<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 8-K/A
---------------
AMENDMENT TO FORM 8-K AS ORIGINALLY FILED ON AUGUST 21, 1996
Amendment to Current Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
August 6, 1996 (Date of earliest event reported)
SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-23938 33-0596831
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
3190 PULLMAN STREET COSTA MESA, CALIFORNIA
(Address of principal executive offices)
92626
(Zip Code)
Registrant's telephone number, including area code (714) 662-7756
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
Exhibit 1:
Calendar Year:
Phoenix AG's Airbag Division
Report of Independent Accountants
Balance Sheet as of December 31, 1995
Statement of Operations and Retained (Deficit) Earnings for the Year
Ended December 31, 1995
Cash Flow Statement for the Year Ended December 31, 1995
Notes to the accounts
Exhibit 2:
Interim:
Phoenix Airbag GmbH
Report of Independent Accountants
Balance Sheet as of August 5, 1996
Statement of Operations for the Period from January 1, 1996 through
August 5, 1996
Statement of Cash Flows for the Period from January 1, 1996 through
August 5, 1996
Notes to the Financial Statements
(b) Pro Forma Unaudited Financial Information
The unaudited pro forma condensed combined balance sheets and statements of
operations of Safety Components International, Inc. (Safety Components) and
Phoenix Airbag, GmbH (Phoenix Airbag) as of and for the three months ended June
30, 1996 and as of and for the most recent fiscal year ended March 31, 1996,
reflect adjustments as if the acquisition of Phoenix Airbag had occurred on
April 1, 1995, the beginning of Safety Components' 1996 fiscal year. The
purchase is being accounted for using the purchase method.
The financial statements of Safety Components are based on its fiscal year
ending March 31. The financial statements of Phoenix Airbag are based on a
calendar year basis. In order to present the unaudited pro forma condensed
combined financial statements based on Safety Components' fiscal year ended
March 31, 1996, Phoenix Airbag's quarterly results for its calendar quarter
ended March 31, 1995 are being excluded, while the quarterly results for its
calendar quarter ended March 31, 1996 are being included for the conversion of
Phoenix Airbag's calendar 1995 financial statements to Safety Components'
fiscal year end. For the three months ended June 30, 1996, Phoenix Airbag's
quarterly results for the second quarter of calendar 1996 are included. In
management's opinion, the conversion of Phoenix Airbag's calendar year end
statements for the periods being presented is necessary to properly reflect the
results of operations for the periods presented in the unaudited pro forma
condensed combined financial statements.
The unaudited pro forma condensed combined financial statements reflect
Safety Components' allocation of the purchase price, including transaction
costs, of approximately $22.5 million to the assets and liabilities of Phoenix
Airbag based upon Safety Components' current estimates of the relative values
of the assets acquired and liabilities assumed. The final allocation of the
purchase price may vary as additional information is obtained, and accordingly,
the ultimate allocations may differ from the allocations used in the unaudited
pro forma condensed financial statements.
The unaudited pro forma condensed combined financial statements should be
read in conjunction with the separate historical financial statements and
related notes of Phoenix AG's Airbag Division and Phoenix Airbag GmbH,
appearing in response to Item 7(a) of this current report on Form 8-K and the
historical financial statements, related notes and "Management's Discussion and
Analysis of Consolidated Financial Condition and Results of Operations" of
Safety Components for the year ended March 31, 1996 and for the three month
period ended June 30, 1996, previously filed with the Securities and Exchange
Commission. The pro forma information is not necessarily indicative of the
results that would have been reported had the acquisition actually occurred on
the dates specified, nor is it necessarily indicative of the future results of
the combined companies.
2
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC. AND PHOENIX AIRBAG GMBH
Unaudited
Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended
June 30, 1996
(In 000's except EPS)
<TABLE>
<CAPTION>
PRO FORMA
SAFETY PHOENIX ADJUSTMENTS COMBINED
COMPONENTS AIRBAG NOTE 2 PRO FORMA
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............................ $16,172 $9,305 $25,477
Cost of sales........................ 13,580 6,977 (50) 20,507
------- ------ ----- -------
Gross profit....................... 2,592 2,328 50 (e) 4,970
------- ------ ----- -------
Selling, general and administrative 1,146 1,072 125 (e) 2,343
expenses............................ ------- ------ ----- -------
Operating income (loss).............. 1,446 1,256 (75) 2,627
Other expense (income)............... 64 64
Amortization of goodwill............. 232 (b) 232
Interest income...................... 88 (50) 38
Interest expense..................... 98 358 (a) 456
------- ------ ----- -------
Income (loss) before income taxes.... 1,372 1,256 (715) 1,913
Provision (benefit) for US income
taxes............................... 519 (208)(c) 311
Provision (benefit) for German taxes. 718 (277)(d) 441
------- ------ ----- -------
Net income (loss).................. $ 853 $ 538 $(230) $ 1,161
======= ====== ===== =======
Earnings per common and common $ 0.17 $ 0.23
equivalent share.................... ======= =======
Weighted average common and common 5,069 5,069
equivalent shares................... ======= =======
</TABLE>
3
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC. AND PHOENIX AIRBAG GMBH
Unaudited
Pro Forma Condensed Combined Balance Sheet
For The Year Ended
June 30, 1996
(In 000's)
<TABLE>
<CAPTION>
PRO FORMA
SAFETY PHOENIX ADJUSTMENTS COMBINED
COMPONENTS AIRBAG NOTE 4 PRO FORMA
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $ 5,461 $ 2,459 $(4,175)(a) $ 3,745
Accounts receivable................. 15,965 4,072 20,037
Inventories......................... 5,091 1,467 6,558
Prepaid expenses.................... 2,137 12 2,149
------- ------- ------- -------
Current assets.................... 28,654 8,010 (4,175) 32,489
Fixed assets, net of accumulated de-
preciation......................... 13,958 4,219 4,967 (b) 23,144
Goodwill, net of accumulated amorti-
zation............................. 0 11,971 (b) 11,971
Other assets........................ 4,525 0 (167) (b) 4,358
------- ------- ------- -------
Total Assets...................... $47,137 $12,229 $12,596 $71,962
