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, 1997
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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
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
--- ---
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, 1997 Common Stock 13,130,560
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL AND OTHER INFORMATION
MARCH 31, 1997
PART 1 - FINANCIAL INFORMATION
------------------------------
Item 1 Page No.
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CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996 2 & 3
CONSOLIDATED STATEMENTS OF EARNINGS AND
RETAINED EARNINGS for the Three-Month periods ended
March 31, 1997 and 1996 4
CONSOLIDATED STATEMENTS OF CASH FLOWS for the
Three-Month periods ended March 31, 1997 and 1996 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 - 8
Item 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9 - 10
PART II - OTHER INFORMATION
---------------------------
Item 6
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Exhibits and Reports on Form 8-K 11
Signature 11
- 1 -
[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
------
<CAPTION>
March 31, December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,416 $ 4,664
Marketable securities (Note 2) 2 2
Accounts and notes receivable, net of
allowance for doubtful accounts and
discounts of $5,994 (1996 - $5,499) 196,723 156,795
Inventories (Note 3) 230,667 229,210
Deferred income taxes 20,668 20,668
Prepaid expenses and other current assets 11,583 7,131
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Total current assets 462,059 418,470
Property, plant and equipment, net of
accumulated depreciation (Note 4) 127,100 126,919
Goodwill, net 34,335 34,417
Other assets (Note 9) 46,216 45,000
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Total assets $ 669,710 $ 624,806
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</TABLE>
See accompanying notes to consolidated financial statements.
- 2 -
[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except for shares and per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<CAPTION>
March 31, December 31,
1997 1996
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(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable - banks $ 99,866 $ 74,568
Current portion of long-term debt (Note 7) 17,215 17,492
Accounts payable 46,733 30,619
Sundry payables and accrued expenses 64,215 59,031
Accrued customer returns 17,595 15,061
Payroll and commissions 7,171 9,973
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Total current liabilities 252,795 206,744
Long-term debt (Note 7) 170,250 172,387
Deferred income taxes 4,160 4,188
Postretirement benefits other than pensions
and other accrued liabilities 19,664 18,576
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Total liabilities 446,869 401,895
Minority interest (267) (429)
Commitments and contingencies (Note 7)
Stockholders' equity (Notes 6 and 7):
Common stock-par value $2.00 per share
Authorized - 30,000,000 shares
Issued - 13,324,476 shares in 1997 and 1996
(including 193,916 and 194,175 shares held as
treasury shares in 1997 and 1996, respectively) 26,649 26,649
Capital in excess of par value 2,703 2,705
Loan to Employee Stock Ownership Plan (ESOP) (1,665) (3,345)
Minimum pension liability adjustment 764 764
Retained earnings 198,249 200,235
Foreign currency translation adjustment 142 71
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226,842 227,079
Less: treasury stock-at cost 3,734 3,739
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Total stockholders' equity 223,108 223,340
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Total liabilities and stockholders' equity $ 669,710 $ 624,806
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</TABLE>
See accompanying notes to consolidated financial statements.
- 3 -
[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
(Dollars in thousands, except for shares and per share data)
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
---------------------------
1997 1996
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<S> <C> <C>
Net sales $ 189,025 $ 174,440
Cost of sales 130,109 118,540
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Gross profit 58,916 55,900
Selling, general and
administrative expenses 55,398 46,552
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Operating Income 3,518 9,348
Other income (expense) - net 523 630
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4,041 9,978
Interest expense 5,028 3,845
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Earnings (loss) before taxes and
minority interest (987) 6,133
Minority interest (146) --
Income taxes (Note 5) (197) 1,840
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Net earnings (loss) $ (936) $ 4,293
Retained earnings
at beginning of period 200,235 189,837
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199,299 194,130
Less: cash dividends for period 1,050 1,050
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Retained earnings at end of period $ 198,249 $ 193,080
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Per share data:
Net earnings (loss) per share ($0.07) $0.33
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Dividends per common share $0.08 $0.08
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Average number of common shares 13,130,465 13,127,826
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</TABLE>
See accompanying notes to consolidated financial statements.
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[CAPTION]
<TABLE>
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (936) $ 4,293
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation and amortization 4,886 4,220
(Gain) loss on disposal of property,plant & equipment - - (7)
Proceeds from sales of trading securities - - 3,951
Purchases of trading securities - - (5,794)
Change in assets and liabilities, net of effects
from acquisitions:
(Increase) in accounts receivable, net (35,094) (60,755)
Decrease in inventories 2,917 4,244
Decrease (Increase) in other assets 312 (1,368)
Increase in accounts payable 12,120 4,484
(Decrease) in other current assets and liabilities (7,248) (2,782)
Increase in sundry payables and accrued expense 6,628 3,580
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Net cash (used in) operating activites (16,415) (45,934)
Cash flows from investing activities:
Purchases of held-to-maturity securities - - (81)
Capital expenditures, net of effects from acquisitions (3,889) (5,259)
Payments for acquisitions, net of cash acquired (6,157) (9,953)
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Net cash (used in) investing activities (10,046) (15,293)
Cash flows from financing activities:
Net borrowings under line-of-credit agreements 25,298 47,600
Proceeds from issuance of long-term debt - - 20,884
Principal payments of long-term debt (1,731) (3,847)
Reduction of loan to ESOP 1,680 1,680
Dividends paid (1,050) (1,050)
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Net cash provided by financing activities 24,197 65,267
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Effect of exchange rate changes on cash 16 2
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Net (decrease) increase in cash (2,248) 4,042
Cash and cash equivalents at beginning of the period 4,664 10,856
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Cash and cash equivalents at end of the period $ 2,416 $ 14,898
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 4,429 $ 1,570
Income taxes 853 2,922
</TABLE>
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
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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, 1996.
