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Standard Motor Products, Inc. Announces Fourth Quarter and 2018 Year End Results

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NEW YORK, Feb. 14, 2019 /PRNewswire/ -- Standard Motor Products, Inc. (NYSE:SMP), an automotive replacement parts manufacturer and distributor, reported today its consolidated financial results for the three months and for the year ended December 31, 2018.

Consolidated net sales for the fourth quarter of 2018 were $247 million, compared to consolidated net sales of $240 million during the comparable quarter in 2017. Earnings (loss) from continuing operations for the fourth quarter of 2018 were $12.2 million or 53 cents per diluted share, compared to ($8.1) million or (36) cents per diluted share in the fourth quarter of 2017. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the fourth quarter of 2018 were $11.8 million or 52 cents per diluted share, compared to $12.4 million or 54 cents per diluted share in the fourth quarter of 2017.

Consolidated net sales for 2018 were $1,092.1 million, compared to consolidated net sales of $1,116.1 million during the comparable period in 2017.  Earnings from continuing operations for 2018 were $56.9 million or $2.48 per diluted share, compared to $43.6 million or $1.88 per diluted share in the comparable period of 2017.  Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the year ended December 31, 2018, and 2017 were $58.5 million or $2.55 per diluted share and $65.6 million or $2.83 per diluted share, respectively. 

Mr. Eric P. Sills, Standard Motor Products' Chief Executive Officer and President, stated, "We were generally pleased with the fourth quarter, as sales and gross margin for the company as a whole were slightly ahead of the prior year. Operating profit was down, excluding the gain on the sale of the Grapevine, Texas facility, primarily as a result of the costs associated with the installation of a new automated distribution system for our Temperature Control Division in Lewisville, Texas. We anticipate significant savings in this area in 2019.

"Turning to the divisions, Engine Management sales were up 2.5% for the quarter. Excluding our wire and cable business, which, as we have discussed, is a product line in general decline, Engine Management sales were ahead 4.5% for the quarter. Full year Engine Management sales, excluding wire, were slightly behind 2017, entirely the result of a few large pipeline orders in 2017 that were not repeated this year. More significantly, our customers reported Engine Management POS up approximately 4% in both the quarter and full year, in line with our long-term forecast.

"Engine Management gross margin was up 40 basis points over the same quarter last year but slightly down for the year. A major contributing factor was the startup costs incurred in our wire assembly plant in Reynosa, Mexico, as we continue to integrate General Cable's assembly operation. We are already seeing improvement in productivity there, as our newly hired employees gain experience, and we move towards historic levels of efficiency. We have also been slightly impacted by the timing of tariffs incurred with Chinese sourced products in 2018.

"2018 was a warm summer, and our customers reported Temperature Control POS sales increases in the 6-7% range. However, they began the year with heavier inventories, the result of the previous year's cool summer, and therefore their purchases in the first half were soft. Our second half Temperature Control sales were strong, and we finished 2018 essentially flat in sales. We believe our customers' inventories at the end of 2018 were at lower levels than the prior year, and we are anticipating stronger pre-season orders in the months ahead.

"Temperature Control gross margin was down slightly for the year. However, this was due to a carryforward of unfavorable variances from the weak season of 2017. As sales and production in the second half of 2018 were stronger, we will begin 2019 in a healthier position.

"Temperature Control SG&A for the year was impacted by higher distribution expenses mentioned above. As stated, we are anticipating significantly improved results this year."

In December 2018, the Company completed the sale of the Grapevine, Texas, property for net proceeds of $4.8 million, and recorded a one-time gain of $3.9 million.  This was the final step in relocating the Temperature Control operations to Reynosa, Mexico. The move went smoothly, was completed on time and within budget, and Reynosa is achieving all of its operational targets.

In December 2018, the Company amended its Credit Agreement with JPMorgan Chase Bank, N.A., as agent, and a syndicate of lenders. The amended Credit Agreement provides for a senior secured revolving credit facility with a line of credit of up to $250 million (with an additional $50 million accordion feature) and extends the maturity date to December 2023.

In the fourth quarter of 2018, the Company increased its asbestos liability to $46.7 million, with a full year pre-tax charge of $13.6 million in loss from discontinued operations. The increase in the asbestos liability was due primarily to a California asbestos lawsuit, in which a jury returned a verdict in the fourth quarter of 2018 in favor of the plaintiff for the gross amount of $8.6 million in compensatory damages, of which the Company was held responsible for approximately $7.4 million. We strongly disagree with the jury verdict and will vigorously pursue all rights to appeal. We anticipate that the appeals process will take approximately two to three years to be resolved.

