SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
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Amendment No. 1
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
May 22, 1997
(Date of earliest event reported)
SAFETY COMPONENTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-23938
(State or other jurisdiction of (Commission File Number)
incorporation or organization)
33-0596831
(I.R.S. Employer Identification No.)
3190 Pullman Street
Costa Mesa, California
(Address of principal executive offices)
92626
(Zip Code)
Registrant's telephone number, including area code (714) 662-7756
Not Applicable
(Former name or former address, if changed since last report)
Page 1 of 24 pages
<PAGE>
This Form 8-K/A, Amendment Number 1, amends and supplements the Form
8-K (the "Original Form 8-K") filed by Safety Components International, Inc. on
June 6, 1997. The purpose of this Amendment Number 1 is to amend Item 7 of the
Original Form 8-K as set forth below.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Item 7 is hereby amended to read in full as follows:
(a) Financial Statements
Predecessor Financial Statements:
Valentec International Corporation Financial Statements
Report of Independent Accountants
Balance Sheet as of March 31, 1997
Statement of Operations and Accumulated Deficit for the Year
Ended March 31, 1997
Statement of Cash Flow for the Year Ended March 31, 1997
Notes to Financial Statements
(b) Pro Forma Unaudited Financial Information
The unaudited pro forma combined balance sheet of Safety Components
International, Inc. (Safety Components or the Company) and Valentec
International Corporation (Valentec) as of March 31, 1997 reflect adjustments as
if the acquisition of all of the issued and outstanding stock of Valentec by
Safety Components had taken place on March 31, 1997. The unaudited pro forma
statement of operations for the twelve months ended March 31, 1997 reflect
adjustments as if the acquisition of Valentec had occurred on April 1,1996, the
beginning of Safety Components' fiscal year. The acquisition is being accounted
for using the purchase method. Certain transactions occurred subsequent to the
acquisition of Valentec which are included in the Pro Forma Unaudited Financial
Information under the heading Subsequent Financing Transactions.
The financial statements of Safety Components and Valentec are based on
their fiscal years ending March 31. The acquisition of Phoenix Airbag GmbH
(Phoenix Airbag) was consummated on August 6, 1996. In order to present the pro
forma combined financial statements based on Safety Components' fiscal year
ended March 31, 1997, Phoenix Airbag's results for the period from April 1, 1996
through August 5, 1996 are being included.
The unaudited pro forma combined financial statements reflect Safety
Components' allocation of the purchase price, including transaction costs, of
approximately $14.3 million to the assets and liabilities of Valentec based upon
Safety Components' appraised values of the relevant assets acquired and
liabilities assumed. The final allocation of the purchase price may vary as
additional information is obtained, and accordingly, the ultimate allocation may
differ from those used in the unaudited pro forma financial statements. Such
final allocation is not expected to be materially different.
The unaudited pro forma combined financial statements should be read in
conjunction with the separate historical financial statements and related notes
of Valentec appearing in 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, 1997 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 VALENTEC INTERNATIONAL CORPORATION
UNAUDITED
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
MARCH 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Subsequent
Company Valentec Acquisition Acquisition Financing
3/31/97 3/31/97 Adjustments Totals Transactions Pro Forma
------- -------- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales $83,958 $14,026 $9,654 (a) $107,638 $ - $107,638
Cost of goods sold 64,130 12,144 6,428 (b) 82,702 - 82,702
Product launch costs 1,761 - - 1,761 1,761
Depreciation 2,043 546 249 (b) 2,838 - 2,838
------- ------- ------ -------- ------ --------
Gross Profit 16,024 1,336 2,977 20,337 - 20,337
Selling and marketing expenses 1,375 - 503 (c) 1,878 - 1,878
General and administrative expenses 5,697 1,683 675 (d) 8,055 - 8,055
Amortization 348 - 662 (e) 1,010 - 1,010
------- ------- ------ -------- ------ --------
Operating Income 8,604 (347) 1,137 9,394 - 9,394
------- ------- ------ -------- ------ --------
Other expense (income) 444 (538) 605 (f) 511 - 511
Interest expense, net 1,319 1,183 138 (g) 2,640 221 (i) 2,861
------- ------- ------ -------- ------ --------
Income (loss) before taxes 6,841 (992) 394 6,243 (221) 6,022
Provision for income taxes 2,995 (286) 175 (h) 2,884 (88) (j) 2,796
------- ------- ------ -------- ------ --------
Income (loss) from continuing
operations $ 3,846 $ (706) $ 219 $ 3,359 $ (133) $ 3,226
======= ======= ====== ======== ====== ========
Per Share Information:
Weighted average pro forma shares
outstanding 5,021
=====
Pro forma income from continuing
operations $ .64
=====
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of this Schedule.
3
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SUMMARY OF PRO FORMA ADJUSTMENTS
(in thousands)
<TABLE>
<CAPTION>
Twelve Months
REF ADJUSTMENTS March 31, 1997
--- ----------- ----------------
<S> <C>
Net sales (a) Eliminate intercompany sales between SCI and Valentec $(2,727)
Revenues for Phoenix prior to
August 5, 1996 (acquisition date) 12,381
-------
9,654
Cost of sales (b) Eliminate intercompany cost of sales between
SCI and Valentec (2,727)
Depreciation for Phoenix prior to acquisition 249
Cost of Goods Sold for Phoenix prior to acquisition 9,155
-------
6,677
-------
Increase in gross profit 2,977
Selling and marketing
expense (c) Selling and marketing for Phoenix prior to acquisition 503
General and
administrative expense (d) General and administrative for Phoenix prior to acquisition 675
Goodwill amortization (e) Amortization of Phoenix goodwill prior to acquisition 153
Amortization of Valentec goodwill 509
-------
662
-------
Increase to operating income 1,137
-------
Other expense (income) (f) Eliminate Valentec investment income related to SCI 605
-------
605
Interest expense (income) (g) Eliminate historical interest expense of Valentec (1,227)
Eliminate historical interest expense of SCI (1,555)
Interest expense for Phoenix prior to acquisition 463
Amortization of deferred financing costs 40
Interest expense related to SCI and Valentec under existing
and new financing arrangements 2,417
-------
Pro forma adjustment required 138
-------
Increase in income before income taxes 394
-------
Income taxes (h) Income taxes related to Phoenix prior to acquisition date 473
Income tax benefit attributable to additional
interest expense on new debt 55
Income tax benefit attributable to Valentec losses (353)
-------
175
-------
Increase in income before extraordinary item and
cummulative effect of change in accounting principle $ 219
=======
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of these Adjustments.
