3/25/2005
10:56 AM








UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 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, 2004**





**or**





**[
]**    **TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(** d **)**


**OF
THE SECURITIES EXCHANGE ACT OF 1934**





**333-114467**


*(Commission
File Number)*





**Viasystems,
Inc.**


*(Exact
name of registrant as specified in its charter)*





**Delaware**
    **43-1777252***(State
      or other jurisdiction*
    *(I.R.S.
      Employer**of
      incorporation or organization)*
    *Identification
      No.)*





**101
South Hanley Road**


**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: **None**


Securities
registered pursuant to Section 12(g) of the Act: **None**





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 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 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. [ ]





Indicate
by check mark whether the Registrant is an accelerated filer as defined in Rule
12b-2 of the Securities Exchange Act of 1934. Yes [ ] No [X]





No
established published trading market exists for the common stock, par value $.01
per share, of Viasystems, Inc. All of the 1,000 outstanding shares of common
stock, par value $.01 per share, of Viasystems, Inc. are held by Viasystems
Group, Inc.





Indicate
by check mark whether the Registrant has filed all documents and reports
required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court Yes [X ] No [ ]








Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.





**Outstanding
      at****Class**
    **March
      31, 2005**Common
      Stock
    1,000





**Documents
incorporated by reference: None**










****








**PART
I**





**CAUTIONARY
STATEMENTS CONCERNING**


**FORWARD-LOOKING
STATEMENTS**














*Statements
made in this Annual Report on Form 10-K (“Report”) include the use of
“Viasystems”, “we” and “our”, which unless specified otherwise refer
collectively to Viasystems, Inc., and its subsidiaries. Additionally, reference
to “Group” refers to Viasystems’ holding company parent Viasystems Group,
Inc.*





We have
made forward-looking statements in this Report, including those made in the
section entitled "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," "anticipates," "intends," "plans," "estimates" or
other similar expressions.





Forward-looking
statements involve risks, uncertainties and assumptions. Actual results may
differ materially from those expressed 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, fluctuations in our operating results and
customer orders, our competitive environment, our reliance on our largest
customers, risks associated with our international operations, 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,
control by our largest stockholders and other factors.











**ITEM
1.**  ***Business***





**General**




We are a
leading worldwide provider of complex multi-layer printed circuit boards
(“PCBs”),wire harnesses and electro-mechanical solutions (“EMS”). We conduct our
operations in two primary segments (i) printed circuit board manufacturing and
(ii) assembly. The products we manufacture include, or can be found in, a wide
array of products including automotive dash panels and control modules, major
household appliances, data networking equipment, telecommunications switching
equipment and a variety of complex medical and technical instruments. We have 16
facilities strategically located in five countries around the world. We have
chosen sites in China and Mexico to take advantage of low cost, high quality
manufacturing environments.


We are a
supplier to over 200 original equipment manufacturers (“OEMs”) in numerous end
markets, including industry leaders Alcatel SA, Bosch Group, Cisco Systems,
Inc., Delphi Corp., Electrolux AB, General Electric Company, Huawei
Technologies, Lucent Technologies Inc., Maytag Corporation, Siemens AG, Sun
Microsystems, Inc. and Whirlpool Corporation. We have also forged strategic
alliances with leading EMS providers such as Celestica, Inc. and Solectron
Corporation. We supply PCBs to our EMS partners through these strategic
alliances.





**Our
Development**





Viasystems
is a wholly owned subsidiary of Group. Group was formed in 1996 by Hicks, Muse,
Tate & Furst Incorporated under the name Circo Craft Holding Company to
create a preferred global manufacturing provider to leading original equipment
manufacturers through acquisitions of PCB fabricators and backpanel assemblers.
In August 1996, Group changed its name to CC Canada Holding Company and then
back to Circo Craft Holding Company in September 1996. Group had no operations
prior to its first acquisition in October 1996, when its name changed to Circo
Technologies, Inc. In January 1997, Group changed its name to Viasystems Group,
Inc. On April 10, 1997, Group contributed to Viasystems all of the capital stock
of its then existing subsidiaries.





From 1998
through 2001 we expanded rapidly through the acquisitions of several businesses
throughout Europe and North America. During that time, we expanded our business
model to include wire harnesses and cable assemblies. In addition, in late 1999,
we purchased our first business based in China.





In early
2001, the telecommunications and networking industries began a significant
business downturn, as overcapacity of voice and data bandwidth reduced demand
for high-end network switches, routers and other infrastructure equipment. The
decline in capital spending was exacerbated by excess inventories within the EMS
supply chain as indicated by the fact that the five largest EMS companies in the
world collectively experienced a 138% increase in inventories during
2000.





The major
appliance wire harness business was generally unaffected by the economic
recession which commenced in 2001. The wire harness business is driven primarily
by sales of household major appliances. Sales of major appliances are related to
macroeconomic factors such as interest rates, employment levels, housing starts
and the rate at which consumers replace appliances.





Since
April 2001, we have conducted an extensive review of our operations and closed
or sold 19 under-performing or non-strategic facilities. During that time, we
streamlined our business to focus on PCBs, wire harnesses and electro-mechanical
solutions, and we significantly diversified our end markets and customer base.
In 2003, we completed a reorganization pursuant to Chapter 11 of the United
States Bankruptcy Code (the “Reorganization”) that has enabled us to improve our
asset base, profitability, operating flexibility and balance sheet and to reduce
our debt leverage.


In 2004,
we continued to further our strategy of expanding our capacity and manufacturing
capabilities in low cost jurisdictions by our $60.0 million investment in our
China PCB operations. Additionally, we continued to diversify our customer base
and to streamline operations in our high cost manufacturing areas. In an effort
to improve our operational efficiency and to adapt to our customers’ needs, in
the first quarter of 2005 we announced our plan to close all of our remaining
printed circuit board facilities located in Montreal, Quebec and Echt, the
Netherlands by the end of 2005.


3


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 web
site www.viasystems.com . Upon
written request, a copy of this Form 10-K will be provided to any senior
subordinated note holder. In addition, copies of our filings are available on
the SEC website at www.sec.gov .





**Our
Industries**




We serve
the PCB fabrication and assembly services industries through our two primary
operating segments (i) printed circuit board manufacturing and (ii) assembly.
Our assembly services segment includes both wire harness assemblies and
electro-mechanical assemblies.


*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, including 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 it.





*Wire
Harnesses and Cable Assemblies* ***-*** Wire
harnesses are used in major appliances to connect the motors, pumps, switches
and other control devices to a central point at which power is
delivered.





*Electro-Mechanical
Solutions* ***-*** Companies
that provide electro-mechanical solutions offer a wide variety of products and
services, primarily including assembly of backplanes, custom and standard metal
enclosures and racks, "box build" systems integration and assembly, final
product testing and fulfillment.





**Our
Business Strategy**





We
believe we are well positioned for growth in sales and operating income through
a strategy based on the following:





*Maintain
Diverse End Market Mix* ***-*** Due to a
dramatic economic downturn during 2001 and 2002 in the telecommunications and
computer/data communications markets, we expanded our offerings into the
automotive, consumer and industrial/ instrumentation markets. Our sales to each
of these segments, both in absolute dollars as well as percentage of sales, have
grown in recent years. From 2002 to 2004, we increased our net sales in the
automotive, consumer and industrial/instrumentation markets by 28.1%, 23.6% and
15.8%, respectively. In order to take advantage of our low cost manufacturing
capabilities, reduce our exposure and reliance on unpredictable end markets and
provide alternative growth paths, we intend to continue to maintain our focus on
a diverse mix of end markets.


*Expand
Capacity and Manufacturing Capabilities in Low Cost Locations* ***-*** To meet
our customers' demands for high quality, low cost products and services, we have
and will continue to invest in facilities and equipment in low cost locations.
As of December 31, 2004 approximately 77.3% of our total manufacturing capacity
was located in China and Mexico. Consistent with this strategy, we announced our
intention to closeour three remaining printed circuit board facilities located
in Montreal, Quebec and Echt, the Netherlands by the end of 2005.


*Enhance
Our Strong Customer Relationships* ***-*** We are
focused on expanding our business with existing customers by leveraging our
history of quality, high levels of customer service and operational excellence,
all of which we believe provide us with the opportunity to bid for additional
programs from the strong position of a preferred provider. In addition, we have
forged strategic alliances with leading EMS providers such as Celestica and
Solectron. These types of alliances provide us access to additional PCB sales
opportunities and provide our strategic partners the ability to market a fully
integrated product offering. Our management team has created a culture that is
focused on providing customers with high-quality service and technical support,
and this is reflected in our continuing ability to obtain new business and
expand our current customer relationships.








4





*Expand
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, which can range from
fabrication of bare PCBs to final system assembly and test. We intend to
continue to leverage our customer relationships to expand the products we sell
to our customers.





*Concentrate
on High Value-Added Products and Services* ***-*** We focus
on providing electro-mechanical solutions to leading manufacturers 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. According to N.T. Information,
we are an industry leader in the manufacture of complex, technologically
advanced multi-layer printed circuit boards and custom designed backpanel
assemblies. We differentiate ourselves from many of our global competitors by
limiting our participation in programs for high volume, low margin products such
as cell phone handsets, personal computers or peripherals and consumer
electronics.





*Focus
on 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) further rationalization of
manufacturing capacity; (2) streamlining of marketing and general and
administrative overhead; (3) continued implementation of lean manufacturing and
six sigma initiatives; (4) efficient investment in new equipment and
technologies and the upgrading of existing equipment; and (5) continued
improvement of our internal controls 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* **-** We
provide services to more than 200 OEMs. We believe our position as a strategic
supplier of printed circuit boards, wire harnesses and electro-mechanical
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.





The
following table shows our net sales as a percentage by principal end-user
markets we serve:





****
    
    Year Ended****
    
    December
      31,**Markets**
    
    
    **2002**
    
    
    **2003**
    
    
    **2004**Consumer
    
    
    26.9
    %
    
    32.1
    %
    
    31.9
    %Automotive
    
    
    18.9
    
    
    24.2
    
    
    23.2Telecommunications
    
    
    28.4
    
    
    19.7
    
    
    22.5Computer/Datacommunications
    
    
    16.3
    
    
    14.1
    
    
    11.9Industrial
      & Instrumentation/Other
    
    
    9.5
    
    
    9.9
    
    
    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, 2002, 2003 and 2004, sales to our 10 largest customers accounted
for 62.8%, 72.4% and 72.1% of our net sales, respectively, and sales to our
largest customer, General Electric, represented 11.7%, 12.1% and 11.3% of our
net sales, respectively.





**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, 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.








5





*Printed
Circuit Board and Backpanel Fabrication* ***-*** Printed
circuit boards and backpanels are platforms that connect semiconductors and
other electronic components. Backpanels connect printed circuit boards. We
manufacture multi-layer printed circuit boards 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 components while reducing their size. Semiconductor designs are
currently so complex that they often require printed circuit boards with many
layers of narrow, tightly spaced wiring. These advancements in component
technologies have driven the change in printed circuit board design to higher
density printed circuits.





*Wire
Harnesses and Cable Assemblies* ***-*** A wire
harness and cable assembly is an assembly of wires with connectors and terminals
attached to their ends that transmits electricity between two or more points. We
are one of the leading suppliers of wire harnesses and cable assemblies for use
in household appliances. Due to the similarity in the process technology used in
the manufacture of wire harnesses and cable assemblies for many other products
and in the manufacture of wire harnesses for use in household appliances, we
strive to leverage this expertise to enhance the value of the products and
services we supply to our OEM customers in the other industries.





*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 printed circuit board
assemblies primarily because of the larger size of the backpanel and the more
complex placement techniques that must be used with higher layer count printed
circuits. We also perform functional and in-circuit testing on assembled
backpanels.





*Printed
Circuit Board Assembly* ***-*** As a
complement to our electro-mechanical solutions offering, we manufacture printed
circuit board assemblies. Generally, we do not produce printed circuit board
assemblies separately, but rather we integrate them with other components as
part of a full electro-mechanical solution. In addition, we offer testing of
assembled printed circuit boards 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 manufacturing defect analysis,
in-circuit tests, functional tests and environmental stress tests of board or
system assemblies.





*Custom
Enclosures* ***-*** We
specialize in the manufacture of custom designed chassis and enclosures
primarily used in the electronics, telecommunications, industrial and computer
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 OEMs from our facilities in China and
Mexico. These services require sophisticated logistics capabilities and supply
chain management capabilities to rapidly procure components, 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 printed circuit board assembly. We also
employ advanced test techniques to various subassemblies and final end
products.





*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 customers' inventory
requirements. We ship products directly into customers' distribution channels or
directly to the end-user.





*After-Sales
Support* ***-*** We offer
a wide range of after-sales support services. This support can be tailored to
meet customer requirements, including field failure analysis, product upgrades,
repair and engineering change management.





*Supply
Chain Management* ***-*** Effective
management of the supply chain is critical to the success of OEMs 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 procure materials.








6





**Sales
and Marketing**





We focus
on developing close relationships with our customers at the earliest development
and design phases and continuing throughout all stages of production. We
identify, develop and market new technologies that benefit our customers and
position us as a preferred product or service provider.





We market
our products through our own sales and marketing organization and through sales
representatives. This global sales organization is structured to ensure global
account coverage by industry-specific teams of account managers. As of December
31, 2004, we employed approximately 251 sales and marketing employees, of which
111 are direct sales representatives strategically located throughout North
America, Europe and Asia. Each customer segment 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 standardized
technology printed circuit boards, backpanel assemblies, printed circuit board
assemblies, wire harnesses and custom cable assemblies, custom enclosures and
full systems that meet increasingly tight tolerances and specifications demanded
by OEMs. Multi-layering, which involves placing multiple layers of electronic
circuitry on a single printed circuit board or backpanel, expands the number of
circuits and components that can be contained on 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 printed circuit board or backpanel. Interconnect
products having narrow, closely spaced circuit tracks are known as fine line
products. The manufacture of complex multi-layer interconnect products often
requires the use of sophisticated circuit interconnections between layers,
called blind or buried vias, and adherence to strict electrical characteristics
to maintain consistent circuit transmission speeds, referred to as controlled
impedance. These technologies require very tight lamination and etching
tolerances and are especially critical for printed circuit boards with ten or
more layers.





The
manufacture of printed circuit boards involves several steps: etching the
circuit image on copper-clad epoxy laminate, pressing the laminates together to
form a panel; drilling holes and depositing copper or other conductive material
to form the innerlayer electrical connections; and cutting the panels to shape.
Advanced interconnect products may also require additional critical steps,
including dry film imaging, photoimageable soldermask processing, computer
controlled drilling and routing, automated plating and process controls and
achievement of controlled impedance. Manufacture of printed circuit boards used
in backpanel assemblies requires specialized expertise and equipment because of
the larger size of the backpanel relative to other printed circuit boards and
the increased number of holes for component mounting.





The
manufacture of wire harnesses and cable assemblies involves four steps: (1)
insulated copper wire is fed through cutting machines that are programmed to cut
wire to a specific length, strip the end of the wire and attach terminals or
connectors; (2) the lengths of wire are spliced or joined together and
additional connectors and/or terminals are attached; (3) the cut and spliced
wires are brought to the assembly area where assembly boards are used to guide
employees on the placement of designated wires; and (4) each assembled harness
is tested for continuity and analyzed by a trained inspector. Every assembly
board is equipped with 100% continuity testers that are designed into the board.
These testers will pinpoint any defective circuits for repair or
rework.





The
manufacture of printed circuit board assemblies involves the attachment of
various electronic components, such as integrated circuits, capacitors,
microprocessors and resistors to printed circuit boards. The manufacture of
backpanel assemblies involves attachment of electronic components, including
printed circuit boards, integrated circuits and other components, to the
backpanel, which is a large printed circuit board. We use surface mount,
pin-through hole and press fit technologies in backpanel assembly. We also
assemble higher-level sub-systems and full systems incorporating printed circuit
boards and complex electro-mechanical components.








7





We also
provide computer-aided testing of printed circuit boards, sub-systems and full
systems, which contributes significantly to our ability to deliver high quality
products on a consistent basis. We test boards and system level assemblies to
verify that all components have been properly inserted and that the electrical
circuits are complete. Further functional tests determine if the board or system
assembly is performing to customer specifications.





**Quality
Standards**





Our
quality systems are defect prevention based, customer focused and compliant to
international standards. All of our facilities are compliant or certified to ISO
9002:1994. ISO 9002:1994 specifies requirements that focus on the effectiveness
of the quality management system in meeting customer requirements. In addition
to ISO 9002:1994, we have facilities that are certified to ISO 9001:2000, ISO
14001:1996, QS 9000, TS9000 and ISO/TS 16949.





Our
facilities are also compliant to industry and regulatory requirements including
Bellcore, British Approval Board for Telecommunications (“BABT”), Underwriters
Laboratory (“UL”), and Canadian Standards Association (“CSA”). These
requirements include quality, manufacturing process controls, manufacturing
documentation and supplier certification of raw materials.





**Supplier
Relationships**





We order
materials and components based on purchase orders, and forecasts, received and
accepted from 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 which reduce inventory carrying costs, and contract
globally, where appropriate, to leverage our purchasing volumes. We also certify
our suppliers and potential suppliers on the basis of quality, on-time delivery,
costs, technical capability, and potential technical advancement.





**Competition**





Our
industry is a highly competitive industry, and we believe our markets are highly
fragmented. We face competition from numerous local, numerous regional and a
number of large international providers of PCBs, wire harnesses and
electro-mechanical solutions. Our primary direct competitors are Flextronics,
Sanmina-SCI, LG,


Nan Ya,
Compeq, Elec & Eltek, and Noma (a division of Gentek). We believe that
competition in the market segments we serve is based more on product quality and
responsive customer service and support as well as price, because many of the
products manufactured by us require high levels of product technology,
reliability, prompt delivery, and competitive pricing. The supplier that can
provide the highest level of all the above gains the greatest market share.





**International
Operations**





As of
December 31, 2004, we had 14 manufacturing facilities located outside the United
States, with sales offices throughout Europe and Asia Pacific. Our international
operations account for 94.1% of our net sales. We believe that our global
presence is important as it allows us to provide consistent, quality products on
a 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. For information about our business broken down by geographic area,
see Note 17 of our consolidated financial statements.








8





**Environmental**





Some of
our operations are subject to federal, state, local and foreign environmental
laws and regulations that govern, among other things, the discharge of
pollutants into the air and water, as well as the handling, storage, manufacture
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 that the costs of compliance with such current or
proposed environmental laws and regulations will not have a material adverse
effect on us. 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. Currently, remediation of contamination is being
undertaken at our facility in Virginia. This facility was closed during 2001 and
has no ongoing production. While the cost of the remediation could be material,
we believe that the contamination pre-dates our use of the property. As such,
the prior owners are conducting the requisite remedial actions and have agreed
to indemnify us for costs associated with the remediation. We believe that the
prior owner of this facility is fully capable of performing and will perform
under such agreements. 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, including for example liabilities due to a change
in the law or the discovery of currently unknown conditions.





**Employees**





As of
December 31, 2004, we had 23,288 employees. Of these employees, 19,902 were
involved in manufacturing, 1,410 in engineering, 251 in sales and marketing, and
1,725 in accounting and administrative capacities. No employees are 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 believe we have good relations with our employees.





**Backlog**




We
estimate that our backlog of unfilled orders on December 31, 2003 and 2004 were
approximately $154.3 million and $167.8 million, respectively. The increase in
backlog from December 31, 2003 was primarily due to increased customer demand in
our Asian assembly facilities, partially offset by decreases in our western
world PCB facilities. 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.
 
 **Segments**
 
 We have
determined that there are four reportable segments under the provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 131: China Printed
Circuit Boards, North America Printed Circuit Boards, European Printed Circuit
Boards, and assembly. See discussion of our segments in Note 17 to our
consolidated financial statements.





9





**ITEM
2.** ***Properties***





In
addition to our executive offices in St. Louis, Missouri, as of December 31, we
operated 16 principal manufacturing and distribution facilities, located in 5
different countries with a total area of approximately 4.8 million square feet.
All of our domestic owned properties are pledged to secure our indebtedness
under our senior credit facility. Our leased properties are leased for terms
ranging from one to ten years. The leases for our Qingdao, China and two of the
three Juarez, Mexico properties will expire within the next two years. We
anticipate that we will be able to renew those leases on terms that are not
materially different than the current terms.





Listed
below are the principal manufacturing and distribution facilities we operated as
of December 31, 2004:





**Location**
    **Size**
      **(Appx.**
      **Sq.
      Ft.)**
    **Type
      of****Interest**
    **Description
      of Primary Products****United
      States**Mishawaka,
      Indiana
    38,000
    Owned
    Wire
      harness and cable assemblyMilwaukee,
      Wisconsin
    305,000
    Leased
    Custom
      metal enclosure fabrication**Canada**Pointe-Claire
      (Montreal),
      Quebec
      (2)
    168,000
    Owned
    Printed
      circuit board fabricationKirkland
      (Montreal), Quebec (2)
    121,000
    Owned
    Printed
      circuit board fabrication**Mexico**Juarez,
      Mexico
    69,000
    Leased
    Backpanel
      assemblyJuarez,
      Mexico
    178,000
    Leased
    Wire
      harness and cable assemblyJuarez,
      Mexico
    54,000
    Leased
    Wire
      harness and cable assemblyChihuahua,
      Mexico
    282,000
    Owned
    Wire
      harness and cable assemblyChihuahua,
      Mexico
    253,000
    Leased
    Wire
      harness and cable assembly**Europe**Echt,
      the Netherlands (2)
    462,000
    Owned
    Printed
      circuit board fabrication / backpanel assembly**Asia**Guangzhou,
      China (1)
    2,000,000
    Owned
    Printed
      circuit board fabrication and wire harnessZhongshan,
      China (3).
    318,000
    Owned
    Printed
      circuit board fabricationShanghai,
      China
    229,000
    Owned
    Backpanel
      assembly / custom metal enclosure fabricationShenzhen,
      China
    286,000
    Leased
    Full
      system assemblyQingdao,
      China
    54,000
    Leased
    Full
      system assembly
   __________


(1)       In
Guangzhou we have a campus which we consider as two separate facilities. One
facility is dedicated to printed circuit board fabrication and the other to wire
harness assembly. (2)       In
February 2005, we announced our intention to close the three printed circuit
board facilities listed above by the end of 2005. (3)       In
conjunction with the closures of the three printed circuit board facilities
noted above, we are increasing capital spending on our China PCB
facilities.  By mid 2005, we expect to increase the square footage of
Zhongshan by at least 175,000 sq. ft.   In
addition to the facilities listed above, we maintained several leased sales and
marketing and other facilities located throughout North America, Europe and
Asia.










10





**ITEM
3.** ***Legal
Proceedings*** ****








On
October 1, 2002, Group and Viasystems filed voluntary petitions for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York seeking court supervision of our
restructuring efforts and confirmation of our plan of reorganization. The plan
of reorganization was confirmed on January 14, 2003 and we emerged from
bankruptcy on January 31, 2003.





We have
certain bankruptcy claims that remain unsettled and are subject to ongoing
negotiations and possible litigation. The aggregate amount of the outstanding
claims is $1.0 million. To the extent these claims become allowed claims, the
payment of these claims will be funded by the issuance of subordinated
promissory notes pursuant to the terms of the confirmed plan of
reorganization.





We are
presently involved in various legal proceedings arising in the ordinary course
of our business operations, including employment matters and contract claims, as
well as in connection with the Chapter 11 claims reconciliation process
described above. We believe that any liability with respect to the above
proceedings will not be material in the aggregate to our consolidated financial
position, results of operations or cash flow.








11





**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
2004.





12





**PART
II**





**ITEM
5.** ***Market
For The Registrant's Common Equity And Related Stockholder Matters, And Issuer
Purchases of Equity Securities***





All of
Viasystems’ outstanding common stock is held by Group and, accordingly, there is
no established public trading market for Viasystems’ common stock. Viasystems
has paid no dividends since inception, and its ability to pay dividends is
limited by the terms of certain agreements related to its indebtedness. We have
no intention to pay dividends in the near future.








13





**ITEM
6.** ***Selected
Financial Data*** ****





The
selected financial and other data below for the years ended December 31, 2000,
2001, 2002 (restated), 2003 (restated) and 2004 presents consolidated financial
information of Viasystems and its subsidiaries and have been derived from our
audited consolidated financial statements.





You
should read the selected historical consolidated financial data set forth below
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 document.





**Restatement
of previously issued consolidated financial statements**




As
discussed in Note 2 to the consolidated financial statements, we have restated
our previously issued financial statements for the years ended December 31, 2002
and 2003. The restatement arises from errors made in the application of the
accounting principles set forth by SFAS No. 142 and SFAS
No. 131 . In
addition, we adjusted the 2003 restructuring and impairment loss for an error
identified during the recording of the SFAS No. 142 impairment adjustments
attributable to currency effects of the SFAS No. 144 impairment recognized at
our Echt, the Netherlands facility. See Note 2 to the consolidated financial
statements for further information, including the impact of the restatements for
each of the restated periods in this filing. A summary of these restatements is
as follows:
 
 ·
    For
      the year ended December 31, 2002, there was a $36.7 million increase in
      goodwill (non-cash) impairment expense, which resulted in a 24.4% increase
      in our operating loss and a 14.2% increase in our net loss. These
      impairments further caused a 4.5% decrease in our total
      assets.
 
 ·
    For
      the year ended December 31, 2003, there was a $22.5 million increase in
      goodwill (non-cash) impairment expense, which resulted in a 45.8% increase
      in our operating loss and a 15.8% increase in our net loss. These
      impairments further caused an 8.3% decrease in our total assets. In
      addition, we reduced the restructuring and impairment expense $0.9
      million, or 1.3%, for a currency error related to the 2003 SFAS No. 144
      impairment.
 
 ·
    For
      the years ended December 31, 2002 and 2003, we restated our reportable
      segments to change from one reportable segment to four reportable
      segments.
 
 This
information in this selected financial data reflects these restatements, but is
not otherwise updated.


14





The
information in this selected financial data reflects the restatements, but is
not otherwise updated.




****
    
    Year
      Ended December 31,****
    
    
    
    
    
    
    
    
    Restated
    
    
    **Restated******
    
    
    **2000**
    
    
    **2001**
    
    
    **2002**
    
    
    **2003**
    
    
    **2004**(in
      thousands)**Statement
      of Operations Data:**Net
      sales
    
    $
    1,604,985
    
    $
    1,206,536
    
    $
    864,047
    
    $
    751,483
    
    $
    901,363Cost
      of goods sold
    
    
    1,230,552
    
    
    1,042,886
    
    
    697,802
    
    
    597,546
    
    
    728,249Selling,
      general and administrative expenses (1)
    
    
    225,611
    
    
    96,838
    
    
    88,160
    
    
    64,119
    
    
    77,977Stock
      compensation expense (2)
    
    
    —
    
    
    —
    
    
    —
    
    
    1,383
    
    
    3,837Depreciation
    
    
    98,457
    
    
    79,718
    
    
    74,221
    
    
    66,070
    
    
    48,232Amortization
    
    
    46,409
    
    
    46,574
    
    
    16,344
    
    
    3,065
    
    
    1,570Write-off
      of amounts due from affiliates (3)
    
    
    —
    
    
    144,099
    
    
    —
    
    
    —
    
    
    —Restructuring
      and impairment charges (4)
    
    
    —
    
    
    152,265
    
    
    52,697
    
    
    66,199
    
    
    1,013Goodwill
      impairment (5)
    
    
    —
    
    
    129,109
    
    
    36,710
    
    
    22,697
    
    
    —Loss
      (gain) on dispositions of businesses, net (6)
    
    
    —
    
    
    —
    
    
    85,531
    
    
    1,226
    
    
    (465
    )Operating
      income (loss)
    
    
    3,956
    
    
    (484,953
    )
    
    (187,418
    )
    
    (70,822
    )
    
    40,950Interest
      expense, net
    
    
    105,514
    
    
    97,174
    
    
    81,898
    
    
    29,729
    
    
    37,818Amortization
      of deferred financing costs
    
    
    4,296
    
    
    4,013
    
    
    4,955
    
    
    104
    
    
    1,305Loss
      on early retirement of debt
    
    
    31,196
    
    
    —
    
    
    —
    
    
    —
    
    
    —Reorganization
      items:Reorganization
      expenses (reversals) (7)
    
    
    —
    
    
    —
    
    
    22,537
    
    
    55,255
    
    
    (9,776
    )(Loss)
      income from debt forgiveness (8)
    
    
    —
    
    
    —
    
    
    —
    
    
    1,517
    
    
    —Other
      expense (income), net
    
    
    1,857
    
    
    879
    
    
    (900
    )
    
    6,882
    
    
    (987
    )Loss(income)
      before income taxes
    
    
    (138,907
    )
    
    (587,019
    )
    
    (295,908
    )
    
    (164,309
    )
    
    12,590Income
      taxes
    
    
    (2,923
    )
    
    —
    
    
    —
    
    
    —
    
    
    6,842Net
      (loss) income
    
    $
    (135,984
    )
    $
    (587,019
    )
    $
    (295,908
    )
    $
    (164,309
    )
    $
    5,748**Balance
      Sheet Data (as****of
      end of period):**Cash
      and cash equivalents
    
    $
    45,676
    
    $
    34,202
    
    $
    83,060
    
    $
    62,676
    
    $
    112,891Working
      capital (9)
    
    
    259,759
    
    
    122,054
    
    
    (383,521
    )
    
    111,573
    
    
    144,565Total
      assets
    
    
    1,611,284
    
    
    988,045
    
    
    777,530
    
    
    694,335
    
    
    750,409Total
      debt, including current maturities
    
    
    1,024,317
    
    
    1,040,919
    
    
    1,125,189
    
    
    456,243
    
    
    465,555Stockholder's
      equity (deficit)
    
    
    135,932
    
    
    (310,324
    )
    
    (584,709
    )
    
    2,480
    
    
    56,534


__________





(1)
    During
      the year ended December 31, 2000, we recorded non-cash compensation
      charges of $104,351, which reflects the difference between the cost of
      certain convertible securities and the value of the common stock that such
      securities were convertible into at those
dates.




