BREED Technologies, Inc. Reports Third Quarter Results
17 May 1999
BREED Technologies, Inc. Reports Third Quarter Results
LAKELAND, Fla.--May 17, 1999--BREED Technologies, Inc. ("BREED") , one of the world's largest occupant restraints suppliers, today reported a net loss of $36.6 million, or $0.99 per share for the third quarter ended March 31, 1999, exclusive of a one-time, non-cash impairment charge.Net sales for the three months ended March 31, 1999 were $401.2 million, a decrease of 7% as compared to $431.7 million for the three months ended March 31, 1998. The decrease in net sales was primarily due to lower sales in the steering wheel division in Europe, the sale of Italtest on January 1, 1999 and lower sales in airbags in North America. These decreases were partially offset by increased sales of seat belts in North America and Europe compared to the prior year quarter.
A special one time, non-cash impairment charge of $135.2 million relating to the Company's European seat belt operations is being taken in the third quarter, resulting in a $234.7 million or $6.37 per share net loss for the nine months ended March 31, 1999. The impairment charge is consistent with SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
The Company experienced a $5.4 million operating loss, excluding impairment charges, for the three months ended March 31, 1999 compared to an operating profit of $23.6 million for the three months ended March 31, 1998. "BREED's results of operations for the third quarter were adversely impacted by losses from inherited seat belt contracts," stated Charles J. Speranzella, Jr., President and Chief Operating Officer of BREED. "However, as we complete our Repositioning Program, we have also instituted a proactive program to regain profitability in our seat belt operations. This includes substantial design changes, consolidation of our supply base and certain manufacturing improvements." he added.
BREED formulated the Repositioning Program during the quarter ended December 31, 1997. As of March 31, 1999, the Company had reduced its workforce by approximately 4,998 employees and closed or sold approximately 45 manufacturing facilities, substantially completing its stated repositioning strategy. "The fourth quarter should show some additional benefits as a result," Speranzella explained. As of the end of the third quarter, the Company had approximately 14,000 employees and 47 locations worldwide.
"It is important to note that we are seeing improvements in all of our reporting units with the exception of our seat belt operations which have been negatively impacted as a result of inherited loss contracts," stated Chairman and Chief Executive Officer Johnnie Cordell Breed. "For the quarter ended March 31, 1999 as compared to the quarter ended December 31, 1998, our steering wheel group's operating income improved 59%, the electronics group's operating income improved 117% and our air bags unit improved 246%. We continue to focus on the losses from our seat belt operations which ran at an operating loss of $10.3 million for the quarter ended March 31, 1999, in addition to the impairment charge of $135.3 million for European seat belt operations.
"We have retained Jay Alix & Associates who have been tasked with assisting in returning BREED to profitability" stated Breed. "Michael A. Feder, a Senior Associate with Jay Alix, has been designated as Chief Financial Officer, working in cooperation with Jack Sontheimer, Corporate Controller, Tatum CFO Partners, LLP. The Tatum team will continue their focus on our financial reporting systems improvement and control with special emphasis on our European operations. In addition, the Company has strengthened its treasury function with the appointment of Thomas Kirk, of Jay Alix, as Treasurer and Gary Colbert as Assistant Treasurer.
On March 31, 1999, BREED obtained a waiver of certain financial covenants related to its credit facility through June 29, 1999. With the waiver, the revolving portion of the Company's credit facility was reduced from $150 million to $125 million. The Company anticipates that this amount will provide the necessary liquidity to operate the business through the waiver period. The Company's Board of Directors elected to defer the quarterly dividend payment due May 15, 1999 relating to its convertible preferred holders as is permitted under the trust instrument. In addition, the waiver obtained by the Company by its lending group on March 31, 1999, specifically provided for the payment of the interest due on its 9.25% Senior Subordinated Notes. The coupon payment was made on time on April 15, 1999.
On May 6, 1999, the Company announced that it had completed the sale of 70% of the non steering wheel business of its wholly-owned subsidiary, Gallino Plasturgia, S.r.l., in connection with the establishment of a joint venture with Textron Automotive Company, Inc. and Magneti Marelli S.p.A. (60% and 10% interests respectively). The Company has retained a 30% interest in the joint venture, which will be known as Textron BREED Automotive, S.r.l.
Headquartered in Lakeland, FL, 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.
The statements contained in this press release that are not purely historical, including statements regarding BREED's objectives, expectations, hopes, intentions, beliefs or strategies regarding the future, are "forward-looking" statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. It is important to note that BREED's actual results could differ materially from those in such forward-looking statements, and undue reliance should not be placed on such statements. Among the important factors that could cause such actual results to differ materially are: 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; risks inherent in conducting business abroad; changes in legislation; BREED's ability to attract and retain key management personnel; and adverse changes in general market and industry conditions. All forward-looking statements included in this press release are made as of the date hereof, and BREED undertakes no obligation to update any such forward-looking statements.
Breed Technologies, Inc.
Consolidated Condensed Statements of Operations (Unaudited)
In Millions, except per share data
Three Months Ended Nine Months Ended
March 31, March 31,
1999 1998 1999 1998
Net sales $ 401.2 $ 431.7 $1136.6 $ 967.6
Cost of sales 357.0 356.8 998.0 836.1
Gross profit 44.2 74.9 138.6 131.5
Operating expenses:
Selling, general
and administrative
expenses 20.5 22.1 64.6 59.7
Research, development
and engineering
expenses 23.3 22.4 72.7 49.9
Repositioning and
impairment charges 135.2 -- 135.2 259.5
In-process research
and development
expenses -- -- -- 77.5
Amortization of
intangibles 5.8 6.8 17.6 12.7
Total operating
expenses 184.8 51.3 290.1 459.3
Operating income
(loss) (140.6) 23.6 (151.5) (327.8)
Interest expense 23.1 28.2 65.2 63.7
Other income
(expense), net (0.7) 2.8 -- 2.8
Loss before income
taxes and
distributions
on Company
obligated
mandatorily
redeemable
convertible
preferred
securities (164.4) (1.8) (216.7) (388.7)
Income taxes (benefit) 3.1 (4.4) 4.9 (54.3)
Distributions on
Company obligated
mandatorily
redeemable
convertible
preferred securities 4.3 4.3 13.1 5.7
Loss before
extraordinary item (171.8) (1.7) (234.7) (340.1)
Extraordinary loss
net of tax benefit
of $1.4 million -- -- -- (0.7)
Net loss $ (171.8) $ (1.7) $(234.7) $ (340.8)
Loss per share:
Basic loss per share
Loss before
extraordinary item $ (4.66) $(0.05) $ (6.37) $ (10.33)
Extraordinary item -- -- -- (0.02)
Net loss $ (4.66) $(0.05) $ (6.37) $ (10.35)
Diluted loss per share
Loss before
extraordinary item $ (4.66) $(0.05) $ (6.37) $ (10.33)
Extraordinary item -- -- -- (0.02)
Net loss $ (4.66) $(0.05) $ (6.37) $ (10.35)
Shares used for computation:
Basic 36,849 35,380 36,849 32,923
Diluted 36,849 35,380 36,849 32,923