4
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
SUMMARY OF SUBSEQUENT TRANSACTIONS
(in thousands)
<TABLE>
<CAPTION>
Twelve Months
REF ADJUSTMENTS March 31, 1997
--- ----------- ----------------
<S> <C>
Interest Expense (i) Increase in SCI interest expense due to mortgage
financing from Bank Austria $ 563
Increase in SCI interest expense due to new equipment
financing 160
Increase amortization of deferred financing costs
incurred from Bank Austria 15
Eliminate historical interest expense for long-term
debt repaid from subsequent transactions (517)
-----
Pro forma adjustment required 221
Income taxes (j) Income tax benefit attributable to additional interest
subsequent financing transactions (88)
-----
Decrease in net income $ 133
=====
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of these adjustments.
5
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC. AND VALENTEC INTERNATIONAL CORPORATION
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1997
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Subsequent
Company Valentec Acquisition Acquisition Financing
3/31/97 3/31/97 Adjustments Totals Transactions Pro Forma
------- -------- ----------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 8,320 $ 37 $ (6,792) (a) $ 1,565 $2,855 (l) $ 4,420
Accounts receivable, net 11,751 2,181 - 13,932 - 13,932
Inventories 6,378 1,225 - 7,603 - 7,603
Prepaid and other 870 1,413 (762) (b) 1,521 - 1,521
------- ------- -------- -------- ------ --------
Current Assets 27,319 4,856 (7,554) 24,621 2,855 27,476
------- ------- -------- -------- ------ --------
Property, plant and equipment, net 28,295 4,605 - (c) 32,900 - 32,900
Receivable from affiliate 4,348 - (4,348) (d) - - -
Goodwill, net 10,991 - 12,715 (e) 23,706 - 23,706
Other assets 2,454 11,047 (10,133) (f) 3,368 150 (m) 3,518
------- ------- -------- -------- ------ --------
Total Long Term Assets 46,088 15,652 (1,766) 59,974 150 60,124
------- ------- -------- -------- ------ --------
Total Assets $73,407 $20,508 $ (9,320) $ 84,595 $3,005 $ 87,600
======= ======= ======== ======== ====== ========
Accounts Payable $ 7,792 $ 2,874 $ - $ 10,666 $ - $10,666
Payable to affiliates - 5,494 (5,494) (g) - - -
Earnout payable 2,211 - - 2,211 - 2,211
Accrued liabilities 2,476 1,945 4,421 - 4,421
Current portion of debt 3,085 571 348 (h) 4,004 1,079 (n) 5,083
------- ------- -------- -------- ------ --------
Total Current Liabilities 15,564 10,884 (5,146) 21,302 1,079 22,381
------- ------- -------- -------- ------ --------
Long term portion of debt 21,296 7,004 (3,540) (i) 24,760 1,926 (o) 26,686
Other Long Term Liabilities 1,273 6,146 (4,160) (j) 3,259 - 3,259
------- ------- -------- -------- ------ --------
Total Liabilities 38,133 24,034 (12,846) 49,321 3,005 52,326
------- ------- -------- -------- ------ --------
Stockholders' equity:
Preferred stock - - - - - -
Common stock 51 22 (22) (k) 51 - 51
Common stock warrants 1 - - 1 - 1
Additional paid-in capital 30,062 428 13,264 (k) 43,754 - 43,754
Treasury stock (1,647) - (13,692) (k) (15,339) - (15,339)
Retained earnings (accumulated deficit) 9,183 (3,976) 3,976 9,183 - 9,183
Cumulative translation adjustment (2,376) - - (2,376) - (2,376)
======= ======= ======== ======== ====== ========
Total Liabilities and Equity $73,407 $20,508 $ (9,320) $ 84,595 $3,005 $ 87,600
======= ======= ======== ======== ====== ========
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of this Schedule.
6
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SUMMARY OF PRO FORMA ADJUSTMENTS
(in thousands)
ASSETS
<TABLE>
<CAPTION>
As of
REF ADJUSTMENTS March 31, 1997
--- ----------- ----------------
<S> <C>
Cash and cash equivalents (a) Payment for professional and other acquisition fees $ (600)
Payment for debt financing fees KeyBank (200)
Paydown of SCI's notes payable to Bank of America (5,192)
Paydown of Valentec's notes payable to VIL (800)
--------
(6,792)
Prepaid and other (b) Reduce Valentec's current portion of deferred tax assets
due to the reduction of deferred tax liability (762)
--------
Decrease in current assets (7,554)
--------
Property and
equipment, net (c) Adjustment to property, plant and equipment to book
value for Valentec (1,498)
Eliminate accumulated depreciation accounts of Valentec 1,498
--------
-
--------
Receivable from
affiliate (d) Eliminate intercompany receivable balance between
SCI and Valentec (4,348)
--------
Goodwill (e) Goodwill from acquisition of Valentec 12,715
--------
Other assets (f) Write-up Valentec's investment in SCI prior to
acquisition 3,359
Record SCI's investment in Valentec 13,692
Reclass Valentec's investment in SCI as Treasury Stock (13,692)
Eliminate SCI's investment in Valentec in consolidation (13,692)
Record debt acquisition costs related to financings 200
--------
(10,133)
--------
Increase in long term assets (1,766)
--------
Increase in total assets $ (9,320)
========
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of these adjustments.