(2)
    In
      connection with the Reorganization, we terminated our 1997 and 2001 stock
      option plans and adopted the 2003 Stock Option Plan. The options we have
      issued under the 2003 Stock Option Plan have a fixed exercise price of
      $12.63 per share 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. As a result of the termination of the 1997
      and 2001 stock option plans and the adoption of the 2003 Stock Option
      Plan, under provision of FIN No. 44,*Accounting
      for Certain Transactions Involving Stock Compensation an Interpretation of
      APB Opinion No. 25*,
      certain options issued under the 2003 Stock Option Plan are treated as
      “variable” options. Effective January 1, 2004, we adopted SFAS
      No. 123,*Accounting
      for Stock-Based Compensation.*




(3)
    In
      2000, we transferred nine European Printed Circuit Board facilities to
      European PCB Group in consideration of subordinated notes payable to us.
      This line item represents charges relating to the write-off of such
      subordinated notes due from European PCB Group. European PCB Group has
      disposed of substantially all of its assets and is in the process of being
      liquidated. Accordingly, we compared the carrying amounts to the
      undiscounted expected future cash flows and concluded the amounts due were
      impaired.




(4)
    This
      line item represents impairment charges related to the write-off of
      long-lived assets in accordance with SFAS No. 121, "Accounting for the
      impairment of long-lived assets and for long-lived assets to be disposed
      of" and SFAS No. 144 "Accounting for the impairment or disposal of
      long-lived assets," as applicable. In addition, due to the industry
      downturn, numerous restructuring charges were taken to downsize and close
      facilities. See "Management's Discussion and Analysis of Financial
      Condition and Results of Operations — Restructuring, Impairment Charges
      and Loss (Gain) on Dispositions of Businesses" and our consolidated
      financial statements and the notes thereto.




15






(5)
    The
      goodwill impairment recognized in 2002 is attributable to $13.4 million
      goodwill impairment recognized in our North American PCB reporting unit,
      $10.1 million goodwill impairment recognized in our Asian EMS reporting
      unit and $13.2 million goodwill impairment recognized in our North
      American EMS reporting unit. The goodwill impairment recognized in 2003 is
      attributable to $22.7 million goodwill impairment recognized in our
      European Printed Circuit Boards reporting
unit.




(6)
    During
      2002, in connection with the continued economic downturn, we sold six
      businesses, including our joint venture interest, and finalized the
      dispositions of several closed facilities. See "Management's Discussion
      and Analysis of Financial Condition and Results of Operations —
      Restructuring, Impairment Charges and Loss on Dispositions of Businesses"
      and our consolidated financial statements and the notes
      thereto.




(7)
    Reorganization
      expenses consisted primarily of professional and bank fees and expenses
      related to the issuance of a promissory note to the Secretary of State for
      Trade and Industry of the United Kingdom incurred in conjunction with the
      Reorganization. In May 2004, this promissory note was discharged in
      full as a result of proceeds received by the Secretary of State for Trade
      and Industry of the United Kingdom in connection with the liquidation of
      Viasystems Tyneside Limited, resulting in a gain of $9.8
      million.




(8)
    In
      connection with our Reorganization, we recorded a loss from debt
      forgiveness of $1.5 million in respect of allowed senior subordinated
      note claims.




(9)
    Working
      capital for the year ended December 31, 2002 includes $526.0 million of
      long-term debt classified as currently due in connection with the
      Reorganization. Excluding this amount, working capital for the year ended
      December 31, 2002 would have been $142.5
million.










16





**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 certain periods prior to our emergence from bankruptcy on
January 31, 2003 in accordance with* *the
Reorganization* *.
Accordingly, the discussion and analysis of historical periods prior to that
date does not reflect our new capital structure. You should read the following
discussion of our financial condition and results of operations with
"Selected Financial Data" and our consolidated financial statements and
related notes included elsewhere in this Form 10-K. This discussion contains
forward-looking statements about our markets, the demand for our products and
services and our future results. We based these statements on assumptions that
we consider reasonable. Actual results may differ materially from those
suggested by our forward-looking statements for various reasons including those
discussed in Part I “Cautionary Statements Concerning Forward-Looking
Statements”.*





**Restatement
of previously issued consolidated financial statements**




As
discussed in Note 2 to the consolidated financial statements, we have restated
our previously issued financial statements for the years ended December 31, 2002
and 2003. The restatement arises from errors made in the application of the
accounting principles set forth by SFAS No. 142 and SFAS No. 131. In addition,
we adjusted the 2003 restructuring and impairment loss for an error identified
during the recording of the SFAS No. 142 impairment adjustments attributable to
currency effects of the SFAS No. 144 impairment recognized at our Echt, the
Netherlands facility. See Note 2 to the consolidated financial statements for
further information, including the impact of the restatements for each of the
restated periods in this filing. A summary of these restatements is as
follows:
 
 ·
    For
      the year ended December 31, 2002 there was a $36.7 million increase in
      goodwill (non-cash) impairment expense, which resulted in a 24.4% increase
      in our operating loss and a 14.2% increase in our net loss. These
      impairments further caused a 4.5% decrease in our total assets of
      Viasystems.
  ·
    For
      the year ended December 31, 2003 there was a $22.5 million increase in
      goodwill (non-cash) impairment expense, which resulted in a 45.8% increase
      in our operating loss and a 15.8% increase in our net loss. These
      impairments further caused an 8.3% decrease in the total assets of the
      Company. In addition, we reduced the restructuring and impairment expense
      $0.9 million, or 1.3%, for a currency error related to the 2003 SFAS No.
      144 and SFAS No. 131 impairment.
  ·
    For
      the years ended December 31, 2002 and 2003, we restated our reportable
      segments to change from one reportable segment to four reportable
      segments.


The
information in this discussion and analysis reflects these restatements, but is
not otherwise updated.





**General**




We are a
leading worldwide provider of complex multi-layer PCBs, wire harnesses and
electro-mechanical solutions. We conduct our operations in two primary segments
(i) printed circuit board manufacturing and (ii) assembly. The products we
manufacture include, or can be found in, a wide array of products including
automotive dash panels and control modules, major household appliances, data
networking equipment, telecommunications switching equipment and a variety of
complex medical and technical instruments. We have 16 facilities strategically
located in five countries around the world. We have chosen sites in China and
Mexico to take advantage of low cost, high quality manufacturing
environments.


We are a
supplier to over 200 manufacturers of original equipment in numerous end
markets, including industry leaders Alcatel SA, Bosch Group, Cisco Systems,
Inc., Delphi Corp., Electrolux AB, General Electric Company, Huawei
Technologies, Lucent Technologies Inc., Maytag Corporation, Siemens AG, Sun
Microsystems, Inc. and Whirlpool Corporation. For the year ended December 31,
2004, approximately 31.9%, 23.2%, 22.5%, 11.9%, and 10.5% of our net sales were
generated from sales to the consumer, automotive, telecommunications,
computer/data communications and industrial and instrumentation/other
industries, respectively. We have also forged strategic alliances with leading
EMS providers such as Celestica, Inc. and Solectron Corporation. We supply PCBs
to our EMS partners through these strategic alliances.







17





**The
Reorganization**


The
telecommunications and networking industries experienced a dramatic economic
downturn during 2001 and 2002, which had a significant adverse impact on our
sales and cash flow, and ultimately impeded our ability to service our long-term
debt. As a consequence, after reviewing our business and prospects, our board of
directors concluded that the long-term interests of our business and of our
creditors and equity holders would be best served by a consensual restructuring
implemented under Chapter 11 of the Bankruptcy Code for the purpose of reducing
our debt and strengthening our balance sheet. On October 1, 2002, we filed a
consensual pre-packaged plan of reorganization under Chapter 11 of the
Bankruptcy Code, which was confirmed on January 14, 2003, and was consummated on
January 31, 2003. In connection with the Reorganization, we extinguished
approximately $716.6 million of indebtedness in exchange for 4.3 million shares
of Group senior convertible preferred stock with an aggregate liquidation
preference of $53.7 million, 1.2 million shares of Group junior preferred stock
with an aggregate liquidation preference of $120.1 million and 20.7 million
shares of Group common stock. Also in connection with the Reorganization, all of
the then outstanding Group preferred stock and common stock was cancelled, in
the case of the preferred stock, in exchange for warrants to purchase Group
common stock. In addition, our senior secured indebtedness was restructured in
connection with the Reorganization under a new senior credit facility providing
for term loans of approximately $447.9 million and revolving credit loans of
approximately $51.3 million. Since our emergence, we have issued new senior
subordinated notes and have amended the terms of the credit agreement to provide
for a new senior credit facility. For a discussion of our new senior
subordinated notes and new senior credit facility, see Note 8 of our
consolidated financial statements.





**Critical
Accounting Policies and Estimates**





Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with GAAP. The preparation of these financial statements requires us
to make estimates, assumptions and judgments that affect the reported amounts of
assets, liabilities, net sales and expenses and related disclosure of contingent
assets and liabilities. On an on-going basis we evaluate our estimates,
including: allowance for bad debts; valuation and recoverability of inventory;
amortization periods; recoverability of long-term assets, intangible assets and
goodwill; income taxes; pensions and other post- retirement benefits and
contingencies; and litigation. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.





***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, except in the
case of vendor managed inventory arrangements, whereby sales and the related
costs of goods sold are included in income when goods are taken into production
by the customer. All services are performed prior to invoicing customers for any
products manufactured by the Company. Reserves for product returns are recorded
based on historical trend rates at the time of sale.





***Accounts
Receivable***





We
perform ongoing credit evaluations of our customers and we adjust credit limits
based upon each customer's payment history and current credit worthiness, as
determined by credit information available at that time. We continuously monitor
collections and payments from our customers and we maintain allowances for
doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. While such losses have historically been
within our expectations and the provisions established, if the condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required.











18





***Inventories***





We write
down our inventory for estimated obsolescence or unmarketable inventory equal to
the difference between the cost of the inventory and the estimated market value
based upon assumptions about future demand and market conditions. If actual
future demand or market conditions are less favorable than those historically
experienced or projected by us, additional inventory write-downs may be
required.





***Valuation
of Goodwill and other Intangible Assets***





We assess
the impairment of goodwill and other identifiable intangible assets annually, or
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important that could trigger an
impairment review include, but are not limited to, the following:





• significant underperformance relative to historical or projected future
operating results; • significant changes in the manner of our use of the acquired assets or
the strategy for our overall business; and • significant negative industry or economic trends.




When we
determine that the carrying value of goodwill and other intangible assets may
not be recoverable based upon the existence of one or more of the above
indicators of impairment, we measure any impairment bases on a projected
discounted cash flow method using a discount rate determined by us to be
commensurate with the risk inherent in our current business model.





In 2002,
SFAS No. 142, "Goodwill and Other Intangible Assets," became effective, and as a
result, we have ceased to amortize goodwill. In lieu of amortization, we are
required to perform an annual impairment review of our goodwill. Goodwill is
tested annually during the fourth quarter of each fiscal year and when events or
circumstances occur indicating possible impairment.





For the
year ended 2002, the evaluation resulted in our recognition of impairment in the
North America EMS, North America PCB and Asian EMS reporting units of $13.2,
13.4 and 10.1 million, respectively. For the year ended 2003, we recognized
impairment in our European Printed Circuit Boards reporting unit of $22.7
million.





***Income
Taxes***





We record
a valuation allowance to reduce our deferred tax assets to the amount that we
believe is more likely than not to be realized. While we have considered future
taxable income and ongoing prudent, feasible tax planning strategies in
assessing the need for the valuation allowance, 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. Likewise, should we
determine that we would be able to realize our deferred tax assets in the future
in excess of its net recorded amount, an adjustment to the net deferred tax
asset would increase income in the period such determination was
made.





***Foreign
Currency Translation***





Local
currencies have been designated as the functional currency for Viasystems'
foreign subsidiaries. Accordingly, assets and liabilities of most foreign
subsidiaries are translated at the rates of exchange in effect at the balance
sheet date. Income and expense items of these subsidiaries are translated at
average monthly rates of exchange. The resultant translation gains and losses
are reported in other comprehensive income. Exchange gains and losses arising
from transactions denominated in a currency other than the functional currency
of the entity involved are included in other expense (income) in the
consolidated statement of operations. To date, the effect of such amounts on net
income has not been material.








19





**Restructuring,
Impairment Charges and Loss (Gain) on the Dispositions of
Businesses**





In 2002,
we either closed or disposed of 14 facilities (Milford, Massachusetts; San Jose,
California; Seattle, Washington; Ballynahinch, United Kingdom; Columbus, Ohio;
Sao Paulo, Brazil; Granby, Quebec; Boldon, United Kingdom; Portland, Oregon;
Rouen, France; Terni, Italy; and the Plastics division of NC&S located in
Coventry, United Kingdom) and took a restructuring charge $37.5 million.
Additionally, in 2002 we either downsized or incurred impairment charges in
respect of five facilities (Juarez, Mexico; Milwaukee, Wisconsin; Coventry,
United Kingdom; Richmond, Virginia; and St. Louis, Missouri) at a cost of $15.2
million. Also during 2002, we began marketing for sale our Portland, Oregon
facility, and as a result, the net assets related to the facility were written
down to their expected fair value of $1.5 million resulting in an impairment
charge of $21.4 million.





In 2003,
our facility in Portland, Oregon was sold and three facilities were either
downsized or incurred impairment charges (Montreal, Quebec; Echt, the
Netherlands; and Richmond, Virginia) at a cost of $7.8 million.





In
2004,we downsized two facilities (Montreal, Quebec and Echt, the Netherlands)
resulting in restructuring and impairment charges of $6.4 million. In addition,
in February of 2005, we announced our intention to close all of our facilities
located in Montreal, Quebec and Echt, the Netherlands. We estimate that
restructuring charges related to the closures will total approximately $50.0
million of which $26.0 million will result in future cash expenditures. We
expect that $23.0 million of such restructuring charge will be related to the
reduction of headcount and $27.0 million will be related to asset write downs
and impairments and other exit costs.





Below is
a table summarizing restructuring and impairment charges and loss (gain) on the
dispositions of businesses for the years ended December 31, 2002, 2003 and 2004.
A detailed discussion of these restructuring and impairment charges and loss
(gain) on the dispositions of businesses is set forth in our consolidated
financial statements and the notes thereto included elsewhere in this
document.




****
    
    Year
      Ended****
    
    December
      31,**2002**
    
    
    **2003**
    
    
    **2004******
    
    (in
      thousands)Restructuring
      and impairment chargesPersonnel
      and service
    
    $
    11,458
    
    $
    827
    
    $
    2,057Lease
      and other collateral commitments (reversals)
    
    
    7,701
    
    
    —
    
    
    (5,861
    )Other
    
    
    1,347
    
    
    —
    
    
    253Asset
      impairments
    
    
    32,191
    
    
    65,372
    
    
    4,564Total
    
    $
    52,697
    
    $
    66,199
    
    $
    1,013Loss
      (gain) on dispositions of businesses
    
    $
    85,531
    
    $
    1,226
    
    $
    (465
    )





20





**Results
of Operations**





The
following table sets forth statement of operations data expressed as a
percentage of net sales for the periods indicated:




****
    
    Year
      Ended December 31,****
    
    
    Restated
    
    
    **Restated******
    
    
    **2002**
    
    
    **2003**
    
    
    **2004**Net
      sales
    
    
    100.0
    %
    
    100.0
    %
    
    100.0
    %Operating
      expenses:Cost
      of goods sold
    
    
    80.8
    
    
    79.5
    
    
    80.8Selling,
      general and administrative expenses
    
    
    10.2
    
    
    8.5
    
    
    8.7Stock
      compensation expense
    
    
    0.0
    
    
    0.2
    
    
    0.4Depreciation
    
    
    8.6
    
    
    8.8
    
    
    5.4Amortization
      of intangible assets
    
    
    1.9
    
    
    0.4
    
    
    0.2Restructuring
      and impairment charges
    
    
    6.1
    
    
    8.8
    
    
    0.1Goodwill
      Impairment
    
    
    4.2
    
    
    3.0
    
    
    0.0Loss
      (gain) on dispositions of assets, net
    
    
    9.9
    
    
    0.2
    
    
    (0.1
    )Operating
      (loss) income
    
    
    (21.7
    )
    
    (9.4
    )
    
    4.5Other
      expenses:Interest
      expense, net
    
    
    9.5
    
    
    4.0
    
    
    4.2Amortization
      of deferred financing costs
    
    
    0.6
    
    
    0.0
    
    
    0.1Reorganization
      expenses
    
    
    2.6
    
    
    7.4
    
    
    (1.1
    )Gain
      from debt forgiveness
    
    
    0.0
    
    
    0.2
    
    
    0.0Other
      expense (income), net
    
    
    (0.1
    )
    
    0.9
    
    
    (0.1
    )Income
      (loss) before income taxes
    
    
    (34.3
    )
    
    (21.9
    )
    
    1.4Income
      taxes
    
    
    0.0
    
    
    0.0
    
    
    0.8Net
      (loss) income
    
    
    (34.3
    )%
    
    (21.9
    )%
    
    0.6
    %


***Year
Ended December 31, 2003 Compared to Year Ended December 31,
2004***


Net sales
for the year ended December 31, 2004 were $901.4 million, representing a $149.9
million, or 19.9% increase, from the same period in 2003. The increase was
primarily a result of the overall market recovery and increased market share
with select customers. Sales of China printed circuit boards increased $55.9
million, or 19.4%, as a result of greater product demand and the installation of
additional capacity. Sales of western world printed circuit boards decreased
$7.2 million, or 6.8% due to reduced market demand in the western world PCB
market primarily as a result of migration of manufacturing to China. Sales in
our assembly segment increased $90.0 million, or 29.3% due to greater product
demand and additional product wins. The future mix of business is dependent upon
available capacity, demand for our customer’s end products and individual
program wins across all customers.


Cost of
goods sold for the year ended December 31, 2004 was $728.2 million, or 80.8% of
net sales, compared to $597.5 million, or 79.5% of net sales, for the year ended
December 31, 2003. Cost of goods sold as a percent of net sales increased
primarily as a result of higher PCB material costs, higher scrap rates in our
western world PCB fabrication facilities and the negative effect of the
strengthening of the Canadian Dollar and Euro.





Selling,
general and administrative expenses for the year ended December 31, 2004
increased by $13.9 million, from $64.1 million for the year ended December 31,
2003, to $78.0 million for the same period of 2004. These costs increased due to
the overall growth of the Company.





Depreciation
and amortization decreased $19.3 million, from $69.1 million for the year ended
December 31, 2003, to $49.8 million for the same period of 2004. This decrease
was primarily due to the fixed asset impairments we recognized during 2003 from
the application of SFAS No. 144.





Interest
expense increased $8.1 million, from $29.7 million for the year ended December
31, 2003, to $37.8 million for the same period of 2004. This increase in
interest expense was primarily due to our increased indebtedness with the
issuance of the senior subordinated notes due 2011 in late 2003 and partially
offset by our ability to negotiate lower interest rates on our senior credit
facility.





21





Amortization
of deferred financing costs increased $1.2 million for the year ended December
31, 2004, compared to the same period in 2003. This increase was due to the
amortization of deferred financing fees incurred with the issuance of the senior
subordinated notes due 2011.





***Year
Ended December 31, 2003 Compared to Year Ended December 31,
2002***





Net sales
for the year ended December 31, 2003 were $751.5 million, representing a
$112.5 million or 13.0% decrease from the same period in 2002. The decrease was
primarily a result of the facilities we closed or disposed of during 2002. In
2002, such closed or disposed of facilities accounted for net sales of $153.2
million. Had we excluded the operations that were closed or disposed of in 2002,
net sales for the year ended December 31, 2002 would have been $710.8
million. Excluding such closed or disposed of facilities, our net sales
increased for the year ended December 31, 2003 by $40.7 million, or
5.7%.




Cost of
goods sold for the year ended December 31, 2003 was $597.5 million, or
79.5% of net sales, compared to $697.8 million, or 80.8% of net sales, for the
year ended December 31, 2002. Cost of goods sold as a percent of net sales
decreased primarily as a result of increased printed circuit board sales, which
carry a higher gross margin than our other products, as a percent of total sales
and cost reduction actions implemented during 2002, partially offset by the
negative effect of the strengthening of the Canadian dollar and
Euro.




Selling,
general and administrative expenses for the year ended December 31, 2003
decreased by $24.1 million, from $88.2 million for the year ended
December 31, 2002, to $64.1 million for the same period of 2003. These
costs decreased primarily due to the elimination of these expenses in connection
with the Plant Rationalizations and additional cost reduction activities
implemented during 2002 and 2003. Included in the selling, general and
administrative expenses for the year ended December 31, 2003 is $1.4
million relating to stock option compensation expense.




Depreciation
and amortization decreased $21.5 million, from $90.6 million for the year ended
December 31, 2002, to $69.1 million for the same period of 2003, primarily
due to the intangibles and fixed assets disposed of or written off in connection
with the Plant Rationalizations.




Interest
expense decreased $52.2 million, from $81.9 million for the year ended
December 31, 2002, to $29.7 million for the same period of 2003, due to
lower overall debt balances as a result of the effects of the
Reorganization.




Amortization
of deferred financing costs decreased $4.9 million for the year ended
December 31, 2003, compared to the same period in 2002. On January 31,
2003, in connection with the consummation of the Reorganization, we wrote off
the deferred financing fees related to debt which was cancelled or
exchanged.




Other
expense (income) changed by $7.8 million, from income of $0.9 million for the
year ended December 31, 2002, to expense of $6.9 million for the same
period in 2003. The change was primarily due to a $7.7 million expense incurred
in connection with a contract settlement with one of our customers related to
one of the facilities we closed as part of the Plant
Rationalizations.




**Cash
Flow**





Net cash
provided by operating activities was $65.9 million for the year ended December
31, 2004, compared to net cash provided by operating activities of $48.4 million
for the same period in 2003. Changes in cash flow were principally the
result of increased net income. Timing of receipts from certain customers,
inventory management and payment to vendors also influenced the cash
balances.




Net cash
used in investing activities was $71.9 million for the year ended December 31,
2004, compared to $47.0 million for the same period in 2003. Such increase is
attributable to the Company’s capital expansion program in China. Specifically,
cash used for capital expenditures during the year ended December 31, 2004 was
$72.0 million compared to $47.5 million for the same period in
2003.








22


Net cash
provided by financing activities was $56.4 million for the year ended December
31, 2004, compared to net cash used in financing activities of $15.0 million for
the same period in 2003. The net cash provided by financing activities for the
year ended December 31, 2004 related to additional borrowings of $21.7 million
incurred in connection with our new $265.0 million term loan facility. Net cash
proceeds of $47.1 million related to the sale of common stock and the repayment
of $12.5 to discharge the Department of Trade and Industry (the “DTI”)
note.




The net
cash used in financing activities for the year ended December 31, 2003 related
principally to payments of term loans under our secured credit facility offset
by proceeds from issuance of long-term debt under senior subordinated notes. In
December 2003, we completed an offering of $200.0 million of Senior Subordinated
Notes. The proceeds from this offering were used to repay in full approximately
$69.4 million outstanding under the Tranche A term loan facility and to repay
approximately $136.1 million of the Tranche B term loan facility. Total payments
under the credit agreement were $205.5 million.




**Financing
Arrangements**





Concurrently
with the consummation of the Reorganization, we entered into a credit agreement
among JPMorgan Chase Bank (the “2003 Credit Agreement”), as administrative
agent, and the several banks and financial institutions party thereto, which
provides for a senior credit facility consisting of a $69.4 million
three-and-one-half year amortizing Tranche A term loan facility, a $378.5
million five-and-one-half year amortizing Tranche B Term Loan facility and a
five year revolving credit facility in an amount of $51.3 million (including, as
a sub-facility of the revolving credit facility, a $15 million letter of credit
facility).




The 2003
Credit Agreement requires Viasystems to maintain certain conditions, affirmative
covenants and negative covenants (including financial covenants), including the
following financial covenants: (1) minimum interest coverage, (2) maximum total
leverage and (3) maximum capital expenditures.




In
December 2003, we completed an offering of $200.0 million of 101⁄2% Senior
Subordinated Notes due 2011. The proceeds from this offering were used to repay
in full approximately $69.4 million outstanding under the Tranche A term loan
facility and to repay approximately $136.1 million of the Tranche B Term Loan
facility. In connection with the consummation of the debt offering, we were able
to amend the terms of the 2003 credit agreement. We believe the results of
operations will be sufficient to satisfy the terms and conditions of our
financing arrangements.




In
conjunction with the Company’s plan of reorganization approved by the Bankruptcy
Court, a £12 million (approximately $18 million) loan guaranteed by the Company
was cancelled and in exchange the DTI received a note (the “DTI Note”) in an
amount equal to £9 million with interest payable semi-annually in cash on a
current basis at an annual interest rate of three percent for periods up to
September 30, 2008 and at an annual interest rate equal to the Bank of England
Base Rate plus two percent for periods thereafter and principal payments from
December 31, 2008 through December 31, 2010. In May 2004, the DTI Note was
discharged in full as a result of proceeds received by the DTI from the
liquidation of Viasystems Tyneside Limited, resulting in a gain of $9.8
million.


On
October 7, 2004, Group, as guarantor, and Viasystems, as borrower, amended the
2003 Credit Agreement to provide for a new $265 million term loan facility (the
“Replacement Tranche B Term Loan”). The proceeds from the New Tranche B Term
Loan were used to extinguish the original Tranche B Term Loan.
  On
October 7, 2004, Group completed a rights offering whereby it sold 5,555,555
shares of common stock at $9.00 per share to its current stockholders. The
proceeds, net of issuance costs, of $47.1 million, werecontributed to the
Company.




**Liquidity**




We have
cash and cash equivalents at December 31, 2003 and December 31, 2004 of $62.7
million and $112.9 million, respectively. We had letters of credit outstanding
of $13.7 million and $13.8 million at December 31, 2003 and December 31, 2004,
respectively.








23




We
anticipate making capital expenditures of approximately $75 to $80 million in
2005. We believe that cash flow from operations and available cash on hand will
be sufficient to fund our capital expenditures and other currently anticipated
cash needs for the next two years. Our ability to meet those needs from cash
provided by 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, however, 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 the 2003 credit agreement in an
amount sufficient to enable us to pay our indebtedness, including these notes,
or to fund our other liquidity needs. We may need to refinance all or a portion
of our indebtedness.




The
following table provides our material debt, capital lease and operating lease
payments as of December 31, 2004:




**Contractual
      Obligation**
    
    
    **Total**
    
    
    **Less
      Than**
      **1
      year**
    
    
    **2
      — 3**
      **years**
    
    
    **4
      — 5**
      **years**
    
    
    **More
      Than**
      **5
      years******
    
    (in
      millions)Senior
      credit facility
    
    $
    265.0
    
    $
    2.7
    
    $
    5.3
    
    $
    257.0
    
    $
    —Interest
      on senior credit facility
    
    
    79.9
    
    
    17.1
    
    
    33.8
    
    
    29.0
    
    
    —Senior
      subordinated notes
    
    
    200.0
    
    
    —
    
    
    —
    
    
    —
    
    
    200.0Interest
      on senior subordinated notes
    
    
    126.9
    
    
    21.0
    
    
    42.0
    
    
    42.0
    
    
    21.9Capital
      lease
    
    
    0.6
    
    
    0.3
    
    
    0.3
    
    
    —
    
    
    —Operating
      leases
    
    
    22.3
    
    
    6.0
    
    
    8.7
    
    
    5.1
    
    
    2.5Total contractual obligations
    
    $
    694.7
    
    $
    47.1
    
    $
    90.1
    
    $
    333.1
    
    $
    224.4





**Net
Operating Losses**





For
United States federal income tax purposes we had net operating loss
carryforwards, or NOLs, amounting to approximately $693.6 million as of December
31, 2004. These NOLs expire in 2019 through 2024 if not utilized before then to
offset taxable income. Section 382 of the Internal Revenue Code of 1986, as
amended, and regulations issued thereunder impose limitations on the ability of
corporations to use NOLs if the corporation experiences more that a 50% change
in ownership during certain periods. We believe an ownership change occurred in
January 2003 in connection with the Reorganization. As a consequence, the
utilization of our NOLs is limited pursuant to Section 382 to approximately
$19.7 million per year, with any unused portion carried over to succeeding
years. Further changes in ownership in future periods could substantially
restrict our ability to utilize our tax net operating loss carryforwards. In
addition, as of December 31, 2004 we had NOLs of $8.8 million in Hong Kong, $5.4
million in China, $14.6 million in the United Kingdom, $88.4 million in
Luxembourg, $74.3 million in Canada and $14.5 million in the Netherlands. These
NOLs carry forward indefinitely, except for the Canadian NOLs which expire in
2007 through 2011.




