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Standard Motor Products, Inc. Discusses COVID-19 Business Impact and Announces First Quarter 2020 Results

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NEW YORK, April 29, 2020 /PRNewswire/ -- Standard Motor Products, Inc. (NYSE:SMP), an automotive replacement parts manufacturer and distributor, reported today its consolidated financial results for the three months ended March 31, 2020, and provided an update regarding the company's response to the current COVID-19 pandemic and its impact on its business.

Consolidated net sales for the first quarter of 2020 were $254.3 million, compared to consolidated net sales of $283.8 million during the comparable quarter in 2019. Earnings from continuing operations for the first quarter of 2020 were $9.6 million or 42 cents per diluted share, compared to $13.1 million or 57 cents per diluted share in the first quarter of 2019. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the first quarter of 2020 were $9.8 million or 43 cents per diluted share, compared to $13.1 million or 57 cents per diluted share in the first quarter of 2019.

Mr. Eric Sills, Standard Motor Products' Chief Executive Officer and President stated, "Prior to a discussion of our first quarter results, it is important to address the current COVID-19 pandemic crisis' impact on the auto care industry in general, and on SMP in particular.  When the U.S. began issuing guidelines in mid-March to slow the spread of the disease through 'stay-at-home' orders, certain industries were identified as essential and could continue to operate. The auto care industry was included, as transportation is critical to the functioning of our nation, as we keep government, fleet, first responders and personal vehicles on our roads operating safely and efficiently.

"Our first obligation is to the health and safety of our employees. We implemented a number of operational changes to improve social distancing within our facilities and to substantially increase all cleaning and hygiene protocols, including the use of protective masks and daily temperature taking for all employees and guests entering our facilities. Thus far, our efforts have been successful, as only a few of our employees globally have tested positive for the virus, and thankfully are all on the road to recovery. We cannot thank our employees enough for the fortitude and loyalty they have shown during these times.

"Turning to our first quarter results, sales lagged behind the first quarter of 2019, with declines in both divisions. The 2019 purchasing patterns of our customers were very front-loaded in the year as compared to their POS. Our first quarter of 2019 was very strong – up 9% from 2018 in Engine Management (excluding wire and cable) and 14% in Temperature Control, making for difficult comps.  This year Engine Management had lower pipeline orders than in 2019, and sales returned to levels more closely aligned to our customers' POS sales. This was anticipated and announced on previous calls. In the second half of March we began to see the effects of the COVID-19 pandemic and sales began to fall further. In Temperature Control, the early part of the year is dominated by pre-season orders, which, for a variety of reasons, were below 2019.  The success of the year is determined by how hot it gets during the summer.  We were pleased that both divisions were able to maintain historic gross margins despite the decline in sales.

"As we head into the second quarter, miles driven are down dramatically as businesses are closed and people are required to shelter at home.  Our customers' sales are down accordingly.  Their purchases from us are down even further, as they look to reduce inventory in line with their lower sales levels.  April was a difficult month for us, with our incoming orders down 30-40%.

"While no one can predict the duration of the economic downturn resulting from the COVID-19 pandemic, we believe it will be a temporary situation. We enter it with a strong balance sheet and ample liquidity, and our goal is to exit it just as strong.  To do so we are taking steps to reduce expenses and conserve cash, making sure that none of our actions will affect the long term health of the Company. We have drawn down an additional $75 million from our bank credit line, temporarily ceased our stock buyback program, and temporarily suspended our quarterly dividend. Our top executive officers and Board of Directors have agreed to a 25% reduction in compensation for the balance of the year. All other senior executives will be taking a reduction in compensation as well.  We will be taking a hard look at discretionary expenses.  While we anticipate substantial savings from these actions, they are all short term in nature, in line with our belief that this is a temporary situation. None of these will affect the long term strength of our Company.

"The automotive aftermarket is highly resilient. We are fortunate that the goods and services we provide are essential. Our addressable market – the hundreds of millions of vehicles on our roads – remains unchanged. The majority of SMP's products are non-discretionary – deferred repairs will need to be performed. Transportation is the lifeblood of our country – people need their vehicles to get to work, shop, take their kids to school, and carry on with their lives.

"As for our company, with our strong position in the market, the brand loyalty of our customers, and our healthy balance sheet, and thanks to our wonderful group of employees, we are confident we will emerge from this crisis and begin the second century of our history, stronger than ever."

Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Wednesday, April 29, 2020.  The dial-in number is 866-342-8588 (domestic) or 203-518-9865 (international). The playback number is 800-839-7408 (domestic) or 402-220-6066 (international). The participant passcode is 76717.

