FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the Quarterly Period Ended March 31, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 1-4743
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Standard Motor Products, Inc.
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(Exact name of registrant as specified in its charter)
New York 11-1362020
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
37-18 Northern Blvd., Long Island City, N.Y. 11101
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(Address of principal executive offices) (Zip Code)
(718) 392-0200
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Date Class Shares Outstanding
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March 31, 1995 Common Stock 13,122,826
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL AND OTHER INFORMATION
MARCH 31, 1995
PART 1 - FINANCIAL INFORMATION
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Item 1 Page No.
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CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994 2 & 3
CONSOLIDATED STATEMENTS OF EARNINGS AND
RETAINED EARNINGS for the Three-Month periods ended 4
March 31, 1995 and 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS for the Three-Month
periods ended March 31, 1995 and 1994 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 8
Item 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 9
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
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Item 6
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Exhibits and Reports on Form 8K 10
Signature 10
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[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
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March 31, December 31,
1995 1994
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(Unaudited)
Current assets:
Cash and cash equivalents $ 5,851 $ 2,796
Marketable securities (Note 2) 6,295 6,018
Accounts and notes receivable, net of
allowance for doubtful accounts and
discounts of $7,111 (1994 - $5,708) 131,419 109,966
Inventories (Note 3) 199,759 185,855
Prepaid taxes based on earnings
Deferred income taxes 20,111 20,111
Prepaid expenses and other current assets 5,685 4,131
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Total current assets 369,120 328,877
Property, plant and equipment, net of
accumulated depreciation (Note 4) 103,773 104,126
Other assets:
Other assets (Note 9) 32,651 29,348
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Total assets $ 505,544 $ 462,351
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[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for shares and per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
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March 31, December 31,
1995 1994
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(Unaudited)
Current liabilities:
Notes payable - banks $ 60,300 $ 6,600
Current portion of long-term debt (Note 7) 19,975 19,987
Accounts payable 35,812 40,517
Sundry payables and accrued expenses 58,365 62,066
Payroll and commissions 7,340 10,500
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Total current liabilities 181,792 139,670
Long-term debt (Note 7) 106,080 109,927
Deferred income taxes 4,863 4,863
Postretirement benefits other than pensions 13,156 12,802
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Total liabilities 305,891 267,262
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 6, 7 and 8):
Common stock-par value $2.00 per share
Authorized - 30,000,000 shares
Issued - 13,324,476 shares in 1995
and 1994
(including 201,650 and 203,650 shares held as 26,649 26,649
treasury shares in 1994 and 1993, respectively)
Capital in excess of par value 2,542 2,555
Loan to Employee Stock Ownership Plan (ESOP) (5,025) (6,705)
Minimum pension liability adjustment (1,204) (1,204)
Retained earnings 180,748 177,904
Foreign currency translation adjustment (125) (139)
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203,585 199,060
Less: treasury stock-at cost 3,932 3,971
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Total stockholders' equity 199,653 195,089
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Total liabilities and stockholders' equit $ 505,544 $ 462,351
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[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Dollars in thousands, except for shares and per share data)
(Unaudited)
For the Three Months Ended
March 31,
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1995 1994
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Net sales $ 159,720 $ 147,126
Cost of sales 105,521 96,900
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Gross profit 54,199 50,226
Selling, general and
administrative expenses 46,085 43,651
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Operating Income 8,114 6,575
Other income (expense) - net 378 228
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8,492 6,803
Interest expense 3,158 2,888
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Earnings before taxes 5,334 3,915
Taxes based on earnings (Note 5) 1,440 1,170
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Net earnings $ 3,894 $ 2,745
Retained earnings
at beginning of period 177,904 158,456
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181,798 161,201
Less: cash dividends for period 1,050 1,066
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Retained earnings at end of period $ 180,748 $ 160,135
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Per share data:
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Net earnings per share $ .30 $ .21
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Dividends per common share $.08 $.08
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Weighted average number of common
shares outstanding 13,122,648 13,271,090
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[CAPTION]
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
March 31,
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1995 1994
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Cash flows from operating activities:
Net Earnings $ 3,894 $ 2,745
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 3,187 2,815
(Gain) loss on sale of property,plant & equipment (11) 25
Proceeds from sales of trading securities 431
Purchases of trading securities (595)
Change in assets and liabilities:
(Increase) in accounts receivable, net (21,431) (20,978)
(Increase) in inventories (13,883) (1,600)
(Increase) decrease in other assets (3,300) 5,462
(Decrease) in accounts payable (4,709) (4,584)
(Decrease) in other current assets and liabilities (4,741) (5,237)
(Decrease) in sundry payables and accrued expenses (3,351) (758)
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Net cash (used in) operating activites (44,509) (22,110)
Cash flows from investing activities:
Purchases of held-to-maturity securities (106)
Proceeds from sales of marketable securities 402
Purchases of marketable securities (6,506)
Capital expenditures (2,825) (2,068)
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Net cash (used in) investing activities (2,931) (8,172)
Cash flows from financing activities:
Net borrowings under line-of-credit agreements 53,700 31,400
Principal payments of long-term debt (3,859) (3,854)
Reduction of loan to ESOP 1,680 1,680
Proceeds from exercise of employee stock options 26 303
Purchase of treasury stock (2,475)
Dividends paid (1,050) (1,066)
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Net cash provided by financing activities 50,497 25,988
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Effect of exchange rate changes on cash (2) (24)
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Net increase (decrease) in cash 3,055 (4,318)
Cash and cash equivalents at beginning of the period 2,796 12,346
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Cash and cash equivalents at end of the period $ 5,851 $ 8,028
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 943 $ 895
Income taxes 3,097 4,999
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The accompanying unaudited financial information should be read in conjunction
with the consolidated financial statements, including the notes thereto, for
the year ended December 31, 1994.
