our
products are or are alleged to be defective, we may be required to participate
in a recall of such products.  As suppliers become more integral to
the vehicle design process and assume more of the vehicle assembly functions,
vehicle manufacturers are increasingly looking to their suppliers for
contributions when faced with product liability claims or recalls.  In
addition, vehicle manufacturers, who have traditionally borne the costs
associated with warranty programs offered on their vehicles, are increasingly
requiring suppliers
to guarantee or warrant their products and may seek to hold us responsible for
some or all of the costs related to the repair and replacement of parts supplied
by us to the vehicle manufacturer.  A successful warranty or product
liability claim against us in excess of our available insurance coverage or
established warranty and legal reserves or a requirement that we participate in
a product recall may have a material adverse effect on our business, financial
condition, operating results and cash flows and may harm our business
reputation, which could lead to customer cancellations or
non-renewals.
 
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 20
 
 Failure to meet
the quality control standards of our automotive customers may cause us to lose
existing, or prevent us from gaining new, automotive customers, which may
adversely affect our financial results.
 
 For
safety reasons, our automotive customers have strict quality standards that
generally exceed the quality requirements of our other
customers.  Because a significant portion of our PCB manufacturing
facilities products are sold to customers in the automotive industry, if those
facilities do not meet these quality standards, our results of operations may be
materially and adversely affected.  These automotive customers may
require long periods of time to evaluate whether our manufacturing processes and
facilities meet their quality standards.  If we were to lose
automotive customers due to quality control issues, we might not be able to
regain those customers or gain new automotive customers for long periods of
time, which could have a material adverse effect on our financial condition,
operating results and cash flows.
 
 The EMS industry
is subject to rapid technological change; our failure to respond timely or
adequately to such changes may render our existing technology less competitive or
obsolete, and our operating results may suffer.
 
 The
market for our products and services is characterized by rapidly changing
product platforms based on technology and continuing process
development.  The success of our business will depend, in large part,
upon our ability to maintain and enhance our technological capabilities, develop
and market products and services that meet changing customer needs and
successfully anticipate or respond to technological product platform changes on
a cost-effective and timely basis.  There can be no assurance that we
will effectively respond to the technological product requirements of the
changing market, including having sufficient cash flow to make additional
capital expenditures that may be required as a result of those
changes.  To the extent we are unable to respond to such technological
product requirements, our operating results may suffer.
 
 Uncertainty and
adverse changes in the economy and financial markets could have an adverse impact on
our business and operating results.
 
 Uncertainty
or adverse changes in the economy could lead to a significant decline in demand
for the end products manufactured by our customers, which, in turn, could result
in a decline in the demand for our products and pressure to reduce our
prices.  As a result of the recent global economic downturn, many
businesses have experienced weaker demand for their products and services and,
therefore, have taken a more conservative stance in ordering component
inventory.  Any decrease in demand for our products could have an
adverse impact on our financial condition, operating results and cash
flows.  Uncertainty and adverse changes in the economy could also
increase the cost and decrease the availability of potential sources of
financing and increase our exposure to losses from bad debts, either of which
could have a material adverse effect on our financial condition, operating
results and cash flows.
 
 Recent
instability in the financial markets has led to the consolidation, restructuring
and closure of certain financial institutions. Should any of the financial
institutions who maintain our cash deposits or who are a party to our credit
facilities become unable to repay our deposits or honor their commitments under
our credit facilities, it could have a material adverse effect on our financial
condition, operating results and cash flows.  As of
December 31, 2009, approximately 19.8% of our cash balances were on
deposit with Citibank (China), which is a subsidiary of Citigroup
Inc.  The U.S. government has previously taken certain actions to
stabilize Citigroup Inc. in an effort to remove uncertainty and restore
confidence in that company.  Our management has been monitoring, and
will continue to monitor, the stability of Citigroup, Inc. and the
appropriateness of our depository relationship with Citibank
(China).
 
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 21
 
 We
may not realize the expected benefits of the Merix Acquisition because of
integration difficulties and other challenges.
 
 The
success of the Merix Acquisition will depend, in part, on our ability to realize
the anticipated synergies and cost savings from integrating the Merix business
with our existing businesses.  The integration process may be complex,
costly and time-consuming.  The difficulties of integrating the
operations of the Merix business include, among others:
 
 ·  failure
to implement our business plan for the combined business;
  ·  unanticipated
issues in integrating manufacturing, logistics, information, communications and
other systems;
  ·  unanticipated
changes in applicable laws and regulations;
  ·  failure
to retain key employees;
  ·  failure
to retain customers;
  ·  the
impact of the Merix Acquisition on our internal controls and compliance with the
regulatory requirements
 under
the Sarbanes-Oxley Act of 2002;
  ·  unanticipated
issues, expenses and liabilities; and
  ·  operating,
competitive and market risks inherent in Merix’ business and our
business.
  
 We may
not accomplish the integration of Merix’ business smoothly, successfully or
within the anticipated cost range or timeframe.  The diversion of our
management’s attention from our current operations to the integration effort and
any difficulties encountered in combining operations could prevent us from
realizing the full benefits anticipated to result from the Merix Acquisition and
could adversely affect our business.
  We
may be unable to realize anticipated cost synergies or may incur additional
costs in connection with the Merix Acquisition.
 
 We have
identified annual cost synergies in connection with the Merix Acquisition,
consisting of the elimination of redundant corporate costs, selling, general and
administrative expense reductions, materials savings and other rationalizations,
in addition to the potential for revenue synergies.  While management
believes that these cost synergies are achievable, we may be unable to realize
all of these cost synergies within the timeframe expected or at
all.  In addition, we may incur additional and/or unexpected costs in
order to realize these cost synergies.
 
 The
requirements of being a public company, including compliance with the
requirements of the NASDAQ and the requirements of the Sarbanes-Oxley Act, may
strain our resources, increase costs and distract management.
 
 As a
public company with listed equity securities, we need to comply with laws,
regulations and requirements, certain corporate governance provisions of the
Sarbanes-Oxley Act of 2002, related regulations of the SEC and requirements of
the NASDAQ, with which we were not required to comply as a private
company.  Complying with these statutes, regulations and requirements
will occupy a significant amount of the time of our board of directors and
management and will increase our costs and expenses.
 
 Success
in Asia may adversely affect our U.S. operations.
 
 To the
extent Asian PCB manufacturers are able to compete effectively with products
historically manufactured in the United States, our facilities in the United
States may not be able to compete as effectively and parts of our North American
operations may not remain viable.
  Table of Contents
 22
  If
competitive production capabilities increase in Asia and other foreign
countries, where production costs are lower, we may lose market share in both
North America and Asia, and our profitability may be materially adversely
affected by increased pricing pressure.
 
 PCB
manufacturers in Asia and other geographies often have significantly lower
production costs than our North American operations and may even have cost
advantages over our Asia operations.  Production capability
improvements by foreign and domestic competitors may play an increasing role in
the PCB markets in which we compete, which may adversely affect our revenues and
profitability.  While PCB manufacturers in these locations have
historically competed primarily in markets for less technologically advanced
products, they are expanding their manufacturing capabilities to produce higher
layer count, higher technology PCBs and could compete more directly with our
North American and Asia operations.
 
 Failure
to maintain good relations with minority investors in certain majority-owned
China subsidiaries could materially adversely affect our ability to manage those
operations.
 
 Currently,
we have two PCB manufacturing plants in China that are each operated by a
separate majority-owned subsidiary.  A minority investor owns a 5%
interest in our subsidiary that operates the Huiyang plant.  The same
minority investor owns a 15% interest in our subsidiary that operates the
Huizhou plant.  The minority investor owns the buildings of the
Huizhou facility and leases the premises to our subsidiary.  The
minority investor is owned by the Chinese government and has close ties to local
economic development and other Chinese government agencies.  In
connection with the negotiation of its investments, the minority investor
secured certain rights to be consulted and to consent to certain operating and
investment matters concerning the plants and our subsidiaries’ boards of
directors that oversee these businesses.  Failure to maintain good
relations with the minority investor in either Chinese subsidiary could
materially adversely affect our ability to manage the operations of one or more
of the plants.
 
 Prior
to the Merix Acquisition, Merix has reported material weaknesses in its internal
control over financial reporting, and if additional material weaknesses are
discovered in the future, investor confidence in us may be adversely
affected.
 
 A
material weakness is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that a material
misstatement of the annual or interim consolidated financial statements will not
be prevented or detected.  Prior to the Merix Acquisition, Merix had
previously identified material weaknesses in internal control over financial
reporting for its Asia operations, which Merix remediated in 2009.  In
addition, at the time of Merix’ acquisition of its subsidiary, Merix Asia
Limited (“Merix Asia”), in September 2005, Merix Asia had a weak system of
internal control over financial reporting and needed to develop processes to
strengthen its accounting systems and control environment.  Merix
devoted significant time and resources to improving the internal controls over
financial reporting since the acquisition of Merix Asia.
 
 We may,
in the future, identify additional internal control deficiencies that could rise
to the level of a material weakness or uncover errors in financial
reporting.  Material weaknesses in its internal control over financial
reporting may cause investors to lose confidence in us, which could have an
adverse effect on our business and the trading price of our common
stock.
 
 If
we do not align manufacturing capacity with customer demand, we could experience
difficulties meeting our customers’ expectations or, conversely, incur excess
costs to maintain unneeded capacity.
 
 If we
fail to recruit, train and retain sufficient staff to meet customer demand,
particularly in China, we may experience extended lead times, leading to the
loss of customer orders.  Conversely, if we increase manufacturing
capacity and order levels do not remain stable or increase, our business,
financial condition, operating results and cash flows could be adversely
impacted.
 
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 23
 
 We
export products from the United States to other countries. If we fail to comply
with export laws, we could be subject to additional taxes, duties, fines and
other punitive actions.
 
 Exports
from the United States are regulated by the U.S. Department of Commerce. Failure
to comply with these regulations can result in significant fines and
penalties.  Additionally, violations of these laws can result in
punitive penalties, which would restrict or prohibit us from exporting certain
products, resulting in significant harm to our business.
 
 There
may not be an active, liquid trading market for our common stock.
 
 Our
common stock began trading on the NASDAQ on February 17,
2010.  Previously, there had been no public market for shares of our
common stock.  We cannot predict the extent to which investor interest
in our company will lead to the development of a trading market on the NASDAQ,
or how liquid that market may become.  If an active trading market
does not develop, investors may have difficulty selling any of our common stock
that they purchase.
 
 We
expect that our stock price will fluctuate significantly.
 
 Securities
markets worldwide have experienced, and are likely to continue to experience,
significant price and volume fluctuations.  This market volatility, as
well as general economic, market or political conditions, could reduce the
market price of our common stock regardless of our operating
performance.  The trading price of our common stock is likely to be
volatile and subject to wide price fluctuations in response to various factors,
including:
 
 ·  market
conditions in the broader stock market;
  ·  actual or
anticipated fluctuations in our quarterly financial and operating
results;
  ·  introduction
of new products or services by us or our competitors;
  ·  issuance
of new or changed securities analysts’ reports or recommendations;
  ·  investor
perceptions of us and the electronics industry or telecommunications
industry;
  ·  sales, or
anticipated sales, of large blocks of our stock;
  ·  additions
or departures of key personnel;
  ·  regulatory
or political developments;
  ·  litigation
and governmental investigations; and
  ·  changing
economic conditions.
 
 These and
other factors may cause the market price and demand for our common stock to
fluctuate substantially, which may limit or prevent investors from readily
selling their shares of common stock and may otherwise negatively affect the
liquidity of our common stock.  In addition, in the past, when the
market price of a stock has been volatile, holders of that stock have sometimes
instituted securities class action litigation against the company that issued
the stock.  If any of our stockholders brought a lawsuit against us,
we could incur substantial costs defending the lawsuit.  Such a
lawsuit could also divert the time and attention of our management from our
business, which could significantly harm our profitability and
reputation.
 
 Some
provisions of Delaware law and our certificate of incorporation and bylaws may
deter third parties from acquiring us and diminish the value of our common
stock.
 
 Our third
amended and restated certificate of incorporation and second amended and
restated bylaws provide for, among other things:
 
 ·  restrictions
on the ability of our stockholders to call a special meeting and the business
that can be conducted at such meeting;
  Table of Contents
 24
 
 ·  restrictions
on the ability of our stockholders to remove a director or fill a vacancy on the
board of directors;
  ·  our
ability to issue preferred stock with terms that the board of directors may
determine, without stockholder
 approval;
  ·  the
absence of cumulative voting in the election of directors;
  ·
              a
      prohibition of action by written consent of stockholders unless such
      action is approved by all stockholders; providing, however, that if VG
      Holdings owns 50% or more of our outstanding capital stock, then action
      may be taken by the stockholders by written consent if signed by
      stockholders having not less than the minimum of votes necessary to take
      such action; and
  ·  advance
notice requirements for stockholder proposals and nominations.
  These
provisions in our third amended and restated certificate of incorporation and
second amended and restated bylaws may discourage, delay or prevent a
transaction involving a change of control of our company that is in the best
interest of our minority stockholders.  Even in the absence of a
takeover attempt, the existence of these provisions may adversely affect the
prevailing market price of our common stock if they are viewed as discouraging
future takeover attempts.
 
 Investors
may experience dilution of their ownership interests due to the future issuance
of additional shares of our capital stock, which could have an adverse effect on
the price of our common stock.
 
 We may in
the future issue additional shares of our common stock which could result in the
dilution of the ownership interests of our stockholders.  As of
February 16, 2010, we have outstanding approximately 20 million shares of common
stock, and no shares of preferred stock.  We are authorized to issue
100 million shares of common stock and 25 million shares of preferred stock with
such designations, preferences and rights as determined by our board of
directors.  The potential issuance of such additional shares of common
stock may create downward pressure on the trading price of our common
stock.  We may also issue additional shares of our common stock in
connection with the hiring of personnel, future acquisitions, future issuances
of our securities for capital raising purposes or for other business
purposes.  Future sales of substantial amounts of our common stock, or
the perception that sales could occur, could have a material adverse effect on
the price of our common stock.
 
 Oil
prices may fluctuate, which would increase our cost to manufacture
goods.
 
 We
generate a portion of our own electricity in certain of our manufacturing
facilities using diesel generators, and we will be required to bear the
increased cost of generating electricity if the cost of oil
increases.  Prices for diesel fuel rose substantially in several
recent years.  Future price increases for diesel fuel would increase
our cost and could have a material adverse effect on our financial condition,
operating results and cash flows.
 
 Damage to our
manufacturing facilities or information systems due to fire, natural disaster
or other events could harm our financial results.
 
 We have
manufacturing facilities in the United States, China and Mexico.  In
addition, we maintain engineering and customer service centers in Canada, China,
England, Hong Kong, Mexico, The Netherlands, and the United
States.  The destruction or closure of any of our facilities for a
significant period of time as a result of fire, explosion, act of war or
terrorism, blizzard, flood, tornado, earthquake, lightning, or other natural
disaster could harm us financially, increasing our cost of doing business and
limiting our ability to deliver our manufacturing services on a timely
basis.  Additionally, we rely heavily upon information technology
systems and high-technology equipment in our manufacturing processes and the
management of our business.  We have developed disaster recovery
plans; however, disruption of these technologies as a result of natural disaster
or other events could harm our business and have a material adverse effect on
our financial condition, operating results and cash flows.
 
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 25
 
 If we lose key
management, operations, engineering or sales and marketing personnel, we
could experience reduced sales, delayed product development and diversion of
management resources.
 
 Our
success depends largely on the continued contributions of our key management,
administration, operations, engineering and sales and marketing personnel, many
of whom would be difficult to replace.  With the exception of certain
of our executive officers, we generally do not have employment or non-compete
agreements with our key personnel.  If one or more members of our
senior management or key professionals were to resign, the loss of personnel
could result in loss of sales, delays in new product development and diversion
of management resources, which would have a negative effect on our
business.  We do not maintain “key man” insurance policies on any of
our personnel.
 
 Due to
the global economic downturn, we have made substantial reductions-in-force,
including a number of management personnel.  We do not anticipate the
loss of any of the personnel will have a material impact on our operations and
have attempted to mitigate the impact of the change in
personnel.  However, there can be no assurance that these risks are
fully mitigated.
 
 In
addition, we rely on the collective experience of our employees, particularly in
the manufacturing process, to ensure we continuously evaluate and adopt new
technologies and remain competitive.  Although we are not generally
dependent on any one employee or a small number of employees involved in our
manufacturing process, we have in the past experienced periods of high employee
turnover and may in the future experience significantly high employee turnover
at our Asian facilities.  If we are not able to replace these people
with new employees with comparable capabilities, our operations could suffer as
we may be unable to keep up with innovations in the industry or the demands of
our customers.  As a result, we may not be able to continue to compete
effectively.
 
 We are subject to
environmental laws and regulations that expose us to potential
financial liability.
 
 Our
operations are regulated under a number of federal, state, local and foreign
environmental laws and regulations that govern, among other things, the
discharge of hazardous materials into the air, ground and water as well as the
handling, storage and disposal of, or exposure to, hazardous materials and
occupational health and safety.  Violations of these laws can lead to
material liabilities, fines or penalties.  Compliance with these
environmental laws is a major consideration in the fabrication of PCBs because
metals and other hazardous materials are used in the manufacturing
process.  In addition, it is possible that in the future, new or more
stringent requirements could be imposed.  Various federal, state,
local and foreign laws and regulations impose liability on current or previous
real property owners or operators for the cost of investigating, cleaning up or
removing contamination caused by hazardous or toxic substances at the
property.  In addition, because we are a generator of hazardous
wastes, we, along with any other person who arranges for the disposal of those
wastes, may be subject to potential financial exposure for costs associated with
the investigation and remediation of sites at which such hazardous waste has
been disposed, if those sites become contaminated.  Liability may be
imposed without regard to legality of the original actions and without regard to
whether we knew of, or were responsible for, the presence of such hazardous or
toxic substances, and we could be responsible for payment of the full amount of
the liability, whether or not any other responsible party is also
liable.
 
 We may have
exposure to income tax rate fluctuations as well as to additional tax liabilities,
which could impact our financial position.
 
 As a
corporation with a presence both abroad and in the United States, we are subject
to taxes in various jurisdictions.  Our effective tax rate is subject
to fluctuation as the income tax rates for each year are a function of the
following factors, among others:
 
 •      the
effects of a mix of profits or losses earned in numerous tax jurisdictions with
a broad range of income tax rates;
 
 •      our
ability to utilize net operating losses;
  Table of Contents
 26
  •      changes
in contingencies related to taxes, interest or penalties resulting from tax
audits; and
 
 •      changes
in tax laws or the interpretation of such laws.
 
 Changes
in the mix of these items and other items may cause our effective tax rate to
fluctuate between periods, which could have a material adverse effect on our
financial position.
 
 Certain
of our Chinese subsidiaries have operated or continue to operate under tax
holidays.  The expiration of these tax holidays and new tax
legislation could have a material adverse effect on our effective tax rate,
financial condition, operating results and cash flows.
 
 We are
also subject to non-income taxes, such as payroll, sales, use, value-added, net
worth, property and goods and services taxes, in various
jurisdictions.
 
 Significant
judgment is required in determining our provision for income taxes and other tax
liabilities.  Although we believe that our tax estimates are
reasonable, we cannot provide assurance that the final determination of tax
audits or tax disputes will not be different from what is reflected in our
historical income tax provisions and accruals.
 
 We could be
subject to litigation in the course of our operations that could adversely affect
our operating results.
 
 If we
became the subject of legal proceedings, our results may be affected by the
outcome of such proceedings and other contingencies that cannot be predicted
with certainty.  When appropriate, and as required by
U.S. generally accepted accounting principles (“GAAP”), we estimate
material loss contingencies and establish reserves based on our assessment of
contingencies where liability is deemed probable and reasonably estimable in
light of the facts and circumstances known to us at a particular point in
time.  Subsequent developments in legal proceedings may affect our
assessment and estimates of the loss contingency recorded as a liability or as a
reserve against assets in our consolidated financial statements and could have a
material adverse effect on our results of operations or cash flows in the period
in which a liability would be recognized and the period in which damages would
be paid, respectively.  Although claims have been rare in the past,
because we are a manufacturer, we are subject to claims by our customers or end
users of our products that we may have been negligent in our production or have
infringed on intellectual property of another.
 
 Several
of our competitors hold patents covering a variety of technologies, applications
and methods of use similar to some of those used in our
products.  From time to time, we and our customers have received
correspondence from our competitors claiming that some of our products, as used
by our customers, may be infringing one or more of these
patents.  Competitors or others have in the past and may in the future
assert infringement claims against us or our customers with respect to current
or future products or uses, and these assertions may result in costly litigation
or require us to obtain a license to use intellectual property rights of
others.  If claims of infringement are asserted against our customers,
those customers may seek indemnification from us for damages or expenses they
incur.
 
 If we
become subject to infringement claims, we would evaluate our position and
consider the available alternatives, which may include seeking licenses to use
the technology in question or defending our position.  These licenses,
however, may not be available on satisfactory terms or at all.  If we
are not able to negotiate the necessary licenses on commercially reasonable
terms or successfully defend our position, it could have a material adverse
effect on our financial condition, operating results and cash
flows.
 
 We may not have
sufficient insurance coverage for certain of the risks and liabilities we
assume in connection with the products and services we provide to customers, which
could leave us responsible for certain costs and damages incurred by
customers.
 
 We carry
various forms of business and liability insurance that we believe are reasonable
and customary for similarly situated companies in our
industry.  However, we do not have insurance coverage for all of the
risks and liabilities
we assume in connection with the products and services we provide to customers,
such as potential warranty, product liability and product recall
claims.  As a result, such liability claims may only be partially
covered under our insurance policies.  We continue to monitor the
insurance marketplace to evaluate the availability of and need to obtain
additional insurance coverage in the future.  However, should we
sustain a significant uncovered loss, it could have a material adverse effect on
our financial condition, operating results and cash flows.
  Table of Contents
 27
  As a U.S.
corporation with international operations, we are subject to the Foreign Corrupt
Practices Act (“FCPA”).  A determination that we violated this
act may
affect our business and operations adversely.
 
 As a
U.S. corporation, we are subject to the regulations imposed by the FCPA,
which generally prohibits U.S. companies and their intermediaries from
making improper payments to foreign officials for the purpose of obtaining or
keeping business.  Any determination that we violated the FCPA could
have a material adverse effect on our financial position, operating results and
cash flows.
 
 Degrading
of our debt ratings would adversely affect us.
 
 Any
degrading by Moody’s Investors Service, Inc. and Standard & Poor’s
Ratings Services, a division of the McGraw-Hill Companies, Inc., of our debt
securities could make it more difficult for us to obtain new financing if we had
an immediate need to increase our liquidity.
 
 We
may be required to recognize additional impairment charges.
 
 Pursuant
to U.S. GAAP, we are required to make periodic assessments of goodwill,
intangible assets and other long-lived assets to determine if they are
impaired.  Disruptions to our business, end-market conditions,
protracted economic weakness, unexpected significant declines in operating
results of reporting units, divestitures and enterprise value declines may
result in additional charges for goodwill and other asset
impairments.  Future impairment charges could substantially affect our
reported earnings in the periods of such charges.  In addition, such
charges would reduce our consolidated net worth and our stockholder’s equity,
increasing our debt-to-total-capitalization ratio.
 
 We have a
substantial amount of debt and may be unable to service or refinance
this debt,
which could have negative consequences on our business in the future,
could
adversely affect our ability to fulfill our obligations under our notes
and may
place us at a competitive disadvantage in our industry.
 
 As of
December 31, 2009, our total outstanding indebtedness was
approximately $225.1 million, net of approximately $105.7 million of cash
restricted for the repurchase of our 2011 Notes.  Our net interest
expense for the year ended December 31, 2009, was approximately
$34.4 million.  As of December 31, 2009, our total
consolidated stockholders’ equity was a deficit of approximately
$58.0 million.
 
 This high
level of debt could have negative consequences. For example, it
could:
 
 •      result
in our inability to comply with the financial and other restrictive covenants in
our credit facilities;
 
 •      increase
our vulnerability to adverse industry and general economic
conditions;
 
 •      require
us to dedicate a substantial portion of our cash flow from operations to make
scheduled principal payments on our debt, thereby reducing the
 availability
of our cash flow for working capital, capital investments and other
business activities;
 
 •      limit
our ability to obtain additional financing to fund future working capital,
capital investments and other business activities;
  Table of Contents
 28
  •      limit
our ability to refinance our indebtedness on terms that are commercially
reasonable, or at all;
  •      expose
us to the risk of interest rate fluctuations to the extent we pay interest at
variable rates on the debt;
 
 •      limit
our flexibility to plan for, and react to, changes in our business and
industry; and
 
 •      place us at a competitive disadvantage
relative to our less leveraged competitors.
 
 Servicing our
debt requires a significant amount of cash and our ability to
generate cash may be affected by factors beyond our control.
 
 Our
business may not generate cash flow in an amount sufficient to enable us to pay
the principal of, or interest on, our indebtedness or to fund our other
liquidity needs, including working capital, capital expenditures, product
development efforts, strategic acquisitions, investments and alliances and other
general corporate requirements.
 
 Our
ability to generate cash is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our
control.  We cannot assure you that:
 
 •
              our
      business will generate sufficient cash flow from
    operations;
 
 •
              we
      will realize the cost savings, revenue growth and operating improvements
      related to the execution of our long-term strategic
      plan; or
 
 •
              future
      sources of funding will be available to us in amounts sufficient to enable
      us to fund our liquidity needs.
 
 If we
cannot fund our liquidity needs, we will have to take actions such as reducing
or delaying capital expenditures, product development efforts, strategic
acquisitions, investments and alliances; selling assets; restructuring or
refinancing our debt; or seeking additional equity capital.  We cannot
assure you that any of these remedies could, if necessary, be effected on
commercially reasonable terms, or at all, or that they would permit us to meet
our scheduled debt service obligations.  The 2010 Credit Agreement and
the indenture governing the outstanding $220.0 million aggregate principal
amount of the 12% Senior Secured Notes due 2015 (the “2015 Notes”) limits the
use of the proceeds from any disposition of assets and, as a result, we may not
be allowed, under those documents, to use the proceeds from such dispositions to
satisfy all current debt service obligations.  In addition, if we
incur additional debt, the risks associated with our substantial leverage,
including the risk that we would be unable to service our debt or generate
enough cash flow to fund our liquidity needs, could intensify.
 
 We
are a holding company with no operations of our own and depend on our
subsidiaries for cash.
 
 Although
our operations are conducted through our subsidiaries, none of our subsidiaries
are obligated to make funds available to us for payment on our
indebtedness.  Accordingly, our ability to service our indebtedness is
dependent on the earnings and the distribution of funds from our
subsidiaries.  In addition, payment of dividends, distributions, loans
or advances to us by our subsidiaries could be subject to restrictions on
dividends or repatriation of earnings under applicable local law and monetary
transfer restrictions in the jurisdictions in which our subsidiaries
operate.  Payments to us by our subsidiaries are also contingent upon
our subsidiaries’ earnings.  Our ability to repatriate cash generated
by our foreign operations or borrow from our foreign subsidiaries may be limited
by tax, foreign exchange or other laws.  Also, the amount we are able
to repatriate to pay U.S. dollar based obligations will be subject to foreign
exchange rates.  Foreign earnings may be subject to foreign taxes and
withholding, potentially at confiscatory levels.  Cash we hold in
foreign entities may become subject to exchange controls that prevent their
being converted into other currencies, including U.S.
dollars.  Foreign tax laws may affect our ability to repatriate cash
from foreign subsidiaries in a tax efficient manner or at all.  Legal
restrictions may prevent foreign subsidiaries from paying dividends or other
cash distributions to service payments on our indebtedness, and directors and
officers of such foreign subsidiaries may therefore be unable or unwilling to
authorize such payments or such loans.  If these or other risks limit
our ability to transfer cash generated by our foreign operations to us, our
ability to make payments on our indebtedness will be impaired.
  Table of Contents
 29
  Restrictive
covenants in the indenture governing the 2015 Notes and the agreements
governing our other
indebtedness will restrict our ability to operate our
business.
 
