Press Room
Press Releases - 2000
Keystone Automotive Industries Reports Sales And Earnings For Third Quarter
Board Of Directors Declare Dividend Distribution Of Preferred Share Purchase Rights
POMONA, Calif., Feb. 11, 2000 -- Keystone Automotive Industries, Inc. (Nasdaq:KEYS) today reported consolidated sales and earnings for the fiscal third quarter ended December 31, 1999, which were negatively impacted by the adverse trial decision against State Farm Insurance company, which is on appeal, and the subsequent temporary suspension of the use of aftermarket ports by State Farm, Farmers and Nationwide, along with several smaller auto insurers.
The company reported net income for the fiscal third quarter of $1.3 million, or $0.09 per diluted share, on net sales of $86.2 million, compared with net income of $5.0 million, or $0.28 per diluted share on net sales of $84.0 million for the same period last year.
Net income for the nine months ended December 31, 1999 was $10.0 million, or $0.62 per diluted share, on net sales of $280.1 million, compared with net income of $12.9 million, or $0.77 per diluted share, on net sales of $235.3 million for the comparable year ago period.
Charles J. Hogarty, President and Chief Executive Officer, said, "The aftermarket collision replacement parts business continues to present multiple challenges for the company, particularly in light of the adverse court decision in October 1999 against State Farm Insurance Company for sometimes specifying the use of aftermarket collision replacement parts. Subsequently, State Farm, Nationwide and Farmers insurance companies temporarily suspended the use of certain aftermarket parts.
"Overall, revenues were down approximately 7% compared to the three month period immediately preceding the court decision. This reduction in revenue had a negative impact on earnings as some operations were unable to maintain profitability due to lack of product line diversification. We have made a concerted effort in all locations to address this shortfall by emphasizing non-affected products such as paint, wheels, radiators, condensers and recycled bumpers, and we have implemented cost reduction policies at locations most seriously affected.
"The second factor affecting profitability was multiple startups that were completed prior to the State Farm decision, including new locations in Cincinnati, Ohio; Little Rock, Arkansas; Elkhart, Indiana; Lubbock Texas and Esconaba, Michigan.
"We have taken a number of steps in an effort to maintain and stabilize profitability in future quarters including a reduction in headcount of approximately 75 employees, along with our emphasis on non-affected product sales. On a positive note, we were able to maintain a forty-three percent gross margin during the December quarter.
"It is difficult to predict what will happen in the near term as much will depend on the timing and result of the State Farm appeal and the actions of major automobile insurance companies with respect to the use of aftermarket collision replacement parts.
"All of us at Keystone continue to believe in the long term viability of the industry in general and the company in particular. We believe that the availability of aftermarket collision parts creates significant benefits to consumers by providing competition in the marketplace and has contributed to lower auto insurance premiums. The availability of high quality aftermarket collision parts allows consumers to restore their vehicle to its pre-loss condition in a cost effective manner."
The company's board of directors today declared a dividend distribution of one Preferred Share Purchase Right on each outstanding share of Keystone Automotive Industries common stock. Subject to limited exceptions, the Rights will be exercisable if a person or group acquires 15% or more of the company's common stock or announces a tender offer for 15% or more of the common stock.
Under certain circumstances, each Right will entitle shareholders to buy one one-hundredth of a share on newly created Series A Junior Participating Preferred Stock of the company at an exercise price of $50. The Keystone Automotive Industries Board will be entitled to redeem the Rights at $.001 per Right at any time before one of the events described above.
The Rights are intended to enable all Keystone Automotive Industries shareholders to realize the long-term value of their investment in the company. According to Ronald G. Brown, chairman of the board, "They do not prevent a takeover, but should encourage anyone seeking to acquire the company to negotiate with the board of directors prior to attempting a takeover." The Rights Plan will expire in ten years.
The Rights are not being distributed in response to any specific effort to acquire control of the company. The Rights are designed to ensure that all Keystone Automotive Industries shareholders receive fair and equal treatment in the event of any proposed takeover of the company and to guard against partial tender offers, open market accumulations and other abusive tactics to gain control of Keystone Automotive Industries without paying all shareholders a control premium.
If a person becomes an Acquiring Person, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of common shares of Keystone Automotive Industries having a market value at that time of twice the Right's exercise price. Rights held by the Acquiring Person will become void and will not be exercisable to purchase shares at the bargain purchase price. An Acquiring Person is defined as a person who acquires 15% or more of the outstanding common stock of Keystone Automotive Industries. If Keystone Automotive industries is acquired in a merger or other business combination transaction which has not been approved by the board of directors, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of the acquiring company's common shares having a market value at that time of twice the Right's exercise price.
The dividend distribution to establish the new Rights Plan will be payable to shareholders of record on March 3, 2000. The Rights will expire in ten years. The Rights distribution is not taxable to shareholders.
Keystone Automotive Industries, Inc. distributes its products in the United States primarily to collision repair shops through its 118 distribution facilities, of which 22 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 22,000 stock keeping units that are sold to more than 25,000 repair shops throughout the nation.
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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) the implementation of a new comprehensive enterprise software package for accounting, distribution and inventory planning (ii) the impact on the Company of the verdict in the State Farm Mutual Automobile Insurance company class action, which is on appeal, and (iii) the possibility that other automobile insurance companies will suspend the use of aftermarket collision replacement parts in repairing covered vehicles. 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)
Thirteen Thirteen Forty Thirty-nine
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Dec. 31, Dec. 25, Dec. 31, Dec. 25,
1999 1998 1999 1998
Net sales $ 86,197 $ 84,017 $ 280,079 $ 235,327
Cost of sales 48,970 47,059 158,663 132,997
Gross profit 37,227 36,958 121,416 102,330
Operating expenses:
Selling and
distribution expenses 27,226 22,935 82,648 64,747
General and
administrative 7,971 6,590 23,194 17,717
Service Center
consolidation costs --- 103 --- 505
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Operating income 2,030 7,330 15,574 19,361
Other income 564 973 1,883 2,155
Interest expense (328) (3) (469) (26)
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Income before income taxes 2,266 8,300 16,988 21,490
Income taxes 929 3,348 6,965 8,596
Net income $ 1,337 $ 4,952 $ 10,023 $ 12,894
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Earnings per share:
Basic $ 0.09 $ 0.28 $ 0.62 $ 0.78
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Diluted $ 0.09 $ 0.28 $ 0.62 $ 0.77
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Weighted average
shares outstanding:
Basic 15,425,000 17,603,000 16,104,000 16,605,000
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Diluted 15,425,000 17,779,000 16,133,000 16,837,000
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CONTACTS:
Steven D. Stern
Pondel/Wilkinson Group
310-207-9300