Safety Components Reports Results For Its Q2 and Six Months
10 November 1999
Safety Components Reports Results For Its Second Quarter and Six Months Ended September 25, 1999
Safety Components Intends to Restate Its Financial Statements
For Fiscal 1998 and 1999
FORT LEE, N.J., Nov. 9 -- Safety Components International,
Inc. , one of the world's leading manufacturers of automotive
airbag fabrics and cushions, today reported results for the second quarter and
twenty-six week period ended September 25, 1999. The comparable periods for
fiscal 1999 have been restated as discussed below. Sales for the quarter
increased to $53,391,000 from $52,651,000 for the comparable quarter of the
prior year. The Company reported a net loss of $1,424,000 or $0.28 loss per
fully diluted share for the quarter, compared to a net loss of $93,000 or
$0.02 loss per fully diluted share for the same period last year.
Sales for the twenty-six weeks ended September 25, 1999 increased to
$117,236,000 from $104,016,000 for the same period last year. The Company
reported a net loss of $775,000 or $0.15 loss per fully diluted share for the
twenty-six week period this year, compared to net income of $1,402,000 or
$0.27 per fully diluted share for the same period last year.
The increase in sales for the quarter and twenty-six week period is
attributable to increased sales volumes in the Company's "core" automotive and
fabric operations which increased 10.2% and 21.7% over comparable periods in
prior year. Such increases reflected strong improvements in both North
America and Europe. For the quarter and twenty-six week period, EBITDA in the
core operations increased 11.7% and 7.3% over the comparable periods in the
prior year. The losses for both periods this year are attributable to
significant declines in sales and reduced margins for the Company's "non-core"
metal and defense operations.
The Company also reported that its management has discovered certain
matters relating to the Company's previously issued financial statements for
each of the fiscal years 1998 and 1999 which will require further
investigation and restatement of such financial statements as well as the
financial statements included in the first quarter report of fiscal 2000. The
discovery was immediately brought to the attention of the Company's board of
directors and independent auditors. The restatement will primarily relate to
reported results of non-core operations.
The Company's audit committee, consisting only of outside members of the
Board of Directors, with the assistance of special counsel and a public
accounting firm, will conduct a thorough investigation of these matters. The
audit committee intends to complete its review expeditiously. In the
meantime, the Company is filing its quarterly report on Form 10-Q for the
quarter ended September 25, 1999. Management believes that such report
reflects all appropriate adjustments to the current and prior periods reported
in such Form 10-Q, although such adjustments have not been audited and there
can be no assurance that additional adjustments will not be required upon
completion of the investigation.
Based upon information currently available to management and subject to
completion of the investigation, the restatement for fiscal 1998 reduces
previously reported net sales by $3,881,000 to net sales of $166,429,000 and
reduces previously reported net income by $2,328,000 to a net income of
$3,680,000, $0.71 per diluted share and the restatement for fiscal 1999
reduces previously reported net sales by $1,048,000 to net sales of
$220,231,000 and increases previously reported net loss by $900,000 to a loss
of $13,763,000, $2.69 loss per diluted share. The principal components of the
adjustments consist of the reversal of a duplicate booking of a sale and the
related receivable in the Company's defense operations and the reversal of
certain items incorrectly recorded in income in connection with a loan
transaction. Although management believes, after an internal review, that it
has found and reported all the adjustments necessary to fairly report the
financial condition and results of operations for the fiscal periods affected,
there can be no assurance that further adjustments will not be required until
the investigation is completed. Upon completion of this investigation, the
Company expects to file amended annual reports on Form 10-K covering fiscal
1998 and 1999 and the applicable quarterly reports on Form 10-Q covering
fiscal 1998, 1999 and the first quarter of fiscal 2000. Accordingly, the
Company's previously issued fiscal 1998 and 1999 annual financial statements
and the independent auditor's reports thereon, as well as the interim
financial statements for fiscal 1998, 1999 and the first quarter of fiscal
2000, should not be relied upon. The Company is exploring the implications of
the restatement on covenant compliance under its outstanding indebtedness and
has initiated discussions with its senior lenders with respect thereto. The
Company intends to seek any waivers which it deems necessary or appropriate.
Robert A. Zummo, Chairman and Chief Executive Officer of the Company,
stated: "The integrity of our financial statements and the growth of our core
businesses are our first priorities. The Company's core operations continue
to show favorable and improving results. Furthermore, the near and longer-
term outlook for new growth opportunities and customer awards remains
excellent. In order to focus our attention on the core operations and curtail
losses of the non-core operations, we are continuing to explore strategic
alternatives for our non-core operations. We expect to conclude our
evaluation of these alternatives by the end of the current fiscal year."
This press release contains forward-looking statements. The Company
wishes to caution the reader of this press release that such forward looking
statements are subject to various known and unknown risks and uncertainties
including, further adverse findings in the investigation and that such
additional findings could delay the completion of the investigation; the
effect of the investigation on lenders, customers and suppliers; dependence of
revenues on several major module suppliers; worldwide economic conditions; the
results of cost-savings programs being implemented; the ability to raise
additional capital; the ability to continue to obtain new awards;
qualification of awarded programs; domestic and international automotive
industry trends; pricing pressures; the ability to identify strategic
alternatives for the Company's non-core operations or otherwise return such
operations to profitability; and the ability to satisfy the Company's
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 and
Europe. 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
(Unaudited)
(in thousands, except per share data)
Restated
Thirteen Thirteen
Weeks Ended Weeks Ended
September 25, 1999 September 26, 1998
Net sales $53,391 $52,651
Cost of sales,
excluding depreciation 44,657 43,793
Depreciation 2,118 1,811
Gross profit 6,616 7,047
Selling and marketing
expenses 675 629
General and
administrative expenses 3,522 2,519
Research and
development expenses 424 195
Amortization of goodwill 574 575
Income from operations 1,421 3,129
Other expense 120 30
Interest expense 3,738 2,993
(Loss) Income before
income taxes (2,437) 106
(Benefit) provision
for income taxes (1,013) 199
Net (loss) income $(1,424) $(93)
Net (loss) income
per share, basic $(0.28) $(0.02)
Net (loss) income per share,
assuming dilution $(0.28) $(0.02)
Weighted average number of
shares outstanding, basic 5,136 5,119
Weighted average number of
shares outstanding,
assuming dilution 5,136 5,119
Safety Components International, Inc.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Restated
Twenty-Six Twenty-Six
Weeks Ended Weeks Ended
September 25, 1999 September 26, 1998
Net sales $117,236 $104,016
Cost of sales,
excluding depreciation 97,521 84,111
Depreciation 4,245 3,677
Gross profit 15,470 16,228
Selling and
marketing expenses 1,434 1,276
General and
administrative expenses 6,311 5,090
Research and
development expenses 647 195
Amortization of goodwill 1,149 1,135
Income from operations 5,929 8,532
Other expense 128 74
Interest expense 7,197 5,796
(Loss) Income
before income taxes (1,396) 2,662
(Benefit) provision
for income taxes (621) 1,260
Net (loss) income $(775) $1,402
Net (loss) income
per share, basic $(0.15) $0.28
Net (loss) income per share,
assuming dilution $(0.15) $0.27
Weighted average number of
shares outstanding, basic 5,136 5,093
Weighted average number of
shares outstanding,
assuming dilution 5,136 5,200