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




MARCH 31,




2020



2019




(Unaudited)


NET SALES


$       254,302



$       283,766









COST OF SALES


183,907



205,803









GROSS PROFIT


70,395



77,963









SELLING, GENERAL & ADMINISTRATIVE EXPENSES


55,873



60,000


RESTRUCTURING AND INTEGRATION EXPENSES


205



-


OTHER INCOME (EXPENSE), NET


6



(6)









OPERATING INCOME 


14,323



17,957









OTHER NON-OPERATING INCOME (EXPENSE), NET


(524)



646









INTEREST EXPENSE


873



1,089









EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES


12,926



17,514









PROVISION FOR INCOME TAXES


3,305



4,410









EARNINGS FROM CONTINUING OPERATIONS


9,621



13,104









LOSS FROM DISCONTINUED OPERATION, NET OF INCOME TAXES


(994)



(888)









NET EARNINGS 


$           8,627



$         12,216












































NET EARNINGS PER COMMON SHARE:














   BASIC EARNINGS FROM CONTINUING OPERATIONS


$             0.43



$             0.58


   DISCONTINUED OPERATION


(0.05)



(0.04)


   NET EARNINGS PER COMMON SHARE - BASIC


$             0.38



$             0.54
















   DILUTED EARNINGS FROM CONTINUING OPERATIONS


$             0.42



$             0.57


   DISCONTINUED OPERATION


(0.04)



(0.04)


   NET EARNINGS PER COMMON SHARE - DILUTED


$             0.38



$             0.53
















WEIGHTED AVERAGE NUMBER OF COMMON SHARES


22,438,087



22,421,795


WEIGHTED AVERAGE NUMBER OF COMMON AND DILUTIVE SHARES


22,868,975



22,905,364


 

STANDARD MOTOR PRODUCTS, INC.

Segment Revenues and Operating Income















(In thousands)























THREE MONTHS ENDED




MARCH 31,




2020



2019




(Unaudited)


Revenues







Ignition, Emission Control, Fuel & Safety







   Related System Products


$       164,526



$       176,061


Wire and Cable


36,592



37,128


        Engine Management


201,118



213,189









Compressors


25,348



39,811


Other Climate Control Parts


26,094



29,113


        Temperature Control


51,442



68,924









All Other


1,742



1,653


        Revenues


$         254,302



$         283,766









Gross Margin







Engine Management


$         56,705

28.2%


$         59,693

28.0%

Temperature Control


12,096

23.5%


16,191

23.5%

All Other


1,594



2,079


        Gross Margin


$           70,395

27.7%


$           77,963

27.5%








Selling, General & Administrative







Engine Management


$         35,073

17.4%


$           37,343

17.5%

Temperature Control


12,444

24.2%


14,141

20.5%

All Other


8,356



8,516


        Selling, General & Administrative


$           55,873

22.0%


$           60,000

21.1%















Operating Income







Engine Management


$           21,632

10.8%


$           22,350

10.5%

Temperature Control


(348)

-0.7%


2,050

3.0%

All Other


(6,762)



(6,437)


        Subtotal


14,522

5.7%


17,963

6.3%

Restructuring & Integration


(205)

-0.1%


-

0.0%

Other Income (Expense), Net


6

0.0%


(6)

0.0%

        Operating Income


$           14,323

5.6%


$           17,957

6.3%

 

STANDARD MOTOR PRODUCTS, INC.

Reconciliation of GAAP and Non-GAAP Measures





















(In thousands, except per share amounts)







THREE MONTHS ENDED



MARCH 31,



2020


2019


(Unaudited)

EARNINGS FROM CONTINUING OPERATIONS










GAAP EARNINGS FROM CONTINUING OPERATIONS


$                    9,621


$                  13,104






RESTRUCTURING AND INTEGRATION EXPENSES


205


-

INCOME TAX EFFECT RELATED TO RECONCILING ITEMS


(53)


-

NON-GAAP EARNINGS FROM CONTINUING OPERATIONS


$                    9,773


$                  13,104











DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS










GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS


$                     0.42


$                     0.57






RESTRUCTURING AND INTEGRATION EXPENSES


0.01


-

INCOME TAX EFFECT RELATED TO RECONCILING ITEMS


-


-






NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS


$                     0.43


$                     0.57











OPERATING INCOME










GAAP OPERATING INCOME


$                  14,323


$                  17,957






RESTRUCTURING AND INTEGRATION EXPENSES


205


-

OTHER (INCOME) EXPENSE, NET


(6)


