Collins & Aikman Reports Q2 Financial Results
23 July 1998
Collins & Aikman Reports Second Quarter Financial Results
CHARLOTTE, N.C., July 23 -- Collins & Aikman Corporation
announced today that its operating profit for the second quarter
of 1998 was $23.7 million compared to $42.2 million for the comparable 1997
period. EBITDA from continuing operations for the second quarter of 1998 was
$39.7 million versus $56.0 million in the 1997 second quarter.
"We experienced a number of adverse factors in the quarter which impacted
our earnings," said Thomas Hannah, Chief Executive Officer of Collins &
Aikman. "The General Motors strike, volume declines and program run-outs at
our Automotive Fabrics Group, manufacturing inefficiencies at our Automotive
Carpet & Acoustics Group, and other factors combined to penalize earnings this
quarter."
Approximately 2,500 of the Company's 15,200 employees are currently on
temporary layoff due to the GM strike. Of those, approximately 150 Automotive
Fabrics Group, 600 Automotive Carpet & Acoustics Group, 1,550 C&A Plastics and
105 Akro employees are laid off due to the strike.
"The increasing diversification of our customer base and our ongoing
globalization helped minimize the effect of the strike. However, our plastics
operations in Michigan and Canada were hit hard, temporarily laying off 62
percent of their hourly workforce," Hannah said. "Our management teams are
doing all they can to work with the employees during this time."
Sales from continuing operations were $463.3 million for the second
quarter ended June 27, 1998, up 11 percent, or $47.3 million, over the
comparable period of 1997. The increase was driven primarily by the Company's
recent acquisitions of acoustics operations in Sweden, Belgium and Germany, as
well as its new plastics operations in the United Kingdom.
The Company's sales were impacted in the second quarter by approximately
$18 million due to the GM strike. Translation of foreign revenues negatively
affected sales by approximately $3 million compared to second quarter 1997,
due to the stronger U.S. dollar. Sales for the Automotive Fabrics Group were
down by approximately $15 million.
In the second quarter of 1998, the Company recorded an inventory
adjustment of $2.0 million at its Akro subsidiary. The Company also increased
its receivables reserves by $1.6 million for the Automotive Fabrics Group and
Collins & Aikman Plastics, due to financial difficulties at a customer.
Other expense for the second quarter of 1998 included foreign exchange
losses totaling $3.4 million, related principally to the strengthening U.S.
dollar versus the Canadian dollar.
Net loss from continuing operations for the second quarter was $482
thousand, or $(0.01) per share, compared to net income of $0.17 per share from
continuing operations in the 1997 second quarter.
An extraordinary charge of $3.7 million, after tax, or approximately
$(0.05) per share, was recorded in the second quarter of 1998 in connection
with the refinancing of the Company's bank facilities.
For the second quarter of 1998, the Company reported a net loss of $4.2
million, or $(0.06) per share compared to net income of $.22 per share in
second quarter 1997.
For the six months ended June 27, 1998, sales from continuing operations
totaled $941.5 million, up 13 percent from $831.6 million, in the first six
months of 1997. Operating profit for continuing operations for the first six
months of 1998 was down $19.0 million to $63.2 million. EBITDA from
continuing operations for the first six months of 1998 was $97.0 million,
compared to $109.8 million for the first six months of 1997.
Net income for the six months ended June 27, 1998, was $4.5 million, or
$0.07 per fully diluted common share, compared to $1.66 per share for the
first six months of 1997, which included an after-tax gain of $85.3 million on
the sale of the Company's Floorcoverings subsidiary.
The Company stated that as the General Motors strike continues, sales for
the third quarter could be affected by approximately $50 million in revenues
per month.
Other Second Quarter Highlights
Carpet & Acoustics
Molded carpet revenues increased 11 percent to $107.6 million for the
second quarter, strengthened by strong sales on the Dodge Durango, Cadillac
Seville, Toyota Sienna, Nissan Sentra, Rover Freelander and the Honda Accord.