The consolidated financial statements include the accounts of the Company and
all domestic and international companies in which the Company has more than a
50% equity ownership. The Company's investments in unconsolidated affiliates
are accounted for on the equity method. All significant inter-company items
have been eliminated.
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 1996 have been reclassified to conform
with the 1997 presentation.
Note 2
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At March 31, 1997, held-to-maturity securities amounted to approximately
$7,200,000. Held-to-maturity securities consist primarily of corporate debt
securities which are reported at unamortized cost which approximates fair value.
As of March 31, 1997, $7,200,000 mature within five to ten years.
The first-in, first-out method is used in computing realized gains or losses.
Note 3
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Inventories
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(Dollars in thousands)
March 31, December 31,
1997 1996
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(Unaudited)
Finished goods $ 152,551 $ 152,404
Work in process 4,688 4,283
Raw materials 73,428 72,523
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Total inventories $ 230,667 $ 229,210
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Note 4
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Property, Plant and Equipment
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(Dollars in thousands)
March 31, December 31,
1997 1996
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(Unaudited)
Land, buildings and improvements $ 72,909 $ 72,785
Machinery and equipment 93,208 93,446
Tools, dies and auxiliary equipment 9,274 9,196
Furniture and fixtures 21,490 21,323
Leasehold improvements 7,180 7,105
Construction in progress 15,226 12,013
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219,287 215,868
Less accumulated depreciation 92,187 88,949
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Total property, plant and equipment-net $ 127,100 $ 126,919
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5
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The provision for taxes is less than the normal statutory rate primarily
because earnings of a subsidiary operating in Puerto Rico, amounting to
approximately $2,126,000 and $3,378,000 for the three months ended March 31,
1997 and 1996, respectively are exempt from United States income taxes and are
partially exempt from Puerto Rican income taxes.
Note 6
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At March 31, 1997, 470,000 Shares of authorized but unissued common stock
where reserved for issuance under the Company's stock option plans, of which
425,000 Shares were subject to outstanding options. 193,916 Shares held in
treasury will be used to meet requirements for the Company's stock option
program.
142,000 Outstanding options were vested at March 31, 1997. 283,000 of the
unvested outstanding options will become vested starting April 4, 1997 through
April 4, 2000.
Note 7
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Long-Term Debt
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(Dollars in thousands)
March 31, December 31,
1997 1996
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(Unaudited)
Long-term debt consists of:
6.81% senior note payable $ 73,000 $ 73,000
7.85% senior note payable 55,714 55,714
9.47% senior note payable 30,000 30,000
Credit Facility ($20 Million Canadian) 14,504 14,624
7.88% - 10.08% purchase obligations 5,830 5,997
Intermotor Facilities 5,191 5,464
Credit Agreement 1,674 3,354
Other 1,552 1,726
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187,465 189,879
Less current portion 17,215 17,492
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Total noncurrent portion of
long-term debt $ 170,250 $ 172,387
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Under the terms of the $73,000,000 senior note agreement, the Company is
required to repay the loan in seven equal annual installments beginning in
2000.
Under the terms of the $55,714,000 senior note agreement, the Company is
required to repay the loan in six equal annual installments from 1997 through
2002.
Under the terms of the $30,000,000 senior note agreement, the Company is
required to repay the loan in seven (7) varying annual installments beginning
in 1998. Subject to certain restrictions, the Company may make prepayments
without premium beginning in 1998.
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STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 (Continued)
- ------------------
Under the terms of the $20,000,000 CDN Credit Agreement, the Company is
required to repay the loan with four (4) equal annual installments of
$2,000,000 CDN beginning in 1998 with a final payment of $12,000,000 CDN due
in 2002. Subject to certain restrictions, the Company can make prepayments
without premium. The Credit Agreement has various interest rate options.
The purchase obligations, due under agreements with municipalities, mature in
annual installments through 2003, and are secured by certain property, plant,
and equipment.
The Company acquired a 73.4% equity interest in Intermotor Holdings Limited
assuming various existing credit facilities which mature by 2001.
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 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
agreement. However, the Company does not anticipate nonperformance by the
counterparties.
