Standard Motor Products, Inc. Announces Third Quarter 2005 Results and a Quarterly Dividend
NEW YORK, Nov. 1, 2005 -- Standard Motor Products, Inc. , an automotive replacement parts manufacturer and distributor, reported today its consolidated financial results for the three months and nine months ended September 30, 2005.
Consolidated net sales for the third quarter of 2005 were $224.4 million, compared to consolidated net sales of $203.5 million during the comparable quarter in 2004. Earnings from continuing operations for the third quarter of 2005 were $4.2 million or 21 cents per diluted share, compared to earnings of $1.3 million or 7 cents per diluted share in the third quarter of 2004. The third quarter improvement in earnings was primarily related to a $4.4 million reduction in integration expenses and a $4 million reduction in retiree medical expense (discussed further below).
Consolidated net sales for the nine month period ended September 30, 2005 were $658.3 million, compared to consolidated net sales of $643.3 million during the comparable period in 2004. Earnings from continuing operations for the nine month period ended September 30, 2005 were $3.9 million or 20 cents per diluted share, compared to earnings of $8.3 million or 43 cents per diluted share in the comparable period of 2004.
Commenting on the results, Mr. Lawrence Sills, Standard Motor Products' Chairman and Chief Executive Officer, said, "On the Engine Management side of the business, while net sales and SGA expenses were roughly in line with projections, there was a major shortfall in gross margin. This was primarily caused by two factors. First, despite the recent round of price increases, which took effect in the third quarter, our pricing levels are still below 2004 on a cumulative basis. Second, we are incurring one-time, non-cash write-offs as we merge the Dana and Standard inventories.
"Looking forward, we have announced another round of price increases, beginning in mid-December. In addition, we are forecasting an additional $6-8 million in annualized cost savings, resulting from new manufacturing of previously purchased product and resourcing of existing purchased items. We anticipate all these being in place by year-end 2005, with benefits beginning in 2006."
Turning to Temperature Control, Mr. Sills commented, "Four Seasons had an excellent quarter. Sales were up 36% in the third quarter primarily because of the hot summer. However, year-to-date increases were only 7.3% because of the weak pre-season orders. On the cost side, we are continuing with our program of outsourcing product to the Far East, and beginning the task of establishing a compressor rebuilding facility in Reynosa, Mexico.
"Europe continues to show slow but steady improvement. By the end of 2005 we will have outsourced all traditional ignition to the Far East and Eastern Europe.
"Further, we continue to show gains on several fronts. We reduced inventory by $21 million in the third quarter, as Temperature Control had the benefit of the hot summer and we continued to integrate the DEM and Standard Engine Management inventories. Second, we are in the process of winding down our customer accounts receivable draft program, which will reduce interest expense and improve cash flow in 2006. Finally, as discussed above, we made substantial changes to our retiree medical program, which will result in a reduction of roughly $5 million to our annual expenses. $4 million of this reduction is included in our third quarter results, and the balance will be reflected in the fourth quarter."
The Board of Directors has approved payment of a quarterly dividend of nine cents per share on the common stock outstanding. The dividend will be paid on December 1, 2005 to stockholders of record on November 15, 2005.
Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Tuesday, November 1, 2005. The dial in number is 877-707-9628 (domestic) or 785-832-0326 (international). The playback number is 800-839-2435 (domestic) or 402-220-7212 international), and the ID # is STANDARD.
Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Standard Motor Products cautions investors that any forward-looking statements made by the company, including those that may be made in this press release, are based on management's expectations at the time they are made, but they are subject to risks and uncertainties that may cause actual results, events or performance to differ materially from those contemplated by such forward-looking statements. Among the factors that could cause actual results, events or performance to differ materially from those risks and uncertainties discussed in this press release are those detailed from time-to-time in prior press releases and in the company's filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K and quarterly reports on Form 10-Q. By making these forward- looking statements, Standard Motor Products undertakes no obligation or intention to update these statements after the date of this release.
STANDARD MOTOR PRODUCTS
CONDENSED CONSOLIDATING BALANCE SHEETS
(Dollars in thousands)
ASSETS
September 30, December 31,
2005 2004
Cash $13,596 $14,934
Accounts receivable, gross 270,855 160,706
Allowance for doubtful accounts 9,978 9,354
Accounts receivable, net 260,877 151,352
Inventories 240,266 258,641
Other current assets 24,021 22,289
Total current assets 538,760 447,216
Property, plant and equipment, net 88,086 97,425
Goodwill and other intangibles 68,662 69,911
Other assets 40,854 42,017
Total assets $736,362 $656,569
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $180,465 $109,416
Current portion of long term debt 534 534
Accounts payable trade 56,381 46,487
Accrued customer returns 31,687 23,127
Restructuring accrual 2,699 6,999
Other current liabilities 62,494 65,893
Total current liabilities 334,260 252,456
Long-term debt 113,829 114,236
Accrued asbestos liability 25,565 26,060
Restructuring accrual 11,515 12,394
Postretirement & other liabilities 45,268 44,111
Total liabilities 530,437 449,257
Total stockholders' equity 205,925 207,312
Total liabilities and
stockholders' equity $736,362 $656,569
STANDARD MOTOR PRODUCTS, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2005 2004 2005 2004
NET SALES $224,438 $203,487 $658,276 $643,317
COST OF SALES 175,301 150,945 511,794 477,547
GROSS PROFIT 49,137 52,542 146,482 165,770
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 39,134 43,436 124,915 137,438
INTEGRATION EXPENSES 218 4,669 4,620 8,592
OPERATING INCOME 9,785 4,437 16,947 19,740
OTHER INCOME (EXPENSE),
NET 67 823 1,046 1,766
INTEREST EXPENSE 4,552 3,474 12,617 10,389
EARNINGS FROM CONTINUING
OPERATIONS BEFORE TAXES 5,300 1,786 5,376 11,117
INCOME TAX EXPENSE 1,137 446 1,441 2,779
EARNINGS FROM CONTINUING
OPERATIONS 4,163 1,340 3,935 8,338
DISCONTINUED OPERATIONS,
NET OF TAX (449) (2,016) (1,240) (3,292)
NET EARNINGS $3,714 $(676) $2,695 $5,046
NET EARNINGS PER COMMON SHARE:
BASIC EARNINGS FROM
CONTINUING OPERATIONS $0.21 $0.07 $0.20 $0.43
DISCONTINUED OPERATION (0.02) (0.10) (0.06) (0.17)
NET EARNINGS PER COMMON
SHARE - BASIC $0.19 $(0.03) $0.14 $0.26
DILUTED EARNINGS FROM
CONTINUING OPERATIONS $0.21 $0.07 $0.20 $0.43
DISCONTINUED OPERATION (0.02) (0.10) (0.06) (0.17)
NET EARNINGS PER COMMON
SHARE - DILUTED $0.19 $(0.03) $0.14 $0.26
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 19,547,319 19,356,423 19,509,040 19,312,334
WEIGHTED AVERAGE NUMBER OF
COMMON AND DILUTIVE
SHARES 19,577,972 19,460,252 19,546,261 19,415,562