SMP
$43.43
Standard Motor Products
($.13)
(.30%)
Earnings Details
3rd Quarter September 2017
Thursday, October 26, 2017 8:30:00 AM
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Summary

Standard Motor Products (SMP) Recent Earnings

Standard Motor Products (SMP) reported 3rd Quarter September 2017 earnings of $0.74 per share on revenue of $281.1 million. The consensus earnings estimate was $0.87 per share on revenue of $301.3 million. Revenue fell 6.6% compared to the same quarter a year ago.

Standard Motor Products Inc is an independent manufacturer and distributor of replacement parts for motor vehicles in the automotive aftermarket industry.

Results
Reported Earnings
$0.74
Earnings Whisper
-
Consensus Estimate
$0.87
Reported Revenue
$281.1 Mil
Revenue Estimate
$301.3 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Standard Motor Products, Inc. Announces Third Quarter 2017 Results and a Quarterly Dividend

Standard Motor Products, Inc. (SMP), an automotive replacement parts manufacturer and distributor, reported today its consolidated financial results for the three months and nine months ending September 30, 2017.

Consolidated net sales for the third quarter of 2017 were $281.1 million, compared to consolidated net sales of $300.8 million during the comparable quarter in 2016. Earnings from continuing operations for the third quarter of 2017 were $17.1 million or 74 cents per diluted share, compared to $21.1 million or 91 cents per diluted share in the third quarter of 2016. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the third quarter of 2017 were $17.2 million or 74 cents per diluted share, compared to $21.3 million or 92 cents per diluted share in the third quarter of 2016.

Consolidated net sales for the nine month period ended September 30, 2017, were $876.2 million, compared to consolidated net sales of $828.7 million during the comparable period in 2016. Earnings from continuing operations for the nine month period ended September 30, 2017, were $51.7 million or $2.22 per diluted share, compared to $53.6 million or $2.32 per diluted share in the comparable period of 2016. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the nine months ended September 30, 2017, and 2016 were $53.2 million or $2.28 per diluted share and $54.1 million or $2.35 per diluted share, respectively.

Loss from discontinued operations, net of income taxes, in the third quarter of 2017 was $4 million compared to $425 thousand in the comparable period last year. The discontinued operation relates to asbestos-related indemnity claims and legal expenses from a brake business divested in 1998. Annually, in the third quarter, the Company engages an independent actuary to assess the Company’s asbestos-related liability exposure. The actuary has estimated that the Company’s gross undiscounted potential exposure for indemnity claims from September 2017 through 2060 will range from $35.2 million to $54 million, and legal expenses will range from $44.3 million to $79.6 million. In the third quarter of 2017, the Company recorded a non-cash $6 million provision, $3.6 million net of taxes, to increase the asbestos-related indemnity liability to $35.2 million. Legal expenses are expensed as incurred.

Mr. Eric P. Sills, Standard Motor Products’ Chief Executive Officer and President stated, "There were two basic reasons for the shortfall in sales and profits in the third quarter, both of which are short-term in nature. First was the decline in Temperature Control sales, which was the result of a cool summer following a very warm 2016; second was a reduction in Engine Management gross margin, which was largely due to the temporary costs of plant moves, which, when complete, will make us a much stronger company.

"First, Temperature Control sales. 2016, you will recall, was a very warm summer, and our customers reported sales increases in our line of 9%. As a result, their pre-season orders this year were very strong, and our first half Temperature Control sales were up 9%.

"2017 has proven to be a cool summer, and our customers have focused on reducing their Temperature Control inventories during the third quarter. Our sales were down 16% in the third quarter, but year-to-date they are down only 1%. This is still slightly better than our customers’ reported year-to-date sales decrease of 5%, and as a result we are anticipating a potential further decline in their purchases in the fourth quarter, as they continue to bring their inventories into line.

"However, despite the decline in sales, we were able to improve Temperature Control gross margin to 26.8% in the third quarter and 26.2% year-to-date, both ahead of 2016 figures. This is primarily the result of the relocation of production from Grapevine, TX, to our low-cost plant in Reynosa, Mexico, which will be complete by the end of 2017, and continuous improvement in our joint venture in Foshan, China.

"Our Engine Management sales decreased in the third quarter by 2% as compared to 2016. Year-to-date, Engine Management sales are up 8.8%; however, adjusting for the General Cable ignition wire business, acquired in May of 2016, our year-to-date Engine Management sales are ahead of the prior year by 2.2%. This increase is within our stated expectations of low single-digit organic growth.