7
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET - CONTINUED
SUMMARY OF PRO FORMA ADJUSTMENTS
(in thousands)
LIABILITIES AND EQUITY
<TABLE>
<CAPTION>
As of
REF ADJUSTMENTS March 31, 1997
--- ----------- ----------------
<S> <C>
Accounts payable to
affiliates (g) Eliminate intercompany balance between
Valentec and SCI $ (4,348)
Replace Valentec's short term note payable to VIL
with SCI's note to VIL (1,146)
--------
(5,494)
Current portion of
long-term debt (h) Repayment of SCI's note payable with Bank of America -
current portion (2,248)
Record current portion of debt with Key Bank 2,250
Record current portion of SCI note payable to VIL 346
--------
348
Long term portion of debt (i) Repayment of SCI's notes payable to Bank of America NT&SA (17,944)
Record long term portion of SCI note payable to VIL 1,654
Record long-term portion of debt with KeyBank 12,750
--------
Other long term
liabilities (j) Reverse Valentec's deferred tax liability
associated with investment in SCI stock,
net of noncurrent deferred tax assets (2,506)
Retire Valentec's note payable to VIL (1,654)
--------
(4,160)
--------
Decrease in total liabilities (12,846)
--------
Stockholders' equity
(capital deficiency) (k) Eliminate Valentec's common stock (22)
Eliminate Valentec's additional paid-in capital (428)
Eliminate Valentec's historical retained deficit 3,976
Record Treasury Stock for stock acquired from Valentec (13,692)
Issuance of common stock in connection with
purchase of Valentec 13,692
--------
Increase in stockholders'
equity (capital deficiency) 3,526
--------
Decrease in liabilities and stockholders' equity (capital deficiency) $ (9,320)
========
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of these adjustments.
8
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SUMMARY OF SUBSEQUENT TRANSACTIONS
(in thousands)
ASSETS
<TABLE>
<CAPTION>
As of
REF ADJUSTMENTS March 31, 1997
--- ----------- ----------------
<S> <C>
Cash and cash equivalents (l) Proceeds from equipment refinancing $ 850
Proceeds from Bank Austria mortgage 7,500
Payment of deferred financing costs for Bank Austria (150)
Repayment of Valentec revolving facility (1,424)
Repayment of Valentec term note (3,921)
-------
2,855
(m) Record deferred financing costs for Bank Austria 150
-------
Increase in total assets $ 3,005
=======
LIABILITIES AND EQUITY
Current portion of
long-term debt (n) Record current portion of mortgage with Bank Austria $ 750
Record current portion of Transamerica equipment
financings 329
-------
1,079
Long term portion of debt (o) Repayment of Valentec equipment notes (1,150)
Repayment of Valentec revolving credit facility (1,424)
Repayment of Valentec term note (3,921)
Record long-term portion of Transamerica
equipment financings 1,671
Record long-term portion of mortgage with Bank Austria 6,750
-------
1,926
-------
Increase in total liabilities $ 3,005
=======
</TABLE>
The Accompanying Notes to the Unaudited Pro Forma Financial Information are an
Integral Part of these adjustments.
9
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 CONSUMMATED TRANSACTION
Valentec Acquisition
Valentec is a high volume manufacturer of stamped and precision machine
products in the automotive, commercial and defense industries. Immediately prior
to the acquisition by the Company of all of the issued and outstanding stock of
Valentec, merger, Valentec sold its wholly-owned subsidiary, Valentec
International Limited ("VIL") for a nominal amount. Upon the divestiture of VIL,
the Company assumed a demand note payable to VIL of $800,000 and a 5 year note
payable aggregating $2.0 million (see Note 3) in connection with certain
intercompany obligations between Valentec and VIL. The Company estimates direct
acquisition costs to be approximately $600,000. The stock of the Company,
1,379,200 shares, previously held by Valentec was reacquired and will be
recorded as treasury shares at fair value. Goodwill has been estimated at $12.7
million and will be amortized over 25 years as of March 31, 1997, and such
amount has been included in these pro forma financial statements. Amortization
of goodwill has been included in the accompanying unaudited pro forma
consolidated statements of operations amounting to approximately $509,000 for
the year ended March 31, 1997. Additionally, the Company had certain related
transactions, which have been eliminated for pro forma presentation. Goodwill as
of the date of this filing has been estimated at $16.8 million. The change in
the original estimate is due to operating losses at Valentec and certain
intercompany transactions. The Company does not expect goodwill to change
materially from this latest estimate.
NOTE 2 PRINCIPLES OF ACCOUNTING FOR UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS
The historical consolidated financial statements include the accounts
of the Company and its substantially-owned subsidiaries. The accounts of Phoenix
Airbag ("Phoenix"), which was acquired by the Company on August 6, 1996, have
been included in the Company's historical consolidated financial statements
beginning August 6, 1996 (date of acquisition). Accordingly, management
adjusted, on a pro forma basis, the historical accounts for Phoenix based on its
actual results of operations for the year ended March 31, 1997.
