Standard Motor Products, Inc. Announces Third Quarter 2006 Results and a Quarterly Dividend
NEW YORK, Oct. 30, 2006 -- 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, 2006.
Consolidated net sales for the third quarter of 2006 were $203.8 million, compared to consolidated net sales of $224.4 million during the comparable quarter in 2005. Earnings from continuing operations for the third quarter of 2006 were $2.6 million or 14 cents per diluted share, compared to earnings of $4.2 million or 21 cents per diluted share in the third quarter of 2005. However the third quarter of 2005 benefited from a $3.8 million reduction in retiree medical expense, resulting in a $2.5 million pre-tax savings, or 8 cents per diluted share, compared to third quarter 2006. Adjusting for that, on a comparable basis, earnings per share for the third quarter of 2006 were slightly ahead of 2005.
Consolidated net sales for the nine month period ended September 30, 2006 were $643 million, compared to consolidated net sales of $658.3 million during the comparable period in 2005. Earnings from continuing operations for the nine month period ended September 30, 2006 were $10.6 million or 58 cents per diluted share, compared to earnings of $3.9 million or 20 cents per diluted share in the comparable period of 2005.
Mr. Lawrence Sills, Standard Motor Products' Chairman and Chief Executive Officer, commented, "After a strong first six months, we were disappointed in our sales in the third quarter. In Engine Management, several of our large accounts focused on inventory reduction, and so while their sales to their customers were essentially flat, their net purchases from us were down. Year to date, however, Engine Management sales are essentially equal to 2005. In Temperature Control, sales were down from a very strong 2005, one of the hottest summers in history, and were further inhibited, we believe, by the high energy prices.
"On the other hand, we continue to make progress in gross margin. In Engine Management, our third quarter gross margin was negatively impacted by higher than average customer returns, but despite that we are running well ahead of last year. We are ahead of plan in both purchase cost reduction and make vs. buy, and we began implementing price increases at the tail end of the third quarter. This should benefit the fourth quarter and into 2007.
"Gross margins in Temperature Control, despite the lower sales, are running slightly ahead of 2005, thanks to improved costs.
"Significantly, we announced the closing of our Puerto Rican facility. Over the next 24 months, the production lines will be shifted to facilities in Independence, Kansas and Reynosa, Mexico. We have been manufacturing in Puerto Rico for nearly 40 years, with an excellent and highly motivated work force, but the demise of the 936 tax incentive made Puerto Rico an expensive place to do business. We estimate one time costs of roughly $6 million and annual savings, once the moves are fully implemented, of over $7 million.
"We have received our first new OES order, though small, and are in discussions for additional product groups. We will advise when we receive firm orders.
"One final area of improvement is inventory reduction. Since January, we have reduced Engine Management inventory by approximately $16 million. While this has negatively impacted our gross margin, with less overhead absorption, it has contributed to our overall cash flow improvement."
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, 2006 to stockholders of record on November 15, 2006.
Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Monday, October 30, 2006. The dial in number is 877-707-9628 (domestic) or 785-832-2041 (international). The playback number is 800-753-5479 (domestic) or 402-220-2675 (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, INC.
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2006 2005 2006 2005
NET SALES $203,755 $224,438 $643,005 $658,276
COST OF SALES 154,423 175,301 483,736 511,794
GROSS PROFIT 49,332 49,137 159,269 146,482
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 40,039 39,134 126,822 124,915
INTEGRATION EXPENSES 598 218 828 4,620
OPERATING INCOME 8,695 9,785 31,619 16,947
OTHER INCOME, NET 820 67 1,980 1,046
INTEREST EXPENSE 5,118 4,552 14,826 12,617
EARNINGS FROM CONTINUING
OPERATIONS BEFORE TAXES 4,397 5,300 18,773 5,376
INCOME TAX EXPENSE 1,814 1,137 8,137 1,441
EARNINGS FROM CONTINUING
OPERATIONS 2,583 4,163 10,636 3,935
DISCONTINUED OPERATION,
NET OF TAX 1,656 (449) 603 (1,240)
NET INCOME $4,239 $3,714 $11,239 $2,695
NET EARNINGS PER COMMON SHARE:
BASIC EARNINGS FROM
CONTINUING OPERATIONS $0.14 $0.21 $0.58 $0.20
DISCONTINUED OPERATION 0.09 (0.02) 0.03 (0.06)
NET INCOME PER COMMON
SHARE - BASIC $0.23 $0.19 $0.61 $0.14
DILUTED EARNINGS FROM
CONTINUING OPERATIONS $0.14 $0.21 $0.58 $0.20
DISCONTINUED OPERATION 0.09 (0.02) 0.03 (0.06)
NET INCOME PER COMMON
SHARE - DILUTED $0.23 $0.19 $0.61 $0.14
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 18,306,178 19,547,319 18,265,784 19,509,040
WEIGHTED AVERAGE NUMBER OF
COMMON AND DILUTIVE
SHARES 18,371,435 19,577,972 18,297,979 19,546,261
STANDARD MOTOR PRODUCTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
September 30, December 31,
2006 2005
Cash $15,019 $14,046
Accounts receivable, gross 241,746 185,868
Allowance for doubtful accounts 10,074 9,574
Accounts receivable, net 231,672 176,294
Inventories 228,098 243,297
Other current assets 23,798 22,053
Total current assets 498,587 455,690
Property, plant and equipment, net 81,326 85,805
Goodwill and other intangibles 56,787 67,402
Other assets 35,096 44,147
Total assets $671,796 $653,044
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $157,497 $149,236
Current portion of long term debt 542 542
Accounts payable trade 55,414 52,535
Accrued customer returns 30,869 22,346
Restructuring accrual 861 1,286
Other current liabilities 63,830 59,977
Total current liabilities 309,013 285,922
Long-term debt 98,127 98,549
Postretirement & other liabilities 47,442 45,962
Restructuring accrual 418 11,348
Accrued asbestos liability 20,903 25,556
Total liabilities 475,903 467,337
Total stockholders' equity 195,893 185,707
Total liabilities and
stockholders' equity $671,796 $653,044