 The
indenture for the 2015 Notes and the agreement governing the Wachovia Credit
Facility do, and agreements governing our other indebtedness in effect from time
to time will likely, contain covenants that restrict our ability to, among other
things, incur additional debt, pay dividends, make investments, enter into
transactions with affiliates, merge or consolidate with other entities or sell
all or substantially all of our assets.  Additionally, the agreement
governing the 2010 Credit Agreement requires us to maintain certain financial
ratios.  A breach of any of these covenants could result in a default
thereunder, which could allow the lenders or the noteholders to declare all
amounts outstanding thereunder immediately due and payable.  If we are
unable to repay outstanding borrowings when due, the lenders, under the 2010
Credit Agreement and the collateral trustee will under the indenture governing
the 2015 Notes and related agreements have the right to proceed against the
collateral granted to them, including our capital stock.  We may also
be prevented from taking advantage of business opportunities that arise because
of the limitations imposed on us by the restrictive covenants under our
indebtedness.
 
 Item 1B.   Unresolved Staff
Comments
 
 Not
Applicable.
 
 Item 2.   Properties
 
 In
addition to our executive offices in St. Louis, Missouri, as of February
16, 2010, we operate ten principal manufacturing and two principal distribution
facilities, located in three different countries with a total area of
approximately 4.9 million square feet.  During 2009, our
manufacturing facilities in Guangzhou, China, and Zhongshan, China were used in
the Printed Circuit Boards segment; and our manufacturing and distribution
facilities in Shanghai, China, Shenzhen, China, Qingdao, China, Juarez, Mexico
and El Paso, Texas were used in the Assembly segment; and our distribution
facility in Hong Kong was used in both the Printed Circuit Boards and Assembly
segments.  With the Merix Acquisition, in 2010 we added four
additional PCB manufacturing facilities which are located in Forest Grove,
Oregon, San Jose, California, Huiyang, China, and Huizhou, China.  Our
Guangzhou, China property is pledged to secure our indebtedness under our
Guangzhou 2009 Credit Facility and our Forest Grove, Oregon property is pledged
to secure our 2010 Credit Agreement.  Our leased properties are leased
for terms ranging from one to ten years.
 
 Table of Contents
 30
 
 As of
February 16, 2010, the principal properties owned or leased by us are described
below.
 
 Location
              
              Size
      (Appx.
                Sq.
      Ft.)
              
              Type
      of Interest
              Description
      of Primary ProductsUnited
      StatesForest
      Grove, Oregon
              
              
              310,500
              
              Owned(a)
              PCB
      fabrication and warehousingSan
      Jose, California
              
              
              40,000
              
              Leased(a)
              PCB
      fabrication and warehousingEl Paso,
      Texas
              
              
              29,000
              
              Leased
              Warehousing
      and distribution of E-M Solutions products, backpanel assemblies, full
      system assemblies and PCB assembliesMexicoJuarez,
      Mexico
              
              
              90,000
              
              Leased
              Backpanel
      assembly, PCB assembly, custom metal enclosure fabrication, and full
      system assembly and testAsiaGuangzhou,
      China
              
              
              2,250,000
              
              Owned(b)
              PCB
      and backpanel fabrication106,000
              
              LeasedZhongshan,
      China
              
              
              799,000
              
              Owned(b)
              PCB
      fabricationHuiyang,
      China
              
              
              250,000
              
              Owned(a)(b)
              PCB
      fabrication and warehousingHuizhou,
      China
              
              
              135,000
              
              Leased(a)
              PCB
      fabrication and warehousingShanghai,
      China
              
              
              430,000
              
              Owned(b)
              Custom
      metal enclosure fabrication, backpanel assembly, PCB assembly and full
      system assembly and testShenzhen,
      China
              
              
              286,000
              
              Leased
              Custom
      metal enclosure fabrication, PCB assembly and full system assembly and
      testQingdao,
      China
              
              
              93,000
              
              Leased
              Full
      system assembly and test/cable assemblyHong
      Kong
              
              
              53,000
              
              Owned
              Warehousing
      and distribution of PCBs, backpanel assemblies, full system assemblies and
      PCB assemblies(a)These
      properties were acquired in February 2010, in connection with the Merix
      Acquisition.(b)Although
      these facilities are owned, we lease the underlying land pursuant to land
      use rights agreements with the Chinese government, which expire from 2043
      to 2050.
 
 In
addition to the facilities listed above, we maintain several engineering,
customer service, sales and marketing and other offices throughout North
America, Europe and Asia, all of which are leased.
 
 Item 3.   Legal Proceedings
 
 We are
presently involved in various legal proceedings arising in the ordinary course
of our business operations, including employment matters and contract
claims.  We believe that any liability with respect to these
proceedings will not be material in the aggregate to our consolidated financial
position, results of operations or cash flows.
 
 Litigation
Relating to the Merix Acquisition
 
 On
October 13, 2009 and November 5, 2009, respectively, Asbestos Workers Pension
Fund and W. Donald Wybert, both Merix shareholders, filed putative class action
complaints in Oregon state court (Multnomah County), on behalf of themselves and
all others similarly situated, against Merix, the members of its board of
directors and Viasystems.  The complaints, which were substantively
identical and sought to enjoin the Merix Acquisition, alleged, among other
things, that Merix’ directors breached their fiduciary duties to Merix’
shareholders by attempting to sell Merix to Viasystems for an inadequate price
and that Viasystems aided and abetted those breaches.
 
 On
November 23, 2009, the court entered an order consolidating the two
cases.  On or about December 2, 2009, the plaintiffs filed a
Consolidated Amended Class Action Complaint (the “Amended Complaint”), which
largely mirrored
the original complaints, but also added Maple Acquisition Corp. (the merger
vehicle) as a defendant and alleged that Merix’ proxy statement for the Merix
Acquisition was materially deficient.
  Table of Contents
 31
  On
January 19, 2010, the plaintiffs filed a motion for a temporary restraining
order and/or a preliminary injunction to enjoin the shareholder vote on the
Merix Acquisition, scheduled to take place on February 8, 2010.  On
January 29, 2010, the defendants filed oppositions to plaintiffs’ motion, and,
on February 2, 2010, plaintiffs filed their reply.  On February 5,
2009, following oral arguments, the court denied the plaintiffs’
motion.  The Merix Acquisition was consummated on February 16,
2010.
 
 Merix
Securities Class Action
 
 Four
purported class action complaints were filed against Merix and certain of its
executive officers and directors on June 17, 2004, June 24, 2004 and
July 9, 2004.  The complaints were consolidated in a single action
entitled In re Merix Corporation Securities Litigation, Lead Case No. CV
04-826-MO, in the U.S. District Court for the District of
Oregon.  After the court granted Merix’ motion to dismiss without
prejudice, the plaintiffs filed a second amended complaint.  That
complaint alleged that the defendants violated the federal securities laws by
making certain inaccurate and misleading statements in the prospectus used in
connection with the January 2004 public offering of approximately $103.4 million
of Merix’ common stock.  In September 2006, the Court dismissed that
complaint with prejudice.  The plaintiffs appealed to the Ninth
Circuit.  In April 2008, the Ninth Circuit reversed the dismissal of
the second amended complaint. Merix sought rehearing which was denied and
rehearing en banc was also denied.  Merix obtained a stay of the
mandate from the Ninth Circuit and filed a certiorari petition with the U.S.
Supreme Court on September 22, 2008.  On December 15, 2008, the U.S.
Supreme Court denied the certiorari petition and the case was remanded back to
the U.S. District Court for the District of Oregon.  On May 15, 2009,
the plaintiffs moved to certify a class of all investors who purchased in the
public offering and who were damaged thereby.  On
November 5, 2009, the court partially granted the certification motion
and certified a class consisting of all persons and entities who purchased or
otherwise acquired the common stock of Merix Corporation from an underwriter
directly pursuant to Merix’ January 29, 2004 offering, who held the stock
through May 13, 2004, and who were damaged thereby.  The case is
currently in the discovery phase.  The plaintiffs seek unspecified
damages.  A potential loss or range of loss that could arise from
these cases is not estimable or probable at this time.
 
 Item 4.  Submission of Matters to a Vote of Security
Holders
 
 No
matters were submitted to a vote of security holders in the fourth quarter of
2009.
 
 PART
II
 
 Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
 
 Our
common stock is listed on the NASDAQ under the symbol VIAS, and began trading on
February 17, 2010.  As of February 24, 2010, we are in the process of
issuing our shares of common stock in connection with the Recapitalization
Agreement and the Merix Acquisition.  After giving effect to such
issuance of shares of common stock, the approximate number of holders of our
common stock was 2,757.  Previously, all of our outstanding common
stock was held privately, and accordingly, there was no public trading market
for our common stock.  We have paid no dividends since our inception,
and our ability to pay dividends is limited by the terms of certain agreements
related to our indebtedness.  We do not anticipate
paying any cash dividends on our common stock in the foreseeable
future.  However, after the Merix Acquisition, our subsidiaries in
China will continue to make required distributions to the minority interest
holders in such subsidiaries.  We currently intend to retain all
available funds and any available future earnings to fund the development and
growth of our business.
  Table of Contents
 32
 
 We
maintain an equity compensation plan for the benefit of our
employees.  The following table sets forth certain information as of
December 31, 2009, with respect to our equity compensation plans (including
individual compensation arrangements) under which our equity securities are
authorized for issuance, aggregated by (i) all compensation plans previously
approved by our security holders, and (ii) all compensation plans not
previously approved by our security holders.  The table includes the
number of securities to be issued upon the exercise of outstanding options,
warrants and rights (column (a)); the weighted-average exercise price of the
outstanding options, warrants and rights (column (b)); and the number of
securities remaining available for future issuance under the plans (column
(c)).
  Equity
      Compensation Plan InformationPlan category
                
                Number of
      securities to be issued upon exercise of outstanding options, warrants and
      rights
                
                
                Weighted-average exercise price of outstanding
      options, warrants and rights
                
                
                Number of
      securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
                
                
                (b)
                
                
                (c)Equity
      compensation plans approved by security holders
                
                
                209,435
                
                
                $
                150.99
                
                
                
                22,917
 Item 6.  Selected Financial Data (U.S. dollars in
thousands)
 
 The
selected financial data and other data below for the years ended December 31,
2009, 2008, 2007, 2006, and 2005, present consolidated financial information of
Viasystems and its subsidiaries and have been derived from our audited
consolidated financial statements.
 
 The
selected historical consolidated financial data set forth below should be read
in conjunction with “Management's Discussion and Analysis of Financial Condition
and Results of Operations” and our consolidated financial statements and the
notes thereto included elsewhere in this Report.
  Table of Contents
 33
 
 Year
      Ended December 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005(dollars
      in thousands, except per share data)Statements
      of Operations Data:Net
      sales
              
              $
              496,447
              
              
              $
              712,830
              
              
              $
              714,343
              
              
              $
              734,992
              
              
              $
              652,821Operating
      expenses:Cost of goods sold
      (1)
              
              
              398,144
              
              
              
              568,356
              
              
              
              570,384
              
              
              
              601,232
              
              
              
              560,974Selling, general and
      administrative (1)
              
              
              45,073
              
              
              
              52,475
              
              
              
              58,215
              
              
              
              56,339
              
              
              
              66,190Depreciation
              
              
              50,161
              
              
              
              53,285
              
              
              
              49,704
              
              
              
              45,422
              
              
              
              44,234Amortization
              
              
              1,191
              
              
              
              1,243
              
              
              
              1,269
              
              
              
              1,325
              
              
              
              1,436Restructuring and impairment
      (2)
              
              
              6,626
              
              
              
              15,069
              
              
              
              278
              
              
              
              (4,915
              )
              
              
              27,662Operating
      (loss)
      income
              
              
              (4,748
              )
              
              
              22,402
              
              
              
              34,493
              
              
              
              35,589
              
              
              
              (47,675
              )Other
      expense (income):Interest expense,
      net
              
              
              34,399
              
              
              
              31,585
              
              
              
              30,573
              
              
              
              38,768
              
              
              
              48,137Amortization of deferred
      financing costs
              
              
              1,954
              
              
              
              2,063
              
              
              
              2,065
              
              
              
              1,678
              
              
              
              1,613Loss on early extinguishment of
      debt (3)
              
              
              2,357
              
              
              
              -
              
              
              
              -
              
              
              
              1,498
              
              
              
              -Other,
      net
              
              
              3,502
              
              
              
              (711
              )
              
              
              277
              
              
              
              742
              
              
              
              13,110(Loss)
      income before income
      taxes
              
              
              (46,960
              )
              
              
              (10,535
              )
              
              
              1,578
              
              
              
              (7,097
              )
              
              
              (110,535
              )Income
      taxes
              
              
              7,757
              
              
              
              4,938
              
              
              
              (6,853
              )
              
              
              18,514
              
              
              
              3,953(Loss)
      income from continuing operations (4)
              
              
              (54,717
              )
              
              
              (15,473
              )
              
              
              8,431
              
              
              
              (25,611
              )
              
              
              (114,488
              )Income
      from discontinued operations, net (1) (4)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              9,475
              
              
              
              25,739Gain
      on disposition of discontinued operations, net (4)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              214,085
              
              
              
              -Net
      (loss)
      income
              
              
              (54,717
              )
              
              
              (15,473
              )
              
              
              8,431
              
              
              
              197,949
              
              
              
              (88,749
              )Accretion
      of Class B Senior Convertible preferredtock
              
              
              8,515
              
              
              
              7,829
              
              
              
              7,203
              
              
              
              6,633
              
              
              
              6,114Net
      (loss) income available to common stockholders
              
              $
              (63,232
              )
              
              $
              (23,302
              )
              
              $
              1,228
              
              
              $
              191,316
              
              
              $
              (94,863
              )Basic
      and diluted (loss) income per share from continuing
    operations
              
              $
              (26.18
              )
              
              $
              (9.65
              )
              
              $
              0.51
              
              
              $
              (13.35
              )
              
              $
              (49.93
              )Shares
      used in basic and diluted share
                calculations
              
              
              2,415,266
              
              
              
              2,415,266
              
              
              
              2,415,266
              
              
              
              2,415,266
              
              
              
              2,415,266Balance
      Sheet Data (at period end):Cash and cash
      equivalents
              
              $
              108,993
              
              
              $
              83,053
              
              
              $
              64,002
              
              
              $
              37,954
              
              
              $
              35,923Restricted cash
      (5)
              
              
              105,734
              
              
              
              303
              
              
              
              303
              
              
              
              1,000
              
              
              
              -Working
      capital
              
              
              113,608
              
              
              
              119,118
              
              
              
              110,460
              
              
              
              95,475
              
              
              
              91,071Total
      assets
              
              
              657,238
              
              
              
              585,238
              
              
              
              628,429
              
              
              
              625,085
              
              
              
              710,237Mandatory Redeemable Class A
      Junior preferred
                stock
      (6)
              
              
              118,836
              
              
              
              108,096
              
              
              
              98,326
              
              
              
              89,439
              
              
              
              81,385Total debt, including current
      maturities
              
              
              330,880
              
              
              
              220,663
              
              
              
              206,613
              
              
              
              206,914
              
              
              
              462,535Redeemable Class B Senior
      Convertible preferred
                stock
      (6)
              
              
              98,327
              
              
              
              89,812
              
              
              
              81,983
              
              
              
              74,780
              
              
              
              68,147Stockholders’ (deficit) equity
      (7)
              
              
              (58,040
              )
              
              
              582
              
              
              
              26,141
              
              
              
              32,844
              
              
              
              (155,631
              )
 
 (1)
              Stock
      compensation expense included in cost of goods sold and selling, general
      and administrative expenses for the years ended December 31, 2009,
      2008, 2007, 2006, and 2005 was $948, $615, $2,085, $1,400, and $6,152,
      respectively.  Stock compensation expense included in income
      from discontinued operations, net for the years ended
      December 31, 2009, 2008, 2007, 2006, and 2005 was $0, $0, $0,
      $105, and $641, respectively.
  (2)
              Represents
      restructuring charges taken to downsize and close facilities, and
      impairment losses related to the write-off of long-lived
      assets.  In 2006, restructuring and impairment includes realized
      gains of $5,463 related to property held for sale that was disposed of in
      2006.  See “Management's Discussion and Analysis of Financial
      Condition and Results of Operations” and the accompanying notes to
      consolidated financial statements.
  Table of Contents
 34
  (3)
              In
      2009, in connection with the repurchase of $94,124 par value of our 2011
      Notes and the termination of our 2006 Credit Facility, and in 2006, in
      connection with the termination of our 2003 credit facility, we recorded
      losses on early extinguishment of debt of $2,357 and $1,498,
      respectively.
 
 (4)
              On
      May 1, 2006, we sold our wire harness business.  All periods
      have been restated to reflect the wire harness business as a discontinued
      operation.
 
 (5)
              Restricted
      cash of $105,734 as of December 31, 2009, was held in escrow for the
      redemption of our 2011 Notes, which occurred in January
    2010.
 
 (6)
              The
      Mandatory Redeemable Class A Junior preferred stock and the Redeemable
      Class B Senior Convertible preferred stock were reclassified as, and
      converted into, common stock in February 2010, in accordance with the
      Recapitalization Agreement.
 
 (7)
              On
      January 1, 2007, we recorded a $10,213 increase in the net liability for
      unrecognized tax positions, which was recorded as a cumulative effect
      adjustment to the opening balance of accumulated
      deficit.  During the fourth quarter of 2006, we adopted the
      SEC’s Staff Accounting Bulletin No. 108, Considering the Effects of
      Prior Year Misstatements when Quantifying Misstatements in Current Year
      Financial Statements(“SAB No. 108”).  As a
      result of the adoption of SAB No. 108, we recorded an $8,628 cumulative
      effect adjustment to accumulated deficit on January 1,
      2006.
 
 Item 7.    Management's Discussion and Analysis
of Financial Condition and Results of Operations
 
 The following discussion and
analysis of our financial condition and results of operations covers periods prior
to the consummation of the Merix Acquisition.  Accordingly,
the discussion and analysis of
historical periods does not reflect the impact that the Merix Acquisition may have on
us.  The following discussion should be read in conjunction with “Selected Financial
Data” and our financial statements and related notes included elsewhere in this
document.  The following discussion contains forward-looking
statements based upon current
expectations and related to future events, and our future financial performance
involves risks and uncertainties.  We based these statements on
assumptions we consider reasonable.  Actual results and the timing of
events could differ materially from those discussed in the
forward-looking statements, see “Cautionary Statements Regarding Forward-Looking
Statements.”  Factors that could cause or contribute to these differences include, but are
not limited to, those discussed below and elsewhere in this document,
particularly in “Risk Factors.”
 
 Overview
 
 We are a
leading worldwide provider of complex multi-layer printed circuit boards
(“PCBs”) and electromechanical solutions (“E-M Solutions”).  PCBs
serve as the “electronic backbone” of almost all electronic equipment, and our
E-M Solutions products and services integrate PCBs and other components into
finished or semi-finished electronic equipment, which include custom and
standard metal enclosures, metal cabinets, metal racks and sub-racks,
backplanes, cable assemblies and busbars.  The components we
manufacture include, or can be found in, a wide variety of commercial products,
including automotive engine controls, hybrid converters, automotive electronics
for navigation, safety, entertainment and anti-lock braking systems,
telecommunications switching equipment, data networking equipment, computer
storage equipment, wind and solar energy applications and several other complex
medical and technical instruments.  As of December 31, 2009, we had
six manufacturing facilities all of which are located outside of the United
States to take advantage of low cost, high quality manufacturing
environments.  Our PCB products are produced in two of our five
facilities in China.  Our E-M Solutions products and services are
provided from our other three Chinese facilities and our one facility in
Mexico.  In addition to our manufacturing facilities, in order to
support our customers’ local needs, we maintain engineering and customer service
centers in Hong Kong, China, The Netherlands, England, Canada, Mexico and the
United States.
 
 As of
December 31, 2009, we were a supplier to over 125 original equipment
manufacturers (“OEMs”) and contract electronic manufacturing service companies
(“CEMs”) in numerous end markets. Our top OEM customers include industry leaders
Alcatel-Lucent SA, Bosch Group, Continental AG, Delphi Corporation, EMC
Corporation, Ericsson
AB, General Electric Company, Hewlett-Packard Company, Hitachi Ltd., Huawei
Technologies Co. Ltd., Rockwell Automation, Inc., Siemens AG, Sun Microsystems,
Inc., Tellabs, Inc., TRW Automotive Holdings Corp. and Xyratex Ltd. Our top CEM
relationships include industry-leading contract manufacturers such as Celestica,
Inc. and Jabil Circuits, Inc.
 
 Table of Contents
 35
 
 For the
years 2009, 2008 and 2007 we operated our business in two segments: Printed
Circuit Boards, which includes our PCB products, and Assembly, which includes
our E-M Solutions products and services.
 
 Industry
Overview
 
 Despite
the current economic downturn, we believe the long-term growth prospects for our
PCB and E-M Solutions products remain solid.  The global economic
recession, which began during 2008, affected demand across all of our customer
end-user markets.  We believe the decline in sales from 2008 to 2009
is primarily attributable to the above mentioned weak economic condition as well
as our customers’ actions to reduce inventory levels as they reacted to economic
conditions.  While our visibility to future demand trends remains
limited, sequential growth in sales in 2009 from the second to third and third
to fourth quarters, together with positive trends in backlog and customer orders
across all of our end-user markets, indicate that our customers may have
achieved their inventory goals and their buying patterns better reflect ongoing
demand.  We expect, however, that while the recovery progresses we
will continue to be impacted by moderate pricing pressures.
 
 As a
result of recent government stimulus programs and recovery in consumer demand,
our automotive end-user market sales improved sequentially in the last half of
2009, and we expect this trend will continue into 2010.  As stability
returns to the financial markets and credit begins to ease, we expect the focus
on “green” technologies and clean energy initiatives to drive growth in wind
power related sales to our industrial and instrumentation, medical, consumer and
other end-user markets.  We expect that anticipated expansion and
enhancements of 3G telecommunication networks in Asia and around the world in
2010 will help to support our sales to the telecommunications end-user
market.  We expect that the modest growth projected by industry
analysts for the computer and datacommunications industry will be reflected in
our sales to that end-user market.
 
 Results
of Operations
 
 Year
Ended December 31, 2009, Compared with Year Ended December 31,
2008
 
 Net
Sales.  Net sales for the year ended
December 31, 2009, were $496.4 million, representing a
$216.4 million, or 30.4%, decrease from net sales for the year ended
December 31, 2008.
 
 Net sales
by end-user market for the years ended December 31, 2009 and 2008,
were as follows:
 
 End-User
      Market (dollars in millions)
              
              2009
              
              
              2008Automotive
              
              $
              191.0
              
              
              $
              266.6Industrial &
      Instrumentation, Medical, Consumer, and Other
              
              
              129.6
              
              
              
              189.7Telecommunications
              
              
              128.8
              
              
              
              184.2Computer
      and Datacommunications
              
              
              47.0
              
              
              
              72.3Total
      net sales
              
              $
              496.4
              
              
              $
              712.8
 
 Our net
sales of products for end use in the automotive market decreased by
approximately 28.3% during the year ended December 31, 2009, compared to
the year ended December 31, 2008, due to reduced global demand from our
automotive customers.  Extended factory closures and the financial
instability of the largest U.S. automotive manufacturers slowed demand
throughout the automotive products supply chain.  Net sales of
products ultimately used in the industrial & instrumentation, medical,
consumer and other markets decreased by approximately 31.7% during the year
ended December 31, 2009 as compared to 2008 due to i) generally weaker
demand from customers, ii) the loss of revenue from a fabricated metal products
program that our customer began to source internally and iii) the closure of our
Milwaukee Facility.  Net sales of products ultimately used in the
telecommunications market declined by approximately 30.2% from the year ended
December 31, 2008, to the year ended
December 31, 2009.
  Table of Contents
 36
  Spending
stimulus projects sponsored by the Chinese government drove increased demand for
telecommunications products during 2009, but this increase was not sufficient to
offset declining demand from our other telecommunications
customers.  An approximate 34.9% decrease in net sales for the year
ended December 31, 2009, compared to the year ended
December 31, 2008, of our products for use in the computer and
datacommunications markets is primarily the result of reduced global demand from
our computer and data communication customers.
  Net sales
by business segment for the years ended December 31, 2009 and 2008, were as
follows:
 
 Segment
      (dollars in millions)
              
              2009
              
              
              2008Printed
      Circuit Boards
              
              $
              350.3
              
              
              $
              489.8Assembly
      (a)
              
              
              141.7
              
              
              
              196.6Other
      (a)
              
              
              14.1
              
              
              
              46.0Eliminations
              
              
              (9.7
              )
              
              
              (19.6
              )Total
      net sales
              
              $
              496.4
              
              
              $
              712.8(a)
      With the closure of the Milwaukee Facility in 2009, we reclassified the
      operating results of the  Milwaukee Facility to “Other.” Segment
      results for all periods presented have been reclassified  for
      comparison purposes.
 
 Printed
Circuit Boards segment net sales, including intersegment sales, decreased by
$139.5 million, or 28.5%, to $350.3 million for the year ended
December 31, 2009.  Four principal factors, including
volume, selling price, product mix and currency changes, can affect PCB sales
growth or decline from one period to the next.  In 2009 compared to
2008, there was a decrease in sales volume that was driven by reduced demand
across all end-users markets.
 
 Finished
PCB volume, measured as total square feet of PCB surface area, decreased by
approximately 27.5% in 2009 compared to 2008, and is the primary reason for the
decline in segment net sales.
 
 Like most
electronic components, our Printed Circuit Boards segment product prices have
historically declined in sequential periods as a result of competitive pressures
and manufacturing cost efficiencies.  However, in September and
October of 2008 we implemented limited PCB product price increases to compensate
for unusually high increases in the costs of our commodity materials, including
petroleum, copper and other precious metals that occurred during the first nine
months of 2008.  As a result of the global economic recession, which
resulted in declining commodity costs and pressure from our customers to reduce
prices, we reversed the price increases implemented in the fourth quarter of
2008.  As a result, changes in selling price did not significantly
impact 2009 sales as compared with 2008.
 
 Printed
Circuit Boards segment sales mix is affected by several factors, including layer
count, hole density, line and space density, materials content, order size and
other factors.  For example, incremental layer content generally
results in a higher selling price for an equivalent finished product outer
surface square footage.  In 2009, the volume mixture of different
layer count PCB products was consistent with 2008. As a result, changes in
product mix did not significantly impact 2009 revenue as compared with
2008.
 
 The
effects of changing currency rates added less than a half-percent to sales in
2009 compared to 2008, as approximately 13.7% of our Printed Circuit Boards
segment sales are denominated in currencies other than the
U.S. dollar.
 
 Assembly
segment net sales decreased by $54.9 million, or 27.9%, to
$141.7 million for the year ended
December 31, 2009.  The decrease is the result of reduced
demand across all end-user markets.
 
 Other
sales relate to the Milwaukee Facility, which for segment reporting purposes,
are included in “Other” as a result of its closure in
May 2009.
 
 Table of Contents
 37
 
 Cost of Goods
Sold.  Cost of goods sold, exclusive of items shown separately
in the consolidated statement of operations for the year ended
December 31, 2009, was $398.1 million, or 80.2% of consolidated
net sales.  This represents a 0.5 percentage point increase from
the 79.7% of consolidated net sales achieved during 2008.  The
increase is a result of higher labor and overhead costs relative to sales
volume.
 
 In
response to global economic conditions, in November 2008, we announced a plan to
close our Milwaukee Facility and to reduce our direct and indirect labor costs
globally.  These activities were designed to better align our labor
and overhead costs with current market demands and were substantially completed
during the last quarter of 2008 and first half of 2009.  As a result
of planned reductions and attrition, our direct labor headcount, including
temporary workers, declined to an average of approximately 8,500 during the year
ended December 31, 2009, compared to an average of approximately
11,400 during the prior year.  Our average indirect labor headcount
declined approximately 28.0% during the year ended December 31, 2009,
compared with 2008.  Various factors, including our willingness to
work with the local labor bureau in China, led to our decision to stagger the
execution of headcount reductions, which negatively impacted direct and indirect
labor costs during the year.
 
