Standard Products Reports Fiscal 1999 Second Quarter Results
26 January 1999
Standard Products Reports Fiscal 1999 Second Quarter Results
DEARBORN, Mich., Jan. 26 -- The Standard Products Co.
today announced results for its second quarter of fiscal 1999,
ended December 31, 1998. Net income for the quarter was $4.9 million, or
$0.30 diluted earnings per share of common stock, on sales of $276.2 million.
This compares with net income of $8.8 million, or $0.52 diluted earnings per
share, on sales of $282.5 million in the second quarter a year ago.
"These lower results reflect two major factors affecting our business: the
economic deterioration in Brazil and the resulting market decline and lower
profits in our European operations. In Brazil, we took immediate and drastic
cost-cutting measures, including reducing staffing levels by 55 percent.
While we believe these measures will help our Brazilian operations achieve
breakeven results in the second half of the year, they did not take effect
soon enough to have a significant impact on results in this quarter," said
Vice Chairman and CEO Ronald L. Roudebush.
"In Europe, we are faced with a different problem. While sales continue
to increase with new model penetrations, competitive pressures have driven
down the prices on this new business. The European auto makers reacting to
their competitive environment are asking for ongoing price givebacks, but the
social regulations in Europe make it difficult, if not impossible, for us to
react quickly in implementing the necessary cost reductions."
Second quarter sales for the Company's Transportation Equipment segment
were $242.0 million, a 2.7 percent decrease from 1998 second quarter sales of
$248.7 million. North American automotive sales declined by 6.7 percent from
$149.4 million to $139.3 million, due to exchange rate changes on the Canadian
dollar and to loss of the Jeep Grand Cherokee sealing business. Profitability
in the North American region equaled last year's level, notwithstanding the
sales decline. Sales of the Company's Nisco joint venture, which are not
consolidated, increased 5 percent during the quarter, and the unit returned to
profitability.
Sales in the Company's European automotive group increased by 10.2 percent
compared with the same period last year, rising from $58.2 million in fiscal
1998 to $64.1 million in fiscal 1999. Strong sales of the Opel Astra, Renault
Espace and other new models accounted for the increase. Second quarter sales
in Brazil declined by $13.0 million, or 62.4 percent, from the same period in
fiscal 1998, when sales were $20.8 million. While we expect sales in Brazil
for the balance of the fiscal year will continue to be below year-ago levels,
volumes are expected to be slightly higher than those reported for this
quarter.
Sales of the Company's Holm Industries subsidiary were up significantly
from last year's second quarter. The increase of $10.2 million, or 43.5
percent, includes the sales of OEM/Miller, which was acquired on August 14,
1998. The Company's Tread Rubber segment reported sales of $38.5 million.
This was unchanged from the second quarter of last year.
"Cost reduction remains the Company's primary focus to improve its
profitability in the short term," said Mr. Roudebush. "As part of this
effort, management has initiated a voluntary early retirement program for
certain qualified salaried employees in the United States. In addition, as
part of the reorganization announced in November, we have initiated a
worldwide analysis of the future capacity needs of each of our business units.
This is expected to be completed during the second half of this year and any
charges required will be recorded at that time. Excluding the impact of any
such charges, we believe that the results for the last half of fiscal 1999
will not exceed those of the same period in fiscal 1998. Major factors
contributing to the profitability decline include: reduced vehicle production
and economic difficulties in Brazil, reduced profitability in Europe and lower
projected volumes in our Tread Rubber segment."
Certain statements in this press release, especially those concerning the
Company's future earnings, constitute "forward-looking statements" as that
term is defined under the Private Securities Litigation Reform Act of 1995.
The achievement of the projections and estimates set forth is subject to
certain general risks and uncertainties, including economic and industry
conditions that affect all international businesses, as well as specific
risks, including but not limited to a prolonged recession in Brazil, and the
various factors contained in the reports filed by the Company with the
Securities and Exchange Commission.
Standard Products produces highly engineered polymer-based products and
systems on a global basis for the automotive, appliance and construction
industries. More information may be found on the Internet at
http://www.standardproducts.com.
THE STANDARD PRODUCTS COMPANY
Consolidated Earnings Summary (Unaudited) (000 omitted)
Three Months Six Months
Periods ended December 31, 1998 1997 1998 1997
Net sales $276,237 $282,544 $508,053 $528,717
Costs and expenses:
Cost of goods sold 245,815 243,240 455,243 462,176
Selling, general and
administrative expenses 19,909 19,832 38,082 37,156
Interest expense 3,588 3,202 6,561 6,158
Other (income) expense (534) 1,421 31 3,806
Income before taxes on income $7,459 $14,849 $8,136 $19,421
Provision for taxes on income 2,604 6,088 2,848 7,849
Net income $4,855 $8,761 $5,288 $11,572
Per share of common share:
Basic $0.30 $0.52 $0.32 $0.69
Diluted $0.30 $0.52 $0.32 $0.68
Dividends $0.18 $0.17 $0.35 $0.34
Average shares outstanding:
Basic 16,083 16,849 16,387 16,838
Diluted 16,087 16,926 16,397 16,907