Collins & Aikman Reports First Quarter 1999 Operating Results
22 April 1999
Collins & Aikman Reports First Quarter 1999 Operating Results And Issues Update on Plan to Reorganize Operations
CHARLOTTE, N.C., April 22 -- Collins & Aikman Corporation
announced today that its sales for the first quarter ended
March 27, 1999, were relatively unchanged at $478.3 million, compared to
$478.1 million for the first quarter of 1998.
EBITDA for the first quarter of 1999 was $47.1 million versus
$57.4 million in the 1998 comparable period. Operating profit was
$29.8 million for the first quarter of 1999, compared to $39.5 million for the
comparable 1998 period.
"The first quarter of 1999 was very strong for new business bookings in
all three of our divisions," said Thomas E. Hannah, Chief Executive Officer of
Collins & Aikman. "We received more than 15 new and incremental business
awards in our Europe Automotive Interior Systems division for carpet,
acoustics, plastics and accessory floormats. And in North America, the
industry's movement from sourcing components to modules and entire systems is
evident in our new business wins for carpet and acoustics systems for Saturn
and Honda. We are also seeing continued strength in new orders for years 2001
-- 2003 in our automotive seat fabric business."
The Company adopted a new accounting standard in the first quarter of
1999, which covers reporting the costs of start-up activities. The impact of
adopting the standard was a charge of $8.8 million, net of taxes, in the first
quarter of 1999 and is reflected as a cumulative effect of a change in
accounting principle.
Net income for the first quarter of 1999, before the change in accounting
principle, was $2.3 million, or $0.04 per share, compared to $8.7 million, or
$0.13 per share, for the first quarter of 1998.
Reorganization Plan Update
In February 1999, Collins & Aikman announced a comprehensive plan to
reorganize its business and position the Company for long-range success in the
global automotive interior trim market.
"Because the industry is moving toward the supply of systems rather than
components and increasingly emphasizing global platforms, a key goal of this
reorganization is to better serve our customers through the global and
seamless interfacing of our interior trim product lines," Hannah said. "In
spite of the initial successes of our reorganization plan, our operating
results this quarter were disappointing. Nonetheless, we are confident that
the ultimate reorganization will enhance shareholder value through improved
operating results. As announced earlier today, I am retiring and my
successor, Tom Evans, is extremely well-qualified to direct our Company to its
goal of capitalizing on our leading positions in the global automotive
interior trim market."
The Company said that Mr. Evans intends to review the reorganization plan,
and that it currently expects to take the previously anticipated restructuring
charge in the second or third quarter of 1999.
Other First Quarter Highlights
North America Automotive Interior Systems
Sales for the North America Automotive Interior Systems division were up
four percent to $284 million, driven by revenue increases at its carpet,
acoustics and plastics operations.
Molded carpet revenues increased $5.8 million to $101.3 million, on sales
increases for a number of Acura, Chrysler, Ford and Toyota models.
Acoustical product revenues increased 25 percent to $28.3 million on models
for Ford, Chrysler and Mercedes, while luggage compartment trim sales declined
$4.8 million, on lower volumes to Chrysler and General Motors.
Accessory floormat sales decreased $4.4 million, on volume declines for
several Chrysler and Mazda models, offset by higher than expected volumes on
the Ford Explorer and several other key models for Toyota and Volvo. A
program run-out on a Subaru model also contributed to the decline in first
quarter 1999 sales, when compared to the first quarter of 1998.
Revenues for plastics-based interior trim systems increased $3.2 million
in the first quarter of 1999, driven by strong sales to General Motors.
New business was won in the first quarter of 1999 for the North American
division on a number of vehicles, including acoustics business in Mexico for a
new Chrysler program.
The Company also announced new business awards for its accessory floormats
products, including Toyota, Volvo, Honda and Jeep year 2000 vehicles and for
three special Ford vehicle programs for shipment to Europe.
The Company announced that its new headquarters facility for the North
America Interior Systems division in the metro-Detroit area is expected to be
completed in September.
"Since our announcement on the plan of reorganization in February, we have
made progress in several key areas, including consolidation of our interior
trim sales and program management force in North America in metro-Detroit.
With the completion of the new building, we will add the finishing touch to
the extensive progress we have already made in creating focused OEM customer
service teams," Hannah said. "These teams, comprised of marketing, sales,
design, engineering and program management personnel, have already been
extremely well-received by our customers, and are beginning to make
significant contributions to the success of Collins & Aikman."