**Recently
Adopted Accounting Pronouncements**





In
January 2003, the FASB issued FIN No. 46, *Consolidation
of Variable Interest Entities* . This
interpretation addresses the consolidation of business enterprises (variable
interest entities) to which the usual condition of consolidation does not apply.
This interpretation focuses on financial interests that indicate control. It
concludes that in the absence of clear control through voting interests, a
company’s exposure (variable interest) to the economic risks and potential
rewards from the variable interest entity’s (VIE) assets and activities are the
best evidence of control. Variable interests are rights and obligations that
convey economic gains or losses from changes in the values of the VIE’s assets
and liabilities. Variable interests may arise from financial instruments,
service contracts, nonvoting ownership interests and other arrangements. If an
enterprise holds a majority of the variable interests of an entity, it would be
considered the primary beneficiary. The primary beneficiary would be required to
include assets, liabilities and the results of operations of the VIE in its
financial statements. This interpretation applies immediately to VIEs that are
created, or for which control is obtained after, January 31, 2003.




In
December 2003, the FASB published a revision to FIN No. 46 to clarify some of
the provisions and to exempt certain entities from its requirements. Under the
new guidance, special effective date provisions apply to enterprises that have
fully or partially applied FIN No. 46 prior to issuance of the revised
interpretation. Otherwise, application of FIN No. 46R is required in financial
statements of public entities that have interests in structures that are
commonly referred to as special-purpose entities (SPEs) for periods ending after
December 15, 2003. Application by public entities, other than business issuers,
for all other types of VIEs other than SPEs is required in financial statements
for periods ending after March 15, 2004. The Company does not have interests in
structures commonly






24




referred to as SPEs. Adoption of FIN No. 46R did not
have an impact on the Company’s consolidated financial position, results of
operations or cash flows.




In April
2003, the FASB issued SFAS No. 149, *Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities.* This
statement amends SFAS No. 133 by requiring that contracts with comparable
characteristics be accounted for similarly and clarifies when a derivative
contains a financing component that warrants special reporting in the statement
of cash flows. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30, 2003
and must be applied prospectively. Adoption of SFAS No. 149 did not have a
material impact on its financial position or results of operations.




In May
2004, the EITF released Issue No. 03-06, *Participating
Securities and the Two-Class Method under FASB Statement No.
128* . EITF
No. 03-06 provides guidance on the calculation and disclosure of earnings per
share. Specifically, EITF No. 03-06 requires that “earnings available to common
shareholders” be calculated including participating securities (e.g. preferred
stock with certain characteristics). The adoption of EITF No. 03-06 is required
for all financial periods beginning after March 31, 2004. Adoption of EITF No.
03-06 resulted in no change to earnings per share as Viasystems, Inc. does not
report earnings per share.




**Recently
Issued Accounting Pronouncements**





In
November 2004 (revised in December 2004), the FASB issued SFAS No. 151, *Inventory
Costs -- an amendment of ARB No. 43, Chapter 4* to be
effective for inventory costs incurred during fiscal years beginning after June
15, 2005, with early adoption permitted. SFAS No. 151 amends the guidance in ARB
No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “. . .
under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. . . .” SFAS No. 151 requires those items be
recognized as current-period charges regardless of whether they meet the
criterion of “so abnormal.” In addition, FAS No. 151 requires the allocation of
fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. The Company does not expect the adoption
of SFAS No. 151 to have a material impact on its financial position or results
of operations.




In
December 2004, the FASB issued SFAS No. 123(R), *Share-Based
Payment (revised 2004* ***)*** , to be
effective as of the beginning of the first interim or annual reporting period
that begins after June 30, 2005. SFAS No. 123 (R) establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity’s equity instruments or that may be settled by the issuance of
those equity instruments. SFAS No. 123(R) focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123(R) does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
Statement 123 as originally issued and EITF Issue No. 96-18, “Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.” SFAS No. 123(R) does not address
the accounting for employee share ownership plans, which are subject to AICPA
Statement of Position 93-6, *Employers’ Accounting for Employee Stock Ownership Plans.* The
Company adopted the provisions of SFAS No. 123 on January 1, 2004. The Company
does not expect the adoption of SFAS No. 123(R) to have a material impact on its
financial position or results of operations.


In
December 2004, the FASB issued FASB staff position (“FSP”) 109-1, *Application
of FASB No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified
Production Activities Provided by the American Jobs Creation Act of
2004.* In
addition, at the same time, the FASB issued FSP No. 109-2, *Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004.* The
American Jobs Creation Act of 2004. The American Jobs Creation Act, which
includes numerous provisions that may affect business practices and accounting
for income taxes, was signed in to law in Ocotber of 2004. As of December 31,
2004, the Company is evaluating all newly issued guidance to make a
determination what, if any, effect these issuances may have on the
Company.





25





In
December 2004, the FASB issued SFAS No. 153, *Exchanges
of Nonmonetary Assets, an amendment to APB Opinion No. 29* , to be
for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005. The guidance in APB Opinion No. 29, *Accounting for Nonmonetary Transactions,* is based
on the principle that exchanges of nonmonetary assets should be measured based
on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. SFAS No. 153 amends
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The Company does not expect
the adoption of SFAS No. 153 to have a material impact on its financial position
or results of operations.







26





**ITEM
7A.** ***Quantitative
And Qualitative Disclosures About Market Risk*** ****





*Interest
Rate Risk*





At
December 31, 2003 and 2004, approximately $242.4 million and $265.0 million,
respectively, of our long-term debt, bore interest at variable rates.
Accordingly, our earnings and cash flow are affected by changes in interest
rates. Assuming the current level of borrowings at variable rates and assuming a
two percentage point increase in the average interest rate under these
borrowings, it is estimated that our interest expense for the year ended
December 31, 2003 and 2004, would have increased by approximately $4.8 and $5.3
million, respectively. In the event of an adverse change in interest rates,
management would likely take actions that would mitigate our exposure to
interest rate risk; however, due to the uncertainty of the actions that would be
taken and their possible effects, this analysis assumes no such action. Further,
this analysis does not consider the effects of the change in the level of
overall economic activity that could exist in such an environment.




*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. Sales and expenses are
frequently denominated in local currencies, and 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. We do not engage in hedging transactions for speculative
investment reasons. 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 from operations. There can be no assurance
that our hedging operations will eliminate or substantially reduce risks
associated with fluctuating currencies.







27





**ITEM
8.** ***Financial
Statements*** **** ***and
Supplementary Data***





**Index
To Financial Statements And Schedule**






**Viasystems,
      Inc. & Subsidiaries**
      Report of Independent Registered Public
      Accounting Firm
    29Consolidated Balance Sheets as
      ofDecember 31, 2003 and 2004
    30Consolidated Statements of Operations for the
      years endedDecember 31, 2002, 2003 and
    2004
    31Consolidated Statements of Stockholder’s Equity
      (Deficit) for the years endedDecember 31, 2002, 2003 and
    2004
    32Consolidated Statements of Cash Flows for the
      years endedDecember 31, 2002, 2003 and
    2004
    33Notes to Consolidated Financial
      Statements
    34Schedule II -- Valuation and Qualifying
      Accounts
    79








28





*Report Of Independent Registered Public
Accounting Firm*





To the
Board of Directors and Stockholder of Viasystems, Inc.:





In our
opinion, the consolidated financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Viasystems,
Inc. and its subsidiaries as of December 31, 2004 and 2003, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




As
indicated in Note 2 to the consolidated financial statements, the Company has
restated its consolidated financial statements for the years ended December 31,
2002 and 2003.
















/s/ 
PricewaterhouseCoopers LLP


Dallas,
Texas





March 24, 2005








29





**Viasystems,
Inc. & Subsidiaries**





**Consolidated Balance Sheets**





****
      ****
    
    Year
      Ended
      December
      31,****
    
    
    Restated****
    
    
    **2003**
    
    
    **2004**ASSETS****
    
    (In
      thousands)Current
      assets:Cash
      and cash equivalents
    
    $
    62,676
    
    $
    112,891Accounts
      receivable, net of allowance for doubtful accounts
      of
       $10,028 and $13,827, respectively
    
    
    135,378
    
    
    140,618Inventories
    
    
    87,744
    
    
    103,904Prepaid
      expenses and other
    
    
    38,004
    
    
    14,807Total current assets
    
    
    323,802
    
    
    372,220Property,
      plant and equipment, net
    
    
    213,172
    
    
    233,764Deferred
      financing costs, net
    
    
    8,806
    
    
    8,931Goodwill
    
    
    110,127
    
    
    109,980Intangible
      assets, net
    
    
    11,129
    
    
    9,985Other
      assets
    
    
    27,299
    
    
    15,529Total assets
    
    $
    694,335
    
    $
    750,409LIABILITIES
      AND STOCKHOLDER’S EQUITYCurrent
      liabilities:Accounts payable
    
    $
    141,542
    
    $
    151,247Accrued and other liabilities
    
    
    69,155
    
    
    68,542Income taxes payable
    
    
    589
    
    
    4,937Current maturities of long-term debt
    
    
    943
    
    
    2,929Total current liabilities
    
    
    212,229
    
    
    227,655Deferred
      taxes
    
    
    18,650
    
    
    2,321Long-term
      debt, less current maturities
    
    
    455,300
    
    
    462,626Other
      non-current liabilities
    
    
    5,676
    
    
    1,273Total liabilities
    
    
    691,855
    
    
    693,875Commitment
      and contingencies
      Stockholder’s
      equityCommon Stock, 1,000 shares authorized, issued and
    outstanding
    
    
    ―
    
    
    ―Paid-in capital
    
    
    2,374,041
    
    
    2,426,794Accumulated deficit
    
    
    (2,362,174
    )
    
    (2,356,426
    )Accumulated other comprehensive loss
    
    
    (9,387
    )
    
    (13,834
    )Total stockholder’s equity
    
    
    2,480
    
    
    56,534Total liabilities and stockholder’s equity
    
    $
    694,335
    
    $
    750,409





The
accompanying notes are an integral part of the consolidated financial
statements.





30





**Viasystems,
Inc. & Subsidiaries**





**Consolidated Statements of
Operations**








****
    
    Year
      Ended December 31,****
    
    
    Restated
    
    
    **Restated******
    
    
    **2002**
    
    
    **2003**
    
    
    **2004******
    
    (In
      thousands)Net
      sales
    
    $
    864,047
    
    $
    751,483
    
    $
    901,363Operating
      expenses:Cost of goods sold, exclusive of items shown separately
    below
    
    
    697,802
    
    
    597,546
    
    
    728,249Selling, general and administrative
    
    
    88,160
    
    
    64,119
    
    
    77,977Stock compensation expense
    
    
    —
    
    
    1,383
    
    
    3,837Depreciation
    
    
    74,221
    
    
    66,070
    
    
    48,232Amortization
    
    
    16,344
    
    
    3,065
    
    
    1,570Restructuring and impairment charges
    
    
    52,697
    
    
    66,199
    
    
    1,013Goodwill impairment
    
    
    36,710
    
    
    22,697
    
    
    —Loss (gain) on dispositions of businesses, net
    
    
    85,531
    
    
    1,226
    
    
    (465
    )Operating
      (loss) income
    
    
    (187,418
    )
    
    (70,822
    )
    
    40,950Other
      expenses (income):Interest expense, net
    
    
    81,898
    
    
    29,729
    
    
    37,818Amortization of deferred financing costs
    
    
    4,955
    
    
    104
    
    
    1,305Reorganization items:Reorganization expenses (reversals)
    
    
    22,537
    
    
    55,255
    
    
    (9,776
    )Loss from debt forgiveness
    
    
    —
    
    
    1,517
    
    
    —Other (income) expense, net
    
    
    (900
    )
    
    6,882
    
    
    (987
    )(Loss)
      income before income taxes
    
    
    (295,908
    )
    
    (164,309
    )
    
    12,590Income
      taxes
    
    
    —
    
    
    —
    
    
    6,842Net (loss) income
    
    $
    (295,908
    )
    $
    (164,309
    )
    $
    5,748





The
accompanying notes are an integral part of the consolidated financial
statements.





31





**Viasystems,
Inc. & Subsidiaries**





**Consolidated Statements of Stockholder’s Equity (Deficit)
and Comprehensive Income (Loss)**





****
    
    
    Common
      Stock
    
    
    **Paid
      in**
      **Capital**
    
    
    **Accumulated**
      **Deficit**
    
    
    **Accumulated**
      **and
      Other**
      **Comprehensive**
      **Income
      (Loss**
    ****
      ****
      ****
      **)**
    
    **Total******
    
    (In
      thousands)Balance
      at December 31, 2001
    
    $
    —
    
    $
    1,634,512
    
    $
    (1,901,957
    )
    $
    (42,879
    )
    $
    (310,324
    )Comprehensive
      loss:Net
      loss (restated)
    
    
    —
    
    
    —
    
    
    (295,908
    )
    
    —
    
    
    (295,908
    )Foreign
      currency translation adjustments, net of taxes of $0
      (restated)
    
    
    —
    
    
    —
    
    
    —
    
    
    21,523
    
    
    21,523Total
      comprehensive loss (restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (274,385
    )Balance
      at December 31, 2002 (restated)
    
    
    —
    
    
    1,634,512
    
    
    (2,197,865
    )
    
    (21,356
    )
    
    (584,709
    )Comprehensive
      loss:Net
      loss (restated)
    
    
    —
    
    
    —
    
    
    (164,309
    )
    
    —
    
    
    (164,309
    )Foreign
      currency translation adjustments, net of taxes of $0
      (restated)
    
    
    —
    
    
    —
    
    
    —
    
    
    11,969
    
    
    11,969Total
      comprehensive loss (restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (152,340
    )Capital
      contribution by Group
    
    
    —
    
    
    738,146
    
    
    —
    
    
    —
    
    
    738,146Stock
      compensation expense
    
    
    —
    
    
    1,383
    
    
    —
    
    
    —
    
    
    1,383Balance
      at December 31, 2003 (restated)
    
    
    —
    
    
    2,374,041
    
    
    (2,362,174
    )
    
    (9,387
    )
    
    2,480Comprehensive
      income:Net
      income
    
    
    —
    
    
    —
    
    
    5,748
    
    
    —
    
    
    5,748Foreign
      currency translation adjustments, net of taxes of $0
    
    
    —
    
    
    —
    
    
    —
    
    
    (4,447
    )
    
    (4,447
    )Total
      comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,301Capital
      contribution by Group
    
    
    —
    
    
    48,916
    
    
    —
    
    
    —
    
    
    48,916Stock
      compensation expense
    
    
    —
    
    
    3,837
    
    
    —
    
    
    —
    
    
    3,837Balance
      at December 31, 2004
    
    $
    —
    
    $
    2,426,794
    
    $
    (2,356,426
    )
    $
    (13,834
    )
    $
    56,534


The
accompanying notes are an integral part of the consolidated financial
statements.








32





**Viasystems,
Inc. & Subsidiaries**





**Consolidated Statements of Cash
Flows**








****
    
    Year
      Ended December 31,****
    
    
    Restated
    
    
    **Restated******
    
    
    **2002**
    
    
    **2003**
    
    
    **2004******
    
    (In
      thousands)Cash
      flows from operating activities:Net
      (loss) income
    
    $
    (295,908
    )
    $
    (164,309
    )
    $
    5,748Adjustments
      to reconcile net (loss) income to net cashprovided
      by operating activities:Impairment
      of assets
    
    
    30,890
    
    
    65,372
    
    
    4,564Goodwill
      impairment
    
    
    36,710
    
    
    22,697
    
    
    —Loss
      from debt forgiveness
    
    
    —
    
    
    1,517
    
    
    —Write-off
      of deferred financing fees, premium and
      discount
      related to debt forgiveness
    
    
    —
    
    
    53,203
    
    
    —Gain
      on early extinguishment of capital leases
    
    
    (656
    )
    
    —
    
    
    —Loss
      (gain) on dispositions of businesses
    
    
    89,718
    
    
    1,226
    
    
    (465
    )Loss
      on sale of property, plant and equipment
    
    
    134
    
    
    31
    
    
    931Gain
      on sale of joint venture interest
    
    
    (4,187
    )
    
    —
    
    
    —Depreciation
      and amortization
    
    
    90,565
    
    
    69,135
    
    
    49,802Amortization
      of deferred financing costs
    
    
    4,955
    
    
    104
    
    
    1,305Non-cash
      stock option compensation charge
    
    
    —
    
    
    1,383
    
    
    3,837Accreted
      interest on senior unsecured notes
    
    
    16,407
    
    
    —
    
    
    —Joint
      venture income
    
    
    (298
    )
    
    —
    
    
    —Gain
      from sale of North Tyneside facility
    
    
    —
    
    
    —
    
    
    (9,789
    )Deferred
      taxes
    
    
    (1,382
    )
    
    1,725
    
    
    4,565Change
      in assets and liabilities, net of acquisitions:Accounts
      receivable
    
    
    8,697
    
    
    (14,058
    )
    
    (4,665
    )Inventories
    
    
    10,220
    
    
    (10,150
    )
    
    (15,221
    )Prepaid
      expenses and other
    
    
    341
    
    
    (10,912
    )
    
    20,070Intercompany
      receivable with Group, Inc.
    
    
    (212
    )
    
    4,551
    
    
    (6,087
    )Accounts
      payable and accrued and other liabilities
    
    
    24,788
    
    
    33,136
    
    
    13,660Income
      taxes payable
    
    
    (2,007
    )
    
    (6,241
    )
    
    (2,338
    )Net
      cash provided by operating activities
    
    
    8,775
    
    
    48,410
    
    
    65,917Cash
      flows from investing activities:Sale
      of businesses and joint venture interest
    
    
    5,900
    
    
    (138
    )
    
    —Sale
      of property, plant and equipment
    
    
    —
    
    
    620
    
    
    73Capital
      expenditures
    
    
    (29,688
    )
    
    (47,506
    )
    
    (72,006
    )Net
      cash used in investing activities
    
    
    (23,788
    )
    
    (47,024
    )
    
    (71,933
    )Cash
      flows from financing activities:Proceeds
      from issuance of long-term debt under credit facilities
    
    
    —
    
    
    —
    
    
    265,000Proceeds
      from issuance of long-term debt under senior
      subordinated
      notes
    
    
    —
    
    
    200,000
    
    
    —Net
      borrowings on revolvers
    
    
    77,870
    
    
    —
    
    
    —Repayment
      of amounts due under credit facilities
    
    
    (1,000
    )
    
    (205,500
    )
    
    (243,260
    )Repayment
      of amounts due under note due to the Department of Trade and
      Industry
    
    
    —
    
    
    (3,127
    )
    
    (12,549
    )Capital
      contributed by Group
    
    
    —
    
    
    102
    
    
    48,916Repayment
      of other long-term and capital lease obligations
    
    
    (6,755
    )
    
    (144
    )
    
    (273
    )Financing
      fees and other
    
    
    (3,206
    )
    
    (6,334
    )
    
    (1,430
    )Net
      cash provided by (used in) financing activities
    
    
    66,909
    
    
    (15,003
    )
    
    56,404Effect
      of exchange rate changes on cash and cash equivalents
    
    
    (3,038
    )
    
    (6,767
    )
    
    (173
    )Net
      change in cash and cash equivalents
    
    
    48,858
    
    
    (20,384
    )
    
    50,215Cash
      and cash equivalents at beginning of year
    
    
    34,202
    
    
    83,060
    
    
    62,676Cash
      and cash equivalents at end of year
    
    $
    83,060
    
    $
    62,676
    
    $
    112,891
The
accompanying notes are an integral part of the consolidated financial
statements.





33





**Viasystems,
Inc. & Subsidiaries**





**Notes to Consolidated Financial
Statements**


**(In
thousands)**








**1.
Basis of Presentation and Summary of Significant Accounting
Policies**


Viasystems,
Inc. (“Viasystems”), a wholly owned subsidiary of Viasystems Group, Inc.,
(“Group”), was formed on April 2, 1997. On April 10, 1997, Group contributed to
Viasystems all of the capital of its then existing subsidiaries. Prior to the
contribution of capital by Group, Viasystems had no operations of its own. The
consolidated financial statements included herein present the results of
operations of Viasystems and its subsidiaries. As used herein, the “Company”
refers to Viasystems and its subsidiaries subsequent to the capital contribution
by Group and to Group and its subsidiaries prior to such capital
contribution.




***Nature
of Business***




The
Company is a leading worldwide provider of complex multi-layer printed circuit
boards, wire harnesses and electro-mechanical solutions. The Company conducts
its operations in two primary segments, (i) printed circuit board manufacturing
and (ii) assembly. Its products are used in a wide range of applications,
including automotive dash panels and control modules, major household
appliances, data networking equipment, telecommunications switching equipment
and complex medical and technical instruments.


***Principles
of Consolidation***





The
accompanying consolidated financial statements include the accounts of the
Company. All intercompany balances and transactions have been eliminated in
consolidation.




***Cash
and Cash Equivalents***





The
Company considers investments purchased with an original maturity of three
months or less to be cash equivalents.




***Foreign
Currency Translation***





Local
currencies have been designated as the functional currency for the Company’s
foreign subsidiaries. Accordingly, assets and liabilities of the foreign
subsidiaries are translated at the rates of exchange in effect at the balance
sheet date. Income and expense items of these subsidiaries are translated at the
weighted average monthly rates of exchange. The resultant translation gains and
losses are reported in other comprehensive income (loss). Exchange gains and
losses arising from transactions denominated in a currency other than the
functional currency of the entity involved are included in other expense
(income) in the consolidated statement of operations.




***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. Such transactions are
not material, and gains and losses from such activities are not significant.
However, there can be no assurance that these activities will eliminate or
reduce foreign currency risk. Gains/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.




***Accounts
Receivable***





Accounts
receivable balances represent customer trade receivables generated from the
Company’s 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, such as in the case of bankruptcy filings or deterioration in the
customer’s operating






34




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, the financial health
of the customer and historical experiences. If circumstances related to specific
customers change, estimates of the recoverability of receivables could be
further adjusted.




***Inventories***





Inventories
are stated at the lower of cost (valued using the first-in, first-out (FIFO) or
last-in, first-out (LIFO) method) or market. Cost includes raw materials, labor
and manufacturing overhead. LIFO is utilized for wire harness and cable assembly
inventories located in the United States. Prior to Viasystems’ acquisition of
Wire Harness Industries, Inc. in March 2000, LIFO was adopted to balance the
anticipated material inflation associated with copper prices and was carried
over by the Company as the method used to value wire harness and cable assembly
inventory.




Inventories
would have decreased by approximately $5,269 and $5,424 at December 31, 2003 and
2004, respectively, had the FIFO method been used to determine purchased
inventory cost. For the years ended December 31, 2003 and 2004, the percentage
of inventory valued at LIFO was 27% and 32%, respectively.




***Property,
Plant and Equipment***





Property,
plant and equipment are recorded at cost. Repairs and maintenance, which 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:




Building
    39-50
      yearsLeasehold
      improvements
    10-12
      yearsMachinery,
      equipment, systems and other
    3-10
      years





***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.




***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.




***Start-Up
Costs***





Start-up
costs consist of salaries, personnel training and other expenses of opening new
facilities and are expensed as incurred.







35





***Intangible
Assets***





Intangible
assets consist primarily of identifiable intangibles acquired and goodwill
arising from the excess of cost over the fair value of net assets acquired.
Amortization of identifiable intangible assets acquired is computed using
systematic methods over the estimated useful lives of the related assets as
follows:




****
    **Life**
    **Method**Developed
      technologies
    15
      years
    Double-declining
      balance








***Impairment
of Long-Lived Assets***





Pursuant
to SFAS No. 142, all goodwill effective January 1, 2002 is not being amortized,
but is subject to at least annual impairment reviews. Other intangible assets
and long-lived assets are reviewed for impairment in accordance with SFAS No.
144, effective January 1, 2002.




In
reviewing goodwill for impairment under SFAS No. 142, potential impairment is
identified by comparing the fair value of a reporting unit with its carrying
amount, and if the fair value is less than the carrying amount, an impairment
loss is recorded as the excess of the carrying amount of the goodwill over the
implied fair value. The implied fair value of goodwill is determined by
allocating the fair value of the reporting unit to all of its assets and
liabilities, with any excess of fair value of the reporting unit over the
amounts allocated representing the implied fair value of that unit's goodwill.
This review is performed at the Company's reporting unit's level. Reporting
units are either an operating segment as defined in SFAS No.131 or one level
below the operating segment.




The
Company reviews the carrying amounts of long-lived assets other than goodwill
for potential impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In evaluating the
recoverability of assets, long-lived assets are grouped at the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
assets, then management compares the carrying amounts of such each asset groups
with the its estimated undiscounted future operating cash flows. In the event an
impairment exists, an impairment charge would be measured as the amount by which
the carrying amount of the long-lived asset group exceeds its fair value. In
addition, the remaining useful life of an impaired asset group would be
reassessed and revised if necessary.




***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.




***Revenue
Recognition***





The
Company recognizes 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, except in the
case of vendor managed inventory arrangements, whereby sales and the related
costs of goods sold are included in income when goods are taken into production
by the customer. All services are performed prior to invoicing customers for any
products manufactured by the Company. Reserves for product returns are recorded
based on historical trend rates at the time of sale.




***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.






36





***Use
of Estimates***





The
preparation of consolidated financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.




***Fair
Value of Financial Instruments***





The fair
market values of the Company’s long-term obligations are as
follows:


****
    
    December
      31,****
    
    
    **2003**
    
    
    **2004**Senior
      Subordinated Notes due 2011
    
    $
    213,250
    
    $
    196,000Credit
      Agreement
    
    $
    246,644
    
    $
    267,995





The
Company determined the 2003 and 2004 fair values of the Senior Subordinated
Notes due 2011 using published market values from third party sources. The
Company determined the 2003 and 2004 fair values of the credit agreement using
the credit agreement trading values from a third party source. In addition,
there are various other insignificant long-term obligations held by the Company.
Each of the fair values of these obligations are estimated by management to be
equal to the carrying value.




***Employee
Stock-Based Compensation***





SFAS No.
148, *Accounting
for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB
Statement No. 123* , was
issued to provide alternative methods of transition of an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of SFAS No. 123, *Accounting
for Stock-Based Compensation,* to
require prominent disclosure about the effects on reported net income of an
entity’s accounting policy decisions with respect to the stock-based employee
compensation and it amends Accounting Principles Board Opinion (“APB”) No. 28, *Interim
Financial Reporting,* to
require disclosure about those effects in interim financial
information.


Group,
the holding company parent of Viasystems, maintains a stock option plan. The
Company records expenses attributable to Group’s stock option plan. In
connection with the Company’s plan of reorganization pursuant to Chapter 11 of
the United States Bankruptcy Code (the “Reorganization”), the Company terminated
its 1997 and 2001 stock option plans and adopted the 2003 stock option plan. The
options issued under the 2003 stock option plan have a fixed exercise price of
$12.63 per share 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. As a result of the termination of the 1997 and 2001 stock option
plans and the adoption of the 2003 stock option plan, under provisions of
Financial Interpretation Number (“FIN”) No. 44,*Accounting
for Certain Transactions Involving Stock Compensation an Interpretation of APB
Opinion No. 25*, certain
options issued under the 2003 stock option plan were treated as “variable”
options. As a result the Company recorded non-cash compensation expense of
$1,383 and $3,837 for the years ended December 31, 2003 and
2004.




Effective
January 1, 2004, the Company adopted the fair value recognition provisions of
SFAS No. 123. Under the modified prospective transition method selected by the
Company as described in SFAS No. 148, compensation cost recognized for the year
ended December 31, 2004 is the same as that which would have been recognized had
the fair value method of SFAS No. 123 been applied from its original effective
date. As required under SFAS No. 123, the proforma effects of stock-based
compensation on net (loss) income are as follows:






37




****
    
    
    Restated
    
    
    **Restated****2002**
    
    
    **2003**
    
    
    **2004**Net
      (loss) income, as reported
    
    $
    (295,908
    )
    $
    (164,309
    )
    $
    5,748Plus:
      Stock-based employee compensation expense
      included
      in reported net (loss) income, net of related
      tax
      effects
    
    
    —
    
    
    1,383
    
    
    3,837Less:
      Total stock-based employee compensation
      expense
      determined under fair value based method for
      all
      awards, net of related tax effects
    
    
    (6,011
    )
    
    (15,932
    )
    
    (3,837
    )Pro
      forma net (loss) income
    
    $
    (301,919
    )
    $
    (178,858
    )
    $
    5,748
   The fair
value of each option grant is estimated on the date of the grant using the
Black-Scholes option-pricing model using the following assumptions:




****
    **2002**
    **2003**
    **2004**Expected
      life of options
    5
      years
    5
      years
    5
      yearsRisk-free
      interest rate
    4.61%
    4.01%
    3.50%Expected
      volatility of stock
    50%
    50%
    50%Expected
      dividend yield
    None
    None
    None





***Recently
Adopted Accounting Pronouncements***





In
January 2003, the Financial Accounting Standard Board (“FASB”) issued FIN No.
46, *Consolidation
of Variable Interest Entities* . This
interpretation addresses the consolidation of business enterprises (variable
interest entities) to which the usual condition of consolidation does not apply.
This interpretation focuses on financial interests that indicate control. It
concludes that in the absence of clear control through voting interests, a
company’s exposure (variable interest) to the economic risks and potential
rewards from the variable interest entity’s (“VIE”) assets and activities are
the best evidence of control. Variable interests are rights and obligations that
convey economic gains or losses from changes in the values of the VIE’s assets
and liabilities. Variable interests may arise from financial instruments,
service contracts, nonvoting ownership interests and other arrangements. If an
enterprise holds a majority of the variable interests of an entity, it would be
considered the primary beneficiary. The primary beneficiary would be required to
include assets, liabilities and the results of operations of the VIE in its
financial statements. This interpretation applies immediately to VIEs that are
created, or for which control is obtained after, January 31, 2003.




