Standard Motor Products Issues Fourth Quarter Earnings
23 January 1998
Standard Motor Products Issues Fourth Quarter Earnings Warning and Announces its Bank Refinancing is Not Completed
NEW YORK, Jan. 23 -- Standard Motor Products, Inc.
, automotive replacement parts manufacturer, announced that it
expects to incur an after-tax loss, before any reserves for discontinued
operations, during its 1997 fourth quarter, the three-month period ended
December 31, 1997. Mr. Lawrence Sills, President said "the unexpected fall-
off in sales experienced throughout the industry during this period had a
significant negative impact on the Company's earnings. This sales softness,
coupled with the amortization of new business expense incurred in late 1996
and early 1997, and under absorption of overhead expenses in our factories,
resulting from production cut-backs implemented to achieve a $40 million
inventory reduction, will result in an estimated fourth quarter after-tax loss
of at least 30 cents per share." Mr. Sills added, "The Company has reacted
quickly to implement immediate and substantial cost reductions, including
labor force and overhead cost reductions in every area of the business and the
retention of an outside consultant to assist in these efforts. The Company
believes these measures should permit it to return to profitability in the
first quarter of 1998."
Mr. Sills further stated, "it is important to put the situation in the
proper perspective. Although the Company had a fourth quarter loss, the full
year of 1997, on an operating basis, was profitable, with estimated after-tax
earnings, before any charges for discontinued operations, of at least
$8 million (61 cents per share). The Company also generated positive cash
flow from operations of nearly $60 million in 1997. The Company remains in a
very strong financial condition." Mr. Sills also noted that it is anticipated
that after taking into account charges for discontinued operations, the
Company will report a loss for 1997.
Mr. Michael Bailey, Chief Financial Officer of Standard Motor Products
said, "due to near-term uncertainty in the industry, the anticipated loss
incurred by the Company during the fourth quarter of 1997 and delays in
completing the swap of businesses with Cooper Industries, as the Company
pursued the required government approvals, the Company did not complete
arrangements for the $185 million committed bank line of credit it was
pursuing. The Company is currently in discussions with its present bank group
to arrange a committed bank facility of approximately $108 million. Based on
its current projections, the Company expects that this $108 million facility,
along with the continuation of other sources of financing that were previously
planned to be consolidated within the $185 million line, will be adequate to
meet its working capital needs. In addition, the Company currently has more
than $35 million in cash or liquid investments, which it believes is adequate
for its working capital needs while it completes arrangements with its banks.
The Company has taken actions to significantly reduce its financing
requirements for 1998. The Company is fully current on all principal and
interest payments and is not in default on any of its outstanding long-term
debt."
Mr. Sills said, "Standard Motor Products anticipates a first quarter 1998
closing of the business swap with Cooper Industries and a second quarter
closing of the sale of its Service Line business to R&B, Inc. These actions
should result in profit improvements for the Company in the second half of
1998 and beyond. The cost reductions discussed above should also produce
favorable benefits to earnings, beginning as early as the first quarter of
1998. We believe we have the management team and plans in place to insure the
Company's long-term success."
This news release contains certain forward-looking statements that involve
risks and uncertainties. Actual results, events and performance could differ
materially from those contemplated by these forward-looking statements. Among
the factors that could cause actual results, events and performance to differ
materially are risks and uncertainties discussed in this news release and
those detailed from time-to-time in prior public statements and the Company's
filings with the Securities and Exchange Commission, including the Company's
annual report on Form 10-K for the fiscal year ended December 31, 1996 and the
Company's quarterly reports on Form 10-Q for the quarterly periods ended March
31, June 30 and September 31, 1997.
SOURCE Standard Motor Products, Inc.