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ 4,969 $ 836 $ 5,805
Accrued expenses.................... 655 1,651 (208) 2,098
Income taxes payable................ 2,268 (277) 1,991
Due to Phoenix AG................... 559 559
Current portion of long-term obliga- 734 0 4,250 (c) 4,984
tions.............................. ------- ------- ------- -------
Current liabilities............... 6,358 5,314 3,765 15,437
Long-term obligations............... 3,264 0 10,437 (c) 13,701
Other long-term liabilities......... 1,579 0 4,675 (b) 6,254
------- ------- ------- -------
Total Liabilities................. 11,201 5,314 18,877 35,392
Stockholders' equity................ 35,936 6,915 (6,281) 36,570
------- ------- ------- -------
Total Liabilities and stockhold- $47,137 $12,229 $12,596 $71,962
ers' equity...................... ======= ======= ======= =======
</TABLE>
4
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC. AND PHOENIX AIRBAG GMBH
Unaudited
Pro Forma Condensed Combined Statement of Operations
For the Year Ended
March 31, 1996
(In 000's except EPS)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
SAFETY PHOENIX ADJUSTMENTS PRO
COMPONENTS AIRBAG NOTE 3 FORMA
---------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales............................ $94,942 $33,176 $128,118
Cost of sales........................ 81,908 26,519 (200)(e) 108,227
------- ------- ------ --------
Gross profit....................... 13,034 6,657 200 19,891
------- ------- ------ --------
Selling, general and administrative 5,430 3,082 450 (e) 8,962
expenses............................ ------- ------- ------ --------
Operating income (loss).............. 7,604 3,575 (250) 10,929
Other expense (income)............... (229) (229)
Amortization of goodwill............. 926 (b) 926
Interest income...................... 578 (125) 453
Interest expense..................... 381 1,684 (a) 2,065
------- ------- ------ --------
Income (loss) before income taxes.... 8,030 3,575 (2,985) 8,620
Provision (benefit) for US income
taxes............................... 3,116 (784)(c) 2,332
Provision (benefit) for German taxes. 2,044 (1,231)(d) 813
------- ------- ------ --------
Net income (loss).................. $ 4,914 $ 1,531 $ (970) $ 5,475
======= ======= ====== ========
Earnings per common and common equiv- $ 0.99 $ 1.10
alent share......................... ======= ========
Weighted average common and common 4,981 4,981
equivalent shares................... ======= ========
</TABLE>
5
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC. AND PHOENIX AIRBAG GMBH
Unaudited
Pro Forma Condensed Combined Balance Sheet
March 31, 1996
(In 000's)
<TABLE>
<CAPTION>
PRO FORMA
SAFETY PHOENIX ADJUSTMENTS COMBINED
COMPONENTS AIRBAG NOTE 4 PRO FORMA
---------- ------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........... $12,033 $ 2,532 $(7,031)(a) $ 7,534
Accounts receivable................. 16,614 4,079 20,693
Inventories......................... 5,315 1,390 6,705
Prepaid expenses.................... 925 209 1,134
------- ------- ------- --------
Current assets.................... 34,887 8,210 (7,031) 36,066
Fixed assets, net of accumulated de-
preciation......................... 12,192 3,545 5,217 (b) 20,954
Goodwill, net of accumulated amorti-
zation............................. 0 12,961 (b) 12,961
Other assets........................ 2,752 0 1,212 (b) 3,964
------- ------- ------- --------
Total Assets...................... $49,831 $11,755 $12,359 $ 73,945
======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable.................... $ 8,066 $ 1,258 $ 9,324
Accrued expenses.................... 1,057 1,780 (784) 2,053
Income taxes payable................ 2,033 (1,231) 802
Due to Phoenix AG................... 307 307
Current portion of long-term obliga- 697 0 4,250 (c) 4,947
tions.............................. ------- ------- ------- --------
Current liabilities............... 9,820 5,378 2,235 17,433
Long-term obligations............... 3,087 0 11,500 (c) 14,587
Other long-term liabilities......... 1,580 0 4,675 (b) 6,255
------- ------- ------- --------
Total Liabilities................. 14,487 5,378 18,410 38,275
Stockholders' equity................ 35,344 6,377 (6,051) 35,670
------- ------- ------- --------
Total Liabilities and stockhold- $49,831 $11,755 $12,359 $ 73,945
ers' equity...................... ======= ======= ======= ========
</TABLE>
6
<PAGE>
Note 1. Safety Components and Phoenix Airbag Reporting Periods for the Three
Months Ended June 30, 1996 and for the Year Ended March 31, 1996
The financial statements of Safety Components are based on its fiscal
year ending March 31. The financial statements of Phoenix Airbag are
based on a calendar year basis. In order to present the unaudited pro
forma condensed combined financial statements based on Safety
Components fiscal year ended March 31, 1996, Phoenix Airbag's quarterly
results for its calendar quarter ended March 31, 1995 are being
excluded, while the quarterly results for its calendar quarter ended
March 31, 1996 are being included for the conversion of Phoenix
Airbag's calendar 1995 Financial Statements to Safety Component's
fiscal year end. For the three months ended June 30, 1996, Phoenix
Airbag's quarterly results for the second quarter of calendar 1996 are
included.
Note 2. Pro Forma Adjustments to the Statement of Operations for the Three
Months Ended June 30, 1996
a) To reflect the increase in interest expense arising from the
borrowing of $20 million for the purchase of Phoenix Airbag.
Interest is assumed to be at Safety Components effective borrowing
rate on the acquisition debt of approximately 9% per annum.
b) To reflect three months amortization of the acquisition goodwill
totaling approximately $14 million, which is being amortized over a
fifteen year period. The goodwill amount represents the current
estimate of the excess of the purchase price over the relative
values of the assets acquired and liabilities assumed.
c) To reflect the income tax effect of the pro forma adjustments
calculated at applicable federal and state statutory rates,
resulting in an effective U.S. tax rate of thirty-nine percent.
d) To reflect the income tax effect of the pro forma adjustments and
applicable tax structure as a result of the purchase of Phoenix
Airbag calculated at applicable German corporate and local trade tax
statutory rates resulting in an effective German tax rate of fifty-
seven percent.
e) To reflect the impact of Safety Components' anticipated changes in
operations associated with the overall increase in size of Safety
Components' operations worldwide and the implementation of Safety
Components' accounting policies and accounting estimates, which
differ from the historical results of Phoenix Airbag.
