QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended: July 29, 2001
For the quarterly period ended: February 3, 2002
OR
/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0333-~~19330~~75869

SPECIAL DEVICES, INCORPORATED
(Exact name of Registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

95-3008754

(I.R.S. Employer Identification No.)

	14370 White Sage Road, Moorpark, California 93021 (Address of principal executive offices)
	(805) 553-1200 (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~~ 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~~ the past 90 days. Yes ~~/x/~~ ý No ~~/ /~~o

At ~~September~~March 1112, ~~2001~~2002, the total number of outstanding shares of the Registrant's common stock was 3,712,764.

SPECIAL DEVICES, INCORPORATED
INDEX TO QUARTERLY REPORT ON FORM 10-Q

			PAGE
PART I—FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	(a)	Consolidated Balance Sheets: ~~July~~February 293, ~~2001~~2002 and October 31, ~~2000~~2001	3
	(b)	Consolidated Statements of Operations: For the ~~three~~Three ~~and~~Months ~~nine~~Ended ~~months~~February ~~ended July 29~~3, ~~2001~~2002 and ~~July~~January 3028, ~~2000~~2001	4
	(c)	Consolidated Statements of Cash Flows: For the ~~nine~~Three ~~months~~Months ~~ended~~Ended ~~July~~February 293, ~~2001~~2002 and ~~July~~January 3028, ~~2000~~2001	5
	(d)	Notes to the Consolidated Financial Statements	6
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		11
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		14
PART II—OTHER INFORMATION
ITEM 1.	Legal Proceedings		14
ITEM 6.	Exhibits and Reports on Form 8-K		15
Signatures			19

SPECIAL DEVICES, INCORPORATED AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)

			July 29, 2001			October 31, 2000
			February 3, 2002			October 31, 2001
ASSETS
Current assets:
	Cash		$	~~11,713~~154		$	~~596~~1,341
	Accounts receivable, net of allowances of $1,008 at July 29, 2001 and $393 at October 31, 2000			12,261			17,346
	Accounts receivable, net of allowances of $672 at February 3, 2002 and $642 at October 31, 2001			11,506			12,745
	Inventories			98,~~333~~499			1110,~~730~~600
	Deferred tax assets			32,~~011~~562			2,~~411~~562
	Prepaid expenses and other current assets			74,~~534~~291			36,~~890~~151
		Total current assets		4327,~~852~~012			3533,~~973~~399
Property, plant and equipment, at cost
	Land			—			3,723
	Machinery and equipment			80,781			80,770
	Building and improvements			—			36,544
	Construction in progress			4,873			2,903
	Other			885,~~082~~475			905,~~418~~474
		Gross property, plant and equipment		8891,~~082~~129			~~130~~89,~~685~~147
		Less accumulated depreciation and amortization		(5156,~~518~~300	)		(4953,~~612~~945	)
		Net property, plant and equipment		3634,~~564~~829			8135,~~073~~202
Other assets, net of accumulated amortization				67,~~820~~497			87,~~109~~159
Notes receivable				4,~~513~~497			—4,505
Net assets of discontinued operations				—			12,688
Total assets			$	73,835		$	80,265
Total assets			$	91,749		$	137,843
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
	Accounts payable		$	109,~~610~~595		$	169,~~553~~188
	Other current liabilities			17,736			24,772
	Income taxes payable			1,437			2,316
	Revolving line of credit			—			4,400
	Accrued interest			1,108			4,309
	Current portion of long-term debt			750			5,157
	Accrued bonus			282			2,074
		Total current liabilities		29,096			50,882
	Other current liabilities			7,174			8,466
Deferred income taxes				5,232			5,232
	Revolving line of credit			2,347			—
Long-term debt, net of current portion				89,680			125,618
	Current portion of long-term debt			1,000			1,000
		Total liabilities		124,008			181,732
		Total current liabilities		22,943			27,353
Commitments and contingencies (Note 9)
Deferred income taxes				2,869			2,869
Redeemable preferred stock				4,000			—
Long-term debt, net of current portion				77,094			78,430
Redeemable common stock				32,875			30,625
		Total liabilities		102,906			108,652
Commitments and contingencies (Note 7)
Redeemable preferred stock				4,000			4,000
Redeemable common stock				34,375			33,625
Stockholders' equity (deficit):
	Preferred stock, $.01 par value; 2,000,000 shares authorized; 4,000 and 0 shares issued and outstanding at July 29, 2001 and October 31, 2000, respectively			—			—
	Preferred stock, $.01 par value; 2,000,000 shares authorized; 4,000 shares issued and outstanding at February 3, 2002 and October 31, 2001			—			—
	Common stock, $.01 par value; 20,000,000 shares authorized; 3,712,764 shares issued and outstanding at July 29, 2001 and October 31, 2000			30			30
	Common stock, $.01 par value; 20,000,000 shares authorized; 3,712,764 shares issued and outstanding at February 3, 2002 and October 31, 2001			30			30
	Additional paid-in capital			6766,~~852~~352			7067,102
	Retained earnings (deficit)			(~~137~~133,~~016~~828	)		(~~144~~133,~~646~~144	)
		Total stockholders' equity (deficit)		(6967,~~134~~446	)		(7466,~~514~~012	)
Total liabilities and stockholders' equity (deficit)			$	9173,~~749~~835		$	~~137~~80,~~843~~265

See accompanying notes to consolidated financial statements.

SPECIAL DEVICES, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
(Unaudited)

			Three Months Ended						~~Nine Months Ended~~
			July 29, 2001			July 30, 2000			July 29, 2001			July 30, 2000
			February 3, 2002			January 28, 2001
Net sales			$	2827,~~428~~565		$	3230,~~356~~181		$	~~91,873~~		$	~~99,287~~
Cost of sales				2622,~~790~~749			2825,~~803~~827			~~80,363~~			~~86,481~~
		Gross profit		14,~~638~~816			34,~~553~~354			~~11,510~~			~~12,806~~
Operating expenses				4,~~788~~675			3,~~506~~374			~~11,911~~			~~9,944~~
Environmental and other investigation costs				552			—			1,552			—
		Income from operations		141			980
		Total operating expenses		5,340			3,506			13,463			9,944
Interest expense, net				(2,218	)		(3,478	)
		Income (loss) from operations		(3,702	)		47			(1,953	)		2,862
		Loss from continuing operations before extraordinary gain and income taxes		(2,077	)		(2,498	)
Other expense:
Income tax benefit				(831	)		(999	)
	Interest expense, net			(2,985	)		(4,095	)		(10,374	)		(12,766	)
		Loss from continuing operations before extraordinary gain		(1,246	)		(1,499	)
	Loss on disposal of assets			(5,047	)		(138	)		(6,258	)		(72	)
Discontinued operations:
		Total other expense		(8,032	)		(4,233	)		(16,632	)		(12,838	)
	Income from discontinued operations, net of taxes of $380			—			570
		Loss from continuing operations before extraordinary gain and income taxes		(11,734	)		(4,186	)		(18,585	)		(9,976	)
	Gain on sale of discontinued operations, net of taxes of $28			41			—
Income tax benefit				(4,294	)		(1,703	)		(7,034	)		(4,027	)
		Loss before extraordinary gain		(1,205	)		(929	)
		Loss from continuing operations before extraordinary gain		(7,440	)		(2,483	)		(11,551	)		(5,949	)
Extraordinary gain on extinguishment of debt, net of taxes of $0				521			—
Discontinued operations:
	Net loss		$	(684	)	$	(929	)
	Income from discontinued operations, net of taxes of $23, $961, $745 and $2,122, respectively			35			1,402			1,118			3,134
	Gain on sale of discontinued operations, net of taxes of $10,158			15,237			—			15,237			—
Extraordinary gain on extinguishment of debt, net of taxes of $1,884				2,826			—			2,826			—
		Net income (loss)	$	10,658		$	(1,081	)	$	7,630		$	(2,815	)

See accompanying notes to consolidated financial statements.