Acoustic products sales increased 47 percent over the second quarter of
1997 to $57.6 million, driven by the acquisitions of acoustic operations in
Germany and of our partner's joint venture interest in Sweden and Belgium, as
well as year over year sales increases from the balance of the Company's
acoustics operations in the U.S., Canada and Europe.
Luggage compartment trim sales were down 8 percent, to $24.2 million, in
the 1998 second quarter on lower volumes on the Honda Accord, Buick Century
and the discontinued Ford Thunderbird.
The second quarter of 1998 reflects some costs associated with the
recently-completed wind-down of the Company's Salisbury, NC, operations, which
were relocated into its Parker plant in Greenville, SC.
Automotive Fabrics
Sales of automotive bodycloth were $57.7 million in the second quarter of
1998, compared to $70.2 million in the second quarter last year. The Company
stated that the shortfall is due to four program run-outs, an unfavorable
sales mix on several models, a decrease in build on several key vehicles, and
the increased demand for leather applications as a trim option rate,
particularly with General Motors.
"We believe this higher level of demand for leather will continue for the
next several years, fueled by dealer strategies, consumer preference and the
increasing popularity of leasing, which makes higher trim level vehicles more
affordable. As a result, we are adjusting our expectations accordingly,"
Hannah said.
Convertible Systems
Sales of convertible top systems increased $3.5 million, or 12 percent, in
the second quarter of 1998 as compared to the same period of 1997. Volumes
increased substantially in the second quarter on the Ford Mustang, Alfa Romeo
Spider, Plymouth Prowler and Chevrolet Corvette convertibles.
Plastics
Worldwide sales for our plastic-based interior trim systems were $105.3
million in the 1998 second quarter versus $73.3 million in the same period
last year, primarily driven by revenues from our recent acquisitions in
Sweden, Belgium and the U.K. Revenues were also up in North America, with
increased volumes on the Cadillac Seville, the Chevrolet Cavalier/Pontiac
Sunfire, and the Lincoln Continental.
Accessory Mats
Sales of accessory floormats increased approximately $2.8 million to $33.7
million for the second quarter of 1998. Strong cargo mat sales to GM for the
Suburban and Tahoe and to Ford for the Explorer contributed the majority of
the increase.
This press release, other than historical financial information, contains
forward-looking statements that involve a number of risks and uncertainties.
Important factors that could cause actual results to vary materially from
those anticipated in the forward-looking statements are set forth in Collins &
Aikman's Securities and Exchange filings, including, without limitation, in
Items 1 and 7 of the Company's Annual Report on Form 10-K for the fiscal year
ended December 27, 1997 and Report on Form 10-Q for the quarter ended
March 28, 1998.
Collins & Aikman Corporation is a global supplier of automotive interior
systems, including textile and plastic trim, acoustics and convertible top
systems. Headquartered in Charlotte, NC, the Company's recent acquisitions
have significantly expanded Collins & Aikman's product offering and
international presence. The company employs more than 15,000 employees and
operates 65 manufacturing facilities in 12 countries.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
Quarter Ended
June 27, 1998 June 28, 1997
Net sales $ 463,335 $ 416,018
Cost of goods sold 401,459 343,829
Selling, general and
administrative expenses 38,215 30,030
439,674 373,859
Operating income 23,661 42,159
Interest expense, net 19,434 19,305
Loss on sale of receivables 1,682 1,562
Other expense 3,485 501
Income (loss) from continuing operations
before income taxes (940) 20,791
Income tax expense (benefit) (458) 9,191