Note 3. Pro Forma Adjustments to the Statement of Operations for the Year Ended
March 31, 1996
a) To reflect the increase in interest expense arising from the
borrowing of $20 million for the purchase of Phoenix Airbag,
interest is assumed to be at Safety Components effective borrowing
rate on the acquisition debt of approximately 9% per annum.
b) To reflect a year of amortization of the acquisition goodwill
totaling approximately $14 million, which is being amortized over a
fifteen year period. The goodwill amount represents the current
estimate of the excess of the purchase price over the relative
values of the assets acquired and liabilities assumed.
c) To reflect the income tax effect of the pro forma adjustments
calculated at applicable federal and state statutory rates,
resulting in an effective U.S. tax rate of thirty-nine percent.
d) To reflect the income tax effect of the pro forma adjustments and
applicable tax structure as a result of the purchase of Phoenix
Airbag calculated at applicable German corporate and local trade tax
statutory rates resulting in an effective German tax rate of fifty-
seven percent.
e) To reflect the impact of Safety Components' anticipated changes in
operations associated with the overall increase size of Safety
Components' operations worldwide and the implementation of Safety
Components' accounting policies and accounting estimates, which
differ from the historical results of Phoenix Airbag.
7
<PAGE>
Note 4. Pro Forma Adjustments for the Balance Sheet as of June 30, 1996 and as
of March 31, 1996
a) To reflect the cash impact of the transactions, which are primarily
associated with debt service, taxation and anticipated changes in
operations.
b) To reflect purchase method of accounting for the acquisition of
Phoenix Airbag by Safety Components.
c) To reflect the appropriate debt associated with the acquisition of
Phoenix Airbag by Safety Components.
8
<PAGE>
7(a) EXHIBIT (1)
[LOGO OF BDO APPEARS HERE]
Short Form Audit Report
on the Financial Statement
of the
PHOENIX AG's AIRBAG DIVISION
for the year ended December 31, 1995
<PAGE>
[LOGO OF BDO APPEARS HERE] -1-
Board of
Safety Components International
Costa Mesa, California
USA
Audit Opinion
We have audited the accompanying balance sheet of PHOENIX AG's Airbag Division
as of December 31, 1995 and the related statement of operations and a statement
of cash flow for the year then ended and the balance sheet as of December 31,
1994 as well as the revenues of 1994.
We have conducted our audit in conformity with internationally recognized
auditing standards and, accordingly it included an examination of the underlying
documentation of the PHOENIX AG's Airbag Division and audit procedures we
considered appropriate. The accounting system was audited by us as the auditors
of the PHOENIX AG earlier. In our opinion on behalf of the annual accounts of
PHOENIX AG for the year ended December 31, 1995 we confirmed that the accounting
principles comply with the German legal requirements.
In consideration that specific current assets and liabilities are not shown
separately but offset against current account of PHOENIX AG and that several
costs are allocated via cost accounts, in our opinion the balance sheet of
PHOENIX AG's Airbag Division as of December 31, 1995, expressed in Deutsche
Mark, and the related statement of income and cash flow 1995, and the balance
sheet as of December 31, 1994 as well as the revenues for the year ended
December 31, 1994 as disclosed in the note 15 present fairly the financial
position of the airbag division as of December 31, 1995 and comply with the
accounting principles of the United States of America.
Hamburg, October 7, 1996
BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
(Dannenbaum) (ppa. Brandt)
<PAGE>
[LOGO OF IBDO APPEARS HERE] -2-
Financial Statements of the year ended
December 31, 1995 of PHOENIX AG's Airbag Division
Balance Sheet
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
December 31, December 31,
Notes 1995 1994
DM DM
-------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current Assets
Inventories 3 3,913,485 2,463,787
------------------------------------
Fixed Assets 4
Intangible fixed assets 25,712 51,760
Machinery and equipment 6,334,992 6,103,522
Assets under construction 301,557 0
------------------------------------
6,662,261 6,155,282
------------------------------------
10,575,746 8,619,069
====================================
LIABILITIES
Current account PHOENIX AG 8,849,226 9,320,799
Accruals 5 136,000 123,810
Deferred taxation 13 1,044,550 1,754,460
------------------------------------
10,029,776 11,199,069
------------------------------------
SHAREHOLDERS EQUITY/(DEFECIT) 6 545,970 (2,580,000)
------------------------------------
10,575,746 8,619,069
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
[LOGO OF BDO APPEARS HERE] -3-
Statement of Operations
and retained (deficit) earnings
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Note DM
----------------------
<S> <C> <C>
1. Net Sales 7 43,015,600
2. Cost of Sales 8 (35,411,735)
------------
3. Gross Profit 7,603,865
4. Research and development 9 (1,223,000)
5. Sales Expenses 10 (1,038,000)
6. General and administrative Expenses 11 (1,568,300)
------------
7. Profit before interest and taxes 3,774,565
8. Interest 12 0
9. Taxes 13 (648,595)
------------
10. Net income 3,125,970
11. Retained deficit at the beginning of the year (2,580,000)
------------
12. Retained earnings at the end of the year 545,970
------------
</TABLE>
- --------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
-4-
[LOGO OF BDO APPEARS HERE]
Cash Flow Statement
for the twelve months ended
December 31, 1995
<TABLE>
<CAPTION>
DM
-------------
<S> <C>
Net income 3,125,970
plus depreciation on fixed assets 2,372,055
changes in current assets and liabilities
Inventories (1,449,698)
Accruals 12,190
Deferred taxes (709,910)
Current account PHOENIX AG (471,573)
-------------
2,879,034
less investments in fixed assets (2,879,034)
-------------
0
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
[LOGO OF BDO APPEARS HERE] -5-
Notes to the accounts
1. Description of Business
The production of sewn airbag was a division of PHOENIX AG in Hildesheim
during the years 1994 and 1995. PHOENIX AG started to produce sewn airbags
in 1994 to replace the gummed airbags.
With a founding contract dated November 14, 1995, and with effect from
January 1, 1996, PHOENIX AG transferred its airbag production into a
separate legal entity called Phoenix Airbag GmbH. Phoenix Airbag was
subsequently sold under a contract dated June 6, 1996 and amended on
June 28 and August 6, 1996, with effect from January 1, 1996 to a
subsidiary of Safety Components Inc.
