SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
Commission File Number 0-23938
SAFETY COMPONENTS INTERNATIONAL, INC
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
2160 North Central Road, New Jersey, 07024
(Address and zip code of principal executive offices)
33-0596831
(IRS Employer Identification Number)
(201) 592-0008
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, $.01 par value
per share, as of November 11, 1998, was 5,125,816.
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
This Form 10-Q/A, Amendment Number 1, amends and supplements the Form 10-Q
(the "Original Form-10-Q") filed by Safety Components International, Inc. on
November 12, 1998. The sole purpose of this Amendment Number 1 is to amend Part
I: Items 1 and 2 of the Original Form 10-Q to amend cost of sales and its impact
on the related consolidated financial information, including the notes thereto,
and include an explanation of such change in the related discussion included in
Management's Discussion and Analysis of Financial Condition and Results of
Operations. The change relates to certain costs associated with the move of the
German operations labor-intensive passenger airbags to the Company's lower labor
cost facility located in the Czech Republic. These costs, approximately $1.2
million, were charged against established reserves for exit costs. This
amendment charges such costs to current earnings during the second quarter of
fiscal year 1999. Items 1 and 2 of Part I of the Original Form 10-Q are hereby
amended and restated to read in their entirety as follows:
PART I
FINANCIAL INFORMATION
The unaudited consolidated financial information at September 26, 1998 and
for the thirteen and twenty-six week period ended September 26, 1998 and the
audited consolidated financial information at March 28, 1998 relate to Safety
Components International, Inc. and its subsidiaries.
ITEM 1. FINANCIAL STATEMENTS PAGE
Consolidated Balance Sheets as of September 26, 1998
and March 28, 1998 3
Consolidated Statements of Operations for the
thirteen weeks ended September 26, 1998 and the
three months ended September 30, 1997 4
Consolidated Statements of Operations for the
twenty-six weeks ended September 26, 1998 and the
six months ended September 30, 1997 5
Consolidated Statements of Cash Flows for the
twenty-six weeks ended September 26, 1998 and the
six months ended September 30, 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
2
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
September 26, March 28,
1998 1998
------------ --------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................. $ 3,095 $ 6,049
Accounts receivable, net ................................... 44,493 39,208
Inventories ................................................ 24,633 19,935
Receivable from affiliate................................... 2,996 -
Prepaid and other .......................................... 4,224 4,196
-------- --------
Total current assets .......................... 79,441 69,388
Property, plant and equipment, net ...................................... 73,563 66,279
Receivable from affiliate ............................................... - 1,206
Intangible assets, net .................................................. 59,736 55,923
Other assets ............................................................ 5,570 6,101
-------- --------
Total assets .................................. $218,310 $198,897
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................... $22,223 $23,009
Earnout payable ............................................ 1,707 1,958
Accrued liabilities ........................................ 10,353 12,558
Current portion of long-term obligations ................... 4,100 2,375
-------- --------
Total current liabilities ..................... 38,383 39,900
Long-term obligations ................................................... 39,512 24,739
Senior subordinated debt ................................................ 90,000 90,000
Other long-term liabilities ............................................. 5,671 5,064
-------- --------
Total liabilities ............................. 173,566 159,703
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock: $.10 par value per share - 2,000,000 shares
authorized; no shares outstanding at
September 26, 1998 and March 28, 1998, respectively.. - -
Common stock: $.01 par value per share - 10,000,000 shares
authorized; 6,618,508 and 6,538,075 shares issued and
5,125,816 and 5,045,383 shares outstanding at
September 26, 1998 and March 28, 1998, respectively.. 66 65
Common stock warrants ...................................... 1 1
Additional paid-in-capital ................................. 45,129 44,040
Treasury stock, 1,492,692 shares at September 26, 1998
and March 28, 1998 respectively, at cost ............ (15,439) (15,439)
Retained earnings .......................................... 16,892 15,191
Cumulative translation adjustment .......................... (1,905) (4,664)
-------- --------
Total stockholders' equity .................... 44,744 39,194
-------- --------
Total liabilities and stockholders' equity .... $218,310 $198,897
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Thirteen Three
Weeks Ended Months Ended
September 26, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net sales ...................................................... $53,059 $42,728
Cost of sales, excluding depreciation .......................... 43,940 34,106
Depreciation ................................................... 1,811 1,333
------- -------
Gross profit ...................................... 7,308 7,289
Selling and marketing expenses ................................. 677 623
General and administrative expenses ............................ 2,519 2,133
Amortization of goodwill ....................................... 575 404
------- -------
Income from operations ............................ 3,537 4,129
Other expense(income), net...................................... 30 (70)
Interest expense ............................................... 2,993 2,165
------- -------
Income before income taxes ........................ 514 2,034
Provision for income taxes ..................................... 356 752
------- -------
Net income ..................................................... $ 158 $ 1,282
======= =======
Net income per share, basic .................................... $ 0.03 $ 0.26
======= =======
Net income per share, assuming dilution ........................ $ 0.03 $ 0.25
======= =======
Weighted average number of shares outstanding, basic ........... 5,119 5,021
======= =======
Weighted average number of shares outstanding, assuming dilution 5,195 5,109
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share and per share data)
<TABLE>
<CAPTION>
Twenty-Six Six
Weeks Ended Months Ended
September 26, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net sales ...................................................... $104,508 $70,357
Cost of sales, excluding depreciation .......................... 84,258 55,262