SPECIAL DEVICES, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

			Nine Months Ended
			Three Months Ended
			July 29, 2001			July 30, 2000
			February 3, 2002			January 28, 2001
Cash Flows From Operating Activities:
	Net income (loss)		$	7,630		$	(2,815	)
	Net loss		$	(684	)	$	(929	)
	Extraordinary gain on extinguishment of debt			(~~2,826~~521	)		—
	Income from discontinued operations			~~(1,118~~—	)		(~~3,134~~570	)
	Gain on sale of discontinued operations			(~~15,237~~41	)		—
	Loss from continuing operations			(111,~~551~~246	)		(51,~~949~~499	)
Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities:
Adjustments to reconcile loss from continuing operations to net cash used in operating activities:
		Depreciation and amortization		92,~~685~~545			103,~~876~~192
		Loss on disposal of assets		6,258			72
		Deferred income taxes		—			(600	)
		Deferred income taxes		(600	)		1,975
	Changes in assets and liabilities:
		Accounts receivable and other assets		12,~~155~~506			(~~778~~722	)
		Inventories		2,~~397~~101			~~(4,658~~96	)
		Accounts payable and other liabilities		(95,~~800~~878	)		(13,~~373~~214	)
		Income taxes payable		~~3,270~~(907	)		—(999	)
		Other		749			—
		Net cash used in continuing operations		(879	)		(3,746	)
		Net cash provided by continuing operations		1,563			165
		Net cash provided by (used in) discontinued operations		69			(7,721	)
		Net cash provided by (used in) discontinued operations		(21,891	)		1,478
		Net cash used in operating activities		(810	)		(11,467	)
		Net cash provided by (used in) operating activities		(20,328	)		1,643
Cash Flows From Investing Activities:
		Purchases of property, plant and equipment		(41,~~302~~982	)		(~~10,423~~792	)
		Proceeds from real estate transaction		27,043			—
		Proceeds on sale of discontinued operations		69			—
		Proceeds on sale of discontinued operations		42,830			—
		Other		(18	)		—
		Other		(547	)		(77	)
		Net cash used in investing activities		(1,931	)		(792	)
		Net cash provided by (used in) investing activities		65,024			(10,500	)
Cash Flows From Financing Activities:
		Net payments (borrowings) under revolving line of credit		(4,400	)		10,000
		Net borrowings under revolving line of credit		2,347			14,700
		Repayment of long-term debt		(~~30,775~~500	)		(~~350~~78	)
		Repurchase of senior subordinated notes		(~~7,404~~293	)		—
		Proceeds from term loan		5,000			—
		Net cash provided by financing activities		1,554			14,622
		Proceeds from issuance of redeemable preferred stock		4,000			—
Net increase (decrease) in cash				(1,187	)		2,363
		Other		—			288
Cash at beginning of year				1,341			596
		Net cash provided by (used in) financing activities		(33,579	)		9,938
Cash at end of period			$	154		$	2,959
Net increase in cash				11,117			1,081
Cash at beginning of year				596			448
Cash at end of period			$	11,713		$	1,529
Supplemental disclosure of cash flow information:
	Cash paid during the period for:
		Interest	$	144,~~820~~420		$	166,~~118~~839
		Income taxes	$	~~10,851~~77		$	—9,130
	Noncash investing and financing activities:
		Notes receivable from disposals of assets	$	4,550		$	—

See accompanying notes to consolidated financial statements.

SPECIAL DEVICES, INCORPORATED AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Unaudited)

1. Company Operations

Special Devices, Incorporated, a Delaware corporation (the "Company" or "SDI"), is a leading designer and manufacturer of highly reliable precision engineered pyrotechnic devices. These devices are used predominantly in vehicle airbag and other automotive safety systems. The Company's primary products are initiators, which function like an "electrical match" to ignite the gas generating charge in an automotive airbag system. We believe ~~that~~we ~~the~~are ~~Automotive Products Division is~~ the world's largest independent supplier of initiators sold to leading domestic and foreign automotive airbag system manufacturers. Those manufacturers use SDI's product in the assembly of integrated airbag safety systems, which they then sell to automobile original equipment manufacturers.

~~The~~On ~~divestiture~~December 15, of1998, the ~~Aerospace~~Company ~~Division,~~consummated ~~which~~a ~~included~~series ~~Scot,~~of ~~Incorporated~~transactions accounted for as a recapitalization (the "~~Scot~~Recapitalization"), ~~was~~whereby ~~completed~~affiliates ~~in a series~~ of ~~transactions~~J.F. inLehman ~~2000~~ and ~~2001~~Company ("J.F. AsLehman") ~~previously~~obtained ~~disclosed,~~a ~~Scot~~controlling ~~was divested~~interest onin ~~September 21,~~the ~~2000~~Company. ~~The~~As ~~net~~a ~~assets~~result of the ~~remaining~~Recapitalization ~~operations~~the ofCompany ~~the~~delisted ~~Aerospace~~its ~~Division~~Common ~~were~~Stock ~~sold~~from onthe ~~May 11~~NASDAQ Stock Market, ~~2001~~and accordingly filed for deregistration with the Securities and Exchange Commission (the "~~Aerospace Sale~~SEC"). ~~See~~The ~~Note 10~~Company continues to file reports with the SEC puruant to the terms governing the Senior Subordinated Notes.

In connection with the Recapitalization all shares of the Company's Common Stock, other than those retained by certain members of management and certain other stockholders (the "Continuing Stockholders"), were converted into the right to receive $34 per share in cash. At the time of the Recapitalization, the Continuing Stockholders retained approximately 41.3% of the common equity of the Company while new investors acquired the balance of the equity interests in the Company. At February 3, 2002, the Continuing Stockholders own approximately 29.5% of the common equity of the Company.

The principal executive offices of the Company are located at 14370 White Sage Road, Moorpark, California 93021 and its telephone number is (805) 553-1200.

2. Interim Financial Statements

The accompanying unaudited consolidated condensed financial statements of the Company include all adjustments (consisting of normal recurring entries) which management believes are necessary for a fair statement of the financial position and results of operations for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted. It is recommended that the accompanying consolidated condensed financial statements be read in conjunction with the Company's audited financial statements and footnotes as of and for the year ended October 31, ~~2000~~2001. Operating results for the ~~nine~~three-month period ended ~~July~~February 293, ~~2001~~2002 are not necessarily indicative of the operating results for the full year. Certain prior year amounts have been reclassified to conform with the current year presentation.

3. ~~Recent~~ ~~Accounting~~Discontinued ~~Pronouncements~~Operations

InThe ~~December 1999,~~divestiture of the ~~Securities~~Aerospace ~~and~~Division, ~~Exchange~~which ~~Commission~~included (the Company's subsidiary, Scot, Incorporated ("~~SEC~~Scot") ~~issued~~was ~~Staff~~completed ~~Accounting~~in ~~Bulletin~~a ~~No. 101~~series ~~("SAB~~of ~~101"),~~transactions ~~"Revenue~~in ~~Recognition~~2000 inand ~~Financial~~2001. ~~Statements"~~As previously disclosed, ~~which~~Scot ~~provides~~was ~~guidance~~divested on ~~the recognition~~September 21, ~~presentation,~~2000 and ~~disclosure~~the net assets of ~~revenue~~the inremaining ~~financial~~Aerospace ~~statements~~operations ~~filed~~were ~~with~~sold ~~the~~on ~~SEC.~~May 11, ~~The~~2001 ~~Company~~(the ~~will~~"Aerospace ~~adopt~~Sale"). ~~SAB~~The results ~~101~~of inoperations and the ~~fourth quarter~~net assets of ~~2001~~the ~~and~~Aerospace ~~does~~Segment ~~not~~have ~~expect~~been ~~such~~reclassified ~~adoption~~ to ~~have~~Discontinued aOperations. ~~material~~Accounting ~~impact~~for ondiscontinued ~~either~~operations ~~the~~according ~~financial~~to ~~position~~GAAP orinvolves ~~results~~identifying charges ofsuch ~~operations~~as ofcorporate ~~the~~allocations ~~Company.~~that were originally

becharged ~~amortized~~ to ~~earnings,~~Aerospace operations but ~~instead~~that ~~tested~~would ~~for~~be ~~impairment at least annually~~continuing. ~~SFAS 143~~Those ~~requires~~continuing ~~that~~charges ~~the~~are ~~fair~~then ~~value~~reallocated ofback ato ~~liability for an asset retirement obligation be recognized in~~ the ~~period~~ inremaining ~~which~~operations ~~it is incurred if a reasonable estimate~~ of ~~fair value can be made, that~~ the ~~associated~~Automotive ~~asset~~Products ~~retirement~~Division. ~~costs~~In beaddition, ~~capitalized~~interest expense aswas ~~part~~reallocated ofto the ~~carrying~~Aerospace ~~amount~~Segment ofbased ~~the~~on ~~asset~~its ~~and~~total ~~requires certain~~assets. ~~disclosures~~This ~~providing~~reallocation ~~descriptions~~ of ~~the~~corporate ~~asset~~charges ~~retirement obligations~~ and ~~reconciliations~~interest ofhas ~~changes~~been indone ~~components of those obligations. Except~~ for ~~business~~all ~~combinations~~prior ~~initiated~~periods ~~after June 30,~~presented. ~~2001,~~As ~~the~~a ~~Company~~result isof ~~required to adopt~~ the reallocations ~~provisions of SFAS No. 141, SFAS No. 142~~ and ~~SFAS~~reclassifications ~~No. 143~~to ondiscontinued ~~November 1~~operations, ~~2002.~~certain ~~The~~amounts ~~Company~~in ~~does not expect~~ the ~~adoption~~ ofConsolidated ~~SFAS 141,~~Financial ~~SFAS 142~~Statements orand ~~SFAS 143~~Notes tothereto have abeen ~~material~~revised ~~impact~~from on the ~~Company's~~amounts ~~results~~presented ofin ~~operations~~prior ~~or financial position~~years.

Net sales of the Aerospace Division were $0 and $4. ~~Inventories~~ 4 million for the three months ended February 3, 2002 and January 28, 2001, respectively.

~~Inventories~~4. ~~consist~~Recent ofAccounting ~~the following components:~~ Pronouncements

	July 29, 2001		October 31, 2000
	(In thousands)
Raw materials and components	$	3,577	$	7,241
Work in process		1,384		1,121
Finished goods		4,372		3,368
Total inventories	$	9,333	$	11,730

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", SFAS No. 142, "Goodwill and Intangible Assets", and SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations, establishes specific criteria for recognizing intangible assets separately from goodwill and requires certain disclosures regarding reasons for a business combination and the allocation of the purchase price paid. SFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for using the purchase accounting method for which the date of acquisition is after June 30, 2001. SFAS No. 142 establishes that goodwill and certain intangible assets will no longer be amortized to earnings, but instead tested for impairment at least annually. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, that the associated asset retirement costs be capitalized as part of the carrying amount of the asset and requires certain disclosures providing descriptions of the asset retirement obligations and reconciliations of changes in components of those obligations. Except for business combinations initiated after June 30, 2001, we are required to adopt the provisions of SFAS No.s 141, 142 and 143 on November 1, 2002. We do not expect the adoption of these statements to have a material impact on our results of operations or financial position.