2. Significant Accounting Principles
The financial Statements have been prepared in accordance with Generally
Accepted Accounting Principles of the United States of America. The
particular accounting principles adopted are described below.
Due to the fact that the sewn airbag production was only a division within
the PHOENIX AG's business, the balance sheet only includes those assets
and liabilities/accruals which relate directly to the airbag production.
Neither trade debtors nor creditors to suppliers are included.
The financial statements have been prepared under the historical cost
convention and are expressed in German Marks (DM).
The airbag division is potentially subject to a concentration of credit
risk consisting of its trade receivables, relying only on two domestic
customers (Petri AG, MST Automative GmbH).
The financial statements have been prepared in conformity with Generally
Accepted Accounting Principles of the United States of America, which
require management to make estimates and assumptions that effect the
amounts and
<PAGE>
-6-
[LOGO OF BDO APPEARS HERE]
disclosures reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
All overheads, general and administrative expenses are allocated to the
airbag division based on reasonable cost accounting principles.
3. Inventories
Inventories as of December 31, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>
December 31 December 31
----------- -----------
1995 1994
---- ----
DM DM
-- --
<S> <C> <C>
Raw Materials, tools 1,168,699 751,383
Unfinished goods 1,213,925 489,947
Finished goods 1,530,861 1,222,457
----------- -----------
3,913,485 2,463,787
=========== ===========
</TABLE>
Inventories are valued at the lower of cost or market value net of adequate
provisions for obsolete inventories. Raw materials are valued at weightened
average cost. Unfinished and finished goods are valued at full absorption
costing.
4. Fixed assets
<TABLE>
<CAPTION>
December 31 December 31
----------- -----------
1995 1994
---- ----
DM DM
-- --
<S> <C> <C>
Intangible fixed assets
At cost 257,108 254,563
less accumulated depreciation (231,396) (202,803)
-------- --------
25,712 51,760
-------- --------
</TABLE>
<PAGE>
[LOGO OF BDO APPEARS HERE]
- 7 -
<TABLE>
<CAPTION>
Tangible fixed assets
December 31 December 31
----------- -----------
1995 1994
---- ----
DM DM
-- --
<S> <C> <C>
At cost
Machinery and equipment 11,692,525 9,328,091
Funiture, fixtures and office equipment 1,222,771 1,051,810
Assets under construction 301,557 0
---------- ----------
13,216,853 10,379,901
---------- ----------
Accumulated depreciation
Machinery and equipment 5,762,734 3,614,890
Furniture, fixtures and office equipment 817,570 661,489
---------- ----------
6,580,304 4,276,379
---------- ----------
Net book value 6,636,549 6,103,522
========== ==========
</TABLE>
Fixed assets are stated at cost less accumulated depreciation. Depreciation
is provided using the reducing-balance method, applied over the expected
useful life of assets five to ten years. Machinery and equipment is
generally depreciated over a period of ten years. Low value items up to DM
800 are depreciated 100% during the period of acquisition.
Additions and improvements are capitalized, maintenance and repairs are
expensed when incurred.
5. Accruals
Accruals consist of pension obligation, valued according to German tax
requirements (DM 53,000) and other obligations to employees (DM 83,000).
<PAGE>
[LOGO OF BDO APPEARS HERE] -8-
6. Shareholders Equity
Shareholders equity includes only retained earnings (deficit). All
investments by PHOENIX AG have netted by the current account.
7. Sales
Sales include only the production of sewn airbags.
<TABLE>
<CAPTION>
DM
--
<S> <C>
Gross sales less VAT 43,350,700
Discounts 335,100
----------
43,015,600
==========
</TABLE>
8. Cost of sales
<TABLE>
<CAPTION>
DM
--
<S> <C>
Material 21,379,000
Wages 8,988,060
Depreciation of fixed assets 2,372,055
Sundry costs 2,672,620
----------
35,411,735
==========
</TABLE>
Sundry costs consist of overheads such as rent for the plant, repair and
maintenance, auxiliary material, energy, proportion of production
management and other services.
9. Research and development
<TABLE>
<CAPTION>
DM
--
<S> <C>
Direct costs of airbag 781,000
Proportion of facilities provided by
the central department 442,000
---------
1,223,000
=========
</TABLE>
<PAGE>
[LOGO OF BDO APPEARS HERE]
- 9 -
<TABLE>
<CAPTION>
10. Sales expenses
DM
--
<S> <C>
Wages and salaries 334,000
Freight and packaging 519,000
Warehouse 180,000
Sundry 5,000
---------
1,038,000
=========
11. General and administrative expenses
DM
--
<S> <C>
General overheads allocated
to the airbag division such
as
managing director of airbag
itself 231,000
proportion of PHOENIX AG's
management 347,000
purchase department 132,000
finance, cost- and controlling
department 252,000
insurance 132,000
duties 133,000
logistic and restructure
department 136,000
other internal and external
services 205,300
---------
1,568,300
=========
</TABLE>
12. Interest
No interest are allocated to the airbag division.
<PAGE>
[LOGO OF BDO APPEARS HERE] -10-
13. Taxes
The income tax charges are calculated as if the airbag division was
already a separate legal entity in 1995 and 1994.
The tax charges comprise corporation tax and municipal trade tax on
income. Municipal trade tax is a deductable expense for corporation
profits tax purposes. The effective rate for municipal trade tax was 17%
in 1995. The standard rate of corporation tax is 45% of taxable income.
This rate will be reduced to 30% for distributed profits. In consistency
with the assumption of the period January to July 1996 the corporation tax
was calculated using the standard rate.
The net operating loss of 1994 (DM 2,580,000) was netted against pre tax
income of 1995.
Deferred taxes at a rate of 54.4% income taxes were accrued for special
depreciations on fixed assets allowed according to German fiscal law for
investments in the region along the former border to the Deutsche
Demokratische Republik.
DM
--
Current income tax 1995 1,358,505
less reduction of deferred taxes (709,910)
--------
648,595
-------
14. Contingent liabilities and commitments
As of December 31, 1995 and 1994 there were no contingent liabilities and
commitments.