Depreciation ................................................... 3,677 2,138
------- -------
Gross profit ...................................... 16,573 12,957
Selling and marketing expenses ................................. 1,324 911
General and administrative expenses ............................ 5,090 4,296
Amortization of goodwill ....................................... 1,135 589
------- -------
Income from operations ............................ 9,024 7,161
Other expense, net.............................................. 78 89
Interest expense ............................................... 5,796 2,647
------- -------
Income before income taxes ........................ 3,150 4,425
Provision for income taxes ..................................... 1,449 1,708
------- -------
Net income ..................................................... $ 1,701 $ 2,717
======= =======
Net income per share, basic .................................... $ 0.33 $ 0.54
======= =======
Net income per share, assuming dilution ........................ $ 0.33 $ 0.54
======= =======
Weighted average number of shares outstanding, basic ........... 5,093 5,021
======= =======
Weighted average number of shares outstanding, assuming dilution 5,200 5,064
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Twenty-Six Six
Weeks Ended Months Ended
September 26, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net cash (used in) provided by operating activities ............. $ (7,655) $ 4,979
-------- --------
Cash Flows From Investing Activities:
Additions to property, plant and equipment ............. (9,873) (6,626)
Additional consideration and costs for Phoenix Airbag .. (1,958) (2,455)
Acquisition costs of Valentec .......................... (502) (809)
Advances to Valentec prior to acquisition............... - (1,215)
Acquisition costs of SCFTI.............................. (242) (57,582)
-------- -------
Net cash used in investing activities ............. (12,575) (68,687)
-------- -------
Cash Flows From Financing Activities:
Net proceeds from Notes................................. - 86,265
Proceeds from KeyBank term note ........................ - 15,000
Proceeds from Bank Austria mortgage .................... - 7,500
Proceeds from Transamerica financing ................... - 2,000
Repayment of Bank of America NT&SA term note ........... - (16,812)
Repayment of KeyBank term note.......................... - (15,000)
Proceeds of KeyBank equipment note...................... 10,000 -
Excersise of stock options.............................. 951 50
Repayments of debt and long-term obligations............ (1,327) (9,309)
Net(repayments) borrowing on revolving credit facility.. 7,824 (2,931)
-------- -------
Net cash provided by financing activities.......... 17,448 66,763
-------- -------
Effect of exchange rate changes on cash ......................... (172) (786)
-------- -------
Change in cash and cash equivalents ............................. (2,954) 2,269
Cash and cash equivalents, beginning of period .................. 6,049 8,320
-------- -------
Cash and cash equivalents, end of period ........................ $ 3,095 $10,589
======== =======
Supplemental disclosure of cash flow information:
Cash paid during period for:
Interest .............................................. $ 5,710 $ 863
Income taxes .......................................... 361 $ 193
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and Basis of Presentation
The consolidated financial statements included herein have been prepared by
Safety Components International, Inc. ("SCI" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from this report, as is permitted by such rules
and regulations; however, SCI believes that the disclosures are adequate to make
the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-K for the year ended March 28, 1998. The Company has experienced, and
expects to continue to experience, variability in net sales and net income from
quarter to quarter. Therefore, the results of the interim periods presented
herein are not necessarily indicative of the results to be expected for any
other interim period or the full year. In the opinion of management, the
information furnished reflects all adjustments, all of which are of a normal
recurring nature, necessary for a fair presentation of the results for the
reported interim periods.
Effective as of May 22, 1997, the Company acquired all of the outstanding
capital stock of Valentec International Corporation ("Valentec") in a tax free
stock-for-stock exchange (the "Valentec Acquisition"). Valentec is a high-volume
manufacturer of stamped and precision-machined products for the automotive,
commercial and defense industries. Valentec was the Company's largest
shareholder immediately prior to the Valentec Acquisition owning approximately
27%, or 1,379,200 shares of the issued and outstanding shares of common stock,
$.01 par value per share, of the Company (the "Common Stock"). In connection
with the Valentec Acquisition, the Company issued an aggregate of 1,369,200
newly issued shares of Common Stock to the shareholders of Valentec. The
Valentec Acquisition was accounted for as a purchase. The purchase price
aggregated approximately $15.2 million, including estimated direct acquisition
costs of approximately $1.4 million. In addition, the Company advanced Valentec
approximately $1.3 million for the purpose of funding operations prior to the
Valentec Acquisition. The operations of Valentec are included in the accounts of
the Company for the entire twenty-six week period ended September 26, 1998 and
beginning on May 22, 1997 for the six month period ended September 30, 1997.
Management of the Company allocated the purchase consideration for Valentec
assets, net of liabilities assumed, at fair market value, with the excess
allocated to goodwill. Goodwill of $19.9 million will be amortized over
twenty-five years on a straight-line basis.
On July 24, 1997, the Company, through a newly-formed, wholly-owned
subsidiary, Safety Components Fabric Technologies, Inc. ("SCFTI"), acquired
("the JPS Acquisition") all of the assets and assumed certain liabilities of the
Air Restraint/Technical Fabrics Division of JPS Automotive L.P. SCFTI is a
leading, low-cost supplier of airbag fabric in North America and is also a
leading manufacturer of value-added technical fabrics used in a variety of niche
industrial and commercial applications. The JPS Acquisition was accounted for as
a purchase. The purchase price aggregated approximately $58.9 million, after
giving effect to post-closing adjustments. The purchase price also included the
repayment of approximately $650,000 of capital lease obligations, direct
acquisition costs of approximately $1.0 million, and approximately $1.2 million
for the purchase of a building in conjunction with the JPS Acquisition. The
operations of SCFTI are included in the accounts of the Company for the entire
thirteen and twenty-six week periods ended September 26, 1998 and beginning on
July 24, 1997 for the three and six-month periods ended September 30, 1997.