Income (loss) from continuing operations (482) 11,600
Income from discontinued operations, net of
income taxes -- 3,881
Gain on sale of discontinued operations, net
of income taxes -- --
Income (loss) before extraordinary loss (482) 15,481
Extraordinary loss, net of income taxes (3,679) (721)
Net income (loss) $ (4,161) $ 14,760
Net income (loss) per basic common share:
Continuing operations $ (.01) $ .17
Discontinued operations -- .06
Gain on sale of discontinued operations -- --
Extraordinary loss (.05) (.01)
Net income (loss) $ (.06) $ .22
Net income (loss) per diluted common share:
Continuing operations $ (.01) $ .17
Discontinued operations -- .06
Gain on sale of discontinued operations -- --
Extraordinary loss (.05) (.01)
Net income (loss) $ (.06) $ .22
Average common shares outstanding:
Basic 65,447 66,144
Diluted 65,447 67,485
EBITDA $ 39,663 $ 55,971
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
Six Months Ended
June 27, 1998 June 28, 1997
Net sales $ 941,475 $ 831,578
Cost of goods sold 802,377 689,144
Selling, general and
administrative expenses 75,924 60,256
878,301 749,400
Operating income 63,174 82,178
Interest expense, net 39,913 38,084
Loss on sale of receivables 3,306 2,763
Other expense 3,725 972
Income (loss) from continuing operations
before income taxes 16,230 40,359
Income tax expense (benefit) 8,034 17,494
Income (loss) from continuing operations 8,196 22,865
Income from discontinued operations, net of
income taxes -- 4,802
Gain on sale of discontinued operations, net
of income taxes -- 85,292
Income (loss) before extraordinary loss 8,196 112,959
Extraordinary loss, net of income taxes (3,679) (721)
Net income (loss) $ 4,517 $ 112,238
Net income (loss) per basic common share:
Continuing operations $ .12 $ .34
Discontinued operations -- .07
Gain on sale of discontinued operations -- 1.28
Extraordinary loss (.05) (.01)
Net income (loss) $ .07 $ 1.68
Net income (loss) per diluted common share:
Continuing operations $ .12 $ .34
Discontinued operations -- .07
Gain on sale of discontinued operations -- 1.26
Extraordinary loss (.05) (.01)
Net income (loss) $ .07 $ 1.66
Average common shares outstanding:
Basic 65,574 66,634
Diluted 66,392 67,823
EBITDA $ 97,013 $ 109,801
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
June 27, December 27,
ASSETS 1998 1997
Current Assets:
Cash and cash equivalents $ 20,323 $ 24,004
Accounts and notes receivable, net 200,913 198,125
Inventories 157,300 142,042
Net assets of discontinued operations -- 53,004
Other 108,912 92,116
Total current assets 487,448 509,291
Property, plant and equipment, net 412,951 388,087
Deferred tax assets 59,593 59,293
Goodwill, net 271,313 263,007
Other assets 84,135 82,714
$ 1,315,440 $ 1,302,392
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable $ 1,531 $ 1,314
Current maturities of long-term debt 18,107 30,301
Accounts payable 137,495 135,468
Accrued expenses 160,570 148,201
Total current liabilities 317,703 315,284
Long-term debt 780,812 752,376
Other, including postretirement
benefit obligation 283,342 301,582
Commitments and contingencies
Common stock (150,000 shares authorized,
70,521 shares issued and 64,972 shares
outstanding at June 27, 1998 and 70,521
shares issued and 65,851 outstanding at
December 27, 1997) 705 705
Other paid-in capital 585,490 585,890
Accumulated deficit (572,334) (576,851)
Accumulated other comprehensive income (36,962) (39,823)
Treasury stock, at cost (5,549 shares
at June 27, 1998 and 4,670 shares at
December 27, 1997) (43,316) (36,771)
Total common stockholders' deficit (66,417) (66,850)
$ 1,315,440 $ 1,302,392
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Quarter Ended
June 27, June 28,
1998 1997
OPERATING ACTIVITIES
Income (loss) from continuing operations $ (482) $ 11,600
Adjustments to derive cash flow from
continuing operating activities:
Deferred income tax expense (benefit) (868) 3,240
