<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
Commission file number 33-96190
AEARO CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------
Delaware 13-3840450
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5457 West 79th Street
Indianapolis, Indiana 46268
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(317) 692-6666
(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 12 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
--- ---
<PAGE> 2
AEARO CORPORATION
TABLE OF CONTENTS
FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1999
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------------
<TABLE>
<CAPTION>
<S> <C>
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 1999 (UNAUDITED) AND SEPTEMBER 30, 1998 3-4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED MARCH 31, 1999
AND 1998 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND 1998 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) 7-11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
- ------------------------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-19
---------------------------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 20
- --------------------------------
ITEM 2. CHANGES IN SECURITIES 20
- ------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 20
- ----------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS 20
- ------------------------------------------------------------------
ITEM 5. OTHER INFORMATION 20
- --------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
- -----------------------------------------------
SIGNATURE PAGE 21
</TABLE>
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
AEARO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS--ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,891 $ 6,737
Accounts receivable (net of reserve for doubtful accounts of $1,280
and $1,239 respectively) 41,531 44,486
Inventories 29,762 30,466
Deferred and prepaid expenses 4,377 3,572
-------- --------
Total current assets 79,561 85,261
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 55,841 57,729
INTANGIBLE ASSETS, NET 131,694 137,848
OTHER ASSETS 4,909 5,909
-------- --------
Total assets $272,005 $286,747
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE> 4
AEARO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS--LIABILITIES AND STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
-------- --------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 14,226 $ 14,573
Accounts payable and accrued liabilities 33,833 37,957
Accrued interest 3,529 3,732
U.S. and foreign income taxes 4,120 3,506
-------- --------
Total current liabilities 55,708 59,768
-------- --------
LONG-TERM DEBT 209,075 218,592
DEFERRED INCOME TAXES 929 959
OTHER LIABILITIES 2,626 2,586
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value-
Authorized--200,000 shares
Issued and outstanding--45,000 shares -- --
Common stock, $.01 par value-
Authorized--200,000 shares
Issued and outstanding--102,588 and 102,338 at
March 31, 1999 and September 30, 1998, respectively 1 1
Additional paid-in capital 32,391 32,383
Accumulated deficit (15,857) (16,715)
Cumulative foreign currency translation adjustments (12,868) (10,827)
-------- --------
Total stockholders' equity 3,667 4,842
-------- --------
Total liabilities and stockholders' equity $272,005 $286,747
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE> 5
AEARO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------------- --------------------------
1999 1998 1999 1998
--------------------------- --------------------------
<S> <C> <C> <C> <C>
NET SALES $72,406 $71,779 $141,519 $141,491
COST OF SALES 38,869 39,799 77,453 78,861
------- ------- -------- --------
Gross profit 33,537 31,980 64,066 62,630
SELLING AND ADMINISTRATIVE 21,802 21,797 43,425 43,312
RESEARCH AND TECHNICAL SERVICES 1,107 1,040 2,244 2,311
AMORTIZATION OF INTANGIBLES 1,702 1,699 3,415 3,423
OTHER CHARGES (INCOME), NET 349 (205) 585 (643)
RESTRUCTURING CHARGE -- 1,585 -- 1,585
------- ------- -------- --------
Operating income 8,577 6,064 14,397 12,642
INTEREST EXPENSE, NET 6,104 6,604 12,428 13,262
------- ------- -------- --------
Income (loss) before provision for
income taxes 2,473 (540) 1,969 (620)
PROVISION FOR INCOME TAXES 717 647 1,111 1,316
------- ------- -------- --------
Net income (loss) 1,756 (1,187) 858 (1,936)
PREFERRED STOCK DIVIDEND ACCRUED 2,217 1,954 4,412 3,888
------- ------- -------- --------
Net Loss applicable to
Common Shareholders $ (461) $(3,141) $ (3,554) $ (5,824)
======= ======= ======== ========
BASIC AND DILUTED NET LOSS PER COMMON SHARE
$ (4.50) $(32.16) $ (34.70) $ (59.80)
======= ======= ======== ========
DILUTED WEIGHTED AVERAGE COMMON
SHARES 102,501 97,669 102,419 97,399
======= ======= ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE> 6
AEARO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
MARCH 31,
----------------------------
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 858 $(1,936)
Adjustments to reconcile net income to cash provided by operating
activities-
Depreciation 4,831 5,873
Amortization of intangible assets and deferred financing costs 4,430 4,377
Deferred income taxes (12) 214
Other, net 224 5
Changes in assets and liabilities-
Accounts receivable 2,288 5,879
Inventories 261 (3,983)
Accounts payable and accrued liabilities (3,961) (2,459)
Other, net (35) 511
------- -------
Net cash provided by operating activities 8,884 8,481
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,731) (3,217)
Proceeds provided by disposals of property, plant and equipment 20 2
------- -------
Net cash used by investing activities (3,711) (3,215)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) revolving credit facility, net 50 (200)
Repayment of term loans (6,198) (4,982)
Repayment of external long-term debt (1,312) (93)
Sale of common stock, net 50 943
Increase in shareholder notes, net (42) (1,107)
------- -------
Net cash used by financing activities (7,452) (5,439)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (567) (32)
------- -------
DECREASE IN CASH AND CASH EQUIVALENTS (2,846) (205)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,737 5,476
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,891 $ 5,271
======= =======
CASH PAID FOR:
Interest $11,696 $12,374
======= =======
Income taxes $ 432 $ 792
======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
6
<PAGE> 7
AEARO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
(1) CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly, in accordance with generally accepted accounting
principles, the Company's financial position, results of operations and
cash flows for the interim periods presented. Such adjustments consisted of
only normal recurring items. The results of operations for the interim
periods shown in this report are not necessarily indicative of results for
any future interim period or for the entire year. These condensed
consolidated financial statements do not include all disclosures associated
with annual financial statements and accordingly should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10K.