In
December 2003, the FASB published a revision to FIN No. 46 to clarify some of
the provisions and to exempt certain entities from its requirements. Under the
new guidance, special effective date provisions apply to enterprises that have
fully or partially applied FIN No. 46 prior to issuance of the revised
interpretation. Otherwise, application of FIN No. 46R is required in financial
statements of public entities that have interests in structures that are
commonly referred to as special-purpose entities (SPEs) for periods ending after
December 15, 2003. Application by public entities, other than business issuers,
for all other types of VIEs other than SPEs is required in financial statements
for periods ending after March 15, 2004. The Company does not have interests in
structures commonly referred to as SPEs. Adoption of FIN No. 46R did not have an
impact on the Company’s consolidated financial position, results of operations
or cash flows.




In April
2003, the FASB issued SFAS No. 149, *Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities.* This
statement amends SFAS No. 133 by requiring that contracts with comparable
characteristics be accounted for similarly and clarifies when a derivative
contains a financing component that warrants special reporting in the statement
of cash flows. SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30, 2003
and must be applied prospectively. Adoption of SFAS No. 149 did not have a
material impact on its financial position or results of operations.




In May
2004, the Emerging Issues Task Force (“EITF”) released Issue No. 03-06, *Participating
Securities and the Two-Class Method under FASB Statement No.
128* . EITF
No. 03-06 provides guidance on the calculation and






38




disclosure of earnings per share. Specifically, EITF
No. 03-06 requires that “earnings available to common shareholders” be
calculated including participating securities (e.g. preferred stock with certain
characteristics). The adoption of EITF No. 03-06 is required for all financial
periods beginning after March 31, 2004. Adoption of EITF No. 03-06 resulted in
no change to earnings per share as Viasystems, Inc. does not report earnings per
share.




***Recently
Issued Accounting Pronouncements***





In
November 2004 (revised in December 2004), the FASB issued SFAS No. 151, *Inventory
Costs -- an amendment of ARB No. 43, Chapter 4* to be
effective for inventory costs incurred during fiscal years beginning after June
15, 2005, with early adoption permitted. SFAS No. 151 amends the guidance in
Accounting Research Bulleting (“ARB”) No. 43, Chapter 4, “Inventory Pricing,” to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter
4, previously stated that “. . . under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal as to require treatment as current period charges. . . .” SFAS
No. 151 requires those items be recognized as current period charges regardless
of whether they meet the criterion of “so abnormal.” In addition, FAS No. 151
requires the allocation of fixed production overheads to the costs of conversion
be based on the normal capacity of the production facilities. The Company does
not expect the adoption of SFAS No. 151 to have a material impact on its
financial position or results of operations.




In
December 2004, the FASB issued SFAS No. 123(R), *Share-Based
Payment (revised 2004* ***)*** , to be
effective as of the beginning of the first interim or annual reporting period
that begins after June 30, 2005. SFAS No. 123 (R) establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. It also addresses transactions in which an entity incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity’s equity instruments or that may be settled by the issuance of
those equity instruments. SFAS No. 123(R) focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. SFAS No. 123(R) does not change the accounting guidance for
share-based payment transactions with parties other than employees provided in
Statement 123 as originally issued and EITF Issue No. 96-18, “Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services.” SFAS No. 123(R) does not address
the accounting for employee share ownership plans, which are subject to AICPA
Statement of Position 93-6, *Employers’ Accounting for Employee Stock Ownership Plans.* The
Company adopted the provisions of SFAS No. 123 on January 1, 2004. The Company
does not expect the adoption of SFAS No. 123(R) to have a material impact on its
financial position or results of operations.




In
December 2004, the FASB issued SFAS No. 153, *Exchanges
of Nonmonetary Assets, an amendment to APB Opinion No. 29* , to be
for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005. The guidance in APB Opinion No. 29, *Accounting for Nonmonetary Transactions,* is based
on the principle that exchanges of nonmonetary assets should be measured based
on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. SFAS No. 153 amends
Opinion 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The Company does not expect
the adoption of SFAS No. 153 to have a material impact on its financial position
or results of operations.


In
December 2004, the FASB issued FASB staff position (“FSP”) 109-1, *Application
of FASB No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified
Production Activities Provided by the American Jobs Creation Act of
2004.* In
addition, at the same time, the FASB issued FSP No. 109-2, *Accounting
and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004.* The
American Jobs Creation Act of 2004. The American Jobs Creation Act, which
includes numerous provisions that may affect business practices and accounting
for income taxes, was signed in to law in Ocotber of 2004. As of December 31,
2004, the Company is evaluating all newly issued guidance to make a
determination what, if any, effect these issuances may have on the
Company.
 
 
 39




**2.
Restatement**




The
Company has restated its previously issued financial statements for 2002 and
2003. The restatement arises primarily from errors made in the application of
the accounting principles set forth by SFAS No. 142, *Goodwill
and Other Intangible Assets* , and
SFAS No. 131, *Disclosures
about Segments of an Enterprise and Related Information* .
Specifically, the Company did not properly identify its reportable segments,
operating segments and reporting units and did not properly identify goodwill
impaired under SFAS No. 142 in 2002 and 2003. In addition, the Company restated
the 2003 restructuring and impairment charges for an error identified during the
recording of the SFAS No. 142 impairment adjustments. This error was
attributable to the currency effects of the SFAS No. 144 impairment recognized
on property, plant and equipment at the Company’s Echt, the Netherlands,
facility. The following is a summary of the impact of the restatement on
previously issued statements of operations and balance sheets:


****
    
    Year
      Ended December 31,****
      ****
    
    
    As
      Originally
      Reported
    
    
    **As
      Restated**
    
    
    
    
    
    **As
      Originally**
      **Reported**
    
    
    **As
      Restated****Statement
      of Operations**
    
    
    **2002**
    
    
    **2002**
    
    
    
    
    
    **2003**
    
    
    **2003**Restructuring
      and impairment charges (1)
    
    $
    52,697
    
    $
    52,697
    
    
    
    
    $
    67,054
    
    $
    66,199Goodwill
      impairment (2)
    
    
    —
    
    
    36,710
    
    
    
    
    
    155
    
    
    22,697Operating
      (loss)
    
    
    (150,708
    )
    
    (187,418
    )
    
    
    
    
    (49,135
    )
    
    (70,822
    )Loss
      before income taxes
    
    
    (259,198
    )
    
    (295,908
    )
    
    
    
    
    (142,622
    )
    
    (164,309
    )Net
      loss
    
    $
    (259,198
    )
    $
    (295,908
    )
    
    
    
    $
    (142,622
    )
    $
    (164,309
    )********
    
    Year
      Ended December 31,****
    
    
    As Originally
      Reported
    
    
    **As
      Restated**
    
    
    
    
    
    **As
      Originally**
      **Reported**
    
    
    **As
      Restated**Balance
      Sheet (as of end of period)(3):
    
    
    **2002**
    
    
    **2002**
    
    
    
    
    
    **2003**
    
    
    **2003**Goodwill
    
    $
    166,619
    
    $
    129,701
    
    
    
    
    $
    173,350
    
    $
    110,127Total
      assets
    
    
    814,448
    
    
    777,530
    
    
    
    
    
    757,558
    
    
    694,335Accumulated
      other comprehensive loss
    
    
    (21,148
    )
    
    (21,356
    )
    
    
    
    
    (4,561
    )
    
    (9,387
    )Total
      stockholder's (deficit) equity
    
    
    (547,791
    )
    
    (584,709
    )
    
    
    
    
    65,703
    
    
    2,480




(1)
    The
      adjustment to restructuring and impairment loss in 2003 is attributable to
      the adjustment of currency effects of fixed assets located at our facility
      in Echt, the Netherlands that were impaired under the provisions of SFAS
      No. 144.




(2)
    The
      $36,710 goodwill impairment recognized in 2002 is attributable to $13,417
      of goodwill impairment recognized in the Company’s North American PCB
      reporting unit, $10,079 of goodwill impairment recognized in the Asian EMS
      reporting unit and $13,214 of goodwill impairment recognized in the North
      American EMS reporting unit. The 2002 goodwill impairment resulted in
      a $36,710 increase in operating loss and net loss. The goodwill impairment
      recognized in 2003 is attributable to $22,697 goodwill impairment
      recognized in the European Printed Circuit Boards reporting unit. The 2003
      goodwill impairment resulted in a $22,542 increase in operating loss and
      net loss.




(3)
    The
      adjustment to the goodwill, total assets, accumulated other comprehensive
      loss and stockholder's equity is attributable to the goodwill impairment
      adjustments in 2002 and 2003 and the currency effect adjustment in
      2003.





**3.
Supplemental Cash Flow Disclosure**





Cash paid
for interest for the years ended December 31, 2002, 2003 and 2004 was $30,801,
$31,497 and $26,315 respectively. For the years ended December 31, 2002, 2003
and 2004, net cash paid for income taxes was $3,389, $4,894 and $5,437,
respectively.






40




**4.
Inventories**





The
composition of inventories at December 31 is as follows:




****
    
    
    **2003**
    
    
    **2004**Raw
      materials
    
    $
    33,222
    
    $
    40,803Work
      in process
    
    
    21,182
    
    
    20,767Finished
      goods
    
    
    33,340
    
    
    42,334Total
    
    $
    87,744
    
    $
    103,904











**5.
Goodwill and Other Intangible Assets (Restated)**





Effective
January 1, 2002, the Company implemented SFAS No. 142, *Goodwill
and Other Intangible Assets,* and as a
result, ceased amortizing goodwill and other indefinite lived intangible assets.
The implementation of SFAS No. 142 did not result in the recognition of goodwill
impairment.




As
required by the provisions of SFAS No. 142, the Company performs an annual
impairment evaluation of goodwill and other indefinite lived intangible assets.
As discussed in Note 2, during 2002 and 2003, the Company did not properly
calculate the impairment of goodwill under SFAS No. 142. For the year ended
December 31, 2002, the corrected evaluation resulted in the recognition of
impairment in the Company’s North American EMS, North American PCB and Asian EMS
reporting units of $13,214, $13,417 and $10,079, respectively. For the year
ended December 31, 2003 the corrected evaluation resulted in the additional
recognition of impairment in the Company’s European Printed Circuit Boards
reporting unit of $22,697.




The table
included below describes the Company’s goodwill activity as restated for
the inclusion of SFAS No. 142 impairments recognized from the previous
years:




****
    
    
    Asia
      Printed
      Circuit
      Board
    
    
    **North
      American Printed****Circuit
      Board**
    
    
    **European
      Printed****Circuit
      Board**
    
    
    **Assembly**
    
    
    **Other**
    
    
    **As
      Restated**Goodwill
      at December 31, 2001
    
    $
    79,250
    
    $
    13,229
    
    $
    17,214
    
    $
    40,628
    
    $
    60,563
    
    $
    210,884Write-off
      related to disposed assets
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    (47,349
    )
    
    (47,349
    )Impairment
      under SFAS No. 142
    
    
    —
    
    
    (13,417
    )
    
    —
    
    
    (10,079
    )
    
    (13,214
    )
    
    (36,710
    )Effect
      of foreign exchange rates
    
    
    (18
    )
    
    188
    
    
    2,706
    
    
    ―
    
    
    ―
    
    
    2,876Goodwill
      at December 31, 2002
    
    
    79,232
    
    
    —
    
    
    19,920
    
    
    30,549
    
    
    —
    
    
    129,701Impairment
      under SFAS No. 142
    
    
    —
    
    
    —
    
    
    (22,697
    )
    
    —
    
    
    —
    
    
    (22,697
    )Effect
      of foreign exchange rates
    
    
    346
    
    
    ―
    
    
    2,777
    
    
    ―
    
    
    ―
    
    
    3,123Goodwill
      at December 31, 2003
    
    
    79,578
    
    
    ―
    
    
    ―
    
    
    30,549
    
    
    ―
    
    
    110,127Effect
      of foreign exchange rates
    
    
    (147
    )
    
    ―
    
    
    ―
    
    
    ―
    
    
    ―
    
    
    (147
    )Goodwill
      at December 31, 2004
    
    $
    79,431
    
    **$**
    ―
    **$**
    **$**
    ―
    
    **$**
    30,549
    
    **$**
    ―
    
    **$**
    109,980




The
components of intangible assets subject to amortization were as
follows:




****
    
    December
      31, 2003
    **December
      31, 2004******
    
    
    Gross
      Carrying
      Amount
    
    
    **Accumulated**
      **Amortization**
    
    
    **Gross**
      **Carrying**
      **Amount**
    
    
    **Accumulated**
      **Amortization**Developed
      technologies
    
    $
    20,397
    
    $
    (9,529
    )
    $
    20,397
    
    $
    (11,237
    )Other
    
    
    913
    
    
    (652
    )
    
    1,352
    
    
    (527
    )Total
    
    $
    21,310
    
    $
    (10,181
    )
    $
    21,749
    
    $
    (11,764
    )





The
Company paid $209 and $439 for acquisitions of patents during the years ended
December 31, 2003 and 2004, respectively. In addition, the Company impaired
$7,850 in developed technologies and $1,374 in trademarks at December 31, 2003
(see Note 11).






Expected
      future annual amortiation expense for the next five fiscal years is as
      follows:2005
    
    $
    1,4152006
    
    
    1,2532007
    
    
    1,1252008
    
    
    1,0662009
    
    
    984








41





**6.
Property, Plant and Equipment**





The
composition of property, plant and equipment at December 31 is as
follows:





****
    
    
    **2003**
    
    
    **2004**Land
      and buildings
    
    $
    92,910
    
    $
    100,327Machinery,
      equipment and systems
    
    
    455,739
    
    
    549,793Construction
      in progress
    
    
    17,377
    
    
    17,074Leasehold
      improvements
    
    
    21,227
    
    
    22,699587,253
    
    
    689,893Less:
      Accumulated depreciation
    
    
    (374,081
    )
    
    (456,129
    )Total
    
    $
    213,172
    
    $
    233,764





**7.
Accrued and Other Liabilities**





The
composition of accrued and other liabilities at December 31 is as
follows:




****
    
    
    **2003**
    
    
    **2004**Accrued
      payroll and related costs
    
    $
    23,768
    
    $
    26,726Accrued
      restructuring
    
    
    13,650
    
    
    4,856Accrued
      interest
    
    
    1,944
    
    
    13,447Deferred
      taxes
    
    
    7,894
    
    
    4,311Product
      warranties
    
    
    3,938
    
    
    2,018Accrued
      other
    
    
    17,961
    
    
    17,184Total
    
    $
    69,155
    
    $
    68,542





**8.
Long-Term Debt**





The
composition of long-term debt at December 31 is as follows:




****
    
    
    **2003**
    
    
    **2004**Credit
      Agreement:Term
      Facilities
    
    $
    242,401
    
    $
    265,000Revolver
    
    
    —
    
    
    —Senior
      Subordinated Notes due 2011
    
    
    200,000
    
    
    200,000Department
      of Trade and Industry Note
    
    
    12,525
    
    
    —Capital
      lease obligations
    
    
    545
    
    
    555Other
    
    
    772
    
    
    —456,243
    
    
    465,555Less:
      Current maturities
    
    
    (943
    )
    
    (2,929
    )Total
    
    $
    455,300
    
    $
    462,626





The
schedule of principal payments for long-term debt at December 31, 2004, is as
follows:




2005
    
    $
    2,9292006
    
    
    2,9192007
    
    
    2,6572008
    
    
    2,6502009
    
    
    254,400Thereafter
    
    
    200,000Total
    
    $
    465,555





***Credit
Agreement***





On
January 31, 2003, Group, as guarantor, and Viasystems, as borrower, entered into
a senior credit facility (the “2003 Credit Agreement”). The 2003 Credit
Agreement provided for:


(a)
    a
      $69,433 term loan facility (the “Tranche A Term Loan”);


(b)
    a
      $378,468 term loan facility (the “Original Tranche B Term Loan”); and


42
   (c)
    a
      $51,289 revolving credit facility (the “2003 Revolving Loans” or
      “Revolver”), which includes a $15,000 letter of credit commitment.





In
December 2003, the Company completed an offering of $200,000 of 10.5% Senior
Subordinated Notes due 2011. The Company used the proceeds from the Senior
Subordinated Notes due 2011 to extinguish the Tranche A Term Loan and to pay
down the Original Tranche B Term Loan to $242,401.




On
October 7, 2004, Group, as guarantor, and Viasystems as borrower, amended the
2003 Credit Agreement to provide for a new $265,000 term loan facility (the
“Replacement Tranche B Term Loan” or “term loan facility”). The Company used the
proceeds from the Replacement Tranche B Term Loan to extinguish the Original
Tranche B Term Loan. The Replacement Tranche B Term Loan matures on September
30, 2009.




Borrowings
under the Original Tranche B Term Loan bore interest at floating rates, which
varied according to the interest option selected by the Company. Borrowings
under the Replacement Tranche B Term Loan bear interest at floating rates, which
vary according to the interest option selected by the Company. Base rate terms
are described below:




**Original
      Tranche B Term**
      **Loan**
    **Replacement
      Tranche B Term**
      **Loan**The
      then effective base rate, plus
    4.25%
    3.25%The
      then effective euro currency base rate, plus
    5.25%
    4.25%





Revolving
credit loans bear interest, at the Company’s option, at the then effective base
rate plus 3.50% or the then effective eurocurrency base rate plus 4.50%. The
Company pays a commitment fee equal to 0.5% on the undrawn portion of the
commitments in respect of the 2003 Revolving Loans. The availability of
borrowings under the Revolver at December 31 is as follows:





**2003**
    
    
    **2004**Total
      available Revolver borrowing capacity
    
    $
    49,984
    
    $
    50,084Balance
      of total available for Letters of Credit
    
    $
    13,695
    
    $
    13,795





The
Company may optionally prepay the term loans from time to time in whole or in
part, without premium or penalty. At the Company’s option, the 2003 Revolving
Loans may be prepaid, and revolving credit commitments may be permanently
reduced, in whole or in part, at any time.




Viasystems’
obligations under the 2003 Credit Agreement are unconditionally and irrevocably
guaranteed by Group and each existing and future domestic subsidiary of
Viasystems. In addition, the 2003 Credit Agreement is secured by a perfected
first priority security interest in all of the capital stock of Viasystems and
each of its direct and indirect domestic subsidiaries and 65% of each first tier
foreign subsidiary of Viasystems and its domestic subsidiaries.




The 2003
Credit Agreement requires Viasystems to maintain certain conditions, affirmative
covenants and negative covenants (including financial covenants), including the
following financial covenants: (1) minimum interest coverage, (2) maximum total
leverage and (3) maximum capital expenditures.




The 2003
Credit Agreement also contains a number of covenants that, among other things,
generally restrict the ability of Group and its subsidiaries to: (a) incur
additional indebtedness; (b) create liens on assets; (c) incur guarantee
obligations; (d) enter into mergers, consolidations or amalgamations or
liquidate, wind up or dissolve; (e) dispose of assets; (f) pay dividends, make
payment on account of, or set apart assets for, a sinking or analogous fund or
purchase, redeem, defease or retire capital stock; (g) make capital
expenditures; (h) make optional repurchases of subordinated debt or modify terms
of preferred stock; (i) make advances, loans, extensions of credit, capital
contributions to, or purchases of any stock, bonds, notes, debentures or other
securities; (j) engage in certain transactions with affiliates; and (k) enter
into certain sale and leaseback transactions.








43




The 2003
Credit Agreement contains customary events of default including: (a) failure to
pay principal on any loan when due or any interest or other amount that becomes
due within five days after the due date thereof; (b) any representation or
warranty made or deemed made is incorrect in any material respect on or as of
the date made or deemed made; (c) the default in the performance of negative
covenants; (d) a default in the performance of other covenants or agreements for
a period of thirty days; (e) default in other indebtedness or guarantee
obligations with a principal amount in excess of $20,000 beyond the period of
grace; (f) events of insolvency; (g) ERISA events; and (h) other customary
events of default for facilities similar to the 2003 Credit
Agreement.




Viasystems
must prepay the term loan facility and reduce the commitments under the
revolving credit facility by the following amounts (subject to certain
exceptions):




·
    an
      amount equal to 100% of the net proceeds of any incurrence of indebtedness
      by Viasystems or any of its subsidiaries;




·
    an
      amount equal to 75% of the net proceeds of any equity issuances (other
      than (1) equity of the Company issued in connection with incentive plans
      and (2) common equity infusions from certain existing equity holders and
      their respective affiliates) by the Company or any of its
      subsidiaries;




·
    an
      amount equal to 100% of the net proceeds of any sale or other disposition
      by Viasystems or any of its subsidiaries of any material assets, except
      for (1) the sale of inventory or obsolete or worn-out property in the
      ordinary course of business, (2) the proceeds of certain specified asset
      sales, (3) transfers resulting from casualty or condemnation and (4) other
      customary exceptions; and




·
    if
      Viasystems’ cash and cash equivalents on hand as of December 31 of each
      year (commencing with December 31, 2003) exceeds certain amounts, an
      amount equal to the lesser of (1) 50% of excess cash flow and (2) the
      amount of cash and cash equivalents on hand as of such date in excess of
      $87.5 million.




The
lenders under the 2003 Credit Agreement will apply each mandatory prepayment to
any outstanding borrowings under the term loan facility. Once Viasystems pays
all outstanding borrowings under the term loan facility, it must cash
collateralize the letters of credit and permanently reduce the commitments in
respect of the revolving credit facility.




On March
19, 2003, the Company executed a first amendment to the 2003 Credit Agreement.
The primary purpose of this amendment was to get clearer definitions on specific
items.




On
December 3, 2003, the Company executed a second amendment to the 2003 Credit
Agreement. Among other provisions, the amendment defined uses of the $200,000
Senior Subordinated Notes due 2011 and amended certain financial condition
covenants.




Borrowings
under credit agreements bear interest at floating rates, which vary according to
the interest option the Company selected. The weighted average interest rate on
outstanding borrowings under the 2003 Credit Agreement was 6.6% for both years
ended December 31, 2003 and 2004.


On March
21, 2005, Group as guarantor, and Viasystems, as borrower, amended the 2003
Credit Agreement to amend certain covenants under the credit agreement. The
amendment modifies the definition of earnings before interest, taxes,
depreciation and amortization to exclude the operating losses and cash
restructuring cost up to $26,100 related to the closure of the Company’s western
world PCB fabrication facilities. The amendment further allows the Company to
fund the cash costs of the closures.




***Senior
Subordinated Notes due 2011***





In
December 2003, Viasystems completed an offering of $200,000 of 10 1/2% Senior
Subordinated Notes due 2011 (the 2011 Notes).




Interest
on the 2011 Notes is due semiannually. The 2011 Notes may be redeemed at any
time prior to January 15, 2008 at the redemption price of 100% plus a
“make-whole” premium (as defined). In the event of an Initial Public Offering
(as defined), 35% of the 2011 Notes may be redeemed at any time prior to January
15, 2007 at the






44




redemption price of 110.5%, plus accrued and unpaid
interest, if any, to the redemption date. In the event of a Change in Control
(as defined), the 2011 Notes may be redeemed at a redemption price of 101%, plus
accrued and unpaid interest.




The
indenture governing the 2011 Notes contains restrictive covenants which, among
other things, limit the ability (subject to exceptions) of Viasystems and its
Guarantors (as defined) to: (a) incur additional debt; (b) pay dividends or
distributions on, or redeem or repurchase, its capital stock; (c) create certain
liens without securing the notes; (d) make investments; (e) engage in
transactions with affiliates; (f) transfer or sell assets; (g) guarantee debt;
(h) restrict dividends or other payments to the Company or any Restricted
Subsidiaries (as defined); (i) consolidate, merge or transfer all or
substantially all of its assets and the assets of its subsidiaries; and (j)
engage in unrelated businesses.




***Department
of Trade and Industry Notes***


In
conjunction with the Company’s plan of reorganization approved by the Bankruptcy
Court, a £12 million (approximately $18 million) loan guaranteed by the Company
was cancelled and in exchange the Department of Trade and Industry (the DTI)
received a note in an amount equal to £9.0 million with interest payable
semi-annually in cash on a current basis at an annual interest rate of three
percent for periods up to September 30, 2008 and at an annual interest rate
equal to the Bank of England Base Rate plus two percent for periods thereafter
and principal payable from December 31, 2008 through December 31, 2010. In May
2004, the DTI Note was discharged in full as a result of proceeds received by
the noteholder in connection with the liquidation of Viasystems Tyneside
Limited, resulting in a reorganization expense reversal of
$9,798.




**9.
Guarantor Subsidiaries**




The 2011
Notes are fully and unconditionally (as well as jointly and severally)
guaranteed on an unsecured, senior subordinated basis by each subsidiary of
Viasystems other than its foreign subsidiaries. Each of the guarantor
subsidiaries and non-guarantor subsidiaries is wholly owned by the
Company.




The
following condensed consolidating financial statements of the Company include
the accounts of the Company, the combined accounts of the guarantor subsidiaries
and the combined accounts of the non-guarantor subsidiaries. Given the size of
the non-guarantor subsidiaries relative to the Company on a consolidated basis,
separate financial statements of the respective guarantor subsidiaries are not
presented because management has determined that such information is not
material in assessing the guarantor subsidiaries.