6






NON-GAAP OPERATING INCOME


$                  14,522


$                  17,963


















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)




















March 31,



December  31,



2020



2019



(Unaudited)










ASSETS







CASH


$         13,268



$         10,372







ACCOUNTS RECEIVABLE, GROSS


171,332



140,728

ALLOWANCE FOR DOUBTFUL ACCOUNTS


5,647



5,212

ACCOUNTS RECEIVABLE, NET


165,685



135,516







INVENTORIES


370,935



368,221

UNRETURNED CUSTOMER INVENTORY


19,379



19,722

OTHER CURRENT ASSETS


15,422



15,602







TOTAL CURRENT ASSETS


584,689



549,433







PROPERTY, PLANT AND EQUIPMENT, NET


88,573



89,649

OPERATING LEASE RIGHT-OF-USE ASSETS


34,292



36,020

GOODWILL


77,588



77,802

OTHER INTANGIBLES, NET


62,482



64,861

DEFERRED INCOME TAXES


36,631



37,272

INVESTMENT IN UNCONSOLIDATED AFFILIATES


38,572



38,858

OTHER ASSETS


17,884



18,835







TOTAL ASSETS


$       940,711



$       912,730













LIABILITIES AND STOCKHOLDERS' EQUITY













NOTES PAYABLE


$       105,000



$         52,460

CURRENT PORTION OF OTHER DEBT


4,595



4,456

ACCOUNTS PAYABLE


81,266



92,535

ACCRUED CUSTOMER RETURNS


52,389



44,116

ACCRUED CORE LIABILITY


21,424



24,357

OTHER CURRENT LIABILITIES


83,533



91,540







TOTAL CURRENT LIABILITIES


348,207



309,464







OTHER LONG-TERM DEBT


111



129

NONCURRENT OPERATING LEASE LIABILITIES


26,841



28,376

ACCRUED ASBESTOS LIABILITIES


48,952



49,696

OTHER LIABILITIES


19,987



20,837







 TOTAL LIABILITIES 


444,098



408,502







 TOTAL STOCKHOLDERS' EQUITY 


496,613



504,228







 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 


$       940,711



$       912,730

 

STANDARD MOTOR PRODUCTS, INC.

Condensed Consolidated Statements of Cash Flows




















(In thousands)



















THREE MONTHS ENDED



MARCH 31,



2020



2019



(Unaudited)








CASH FLOWS FROM OPERATING ACTIVITIES












NET EARNINGS 

$           8,627



$        12,216


ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH






USED IN OPERATING ACTIVITIES:






DEPRECIATION AND AMORTIZATION

6,539



6,178


OTHER

6,034



5,303


CHANGE IN ASSETS AND LIABILITIES:






ACCOUNTS RECEIVABLE

(32,681)



(22,252)


INVENTORY 

(5,339)



(14,656)


ACCOUNTS PAYABLE

(11,883)



1,181


PREPAID EXPENSES AND OTHER CURRENT ASSETS

1,303



(282)


SUNDRY PAYABLES AND ACCRUED EXPENSES 

(2,684)



(12,911)


OTHER

(2,705)



(1,503)


NET CASH USED IN OPERATING ACTIVITIES

(32,789)



(26,726)














CASH FLOWS FROM INVESTING ACTIVITIES












NET PROCEEDS FROM SALE OF FACILITY

-



4,801


CAPITAL EXPENDITURES

(4,422)



(3,084)


OTHER INVESTING ACTIVITIES

6



29


NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 

(4,416)



1,746














CASH FLOWS FROM FINANCING ACTIVITIES












NET CHANGE IN DEBT

53,068



34,758


PURCHASE OF TREASURY STOCK

(8,726)



(5,835)


DIVIDENDS PAID

(5,615)



(5,159)


OTHER FINANCING ACTIVITIES

1,248



1,409


NET CASH PROVIDED BY FINANCING ACTIVITIES

39,975



25,173














EFFECT OF EXCHANGE RATE CHANGES ON CASH

126



415


NET INCREASE IN CASH AND CASH EQUIVALENTS

2,896



608


CASH AND CASH EQUIVALENTS at beginning of period

10,372



11,138


CASH AND CASH EQUIVALENTS at end of period

$        13,268



$        11,746

 

Cision View original content:http://www.prnewswire.com/news-releases/standard-motor-products-inc-discusses-covid-19-business-impact-and-announces-first-quarter-2020-results-301048872.html

SOURCE Standard Motor Products, Inc.

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