~~Inventory~~In ~~amounts~~August 2001, ~~relating~~the toFASB issued SFAS No. 144, "Accounting for the ~~Aerospace~~Impairment ~~Division~~or ~~were~~Disposal ~~reclassified~~of Long-Lived Assets." This statement supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"~~Net~~ ~~assets~~issued in June 1995 and the accounting and reporting provisions of ~~discontinued~~APB Opinion ~~operations~~No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 establishes accounting standards for the impairment of long-lived assets, excluding goodwill, and for long-lived assets to be disposed of. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the ~~Consolidated~~carrying ~~Balance~~amount ~~Sheet~~of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at ~~October~~the lower of the carrying amount or fair value less costs to sell. The statement retains the basic provisions of APB Opinion No. ~~31,~~30 ~~2000~~for the presentation of discontinued operations in the statement of operations but broadens that presentation to include a component of an entity (rather than a segment of a business). The Company

5. Debt

In June 2001, the Company repaid its existing senior term loan and revolving credit facility (the "Prior Credit Facility") with the proceeds of the Aerospace Sale and the Real Estate Transaction and terminated its credit agreement with a syndicate of banks. The Company entered into a new credit facility (the "New Credit Facility") in June 2001 which consists of a $25.0 million five-year Revolving Credit Facility (the "New Revolver") and a $5.0 million five-year Term Loan (the "New Term Loan"). Available borrowings under the New Revolver are based on a formula comprised of accounts receivable and inventory.

The New Revolver and the New Term Loan bear interest at the Bank's Base Rate or the LIBOR Rate plus applicable margins. The Company has the option of electing the LIBOR Rate on all or a portion of the amount outstanding under the New Credit Facility prior to the start of each quarterly interest period. The New Term Loan had an effective rate of 7.25% per annum at July 29, 2001. At July 29, 2001, no amount was outstanding under the New Revolver. Letters of credit outstanding under the New Revolver reduce the amount of borrowings available. The Company had $4.0 million in letters of credit outstanding at July 29, 2001. The total amount available under the New Revolver at July 29, 2001 was $8.8 million subject to compliance with certain financial and operating covenants which the Company must meet on a quarterly basis.

Substantially all of the Company's assets are pledged as collateral under the New Credit Facility.

In July 2001, the Company purchased $14.6 million face value of its Senior Subordinated Notes (the "Notes") in the open market for $7.4 million. At July 29, 2001, the Company had $85.4 million of Notes outstanding. The Notes are due in December 2008, and bear interest at 113/8% per annum. Subsequent to July 29, 2001, the Company purchased another $11.0 million face value of Notes at a

~~cost~~is ofrequired ~~$6.0 million.~~to ~~Interest~~adopt isthe ~~payable~~provisions ~~semi-annually~~of inSFAS ~~June and December~~No. 144 ~~The~~on ~~Notes~~November 1, ~~are~~2002 ~~noncollateralized~~and ~~obligations~~does ofnot expect the ~~Company~~adoption ~~and~~to ~~are~~have ~~subordinated~~a tomaterial ~~its~~impact ~~obligations under~~on the ~~New~~Company's ~~Credit~~results ~~Facility~~of operations or financial position.

5. Inventories

Inventories consist of the following components:

	February 3, 2002		October 31, 2001
	(In thousands)
Raw materials and components	$	3,541	$	3,770
Work in process		1,365		888
Finished goods		3,593		5,942

Total inventories	$	8,499	$	10,600

6. Debt

The Company entered into a new credit facility (the "Credit Facility") in June 2001 which consists of a $25.0 million five-year Revolving Credit Facility (the "Revolver") and a $5.0 million five-year Term Loan (the "Term Loan"). Available borrowings under the Revolver are based on a formula comprised of eligible accounts receivable and inventory.

The Revolver and the Term Loan bear interest at the Bank's Base Rate or the LIBOR Rate plus applicable margins. The Company has the option of electing the LIBOR Rate on all or a portion of the amount outstanding under the Credit Facility prior to the start of each quarterly interest period. The Term Loan had a balance of $4.5 million and an effective interest rate of 5.25% per annum at February 3, 2002. At February 3, 2002, $2.3 million was outstanding under the Revolver with an effective interest rate of 5.00% per annum. Letters of credit outstanding under the Revolver reduce the amount of borrowings available. The Company had $4.0 million in letters of credit outstanding at February 3, 2002. The total amount available under the Revolver at February 3, 2002 was $6.4 million subject to compliance with certain financial and operating covenants which the Company must meet on a quarterly basis. The Company was in compliance with these covenants as of February 3, 2002. Substantially all of the Company's assets are pledged as collateral under the Credit Facility.

In November 2001, the Company purchased $0.8 million face value of its Senior Subordinated Notes (the "Notes") in the open market for $0.3 million resulting in an extraordinary gain of $0.5 million. At February 3, 2002, the Company had $73.6 million of Notes outstanding. The Notes are due in December 2008, and bear interest at 11³/8% per annum. Interest is payable semi-annually in June and December. The Notes are noncollateralized obligations of the Company and are subordinated to its obligations under the Credit Facility.

The fair value and carrying amount of long-term debt, including short-term borrowings, are as follows:

	July 29, 2001		October 31, 2000
	February 3, 2002		October 31, 2001
	(In thousands)
Fair value	$	4843,~~569~~644	$	5534,~~175~~772
Carrying amount	$	9080,~~430~~441	$	~~135~~79,~~175~~430

The Company's borrowings under the New Term Loan and the New Revolver have variable rates that reflect currently available terms and conditions for similar debt. The carrying amount of the New Term Loan and New Revolver is a reasonable estimate of its fair value. The Notes are traded occasionally in public markets.

6. Redeemable Preferred Stock

The Company issued 4,000 shares of Series A Cumulative Convertible Preferred Stock ("Preferred Stock") to participating stockholders on February 28, 2001 for a total consideration of $4.0 million.

The Preferred Stock is redeemable at the option of the Company at any time at a stated liquidation value of one thousand dollars per share (the "Stated Liquidation Value") plus accrued dividends (the "Liquidation Preference"). Holders of the Preferred Stock have the option to require the Company to redeem their shares at the Liquidation Preference upon a change in control as defined. The Preferred Stock has therefore been recorded as Redeemable Preferred Stock.

The Preferred Stock is convertible into the Company's Common Stock upon the occurrence of certain triggering events as defined, which includes the fifth anniversary of the issuance of the Preferred Stock. Each share of Preferred Stock is convertible into the number of shares of Common Stock which results from dividing the Stated Liquidation Value by the conversion price (the "Conversion Price"). The Conversion Price is $5.00 per share and is subject to antidilutive adjustments.

7. Redeemable Common Stock

Some of the outstanding shares of Common Stock held by certain stockholders, are subject to the right, under certain conditions, to require the Company to purchase all or a portion of these shares at a price per share based on a formula. Accordingly, these 735,294 shares have been recorded as redeemable common stock. Annual accretion on the redeemable common stock is $3.0 million.

8. Stockholders' Equity

The Company issued warrant certificates in June 2001 for 135,382 warrants in connection with the Real Estate Transaction. The warrant certificates expire in June 2021 and entitle the holders to purchase one share of Common Stock, par value of $.01, for each warrant at an exercise price of $34.00 per share.

9The Company's borrowings under the Term Loan and the Revolver have variable rates that reflect currently available terms and conditions for similar debt. ~~Commitments~~ The carrying amount of the Term Loan and ~~Contingencies~~ Revolver is a reasonable estimate of its fair value. The Notes are traded occasionally in public markets.

~~OSHA Investigations~~7. On ~~April 24,~~Commitments 2000, an accidental initiation incident occurred at the premises leased by the Company from McCormick Selph, Inc. ("MSI") in Hollister, California for the Company's microgas generator ("MGG") production line, which it acquired from MSI in July 1999. The incident resulted in the death of one of the Company's employees and injury to another. Prior to the April 24, 2000 incident, the Company had intended to move its MGG operations in Hollister to its Mesa, Arizona facility. Following the incident, the Company moved its MGG production to Mesa and ceased operations at the Hollister facility. The State of California, Department of Industrial Relations, Division of Occupational Safety and Health ("Cal-OSHA") conducted a post-incident and process safety management inspection, which resulted in the issuance on October 20, 2000 of administrative citations for alleged safety violations and proposed fines aggregating approximately $250,000. The Company appealed the citations and the appeal is pending. The District Attorney's Office for San Benito County filed a complaint on April 23, 2001 charging the Company with two misdemeanors and two felonies. On May 8, 2001, SDI entered into a civil and criminal settlement agreement pursuant to which the pending case was resolved for a total of $1.0 million which was accrued during the quarter ended April 29, 2001. Under the agreement, SDI entered a nolo contendere plea to the two misdemeanor violations, and will pay a $30,000 criminal fine and a $970,000 civil settlement. The $970,000 civil settlement will be offset by: (1) payments of up to $200,000 to resolve the Cal-OSHA administrative citations; (2) payments of up to $200,000 made to victims of the accident and their families; and (3) payments of up to $20,000 for the State's investigation costs. Further proceedings on the two felony counts are stayed for two years and will be dismissed upon SDI's completion of a two-year term of probation. Contingencies

