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