"Our Engine Management gross margins continue to be impacted by the multiple facility moves that began in 2016. Two moves - ignition coils from Greenville, SC, to Poland, and diesel products from Grapevine, TX, to Greenville - are physically complete, with the receiving locations doing well but still working towards achieving run-rate efficiencies.

"Two moves are still underway. The largest is the consolidation of the General Cable wire assembly operation from Nogales, Mexico, to Reynosa, a move involving 500 people. We have also begun the relocation of our electronics plant in Orlando, Florida, to our Independence, Kansas, facility. These moves are on schedule and due to be complete by mid-2018. Until then, as we have discussed, we are incurring substantial temporary costs relating to ramp-up inefficiencies, duplication of overhead, and the hiring and training of hundreds of employees. These costs, temporary in nature, are the primary reason for the decline in Engine Management gross margin.

"These moves have been a major effort for our company, involving many of our locations and many of our people. When complete, they will result in the closing of three facilities - Grapevine, Texas; Orlando, Florida; and Nogales, Mexico. Once the receiving locations achieve run-rate efficiencies, we anticipate annualized corporate-wide savings of $16-18 million from today’s costs.

"During the third quarter, despite the drop in volume, we were able to reduce SG&A expenses nearly a full point, from 20.4% to 19.5%. A major component was the integration of General Cable distribution and sales function into SMP as well as overall management of controllable costs and reduced incentive compensation expenses.

"In conclusion, while we are not satisfied with our third quarter results, we believe that the causes are relatively short-term in nature, and that the steps we have taken will lead to substantial improvements in future years. We wish to thank all our employees as we strive to deliver our value proposition to our customers as the best full-line, full service supplier of premium Engine Management and Temperature Control Products."

The Board of Directors has approved payment of a quarterly dividend of nineteen cents per share on the common stock outstanding. The dividend will be paid on December 1, 2017 to stockholders of record on November 15, 2017.

Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Thursday, October 26, 2017. The dial-in number is 866-952-8559 (domestic) or 785-424-1881 (international). The playback number is 800-839-6803 (domestic) or 402-220-6056 (international). The conference ID # is STANDARD.

Under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Standard Motor Products cautions investors that any forward-looking statements made by the company, including those that may be made in this press release, are based on management’s expectations at the time they are made, but they are subject to risks and uncertainties that may cause actual results, events or performance to differ materially from those contemplated by such forward looking statements. Among the factors that could cause actual results, events or performance to differ materially from those risks and uncertainties discussed in this press release are those detailed from time-to-time in prior press releases and in the company’s filings with the Securities and Exchange Commission, including the company’s annual report on Form 10-K and quarterly reports on Form 10-Q. By making these forward-looking statements, Standard Motor Products undertakes no obligation or intention to update these statements after the date of this release.