~~A separate Cal-~~OSHA ~~investigation is also pending~~Investigations. On September 1, 2000, an accidental initiation incident occurred at the Company's Moorpark facility and two employees were injured. The State of California, Department of Industrial Relations, Division of Occupational Safety and Health ("Cal-OSHA") conducted a post-incident and process safety management inspection, which resulted in the issuance in ~~late~~ February 2001 of citations for alleged safety violations and proposed fines aggregating approximately $168,000. The Company has appealed the citations and the appeal is pending. Because the accident resulted in a serious injury, the Cal-OSHA's Bureau of Investigation ("BOI") conducted ~~is conducting~~ its own investigation to determine whether to refer the matter to the District Attorney's Office for Ventura County. ~~Given~~ ~~the~~The ~~limited~~Company ~~information~~believes ~~available~~that ~~regarding~~this ~~the~~investigation ~~BOI's~~has ~~inquiry,~~concluded itand isno referral ~~impossible~~has tobeen ~~predict or assess the likelihood of an unfavorable outcome~~made. At this stage, it is not possible to predict or assess the amount of potential liabilities associated with ~~this~~the ~~pending~~BOI ~~Cal-OSHA~~investigation ~~matter,~~ which could result in ~~civil and/or~~ criminal liabilities and penalties.

~~Other~~Qui ~~Litigation~~Tam Suit. The Company is a defendant in ~~various~~a ~~other~~civil ~~pending~~action ~~claims~~entitled ~~and~~United ~~lawsuits~~States ex rel. InCharles K Holder v. Special Devices, Incorporatedpending in the ~~opinion~~U.S. ofDistrict Court for the Central District of California. The action, filed under seal in August 1999 and first served on the Company's ~~management~~in December 2001 is a qui tam lawsuit in which a former employee of the Company is seeking, ~~after~~on ~~consultation~~behalf ~~with~~of ~~counsel~~the United States, an ~~disposition~~unspecified amount of ~~such~~money ~~matters~~damages isand ~~not~~civil ~~expected~~penalties tounder ~~have~~the afederal ~~material~~False ~~adverse~~Claims ~~effect~~Act. ~~upon~~The complaint alleges that the Company's, ~~results~~when ofsubmitting ~~operations,~~invoices ~~financial~~under ~~position~~unspecified orgovernment contracts ~~liquidity~~prior to August 1999, falsely certified that it was in compliance with environmental laws. The Company is investigating the allegations and intends to vigorously defend the action.

10CharTech Suit. ~~Aerospace~~ ~~Sale~~ A lawsuit alleging that the Company willfully infringes two patents held by CharTech Engineering, Inc. ("CharTech") was filed on July 14, 2000, in the U.S. District Court for the Central District of California. The suit seeks unspecified monetary damages and an injunction against the Company's alleged practice of the technology claimed in these patents. The patents at issue relate to the use of a "getter" material in connection with leak-testing hermetically sealed devices. CharTech's suit claims that initiators produced by the Company infringe these patents. The Company answered the complaint, asserted counterclaims against CharTech, and filed a third party complaint against CharTech, its related company IsoVac Engineering, Inc. ("IsoVac") and George Neff, a principal in both companies. If the Company is found liable for patent infringement, it could be liable for monetary damages, which could be increased up to three times if willful infringement is also found to exist. In addition, if the Company is found liable for patent infringement, the Company could be enjoined from producing the subject initiators. The Company believes that it has meritorious defenses in this action that could serve to avoid liability or limit the damages that might be due if liability were found. The Company believes that its counterclaims and third party claims are also meritorious and may lead to a monetary recovery by the Company. A trial date has not yet been set and a previously scheduled pre-trial conference was taken off the calendar.

~~The Aerospace Division~~Recently, ~~which included Scot, Incorporated, comprised our Aerospace segment (~~ the ~~"Aerospace~~court ~~Segment").~~granted Asa ~~previously~~stay ~~disclosed,~~of ~~the~~most ~~Company divested~~claims ~~Scot on September 21, 2000 and on May 11, 2001, the Company completed the sale~~ of the ~~net~~lawsuit ~~assets~~pending ~~comprising~~ the ~~remaining~~court's ~~operations~~consideration of ~~the~~CharTech's ~~Aerospace~~motion ~~Division.~~to ~~Proceeds~~bifurcate ~~from~~ the ~~sale~~ ~~were~~Company's ~~used~~indemnification toclaim, ~~pay~~and ~~senior~~to ~~indebtedness~~stay ~~under~~ the rest ~~Prior Credit Facility. A related party received a transaction fee~~ of ~~$0.5 million and expense reimbursements as advisors to~~ the ~~transaction.~~lawsuit

~~The~~until ~~disposal of~~ the ~~Aerospace~~indemnification ~~Segment~~claim has been ~~accounted for as discontinued operations ("Discontinued Operations")~~decided. ~~The~~A ~~divestiture~~court-ordered ofsettlement ~~Scot~~mediation ~~was~~conference ~~originally~~is ~~accounted~~also scheduled for aslater ain ~~sale of a subsidiary since it was only a part of the Company's Aerospace operations~~March 2002. ~~Due to the sale of the remainder of the Aerospace operations, the Company reclassified the Scot transaction and the results of Scot's operations to Discontinued Operations.~~

Other Litigation. The ~~following~~ ~~are~~Company ~~the~~is ~~assets~~a defendant in various other pending claims and ~~liabilities~~lawsuits. ofIn the ~~Aerospace~~opinion ~~Segment~~of ~~shown~~the ~~net~~Company's management, asafter ~~"Net~~consultation ~~assets~~with counsel, disposition of ~~discontinued~~such ~~operations"~~matters inis not expected to have a material adverse effect upon the Company's ~~Consolidated~~results ~~Balance~~of ~~Sheet at October 31~~operations, ~~2000:~~financial position or liquidity.

		October 31, 2000
Accounts receivable		$	4,343
Inventories			8,748
Net property, plant and equipment			1,558
Other assets			33
	Total assets		14,682
Accounts payable			(1,740	)
Accrued liabilities			(254	)
	Total liabilities		(1,994	)
	Net assets of discontinued operations	$	12,688

Net sales of the Aerospace Division were $0.3 million and $10.2 million for the three months ended July 29, 2001 and July 30, 2000, respectively. Net sales of the Aerospace Division were $11.4 million and $29.7 million for the nine months ended July 29, 2001 and July 30, 2000, respectively.

11. Real Estate Transaction

On June 5, 2001, the Company completed the sale and leaseback of its facilities in Moorpark, California and Mesa, Arizona to Autosafe Airbag 14(CA) LP and Autosafe Airbag 12(CA) LP for cash and notes receivable. The transaction resulted in a loss of $4.8 million that was recorded in the three months ended July 29, 2001. Net cash proceeds were $27.0 million which were used to pay senior indebtedness under the Prior Credit Facility with the balance used for general corporate purposes. A related party received a transaction fee of $1.0 million and expense reimbursements as advisors to the transaction. The lease provides for an initial term of twenty years with options to extend for two ten year-terms and annual rent of $3.9 million with yearly rent escalations based on the Consumer Price Index beginning in 2003.

12. Extraordinary Gain on Extinguishment of Debt

The Company recorded an extraordinary gain of $4.7 million, before taxes of $1.9 million, during the three months ended July 29, 2001. The Company purchased $14.6 million face value of Notes in the open market for $7.4 million resulting in a gain of $6.8 million, net of the write off of $0.4 million in prepaid financing fees. This $6.8 million gain was partially offset by prepaid financing fees of $2.1 million which were written off in connection with the termination of the Company's Prior Credit Facility.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and the related Notes thereto included elsewhere in this report. We sold the net assets comprising our remaining Aerospace operations on May 11, 2001. The results of operations and the net assets of the Aerospace Segment have been reclassified to Discontinued Operations. Accounting for discontinued operations according to GAAP involves identifying charges such as corporate allocations that were originally charged to Aerospace operations but that would be continuing. Those continuing charges are then reallocated back to the remaining operations of the Automotive Products Division. In addition, interest expense was reallocated to the Aerospace segment based on its total assets. This reallocation of corporate charges and interest has been done for all prior periods presented. As a result, the narrative that follows has been revised from the narrative presented in the prior year.

Results of Operations

We sold the net assets comprising our remaining Aerospace operations on May 11, 2001 and the results of operations for the Aerospace Segment have been reclassified to Discontinued Operations. The narrative that follows relates to the continuing operations of our Automotive Products Division.

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in the Company's Consolidated Statements of Operations.