There were also two personnel changes. As previously announced, James Burke has been promoted from Chief Financial Officer to Chief Operating Officer.  In addition to his new assignment, Mr. Burke will continue to serve as CFO until a replacement is identified.  We are confident that Mr. Burke will make significant contributions to the Company in his new position.

Secondly, Frederick D. Sturdivant announced that he will retire from the Board, at the conclusion of his term, in May. Mr. Lawrence I. Sills, Executive Chairman of the Board, said, "Fred has been a tremendous contributor to the Board, especially in the area of strategic planning, since he joined us in 2001. We wish him the best of luck in his retirement."

In conjunction with Mr. Sturdivant's retirement, the Board of Directors has voted to reduce the total number of Board seats from eleven to ten, effective on May 16, 2019.

As announced previously, our Board has approved an increase in our quarterly dividend from 21 cents per share to 23 cents per share payable on March 1, 2019. This represents our tenth consecutive year of dividend increases.

Mr. Eric Sills concluded, "While we realize that there is still a great deal to be done, we are pleased with the trends going forward. Our customers continue to show solid sales increases in our lines, and we anticipate significant cost improvements in our two major initiatives in Reynosa and Lewisville. Our position in our industry, where the demographics remain positive, has never been stronger. We are optimistic heading into 2019, our centennial year."

Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Thursday, February 14, 2019.  The dial-in number is 877-876-9173 (domestic) or 785-424-1667 (international). The playback number is 800-839-5689 (domestic) or 402-220-2570 (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




TWELVE MONTHS ENDED





DECEMBER 31,




DECEMBER 31,





2018



2017




2018



2017





(Unaudited)




(Unaudited)



NET SALES


$       246,970



$       239,978




$   1,092,051



$   1,116,143


















COST OF SALES


175,367



170,633




779,264



789,487


















GROSS PROFIT


71,603



69,345




312,787



326,656


















SELLING, GENERAL & ADMINISTRATIVE EXPENSES


55,732



51,511




231,336



224,237



RESTRUCTURING AND INTEGRATION EXPENSES


1,437



2,259




4,510



6,173



OTHER INCOME, NET


3,999



329




4,327



1,275


















OPERATING INCOME 


18,433



15,904




81,268



97,521


















OTHER NON-OPERATING INCOME (EXPENSE), NET


(1,211)



(1,122)




(411)



1,250


















INTEREST EXPENSE


889



544




4,026



2,329


















EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES


16,333



14,238




76,831



96,442


















PROVISION FOR INCOME TAXES


4,176



22,344




19,977



52,812


















EARNINGS (LOSS) FROM CONTINUING OPERATIONS


12,157



(8,106)




56,854



43,630


















LOSS FROM DISCONTINUED OPERATION, NET OF INCOME TAXES


(8,837)



(541)




(13,851)



(5,654)


















NET EARNINGS (LOSS)


$           3,320



$          (8,647)




$         43,003



$         37,976





























































































NET EARNINGS PER COMMON SHARE:






























   BASIC EARNINGS (LOSS) FROM CONTINUING OPERATIONS


$             0.54



$            (0.36)




$             2.53



$             1.92



   DISCONTINUED OPERATION


(0.39)



(0.02)




(0.62)



(0.25)



   NET EARNINGS (LOSS) PER COMMON SHARE - BASIC


$             0.15



$            (0.38)




$             1.91



$             1.67

































   DILUTED EARNINGS (LOSS) FROM CONTINUING OPERATIONS


$             0.53



$            (0.36)




$             2.48



$             1.88



   DISCONTINUED OPERATION


(0.39)



(0.02)




(0.60)



(0.24)



   NET EARNINGS (LOSS) PER COMMON SHARE - DILUTED


$             0.14



$            (0.38)




$             1.88



$             1.64

































WEIGHTED AVERAGE NUMBER OF COMMON SHARES


22,432,095



22,582,763




22,456,480



22,726,491



WEIGHTED AVERAGE NUMBER OF COMMON AND DILUTIVE SHARES


22,941,271



23,045,565




22,931,723



23,198,392



 

 

STANDARD MOTOR PRODUCTS, INC.