45





**Balance
Sheet as of December 31, 2003 (Restated)**




****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,
      Inc.**
      **Consolidated****ASSETS**
      Cash
      and cash equivalents
    
    $
    993
    
    $
    38,236
    
    $
    23,447
    
    $
    —
    
    $
    62,676Accounts
      receivable, net allowance for doubtful accounts
    
    
    —
    
    
    55,267
    
    
    80,111
    
    
    —
    
    
    135,378Inventories
    
    
    —
    
    
    27,279
    
    
    60,465
    
    
    —
    
    
    87,744Other
      current assets
    
    
    446
    
    
    12,174
    
    
    25,384
    
    
    —
    
    
    38,004Total
      current assets
    
    
    1,439
    
    
    132,956
    
    
    189,407
    
    
    —
    
    
    323,802Property,
      plant and equipment, net
    
    
    —
    
    
    5,765
    
    
    207,407
    
    
    —
    
    
    213,172Investment
      in subsidiaries
    
    
    230,060
    
    
    (297,325
    )
    
    —
    
    
    67,265
    
    
    —Other
      assets
    
    
    (41,988
    )
    
    83,943
    
    
    115,406
    
    
    —
    
    
    157,361Total
      assets
    
    $
    189,511
    
    $
    (74,661
    )
    $
    512,220
    
    $
    67,265
    
    $
    694,335**LIABILITIES
      AND STOCKHOLDER’S EQUITY (DEFICIT)**Current
      maturities of long-term debt
    
    $
    —
    
    $
    172
    
    $
    771
    
    $
    —
    
    $
    943Accounts
      payable
    
    
    —
    
    
    33,085
    
    
    108,457
    
    
    —
    
    
    141,542Accrued
      and other liabilities
    
    
    5,320
    
    
    42,869
    
    
    21,555
    
    
    —
    
    
    69,744Total
      current liabilities
    
    
    5,320
    
    
    76,126
    
    
    130,783
    
    
    —
    
    
    212,229Long-term
      debt, less current maturities
    
    
    454,927
    
    
    373
    
    
    —
    
    
    —
    
    
    455,300Other
      non-current liabilities
    
    
    (4,215
    )
    
    6,374
    
    
    22,167
    
    
    —
    
    
    24,326Intercompany
      (receivable)/payable
    
    
    (264,180
    )
    
    (393,719
    )
    
    657,899
    
    
    —
    
    
    —Total
      liabilities
    
    
    191,852
    
    
    (310,846
    )
    
    810,849
    
    
    —
    
    
    691,855Stockholder’s
      equity (deficit)
    
    
    11,867
    
    
    230,060
    
    
    (297,325
    )
    
    67,265
    
    
    11,867Accumulated
      other comprehensive income (loss)
    
    
    (14,208
    )
    
    6,125
    
    
    (1,304
    )
    
    —
    
    
    (9,387
    )Total
      liabilities and stockholder’s equity (deficit)
    
    $
    189,511
    
    $
    (74,661
    )
    $
    512,220
    
    $
    67,265
    
    $
    694,335







**Balance
Sheet as of December 31, 2004**




****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,
      Inc.**
      **Consolidated****ASSETS**
      Cash
      and cash equivalents
    
    $
    10
    
    $
    80,256
    
    $
    32,625
    
    $
    —
    
    $
    112,891Accounts
      receivable, net of allowance for doubtful accounts
    
    
    —
    
    
    45,110
    
    
    95,508
    
    
    —
    
    
    140,618Inventories
    
    
    —
    
    
    42,548
    
    
    61,356
    
    
    —
    
    
    103,904Other
      current assets
    
    
    (7,764
    )
    
    11,866
    
    
    10,705
    
    
    —
    
    
    14,807Total
      current assets
    
    
    (7,754
    )
    
    179,780
    
    
    200,194
    
    
    —
    
    
    372,220Property,
      plant and equipment, net
    
    
    245
    
    
    5,681
    
    
    227,838
    
    
    —
    
    
    233,764Investment
      in subsidiaries
    
    
    219,693
    
    
    (260,414
    )
    
    —
    
    
    40,721
    
    
    —Other
      assets
    
    
    (21,797
    )
    
    72,845
    
    
    93,377
    
    
    —
    
    
    144,425Total
      assets
    
    $
    190,387
    
    $
    (2,108
    )
    $
    521,409
    
    $
    40,721
    
    $
    750,409**LIABILITIES
      AND STOCKHOLDER’S EQUITY (DEFICIT)**Current
      maturities of long-term debt
    
    $
    2,650
    
    $
    188
    
    
    91
    
    $
    —
    
    $
    2,929Accounts
      payable
    
    
    —
    
    
    35,617
    
    
    115,630
    
    
    —
    
    
    151,247Accrued
      and other liabilities
    
    
    9,842
    
    
    30,412
    
    
    33,225
    
    
    —
    
    
    73,479Total
      current liabilities
    
    
    12,492
    
    
    66,217
    
    
    148,946
    
    
    —
    
    
    227,655Long-term
      debt, less current maturities
    
    
    462,350
    
    
    185
    
    
    91
    
    
    —
    
    
    462,626Other
      non-current liabilities
    
    
    (22,880
    )
    
    7,061
    
    
    19,413
    
    
    —
    
    
    3,594Intercompany
      (receivable)/ payable
    
    
    (316,496
    )
    
    (319,023
    )
    
    635,519
    
    
    —
    
    
    —Total
      liabilities
    
    
    135,466
    
    
    (245,560
    )
    
    803,969
    
    
    —
    
    
    693,875Stockholder’s
      equity (deficit)
    
    
    70,368
    
    
    219,693
    
    
    (260,414
    )
    
    40,721
    
    
    70,368Accumulated
      other comprehensive income (loss)
    
    
    (15,447
    )
    
    23,759
    
    
    (22,146
    )
    
    —
    
    
    (13,834
    )Total
      liabilities and stockholder’s equity (deficit)
    
    $
    190,387
    
    $
    (2,108
    )
    $
    521,409
    
    $
    40,721
    
    $
    750,409










46





**Income
Statement as of December 31, 2002 (Restated)**






****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,
      Inc.**
      **Consolidated**Net
      sales
    
    $
    —
    
    $
    427,833
    
    $
    483,932
    
    $
    (47,718
    )
    $
    864,047Operating
      expenses:
    
    
    —Cost
      of goods sold
    
    
    —
    
    
    386,265
    
    
    359,255
    
    
    (47,718
    )
    
    697,802Selling,
      general and administrative
    
    
    11,179
    
    
    23,297
    
    
    53,684
    
    
    —
    
    
    88,160Depreciation
    
    
    281
    
    
    8,512
    
    
    65,428
    
    
    —
    
    
    74,221Amortization
    
    
    213
    
    
    350
    
    
    15,781
    
    
    —
    
    
    16,344Restructuring
      and impairment charges
    
    
    639,059
    
    
    (96,316
    )
    
    (490,046
    )
    
    —
    
    
    52,697Goodwill
      impairment
    
    
    —
    
    
    13,214
    
    
    23,496
    
    
    —
    
    
    36,710Loss
      on dispositions of businesses, net
    
    
    —
    
    
    41,776
    
    
    43,755
    
    
    —
    
    
    85,531Operating
      (loss) income
    
    
    (650,732
    )
    
    50,735
    
    
    412,579
    
    
    —
    
    
    (187,418
    )Other
      expenses (income):Interest
      income expense
    
    
    71,164
    
    
    (31,059
    )
    
    41,793
    
    
    —
    
    
    81,898Amortization
      of deferred financing costs
    
    
    4,930
    
    
    —
    
    
    25
    
    
    —
    
    
    4,955Reorganization
      expenses
    
    
    22,537
    
    
    —
    
    
    —
    
    
    —
    
    
    22,537Other
      expense (income), net
    
    
    (10,920
    )
    
    —
    
    
    10,020
    
    
    —
    
    
    (900
    )Equity
      earnings (loss) in subsidiaries
    
    
    452,590
    
    
    367,637
    
    
    —
    
    
    (820,227
    )
    
    —Income
      (loss) before income taxes
    
    
    (285,853
    )
    
    449,431
    
    
    360,741
    
    
    (820,227
    )
    
    (295,908
    )Income
      taxes (benefit)
    
    
    10,055
    
    
    (3,159
    )
    
    (6,896
    )
    
    —
    
    
    —Net
      (loss) income
    
    $
    (295,908
    )
    $
    452,590
    
    $
    367,637
    
    $
    (820,227
    )
    $
    (295,908
    )




**Income
Statement as of December 31, 2003 (Restated)**




****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,
      Inc.**
      **Consolidated**Net
      sales
    
    $
    —
    
    $
    328,641
    
    $
    488,632
    
    $
    (65,790
    )
    $
    751,483Operating
      expenses:Cost
      of goods sold
    
    
    —
    
    
    293,892
    
    
    369,444
    
    
    (65,790
    )
    
    597,546Selling,
      general and administrative
    
    
    267
    
    
    30,085
    
    
    33,767
    
    
    —
    
    
    64,119Stock
      compensation expense
    
    
    1,383
    
    
    —
    
    
    —
    
    
    —
    
    
    1,383Depreciation
    
    
    —
    
    
    3,406
    
    
    62,664
    
    
    —
    
    
    66,070Amortization
    
    
    195
    
    
    —
    
    
    2,870
    
    
    —
    
    
    3,065Restructuring
      and impairment charges
    
    
    2,089
    
    
    15,201
    
    
    48,909
    
    
    —
    
    
    66,199Goodwill
      impairment
    
    
    —
    
    
    (155
    )
    
    22,852
    
    
    —
    
    
    22,697Loss
      (gain) on dispositions of businesses, net
    
    
    —
    
    
    114
    
    
    1,112
    
    
    —
    
    
    1,226Operating
      loss
    
    
    (3,934
    )
    
    (13,902
    )
    
    (52,986
    )
    
    —
    
    
    (70,822
    )Other
      expenses (income):Interest
      income expense net
    
    
    22,621
    
    
    (31,115
    )
    
    38,223
    
    
    —
    
    
    29,729Amortization
      of deferred financing costs
    
    
    104
    
    
    —
    
    
    —
    
    
    —
    
    
    104Reorganization
      expenses
    
    
    55,255
    
    
    —
    
    
    —
    
    
    —
    
    
    55,255Loss
      from debt forgiveness
    
    
    1,517
    
    
    —
    
    
    —
    
    
    —
    
    
    1,517Other
      expense (income), net
    
    
    16,627
    
    
    28,850
    
    
    (38,595
    )
    
    —
    
    
    6,882Equity
      earnings (loss) in subsidiaries
    
    
    (49,517
    )
    
    (47,046
    )
    
    —
    
    
    96,563
    
    
    —Income
      (loss) before income taxes
    
    
    (149,575
    )
    
    (58,683
    )
    
    (52,614
    )
    
    96,563
    
    
    (164,309
    )Income
      taxes (benefit)
    
    
    14,734
    
    
    (9,166
    )
    
    (5,568
    )
    
    —
    
    
    —Net
      (loss) income
    
    $
    (164,309
    )
    $
    (49,517
    )
    $
    (47,046
    )
    $
    96,563
    
    $
    (164,309
    )







**Income
Statement as of December 31, 2004**




****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,
      Inc.**
      **Consolidated**Net
      sales
    
    $
    —
    
    $
    407,551
    
    $
    599,020
    
    $
    (105,208
    )
    $
    901,363Operating
      expenses:Cost
      of goods sold
    
    
    —
    
    
    357,043
    
    
    476,414
    
    
    (105,208
    )
    
    728,249Selling,
      general and administrative
    
    
    442
    
    
    32,564
    
    
    44,971
    
    
    —
    
    
    77,977Stock
      compensation expense
    
    
    3,837
    
    
    —
    
    
    —
    
    
    —
    
    
    3,837Depreciation
    
    
    —
    
    
    1,588
    
    
    46,644
    
    
    —
    
    
    48,232Amortization
    
    
    124
    
    
    —
    
    
    1,446
    
    
    —
    
    
    1,570Restructuring
      and impairment charges
    
    
    1,374
    
    
    508
    
    
    (869
    )
    
    —
    
    
    1,013Goodwill
      impairment
    
    
    —
    
    
    —
    
    
    —
    
    
    —
    
    
    —Loss
      (gain) on dispositions of businesses, net
    
    
    —
    
    
    300
    
    
    (765
    )
    
    —
    
    
    (465
    )Operating
      loss
    
    
    (5,777
    )
    
    15,548
    
    
    31,179
    
    
    —
    
    
    40,950Other
      expenses (income):Interest
      income expense net
    
    
    30,225
    
    
    (31,014
    )
    
    38,607
    
    
    —
    
    
    37,818Amortization
      of deferred financing costs
    
    
    1,305
    
    
    —
    
    
    —
    
    
    —
    
    
    1,305Reorganization
      expenses (reversals)
    
    
    (9,776
    )
    
    —
    
    
    —
    
    
    —
    
    
    (9,776
    )Other
      expense (income), net
    
    
    1,570
    
    
    80,297
    
    
    (82,854
    )
    
    —
    
    
    (987
    )Equity
      earnings (loss) in subsidiaries
    
    
    (10,367
    )
    
    36,911
    
    
    —
    
    
    (26,544
    )
    
    —Income
      (loss) before income taxes
    
    
    (39,468
    )
    
    3,176
    
    
    75,426
    
    
    (26,544
    )
    
    12,590Income
      taxes (benefit)
    
    
    (45,216
    )
    
    13,543
    
    
    38,515
    
    
    —
    
    
    6,842Net
      (loss) income
    
    $
    5,748
    
    $
    (10,367
    )
    $
    36,911
    
    $
    (26,544
    )
    $
    5,748







47




**Statement
of Cash Flows as of December 31, 2002 (Restated)**




****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,
      Inc.**
      **Consolidated**Net
      cash provided by (used in) operating activities
    
    $
    (16,200
    )
    $
    6,565
    
    $
    18,410
    
    $
    —
    
    $
    8,775Net
      cash provided by (used in) investing activities
    
    
    —
    
    
    (1,570
    )
    
    (22,218
    )
    
    —
    
    
    (23,788
    )Net
      cash provided by (used in) financing activities
    
    
    73,664
    
    
    (6,724
    )
    
    (31
    )
    
    —
    
    
    66,909Effect
      of exchange rate changes on cash and cash
      equivalents
    
    
    —
    
    
    —
    
    
    (3,038
    )
    
    —
    
    
    (3,038
    )Net
      change in cash and cash equivalent
    
    $
    57,464
    
    $
    (1,729
    )
    $
    (6,877
    )
    $
    —
    
    $
    48,858




**Statement
of Cash Flows as of December 31, 2003 (Restated)**




****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total
      Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,**
      **Inc.**
      **Consolidated**Net
      cash provided by (used in) operating activities
    
    $
    (46,735
    )
    $
    60,661
    
    $
    34,484
    
    $
    —
    
    $
    48,410Net
      cash provided by (used in) investing activities
    
    
    —
    
    
    (23,075
    )
    
    (23,949
    )
    
    —
    
    
    (47,024
    )Net
      cash provided by (used in) financing activities
    
    
    (15,082
    )
    
    (142
    )
    
    221
    
    
    —
    
    
    (15,003
    )Effect
      of exchange rate changes on cash and cash
      equivalents
    
    
    —
    
    
    —
    
    
    (6,767
    )
    
    —
    
    
    (6,767
    )Net
      change in cash and cash equivalents
    
    $
    (61,817
    )
    $
    37,444
    
    $
    3,989
    
    $
    —
    
    $
    (20,384
    )
 
  **Statement
of Cash Flows as of December 31, 2004**
  ****
    
    
    Viasystems,
      Inc.
    
    
    **Total**
      **Guarantor**
    
    
    **Total**
      **Non-**
      **Guarantor**
    
    
    **Eliminations**
    
    
    **Viasystems,**
      **Inc.**
      **Consolidated**Net
      cash provided by (used in) operating activities
    
    $
    (983
    )
    $
    (13,366
    )
    $
    80,266
    
    $
    —
    
    $
    65,917Net
      cash provided by (used in) investing activities
    
    
    —
    
    
    (1,050
    )
    
    (70,883
    )
    
    —
    
    
    (71,933
    )Net
      cash provided by (used in) financing activities
    
    
    —
    
    
    56,436
    
    
    (32
    )
    
    —
    
    
    56,404Effect
      of exchange rate changes on cash and cash
      equivalents
    
    
    —
    
    
    —
    
    
    (173
    )
    
    —
    
    
    (173
    )Net
      change in cash and cash equivalents
    
    $
    (983
    )
    $
    42,020
    
    $
    9,178
    
    $
    —
    
    $
    50,215


**10.**  **Prepackaged
Plan of Reorganization**





***Summary
of the Plan***





On
October 1, 2002, Group and Viasystems filed a joint prepackaged plan of
reorganization, as modified on January 2, 2003 (the Plan), pursuant to a
voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code (the
Bankruptcy Code) in the United States Bankruptcy Court for the Southern District
of New York (the Bankruptcy Court). Other than Viasystems, none of Group’s
subsidiaries filed for protection under the Bankruptcy Code.




On
January 14, 2003, the Bankruptcy Court entered an order approving and confirming
the Plan. Subsequently, on January 31, 2003, the Plan became effective and in
accordance with the terms and conditions of the Plan:




·
    Viasystems’
      outstanding Credit Agreement debt was reduced by $77.4 million from
      proceeds of the Rights Offering and Exchange described below and was
      restructured to provide for an aggregate term loan facility of $447.9
      million and a revolving facility of $51.3 million with a letter of credit
      subfacility of $15.0 million (the Exit
Facility);




·
    Viasystems’
      Senior Unsecured Notes were cancelled, and in exchange the holders thereof
      received (a) approximately 1.2 million shares of New Junior Preferred
      Stock (as defined below) having a liquidation preference of $120.1 million
      and (b) approximately 1.6 million shares of New Common Stock (as defined
      below);




·
    Claims
      held by the Department of Trade and Industry of the United Kingdom (the
      DTI), pursuant to a guaranty made by Viasystems with respect to a £12.0
      million loan made by the DTI to Viasystems Tyneside Limited (VTL), were
      cancelled, and in exchange the DTI received a note (the DTI Note) in an
      amount equal






48




to
      £9.0 million with interest payable semi-annually in cash on a current
      basis at an annual interest rate of three percent for periods up to
      September 30, 2008 and at an annual interest rate equal to the Bank of
      England Base Rate plus two percent for periods thereafter and principal
      payable from December 31, 2008 through December 31, 2010 (provided all
      amounts due and owing under the Exit Facility are not paid in full prior
      to October 1, 2008); provided, however, proceeds received by the DTI
      pursuant to the liquidation of VTL were used to reduce the outstanding
      principal under the DTI Note;


·
    Viasystems’
      Subordinated Notes in the principal amount of $500.0 million were
      cancelled, and in exchange the holders thereof received 17.2 million
      shares of the New Common Stock;




·
    Claims
      held by the general unsecured creditors of Group were cancelled, and in
      exchange such holders were given the right to receive the lesser of (a)
      its pro rata share of 55,540 shares of the New Common Stock and (b) shares
      of the New Common Stock having a value equal to the amount of such
      holder’s claim;




·
    Claims
      held by the general unsecured creditors of Viasystems were cancelled, and
      in exchange the holders thereof will receive non-transferable subordinated
      promissory notes in amounts equal to 100% of such claims with interest
      payable semi-annually in cash on a current basis at an annual interest
      rate of three percent for periods up to September 30, 2008 and at an
      annual interest rate equal to the prime commercial lending rate per annum
      published in The Wall Street Journal, New York City edition, for periods
      thereafter and principal payable from December 31, 2008 through December
      31, 2010;




·
    The
      Series B Preferred Stock of Group was cancelled, and in exchange the
      holders thereof received warrants (the New Warrants) to purchase
      approximately 1.4 million shares of the New Common Stock at a purchase
      price of $25.51 per share;




·
    The
      existing common stock, options and warrants of Group were cancelled, and
      the holders thereof did not receive any distribution under the Plan;
      and




·
    Group
      adopted an incentive option plan authorizing the issuance of stock options
      to purchase up to approximately 2.8 million shares of New Common Stock to
      employees of Group and its subsidiaries, and, on the effective date of the
      reorganization, issued options to acquire approximately 2.2 million of
      such shares to employees at an exercise price of $12.63 per share. The
      value of these shares was determined by a third party, on the basis of
      total enterprise value of approximately $828
million.




In
addition, under the terms of the plan of reorganization, (1) Group issued rights
to purchase approximately 4.3 million shares of Group class B senior convertible
preferred stock at an aggregate purchase price of $53.7 million to HMTF, certain
affiliates of GSCP (NJ), Inc. (GSC), TCW Share Opportunity Fund III, L.P., and
other holders of the Subordinated Notes (the Rights Offering) and (2) $23.7
million of bank debt outstanding under the 2002 Credit Agreement held by HMTF
was exchanged for approximately 1.9 million shares of New Common Stock.
Affiliates of HMTF, certain affiliates of GSC, and TCW Share Opportunity Fund
III, L.P. severally committed to purchase all of the Group class B senior
convertible preferred stock offered in the Rights Offering. In consideration for
their commitment, the parties received an aggregate fee of approximately $1.0
million. All proceeds of the Rights Offering were applied to reduce the
outstanding indebtedness under the 2003 Credit Agreement.




The
reorganization did not qualify for “Fresh-Start” accounting as the holders of
existing voting shares immediately before confirmation received more than 50% of
the voting shares of the emerged entity due to the exchange of debt securities
held by such holders and their participation in the Rights Offering described
above.




On
January 31, 2003, in accordance with the terms and conditions of the Plan, Group
issued approximately 20.7 million shares of common stock of Group (the New
Common Stock), approximately 4.3 million shares of senior convertible preferred
stock of Group (the New Senior Convertible Preferred Stock), approximately 1.2
million shares of junior preferred stock of Group (the New Junior Preferred
Stock), New Warrants to purchase approximately 1.4 million shares of New Common
Stock of Group, and options under the Incentive Option Plan to purchase
approximately 2.2 million shares of New Common Stock. All the agreements and
other documents evidencing the previously outstanding rights of any holder of an
equity interest in Group, including options and warrants to purchase equity
interest, were cancelled. Additionally, all of the agreements and other
documents






49




evidencing the rights of any holder of a claim
against Viasystems or Group in respect to the Senior Notes and the Subordinated
Notes of Viasystems were cancelled.




***Liabilities
Subject to Compromise***





The
Company incurred reorganization expenses as follows:





****
    
    December
      31,**2002**
    
    
    **2003**Professional
      and bank fees
    
    $
    22,537
    
    $
    4,391Insurance
      of a promissory note to the DTI, net*
    
    
    —
    
    
    7,735Write-off
      of deferred financing fees, discount and premium related to debt
      forgiveness*
    
    
    —
    
    
    42,593Other
      reorganization expenses*
    
    
    —
    
    
    536Total
    
    $
    22,537
    
    $
    55,255




______________


*
Non-cash item.





**11.
Restructuring and Impairment Charges**





In light
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, the Company initiated restructuring activities during 2001 to adjust
its cost position compared to anticipated levels of business. The Company also
reviewed the carrying value of the related assets. These actions resulted in
plant shutdowns and downsizings as well as asset impairments. These actions
continued through 2004. The following table summarizes the restructuring and
impairment charges taken during the years ended December 31:





****
    
    Charges
      (Reversals)****
    
    
    **2002**
    
    
    **2003**
    
    
    **2004**Personnel
      and severance
    
    $
    11,458
    
    $
    827
    
    $
    2,057Lease
      and other contractual commitments
    
    
    7,701
    
    
    —
    
    
    (5,861
    )Other
    
    
    1,347
    
    
    —
    
    
    253Asset
      impairments
    
    
    32,191
    
    
    65,372
    
    
    4,564Total
    
    $
    52,697
    
    $
    66,199
    
    $
    1,013





***2002
Restructuring and Impairment Charges***





During
the year ended December 31, 2002, the Company completed the following
restructuring activities:




·
    Closure
      of its remaining San Jose, California printed circuit board assembly
      facility;




·
    Closure
      of its Granby, Quebec printed circuit board fabrication
      facility;




·
    Closure
      of its regional headquarters facilities in Richmond, Virginia and London,
      England; and




·
    Other
      small workforce reductions at other European and North American EMS
      facilities.




During
2002, the Company also reversed restructuring charges totaling $6,194 primarily
related to accruals no longer needed due to the sales of certain businesses as
well as true-ups to previously estimated amounts.




In
addition to and in connection with the above 2002 restructuring activity, the
Company evaluated the carrying amount of certain long-lived assets for
impairment. The Company’s evaluation identified the long-lived assets related to
its Juarez, Mexico and San Jose, California facilities were impaired as the
carrying amount of these assets exceeded the undiscounted cash flows expected to
be generated by these assets. Accordingly, the Company had these assets
appraised based on prices for similar assets in use, resulting in an impairment
charge totaling $9,024.








50




In
connection with the closure of the Company’s Granby, Quebec printed circuit
board fabrication facility, during the fourth quarter of 2002, the Company
engaged a broker to sell the related building. As such, the Company recorded an
impairment charge of $1,735 to write down the building to its expected fair
value.




Also
during the fourth quarter of 2002, the Company began marketing for sale its
Portland, Oregon printed circuit board assembly facility. As a result, the
Company wrote down the net assets to their expected fair value of $1,500
resulting in an impairment charge of $21,432. Subsequent to December 31, 2002,
the Company sold its entire equity interest of Viasystems Portland, Inc. for a
consideration of $1,370, consisting of $370 in cash and a $1,000 secured
promissory note resulting in a loss on disposition of assets of $1,226 in
2003.




To
summarize, in 2002, the Company either closed or disposed of fourteen facilities
(Milford, Massachusetts; San Jose, California; Seattle, Washington;
Ballynahinch, United Kingdom; Columbus, Ohio; Sao Paulo, Brazil; Granby, Quebec;
Boldon, United Kingdom; Portland, Oregon; Rouen, France; Terni, Italy;
Spartanburg, South Carolina; Skive, Denmark; and the Plastics division of
NC&S located in Coventry, United Kingdom) and took a restructuring charge of
$37,529. Additionally, in 2002 the Company either downsized or incurred
impairment charges in respect of five facilities (Juarez, Mexico; Milwaukee,
Wisconsin; Coventry, United Kingdom; Richmond, Virginia; and St. Louis,
Missouri) at a cost of $15,168.




In
connection with the closure of the Granby, Quebec facility and sale of the
Portland, Oregon facility, the Company scrapped inventory of $1,357 and sold
inventory written off in 2001 for a gain of $118, resulting in a net charge to
cost of goods sold of $1,239 in 2002.




***2003
Restructuring and Impairment Charges***





During
the quarter ended September 30, 2003, the Company recorded a personnel and
severance restructuring charge of $827 related to the downsizing of the
Montreal, Quebec printed circuit board fabrication facilities.




Over the
past several years, beginning in 2001, the telecommunications and computer
markets have experienced a significant economic downturn. Due to this downturn
the Company has closed and restructured numerous plants under the belief that
this downturn was temporary and the cost structure had to be reduced in light of
the market’s decreased demands. To compound the negative impact of such
downturn, the U.S. dollar (“USD”) weakened during the second half of 2003. This
weakening caused the cost of certain local currencies (primarily the Canadian
dollar and the Euro) to increase. As the Company’s costs are primarily in local
currencies and their sales are primarily in USD, its cash flows have been
negatively impacted.




During
the quarter ended June 30, 2003, an impairment charge of $6,588 was recorded to
write down the assets held for sale related to the Richmond, Virginia printed
circuit board fabrication facility, to an offer price received by the Company
for the property by a third party. This transaction ultimately failed to close.
The Company continues to actively market this property. As of December 31, 2004,
this facility is recorded as an other asset in the Company’s consolidated
balance sheet.




During
the quarter ended September 30, 2003, in connection with the closure of the
Granby, Quebec printed circuit board fabrication facility in 2002, the Company
also recorded an asset impairment charge of $358 to write down to fair value the
assets being held for sale related to the operation. The Company is actively
marketing this property.




During
the Company’s 2004 budgeting process conducted in the quarter ended December 31,
2003, the Company concluded that the cash flows at Echt, the Netherlands and
Montreal, Quebec would be impacted beyond the near term. In addition, due to
business conditions at the Company’s Milwaukee, Wisconsin facility, the Company
expected the facility to fail to generate meaningful, if any, cash flow in the
foreseeable future.




Based on
the Company’s future cash flow analysis prepared under SFAS No. 144, it was
determined that the fixed asset groupings at Echt, Montreal, and Milwaukee were
impaired. The Company utilized recent auction prices or appraisals for similar
equipment and buildings as a basis for the fair value of the individual pieces
of equipment and buildings. Accordingly, the fixed asset grouping at Echt,
Montreal, and Milwaukee were written down by $28,285, $12,305 and $8,612,
respectively.








51




***2004
Restructuring and Impairment Charges***





During
the quarter ended June 30, 2004, the Company reversed an $85 personnel accrual
and a $10 miscellaneous accrual for previous restructuring at its printed
circuit board fabrication facility located in Granby, Quebec. In addition, the
Company reversed a $6,069 restructuring accrual based on its release from an
operating lease contract of a closed business.




During
the quarter ended December 31, 2004, the Company completed the following
restructuring activities:




·
    Downsizing
      of the Montreal, Quebec printed circuit board fabrication facilities
      requiring the recognition of a personnel and severance charge of
      $81.




·
    Downsizing
      of the corporate offices requiring the recognition of a personnel and
      severance charge of $508.




·
    Downsizing
      of the Echt, the Netherlands printed circuit board fabrication facilities
      requiring the recognition of a personnel and severance charge of
      $1,553.




Throughout
the year ended December 31, 2004, the Company recognized $263 in restructuring
expense in connection with the upkeep of assets being held for sale related to
the closure of the Granby, Quebec printed circuit board fabrication facility in
2002. The Company is actively marketing this property. As of December 31, 2004,
this facility is recorded as an other asset in the Company’s consolidated
balance sheet. Additionally, the Company recognized $208 in restructuring
expense in connection with satisfying contractual commitments of the previously
closed Coventry, England manufacturing facility.




During
the Company’s 2005 budgeting process conducted in the quarter ended December 31,
2004, the Company concluded that the cash flows at Echt, the Netherlands and
Montreal, Quebec would be impacted beyond the near term. The expected future
cash flows of the facilities were reviewed under the provisions of SFAS No. 144
resulting in an impairment charge of $3,121 and $1,443 for Echt and Montreal,
respectively.




Below are
tables summarizing restructuring and impairment accruals and the related
activity as of and for the year ended December 31, 2002, 2003 and
2004:







****
    
    
    
    
    Year
      Ended
    **Cumulative******
    
    
    Balance
    
    **December
      31, 2002**
    **Drawdowns**
    
    **Balance******
    
    
    at
    
    
    
    **Cash**
    
    
    **Non-Cash**
    
    
    **at**12/31/01
    
    
    **Charges**
    
    
    **Reversals**
    
    
    **Total**
    
    
    **Payments**
    
    
    **Charges**
    
    
    **12/31/02**Restructuring
      Activities:Personnel
      and severance
    
    $
    7,570
    
    $
    12,751
    
    $
    (1,293
    )
    $
    11,458
    
    $
    (8,568
    )
    $
    —
    
    $
    10,460Lease
      and other contractual commitments
    
    
    7,343
    
    
    11,588
    
    
    (3,887
    )
    
    7,701
    
    
    (3,276
    )
    
    —
    
    
    11,768Other
    
    
    155
    
    
    2,361
    
    
    (1,014
    )
    
    1,347
    
    
    (1,021
    )
    
    —
    
    
    481Asset
      impairments
    
    
    —
    
    
    32,191
    
    
    —
    
    
    32,191
    
    
    —
    
    
    (32,191
    )
    
    —Total
      restructuring and impairment charges
    
    $
    15,068
    
    $
    58,891
    
    $
    (6,194
    )
    $
    52,697
    
    $
    (12,865
    )
    $
    (32,191
    )
    $
    22,709
 
  
 ****
    
    
    
    
    Year
      Ended
    **Cumulative**December
      31, 2003
    **Drawdowns******
    
    
    Balance
    
    
    
    
    
    
    **Restated**
    
    
    **Balance******
    
    
    at
    
    
    **Restated**
    
    
    
    
    
    **Restated**
    
    
    **Cash**
    
    
    **Non-Cash**
    
    
    **at**12/31/02
    
    
    **Charges**
    
    
    **Reversals**
    
    
    **Total**
    
    
    **Payments**
    
    
    **Charges**
    
    
    **12/31/03**Restructuring
      Activities:Personnel
      and severance
    
    $
    10,460
    
    $
    827
    
    $
    —
    
    $
    827
    
    $
    (7,211
    )
    $
    —
    
    $
    4,076Lease
      and other contractual commitments
    
    
    11,768
    
    
    —
    
    
    —
    
    
    —
    
    
    (2,208
    )
    
    —
    
    
    9,560Other
    
    
    481
    
    
    —
    
    
    —
    
    
    —
    
    
    (467
    )
    
    —
    
    
    14Asset
      impairments
    
    
    —
    
    
    65,372
    
    
    —
    
    
    65,372
    
    
    —
    
    
    (65,372
    )
    
    —Total
      restructuring and impairment charges
    
    $
    22,709
    
    $
    66,199
    
    $
    —
    
    $
    66,199
    
    $
    (9,886
    )
    $
    (65,372
    )
    $
    13,650
  
  52
 
 ****
    
    
    
    
    Year
      Ended
    **Cumulative******
    
    
    Balance
    
    **December
      31, 2004**
    **Drawdowns**
    
    **Balance******
    
    
    at
    
    
    
    **Cash**
    
    
    **Non-Cash**
    
    
    **at**12/31/03
    
    
    **Charges**
    
    
    **Reversals**
    
    
    **Total**
    
    
    **Payments**
    
    
    **Charges**
    
    
    **12/31/04**Restructuring
      Activities:Personnel
      and severance
    
    $
    4,076
    
    $
    2,142
    
    $
    (85
    )
    $
    2,057
    
    $
    (2,924
    )
    $
    —
    
    $
    3,209Lease
      and other contractual commitments
    
    
    9,560
    
    
    208
    
    
    (6,069
    )
    
    (5,861
    )
    
    (2,052
    )
    
    —
    
    
    1,647Other
    
    
    14
    
    
    263
    
    
    (10
    )
    
    253
    
    
    (267
    )
    
    —
    
    
    —Asset
      impairments
    
    
    —
    
    
    4,564
    
    
    —
    
    
    4,564
    
    
    —
    
    
    (4,564
    )
    
    —Total
      restructuring and impairment charges
    
    $
    13,650
    
    $
    7,177
    
    $
    (6,164
    )
    $
    1,013
    
    $
    (5,243
    )
    $
    (4,564
    )
    $
    4,856


The
restructuring and impairment charges were determined based on formal plans
approved by the Company’s management using the best information available to it
at the time. The amounts the Company may ultimately incur may change as the
balance of the plans are executed. Expected cash payout of the accrued expenses
is as follows:





**Year
      Ended December 31,**
    
    
    **Cash**
      **Payments**2005
    
    $
    3,6642006
    
    
    9362007
    
    
    256Total
    
    $
    4,856





***Identifiable
Intangibles Impairment***





In
connection with the Company’s 2003 annual impairment testing required by SFAS
No. 142, impairment was recognized on the Company’s intangible assets. When the
Company acquired Echt and Montreal, the excess purchase price was allocated to
goodwill, developed technologies and assembled workforce. Due to rapid
technological changes as well as strategic decisions to migrate from western
world manufacturing facilities to China-based manufacturing facilities, it
became apparent that the remaining developed technologies balances, of $4,430
for Montreal and $3,420 for Echt, were impaired and should be written
off.