(2) FORMATION ACQUISITION AND FINANCING
Aearo Corporation, a Delaware corporation, and its direct wholly-owned
subsidiary, Aearo Company, a Delaware corporation (collectively referred to
herein as "the Company") manufacture and sell hearing protection devices
(ear plugs and ear muffs), prescription and non-prescription safety
eyewear, face shields, reusable and disposable respirators, hard hats and
first aid kits which are protection segments of the personal protection
equipment market world-wide. Additionally, the Company manufactures and
sells worldwide, a wide array of energy-absorbing materials that are
incorporated into other manufacturer's products to control noise, vibration
and shock.
Aearo Corporation was formed by Vestar Equity Partners, L.P. (Vestar) in
June, 1995 to effect the acquisition (the Formation Acquisition) of
substantially all of the assets and liabilities of Aearo Company (formerly
Cabot Safety Corporation) and certain affiliates (the Predecessor). The
Predecessor was wholly owned by Cabot Corporation (Cabot) prior to the
Formation Acquisition. The Formation Acquisition closed on July 11, 1995,
when Aearo Corporation acquired substantially all of the assets and certain
liabilities of the Predecessor for cash, preferred stock and a 42.5% common
equity interest in Aearo Corporation. Aearo Corporation immediately
contributed the acquired assets and liabilities to Aearo Company, a wholly
owned subsidiary of Aearo Corporation, pursuant to an asset transfer
agreement dated June 13, 1995. Aearo Corporation has no other materials
assets, liabilities or operations other than those that result from its
ownership of the common stock of Aearo Company.
The Formation Acquisition has been accounted for as a purchase transaction
effective as of July 11, 1995, in accordance with Accounting Principles
Board Opinion No. 16, BUSINESS COMBINATIONS, and EITF Issue No. 88-16,
BASIS IN LEVERAGED BUYOUT TRANSACTIONS, and accordingly, the consolidated
financial statements for the periods subsequent to July 11, 1995 reflect
the purchase price, including transaction costs, allocated to tangible and
intangible assets acquired and liabilities assumed, based on a portion of
their estimated fair values as of July 11, 1995. The valuation of assets
and liabilities acquired reflect carryover basis for the percentage
ownership retained by Cabot.
7
<PAGE> 8
AEARO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED)
(3) SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
FOREIGN CURRENCY TRANSLATION. Assets and liabilities of the Company's
foreign operations are translated at period-end exchange rates. Revenues
and expenses are translated at the average rate during the period.
Translation gains and losses are reflected as a separate component of
stockholders' equity. Foreign currency gains and losses arising from
transactions by any of the Company's subsidiaries are reflected in net
income.
INCOME TAXES. Deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
INTANGIBLE ASSETS. Intangible assets consist primarily of the costs of
goodwill, patents, and trademarks purchased in business acquisitions.
Intangible assets are amortized on the straight-line basis over either 25
years or an estimated useful life, whichever is shorter.
LOSS PER COMMON SHARE. Loss per common share has been computed by dividing
loss applicable to common shareholders for the period by the weighted
average number of common shares outstanding during the period.
In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, EARNINGS PER Share. Basic earnings per common share is
computed by dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per
common share is calculated the same as basic except, if not antidilutive,
stock options are included using the treasury stock method to the extent
that the average share trading price exceeds the exercise price. The
implementation of this standard did not have an effect on earnings per
common share for the periods presented and, therefore, did not require
restatement.
Effective October 1, 1998, the Company adopted SFAS No. 130, REPORTING
COMPREHENSIVE INCOME. SFAS No. 130 requires the reporting of comprehensive
income in addition to net income from operations. The Company's only item
of comprehensive income relates to foreign currency translation
adjustments, and is presented separately on the balance sheet as required.
If presented on the statement of operations comprehensive income would be
approximately $2.0 million, and $3.7 million less than reported net income
due to foreign currency translation adjustments for the six months ended
March 31, 1999, and March 31, 1998, respectively.
8
<PAGE> 9
AEARO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED)
In June 1997, the Financial Accounting Standards board issued SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS
No. 131 requires companies to present segment information using the
management approach. The management approach is based upon the way that
management organizes the segments within a Company for making operating
decisions and assessing performance. SFAS No. 131 is effective for the
Company beginning September 30, 1999. Adoption of this standard will not
impact the Company's consolidated financial position, results of operations
or cash flows, and any effect will be limited to the form and content of
its disclosures.
In June 1998, the Financial Accounting Standards board issued SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or a
liability measured at its fair value. SFAS No. 133 requires that changes in
the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a
company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal quarters of all fiscal years beginning
after June 15, 1999. A company may also implement SFAS No. 133 as of the
beginning of any fiscal quarter after issuance (that is, fiscal quarters
beginning June 16, 1998 and thereafter). SFAS No. 133 cannot be applied
retroactively. SFAS No. 133 must be applied to (a) derivative instruments
and (b) certain derivative instruments embedded in hybrid contracts that
were issued, acquired or substantially modified after December 31, 1997
(and, at a company's election, before January 1, 1998).