	Three Months Ended				~~Nine Months Ended~~
	July 29, 2001		July 30, 2000		July 29, 2001		July 30, 2000
	February 3, 2002		January 28, 2001
Net sales	100.0	%	100.0	%	~~100.0~~	%	~~100.0~~	%
Cost of sales	9482.25	%	8985.06	%	~~87.5~~		~~87.1~~
Gross profit	517.85	%	1114.04	%	~~12.5~~		~~12.9~~
Operating expenses	1617.90	%	1011.82	%	~~12.9~~		~~10.0~~
Environmental and other investigation costs	1.9		—		1.7		—
Income from operations	0.5	%	3.2	%
Income (loss) from operations	(13.0	)%	0.2	%	(2.1	)%	2.9	%

Comparison of the Three Months Ended ~~July~~February 293, ~~2001~~2002 to the Three Months Ended ~~July~~January 3028, ~~2000~~2001

Net Sales

Consolidated net sales for the ~~third~~first quarter of ~~2001~~2002 were $2827.46 million, compared to consolidated net sales of $3230.42 million for the ~~third quarter~~first quarter of ~~2000~~2001. The decrease was primarily due to ~~lower automotive industry production in July, unfavorable~~ product mix and lower unit pricing.

Gross Profit

Consolidated gross profit for the ~~third~~first quarter of ~~2001~~2002 was $14.68 million or 517.85% of consolidated net sales, compared to consolidated gross profit of $34.64 million or 1114.04% of consolidated net sales for the ~~third~~first quarter of ~~2000. The decrease is primarily due to the write-off of $2.5 million in obsolete inventory. Consolidated gross margin was 14.6% for the third quarter of~~ 2001~~, excluding the inventory adjustment~~. The improvement in gross margin is primarily due to cost reductions in excess of unit price reductions.

Operating Expenses

Consolidated operating expenses for the ~~third~~first quarter of ~~2001~~2002 were $4.87 million or 1617.90% of consolidated net sales, compared with consolidated operating expenses of $3.54 million or 1011.82% of consolidated net sales for the ~~third~~first quarter of ~~2000 (excluding expenses for environmental and other investigations in both years)~~2001. The increase is primarily due to ~~increased~~higher ~~spending~~legal ~~for~~expenses ~~research~~related ~~and~~to ~~development~~the ~~for~~CharTech ~~new~~litigation ~~products,~~(see Note 7 ~~higher~~to ~~legal~~the ~~expense~~Consolidated ~~and~~Financial anStatements ~~accrued incentive bonus~~ in ~~2001~~Part 1).

Expenses Related to Environmental and Other Investigations

There were $0.6 million in expenses related to our former Newhall, California facility in the third quarter of 2001, while no such expenses were incurred in the third quarter of 2000.

Other Expense

Net interest expense was $32.02 million for the ~~third~~first quarter of ~~2001~~2002 compared to net interest expense of $43.15 million for the ~~third~~first quarter of ~~2000.~~ 2001. The decrease was primarily due to a reduction in outstanding debt. Average debt outstanding was $~~120~~80.93 million in the ~~third~~first quarter of ~~2001~~2002, compared with $~~183~~140.98 million in the ~~third~~ first quarter of ~~2000~~2001. We used the net proceeds from the ~~Scot divestiture, the~~ Aerospace Sale and the Real Estate Transaction to repay borrowings under our ~~Prior~~prior ~~Credit~~credit ~~Facility~~facility and to retire a portion of our Senior Subordinated Notes ("Notes").

Loss on disposal of assets was $5.0 million for the third quarter of 2001 compared with $0.1 million for the third quarter of 2000. The majority of these losses ($4.8 million) relate to the sale of our real estate assets in the third quarter of 2001.

Comparison of the Nine Months Ended July 29, 2001 to the Nine Months Ended July 30, 2000

Net Sales

Consolidated net sales for the nine months ended July 29, 2001 were $91.9 million, compared to consolidated net sales of $99.3 million for the same period in 2000. The decrease was primarily due to unfavorable product mix and lower unit pricing, partially offset by increased unit shipments.

Gross Profit

Consolidated gross profit for the nine months ended July 29, 2001 was $11.5 million or 12.5% of consolidated net sales, compared to consolidated gross profit of $12.8 or 12.9% of consolidated net sales for the nine months ended July 30, 2000. The decrease is primarily due to the write-off of $2.5 million in obsolete inventory. Consolidated gross margin was 15.3% for the nine months ending July 29, 2001, excluding the inventory adjustment. The improvement in gross margin is primarily due to cost reductions in excess of unit price reductions and increased unit shipments.

Operating Expenses

Consolidated operating expenses for the nine months ended July 29, 2001 were $11.9 million or 12.9% of consolidated net sales, compared with consolidated operating expenses of $9.9 million or 10.0% of consolidated net sales for the same period in 2000 (excluding expenses for environmental and other investigations in both years). The increase is primarily due to increased spending for research and development for new products, higher legal and insurance expense and an accrued incentive bonus in 2001.

Expenses Related to Environmental and Other Investigations

There were $1.6 million in expenses related to environmental and other investigations in the first nine months of 2001, while no such expenses were incurred in the first nine months of 2000. These expenses included $1.0 million related to the settlement of the Cal-OSHA Hollister investigation and $0.6 million related to our former Newhall, California facility.

Other Expense

Net interest expense was $10.4 million for the nine months ended July 29, 2001, a $2.4 million decrease compared with net interest expense of $12.8 million for the same period in 2000. The decrease was primarily due to a reduction in outstanding debt. Average debt outstanding was $138.0 million in the first nine months of 2001, compared with $180.7 million in the first nine months of 2000. We used the net proceeds from the Scot divestiture, the Aerospace Sale and the Real Estate Transaction to repay borrowings under our Prior Credit Facility and to retire a portion of our Notes.

Loss on disposal of assets was $6.3 million for the nine months ended July 29, 2001, compared with $0.1 million for the nine months ended July 30, 2000. We recorded a $4.8 million loss in the third quarter of 2001 on the sale of our real estate assets and a $1.2 million loss in the second quarter of 2001 on the disposition of assets related to our discontinued glass seal operations.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flow from operations and borrowings under our credit facilities. Our principal uses of cash are debt service requirements, capital expenditures and working capital.

Proceeds from the Aerospace Sale and the Real Estate Transaction were used to repay our existing senior term loan and revolving credit facility (the "Prior Credit Facility"), which we then terminated in June 2001. We entered into a new credit facility (the "~~New~~ Credit Facility") in June 2001 which consists of a $25.0 million Revolving Credit Facility (the "~~New~~ Revolver") and a $5.0 million Term Loan (the "~~New~~ Term Loan"). Available borrowings under the ~~New~~ Revolver are based on a formula comprised of our eligible accounts receivable and inventory.

AsThe ofagreement ~~July 29,~~governing ~~2001,~~the weCredit ~~had~~Facility ~~$4.0 million~~contains ofcustomary ~~letters~~covenants, ofincluding ~~credit~~restrictions ~~outstanding~~on ~~under~~ the ~~New~~incurrence ~~Revolver.~~of ~~The~~debt, ~~total~~the ~~amount~~sale ~~available~~of ~~under~~assets, ~~the~~mergers, ~~New~~acquisitions ~~Revolver~~and atother ~~July 29,~~business ~~2001~~combinations, ~~was~~voluntary ~~$8.8 million~~prepayment ~~subject~~of toother ~~compliance~~debt of the Company, transactions with ~~certain~~affiliates, ~~financial~~repurchase ~~covenants.~~or Asredemption of ~~July 29,~~equity ~~2001~~securities, weand ~~were~~financial incovenants ~~compliance~~on ~~with~~tangible ~~all~~net ~~such covenants~~worth.

~~Continuing~~As ~~operations provided cash~~ of ~~$1.6~~February ~~million and $0.2 million in the nine months ended July 29~~3, ~~2001 and July 30~~2002, ~~2000,~~we ~~respectively.~~had ~~Cash from the increase in profitability was used to reduce trade payables and accrued liabilities in 2001. Capital expenditures, primarily for manufacturing equipment, were~~ $42.34 million in ~~the~~borrowings ~~nine months ended July 29, 2001~~ and $~~10.~~4.0 million inof ~~the~~letters ~~nine~~of ~~months~~credit ~~ended~~outstanding ~~July 30,~~under ~~2000~~the Revolver. WeThe ~~expect~~total toamount ~~spend~~available ~~approximately~~under ~~$5.0~~the Revolver toat ~~$6.0~~February ~~million on capital expenditures~~3, ~~primarily for manufacturing equipment, during each of fiscal 2001 and~~ 2002. Anwas ~~estimated tax payment of approximately~~ $26.04 million issubject ~~due~~to incompliance ~~October 2001.~~with Wecertain ~~anticipate~~financial ~~making~~covenants. aAs ~~capital contribution~~ of ~~approximately Euro1.0~~February ~~million~~3, ~~during~~2002, ~~the~~we ~~next~~were ~~six months to a German joint venture formed~~ in ~~June 2001.~~compliance ~~We expect to make the aforementioned payments~~ with ~~cash~~all ~~from~~such ~~operations and borrowings under the New Revolver~~covenants.

~~Our~~Continuing ~~working~~operations ~~capital~~used ~~was~~cash of $14(0.8 9) million atand ~~July~~$(3.7) million in the three months ended February 293, 2002 and January 28, 2001, anrespectively. ~~increase~~Capital ofexpenditures, primarily for manufacturing equipment, were $292.70 million ~~from~~in athe ~~working~~three ~~capital~~months ~~deficit~~ended ofFebruary 3, (2002 and $140.9) 8 million atin ~~October~~the three months ended January 3128, ~~2000~~2001. We expect ~~The~~to ~~increase~~spend ~~was~~approximately ~~due~~$5.0 to ~~cash~~$6.0 million ~~proceeds received~~ on ~~the~~capital ~~issuance~~expenditures, ofprimarily ~~preferred~~for ~~stock~~manufacturing equipment, ~~the~~during ~~Aerospace~~fiscal ~~Sale~~2002. ~~and~~We ~~the~~anticipate ~~Real~~making ~~Estate~~a ~~Transaction,~~capital ~~net~~contribution of approximately $0.9 million during the ~~repayment~~next ofsix ~~long-term~~months ~~debt~~to ~~outstanding under~~SDI Molan, the ~~Prior~~German ~~Credit~~joint ~~Facility~~venture ~~and~~formed in June 2001. We expect to make the ~~repurchase~~aforementioned ofpayments ~~our~~with ~~Notes~~cash from operations and borrowings under the Revolver.

