STANDARD MOTOR PRODUCTS, INC. ANNOUNCES
THIRD QUARTER 2002 RESULTS AND A QUARTERLY DIVIDEND
New York, NY, October 24, 2002……Standard Motor Products, Inc. (NYSE:SMP), an automotive replacement parts manufacturer and distributor, reported consolidated net sales for the third quarter of 2002, of $182.6 million, $25.9 million, or 16.5%, higher than consolidated net sales of $156.7 million during the comparable quarter a year ago. Earnings from continuing operations for the third quarter of 2002 were $9.8 million, or 72 cents per diluted share, compared to $3.7 million, or 32 cents per diluted share for the third quarter of 2001.
Consolidated net sales for the nine month period ended September 30, 2002 were $488 million, slightly lower than net sales of $492.6 million in the comparable period in 2001. Earnings from continuing operations for the nine month period ended September 30, 2002 were $14.1 million, or $1.14 per diluted share, compared to $6.6 million, or 56 cents per diluted share, for the comparable period of a year ago.
Mr. Lawrence Sills, Standard Motor Products, Inc.’s Chief Executive Officer, said, "We are very pleased with our sales improvement in the third quarter of 2002. Temperature Control’s consolidated net sales increased $15.7 million, or 21.4% compared to the prior year’s third quarter, with the first warm summer in four years. Engine Management’s consolidated net sales also improved, up $9.1 million, or 12.3% in the third quarter of 2002 compared to 2001’s third quarter, assisted by previously announced new accounts."
Mr. Sills further stated, "Gross margins for the third quarter of 2002 increased 1.5 percentage points to 27.2% over the comparable quarter of last year. Year-to-date gross margins improved by 1.9 percentage points to 25.8%. By segment, year-to-date gross margins in Engine Management improved 3.1 percentage points to 30.0% and in Temperature Control improved 1.8 percentage points to 20.7%. The improvements in gross margins reflect the return to more normal production levels and our ongoing cost-reduction activities."
"We continue to concentrate on reducing capital employed in the business. Net inventory has been reduced $15.5 million compared to September 2001 levels, bringing our total inventory reduction since January 2001 to $72.5 million. In addition, our total borrowings of $208.4 million represent a reduction of $35.4 million compared to the September 2001 level", Mr. Sills noted.
The Company recently conducted a review of its contingent liabilities associated with asbestos. As previously disclosed in its periodic filings with the Securities and Exchange Commission, in 1986 we acquired the EIS brake business, which we subsequently sold in March 1998. In accordance with the purchase agreement for this business, we agreed to assume liability for all new asbestos-related claims filed after September 1, 2001. In order to quantify its possible future asbestos liability, an actuarial study by a leading actuarial firm with expertise in assessing asbestos-related liabilities was engaged to estimate the potential claim liability over approximately the next fifty years. According to the actuarial study, indemnity payments are estimated to peak at $1.7 million in 2003, tapering off to below $1 million by 2015. The gross, non-discounted amount of indemnity payments for the entire fifty-year period is estimated to be $27.3 million. Based on the results of the actuarial study, the Company has determined to take a pre-tax charge in the third quarter of 2002 of approximately $22.6 million to bring the reserve the Company maintains for potential asbestos-related damages of settlement awards up to this total amount.
As a result of the aforementioned asbestos charge, the net loss for the three-month period ended September 30, 2002 was $7.1 million, or 42 cents per diluted share, as compared to $3.7 million of net earnings, or 32 cents per diluted share, for the comparable 2001 quarter. With respect to the nine month period ended September 30, 2002, the net loss was $19.9 million, or $1.16 per diluted share, after giving effect to the asbestos charge and $16 million for the cumulative effect of an accounting change related to goodwill in 2002. This compares to $3.8 million of net earnings, or 33 cents per diluted share, for the comparable 2001 nine month period. The nine month period ended September 30, 2001 included a $2.8 million extraordinary loss on the early retirement of debt.
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 2, 2002 to stockholders of record on November 15, 2002.
Standard Motor Products will hold a conference call at 10:00 AM, Eastern Time, on Friday, October 25, 2002. The dial in number is 1-800-540-0559. The playback number is 1-800-934-2729 and the ID# is J405.
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, including, without limitation, those related to estimates of asbestos-related contingent liabilities, and 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.
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