NEW YORK — Standard Motor Products, an automotive replacement parts manufacturer and distributor, has reported its consolidated financial results for the third quarter, which ended on Sept. 30.
Consolidated net sales for the third quarter of 2004 were $203.5 million, compared to consolidated net sales of $214.5 million during the comparable quarter in 2003. Earnings from continuing operations for the third quarter of 2004 were $1.3 million or 7 cents per diluted share, compared to $2 million or 11 cents per diluted share in the third quarter of 2003.
Consolidated net sales for the nine month period which ended on Sept. 30, were $643.3 million, compared to consolidated net sales of $516.3 million during the comparable period in 2003. Earnings from continuing operations for the nine months were $8.3 million or 43 cents per diluted share, compared to $5.7 million or 39 cents per diluted share for the comparable period in 2003.
Lower sales in the third quarter occurred primarily in the Temperature Control segment. Temperature Control net sales were down by $ 14.4 million for the third quarter and $9 million for the nine months, a result of one of the coldest summers in history. The segment worked aggressively to reduce costs in manufacturing and selling, general and administrative expenses to reflect the reduced sales levels.
With the acquisition of Dana Engine Management (DEM), which occurred June 30, 2003, this was the first quarter where the company was able to report comparable numbers versus the prior year. Engine Management sales were approximately 2 percent ahead for the quarter, and operating profit, excluding integration costs, increased by $5.6 million to $13 million.
CEO Lawrence Sills commented, “We are pleased that the integration has proceeded on schedule. All DEM operations – Manufacturing, Distribution, MIS, Finance, Sales and Marketing – have been transferred to SMP locations. As planned, we have exited seven of the acquired nine facilities, and this has been accomplished within our original time frame of twelve to eighteen months. The moves have been completed within budget, and thus far we have maintained all the DEM customers.
“We are beginning to see the results of the cost savings within our Engine Management segment, as reflected in the improved operating profit before integration costs. However, we still have work to do, especially in the area of gross margin. We are confident that, as we achieve the planned material product cost savings, and our new employees achieve normal efficiency, we will accomplish our target of $55 million annual savings from the DEM acquisition. It is our goal to begin approaching this number by the second half of 2005.”
The company, in accordance with its accounting policy, recently conducted an actuarial study of its contingent liabilities associated with asbestos. As previously disclosed, in 1986 the company acquired a brake business, which was subsequently sold in March 1998 and which is accounted for as a loss from discontinued operation on the consolidated financial statements. The updated study has estimated an undiscounted liability for settlement payments, excluding legal costs, ranging from $28.2 to $62.9 million for the period through 2049. The change from the prior year study was a $1.5 million increase for the low end of the range and a $7.9 million decrease for the high end of the range. As a result, in September 2004, an incremental $3 million provision was added to the asbestos accrual increasing the reserve to approximately $28.2 million. The company will perform an actuarial analysis during the third quarter of each year.
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