 The
quantities of materials and supplies used for production are responsible for the
most significant costs in our Printed Circuit Boards segment, and represent
approximately 60.0% of that segment’s cost of sales.  The costs of
materials, labor and overhead in our Printed Circuit Boards segment can be
impacted by trends in global commodities prices and currency exchange rates, as
well as other cost trends that can impact minimum wage rates, and electricity
and diesel fuel costs in China.  Economies of scale can help to offset
any adverse trends in these costs.  Cost of goods sold for the year
ended December 31, 2009, as compared to the prior year, was negatively
impacted by higher labor and overhead costs relative to sales
volume.  Partially offsetting the effect of labor and overhead costs,
our cost of materials was favorably impacted by positive trends in the global
commodities markets as well as favorable pricing from our materials
suppliers.
 
 Cost of
goods sold in our Assembly segment relates primarily to component materials
costs.  As a result, trends in net sales for the segment drive similar
trends in cost of goods sold.  Cost of goods sold relative to net
sales was consistent in 2009 as compared with 2008.
 
 Selling, General
and Administrative Costs.  Selling, general and administrative
costs were $45.1 million, or 9.1% of net sales for the year ended
December 31, 2009, and decreased by $7.4 million compared with the
year ended December 31, 2008.  This decline was the result
of global headcount reductions in our sales and administrative organization
during the fourth quarter of 2008, the closure of our Milwaukee Facility, lower
compensation expense and the successful implementation of other cost savings
initiatives including temporary wage freezes and travel
restrictions.  Professional fees and other costs of $4.0 million were
incurred during the year related to effecting the Merix
Acquisition.  Approximately one-half of our total selling, general and
administrative costs are incurred to support our global operations and are not
specific to any segment.  These common costs are allocated to our
Printed Circuit Boards segment and Assembly segment, however; costs associated
with effecting the Merix Acquisition are reported as “Other” for segment
reporting.
 
 Depreciation.  Depreciation
expense for the year ended December 31, 2009, was approximately
$50.2 million, including approximately $45.6 million related to our
Printed Circuit Boards segment, and approximately $4.6 million related to
our Assembly segment.  Depreciation expense in our Printed Circuit
Boards segment and Assembly segment decreased by approximately $0.7 million
and $0.4 million, respectively, compared to the year ended December 31,
2008, as a result of reduced capital spending in 2009.  Depreciation
expense related to our Milwaukee Facility, which closed during 2009 was
approximately $2.0 million for the year ended December 31, 2008, and
is included in “Other” for segment reporting.
 
 Restructuring and
Impairment.   In light of the global economic downturn which
began towards the end of 2008, and as part of our ongoing efforts to align
capacity, overhead costs and operating expenses with market demand, we initiated
restructuring activities (the “2008 Restructuring”) during the fourth quarter of
2008 which were completed during 2009.  These activities included the
shutdown of our metal fabrication facility in Milwaukee, Wisconsin, and its
satellite final-assembly and distribution facility in Newberry, South Carolina
(together, the “Milwaukee Facility”); as well as workforce reductions across our
global operations.
  Table of Contents
 38
  Previously,
we initiated restructuring activities during 2001 (the “2001 Restructuring”) to
adjust our cost position relative to anticipated levels of
business.  These restructuring activities were a result of the
economic downturn that began in 2000 and continued into early 2003 related to
many of our key telecommunication and networking customers, and the shift of
production demand from high cost countries to low cost
countries.  These actions resulted in plant shutdowns and downsizings
as well as asset impairments, which continued through 2005.
 
 For the
year ended December 31, 2009, we recorded gross restructuring and impairment
charges of approximately $9.7 million, of which $7.5 million and $0.6 million
were related to the 2008 Restructuring and the 2001 Restructuring, respectively,
and $1.6 million was related to the write-off of obsolete equipment in our
Printed Circuit Boards segment.  In addition, we reversed
restructuring accruals of $3.1 million, of which $2.5 million and $0.6 million
were related to the 2008 Restructuring and the 2001 Restructuring,
respectively.
 
 The gross
charges related to the 2008 Restructuring were substantially related to the
closure of the Milwaukee Facility.  Restructuring accrual reversals
related to the 2008 Restructuring included i) $1.7 million in the Printed
Circuit Boards segment as a result of higher than anticipated employee
attrition, which reduced the amount of severance costs related to involuntary
headcount reductions anticipated in our 2008 Restructuring plan, ii)
$0.7 million of gains realized from the disposal of assets in connection
with the shut down of the Milwaukee Facility, and iii) $0.1 million related to
the early termination of a long-term lease obligation related to the Milwaukee
Facility.  With respect to the 2001 Restructuring, during the year
ended December 31, 2009, we recorded $0.6 million of non-cash
restructuring charges which was offset by a $0.6 million gain recorded upon the
early termination of a long-term lease obligation.
 
 For the
year ended December 31, 2009, we recorded restructuring charges of
$0.1 million and $6.6 million in the Assembly and “Other” segments,
respectively; and recorded a net reversal of restructuring expense of $0.1
million in the Printed Circuit Boards segment.  Of these charges, $1.6
million were non-cash asset impairment charges in the Printed Circuit Boards
segment.
 
 The
primary components of restructuring and impairment expense for the years ended
December 31, 2009 and 2008, are as follows:
 
 Restructuring
      Activity (dollars in millions)
              
              2009
              
              
              2008Personnel
      and severance
              
              $
              0.6
              
              
              $
              9.5Lease
      and other contractual commitment expenses
              
              
              5.1
              
              
              
              -Asset
      impairments
              
              
              0.9
              
              
              
              5.6Total
      expense, net
              
              $
              6.6
              
              
              $
              15.1
 
 In
connection with the integration of Merix into our existing operations, we expect
we will incur additional restructuring charges beginning in the first quarter of
2010.
 
 Operating
Income.  The operating loss of $4.7 million for the year
ended December 31, 2009, represents a decrease of $27.1 million
compared with operating income of $22.4 million during the year ended
December 31, 2008.  The primary sources of operating (loss)
income for the years ended December 31, 2009 and 2008, are as
follows:
 
 Source
      (dollars in millions)
              
              2009
              
              
              2008Printed
      Circuit Boards
      segment
              
              $
              3.3
              
              
              $
              23.8Assembly
      segment
      (a)
              
              
              4.1
              
              
              
              8.8Other
      (a)
              
              
              (12.1
              )
              
              
              (10.2
              )Operating
      (loss)
      income
              
              $
              (4.7
              )
              
              $
              22.4(a)With
      the closure of the Milwaukee Facility in 2009, we reclassified the
      operating results of the Milwaukee Facility to “Other.” Segment results
      for all periods presented have been reclassified for comparison
      purposes.
 
 Operating
income of our Printed Circuit Boards segment decreased by $20.5 million to
$3.3 million for the year ended December 31, 2009, compared to
$23.8 million for the year ended
December 31, 2008.  The decrease is primarily
the result of a 28.5% decline in revenues, partially offset by reduced
restructuring costs and selling, general and administrative
expense.
  Table of Contents
 39
 Operating
income of our Assembly segment decreased by $4.7 million to
$4.1 million for the year ended December 31, 2009, compared with
operating income of $8.8 million in 2008.  The decrease is
primarily the result of declining sales volumes, partially offset by reduced
selling, general and administrative expense.
 
 The
operating loss of $12.1 million in “Other” for the year ended
December 31, 2009, relates to our closed Printed Circuit Board and
Assembly operations; and also includes approximately $4.0 million of
professional fees and other costs associated with effecting the Merix
Acquisition.
 
 Adjusted
EBITDA.  We measure our performance primarily through our
operating income.  In addition to our consolidated financial
statements presented in accordance with U.S. GAAP, management uses certain
non-U.S. 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 our operating results and is not intended to
represent cash flows or results of operations.  Our board of directors
and management use Adjusted EBITDA primarily as an additional measure of
operating performance for matters including executive compensation and
competitor comparisons.  In addition, the use of this non-U.S. GAAP
measure provides an indication of our ability to service debt, and we consider
it an appropriate measure to use because of our highly leveraged
position.
 
 Adjusted
EBITDA has certain material limitations, primarily due to the exclusion of
certain amounts that are material to our 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 of other companies in our industry, limiting its
usefulness as a comparative measure.
 
 We use
Adjusted EBITDA to provide meaningful supplemental information regarding our
operating performance and profitability by excluding from EBITDA certain items
that we believe are not indicative of our ongoing operating results or will not
impact future operating cash flows as follows:
 
 •           Restructuring
and Impairment Charges - which consist primarily of facility closures and
other headcount reductions.  Historically, a significant amount of
these restructuring and impairment charges have been non-cash charges related to
the write-down of property, plant and equipment to estimated net realizable
value.  We exclude these restructuring and impairment charges to more
clearly reflect our ongoing operating performance.
 
 •           Stock
Compensation - non-cash charges associated with recognizing the fair value
of stock options granted to employees.  We exclude these charges to
more clearly reflect comparable year-over-year cash operating
performance.
 
 •           Costs
Relating to the Merger - professional fees and expenses incurred in
connection with effecting the Merix Acquisition.  We exclude these
fees and expenses because they are not representative of our customary operating
expenses.
  Table of Contents
 40
  Reconciliations
of operating (loss) income to Adjusted EBITDA for the years ended
December 31, 2009 and 2008, were as follows:
 
 December 31,Source
      (dollars in millions)
              
              2009
              
              
              2008Operating
      (loss)
      income
              
              $
              (4.7
              )
              
              $
              22.4Add-back:Depreciation
      and
      amortization
              
              
              51.4
              
              
              
              54.5Restructuring
      and
      impairment
              
              
              6.6
              
              
              
              15.1Non-cash
      stock compensation
      expense
              
              
              0.9
              
              
              
              0.6Costs
      related to the
      merger
              
              
              4.0
              
              
              
              -Adjusted
      EBITDA
              
              $
              58.2
              
              
              $
              92.6
 
 Adjusted
EBITDA decreased by $34.4 million, or 37.1%, primarily as a result of an
approximate 30.4% decrease in net sales and a 0.5 percentage point increase in
cost of good sold relative to consolidated net sales, partially offset by
reductions in selling, general and administrative expense.
 
 Interest Expense,
net.  Interest expense, net of interest income, for the year
ended December 31, 2009, was $34.4 million, compared with
$31.6 million for the year ended December 31, 2008.
 
 Interest
expense related to the Class A Junior preferred stock was approximately
$10.7 million and $9.8 million for the twelve months ended
December 31, 2009 and 2008, respectively.  On February 11, 2010,
in connection with the Recapitalization Agreement, we exchanged the outstanding
shares of Class A Junior preferred stock for approximately 7,658,226 shares of
our common stock.  In connection with this exchange, we expect to
record a gain or loss on the extinguishment of debt based on the difference
between the carrying balance of the Class A Junior preferred stock and the fair
value of the common shares issued.  As of February 11, 2010, our
common stock was not traded on any exchange.  As a result, as of the
date of this Report, we have not completed an estimate of the fair value of our
common stock nor the calculation of the gain or loss on the exchange of the
Class A Junior preferred stock.
 
 Interest
expense related to the $200.0 million 10.5% 2011 Senior Subordinated Notes (the
“2011 Notes”) declined by $1.0 million to approximately $20.0 million for the
year ended December 31, 2009, as compared to $21.0 million in 2008 as a
result of the redemption of $94.1 million par value of the 2011 Notes in
November 2009.  Interest expense related to the $220 million 12.0%
2015 Notes which we issued in November 2009 was approximately $2.9
million.  For the year ended December 31, 2009, interest expense
under our 2006 Credit Agreement, which we extinguished in September 2009,
declined by $0.7 million to $0.6 million as compared to 2008 due to lower
average borrowings.  Interest expense on capital leases declined by
approximately $0.2 million to approximately $0.4 million during the
year ended December 31, 2009, as compared with the prior year.
 
 Interest
income decreased $0.9 million to $0.5 million for the year ended
December 31, 2009, as compared with the year ended December 31, 2008,
as interest rates earned on cash deposits declined year over year.
 
 Income
Taxes.  Income tax expense of $7.8 million for the year
ended December 31, 2009, compares to an income tax expense of
$4.9 million for the year ended December 31, 2008.
 
 Our
income tax provision in both 2009 and 2008 relates primarily to expense from our
profitable operations in Asia.  Because of the substantial net
operating loss carry forwards existing in our U.S. and other tax
jurisdictions, we have not fully recognized income tax benefits related to our
substantial interest expense, among other expenses.
 
 Year
Ended December 31, 2008, Compared with Year Ended December 31,
2007
 
 Net
Sales.  Net sales for the year ended December 31, 2008,
were $712.8 million, representing a $1.5 million, or 0.2%, decrease
from net sales for the year ended December 31, 2007.
 
 Table of Contents
 41
 
 Net sales
by end-user market for the years ended December 31, 2008 and 2007, were as
follows:
 
 End-User
      Market (dollars in millions)
              
              2008
              
              
              2007Automotive
              
              $
              266.6
              
              
              $
              258.8Industrial &
      Instrumentation, Medical, Consumer, and Other
              
              
              189.7
              
              
              
              159.3Telecommunications
              
              
              184.2
              
              
              
              221.2Computer
      and Datacommunications
              
              
              72.3
              
              
              
              75.0Total
      net sales
              
              $
              712.8
              
              
              $
              714.3
 
 Our net
sales of products for end use in the automotive market grew by approximately
3.0% during the year ended December 31, 2008, based on strong demand early
in the year and new program wins with European and Asian automotive producers,
partially offset by weak demand in North America throughout the year, and in all
regions towards the end of the year.  The increase in the automotive
market was negatively impacted by an approximately 17.0% year-over-year decline
in fourth quarter 2008 net sales as a result of reduced global demand from
our automotive customers.  In the industrial and instrumentation,
medical, consumer and other market, new wind power related programs with an
existing customer were the primary driver of our 19.1% increase in net sales to
this end user market, in which a broad base of other customers remained
stable.  Net sales of products ultimately used in the
telecommunications market declined by approximately 16.7% from the year ended
December 31, 2007, to the year ended December 31, 2008, primarily
as a result of weak demand from our customers on select product
offerings.  An approximate 3.6% decrease in net sales for the year
ended December 31, 2008, of our products for use in the computer and
datacommunications markets is largely the result of an approximately 49.6%
year-over-year decline in fourth quarter 2008 net sales as a result of
reduced global demand from our computer and datacommunication customers, which
was partially offset by sales to a new customer and increased demand from
existing customers through the first nine months of the year.
 
 Net sales
by business segment for the years ended December 31, 2008 and 2007, were as
follows:
 
 Segment
      (dollars in millions)
              
              2008
              
              
              2007Printed
      Circuit Boards
              
              $
              489.8
              
              
              $
              489.8Assembly
      (a)
              
              
              196.6
              
              
              
              187.3Other
      (a)
              
              
              46.0
              
              
              
              58.5Eliminations
              
              
              (19.6
              )
              
              
              (21.3
              )Total
      net sales
              
              $
              712.8
              
              
              $
              714.3(a)  With
      the closure of the Milwaukee Facility in 2009, we reclassified the
      operating results of the Milwaukee Facility to“Other.”
      Segment results for all periods presented have been reclassified for
      comparison purposes.
 
 Printed
Circuit Boards segment net sales, including intersegment sales, were flat for
the year ended December 31, 2008, as compared with 2007, as an
approximately 9.2% year-over-year growth in sales through the third quarter of
2008 was offset by falling demand during the fourth quarter of 2008. Four
principal factors, including volume, selling price, product mix and currency
changes, can affect PCB sales growth or decline from one period to the
next.  In 2008 compared with 2007, there was a decrease in sales
volume that was offset by selling price increases introduced towards the end of
the third quarter 2008.
 
 Finished
PCB volume, measured as total square feet of PCB surface area, decreased by
approximately 3.6% in 2008 compared with 2007, while our capacity remained
unchanged.
 
 Like most
electronic components, Printed Circuit Boards segment product prices
historically have declined in sequential periods as a result of competitive
pressures and manufacturing cost efficiencies.  However, in September
and October of 2008, we implemented limited PCB product price increases to
compensate for unusually high increases in the cost of commodity materials,
including petroleum, copper and other precious metals that occurred during the
first nine months of 2008.
  Table of Contents
 42
 
 Printed
Circuit Boards segment sales mix is affected by several factors, including layer
count, hole density, line and space density, materials content, order size and
other factors.  For example, incremental layer content generally
results in a higher selling price for an equivalent finished product outer
surface square footage.  In 2008, the volume mixture of different
layer count PCB products was consistent with 2007.  As a result, we
estimate that product mix changes did not significantly impact 2008 sales as
compared with 2007.
 
 Approximately
10% of our Printed Circuit Boards segment sales are denominated in currencies
other than the U.S. dollar.  The effects of changing currency
rates added less than 1.0% to sales in 2008 compared with 2007.
 
 Assembly
segment net sales increased by $9.3 million, or 5.0%, to
$196.6 million for the year ended
December 31, 2008.  The increase was the result of new wind
power related programs with an existing customer in our industrial and
instrumentation end market, partially offset by reduced demand from select
customers in our telecommunications end market.
 
 Other
sales relate to the Milwaukee Facility, which for segment reporting purposes,
are included in “Other” as a result of its closure in
May 2009.
 
 Cost of Goods
Sold.  Cost of goods sold, exclusive of items shown separately
in the consolidated statement of operations for the year ended December 31,
2008, was $568.4 million, or 79.7% of consolidated net
sales.  This represents a 0.1 percentage point improvement from
the 79.8% of consolidated net sales achieved during 2007.  The
improvement was a result of successful implementation of cost improvement
initiatives, partially offset by adverse trends in global commodities and
currency exchange rates and cost trends in China.
 
 In our
Printed Circuit Boards segment, the cost of direct materials represents
approximately 60% of its cost of sales.  As a result, the quantities
of materials and supplies used for production are responsible for the most
significant costs in this segment.  Materials, labor and overhead
costs in the segment have been impacted by adverse trends in global commodities
and currency exchange rates and minimum wage increases.  Copper is
used in our circuit plating processes and by our suppliers in the form of
high-quality foil to make laminate materials that are the basic building blocks
in our products.  Despite steep global copper price declines during
the fourth quarter of 2008, the average cost of copper was higher during most of
2008, when compared to 2007.
 
 Other
cost trends in China also adversely impacted our costs, including increases in
electricity and diesel fuel prices, which began in July 2008.  In
addition, the RMB strengthened versus the U.S. dollar by more than 5.0%
during 2008.  Despite these cost increases, wages and local operating
costs in China remain among the most competitive in the
world.  Finally, cost of goods sold was favorably impacted by the
elimination of professional fees associated with initiatives to reduce
production costs.  In addition to the $7.6 million improvement
related to professional fees, 2008 reflects cost improvements associated with
these initiatives.
 
 Cost of
goods sold in our Assembly segment relates primarily to component materials
costs.  As a result, trends in net sales for the segment drive similar
trends in cost of goods sold.  However, in 2008 our costs were
negatively impacted by startup costs for production of new products related to
new customers and new programs with existing customers.  In addition,
costs of materials, labor and overhead incurred in RMB were negatively impacted
by the appreciation of that currency.
 
 Selling, General
and Administrative Costs.  Selling, general and administrative
costs were $52.5 million, or 7.4% of net sales for the year ended
December 31, 2008, and decreased by $5.7 million compared to the year
ended December 31, 2007.  The decrease was primarily due to
reduced professional fees and other cost savings initiatives, as well as lower
bonus and stock-based compensation.  Approximately one-half of our
costs are incurred to support our global operations and are not specific to any
segment.  These common costs were allocated to our Printed Circuit
Boards segment and Assembly segment.
 
 Depreciation.  Depreciation
expense for the year ended December 31, 2008, was $53.3 million,
including $46.3 million related to our Printed Circuit Boards segment,
$5.0 million related to our Assembly segment and $2.0 million related
to “Other.”  Depreciation expense in our Printed Circuit Boards
segment and Assembly segment
increased by approximately $2.6 million and $0.2 million,
respectively, compared with the year ended December 31, 2007, as a
result of investment in new equipment.  Depreciation expense in
“Other,” which relates to the Milwaukee Facility, declined by approximately
$0.8 million.
  Table of Contents
 43
  Restructuring and
Impairment.  In light of the global economic downturn which
began towards the end of 2008, and as part of our ongoing efforts to align
capacity, overhead costs and operating expenses with market demand, we initiated
restructuring activities during the fourth quarter of 2008.  These
activities were completed during the first half of 2009, and included the
shutdown of our Milwaukee Facility and workforce reductions across our global
operations.
 
 For the
year ended December 31, 2008, we recorded restructuring charges of
approximately $15.1 million, which included approximately $9.5 million
related to headcount reductions and approximately $5.6 million of non-cash
asset impairment charges.  The total $15.1 million charge is
attributable to our Printed Circuit Boards, Assembly and “Other” segments in
amounts totaling approximately $10.0 million, $4.4 million and
$0.7 million, respectively.
 
 Previously,
dating back to 2000, we have incurred substantial costs to downsize and/or close
facilities in Europe and North America in response to market pressures for low
cost products.  We reported net restructuring and impairment losses of
$0.3 million for the year ended December 31, 2007, related to closed
facilities sold late in 2006.
 
 The
primary components of restructuring and impairment expense for the years ended
December 31, 2008 and 2007, are as follows:
 
 Restructuring
      Activity (dollars in millions)
              
              2008
              
              
              2007Personnel
      and severance
              
              $
              9.5
              
              
              $
              -Lease
      and other contractual commitment expenses
              
              
              -
              
              
              
              0.3Asset
      impairments
              
              
              5.6
              
              
              
              -Total
      expense, net
              
              $
              15.1
              
              
              $
              0.3
 
 Operating
Income.  Operating income of $22.4 million for the year
ended December 31, 2008, represents a decrease of $12.1 million
compared with operating income of $34.5 million during the year ended
December 31, 2007.  The primary sources of operating income
for the years ended December 31, 2008 and 2007, are as
follows:
 
 December 31,Source
      (dollars in millions)
              
              2008
              
              
              2007Printed
      Circuit Boards segment
      (a)
              
              $
              23.8
              
              
              $
              26.1Assembly
      segment
      (a)(b)
              
              
              8.8
              
              
              
              8.4Other
      (b)
              
              
              (10.2
              )
              
              
              -Operating
      income
              
              $
              22.4
              
              
              $
              34.5(a)
      During 2008, we refined our methodology for allocating common selling,
      general and administrative expenses to our segments to better reflect the
      efforts       undertaken to support each
      segment. Previously, these costs were allocated based solely on each
      segment’s percentage of total net sales. For the year
            ended December 31, 2007,
      operating income has been restated to conform to the presentation in the
      current period.(b)
      With the closure of the Milwaukee Facility in 2009, we reclassified the
      operating results of the Milwaukee Facility to “Other.” Segment results
      for all periods presented have been reclassified for comparison
      purposes.
 
 Operating
income of our Printed Circuit Boards segment decreased by $2.3 million to
$23.8 million for the year ended December 31, 2008, compared to
$26.1 million for the year ended December 31, 2007.  The
decrease is primarily the result of $7.8 million of severance costs related
to restructuring activities, non-cash fixed asset impairment charges of
$1.7 million, sales declines during the fourth quarter, currency exchange
rates and increased depreciation expense, partially offset by net cost
improvements and a reduction in professional fees associated with our continuing
initiatives to reduce production costs.
 
 Table of Contents
 44
 
 Operating
income of our Assembly segment increased by $0.4 million to
$8.8 million for the year ended December 31, 2008, compared to
operating income of $8.4 million in 2007.  The increase is
primarily the result of increased sales, partially offset by restructuring
costs, currency exchange rates and increased depreciation expense.
 
 The
operating loss of $10.2 million in “Other” for the year ended
December 31, 2008, relates to the Milwaukee Facility, and is primarily
the result of a $12.5 million decline in net sales, and non-cash fixed
asset impairment charges of $3.9 million.
 
 Adjusted
EBITDA.  Reconciliations of operating income to Adjusted EBITDA
for the years ended December 31, 2008 and 2007, were as
follows:
 
 December 31,Source
      (dollars in millions)
              
              2008
              
              
              2007Operating
      Income
              
              $
              22.4
              
              
              $
              34.5Add-back:Depreciation
      and
      amortization
              
              
              54.5
              
              
              
              51.0Restructuring
      and
      impairment
              
              
              15.1
              
              
              
              0.3Non-cash
      stock compensation
      expense
              
              
              0.6
              
              
              
              2.1Adjusted
      EBITDA
              
              $
              92.6
              
              
              $
              87.9
 
 Adjusted
EBITDA increased by $4.7 million, or 5.3%, primarily as a result of an
approximate 9.9% decrease in selling, general and administrative expense and
reduced cost of goods sold relative to our sales.
 
 Interest Expense,
net.  Interest expense, net of interest income, for the year
ended December 31, 2008, was $31.6 million, compared with
$30.6 million for the year ended December 31,
2007.  Interest expense related to the Class A Junior preferred
stock was approximately $9.8 million and $8.9 million for the twelve
months ended December 31, 2008 and 2007, respectively.  Interest
expense related to the 2011 Notes was $21.0 million in each year, as the
$200.0 million principal and the 10.5% interest rate remained unchanged
since the 2011 Notes were issued in 2003.
 
 For the
year ended December 31, 2008, interest expense was $1.3 million under
our 2006 Credit Agreement.  Interest expense on capital leases
declined by approximately $0.1 million to approximately $0.6 million
during the year ended December 31, 2008, as compared to the prior
year.
 
 Interest
income increased $0.3 million to $1.4 million for the year ended
December 31, 2008, as compared to the year ended December 31, 2007, on
higher cash deposits in interest bearing accounts.
 
 Income
Taxes.  Income tax expense of $4.9 million for the year
ended December 31, 2008, compares to an income tax benefit of
$6.9 million for the year ended December 31, 2007.  For the
year ended December 31, 2007, we recorded a $10.4 million benefit
related to the settlement of prior uncertain tax positions and a
$3.2 million benefit related to certain tax benefits received in China
related to additional investments made.  In addition, we revalued
certain foreign deferred tax assets and liabilities as a result of a March 2007
tax law change in China.  The income tax provision for the year ended
December 31, 2007, includes approximately $1.7 million of deferred tax
expense related to this revaluation.
 
 Excluding
these items, our income tax provision in both 2008 and 2007 relates primarily to
expense from our profitable operations in China and Hong
Kong.  Because of the substantial net operating loss carryforwards
previously existing in our U.S. and other tax jurisdictions, we have not
fully recognized income tax benefits related to our substantial interest
expense, among other expenses.
 
 Table of Contents
 45
 
 Liquidity
and Capital Resources
 
 Cash
Flow
 
 Net cash
provided by operating activities for the year ended December 31, 2009, was
$47.6 million, compared with $53.7 million for the year ended
December 31, 2008, and $63.8 million for the year ended
December 31, 2007.  The decrease in net cash from operating
activities is primarily due to reduced income from operations and cash payments
of approximately $14.1 million for severance and other restructuring costs,
partially offset by positive changes in working capital.  The decrease
in net cash provided by operating activities from 2007 to 2008 was primarily due
to lower net income, partially offset by positive changes in working
capital.
 
 Net cash
used in investing activities for the year ended December 31, 2009, was
$17.6 million, compared with $48.3 million for the year ended
December 31, 2008, and $37.0 million for the year ended
December 31, 2007.  The decrease from 2008 to 2009 was due to
significantly lower capital expenditures and the sale of equipment related to
the closure of our Milwaukee Facility.  The increase from 2007 to 2008
was due primarily to higher capital expenditures.
 
 Given the
uncertainty about global economic conditions, we have and will continue to focus
on managing capital expenditures to respond to changes in demand or other
economic conditions.  Our Printed Circuit Boards segment is a
capital-intensive business that requires annual spending to keep pace with
customer demands for new technologies, cost reductions and product quality
standards.  The spending required to meet our customers’ requirements
is incremental to recurring repair and replacement capital expenditures required
to maintain our existing production capacities and
capabilities.  Investing cash flows include capital expenditures by
our Printed Circuit Boards segment of $17.5 million, $42.9 million and
$29.5 million for the years ended December 31, 2009, 2008 and
2007, respectively.  Recovering sales growth in our Printed Circuit
Boards segment and advances in technological requirements to meet customer needs
were the primary drivers of our investments in property and equipment in that
segment.  Capital expenditures related to our Assembly segment for the
years ended December 31, 2009, 2008 and 2007 were $2.2 million,
$2.8 million and $4.0 million, respectively.
 
