Safety Components Comments on Third Quarter Performance
11 January 1999
Safety Components Comments on Third Quarter Performance; Review of Strategic Alternatives
FORT LEE, N.J., Jan. 11 -- Safety Components International,
Inc. , one of the world's leading manufacturers of automotive
airbag fabric and cushions, today announced that it expects its results for
the third quarter ended December 26, 1998 to be significantly below
expectations and that the Company expects to incur a loss for such quarter.
It is anticipated that actual results for the quarter will be reported on or
about February 9, 1999. Based on current estimates, the Company expects to
report a loss in the range of $4.3 million to $4.8 million or $.83 to $.92 per
share for the third quarter, of which in excess of 80% consisted of
nonrecurring provisions associated with the write-off of certain assets and
other one-time costs.
Robert A. Zummo, President and Chief Executive Officer of the Company,
stated: "In the latest quarter, the Company experienced unusual start-up
costs in manufacturing airbags for new automobile platforms in connection with
orders recently received from a new customer in North America and an existing
customer in Europe. We expect profit pressures to continue in the next two
fiscal quarters as a result of continued cost overruns, and believe that our
manufacturing costs will return to historical levels by the second quarter of
fiscal 2000. Most of our loss for the third quarter, however, resulted from
certain one-time charges, which include charges relating to the transfer of
the Company's passenger airbag manufacturing operations in its German facility
to its lower labor costs facility in the Czech Republic, a contract dispute
and losses from a write-off of certain assets."
Mr. Zummo further stated that: "The Company expects to achieve record
sales for its fiscal year ended March 31, 1999, and based on current and
anticipated program delivery commitments, sales in fiscal 2000, commencing in
the first fiscal quarter, are expected to be significantly higher than fiscal
1999 levels. In connection with meeting the ramp-up requirements for delivery
of such commitments in fiscal 2000 and beyond, the Company plans to commence
construction of a new facility in Poland and to expand capacity in its
existing facilities. Capital requirements needed for current operations and
planned growth may require the Company to revise its existing credit
agreements and to raise additional equity capital.
Mr. Zummo also stated that "The Company's investment banker, BT
Wolfensohn, a division of BT Alex Brown, Inc., has been reviewing strategic
alternatives for the Company, including the possible sale of the Company or
the placement of additional equity and debt capital. As part of such review,
indications of interest from prospective purchasers have been solicited. The
Company has received an indication of interest from a prospective purchaser at
$12 per share, which would require me and possibly other members of senior
management to retain a portion of our equity interest in the Company. A
Special Committee of the Company's Board of Directors has been reviewing all
such alternatives. Of course, there can be no assurance that any transaction
will be consummated.
Safety Components International, Inc. is a leading, low cost supplier of
automotive airbag fabric and cushions and metal airbag components with
operations in North America, Europe and Asia. The Company is also a leading
manufacturer of value-added synthetic fabrics used in a variety of niche
industrial and commercial applications as well as a systems integrator and
manufacturer for military ordnance programs.
This release contains forward-looking statements. There are certain
important factors that could cause results to materially differ from those
anticipated from the statements above. These factors include, but are not
limited to: worldwide economic conditions; automotive industry trends; the
marketplace for airbag related products; approval of automobile manufacturers
of airbag cushions currently in production; pricing pressures; the ability of
the Company to raise capital and to effectively control costs and the ability
to satisfy the Company's customers in timeliness and quality. Additional
information on these and other factors that could potentially affect the
Company's financial results may be found in the Company's filings with the
Securities and Exchange Commission.