The Company has not yet quantified the impact of adopting SFAS No. 133 on
the consolidated financial statements and has not determined the timing of
or method of the adoption of SFAS No. 133. However, SFAS No. 133 could
increase volatility in earnings and other comprehensive income.
(4) INVENTORIES
Inventories consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1999 1998
------- -------
(unaudited)
<S> <C> <C>
Raw materials $ 8,982 $ 9,113
Work in process 7,960 9,257
Finished goods 12,820 12,096
------- -------
$29,762 $30,466
======= =======
</TABLE>
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method.
9
<PAGE> 10
AEARO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED)
(5) DEBT
The Company's debt structure includes $100.0 million of Senior Subordinated
Notes (Notes) due 2005, as well as a senior bank facility comprised of (i)
term loans denominated in U.S., Canadian, British, and German currencies
(Term Loans) and (ii) a revolving credit facility providing for up to $25.0
million (Revolving Credit Facility), (collectively the Senior Bank
Facilities). Under the terms of both the Senior Bank Facilities and the
Notes indenture, Aearo Company is required to comply with certain financial
covenants and restrictions with which Aearo Company was in compliance at
March 31, 1999. At March 31, 1999, the amounts outstanding on the term
loans and the revolving credit facility were approximately $112.0 million
and $8.1 million, respectively.
(6) COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS. The Company leases certain transportation vehicles,
warehouse facilities, office space, and machinery and equipment under
cancelable and noncancelable leases, most of which expire within 10 years
and may be renewed by the Company.
CONTINGENCIES. The Company is a defendant in various lawsuits and
administrative proceedings which are being handled in the ordinary course
of business. In the opinion of management of the Company, these suits and
claims should not result in final judgments or settlements which, in the
aggregate, would have a material adverse effect on the Company's financial
condition or results of operations.
(7) RESTRUCTURING CHARGE
During fiscal 1998 the Company recorded a restructuring charge of $11.6
million related to the restructuring plans announced by the Company during
the fiscal year. On February 3, 1998, the Company announced the appointment
of Michael A. McLain as President and Chief Executive Officer and on March
25, 1998 the Company announced plans to close the Boston headquarters and
relocate it to Indianapolis, Indiana, where the Company has substantial
operations. In addition, on September 30, 1998 the Company announced plans
to improve profitability through complexity reduction and restructuring.
The Company is eliminating certain product offerings in its Eyewear and
Respiratory product lines, reducing head count in North America through
restructuring and outsourcing, consolidating the branding in its Consumer
product line and reducing selling and manufacturing cost in its
Prescription eyewear product line.
The $11.6 million charge includes a $6.1 million provision for inventories
and product returns for products that are being discontinued. The charge
also provides $1.1 million for certain property, plant and equipment for
which the Company has determined there is no future use, and $0.1 million
related to intangibles on an abandoned product line. In addition, the
charge provides $4.3 million to cover mainly employee severance and other
contractual obligations.
10
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AEARO CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1999
(UNAUDITED)
As of March 31, 1999, there is approximately $1.8 million of remaining
accruals related to cash charges for severance and non-cancelable lease
payments to be substantially paid in fiscal 1999. The Company has entered
into a sublease agreement for the Boston office space that was formerly
utilized as the Corporate Headquarters. This sublease is effective as of
May 1, 1999.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING NOTES THERETO, APPEARING
ELSEWHERE IN THIS REPORT. THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN SUCH FORWARD-LOOKING STATEMENTS. THE FACTORS
THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, AMONG OTHERS, THE FOLLOWING: RISKS
ASSOCIATED WITH INDEBTEDNESS; RISKS RELATED TO ACQUISITIONS; RISKS ASSOCIATED
WITH THE CONVERSION TO A NEW MANAGEMENT INFORMATION SYSTEM; HIGH LEVEL OF
COMPETITION IN THE COMPANY'S MARKETS; IMPORTANCE AND COSTS OF PRODUCT
INNOVATION; RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; PRODUCT LIABILITY
EXPOSURE; UNPREDICTABILITY OF PATENT PROTECTION AND OTHER INTELLECTUAL PROPERTY
ISSUES; DEPENDENCE ON KEY PERSONNEL; THE RISK OF ADVERSE EFFECT OF ECONOMIC AND
REGULATORY CONDITIONS ON SALES; AND RISKS ASSOCIATED WITH ENVIRONMENTAL MATTERS.