<PAGE>
-11-
[LOGO OF BDO APPEARS HERE]
15. Results of operations of PHOENIX AG's Airbag Division for the year ended
December 31, 1994
The following information for the year ended December 31, 1994 includes the
audited revenues and unaudited costs of the airbag product line of
Phoenix's parent, PHOENIX AG. Costs for 1994 have been included for
informational purposes and are unaudited since the airbag division was in
the process of being established and the organizational structure was not
designed to segregate costs between product lines. Costs for 1994 are based
on the internal operating statements of PHOENIX AG. Included in costs are
certain adjustments made by management to allocate common expenditures
utilized by the various product lines located in PHOENIX AG's Hildesheim
facility.
<TABLE>
<CAPTION>
Year ended
December 31, 1994
DM (000)
--------
<S> <C>
Revenues (audited) 19,718
Costs (unaudited)
Cost of sales (18,673)
Research and development ( 1,559)
Selling, general and administrative ( 2,010)
Other ( 56)
--------
Income before income taxes ( 2,580)
Provision for income taxes 0
--------
Net income ( 2,580)
--------
</TABLE>
<PAGE>
General Conditions of Assignment
for
Wirtschaftsprufer and Wirtschaftsprufungsgesellschaften
1st January 1995
1. Scope and application
(1) These conditions are applicable to agreements between Wirtschaftsprufer or
Wirtschaftsprufungsgesellschaften (hereafter uniformly referred to as
"Wirtschaftsprufer") and their clients concerning audits, advisory work and any
other services, as far as these are not otherwise expressly agreed in writing or
providing for by non-discretionary legal regulations.
(2) If, in exceptional cases, contractual relations also exist between the
Wirtschaftsprufer and parties other than the client, the provisions of Section
9 below also apply to the relations with such parties.
2. Scope and execution of assignment
(1) The object of the Wirtschaftsprufer's assignment is the performance of
agreed services and not the achievement of a particular economic result. The
assignment is executed in accordance with generally accepted professional
standards. The Wirtschaftsprufer is entitled to use qualified persons to carry
out his assignment.
(2) The application of foreign law requires special written agreement, except in
cases of special investigations.
(3) The assignment does not extend - unless expressly stated otherwise - to an
examination of due adherence to tax laws or special regulations, e.g. to the law
of price control, laws of limitation of competition and other controls; the same
applies to determination as to whether grants, allowances or benefits of any
other type may be claimed. The execution of an assignment includes only the
application of auditing procedures aimed at the disclosure of bookkeeping frauds
and other irregularities if during the performance of the audit such requirement
becomes apparent, or if this has been expressly agreed in writing.
(4) If the legal position changes after the final professional pronouncement by
the Wirtschaftsprufer, he is not obliged to inform the client of the changes or
any resulting consequences. This provision also applies to parts of the
assignment which are already completed.
3. Information to be given by the client
(1) The client has to see that the Wirtschaftsprufer even without his specific
request is supplied in good time with all the documentary evidence necessary for
the execution of the assignment and informed of all events and circumstances
which may have a bearing on the execution of the assignment. This also applies
to any evidence, events and circumstances which come to light during the course
of the Wirtschaftsprufer's work.
(2) Upon request of the Wirtschaftsprufer, the client must confirm in a written
statement formulated by the Wirtschaftsprufer that the evidence, information and
explanations applied are complete.
4. Safeguard of independence
The client undertakes to ensure that no action is committed which might endanger
the independence of the Wirtschaftsprufer's staff. This applies especially to
offers of employment and offers to perform professional work on the staff
member's own account.
5. Reporting and oral information
If the Wirtschaftsprufer is obligated to present the results of his work in
writing, only that written presentation is authoritative and binding. In the
case of audit assignments the report is, unless otherwise agreed, submitted in
writing. Oral explanations and information given by the staff of the
Wirtschaftsprufer outside the scope of the assignment are never binding.
6. Protection of the Wirtschaftsprufer's intellectual property
The client warrants that special opinions, organization plans, drafts, sketches,
tabulations and calculations, particularly quantity and cost computations,
prepared by the Wirtschaftsprufer within the scope of the assignment, are only
used for his own purposes.
7. Release of a Wirtschaftsprufer's professional statement to third parties
(1) The release to third parties of professional statements made by the
Wirtschaftsprufer (reports, special opinions, etc.) requires the
Wirtschaftsprufer's written consent, unless the terms of the assignment allow
release thereof to a designated person.
As to third parties, the Wirtschaftsprufer is liable (within the limits of
Section 9) only if the prerequisites of sentence 1 are satisfied.
(2) The use for advertising purposes of professional statements made by the
Wirtschaftsprufer is not permitted; any infringement entitles the
Wirtschaftsprufer to instant termination of all assignments not yet completed
for the client.
8. Correction of deficiencies
(1) The client is entitled to have deficiencies in the Wirtschaftsprufer's work
corrected. Only if the correction fails may the client also claim a reduction
of fees or cancellation of the contract. If the assignment has been awarded by
a merchant within the scope of his commercial activities, by a public-law legal
entity or by a public-law fund, the client can only claim cancellation of the
contract if the Wirtschaftsprufer's work, because of the failure in correcting
the deficiency, is of no interest to the client.
Claims for additional compensation are dealt with under Section 9.
(2) The client must submit his claim for correction of deficiencies in writing
without delay. Claims under Paragraph (1) sentence 1 expire six months after
completion of the Wirtschaftsprufer's professional work.
(3) Obvious errors, such as typing and arithmetical errors and deficiencies of
form contained in a Wirtschaftsprufer's professional statements (report,
special opinion, etc.) may be corrected by the Wirtschaftsprufer at any time
also with effect against third parties. Errors which are apt to question the
results contained in the Wirtschaftsprufer's professional statements, entitle
the Wirtschaftsprufer to withdraw such statements also with effect against any
third party. In such cases the Wirtschaftsprufer should, if practicable, first
hear the client.
9. Liability
(1) With regard to audits required by law, the liability limitations set out in
(S) 323 par. (2) Commercial Code apply.
(2) Liability in cases of negligence; Single cases of damages
Pursuant to (S)54a par.(1) no.2 Law regulating the Profession of
Wirtschaftsprufer (WPO) the liability of the Wirtschaftsprufer for damages of
any kind, whether it is joint or several liability, is limited in a single case
of damages due to negligence to DM 2 million; this limitation also applies to
liability to a person other than the client. A single case of damages is defined
as the total sum of the damages claims of all persons entitled to claim, which
arise from one and the same professional error (offence); a single case of
damages is also defined as the total of all offences committed in performing
an audit or other coherent service (a specifiable professional service which
technically represents an undivisible performance) by one or more persons.
