FOURTH QUARTER 1999 OUTLOOK
New York, NY, January 5, 2000……..Standard Motor Products, Inc. (NYSE:SMP), automotive replacement parts manufacturer and distributor, announced today that losses in the fourth quarter, before provisions for non-recurring items, will exceed expectations, bringing net income for the full year, before giving effect to the non-recurring items, to a level approximately $7-8 million below 1998. EBITDA for the full year 1999 is estimated at $56 million vs. $58 million in 1998.
Gross sales for the fourth quarter are estimated at $134 million compared with $147 million for the fourth quarter of 1998. Net losses for the fourth quarter of 1999 are estimated at $11 million prior to provisions for non-recurring items.
Lawrence I. Sills, President, stated, "Due to the highly seasonal nature of our business, the fourth quarter is normally forecast at a break-even or slight loss. This year, due to a number of factors, the loss will be greater than previously anticipated. First, Four Seasons heater parts sales are below forecast, due to the mild weather conditions prevailing in most of the country. Second, several of our factories, most specifically Puerto Rico, ran well below capacity, as we reduced our Engine Management inventory by $5 million. This hurt gross profit margins. However, since the beginning of December, our Puerto Rico factory is back to full production and is scheduled to remain so throughout 2000.
"The largest single reason, however, is an unexpected and unprecedented level of product returns at Four Seasons, which came in at the tail end of the year. Some of this is the result of a weak air conditioning season in much of the country compared to 1998, which left customers with larger than expected stocks. Another significant portion has been the increased cost of dealing with inventories and customers acquired as part of the Cooper transaction. However, we expect these costs to diminish in the future as the Cooper inventories become fully absorbed. In addition, we are substantially tightening our rules and procedures for accepting all customer returns in 2000. We expect to revert to more normal levels of customer returns in the future."
Mr. Sills continued, "While we are disappointed with these results, we remain fully confident about our ability to achieve our profit forecast goals for 2000 and beyond. We have completed all of our planned facility moves, consolidating three distribution centers into one for Four Seasons; merging the Eaglemotive fan clutch acquisition into our Hayden operation in California; and moving two US wire manufacturing plants into a single facility in Reynosa, Mexico. In addition, we have taken steps to improve our gross margin at Four Seasons, have reduced salaried personnel throughout our company, and have exited the Heat Battery business, which was operating at a loss. We believe that our prior estimate of $10 million in cost reductions for 2000 will not only be achieved but surpassed. Further consolidations and improvements are planned for 2001 and beyond."
Further, the Company announced that it will take a fourth quarter charge to earnings for non-recurring items of approximately $7 million after tax to cover the cost of consolidating the remaining Cooper inventories in the field, closing the Heat Battery joint venture in Canada, and the one-time cost of layoffs to achieve the cost reduction targets.
Mr. Sills concluded, "We will continue our program of purchasing our stock. We still have 200,000 shares remaining from prior authorizations and our Board has approved the purchase of an additional 350,000 shares. Some of these shares are to be used to fund our continuing ESOP program."
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