Collins & Aikman Reports Improved Second-Quarter Results
20 July 1999
Collins & Aikman Reports Improved Second-Quarter Results
Strong North American Auto Build, Improved Operating Efficiencies Contribute
To Significant Earnings Growth
DETROIT, July 20 -- Collins & Aikman Corporation
today reported sharply improved second-quarter earnings versus 1998.
Operating profit before restructuring charges for the second quarter
climbed 69 percent to $40 million from $24 million in the prior year period.
EBITDA increased to $54 million from $40 million, up 35 percent from 1998's
second quarter level.
"Earnings benefited from a better-than two percentage point improvement in
gross margin and a strong North American auto build," explained Thomas E.
Evans, Collins & Aikman's Chairman and Chief Executive Officer. "This was a
very strong quarter; even after adjusting for last year's second-quarter
impact of the GM strike, operating profit and EBITDA before restructuring
charges were still up 35 percent and 26 percent, respectively. "We are pleased
that our annual run rate for EBITDA is now in excess of $200 million.
Additionally, we are very encouraged by the continued strength in our new
business bookings."
In connection with the restructuring program announced in February of this
year, the Company recognized $4.6 million in pre-tax restructuring charges in
the quarter. The charges principally represented severance costs incurred in
connection with headcount reductions since the implementation of the program.
Mr. Evans added, "The Company is making excellent progress on its
restructuring program, which includes product moves, facility rationalizations
and a broad organizational realignment."
Net income for the quarter totaled $5.3 million, or $0.09 per share,
versus a loss of $4.2 million or ($0.06) per share in 1998's second quarter,
which had included an after tax extraordinary charge of $3.7 million, or
($0.05) per share in connection with the refinancing of the Company's bank
credit facilities. Average shares outstanding for the second quarter 1999
were 62 million, down approximately 4 million from prior year levels, due to
the Company's share repurchase program.
Sales for the quarter were up 5.1 percent to $487 million from
$463 million in 1998's second quarter. The Company estimated that the GM
strike had negatively affected sales by $18 million in last year's second
quarter.
Reorganization Plan Update
In February of this year, Collins & Aikman announced a broad
reorganization plan aimed at better positioning the company to service the
global automotive interior trim market on an integrated basis. Mr. Evans, who
was named Chairman and CEO in April, has been assessing both the scope and
implementation schedule of the reorganization plan. "Over the past two months
I have conducted a comprehensive review of our global operations and
facilities. We currently expect to be in a position to finalize our
consolidated reorganization plan during the third quarter, at which time we
would take the remainder of the associated restructuring charge," Mr. Evans
stated. "I am confident that the Company is headed in the right strategic
direction and that fully implementing the reorganization plan should allow us
to accelerate the positive momentum that is evident in our strong second
quarter results."
Collins & Aikman expects to move into its new 60,000-square-foot World
Headquarters building in Troy, Mich., in October of this year. "The new
headquarters investment solidifies our continued emergence as a major
automotive company and signals our dedication to being a customer focused
supplier," said Mr. Evans. The Company expects that the new headquarters will
greatly enhance its ability to more efficiently serve major automakers.
Divisional Highlights
North America Automotive Interior Systems
Sales in the second quarter rose 8.1 percent to $292 million, with revenue
increases across nearly all product categories. Profits grew at a faster pace
than sales, benefiting from productivity gains and plant consolidations begun
earlier in connection with plans laid at the time of the JPS Automotive
acquisition. The division expects to realize further consolidation synergies
in future periods, including additional savings in connection with Collins &
Aikman's current restructuring initiative. Future restructuring actions are
planned that include closing an antiquated carpet plant in Mexico City and
expanding a highly automated facility in Queretaro, Mexico. As previously
announced, the Company will close a plastics plant in Homer, Michigan, while
expanding its Stratford, Ontario facility.
The division's going forward sales outlook remains strong in part because
of several new business awards. These include molded carpet for the next
generation Toyota Camry and DaimlerChrysler minivan, the carpet and acoustics
systems for the Ford Explorer and new acoustics parts for both Ford Model 204
and 208 pick-ups. In addition, Collins & Aikman is now providing both carpet
and acoustics for the extremely popular Honda Odyssey.