As part
of acquiring numerous printed circuit board assembly facilities, the Company was
required to buy a license from the Lemelson Medical, Education & Research
Foundation, Limited Partnership which is required in the inspection process of
this product. This license was capitalized as an intangible and was being
amortized over its life. On January 26, 2004, a U.S. District Court in Las Vegas
ruled the 14 patents asserted by the Lemelson Partnership were invalid and
unenforceable. Therefore as part of this analysis, the Company wrote off $1,374
related to this license in 2003.




No
identifiable intangibles were deemed to be impaired during the annual impairment
testing required by SFAS No. 142.




**12.
Dispositions of Businesses**





In
connection with the continued economic downturn that led to the Company’s
restructuring and impairment activities, the Company evaluated alternatives to
plant closures and workforce reductions. As a result, the Company sold six
businesses, including its joint venture interest, during 2002. Also, during the
fourth quarter of 2002, the Company finalized the dispositions of assets at
several closed facilities. These actions resulted in net losses on dispositions
of assets totaling $85,531.




The
Company finalized the sale of the Portland, Oregon facility during December
2003. Upon completion of the transaction, the disposition resulted in a net loss
of $1,226.







53








Below are
tables summarizing the net loss on dispositions of businesses for the years
ended December 31, 2002, 2003 and 2004:





**Net
      Proceeds from**
    
    
    
    
    
    
    
    Net
      Proceeds from**Disposition**
    
    
    
    
    
    
    
    Disposition**Entity
      dispositions in 2002**
    
    
    **Disposition****Transaction**
    
    
    **Loss
      (Gain)**
      **On****Disposition**
    
    
    **Net
      Cash***
    
    
    **Notes**
    
    
    **Total**Viasystems
      Milford, Inc.
    
    
    Sale
    
    $
    28,580
    
    $
    (1,460
    )
    $
    500
    
    $
    (960
    )Viasystems
      Puerto Rico, Inc..
    
    
    Sale
    
    
    (152
    )
    
    1,996
    
    
    300
    
    
    2,296Plastics
      Division of Viasystems EMS UK Ltd.
    
    
    Sale
    
    
    (107
    )
    
    91
    
    
    —
    
    
    91Ballynahinch
      facility of Viasystems EMS UK Ltd.
    
    
    Sale
    
    
    (351
    )
    
    (1,000
    )
    
    —
    
    
    (1,000
    )Viasystems
      EMS — Italian Srl
    
    
    Sale
    
    
    (822
    )
    
    (1,819
    )
    
    —
    
    
    (1,819
    )JV
      equity interest in Raintherm Limited
    
    
    Sale
    
    
    (4,187
    )
    
    14,500
    
    
    —
    
    
    14,500AdministrativeViasystems
      EMS — France SARL
    
    
    Receivership
    
    
    24,245
    
    
    (6,314
    )
    
    —
    
    
    (6,314
    )Viasystems
      San Jose, Inc.
    
    
    Closure
    
    
    11,981
    
    
    (94
    )
    
    —
    
    
    (94
    )Columbus,
      Ohio facility of Viasystems Technologies
      Corp.,
      LLC.
    
    
    Closure
    
    
    1,215
    
    
    —
    
    
    —
    
    
    —Chips
      Acquisition Limited/PCB Investments Ltd.
    
    
    Waiving
      Of
      Notes
    
    
    25,129
    
    
    —
    
    
    —
    
    
    —Total
    
    
    
    
    $
    85,531
    
    $
    5,900
    
    $
    800
    
    $
    6,700
 
 
 ****
    
    
    
    
    
    
    
    Net
      Proceeds fromDisposition**Entity
      dispositions in 2003**
    
    
    **Disposition**
      **Transaction**
    
    
    **Loss
      On****Disposition**
    
    
    **Net
      Cash***
    
    
    **Notes**
    
    
    ******Total**Viasystems
      Portland, Inc.
    
    
    Sale
    
    $
    1,226
    
    $
    370
    
    $
    —
    
    $
    370Total
    
    
    
    
    $
    1,226
    
    $
    370
    
    $
    —
    
    $
    370
 
 
 ****
    
    
    
    
    
    
    
    Net
      Proceeds from****
    
    
    
    
    
    Loss
      (Gain)
    
    **Disposition****Entity
      dispositions in 2004**
    
    
    **Disposition**
      **Transaction**
    
    
    **On**
      **Disposition**
    
    
    **Net
      Cash***
    
    
    **Notes**
    
    
    **Total**Telecom
      Division of Viasystems EMS UK Ltd..
    
    
    Closure
    
    $
    (765
    )
    $
    111
    
    $
    —
    
    $
    111Viasystems
      Puerto Rico, Inc.
    
    
    Waiving
      Of
      Notes
    
    $
    300
    
    $
    —
    
    $
    300
    
    $
    300Total
    
    
    
    
    $
    (465
    )
    $
    111
    
    $
    300
    
    $
    411
 __________


* Cash
proceeds from sale, net of cash in the entity upon disposition and fees paid
related to transactions.





**13.
Commitments**





The
Company leases certain building and transportation and other equipment under
capital and operating leases. Included in property, plant and equipment as of
December 31, 2003 and 2004, were $932 and $1,671, respectively, of cost basis
and $217 and $1,030, respectively, of accumulated depreciation related to
equipment held under capital leases. Total rental expense under operating leases
was $7,608, $6,870 and $8,022 for the years ended December 31, 2002, 2003 and
2004, respectively. Future minimum lease payments under capital leases and
operating leases that have initial or remaining noncancelable lease terms in
excess of one year are as follows:





**Year
      Ended December 31,**
    
    
    **Capital**
    
    
    **Operating**2005
    
    $
    305
    
    $
    6,0172006
    
    
    277
    
    
    4,6432007
    
    
    7
    
    
    4,0092008
    
    
    —
    
    
    2,8102009
    
    
    —
    
    
    2,262Thereafter
    
    
    —
    
    
    2,506Total
    
    $
    589
    
    $
    22,247Less:
      Amounts representing interest
    
    
    34Capital
      lease obligations
    
    $
    555











54








**14.
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, such indemnification obligations are
immaterial.




The
Company 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 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 derived improper personal benefits.




The
Company has fully and unconditionally guaranteed the operating lease payments of
the Milwaukee, Wisconsin facility through the year 2010. The total maximum
payments from this guarantee is $8,558. As of December 31, 2004, no liability
related to this guarantee has been established.




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 the Company’s management, the
ultimate liabilities resulting from such lawsuits and claims will not have a
material adverse effect on the Company’s financial condition and results of
operations and cash flows.




The
Company believes it is in material compliance with applicable environmental laws
and regulations and that its environmental controls are adequate to address
existing regulatory requirements.




**15.
Income Taxes**





The
Company accounts for income taxes in accordance with the provisions of SFAS No.
109, *Accounting
for Income Taxes* . The
benefit for income taxes for the years ended December 31, 2002, 2003 and 2004,
consists of the following:




****
    
    
    ******2002**
    
    
    ******2003**
    
    
    **2004**Current:Federal
    
    $
    (6,592
    )
    $
    (3,784
    )
    $
    (7,553
    )State.
    
    
    1,038
    
    
    —
    
    
    —Foreign
    
    
    4,579
    
    
    4,989
    
    
    9,669(975
    )
    
    1,205
    
    
    2,116Deferred:Federal
    
    
    —
    
    
    —
    
    
    —State
    
    
    —
    
    
    —
    
    
    —Foreign
    
    
    975
    
    
    (1,205
    )
    
    4,726975
    
    
    (1,205
    )
    
    4,726$
    —
    
    $
    —
    
    
    6,842




Reconciliation
between the statutory income tax rate and effective tax rate is summarized
below:







****
    
    
    ******2002**
    
    
    ******2003**
    
    
    **2004**U.S.
      Federal statutory rate
    
    $
    (103,566
    )
    $
    (57,508
    )
    $
    4,406State
      taxes, net of Federal benefit
    
    
    (661
    )
    
    (4,561
    )
    
    (1,866
    )Foreign
      taxes in excess of U.S. statutory rate
    
    
    (7,273
    )
    
    (2,611
    )
    
    (9,936
    )Amortization
      of intangibles
    
    
    18,356
    
    
    (1,317
    )
    
    1,599Gain/(Loss)
      on investment in subsidiaries
    
    
    38,052
    
    
    (30,501
    )
    
    178,830Change
      in the valuation allowance for deferred tax assets.
    
    
    50,235
    
    
    130,637
    
    
    (308,339
    )Cancellation
      of indebtedness income
    
    
    —
    
    
    8,649
    
    
    —Capital
      losses
    
    
    —
    
    
    (39,325
    )
    
    129,250Foreign
      tax credit carry forward
    
    
    —
    
    
    —
    
    
    (3,678
    )Non-deductible
      items
    
    
    —
    
    
    —
    
    
    7,032Deemed
      dividend inclusions in US income
    
    
    19,900
    
    
    —
    
    
    16,111Branch
      and partnership loss
    
    
    (15,384
    )
    
    —
    
    
    (3,937
    )Other
    
    
    341
    
    
    (3,463
    )
    
    (2,630
    )$
    —
    
    $
    —
    
    $
    6,842








55





The tax
effects of significant temporary differences representing deferred tax assets
and liabilities at December 31 are as follows:







**2002**
    
    
    **2003**
    
    
    **2004**Deferred
      tax assets:Accrued
      liabilities not yet deductible
    
    $
    16,763
    
    $
    18,779
    
    $
    11,129Net
      operating loss carryforwards
    
    
    410,015
    
    
    485,164
    
    
    320,086AMT
      credit carryforwards
    
    
    802
    
    
    802
    
    
    —Property,
      plant and equipment
    
    
    35,554
    
    
    52,923
    
    
    30,983Capital
      loss carryforwards
    
    
    126,391
    
    
    165,716
    
    
    37,246Foreign
      tax credit carry forward
    
    
    —
    
    
    —
    
    
    3,678Other
    
    
    12,163
    
    
    14,702
    
    
    412601,688
    
    
    738,086
    
    
    403,534Valuation
      allowance
    
    
    (576,652
    )
    
    (707,289
    )
    
    (398,950
    )25,036
    
    
    30,797
    
    
    4,584Deferred
      tax liabilities:Intangibles
    
    
    (5,825
    )
    
    (5,825
    )
    
    (283
    )Property,
      plant and equipment
    
    
    (9,798
    )
    
    (12,827
    )
    
    (2,033
    )LIFO
    
    
    (7,900
    )
    
    (7,894
    )
    
    (4,305
    )(23,523
    )
    
    (26,546
    )
    
    (6,621
    )Net
      deferred tax assets (liabilities)
    
    $
    1,513
    
    $
    4,251
    
    $
    (2,037
    )







The
current deferred tax assets are included in prepaid expenses and other and the
long-term deferred tax assets, consisting of net operating loss carryforwards,
are in other assets in the consolidated balance sheets. The current deferred tax
liabilities are included in accrued and other liabilities in the consolidated
balance sheets.


Approximate
domestic and foreign income (loss) before income tax provision are as
follows:




****
    
    Year
      Ended December 31,**2002**
    
    
    **2003**
    
    
    **2004**Domestic
    
    $
    (657,173
    )
    $
    (86,788
    )
    $
    14,433Foreign
    
    
    361,265
    
    
    (77,521
    )
    
    (1,843
    )$
    (295,908
    )
    $
    (164,309
    )
    $
    12,590




As of
December 31, 2004, the Company had the following net operating loss (NOL)
carryforwards: $693,430 in the U.S., $5,365 in China, $88,425 in Luxembourg,
$74,281 in Canada, $8,835 in Hong Kong, $14,579 in the U.K., and $14,455 in the
Netherlands. The U.S. NOLs expire in 2019 through 2024 and the Canada NOLs
expire in 2007 through 2011. All other NOLs carry forward indefinitely. The U.S.
also has a capital loss carryforward of $26,000, which will expire in 2009.
Approximately $361,117 of the Company’s U.S. capital loss expired unused in
2004. Canada has an investment tax credit carryforward of $1,191 that will
expire in 2010 and a capital loss of $123,717 that will carry forward
indefinitely. The Company has not recognized and does not anticipate recognizing
a deferred tax liability for approximately $11,407 on undistributed earnings of
its foreign subsidiaries because the Company intends to indefinitely reinvest
the earnings.




In
connection with the Reorganization completed on January 31, 2003, the Company
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 annually to
approximately $19.7 million 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.




The
Company has a tax holiday in China that allows a two-year tax exemption and
three-year 50% reduction in the tax rate. The tax holiday began in 2001. If not
for such tax holiday, the Company would have had $3,787 and $3,674 of additional
income tax expense for December 31, 2003 and 2004, respectively, based on the
applicable rates ranging from 15% to 27%.






56




On
October 22, 2004, President Bush signed the American Jobs Creation Act (the
“Act”), which includes numerous provisions that may affect business practices
and accounting for income taxes. As of December 31, 2004 management is
evaluating the Act to make a determination what, if any, effect the Act may have
on the Company.




**16.
Derivative Financial Instruments**





The
Company accounts for derivative financial instruments under the provisions of
SFAS No. 133, *Accounting
for Derivative Instruments and Hedging Activities,* as
amended by SFAS No. 137 and SFAS No. 138 (collectively, the Statement). The
Statement requires all derivatives to be recognized in the statement of
financial position at fair value, with changes in the fair value of derivative
instruments to be recorded in current earnings or deferred in accumulated other
comprehensive loss, depending on whether a derivative is designated as and is
effective as a hedge and on the type of hedging transaction.




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
exposures arise from transactions denominated in a currency other than an
entity’s functional currency, primarily anticipated sales of finished product
and the settlement of payables.




Generally,
the Company applies hedge accounting as allowed by the Statement. For hedged
forecasted transactions, hedge accounting is discontinued if the forecasted
transaction is no longer intended to occur, and any previously deferred hedging
gains or losses would be recorded to earnings immediately. Earnings impacts for
all designated hedges are recorded in the consolidated statement of operations
generally on the same line item as the gain or loss on the item being hedged.
The Company records all derivatives at fair value as assets or liabilities in
the consolidated balance sheet, with classification as current or long-term
depending on the duration of the instrument.




At
December 31, 2004, the net deferred hedging gain in accumulated other
comprehensive loss was $0 as the contracts entered into during 2004 had expired.
There was no hedge ineffectiveness during the years ended December 31, 2003 and
2004; and no derivative financial instruments were entered into during the year
ended December 31, 2002. In addition, there were no hedging instruments
outstanding at December 31, 2003 or 2004.




**17.
Business Segment Information**


SFAS
No. 131, *Disclosures
about Segments of an Enterprise and Related Information* ,
establishes standards for reporting information about operating segments in
annual financial statements and requires selected information about operating
segments in financial reports issued to stockholders. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. Operating segments are defined as components of an
enterprise about 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.
  Prior to
2004, the Company reported its financial results in one reportable segment. The
Company has reevaluated and restated its operating segments based on the
application of SFAS No. 131, and determined that there are four reportable
segments: (i) China Printed Circuit Boards, (ii) North America Printed Circuit
Boards, (iii) European Printed Circuit Boards and (iv) Assembly. The other
operating segments consists of the remaining operating segments, which include
certain North American EMS operations. Following the planned closure of the
North American and European Printed Circuit Board operations in 2005, the
Company expects to have two remaining reportable segments - China Printed
Circuit Boards and Assembly. Segment disclosures for 2003 and 2002 and have been
restated to reflect the 2004 reportable segments.
  China
printed circuit boards, consists of the Company's printed circuit board
fabrication manufacturing facilities located within China. These facilities
provide comprehensive front-end engineering services, including, circuit board
layout and related design services leading to manufacturing of multi-layer
printed circuit boards and backpanels.
  The
Company's western world printed circuit board fabrication manufacturing
facilities - North American Printed Circuit Board located in Montreal, Canada
and European Printed Circuit Boards located in Echt, the
   57
  Netherlands provide comprehensive front-end
engineering services, including, circuit board layout and related design
services leading to manufacturing of multi-layer printed circuit boards and
backpanels. On February 25, 2005 the Company announced its plan for the closure
of the facilities located in Echt, the Netherlands and Montreal, Canada. See
further discussion of the closures in Note 22.
  The
Assembly segment is composed of the assembly operations for three operating
segments, which have been aggregated under SFAS No. 131, including wire
harnesses and cable assemblies, backpanel assembly, printed circuit board
assembly, custom enclosures and full system assembly and test. These assembly
operations are conducted in facilities located in China and Mexico.
  Following
is the Company’s reportable segment information for the years ended December 31,
2002, 2003 and 2004, with the 2002 and 2003 amounts restated for the 2004
reportable segments. Intersegment sales are fully eliminated in consolidation.
General corporate operating expenses are allocated to each operating segment
based on sales. The accounting policies of the segments are the same as those
described in Note 1. Segment data includes intersegment revenues and is
eliminated in consolidation.


****
    
    
    China 
      Printed Circuit Boards
    
    
    **North
      American**
      **Printed**
      **Circuit**
      **Boards****(1)**
    ****
      ****
      ****
      ****
    
    **European**
      **Printed
      Circuit****Boards****(1)**
    ****
      ****
    
    **Assembly**
    
    
    **Other**
    
    
    **Eliminations**
    
    
    **Total****Net
      Sales:**Year
      ended December 31, 2002
    
    $
    244,929
    
    $
    96,686
    
    $
    52,068
    
    $
    283,345
    
    $
    209,708
    
    $
    (22,689
    )
    $
    864,047Year
      ended December 31, 2003
    
    
    288,018
    
    
    55,650
    
    
    50,673
    
    
    306,978
    
    
    76,502
    
    
    (26,338
    )
    
    751,483Year
      ended December 31, 2004
    
    
    343,880
    
    
    56,163
    
    
    41,993
    
    
    397,094
    
    
    96,772
    
    
    (34,539
    )
    
    901,363**Operating
      Income (Loss):**Year
      ended December 31, 2002
    
    
    25,223
    
    
    (39,736
    )
    
    (1,300
    )
    
    10,504
    
    
    (182,109
    )
    
    —
    
    
    (187,418
    )Year
      ended December 31, 2003
    
    
    36,409
    
    
    (59,793
    )
    
    (45,867
    )
    
    24,334
    
    
    (25,905
    )
    
    —
    
    
    (70,822
    )Year
      ended December 31, 2004
    
    
    32,689
    
    
    (14,386
    )
    
    (21,908
    )
    
    58,887
    
    
    (14,332
    )
    
    —
    
    
    40,950**Total
      Assets:**Year
      ended December 31, 2002
    
    
    304,197
    
    
    132,409
    
    
    84,465
    
    
    148,410
    
    
    108,050
    
    
    —
    
    
    777,531Year
      ended December 31, 2003
    
    
    310,926
    
    
    48,126
    
    
    63,486
    
    
    179,093
    
    
    92,704
    
    
    —
    
    
    694,335Year
      ended December 31, 2004
    
    
    356,168
    
    
    43,918
    
    
    26,584
    
    
    171,960
    
    
    151,779
    
    
    —
    
    
    750,409**Total
      Capital Expenditures:**Year
      ended December 31, 2002
    
    
    11,979
    
    
    4,957
    
    
    7,637
    
    
    14,265
    
    
    (9,150
    )
    
    —
    
    
    29,688Year
      ended December 31, 2003
    
    
    26,883
    
    
    (4,428
    )
    
    (5,258
    )
    
    10,147
    
    
    790
    
    
    —
    
    
    47,506Year
      ended December 31, 2004
    
    
    49,495
    
    
    5,714
    
    
    4,650
    
    
    10,928
    
    
    1,219
    
    
    —
    
    
    72,006**Total
      Depreciation:**Year
      ended December 31, 2002
    
    
    21,894
    
    
    19,740
    
    
    9,928
    
    
    10,706
    
    
    11,953
    
    
    —
    
    
    74,221Year
      ended December 31, 2003
    
    
    24,019
    
    
    15,589
    
    
    11,007
    
    
    9,767
    
    
    5,688
    
    
    —
    
    
    66,070Year
      ended December 31, 2004
    
    
    27,252
    
    
    4,112
    
    
    5,086
    
    
    9,199
    
    
    2,583
    
    
    —
    
    
    48,232**Total
      Amortization:**Year
      ended December 31, 2002
    
    
    14,697
    
    
    657
    
    
    450
    
    
    350
    
    
    190
    
    
    —
    
    
    16,344Year
      ended December 31, 2003
    
    
    1,666
    
    
    632
    
    
    469
    
    
    —
    
    
    298
    
    
    —
    
    
    3,065Year
      ended December 31, 2004
    
    
    1,444
    
    
    2
    
    
    —
    
    
    —
    
    
    124
    
    
    —
    
    
    1,570




(1)
    On
      February 25, 2005 the Company announced the closure of the facilities
      located in Echt, the Netherlands and Montreal, Quebec. See further
      discussion of the closures in Note 22.








58





Net sales
by country of destination are as follows:


****
    
    Year
      Ended December 31,****
    
    
    **2002**
    
    
    **2003**
    
    
    **2004**United
      States
    
    $
    461,283
    
    $
    384,786
    
    $
    416,457United
      Kingdom
    
    
    36,416
    
    
    16,020
    
    
    12,210Canada
    
    
    62,243
    
    
    25,841
    
    
    31,682France
    
    
    28,711
    
    
    18,375
    
    
    22,326Malaysia
    
    
    40,000
    
    
    37,673
    
    
    26,474China
    
    
    75,798
    
    
    101,890
    
    
    120,902Germany
    
    
    72,851
    
    
    80,395
    
    
    84,530Other
    
    
    86,745
    
    
    86,503
    
    
    186,782Total
    
    $
    864,047
    
    $
    751,483
    
    $
    901,363


Net sales
by product offering are as follows:




****
    
    Year
      Ended December 31,**2002**
    
    
    **2003**
    
    
    **2004**Printed
      circuit boards
    
    $
    359,482
    
    $
    373,260
    
    $
    420,512Wire
      harnesses and electro-mechanical solutions
    
    
    504,565
    
    
    378,223
    
    
    480,851Total.
    
    $
    864,047
    
    $
    751,483
    
    $
    901,363
 
 Property,
plant and equipment, net by country are as follows:
 
 ****
    
    Year
      Ended December 31,****
    
    
    **2003**
    
    
    **2004**United
      States
    
    $
    3,171
    
    $
    5,704China
    
    
    160,305
    
    
    181,394Canada
    
    
    13,319
    
    
    14,652Mexico
    
    
    20,466
    
    
    20,048Other
    
    
    15,911
    
    
    11,966Total
    
    $
    213,172
    
    $
    233,764
 
 **18.
Concentration Of Business**





During
the years ended December 31, 2002, 2003 and 2004, sales to General Electric were
11.7%, 12.1% and 11.3%, respectively of net sales. No sales to any other
customers represented over 10.0% of net sales for the years ended December 2002,
2003 and 2004.




The
Company holds cash amounts in excess of federally insured amounts in certain
bank accounts.




**19.
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 compensation or the annual maximum limit
prescribed by the Internal Revenue Code. The Company may contribute 1% of
employees’ salaries to the Retirement Plan and matches a percentage of the
employees’ 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 $2,510, $503 and $506 for
the years ended December 31, 2002, 2003 and 2004, respectively.




**20.
Research And Development**





Research,
development and engineering expenditures for the creation and application of new
products and processes were approximately $10,405, $2,882 and $3,320 for the
years ended December 31, 2002, 2003 and 2004, respectively. Research and
Development is included in the selling, general and administrative line item on
the statement of operations.






59




**21.
Related Party Transactions**





***Monitoring
and Oversight Agreement***





The
Company entered into a ten-year monitoring and oversight agreement with an
affiliate of Hicks, Muse, Tate and Furst (“HMTF”), effective as of January 31,
2003. The monitoring and oversight agreement obligates the Company to indemnify
HMTF, its 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 under the monitoring and
oversight agreement and not resulting primarily from the bad faith, gross
negligence, or willful misconduct of HMTF. The Company has accrued a fee of
$1,375 and $2,875 at December 31, 2003 and 2004, respectively.




***Consulting
Arrangement***





In
connection with the Company’s restructuring activities, commencing December
2001, the Company engaged Katia Advisors LLC to provide sales and marketing
consulting services related to strategic marketing opportunities. Such services
were provided on a month-by-month basis and effective December 1, 2004 the
Company discontinued using these services. As of December 1, 2004, the Company
had paid Katia Advisors an aggregate of $520. These services were provided by
Richard McGinn, a partner of Katia and a member of the board of directors of the
Company.




***Compensation
of Directors***





The
chairman of the board receives an annual fee of $120 and directors (other than
the Chairman) who are not executive officers receive an annual fee of $30. In
addition, each audit committee member receives an annual fee of $10 and the
Chairman of the audit committee receives an additional fee of $5. 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. The Company also has granted
55,000 stock options with an exercise price of $12.63, which vest over a period
of three years, to each of Mr. Steffen, Mr. McGinn, Mr. Vieser and Ms. Gulyas as
compensation for their services as members of the board.




***Rights
Offering***


** 
 On
October 7, 2004, Group completed a Rights Offering whereby they sold 5,555,555
shares of common stock at $9.00 per share to current holders of stock. The
proceeds, net of issuance costs, of $47,069, were contributed to the Company. In
connection with such Rights Offering, Group paid certain affiliates of GSC a
commitment fee of $1,000. The proceeds from such offering are being used for
general working capital purposes and in the expansion of our printed circuit
board operations in China.
 ***Other***
 
 Certain
affiliates of GSC are stockholders of Group and have the right together with
certain other stockholders of Group to designate certain members of Group’s
board of directors. An affiliate of GSC held an aggregate face amount of $640
and $5,000 of debt under the 2003 Credit Agreement as of December 31, 2003 and
2004, respectively.
  In 2000,
the Company acquired all of the outstanding shares of Wirekraft Industries,
Inc., a wholly owned subsidiary of International Wire Group, Inc. ("IWG"), an
affiliate of HMTF. IWG continued as an affiliate of HMTF until all interests
were terminated in November of 2004. Mr. Hamwee and Mr. Cummings, both members
of the Company's board of directors, are affiliates of GSC. GSC owns 16.8%
of International Wire Group, Inc. and Mr. Hamwee is Chairman of the Board of
International Wire Group, Inc. As of November 2004, Hicks Muse was no longer
affiliated with International Wire Group, Inc.




The
Company’s wire harness operations, in accordance with negotiated contract terms,
purchased an aggregate of $35,628, $34,077 and $37,730 of product from
International Wire Group, Inc. in 2002, 2003 and 2004 respectively. Viasystems
had amounts due to International Wire Group, Inc. of $10,816 and $6,510 at
December 31, 2003 and 2004, respectively.