 Net cash
used in financing activities was $4.1 million for the year ended
December 31, 2009, which related to the issuance of $220.0 million par
value 12% Senior Secured Notes due 2015 (the “2015 Notes”), including an
original issue discount of approximately $8.2 million, the redemption of $94.1
million of par value of our 2011 Notes, including a tender premium and other
related costs of $0.9 million, the repayment of $15.5 million term loan
balance under our 2006 Credit Agreement, $10.0 million of borrowings on our
$29.3 million Guangzhou 2009 Credit Facility, and a $2.1 million payment
related to a capital lease obligation.  During the period we also
incurred financing costs of approximately $7.4 million, which primarily related
to the issuance of the 2015 Notes and the Guangzhou 2009 Credit
Facility.  Net cash provided by financing activities of
$13.6 million for the year ended December 31, 2008, related to net
borrowings under the term loan facility of the 2006 Credit Agreement of
$15.5 million, offset by the payment of capital lease obligations of
$1.9 million.  Net cash used in financing activities of
$0.8 million for the year ended December 31, 2007, related entirely to
the payment of capital lease obligations.
 
 Financing
Arrangements
 
 During
2009 and the first quarter of 2010, and in anticipation of the Merix
Acquisition, we undertook several financing transactions in order to better
align our capital structure with our long-term financial
outlook.  These transactions included, as further described below, the
retirement of our $200 million 2011 Notes, the issuance of our $220 million 2015
Notes, the extinguishment of our 2006 Credit Facility and the establishment of
our 2009 Guangzhou Credit Facility and 2010 Credit Facility.
 
 On
October 27, 2009, our subsidiary, Viasystems, Inc., commenced a tender offer to
purchase up to $200 million aggregate principal amount of its outstanding 2011
Notes.  On November 24, 2009, Viasystems, Inc. completed a private
placement offering of $220 million in aggregate principal amount of the 2015
Notes.  The net proceeds of the 2015 Notes offering were used to fund
the tender of approximately $94.1 million of the 2011 Notes and were used to
redeem, in January 2010, the 2011 Notes that remained outstanding after the
expiration of the tender offer and to pay related transaction fees and
expenses.  In connection with the issuance of the 2015 Notes, we
incurred financing
fees of approximately $7.3 million.  In connection with the tender
offer in 2009 and subsequent redemption in 2010, we incurred a loss on the early
extinguishment of debt of $1,628 and $681, respectively.
 
 Table of Contents
 46
 
 In
September 2009, our Guangzhou Termbray Electronics Technology Company
Limited subsidiary consummated a 200 million RMB (approximately $29.3 million
U.S. Dollars based on the exchange rate at December 31, 2009) revolving credit
facility (the “Guangzhou 2009 Credit Facility”) with China Construction Bank,
Guangzhou Economic and Technological Development District Branch.  The
Guangzhou 2009 Credit Facility provides for borrowings denominated in RMB and
foreign currencies, including the U.S. dollar; and borrowings are secured
by a mortgage lien on the buildings and land lease at our manufacturing facility
in Guangzhou, China.  The revolving credit facility is renewable
annually beginning June 30, 2010.  Loans under the credit
facility bear interest at the rate of (i) LIBOR plus a margin negotiated
prior to each U.S. dollar denominated loan or (ii) the interest rate
quoted by the People’s Bank of China multiplied by 0.9 for RMB denominated
loans.  The Guangzhou 2009 Credit Facility has certain restrictions
and other covenants that are customary for similar credit arrangements; however,
there are no financial covenants contained in this facility.  As of
December 31, 2009, $10.0 million in U.S. dollar loans were
outstanding under the Guangzhou 2009 Credit Facility, and approximately
$19.3 million of the revolving credit facility was unused and
available.
 
 In
September 2009, in connection with the consummation of the Guangzhou 2009 Credit
Facility, we provided notice to voluntarily prepay and cancel the 2006 Credit
Agreement and repaid all outstanding amounts under the 2006 Credit
Agreement.  The 2006 Credit Agreement was for a term of four years and
provided a $60.0 million revolving credit facility and a $20.0 million
term loan facility.  As a result of the prepayment and cancellation of
the 2006 Credit Agreement, we recorded a loss on early extinguishment of debt of
$0.7 million in conjunction with the write-off of related unamortized
deferred financing costs.
 
 Subsequent
to December 31, 2009, on February 16, 2010, we entered into a senior secured
revolving credit agreement (the “2010 Credit Agreement”), with Wachovia Bank,
National Association, which provides a secured revolving credit facility in an
aggregate principal amount of up to $75 million with an initial maturity of four
years. The annual interest rates applicable to loans under the 2010 Credit
Agreement are, at our option, either the Base Rate or Eurodollar Rate (each as
defined in the 2010 Credit Agreement) plus, in each case, an applicable margin.
The applicable margin is tied to our Quarterly Average Excess Availability (as
defined in the 2010 Credit Agreement) and ranges from 2.00% to 2.50% for Base
Rate loans and 3.50% to 4.00% for Eurodollar Rate loans. In addition, we are
required to pay an Unused Line Fee and other fees as defined in the 2010 Credit
Agreement.
 
 The 2010
Credit Agreement is guaranteed by and secured by substantially all of the assets
of our current and future domestic subsidiaries, subject to certain exceptions
as set forth in the 2010 Credit Agreement. The 2010 Credit Agreement contains
certain negative covenants restricting and limiting our ability to, among other
things:
 
 •incur debt, incur contingent obligations and issue certain types of
preferred stock;
 •create liens;
 •pay dividends, distributions or make other specified restricted
payments;
 •make certain investments and acquisitions;
 •enter into certain transactions with affiliates; and
 •merge or consolidate with any other entity or sell, assign, transfer,
lease, convey or otherwise dispose ofassets.
 
 The 2010
Credit Agreement includes a financial covenant requirement that, if the Excess
Availability (as defined in the 2010 Credit Agreement) is less than $15 million
then we must maintain, on a monthly basis, a minimum fixed charge coverage ratio
of 1.1.
 
 Table of Contents
 47
 
 Liquidity
 
 We had
cash and cash equivalents at December 31, 2009 and 2008, of $109.0
million and $83.1 million, respectively.  At
December 31, 2009, we had outstanding borrowings of $10.0 million
under the Guangzhou 2009 Credit Facility.
 
 Given the
uncertainty about global economic conditions, management has and will continue
to focus on managing capital expenditures to respond to changing economic
conditions.  We believe that cash flow from operations, available cash
on hand and the cash available from the Guangzhou 2009 Credit Facility and the
2010 Credit Agreement will be sufficient to fund our capital expenditures and
other currently anticipated cash needs, including, i) our semi-annual $13.2
million interest payments on our senior secured notes, payable in January and
July each year (beginning July 2010), ii) working capital needs, iii) scheduled
capital lease payments for equipment leased by our Printed Circuit Boards
segment, iv) integration and restructuring costs related to the Merix
Acquisition, and v) debt service requirements in connection with the Guangzhou
2009 Credit Facility.
 
 Our
ability to meet our cash needs through cash generated by our operating
activities will depend on the demand for our products, as well as general
economic, financial, competitive and other factors, many of which are beyond our
control.  We cannot assure you that our business will generate
sufficient cash flow from operations, that currently anticipated cost savings
and operating improvements will be realized on schedule or that future
borrowings will be available to us under our credit facility and our ability to
raise third party financing in an amount sufficient to enable us to pay our
indebtedness or to fund our other liquidity needs.  We may need to
refinance all or a portion of our indebtedness.
 
 Recent
instability in the financial markets has led to the consolidation, restructuring
and closure of certain financial institutions.  Should any of the
financial institutions who maintain our cash deposits or who are party to our
credit agreements become unable to repay our deposits or honor their commitments
under our credit agreements, it could have a material adverse effect on our
liquidity.  As of December 31, 2009, approximately 19.8% of
our cash balances were on deposit with Citibank (China), which is a subsidiary
of Citigroup Inc.  During 2009, the United States government took
certain actions to stabilize Citigroup Inc. in an effort to remove uncertainty
and restore confidence in that company.  Management has been
monitoring, and will continue to monitor, the stability of Citigroup Inc. and
the appropriateness of our depository relationship with Citibank
(China).
 
 Off
Balance Sheet Arrangements
 
 We do not
have any off balance sheet arrangements.
 
 Backlog
 
 We
estimate that our backlog of unfilled orders as of December 31, 2009,
was approximately $97.8 million, which includes $74.7 million and
$23.1 million from our Printed Circuit Board and Assembly segments,
respectively.  This compares with our backlog of unfilled orders of
$78.0 million at December 31, 2008, which included $54.1 million
and $23.9 million from our Printed Circuit Board and Assembly segments,
respectively.  Because unfilled orders may be cancelled prior to
delivery, the backlog outstanding at any point in time is not necessarily
indicative of the level of business to be expected in the ensuing
period.
 
 Related
Party Transactions
 
 Monitoring
and Oversight Agreement
 
 We
entered into a ten-year monitoring and oversight agreement with HM Co.,
effective as of January 31, 2003.  Under the monitoring and
oversight agreement, we are required to pay HM Co. an annual fee for oversight
and monitoring services equal to the lesser of (i) 2% of our consolidated
adjusted EBITDA for such year or (ii) $1.5 million.  The
fee is payable for the preceding year following the completion of the audited
financial statements for the preceding year, provided that HM Co. may elect to
defer the payment of its fees, in which case these amounts will become due and
payable at such time as HM Co. elects to require the payment of these
obligations.  The monitoring and oversight agreement makes available
the resources of HM Co. concerning a variety of financial and operational
matters.  These services have been provided not only by Mr. Furst and
Mr. Herring, outside the scope of their duties as our directors, but also from
numerous other principals and employees of HM Co.  Mr. Furst and Mr.
Herring are each principals of HM Co.  HM Co. has performed various
monitoring and oversight services, including providing input in management’s
establishment of our financial and strategic acquisition plans.  HM
Co. monitors the viability and implementation of our strategic plan through
actions such as review of monthly financial data, management briefings and
facility visits.  HM Co. is also entitled to reimbursement for any
expenses incurred by it in connection with rendering services under the
monitoring and oversight agreement.  In addition, we have agreed to
indemnify HM Co., our affiliates, and their respective directors, officers,
controlling persons, agents and employees from and against all claims,
liabilities, losses, damages, expenses and fees and disbursements of counsel
related to or arising out of or in connection with the services rendered by HM
Co. under the monitoring and oversight agreement and not resulting primarily
from the bad faith, gross negligence, or willful misconduct of HM
Co.  The consolidated statements of operations include expenses of
$1.2 million, $1.5 million and $1.5 million for the years ended December 31,
2009, 2008 and 2007, respectively, related to the monitoring and oversight
agreement.  On February 11, 2010, under the terms and
conditions of the Recapitalization Agreement, the monitoring and oversight
agreement was terminated in consideration for the payment by us of a cash
termination fee of approximately $4.4 million to HM Co.
  Table of Contents
 48
 
 Critical
Accounting Policies and Estimates
 
 The
preparation of financial statements in conformity with U.S. GAAP requires
that management make certain estimates and assumptions that affect amounts
reported in the financial statements and accompanying notes.  Actual
results may differ from those estimates and assumptions and the differences may
be material.  Significant accounting policies, estimates and judgments
that management believes are the most critical to aid in fully understanding and
evaluating the reported financial results are discussed below.
 
 Revenue
Recognition
 
 We
recognize revenue when all of the following criteria are satisfied: persuasive
evidence of an arrangement exists; risk of loss and title transfer to the
customer; the price is fixed and determinable; and collectibility is reasonably
assured. Sales and related costs of goods sold are included in income when goods
are shipped to the customer in accordance with the delivery terms and the above
criteria are satisfied.  All services are performed prior to invoicing
customers for any products manufactured by us.  We monitor and track
product returns, which have historically been within our expectations and the
provisions established. Reserves for product returns are recorded based on
historical trend rates at the time of sale.  Despite our efforts to
improve our quality and service to customers, we cannot guarantee that we will
continue to experience the same or better return rates than we have in the
past.  Any significant increase in returns could have a material
negative impact on our operating results.
 
 Accounts
Receivable and Allowance for Doubtful Accounts
 
 Accounts
receivable balances represent customer trade receivables generated from our
operations.  We evaluate collectibility of accounts receivable based
on a specific case-by-case analysis of larger accounts; and based on an overall
analysis of historical experience, past due status of the entire accounts
receivable balance and the current economic environment.  Based on
this evaluation, we make adjustments to the allowance for doubtful accounts for
expected losses.  We also perform credit evaluations and adjust credit
limits based upon each customer’s payment history and
creditworthiness.  While credit losses have historically been within
our expectations and the provisions established, actual bad debt write-offs may
differ from our estimates, resulting in higher or lower charges in the future
for our allowance for doubtful accounts.
 
 Table of Contents
 49
 Inventories
 
 Inventories
are stated at the lower of cost (valued using the first-in, first-out (FIFO)
method) or market value.  Cost includes raw materials, labor and
manufacturing overhead.
 
 We apply
judgment in valuing our inventories by assessing the net realizable value of our
inventories based on current expected selling prices, as well as factors such as
obsolescence and excess stock.  We provide valuation allowances as
necessary.  Should we not achieve our expectations of the net
realizable value of our inventory, future losses may occur.
 
 Long-Lived
Assets, excluding goodwill
  We review
the carrying amounts of property, plant and equipment, definite-lived intangible
assets and other long-lived assets for potential impairment if an event occurs
or circumstances change that indicates the carrying amount may not be
recoverable. In evaluating the recoverability of a long-lived asset, we compare
the carrying value of the assets with corresponding estimated undiscounted
future operating cash flows. In the event the carrying value of long-lived
assets are not recoverable by future undiscounted operating cash flows,
impairment may exist. In the event of impairment, an impairment charge would be
measured as the amount by which the carrying value of the relevant long-lived
assets exceeds their fair value. Notes 4 and 6 to the consolidated financial
statements disclose the impact of charges taken to recognize the impairment of
fixed assets during 2009 and 2008 and the factors which led to these
impairments.
 
 Goodwill
 
 We
conduct an assessment of the carrying value of goodwill annually, as of the
first day of our fourth fiscal quarter, or more frequently if circumstance arise
which would indicate the fair value of a reporting unit is below its carrying
amount. This test requires us to make certain assumptions and estimates in
determining fair value of our reporting units. At December 31, 2009, our
goodwill balance relates entirely to our Printed Circuit Boards segment. We used
multiple methods to estimate the fair value of our reporting units, including
discounted cash flow analyses and an EBITDA-multiple approach, which derives an
implied fair value of a business unit based on the market value of comparable
companies expressed as a multiple of those companies’ earnings before interest,
taxes, depreciation and amortization (“EBITDA”). Discounted cash flow analyses
require us to make significant assumptions about discount rates, sales growth,
profitability and other factors. The EBITDA-multiple approach requires us to
judgmentally selected comparable companies based on factors such as their
nature, scope and size.  While significant judgment is required, we
believe that our assumptions and estimates are reasonable.  However,
should our assumptions change in the future, our fair value models could result
in lower fair values, which could materially affect the value of goodwill and
our operating results.  In addition to performing the annual
impairment tests for 2009 and 2008, we reviewed the goodwill balance for
impairment upon the announcement of certain restructuring plans on
November 24, 2008.  No adjustments were recorded to the balance
of goodwill as a result of these reviews.
 
 Income
Taxes
 
 We record
a valuation allowance to reduce our deferred tax assets to the amount that we
believe will more likely than not be realized.  We have considered
future taxable income and ongoing prudent, feasible tax planning strategies in
assessing the need for the valuation allowance, but in the event we were to
determine that we would not be able to realize all or part of our net deferred
tax assets in the future, an adjustment to the net deferred tax assets would be
charged to income in the period such determination was
made.  Similarly, should we determine that we would be able to realize
our deferred tax assets in the future in excess of the deferred tax asset’s net
recorded amount, an adjustment to the net deferred tax asset would increase
income in the period such determination was made.
 
 Derivative
Financial Instruments and Fair Value Measurements
 
 We
conduct our business in various regions of the world, and export and import
products to and from several countries.  As a result, a significant
portion of our expenses and some of our sales are denominated in local currencies.  From
time to time, we enter into foreign exchange forward contracts to minimize the
short-term impact of foreign currency fluctuations.  However, there
can be no assurance that these hedging activities will eliminate or reduce
foreign currency risk.  We do not engage in hedging transactions for
speculative investment reasons.
 
 Table of Contents
 50
 
 The
foreign exchange forward contracts are designated as cash flow hedges and are
accounted for at fair value.  We record deferred gains and losses
related to cash flow hedges based on their fair value using a market approach
and Level 2 inputs.  The effective portion of the change in each cash
flow hedge’s gain or loss is reported as a component of other comprehensive
income, net of taxes.  The ineffective portion of the change in the
cash flow hedge’s gain or loss is recorded in earnings at each measurement
date.  Gains and losses on derivative contracts are reclassified from
accumulated other comprehensive income (loss) to current period earnings in the
line item in which the hedged item is recorded at the time the contracts are
settled.  Our hedging operations historically have not been material,
and gains or losses from these operations have not been material to our cash
flows, financial position or results of operations.  At
December 31, 2009, we have foreign exchange contracts outstanding that
hedge a notional amount of 480 million RMB at an average exchange rate of
6.770 with a weighted average remaining maturity of
4.0 months.
 
 Recently
Adopted Accounting Pronouncements
 
 As of
January 1, 2009, we adopted new accounting standards related to disclosures
about derivative instruments, nonderivative instruments that are designed and
qualify as hedging instruments and related hedged items.  These
standards do not change the way we account for derivates and hedging activities,
but do enhance our disclosures concerning the effect of these instruments on our
financial statements from their use.  Upon adoption, there was no
effect on our financial position, results of operations or cash
flows.
 
 In May
2009, the Financial Accounting Standards Board (the “FASB”) established new
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or available
to be issued.  We adopted the new standards as of June 30, 2009,
and upon adoption, there was no material effect on our financial position,
results of operations or cash flows.
 
 In June
2009, the FASB established, with effect from July 1, 2009, the FASB
Accounting Standards Codificationtm
(the “Codification”) as the source of authoritative U.S. GAAP recognized by
the FASB to be applied by nongovernmental entities.  Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative U.S. GAAP for SEC registrants.  We
adopted the Codification beginning July 1, 2009, and while it will
impact the way we refer to accounting pronouncements in our disclosures, it did
not affect our financial position, results of operations or cash
flows.
 
 Table of Contents
 51
 
 Contractual
Obligations
 
 The
following table provides a summary of future payments due under contractual
obligations and commitments as of December 31, 2009:
 
 Payments
      due by periodContractual
      Obligations (dollars in millions)
              
              Less
      than
                1 year
              
              
              1-3
                years
              
              
              3-5
                years
              
              
              More
      than
                5 years
              
              
              Total2015
      Notes
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              220.0
              
              
              $
              220.0Interest
      on 2015 Notes
              
              
              17.0
              
              
              
              52.8
              
              
              
              52.8
              
              
              
              13.2
              
              
              
              135.82011
      Notes
              
              
              105.9
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              105.9Interest
      on 2011 Notes
              
              
              5.7
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              5.7Guangzhou
      2009 Credit Facility
              
              
              10.0
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              10.0Capital
      lease payments
              
              
              2.6
              
              
              
              0.2
              
              
              
              0.2
              
              
              
              0.8
              
              
              
              3.8Operating
      leases
              
              
              3.7
              
              
              
              3.0
              
              
              
              0.8
              
              
              
              1.3
              
              
              
              8.8Restructuring
      payments
              
              
              2.6
              
              
              
              0.2
              
              
              
              0.1
              
              
              
              1.2
              
              
              
              4.1Management
      fees (a)
              
              
              1.5
              
              
              
              0.6
              
              
              
              0.7
              
              
              
              12.3
              
              
              
              15.1Unrecognized
      tax benefits (b)
              
              
              0.1
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              0.1Deferred
      compensation
              
              
              0.1
              
              
              
              0.2
              
              
              
              0.2
              
              
              
              1.7
              
              
              
              2.2Purchase
      orders
              
              
              19.4
              
              
              
              0.3
              
              
              
              -
              
              
              
              -
              
              
              
              19.7Total
      (c)
              
              $
              168.6
              
              
              $
              57.3
              
              
              $
              54.8
              
              
              $
              250.5
              
              
              $
              531.2(a)    Includes
      a management fee of $1.2 million owed to HM Co. in 2009 in connection
      with the monitoring and oversight agreement, and excludes a
      $4.4 million termination fee that we became contractually obligated
      to pay HM Co. in February 2010, pursuant to the Recapitalization
      Agreement.(b)   Includes
      the liability for unrecognized tax benefits that could be settled in the
      next twelve months and has been classified as current income taxes payable
      in the consolidated balance sheet at December 31, 2009. The liability
      for unrecognized tax benefits of $18.7 million included in other
      non-current liabilities at December 31, 2009, has been excluded
      from the above table as we cannot make a reasonably reliable estimate of
      the timing of future payments.(c)    Excludes
      the redemption of Class B Senior preferred stock and Class A Junior
      preferred stock of $203.6 million and $159.2 million, respectively, as, in
      connection with the Recapitalization Agreement, these obligations were
      satisfied by a conversion to common stock on February 16,
      2010.
 
 Item 7A.  Quantitative and Qualitative Disclosures About
Market Risk
 
 Interest
Rate Risk
 
 As of
December 31, 2009, we had a $10.0 million outstanding short-term
loan with a variable interest rate, and we may have additional variable rate
long-term debt in the future.  Accordingly, our earnings and cash
flows could be affected by changes in interest rates in the
future.  As of December 31, 2009, our variable rate debt
bears interest at the London Inter-Bank Offer Rate (“LIBOR”) plus 0.500% per
annum.  Based on the December 31, 2009, LIBOR rate, we do
not believe a 10% movement in LIBOR would have a material effect on our
financial condition, operating results or cash flows.
 
 Foreign
Currency Risk
 
 We
conduct our business in various regions of the world and export and import
products to and from several countries.  Our operations may,
therefore, be subject to volatility because of currency fluctuations,
principally the Chinese RMB, Hong Kong dollar, Canadian dollar, Mexican peso and
the Euro.  A significant portion of our expenses and some of our sales
are in local currencies, and our results of operations may be affected adversely
as currency fluctuations affect our product prices and operating costs or those
of our competitors.  From time to time, we enter into foreign exchange
forward contracts to minimize the short-term impact of foreign currency
fluctuations in Chinese RMB.  We do not engage in hedging transactions
for speculative investment reasons.  Our hedging transactions
historically have not been material, and gains or losses from these transactions
have not been material to our cash flows, financial position or results from
operations.  There can be no assurance that our hedging operations
will eliminate or substantially reduce risks associated with fluctuating
currencies.  Based on December 31, 2009, exchange rates, an
increase or decrease in foreign exchange rates of 10% (ignoring the effects of
hedging) would result in an increase or decrease, respectively, in our operating
expenses of approximately $29.2 million per year.
 
 Table of Contents
 52
 
 Commodity
Price Risk
 
 We
purchase diesel fuel to generate portions of our energy in certain of our
manufacturing facilities using generators, and we will be required to bear the
increased cost of generating energy if the cost of oil increases.  In
addition, the materials we purchase to manufacture PCBs contain copper, gold,
silver and tin.  To the extent prices for such metals increase, our
cost to manufacture PCBs will increase.  Prices for copper, gold,
silver, tin and oil have a history of substantial fluctuation in recent
years.  Future price increases for such commodities would increase our
cost and could have an adverse effect on our results of operations.
 
 Item 8.   Financial Statements and Supplementary
Data
 
 Index
To Financial Statements
 
 Viasystems
      Group, Inc. & SubsidiariesReport
      of Independent Registered Public Accounting
      Firm
              53Consolidated
      Balance Sheets as of December 31, 2009 and
      2008
              54Consolidated
      Statements of Operations for the years ended December 31, 2009, 2008 and
      2007
              55Consolidated
      Statements of Stockholder’s Equity (Deficit) and Comprehensive Income
      (Loss) for the years ended December 31, 2009, 2008 and
2007
              56Consolidated
      Statements of Cash Flows for the years ended December 31, 2009, 2008 and
      2007
              57Notes
      to Consolidated Financial
      Statements
              58
 
 Table of Contents
 53
 
 Report of IndependentRegistered Public Accounting
Firm
 
 The Board
of Directors and Stockholders
 Viasystems
Group, Inc.
 
 We have
audited the accompanying consolidated balance sheets of Viasystems Group, Inc.
and subsidiaries (the Company) as of December 31, 2009 and 2008, and the
related consolidated statements of operations, stockholders’ equity (deficit)
and comprehensive income (loss), and cash flows for each of the three years in
the period ended December 31, 2009.  These financial
statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements.  An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Viasystems Group, Inc.
and subsidiaries at December 31, 2009 and 2008, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Viasystems Group, Inc. and subsidiaries’
internal control over financial reporting as of December 31, 2009,
based on criteria established in the Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, and our report dated February 25, 2010, expressed
an unqualified opinion thereon.
 