However, in the case of damages suffered from several audits of the same kind or
several coherent services of similar nature a Wirtschaftsprufer can be held
liable only up to an amount of DM 2.5 million irrespective of whether the
damages were caused by offences within one year or within several consecutive
years.
(3) Limitation periods
A damages claim may only be lodged within twelve months of the claimant becoming
aware of the damages and of the event constituting the claim, at the very
latest, however, within 5 years following the event constituting the claim.
The claim expires unless legal action is taken within six months following the
written refusal of acceptance of the correction and the client was informed of
this consequence. The right to apply the statute of limitations is not
prejudiced. This paragraph (3) applies equally to audits required by law with
legally imposed liability limitations.
<PAGE>
10. Supplementary provisions relating to audits
(1) A subsequent amendment or abridgement of the audited and certified financial
statements or management report requires the written consent of the
Wirtschaftsprufer even if these documents are not published. In cases where the
Wirtschaftsprufer has not issued an audit opinion, reference to the
Wirtschaftsprufer's examination may only be made in the management report or
other publications with his written consent and then only with a wording
authorized by him.
(2) If the Wirtschaftsprufer revokes his opinion, it must no longer be used. If
the client has already made use of the opinion, he must announce its revocation
upon the request of the Wirtschaftsprufer.
(3) The client is entitled to 5 copies of the report. Additional copies are
charged for separately.
11. Supplementary provisions relating to tax advisory services
(1) When advising the client on a particular tax problem or when furnishing
continuous tax advice, the Wirtschaftsprufer is entitled to assume that the
facts, especially figures, provided by the client, are complete and correct;
this also applies to bookkeeping assignments. He is, however, obliged to inform
the client of any errors discovered by him.
(2) The assignment for tax advisory services does not comprise those services
required for meeting deadlines, except in cases where the Wirtschaftsprufer has
specifically accepted such assignment. In such cases the client must supply the
Wirtschaftsprufer with all documents essential for meeting deadlines, especially
with tax assessments, with sufficient time for the Wirtschaftsprufer to give
them adequate attention.
(3) In the absence of other written agreements, a continuous tax advice
assignment covers the following work arising during the period of the agreement:
a) preparation of the annual income, corporation and trade tax returns as
well as property tax returns on the basis of financial statements and
other records and evidence required for tax purposes, to be submitted by
the client
b) review of assessments concerning the taxes mentioned in (a)
c) negotiations with the tax authorities with regard to the returns and
assessments mentioned in (a) and (b)
d) participation in tax audits and evaluation of the results of tax audits
concerning the taxes mentioned in (a)
e) participation in appeals and complaints filed with Fiscal Authorities
("Einspruchsverfahren" and "Beschwerdeverfahren"), concerning the taxes
mentioned in (a).
When undertaking the aforementioned work the Wirtschaftsprufer takes into
account major published legal decisions and the administration's opinion.
(4) In cases where the Wirtschaftsprufer receives a retainer fee for continuous
advice, the work mentioned in paragraph 3(d) and (e) is chargeable separately
unless otherwise agreed in writing.
(5) A special agreement is required to engage the Wirtschaftsprufer's services
on particular individual problems with regard to income, corporation and trade
tax, the valuation procedures for property taxation, property tax, as well as
all problems concerning turnover tax, wages tax and any other taxes and dues.
This also applies to:
a) the treatment of non-recurring tax matters, e.g. in the field of estate
tax, capital transactions tax, real estate acquisition tax
b) participation and representation in proceedings before tax and
administrative courts and in criminal proceedings concerning taxes and
c) granting of advice and expert opinions in connection with conversions,
mergers, capital increases and reductions, financial reorganizations,
admission and retirement of partners or shareholders, sale of
businesses, liquidations and similar matters.
(6) If, in addition to the above, the Wirtschaftsprufer is requested to prepare
the annual turnover tax return, he is not obliged to examine adherence to
special accounting requirements, if any, or to determine whether the client has
taken full advantage of all benefits offered under the turnover tax law. No
guarantee is assumed for the completeness of the evidence complied in
substantiation of the credit against the client's turnover tax liability for
his suppliers' turnover tax charge.
12. Professional descretion towards third parties and data protection
(1) The Wirtschaftsprufer is, as provided by law, obliged to treat all maters
which come to his knowledge in connection with his engagement as confidential,
irrespective of whether these matters concern the client himself or his business
connections, unless the client releases him from this obligation.
(2) The Wirtschaftsprufer is not allowed to release reports, special opinions
and other written statements on the results of his work to third parties without
the consent of his client.
(3) The Wirtschaftsprufer is entitled - within the framework of his assignment -
to process personal data made available to him or to authorize third parties to
process them.
13. Default of acceptance and lack of co-operation
on the part of the client
If the client is in default of accepting the services offered by the Wirt-
schaftsprufer or if the client refrains from the co-operation incumbent on
him in accordance with Section 3 or otherwise the Wirtschaftsprufer is entitled
to terminate the agreement without notice. The right of the Wirtschaftsprufer
to compensation of additional expenses as well as damages caused by default or
by the client's failure to co-operate is not prejudiced, even if the Wirt-
schaftsprufer does not exercise his right to terminate the agreement.
14. Remuneration
(1) In addition to his fees or remuneration, the Wirtschaftsprufer is entitled
to reimbursement of his expenses; the value added tax is billed separately. He
may request appropriate advances on account of remuneration and expenses and may
withhold the results of his services until full payment of his claims has been
made. If there is more than one client, they are jointly and severally liable.
(2) Any set off against claims of the Wirtschaftsprufer for remuneration and
reimbursement of expenses is only permitted in the case of undisputed or
legally settled claims.
15. Storage and return of documentation
(1) The Wirtschaftsprufer shall retain, for a period of seven years, the
documents handed over to him or prepared by himself in connection with the
performance of the assignment as well the correspondence concerning the
assignment.