The North America division experienced strong sales increases in the
quarter versus the prior year period. Molded floor carpet increased
8.5 percent to $106 million, acoustics products were up 18 percent to
$31 million, accessory floormats were up 17 percent to $39 million, and
plastics increased 10 percent to $84 million. "These increases are
particularly gratifying since they significantly exceed the increase in base
car build," commented Dennis Hiller, President of North America Automotive
Interior Systems. Luggage compartment trim was down 14 percent to $16 million
driven primarily by certain scheduled program run-outs.
Europe Automotive Interior Systems
Sales declined 6 percent from 1998 levels to $77 million reflecting
continued reduced production levels at Rover. "While sales for the quarter
were below expectations, year-to-date new business awards totaling $60 million
on an annualized basis should set the stage for excellent potential future
sales growth", stated Mike Weston, President of Europe Automotive Interior
Systems.
New orders booked in the second quarter included door sill trim for the
2002 Saab, an insulation package for the 2001 Ford Fiesta diesel, NVH
components for the 2001 Rover Jewell, and significant new acoustics business
beginning this year for Volkswagen in both Brazil and Mexico, as well as
Peugeot in France.
The division also announced being awarded a sound insulation package for
the 2000 V184 Ford Transit van. "With the design and engineering work being
conducted in Collins & Aikman's North American facilities and the program
management and production launch being handled in Europe, this program
represents an excellent example of the seamless global interior systems
capabilities available to our OEM customers," added Weston.
"I firmly believe that this brisk pace of market penetration is in part a
result of establishing our European headquarters in Wiesbaden, Germany,
earlier this year, which was a clear signal of our commitment to serve this
market on an integrated basis."
The division plans to expand its Gent, Belgium plant, which together with
its Duerne, Netherlands facility will comprise the only European center of
excellence dedicated to accessory mat engineering, design and production.
When completed early next year, the expansion will further strengthen
Collins & Aikman's position as the largest supplier of accessory mats in
Europe.
Specialty Automotive Products
Total second-quarter sales increased to $117 million from $111 million,
with gains recorded by both the Automotive Fabrics and the Dura Convertible
Systems units of the division.
Improving over second quarter 1998 performance, sales of automotive
fabrics were up 6.5 percent to $68 million, reflecting the strong North
American auto build.
Following impressive business bookings in 1998 (over 50 percent of the
awarded industry yardage), Collins & Aikman has continued this success rate by
winning over 40 percent of the new business sourced in North America during
the first half of 1999. New fabrics business awards include the 2001 GM
Blazer, 2002 Mercury Villager, 2002 Honda Civic, 2002 Saturn LS, 2002 GM
Warrior, and 2002 Ford F-250.
The Automotive Fabrics operations will begin the 2000 model year with the
number one product share in North America for the 10th consecutive year. In
2000, the division will supply fabrics for five of the top six selling
minivans in North America.
During third quarter 1999 the Fabrics unit will launch programs for two of
the highest selling vehicles in North America, a new knit product for the
Toyota Camry and a woven velour product for General Motors' GMT 800 truck
model.
Additionally, the Fabrics operation will benefit from the planned
relocation of its Cramerton, North Carolina, headliner business to its
facility in Farmville, North Carolina. During the second quarter,
Collins & Aikman announced an agreement, subject to certain conditions, to
sell the Cramerton facility to Joan Fabrics Corporation.
"Our Automotive Fabrics management team has worked hard to improve both
the top line and overall cost performance in the face of a very challenging
market environment. The improved operational performance of our unit is
tangible evidence that we are realizing the fruits of these efforts," said
Dean Gaskins, President of Collins & Aikman's Automotive Fabrics unit.
Sales of the Dura Convertible Systems unit rose 10.8 percent to
$37 million. The improvement was attributable in part to strong sales of both
the Ford Mustang and DaimlerChrysler Sebring models. "Our highly successful
specialized operation continues to provide our customers with unparalleled
products and service and has gained a worldwide reputation that will solidify
Collins & Aikman's book of business well into the next century," stated Reed
White, President of Dura Convertible Systems.
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 and Item 2 of the Report on Form 10-Q for the quarter ended
March 27, 1999.