Management acknowledges its responsibility for the preparation of the
accompanying interim consolidated financial statements which reflect all
adjustments considered necessary, in the opinion of management, for a fair
statement of the results of interim periods presented. The results of
operations for the interim periods are not necessarily indicative of the
results of operations for the entire year.
Where appropriate, certain amounts in 1994 have been reclassified to
conform with the 1995 presentation.
Note 2
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". Prior years' financial statements have not
been restated to apply the provisions of SFAS No.115. The adoption of the
standard had an immaterial impact on the Company's financial position and
results of operations for the quarter ended March 31, 1995.
At March 31, 1995, held-to-maturity securities amounted to approximately
$10,896,000 and trading securities amounted to approximately $199,000.
Held-to-maturity securities consist primarily of U.S. Treasury Bills and
corporate debt securities which are reported at unamortized cost which
approximates fair value. As of March 31, 1995, $6,096,000 of the
held-to-maturity securities mature within one year and $4,800,000 mature
within five to ten years.
The first-in, first-out method is used in computing realized gains or losses.
Note 3
Inventories
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(Dollars in thousands)
March 31, December 31,
1995 1994
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(Unaudited)
Finished goods $ 123,917 $ 114,021
Work in process 17,477 19,336
Raw materials 58,365 52,498
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Total inventories $ 199,759 $ 185,855
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Note 4
Property, Plant and Equipment
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(Dollars in thousands)
March 31, December 31,
1995 1994
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(Unaudited)
Land and buildings $ 67,849 $ 67,819
Machinery and equipment 65,259 65,146
Tools, dies and auxiliary equipment 7,263 7,244
Furniture and fixtures 15,051 15,025
Leasehold improvements 4,669 4,641
Construction in progress 10,098 7,481
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170,189 167,356
Less accumulated depreciation 66,416 63,230
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Total property, plant and equipment - net$ 103,773 $ 104,126
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5
The provision for taxes is less than the normal statutory rate primarily because
earnings of a subsidiary operating in Puerto Rico, amounting to approximately
$3,123,000 and $2,134,000 for the three months ended March 31, 1995 and
1994, respectively, are exempt from United States income taxes and are
partially exempt from Puerto Rican income taxes.
Note 6
At March 31, 1995, 436,000 shares of authorized but unissued common
stock were reserved for issuance under the Company's stock option plans, of
which 286,000 shares were subject to outstanding options. 201,650 shares
held in treasury will be used to meet requirements for the Company's stock
option program.
36,000 outstanding options were vested at March 31, 1995. 62,500 of the
unvested outstanding options will become vested each May 2 beginning May
2, 1995.
Note 7
Long-Term Debt
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(Dollars in thousands)
March 31, December 31,
1995 1994
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(Unaudited)
Long-term debt consists of:
7.85% senior note payable $ 65,000 $ 65,000
10.25% - 10.50% senior note payable 2,000 4,000
9.47% senior note payable 30,000 30,000
6.01% senior note payable 15,000 15,000
Credit Agreement 5,034 6,714
7.50% - 10.50% purchase obligations 8,034 8,200
Floating rate purchase obligation 950 950
9.50% mortgage payable 37 50
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126,055 129,914
Less current portion 19,975 19,987
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Total noncurrent portion of
long-term debt $ 106,080 $ 109,927
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Under the terms of the $65,000,000 senior note agreement, the Company is
required to repay the loan in seven equal annual installments beginning in 1996.
Under the terms of the $4,000,000 senior note agreement, the Company is
required to repay the remaining loan in two equal annual installments ending
in 1996.
Under the terms of the $30,000,000 senior note agreement, the Company is
required to repay the loan in seven varying annual installments beginning in
1998. Subject to certain restrictions, the Company may make prepayments
without premium beginning in 1998.
Under the terms of the $15,000,000 senior note agreement, the Company is
required to repay the loan in full in 1995. The Company also entered into an
interest rate swap agreement. The swap agreement modifies the interest rate
on the $15,000,000 senior note agreement, adjusted favorably or unfavorably
for the spread between 5.66% and the 6-month reserve unadjusted London
Interbank Offering Rate ("LIBOR").