Management of the Company allocated the purchase consideration for SCFTI assets,
net of liabilities assumed, at fair market value, with the excess allocated to
goodwill. Goodwill of $19.2 million will be amortized over forty years based on
a straight line method.
7
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Additionally, on December 22, 1997, the Company acquired all of the issued
and outstanding capital stock of CSSC, Inc. (formerly known as Champion Sales
and Service Company) ("Champion") for an aggregate amount of $3.4 million
including direct acquisition costs of approximately $125,000 (the "Champion
Transaction"). In conjunction with the Champion Transaction, the Company entered
into a management services agreement with the former shareholders of Champion.
The terms of such management services agreement prohibits the Champion
shareholders from competing with certain businesses of the Company for a period
of five years. Each such management services agreement also provides that the
Company has the option, in its sole discretion, to extend the non-competition
period for three successive five-year periods, upon payment of a nominal
extension fee. Accordingly, the Company has allocated the purchase consideration
to these non-compete agreements. In connection with the Champion Transaction,
the Company also entered into a definitive Put Agreement (the "Put Transaction")
with an associate of Champion (the "Associate") who had the right to a portion
of any of the sales commissions actually received by Champion. Pursuant to the
Put Transaction, the Associate has the option to put to the Company, subject to
certain conditions, all of the issued and outstanding capital stock of Duchi &
Associates, Inc., an affiliated entity, for a put price of $740,000. The Put
Transaction will include (as a condition to its exercise), a twenty year
management services agreement and non-compete agreement between the Company and
the Associate. The Company believes that the Put Transaction will be exercised,
and accordingly, has recorded $740,000 as an intangible asset and accrued for
the Put Transaction as part of accrued liabilities, during fiscal year 1998. The
Associate had not exercised his put option as of September 26, 1998.
NOTE 2 COMPOSITION OF CERTAIN CONSOLIDATED BALANCE SHEET COMPONENTS
(in thousands)
<TABLE>
<CAPTION>
September 26, 1998 March 28, 1998
------------------ --------------
<S> <C> <C>
Accounts receivable:
Billed receivables $ 34,217 $29,034
Unbilled receivables (net of unliquidated progress
payments of $12,686 and $12,795 at September 26, 1998 and
March 28, 1998, respectively) 7,686 8,759
Other 2,590 1,415
------- -------
$44,493 $39,208
======= =======
Inventories:
Raw materials $ 6,917 $ 6,072
Work-in-process 11,307 6,743
Finished goods 6,409 7,120
------- -------
$24,633 $19,935
======= =======
Property, plant and equipment:
Land and building $ 9,816 $ 9,134
Machinery and equipment 76,300 65,846
------- -------
86,116 74,980
Less - accumulated depreciation and amortization (12,553) (8,701)
------- -------
$73,563 $66,279
======= =======
</TABLE>
8
<PAGE>
NOTE 3 LONG-TERM OBLIGATIONS (in thousands)
<TABLE>
<CAPTION>
September 26, 1998 March 28, 1997
------------------ --------------
<S> <C> <C>
Senior Subordinated Notes due July 15, 2007, bearing
interest at 10 1/8% $90,000 $ 90,000
KeyBank and Fleet Bank revolving credit facility due
May 5, 2002, bearing interest at 1.0% over LIBOR 22,000 14,176
KeyCorp equipment note due July 10, 2005, bearing interest
at 7.09% 10,000 -
Bank Austria mortgage note, due March 31, 2007, bearing
interest at 1.0% over LIBOR 6,750 7,125
Note payable, principal due in annual installments of $212
beginning January 12, 1999 to January 12, 2002, with
interest at 7.22% in semiannual installments, secured by
assets of the Company's United Kingdom subsidiary 848 847
Capital equipment notes payable, due in monthly installment
with interest at 8.53% to 16.0% maturing at various rates
through June 2002, secured by machinery and equipment 4,014 4,966
-------- --------
133,612 117,114
Less - current portion (4,100) (2,375)
-------- --------
$129,512 $114,739
======== ========
</TABLE>
On July 24, 1997, the Company issued $90.0 million aggregate principal
amount of its 10 1/8% Senior Subordinated Notes due 2007, Series A (the "Old
Notes") to BT Securities Corporation, Alex. Brown & Sons Incorporated and
BancAmerica Securities, Inc. in a transaction not registered under the
Securities Act of 1933, as amended, in reliance upon an exemption thereunder
(the "Debt Offering"). On September 2, 1997, the Company commenced an offer to
exchange (the "Exchange Offer", together with the Debt Offering, the "Offering")
the Old Notes for $90.0 million aggregate principal amount of its 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes", together with the
Old Notes, the "Notes"). All of the Old Notes were exchanged for Exchange Notes
pursuant to the terms of the Exchange Offer, which expired on October 1, 1997.
Interest on the Notes accrue from July 24, 1997 and is payable semi-annually in
arrears on each of January 15 and July 15 of each year. The Company made a
semi-annual interest payment on July 15, 1998 to the holders for an aggregate of
$4.6 million. The Company has also accrued through September 26, 1998, as part
9
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
of accrued liabilities, approximately $1.9 million of interest, which is due on
January 15, 1999 as part of the next semi-annual payment. The Company incurred
approximately $3.9 million of fees and expenses related to the Offering. Such
fees have been deferred and will be charged to operations over the expected term
of the Notes, not to exceed 10 years. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future Senior Indebtedness (as defined in the Indenture pursuant to
which the Notes were issued) and to all existing and future indebtedness of the
Company's subsidiaries that are not Guarantors (as defined herein). All of the
Company's direct and indirect wholly-owned domestic subsidiaries are Guarantors.