STANDARD MOTOR PRODUCTS, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2017
2016
2017
2016
(Unaudited)
(Unaudited)
NET SALES
$
281,058
$
300,795
$
876,165
$
828,683
COST OF SALES
198,523
205,151
618,854
572,967
GROSS PROFIT
82,535
95,644
257,311
255,716
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
54,800
61,277
172,236
169,033
RESTRUCTURING AND INTEGRATION EXPENSES
1,132
1,115
3,914
2,127
OTHER INCOME , NET
316
322
946
881
OPERATING INCOME
26,919
33,574
82,107
85,437
OTHER NON-OPERATING INCOME, NET
319
208
1,882
806
INTEREST EXPENSE
595
501
1,785
1,206
EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES
26,643
33,281
82,204
85,037
PROVISION FOR INCOME TAXES
9,535
12,226
30,468
31,464
EARNINGS FROM CONTINUING OPERATIONS
17,108
21,055
51,736
53,573
LOSS FROM DISCONTINUED OPERATION, NET OF INCOME TAXES
(3,983)
(425)
(5,113)
(1,495)
NET EARNINGS
$
13,125
$
20,630
$
46,623
$
52,078
NET EARNINGS PER COMMON SHARE:
BASIC EARNINGS FROM CONTINUING OPERATIONS
$
0.75
$
0.93
$
2.27
$
2.36
DISCONTINUED OPERATION
(0.17)
(0.02)
(0.22)
(0.06)
NET EARNINGS PER COMMON SHARE - BASIC
$
0.58
$
0.91
$
2.05
$
2.30
DILUTED EARNINGS FROM CONTINUING OPERATIONS
$
0.74
$
0.91
$
2.22
$
2.32
DISCONTINUED OPERATION
(0.17)
(0.02)
(0.22)
(0.06)
NET EARNINGS PER COMMON SHARE - DILUTED
$
0.57
$
0.89
$
2.00
$
2.26
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
22,660,157
22,716,279
22,774,927
22,688,071
WEIGHTED AVERAGE NUMBER OF COMMON AND DILUTIVE SHARES
23,174,700
23,097,699
23,287,052
23,044,604
STANDARD MOTOR PRODUCTS, INC.
Segment Revenues and Operating Income
(In thousands)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2017
2016
2017
2016
(Unaudited)
(Unaudited)
Revenues
Engine Management
$
196,776
$
200,782
$
631,439
$
580,311
Temperature Control
81,160
96,819
238,841
241,088
All Other
3,122
3,194
5,885
7,284
$
281,058
$
300,795
$
876,165
$
828,683
Gross Margin
Engine Management
$
57,808
29.4%
$
66,849
33.3%
$
187,531
29.7%
$
187,956
32.4%
Temperature Control
21,721
26.8%
25,773
26.6%
62,539
26.2%
60,447
25.1%
All Other
3,006
3,022
7,241
7,313
$
82,535 29.4%
$
95,644 31.8%
$
257,311
29.4%
$
255,716
30.9%
Selling, General & Administrative
Engine Management
$
34,289
17.4%
$
36,659
18.3%
$
108,497
17.2%
$
102,908
17.7%
Temperature Control
13,665
16.8%
15,827
16.3%
41,215
17.3%
41,778
17.3%
All Other
6,846
8,791
22,524
24,347
$
54,800 19.5%
$
61,277 20.4%
$
172,236
19.7%
$
169,033
20.4%
Operating Income
Engine Management
$
23,519
12.0%
$
30,190
15.0%
$
79,034 12.5%
$
85,048 14.7%
Temperature Control
8,056
9.9%
9,946
10.3%
21,324
8.9%
18,669
7.7%
All Other
(3,840)
(5,769)
(15,283)
(17,034)
27,735
9.9%
34,367
11.4%
85,075
9.7%
86,683
10.5%
Restructuring & Integration
(1,132)
-0.4%
(1,115)
-0.4%
(3,914)
-0.4%
(2,127)
-0.3%
Other Income, Net
316
0.1%
322
0.1%
946
0.1%
881
0.1%
$
26,919 9.6%
$
33,574 11.2%
$
82,107 9.4%
$
85,437 10.3%
STANDARD MOTOR PRODUCTS, INC.
Reconciliation of GAAP and Non-GAAP Measures
(In thousands, except per share amounts)
THREE MONTHS ENDED
NINE MONTHS ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2017
2016
2017
2016
(Unaudited)
(Unaudited)
EARNINGS FROM CONTINUING OPERATIONS
GAAP EARNINGS FROM CONTINUING OPERATIONS
$
17,108
$
21,055
$
51,736
$
53,573
RESTRUCTURING AND INTEGRATION EXPENSES
1,132
1,115
3,914
2,127
CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD
(463)
(235)
(463)
(235)
GAIN FROM SALE OF BUILDINGS
(262)
(262)
(786)
(786)
INCOME TAX EFFECT RELATED TO RECONCILING ITEMS
(348)
(340)
(1,251)
(536)
NON-GAAP EARNINGS FROM CONTINUING OPERATIONS
$
17,167
$
21,333
$
53,150
$
54,143
DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
$
0.74
$
0.91
$
2.22
$
2.32
RESTRUCTURING AND INTEGRATION EXPENSES
0.05
0.05
0.16
0.09
CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD
(0.02)
(0.01)
(0.02)
(0.01)
GAIN FROM SALE OF BUILDINGS
(0.01)
(0.01)
(0.03)
(0.03)
INCOME TAX EFFECT RELATED TO RECONCILING ITEMS
(0.02)
(0.02)
(0.05)
(0.02)
NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
$
0.74
$
0.92
$
2.28
$
2.35
OPERATING INCOME
GAAP OPERATING INCOME
$
26,919
$
33,574
$
82,107
$
85,437
RESTRUCTURING AND INTEGRATION EXPENSES
1,132
1,115
3,914
2,127
OTHER INCOME, NET
(316)
(322)
(946)
(881)
NON-GAAP OPERATING INCOME
$
27,735
$
34,367
$
85,075
$
86,683
MANAGEMENT BELIEVES THAT EARNINGS FROM CONTINUING OPERATIONS, DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS, AND OPERATING INCOME,
EACH OF WHICH ARE NON-GAAP MEASUREMENTS AND ARE ADJUSTED FOR SPECIAL ITEMS, ARE MEANINGFUL TO INVESTORS BECAUSE THEY PROVIDE A VIEW OF THE
COMPANY WITH RESPECT TO ONGOING OPERATING RESULTS. SPECIAL ITEMS REPRESENT SIGNIFICANT CHARGES OR CREDITS THAT ARE IMPORTANT TO AN
UNDERSTANDING OF THE COMPANY’S OVERALL OPERATING RESULTS IN THE PERIODS PRESENTED. SUCH NON-GAAP MEASUREMENTS ARE NOT RECOGNIZED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND SHOULD NOT BE VIEWED AS AN ALTERNATIVE TO GAAP MEASURES OF PERFORMANCE.
STANDARD MOTOR PRODUCTS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
September 30,
December
31,
2017
2016
(Unaudited)
ASSETS
CASH
$
25,398
$
19,796
ACCOUNTS RECEIVABLE, GROSS
168,639
139,055
ALLOWANCE FOR DOUBTFUL ACCOUNTS
5,464
4,425
ACCOUNTS RECEIVABLE, NET
163,175
134,630
INVENTORIES
332,601
312,477
OTHER CURRENT ASSETS
12,703
7,318
TOTAL CURRENT ASSETS
533,877
474,221
PROPERTY, PLANT AND EQUIPMENT, NET
86,738
78,499
GOODWILL
67,451
67,231
OTHER INTANGIBLES, NET
58,204
64,056
DEFERRED INCOME TAXES
50,575
51,127
OTHER ASSETS
34,840
33,563
TOTAL ASSETS
$
831,685
$
768,697
LIABILITIES AND STOCKHOLDERS’ EQUITY
NOTES PAYABLE
$
73,000
$
54,812
CURRENT PORTION OF LONG TERM DEBT
47
43
ACCOUNTS PAYABLE
86,278
83,878
ACCRUED CUSTOMER RETURNS
45,074
40,176
OTHER CURRENT LIABILITIES
110,166
104,932
TOTAL CURRENT LIABILITIES
314,565
283,841
LONG-TERM DEBT
90
120
ACCRUED ASBESTOS LIABILITIES
33,629
31,328
OTHER LIABILITIES
13,881
12,380
TOTAL LIABILITIES
362,165
327,669
TOTAL STOCKHOLDERS’ EQUITY
469,520
441,028
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
831,685
$
768,697
STANDARD MOTOR PRODUCTS, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
2017
2016
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
NET EARNINGS
$
46,623
$
52,078
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION
17,439
14,829
OTHER
14,065
10,581
CHANGE IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE
(27,753)
(35,192)
INVENTORY
(18,746)
(7,422)
ACCOUNTS PAYABLE
90
9,900
PREPAID EXPENSES AND OTHER CURRENT ASSETS
(4,805)
5,426
SUNDRY PAYABLES AND ACCRUED EXPENSES
8,728
31,016
OTHER
1,120
1,752
NET CASH PROVIDED BY OPERATING ACTIVITIES
36,761
82,968
CASH FLOWS FROM INVESTING ACTIVITIES
ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES
-
(67,289)
CAPITAL EXPENDITURES
(17,710)
(15,194)
OTHER INVESTING ACTIVITIES
6
191
NET CASH USED IN INVESTING ACTIVITIES
(17,704)
(82,292)
CASH FLOWS FROM FINANCING ACTIVITIES
NET CHANGE IN DEBT
18,153
22,672
PURCHASE OF TREASURY STOCK
(20,000)
(377)
DIVIDENDS PAID
(12,990)
(11,566)
OTHER FINANCING ACTIVITIES
658
736
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (14,179)
11,465
EFFECT OF EXCHANGE RATE CHANGES ON CASH
724
(404)
NET INCREASE IN CASH AND CASH EQUIVALENTS
5,602
11,737
CASH AND CASH EQUIVALENTS at beginning of Period
19,796
18,800
CASH AND CASH EQUIVALENTS at end of Period
$
25,398
$
30,537

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SOURCE Standard Motor Products, Inc.

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