60





**22.
Subsequent Events**





On
February 25, 2005, Group announced plans for the continued expansion of its
facilities in China to meet the demands of its global customers. The Company
also announced the closure of the three western world printed circuit board
facilities located in Canada and the Netherlands. The Company estimates that the
restructuring charges related to the closures will total approximately $50,000
of which $26,000 will result in future cash expenditures. It is expected that
$23,000 of such restructuring charge will be related to the reduction of
headcount and $27,000 will be related to asset write downs and impairments and
other exit costs. The restructuring activities pursuant to these closures are
expected to be substantially completed by the end of 2005 with cash expenditures
expected through 2007.







61








**ITEM
9.** ***Changes
in and Disagreements with Accountants on Auditing and Financial
Disclosure***





None.











62





**ITEM
9A.** ***Controls
and Procedures***


**  The
Company carried out an evaluation, under the supervision and with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Company's disclosure controls and
procedures (as such term is defined in Rules 13a-15(d) or 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act) as of December
31, 2004. The Company’s disclosure controls and procedures are designed to
ensure that information required to be disclosed by the company in the reports
it files or submits under the Exchange Act is recorded, processed, summarized
and reported on a timely basis and that such information is accumulated and
communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure


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 financial statements will not be prevented
or detected. As of December 31, 2004, the company did not maintain effective
controls over the accounting for goodwill. Specifically, goodwill impairments
were not properly identified and calculated for 2002 through 2004. Further, it
resulted in the restatement of the company’s consolidated financial statements
for 2002 and 2003 and of the company’s interim financial statements for the
second and third quarters of 2004. This control deficiency resulted in more than
a remote likelihood that a material misstatement of annual or interim financial
statements would not be prevented or detected. Accordingly, management
determined that this control deficiency constituted a material weakness. Because
of the material weakness, we have concluded that our disclosure controls and
procedures were ineffective as of December 31, 2004.
 
 To
address this material weakness, subsequent to December 31, 2004, our Chief
Executive Officer and Chief Financial Officer, in consultation with management,
have taken action to address this control deficiency in the manner described
below:
 
 1.
    Performed
      an extensive evaluation of its goodwill accounts for each of its reporting
      units.
  2.
    During
      the evaluation, the Company identified adjustments to the goodwill
      accounts that relate to prior periods.
  3.
    Assessed
      the materiality of these adjustments with the Chief Executive Officer and
      the Chief Financial Officer and the Audit Committee and concluded that the
      historical consolidated financial statements indicated above should be
      restated.
  4.
    Implemented
      detailed procedures to be followed in future periods to ensure that the
      annual goodwill impairment analysis is performed in a manner consistent
      with generally accepted accounting
principles.
  As a
result of these actions, management believes that the financial statements
included in this report fairly present in all material respects our financial
condition, results of operations and cash flows for the periods
presented.










63





**PART
III**





**ITEM
10.** ***Directors
And Executive Officers Of The Registrant*** ****





The
following table sets forth the names and ages of each of the directors and the
executive officers of Group and Viasystems, followed by a description of their
business experience during the past five years. The positions held by the
directors and executive officers are with Group and Viasystems, unless indicated
otherwise. All executive officers are appointed by the board of directors of
Group and Viasystems and serve at its pleasure. There are no family
relationships among any of the executive officers. Unless indicated otherwise,
each of the directors and executive officers is a U.S. citizen and the business
address of each individual is 101 South Hanley Road, Suite 400, St. Louis,
Missouri 63105.




Pursuant
to the terms of the Stockholders’ Agreement, the board of directors of Group
will consist of at least nine members, including the chief executive officer of
the company and five designees of affiliates of Hicks, Muse, Tate & Furst
Incorporated. See "Certain Relationships and Related Party Transactions —
Stockholders Agreement."






**Name**
    **Age**
    **Position***Non-Employee*
      *Directors*Christopher
      J. Steffen (1) (2)*
    63
    ChairmanJack
      D. Furst
    46
    DirectorAndrew
      S. Rosen (1)
    36
    DirectorRobert
      F. Cummings Jr. (2)
    55
    DirectorDiane
      H. Gulyas (2)
    48
    DirectorRobert
      A. Hamwee (1)
    34
    DirectorRichard
      A. McGinn (1) (2)
    58
    DirectorRichard
      W. Vieser (2)
    77
    Director*Executive
      Officers*David
      M. Sindelar
    47
    Chief
      Executive Officer and DirectorTimothy
      L. Conlon
    53
    President,
      Chief Operating Officer and DirectorDavid
      J. Webster
    42
    Chief
      Administrative OfficerJoseph
      S. Catanzaro
    52
    Senior
      Vice President and Chief Financial OfficerSteven
      S.L. Tang
    49
    President
      — Asia Pacific GroupGerald
      G. Sax
    44
    Senior
      Vice President — Supply Chain
   ________





(1)  Member of
the Group compensation committee.





(2)  Member of
the Group audit committee.





* Denoted
financial expert of the audit committee and independent director.





***Christopher
J. Steffen*** has been
Chairman of the board of directors since December 2003 and a director since
October 2003. Mr. Steffen has been an advisor to Wall Street Management and
Capital, Inc. since 2002. From 1993 to 1996, Mr. Steffen served as the Vice
Chairman and Director of Citicorp and its principal subsidiary, Citibank, N.A.
In 1993, Mr. Steffen served as Senior Vice President and Chief Financial Officer
of Eastman Kodak. From 1989 to 1993, Mr. Steffen served as Executive Vice
President and Chief Financial and Administrative Officer and Director of
Honeywell, Inc. Mr. Steffen serves as director of Accelrys, Inc. He formerly
served as Chairman of the board of directors of Veltri Metal Products, director
and Chairman of the audit committee of Seminis, Inc. and as director and
Chairman of the audit committee of UCMS Pty.


***Jack
D. Furst*** has been
a director since February 2005 and was previously a director from the inception
of Viasystems until 2002. Mr. Furst is a Partner of Hicks, Muse, Tate &
Furst Incorporated and has held this position since 1989. Prior to joining Hicks
Muse, Mr. Furst was a Vice President and subsequently a Partner of Hicks &
Haas Incorporated from 1987 to 1989. From 1984 to 1986, Mr. Furst was a Merger
and Acquisitions/Corporate Finance Specialist for The First Boston Corporation.
Before joining First Boston, Mr. Furst was a Financial Consultant with Price
Waterhouse, LLP. Mr. Furst serves on the board of directors of Home Interiors
& Gifts, Inc. and Activant Solutions, Inc.
   64
  ***Andrew
S. Rosen*** has been
a director since November 2004 and is a Partner of Hicks Muse. Mr. Rosen
has been with Hicks Muse since 1993 and has over 13 years of private equity
experience. Prior to joining Hicks Muse, Mr. Rosen served as an Associate with
the Carlyle Group, a Washington, DC-based private investment firm, where he was
employed for three years.




***Robert
F. Cummings, Jr.*** has been
a director since January 2003. In January 2005, he became a managing
Director of GSC. Mr. Cummings served as Senior Advisor to GSC (a private asset
management firm) in 2002. He is a member of GSC’s Board of Advisors and is the
chairman of the GSC Risk Committee. For the prior 28 years, Mr. Cummings was
with Goldman, Sachs & Co., where he was a member of the Corporate Finance
Department, advising corporate clients on financing, mergers and acquisitions
and strategic financial issues. Mr. Cummings was named a Partner of Goldman
Sachs in 1986. He retired in 1998 and was retained as an Advisory Director by
Goldman, Sachs & Co. to work with certain clients on a variety of banking
matters through 2001. Mr. Cummings is a director of RR Donnelley & Sons
Company, Axiohm Transaction Solutions, Inc. and Precision Partners, Inc. and is
a member of the Board of Trustees of Union College.




***Diane
H. Gulyas*** has been
a director since January 2003. Ms. Gulyas is Chief Marketing & Sales
Officer of E.I. du Pont de Nemours and Company and has held such position since
April 2004. Before being appointed Chief Marketing & Sales Officer, she was
Group Vice President of DuPont Electronics and Communication Technologies, a
position she had held since February 2002. Prior to that appointment, Ms. Gulyas
served as Vice President and General Manager of the DuPont Advanced Fibers
Businesses. Since 1978, Ms. Gulyas has held various positions with DuPont
including Executive Assistant to the Chairman of the board and Global Business
Director.




***Robert
A. Hamwee*** has been
a director since January 2003. Mr. Hamwee joined GSC at its inception in
1994 and became a Managing Director in 2000. He currently manages the day-to-day
activities of the controlled distressed debt securities group. Mr. Hamwee was
previously with The Blackstone Group (a private investment and advisory firm),
from 1992 to 1994 where he worked in the Merchant Banking Division. In addition,
he worked on a wide range of assignments in the Mergers and Acquisitions and
Restructuring Departments. Mr. Hamwee is Chairman of the board for Axiohm
Transaction Solutions, Inc., Envirosource, Inc. and International Wire Group,
Inc., and a director of RAM Holdings Limited, Scovill Fasteners, Inc., APW Ltd.,
Precision Partners, Inc. and Wright Line, LLC.




***Richard
A. McGinn*** has been
a director since January 2003. Mr. McGinn has been a General Partner at RRE
Ventures (a private company that invests in entrepreneurial information
technology companies) since August 2001. From 1997 to October 2000,
Mr. McGinn served as Chief Executive Officer of Lucent Technologies, Inc. From
1996 to 1997, Mr. McGinn served as President of Lucent Technologies, Inc. Mr.
McGinn is a director of American Express Company.


***Richard
W. Vieser*** has been
a director since 1997. Mr. Vieser is the retired Chairman of the board of Varian
Medical Systems where he served from April 1999 to February 2003. From
June 1985 to December 1989, Mr. Vieser served as Chairman of the board
and Chief Executive Officer of FL Industries, Inc. (a manufacturer of electrical
components). From September 1986 to December 1989, Mr. Vieser served
as Chairman of the board and Chief Executive Officer of FL Aerospace (a
manufacturer and developer of aviation lighting). From March 1987 to
December 1989, Mr. Vieser served as Chairman, President and Chief Executive
Officer of Lear Siegler, Inc. (a diversified manufacturing company). From
April 1984 through June 1985, he served as President and Chief
Operating Officer of McGraw-Edison Company. Mr. Vieser is Chairman Emeritus of
Varian Medical Systems and is a director of Fisher Scientific.


***Richard
W. Vieser*** has been
a director since 1997. Mr. Vieser is the retired Chairman of the board of Varian
Medical Systems where he served from April 1999 to February 2003. From
June 1985 to December 1989, Mr. Vieser served as Chairman of the board
and Chief Executive Officer of FL Industries, Inc. (a manufacturer of electrical
components). From September 1986 to December 1989, Mr. Vieser served
as Chairman of the board and Chief Executive Officer of FL Aerospace (a
manufacturer and developer of aviation lighting). From March 1987 to
December 1989, Mr. Vieser served as Chairman, President and Chief Executive
Officer of Lear Siegler, Inc. (a diversified manufacturing company). From
April 1984 through June 1985, he served as President and Chief
Operating Officer of McGraw-Edison Company. Mr. Vieser is Chairman Emeritus of
Varian Medical Systems. Mr. Furst was a director of International Wire Group,
Inc., which filed for protection under Chapter 11 of the United States
Bankruptcy Code on March 24, 2004. Mr. Furst also served as a director when we
filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code, and
is a director of Fisher Scientific.




***David
M. Sindelar*** has been
a director since August 2001 and Chief Executive Officer since
July 2001. Mr. Sindelar served as a director and executive officer when we
filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code and
throughout the bankruptcy proceedings described in “Our Bankruptcy and
Reorganization.” He is the managing partner of Hanley Partners, Inc. (a firm
that specializes in the acquisition and operation of commercial and industrial
manufacturing companies). He also served as Senior Vice President from
January 1997 through June 2001 and Chief Financial Officer since our
inception through June 2001. Mr. Sindelar was Chief Executive Officer of
International Wire Group, Inc. (a designer, manufacturer and marketer of bare
and tin-plated copper wire and insulated copper wire) from July 2001 to
September 2003, which filed for protection under Chapter 11 of the
United States Bankruptcy Code on March 24, 2004. He was Chief Executive
Officer of LLS Corp. from August 1999 to November 2002, which filed
for protection under Chapter 11 of the United States






65




Bankruptcy Code on January 16, 2002. Mr.
Sindelar was Senior Vice President and Chief Financial Officer of Berg
Electronics Corp. from March 1993 through October 1998 and of Crain
Industries, Inc. and Crain Holdings Corp. (a manufacturer, fabricator and
distributor of polyurethane foam and foam products) from August 1995
through December 1997 and of Jackson Holding Company from
February 1993 through August 1995.




***Timothy
L. Conlon*** has been
a director, President and Chief Operating Officer since October 1998. Mr.
Conlon served as a director and executive officer when we filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code and throughout the
bankruptcy proceedings described in “Our Bankruptcy and Reorganization.” He is a
partner of Hanley Partners, Inc. Prior to joining us, Mr. Conlon was employed as
President and Chief Operating Officer of Berg Electronics Corp. from
January 1997 through October 1998. Mr. Conlon also served as Executive
Vice President and Chief Operating Officer of Berg Electronics Group, Inc., a
wholly-owned subsidiary of Berg Electronics Corp., from October 1993
through January 1997. Prior to joining Berg Electronics Group, Inc., Mr.
Conlon was employed as President of the Cutting and Welding Division of
Thermadyne Industries, Inc. from April 1993 through October 1993.
Prior to joining Thermadyne Industries, Inc., Mr. Conlon spent nine years in the
electronic connector industry including serving as General Manager of the
Information Technologies and Spectra strip divisions of Amphenol Corporation
from 1990 through July 1992 and President of Cambridge Products (a
manufacturer of electronic and communications connector products) from 1988
through 1989.




***David
J. Webster*** has been
Chief Administrative Officer since May 2004. Mr. Webster served as an executive
officer when we filed for bankruptcy under Chapter 11 of the United States
Bankruptcy Code and throughout the bankruptcy proceedings described in “Our
Bankruptcy and Reorganization.” He also served as Senior Vice President from
1997 through May 2004. From 1997 to 2004, Mr. Webster was an executive officer
of International Wire Group, Inc., which filed for protection under Chapter 11
of the United States Bankruptcy Code on March 24, 2004. Mr. Webster has
been a partner of Hanley Partners, Inc. since its inception in 2001. From
August 1999 through November 2002, Mr. Webster was Senior Vice
President and a member of the board of directors of LLS Corp., which filed for
protection under Chapter 11 of the United States Bankruptcy Code on
January 16, 2002. From 1997 through 2001, Mr. Webster was a partner of
Mills & Partners, Inc., and from 1997 through 1998 served as Senior Vice
President of Berg Electronics Corp. During 1997, Mr. Webster served as Senior
Vice President of Crain Industries, Inc. Prior to 1997, Mr. Webster was a
partner in the law firm of Weil, Gotshal & Manges LLP.




***Joseph
S. Catanzaro*** has been
Senior Vice President and Chief Financial Officer since September 2001. He
also served as Senior Vice President — Finance of Group from June 1999 to
September 2001. Mr. Catanzaro joined us in October 1998 in the
position of Vice President of Business Services. Mr. Catanzaro served as an
executive officer when we filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code and throughout the bankruptcy proceedings described in
“Our Bankruptcy and Reorganization.” Prior to joining us, Mr. Catanzaro was Vice
President of Finance of Berg Electronics Corp. from April 1993 to
October 1998.




***Steven
S.L. Tang*** has been
President — Asia Pacific since June 1999 and is responsible for the overall
operations of our facilities on the continent of Asia. Mr. Tang served as an
executive officer when we filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code and throughout the bankruptcy proceedings described in
“Our Bankruptcy and Reorganization.” Prior to joining us, Mr. Tang served as a
Managing Director for the Asian division of Utilux Asia Limited, an Australian
connector manufacturing company, from January 1995 to July 1999. Prior
to 1995, Mr. Tang held various positions, all in Asia, with companies such as
Amphenol, Pace Inc., National Semiconductor and Honeywell. Mr. Tang is a
director of Wanji Pharmaceutical Holdings Limited.




***Gerald
G. Sax*** has been
Senior Vice President — Supply
Chain since February 2003. He also served as Senior Vice President — Europe from
July 1999 to January 2003. Mr. Sax served as an executive officer when
we filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code
and throughout the bankruptcy proceedings described in “Our Bankruptcy and
Reorganization.” Mr. Sax joined us in November 1998 in the position of Vice
President — Corporate Controller. Prior to joining us, Mr. Sax was Vice
President — Corporate Controller for Berg Electronics Corp. from
September 1995 to October 1998.








66


****


**Code
of Ethics and Business Conduct**





The
Company has recently adopted a Code of Ethics applicable to its Chief Executive
Officer and senior financial officers. A copy of the Code of Ethics has been
filed with the SEC as an exhibit to the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2004.








67





**ITEM
11.** ***Executive
Compensation*** ****





**Compensation
of Directors and Executive Officers**





The
Chairman of the Board receives an annual fee of $120,000 and directors (other
than the Chairman) who are not executive officers receive an annual fee of
$30,000. In addition, each compensation and audit Committee Member receives an
annual fee of $10,000 and the Chairman of the compensation and audit Committee
receives an additional fee of $5,000. 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 $1,000 for additional time spent on our
business beyond six regular meeting’s during a calendar year. We also have
granted 55,000 stock options with an exercise price of $12.63, which vest over a
period of three years, to each of our non-employee directors as compensation for
their services as members of our board. In addition, the chairman of the Board
received an additional 50,000 options with an exercise price of $12.63, which
vest over a period of three years.




The
following table sets forth the cash and non-cash compensation earned during the
years ended December 31, 2002, 2003 and 2004 by our Chief Executive Officer and
our four other most highly compensated executive officers.




**Summary
Compensation Table**




****
    
    
    
    
    
    
    Long-Term****
    
    
    
    
    Annual
    
    **Compensation******
    
    
    
    
    Compensation
    
    **Awards******
    
    
    
    
    
    
    Securities
    
    
    **All
      Other******
    
    
    
    
    
    
    Underlying**Name
      and Principal Position**
    
    
    **Year**
    
    
    **Salary**
    
    
    **Bonus
      (1**
    **)**
    
    **Options
      (2**
    **)**
    
    **Compensation
      (3**
    **)**David
      M. Sindelar
    
    
    2004
    
    $
    645,833
    
    $
    1,076,400
    
    
    70,000
    
    
    —Chief
      Executive Officer
    
    
    2003
    
    
    550,000
    
    
    598,000
    
    
    350,000
    
    
    —2002
    
    
    550,000
    
    
    275,000
    
    
    —
    
    
    —Timothy
      L. Conlon
    
    
    2004
    
    
    550,000
    
    
    643,500
    
    
    70,000
    
    
    —President
      and Chief
    
    
    2003
    
    
    550,000
    
    
    357,500
    
    
    330,000
    
    
    —Operating
      Officer
    
    
    2002
    
    
    550,000
    
    
    275,000
    
    
    —
    
    
    —David
      J. Webster
    
    
    2004
    
    
    335,417
    
    
    357,435
    
    
    40,000
    
    
    —Chief
      Administrative Officer
    
    
    2003
    
    
    300,000
    
    
    126,750
    
    
    260,000
    
    
    —2002
    
    
    300,000
    
    
    97,500
    
    
    —
    
    
    —Joseph
      S. Catanzaro
    
    
    2004
    
    
    270,500
    
    
    205,335
    
    
    10,000
    
    
    —Senior
      Vice President and
    
    
    2003
    
    
    263,500
    
    
    111,786
    
    
    150,000
    
    
    —Chief
      Financial Officer
    
    
    2002
    
    
    257,000
    
    
    83,525
    
    
    —
    
    
    —Steven
      S. L. Tang
    
    
    2004
    
    
    430,324
    
    
    251,740
    
    
    70,000
    
    
    —President
      — Asia Pacific
    
    
    2003
    
    
    423,903
    
    
    137,769
    
    
    150,000
    
    
    —2002
    
    
    398,726
    
    
    99,681
    
    
    —
    
    
    —
  __________


(1)
    The
      bonus amounts listed for 2002, 2003 and 2004 were paid in 2003, 2004 and
      2005, respectively.


(2)
    Reflects
      options granted under our 2003 Stock Option
Plan.
  (3)
    We
      provide perquisites and other personal benefits to certain executives. The
      aggregate incremental costs of these benefits to us do not exceed the
      lesser of either $50,000 or 10% of the total of annual salary and bonus
      reported for each executive officer.





68





***Aggregated
Option Exercises in 2004 and Year End Option Values***





The
following table summarizes the number of options exercised during the year ended
December 31, 2004 for the above named executive officers and the value of
unexercised options as of December 31, 2004.




**Shares**
      **Acquired**
      **on
      Exercise(#)**
    **Value**
      **Realized($)**
    **Number
      of Securities**
      **Underlying
      Unexercised**
      **Options
      at**
      **Year
      End(#)**
      **Exercisable/Unexercisable**
    **Value
      of Unexercised**
      **In-the-money
      Options at**
      **Year
      End (1)**
      **Exercisable/Unexercisable**David
      M. Sindelar
    —
    —
    256,667
      / 163,333
    $0
      / $0Timothy
      L. Conlon
    —
    —
    243,333
      / 156,667
    $0
      / $0David
      J. Webster
    —
    —
    186,667
      / 113,333
    $0
      / $0Joseph
      S. Catanzaro
    —
    —
    103,333
      / 56,667
    $0
      / $0Steven
      S. L. Tang
    —
    —
    123,333
      / 96,667
    $0
      / $0
   __________





(1)  Based on
a fair market value of $9.00, which was determined to be a reasonable estimate
of Group's stock price as of October 1, 2004, the date of rights offering. For
more information on the rights offering, see Note 21 of the consolidated
financial statements. As of December 31, 2004, none of the options held by the
named executive officers were in-the-money.





**Benefit
Plans**





***2003
Stock Option Plan***





The Group
2003 Stock Option Plan provides for the award of incentive stock options, or
ISOs, and non-qualified stock options, or NSOs. Subject to adjustment in the
event of certain corporate transactions or events, a maximum of 2,777,778 shares
of common stock is issuable under the 2003 Stock Option Plan. As of December 31,
2004, options to purchase an aggregate of 2,647,800 shares of common stock were
outstanding. The exercise price of all outstanding options is $12.63 per share.
Options issued under the plan that expire, are forfeited or otherwise terminate
will again be available for grant under the 2003 Stock Option Plan. The plan is
administered by the compensation committee of the board of directors of
Group.




Generally,
each option granted under the 2003 Stock Option Plan is required to expire on or
before the tenth anniversary of the date of grant. The exercise price of each
ISO is required to be not less than 100% of the fair market value of the
underlying stock subject to the option on the date of grant. This minimum
exercise price provision is increased, and other conditions and restrictions
apply, with respect to awards granted to persons who own or are deemed to own
more than 10% of the total combined voting power of all classes of stock of
Group.




The 2003
Stock Option Plan provides for payment of the exercise price of options in the
form of cash or, subject to the discretion of the compensation committee of the
board of directors of Group, by delivery of shares of Group common
stock.




The 2003
Stock Option Plan provides for the grant of ISOs only to employees of Group and
its affiliates. NSOs may be granted to employees, or other persons providing
services for Group or its affiliates.




***Incentive
Compensation Plan***





Officers
and other key employees designated by our chief executive officer are eligible
to participate in our annual incentive compensation plan. The plan is
administered by the compensation committee of our board of directors and
participants under the plan may receive cash awards based on annual performance
targets set by the compensation committee. The compensation committee may also
make discretionary awards under the plan. The plan remains effective until
terminated by the compensation committee.






69




***Option
Grants to Certain Non-Employee Directors***





During
2003, certain non-employee members of our board of directors, consisting of Mr.
Steffen, Ms. Gulyas, Mr. McGinn and Mr. Vieser, were granted an option to
purchase 55,000 shares of our common stock at an exercise price of $12.63 per
share.




During
2004, Mr. Steffen was granted an additional option to purchase 50,000 shares of
our common stock at an exercise price of $12.63 per share.




**Employment
Agreements**





***David
M. Sindelar Executive Employment Agreement***





Mr. David
M. Sindelar entered into an amended and restated executive employment agreement
with Group and certain of its subsidiaries as of January 31, 2003, as amended.
Pursuant to his employment agreement, Mr. Sindelar will serve as Chief Executive
Officer of Group through January 31, 2006, unless terminated earlier by Group or
Mr. Sindelar. Mr. Sindelar is required to devote the amount of time reasonably
necessary to faithfully and adequately supervise the overall management of Group
and its subsidiaries. Subject to the foregoing limitation on his activities, Mr.
Sindelar is free to participate in other business endeavors.




The
compensation provided to Mr. Sindelar under his executive employment agreement
includes an annual base salary of not less than $920,000 (reduced by any amount
of salary actually received by Mr. Sindelar in respect of his severance
arrangement with International Wire Group, Inc. from October 16, 2003 to April
15, 2005), subject to upward adjustment at the sole discretion of the chairman
of the board of directors of Group, as well as those benefits customarily
accorded the executives of Group as long as the executive employment agreement
is in force. In addition, Mr. Sindelar is entitled to an annual bonus in an
amount determined in accordance with our incentive compensation plan for senior
executives and reimbursement for expenses to own and maintain an
automobile.




Mr.
Sindelar's executive employment agreement also provides that if Mr. Sindelar's
employment is terminated without cause, Mr. Sindelar will continue to receive
his then current salary, which shall not be less than $920,000, together with
his annual bonus amount, for a period of eighteen months following such
termination. The executive employment agreement terminates upon Mr. Sindelar's
death or his inability to perform his duties due to mental or physical
incapacity for six consecutive months or any one hundred working days out of a
twelve month period, and no further compensation shall be payable except that he
or his estate, heirs or beneficiaries, as applicable, shall receive his then
current salary, together with his annual bonus amount, for a period of 18
months, in addition to benefits otherwise specifically provided for. The
agreement also provides medical benefits for his and his spouse's
lifetime.




***Timothy
L. Conlon Executive Employment Agreement***





Mr.
Timothy L. Conlon entered into an amended and restated executive employment
agreement with Group and certain of its subsidiaries as of January 31, 2003.
Pursuant to his employment agreement, Mr. Conlon will serve as President and
Chief Operating Officer of Group through January 31, 2006, unless terminated
earlier by Group or Mr. Conlon. Mr. Conlon is required to devote the amount of
time reasonably necessary to faithfully and adequately supervise the overall
financial management of Group.




The
compensation provided to Mr. Conlon under his executive employment agreement
includes an annual base salary of not less than $550,000, subject to upward
adjustment at the sole discretion of the Chief Executive Officer of Group, as
well as those benefits customarily accorded the executives of Group as long as
the executive employment agreement is in force. In addition, Mr. Conlon is
entitled to an annual bonus in an amount determined in accordance with our
incentive compensation plan for senior executives and reimbursement for expenses
to own and maintain an automobile.








70




Mr.
Conlon's executive employment agreement also provides that if Mr. Conlon's
employment is terminated without cause, Mr. Conlon will continue to receive his
then current salary, which shall not be less than $550,000, together with his
annual bonus amount, for a period of eighteen months following such termination.
The executive employment agreement terminates upon Mr. Conlon's death or his
inability to perform his duties due to mental or physical incapacity for six
consecutive months or any one hundred working days out of a twelve month period,
and no further compensation shall be payable except that he or his estate, heirs
or beneficiaries, as applicable, shall receive his then current salary for a
period of eighteen months, in addition to benefits otherwise specifically
provided for. The agreement also provides medical benefits for his and his
spouse's lifetime.




***David
J. Webster Executive Employment Agreement***





Mr. David
J. Webster entered into an amended and restated executive employment agreement
with Group and certain of its subsidiaries as of January 31, 2003. Pursuant to
his employment agreement, Mr. Webster will serves as Chief Administrative
Officer of Group through January 31, 2006, unless terminated earlier by Group or
Mr. Webster. Mr. Webster is required to devote the amount of time reasonably
necessary to faithfully and adequately supervise the overall management of Group
and its subsidiaries. Subject to the foregoing limitation on his activities, Mr.
Webster is free to participate in other business endeavors.




The
compensation provided to Mr. Webster under his executive employment agreement
includes an annual base salary of not less than $470,000 subject to upward
adjustment at the sole discretion of the Chief Executive Officer of Group, as
well as those benefits customarily accorded the executives of Group as long as
the executive employment agreement is in force. In addition, Mr. Webster is
entitled to an annual bonus in an amount determined in accordance with our
incentive compensation plan for senior executives and reimbursement for expenses
to own and maintain an automobile.




Mr.
Webster's executive employment agreement also provides that if Mr. Webster's
employment is terminated without cause, Mr. Webster will continue to receive his
then current salary, which shall not be less than $470,000, together with his
annual bonus amount, for a period of eighteen months following such termination.
The executive employment agreement terminates upon Mr. Webster's death or his
inability to perform his duties due to mental or physical incapacity for six
consecutive months or any one hundred working days out of a twelve month period,
and no further compensation shall be payable except that he or his estate, heirs
or beneficiaries, as applicable, shall receive his then current salary, together
with his annual bonus amount, for a period of 18 months, in addition to benefits
otherwise specifically provided for. The agreement also provides medical
benefits for his and his spouse's lifetime.




***Joseph
S. Catanzaro Executive Employment Agreement***





Mr.
Joseph S. Catanzaro entered into an amended and restated executive employment
agreement with Group and certain of its subsidiaries as of January 31, 2003.
Pursuant to his employment agreement, Mr. Catanzaro will serve as Senior Vice
President and Chief Financial Officer of Group through January 31, 2006, unless
terminated earlier by Group or Mr. Catanzaro. Mr. Catanzaro is required to
devote the amount of time reasonably necessary to faithfully and adequately
supervise the overall financial management of Group.