The Company, Phoenix Airbag GmbH & Co. KG ("Phoenix Airbag") and Automotive
Safety Components International Limited entered into an agreement with KeyBank
National Association, as administrative agent ("KeyBank"), dated as of May 21,
1997 as amended to date (the "Credit Agreement"). The Credit Agreement, as
amended, consists of a $40.0 million revolving credit facility for a five year
term ( $22.0 million outstanding as of September 26, 1998), bearing interest at
LIBOR (5.38672% as of September 26, 1998) plus 1.00% with a commitment fee of
0.25% per annum for any unused portion. The initial proceeds from KeyBank were
used to repay the Bank of America NT&SA term loan and revolving credit. KeyBank
was subsequently repaid with the proceeds from the Offering. The Company
incurred approximately $470,000 of financing fees and related costs. These costs
have been deferred and will be charged to operations over the expected term of
the Credit Agreement not to exceed 5 years. On July 30, 1998, the Company and
KeyBank entered into Amendment No. 3 to the Credit Agreement to increase the
limits on certain capital expenditures and lease covenants. On October 9, 1998,
the Company entered into Amendment No. 4 to the Credit Agreement, which
increased the revolving credit facility from $27.0 million to $40.0 million, and
added Fleet Bank as a member of the bank syndicate. KeyBank and Fleet Bank each
provide fifty percent of the financing available under the Credit Agreement and
KeyBank will remain as acting agent. The Company has used and will continue to
use the revolving credit facility to fund working capital. Letters of credit
outstanding were $4.2 million and $3.4 million at September 26, 1998 and March
28, 1998, respectively. The indebtedness under the Credit Agreement is secured
by substantially all the assets of the Company. 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; 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.
On July 10, 1998, the Company entered into a $10.0 million financing
arrangement with KeyCorp Leasing, a division of Key Corporate Capital Inc.
("KeyCorp"). The Company applied the entire proceeds to satisfy outstanding
indebtedness under the KeyBank revolving credit facility, thereby increasing the
availability under the revolving credit facility. The KeyCorp financing
agreement has a seven-year term, bears interest at 7.09%, and requires monthly
payments of $150,469, secured by certain equipment located at SCFTI.
10
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On June 4, 1997, the Company secured a $7.5 million mortgage note facility
with Bank of Austria. The note is payable in semi-annual installments of
$375,000 through March 31, 2007 and bears interest at 1.0% over LIBOR. The note
is secured by the assets of the Company's Czech Republic facility. The Company
incurred approximately $437,000 of financing fees and related costs. These costs
have been deferred and will be charged to operations over the expected term of
the note not to exceed 5 years.
During fiscal year 1997, the Company entered into a sale-leaseback of
certain equipment which is accounted for as a capital lease. The Company
received proceeds (which approximated the carrying value of the asset at the
time of sale) of approximately $1.5 million; no gain or loss was recorded in
connection with this transaction. The agreement requires that specified
machinery and equipment used in the Company's operations be pledged as
collateral, among other criteria. The Company imputed interest at 9% per annum.
NOTE 4 - RECONCILIATION TO DILUTED EARNINGS PER SHARE (in thousands)
The following data show the amounts used in computing earnings per share and the
effect on income and the weighted average number of shares of dilutive potential
common stock.
<TABLE>
<CAPTION>
Thirteen Three Months Twenty-Six Six Months
Weeks Ended Ended Weeks Ended Ended
September 26, 1998 September 30, 1997 September 26, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net Income $ 158 $1,282 $1,701 $2,717
===== ====== ====== ======
Weighted average number of
common shares used in basic
earnings per share 5,119 5,021 5,093 5,021
Effect of dilutive securities:
Stock options 72 86 98 42
Warrants 4 2 9 1
----- ----- ----- -----
Weighted average number of
common shares and dilutive
potential common stock used
in diluted earnings per share 5,195 5,109 5,200 5,064
===== ===== ===== =====
</TABLE>
Options on approximately 286,000 and 96,000 shares of common stock were not
included in computing diluted earnings per share as of September 26, 1998 and
September 30, 1997, respectively, because their effects were antidilutive.
11
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - COMPREHENSIVE INCOME (in thousands)
During the first quarter of fiscal year 1999, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income", which became effective for fiscal years
beginning after December 15, 1997. This Statement requires disclosure of
comprehensive income, defined as the total of net income and all other non-owner
changes in equity, which under generally accepted accounting principles, are
recorded directly to the stockholders' equity section of the consolidated
balance sheet and, therefore bypass net income. In SCI's case, the non-owner
changes in equity relate to the tax benefit from stock options exercised and the
foreign currency translation adjustment.
Comprehensive income is as follows:
<TABLE>
<CAPTION>
Thirteen Three Months Twenty-Six Six Months
Weeks Ended Ended Weeks Ended Ended
September 26, 1998 September 30, 1997 September 26, 1998 September 30, 1997
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net Income $ 158 $1,282 $1,701 $2,717
Tax benefit from stock
options exercised 25 10 137 10
Foreign currency
translation adjustment 2,691 57 2,759 (847)
------ ------ ------ ------
Comprehensive income $2,874 $1,349 $4,597 $1,880
====== ====== ====== ======
</TABLE>
NOTE 6 - UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma revenues, net income and net income per common share,
assuming that each of: (i) the Valentec Acquisition; (ii) the JPS Acquisition;
(iii) the completion of the debt offering (Note 3) and application of the
proceeds therefrom; and (iv) the Champion Transaction was consummated on April
1, 1997 are as follows below, in thousands, except per share data. The unaudited
pro forma information does not purport to represent what the Company's results
of operations actually would have been if those transactions had been
consummated on the date or for the periods indicated, or what such results will
be for any future date or for any future period.
