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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005
OR
|_| 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)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes |X| No |_|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
As of the close of business on October 28, 2005, there were 19,849,651
outstanding shares of the registrant's Common Stock, par value $2.00 per share.
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EXPLANATORY NOTE
This Amendment No. 1 to our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2005, as originally filed on November 9, 2005 (the "Report"), is
being filed in response to comments received by us from the Staff of the
Securities and Exchange Commission (the "Staff"). This Amendment amends and
replaces in its entirety our disclosure in Item 4 of the Report to clarify (1)
management's assessment of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by the Report and (2) that we
design our disclosure controls and procedures to provide reasonable assurance of
achieving their desired control objectives.
Except to the extent expressly set forth herein, this Amendment speaks as of the
original filing date of our Report and has not been updated to reflect events
occurring subsequent to the original filing date other than those required to
reflect the effects of the comments received by the Staff. Accordingly, this
Amendment should be read in conjunction with our filings made with the
Securities and Exchange Commission subsequent to the filing of the Report,
including any amendments to those filings.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Exchange Act, as of the end of the
period covered by this Report. This evaluation also included consideration of
our internal controls and procedures for the preparation of our financial
statements as required under Section 404 of the Sarbanes-Oxley Act.
Grant Thornton LLP, our independent registered public accounting firm, has
provided us with an unqualified report on our consolidated financial statements
for 2004. However, in the course of conducting its assessment of our internal
controls and its audit of our financial statements for our year ended December
31, 2004, Grant Thornton advised management and the audit committee of our board
of directors that it had identified the following material weaknesses in our
internal controls:
(1) There were insufficient personnel resources within the accounting
and financial reporting function due to accounting staff (including
senior level employees) turnover occurring in the fourth quarter of
2004.
(2) There were deficiencies identified in the following areas of the
Company's information technology function which, when considered in
the aggregate, constitute a material weakness over financial
reporting:
o The Company's IT system is decentralized with disparate IT
platforms, business solutions and software applications being
utilized.
o System maintenance policies and procedures (including an
enhanced disaster recovery plan) require development and
adoption.
o Security of systems used for the entry and maintenance of
accounting records requires additional documentation and
scrutiny to ensure that appropriate access to such systems and
the data contained therein is restricted.
2
o A policy and procedure to address an overall security
framework, including password usage, intrusion detection,
system security monitoring and back-up recovery must be
written and implemented.
(3) There were deficiencies in the analysis and reconciliation of
general ledger accounts which were indicative of a material weakness
in controls over closing procedures, including the (a) month end cut
off processes, and (b) the accounting and reporting of restructuring
charges.
While these material weaknesses did not have an effect on our reported results,
they nevertheless constituted deficiencies in our disclosure controls. In light
of these material weaknesses and the requirements enacted by the Sarbanes-Oxley
Act of 2002 and the related rules and regulations adopted by the SEC, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the end of
the period covered by this Report, our disclosure controls and procedures needed
improvement and were not effective at a reasonable assurance level. Despite
those deficiencies in our disclosure controls, management believes that there
were no material inaccuracies or omissions of material facts in this Report.
Since the discovery of the material weaknesses in internal controls described
above, management is strengthening the Company's internal control over financial
reporting beyond what has existed in prior years, and we have taken various
actions to improve our disclosure controls and procedures and to remediate our
internal control over financial reporting including, but not limited to, the
following:
(1) We have engaged a search firm to assist us in the hiring of
additional senior level accounting staff. In the third quarter of
2005, we hired a Corporate Controller/Chief Accounting Officer and
an Assistant Corporate Controller. In addition, we have hired other
accounting personnel for our Engine Management division. We intend
to continue to fill other accounting positions by the end of 2005.
In addition, in the first quarter of 2005, we hired a Financial
Compliance Manager to help drive our Sarbanes-Oxley compliance
effort.
(2) We have re-allocated resources to our accounting and finance
department to strengthen our accounting function. In particular, in
the first quarter of 2005 we transferred one employee from our
European operations to become our Engine Management Group
Controller; in the second quarter of 2005 we transferred one
employee from our Canadian operations to serve in a senior level
accounting position in our Engine Management division; and in the
third quarter of 2005 we transferred one employee from our Engine
Management division to become our Corporate Accounting Manager. In
addition, in the fourth quarter of 2004 and third quarter of 2005 we
hired, and are continuing to utilize, an outside consultant and
temporary employee to assist us with our accounting function.