Collins & Aikman Corporation is a global supplier of automotive interior
systems, including textile and plastic products, acoustics and convertible top
systems. The Company employs more than 15,000 employees and operates
65 facilities in 12 countries, including 13 state of the art advanced
automotive design, development and testing centers, as well as several
manufacturing centers of excellence for automotive trim products. Collins &
Aikman combines superior manufacturing capabilities, product quality, delivery
and service with industry leading design and styling capabilities and the most
effective NVH "quiet" technologies.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
Quarter Ended
June 26, 1999 June 27, 1998
Net sales $ 486,821 $ 463,335
Cost of goods sold 408,559 399,521
Selling, general and
administrative expenses 38,322 40,153
Restructuring charge 4,554 --
451,435 439,674
Operating income 35,386 23,661
Interest expense, net 23,009 19,434
Loss on sale of receivables 1,323 1,682
Other expense (income) (983) 3,485
Income (loss) before income
taxes 12,037 (940)
Income tax expense (benefit) 6,719 (458)
Income (loss) before
extraordinary charge and
cumulative effect of a change
in accounting principle 5,318 (482)
Extraordinary charge, net of
income taxes of $2,452 -- (3,679)
Cumulative effect of a change
in accounting principle, net
of income taxes of $5,083 -- --
Net income (loss) $ 5,318 $ (4,161)
Net income (loss) per basic and diluted common share:
Income (loss) before
extraordinary charge and
cumulative effect of a change
in accounting principle $ 0.09 $ (0.01)
Extraordinary charge -- (0.05)
Cumulative effect of a change
in accounting principle -- --
Net income (loss) $ 0.09 $ (0.06)
Average common shares outstanding:
Basic 61,947 65,447
Diluted 62,303 65,447
EBITDA $ 53,621 $ 39,663
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
Six Months Ended
June 26, 1999 June 27, 1998
Net sales $ 965,158 $ 941,475
Cost of goods sold 816,308 798,928
Selling, general and
administrative expenses 79,077 79,373
Restructuring charge 4,554 --
899,939 878,301
Operating income 65,219 63,174
Interest expense, net 44,824 39,913
Loss on sale of receivables 2,634 3,306
Other expense (income) 1,194 3,725
Income (loss) before
income taxes 16,567 16,230
Income tax expense (benefit) 8,933 8,034
Income (loss) before extraordinary
charge and cumulative effect of
a change in accounting
principle 7,634 8,196
Extraordinary charge, net of
income taxes of $2,452 -- (3,679)
Cumulative effect of a change
in accounting principle, net
of income taxes of $5,083 (8,850) --
Net income (loss) $ (1,216) $ 4,517
Net income (loss) per basic and diluted common share:
Income (loss) before extraordinary
charge and cumulative effect
of a change in accounting
principle $ 0.12 $ 0.12
Extraordinary charge -- --
Cumulative effect of a change
in accounting principle (0.14) (0.05)
Net income (loss) $ (0.02) $ 0.07
Average common shares outstanding:
Basic 61,970 65,574
Diluted 62,327 66,392
EBITDA $ 100,686 $ 97,013
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
ASSETS June 26, December 26,
1999 1998
Current Assets:
Cash and cash
equivalents $ 44,005 $ 23,755
Accounts and other
receivables, net 226,294 237,645
Inventories 142,457 152,840
Other 103,643 96,156
Total current assets 516,399 510,396
Property, plant and
equipment, net 445,812 447,121
Deferred tax assets 77,894 70,632
Goodwill, net 259,352 264,138
Other assets 88,293 89,924
$1,387,750 $1,382,211
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Short-term borrowings $ 5,331 $ 10,954
Current maturities of
long-term debt 25,921 19,942
Accounts payable 148,601 169,808
Accrued expenses 161,837 143,302
Total current
liabilities 341,690 344,006
Long-term debt 916,114 846,107
Other, including
postretirement benefit
obligation 273,302 271,869
Commitments and contingencies
Common stock (150,000 shares
authorized, 70,521 shares
issued and 61,960 shares
outstanding at June 26, 1999
and 70,521 shares issued and
62,182 outstanding at
December 26, 1998) 705 705
Other paid-in capital 585,332 585,401
Accumulated deficit (632,118) (580,666)
Accumulated other