 
 /s/
Ernst & Young LLP
 
 St.
Louis, Missouri
 February
25, 2010
  Table of Contents
 54
 
 VIASYSTEMS
GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 (in
thousands, except share data)
 
 December 31,ASSETS
              
              2009
              
              
              2008Current
      assets:Cash
      and cash equivalents
              
              $
              108,993
              
              
              $
              83,053Restricted
      cash
              
              
              105,734
              
              
              
              303Accounts
      receivable, net
              
              
              89,512
              
              
              
              96,564Inventories
              
              
              49,197
              
              
              
              70,419Deferred
      taxes
              
              
              3,115
              
              
              
              -Prepaid
      expenses and other
              
              
              8,273
              
              
              
              11,599Total
      current assets
              
              
              364,824
              
              
              
              261,938Property,
      plant and equipment, net
              
              
              199,044
              
              
              
              232,741Goodwill
              
              
              79,485
              
              
              
              79,485Intangible
      assets, net
              
              
              4,676
              
              
              
              5,780Deferred
      financing costs, net
              
              
              7,986
              
              
              
              3,917Other
      assets
              
              
              1,223
              
              
              
              1,377Total
      assets
              
              $
              657,238
              
              
              $
              585,238LIABILITIES
      AND STOCKHOLDERS’ (DEFICIT) EQUITYCurrent
      liabilities:Current
      maturities of long-term debt
              
              $
              118,207
              
              
              $
              9,617Accounts
      payable
              
              
              90,661
              
              
              
              74,668Accrued
      and other liabilities
              
              
              38,751
              
              
              
              50,832Income
      taxes payable
              
              
              3,597
              
              
              
              7,224Deferred
      taxes
              
              
              -
              
              
              
              479Total
      current liabilities
              
              
              251,216
              
              
              
              142,820Long-term
      debt, less current maturities
              
              
              212,673
              
              
              
              211,046Other
      non-current liabilities
              
              
              34,226
              
              
              
              32,882Mandatory
      redeemable Class A Junior preferred stock
              
              
              118,836
              
              
              
              108,096Total
      liabilities
              
              
              616,951
              
              
              
              494,844Redeemable
      Class B Senior Convertible preferred stock
              
              
              98,327
              
              
              
              89,812Commitments
      and contingenciesStockholders’
      (deficit) equity:Common
      stock, $0.01 par value, 110,000,000 shares authorized;
      2,415,266 shares issued and outstanding in 2009 and
    2008
              
              
              24
              
              
              
              24Paid-in
      capital
              
              
              1,944,413
              
              
              
              1,951,980Accumulated
      deficit
              
              
              (2,010,069
              )
              
              
              (1,955,352
              )Accumulated
      other comprehensive income
              
              
              7,592
              
              
              
              3,930Total
      stockholders’ (deficit) equity
              
              
              (58,040
              )
              
              
              582Total
      liabilities and stockholders’ (deficit) equity
              
              $
              657,238
              
              
              $
              585,238
 
 See
accompanying notes to consolidated financial statements.
  Table of Contents
 55
  VIASYSTEMS
GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (dollars
in thousands, except per share amounts)
 
 Year
      Ended December 31,2009
              
              
              2008
              
              
              2007Net
      sales
              
              $
              496,447
              
              
              $
              712,830
              
              
              $
              714,343Operating
      expenses:Cost
      of goods sold, exclusive of items shown separately below
              
              
              398,144
              
              
              
              568,356
              
              
              
              570,384Selling,
      general and administrative
              
              
              45,073
              
              
              
              52,475
              
              
              
              58,215Depreciation
              
              
              50,161
              
              
              
              53,285
              
              
              
              49,704Amortization
              
              
              1,191
              
              
              
              1,243
              
              
              
              1,269Restructuring
      and impairment
              
              
              6,626
              
              
              
              15,069
              
              
              
              278Operating
      (loss) income
              
              
              (4,748
              )
              
              
              22,402
              
              
              
              34,493Other
      expense :Interest
      expense,
      net
              
              
              34,399
              
              
              
              31,585
              
              
              
              30,573Loss
      on early extinguishment of
      debt
              
              
              2,357
              
              
              
              -
              
              
              
              -Amortization
      of deferred financing
      costs
              
              
              1,954
              
              
              
              2,063
              
              
              
              2,065Other,
      net
              
              
              3,502
              
              
              
              (711
              )
              
              
              277(Loss)
      income before income taxes
              
              
              (46,960
              )
              
              
              (10,535
              )
              
              
              1,578Income
      taxes
              
              
              7,757
              
              
              
              4,938
              
              
              
              (6,853
              )Net
      (loss) income
              
              
              (54,717
              )
              
              
              (15,473
              )
              
              
              8,431Less:
      Accretion of Class B Senior Convertible preferred
    stock
              
              
              8,515
              
              
              
              7,829
              
              
              
              7,203Net
      (loss) income attributable to common stockholders
              
              $
              (63,232
              )
              
              $
              (23,302
              )
              
              $
              1,228Basic
      and diluted (loss) income per share
              
              $
              (26.18
              )
              
              $
              (9.65
              )
              
              $
              0.51Shares
      used in basic and diluted share calculations
              
              
              2,415,266
              
              
              
              2,415,266
              
              
              
              2,415,266
 
 See
accompanying notes to consolidated financial statements.
  Table of Contents
 56
  VIASYSTEMS
GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’
 EQUITY
(DEFICIT) AND COMPREHENSIVE INCOME (LOSS)
 (dollars
in thousands)
 
 Common
                Stock
      Shares
              
              
              Common
                Stock
              
              
              Paid-in
                Capital
              
              
              Accumulated
                Deficit
              
              
              Accumulated
                Other
                Comprehensive
                Income
      (Loss)
              
              
              TotalBalance
      at December 31, 2006
              
              
              2,415,266
              
              
              $
              24
              
              
              $
              1,964,312
              
              
              $
              (1,938,097
              )
              
              $
              6,605
              
              
              $
              32,844Cumulative
      effect of adoption of new accounting guidance (See Note
11)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (10,213
              )
              
              
              -
              
              
              
              (10,213
              )Comprehensive
      income:Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              8,431
              
              
              
              -
              
              
              
              8,431Change
      in fair value of derivatives, net of taxes of $0
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              241
              
              
              
              241Foreign
      currency translation, net of taxes of $0
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (44
              )
              
              
              (44
              )Total
      comprehensive income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              8,628Accretion
      of Class B Senior Convertible preferred stock
              
              
              -
              
              
              
              -
              
              
              
              (7,203
              )
              
              
              -
              
              
              
              -
              
              
              
              (7,203
              )Stock
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              2,085
              
              
              
              -
              
              
              
              -
              
              
              
              2,085Balance
      at December 31, 2007
              
              
              2,415,266
              
              
              
              24
              
              
              
              1,959,194
              
              
              
              (1,939,879
              )
              
              
              6,802
              
              
              
              26,141Comprehensive
      loss:Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (15,473
              )
              
              
              -
              
              
              
              (15,473
              )Change
      in fair value of derivatives, net of taxes of $0
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (2,872
              )
              
              
              (2,872
              )Total
      comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (18,345
              )Accretion
      of Class B Senior Convertible preferred stock
              
              
              -
              
              
              
              -
              
              
              
              (7,829
              )
              
              
              -
              
              
              
              -
              
              
              
              (7,829
              )Stock
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              615
              
              
              
              -
              
              
              
              -
              
              
              
              615Balance
      at December 31, 2008
              
              
              2,415,266
              
              
              
              24
              
              
              
              1,951,980
              
              
              
              (1,955,352
              )
              
              
              3,930
              
              
              
              582Comprehensive
      loss:Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (54,717
              )
              
              
              -
              
              
              
              (54,717
              )Change
      in fair value of derivatives, net of taxes of $0
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,195
              
              
              
              2,195Foreign
      currency translation, net of taxes of $0
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,467
              
              
              
              1,467Total
      comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (51,055
              )Accretion
      of Class B Senior Convertible preferred stock
              
              
              -
              
              
              
              -
              
              
              
              (8,515
              )
              
              
              -
              
              
              
              -
              
              
              
              (8,515
              )Stock
      compensation expense
              
              
              -
              
              
              
              -
              
              
              
              948
              
              
              
              -
              
              
              
              -
              
              
              
              948Balance
      at December 31, 2009
              
              
              2,415,266
              
              
              $
              24
              
              
              $
              1,944,413
              
              
              $
              (2,010,069
              )
              
              $
              7,592
              
              
              $
              (58,040
              )
 
 Accumulated
other comprehensive income at December 31, 2009, 2008 and 2007 includes the
following:
 
 2009
              
              
              2008
              
              
              2007Foreign
      currency translation
              
              $
              7,919
              
              
              $
              6,452
              
              
              $
              6,452Unrecognized
      loss on derivatives
              
              
              (327
              )
              
              
              (2,522
              )
              
              
              350$
              7,592
              
              
              $
              3,930
              
              
              $
              6,802
 
 See
accompanying notes to consolidated financial statements.
  Table of Contents
 57
  VIASYSTEMS
GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (in
thousands)
 
 Year
      Ended December 31,2009
              
              
              2008
              
              
              2007Cash
      flows from operating activities:Net
      (loss) income
              
              $
              (54,717
              )
              
              $
              (15,473
              )
              
              $
              8,431Adjustments
      to reconcile net (loss) income to net cash provided by operating
      activities:Depreciation
      and amortization
              
              
              51,352
              
              
              
              54,528
              
              
              
              50,973Accretion
      of Class A Junior preferred stock dividends
              
              
              7,270
              
              
              
              6,880
              
              
              
              6,510Amortization
      of preferred stock discount
              
              
              3,470
              
              
              
              2,890
              
              
              
              2,377Non-cash
      impact of exchange rates
              
              
              2,035
              
              
              
              (631
              )
              
              
              595Amortization
      of deferred financing costs
              
              
              1,954
              
              
              
              2,063
              
              
              
              2,065Impairment
      of assets
              
              
              1,592
              
              
              
              5,558
              
              
              
              -Loss
      on early extinguishment of debt
              
              
              2,357
              
              
              
              -
              
              
              
              -Non-cash
      stock compensation charge
              
              
              948
              
              
              
              615
              
              
              
              2,085Amortization
      of original issue discount
              
              
              164
              
              
              
              -
              
              
              
              -Deferred
      taxes
              
              
              (3,469
              )
              
              
              (2,822
              )
              
              
              (1,121
              )(Loss)
      gain on sale of property, plant and equipment
              
              
              (483
              )
              
              
              671
              
              
              
              967Change
      in assets and liabilities:Accounts receivable
              
              
              7,052
              
              
              
              38,762
              
              
              
              (3,831
              )Inventories
              
              
              21,222
              
              
              
              10,639
              
              
              
              4,127Prepaid expenses and other
              
              
              3,578
              
              
              
              (1,456
              )
              
              
              4,114Accounts payable
              
              
              15,993
              
              
              
              (38,097
              )
              
              
              (2,345
              )Accrued and other
      liabilities
              
              
              (9,113
              )
              
              
              (13,096
              )
              
              
              (12,523
              )Income taxes payable
              
              
              (3,627
              )
              
              
              2,707
              
              
              
              1,370Net
      cash provided by operating activities
              
              
              47,578
              
              
              
              53,738
              
              
              
              63,794Cash
      flows from investing activities:Proceeds
      from disposals of property, plant and equipment
              
              
              4,352
              
              
              
              663
              
              
              
              205Capital
      expenditures
              
              
              (21,925
              )
              
              
              (48,925
              )
              
              
              (37,197
              )Net
      cash used in investing activities
              
              
              (17,573
              )
              
              
              (48,262
              )
              
              
              (36,992
              )Cash
      flows from financing activities:Proceeds
      from issuance of 12% Senior Secured Notes
              
              
              211,792
              
              
              
              -
              
              
              
              -Repayment
      of 10 1⁄2% Senior Subordinated Notes
              
              
              (95,065
              )
              
              
              -
              
              
              
              -Change
      in restricted cash
              
              
              (105,734
              )
              
              
              -
              
              
              
              -Proceeds
      from borrowing under credit facilities
              
              
              10,000
              
              
              
              20,000
              
              
              
              -Repayment
      of amounts due under credit facilities
              
              
              (15,500
              )
              
              
              (4,500
              )
              
              
              -Repayment
      of capital lease obligations
              
              
              (2,119
              )
              
              
              (1,925
              )
              
              
              (754
              )Financing
      and other fees
              
              
              (7,439
              )
              
              
              -
              
              
              
              -Net
      cash (used in) provided by financing activities
              
              
              (4,065
              )
              
              
              13,575
              
              
              
              (754
              )Net
      change in cash and cash equivalents
              
              
              25,940
              
              
              
              19,051
              
              
              
              26,048Cash
      and cash equivalents, beginning of year
              
              
              83,053
              
              
              
              64,002
              
              
              
              37,954Cash
      and cash equivalents, end of year
              
              $
              108,993
              
              
              $
              83,053
              
              
              $
              64,002Supplemental
      cash flow information:Interest
      paid
              
              $
              25,326
              
              
              $
              22,152
              
              
              $
              21,585Income
      taxes paid, net
              
              $
              10,223
              
              
              $
              6,400
              
              
              $
              7,804
 
 See
accompanying notes to consolidated financial statements.
  Table of Contents
 58
  VIASYSTEMS
GROUP, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars
in thousands, except per share data)
 
 1.  Summary
of Significant Accounting Policies
 
 Viasystems
Group, Inc., a Delaware corporation (“Group”) was formed on
August 28, 1996. Group is a holding company whose only significant
asset is stock of its wholly owned subsidiary, Viasystems, Inc.  On
April 10, 1997, Group contributed to Viasystems, Inc. all of the
capital of its then existing subsidiaries.  Prior to the contribution
of capital by Group, Viasystems, Inc. had no operations of its own. Group relies
on distributions from Viasystems, Inc. for cash.  Moreover, the
Wachovia Credit Agreement (see Note 8) and the indentures governing Viasystems,
Inc.’s 2015 Notes each contain restrictions on Viasystems, Inc.’s ability to pay
dividends to Group. Group, together with Viasystems, Inc. and its subsidiaries,
is herein referred to as “the Company.”
 
 Nature
of Business
 
 The
Company is a leading worldwide provider of complex multi-layer printed circuit
boards and electro-mechanical solutions.  The Company’s products are
used in a wide range of applications, including automotive dash panels and
control modules, data networking equipment, telecommunications switching
equipment, and complex medical and technical instruments.
 
 Principles
of Consolidation
 
 The
accompanying consolidated financial statements include the accounts of Group and
its subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with generally accepted
accounting principles (“GAAP”) in the United States (“U.S.”) requires management
to make estimates and assumptions that affect i) the reported amounts of
assets and liabilities, ii) the disclosure of contingent assets and
liabilities at the date of the financial statements and iii) the reported
amounts of revenues and expenses during the reporting period.
 
 Estimates
and assumptions are used in accounting for the following significant matters,
among others:
 
 •      allowances
for doubtful accounts;
 •      inventory
valuation;
 •      fair
value of derivative instruments and related hedged items;
 •      useful
lives of property, plant, equipment and intangible assets;
 •      long-lived
and intangible asset impairments;
 •      restructuring
charges;
 •      warranty
and product returns allowances;
 •      deferred
compensation agreements;
 •      tax
related items;
 •      contingencies; and
 •      fair
value of options granted under our stock-based compensation plan.
 
 Actual
results may differ from previously estimated amounts, and such differences may
be material to our consolidated financial statements.  Estimates and
assumptions are reviewed periodically, and the effects of revisions are
reflected in the period in which the revision is made.  As further
discussed in Note 6, the Company reversed $1,676 of accrued restructuring
charges in its Printed Circuit Boards segment during 2009 as a result of higher
than expected employee attrition, which reduced the amount of severance costs
related to involuntary headcount reductions anticipated in the Company’s 2008
Restructuring Plan.
  Table of Contents
 59
  Cash,
Cash Equivalents and Restricted Cash
 
 The
Company considers short-term highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
 
 Restricted
cash of $105,734 at December 31, 2009, was held in escrow for the
redemption of the Company’s outstanding Senior Secured Notes due 2011, which
occurred on January 15, 2010 (see Note 8).
 
 Accounts
Receivable and Concentration of Credit Risk
 
 Accounts
receivable balances represent customer trade receivables generated from our
operations.  To reduce the potential for credit risk, the Company
evaluates the collectibility of customer balances based on a combination of
factors but does not generally require significant collateral.  The
Company regularly analyzes significant customer balances, and when it becomes
evident a specific customer will be unable to meet its financial obligations to
the Company for reasons including, but not limited to, bankruptcy filings or
deterioration in the customer’s operating results or financial position, a
specific allowance for doubtful accounts is recorded to reduce the related
receivable to the amount that is believed reasonably collectible.  The
Company also records an allowance for doubtful accounts for all other customers
based on a variety of factors, including the length of time the receivables are
past due, historical experience and current economic conditions.  If
circumstances related to specific customers change, estimates of the
recoverability of receivables could be further adjusted.
 
 The
provision for bad debts is included in selling, general and administrative
expense.  Account balances are charged off against the allowance when
the Company believes it is probable the receivable will not be
recovered.
 
 Inventories
 
 Inventories
are stated at the lower of cost or market. Cost is determined using the
first-in, first-out (FIFO) method.  Cost includes raw materials, labor
and manufacturing overhead.
 
 Property,
Plant and Equipment
 
 Property,
plant and equipment are stated at cost. Repairs and maintenance that do not
extend the useful life of an asset are charged to expense as
incurred.  The useful lives of leasehold improvements are the lesser
of the remaining lease term or the useful life of the
improvement.  When assets are retired or otherwise disposed of, their
costs and related accumulated depreciation are removed from the accounts, and
any resulting gains or losses are included in the operations for the
period.  Depreciation is computed using the straight-line method over
the estimated useful lives of the related assets as follows:
 
 Buildings
              20-50
      yearsLeasehold
      improvements
              3-15
      yearsMachinery,
      equipment, systems and other
              3-10
      years
 
 Impairment
of Long-Lived Assets
 
 The
Company reviews intangibles assets with a finite life and other long-lived
assets for impairment if facts and circumstances exist that indicate that the
asset’s useful life is shorter than previously estimated or the carrying amount
may not be recoverable from future operations based on undiscounted expected
future cash flows.  Impairment losses are recognized in operating
results for the amount by which the carrying value of the asset exceeds its fair
value.  In addition, the remaining useful life of an impaired asset
group would be reassessed and revised, if necessary.
 
 Table of Contents
 60
  Goodwill
 
 Goodwill
is recorded when the consideration paid for an acquisition exceeds the fair
value of identifiable net tangible and identifiable intangible assets
acquired.  Goodwill and other indefinite-lived intangible assets are
not amortized but are reviewed for impairment at least annually and, if a
triggering event were to occur in an interim period.
 
 Intangible
Assets
 
 Intangible assets consist primarily of
identifiable intangibles acquired. Amortization of identifiable intangible
assets acquired is computed using systematic methods over the estimated useful
lives of the related assets as follows:
 
 Life
              
              MethodDeveloped
      technologies
              15 years
              
              Double-declining
      balancePatents
      and
      trademarks
              5 years
              
              Straight-line
 
 Impairment
testing of these assets would occur if and when an indicator of impairment is
identified.
 
 Deferred
Financing Costs
 
 Deferred
financing costs, consisting of fees and other expenses associated with debt
financing, are amortized over the term of the related debt using the
straight-line method, which approximates the effective interest
method.
 
 Product
Warranties
 
 Provisions
for estimated expenses related to product warranties are made at the time
products are sold.  These estimates are established using historical
information on the nature, frequency and average cost of warranty
claims.
 
 Environmental
Costs
 
 Accruals
for environmental matters are recorded in operating expenses when it is probable
that a liability has been incurred and the amount of the liability can be
reasonably estimated.  Accrued liabilities do not include claims
against third parties and are not discounted.  Costs related to
environmental remediation are charged to expense.  Other environmental
costs are also charged to expense unless they increase the value of the property
and/or mitigate or prevent contamination from future operations, in which event
they are capitalized.
 
 Derivative
Financial Instruments
 
 From time
to time, the Company enters into foreign exchange forward contracts to minimize
the short-term impact of foreign currency fluctuations.  However,
there can be no assurance that these activities will eliminate or reduce foreign
currency risk.  The foreign exchange forward contracts are designated
as cash flow hedges and are accounted for at fair value.  The
effective portion of the change in each cash flow hedge’s gain or loss is
reported as a component of other comprehensive income (loss), net of
taxes.  The ineffective portion of the change in the cash flow hedge’s
gain or loss is recorded in earnings at each measurement date.  Gains
and losses on derivative contracts are reclassified from accumulated other
comprehensive income (loss) to current period earnings in the line item in which
the hedged item is recorded at the time the contracts are settled (see Note
12).
 
 Foreign
Currency Translation
 
 All the
Company’s foreign subsidiaries use the U.S. dollar as their functional
currency.  Prior to January 1, 2007, certain of the Company’s
subsidiaries used different currencies as their functional currency, and
adjustments from translating the foreign currency financial statements of these
subsidiaries into the U.S. dollar was included as a separate component of
accumulated other comprehensive income.  The Company recorded a net
translation adjustment of $1,467 (net of tax of $0) for the year ended
December 31, 2009.  There was no translation adjustment
recorded for the year ended December 31, 2008, and the net translation
adjustment for the year ended December 31, 2007,
was $44 (net of tax of $0).  The 2009 and 2007 amounts represent
adjustments as a result of the reversal of cumulative translation adjustments
required in connection with the liquidation of certain foreign
investments.
 
 Table of Contents
 61
 
 Also
included in net income are the gains and losses arising from transactions
denominated in a currency other than the functional currency of a location, the
impact of remeasuring assets and liabilities of foreign subsidiaries using
U.S. dollars as their functional currency, and the realized results of our
foreign currency hedging activities.
 
 Fair
Value of Financial Instruments
 
 The
Company measures the fair value of assets and liabilities using a three-tier
fair value hierarchy which prioritizes the inputs used in measuring fair value
as follows: Level 1 — observable inputs such as quoted prices in
active markets; Level 2 — inputs, other than quoted market prices in
active markets, which are observable, either directly or indirectly; and
Level 3 — valuations derived from valuation techniques in which one or
more significant inputs are unobservable.  In addition, the Company
may use various valuation techniques, including the market approach, using
comparable market prices; the income approach, using present value of future
income or cash flow; and the cost approach, using the replacement cost of
assets.
 
 The
Company records deferred gains and losses related to cash flow hedges based on
the fair value of active derivative contracts on the reporting date, as
determined using a market approach (see Note 12).  As quoted
prices in active markets are not available for identical contracts, Level 2
inputs are used to determine fair value.  These inputs include quotes
for similar but not identical derivative contracts and market interest rates
that are corroborated with publicly available market information.
 
 The
Company’s financial instruments consist of cash equivalents, accounts
receivable, notes receivable, long-term debt, preferred stock and other
long-term obligations.  For cash equivalents, accounts receivable,
notes receivable and other long-term obligations, the carrying amounts
approximate fair value.  The estimated fair market values of the
Company’s debt instruments, preferred stock and cash flow hedges are as
follows:
 
 December
      31, 2009Fair
      Value
              
              
              Carrying
      Amount
              
              Balance
      Sheet ClassificationSenior
      Secured Notes due 2015
              
              $
              231,000
              
              
              $
              211,956
              
              Long-term
      debt, less current maturitiesSenior
      Subordinated Notes due 2011
              
              
              105,876
              
              
              
              105,876
              
              Current
      maturities of long-term debtGuangzhou
      2009 Credit Facility
              
              
              10,000
              
              
              
              10,000
              
              Current
      maturities of long-term debtClass
      A Junior preferred stock
              
              
              124,943
              
              
              
              118,836
              
              Mandatory
      redeemable Class A Junior preferred stockClass
      B Senior Convertible preferred stock
              
              
              98,823
              
              
              
              98,324
              
              Redeemable
      Class B Senior Convertible preferred stockCash
      flow
      hedges
              
              
              (327
              )
              
              
              (327
              )
              Accrued
      and other liabilitiesDecember
      31, 2008Fair
      Value
              
              
              Carrying
      Amount
              
              Balance
      Sheet ClassificationSenior
      Subordinated Notes due 2011
              
              $
              150,000
              
              
              $
              200,000
              
              Long-term
      debt, less current maturities2006
      Credit
      Agreement
              
              
              15,500
              
              
              
              15,500
              
              Long-term
      debt, including current maturitiesClass
      A Junior preferred stock
              
              
              115,517
              
              
              
              108,096
              
              Mandatory
      redeemable Class A Junior preferred stockClass
      B Senior Convertible preferred stock
              
              
              90,495
              
              
              
              89,812
              
              Redeemable
      Class B Senior Convertible preferred stockCash
      flow
      hedges
              
              
              (2,522
              )
              
              
              (2,522
              )
              Accrued
      and other liabilities
 
 The
Company determined the 2009 and 2008 fair values of the Senior Secured Notes due
2015, and the Senior Subordinated Notes due 2011 using quoted market prices for
the Notes.  As the balance owed on the Guangzhou 2009 Credit Facility
and the 2006 Credit Agreement bear interest at a variable rate, the carrying
value of the these debt instruments approximates their fair
value.  The Company estimated the fair values of its preferred stock
instruments to approximate the current liquidation value of each
instrument.
 
 Revenue
Recognition
 
 Revenue
is recognized when all of the following criteria are satisfied: persuasive
evidence of an arrangement exists; risk of loss and title transfer to the
customer; the price is fixed and determinable; and collectibility is reasonably
assured.  Sales and related costs of goods sold are included in income
when goods are shipped to the customer in accordance
with the delivery terms, except in the case of vendor managed inventory
arrangements, whereby sales and the related costs of goods sold are included in
income when possession of goods is taken by the customer.  Generally,
there are no formal customer acceptance requirements or further obligations
related to manufacturing services.  If such requirements or
obligations exist, then revenue is recognized at the time when such requirements
are completed and the obligations are fulfilled.  Services provided as
part of the manufacturing process represent less than 10% of
sales.  Reserves for product returns are recorded based on historical
trend rates at the time of sale.
 
 Table of Contents
 62
 
 Shipping
Costs
 
 Costs
incurred by the Company to ship finished goods to its customers are included in
cost of goods sold on the consolidated statements of operations.
 
 Income
Taxes
 
 The
Company accounts for certain items of income and expense in different periods
for financial reporting and income tax purposes.  Provisions for
deferred income taxes are made in recognition of such temporary differences,
where applicable.  A valuation allowance is established against
deferred tax assets unless the Company believes it is more likely than not that
the benefit will be realized.
 
 The
Company provides for uncertain tax positions and the related interest and
penalties based upon its assessment of whether it is more likely than not that
the tax position will be sustained on examination by the taxing authorities,
given the technical merits of the position.  The tax benefits
recognized in the financial statements from such a position are measured based
on the largest benefit that has a greater than fifty percent likelihood of being
realized upon ultimate resolution.
 
 The
Company recognizes accrued interest and penalties related to unrecognized tax
benefits as a component of income tax expense.
 
 Earnings
or Loss Per Share
 
 On
February 16, 2010, in connection with a recapitalization of the Company (see
Note 20), each outstanding share of the Company’s common stock was exchanged for
0.083647 shares of newly issued common stock.  In accordance with the
Securities and Exchange Commission’s (the “SEC’s”) Staff Accounting Bulletin
Topic 4.C, Changes in Capital
Structure, all share amounts have been adjusted retroactively to reflect
the reverse stock split.
 
 The
Company computes basic net earnings or loss per share attributable to common
stockholders by dividing its net income (loss) attributable to common
stockholders for the period by the weighted average number of common shares
outstanding during the period.
 
 The
components of the net loss per share attributable to common stockholders were as
follows (in thousands except share and per share amounts):
  Fiscal
      Year Ended December 31,2009
              
              
              2008
              
              
              2007Net
      (loss) income attributable to common stockholders
              
              $
              (63,232
              )
              
              $
              (23,302
              )
              
              $
              1,228Weighted
      average shares used to compute basic and diluted net(loss)
      income per
      share
              
              
              2,415,266
              
              
              
              2,415,266
              
              
              
              2,415,266Net
      (loss) income per share attributable to common stockholders-basic and
      diluted
              
              $
              (26.18
              )
              
              $
              (9.65
              )
              
              $
              0.51
  Currently
exercisable stock options of 198,699, 193,491 and 196,546 for 2009, 2008 and
2007, respectively, and currently exercisable warrants of 120,131 in each year
2009, 2008 and 2007, were excluded from the calculation of diluted net (loss)
income per share because the exercise price of such options and warrants was
higher than market value.  Convertible redeemable preferred stock, on
an “as-converted basis”, of 654,494 shares, 599,340 share and 548,833 shares has
been excluded from the computation of diluted net (loss) income per share for
the years ended December 31, 2009,
2008 and 2007, respectively, because their inclusion would be
anti-dilutive.  The Company has excluded the convertible redeemable
preferred stock from the basic and diluted earnings per share calculation as the
preferred stockholders did not have a contractual right or obligation to share
in the income or losses of the Company.
 
 Table of Contents
 63
 
 Employee
Stock-Based Compensation
 
 The
Company maintains a stock option plan (the “2003 Stock Option
Plan”).  The Company recognizes compensation expense for share-based
awards, including stock options, based on the grant date fair values of the
awards.
 
 Reclassifications
 
 The
accompanying consolidated financial statements for prior years contain certain
reclassifications to conform to the presentation used in the current
period.
 
 Recently
Adopted Accounting Pronouncements
 
 As of
January 1, 2009, the Company adopted new accounting standards related to
disclosures about derivative instruments, nonderivative instruments that are
designed and qualify as hedging instruments and related hedged
items.  These standards did not change the way the Company accounts
for derivatives and hedging activities, but do enhance the Company’s disclosures
concerning the effect of these instruments on the Company’s consolidated
financial statements from their use.  Upon adoption, there was no
effect on the Company’s financial position, results of operations or cash
flows.
 
 In
May 2009, the Financial Accounting Standards Board (“FASB”) established
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or available
to be issued. The Company adopted these standards as of June 30, 2009, and upon
adoption there was no material effect on the Company’s financial position,
results of operations or cash flows.
 
 In June
2009, the FASB established, with effect from July 1, 2009, the FASB
Accounting Standards CodificationTM (the
“Codification”) as the source of authoritative U.S. GAAP recognized by the FASB
to be applied by nongovernmental entities. Rules and interpretive releases of
the SEC under authority of federal securities laws are also sources of
authoritative U.S. GAAP for SEC registrants. The Company adopted the
Codification beginning July 1, 2009, and while it impacts the way the Company
refers to accounting pronouncements in its disclosures, it had no affect on the
Company’s financial position, results of operations or cash flows upon
adoption.
 
 2.  Accounts
Receivable and Concentration of Credit Risk
 
 The
allowance for doubtful accounts is included in accounts receivable, net in the
accompanying consolidated balance sheets.
 