For the year ended March 31, 1997, the accompanying unaudited pro forma
consolidated statements of operations have been adjusted to reflect, on a pro
forma basis, the historical results of Phoenix for a full year, and management's
estimates of costs and expenses for the period April 1, 1996 through August 5,
1996 as follows (in thousands):
Net sales $12,381
Cost of sales 9,155
Depreciation 249
Selling, general and administrative expenses 1,178
Amortization of goodwill 153
Interest expense 83
Income tax expense 473
-------
Increase in net income $ 1,090
=======
NOTE 3 LONG-TERM OBLIGATIONS
The Credit Agreement with KeyBank provided for a Term Loan in the
principal amount of $15.0 million and (ii) a Revolving Credit Facility in the
aggregate principal amount of $12.0 million. The indebtedness under the Credit
Agreement is secured by substantially all the assets of the Company. The loans
under the Credit Agreement will mature on May 31, 2002. The Credit Agreement
contains certain restrictive covenants that impose limitations upon, among other
things, the Company's ability to change its business; merge, consolidate or
dispose of assets; incur liens; make loans and investments; incur indebtedness;
10
<PAGE>
pay dividends and other distributions; engage in certain transactions with
affiliates; engage in sale and lease-back transactions; enter into lease
agreements; and make capital expenditures. During July 1997 the Company's
existing Credit Facility with Key Bank was converted into a $27.0 million
revolving credit facility, for an initial five year term bearing interest at
LIBOR plus 1.00% with a commitment fee of 0.25% for any unused portion, with the
remaining terms and conditions, being similar, to the existing revolving credit
facility. The Company incurred approximately $200,000 of financing fees for the
KeyBank Credit Facility.
Effective as of May 22, 1997, the Company completed the acquisition of
Valentec. The Company assumed all of Valentec's outstanding obligations as of
that date, including two term notes of approximately $5.1 million, excluding net
of assets held by the lender, a revolving line of credit of approximately $1.4
million, as of March 31, 1997 and equipment financings of approximately $1.1
million as of March 31, 1997. Approximately $6.5 million of such indebtedness
described in this paragraph was retired in May and June 1997 from the proceeds
received from the Bank Austria mortgage note (see below).
In connection with the acq acquisition of Valentec, the Company assumed
a note payable to VIL amounting to $2.0 million, payable in 60 monthly
installments of approximately $39,600, together with interest at 7.0% per annum.
Interest expense of $140,000 has been included in the unaudited pro forma
consolidated statement of operations.
On June 4, 1997, the Company obtained a $7.5 million mortgage note
facility with Bank Austria. The note is payable in semi-annual installments
through March 31, 2007 and bears an interest rate of 7.5%. The note is secured
by the assets of the Company's Czech Republic facility. The Company increased
interest expense in the accompanying unaudited pro forma consolidated statement
of operations by $563,000 for these borrowings assuming they were outstanding
for the year ended March 31, 1997.
Deferred Financing Costs
Deferred financing costs, included in other assets, will arise from the
KeyBank Credit Facility and the subsequent transactions (see Note 5). Costs will
be capitalized and amortized using the effective interest method. Amounts
charged to interest expense in the accompanying unaudited pro forma consolidated
statements of operations amounted to $55,000.
NOTE 4 INCOME TAXES
As discussed in Note 1, in connection with the acquisition of Valentec,
the Company received 1,379,200 treasury shares. The historical financial
statements of Valentec have a carrying value of $10.3 million and a
corresponding deferred income tax liability of $3.4 million. The shares are
recorded at their estimated fair value of $13.7 million, an increase adjustment
of $3.4 million, in the accompanying unaudited pro forma consolidated balance
sheet. Since management intends to merge Valentec with the Company in the second
quarter of fiscal 1998, no deferred income tax liability is recorded in the
accompanying unaudited pro forma consolidated balance sheet. The Company also
recorded a tax benefit for additional expenses, which are deductible for income
tax purposes and included in the pro forma presentation.
NOTE 5 SUBSEQUENT TRANSACTIONS
Subsequent to the acquisition of Valentec, the Company entered into
certain financing arrangements. On June 4, 1997, the Company obtained a $7.5
million mortgage note facility with Bank Austria (see Note 3). The proceeds were
used to repay approximately $6.5 million of debt obligations assumed by the
Company as part of the acquisition of Valentec. In connection with this mortgage
the Company incurred approximately $150,000 of financing fees. Additionally, the
Company replaced certain existing capital lease obligations with new capital
lease obligations with similar terms. These transactions are collectively known
as the "Subsequent Transactions".
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
of Valentec International Corporation
In our opinion, the accompanying balance sheet and the related
statements of operations and accumulated deficit, and of cash flows for the year
then ended, present fairly, in all material respects, the financial position of
Valentec International Corporation, excluding Valentec International, Ltd. as of
March 31, 1997, and the results of operations and its cash flows for the year
then ended in conformity with generally accepted accounting principles. 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. We conducted our audit of these financial statements in accordance
with generally accepted auditing standards which 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, assessing the accounting policies 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 the
opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Costa Mesa, California
May 22, 1997
<PAGE>
VALENTEC INTERNATIONAL CORPORATION
HISTORICAL BALANCE SHEET
EXCLUDING ASSETS AND LIABILITIES OF
VALENTEC INTERNATIONAL, LTD (NOTE 1)
For the Year Ended March 31, 1997
(in thousands)
ASSETS
Current assets:
Cash $ 37
Accounts receivable, net of
allowance for doubtful accounts of $52 2,181
Inventories (Notes 2 and 3) 1,225
Deferred income taxes (Notes 2 and 6) 762
Prepaid expenses and other 651
-------
Total current assets 4,856
Property and equipment, net of accumulated depreciation
of $1,498 (Notes 2 and 3) 4,605
Other assets (Notes 2 and 3) 714
Investment in affiliate (Notes 2 and 11) 10,333
-------
Total assets $20,508
=======
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 2,874
Payable to affiliate (Note 4) 4,348
Accrued liabilities (Notes 3 and 7) 1,945
Current portion of note payable to affiliate (Note 4) 1,146
Current portion of long-term obligations (Note 5) 571
-------
Total current liabilities 10,884
Long-term obligations (Note 5) 7,004
Note payable to affiliate (Note 4) 1,654
Other long-term liabilities (Notes 3 and 7) 2,436
Deferred income taxes (Notes 2 and 6) 2,056
-------
Total liabilities 24,034
-------
Commitments and contingencies (Note 7)
Capital deficiency (Note 11):
Common stock, $.01 par value per share,
3,000,000 shares authorized;
2,160,000 shares issued and outstanding 22
Additional paid-in capital 428
Accumulated deficit (3,976)
-------
Total capital deficiency (3,526)
-------
Total liabilities and capital deficiency $20,508
=======
See notes to financial statements.