The
compensation provided to Mr. Catanzaro under his executive employment agreement
includes an annual base salary of not less than $257,000, subject to upward
adjustment at the sole discretion of the Chief Executive Officer of Group, as
well as those benefits customarily accorded the executives of Group as long as
the executive employment agreement is in force. In addition, Mr. Catanzaro is
entitled to an annual bonus in an amount determined in accordance with our
incentive compensation plan for senior executives and reimbursement for expenses
to own and maintain an automobile.








71




Mr.
Catanzaro's executive employment agreement also provides that if Mr. Catanzaro's
employment is terminated without cause, Mr. Catanzaro will continue to receive
his then current salary, which shall not be less than $257,000 for a period of
eighteen months following such termination. The executive employment agreement
terminates upon Mr. Catanzaro's death or his inability to perform his duties due
to mental or physical incapacity for six consecutive months or any one hundred
working days out of a twelve month period, and no further compensation shall be
payable except that he or his estate, heirs or beneficiaries, as applicable,
shall receive his then current salary for a period of eighteen months, in
addition to benefits otherwise specifically provided for. The agreement also
provides medical benefits for his and his spouse's lifetime.







72





**ITEM
12.** ***Security
Ownership Of Certain Beneficial Owners And Management*** ****





Group
owns 100% of our capital stock. The following table sets forth, as of December
31, 2004, information regarding the beneficial ownership of Group's common stock
by each person who beneficially owned more than 5% of any class of Group's
voting securities and by its directors and named executive officers,
individually, and by its directors and executive officers as a
group.




****
    
    
    Amount
      and****
    
    
    Nature
      of****
    
    
    Beneficial
    
    
    **Percent
      of******
    
    
    Ownership
      (1)
    
    
    **Common
      Stock***5%
      Stockholders:*Hicks
      Muse Parties (2)
    
    
    18,838,641
    
    
    59.9
    %c/o
      Hicks, Muse, Tate & Furst Incorporated
      200
      Crescent Court, Suite 1600
      Dallas,
      Texas 75201
      GSC
      Parties (3)
    
    
    8,741,808
    
    
    28.5
    %c/o
      GSC Partners
      500
      Campus Drive, Suite 220
      Florham
      Park, New Jersey 07932Fidelity
      Parties (5)
      c/o
      Fidelity Management & Research Company
    
    
    1,803,390
    
    
    6.2
    %82
      Evanshire StreetBoston,
      Massachusetts 02109*Officers
      and Directors:*Jack
      D. Furst (4)
    
    
    18,838,641
    
    
    59.9
    %Andrew
      S. Rosen
    
    
    —
    
    
    —Richard
      W. Vieser (6)
    
    
    36,667
    
    
    *Robert
      F. Cummings
    
    
    —
    
    
    —Diane
      H. Gulyas (6)
    
    
    36,667
    
    
    *Robert
      A. Hamwee (3)
    
    
    8,741,808
    
    
    28.5
    %Richard
      A. McGinn (6)
    
    
    36,667
    
    
    *Christopher
      J. Steffen (6)
    
    
    53,333
    
    
    *David
      M. Sindelar (6)
    
    
    256,667
    
    
    *Timothy
      L. Conlon (6)
    
    
    243,333
    
    
    *David
      J. Webster (6)
    
    
    186,667
    
    
    *Joseph
      S. Catanzaro (6)
    
    
    103,333
    
    
    *Steven
      S. L. Tang (6)
    
    
    123,333
    
    
    *Gerald
      G. Sax (6)
    
    
    45,000
    
    
    *All
      executive officers and directors as a group (14 persons)
    
    
    28,702,116
    
    
    83.6
    %


__________





*
Represents less than 1%




(1)
    Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. Shares of common stock and options, warrants or
      other convertible securities (such as the class B senior convertible
      preferred stock) that are currently exercisable or exercisable within 60
      days of December 31, 2004 are deemed to be outstanding and to be
      beneficially owned by the person holding those options, warrants or other
      convertible securities for the purpose of computing the percentage
      ownership of that person, but are not treated as outstanding for the
      purpose of computing the percentage ownership of any other
      person.
  (2)
    These
      figures include:
  ·
    3,454,094
      shares of common stock held of record by Hicks, Muse, Tate & Furst
      Equity Fund III, L.P., a limited partnership, of which the ultimate
      general partner is Hicks, Muse Fund III Incorporated, an affiliate of
      Hicks, Muse, Tate & Furst Incorporated.
 ·
    93,681
      shares of common stock held of record by HM3 Coinvestors, L.P., a limited
      partnership of which the ultimate general partner is Hicks, Muse Fund III
      Incorporated, an affiliate of Hicks, Muse, Tate & Furst
      Incorporated.
 ·
    601,355
      shares of common stock held of record by HMTF Equity Fund IV (1999), L.P.,
      a limited partnership of which the ultimate general partner is Hicks, Muse
      (1999) Fund IV, LLC, an affiliate of Hicks, Muse, Tate & Furst
      Incorporated.
 
   73
  ·
    32,014
      shares of common stock held of record by Hicks, Muse PG- IV (1999), C.V.,
      of which the ultimate general partner is HM Fund IV Cayman, LLC, an
      affiliate of Hicks, Muse, Tate & Furst
Incorporated.
 ·
    14,785
      shares of common stock held of record by HM 4-SBS (1999) Coinvestors, L.P.
      a limited partnership of which the ultimate general partner is Hicks, Muse
      (1999) Fund IV, LLC, an affiliate of Hicks, Muse, Tate & Furst
      Incorporated.
 ·
    9,826
      shares of common stock held of record by HM 4-EQ (1999) Coinvestors, L.P.,
      a limited partnership of which the ultimate general partner is Hicks, Muse
      (1999) Fund IV, LLC, an affiliate of Hicks, Muse, Tate & Furst
      Incorporated.
 ·
    4,259
      shares of common stock held of record by HMTF Private Equity Fund IV
      (1999), L.P., a limited partnership of which the ultimate general partner
      is Hicks, Muse (1999) Fund IV, LLC, an affiliate of Hicks, Muse, Tate
      & Furst Incorporated.
 ·
    9,873,369
      shares of common stock and 2,177,356 shares of class B senior convertible
      preferred stock (currently convertible into 2,577,902 shares of common
      stock) held of record by Pearl Street II, L.P., a limited partnership of
      which the ultimate general partner is Hicks, Muse Fund III Incorporated,
      an affiliate of Hicks, Muse, Tate & Furst
  Incorporated.
 
 (3)
    These
      figures include:
 
 ·
    654,801
      shares of common stock held of record by GSC Partners CDO Fund, Limited, a
      Cayman Islands corporation, for which GSCP (NJ), L.P. is the collateral
      manager. GSCP (NJ), Inc. is the general partner of GSCP (NJ),
      L.P.
 ·
    459,408
      shares of common stock held of record by GSC Partners CDO Fund II,
      Limited, a Cayman Islands corporation, for which GSCP (NJ), L.P. is the
      collateral manager. GSCP (NJ), Inc. is the general partner of GSCP (NJ),
      L.P.
 ·
    2,893,887
      shares of common stock and 979,957 shares of class B senior convertible
      preferred stock (currently convertible into 1,160,230 shares of common
      stock) held of record by GSC Recovery II, L.P., a Delaware limited
      partnership. GSC Recovery II GP, L.P. is the general partner of GSC
      Recovery II, L.P.; GSC RII, LLC is the general partner of GSC Recovery II
      GP, L.P.; GSCP (NJ) Holdings, L.P. is the managing member of GSC RII, LLC;
      GSCP (NJ), L.P. is the manager of GSC Recovery II, L.P.; and GSCP (NJ),
      Inc. is the general partner of GSCP (NJ), L.P. and GSCP (NJ) Holdings,
      L.P.
 ·
    4,357,448
      shares of common stock and 503,215 shares of class B senior convertible
      preferred stock (currently convertible into 595,786 shares of common
      stock) held of record by GSC Recovery IIA, L.P., a Delaware limited
      partnership. GSC Recovery IIA GP, L.P. is the general partner of GSC
      Recovery IIA, L.P.; GSC RIIA, LLC is the general partner of GSC Recovery
      IIA GP, L.P.; GSCP (NJ) Holdings, L.P. is the sole member of GSC RIIA,
      LLC; GSCP (NJ), L.P. is the manager of GSC Recovery IIA, L.P.; and GSCP
      (NJ), Inc. is the general partner of GSCP (NJ), L.P. and GSCP (NJ)
      Holdings, L.P.
 
 Each of
Keith W. Abell, Alfred C. Eckert III, Robert A. Hamwee (a director of
Viasystems), Richard M. Hayden, Thomas V. Inglesby, Matthew C. Kaufman,
Christine K. Vanden Beukel, and Andrew Wagner are the executive officers and
stockholders of GSCP(NJ), Inc. and the limited partners of GSCP (NJ), L.P. and
GSCP (NJ) Holdings, L.P. By virtue of each of the above entities’ and
individuals’ relationship with GSC Recovery II, L.P., GSC Recovery IIA, L.P.,
GSC Partners CDO Fund, Limited and GSC Partners CDO Fund II, Limited, each may
be deemed to have shared voting and investment power over, and be the indirect
beneficial owner of, the shares of common stock owned by GSC Recovery II, L.P.,
GSC Recovery IIA, L.P., GSC Partners CDO Fund, Limited and GSC Partners CDO Fund
II, Limited. Each of the above entities and individuals disclaims beneficial
ownership of the common stock except to the extent of each entity’s and
individual’s pecuniary interest in such common stock.
 
 (4)
    Mr.
      Furst is a partner, stockholder and member of the management committee of
      Hicks Muse and, accordingly, may be deemed to beneficially own all or a
      portion of the shares of Holding Common Stock beneficially owned by the
      Hicks Muse Parties described above. Mr. Furst disclaims beneficial
      ownership of shares of Group’s Common Stock not owned of record by
      him.
  
 74
  (5)
    These
      figures include:
  ·
    1,026,780
      shares of common stock held by Fidelity Advisor Series II: Fidelity
      Advisor High Income Advantage Fund.
 ·
    55,430
      shares of common stock held by Fidelity Advisor Series I: Fidelity Advisor
      Leveraged Company Stock Fund.
 ·
    721,180
      shares of common stock held by Fidelity Securities Fund: Leveraged Company
      Stock Fund.
 
 The
Fidelity entities identified above are either an investment company or a
portfolio of an investment company registered under Section 8 of the Investment
Company Act of 1940, as amended, or a private investment account advised by
Fidelity Management & Research Company (“FMR Co.”). FMR Co. is a
Massachusetts corporation and an investment advisor registered under Section 203
of the Investment Advisers Act of 1940, as amended, and provides investment
advisory services to each of such Fidelity entities identified above, and to
other registered investment companies and to certain other funds which are
generally offered to a limited group of investors. FMR Co. is a wholly-owned
subsidiary of FMR Corp., a Delaware corporation.
  (6)
    Represents
      shares of common stock issuable upon the exercise of options that are
      exercisable within 60 days.





75





**ITEM
13.** ***Certain
Relationships And Related Transactions*** ****





**Purchases
from International Wire Group, Inc.**





In
March 2000, Viasystems, Inc. acquired the wire harness business of
International Wire Group, Inc., which at the time was an affiliate of Hicks
Muse. Our wire harness operations, in accordance with a supply agreement entered
into in connection with our acquisition of the wire harness business, purchased
an aggregate of $37.7 million of insulated wire products from International Wire
Group, Inc. in the year ended December 31, 2004. The terms of the supply
agreement are consistent with terms prevailing in an arms length transaction.
The negotiated terms of the supply agreement include the pricing, purchase
commitment, payment, quality and liability terms.




Mr.
Hamwee and Mr. Cummings, both members of our board of directors, are affiliates
of GSC. GSC owns 16.8% of International Wire Group, Inc. and Mr. Hamwee is
Chairman of the Board of International Wire Group, Inc. As of November 2004,
Hicks Muse was no longer affiliated with International Wire Group,
Inc.




Under the
terms of the purchase agreement, International Wire Group, Inc. agreed to
indemnify Viasystems. for various matters associated with the pre-acquisition
operations of the wire harness business, including product liability claims
related to hose assemblies manufactured by one of the acquired companies through
1997. Certain claims have been asserted against International Wire Group, Inc.
by insurers as subrogees of their insured homeowners with respect to property
damages arising from the failure of allegedly defective washing machine hose
assemblies manufactured by one of the acquired companies. International Wire and
its insurers have to date have defended and/or settled all such claims
consistent with their indemnity obligations. International Wire filed for
protection under Chapter 11 of the Bankruptcy Code on March 24, 2004. On
August 5, 2004, International Wire’s plan of reorganization was confirmed and on
October 20, 2004, International Wire emerged from bankruptcy. Under the terms of
International Wire’s plan of reorganization, it assumed the obligations under
its indemnity to us. While International Wire has advised us that it believes
that it will be financially capable of honoring any further claims, there can be
no assurance of the foregoing, in which case insurers could potentially assert
claims directly against one of the acquired companies.




**Stockholders
Agreement**





On
January 31, 2003, we entered into a Stockholders Agreement with certain persons
acquiring shares of Group capital stock in connection with the Reorganization,
including Hicks Muse, which controls a majority of the voting stock of Group,
and certain affiliates of GSC.




The
Stockholders Agreement provides that our board of directors will be comprised of
at least nine members as follows: our chief executive officer; five members
designated for election by affiliates of Hicks Muse; and three members
designated for election by affiliates of GSC and the other stockholder parties
to the Stockholders Agreement other than Hicks Muse. In addition, affiliates of
Hicks Muse, on the one hand, and affiliates of GSC and the other stockholder
parties to the Stockholders Agreement other than Hicks Muse, on the other hand,
have the right to jointly designate additional members to our board of
directors. The five directors designated by affiliates of Hicks Muse are Mr.
Furst, Mr. Rosen, Mr. McGinn, Mr. Vieser and Mr. Conlon. The three directors
designated by affiliates of GSC and other non-Hicks Muse stockholders are Mr.
Cummings, Mr. Hamwee and Ms. Gulyas. Mr. Steffen is a jointly nominated director
and Mr. Sindelar holds the remaining seat as our chief executive officer. The
Stockholders Agreement also provides that the compensation committee of our
board of directors will be comprised of two members designated by the Hicks Muse
board designees and one member designated by the GSC and non-Hicks Muse
stockholders’ board designees, so long as such individuals are qualified to
serve in such capacity.




To the
extent that the affiliates of Hicks Muse or the affiliates of GSC and the other
non-Hicks Muse stockholders dispose of shares of common stock held by them, such
constituency’s right to designate directors for election (and to appoint
compensation committee members) shall be reduced as follows:








76




**Percentage
      of Common Stock**
      **Disposed
      of by Affiliates of Hicks Muse**
    **Number
      of**
      **Designated**
      **Directors**
    **Number
      of**
      **Compensation**
      **Committee**
      **Members**More
      than 20% but equal to or less than 40%
    4
    2More
      than 40% but equal to or less than 60%
    3
    2More
      than 60% but equal to or less than 80%
    2
    1More
      than 80% but equal to or less than 90%
    1
    1More
      than 90%
    0
    0
 
 **Percentage
      of Common Stock**
      **Disposed
      of by Affiliates of GSC and**
      **Other
      Non-Hicks Muse Stockholders**
    **Number
      of**
      **Designated**
      **Directors**
    **Number
      of**
      **Compensation**
      **Committee**
      **Members**More
      than 30% but equal to or less than 60%
    2
    1More
      than 60% but equal to or less than 90%
    1
    1More
      than 90%
    0
    0


**Rights
Offering**





On
October 7, 2004, Group completed a Rights Offering whereby they sold 5,555,555
shares of common stock at $9.00 per share to current holders of stock. The
proceeds, net of issuance costs, of $47.1 million, was contributed to
Viasystems. In connection with such Rights Offering, Group paid certain
affiliates of GSC a commitment fee of $1.0 million. The proceeds from this
offering are being used for general working capital purposes and in the
expansion of our printed circuit board operations in China.




**Monitoring
and Oversight Agreement**





Viasystems
entered into a ten-year monitoring and oversight agreement with an affiliate of
Hicks Muse, effective as of January 31, 2003. Under the monitoring and
oversight agreement, Viasystems is required to pay Hicks Muse an annual fee,
payable quarterly, for oversight and monitoring services equal to the lesser of
(1) 2% of its consolidated EBITDA for such year and (2) $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 Hicks Muse may elect to defer
the payment of their fees, in which case these amounts will become due and
payable at such time as Hicks Muse elects to require the payment of these
obligations. The monitoring and oversight agreement makes available the
resources of Hicks Muse concerning a variety of financial and operational
matters. Historically, these services have been provided not only by Mr. Furst
and Mr. Rosen, outside the scope of their duties as our directors, but also from
numerous other principals and employees of Hicks Muse. Mr. Furst and Mr. Rosen
are each principals of Hicks Muse. Hicks Muse has performed various monitoring
and oversight services, including providing input in management’s establishment
of Viasystems’ financial and strategic acquisition plans. Hicks Muse monitors
the viability and implementation of Viasystems’ strategic plan through actions
such as review of monthly financial data, management briefings and facility
visits. Hicks Muse is also entitled to reimbursement for any expenses incurred
by it in connection with rendering services under the monitoring and oversight
agreement. In addition, Viasystems, Inc. has agreed to indemnify Hicks Muse, its
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 Hicks Muse under the monitoring and
oversight agreement and not resulting primarily from the bad faith, gross
negligence, or willful misconduct of Hicks Muse.




**Consulting
Arrangement**





In
connection with our restructuring activities, commencing December 2001,
Viasystems, Inc. engaged Katia Advisors LLC to provide sales and marketing
consulting services related to strategic marketing opportunities. Such services
were provided on a month-by-month basis and effective December 1, 2003,
Viasystems, Inc. discontinued using these services. As of December 31,
2004, Viasystems had paid Katia Advisors an aggregate of $520,000. These
services were provided by Richard McGinn, a partner of Katia and a member of our
board of directors.






77





**ITEM
14.** ***Principal
Accountant Fees and Services*** ****







The Audit
Committee has considered whether the provision by PricewaterhouseCoopers LLP of
the services covered by the audit fees is compatible with maintaining the firm’s
independence and concluded that it is compatible.






The Audit
Committee is responsible for pre-approving all auditing services and permitted
non-auditing services to be performed by the Company’s independent
auditors.  The Chairman of the Audit Committee has authority to approve in
advance all audit or non-audit services to be provided by the independent
auditors if presented to the full Audit Committee at the next regularly
scheduled meeting.






**Principal
Accounting Fees**






The
following table sets forth fees billed to the Company for the years ended
December 31, 2004 and 2003 by the Company’s principal accounting firm
PricewaterhouseCoopers LLP:




****
    
    Year
      Ended December 31,**2003**
    
    
    **2004**Audit
      fees (1)
    
    $
    599,000
    
    $
    622,300Audit
      related fees (2)
    
    
    101,000
    
    
    726,800Tax
      fees (3)
    
    
    19,943
    
    
    64,181All
      other fees
    
    
    —
    
    
    —Total
    
    $
    719,943
    
    $
    1,413,281




(1)
    Includes
      professional services rendered for the audit of the Company’s consolidated
      annual financial statements and review of financial statements in the
      Company’s reports on Form 10-Q and services normally provided in
      connection with various accounting matters.






(2)
    Includes
      professional services rendered for procedures performed in connection with
      statutory filings and review of various registration statements filed with
      the SEC.






(3)
    Includes
      professional services rendered for preparation of tax returns and
      consultation with the Company on various tax
matters






**Financial
Information Systems Design and Implementation Fees**






PricewaterhouseCoopers
LLP did not perform any services and therefore billed no fees relating to
operating or supervising the operation of the Company’s information systems or
local area network or for designing or implementing the Company’s financial
information management systems during 2004.






78




**** **PART
IV**









**ITEM
15.** ***Exhibits,
Financial Statement Schedules, and Reports on Form
8-K***





(a)  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 Schedule*





**Schedule II — Valuation and Qualifying
Accounts**


**For
the Year Ended December 31**


**(In
thousands)**




**Allowance
      for doubtful accounts**
    
    
    **Beginning****Balance**
    
    
    **Acquisitions/**
      **(Distributions)**
    ****
      ****
    
    **Charges
      to**
      **Cost**
    
    
    **Accounts**
      **written
      off**
    
    
    **Translation**
      **Adjustments**
    
    
    **Balance
      at**
      **End
      of**
      **Period**2002
    
    $
    15,654
    
    $
    (3,251
    )
    $
    3,063
    
    $
    (5,091
    )
    $
    518
    
    $
    10,8932003
    
    $
    10,893
    
    $
    (942
    )
    $
    6,259
    
    $
    (7,228
    )
    $
    1,046
    
    $
    10,0282004
    
    $
    10,028
    
    $
    (296
    )
    $
    7,699
    
    $
    (3,932
    )
    $
    328
    
    $
    13,827
 
 
 **Valuation
      Allowance for**
      **deferred
      tax assets**
    
    
    **Beginning****Balance**
    
    
    **Acquisitions/**
      **(Distributions**
    ****
      **)**
    
    **Charges
      to**
      **Cost**
    
    
    **Extraordinary**
      **Items**
    
    
    **Translation**
      **Adjustments**
    
    
    **Balance
      at**
      **End
      of**
      **Period**2002
    
    $
    526,417
    
    $
    0
    
    $
    50,235
    
    $
    0
    
    $
    0
    
    $
    576,6522003
    
    $
    576,652
    
    $
    0
    
    $
    130,635
    
    $
    0
    
    $
    0
    
    $
    707,2872004
    
    $
    707,287
    
    $
    0
    
    $
    (308,339
    )
    $
    0
    
    $
    0
    
    $
    398,948


*3.*
    *Exhibits*





The
following exhibits are filed as part of this Registration Statement or
incorporated by reference herein:




**Exhibit
      No**.
    **Exhibit
      Description**2.1
    (1)
    Prepackaged
      Joint Plan of Reorganization of Group, Inc. and Viasystems, Inc. under
      Chapter 11 of the Bankruptcy Code, dated August 30,
2002.2.1(a)
    (1)
    Amended
      Motion of Debtors for Order Approving Modification to the Debtors’
      Prepackaged Joint Plan of Reorganization, dated January 2,
      2003.3.1
    (1)
    Third
      Amended and Restated Certificate of Incorporation of Group,
      Inc.3.2
    (1)
    Amended
      and Restated Bylaws of Group, Inc.3.3
    (2)
    Amended
      and Restated Certificate of Incorporation of Viasystems, Inc.3.4
    (1)
    Amended
      and Restated Bylaws of Viasystems, Inc.4.1
    (1)
    Indenture,
      dated as of December 17, 2003, among Viasystems, Inc., the Guarantors
      party thereto, and The Bank of New York, as Trustee.4.2
    (1)
    Form
      of 10.50% Senior Subordinated Note (included as Exhibit A to the Indenture
      filed as Exhibit 4.1 hereto)
   79
  **Exhibit
      No**.
    **Exhibit
      Description**10.1
    (1)
    Credit
      Agreement, dated as of January 31, 2003, among Group, Inc.,
      Viasystems, Inc., the several banks and other financial institutions party
      thereto, and JPMorgan Chase Bank, as Administrative Agent.10.1(a)
    (1)
    First
      Amendment, dated as of March 19, 2003, to the Credit Agreement, dated
      as of January 31, 2003, among Group, Inc., Viasystems, Inc., the
      several banks and other financial institutions party thereto, and JPMorgan
      Chase Bank, as Administrative Agent.10.1(b)
    (1)
    Second
      Amendment, dated as of December 3, 2003, to the Credit Agreement,
      dated as of January 31, 2003, among Group, Inc., Viasystems, Inc.,
      the several banks and other financial institutions party thereto, and
      JPMorgan Chase Bank, as Administrative Agent.10.1(c)
    (3)
    Third
      Amendment, dated as of October 7, 2004, to the Credit Agreement,
      dated as of January 31, 2003, among Group, Inc., Viasystems, Inc.,
      the several banks and other financial institutions party thereto, and
      JPMorgan Chase Bank, as Administrative Agent10.1(d)
    (3)
    Fourth
      Amendment, dated as of March 18, 2005, to the Credit Agreement, dated as
      of January 31, 2003, among Group, Inc., Viasystems, Inc., the several
      banks and other financial institutions party thereto, and JPMorgan Chase
      Bank, as Administrative Agent10.2
    (1)
    Guarantee
      and Collateral Agreement, dated as of January 31, 2003, among Group,
      Inc., Viasystems, Inc., the subsidiaries party thereto, and JPMorgan Chase
      Bank, as Collateral Agent.10.3
    (1)
    Group,
      Inc. 2003 Stock Option Plan.10.4
    (1)
    Amended
      and Restated Executive Employment Agreement, dated October 16, 2003,
      among Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC,
      the other subsidiaries party thereto, and David M. Sindelar.10.5
    (1)
    Amended
      and Restated Executive Employment Agreement, dated January 31, 2003,
      among Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC,
      and Timothy L. Conlon.10.6
    (1)
    Amended
      and Restated Executive Employment Agreement, dated January 31, 2003,
      among Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC,
      the other subsidiaries party thereto, and David J. Webster.10.7
    (1)
    Amended
      and Restated Executive Employment Agreement, dated January 31, 2003,
      among Group, Inc., Viasystems, Inc., Viasystems Technologies Corp. LLC,
      and Joseph S. Catanzaro.10.9
    (1)
    Monitoring
      and Oversight Agreement, made and entered into effective as of
      January 31, 2003, among Group, Inc., Viasystems, Inc., the
      subsidiaries party thereto, and Hicks, Muse & Co. Partners,
      L.P.10.10
    (1)
    Registration
      Rights Agreement, dated as of December 17, 2003, among Viasystems
      International, Inc., Viasystems Milwaukee, Inc., Viasystems Technologies
      Corp. LLC, Wire Harness Industries, Inc., Wirekraft Industries, LLC,
      Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Lehman Brothers
      Inc.14.1
    (3)
    Code
      of Ethics for the Principal Executive Officer and Senior Financial
      Officers filed on Exhibit to Registrant’s Report on Form 10-K for the year
      ended December 31, 2004.21.1
    (2)
    Subsidiaries
      of the Co-Registrants.
  80
  **Exhibit
      No**.
    **Exhibit
      Description**24.1
    (2)
    Powers
      of Attorney (included in the signature pages of this registration
      statement).31.1
    (3)
    Chief
      Executive Officer’s Certification required by Rule
      13(a)-14(a).31.2
    (3)
    Chief
      Financial Officer’s Certification required by Rule
      13(a)-14(a).32.1
    (3)
    Chief
      Executive Officer Certification pursuant to 18 U.S.C. 1350, as adopted to
      section 906 of the Sarbanes-Oxley Act of 200232.2
    (3)
    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 of
      Group, Inc. filed on April 28, 2004.





(2)
    Incorporated
      reference to Registration Statement No. 333-114467 on Form S-4 of
      Viasystems, Inc. filed on July 12, 2004.





(3)
    Filed
      herewith.




**Reports
on Form 8-K**


Filed
February 14, 2005 as required by item 5.02. We announced the retirement of Mr.
Thomas Hicks from our board of directors and the addition of Mr. Jack
Furst.
 
 Filed
February 25, 2005 as required by items 2.05 and 9.01. We announced our continued
expansion in China and the closure of the three printed circuit board facilities
located in Echt, the Netherlands and Montreal, Quebec.
 
 Filed
March 24, 2005 as required by items 1.01, 2.05, 4.02 and 9.01. We announced the
amendment to our credit agreement, management’s cost estimate to close the three
western world printed circuit board facilities and the restatement of our
previously issued financial statements as of and for the three and six months
ended June 30, 2004 and the three and nine months ended September 30,
2004.





81





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, in the City of Clayton, State of
Missouri, on the 29 th day of
March, 2005.







Viasystems,
      Inc./s/
      David M. Sindelar
    
    /s/
      Joseph S. CatanzaroDavid
      M. Sindelar
    
    Joseph
      S. Catanzaro*Chief
      Executive Officer*
    
    *Senior
      Vice President and Chief Financial
Officer*




Pursuant
to the requirements of the Securities Act of 1934, this Report on Form 10-K has
been signed by the following persons in the capacities indicated on the
29thday of
March, 2005.


/s/
      Christopher J. SteffenChristopher
      J. Steffen
    
    *Chairman
      of the Board of Directors*/s/
      Jack D. FurstJack
      D. Furst
    
    *Director*/s/
      Andrew S. RosenAndrew
      S. Rosen
    
    *Director*/s/
      Robert F. Cummings, Jr.Robert
      F. Cummings, Jr.
    
    *Director*/s/
      Diane H. GulyasDiane
      H. Gulyas
    
    *Director*/s/
      Robert A. HamweeRobert
      A. Hamwee
    
    *Director*/s/
      Richard A. McGinnRichard
      A. McGinn
    
    *Director*/s/
      Richard W. VieserRichard
      W. Vieser
    
    *Director*/s/
      David M. SindelarDavid
      M. Sindelar
    
    *Chief
      Executive Officer and Director*/s/
      Timothy L. ConlonTimothy
      L. Conlon
    
    *President,
      Chief Operating Officer and Director*


82