 The
activity in the allowance for doubtful accounts is summarized as
follows:
 
 2009
              
              
              2008
              
              
              2007Balance,
      beginning of
      year
              
              $
              3,194
              
              
              $
              2,104
              
              
              $
              3,333Provision
              
              
              1,987
              
              
              
              2,341
              
              
              
              1,269Write-offs,
      credits and adjustments
              
              
              (2,766
              )
              
              
              (1,251
              )
              
              
              (2,498
              )Balance,
      end of
      year
              
              $
              2,415
              
              
              $
              3,194
              
              
              $
              2,104
 
 Table of Contents
 64
 
 For the
years ended December 31, 2009, 2008 and 2007, sales to the Company’s ten
largest customers accounted for approximately 74.1%, 73.3%, and 76.2% of the
Company’s net sales, respectively.  The table below highlights
individual end customers accounting for more than ten percent of the Company’s
consolidated net sales.
 
 Customer
              
              2009
              
              
              2008
              
              
              2007Alcatel-Lucent
      SA
              
              
              14.2
              %
              
              
              16.3
              %
              
              
              20.2
              %Bosch
      Group
              
              
              13.7
              
              
              
              11.2
              
              
              
              10.7Continental
      AG
      (a)
              
              
              11.8
              
              
              
              13.4
              
              
              (b)General
      Electric
      Company
              
              
              11.4
              
              
              
              10.2
              
              
              (b)Siemens
      AG
      (a)
              
              (b)
              
              
              (b)
              
              
              
              12.4(a)   In
      December 2007, Continental AG concluded the purchase of the automotive
      parts business unit of Siemens AG. Sales to that business unit in 2008 are
      included in the table for Continental AG. Sales to that business unit in
      2007 are included in the table for Siemens AG. Through its other business
      units, Siemens AG remains a customer.(b)
        Represents less than 10% of consolidated net
      sales.
 
 Sales to
Alcatel-Lucent SA, Siemens AG and General Electric Company occurred in both the
Printed Circuit Boards and Assembly segments. Sales to Continental AG and Bosch
Group occurred in the Printed Circuit Boards segment.
 
 3.  Inventories
 
 The
composition of inventories at December 31, is as follows:
 
 2009
              
              
              2008Raw
      materials
              
              $
              15,090
              
              
              $
              26,388Work
      in
      process
              
              
              15,720
              
              
              
              18,488Finished
      goods
              
              
              18,387
              
              
              
              25,543Total
              
              $
              49,197
              
              
              $
              70,419
 
 4.  Property,
Plant and Equipment
 
 The
composition of property, plant and equipment at December 31, is as
follows:
 
 2009
              
              
              2008Land
      and
      buildings
              
              $
              54,603
              
              
              $
              54,885Machinery,
      equipment and
      systems
              
              
              427,619
              
              
              
              422,489Leasehold
      improvements
              
              
              42,102
              
              
              
              40,355Construction
      in
      progress
              
              
              1,063
              
              
              
              1,537525,387
              
              
              
              519,266Less:
      Accumulated
      depreciation
              
              
              (326,343
              )
              
              
              (286,525
              )Total
              
              $
              199,044
              
              
              $
              232,741
 
 During
the years ended December 31, 2009 and 2008, the Company recorded charges
for the impairment of property plant and equipment of $1,592 and $5,558,
respectively.  The effect of the charge was to reduce the gross book
value and accumulated depreciation of related assets in 2009 by $4,943, and
$3,351, respectively, and in 2008 by $19,593 and $14,035,
respectively.
 
 5.  Goodwill
and Other Intangible Assets
 
 The
goodwill balance relates entirely to the Company’s Printed Circuit Boards
segment.  The balance of goodwill as of December 31, 2009 and
2008, was $79,485.
 
 The
Company performs an annual impairment evaluation of goodwill.  In
addition to performing the annual impairment tests for 2009, 2008 and 2007, the
Company reviewed the goodwill balance for impairment upon the announcement of
its 2008 Restructuring (see Note 6) on November 24, 2008. No
adjustments were recorded to goodwill as a result of these reviews.
 
 Table of Contents
 65
 
 The
components of intangible assets subject to amortization were as
follows:
 
 December 31,
      2009
              
              
              December 31,
      2008Gross
                Carrying
                Amount
              
              
              Accumulated
                Amortization
              
              
              Net
      Book
                Value
              
              
              Gross
                Carrying
                Amount
              
              
              Accumulated
                Amortization
              
              
              Net
      Book
                ValueDeveloped
      technologies
              
              $
              20,371
              
              
              $
              (16,126
              )
              
              $
              4,245
              
              
              $
              20,371
              
              
              $
              (15,200
              )
              
              $
              5,171Other
              
              
              2,472
              
              
              
              (2,041
              )
              
              
              431
              
              
              
              2,385
              
              
              
              (1,776
              )
              
              
              609Total
              
              $
              22,843
              
              
              $
              (18,167
              )
              
              $
              4,676
              
              
              $
              22,756
              
              
              $
              (16,976
              )
              
              $
              5,780
 
 The
Company paid $87 and $119 for capitalizable patent costs during the years ended
December 31, 2009 and 2008, respectively.  The expected future
annual amortization expense of definite-lived intangible assets for the next
five fiscal years is as follows:
 
 Year
      Ended December 31,2010
              
              $
              1,1192011
              
              
              1,0632012
              
              
              9892013
              
              
              9572014
              
              
              548Thereafter
              
              
              -Total
              
              $
              4,676
 
 6.  Restructuring
and Impairment
 
 In light
of the global economic downturn which began towards the end of 2008, and as part
of the Company’s ongoing efforts to align capacity, overhead costs and operating
expenses with market demand, the Company initiated restructuring activities (the
“2008 Restructuring”) during the fourth quarter of 2008 which were completed
during 2009.  These activities included the shutdown of the Company’s
metal fabrication facility in Milwaukee, Wisconsin, and its satellite
final-assembly and distribution facility in Newberry, South Carolina (together,
the “Milwaukee Facility”); as well as workforce reductions across the Company’s
global operations.
 
 The
reserve for restructuring activities also includes amounts related to
restructuring activities initiated during 2001 (the “2001 Restructuring”) to
adjust the Company’s cost position relative to anticipated levels of
business.  These restructuring activities were a result of the
economic downturn that began in 2000 and continued into early 2003 related to
many of the Company’s key telecommunication and networking customers, and the
shift of production demand from high cost countries to low cost
countries.  These actions resulted in plant shutdowns and downsizings
as well as asset impairments, which continued through 2005.
 
 As of
December 31, 2009, the reserve for restructuring and impairment charges include
$2,604 and $720, related to the 2008 Restructuring and 2001 Restructuring,
respectively.  The following tables summarize changes in the reserve
for the restructuring and impairment charges for the years ended
December 31, 2009, 2008 and 2007:
 
 Year
      Ended December 31, 200912/31/08
              
              
              Charges
              
              
              Reversals
              
              
              Total
              
              
              Cash
      Payments
              
              
              Adjustments
              
              
              12/31/09Restructuring
      activities:Personnel
      and severance
              
              $
              8,896
              
              
              $
              2,298
              
              
              $
              (1,676
              )
              
              $
              622
              
              
              $
              (8,675
              )
              
              $
              -
              
              
              $
              843Lease
      and other contractual commitments
              
              
              3,226
              
              
              
              5,806
              
              
              
              (731
              )
              
              
              5,075
              
              
              
              (5,414
              )
              
              
              (406
              )(a)
              
              
              2,481Asset
      impairments
              
              
              -
              
              
              
              1,592
              
              
              
              (663
              )
              
              
              929
              
              
              
              -
              
              
              
              (929
              )
              
              
              -Total
      restructuring and impairment charges
              
              $
              12,122
              
              
              $
              9,696
              
              
              $
              (3,070
              )
              
              $
              6,626
              
              
              $
              (14,089
              )
              
              $
              (1,335
              )
              
              $
              3,324(a)
      Represents $183 of accretion of interest on discounted restructuring
      liabilities, net of $589 of non-cash restructuring expense related to the
      2001 Restructuring.
 
 Table of Contents
 66
 
 Year Ended December 31,
      200812/31/07
              
              
              Charges
              
              
              Reversals
              
              
              Total
              
              
              Cash
      Payments
              
              
              Adjustments
              
              
              12/31/08Restructuring
      activities:Personnel
      and severance
              
              $
              349
              
              
              $
              9,511
              
              
              $
              -
              
              
              $
              9,511
              
              
              $
              (964
              )
              
              $
              -
              
              
              $
              8,896Lease
      and other contractual commitments
              
              
              4,818
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (870
              )
              
              
              (722
              )(a)
              
              
              3,226Asset
      impairments
              
              
              -
              
              
              
              5,558
              
              
              
              -
              
              
              
              5,558
              
              
              
              -
              
              
              
              (5,558
              )
              
              
              -Total
      restructuring and impairment charges
              
              $
              5,167
              
              
              $
              15,069
              
              
              $
              -
              
              
              $
              15,069
              
              
              $
              (1,834
              )
              
              $
              (6,280
              )
              
              $
              12,122(a)
      Represents $1,044 decrease due to changes in foreign currency exchange
      rates, net of $322 of accretion of interest on discounted restructuring
      liabilities.
 
 Year Ended December 31,
      200712/31/06
              
              
              Charges
              
              
              Reversals
              
              
              Total
              
              
              Cash
      Payments
              
              
              Adjustments
              
              
              12/31/07Restructuring
      activities:Personnel
      and severance
              
              $
              596
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (247
              )
              
              $
              -
              
              
              $
              349Lease
      and other contractual commitments
              
              
              5,471
              
              
              
              278
              
              
              
              -
              
              
              
              278
              
              
              
              (1,270
              )
              
              
              339
              (a)
              
              
              4,818Total
      restructuring and impairment charges
              
              $
              6,067
              
              
              $
              278
              
              
              $
              -
              
              
              $
              278
              
              
              $
              (1,517
              )
              
              $
              339
              
              
              $
              5,167(a)Represents
      accretion of interest on discounted restructuring
    liabilities.
 
 The
restructuring and impairment charges were determined based on formal plans
approved by the Company’s management using the best information available at the
time.  The amounts the Company ultimately incurs may change as the
balance of the plans are executed.  Expected cash payout of the
accrued expenses is as follows:
 
 Year
      Ended December 31,2010
              
              $
              2,6212011
              
              
              1202012
              
              
              552013
              
              
              512014
              
              
              52Thereafter
              
              
              1,160Total
              
              
              4,059Less:
      Amounts representing
      interest
              
              
              (735
              )Restructuring
      liability
              
              $
              3,324
 
 2009
Restructuring and Impairment
 
 For the
year ended December 31, 2009, the Company recorded gross restructuring and
impairment charges of $9,696 of which $7,515 and $589 were related to the 2008
Restructuring and the 2001 Restructuring, respectively, and $1,592 was related
to the write-off of obsolete equipment in the Company’s Printed Circuit Boards
segment.  In addition, the Company reversed restructuring accruals of
$3,070 of which $2,469 and $601 were related to the 2008 Restructuring and the
2001 Restructuring, respectively.
 
 The gross
charges in 2009 related to the 2008 Restructuring were substantially related to
the closure of the Milwaukee Facility.  Restructuring accrual
reversals related to the 2008 Restructuring included i) $1,676 in the Printed
Circuit Boards segment as a result of higher than anticipated employee
attrition, which reduced the amount of severance costs related to involuntary
headcount reductions anticipated in the Company’s 2008 Restructuring plan, ii)
$663 of gains realized from the disposal of assets in connection with the
shutdown of the Milwaukee Facility, and iii) $130 related to the early
termination of a long-term lease obligation related to the Milwaukee
Facility.  With respect to the 2001 Restructuring, during the year
ended December 31, 2009, the Company recorded $589 of non-cash
restructuring charges which were more than offset by a $601 gain recorded upon
the early termination of a long-term lease obligation.
 
 2008
Restructuring and Impairment
 
 On
November 24, 2008, the Company announced plans to close its Milwaukee
Facility. In addition, the Company announced other workforce reductions across
its global operations.  These activities were completed during 2009,
and the total cost of these activities, including asset impairments, was
$20,088, with $10,130 related to headcount reduction
costs, $4,895 related to non-cash asset impairments, and the remainder related
to lease termination and other costs.  These costs were incurred in
the Printed Circuit Boards segment, Assembly segment and “Other” (see
Note 15) in the amounts of $8,259, $833 and $10,996,
respectively.  For the year ended December 31, 2008, the Company
recorded restructuring charges of $15,069 which included $9,511 related to
headcount reductions and $5,558 of non-cash asset impairment
charges.
 
 Table of Contents
 67
 
 2007
Restructuring and Impairment
 
 The
Company incurred $278 in restructuring and impairment charges for the year ended
December 31, 2007, related to closed facilities sold late in
2006.
 
 7.  Accrued
and Other Liabilities
 
 The
composition of accrued and other liabilities at December 31, is as
follows:
 
 2009
              
              
              2008Accrued
      payroll and related costs
              
              $
              8,965
              
              
              $
              12,130Accrued
      interest
              
              
              7,873
              
              
              
              9,919Accrued
      restructuring costs
              
              
              2,621
              
              
              
              9,310Accrued
      other
              
              
              19,292
              
              
              
              19,473Total
              
              $
              38,751
              
              
              $
              50,832
 
 8.  Long-Term
Debt
 
 The
composition of long-term debt at December 31, is as follows:
 
 2009
              
              
              2008Senior
      Secured Notes due
      2015
              
              $
              211,956
              
              
              $
              -Senior
      Subordinated Notes due
      2011
              
              
              105,876
              
              
              
              200,000Guangzhou
      2009 Credit
      Facility
              
              
              10,000
              
              
              
              -2006
      Credit Agreement; Term
      loan
              
              
              -
              
              
              
              15,500Capital
      leases
              
              
              3,048
              
              
              
              5,163330,880
              
              
              
              220,663Less:
      Current
      maturities
              
              
              (118,207
              )
              
              
              (9,617
              )$
              212,673
              
              
              $
              211,046
 
 The
schedule of principal payments for long-term debt at December 31, 2009, is
as follows:
 
 Year
      Ended December 31,2010
              
              $
              118,2072011
              
              
              452012
              
              
              502013
              
              
              552014
              
              
              60Thereafter
              
              
              220,507Total
              
              $
              338,924
 
 Senior
Secured Notes due 2015
 
 In
November 2009, the Company’s subsidiary, Viasystems, Inc., completed an offering
of $220,000 of 12.0% Senior Secured Notes due 2015 (the “2015
Notes”).  The 2015 Notes were issued at an original issue discount
(“OID”) of 96.269%.  The OID was recorded on the Company’s balance
sheet as a reduction of the liability for the 2015 Notes, and is being amortized
to interest expense over the life of the notes.  As of
December 31, 2009, the unamortized OID was $8,044.  The
Company incurred $7,298 of deferred financing fees related to the 2015 Notes,
that have been capitalized and will be amortized over the life of the
notes.
 Interest
on the 2015 Notes is due semiannually on January 15 and July 15 of each
year, beginning on July 15, 2010.  The Company may redeem
all or part of the 2015 Notes at any time prior to July 15, 2012, at a
redemption price of 100% of the notes redeemed plus a “make-whole” premium equal
to the greater of a) 1% of the principal amount, or b) the excess of i) the
present value at the redemption rate of 106.0% of the principal amount redeemed
calculated using a discount rate equal to the treasury rate (as defined) plus 50
basis points, over ii) the principal amount of the notes.  Subsequent
to July 15, 2014, the Company may redeem the 2015 Notes at the redemption
price of 100%.  In the event of a Change in Control (as defined), the
Company is required to make an offer to purchase the 2015 Notes at a redemption
price of 101%, plus accrued and unpaid interest.
 
 The 2015
Notes are guaranteed, jointly and severally, by Group and all of the Viasystems,
Inc.’s current and future domestic subsidiaries.  The 2015 Notes are
collateralized by all of the equity interests of each guarantor, each existing
and subsequently acquired domestic subsidiary and certain foreign subsidiaries
(as defined), and by liens on substantially all of Viasystems, Inc.’s and the
guarantors assets.
 
 Table of Contents
 68
 
 The
indenture governing the 2015 Notes contains restrictive covenants which, among
other things, limit the ability (subject to exceptions) of Viasystems, Inc. and
its Guarantors (as defined), which includes Group, to: a) incur additional
indebtedness or issue disqualified stock or preferred stock; b) create liens, c)
pay dividends, make investments or make other restricted payments; d) sell
assets; e) consolidate, merge, sell or otherwise dispose of all or substantially
all of the Company’s assets; f) enter into transactions with the Company’s
affiliates; and g) designate the Company’s subsidiaries as unrestricted (as
defined).
 
 Guangzhou
2009 Credit Facility
  In
September 2009, the Company’s Guangzhou Termbray Electronics Technology Company
Limited subsidiary consummated a 200 million Renminbi (approximately $29,290
U.S. dollars based on the exchange rate as of December 31, 2009)
revolving credit facility (the “Guangzhou 2009 Credit Facility”) with China
Construction Bank, Guangzhou Economic and Technological Development District
Branch.  The Guangzhou 2009 Credit Facility provides for borrowings
denominated in Renminbi and foreign currencies, including the U.S.
dollar.  Borrowings are secured by a mortgage lien on the buildings
and land lease at the Company’s manufacturing facility in Guangzhou,
China.  This revolving credit facility is renewable annually beginning
June 30, 2010.  Loans under the credit facility bear interest at the
rate of (i) LIBOR plus a margin negotiated prior to each U.S. dollar denominated
loan or (ii) the interest rate quoted by the Peoples Bank of China multiplied by
0.9 for Renminbi denominated loans.  The Guangzhou 2009 Credit
Facility has certain restrictions and other covenants that are customary for
similar credit arrangements; however, there are no financial covenants contained
in this facility.  The Company incurred $37 of deferred financing fees
related to the facility.  As of December 31, 2009, $10,000
in U.S. dollar loans was outstanding under the Guangzhou 2009 Credit Facility at
a rate of LIBOR plus 0.5%, and approximately $19,290 of the revolving credit
facility was unused and available.
  
 Senior
Subordinated Notes due 2011
 
 In
November 2009, as a result of a tender offer, the Company repurchased $94,124 of
its 10.5% Senior Subordinated Notes due 2011 (the “2011 Notes”).  In
connection with the repurchase, the Company incurred a $1,628 loss on the early
extinguishment of the debt which consisted of a $687 write off of deferred
financing fees and a tender premium of $470 and related professional fees of
$471. Subsequent to December 31, 2009, on January 15, 2010,
the Company redeemed all of the remaining outstanding 2011 Notes at
par.  In connection with the redemption, in January 2010, the Company
recognized a loss on the early extinguishment of debt of $681.  The
tender and 2010 redemption were financed from proceeds of the 2015
Notes.  At December 31, 2009, restricted cash of $105,734
was held in escrow for the redemption of the outstanding 2011
Notes.
 
 2006
Credit Agreement
  In
September 2009, in connection with the consummation of the Guangzhou 2009 Credit
Facility, the Company provided a notice to voluntarily prepay and cancel the
credit agreement that had been previously entered into as of August 17, 2006
(the “2006 Credit Agreement”) with UBS AG Hong Kong Branch and UBS AG, Singapore
Branch, and repaid all outstanding amounts under that agreement. The 2006 Credit
Agreement was for a term of four
years and provided a $60,000 revolving credit facility and a $20,000 term loan
facility.  As a result of the prepayment and cancellation of the 2006
Credit Agreement, the Company recorded a loss on early extinguishment of debt of
$729 in conjunction with the write-off of related unamortized deferred financing
costs in 2009.
  Table of Contents
 69
 
 Capital
Leases
 
 The
Company leases certain of its machinery and equipment under capital lease
agreements. During 2009, 2008 and 2007, the Company entered into no new capital
leases.
 
 2010
Credit Agreement
 
 Subsequent
to December 31, 2009, on February 16, 2010, the Company entered into a senior
secured revolving credit agreement (the “2010 Credit Agreement”), with Wachovia
Bank, National Association, which provides a secured revolving credit facility
in an aggregate principal amount of up to $75,000 with an initial maturity of
four years. The annual interest rates applicable to loans under the 2010 Credit
Agreement are, at the Company’s option, either the Base Rate or Eurodollar Rate
(each as defined in the 2010 Credit Agreement) plus, in each case, an applicable
margin. The applicable margin is tied to the Company’s Quarterly Average Excess
Availability (as defined in the 2010 Credit Agreement) and ranges from 2.00% to
2.50% for Base Rate loans and 3.50% to 4.00% for Eurodollar Rate loans. In
addition, the Company is required to pay an Unused Line Fee and other fees
defined in the 2010 Credit Agreement.
 
 The 2010
Credit Agreement is guaranteed by and secured by substantially all of the assets
of the Company’s current and future domestic subsidiaries, subject to certain
exceptions as set forth in the 2010 Credit Agreement. The 2010 Credit Agreement
contains certain negative covenants restricting and limiting the Company’s
ability to, among other things:
 
 •incur debt, incur contingent
obligations and issue certain types of preferred stock;
 •create liens;
 •pay dividends, distributions
or make other specified restricted payments;
 •make certain investments and
acquisitions;
 •enter into certain
transactions with affiliates; and
 •merge or consolidate with
any other entity or sell, assign, transfer, lease, convey or otherwise dispose
ofassets.
 
 The 2010
Credit Agreement includes a financial covenant requirement that, if the Excess
Availability (as defined in the 2010 Credit Agreement) is less than $15,000 then
the Company must maintain, on a monthly basis, a minimum fixed charge coverage
ratio of 1.1.
 
 9.  Commitments
 
 The
Company leases certain buildings, transportation and other equipment under
capital and operating leases.  As of December 31, 2009 and 2008,
there was equipment held under capital leases with a cost basis of $12,007
included in property, plant and equipment.  The Company recorded
accumulated depreciation related to this equipment of $3,602 and $2,285 as of
December 31, 2009 and 2008, respectively.  Total rental expense
under operating leases was $4,438, $5,285 and $5,115 for the years ended
December 31, 2009, 2008 and 2007, respectively.
  Table of Contents
 70
 
 Future
minimum lease payments under capital leases and operating leases that have
initial or remaining non-cancelable lease terms in excess of one year at
December 31, 2009, are as follows:
 
 Year
      Ended December 31,
              
              Capital
              
              
              Operating2010
              
              $
              2,636
              
              
              $
              3,6782011
              
              
              117
              
              
              
              2,4052012
              
              
              117
              
              
              
              5502013
              
              
              117
              
              
              
              3922014
              
              
              117
              
              
              
              365Thereafter
              
              
              697
              
              
              
              1,431Total
              
              
              3,801
              
              
              $
              8,821Less:
      Amounts representing interest
              
              
              (753
              )Capital
      lease obligations
              
              $
              3,048
 
 10.  Contingencies
 
 The
Company is a party to contracts with third party consultants, independent
contractors and other service providers in which the Company has agreed to
indemnify such parties against certain liabilities in connection with their
performance.  Based on historical experience and the likelihood that
such parties will ever make a claim against the Company, in the opinion of our
management, the ultimate liabilities resulting from such indemnification
obligations will not have a material adverse effect on its financial condition
and results of operations and cash flows.
 
 The
Company is a party to contracts and agreements with other third parties in which
the Company has agreed to indemnify such parties against certain liabilities in
connection with claims by unrelated parties.  At
December 31, 2009 and 2008, other non-current liabilities include
$12,605, and $13,486 of accruals for potential claims in connection with such
indemnities.
 
 The
Company’s charter provides that none of the Directors and officers of the
Company bear the risk of personal liability for monetary damages for breach of
fiduciary duty as a Director or officer except in cases where the action
involves a breach of the duty of loyalty, acts in bad faith or intentional
misconduct, the unlawful paying of dividends or repurchasing of capital stock,
or transactions from which the Director or officer derived improper personal
benefits.
 
 The
Company is subject to various lawsuits and claims with respect to such matters
as product liability, product development and other actions arising in the
normal course of business. In the opinion of our management, the ultimate
liabilities resulting from such lawsuits and claims have been adequately
provided for and will not have a material adverse effect on the Company’s
financial condition and results of operations and cash flows.
 
 11.  Income
Taxes
 
 The
Company’s income tax provision for the years ended December 31, 2009, 2008
and 2007, consists of the following:
 
 2009
              
              
              2008
              
              
              2007Current:Federal
              
              $
              -
              
              
              $
              (28
              )
              
              $
              (316
              )State
              
              
              (923
              )
              
              
              72
              
              
              
              22Foreign
              
              
              11,119
              
              
              
              7,716
              
              
              
              (5,237
              )10,196
              
              
              
              7,760
              
              
              
              (5,531
              )Deferred:Federal
              
              
              (1,508
              )
              
              
              -
              
              
              
              -State
              
              
              -
              
              
              
              -
              
              
              
              -Foreign
              
              
              (931
              )
              
              
              (2,822
              )
              
              
              (1,322
              )(2,439
              )
              
              
              (2,822
              )
              
              
              (1,322
              )Total
              
              $
              7,757
              
              
              $
              4,938
              
              
              $
              (6,853
              )
 
 Table of Contents
 71
 
 A
reconciliation between the income tax provision at the federal statutory income
tax rate and at the effective tax rate, for the years ended December 31,
2009, 2008 and 2007, is summarized below:
 
 2009
              
              
              2008
              
              
              2007U.S.
      Federal Statutory Rate
              
              $
              (16,436
              )
              
              $
              (3,687
              )
              
              $
              552State
      taxes, net of federal benefit
              
              
              (1,018
              )
              
              
              (134
              )
              
              
              (1,071
              )Impact
      from permanent items
              
              
              7,676
              
              
              
              11,442
              
              
              
              5,783Foreign
      tax (under) U.S. Statutory rate
              
              
              (1,581
              )
              
              
              (5,372
              )
              
              
              (4,799
              )Translation
      revaluation of deferred taxes
              
              
              (13,397
              )
              
              
              24,608
              
              
              
              113,434Change
      in the valuation allowance for deferred tax assets
              
              
              27,580
              
              
              
              (24,664
              )
              
              
              (100,502
              )Tax
      contingencies
              
              
              1,925
              
              
              
              (900
              )
              
              
              (8,763
              )Foreign
      tax rate changes and withholdings
              
              
              2,937
              
              
              
              (1,218
              )
              
              
              2,402Expired
      foreign tax credit
              
              
              -
              
              
              
              3,057
              
              
              
              -Foreign
      dividend reinvestment tax credit
              
              
              -
              
              
              
              -
              
              
              
              (3,223
              )Other
              
              
              71
              
              
              
              1,806
              
              
              
              (10,666
              )$
              7,757
              
              
              $
              4,938
              
              
              $
              (6,853
              )
 
 The tax
effects of significant temporary differences representing deferred tax assets
and liabilities at December 31, 2009 and 2008, are as
follows:
 
 2009
              
              
              2008Deferred
      tax assets:Net
      operating loss carryforwards
              
              $
              357,925
              
              
              $
              345,829Capital
      loss carryforwards
              
              
              117,455
              
              
              
              98,793AMT
      credit carryforwards
              
              
              1,508
              
              
              
              1,508Accrued
      liabilities not yet deductible
              
              
              12,299
              
              
              
              11,765Property,
      plant and equipment
              
              
              2,763
              
              
              
              3,290Other
              
              
              3,364
              
              
              
              4,658495,314
              
              
              
              465,843Valuation
      allowance
              
              
              (486,881
              )
              
              
              (459,301
              )8,433
              
              
              
              6,542Deferred
      tax liabilities:Intangibles
              
              
              (283
              )
              
              
              (283
              )Other
              
              
              (4,561
              )
              
              
              (6,135
              )(4,844
              )
              
              
              (6,418
              )Net
      deferred tax assets (liabilities)
              
              $
              3,589
              
              
              $
              124
 
 The
domestic and foreign (loss) income before income tax provision are as
follows:
 
 Year
      Ended December 31,2009
              
              
              2008
              
              
              2007Domestic
              
              $
              (57,809
              )
              
              $
              (12,822
              )
              
              $
              (153,570
              )Foreign
              
              
              10,849
              
              
              
              2,287
              
              
              
              155,148$
              (46,960
              )
              
              $
              (10,535
              )
              
              $
              1,578
 
 As of
December 31, 2009, the Company had the following net operating loss (“NOL”)
carryforwards: $792,908 in the U.S., $7,160 in China, $142,783 in Luxembourg,
$881 in Canada, $21,045 in Hong Kong, $0 in the U.K., and $37,974 in the
Netherlands. The U.S. NOLs expire in 2018 through 2029 and the Canada NOLs
expire in 2010 through 2028. All other NOLs carry forward indefinitely. Canada
has a capital loss of $380,115 that will carry forward
indefinitely.
 