<PAGE>
VALENTEC INTERNATIONAL CORPORATION
HISTORICAL STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
EXCLUDING OPERATIONS OF VALENTEC INTERNATIONAL LTD. (NOTE 1)
For the Year Ended March 31, 1997
(in thousands)
Net revenues (Notes 2 and 9):
Trade revenues $11,403
Sales to affiliates 2,623
Total revenues 14,026
Cost of revenues 12,690
Gross profit 1,336
Selling and marketing expenses 99
General and administrative expenses 1,584
-------
Operating loss (347)
Other expense 67
Interest expense 1,183
Income from investment in affiliate (Notes 2 and 11) 605
-------
Loss before income taxes (992)
Income tax benefit (Notes 2 and 6) (286)
Net loss (706)
Accumulated deficit, beginning of year (3,270)
-------
Accumulated deficit, end of year $(3,976)
=======
See notes to financial statements.
<PAGE>
VALENTEC INTERNATIONAL CORPORATION
HISTORICAL STATEMENT OF CASH FLOWS
EXCLUDING CASH FLOWS OF VALENTEC INTERNATIONAL, Ltd. (NOTE 1)
For the Year Ended March 31, 1997
(in thousands)
Cash flows from operating activities:
Net loss $ (706)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 546
Net Income from investment in affiliate (605)
Other 28
Changes in operating assets and liabilities:
Accounts receivable, net 1,585
Inventories (111)
Deferred income taxes (407)
Prepaid expenses and other (158)
Accounts payable 415
Accrued liabilities 415
Reserve for litigation (1,176)
------
Other liabilities (2,901)
------
Net cash used in operating activities (3,075)
------
Cash flows from investing activities:
Additions to property and equipment (1,116)
Proceeds from sale of fixed assets 1,119
Proceeds from sale of building 1,185
------
Net cash provided by investing activities 1,188
------
Cash flows from financing activities:
Net repayments under long-term obligations (1,193)
Repayment of advances from affiliates (1,237)
Net Borrowings from affiliates 3,031
------
Net cash provided by financing activities 601
Increase in cash and cash equivalents (1,286)
Cash and cash equivalents, beginning of year 1,323
------
Cash, end of year $ 37
======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $1,199
Income taxes 8
See notes to financial statements.
<PAGE>
VALENTEC INTERNATIONAL CORPORATION
NOTES TO HISTORICAL FINANCIAL STATEMENTS
EXCLUDING VALENTEC INTERNATIONAL, LTD.
Note 1 Organization and Basis of Presentation
On April 27, 1993, the management of Valentec International Corporation and
subsidiaries ("Valentec") completed a management buyout (the "Acquisition") from
its parent company, Insilco Corporation. Subsequent to the Acquisition, certain
of Valentec's business entities were transferred into a new subsidiary, Safety
Components International, Inc., ("SCI") which completed its initial public
offering in May 1994. The purchase price for the assets and liabilities retained
by Valentec in May 1994 was $3.7 million with the excess of purchase price over
the fair value of the net assets acquired of $2.8 million allocated to goodwill.
The effects of the acquisition were "pushed down" to Valentec. In fiscal 1996,
goodwill was determined to be unrecoverable and charged to operations.
Effective as of May 22, 1997, Valentec, upon the close of its statutory
tax-free stock-for-stock exchange with SCI (Note 11), divested itself of its
88.8% owned United Kingdom subsidiary, Valentec International Limited ("VIL").
Accordingly, the accompanying financial statements include only the assets and
liabilities, revenues and expenses of Valentec acquired by SCI (hereinafter
defined as the "Company"). Valentec is a manufacturer of stamped and precision
machined products for the automotive, commercial and defense industries. The
Company also manages the acquisition of ordnance systems for international
customers. The Company's manufacturing operations and headquarters are located
in California.
Note 2 Summary of Significant Accounting Policies
Revenue recognition
Revenues are generally recognized as units are shipped to customers.
The Company accounts for certain long-term contracts under the percentage
of completion method, whereby progress toward contract completion is measured on
a cost-incurred basis (including direct labor, materials and allocable indirect
manufacturing overhead and general and administrative costs). Losses on
long-term contracts are recognized in the period when such losses are
identified. On certain contracts with the U.S. Government, contract costs,
including indirect costs, are subject to audit and adjustment by negotiations
between the Company and government representatives. Contract revenues have been
recorded in amounts which are expected to be realized upon final settlement.
Annual revenues from major customers
The Company had sales from two customers in fiscal year 1997 aggregating
34% and 19% of net revenues, respectively.
Concentration of credit risk
At March 31, 1997, two customers accounted for approximately 31% and 29%,
respectively, of its accounts receivable. The Company is potentially subject to
a concentration of credit risk consisting of its accounts receivable. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The Company maintains reserves for potential losses for
uncollectible accounts and such losses have historically been immaterial and
within management's expectations.
Environmental expenditures
Environmental expenditures which extend the life of the related property or
prevent future environmental contamination are capitalized. Expenditures that
result from the remediation of an existing condition caused by past operations
that do not contribute to current or future revenues are expensed. Liabilities
are recognized for remedial activities when the cleanup is probable and the cost
can be reasonably estimated.