Pro Forma Pro Forma
September 30, March 28,
1997 1998
------------- --------------
(unaudited) (unaudited)
Revenues $48,309 $194,635
Net sales $ 1,063 $ 5,420
Net income per common share, basic $ 0.21 $ 1.08
Net income per common share, assuming dilution $ 0.21 $ 1.05
12
<PAGE>
SAFETY COMPONENTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The Notes are guaranteed on a senior unsecured basis, jointly and severally, by
each of the Company's principal wholly-owned domestic operating subsidiaries and
certain of its indirect domestic wholly-owned subsidiaries (the "Guarantors").
Certain condensed consolidating information of the guarantors are presented
below as of September 26, 1998.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
GUARANTOR NONGUARANTOR PARENT ELIMINATION CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES CORPORATION ENTRIES TOTAL
------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets................ $ 58,367 $ 18,810 $ 2,264 $ - $ 79,441
======= ======= ======= ====== =======
Total assets.................. $148,610 $ 64,634 $ 13,708 $(8,642) $218,310
======= ======= ======= ====== =======
Current liabilities........... $ 32,631 $ 19,687 $(13,935) $ - $ 38,383
======= ======= ======= ====== =======
Total liabilities............. $128,523 $ 50,786 $ (5,743) $ - $173,566
======= ======= ======= ====== =======
Revenues...................... $ 74,003 $ 33,585 $ - $(3,080) $104,508
======= ======= ======= ====== =======
Gross Profit.................. $ 11,723 $ 4,850 $ - $ - $ 16,573
======= ======= ======= ====== =======
Income from operations........ $ 7,439 $ 3,709 $ (2,124) $ - $ 9,024
======= ======= ======= ====== =======
Income before taxes........... $ 8,101 $ 2,486 $ (7,437) $ - $ 3,150
======= ======= ======= ====== =======
Net Income.................... $ 4,795 $ 1,373 $ (4,467) $ - $ 1,701
======= ======= ======= ====== =======
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
SECOND QUARTER ENDED SEPTEMBER 26, 1998 COMPARED TO SECOND QUARTER ENDED
SEPTEMBER 30, 1997
Net Sales. Net sales increased by $10.3 million or 24.2% to $53.1 million
for the second quarter of fiscal year 1999 compared to the second quarter of
fiscal year 1998. The increase was primarily attributable to increased sales
volumes of $5.5 million in the European automotive operations, primarily Phoenix
Airbag. The remaining increase in sales during the second quarter of fiscal year
1999 was due to the inclusion of the operations of SCFTI for the entire
three-month period of fiscal 1999 and higher sales in the defense operations due
to the resumption in delivery under the Company's 120 millimeter mortar systems
contract with the U.S. Army. SCFTI was acquired on July 24, 1997 and included in
the Company's entire second quarter of fiscal year 1999 whereas in the second
quarter of fiscal year 1998 SCFTI was only included for approximately two
months. Sales at SCFTI were approximately $3.4 million higher for the second
quarter of fiscal year 1999. The increase in sales was offset by the effects of
the GM strike on the company during the second quarter of fiscal year 1999 as
well as price reductions to the company's customers. Sales of airbag fabric,
cushions and metal components to suppliers of General Motors were significantly
reduced during the second quarter of fiscal year 1999. The total impact on sales
of the GM strike during the second quarter of fiscal year 1999 was approximately
$4.3 million.
Gross Profit. Gross profit increased by $19,000 or 0.3% to $7.3 million
for the second quarter of fiscal year 1999 compared to the second quarter of
fiscal year 1998. The increase was primarily attributable to the inclusion of
operations of SCFTI for the entire second quarter of fiscal year 1999, which
contributed approximately $584,000 to gross profit. Additionally, the defense
operations contributed approximately $600,000 of additional gross profit due the
increased shipments under the Company's 120 millimeter mortar systems contract
with the U.S. Army. These increases were offset by lower margins in Europe due
to price reductions, and more significantly, approximately $1.2 million of
one-time cost related to duplicative inspection of airbags required by customer
specifications. The incremental costs resulting in this increase related to
personnel in the operations in Hildesheim, Germany during the transition period
in which, labor intense passenger airbag production was shifted to the Company's
lower labor cost facility located in the Czech Republic. The Company does not
expect these costs to reoccur in the future. The General Motors strike also
adversely effected gross profit by approximately $1.1 million during the second
quarter of fiscal year 1999. The strike impact was not only the loss of gross
margin from lost sales during the second quarter of fiscal year 1999 but also
the cost of additional personnel, which had been hired for the ramp up of
certain programs that were delayed. These newly trained employees were not laid
off because the Company anticipated a timely ending to the strike.
Gross profit as a percentage of sales decreased to approximately 13.8% for
the second quarter of fiscal year 1999 from 17.1% for the second quarter of
fiscal year 1998. The decrease as a percentage of sales was primarily due to the
historically lower gross margins at SCFTI. The textile industry generally
produces margins in the range of 13% to 14% due to the capital intensive
production process. The remainder of the decrease was due to the costs
associated with the Company's relocation of German operations and the General
Motors strike.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $440,000 or 16.0% to $3.2 million for the
second quarter of fiscal year 1999 compared to the second quarter of fiscal year
1998. The increase was primarily attributable to the acquisitions of SCFTI and
Valentec. Selling, general and administrative expenses as a percentage of sales
decreased to 6.0% for the second quarter of fiscal year 1999 from 6.5% for the
second quarter of fiscal year 1998 due to the increased sales volumes.