Depreciation and leasehold amortization 12,785 10,611
Amortization of goodwill 1,766 1,613
Amortization of other assets 2,183 1,562
Decrease (increase) in accounts and
other receivables 22,897 (19,829)
Increase in inventories (3,124) (3,783)
Decrease (increase) in other current
assets 1,812 2,328
Increase in other non-current assets (2,833) (1,896)
Increase (decrease) in accounts payable (15,453) 7,400
Decrease in interest payable (15,636) (14,370)
Other, net (23,252) (5,629)
Net cash provided by (used in)
continuing operating activities (20,205) (7,153)
Cash provided by (used in) Wallcoverings,
Floorcoverings, Airbag and the Mastercraft
Group discontinued operations -- 5,049
Cash used in other discontinued operations (4,801) (1,027)
Net cash provided by (used in)
discontinued operations (4,801) 4,022
INVESTING ACTIVITIES
Additions to property, plant and equipment (22,773) (18,099)
Sales of property, plant and equipment 186 443
Proceeds from disposition of discontinued
operations -- --
Acquisition of businesses, net of cash
acquired (1,003) --
Other, net 5,646 (18,694)
Net cash provided by (used in)
investing activities (17,944) (36,350)
FINANCING ACTIVITIES
Issuance of long-term debt 283,509 --
Repayment of long-term debt (236,848) (32,948)
Proceeds from sales (reduction)
of a participating interest in
accounts receivables, net of redemptions (2,000) 30,000
Net borrowings (repayments) on revolving
credit facilities 10,000 35,000
Purchase of treasury stock (4,481) (4,426)
Proceeds from exercise of stock options -- 189
Other, net (1,773) (2,109)
Net cash provided by (used in)
financing activities 48,407 25,706
Net increase (decrease) in cash and cash
equivalents 5,457 (13,775)
Cash and cash equivalents at beginning of
period 14,866 26,196
Cash and cash equivalents at end
of period $ 20,323 $ 12,421
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 27, June 28,
1998 1997
OPERATING ACTIVITIES
Income (loss) from continuing operations $ 8,196 $ 22,865
Adjustments to derive cash flow from
continuing operating activities:
Deferred income tax expense (benefit) 3,430 6,784
Depreciation and leasehold amortization 27,005 21,480
Amortization of goodwill 3,539 3,457
Amortization of other assets 4,522 3,443
Decrease (increase) in accounts and other
receivables 16,058 6,288
Increase in inventories (12,053) (4,374)
Decrease (increase) in other current
assets (19,319) 4,647
Increase in other non-current assets (12,377) (1,993)
Increase (decrease) in accounts payable (13,374) 7,642
Decrease in interest payable (2,092) (787)
Other, net (463) (9,603)
Net cash provided by (used in) continuing
operating activities 3,072 59,849
Cash provided by (used in) Wallcoverings,
Floorcoverings, Airbag
and the Mastercraft Group discontinued
operations (15,052) 5,886
Cash used in other discontinued operations (7,802) (4,728)
Net cash provided by (used in)
discontinued operations (22,854) 1,158
INVESTING ACTIVITIES
Additions to property, plant and equipment (49,505) (34,850)
Sales of property, plant and equipment 3,924 772
Proceeds from disposition of discontinued
operations 71,200 195,600
Acquisition of businesses, net of cash
acquired (20,239) --
Other, net 3,537 (36,754)
Net cash provided by (used in)
investing activities 8,917 124,768
FINANCING ACTIVITIES
Issuance of long-term debt 283,509 4,495
Repayment of long-term debt (264,689) (42,180)
Proceeds from sales (reduction) of
a participating interest in
accounts receivables, net of redemptions (3,000) 12,000
Net borrowings (repayments) on revolving
credit facilities -- (144,000)
Purchase of treasury stock (6,545) (16,237)
Proceeds from exercise of stock options -- 328
Other, net (2,091) (2,074)
Net cash provided by (used in)
financing activities 7,184 (187,668)
Net increase (decrease) in cash and cash
equivalents (3,681) (1,893)
Cash and cash equivalents at beginning of
period 24,004 14,314
Cash and cash equivalents at end of
period $ 20,323 $ 12,421