Inventories
Inventories represent direct labor, materials and overhead costs incurred
for products not yet delivered and are stated at the lower of cost (first-in,
first-out) or market.
<PAGE>
Property and equipment
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets. Estimated
useful lives by class of assets are as follows:
Machinery and equipment 5-10 years
Furniture and fixtures 3-5 years
Leasehold improvements 3-10 years or term of lease,
whichever is shorter
Expenditures for repairs and maintenance are charged to expense as
incurred. Renewals or betterments of assets are capitalized. When assets are
sold or otherwise disposed of, the cost and related accumulated depreciation or
amortization are removed from the respective accounts and any resulting gain or
loss is recognized. Depreciation and amortization expense during fiscal 1997
amounted to $546,000.
Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of. SFAS
No. 121 requires that long-lived assets and certain identifiable intangibles to
be held and used by an entity be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable and that certain long-lived assets and identifiable intangibles
to be disposed of be reported at the lower of carrying amount or fair value,
less cost of sale.
Investment in affiliate
The Company accounts for its 27% investment in SCI under the equity method
of accounting, whereby the Company recognizes its proportionate share of income
or loss as an adjustment to the carrying value of the investment at historical
cost. At March 31, 1997, the Company owned 1,379,200 shares of SCI's common
stock. The total estimated fair value of the Company's holdings on March 31,
1997 was approximately $13.7 million.
The Company has not included certain financial information of its investee
SCI, as such information is included in the Consolidated Financial Statements of
SCI elsewhere herein.
Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). Under FAS 109, the deferred tax assets and liabilities are measured each
year based on the difference between the financial statement and tax bases of
assets and liabilities at the applicable enacted tax rates when temporary
differences are expected to reverse. Additionally, a valuation allowance is
recorded for that portion of deferred tax assets for which it is more likely
than not that the assets will not be realized. The deferred tax provision
(benefit) is the result of changes in the deferred tax assets and liabilities.
Cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Fair value of financial instruments
The financial statements include financial instruments whereby the fair
market value of such instruments may differ from amounts reflected on a
historical basis. Financial instruments of the Company consist of cash deposits,
accounts receivable, accounts payable, certain accrued liabilities, long-term
obligations and capital leases. The Company's financial instruments generally
approximate their fair values at March 31, 1997. Payables to affiliates
generally have no market and as a result, have no readily determinable fair
value.
<PAGE>
Use of estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles, which require management to make estimates and
assumptions that effect the amounts and disclosures reported in the financial
statements and accompanying notes. Significant estimates made by management
include allowances for doubtful accounts receivable, reserves for inventories,
legal actions and environmental matters, as well as costs to complete on
long-term contracts. Actual results could differ from those estimates.
Note 3 Composition of Certain Balance Sheet Components at March 31, 1997
The composition of certain balance sheet items is as follows (in
thousands):
Inventories:
Raw materials $ 854
Work-in-process 306
Finished goods 65
------
$1,225
======
Property, plant and equipment:
Land and building $ 74
Machinery and equipment 4,859
Furniture and fixtures 199
Construction in process 971
------
6,103
Less accumulated depreciation
and amortization (1,498)
------
$4,605
======
Other assets:
Deposits $ 571
Other 143
------
$ 714
======
Accrued liabilities (Notes 6 and 7):
Reserves for litigation $ 587
Deferred rent 232
Reserve for workers compensation 201
Income taxes payable 158
Reserve for building repair 150
Reserve for environmental matters 150
Other 467
------
$1,945
======
Other long-term liabilities (Note 7):
Reserve for building repair $ 850
Reserve for litigation 799
Deferred rent 342
Reserve for environmental matters 235
Other 210
------
$2,436
======
Note 4 Related Party Transactions
The Company sells certain components to affiliates for use in their
products. Sales to affiliates totaled $2.6 million for the year ended March 31,
1997. The Company purchases certain components from affiliates for use in its
products. Purchases from affiliates amounted to $104,000 for the year ended
March 31, 1997.
<PAGE>
SCI allocates certain corporate general and administrative expenses to the
Company, such charges were $726,000 for the year ended March 31, 1997. In
addition, SCI has made advances to the Company from time to time. At March 31,
1997, such amount, which is noninterest bearing, was $4.3 million.
At March 31, 1997, the Company had a payable to VIL amounting to $2.8
million as a result of the divestiture of VIL (Notes 1 and 11). Subsequent to
March 31, 1997, the Company assumed a demand note payable of $800,000 and a 7%
note payable aggregating $2.0 million. The $2.0 million note is payable monthly
with interest in equal installments over five years.
Future annual principal payments under this note payable to affiliate,
including the demand note of $800,000, at March 31, 1997 are as follows:
1998 $1,146
1999 371
2000 398
2001 427
2002 and thereafter 458
------
$2,800
======
Note 5 Long-Term Obligations
Long-term obligations outstanding as of March 31, 1997
are as follows (in thousands):
Revolving credit agreements,
as described below $1,424
Term notes, as described below 5,071
Capital equipment notes payable, due
in monthly installments with interest rates from
9.28% to 12.75%, maturing at various dates through
October 2000, secured by machinery and equipment 1,080
------
Total debt 7,575
Less current portion (571)
------
Long-term debt, less current portion $7,004
======
The Company's credit facilities, which were subsequently retired in June
1997, consisted of the following at March 31, 1997: (1) a revolving credit
agreement, payable at the discretion of the Company with a $4.0 million maximum
limit secured by accounts receivable and inventory with interest paid monthly at
prime plus 2.5% (10.75% at March 31, 1997), (2) a $1.2 million term note,
secured by fixed assets with interest paid monthly at prime plus 2.5% (10.75% at
March 31, 1997), and (3) a demand note with a $6.0 million dollar maximum
borrowing capacity with interest paid monthly at LIBOR plus 3% for working
capital advances and libor plus 1% for investment financing. Substantially all
of the assets of the Company were pledged as collateral under the Company's
available credit facilities.