comprehensive loss (34,570) (23,427)
Treasury stock, at cost
(8,561 shares at
June 26, 1999
and 8,339 shares at
December 26, 1998) (62,705) (61,784)
Total common stockholders'
deficit (143,356) (79,771)
$1,387,750 $ 1,382,211
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Quarter Ended
June 26, June 27,
1999 1998
OPERATING ACTIVITIES
Income (loss) from
continuing operations $ 5,318 $ (482)
Adjustments to derive cash
flow from continuing
operating activities:
Impairment of long-lived
assets 536 --
Deferred income tax expense
(benefit) (38) (868)
Depreciation and leasehold
amortization 14,105 12,785
Amortization of goodwill 2,089 1,766
Amortization of other
assets 1,505 1,451
Decrease in accounts and
other receivables 34,326 22,897
Decrease (increase) in
inventories (751) (3,124)
Decrease in accounts
payable (8,041) (15,323)
Increase (decrease) in
interest payable (12,783) (15,636)
Other, net (11,604) (23,541)
Net cash provided by
(used in) continuing
operating activities 24,662 (20,075)
Cash used in Wallcoverings
discontinued operations -- --
Cash used in other
discontinued operations (2,748) (4,801)
Net cash used in
discontinued operations (2,748) (4,801)
INVESTING ACTIVITIES
Additions to property, plant
and equipment (19,843) (22,773)
Sales of property, plant
and equipment 193 186
Proceeds from disposition of
discontinued operations -- --
Acquisition of businesses, net
of cash acquired (369) (1,003)
Other, net (316) 5,646
Net cash provided by
(used in) investing
activities (20,335) (17,944)
FINANCING ACTIVITIES
Issuance of long-term debt 100,000 225,000
Repayment of long-term debt (4,897) (235,703)
Reduction of a participating
interest in accounts
receivable (10,500) (2,000)
Net borrowings (repayments)
on revolving credit
facilities (26,881) 67,702
Decrease on short-term
borrowings (7,423) (468)
Reissuance (purchase) of
treasury stock, net 312 (4,481)
Dividends paid (44,005) --
Other, net 1,345 (1,773)
Net cash provided by
financing activities 7,951 48,277
Net increase (decrease) in cash
and cash equivalents 9,530 5,457
Cash and cash equivalents at
beginning of period 34,475 14,866
Cash and cash equivalents at
end of period $ 44,005 $ 20,323
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 26, June 27,
1999 1998
OPERATING ACTIVITIES
Income (loss) from
continuing operations $ 7,634 $ 8,196
Adjustments to derive cash
flow from continuing
operating activities:
Impairment of long-lived
assets 536 --
Deferred income tax expense
(benefit) (1,231) 3,430
Depreciation and leasehold
amortization 28,272 27,005
Amortization of goodwill 3,838 3,539
Amortization of other
assets 2,821 3,295
Decrease in accounts and
other receivables 13,551 16,058
Decrease (increase) in
inventories 10,383 (12,053)
Decrease in accounts
payable (21,207) (13,374)
Increase (decrease) in
interest payable 1,348 (2,092)
Other, net (9,719) (30,932)
Net cash provided by
(used in) continuing
operating activities 36,226 3,072
Cash used in Wallcoverings
discontinued operations -- (15,052)
Cash used in other discontinued
operations (4,431) (7,802)
Net cash used in
discontinued operations (4,431) (22,854)
INVESTING ACTIVITIES
Additions to property, plant
and equipment (32,377) (49,505)
Sales of property, plant
and equipment 2,634 3,924
Proceeds from disposition of
discontinued operations -- 71,200
Acquisition of businesses,
net of cash acquired (369) (20,239)
Other, net 1,758 3,537
Net cash provided by
(used in) investing
activities (28,354) 8,917
FINANCING ACTIVITIES
Issuance of long-term debt 100,000 225,000
Repayment of long-term debt (9,486) (256,391)
Reduction of a participating
interest in accounts
receivables (2,200) (3,000)
Net borrowings (repayments)
on revolving credit
facilities (17,381) 57,702
Decrease on short-term
borrowings (5,272) (7,491)
Reissuance (purchase) of
treasury stock, net (921) (6,545)
Dividends paid (50,198) --
Other, net 2,267 (2,091)
Net cash provided by
financing activities 16,809 7,184
Net increase (decrease) in
cash and cash equivalents 20,250 (3,681)
Cash and cash equivalents at
beginning of period 23,755 24,004
Cash and cash equivalents at
end of period $ 44,005 $ 20,323