Our ~~ability~~working tocapital ~~pay~~was ~~the~~$4.1 ~~interest~~million ~~on,~~at ~~or to refinance our debt~~February 3, ~~or to fund planned capital expenditures~~2002, ~~will depend on our future performance which, to~~ a ~~certain~~decrease ~~extent,~~of is$1.9 million ~~subject~~from ~~to general~~our ~~economic,~~working ~~financial,~~capital ~~competitive,~~of ~~legislative, regulatory and other factors that are beyond our control~~$6.0 million ~~While~~at ~~management believes that we will be able to meet our liquidity needs~~October 31, ~~there~~2001. ~~can~~The bedecrease nowas ~~assurance~~due ~~that~~to ~~our~~capital ~~business~~expenditures ~~will~~and ~~generate sufficient cash flow from operations or that future borrowings will be available under~~ the ~~New~~repurchase ~~Revolver~~of ~~in an amount sufficient to enable us to service~~ our ~~debt, or to fund our other liquidity needs~~Notes.

Our ability to pay the interest on, or to refinance our debt, or to fund planned capital expenditures, will depend on our future performance which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. While management believes that we will be able to meet our liquidity needs, there can be no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available under the Revolver in an amount sufficient to enable us to service our debt, or to fund our other liquidity needs.

Accounting Developments

In ~~December~~June ~~1999~~2001, the ~~Securities~~Financial ~~and~~Accounting ~~Exchange~~Standards ~~Commission~~Board (~~the~~ "~~SEC~~FASB") issued ~~Staff~~Statement ~~Accounting~~of ~~Bulletin~~Financial ~~No. 101~~Accounting Standards ("~~SAB 101~~SFAS") No. 141, "~~Revenue Recognition~~Business ~~in Financial Statements~~Combinations", ~~which~~SFAS ~~provides guidance on the recognition~~No. 142, ~~presentation,~~"Goodwill and ~~disclosure of revenue in financial statements filed with~~

1312

Intangible Assets", and SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 141 requires that the ~~SEC~~purchase method of accounting be used for all business combinations, establishes specific criteria for recognizing intangible assets separately from goodwill and requires certain disclosures regarding reasons for a business combination and the allocation of the purchase price paid. WeSFAS No. 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for using the purchase accounting method for which the date of acquisition is after June 30, 2001. SFAS No. 142 establishes that goodwill and certain intangible assets will ~~adopt~~no ~~SAB~~longer ~~101~~be amortized to earnings, but instead tested for impairment at least annually. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the ~~fourth~~period ~~quarter~~in which it is incurred if a reasonable estimate of fair value can be made, that the associated asset retirement costs be capitalized as part of the carrying amount of the asset and requires certain disclosures providing descriptions of the asset retirement obligations and reconciliations of changes in components of those obligations. Except for business combinations initiated after June 30, 2001, we are required to adopt the provisions of SFAS No.s 141, 142 and 143 on November 1, 2002. We do not expect ~~such~~the adoption of these statements to have a material impact on our ~~financial position or~~ results of operations or financial position.

In ~~June~~August 2001, the ~~Financial Accounting Standards Board ("~~FASB") issued ~~Statement of Financial Accounting Standards ("~~SFAS") No. ~~141~~144, "~~Business~~Accounting ~~Combinations",~~for ~~SFAS No. 142,~~the ~~"Goodwill~~Impairment ~~and~~or ~~Intangible~~Disposal of Long-Lived Assets.", ~~and~~This statement supersedes SFAS No. ~~143~~121, "Accounting for ~~Asset~~the ~~Retirement~~Impairment ~~Obligations."~~of ~~SFAS~~Long-Lived ~~No. 141~~Assets ~~requires~~and ~~that~~for ~~the~~Long-Lived ~~purchase~~Assets ~~method~~to ofBe ~~accounting~~Disposed beOf" ~~used~~issued ~~for all~~in ~~business~~June 1995 ~~combinations,~~and ~~establishes~~the ~~specific~~accounting ~~criteria~~and ~~for~~reporting ~~recognizing~~provisions ~~intangible~~of ~~assets~~APB Opinion ~~separately~~No. 30, ~~from~~"Reporting ~~goodwill~~the ~~and~~Results ~~requires~~of ~~certain~~Operations—Reporting ~~disclosures~~the ~~regarding~~Effects ~~reasons~~of ~~for~~Disposal of a ~~business~~Segment ~~combination~~of a Business and ~~the~~ ~~allocation~~Extraordinary, ofUnusual ~~the~~and ~~purchase~~Infrequently ~~price~~Occurring ~~paid~~Events and Transactions." SFAS No. ~~141~~144 isestablishes ~~effective~~accounting standards for ~~all~~the ~~business~~impairment ~~combinations~~of ~~initiated~~long-lived ~~after June 30~~assets, ~~2001~~excluding goodwill, and for ~~all~~long-lived ~~business~~assets ~~combinations~~to ~~accounted~~be ~~for~~disposed ~~using the~~of. ~~purchase~~SFAS ~~accounting~~No. 144 ~~method~~requires ~~for~~that ~~which~~long-lived ~~the~~assets ~~date~~be ofreviewed ~~acquisition~~for isimpairment ~~after~~whenever ~~June 30,~~events ~~2001.~~or ~~SFAS~~changes ~~No. 142~~in ~~establishes~~circumstances indicate that ~~goodwill~~the ~~and~~carrying ~~certain~~amount ~~intangible~~of ~~assets~~an ~~will~~asset nomay ~~longer~~not be recoverable. ~~amortized~~Recoverability toof ~~earnings,~~assets ~~but~~to ~~instead~~be ~~tested~~held ~~for~~and ~~impairment~~used atis ~~least~~measured ~~annually.~~by ~~SFAS 143~~a ~~requires~~comparison ~~that~~of the ~~fair~~carrying ~~value~~amount of aan ~~liability~~asset ~~for~~to anfuture net cash flows expected to be generated by the asset. ~~retirement~~If ~~obligation~~such assets are considered to be impaired, the impairment to be recognized inis measured by the ~~period~~amount inby which itthe ~~is incurred~~carrying ifamount aof ~~reasonable~~the ~~estimate~~assets ofexceeds the fair value ~~can~~of bethe ~~made,~~assets. ~~that~~Assets ~~the~~to ~~associated~~be ~~asset~~disposed ~~retirement~~of ~~costs~~are bereported ~~capitalized~~at asthe ~~part~~lower of the carrying amount ofor ~~the~~fair ~~asset~~value ~~and~~less ~~requires~~costs ~~certain~~to ~~disclosures providing~~sell. ~~descriptions~~The ofstatement retains the ~~asset~~basic ~~retirement~~provisions ~~obligations~~of ~~and~~APB ~~reconciliations~~Opinion No. 30 for the presentation of ~~changes~~discontinued operations in ~~components~~the statement of ~~those~~operations but ~~obligations.~~broadens ~~Except~~that ~~for~~presentation ~~business~~to ~~combinations~~include ~~initiated~~a ~~after~~component ~~June 30,~~of ~~2001,~~an ~~we are~~entity (rather than a segment of a business). The Company is required to adopt the provisions of SFAS No. ~~141,~~144 ~~SFAS No. 142 and SFAS 143~~ on November 1, 2002. Weand dodoes not expect the adoption ~~of SFAS 141, SFAS 142 or SFAS 143~~ to have a material impact on ~~our~~the Company's results of operations or financial position.