Europe Automotive Interior Systems
Sales for the Europe Automotive Interior Systems division were down five
percent to $81.9 million as build for a number of vehicles was lower than
expected.
Molded carpet revenues were $12.8 million, up 31 percent, driven mainly by
sales to Rover, Toyota and General Motors in the U.K. and to Chrysler in
Austria.
Acoustical product revenues were down 11 percent to $27.7 million,
primarily because of volume declines on several Ford and Rover vehicles in the
U.K.
Luggage compartment trim revenues increased $3.1 million to $9.5 million
on strong sales to Volvo in Belgium.
Accessory floormat sales were $4.8 million, driven by the acquisition last
year of a Netherlands-based operation.
Revenues for plastics-based interior trim systems decreased $11.0 million
in the first quarter of 1999, primarily on build decreases on a number of
Rover, Ford, General Motors and Honda models.
In the first quarter of 1999, the Europe Automotive Interior Systems
division received nine new business wins, four replacement and incremental
business awards, and took over three competitors' programs in the first
quarter of 1999.
Five of the new business wins came in for various acoustical products and
systems, including for the Volkswagen 2000 Jetta, which is manufactured in
Mexico, but will be supplied with acoustical damping materials from the
Company's Skara, Sweden location. Other new business for acoustics included
models for LDV, Alstom, Skoda and BMW.
New business for carpet and trunk systems included a win for a General
Motors/Renault joint venture year 2001 van, in addition to business awards
from IBC, Saab and Rover.
The Company was awarded new business for its plastics-based interior
systems product line from Rover and General Motors.
Collins & Aikman's recently acquired accessory floormat operation in the
Netherlands was awarded new business for two Renault 1999 vehicles and
replacement business for a 1999 Skoda model.
Specialty Automotive Products
Total sales for the Specialty Automotive Products division were $112.9
million for the first quarter of 1999, down approximately five percent.
Sales of automotive seat fabrics were $56.5 million for the first quarter
of 1999, down $8.3 million, due mainly to unfavorable mix on certain models, a
strong demand for leather, primarily as a higher option rate, and program run
outs and volume declines on a number of Ford, Nissan, Mazda, Chrysler and GM
models.
"We continue to see the potential strength in the out years for our
automotive seat fabrics business. Our fabrics business garnered almost
50 percent of the yardage awarded by OEMs last year, and we have started 1999
with a number of new wins, including Ford and Chrysler," Hannah said. "These
new placements all feature one of our new tricot knit products and represent
our commitment to growing our product portfolio with a wide range of knit
capabilities."
Sales for the Company's convertible systems business increased 8 percent,
to $33.4 million, in the first quarter of 1999, fueled by robust build of the
Chrysler Sebring.
During the first quarter of 1999, the Company experienced the highest
level of activity in recent years and quoted on a number of new programs,
including several new product applications for roof systems, like retractable
hard tops and removable targa tops.
"Many of the Company's present and potential customers have expressed
their desire for a roof system supplier with our track record, technical
expertise and service capabilities, and we are pleased to be embarking on this
area of product applications," Hannah said.
Company Financing Update
The Company also announced that it has received a commitment, subject to
certain conditions, from The Chase Manhattan Bank to arrange a new senior term
loan facility in a principal amount of up to $100 million. The new facility
would be a Term Loan C, as permitted by the Company's existing credit
agreement. Term Loan C is intended to be used to reduce outstandings under
the Company's revolving credit facility and for general corporate purposes,
including a payment of a special dividend to shareholders of approximately
$44 million, or $0.71 per share after Term Loan C closes. Contingent upon such
closing, the Company's Board of Directors is expected to declare the special
dividend, which would be payable in late May.
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 year-ended
December 26, 1998.