Certain loans agreements contain restrictive covenants which require the
maintenance, on a quarterly basis, of minimum working capital and tangible net
worth, as defined, and limit, among other items, investments, indebtedness and
distributions for the payment of dividends and the acquisition of capital
stock. At March 31, 1997, the Company has unrestricted retained earnings of
$34,214,000.
Note 8
- ------
In January 1997, the Company acquired the assets of the Filko Automotive
Division of F & B Manufacturing Company for approximately $6,200,000 plus
certain future consulting and non-compete payments. Located in Des Plaines,
Illinois, Filko Automotive assembles and distributes ignition, emissions and
wire products to traditional and retail aftermarket customers in North America
under the Filko and Cobra brands. The acquisition had a $312,000 loss for the
three months ending March 31, 1997.
Note 9
- ------
Other assets primarily consist of deferred new customer acquisition costs,
marketable securities, unamortized customer supply agreements, equity in joint
ventures and pension assets.
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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
- -------------------------------
As of March 31, 1997, the Company had stockholders' equity of $223,108,000 and
working capital of $209,264,000. The Company expects capital expenditures to
be approximately $16,000,000 primarily for new machinery and equipment for the
remainder of 1997. The Company utilized funds from its lines of
credit to acquire Filko Automotive during the first quarter of 1997. At March
31, 1997, the Company had unused lines of credit aggregating approximately
$35,000,000. The Company's cash requirements are expected to peak in the
second quarter of this year at a level which could exceed the available credit
lines. The Company is working with its banks to expand the credit facility
to provide for the Company's capital needs. Completion of this new facility
is expected by the end of the second quarter. In the interim, the Company is
securing bridge financing from its lenders to accommodate its peak cash needs
during the second quarter.
During the three months ended March 31, 1997, total debt increased by
$22,884,000. This was primarily due to an increase in accounts receivable and
the Filko acquisition completed in the first quarter. During the three-month
period ended March 31, 1997, accounts receivable increased by $39,928,000
primarily due to receivables associated with increased sales versus the fourth
quarter of 1996 and the accounts receivable resulting from the recent
acquisition.
INTERIM RESULTS OF OPERATIONS
- -----------------------------
Comparison of the three months ended March 31, 1997 to the three months
- -----------------------------------------------------------------------
ended March 31, 1996.
- ---------------------
Net sales for the current quarter increased $14,585,000 or 8.4% from the
comparable period in 1996 primarily due to sales resulting from recent
acquisitions. Excluding the revenues from acquisitions not present in last
year's first quarter, net sales decreased in the first quarter of 1997 by
2.8%. Sales decreases at the Engine Management and Service Line
Divisions were partially offset by sales increases at the Brake Products
Division and in Canada.
The gross margin percentage for the first quarter of 1997 of 31.2% was below
the 32.0% during the first quarter in 1996. The decline in gross margin for
the quarter was primarily due to lower manufacturing throughput in the Engine
Management business, as we reduced inventory, and a higher mix of lower margin
business.
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INTERIM RESULTS OF OPERATIONS (Continued)
- -----------------------------------------
Selling, general and administrative (S.G. & A.) expenses increased by
$8,846,000 over the comparable quarter in 1996. As a percentage of net sales,
S.G.& A. increased by 2.6 percentage points (29.3% versus 26.7% in 1996). This
S.G.& A. increase was primarily attributable to acquisitions not present in
the first quarter of 1996 and new customer acquisition costs related primarily
to a major customer changeover. Excluding these two items, S.G. & A. expenses
increased by $1,900,000 or 3.4% compared with a year ago.
Interest expense increased by $1,183,000 as compared to 1996 due primarily to
higher average borrowings needed to finance recent acquisitions in the second
half of 1996 and the first quarter of 1997.
Taxes based on earnings decreased by $2,037,000 as compared to 1996 due to
reduced earnings.
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PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibit(s)
----------
Number Description Method of Filing
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27 Financial Data Schedule Filed with this Document
(b) Reports on Form 8-K
-------------------
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.
-------------------------------
(Registrant)
May 15, 1997 Michael J. Bailey
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(Date) Vice President Finance,
Chief Financial Officer
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,416
<SECURITIES> 2
<RECEIVABLES> 202,717
<ALLOWANCES> 5,994
<INVENTORY> 230,667
<CURRENT-ASSETS> 462,059
<PP&E> 219,287
<DEPRECIATION> 92,187
<TOTAL-ASSETS> 669,710
<CURRENT-LIABILITIES> 252,795
<BONDS> 170,250
0
0
<COMMON> 26,649
<OTHER-SE> 196,459
<TOTAL-LIABILITY-AND-EQUITY> 669,710
<SALES> 189,025
<TOTAL-REVENUES> 189,025
<CGS> 130,109
<TOTAL-COSTS> 130,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 207
<INTEREST-EXPENSE> 5,028
<INCOME-PRETAX> (987)
<INCOME-TAX> (197)
<INCOME-CONTINUING> (936)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (936)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