(2) After settlement of his claims arising from the assignment, the
Wirtschaftsprufer, on request of the client, has to return all documents
obtained from the client or from a third party on his behalf by reason of
his assignment. This does not, however, apply to correspondence exchanged
between the Wirtschaftsprufer and his client and to any documents of which the
client already has the original or a copy. The Wirtschaftsprufer is entitled to
prepare and retain copies or photocopies of any documents which he returns to
the client.
16. Applicable law
(1) The assignment of the Wirtschaftsprufer, the execution of the assignment
and the resulting claims are solely governed by German Law.
<PAGE>
7(A) EXHIBIT (2)
PHOENIX AIRBAG GMBH
HILDESHEIM
FINANCIAL STATEMENTS AS OF
AUGUST 5, 1996 TOGETHER WITH
REPORT OF INDEPENDENT
ACCOUNTANTS
<PAGE>
SIGNED COPY
- --------------------------------------------------------------------------------
[LOGO OF PRICE WATERHOUSE APPEARS HERE]
To the Board of Directors
Safety Components International, Inc.
Costa Mesa, California
United States of America
REPORT OF INDEPENDENT ACCOUNTANTS
1. We have audited the accompanying balance sheet of Phoenix Airbag GmbH,
Hildesheim (a German limited liability company) expressed in Deutsche
Mark as of August 5, 1996 and the related statements of operations, of
stockholders' equity and of cash flows for period from January 1, 1996
to August 5, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
3. In our opinion, the financial statements audited by us present fairly,
in all material respects, the financial position of Phoenix Airbag GmbH,
Hildesheim as of August 5, 1996 and the results of its operations and
its cash flows for the period from January 1, 1996 to August 5, 1996, in
conformity with generally accepted accounting principles in the United
States of America.
Hamburg, October 7, 1996
/s/ Price Waterhouse
<PAGE>
PHOENIX AIRBAG GMBH, HILDESHEIM
BALANCE SHEET AS OF AUGUST 5, 1996
August 5,
Notes 1996
----- -----------
DM
ASSETS
CURRENT ASSETS
Cash 428
Trade accounts receivable 2,3 6,044,852
Other accounts receivable 68,888
Inventories 2,4 2,131,377
Phoenix AG current account 1,5 478,348
----------
Total current assets 8,723,893
----------
PLANT AND EQUIPMENT 2,6
At cost 13,923,472
Less: Accumulated depreciation 7,239,991
---- ----------
Net book value 6,683,481
----------
GOODWILL, LICENSES AND SOFTWARE 2,7
At cost 257,108
Less: Accumulated depreciation ( 244,810)
----------
Net book value 12,298
----------
15,419,672
==========
<PAGE>
August 5,
Notes 1996
----- -----------
DM
LIABILITIES
CURRENT LIABILITIES
Trade accounts payable 1,886,712
Other accounts payable and accrued liabilities 2,668,500
Taxation 8 3,047,000
----------
Total current liabilities 7,602,212
----------
LONG-TERM LIABILITIES
Deferred taxation 8 752,096
----------
Total liabilities 8,354,308
----------
STOCKHOLDERS' EQUITY
Common stock 1 1,500,000
Additional paid-in capital 3,500,000
Net income for the period 2,065,364
----------
Total stockholders' equity 7,065,364
----------
15,419,672
==========
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
<PAGE>
PHOENIX AIRBAG GMBH, HILDESHEIM
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JANUARY 1, 1996 TO AUGUST 5, 1996
<TABLE>
<CAPTION>
The period ended
August 5,
Notes 1996
----- ----------------
DM
<S> <C> <C>
Net sales 2 34,926,270
Cost of sales (26,595,873)
----------
Gross profit 8,330,397
Research and development (782,000)
Selling expenses (555,234)
General and administrative expenses (2,037,135)
----------
Profit before interest and taxes 4,956,028
Interest (net) (136,118)
Taxation 8 (2,754,546)
----------
Net income 2,065,364
==========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
<PAGE>
PHOENIX AIRBAG GMBH, HILDESHEIM
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1996 TO AUGUST 5, 1996
The period ended
August 5,
1996
----------------
DM
CASH FLOWS FROM OPERATING ACTIVITIES:
- -----------------------------------
Net income 2,065,364
---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,336,728
Loss on retirement of fixed assets 12,704
---------
1,349,432
---------
Changes in current assets and liabilities:
(Increase)/decrease in
Accounts receivable trade and other (6,113,740)
Inventories 1,782,108
Phoenix AG current account (9,873,544)
Increase/(decrease) in
Trade accounts payable 1,886,712
Other accounts payable and accrued liabilities 2,532,200
Taxation 3,047,000
---------
(6,738,964)
---------
Net cash used by operating activities (3,324,168)
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Investments in fixed assets (1,382,950)
---------
Net cash used by investing activities (1,382,950)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Share capital paid in 5,000,000
Decrease in deferred taxation ( 292,454)
----------
Net cash provided by financing activities 4,707,546
---------
Increase in cash 428
Cash at beginning of the period -
---------
Cash at end of the period 428
=========
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
<PAGE>
PHOENIX AIRBAG GMBH, HILDESHEIM
NOTES TO THE FINANCIAL STATEMENTS
AS OF AUGUST 5, 1996
1. DESCRIPTION OF BUSINESS
-----------------------
With a founding contract ("Einbringungsvertrag") dated November 14, 1995
effective as of January 1, 1996, Phoenix AG transferred its airbag
production, which is located in Hildesheim, Germany, into a separate legal
entity called "Phoenix Airbag GmbH". Phoenix Airbag GmbH was subsequently
sold under a contract dated June 6, 1996 as amended on June 28, 1996 and
August 5, 1996 to AB 9607 Verwaltungs GmbH & Co KG, a wholly owned
subsidiary of Safety Components International, Inc. The transaction closed
at the end of business on August 5, 1996.
At January 1, 1996, only certain assets (ie inventories and fixed assets)
and only some specific business-related liabilities were transferred into
the new GmbH. Cash, trade accounts receivable and trade accounts payable
were all netted into the PHOENIX AG current account.