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 (Continued)
The Credit Agreement matures in varying annual installments through 1998 and
bears interest at the lower of 91% of prime rate, or 91% of the "LIBOR" plus
1.092%. The Company also entered into an interest rate swap agreement to
reduce the impact of changes in interest rates on its Credit Agreement. The
swap agreement modifies the interest rate on $6,075,000 of the Credit
Agreement, adjusted favorably or unfavorably for the spread between 77.52% of
the 3-month reserve unadjusted "LIBOR" and 7.69%. The proceeds of such
note were loaned to the Company's Employee Stock Ownership Plan (ESOP) to
purchase 1,000,000 shares of the Company's common stock to be distributed in
accordance with the terms of the ESOP established in 1989.
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate swap agreements. However, the Company
does not anticipate nonperformance by the counterparties.
The purchase obligations, due under agreements with municipalities, mature in
annual installments through 2003, and are secured by certain property, plant,
and equipment.
The floating rate purchase obligation matures in annual installments through
1999, bears interest at sixty-five percent of prime, and is secured by certain
property, plant and equipment.
The mortgage payable is due in installments through 1995.
Certain loan agreements require the maintenance of a specified amount of working
capital and limit, among other items, investments, leases, indebtedness and
distributions for the payment of dividends and the acquisition of capital stock.
At March 31, 1995, the Company had unrestricted retained earnings of
$13,130,000.
Note 8
In February 1995 the Company acquired, for approximately $3,900,000, the
assets and certain liabilities of PIK-A-NUT Corporation. Located in
Huntington, Indiana, PIK-A-NUT Corporation distributes a complete line of
general fasteners, brass fittings, expansion plugs and clamps primarily to the
automotive aftermarket. This acquisition will expand the capability of
Standard's Champ Service Line Division to supply a full line of service products
to the automotive aftermarket. The acquisition had an immaterial effect on
consolidated net earnings for the three months ended March 31, 1995.
Note 9
Other assets consist of unamortized customer supply agreements,
long-term investments, pension assets, equity in joint ventures, deferred
charges, security deposits and receivables due after one year.
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
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As of March 31, 1995, the Company was in a liquid position with
stockholders' equity of $199,653,000 and working capital of $187,328,000. The
Company expects capital expenditures to be approximately $15,000,000 for new
machinery and equipment for the remainder of 1995. At March 31, 1995,
the Company had unused lines of credit aggregating approximately $45,000,000
which will be used as a source of funding working capital requirements and
capital expenditures. The Company anticipates that its present sources of funds
will continue to be adequate to meet its needs.
As part of an ongoing operating strategy, the Company is reviewing potential
acquisition candidates in related automotive component businesses. If such
an acquisition is made, additional sources of capital could be required. It
presently is anticipated that any such acquisition could be funded in the
short term by presently available lines of credit with new long term financing
to follow.
INTERIM RESULTS OF OPERATIONS
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Comparison of the three months ended March 31, 1995 to the three months
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ended March 31, 1994.
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Net sales for the current quarter increased $12,594,000 or 8.6% from the
comparable quarter in 1994. Despite the unusually warm winter, all divisions
experienced sales growth of 5% or more for the quarter. This was primarily
attributable to strong pre-season orders of temperature control products and
opening orders shipped to the retail and Canadian markets.
The gross margin percentage for the first quarter of 1995 of 33.9% was slightly
below the 34.1% during the comparable quarter in 1994. This slight increase in
cost of goods sold as a percentage of net sales reflects the Company's continued
expansion into non-traditional markets, which generally have lower gross
margins, but require less selling, general and administrative support expense.
A lower recovery rate on returned goods and stocklift merchandise also impacted
gross margins for the quarter. Partially offsetting these factors was the
Company's continuing cost reduction programs.
Selling, general and administrative (S.G. & A.) expenses increased by $2,434,000
over the comparable period in 1994. This increase was primarily due to higher
variable distribution expenses, marketing cooperative programs and commission
fees due to increased sales, partially offset by lower new customer acquisition
costs and the Company's continuing cost reduction programs. As a percentage of
net sales, S.G.& A. expenses declined to 28.9% in 1995 compared to 29.7% in
1994. This percentage decrease was due in part to the continued expansion
into non-traditional markets which require less selling, general and
administrative support expense.
Other income - net increased by $150,000 primarily due to higher earnings at
Blue Streak Electronics, Inc., the Canadian joint venture, and a higher rate of
return on investments, partially offset by an increase in the loss on sale of
accounts receivable.
Interest expense increased by $270,000 due primarily to a higher average
effective borrowing rate on total borrowings and higher average
borrowings.
Taxes based on earnings increased by $270,000 due to higher earnings partially
offset by a lower effective tax rate of 27% in 1995 as compared to 29.9% in
1994. The lower effective tax rate in 1995 was primarily due to the higher
relative benefits from the Company's Puerto Rican subsidiary.
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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There were no reports on Form 8-K filed for this quarter.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STANDARD MOTOR PRODUCTS, INC.
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(Registrant)
May 8, 1995 Michael J. Bailey
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(Date) Vice President Finance,
Chief Financial Officer
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