 In
connection with the Company reorganization under Chapter 11 completed on
January 31, 2003, Viasystems Group believes more than a 50% change in
ownership occurred under Section 382 of the Internal Revenue Code of 1986,
as amended, and regulations issued thereunder. As a consequence, the utilization
of the U.S. NOLs is limited to approximately $19,700 per year (except to
the extent the Company recognizes certain gains built in at the time of the
ownership change), with any unused portion carried over to succeeding years. Any
NOLs not utilized in a year can be carried over to succeeding
years.
 
 Table of Contents
 72
 
 The
Company has tax holidays in China, covering certain of the Company’s
subsidiaries, that allow either a two-year tax exemption and three-year 50%
reduction in the tax rate or an annually-reviewed rate reduction.  If
not for such tax holidays, the Company would have had $1,798, $1,935 and $338 of
additional income tax expense for December 31, 2009, 2008 and 2007,
respectively, based on the applicable tax rates ranging from 12% to
27%.
 
 Uncertain
Tax Positions
 
 In 2007
the Company changed its method for accounting for uncertain tax
positions.  As a result of this change, the Company recorded a $10,213
increase in the net liability for unrecognized tax positions, which was recorded
as a cumulative effect adjustment to the opening balance of accumulated deficit
on January 1, 2007.  The total amount of unrecognized tax
benefits included in the consolidated balance sheets at December 31, 2009
and 2008, were $18,865 and $17,753, respectively.  The liability for
unrecognized tax benefits increased by $1,112 from December 31, 2008, to
December 31, 2009.  The increase was reduced by the payment of
prior uncertain tax positions and increased by both additional provisions
related to tax positions taken in the current period, and interest and penalties
related to positions taken in prior periods.  Included in the
December 31, 2009, balance was $18,865 of unrecognized tax positions
that, if recognized, would affect the effective tax rate.  The Company
is in discussions with various taxing authorities on several open tax positions,
and it is possible that the amount of the liability for unrecognized tax
benefits could change during the nextyear.The Company currently
estimates approximately $137 of the liability for uncertain tax positions could
be settled in the next twelve months and has classified this as
current.
 
 The
current portion of the Company’s unrecognized tax benefits is presented in the
consolidated balance sheets within accrued income taxes payable, and the amount
expected to be settled after one year is recorded in other non-current
liabilities. At December 31, 2009 and 2008, other non-current liabilities
include $18,728 and $16,153 of long-term accrued taxes, respectively, related to
the liability for unrecognized tax benefits.
 
 The
Company classifies income tax-related interest and penalties as a component of
income tax expense.  At December 31, 2009, the total
unrecognized tax benefit in the consolidated balance sheet included a liability
of $5,630 related to accrued interest and penalties on unrecognized tax
benefits.  For the year ended December 31, 2009, the income
tax provision included in the Company’s consolidated statement of operations
included $1,520 related to interest and penalties on unrecognized tax
benefits.
 
 As of
December 31, 2009, the Company is subject to U.S. federal income tax
examination for all tax years from 1996 forward, and to non-U.S. income tax
examinations generally for the tax year’s 2001 through 2008.  In
addition, the Company is subject to state and local income tax examinations
generally for the tax years 2000 through 2008.
 
 Following
is a reconciliation of the Company’s total gross unrecognized tax benefits,
exclusive of related interest and penalties, for the year ended
December 31, 2009.
 
 Balance
      at December 31,
      2008
              
              $
              13,644Tax
      positions related to current year:Additions
              
              
              1,194Reductions
              
              
              -Tax
      positions related to prior years:Additions
              
              
              -Reductions
              
              
              -Settlements
              
              
              (1,603
              )Lapses
      in statutes of
      limitations
              
              
              -Balance
      at December 31,
      2009
              
              $
              13,235
 
 Table of Contents
 73
 
 12.  Derivative
Financial Instruments
 
 The
Company recognizes all of its derivatives contracts as either assets or
liabilities in the balance sheet and measures those instruments at fair value
through adjustments to other comprehensive income, current earnings, or both, as
appropriate.
 
 The
Company uses derivative instruments, primarily foreign exchange forward
contracts, to manage certain of its foreign exchange rate risks.  The
Company’s objective is to limit potential losses in earnings or cash flows from
adverse foreign currency exchange rate movements.  The Company’s
foreign currency exposure arises from the transacting of business in a currency
that is different from the currency that the Company incurs the majority of its
costs.
 
 The
Company’s decision to enter into forward purchase contracts is made after
considering future use of foreign currencies, the desired foreign exchange rate
sensitivity and exchange rate levels.  Prior to entering into a hedge
transaction, the Company formally documents the relationship between hedging
instruments and hedged items, as well as the risk management objective for
undertaking the various hedge transactions.
 
 The
Company’s currency forward contracts as of December 31, 2009, relate
only to Chinese Renminbi (“RMB”) exchange rates, and because that currency
is not freely traded outside of the People’s Republic of China, the Company’s
contracts are settled in U.S. dollars by reference to changes in the value
of notional quantities of RMB through the contract settlement
date.  Amounts received or paid at the contract settlement date are
recorded in cost of goods sold at the time of settlement.  For the
years ended December 31, 2009 and 2008, a loss of $703 and a gain of
$1,197, were recorded in cost of goods sold related to settled currency forward
contracts, respectively.
 
 At
December 31, 2009 and 2008, deferred losses of $327 and $2,522 (net of tax
of $0) related to cash flow hedges were recorded in accrued and other
liabilities and other accumulated comprehensive income on the consolidated
balance sheet.  The deferred losses were measured using Level 2
inputs, including market interest rates and quoted prices for similar
instruments, and a market approach (see Note 1).  There was no
ineffectiveness recorded in earnings as of December 31, 2009, 2008 or
2007.
 
 The
maximum term over which the Company hedges exposure to the exchange rate
variability of future cash flows is generally less than one year.
 
 The
following table summarizes the Company’s derivative instrument activity at
December 31, 2009:
 
 Notional
                Amount
              
              
              Weighted
                Average
                Remaining
                Maturity
      in
                Months
              
              
              Average
                Exchange
                RateCash
      flow hedges:Chinese
      RMB
              
              
              480,000
              
              
              
              4.0
              
              
              
              6.770Deferred
      loss, net of
      tax
              
              $
              327
 
 13.  Stock
Option Plan and Warrants
 
 2003
Stock Option Plan
 
 Under the
2003 Stock Option Plan, options to purchase a total of 232,352 shares of the
Company’s common stock may be granted to the Company’s
employees.  Stock options may be granted to employees in the form of
nonqualified stock options at market value, and the Company’s practice has been
to grant options at the greater of a fixed exercise price of $150.99 or market
value.  Options granted expire 10 years after the grant date and
vest one-third at the grant date, one-third on the 24-month anniversary of the
grant date and one-third on the 36 month anniversary of the grant
date.  At December 31, 2009, 22,917 of these shares were
available for future grants.
  Table of Contents
 74
  Stock
compensation expense is recognized over the requisite service period for each
award, and recorded in the consolidated statements of operations as
follows:
 
 2009
              
              
              2008
              
              
              2007Cost
      of goods
      sold
              
              $
              144
              
              
              $
              91
              
              
              $
              217Selling,
      general and
      administrative
              
              
              804
              
              
              
              524
              
              
              
              1,868$
              948
              
              
              $
              615
              
              
              $
              2,085
 
 At
December 31, 2009, unrecognized compensation expense totaled approximately
$250 and will be recognized over a weighted average period of approximately
4 months.
 
 No
options were granted in 2009, and the weighted average grant date fair value of
options granted in 2008 and 2007 was $73.28 and $76.99,
respectively.  The fair value of each option grant in 2008 and 2007
was estimated on the date of the grant using the Black-Scholes option-pricing
model and the following assumptions:
 
 2008
              
              
              2007Expected
      life of
      options
              
              5 years
              
              
              5 yearsRisk-free
      interest
      rate
              
              
              2.71%
              
              
              4.02%
      to 4.76%Expected
      volatility of
      stock
              
              
              52%
              
              
              54%
      to 64%Expected
      dividend
      yield
              
              None
              
              
              None
 
 Presented
below is a summary of stock option plan’s activity for the years and as of the
dates shown:
 
 2009
              
              
              2008
              
              
              2007Options
              
              
              Exercise
                Price(1)
              
              
              Options
              
              
              Exercise
                Price(1)
              
              
              Options
              
              
              Exercise
                Price(1)Beginning
      balance
              
              
              218,185
              
              
              $
              150.99
              
              
              
              231,334
              
              
              $
              150.99
              
              
              
              214,839
              
              
              $
              150.99Granted
              
              
              -
              
              
              
              150.99
              
              
              
              1,004
              
              
              
              150.99
              
              
              
              39,732
              
              
              
              150.99Exercised
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
              
              
              (8,750
              )
              
              
              150.99
              
              
              
              (14,153
              )
              
              
              150.99
              
              
              
              (23,237
              )
              
              
              150.99Ending
      balance
              
              
              209,435
              
              
              $
              150.99
              
              
              
              218,185
              
              
              $
              150.99
              
              
              
              231,334
              
              
              $
              150.99Exercisable
      at year
      end
              
              
              198,699
              
              
              $
              150.99
              
              
              
              193,491
              
              
              $
              150.99
              
              
              
              196,546
              
              
              $
              150.99(1)
      Weighted average.
 
 As of
December 31, 2009, the weighted average remaining contractual life of
outstanding options was 4.2 years, and the weighted average remaining
contractual life of exercisable options was 3.9 years.
 
 Table of Contents
 75
 
 2003
Warrants
 
 On
January 31, 2003, the Company authorized warrants to purchase
120,131 shares of common stock for certain pre-petition holders of the
Series B preferred stock interest and to pre-petition unsecured
creditors.  As of December 31, 2009 and 2008, 115,284 warrants
were issued and outstanding.  Each warrant allows the holder to
purchase one share of common stock at an exercise price of $304.97 per
share.  The warrants expired on January 31, 2010, with no
warrants having been exercised.
 
 14.  Preferred
Stock
 
 Mandatory
Redeemable Class A Junior Preferred Stock
 
 As of
December 31, 2009, 2008 and 2007 there were 1,500,000 shares authorized and
903,233 shares of Class A Junior Preferred Stock (the “Class A
Preferred”) issued and outstanding.  Par value of the stock was $.01
per share. Dividends accrue semi-annually on June 30 and December 31,
commencing on January 1, 2004. Dividends were cumulative and accrued
at an annual rate of 1.0% on the Liquidation Preference ($100 per share plus
accrued, but unpaid dividends) per share per annum from January 1, 2004 to
December 31, 2004, 3.0% on the Liquidation Preference per share per annum
from January 1, 2005 to December 31, 2005, 5.0% on the Liquidation
Preference per share per annum from January 1, 2006 to December 31,
2006, 8.0% on the Liquidation Preference per share per annum
from January 1, 2007 to January 31, 2013, and 14.0% on the Liquidation
Preference per share per annum beginning February 1, 2013, until the
redemption completion date.
 
 Table of Contents
 76
 
 The
Class A Preferred is classified as a liability under accounting rules for
financial instruments with characteristics of both liabilities and
equity.  The recorded balance in the Company’s financial statements is
the present value of the redemption amount of securities.  When
issued, the future value of the securities resulted in the discount of $37,930
from the face amount of $120,100.  Upon completion of the
October 7, 2004, exchange of Class A Preferred, the discount was
reduced by $9,900.  The discount, recorded as interest expense, is
being amortized to the contractual maturity of the Class A Preferred,
January 31, 2013.  All dividends are recorded as interest expense
using the weighted average interest rate of all dividends to be paid over the
term.  A total of $10,740, $9,770, and $8,887 were recorded as
interest expense during the years ended December 31, 2009, 2008 and 2007,
respectively.
 
 Subsequent
to December 31, 2009, in connection with the Recapitalization
Agreement (see Note 20), on February 11, 2010, all of the outstanding
shares of the Company’s Class A Preferred were reclassified as, and converted
into, approximately 7,658,226 shares of newly issued common stock.
 
 Redeemable
Class B Senior Convertible Preferred Stock
 
 At
December 31, 2009, there were 4,500,000 shares authorized and
4,255,546 shares issued and outstanding of Class B Senior Convertible
Preferred Stock (the “Class B Preferred”).  Par value of the
stock is $.01 per share. Dividends accrue semi-annually on June 30 and
December 31, commencing on June 30, 2003.  Dividends are
cumulative and accrue at an annual rate of 9.0% on the Liquidation Preference
($12.63 per share plus accrued, but unpaid dividends) prior to January 31,
2013 and at an annual rate of 14.0% on the Liquidation Preference per share per
annum beginning February 1, 2013, until the redemption completion
date.  The Company’s credit agreement prohibits the payment of cash
dividends.
 
 The
Class B Preferred is classified as temporary equity. In 2003, as part of
the Company’s reorganization under Chapter 11, a payment of $1,072 was paid
to investors in connection with issuance of the Class B
Preferred.  As a result, the investors’ effective conversion price was
lower than the fair value of our common stock at the commitment date, which
created a beneficial conversion factor (“BCF”) of $1,081.  Both the
payment to investors and BCF were capitalized to reduce the face value of the
Class B Preferred and are being amortized over ten years.
 
 Subsequent
to December 31, 2009, in connection with the Recapitalization
Agreement (see Note 20), on February 11, 2010, all of the outstanding
shares of the Company’s Class B Preferred were reclassified as, and converted
into, approximately 6,028,260 shares of newly issued common stock.
 
 The
Company recorded increases to the Class A and Class B Preferred Stock
as follows to reflect accretion of dividends and amortization of the discount
and BCF:
 
 Class
      A Preferred
              
              
              Class
      B PreferredShares
              
              
              Amount
              
              
              Shares
              
              
              AmountBalance
      at December 31,
      2007
              
              
              903,233
              
              
              $
              98,326
              
              
              
              4,255,546
              
              
              $
              81,983Accretion
      and
      amortization
              
              
              -
              
              
              
              9,770
              
              
              
              -
              
              
              
              7,829Balance
      at December 31,
      2008
              
              
              903,233
              
              
              $
              108,096
              
              
              
              4,255,546
              
              
              $
              89,812Accretion
      and
      amortization
              
              
              -
              
              
              
              10,740
              
              
              
              -
              
              
              
              8,515Balance
      as of December 31,
      2009
              
              
              903,233
              
              
              $
              118,836
              
              
              
              4,255,546
              
              
              $
              98,327
 
 As of
December 31, 2009, the aggregate cumulative preferred dividends in arrears
for the Class A and Class B Preferred was $34,622 and $45,076,
respectively.
  15.  Business
Segment Information
 
 Operating
segments are defined as components of an enterprise for which separate financial
information is available that is evaluated regularly by the chief operating
decision maker or decision making group in deciding how to allocate
resources and in assessing performance.  During the year ended
December 31, 2009, the Company operated its business in two segments
(i) Printed Circuit Boards and (ii) Assembly.
 
 Table of Contents
 77
 
 The
Printed Circuit Boards segment consists of the Company’s printed circuit board
manufacturing facilities located in China.  These facilities
manufacture double-sided and multi-layer printed circuit boards and
backpanels.  The Assembly segment consists of assembly operations
including backpanel assembly, printed circuit board assembly, cable assembly,
custom enclosures, and full system assembly and testing.  The assembly
operations are conducted in manufacturing facilities in China and
Mexico.
 
 The
assets and liabilities of the Company’s corporate headquarters, and the assets,
liabilities and operating results of its closed Printed Circuit Boards and
Assembly operations, are reported in “Other.”  Operating expenses of
our corporate headquarters are allocated to the Printed Circuit Boards and
Assembly segments.  During 2008, the Company refined its methodology
for allocating operating expenses of our corporate headquarters to its segments
to better reflect the efforts undertaken to support each segment. Previously
these costs were allocated based solely on each segment’s percentage of total
net sales.  Inter-segment sales are eliminated in
consolidation.  The accounting policies of the segments are the same
as those described in Note 1.
 
 During
2009, the Company’s Milwaukee Facility was closed, and the Company began to
report the assets, liabilities and operating results of the Milwaukee Facility
in “Other.”  Previously, the operating results of the Milwaukee
Facility were reported in the Assembly segment.  For all periods
presented, segment results have been reclassified for comparison purposes to
reflect the assets, liabilities and operating results of the Milwaukee Facility
in “Other,” and the refined methodology for allocating operating expenses of the
Company’s corporate headquarters to the Printed Circuit Boards and Assembly
segments.
 
 Total
assets by segment are as follows:
 
 December 31,2009
              
              
              2008Total
      assets:Printed
      Circuit
      Boards
              
              $
              382,238
              
              
              $
              435,664Assembly
              
              
              85,448
              
              
              
              102,208Other
              
              
              189,552
              
              
              
              47,366Total
      assets
              
              $
              657,238
              
              
              $
              585,238
 
 Table of Contents
 78
 
 Net sales
and operating income (loss) by segment are as follows:
 
 2009
              
              
              2008
              
              
              2007Net
      sales to external customers:Printed
      Circuit Boards
              
              $
              340,993
              
              
              $
              471,386
              
              
              $
              471,211Assembly
              
              
              141,693
              
              
              
              196,552
              
              
              
              187,338Other
              
              
              13,761
              
              
              
              44,892
              
              
              
              55,794$
              496,447
              
              
              $
              712,830
              
              
              $
              714,343Intersegment
      sales:Printed
      Circuit Boards
              
              $
              9,273
              
              
              $
              18,398
              
              
              $
              18,616Assembly
              
              
              13
              
              
              
              9
              
              
              
              7Other
              
              
              363
              
              
              
              1,113
              
              
              
              2,655$
              9,649
              
              
              $
              19,520
              
              
              $
              21,278Operating
      income (loss):Printed
      Circuit Boards
              
              $
              3,244
              
              
              $
              23,838
              
              
              $
              26,078Assembly
              
              
              4,120
              
              
              
              8,836
              
              
              
              8,365Other
              
              
              (12,112
              )
              
              
              (10,272
              )
              
              
              50Total
      operating (loss) income
              
              
              (4,748
              )
              
              
              22,402
              
              
              
              34,493Interest
      expense, net
              
              
              34,399
              
              
              
              31,585
              
              
              
              30,573Amortization
      of deferred financing costs
              
              
              1,954
              
              
              
              2,063
              
              
              
              2,065Loss
      on early extinguishment of debt
              
              
              2,357
              
              
              
              -
              
              
              
              -Other,
      net
              
              
              3,502
              
              
              
              (711
              )
              
              
              277(Loss)
      income before income taxes
              
              $
              (46,960
              )
              
              $
              (10,535
              )
              
              $
              1,578
 
 For the
year ended December 31, 2009, the Company recorded net restructuring
charges of $118 and $6,592 in the Assembly and “Other” segments, respectively;
and recorded a net reversal of restructuring expense of $84 in the Printed
Circuit Boards segment.  Of these charges, $1,592 were non-cash asset
impairment charges in the Printed Circuit Boards segment.  For the
year ended December 31, 2008, the Company recorded restructuring charges of
$9,948, $702 and $4,419 in the Printed Circuit Boards, Assembly and “Other”
segments, respectively.  Of these charges, $1,690 and $3,868 were
non-cash asset impairment charges in the Printed Circuit Boards and “Other”
segments, respectively.  No restructuring charges were incurred in the
Printed Circuit Boards and Assembly segments in 2007.  In the “Other”
segment, restructuring charges of $278, were recorded for 2007.
 
 Capital
expenditures and depreciation expense by segment are as follows:
 
 2009
              
              
              2008
              
              
              2007Capital
      expenditures:Printed
      Circuit
      Boards
              
              $
              17,524
              
              
              $
              42,920
              
              
              $
              29,549Assembly
              
              
              2,190
              
              
              
              2,846
              
              
              
              4,046Other
              
              
              2,211
              
              
              
              3,159
              
              
              
              3,602Total
      capital
      expenditures
              
              $
              21,925
              
              
              $
              48,925
              
              
              $
              37,197Depreciation
      expense:Printed
      Circuit
      Boards
              
              $
              45,579
              
              
              $
              46,262
              
              
              $
              43,722Assembly
              
              
              4,582
              
              
              
              4,979
              
              
              
              4,752Other
              
              
              -
              
              
              
              2,044
              
              
              
              1,230Total
      depreciation
      expense
              
              $
              50,161
              
              
              $
              53,285
              
              
              $
              49,704
 
 Table of Contents
 79
 
 Net sales
by country of destination are as follows:
 
 Year
      Ended December 31,2009
              
              
              2008
              
              
              2007United
      States
              
              $
              138,632
              
              
              $
              264,490
              
              
              $
              263,680People’s
      Republic of China, including Hong Kong
              
              
              126,105
              
              
              
              147,638
              
              
              
              170,579Germany
              
              
              39,338
              
              
              
              56,951
              
              
              
              50,167Malaysia
              
              
              22,298
              
              
              
              19,844
              
              
              
              26,121Mexico
              
              
              21,706
              
              
              
              18,570
              
              
              
              12,743France
              
              
              20,794
              
              
              
              29,827
              
              
              
              40,425Hungary
              
              
              16,323
              
              
              
              18,734
              
              
              
              20,788Canada
              
              
              15,082
              
              
              
              14,115
              
              
              
              9,824Thailand
              
              
              12,057
              
              
              
              5,719
              
              
              
              6,919Czech
      Republic
              
              
              11,745
              
              
              
              16,009
              
              
              
              15,945Singapore
              
              
              8,429
              
              
              
              9,922
              
              
              
              6,893United
      Kingdom
              
              
              8,059
              
              
              
              10,309
              
              
              
              9,277Belgium
              
              
              7,838
              
              
              
              17,372
              
              
              
              31,999Portugal
              
              
              7,283
              
              
              
              8,688
              
              
              
              7,414Japan
              
              
              7,191
              
              
              
              6,191
              
              
              
              1,813Poland
              
              
              4,689
              
              
              
              7,271
              
              
              
              2,357Other
              
              
              28,878
              
              
              
              61,180
              
              
              
              37,399Total
              
              $
              496,447
              
              
              $
              712,830
              
              
              $
              714,343
 
 Property,
plant and equipment, net by country are as follows:
 
 December 31,2009
              
              
              2008People’s
      Republic of
      China
              
              $
              193,672
              
              
              $
              225,222Mexico
              
              
              2,877
              
              
              
              3,571United
      States
              
              
              2,495
              
              
              
              3,948$
              199,044
              
              
              $
              232,741
 
 16.  
Retirement Plans
 
 The
Company has a defined contribution retirement savings plan (the “Retirement
Plan”) covering substantially all domestic employees who meet certain
eligibility requirements as to age and length of service.  The
Retirement Plan incorporates the salary deferral provision of
Section 401(k) of the Internal Revenue Code and employees may defer up to
30% of their compensation or the annual maximum limit prescribed by the Internal
Revenue Code.  The Company matches a percentage of the employees’
deferrals and may contribute an additional 1% of employees’ salaries to the
Retirement Plan regardless of employee deferrals.  The Company may
also elect to contribute an additional profit-sharing contribution to the
Retirement Plan at the end of each year.  The Company’s contributions
to the Retirement Plan were $295, $465, and $474 for the years ended
December 31, 2009, 2008 and 2007, respectively.
 
 17.  Research
and Development
 
 Research,
development and engineering expenditures for the creation and application of new
products and processes were approximately $1,225, $2,157, and $3,397 for the
years ended December 31, 2009, 2008 and 2007,
respectively.  Research and development is included in the selling,
general and administrative line item on the consolidated statements of
operations.
 
 18.  Related
Party Transactions
 
 Monitoring
and Oversight Agreement
 
 Effective
as of January 31, 2003, the Company entered into a ten-year monitoring
and oversight agreement with an affiliate of Hicks, Muse & Co. Partners L.P.
(“HM Co.”), which, through its affiliates as of December 31, 2009, controlled a
majority of the voting stock of the Company.  The monitoring and
oversight agreement obligates the Company to indemnify HMT Co., its affiliates,
and its respective directors, officers, controlling persons, agents and employees
from and against all claims, liabilities, losses, damages, expenses and fees and
disbursements of counsel related to or arising out of or in connection with the
 
 Table of Contents
 80
 
 services
rendered under the monitoring and oversight agreement and not resulting
primarily from the bad faith, gross negligence or willful misconduct of HM
Co.  The consolidated statements of operations include expense of
$1,159, $1,500 and $1,500 for each of the years ended December 31, 2009,
2008 and 2007, respectively.  The Company made cash payments of $1,500
to HM Co. related to these expenses during each of the years ended
December 31, 2009, 2008 and 2007.  At December 31, 2009,
$1,159 is included in accrued and other liabilities for amounts due under this
agreement.  On February 11, 2010, under the terms and
conditions of the Recapitalization Agreement (see Note 20), the monitoring and
oversight agreement was terminated in consideration for the payment by the
Company of a cash termination fee of approximately $4,441 to HM
Co.
  Compensation
of Directors
 
 For each
of the years 2009 and 2008 the Chairman of the Board received an annual fee of
$130.  Directors (other than the Chairman) who are not executive
officers received an annual fee of $35 in each of the years 2009 and
2008.  In addition, each Audit Committee and Compensation Committee
member received an annual fee of $12 in each of the years 2009 and 2008; and the
Chairman of the Audit Committee and Compensation Committee each received an
additional fee of $7 in each of the years 2009 and 2008.  In addition,
Directors are reimbursed for out-of-pocket expenses incurred in connection with
attending meetings of the Board and its committees and receive a per diem fee of
$1 for additional time spent on the Company’s business.
 
 Table of Contents
 81
 
 19.  Summary
of Interim Financial Information (unaudited)
  
 Quarterly
financial data for the years ended December 31, 2009 and 2008 is
presented below:
 
 Quarter1st
              
              
              2nd
              
              
              3rd
              
              
              4th
              
              
              Year2009:Net
      Sales
              
              $
              123,437
              
              
              $
              120,561
              
              
              $
              121,087
              
              
              $
              131,362
              
              
              $
              496,447Cost
      of goods sold
              
              
              102,876
              
              
              
              97,323
              
              
              
              96,101
              
              
              
              101,844
              
              
              
              398,144Selling,
      general and administrative
              
              
              10,204
              
              
              
              11,455
              
              
              
              10,456
              
              
              
              12,958
              
              
              
              45,073Depreciation
      and amortization
              
              
              12,984
              
              
              
              12,913
              
              
              
              12,835
              
              
              
              12,620
              
              
              
              51,352Restructuring
      and impairment
              
              
              723
              
              
              
              3,847
              
              
              
              583
              
              
              
              1,473
              
              
              
              6,626Operating
      (loss) income
              
              
              (3,350
              )
              
              
              (4,977
              )
              
              
              1,112
              
              
              
              2,467
              
              
              
              (4,748
              )Net
      loss
              
              
              (14,500
              )
              
              
              (12,864
              )
              
              
              (11,444
              )
              
              
              (15,909
              )
              
              
              (54,717
              )Accretion
      of Class B Senior Convertible preferred stock
              
              
              2,084
              
              
              
              2,085
              
              
              
              2,173
              
              
              
              2,173
              
              
              
              8,515Net
      loss attributable to commonstockholders
              
              $
              (16,584
              )
              
              $
              (14,949
              )
              
              $
              (13,617
              )
              
              $
              (18,082
              )
              
              $
              (63,232
              )Basic
      and diluted loss per share
              
              $
              (6.87
              )
              
              $
              (6.19
              )
              
              $
              (5.64
              )
              
              $
              (7.48
              )
              
              $
              (26.18
              )2008:Net
      Sales
              
              $
              180,519
              
              
              $
              188,157
              
              
              $
              196,343
              
              
              $
              147,811
              
              
              $
              712,830Cost
      of goods sold
              
              
              140,430
              
              
              
              147,452
              
              
              
              158,580
              
              
              
              121,894
              
              
              
              568,356Selling,
      general and administrative
              
              
              15,324
              
              
              
              14,365
              
              
              
              13,249
              
              
              
              9,537
              
              
              
              52,475Depreciation
      and amortization
              
              
              13,352
              
              
              
              13,562
              
              
              
              13,861
              
              
              
              13,753
              
              
              
              54,528Restructuring
      and impairment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              15,069
              
              
              
              15,069Operating
      income (loss)
              
              
              11,413
              
              
              
              12,778
              
              
              
              10,653
              
              
              
              (12,442
              )
              
              
              22,402Net
      income (loss)
              
              
              1,733
              
              
              
              1,768
              
              
              
              602
              
              
              
              (19,576
              )
              
              
              (15,473
              )Accretion
      of Class B Senior Convertible preferred stock
              
              
              1,917
              
              
              
              1,916
              
              
              
              1,999
              
              
              
              1,997
              
              
              
              7,829Net
      loss attributable to commonstockholders
              
              $
              (184
              )
              
              $
              (148
              )
              
              $
              (1,397
              )
              
              $
              (21,573
              )
              
              $
              (23,302
              )Basic
      and diluted loss per share
              
              $
              (0.08
              )
              
              $
              (0.06
              )
              
              $
              (0.58
              )
              
              $
              (8.93
              )
              
              $
              (9.65
              )
 
 20.  Subsequent
Events (unaudited)
 
 The
Merix Acquisition
 
 On
February 16, 2010, the Company acquired Merix Corporation (“Merix”) in a
transaction pursuant to which Merix became a wholly owned subsidiary of the
Company (the “Merix Acquisition”).  Merix is a leading manufacturer of
technologically advanced, multi-layer printed circuit boards with operations in
the United States and China.  The Merix Acquisition increases the
Company’s PCB manufacturing capacity by adding four additional PCB production
facilities, adds North American quick-turn services capability and adds
defense and aerospace to the Company’s end-user markets.  The
consideration paid by the Company in the merger included cash of $34,908 and
common stock of the Company representing, after giving effect to the
Recapitalization Agreement (see below), approximately 19.5% of the Company’s
common stock.  As of February 16, 2010, the Company’s common stock was
not traded on any exchange.  As a result, as of the date these
financial statements were issued, the Company has not completed an estimate of
fair value of the common stock paid as partial consideration in the merger, nor
has the Company completed a calculation of any gain or loss on the exchange of
its preferred stock in connection with the Recapitalization
Agreement.  The purchase price
allocation has not been completed as of the date these financial statements were
issued.  During the year ended December 31, 2009, in
connection with the Merix Acquisition, the Company incurred $4,048 of
professional fees and other costs which were recorded in selling, general and
administrative expenses.
 