Collins & Aikman Corporation is a global supplier of automotive interior
systems, including textile and plastic trim, acoustics and convertible top
systems. The Company employs more than 15,000 employees and operates 65
facilities in 12 countries.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
Quarter Ended
March 27, March 28,
1999 1998
Net sales $ 478,337 $ 478,140
Cost of goods sold 407,749 399,408
Selling, general and
administrative expenses 40,755 39,219
448,504 438,627
Operating income 29,833 39,513
Interest expense, net 21,815 20,479
Loss on sale of receivables 1,311 1,624
Other expense 2,177 240
Income before income taxes 4,530 17,170
Income taxes 2,214 8,492
Income before cumulative
effect of a change in
accounting principle 2,316 8,678
Cumulative effect of change
in accounting principle,
net of income taxes
of $5,083 (8,850) --
Net income (loss) $ (6,534) $ 8,678
Net income (loss) per basic
and diluted common share:
Income before cumulative
effect of a change
in accounting principle $ 0.04 $ 0.13
Cumulative effect
of a change in
accounting principle (0.14) --
Net income (loss) $ (0.10) $ 0.13
Average common
shares outstanding:
Basic 61,992 65,701
Diluted 62,351 66,571
EBITDA $ 47,065 $ 57,350
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
ASSETS March 27, December 26,
1999 1998
Current Assets:
Cash and cash
equivalents $ 34,475 $ 23,755
Accounts and other
receivables, net 250,119 237,645
Inventories 141,706 152,840
Other 93,721 96,156
Total current
assets 520,021 510,396
Property, plant and
equipment, net 440,193 447,121
Deferred tax assets 76,971 70,632
Goodwill, net 261,275 264,138
Other assets 87,621 89,924
$ 1,386,081 $1,382,211
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Short-term
borrowings $ 12,940 $ 10,954
Current maturities
of long-term debt 20,451 19,942
Accounts payable 156,642 169,808
Accrued expenses 169,883 143,302
Total current
liabilities 359,916 344,006
Long-term debt 851,681 846,107
Other, including post
retirement benefit
obligation 275,272 271,869
Commitments and contingencies
Common stock (150,000 shares
authorized, 70,521 shares
issued and 61,932 shares
outstanding at March 27, 1999
and 70,521 shares issued
and 62,182 outstanding at
December 26, 1998) 705 705
Other paid-in capital 585,284 585,401
Accumulated deficit (593,431) (580,666)
Accumulated other
comprehensive income (30,329) (23,427)
Treasury stock, at cost
(8,589 shares at
March 27, 1999 and
8,339 shares at
December 26, 1998) (63,017) (61,784)
Total common
stockholders'
deficit (100,788) (79,771)
$ 1,386,081 $1,382,211
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Quarter Ended
March 27, March 28,
1999 1998
OPERATING ACTIVITIES
Income from continuing operations $ 2,316 $ 8,678
Adjustments to derive cash flow from
continuing operating activities:
Deferred income tax expense (benefit) (1,193) 4,298
Depreciation and leasehold amortization 14,167 14,220
Amortization of goodwill 1,749 1,773
Amortization of other assets 1,316 1,844
Increase in accounts and notes
receivable (20,775) (6,839)
Decrease (increase) in inventories 11,134 (8,929)
Increase (decrease) in accounts
payable (13,166) 1,949
Increase in interest payable 14,131 13,544
Other, net 1,885 (7,391)
Net cash provided by continuing
operating activities 11,564 23,147
Cash used in Wallcoverings discontinued
operations -- (15,052)
Cash used in other discontinued operations (1,683) (3,001)
Net cash used in discontinued
operations (1,683) (18,053)
INVESTING ACTIVITIES
Additions to property, plant and
equipment (12,534) (26,732)
Sales of property, plant and equipment 2,441 3,738
Proceeds from disposition of
discontinued operations -- 71,200
Acquisition of businesses, net of cash
acquired -- (19,236)
Other, net 2,074 (2,109)
Net cash provided by (used in)
investing activities (8,019) 26,861
FINANCING ACTIVITIES
Repayment of long-term debt (4,589) (20,688)
Proceeds from (reduction of) participating
interest in accounts receivable 8,300 (1,000)
Net borrowings (repayments) on revolving
credit facilities 9,500 (10,000)
Increase (decrease) on short-term
borrowings 2,151 (7,023)
Purchase of treasury stock, net (1,233) (2,064)
Dividends paid (6,193) --
Other, net 922 (318)
Net cash provided by (used in)
financing activities 8,858 (41,093)
Net increase (decrease) in cash and
cash equivalents 10,720 (9,138)
Cash and cash equivalents at beginning
of period 23,755 24,004
Cash and cash equivalents at end
of period $ 34,475 $ 14,866