<TABLE>
<CAPTION>
1999 COMPARED TO 1998 RESULTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Three Months Ended Change - Favorable
------------------ ------------------ (Unfavorable)
March 31, Percent of March 31, Percent of -------------
1999 Net Sales 1998 Net Sales Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Net Sales
Safety Products $61,371 84.8 $61,639 85.9 $ (268) (0.4)
Specialty Composites 11,035 15.2 10,140 14.1 895 8.8
------- ----- ------- ----- ------
Total net sales 72,406 100.0 71,779 100.0 627 0.9
Cost of Sales 38,869 53.7 39,799 55.4 930 2.3
------- ----- ------- ----- ------
Gross profit 33,537 46.3 31,980 44.6 1,557 4.9
Operating Expenses-
Selling and administrative 21,802 30.1 21,797 30.4 (5) --
Research and technical services 1,107 1.5 1,040 1.4 (67) (6.4)
Amortization of intangibles 1,702 2.4 1,699 2.4 (3) (0.2)
Other charges(income), net 349 0.5 (205) (0.3) (554) (270.2)
Restructuring charge -- -- 1,585 2.2 1,585 --
------- ----- ------- ----- ------
Operating income 8,577 11.8 6,064 8.4 2,513 41.4
Interest expense, net 6,104 8.4 6,604 9.2 500 7.6
------- ----- ------- ----- ------
Income (loss) before provision
for income taxes 2,473 3.4 (540) (0.8) 3,013 558.0
Provision for income
taxes 717 1.0 647 0.9 70 10.8
------- ----- ------- ----- ------
Net income (loss) 1,756 2.4 (1,187) (1.7) 2,943 247.9
Preferred stock dividend accrued 2,217 3.1 1,954 2.7 (263) (13.5)
------- ----- ------- ----- ------
Loss applicable to common
shareholders $ (461) (0.6) $(3,141) (4.4) $2,680 85.3
======= ===== ======= ===== ======
Loss per common share $ (4.50) $(32.16) $27.66 86.0
======= ======= ======
EBITDA $12,595 17.4 $10,685 14.9 $1,910 17.9
======= ===== ======= ===== ======
</TABLE>
12
<PAGE> 13
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
NET SALES. Net sales in the three months ended March 31, 1999 increased 0.9% to
$72.4 million from $71.8 million in the three months ended March 31, 1998.
Safety Products net sales in the three months ended March 31, 1999 decreased
0.4% to $61.4 million from $61.6 million in the three months ended March 31,
1998 as growth in Europe and other international markets was more than offset by
declines in North America which has been negatively affected by lower levels of
manufacturing employment and increased competitive activity. Specialty
Composites' net sales in the three months ended March 31, 1999 increased 8.8% to
$11.0 million from $10.1 million in the three months ended March 31, 1998. The
increase was primarily driven by strong demand in the trucking, aircraft, and
precision equipment markets.
GROSS PROFIT. Gross Profit in the three months ended March 31, 1999 increased
4.9% to $33.5 million from $32.0 million in the three months ended March 31,
1998. Gross Profit as a percentage of net sales in the three months ended March
31, 1999 was 46.3% as compared to 44.6% in the three months ended March 31,
1998. This improvement in the Gross Profit percentage of net sales is primarily
due to reduced spending and increased productivity in the manufacturing plants.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
remained unchanged at $21.8 million for the three months ended March 31, 1999
and 1998, respectively. Although the overall selling and administrative expenses
remain unchanged, the Company has reallocated its spending in an effort to more
strongly promote and build its brands. As a result, spending in selling and
marketing was increased by $0.8 million and spending in the customer service,
distribution and administrative functions decreased by $0.8 million. Selling and
administrative expenses as a percentage of net sales in the three months ended
March 31, 1999 decreased to 30.1% of net sales as compared to 30.4% of net sales
in the three months ended March 31, 1998.
RESEARCH AND TECHNICAL SERVICE EXPENSES. Research and technical service expenses
in the three months ended March 31, 1999 increased 6.4% to $1.1 million from
$1.0 million in the three months ended March 31, 1998.
AMORTIZATION OF INTANGIBLES. Amortization expense in the three months ended
March 31, 1999 and 1998 was unchanged at $1.7 million.
OTHER CHARGES (INCOME), NET. Other Charges (Income), Net was an expense of $0.3
million for the three months ended March 31, 1999 as compared to income of $0.2
million for the three months ended March 31, 1998. This change was primarily a
result of net foreign currency transaction losses in the three months ended
March 31, 1999 as compared to net foreign currency transaction gains in the
three months ended March 31, 1998.
RESTRUCTURING CHARGE. During fiscal 1998 the Company recorded a restructuring
charge related to the restructuring plans announced by the Company during the
fiscal year. In the three months ended March 31, 1998 the Company recorded
restructuring charges of $1.6 million.
OPERATING INCOME. Operating income improved 41.4% to $8.6 million in the three
months ended March 31, 1999 from $6.1 million in the three months ended March
31, 1998. This improvement was due primarily to improvements in gross profit and
the absence of a restructuring charge in the three months ended March 31, 1999,
partially offset as a result of the change in net foreign currency transaction
gains and losses. Operating income as a percentage of net sales in the three
months ended March 31, 1999 was 11.8% as compared to 8.4% in the three months
ended March 31, 1998.
13
<PAGE> 14
PROVISION FOR INCOME TAXES. The provision for income taxes in the three months
ended March 31, 1999 was $0.7 million compared to $0.6 million in the three
months ended March 31, 1998. The Company's foreign subsidiaries have taxable
income in their foreign jurisdictions, but the domestic subsidiaries have a net
operating loss carryforward for income tax purposes in the U.S.
INTEREST EXPENSE, NET. Interest expense, net in the three months ended March 31,
1999 decreased 7.6% to $6.1 million from $6.6 million in the three months ended
March 31, 1998. The reduction in interest expense was due to a reduction in
average borrowings as well as a reduction in the weighted average interest rates
in effect for the three months ended March 31, 1999 as compared to the three
months ended March 31, 1998.
