POMONA, Calif., Nov. 12, 1999 (PRIMEZONE) -- Keystone Automotive Industries, Inc. (Nasdaq:KEYS) today reported consolidated sales and earnings for the second quarter ended October 1, 1999, which were negatively impacted by the recent adverse trial decision against State Farm Insurance Company.
The company reported net income for the quarter of $3.2 million, or $0.20 per diluted share, on net sales of $92.5 million, compared with net income of $4.1 million, or $0.23 per diluted share, on net sales of $81.4 million for the same period last year.
Net income for the year to date was $8.7 million, or $0.53 per diluted share, on net sales of $193.9 million, compared with net income of $7.9 million, or $0.49 per diluted share, on net sales of $151.3 million for the first six months of the previous year.
Charles J. Hogarty, president and chief executive officer, said "The second quarter of fiscal 2000 was a challenging one for Keystone. Shortly after the end of the quarter, State Farm received an adverse decision in a class action lawsuit involving the use of aftermarket parts. State Farm temporarily suspended the use of many aftermarket parts on October 7. Given the timing of the suspension, many collision shops working on State Farm estimates returned product shipped during the second quarter. These returns were estimated and booked into the second quarter.
The gross margin during the second quarter was impacted by two factors. In March of this year, the freight rates for marine cargo increased by 40%. We began to feel the effects during the second quarter in certain geographic areas where, due to competitive pressures, we were unable to pass along the increase. The second factor was the decision to ramp-up our bumper recycling capacity. We did this in anticipation of a possible adverse decision in the State Farm trial, as this activity involves recycling OEM product, which will not be subject to any aftermarket parts suspension. On a short-term basis, this ramp-up had a negative impact on margins.
Other factors affecting the results for the quarter include start-up expenses and operating losses incurred in connection with the company's opening of distribution facilities in Little Rock, Arkansas, Elkhart, Indiana and Cincinnati, Ohio, in addition to expenses relating to the acquisition of Supreme Bumper. In addition, we expensed approximately $200,000 relating to the company's Y2K compliance program and approximately $100,000 of legal expenses relating to the company's attempt to recover fees paid with respect to an aborted software installation.
On November 8, 1999 Nationwide Insurance Company and Farmers Insurance Company also temporarily suspended the use of many aftermarket replacement parts. It is very difficult for us to predict with any degree of accuracy what the impact of these temporary bans will be. Much will depend on whether or not other major automobile insurers use aftermarket parts. At this time, our best estimates for the second half of fiscal 2000 are revenues of between $150 million and $180 million and earnings of between $0.40 to $0.50 per share. However, there can be no assurance that these estimates will prove accurate."
The company also announced that its board of directors has authorized the repurchase of up to $10 million of Keystone common shares.
Keystone Automotive Industries, Inc. distributes aftermarket collision replacement parts in the United States primarily to collision repair shops through its 118 warehouses, of which 21 serve as regional hubs. Its product lines consist of automotive body parts, bumpers, auto glass and remanufactured alloy wheels, as well as paint and other materials used in repairing a damaged vehicle. These products comprise more than 19,000 stock keeping units that are sold to more than 25,000 repair shops throughout the nation.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. The statements contained in this press release that are not historical facts are forward-looking statements based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the impact on the Company of (i) an unfavorable article on aftermarket collision parts in Consumer Reports, (ii) the potential impact on the Company if other insurane companies also suspend specifying many non-OEM crash parts, (iii) the implementation of a new comprehensive enterprise software package for accounting, distribution and inventory planning and year 2000 compliance, (iv) the impact on the sales of the Company as a result of the recent verdict against State Farm relating to its specification of afermarket collision replacement parts and the decision of State Farm, National Insurance and Farmers Insurance to suspend specifying many non-OEM crash parts in connection with the repair of damaged vehicles which they insure, and iv) the impact of pending and threatened class action law suits against various insurance companies relating to the use of aftermarket collision replacement parts. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the Company's business, see the Company's filings with the Securities and Exchange Commission.
Keystone Automotive Industries, Inc.
Condensed Consolidated Statements of Income
(In thousands, except per share and share amounts)
(Unaudited)
13 13 27 26
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
10/1/99 9/25/98 10/1/99 9/25/98
Net sales $ 92,501 $ 81,438 $ 193,882 $ 151,310
Cost of sales 53,218 46,404 109,693 85,938
Gross profit 39,283 35,034 84,189 65,372
Operating expenses:
Selling and
Distribution
Expenses 26,848 22,264 55,422 41,812
General and
Administrative 7,566 6,341 15,223 11,127
Service Center
Consolidation
Costs --- 402 --- 402
Operating income 4,869 6,027 13,544 12,031
Other income 633 742 1,319 1,182
Interest expense (93) (12) (141) (23)
Income before
income taxes 5,409 6,757 14,722 13,190
Income taxes 2,218 2,675 6,036 5,248
Net income $ 3,191 $ 4,082 $ 8,686 $ 7,942
Earnings per share:
Basic $ 0.20 $ 0.23 $ 0.53 $ 0.49
Diluted $ 0.20 $ 0.23 $ 0.53 $ 0.49
Weighted average
shares outstanding:
Basic 16,117,000 17,587,000 16,435,000 16,113,000
Diluted 16,219,000 17,797,000 16,520,000 16,363,000
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