In May and June 1997, subsequent to the completion of the acquisition of
the Company by SCI (Notes 1 and 11), the Company retired its revolving credit
and term notes with the proceeds of a $2.0 million equipment note and a loan
totaling $4.5 million from SCI. The equipment note is payable in equal monthly
installments with an interest rate of 9.38% over five years. The loan received
subsequent to year end from SCI bears no interest, has no defined due date and
is intended by SCI management to be long-term in nature.
Future annual maturities of long-term debt, as affected by the retirement
of the credit facilities through proceeds from the equipment note and SCI, as of
March 31, 1997 are as follows (in thousands):
1998 $ 571
1999 716
2000 700
2001 502
2002 467
Thereafter 4,619
------
Total $7,575
<PAGE>
Note 6 Income Taxes
The income tax benefit comprises the following (in thousands):
Current:
Federal $ --
State --
-----
--
Deferred:
Federal (329)
State 43
-----
(286)
-----
$(286)
=====
The following is a reconciliation of the tax benefit using a Federal
statutory tax rate of 34%:
Amount Rate
Tax at statutory rate (337,000) (34%)
State income taxes, net (59,000) (6)
Other 8,000 1
State net operating loss
carryforward limitation 102,000 10
-------- ---
(286,000) (29%)
======== ===
The Company has the following deferred tax assets (liabilities) (in
thousands):
Investment in affiliate $(4,134)
Property and equipment (111)
Accruals and reserves 1,205
Net operating losses 1,746
Valuation allowance --
-------
Net deferred tax asset(liability) $(1,294)
=======
At March 31, 1997, the Company had Federal and state net operating loss
carryforwards of $4.8 million and $1.7 million, respectively, expiring in
various years beginning in 2002. The amount of net operating losses that may be
utilized in the future may be subject to limitations in the event of a change in
control of the Company, as defined in the Internal Revenue Code.
Note 7 Commitments and Contingencies
Operating leases
The Company has noncancellable operating leases for office space and
equipment that expire at various dates through 2000.
Future annual minimum lease payments for all noncancellable operating
leases are as follows (in thousands):
1998 $ 906
1999 904
2000 603
------
Total future annual minimum
lease payments $2,413
======
<PAGE>
Certain of the lease payments are subject to adjustment for increases in
utility costs, real estate taxes and inflation. Accordingly, rent expense has
been normalized. The Company incurred rent expense of $868,000 for the year
ended March 31, 1997. At March 31, 1997, deferred rent included in total
liabilities amounted to $574,000.
Environmental issues
The Company has certain environmental contingencies as of March 31, 1997.
Phase I and II investigations have identified certain environmental issues at
its Costa Mesa, California location which will require remediation. The
Company's management estimates that its maximum liability for these
environmental matters, over the life of the remediation program, will be
$385,000. Such amount is included in total liabilities (Note 3) as of March 31,
1997.
No other significant environmental matters are known by management.
Deferred compensation and other matters
The Company has a deferred compensation agreement with the widow of an
officer of a former division. The liability related to this agreement was
approximately $151,000 at March 31, 1997.
Legal proceedings
The Company is subject to various legal actions arising out of the conduct
of its business, relating to product liability. In one case, the plaintiff
contends that the Company's products failed inspection. However, the Company
contends that the design of the products were produced in accordance with the
design specifications. The Company has already received a favorable initial
ruling. In another case, the plaintiff contends that the Company bore
responsibility for the failure of a product to pass first article production
ballistics testing. The matter was resolved in October 1996, resulting in the
Company testing the product and paying for any failing products. The Company
estimates that one lot does not meet specifications and has accrued for the
rework costs. In the opinion of management of the Company, amounts accrued for
assessments and rework of $1.4 million in connection with these matters are
adequate.
The Company is obligated to make certain repairs, including the parking
lot, the roof and structure to the Costa Mesa, California facility prior to the
lease expiration date of 2000. In the opinion of management of the Company,
amounts accrued for repairs for the building of $1.0 million are adequate.
Note 8 Benefit Plans
The Company has a defined contribution plan intended to qualify under
Section 401(k) of the Internal Revenue Code for eligible employees. The plan
provides for discretionary employer contributions. The Company made no employer
contributions during any of the periods presented in the financial statements.
During the year ended March 31, 1997, the Company established an Employee
Stock Ownership Plan (ESOP). The plan participants include all individuals who
were employed by the Company on January 1, 1996. All participants in the plan
will vest over a five year period from the inception of the plan.
<PAGE>
Note 9 Business Segment Information
The Company's operations have been classified into two business segments:
automotive and defense.