NET INCOME (LOSS). For the three months ended March 31, 1999 the Company had net
income of $1.8 million as compared to a net loss of $1.2 million for the three
months ended March 31, 1998.
EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and non-operating income or expense. Non-operating income or
expense is further defined as extraordinary gains or losses, or gains or losses
from sales of assets other than in the ordinary course of business. While the
Company believes EBITDA is a useful indicator of its ability to service debt,
EBITDA should not be considered as a substitute for net income determined in
accordance with generally accepted accounting principles as an indicator of
operating performance or as an alternative to cash flow as a measure of
liquidity. Investors should be aware that EBITDA as presented below may not be
comparable to similarly titled measures presented by other companies and
comparisons could be misleading unless all companies and analysts calculate this
measure in the same fashion.
<TABLE>
<CAPTION>
EBITDA CALCULATION
(DOLLARS IN THOUSANDS)
Three Months Ended Change
March 31, Favorable (Unfavorable)
1999 1998 Amount Percent
---- ---- ------ ------
<S> <C> <C> <C> <C>
Operating Income $ 8,577 $ 6,064 $2,513 41.4%
Add Backs:
Depreciation 2,325 2,952 (627) (21.2)%
Amortization of Intangibles 1,702 1,699 3 0.2%
Non-operating income, net (1) (9) (30) 21 70.0%
------- ------- ------
EBITDA $12,595 $10,685 $1,910 17.9%
======= ======= ======
(1) Other Charges (Income), Net Summary:
-----------------------------------
Non-operating income, net $ (9) $ (30) $ (21) (70.0)%
Foreign Transaction losses (gains) 358 (175) (533) (304.6)%
------- ------- ------
Total Other Charges (Income), Net $ 349 $ (205) $ (554) (270.2)%
======= ======= ======
</TABLE>
EBITDA for the three months ended March 31, 1999 was $12.6 million as compared
to $10.7 million for the three months ended March 31, 1998. This improvement was
due primarily to improvements in gross profit and the absence of a restructuring
charge in the three months ended March 31, 1999, partially offset as a result of
the change in net foreign currency transaction gains and losses. EBITDA as a
percentage of net sales in the three months ended March 31, 1999 was 17.4% as
compared to 14.9% in the three months ended March 31, 1998.
14
<PAGE> 15
<TABLE>
<CAPTION>
1999 COMPARED TO 1998 RESULTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six Months Ended Six Months Ended Change - Favorable
---------------- ---------------- (Unfavorable)
March 31, Percent of March 31, Percent of -------------
1999 Net Sales 1998 Net Sales Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Net Sales
Safety Products $120,311 85.0 $121,564 85.9 $(1,253) (1.0)
Specialty Composites 21,208 15.0 19,927 14.1 1,281 6.4
-------- ----- -------- ----- -------
Total net sales 141,519 100.0 141,491 100.0 28 0.0
Cost of Sales 77,453 54.7 78,861 55.7 1,408 1.8
-------- ----- -------- ----- -------
Gross profit 64,066 45.3 62,630 44.3 1,436 2.3
Operating Expenses-
Selling and administrative 43,425 30.7 43,312 30.6 (113) (0.3)
Research and technical services 2,244 1.6 2,311 1.6 67 2.9
Amortization of intangibles 3,415 2.4 3,423 2.4 8 0.2
Other charges(income),net 585 0.4 (643) (0.5) (1,228) (191.0)
Restructuring charge -- -- 1,585 1.1 1,585 --
-------- -----
Operating income 14,397 10.2 12,642 8.9 1,755 13.9
Interest expense, net 12,428 8.8 13,262 9.4 834 6.3
-------- ----- -------- ----- ------- ------
Income (loss) before provision
for income taxes 1,969 1.4 (620) (0.4) 2,589 417.6
Provision (benefit) for income
taxes 1,111 0.8 1,316 0.9 205 15.6
-------- ----- -------- ----- -------
Net income (loss) 858 0.6 (1,936) (1.4) 2,794 144.3
Preferred stock dividend accrued 4,412 3.1 3,888 2.7 (524) (13.5)
-------- ----- -------- ----- -------
Loss applicable to common
shareholders $ (3,554) (2.5) $ (5,824) (4.1) $ 2,270 39.0
======== ===== ======== ===== =======
Loss per common share $ (34.70) $ (59.80) $ 25.10 42.0
======== ======== =======
EBITDA $ 22,650 16.0 $ 21,900 15.5 $ 750 3.4
======== ===== ======== ===== =======
</TABLE>
RESULTS OF OPERATIONS -- SIX MONTHS ENDED MARCH 31, 1999 COMPARED TO SIX MONTHS
ENDED MARCH 31, 1998
NET SALES. Net sales remained unchanged at $141.5 million in the six months
ended March 31, 1999 and 1998. Safety Products net sales in the six months ended
March 31, 1999 decreased 1.0% to $120.3 million from $121.6 million in the six
months ended March 31, 1998 as growth in Europe was more than offset by declines
in North America which has been negatively affected by lower levels of
manufacturing employment and increased competitive activity. Specialty
Composites' net sales in the six months ended March 31, 1999 increased 6.4% to
$21.2 million from $19.9 million in the six months ended March 31, 1998. The
increase was primarily driven by new product offerings in the European health
care marketplace as well as strong demand in the trucking, aircraft, and
precision equipment markets.