Hence, as Phoenix Airbag GmbH was not a separate legal entity prior to
January 1, 1996, pro-forma "as-if" financial statements were prepared as
per December 31, 1995 and the twelve months then ended, which were audited
by BDO Deutsche Warentreuhand AG. Consequently, care has to be exercised
when comparing the results for 1996 with the "as-if" 1995 figures.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
a) General
-------
The company maintains its books of record and prepares the financial
statements in Deutsche Mark in accordance with generally accepted
accounting principles in Germany. Certain reclassifications are made to
restate the Company's financial statements in conformity with generally
accepted accounting principles in the United States of America.
b) Financial statement preparation
-------------------------------
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
Page 2
c) Revenue recognition
-------------------
Sales are recognized at the time when the goods are shipped, net of
discounts granted and VAT.
d) Concentration of credit risk
----------------------------
The Company is potentially subject to a concentration of credit risk
consisting of its trade accounts receivables, a significant portion of which
are due from Petri AG and MST Automotive. The Company performs ongoing
credit evaluations of its customers and generally does not require
collateral. The company maintains reserves for potential losses for
uncollectible amounts and such losses have historically been within
management's expectations.
e) Trade accounts receivable
-------------------------
Trade accounts receivable consist of amounts receivable from customers net
of allowances for doubtful accounts and cash discounts.
f) Inventories
-----------
Inventories consist of raw materials, unfinished and finished goods. Raw
materials are valued at weighted average cost. Unfinished and finished goods
are valued at the lower of full absorption costing and net realisable value.
g) Plant and Equipment
-------------------
Plant and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the reducing-balance method over estimated
useful lives of three to ten years. In the past, where allowable, the
maximum accelerated depreciation allowable under German tax laws was
recognised.
Additions and improvements are capitalized. Maintenance and repairs are
expensed when incurred. As permitted under German income tax law, the
company charges the acquisition cost of low value items (costs not in excess
of DM 800) to depreciation expense during the year of acquisition.
h) Goodwill, licenses and software
-------------------------------
Software acquired from third parties is stated at cost less accumulated
depreciation. Depreciation is provided using the straight line method over
estimated useful lives of three years.
<PAGE>
Page 3
3. TRADE ACCOUNTS RECEIVABLE
-------------------------
Trade accounts receivable as of August 5, 1996 consisted of the following:
<TABLE>
<CAPTION>
August 5,
1996
---------
DM
<S> <C>
Trade accounts receivable 6,203,852
Allowance for doubtful amounts and cash discounts ( 159,000)
---------
6,044,852
=========
</TABLE>
4. INVENTORIES
-----------
Inventories as of August 5, 1996 consisted of the following:
<TABLE>
<CAPTION>
August 5,
1996
---------
DM
<S> <C>
Raw materials 1,493,728
Unfinished goods 318,565
Finished goods 319,084
=========
2,131,377
=========
</TABLE>
5. PHOENIX AG CURRENT ACCOUNT
--------------------------
As part of the transfer at January 1, 1996 of fixed assets and inventories
and some specific business-related liabilities from Phoenix AG into the newly
founded company, which had a share capital of DM 5,000,000, a current account
liability to Phoenix AG of DM 4,395,196 was set up representing the difference
between the net assets contributed and the Company's share capital. During the
period ended August 5,1996, this current account was repaid primarily through
the movement on the cashpooling arrangement which still existed between Phoenix
AG and the Company. As per August 5, 1996 the Phoenix AG current account showed
an amount due to the Company of DM 478 348.
<PAGE>
Page 4
<TABLE>
<CAPTION>
6. PLANT AND EQUIPMENT
-------------------
Plant and equipment as of August 5, 1996 consisted of the following:
August 5,
1996
---------
DM
<S> <C>
At cost
-------
Plant and machinery 12,017,091
Furniture, fixtures and office equipment 1,327,268
Assets under construction 579,113
----------
13,923,472
Accumulated Depreciation
------------------------
Plant and machinery 6,359,240
Furniture, fixtures and office equipment 880,751
----------
7,239,991
----------
6,683,481
==========
Net book value
--------------
Depreciation expense 1,323,314
==========
7. GOODWILL, LICENCES AND SOFTWARE
-------------------------------
Goodwill, licences and software as of August 5, 1996 consisted of the
following:
August 5,
1996
---------
DM
At cost
-------
Software 257,108
----------
Accumulated Depreciation
------------------------
Software 244,810
----------
Net book value 12,298
-------------- ==========
Depreciation expense 13,414
==========
</TABLE>
<PAGE>
Page 5
8. TAXATION
--------
In Germany, tax assessments do not become final until the accounting records
and tax returns for the periods concerned have been examined by the tax
authorities. These reviews by the tax authorities have to be carried out
within five years after the year of assessment.
The income tax charge comprises corporation profits tax and municipal trade
tax on income. Municipal trade taxes are also a deductible expense for
corporation profits tax purposes. The effective rate for municipal trade tax
on income in 1996 was 17%. The standard rate of corporation profits tax is
45% of taxable income but distributed profits qualify for a rate reduction
to 30%. Dividends paid or declared are subject to withholding tax at the
rate of 25% of the gross dividend.
Income taxes for the seven month period to August 5, 1996 have been
calculated as if that seven month period would be the relevant fiscal
period.
Deferred taxes at a rate of 54.4% were accrued for special depreciations on
fixed assets which were allowed according to German fiscal laws for
investments made in the region along the border to the former German
Democratic Republic.
The taxation charge for the 7 month period ended August 5, 1996 consisted of
the following:
DM
Current income tax 3,047,000
Deferred tax (292,454)
---------
Total tax charge for the period 2,754,546
=========
The movement on the deferred tax account for the 7 month period ended August
5, 1996 was as follows:
DM
Deferred tax liability as at January 1, 1996 1,044,550
Released to income (292,454)
---------
Deferred tax liability as at August 5, 1996 752,096
=========
9. CONTINGENT LIABILITIES AND COMMITMENTS
--------------------------------------
As of August 5, 1996 the Company had no contingent liabilities or
commitments.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Safety Components International, Inc.
We hereby consent to the incorporation by reference in Registration
Statement on Form S-8 (file 333-04709) of our report dated October 7, 1996,
appearing in the financial statements of Phoenix AG's Airbag Division for the
year ended December 31, 1995.
BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprufungsgesellschaft
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Safety Components International, Inc.
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (file No. 333-04709) of our report dated October 7, 1996,
appearing in the financial statements of Phoenix Airbag GmbH as of August 5,
1996.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Costa Mesa, CA
October 18, 1996