Forward-Looking Information

This report on Form 10-Q contains certain forward-looking statements and information relating to our business that are based on the beliefs of management as well as assumptions made by and information currently available to management. The words "anticipates," "believes," "estimates," "expects," "plans," "intends," and similar expressions, as they relate to our operations, are intended to identify forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. We do not intend to update these forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We dohave ~~not~~only ~~have~~limited ~~any~~involvement in derivative financial instruments and do not hold or issue them for trading purposes. We are exposed to market risk related to changes in foreign exchange rates on transactions denominated in foreign currencies and we selectively use foreign currency forward exchange contracts to manage those risks. At February 3, 2002, we had no open contracts. Certain amounts borrowed under our ~~New~~ Credit Facility are at variable rates and we are thus subject to market risk resulting from interest rate fluctuations. ~~Our interest rate swap agreement with the agent under our Prior Credit Facility terminated March 7, 2001.~~

We also are exposed to market risks related to fluctuations in interest rates on the Notes we issued in December 1998. For fixed rate debt such as the Notes, changes in interest rates generally affect the fair value of the debt instrument. However, we do not have an obligation to repay the Notes prior to maturity in December 2008.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~For~~CharTech ~~OSHA~~Suit. ~~Investigations~~A lawsuit alleging that the Company willfully infringes two patents held by CharTech Engineering, Inc. ~~see~~("CharTech") ~~Note~~was filed on July 914, 2000, in the U.S. District Court for the Central District of California. The suit seeks unspecified monetary damages and an injunction against the Company's alleged practice of the technology claimed in these patents. The patents at issue relate to the ~~Consolidated~~use ~~Financial~~of ~~Statements~~a "getter" material in ~~Part I~~connection ~~that~~with weleak-testing hermetically ~~hereby~~sealed ~~incorporate~~devices. CharTech's suit claims that initiators produced by ~~reference~~the Company infringe these patents. ~~For~~The ~~other~~Company ~~legal proceedings~~answered the complaint, ~~see~~asserted ~~our~~counterclaims ~~Annual~~against ~~Report~~CharTech, onand filed ~~Form~~a third party complaint against CharTech, its related company IsoVac Engineering, ~~10-K405~~Inc. ("IsoVac") and George Neff, a principal in both companies. If the Company is found liable for patent infringement, it could be liable for monetary damages, which could be increased up to three times if willful infringement is also found to exist. In addition, if the ~~year~~Company ~~ended~~is ~~October 31~~found liable for patent infringement, ~~2000~~the Company could be enjoined from producing the subject initiators. The Company believes that it has meritorious defenses in this action that could serve to avoid liability or limit the damages that might be due if liability were found. The Company believes that its counterclaims and third party claims are also meritorious and may lead to a monetary recovery by the Company. A trial date has not yet been set and a previously scheduled pre-trial conference was taken off the calendar. Recently, the court granted a stay of most claims of the lawsuit pending the court's consideration of CharTech's motion to bifurcate the Company's indemnification claim, and to stay the rest of the lawsuit until the indemnification claim has been decided. A court-ordered settlement mediation conference is also scheduled for later in March 2002.

For other legal proceedings, see our Annual Report on Form 10-K405 for the year ended October 31, 2001.

ITEM 3 THROUGH 5.

Omitted as not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a): EXHIBITS

Exhibit No.		Description
1.1(k)		Purchase Agreement, dated as of December 11, 1998, among SDI Acquisition Corp. and BT Alex. Brown Incorporated and Paribas Corporation.
1.1(g)		Purchase Agreement, dated as of December 11, 1998, among SDI Acquisition Corp. and BT Alex. Brown Incorporated and Paribas Corporation.
2.1(a)		Amended and Restated Agreement and Plan of Merger, dated as of June 19, 1998, between the Company and SDI Acquisition Corp.
2.2(b)		Amendment No. 1, dated as of October 27, 1998, to the Amended and Restated Agreement and Plan of Merger between the Company and SDI Acquisition Corp.
2.3(c)		Guaranty Agreement, dated as of June 19, 1998, between J.F. Lehman Equity Investors I, LP and the Company.
3.1(k)		Certificate of Incorporation of the Company.
3.1(g)		Certificate of Incorporation of the Company.
3.2(k)		Bylaws of the Company.
3.2(g)		Bylaws of the Company.
4.1(k)		Indenture, dated as of December 15, 1998, among SDI Acquisition Corp., the Guarantors named therein and United States Trust Company of New York, as Trustee.
4.1(g)		Indenture, dated as of December 15, 1998, among SDI Acquisition Corp., the Guarantors named therein and United States Trust Company of New York, as Trustee.
4.2(k)		First Supplemental Indenture, dated as of December 15, 1998, among the Company, the Guarantors named therein and the United States Trust Company of New York, as Trustee.
4.2(g)		First Supplemental Indenture, dated as of December 15, 1998, among the Company, the Guarantors named therein and the United States Trust Company of New York, as Trustee.
4.3(k)		Form of 113/8% Senior Subordinated Note due 2008, Series A (see Exhibit A of the First Supplemental Indenture in Exhibit 4.2).
4.3(g)		Form of 113/8% Senior Subordinated Note due 2008, Series A (see Exhibit A of the First Supplemental Indenture in Exhibit 4.2).
4.4(k)		Form of 113/8% Senior Subordinated Note due 2008, Series B (see Exhibit B of the First Supplemental Indenture in Exhibit 4.2).
4.4(g)		Form of 113/8% Senior Subordinated Note due 2008, Series B (see Exhibit B of the First Supplemental Indenture in Exhibit 4.2).
4.5(k)		Registration Rights Agreement, dated as of December 15, 1998, among SDI Acquisition Corp., as Issuer and BT Alex. Brown Incorporated and Paribas Corporation as Initial Purchasers.
4.5(g)		Registration Rights Agreement, dated as of December 15, 1998, among SDI Acquisition Corp., as Issuer and BT Alex. Brown Incorporated and Paribas Corporation as Initial Purchasers.
4.6(p)		Certificate of Designation of Preferences and Relative Participating, Optional and Other Special Rights of Series A 6% Cumulative Convertible Preferred Stock of Special Devices, Incorporated dated as of February 28, 2001.
4.6(l)		Certificate of Designation of Preferences and Relative Participating, Optional and Other Special Rights of Series A 6% Cumulative Convertible Preferred Stock of Special Devices, Incorporated dated as of February 28, 2001.
10.2(k)		Credit Agreement, dated as of December 15, 1998, among the Company, various banks and Bankers Trust Company, as Lead Arranger and Administrative Agent.
10.2(g)		Credit Agreement, dated as of December 15, 1998, among the Company, various banks and Bankers Trust Company, as Lead Arranger and Administrative Agent.
10.6(k)		Management Agreement dated as of December 15, 1998, between the Company and J.F. Lehman & Company.
10.6(g)		Management Agreement, dated as of December 15, 1998, between the Company and J.F. Lehman & Company.
10.7(k)		Management Services Agreement, dated as of December 15, 1998, between the Company and J.F. Lehman & Company.
10.7(g)		Management Services Agreement, dated as of December 15, 1998, between the Company and J.F. Lehman & Company.
10.8(k)		Subscription Agreement, dated as of September 7, 1998, among the Company, Paribas Principal Inc., J.F. Lehman Equity Investors I, LP and JFL Co-Invest Partners I, LP.
10.8(g)		Subscription Agreement, dated as of September 7, 1998, among the Company, Paribas Principal Inc., J.F. Lehman Equity Investors I, LP and JFL Co-Invest Partners I, LP.
10.9(k)		Amendment No. 1 to Subscription Agreement, dated as of December 3, 1998, among the Company, Paribas Principal Inc., J.F. Lehman Equity Investors I, LP and JFL Co-Invest Partners I, LP.
10.9(g)		Amendment No. 1 to Subscription Agreement, dated as of December 3, 1998, among the Company, Paribas Principal Inc., J.F. Lehman Equity Investors I, LP and JFL Co-Invest Partners I, LP.
10.10(k)		Amendment No. 2 to Subscription Agreement, dated as of December 15, 1998, among the Company, Paribas Principal Inc., J.F. Lehman Equity Investors I, LP and JFL Co-Invest Partners I, LP.
10.10(g)		Amendment No. 2 to Subscription Agreement, dated as of December 15, 1998, among the Company, Paribas Principal Inc., J.F. Lehman Equity Investors I, LP and JFL Co-Invest Partners I, LP.