 Table of Contents
 82
 
 Recapitalization
Agreement
 
 In
connection with the Merix Acquisition, on February 11, 2010, pursuant to a
recapitalization agreement dated October 6, 2009, (the “Recapitalization
Agreement”), by and among the Company and affiliates of Hicks, Muse, Tate &
Furst, Incorporated (“HMTF”), affiliates of GSC Recovery II, L.P. (“GSC”) and
TCW Shared Opportunities Fund III, L.P. (“TCW” and together with HMTF and GSC,
the “Funds”), the Company and the Funds approved a Recapitalization of the
Company such that (i) each outstanding share of common stock of the Company was
exchanged for 0.083647 shares of newly issued common stock of the Company, (ii)
each outstanding share of Class A Junior Preferred Stock of the Company was
reclassified as, and converted into, 8.478683 shares of newly issued common
stock of the Company and (iii) each outstanding share of Class B Senior
Preferred Stock of the Company was reclassified as, and converted into, 1.416566
shares of newly issued common stock of the Company.
 
 As a
result of the completion of the recapitalization and the Merix Acquisition, (i)
the holders of the Company’s common stock prior to the recapitalization received
approximately 2,415,263 shares of newly issued common stock of the Company, (ii)
the holders of the Company’s Class A Junior Preferred Stock prior to the
recapitalization received approximately 7,658,226 shares of newly issued common
stock of the Company, (iii) the holders of the Company’s Class B Senior
Preferred Stock prior to the recapitalization received approximately 6,028,260
shares of newly issued common stock of the Company, (iv) the holders of the
Merix common stock prior to the closing of the Merix Acquisition received
approximately 2,500,000 shares of newly issued common stock of the Company and
(v) the holders of Merix’ convertible notes prior to the closing of the Merix
Acquisition received, in addition to a cash payment of approximately $34.9
million, 1,398,251 shares of newly issued common stock of the
Company.  The total issued and outstanding common stock of the Company
immediately after the closing of the Merix Acquisition was 20,000,000 shares of
common stock of the Company.
 
 New
Stockholder Agreement
 
 Pursuant
to the terms of the Recapitalization Agreement, in connection with the closing
of the Merix Acquisition, on February 11, 2010, the Company entered into a new
stockholder agreement (the “2010 Stockholder Agreement”), by and among the
Company and VG Holdings, LLC (“VG Holdings”) which was formed by the Funds and
which holds approximately 77.8% of the common stock of the
Company.  Under the terms of the 2010 Stockholder Agreement, VG
Holdings has the right, subject to certain reductions, to designate up to five
directors to serve on the board of directors of the Company.  Subject
to certain exceptions, VG Holdings agreed not to sell any of the Company’s
common stock held by VG Holdings for 180 days after the closing of the Merix
Acquisition.  In addition, the 2010 Stockholder Agreement provides VG
Holdings with certain registration rights related to its shares of the Company’s
common stock.  The new stockholder agreement will terminate on
February 11, 2020.
 
 Table of Contents
 83
 
 Item 9.   Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
 
 None.
 
 Item 9A.   Controls and Procedures
 
 (a) Evaluation of
Disclosure Controls and Procedures
 
 Under the
supervision and with the participation of Viasystems’ management, including
Viasystems’ Chief Executive Officer and Chief Financial Officer, Viasystems has
evaluated the effectiveness of Viasystems’ disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as
amended) as of December 31, 2009.  Based on that evaluation,
Viasystems’ Chief Executive Officer and Chief Financial Officer concluded that,
as of December 31, 2009, such disclosure controls and procedures were
effective in ensuring information required to be disclosed by Viasystems in
reports that it files or submits under the Securities Exchange Act of 1934, as
amended, is (i) recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and
forms and (ii) accumulated and communicated to our management, including
our principal executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure.
 
 (b)
Inherent Limitations on Effectiveness of Controls
 
 Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls or our internal control over
financial reporting will prevent or detect all errors and all
fraud.  A control system, no matter how well conceived or operated,
can provide only reasonable, not absolute, assurance the objectives of the
control system are met.  Further, the design of a control system must
reflect the fact there are resource constraints, and the benefits of controls
must be considered relative to their costs.  Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have
been detected.  These inherent limitations include the realities that
judgments in decision-making can be faulty, and breakdowns can occur because of
simple error or mistake.  Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of the controls.  The design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance any design will succeed in
achieving its stated goals under all potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may
deteriorate.  Because of the inherent limitations in a cost-effective
control system, misstatements due to errors or fraud may occur and not be
detected. Our disclosure controls and procedures are designed to provide a
reasonable level of assurance that their objectives are achieved.
 
 (c)
Management’s Annual Report on Internal Control over Financial
Reporting
 
 Management
is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended.  As of
December 31, 2009, under the supervision and with the participation of
management, including Viasystems’ Chief Executive Officer and Chief Financial
Officer, an evaluation was conducted of the effectiveness of Viasystems’
internal control over financial reporting based on the framework contained in
the report titled“Internal Control —
Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”).  This evaluation
included review of the documentation of controls, evaluation of the design
effectiveness of controls, testing of the operating effectiveness of controls
and a conclusion on this evaluation.  Based on that evaluation,
management concluded that Viasystems’ internal control over financial reporting
was effective to provide reasonable assurance that the desired control
objectives were achieved as of December 31, 2009.
  Table of Contents
 84
  The
Company’s independent registered public accounting firm, Ernst & Young LLP,
has audited the effectiveness of the Company’s internal control over financial
reporting as of December 31, 2009, as stated in their report, which is
included herein.
 
 (d)
Changes in Internal Control Over Financial Reporting
 
 There
were no changes in Viasystems’ internal control over financial reporting that
occurred during the quarter ended December 31, 2009, that have materially
affected, or are reasonably likely to materially affect, its internal control
over financial reporting.
 
 Date:
February 25,
2010                                                                            /s/ David M.
Sindelar
 David
M. Sindelar
 Chief
Executive Officer
 
 Date:
February 25,
2010                                                                            /s/ Gerald G.
Sax
 Gerald
G. Sax
 Chief
Financial Officer
  Table of Contents
 85
 
 Report
of Independent Registered Public Accounting Firm
 
 The Board
of Directors and Stockholders
 Viasystems
Group, Inc.
 
 We have
audited Viasystems Group, Inc.’s (the Company’s) internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). The Company’s management is responsible
for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Annual Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
 
 A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the COSO
criteria.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Viasystems
Group, Inc. as of December 31, 2009 and 2008, and the related consolidated
statements of operations, stockholders’ equity (deficit) and comprehensive
income (loss), and cash flows for each of the three years in the period ended
December 31, 2009, and our report dated February 25, 2010, expressed
an unqualified opinion thereon.
  /s/ Ernst
& Young LLP
 
 St.
Louis, Missouri
 February
25, 2010
 
 Table of Contents
 86
 
 Item 9B.   Other Information
 
 None
 
 PART
III
 
 Item 10. Directors, Executive Officers and Corporate
Governance
 
 The
information required by this Item is incorporated herein by reference from the
information to be contained in our 2010 Proxy Statement to be filed with the SEC
in connection with the solicitation of proxies for the Company’s 2010 Annual
Meeting of Shareholders (“2010 Proxy Statement”). The 2010 Proxy Statement will
be filed with the SEC within 120 days after the end of the fiscal year to which
this report relates.
 
 Item 11. Executive Compensation
 
 The
information required by this Item is incorporated herein by reference from the
information to be contained in the 2010 Proxy Statement.
 
 Item 12. SecurityOwnership of Certain Beneficial Owners and
Management and Related Stockholder Matters
 
 The
information required by this Item is incorporated herein by reference from the
information to be contained in the 2010 Proxy Statement.
 
 Item 13. Certain Relationships and Related Transactions, and
Director Independence
 
 The
information required by this Item is incorporated herein by reference from the
information to be contained in the 2010 Proxy Statement.
 
 Item 14. Principal
Accountant Fees and Services
 
 The
information required by this Item is incorporated herein by reference from the
information to be contained in the 2010 Proxy Statement.
 
 PART
IV
 
 Item 15.  Exhibits and Financial Statement
Schedules
 
 1.  Financial
Statements
 
 The
information required by this item is included in Item 8 of Part II of this Form
10-K.
 
 2.
              Financial
      Statement Schedules
 
 None.
 
 3.
              Exhibits
 
 The
information required by this item is included on the exhibit index that follows
the signature page of this Form 10-K.
  Table of Contents
 87
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 25th day
of February, 2010.
 
 Viasystems
Group, Inc.
 /s/
      David M. Sindelar
              
              /s/
      Gerald G. SaxDavid
      M. Sindelar
              
              Gerald
      G. SaxChief
      Executive Officer
              
              Senior
      Vice President and Chief Financial OfficerPrincipal
      Accounting Officer
 
 Pursuant
to the requirements of the Securities Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
indicated on the 25th day
of February, 2010.
 
 /s/
      Christopher J. SteffenChristopher
      J. Steffen
              
              Chairman
      of the Board of Directors/s/
      Jack D. FurstJack
      D. Furst
              
              Director/s/
      Edward HerringEdward
      Herring
              
              Director/s/
      Robert F. Cummings, Jr.Robert
      F. Cummings, Jr.
              
              Director/s/
      Richard A. McGinnRichard
      A. McGinn
              
              Director/s/
      Philip RaygorodetskyPhilip
      Raygorodetsky
              
              Director/s/
      Richard W. VieserRichard
      W. Vieser
              
              Director/s/
      Kirby DyessKirby
      Dyess
              
              Director/s/
      William McCormickWilliam
      McCormick
              
              Director/s/
      Michael BurgerMichael
      Burger
              
              Director/s/
      David M. SindelarDavid
      M. Sindelar
              
              Chief
      Executive Officer and Director
                (Principal
      Executive Officer)/s/
      Timothy L. ConlonTimothy
      L. Conlon
              
              President,
      Chief Operating Officer and Director/s/
      Gerald G. SaxGerald
      G. Sax
              
              Senior
      Vice President and Chief Financial Officer (Principal Financial Officer
      and Principal Accounting Officer)
 
 Table of Contents
 88
 
 Exhibit Index
 
 The
following exhibits are filed as part of this Form 10-K or incorporated by
reference herein:
  Exhibit No.
              Exhibit Description2.1
              (1)
              Prepackaged
      Joint Plan of Reorganization of Viasystems Group, Inc. and Viasystems,
      Inc. under Chapter 11 of the Bankruptcy Code, dated August 30,
      2002.2.1(a)
              (1)
              Modification
      to the Debtors’ Prepackaged Joint Plan of Reorganization, dated
      January 2, 2003.2.2
              (4)
              Stock
      Purchase Agreement between Electrical Components International Holdings
      Company, Viasystems Group, Inc., Wire Harness Holding Company, Inc. and
      Wire Harness Industries, Inc. dated March 21, 2006.2.3
              (6)
              Agreement
      and Plan of Merger, dated as of October 6, 2009, by and among Viasystems
      Group, Inc., Maple Acquisition Corp. and Merix
  Corporation.3.1
              (9)
              Third
      Amended and Restated Certificate of Incorporation of Group,
      Inc.3.2
              (9)
              Second
      Amended and Restated Bylaws of Group, Inc.4.1
              (8)
              Indenture,
      dated as of November 24, 2009, among Viasystems, Inc., the guarantors
      named therein and Wilmington Trust FSB, as trustee.4.2
              (8)
              Form
      of 12.00% Senior Secured Note (included as Exhibit A1 to the Indenture
      filed as Exhibit 4.1 hereto).4.3
              (10)
              Indenture
      dated May 16, 2006, between Merix Corporation and U.S. Bank National
      Association, as trustee.4.4
              (10)
              Form
      of 4% Convertible Senior Subordinated Note Due 2013 (included in Section
      2.2 of the Indenture filed as Exhibit 4.3 hereto).4.5
              (9)
              First
      Supplemental Indenture, dated as of February 16, 2010, by and among
      Viasystems Group, Inc., Merix Corporation and U.S. Bank, National
      Association, as trustee.4.6
              (9)
              Specimen
      Common Stock Certificate.10.1
              (1)
              Viasystems
      Group, Inc. 2003 Stock Option Plan.10.2
              (1)
              Amended
      and Restated Executive Employment Agreement, dated October 13, 2003,
      among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies
      Corp. LLC, the other subsidiaries party thereto, and David M.
      Sindelar.10.3
              (1)
              Amended
      and Restated Executive Employment Agreement, dated January 31, 2003,
      among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies
      Corp. LLC, and Timothy L. Conlon.10.4
              (3)
              Amended
      and Restated Executive Employment Agreement made and entered into
      effective as of August 15, 2005, among Viasystems Group, Inc., Viasystems,
      Inc., Viasystems Technologies Corp., LLC and Gerald G.
  Sax.10.5
              (1)
              Amended
      and Restated Executive Employment Agreement, dated as of January 31, 2003,
      among Viasystems Group, Inc., Viasystems, Inc., Viasystems Technologies
      Corp., LLC and Joseph Catanzaro.10.6
              (9)
              Stockholder
      Agreement, dated as of February 11, 2010, by and between Viasystems Group,
      Inc. and VG Holdings, LLC.10.7
              (2)
              Annual
      Incentive Compensation Plan for Viasystems Group,
  Inc.
  Table of Contents
 89
  10.8
              (5)
              English
      translation of the Guangzhou 2009 Credit Facility Contract, dated as of
      August 17, 2009, by and between Guangzhou Termbray Electronics Technology
      Co., Ltd, as Borrower, and China Construction Bank Guangzhou Economic and
      Technological Development District Branch, as Lender.10.9
              (5)
              English
      translation of the Maximum-Amount Mortgage Contract by and between
      Guangzhou Termbray Electronics Technology Co., Ltd, as Borrower, and China
      Construction Bank Guangzhou Economic and Technological Development
      District Branch, as Lender.10.10
              (7)
              Industrial
      Lease, dated as of April 16, 2008, by and between Verde 9580 Joe Rodriquez
      LP and Viasystems Technologies Corp., LLC.10.11
              (7)
              First
      Amendment to Industrial Lease, dated as of December 8, 2008, by and
      between Verde 9580 Joe Rodriquez LP and Viasystems Technologies Corp.,
      LLC.10.12
              (7)
              English
      translation of the Lease Agreement on Tong Fu Kang Plant Building
      (Building A, Shenzhen), dated as of October 26, 2006, by and between
      Shenzhen Tong Fu Kang Industry Development Co., Ltd and Viasystems Chang
      Yuan EMS (Shenzhen) Co., Ltd (now known as Viasystems EMS (Shenzhen) Co.,
      Ltd).10.13
              (7)
              English
      translation of the Lease Agreement on Tong Fu Kang Plant Building
      (Building D, Shenzhen), dated as of May 6, 2003, by and between Shenzhen
      Tong Fu Kang Industry Development Co., Ltd and Viasystems Chang Yuan EMS
      (Shenzhen) Co., Ltd (now known as Viasystems EMS (Shenzhen) Co.,
      Ltd).10.14
              (7)
              English
      translation of the Lease Agreement, dated as of October 18, 2008, by and
      between Qingdao Jijia Electronics Co., Ltd and Qingdao Viasystems
      Telecommunications Technologies Co., Ltd.10.15
              (7)
              English
      translation of the Contract of Lease, dated as of September 1, 2002, by
      and between Parque Industrial Internacional Mexicano, S.A. de C.V. and
      Electrocomponentes de Mexico, S.A. de C.V.10.16
              (7)
              Amendment
      Agreement to the Lease Agreement, dated as of June 25, 2004, by and among
      Parque Industrial Internacional Mexicano, S.A. de C.V., Electrocomponentes
      de Mexico, S.A. de C.V. and Viasystems, Inc.10.17
              (7)
              Second
      Amendment to the Lease Agreement, dated as of October 15, 2007, by and
      among Banco J.P. Morgan, Sociedad Anónima, Institución de Banca Múltiple,
      J.P. Morgan Grupo Financiero, División Fiduciaria, International
      Manufacturing Solutions Operaciones, S. de R.L. de C.V. and Viasystems,
      Inc.10.18
              (7)
              Third
      Amendment to the Lease Agreement, dated as of August 26, 2009, by and
      among The Bank of New York Mellon, S.A., Institución de Banca Múltiple
      (Final Successor of Banco J.P. Morgan, Sociedad Anónima, Institución de
      Banca Múltiple, J.P. Morgan Grupo Financiero, División Fiduciaria),
      International Manufacturing Solutions Operaciones, S. de R.L. de C.V. and
      Viasystems, Inc.10.19
              (8)
              Collateral
      Trust Agreement, dated as of November 24, 2009, among Viasystems, Inc.,
      the guarantors named therein, Wilmington Trust FSB, as trustee and
      collateral trustee, and the other party lien representatives from time to
      time party thereto.10.20
              (11)
              Loan
      and Security Agreement, dated as of February 16, 2010, by and among
      Viasystems Technologies Corp., L.L.C. and Merix Corporation, as borrowers,
      and Viasystems, Inc., Viasystems International, Inc. and Merix Asia, Inc.,
      as guarantors, the lenders and issuing bank from time to time party
      thereto, Wachovia Capital Finance Corporation (New England), as
      administrative agent, and Wells Fargo Capital Finance, LLC, as sole lead
      arranger, manager and bookrunner.
  Table of Contents
 90
 10.21
              (6)
              Note
      Exchange Agreement, dated as of October 6, 2009, by and among Viasystems
      Group, Inc., Maple Acquisition Corp., and the entities listed on Schedule
      I attached thereto.10.22
              (11)
              First
      Supplemental Indenture, dated as of February 22, 2010, by and among
      Merix Corporation, Merix Asia, Inc., Viasystems, Inc., the other
      guarantors as defined in the indenture (the “Indenture”) dated as of
      November 24, 2009 providing for the issuance of Viasystems, Inc.’s
      12.00% Senior Secured Notes due 2015, and Wilmington Trust FSB, as trustee
      under the Indenture.10.23
              (11)
              Second
      Supplemental Indenture, dated as of February 22, 2010, by and among
      Viasystems Group, Inc., Viasystems, Inc., the other guarantors as defined
      in the Indenture, and Wilmington Trust, FSB, as trustee under the
      Indenture.14.1
              (12)
              Code
      of Business Conduct and Ethics.14.2
              (12)
              Supplemental
      Code of Ethics for the CEO and Senior Officers.21.1
              (12)
              Subsidiaries
      of the Registrant.31.1
              (12)
              Chief
      Executive Officer’s Certification required by Rule
      13(a)-14(a).31.2
              (12)
              Chief
      Financial Officer’s Certification required by Rule
      13(a)-14(a).32
              (12)
              Chief
      Executive Officer and Chief Financial Officer Certification pursuant to 18
      U.S.C. 1350, as adopted to section 906 of the Sarbanes-Oxley Act of
      2002.
 
 (1)
              Incorporated
      by reference to Registration Statement No. 333-113664 on Form S-1/A of
      Viasystems Group, Inc. filed on April 28,
  2004.
 (2)
              Incorporated
      by reference to Registration Statement No. 333-114467 on Form S-4/A filed
      on June 22, 2004
 (3)
              Incorporated
      by reference to the Quarterly Report on Form 10-Q of Viasystems, Inc.
      filed on
November 14, 2005.
 (4)
              Incorporated
      by reference to the Form 8-K of Viasystems, Inc. filed on March 22,
      2006.
 (5)
              Incorporated
      by reference to the Form 8-K of Viasystems, Inc. filed on September 10,
      2009.
 (6) Incorporated by
      reference to Registration Statement No. 333-163040 on Form S-4 of
      Viasystems Group, Inc. filed on November 12,
  2009.
 (7)
              Incorporated
      by reference to Registration Statement No. 333-163040 on Form S-4/A of
      Viasystems Group, Inc. filed on December 17,
  2009.
 (8)
              Incorporated
      by reference to the Form 8-K of Viasystems, Inc. filed on December 2,
      2009.
 (9)
              Incorporated
      by reference to the Form 8-K of Viasystems Group, Inc. filed on February
      17, 2010.
 (10)
              Incorporated
      by reference to the Form 8-K of Merix Corporation filed on May 16,
      2006.
 (11)
              Incorporated
      by reference to the Form 8-K of Viasystems Group, Inc. filed on
      February 22, 2010.
 (12)
              Filed
      herewith.


Table of Contents
 91
  
 EXHIBIT
      21.1
 Subsidiaries of Viasystems Group, Inc.
 
 NAME
      OF ENTITY
              JURISDICTION
      OF ORGANIZATIONGuangzhou
      Kalex Laminate Company Limited
              ChinaGuangzhou
      Termbray Circuit Board Co. Limited
              ChinaGuangzhou
      Termbray Electronics Technology Co. Limited
              ChinaGuangzhou
      Viasystems Commercial Trading Co. Limited
              ChinaKalex
      Circuit Board (China) Limited
              Hong
      KongKalex
      Circuit Board (Guangzhou) Limited
              Hong
      KongKalex
      Multi-Layer Circuit Board (Zhong Shan) Limited
              ChinaKalex
      Printed Circuit Board Limited
              Hong
      KongMaple
      Acquisition Corp.
              OregonMerix
      Asia Limited
              Hong
      KongMerix
      Asia, Inc.
              OregonMerix
      Caymans Holding Company Limited
              Cayman
      IslandsMerix
      Caymans Trading Company Limited
              Cayman
      IslandsMerix
      Circuits Corp.
              CanadaMerix
      Corporation
              OregonMerix
      Europe B.V.
              NetherlandsMerix
      Holding (Singapore) Pte Ltd.
              SingaporeMerix
      Printed Circuits (Huizhou) Limited
              ChinaMerix
      Printed Circuits Technology Limited
              ChinaMerix
      Singapore Sales Pte Ltd.
              SingaporeMerix
      U.K. Limited
              United
      KingdomPrint
      Service Holding NV
              NetherlandsQingdao
      Viasystems Telecommunications Technologies Co. Limited
              ChinaShanghai
      Reltec Communications Technology Co. Limited
              ChinaShanghai
      Viasystems Electronic Systems Company Limited
              ChinaShanghai
      Viasystems EMS Co. Limited
              ChinaTermbray
      Circuit Board Company Limited
              Hong
      KongTermbray
      Laminate Company Limited
              Hong
      KongViasupply
      Company Limited
              Hong
      KongViasystems
      (Nantong) Electronic Technologies Co., Limited
              ChinaViasystems
      (Singapore) Pte Limited
              SingaporeViasystems
      (South China) Company Limited
              Hong
      KongViasystems
      Asia Pacific Company Limited
              Hong
      KongViasystems
      Asia Pacific Property B.V.I. Limited
              British
      Virgin IslandsViasystems
      BV
              NetherlandsViasystems
      BVI Limited
              British
      Virgin IslandsViasystems
      Canada Holdings, Inc.
              CanadaViasystems
      Electronics (Guangzhou) Company Limited
              ChinaViasystems
      EMS (Hong Kong) Company Limited
              Hong
      KongViasystems
      EMS (Shenzhen) Company Limited
              ChinaViasystems
      Group Limited
              England/WalesViasystems
      International, Inc.
              DelawareViasystems
      Kalex Printed Circuit Board Limited
              Hong
      KongViasystems
      Luxembourg S.a.r.l.
              LuxembourgViasystems
      Milwaukee, Inc.
              WisconsinViasystems
      Mommers BV
              NetherlandsViasystems
      Research & Development Center (Guangzhou) Co. Limited
              ChinaViasystems
      Services BV
              NetherlandsViasystems
      Technologies Corp. LLC
              DelawareViasystems
      Technology International Trading (Shanghai) Co. Limited
              ChinaViasystems
      ULC
              Nova
      ScotiaWirekraft
      Industries, LLC
              Delaware
  Table of Contents
 92
  Exhibit
31.1
  PRINCIPAL
EXECUTIVE OFFICER CERTIFICATION
 PURSUANT
TO
 SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
 
  I, David
M. Sindelar, certify that:
  1.           I
have reviewed this annual report on Form 10-K of Viasystems Group,
Inc.;
  2.           Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
  3.           Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
  4.           The
registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
  (a)
              Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
  (b)
              Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;
  (c)
              Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and
  (d)
              Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting; and
  5.           The
registrant’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
  (a)
              All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and
  (b)
              Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal control
      over financial reporting.
  Date:
February 25, 2010
 
 /s/ David M.
Sindelar
 David M.
Sindelar
 Chief
Executive Officer
  Table of Contents
 93
  Exhibit
31.2
  PRINCIPAL
FINANCIAL OFFICER CERTIFICATION
 PURSUANT
TO
 SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
 
  I, Gerald
G. Sax, certify that:
  1.           I
have reviewed this annual report on Form 10-K of Viasystems Group,
Inc.;
  2.           Based
on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
  3.           Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
  4.           The
registrant’s other certifying officer(s) and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
  (a)
              Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;
  (b)
              Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;
  (c)
              Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and
  (d)
              Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
      annual report) that has materially affected, or is reasonably likely to
      materially affect, the registrant’s internal control over financial
      reporting; and
  5.           The
registrant’s other certifying officer(s) and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
  (a)
              All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and
  (b)
              Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal control
      over financial reporting.
  Date:
February 25, 2010
 
 /s/ Gerald G.
Sax
 Gerald G.
Sax
 Chief
Financial Officer
  Table of Contents
 94
  Exhibit
32
   CERTIFICATION
OF CHIEF EXECUTIVE OFFICER AND
 CHIEF
FINANCIAL OFFICER
 PURSUANT
TO
 SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
 
  Pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of
Section 1350, Chapter 63 of Title 18, United States Code), each of the
undersigned officers of Viasystems Group, Inc., a Delaware corporation (the
“Company”), does hereby certify that, to the best of their
knowledge:
  The
Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (the
“Form 10-K”) of the Company fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and the information
contained in the Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of the Company.
  Date:
February 25,
2010                                                                            /s/ David M.
Sindelar
 David
M. Sindelar
 Chief
Executive Officer
 
 Date:
February 25,
2010                                                                            /s/ Gerald G.
Sax
 Gerald
G. Sax
 Chief
Financial Officer
 
 
 
 
  Table of Contents
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