14
<PAGE>
Operating Income. Operating income decreased by $592,000 or 14.3% to $3.5
million for the second quarter of fiscal year 1999 compared to the second
quarter of fiscal year 1998. The decrease was primarily attributable to the $1.2
million in costs incurred in the relocation of German operations and the
approximately $1.1 million unfavorable impact of the General Motors strike
partially offset by increased sales volumes of the European automotive
operations, higher sales in the defense operations under the Company's 120
millimeter mortar systems contract with the U.S. Army and the inclusion of SCFTI
for the entire second quarter of fiscal year 1999.
Interest Expense. Interest expense increased $828,000 to $3.0 million for
the second quarter of fiscal year 1999 compared to the second quarter of fiscal
year 1998. This increase was primarily attributable to the issuance of the Notes
(as defined herein) the proceeds of which were used primarily to acquire SCFTI.
Income Taxes. The income tax rate applied against pre-tax income was 69.3%
for the second quarter of fiscal year 1999 compared to 37.0% for the second
quarter of fiscal year 1998. The tax rate was lower during the second quarter of
fiscal year 1998 due to the reversal of foreign tax reserves no longer needed
during that period. The increase in tax rate during the second quarter of fiscal
year 1999 was due to non-deductible goodwill at Valentec, coupled by a greater
proportion of income from foreign sources, which have higher tax rates.
Net Income. Net income decreased to $158,000 for the second quarter of
fiscal year 1999 compared to $1.3 million for the second quarter of fiscal year
1998. This decrease is a result of the items discussed above, most notably the
costs incurred in the Company's relocation of German operations coupled with the
General Motors strike which in the aggregate reduced net income by approximately
$1.2 million.
TWENTY-SIX WEEKS ENDED SEPTEMBER 26, 1998 COMPARED TO SIX MONTHS ENDED
SEPTEMBER 30, 1997
Net Sales. Net sales increased by $34.2 million or 48.5% to $104.5 million
for the first twenty-six weeks of fiscal year 1999 compared to the first six
months of fiscal year 1998. The increase was primarily attributable to increased
sales volume in North America due to the inclusion of the operations of SCFTI
and Valentec for the full twenty-six week period. SCFTI was acquired on July 24,
1997 and included in the Company's entire first twenty-six weeks of fiscal year
1999 whereas in the first six months of fiscal year 1998 SCFTI was only included
for approximately two months. Sales at SCFTI were approximately $22.8 million
higher for the first twenty-six weeks of fiscal year 1999. Valentec was acquired
effective as of May 22, 1997 and included in the Company's entire twenty-six
weeks of fiscal year 1999 whereas in the first six months of fiscal year 1998
Valentec was included for approximately four months. Sales at Valentec increased
approximately $2.2 million for the first twenty-six weeks of fiscal year 1999.
The remaining increase in sales during the first twenty-six weeks of fiscal year
1999 was due to increased volumes in the European automotive operations, of
approximately $5.9 million, and higher sales in the defense operations of
approximately $7.0 million due to the resumption in delivery under the Company's
120 millimeter mortar systems contract with the U.S. Army. The increase in sales
was offset in part by the effects of the General Motors strike and price
decreases to the Company's customers. Sales of airbag fabric, cushions and metal
components to suppliers of General Motors were significantly reduced during the
first twenty-six weeks of fiscal year 1999. The total impact on sales of the GM
strike during the first twenty-six weeks of fiscal year 1999 was approximately
$4.5 million.
Gross Profit. Gross profit increased by $3.6 million or 27.9% to $16.6
million for the first twenty-six weeks of fiscal year 1999 compared to the first
six months of fiscal year 1998. The increase was primarily attributable to the
inclusion of the operations of SCFTI for the entire first twenty-six weeks of
fiscal year 1999, which contributed approximately $3.7 million to gross profit.
The remaining increase was attributable to the increased shipments of the
defense operations, which were partially offset by both lower margins in Europe
due to price reductions and more significantly, approximately $1.2 million of
one-time cost related to duplicative inspection of airbags required by customer
specifications. The incremental costs resulting in this increase related to
personnel in the operations in Hildesheim, Germany during the transition period
15
<PAGE>
in which, labor intense passenger airbag production was shifted to the Company's
lower labor cost facility located in the Czech Republic. The Company does not
expect these costs to reoccur in the future. The General Motors strike also
adversely effected gross profit by approximately $1.3 million during the first
twenty-six weeks of fiscal year 1999. The strike impact was not only the loss of
gross margin from lost sales during the period, but also the cost of additional
personnel, which had been hired for the ramp up of certain programs that were
delayed. These newly trained employees were not laid off because the Company
anticipated a timely ending to the strike.
Gross profit as a percentage of sales decreased to approximately 15.9% for
the first twenty-six weeks of fiscal year 1999 from 18.4% for the first six
months of fiscal year 1998. The decrease as a percentage was primarily due to
the historically lower gross margins at SCFTI. The textile industry generally
produces margins in the range of 13% to 14% due to the capital intensive
production process. The remainder of the decrease was due to the costs
associated with the Company's relocation of German operations and the General
Motors strike.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.2 million or 23.2% to $6.4 million for
the first twenty-six weeks of fiscal year 1999 compared to the first six months
of fiscal year 1998. The increase was primarily attributable to the acquisitions
of SCFTI and Valentec. Selling, general and administrative expenses as a
percentage of sales decreased to 6.1% for the first twenty-six weeks of fiscal
year 1999 from 7.4% for the first six months of fiscal year 1998 due to the
increased sales volumes.