GROSS PROFIT. Gross Profit in the six months ended March 31, 1999 increased 2.3%
to $64.1 million from $62.6 million in the six months ended March 31, 1998.
Gross Profit as a percentage of net sales in the six months ended March 31, 1999
was 45.3% as compared to 44.3% in the six months ended March 31, 1998. This
improvement in the Gross Profit percentage of net sales is primarily due to
reduced spending and increased productivity in the manufacturing plants.
15
<PAGE> 16
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses in the
six months ended March 31, 1999 increased 0.3% to $43.4 million from $43.3
million in the six months ended March 31, 1998. Spending in selling and
marketing was increased by $1.3 million and spending in the customer service,
distribution and administrative functions decreased by $1.2 million. Selling and
administrative expenses as a percentage of net sales in the six months ended
March 31, 1999 increased to 30.7% of net sales as compared to 30.6% of net sales
in the six months ended March 31, 1998.
RESEARCH AND TECHNICAL SERVICE EXPENSES. Research and technical service expenses
in the six months ended March 31, 1999 decreased 2.9% to $2.2 million from $2.3
million in the six months ended March 31, 1998.
AMORTIZATION OF INTANGIBLES. Amortization expense in the six months ended March
31, 1999 and 1998 was unchanged at $3.4 million.
OTHER CHARGES (INCOME), NET. Other Charges (Income), Net was an expense of $0.6
million for the six months ended March 31, 1999 as compared to income of $0.6
million for the six months ended March 31, 1998. This change was primarily a
result of net foreign currency transaction losses in the six months ended March
31, 1999 as compared to net foreign currency transaction gains in the six months
ended March 31, 1998.
RESTRUCTURING CHARGE. During fiscal 1998 the Company recorded a restructuring
charge related to the restructuring plans announced by the Company during the
fiscal year. In the six months ended March 31, 1998 the Company recorded
restructuring charges of $1.6 million.
OPERATING INCOME. Operating income improved 13.9% to $14.4 million in the six
months ended March 31, 1999 from $12.6 million in the six months ended March 31,
1998. This improvement was due primarily to improvements in gross profit and the
absence of a restructuring charge in the six months ended March 31, 1999,
partially offset as a result of the change in net foreign currency transaction
gains and losses. Operating income as a percentage of net sales in the six
months ended March 31, 1999 was 10.2% as compared to 8.9% in the six months
ended March 31, 1998.
PROVISION FOR INCOME TAXES. The provision for income taxes in the six months
ended March 31, 1999 was $1.1 million compared to $1.3 million in the six months
ended March 31, 1998. The Company's foreign subsidiaries have taxable income in
their foreign jurisdictions, but the domestic subsidiaries have a net operating
loss carryforward for income tax purposes in the U.S. In the results for the six
months ended March 31, 1999 and March 31, 1998 the Company has not recognized
any of the tax benefits which will occur in future periods if there is taxable
income in the U.S.
INTEREST EXPENSE, NET. Interest expense, net in the six months ended March 31,
1999 decreased 6.3% to $12.4 million from $13.3 million in the six months ended
March 31, 1998. The reduction in interest expense was due to a reduction in
average borrowings as well as a reduction in the weighted average interest rates
in effect for the six months ended March 31, 1999 as compared to the six months
ended March 31, 1998.
NET INCOME (LOSS). For the six months ended March 31, 1999 the Company had net
income of $0.9 million as compared to a net loss of $1.9 million for the six
months ended March 31, 1998.
EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation,
amortization, and non-operating income or expense. Non-operating income or
expense is further defined as extraordinary gains or losses, or gains or losses
from sales of assets other than in the ordinary course of business. While the
Company believes EBITDA is a useful indicator of its ability to service debt,
EBITDA should not be considered as a substitute for net income determined in
accordance with generally accepted accounting principles as an indicator of
operating performance or as an alternative to cash flow as a measure of
liquidity. Investors should be aware that EBITDA as presented
16
<PAGE> 17
below may not be comparable to similarly titled measures presented by other
companies and comparisons could be misleading unless all companies and analysts
calculate this measure in the same fashion.
<TABLE>
<CAPTION>
EBITDA CALCULATION
(DOLLARS IN THOUSANDS)
Six Months Ended Change
March 31, Favorable (Unfavorable)
1999 1998 Amount Percent
---- ---- ------ ------
<S> <C> <C> <C> <C>
Operating Income $14,397 $12,642 $ 1,755 13.9%
Add Backs:
Depreciation 4,831 5,873 (1,042) (17.7%)
Amortization of Intangibles 3,415 3,423 (8) (0.2%)
Non-operating costs (income), net (1) 7 (38) 45 118.4%
------- ------- -------
EBITDA $22,650 $21,900 $ 750 3.4%
======= ======= =======
(1) Other Charges (Income), Net Summary:
------------------------------------
Non-operating costs (income), net $ 7 $ (38) $ (45) (118.4%)
Foreign Transaction losses (gains) 578 (605) (1,183) (195.5%)
------- ------- -------
Total Other Charges (Income), Net $ 585 $ (643) $(1,228) (191.0%)
======= ======= =======
</TABLE>
EBITDA for the six months ended March 31, 1999 was $22.7 million as compared to
$21.9 million for the six months ended March 31, 1998. This improvement was due
primarily to improvements in gross profit and the absence of a restructuring
charge in the six months ended March 31, 1999, partially offset as a result of
the change in net foreign currency transaction gains and losses. EBITDA as a
percentage of net sales in the six months ended March 31, 1999 was 16.0% as
compared to 15.5% in the six months ended March 31, 1998.