Segment Revenues and Operating Income



























(In thousands)









































THREE MONTHS ENDED



TWELVE MONTHS ENDED




DECEMBER 31,



DECEMBER 31,




2018



2017



2018



2017




(Unaudited)



(Unaudited)


Revenues













Ignition, Emission Control, Fuel & Safety













   Related System Products


$       165,630



$       158,485



$       648,270



$       657,287


Wire and Cable


37,370



39,489



155,217



172,126


        Engine Management


203,000



197,974



803,487



829,413















Compressors


16,736



16,099



148,416



148,377


Other Climate Control Parts


25,040



24,187



130,040



130,750


        Temperature Control


41,776



40,286



278,456



279,127















All Other


2,194



1,718



10,108



7,603


        Revenues


$         246,970



$         239,978



$      1,092,051



$      1,116,143















Gross Margin













Engine Management


$         58,509

28.8%


$         56,260

28.4%


$       229,949

28.6%


$       243,791

29.4%

Temperature Control


9,571

22.9%


10,715

26.6%


70,561

25.3%


73,254

26.2%

All Other


3,523



2,370



12,277



9,611


        Gross Margin


$           71,603

29.0%


$           69,345

28.9%


$         312,787

28.6%


$         326,656

29.3%














Selling, General & Administrative













Engine Management


$         34,588

17.0%


$         33,498

16.9%


$         141,003

17.5%


$         141,995

17.1%

Temperature Control


13,058

31.3%


10,665

26.5%


59,569

21.4%


51,880

18.6%

All Other


8,086



7,348



30,764



30,362


        Selling, General & Administrative


$           55,732

22.6%


$           51,511

21.5%


$         231,336

21.2%


$         224,237

20.1%



























Operating Income













Engine Management


$         23,921

11.8%


$           22,762

11.5%


$           88,946

11.1%


$         101,796

12.3%

Temperature Control


(3,487)

-8.3%


50

0.1%


10,992

3.9%


21,374

7.7%

All Other


(4,563)



(4,978)



(18,487)



(20,751)


        Subtotal


15,871

6.4%


17,834

7.4%


81,451

7.5%


102,419

9.2%

Restructuring & Integration


(1,437)

-0.6%


(2,259)

-0.9%


(4,510)

-0.4%


(6,173)

-0.6%

Other Income, Net


3,999

1.6%


329

0.1%


4,327

0.4%


1,275

0.1%

        Operating Income


$           18,433

7.5%


$           15,904

6.6%


$           81,268

7.4%


$           97,521

8.7%

 

 

STANDARD MOTOR PRODUCTS, INC.

Reconciliation of GAAP and Non-GAAP Measures









































(In thousands, except per share amounts)












THREE MONTHS ENDED



TWELVE MONTHS ENDED



DECEMBER 31,



DECEMBER 31,



2018


2017



2018


2017


(Unaudited)


(Unaudited)

EARNINGS FROM CONTINUING OPERATIONS




















GAAP EARNINGS (LOSS) FROM CONTINUING OPERATIONS


$            12,157


$             (8,106)



$            56,854


$            43,630











RESTRUCTURING AND INTEGRATION EXPENSES


1,437


2,259



4,510


6,173

IMPAIRMENT OF OUR INVESTMENT IN ORANGE ELECTRONICS CO.,LTD


1,683


1,815



1,683


1,815

IMPACT OF TAX CUTS AND JOBS ACT


-


17,515



-


17,515

CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD


-


-



(144)


(463)

GAIN FROM SALE OF BUILDINGS


(3,940)


(262)



(4,158)


(1,048)

INCOME TAX EFFECT RELATED TO RECONCILING ITEMS


492


(799)



(250)


(2,050)

NON-GAAP EARNINGS FROM CONTINUING OPERATIONS


$            11,829


$            12,422



$            58,495


$            65,572





















DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS




















GAAP DILUTED EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS


$               0.53


$              (0.36)



$               2.48


$               1.88











RESTRUCTURING AND INTEGRATION EXPENSES


0.06


0.10



0.20


0.27

IMPAIRMENT OF OUR INVESTMENT IN ORANGE ELECTRONICS CO.,LTD


0.07


0.08



0.07


0.08

IMPACT OF TAX CUTS AND JOBS ACT


-


0.76



-


0.75

CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD


-


-



(0.01)


(0.02)

GAIN FROM SALE OF BUILDINGS


(0.17)


(0.01)



(0.18)


(0.04)

INCOME TAX EFFECT RELATED TO RECONCILING ITEMS


0.03


(0.03)



(0.01)


(0.09)











NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS


$               0.52


$               0.54



$               2.55


$               2.83





















OPERATING INCOME




















GAAP OPERATING INCOME


$            18,433


$            15,904



$            81,268


$            97,521











RESTRUCTURING AND INTEGRATION EXPENSES


1,437


2,259



4,510


6,173

OTHER INCOME, NET


(3,999)