Operating Income. Operating income increased by $1.9 million or 26.0% to
$9.0 million for the first twenty-six weeks of fiscal year 1999 compared to the
first six months of fiscal year 1998. The increase was primarily attributable to
the inclusion of SCFTI and Valentec for the entire first twenty-six weeks of
fiscal year 1999, which contributed approximately $2.5 million. The remaining
increase was due to the increased sales volumes in Europe and higher sales in
the defense operations under the Company's 120 millimeter mortar systems
contract with the U.S. Army. These increases were offset by both the unfavorable
impact of the General Motors strike of approximately $1.3 million and the costs
incurred in the Company's relocation of German operations of approximately $1.2
million.
Interest Expense. Interest expense increased $3.1 million to $5.8 million
for the first twenty-six weeks of fiscal year 1999 compared to the first six
months of fiscal year 1998. This increase was primarily attributable to the
issuance of the Notes, the proceeds of which were used primarily to acquire
SCFTI.
Income Taxes. The income tax rate applied against pre-tax income was 46.0%
for the first twenty-six weeks of fiscal year 1999 compared to 38.6% for the
first six months of fiscal year 1998. The tax rate was lower during the first
six months of fiscal year 1998 due to the reversal of foreign tax reserves no
longer needed during that period. Additionally, the tax rate has increased as a
percentage during the first twenty-six weeks of fiscal year 1999 due to the
non-deductible goodwill amortization at Valentec.
Net Income. Net income decreased to $1.7 million for the first twenty-six
weeks of fiscal year 1999 compared to $2.7 million for the first six months of
fiscal year 1998. This decrease is a result of the items discussed above, most
notably the General Motors strike which was a reduction to net income of
approximately $750,000 and the relocation of German operations of approximately
$650,000.
16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As the Company's business continues to grow, its equipment and working
capital requirements are also expected to continue to increase. The Company
expects to fund this growth through a combination of cash flow from operations,
equipment financing, revolving credit borrowings and the proceeds from potential
future Company public and/or private offerings.
The Company, Phoenix Airbag GmbH & Co. ("Phoenix Airbag") and Automotive
Safety Components International Limited entered into an agreement with KeyBank
National Association, as administrative agent ("KeyBank"), dated as of May 21,
1997 as amended to date (the "Credit Agreement"). The Credit Agreement, as
amended, consists of a $40.0 million revolving credit facility for a five year
term ($22.0 million outstanding as of September 26, 1998), bearing interest at
LIBOR (5.38672% as of September 26, 1998) plus 1.00% with a commitment fee of
0.25% per annum for any unused portion. The Company incurred approximately
$470,000 of financing fees and related costs. These costs have been deferred and
will be charged to operations over the expected term of the Credit Agreement not
to exceed 5 years. On July 30, 1998, the Company and KeyBank entered into
Amendment No. 3 to the Credit Agreement to increase the limits on certain
capital expenditures and lease covenants. On October 9, 1998, the Company
entered into Amendment No. 4 to the Credit Agreement, which increased the
revolving credit facility from $27.0 million to $40.0 million, and added Fleet
Bank as a member of the bank syndicate. KeyBank and Fleet Bank each provide
fifty percent of the financing available under the Credit Agreement and KeyBank
will remain as acting agent. The Company has used and expects to continue to use
the revolving credit facility to fund working capital. Letters of credit
outstanding were $4.2 million at September 26, 1998. The indebtedness under the
Credit Agreement is secured by substantially all the assets of the Company. 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; 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.
On July 10, 1998, the Company entered into a $10.0 million financing
arrangement with KeyCorp Leasing, a division of Key Corporate Capital Inc.
("KeyCorp"). The Company applied the entire proceeds to satisfy outstanding
indebtedness under the KeyBank revolving credit facility, thereby increasing the
availability under the revolving credit facility. The KeyCorp financing
agreement has a seven-year term, bears interest at 7.09%, and requires monthly
payments of $150,469, secured by certain equipment located at SCFTI.
On July 24, 1997, the Company issued $90.0 million aggregate principal
amount of its 10 1/8% Senior Subordinated Notes due 2007, Series A (the "Old
Notes") to BT Securities Corporation, Alex. Brown & Sons Incorporated and
BancAmerica Securities, Inc. in a transaction not registered under the
Securities Act of 1933, as amended, in reliance upon an exemption thereunder
(the "Debt Offering"). On September 2, 1997, the Company commenced an offer to
exchange (the "Exchange Offer", together with the Debt Offering, the "Offering")
the Old Notes for $90.0 million aggregate principal amount of its 10 1/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes", together with the
Old Notes, the "Notes"). All of the Old Notes were exchanged for Exchange Notes
pursuant to the terms of the Exchange Offer, which expired on October 1, 1997.
Interest on the Notes accrues from July 24, 1997 and is payable semi-annually in
arrears on each of January 15 and July 15 of each year. The Company made a
semi-annual interest payment on July 15, 1998 to the holders for an aggregate of
$4.6 million. The Company has also accrued through September 26, 1998, as part
of accrued liabilities, approximately $1.9 million of interest, which is due on
January 15, 1999 as part of the next semi-annual payment. The Company incurred
approximately $3.9 million of fees and expenses related to the Offering. Such
fees have been deferred and will be charged to operations over the expected term
of the Notes, not to exceed 10 years. The Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future Senior Indebtedness (as defined in the Indenture pursuant to
17
<PAGE>
which the Notes were issued) and to all existing and future indebtedness of the
Company's subsidiaries that are not Guarantors. All of the Company's direct and
indirect wholly-owned domestic subsidiaries are Guarantors.
