BREED Reports First Quarter Results
17 November 1998
BREED Reports First Quarter Results
LAKELAND, Fla.--Nov. 16, 1998--BREED Technologies, Inc. , a worldwide leader in automotive occupant safety systems, today reported a net loss of $28.5 million or $0.77 per share for the first quarter ended September 30, 1998. The company previously announced that it expected to report a net loss for the quarter of between $0.75 and $0.80 per share.Net sales for the three months ended September 30, 1998, were $339.1 million, as compared to $417.7 million for the three months ended June 30, 1998. The quarter over quarter decrease in sales was primarily due to the European automotive industry's annual shutdown, the significant impact of the strike at General Motors, one of BREED's largest customers, and lower unit volumes of airbag and sensor products.
Year over year net sales for the three months ended September 30, 1998, increased 74%, as compared to the three months ended September 30, 1997, due to the acquisition of AlliedSignal Inc.'s safety restraints business in October 1997.
The company reported an operating loss of $3.0 million for the three months ended September 30, 1998, compared to operating income of $3.6 million for the three months ended June 30, 1998. In each quarter, the company was negatively impacted by the GM strike, although, the impact on the first quarter 1999 was more than double the impact on the fourth quarter 1998. In addition, operating income for the quarter ended June 30, 1998, was impacted by a $21.7 million special charge in the fourth quarter of fiscal year 1998 for acquisition related contracts. Excluding these items, the adjusted operating income was $4.8 million for the first quarter of fiscal year 1999, as compared to $28.8 million in the fourth quarter of fiscal year 1998, reflecting a shortfall of $24.0 million in the operating results.
The decrease in the quarter over quarter adjusted operating income of $24.0 million is attributable to (a) $8.3 million due to the loss of throughput from the annual European shutdown in August, (b) an $8.4 million shortfall in anticipated cost savings from the company's repositioning program, (c) an additional $2.2 million related to customer support activities caused by the product launches and (d) $5.1 million due to lower sales volumes of airbag products and electromechanical sensors.
The company made a second voluntary prepayment of $19.0 million toward outstanding term loan balances under the secured credit facility in the first quarter. Since the credit facility was completed in April 1998, BREED has made a total of $37 million in voluntary prepayments toward the outstanding term loan balances.
The company's total debt decreased from $898.0 million at June 30, 1999, to $876.9 million at September 30, 1998.
"The unprecedented number of product launches we supported in the first quarter affected the pace of our repositioning program. The long-term growth anticipated for our company is dependent upon the successful introduction of new products and technologies to our customers' platforms. Our reallocation of resources during the first quarter was appropriate and is evidence of our commitment to customer service," commented Vice Chairman, President and Chief Operating Officer Charles J. Speranzella, Jr. "However, the management of this company is equally committed to improving our operating results and has developed a preliminary recovery plan designed to put the repositioning program back on course."
Headquartered in Lakeland, Fla., BREED is one of the world's most fully integrated suppliers of complete automotive occupant safety systems. The company supports its growing list of automotive customers with advanced engineering, testing and manufacturing facilities located in 13 countries around the globe.
Caution on Forward-Looking Statements
Statements herein regarding the expected future operating performance and the company's repositioning program constitute forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. With respect to the anticipated progress under the recovery program, management has made certain assumptions regarding its ability to implement the program as well as on the expected results, which may change or be affected by, among other things, customer demands and difficulties with product launches. Statements herein regarding the expected future operating performance and the company's repositioning program are also subject to risks relating to, among other things, possible higher costs associated with product launches, difficulties in integrating acquired businesses, deterioration of relationships with material customers, possible significant product liability claims, decreases in demand for the Company's products, and adverse changes in general market and industry conditions. Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on such forward-looking statements, which are based on current expectations.
BREED Technologies, Inc.
Consolidated Condensed Statements of Earnings (Unaudited)
In millions, except earnings per share and share data
Three months ended
September 30,
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1998 1997
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Net sales $ 339.1 $ 195.2
Cost of sales 291.7 166.9
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Gross profit 47.4 28.3
Operating expenses:
Selling, general and
administrative expenses 20.9 16.2
Research, development and
engineering expenses 23.7 8.9
Amortization of intangibles 5.8 2.0
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Total operating expenses 50.4 27.1
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Operating income (loss) (3.0) 1.2
Interest expense 22.1 8.4
Other income (expense), net 1.0 (0.4)
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Earnings (loss) before income
taxes and distributions
on Company obligated mandatorily
redeemable convertible preferred
securities (24.1) (7.6)
Income tax (benefit) -- (3.4)
Distributions on Company
obligated mandatorily redeemable
convertible preferred securities 4.4 --
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Net (loss) $ (28.5) $ (4.2)
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Net (loss) per common share $ (0.77) $ (0.13)
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Net (loss) before one-time costs:
Net (loss) $ (28.5) $ (4.2)
One-time costs:
GM strike, net of tax 7.8 --
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Net (loss) before one-time costs $ (20.7) $ (4.2)
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Net (loss) per common share
before one-time costs $ (0.56) $ (0.13)
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Average Shares Outstanding 36,850 31,682
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Depreciation and amortization $ 18. $ 12.7
Capital Expenditures $ 18.5 $ 6.9