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Viasystems adds net sales increase YoY

Viasystems Group, Inc. announced net sales of USD 295.9 million in the quarter ended March 31, 2014, a year-over-year increase of 8.4%, and a seasonal sequential decrease from the immediately preceding quarter of (2.5)%.
‚ÄüWhile the markets we serve did not demonstrate any significant strength, and in some instances declined both year-over-year and sequentially, we were able to generate net sales and earnings in line with our first quarter expectations," noted Viasystems' CEO David M. Sindelar. ‚ÄüIt is difficult to draw many trend conclusions from our consolidated first quarter results as they were impacted by very weak demand leading up to the Chinese New Year holiday period, which was compounded by the effects of production shutdowns during the holiday period. Nonetheless, one conclusion that is clear is that our Assembly segment continues to struggle to find an optimum cost base in this period of inconsistent demand. Finding greater demand consistency and greater cost flexibility in that segment remains one of the most pressing matters for our management team to address in the near term."

‚ÄüIn terms of our end markets," continued Mr. Sindelar, ‚Äüour automotive, telecommunications, and military and aerospace sectors performed as expected. The only real trend change we are seeing is a broad softness in demand from our computer and data communications end market. Market intelligence gathered from our customers and suppliers suggests that what we are experiencing is consistent with the market in general, though we seem to hear slightly different reasons from each source. We are also addressing some customer-specific softness of demand in our industrial & instrumentation end market, but those appear to be more concentrated."

‚ÄüLooking forward," continued Mr. Sindelar, ‚ÄüI expect both sequential and year-over-year sales growth for our second quarter. In addition, as we continue to target a return to our historical gross margin rates by the end of this year, I expect to see almost a full point of sequential gross margin improvement compared to our consolidated first quarter result."

Financial Results

The company reported net sales of $295.9 million for the three months ended March 31, 2014. The year-over-year increase of 8.4% was primarily the result of increased demand for printed circuit boards from the company's automotive and telecommunications end markets, and for electromechanical solutions products from each of the company's end markets.

The company attributes this to the effects of

i) the recovery of the Printed Circuit Boards segment capacity that was unavailable in the same quarter in the prior year following the September 2012 fire in a company factory in China,
ii) additional Printed Circuit Boards segment capacity due to investments made in 2013 at our primary factory in China serving the automotive end market, and
iii) additional sales in the Assembly segment to a new telecommunications customer. Sequentially, net sales decreased (2.5)% in comparison to the fourth quarter of 2013.

The seasonal sequential sales decrease was driven by the adverse effects of the Chinese New Year on both

i) customer demand and
ii) factory production capacity, resulting in reduced product shipments into all markets except the company's industrial & instrumentation and military and aerospace end markets.

Operating income was $5.5 million, or 1.9% of net sales, in the three months ended March 31, 2014, compared with $2.6 million, or 0.9% of net sales, for the first quarter of 2013, and compared with $11.7 million, or 3.9% of net sales, for the three months ended December 31, 2013.

Adjusted EBITDA, on a non-GAAP basis, was $31.0 million, or 10.5% of net sales, for the three months ended March 31, 2014, compared with $29.5 million, or 10.8% of net sales, for the first quarter of 2013, and compared with $37.9 million, or 12.5% of net sales, for the three months ended December 31, 2013. A reconciliation of operating income to Adjusted EBITDA is provided at the end of this news release.

For the three months ended March 31, 2014, net loss was $(9.4) million, of which $(9.5) million was attributable to common stockholders, and resulted in $(0.47) of loss per basic and diluted share. Adjusted EPS, on a non-GAAP basis, for the three months ended March 31, 2014, was a loss of $(0.26).
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