EFFECTS OF CHANGES IN EXCHANGE RATES
In general, the Company's results of operations are affected by changes in
exchange rates. Subject to market conditions, the Company prices its products in
Europe and Canada in local currency. While many of the Company's selling and
distribution costs are also denominated in these currencies, a large portion of
product costs are U.S. Dollar denominated. As a result, a decline in the value
of the U.S. Dollar relative to other currencies can have a favorable impact on
the profitability of the Company and an increase in the value of the U.S. Dollar
relative to these other currencies can have a negative effect on the
profitability of the Company. As a result of the acquisition of Peltor, the
Company's operations are also affected by changes in exchange rates relative to
the Swedish Krona. A decline in the value of the Krona relative to other
currencies can have a favorable impact on the profitability of the Company and
an increase in the value of the Krona relative to other currencies can have a
negative impact on the profitability of the Company. The Company utilizes
forward foreign currency contracts to mitigate the effects of changes in foreign
currency rates on profitability.
17
<PAGE> 18
EFFECTS OF INFLATION
In recent years, inflation has been modest and has not had a material impact
upon the results of the Company's operations.
YEAR 2000 COMPLIANCE
The "Year 2000 problem" is a flaw existing in many computer hardware and
software programs caused by historical use of dates represented by only two
digits (for example, 98 rather than 1998). This causes computer programs (both
system and application) that perform arithmetic operations, comparisons, or
sorting of data fields to yield incorrect results when working with years
outside the range of 1900-1999. To evaluate the impact of this the Company has
assembled a "Y2K" cross functional team which has assessed the impact of year
2000 compliance with respect to Information Technology (IT) and manufacturing
systems as well as the Company's exposure to significant third party risks.
Accordingly, the Company has initiated and substantially completed a plan to
replace or modify existing systems and technology as required and to assure
itself that major customers and critical vendors are also addressing these
issues.
The Company's recent conversion to a new management information system that has
been in use by a majority of the Company's operating units has brought the
advantage of year 2000 compliance to the bulk of the internal systems that could
potentially otherwise have material adverse impacts on the Company's operations.
The prescription eyewear product line is the remaining operating unit that is
not predominantly operated on the new management information system. The
software for this unit has been modified to include year 2000 compliance and the
implementation activity continues. It is anticipated that this project will be
completed by the end of fiscal 1999. It is also expected that other remaining
conversions will be substantially completed by the end of fiscal 1999, and at
this time a contingency plan is being developed in the event these systems
conversions are not completed on a timely basis. As it relates to internal
E-mail and desktop hardware and software systems, the Company has begun a
desktop update and standardization effort which in addition to providing
efficiency tools to the global organization will also address those remaining
year 2000 compliance issues that may exist in that environment. Including the
remaining conversion and desktop standardization initiatives and the costs of
modifying internal software for the prescription eyewear product line, the cost
to achieve year 2000 compliance is anticipated to be less than $1.0 million.
The Company has contacted its major customers and vendors regarding their
readiness for year 2000 compliance and efforts continue with the evaluations of
any impact that their readiness may have on the Company's systems. However,
there can be no assurance that year 2000 deficiencies in the systems of other
companies on which the Company's systems rely will be timely corrected or that
any such failure by another company to correct its deficiencies would not have
an adverse effect on the Company's systems, business or results of operations.
The Company is continuing its assessment of the remainder of its internal
systems and that of other companies on which the Company's systems rely.
Since the majority of the Company's products are passive in nature and do not
utilize chip technologies, it is not anticipated that product returns could
materially impact the Company.
18
<PAGE> 19
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of funds have consisted primarily of operating cash flow
and debt financing. The Company's uses of those funds consist principally of
debt service, capital expenditures and acquisitions.
The Company's debt structure includes $100.0 million of Senior Subordinated
Notes (Notes) due 2005, as well as a senior bank facility comprised of (i) term
loans denominated in U.S., Canadian, British and German currencies (Term Loans)
and (ii) a revolving credit facility providing for up to $25.0 million
(Revolving Credit Facility), (collectively the Senior Bank Facilities). Under
the terms of both the Senior Bank Facilities and the Notes indenture, Aearo
Company is required to comply with certain financial covenants and restrictions
with which Aearo Company was in compliance at March 31, 1999. At March 31, 1999,
the amounts outstanding on the Term Loans and the Revolving Credit Facility were
approximately $112.0 million and $8.1 million, respectively.
Maturities under the Company's Term Loans are: $6.7 million for the remainder of
fiscal 1999, $15.8 million in fiscal 2000, $20.5 million in fiscal 2001, $33.8
million in fiscal 2002, and $35.2 million in fiscal 2003. Other than upon a
change of control or as a result of certain asset sales, or in the event that
certain excess funds exist at the end of a fiscal year, the Company will not be
required to make any principal payments in respect of the Notes until maturity.
The Company is required to make interest payments with respect to both the
Senior Bank Facilities and the Notes.
