Safety Components International Announces Fiscal 1999 Q3 Results
9 February 1999
Safety Components International, Inc. Announces Fiscal 1999 Third Quarter Results
FORT LEE, N.J., Feb. 8 -- Safety Components International,
Inc. , one of the world's leading manufacturers of automotive
airbag fabric and cushions, today reported results for the third quarter and
nine months ended December 26, 1998. Sales for the quarter increased
$13,686,000 to $61,056,000 from $47,370,000 for the previous year's comparable
quarter. The Company reported a net loss of $3,772,000, or $O.73 per diluted
share, for the quarter, compared to net income of $1,386,000, or $0.27 per
diluted share, for the same period in the prior year.
Sales for the nine months ended December 26, 1998, increased
$47,837,000 to $165,564,000 from $117,727,000 for the comparable period in the
prior year. The Company reported a net loss of $2,070,000, or $O.40 per
diluted share, for the nine months compared to net income of $4,103,000, or
$0.80 per diluted share, for the same period in the prior year.
Earnings before interest, taxes, depreciation and amortization (EBITDA),
before giving effect to one-time charges fell $2,023,000 to $4,693,000, or
$.90 per diluted share, for the third quarter of fiscal 1999, compared to
$6,716,000, or $1.29 per diluted share, in the comparable 1998 quarter.
EBITDA (before one-time charges) for the nine-month period increased
$3,129,000, to $19,733,000 or $3.79 per diluted share from $16,604,000, or
$3.24, per diluted share for the same period in the prior year. The one-time
charges include: the transfer of the Company's labor-intensive passenger
airbag manufacturing operations in its German facility to its lower labor cost
facility in the Czech Republic, a contract dispute and losses from a write-off
of certain assets.
During the third quarter the Company reevaluated its decision to exit the
manufacturing of airbags in Hildesheim, Germany. The original plan called for
the transfer of the entire manufacturing operation to the Company's Czech
Republic and United Kingdom production facilities. While the Company
accomplished the move of substantially all of the labor-intensive passenger
airbags, the Company has now decided not to move the remaining automated
airbags, primarily driver and side impact bags. The Company has identified a
new facility within Germany near the existing facility. The decision to
remain in Germany is based on current and anticipated program delivery
commitments. The Company believes this new facility will be more cost
effective than the existing German facility, and the Company will be able to
retain a majority of its employees thereby leaving intact a knowledge base on
current and anticipated airbag platforms. Upon reviewing in greater detail
the costs associated with the move, the Company decided it more appropriate to
charge $1,204,000 to the second quarter of fiscal year 1999 thereby reducing
net income for such quarter by $649,000 or $0.13 per diluted share to
$158,000 or $0.03 per diluted share. These costs had been previously charged
against established reserves for exit costs. In addition, the Company plans
to open a new facility in Eastern Europe to expand its capacity in Europe to
meet the requirements of recent customer awards.
Robert A. Zummo, president and chief executive officer of Safety
Components International, stated, "In fiscal year 1998, we shipped 6.6 million
airbag cushions and expect to ship in excess of 10.0 million units in fiscal
year 1999 and in excess of 16.0 million units in fiscal year 2000. We will be
producing at an annual rate of approximately 14.0 million units by the end of
this fiscal year, having more than doubled production in North America and
Europe over the prior fiscal year. Our management team is executing plans to
return margins to historical levels on this increased volume and the ramp up
difficulties are abating. The Metal Components Group's revenues have not
increased as expected; however, we are introducing newly developed proprietary
products to the automotive aftermarket and expect these products to increase
revenues and improve margins for this group in fiscal year 2000."
"We have met these challenges before," continued Zummo, "as the Company
has grown from $22.4 million of revenues and $1.1 million of EBITDA in fiscal
year 1994 to over $194.6 million in proforma revenues and $28.9 million of
proforma EBITDA in fiscal year 1998. While I am disappointed by the ramp up
inefficiencies in this fiscal year, my confidence in returning to our
historical margins is high."
As announced on January 11, the Company is continuing to explore through
its investment bankers, BT Wolfensohn, a division of BT Alex. Brown, certain
strategic alternatives including the possible sale of the Company or the
placement of equity securities. The Company anticipates being in a position
to select one of the alternatives in the near-term, although there can be no
assurance that any transaction will be consummated.
"The Company's Board of Directors expects to make a decision in the
near-term on the direction of our review of strategic alternatives," stated
Mr. Zummo. "We expect to choose an alternative that will increase shareholder
value by providing both the capital needed to meet forecasted internal growth
as well as provide capital to further vertically integrate the Company. Our
vision remains becoming a low-cost global supplier of airbag fabric and
cushions."
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: the ability to obtain financing to fund growth; the ability to
sell the newly developed products of the Metal Components Group; 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
effectively control costs and to satisfy our customers on 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.
Safety Components International, Inc. is a leading, low-cost supplier of
automotive airbag fabric and cushions 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. In
addition, Safety Components supplies metal airbag components to its airbag
customers utilizing its machining and stamping capabilities gained from years
of experience as a military ordnance manufacturer and continues as a systems
integrator and manufacturer for ordnance programs.
Safety Components International, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
Thirteen Three
Weeks Ended Months Ended
December 26, 1998 December 31, 1997
Net sales $61,056 $47,370
Cost of sales,
excluding depreciation 54,356 38,370
Depreciation 2,049 1,517
Gross profit 4,651 7,483
Selling and marketing expenses 1,005 357
General and
administrative expenses 4,752 1,927
Amortization of goodwill 612 474
Income (loss) from operations (1,718) 4,725
Other (income) expense, net 1,136 (10)
Interest expense 3,192 2,726
Income (loss) before
income taxes (6,046) 2,009
Provision (benefit)
for income taxes (2,274) 623
Net income (loss) $(3,772) $1,386
Net income (loss)
per share, diluted $(0.73) $0.27
Weighted average number of
shares outstanding, diluted 5,200 5,188
EBITDA $4,693 $6,716
EBITDA per share $0.90 $1.29
Safety Components International, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
Thirty-nine Weeks Nine
Ended Months Ended
December 26, 1998 December 31, 1997
Net sales $165,564 $117,727
Cost of sales, excluding
depreciation 138,614 93,632
Depreciation 5,726 3,655
Gross profit 21,224 20,440
Selling and marketing expenses 2,480 1,268
General and
administrative expenses 9,691 6,223
Amortization of goodwill 1,747 1,063
Income from operations 7,306 11,886
Other (income) expense, net 1,213 79
Interest expense 8,989 5,373
Income (loss) before
income taxes (2,896) 6,434
Provision (benefit) for
income taxes (826) 2,331
Net income (loss) $(2,070) $4,103
Net income (loss)
per share, diluted $(0.40) $0.80
Weighted average number of
shares outstanding, diluted 5,206 5,125
EBITDA $19,733 $16,604
EBITDA per share $3.79 $3.24