Summarized financial information by business segment as of and for the year
ended March 31, 1997 is as follows (in thousands):
Net Sales:
Automotive $ 9,479
Defense 4,547
-------
$14,026
=======
Operating loss:
Automotive $ (239)
Defense (108)
-------
$ (347)
=======
Identifiable assets:
Automotive $13,945
Defense 6,563
-------
$20,508
=======
Depreciation and amortization:
Automotive $ 371
Defense 175
-------
$ 546
=======
Capital expenditures:
Automotive $ 953
Defense 163
-------
$ 1,116
=======
Note 10 Supplemental Information
In connection with the proposed offering of Senior Subordinated Notes as
described elsewhere herein, the Company will be a guarantor, and accordingly,
the following condensed financial information is provided:
<PAGE>
HISTORICAL BALANCE SHEET
EXCLUDING ASSETS AND LIABILITIES OF VALENTEC INTERNATIONAL, Ltd. (NOTE 1)
March 31, 1997
(in thousands)
March 31,
1996
---------
ASSETS
Current assets:
Cash and cash equivalents $ 1,323
Accounts receivable, net 3,766
Inventories 1,114
Deferred income taxes 959
Prepaid expenses and other 2,494
-------
Total current assets 9,656
Property, plant, and equipment, net 4,901
Other assets 906
Investment in affiliate 9,756
-------
Total assets $25,219
=======
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 2,459
Payable to affiliates 1,317
Accrued liabilities 1,497
Other current liabilities 1,297
Current portion of long-term obligations 4,760
------
Total current liabilities 11,330
Long-term obligations 4,008
Notes payable to affiliates 4,037
Other long-term liabilities 5,249
Deferred income taxes 3,415
------
Total liabilities 28,039
------
Capital Deficiency:
Common stock, $.01 par value per share,
3,000,000 shares authorized;
2,160,000 shares issued and outstanding 22
Additional paid-in capital 428
Accumulated deficit (3,270)
------
Total capital deficiency (2,820)
-------
Total liabilities and capital deficiency $25,219
=======
<PAGE>
HISTORICAL STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
EXCLUDING OPERATIONS OF VALENTEC INTERNATIONAL LTD. (NOTE 1)
For the Years Ended March 31, 1995 and 1996
(in thousands)
March 31, March 31,
1996 1995
------- -------
Net revenues $19,367 $16,979
Cost of revenues 16,778 16,145
------- -------
Gross profit 2,589 834
Selling and marketing expenses 226 389
General and administrative expenses 1,754 2,303
Restructuring charges 13,954 --
------- -------
Operating loss 13,345 (1,858)
Other expense (income) 366 (549)
Gain on partial sale of investment in affiliate 9,712 8,186
Gain on sale of fixed assets -- 1,147
Interest expense, net 1,132 617
Income from investment in affiliate
(Notes 2 and 11) 1,343 957
------- -------
Income (loss) before income taxes (3,788) 8,364
Income taxes (1,020) 4,629
------- -------
Net income (loss) (2,768) 3,735
Repurchase of common stock (575) --
Retained earnings (accumulated deficit)
beginning of year 73 (3,662)
------- ------
Retained earnings (accumulated deficit)
end of year $(3,270) $ 73
======= =======
<PAGE>
HISTORICAL STATEMENT OF CASH FLOWS
EXCLUDING CASH FLOWS OF VALENTEC INTERNATIONAL, LTD. (NOTE 1)
For the Years Ended March 31, 1995 and 1996
(in thousands)
March 31, March 31,
1996 1995
------- ------
Cash flows from operating activities:
Net income (loss) $(2,768) $3,735
Adjustments to reconcile net income
(loss) to net cash used in operating
activities:
Depreciation and amortization 728 567
Income from investment in affiliate (1,343) (957)
Gain on partial sale of investment
in affiliate (9,712) (8,186)
Changes in operating assets and
liabilities:
Accounts receivable, net (1,667) 320
Inventories 160 (43)
Deferred income taxes (304) 3,941
Prepaid expenses and other (842) (672)
Accounts payable 351 (349)
Accrued liabilities (436) (800)
Other liabilities (1,048) (3,826)
------- ------
Net cash used in operating activities (16,881) (6,270)
------- ------
Cash flows from investing activities:
Additions to property and equipment (700) (1,632)
Proceeds from partial sale of
investment in affiliate 16,509 1,621
------- -------
Net cash provided by (used in)
investing activities 15,809 (11)
-------- ------
Cash flows from financing activities:
Net borrowings under long-term obligations 3,284 771
Repurchase of common stock (625) --
Net borrowings of notes payable to affiliates 138 4,070
Net borrowings from affiliate (499) 1,537
------- -------
Net cash provided by (used in)
financing activities 2,298 6,378
Increase in cash and cash equivalents 1,226 97
Cash beginning of year 97 0
-------- -------
Cash and cash equivalents, end of year $ 1,323 $ 97
======== =======
<PAGE>
Note 11 Subsequent Events
Pursuant to a definitive Stock Purchase Agreement, effective as of May 22,
1997, SCI acquired all of the outstanding common stock of Valentec in a tax-free
stock-for-stock exchange. As a condition to the consummation of such
acquisition, Valentec divested VIL, the proceeds from which were insignificant.
Valentec was the SCI's largest shareholder immediately prior to the acquisition
owning approximately 27%, or 1,379,200 shares of the issued and outstanding
shares of the SCI common stock. SCI issued the shareholders of Valentec
an aggregate of 1,369,200 newly issued shares of its common stock.
The purchase price for the Valentec acquisition was negotiated between
Valentec and a special committee consisting of independent members of the Board
of Directors of SCI. The special committee was advised by independent legal
counsel and an independent financial advisor as to the fairness from a financial
point of view of the consideration to be received by SCI to SCI's shareholders
other than Valentec.
The acquisition was accounted for as a purchase. The aggregate purchase
price amounted to approximately $14.3 million, including direct acquisition
costs of approximately $600,000. The assets and liabilities acquired approximate
their fair value, except for the common stock of SCI held by Valentec. These
common shares which were previously accounted for under the equity method of
accounting for the investment by the Company will be recorded as treasury shares
at their estimated fair value of $13.7 million. Management intends to merge
Valentec into SCI during fiscal 1998. The excess of the purchase price over the
fair value of the net assets acquired will be allocated to goodwill.
Also see Notes 4 and 5 for additional information regarding subsequent
events.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
SAFETY COMPONENTS INTERNATIONAL, INC.
By: /s/ JEFFREY J. KAPLAN
-------------------------------------
Name: Jeffrey J. Kaplan
Title: Executive Vice President and
Chief Financial Officer
Date: August 5, 1997