During the first twenty-six weeks of fiscal year 1999, net cash used by
operations was $7.7 million. Such cash used was substantially for the payments
of interest related to the Notes and income taxes. Cash used by investing
activities was $12.6 million, of which $9.9 million was used for the acquisition
of additional equipment to expand the Company's production capacity worldwide.
The Company also paid additional consideration in connection with the
acquisition of Phoenix Airbag, which consisted of $2.0 million earn-out accrued
at the end of fiscal year 1998. In addition, the Company incurred certain costs
in connection with the acquisitions of Valentec and SCFTI of approximately
$502,000 and $242,000, respectively. Net cash provided by financing activities
in the first twenty-six weeks of fiscal year 1999 was $17.4 million.
Additionally, the Company has experienced increases in accounts receivable and
inventories as the Company has increased production for new airbag cushion
programs recently awarded and set into production. These activities resulted in
a net decrease in cash of $3.0 million in the first twenty-six weeks of fiscal
year 1999.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
State of Readiness and Cost
The Company relies on systems developed by other parties in regard to its
business, accounting and operational software. The Company believes that its
significant business, accounting and operations software are year 2000
compliant. Additionally, the Company is currently assessing the impact of this
issue on its manufacturing equipment.
The Company is currently evaluating its management information systems
including information technology ("IT") and non-IT computerized systems and has
prepared a plan for Year 2000 compliance. This evaluation is expected to be
completed by March 1999. The Company is currently in the process of upgrading
its accounting and manufacturing software systems. The Company expects that the
new systems should be Year 2000 compliant. The costs of achieving Year 2000
compliance are not expected to have a material impact on the Company's business,
operations or financial condition.
Risk
The Company relies on third party suppliers for raw materials, utilities,
and other critical services. The Company's operations could be affected by the
interruption of significant suppliers. The Company is in the process of
evaluating the status of suppliers' compliance with year 2000 issues and is in
the process of determining alternatives and contingency plan requirements. The
cost of this evaluation is expected to be nominal, however, there can be no
assurance that such cost will not be material. In the event that its current
vendors are unable to certify that they will be Year 2000 compliant by the
middle of calendar 1999 or if such suppliers are unable to certify that their
failure to be Year 2000 compliant will not adversely affect the Company, the
Company will be reviewing its alternatives with respect to other vendors. There
can be no assurance that the Company will be able to find suppliers which are
acceptable to the Company and its customers.
18
<PAGE>
The Company also is dependent on customers for sales and for cash flow.
Interruptions in customers' operations due to Year 2000 problems could result in
decreased revenue, increased inventory and cash flow reductions. The Company has
initiated efforts to evaluate its customers' Year 2000 risks, as well as
developing alternative sales strategies. The cost of this evaluation is expected
to be nominal, however, there can be no assurance that such cost will not be
material.
Based on information known to date, the Company believes that the most
reasonably likely worst-case Year 2000 scenario would entail a significant
interruption in its business, including disruption in the manufacturing and
delivery of its products due to the inability to obtain critical raw materials
and supplies, and loss of revenue due to disruptions in its customers'
operations. The Company could also be significantly affected by the failure of
infrastructure services such as electricity and telephone service. Despite the
Company's efforts in regard to the Year 2000 issue, the Company is unable to
quantify the effect of any such failure or the Year 2000 scenario referenced
above and no assurance can be given that the Company's business, financial
condition or results of operations will not be materially adversely affected by
the failure of its systems and applications or those operated by other parties
to properly manage dates beyond 1999.
Contingency Plans
Given that the upgrading of its accounting and manufacturing software
systems is expected to be completed by the middle of calendar 1999, the Company
has not prepared a contingency plan pertaining to its information systems and
does not currently believe that a contingency plan is necessary. The Company is
in the process of developing a contingency plan based on its evaluation of
significant suppliers and customers in regard to Year 2000 compliance. The
contingency plan includes the identification of backup suppliers, broadening the
customer base and stockpiling raw materials in the months before Year 2000.
The above discussion may contain forward-looking statements that involve
risks and uncertainties, including, but not limited to, the impact of
competitive products and pricing, product demand and market condition risks, the
ability of Safety Components to realize anticipated cost savings and earnings
projections by Valentec; the ability of the Company to satisfy customers on
timeliness and quality; labor strikes; the ability of the Company to realize the
remaining proceeds under the Systems Contract; the continued performance by
SCFTI at or above historical levels; world-wide economic conditions; dependence
of revenues upon several major module suppliers and pricing pressures.
SIGNATURE(S)
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SAFETY COMPONENTS INTERNATIONAL, INC.
(Registrant)
DATED: February 9, 1999 BY: /s/ JEFFREY J. KAPLAN
----------------------------
Jeffrey J. Kaplan
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
INCOME.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-27-1999
<PERIOD-END> SEP-26-1998
<CASH> 3,095
<SECURITIES> 0
<RECEIVABLES> 44,833
<ALLOWANCES> 340
<INVENTORY> 24,633
<CURRENT-ASSETS> 79,441
<PP&E> 86,116
<DEPRECIATION> 12,553
<TOTAL-ASSETS> 218,310
<CURRENT-LIABILITIES> 38,383
<BONDS> 90,000
0
0
<COMMON> 66
<OTHER-SE> 44,678
<TOTAL-LIABILITY-AND-EQUITY> 218,310
<SALES> 104,508
<TOTAL-REVENUES> 104,508
<CGS> 84,258
<TOTAL-COSTS> 84,258
<OTHER-EXPENSES> 78
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,796
<INCOME-PRETAX> 3,150
<INCOME-TAX> 1,449
<INCOME-CONTINUING> 1,701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,701
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