10.11(k)		Stockholders Agreement, dated as of December 15, 1998, among the Company, J.F. Lehman & Co., J.F. Lehman Equity Investors I, LP, JFL Co-Invest Partners I, LP, the Neubauer Family Trust, by Walter Neubauer trustee, and the Treinen Family Trust, by Thomas F. Treinen trustee.
10.11(g)		Stockholders Agreement, dated as of December 15, 1998, among the Company, J.F. Lehman & Co., J.F. Lehman Equity Investors I, LP, JFL Co-Invest Partners I, LP, the Neubauer Family Trust, by Walter Neubauer trustee, and the Treinen Family Trust, by Thomas F. Treinen trustee.
10.12(k)		Pledge Agreement, dated as of December 15, 1998, between the Neubauer Family Trust, by Walter Neubauer, trustee and J.F. Lehman & Company.
10.12(g)		Pledge Agreement, dated as of December 15, 1998, between the Neubauer Family Trust, by Walter Neubauer, trustee and J.F. Lehman & Company.
10.13(k)		Rollover Stockholders Agreement, dated as of December 15, 1998, among the Company, J.F. Lehman & Co., the Neubauer Family Trust, by Walter Neubauer trustee, and the Treinen Family Trust, by Thomas F. Treinen trustee.
10.13(g)		Rollover Stockholders Agreement, dated as of December 15, 1998, among the Company, J.F. Lehman & Co., the Neubauer Family Trust, by Walter Neubauer trustee, and the Treinen Family Trust, by Thomas F. Treinen trustee.
10.14(k)		Pledge Agreement, dated as of December 15, 1998, between Thomas Treinen Family Trust, by Thomas F. Treinen, trustee and J.F. Lehman & Company.
10.14(g)		Pledge Agreement, dated as of December 15, 1998, between Thomas Treinen Family Trust, by Thomas F. Treinen, trustee and J.F. Lehman & Company.
10.15(k)		Registration Rights Agreement, dated as of December 15, 1998, among the Company, J.F. Lehman Equity Investors I, LP, JFL Co-Invest Partners I, LP, Paribas Principal Inc., the Neubauer Family Trust, by Walter Neubauer trustee, and the Treinen Family Trust, by Thomas F. Treinen trustee.
10.15(g)		Registration Rights Agreement, dated as of December 15, 1998, among the Company, J.F. Lehman Equity Investors I, LP, JFL Co-Invest Partners I, LP, Paribas Principal Inc., the Neubauer Family Trust, by Walter Neubauer trustee, and the Treinen Family Trust, by Thomas F. Treinen trustee.
10.17(d)		Letter Agreement dated June 8, 1990 between the Company and Hermetic Seal Corporation.
10.18(d)		Master Purchase Agreement, dated May 15, 1990, between the Company and TRW Inc. (confidential treatment granted as to part).
10.19(d)		Technology License Agreement dated November 7, 1990 between the Company and Davey Bickford Smith.
10.20(e)		Amended and Restated 1991 Stock Incentive Plan of the Company.
10.21(d)		Special Devices, Incorporated 401(k) Plan.
10.22(e)		First Amendment to Master Purchase Agreement, dated February 25, 1993, between the Company and TRW, Inc. (confidential treatment granted as to part).
10.27(f)		Development Agreement, dated August 28, 1996, between Company and the City of Moorpark.
10.23(f)		Letter Agreement, dated November 30, 1994 between the Company and Hermetic Seal Corporation (confidential treatment granted as to part).
10.29(h)		Employment Agreement dated October 1, 1999 between the Company and Thomas W. Cresante.
10.25(g)		Second Amendment to Master Purchase Agreement, dated March 8, 1995, between the Company and TRW, Inc. (confidential treatment granted as to part).
10.31(h)		1999 Stock Option Plan dated June 23, 1999.
10.26(h)		Supply Agreement dated as of November 14, 1995 between the Company and Autoliv International, Inc. (confidential treatment requested as to part).
10.33(h)		Capital Call Agreement dated January 26, 2000 among the Company, various banks, and Bankers Trust Company as Administrative Agent.
10.27(i)		Development Agreement, dated August 28, 1996, between Company and the City of Moorpark.
10.34(h)		Second Amendment to Credit Agreement, dated January 26, 2000 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.28(j)		Purchase Agreement, dated September 30, 1997, between the Company and Hermetic Seal Corporation (confidential treatment requested as to part).
10.35(k)		Third Amendment to Credit Agreement, dated June 7, 2000 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.29(l)		Employment Agreement dated October 1, 1999 between the Company and Thomas W. Cresante.
10.36(k)		Fourth Amendment to Credit Agreement, dated September 18, 2000 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.31(l)		1999 Stock Option Plan dated June 23, 1999.
10.37(j)		Fifth Amendment to Credit Agreement, dated January 12, 2001 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.33(l)		Capital Call Agreement dated January 26, 2000 among the Company, various banks, and Bankers Trust Company as Administrative Agent.
10.38(k)		Capital Call Agreement dated September 18, 2000 among the Company, various banks, and Bankers Trust Company as Administrative Agent.
10.34(l)		Second Amendment to Credit Agreement, dated January 26, 2000 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.39(l)		First Amendment to Credit Agreement, dated July 14, 1999 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.35(n)		Third Amendment to Credit Agreement, dated June 7, 2000 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.40(l)		Sixth Amendment to Credit Agreement, dated April 25, 2001 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.41(m)		Partnership Agreement, dated as of June 26, 2001, among SDI Germany GmbH, Klaus-Jurgen Dittrich and Frank Dittrich.

10.36(n)		Fourth Amendment to Credit Agreement, dated September 18, 2000 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.42(m)		Side Agreement, dated as of June 26, 2001, among the Company, Anhaltinische Chemische Fabriken ACF GmbH, Molan-Werk Dittrich Gessellschaft mit beschrankter Haftung & Co. Komman-ditgesellschaft, SDI Germany GmbH, Klaus-Jurgen Dittrich and Frank Dittrich.
10.37(n)		Fifth Amendment to Credit Agreement, dated January 12, 2001 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
10.43(m)		Loan and Security Agreement, dated as of June 27, 2001, among the Company and Foothill Capital Corporation.
10.38(n)		Capital Call Agreement dated September 18, 2000 among the Company, various banks, and Bankers Trust Company as Administrative Agent.
12.1(g)		Statement of Computation of Ratios of Earnings to Fixed Charges.
10.39(p)		First Amendment to Credit Agreement, dated July 14, 1999 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
21.1(g)		Subsidiaries of the Company.
10.40(p)		Sixth Amendment to Credit Agreement, dated April 25, 2001 among the Company, various banks, and Bankers Trust Company, as Lead Arranger or Administrative Agent.
25.1(g)		Form T-1 Statement of Eligibility of United States Trust Company of New York to act as trustee under the Indenture.
10.41		Partnership Agreement, dated as of June 26, 2001, among SDI Germany GmbH, Klaus-Jurgen Dittrich and Frank Dittrich.
99.1(I)		Special Devices, Incorporated Press Release dated September 22, 2000.
10.42		Side Agreement, dated as of June 26, 2001, among the Company, Anhaltinische Chemische Fabriken ACF GmbH, Molan-Werk Dittrich Gessellschaft mit beschrankter Haftung & Co. Komman-ditgesellschaft, SDI Germany GmbH, Klaus-Jurgen Dittrich and Frank Dittrich.
99.2(I)		Agreement and Plan of Merger between the Company and Wind Point Partners IV, LP dated August 18, 2000.
10.43		Loan and Security Agreement, dated as of June 27, 2001, among the Company and Foothill Capital Corporation.
99.3(k)		Special Devices, Incorporated Press Release dated May 14, 2000.
25.1(k)		Form T-1 Statement of Eligibility of United States Trust Company of New York to act as trustee under the Indenture.
99.4(k)		Asset Purchase Agreement, dated as of March 27, 2001, among the Company, PS/EMC West LLC and Pacific Scientific Company (solely with respect to Section 7.2 thereof).
99.1(m)		Special Devices, Incorporated Press Release dated September 22, 2000.
99.5(k)		Amendment No. 1 to Asset Purchase Agreement dated as of May 11, 2001.
99.2(m)		Agreement and Plan of Merger between the Company and Wind Point Partners IV, L.P.
99.6(l)		Lease Agreement, dated as of June 4, 2001, among the Company, Autosafe Airbag 14 (CA) LP and Autosafe Airbag 12 (CA) LP.
99.3(o)		Special Devices, Incorporated Press Release dated May 14, 2000.
99.7(n)		Amendment No. 2 to Asset Purchase Agreement dated as of July 30, 2001.
99.4(o)		Asset Purchase Agreement, dated as of March 27, 2001, among the Company, PS/EMC West LLC and Pacific Scientific Company (solely with respect to Section 7.2 thereof).
99.5(o)		Amendment No. 1 to Asset Purchase Agreement dated as of May 11, 2001.
99.6(p)		Lease Agreement, dated as of June 4, 2001, among the Company, Autosafe Airbag 14 (CA) LP and Autosafe Airbag 12 (CA) LP.

(a): Previously filed as Appendix A to the Company's Proxy Statement on Schedule 14A filed with the Commission on August 18, 1998 and incorporated herein by reference.
(b): Previously filed as Appendix B to the Company's Proxy Statement on Schedule 14A filed with the Commission on December 10, 1998 and incorporated herein by reference.
(c): Previously filed as Exhibit 2.3 to the Company's Current Report on Form 8-K filed with the Commission on July 10, 1998 and incorporated herein by reference.
(d): Previously filed as an exhibit to Registration Statement on Form S-1 (File No. 33-40903) and incorporated herein by reference.
(e): Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1994 and incorporated herein by reference.
(f): Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1996 and incorporated herein by reference.
(g): Previously filed as an exhibit to Registration Statement on Form S-4 (File No. 333-75869) and incorporated herein by reference.
(h): Previously filed as an exhibit to the Company's Annual Report on Form 10-K405 for the fiscal year ended October 31, 1999 and incorporated herein by reference.
(i): Previously filed as an exhibit to the Company's Current Report on Form 8-K filed with the Commission on October 6, 2000 and incorporated herein by reference.
(j): Previously filed as an exhibit to the Company's Annual Report on Form 10-K405 for the fiscal year ended October 31, 2000 and incorporated herein by reference.

(k): Previously filed as an exhibit to the Company's Current Report on Form 8-K filed with the Commission on May 25, 2001 and incorporated herein by reference.
(l): Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended April 29, 2001 and incorporated herein by reference.
(m): Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarterly period ended July 29, 2001 and incorporated herein by reference.
(n): Previously filed as an exhibit to the Company's Annual Report on Form 10-K405 for the fiscal year ended October 31, 2001 and incorporated herein by reference.
(b): REPORTS ON FORM 8-K.

None

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.

		SPECIAL DEVICES, INCORPORATED
Dated: September 12, 2001		/s/ THOMAS W. CRESANTE Thomas W. Cresante Director, President and Chief Executive Officer (Principal Executive Officer)
Dated: March 15, 2002		/s/ THOMAS W. CRESANTE Director, President and Chief Executive Officer (Principal Executive Officer)
Dated: September 12, 2001		/s/ DONALD C. CAMPION Donald C. Campion Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
Dated: March 15, 2002		/s/ JAMES E. REEDER Vice President Finance (Principal Financial and Accounting Officer)

QuickLinks

FORM 10-Q
SPECIAL DEVICES, INCORPORATED INDEX TO QUARTERLY REPORT ON FORM 10-Q
SPECIAL DEVICES, INCORPORATED AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 3 THROUGH 5.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES

Filing Compare · SPECIAL DEVICES INC /DE