(329)



(4,327)


(1,275)











NON-GAAP OPERATING INCOME


$            15,871


$            17,834



$            81,451


$          102,419































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)























December  31,




December  31,



2018




2017



(Unaudited)












ASSETS










CASH


$            11,138




$            17,323








ACCOUNTS RECEIVABLE, GROSS


163,222




145,024

ALLOWANCE FOR DOUBTFUL ACCOUNTS


5,687




4,967

ACCOUNTS RECEIVABLE, NET


157,535




140,057








INVENTORIES


349,811




326,411

UNRETURNED CUSTOMER INVENTORY


20,484




-

OTHER CURRENT ASSETS


7,256




12,300








TOTAL CURRENT ASSETS


546,224




496,091








PROPERTY, PLANT AND EQUIPMENT, NET


90,754




89,103

GOODWILL


67,321




67,413

OTHER INTANGIBLES, NET


48,411




56,261

DEFERRED INCOME TAXES


42,334




32,420

INVESTMENT IN UNCONSOLIDATED AFFILIATES


32,469




31,184

OTHER ASSETS


15,619




15,095








TOTAL ASSETS


$          843,132




$          787,567















LIABILITIES AND STOCKHOLDERS' EQUITY

















NOTES PAYABLE


$            43,689




$            57,000

CURRENT PORTION OF OTHER DEBT


5,377




4,699

ACCOUNTS PAYABLE


94,357




77,990

ACCRUED CUSTOMER RETURNS


57,433




35,916

ACCRUED CORE LIABILITY


31,263




11,899

OTHER CURRENT LIABILITIES


80,467




98,393








TOTAL CURRENT LIABILITIES


312,586




285,897








OTHER LONG-TERM DEBT


153




79

ACCRUED ASBESTOS LIABILITIES


45,117




33,376

OTHER LIABILITIES


18,075




14,561








 TOTAL LIABILITIES 


375,931




333,913








 TOTAL STOCKHOLDERS' EQUITY 


467,201




453,654








 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 


$          843,132




$          787,567

 

 

STANDARD MOTOR PRODUCTS, INC.

Condensed Consolidated Statements of Cash Flows




















(In thousands)



















TWELVE MONTHS ENDED



December  31,



2018



2017



(Unaudited)








CASH FLOWS FROM OPERATING ACTIVITIES












NET EARNINGS 

$        43,003



$        37,976


ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH






PROVIDED BY OPERATING ACTIVITIES:






DEPRECIATION AND AMORTIZATION

24,104



23,916


DEFERRED INCOME TAXES

(10,046)



19,059


LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES

13,851



5,654


OTHER

11,771



13,823


CHANGE IN ASSETS AND LIABILITIES:






ACCOUNTS RECEIVABLE

(13,699)



(5,100)


INVENTORY 

(30,199)



(13,901)


ACCOUNTS PAYABLE

16,894



(7,186)


PREPAID EXPENSES AND OTHER CURRENT ASSETS

4,926



(4,869)


SUNDRY PAYABLES AND ACCRUED EXPENSES 

8,407



(6,015)


OTHER

1,246



1,260


NET CASH PROVIDED BY OPERATING ACTIVITIES

70,258



64,617














CASH FLOWS FROM INVESTING ACTIVITIES












ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES

(9,852)



(6,808)


CAPITAL EXPENDITURES

(20,141)



(24,442)


OTHER INVESTING ACTIVITIES

107



22


NET CASH USED IN INVESTING ACTIVITIES 

(29,886)



(31,228)














CASH FLOWS FROM FINANCING ACTIVITIES












NET CHANGE IN DEBT

(12,196)



6,253


PURCHASE OF TREASURY STOCK

(14,886)



(24,376)


DIVIDENDS PAID

(18,854)



(17,287)


OTHER FINANCING ACTIVITIES

(185)



(534)


NET CASH USED IN FINANCING ACTIVITIES

(46,121)



(35,944)














EFFECT OF EXCHANGE RATE CHANGES ON CASH

(436)



82


NET DECREASE IN CASH AND CASH EQUIVALENTS

(6,185)



(2,473)


CASH AND CASH EQUIVALENTS at beginning of year

17,323



19,796


CASH AND CASH EQUIVALENTS at end of year

$        11,138



$        17,323

 

Cision View original content:http://www.prnewswire.com/news-releases/standard-motor-products-inc-announces-fourth-quarter-and-2018-year-end-results-300795508.html

SOURCE Standard Motor Products, Inc.

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