(3) In 2004, we retained an independent third party consulting firm to
assist us in the preparation, documentation and testing of our
compliance with Section 404 of the Sarbanes-Oxley Act of 2002. We
are continuing to utilize this consulting firm with our
Sarbanes-Oxley compliance efforts in 2005.
(4) As part of our efforts to improve our IT function, we are in the
process of:
o Establishing an enterprise wide information technology
strategy to synthesize the disparate IT platforms and to
develop policies to unify the business solutions and software
applications being employed;
o Establishing a plan for uniform upgrades of workstations and
software, including virus protection and software fixes;
3
o Establishing a formal policy and procedure to address the
overall security framework, including password usage,
intrusion detection and system security monitoring;
o Improving our security measures to safeguard our data,
including enhancing our disaster recovery procedures;
o Improving our policies and procedures for system maintenance
and handling back-up and recovery tapes; and
o Utilizing a consulting firm to assist us with preparing an IT
policy and procedures manual to document all of our updated IT
procedures/standards on a company-wide basis.
The continued implementation of the initiatives described above is among our
highest priorities. We have discussed our corrective actions and future plans
with our audit committee and Grant Thornton and, as of the date of this Report,
we believe the actions outlined above should correct the above-listed material
weaknesses in our internal controls. However, although our disclosure controls
and procedures are designed to provide reasonable assurance of achieving their
desired control objectives, in designing and evaluating the disclosure controls
and procedures, management recognizes that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives and are subject to certain limitations,
including the exercise of judgment by individuals, the inability to identify
unlikely future events, and the inability to eliminate misconduct completely. As
a result, there can be no assurance that our disclosure controls and procedures
will prevent all errors or fraud or ensure that all material information will be
made known to management in a timely manner. In addition, we cannot assure you
that neither we nor our independent auditors will in the future identify further
material weaknesses or significant deficiencies in our internal control over
financial reporting that we have not discovered to date.
When in certain of the Company's prior filings under the Exchange Act officers
of the Company provided conclusions regarding the effectiveness of our
disclosure controls and procedures, they believed that their conclusions were
accurate. However, after receiving and assessing the formal advice regarding our
internal control over financial reporting that our independent auditors provided
in the course of the audit of our financial statements for the year ended
December 31, 2004, our Chief Executive Officer and Chief Financial Officer have
reached the conclusions set forth above.
We believe that the material weaknesses in our internal controls identified
during our Sarbanes-Oxley testing review and described above do not materially
affect the fairness or accuracy of the presentation of our financial condition
and results of operation in our historical financial statements as set forth in
this Report or in our reports previously filed with the SEC under the Exchange
Act.
(b) Changes in Internal Control Over Financial Reporting.
During the quarter ended September 30, 2005 and subsequent to that date, we made
and continue to make changes in the Company's internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting, including the
following:
(1) Hired a new Corporate Controller/Chief Accounting Officer and an
Assistant Corporate Controller as well as other accounting
personnel. We are continuing a search for additional accounting
staff.
(2) Increased employee training on compliance with Section 404 of the
Sarbanes-Oxley Act at our various facilities.
(3) Continuing to utilize a consulting firm with the requisite
experience and expertise to assist us in the implementation and
compliance with Section 404 of the Sarbanes-Oxley Act.
4
(4) Improved the documentation of our significant accounting and IT
policies, and we are in the process of strengthening the integrity
and access controls of our systems.
We continue to review, document and test our internal control over financial
reporting, and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that our systems evolve with our business. These
efforts will lead to various changes in our internal control over financial
reporting.
The certifications of the Company's Chief Executive Officer and Chief Financial
Officer attached as Exhibits 31.1 and 31.2 to this Report include, in paragraph
4 of such certifications, information concerning the Company's disclosure
controls and procedures and internal control over financial reporting. These
officers believe these certifications to be accurate, because we did have
procedures in place during the quarter ended September 30, 2005 to detect errors
in our systems. Such certifications should be read in conjunction with the
information contained in this Item 4 for a more complete understanding of the
matters covered by such certifications.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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)
Date: January 20, 2006 /s/ James J. Burke
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James J. Burke
Vice President Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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STANDARD MOTOR PRODUCTS, INC.
EXHIBIT INDEX
EXHIBIT
NUMBER
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31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.