The Company's net cash provided by operating activities for the six months ended
March 31, 1999 totaled $8.9 million as compared to $8.5 million for the six
months ended March 31, 1998. The increase was due primarily to the improvement
in net income (loss) which was mostly offset by reduced depreciation and the
Company's net changes in assets and liabilities.
Net cash used by investing activities was $3.7 million for the six months ended
March 31, 1999 as compared to $3.2 million for the six months ended March 31,
1998. The increase in net cash used by investing activities is attributed to a
higher level of capital expenditures in the six months ended March 31, 1999 as
compared to the six months ended March 31, 1998.
Net cash used by financing activities for the three months ended March 31, 1999
was $7.5 million as the Company made scheduled principal repayments on the Term
Loans for $6.2 million, and reduced external long term debt by retiring a higher
interest revenue bond for $1.0 million. Net cash used by financing activities
for the six months ended March 31, 1998 was $5.4 million as the Company made
scheduled principal repayments on the Term Loans for $5.0 million.
The Company has a substantial amount of indebtedness. The Company relies on
internally generated funds, and to the extent necessary, on borrowings under the
Revolving Credit Facility (subject to certain customary drawing conditions) to
meet its liquidity needs. The Company anticipates that operating cash flow will
be adequate to meet its debt service and capital expenditure requirements for
the next several years, although there can be no assurances that existing levels
of sales and normalized profitability, and therefore cash flow, will be
maintained in the future. Levels of sales and profitability may be impacted by
service levels, continued new product development, worldwide economic conditions
and competitive pressures. In particular, the Company expects that sales and
profitability in the second half of fiscal 1999 will be adversely affected by
the strength of the U.S. Dollar relative to the Euro. In addition, the Company
may make additional acquisitions in the future and would rely on internally
generated funds and, to the extent necessary, on borrowings to finance such
acquisitions.
19
<PAGE> 20
PART II
ITEM 1. LEGAL PROCEEDINGS
Various lawsuits and claims arise against the Company in the ordinary course of
its business. Most of these lawsuits and claims relate to the Company's safety
eyewear and respiratory product lines and primarily involve accidents and/or
exposures occurring after the Company's predecessor acquired the AOSafety
Division from American Optical Corporation in April 1990. The Company is
contingently liable with respect to numerous lawsuits involving respirators
manufactured by American Optical Corporation prior to the acquisition of the
AOSafety Division in April 1990. These lawsuits typically involve plaintiffs
alleging that they suffer from asbestosis or silicosis, and that such condition
results in part from respirators which were negligently designed or
manufactured. The defendants in these lawsuits are often numerous, and include,
in addition to respirator manufacturers, employers of the plaintiffs and
manufacturers of sand (used in sand blasting) and asbestos. Responsibility for
legal costs, as well as for settlements and judgments, is shared contractually
by the Company, American Optical Corporation and a prior owner of American
Optical Corporation. The Company and Cabot have entered into an arrangement
relating to certain respirator claims asserted after July 11, 1995 (the date of
the Company's formation) whereby, so long as the Company pays to Cabot an annual
fee of $400,000, which the Company has elected to pay, Cabot will retain
responsibility and liability for, and indemnify the Company against, certain
legal claims alleged to arise out of the use of respirators manufactured prior
to July 1995. The Company has the right to discontinue the payment of such
annual fee at any time, in which case the Company will assume responsibility for
and indemnify Cabot with respect to such claims.
ITEM 2. CHANGES IN SECURITIES
Effective February 1, 1999, the Company sold 250 shares of its common stock to
Bryan Marsal, a Director, at a purchase price per share of $200. The issuance
of the shares was made pursuant to the Company's 1995 Employee Stock Purchase
Plan and was exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), by virtue of Section 4(2) of the Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27.1 -- Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
20
<PAGE> 21
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 6, 1999 AEARO CORPORATION
/s/ Bryan J. Carey
---------------------------------------------
Bryan J. Carey
Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
21
<PAGE> 22
EXHIBIT INDEX
EXHIBITS DESCRIPTION
- -------- -----------
27.1* -- Financial Data Schedule.
*Filed herewith.
22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED BALANCE SHEETS OF AEARO CORPORATION AS OF
MARCH 31, 1999 (UNAUDITED) AND SEPTEMBER 30, 1998 AND THE CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 1998 CONTAINED IN AEARO CORPORATION'S 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 3,891
<SECURITIES> 0
<RECEIVABLES> 41,531
<ALLOWANCES> 0
<INVENTORY> 29,762
<CURRENT-ASSETS> 79,561
<PP&E> 88,481
<DEPRECIATION> 32,640
<TOTAL-ASSETS> 272,005
<CURRENT-LIABILITIES> 55,708
<BONDS> 209,075
0
0
<COMMON> 1
<OTHER-SE> 3,666
<TOTAL-LIABILITY-AND-EQUITY> 272,005
<SALES> 141,519
<TOTAL-REVENUES> 141,519
<CGS> 77,453
<TOTAL-COSTS> 77,453
<OTHER-EXPENSES> 49,669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,428
<INCOME-PRETAX> 1,969
<INCOME-TAX> 1,111
<INCOME-CONTINUING> 858
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 858
<EPS-PRIMARY> (34.70)
<EPS-DILUTED> (34.70)
</TABLE>
