Standard Motor Products, Inc. Announces Second Quarter 2014 Results and a Quarterly Dividend

By PR Newswire,  July 30, 2014, 08:30:00 AM EDT


NEW YORK, July 30, 2014 /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 six months ended June 30, 2014.

Consolidated net sales for the second quarter of 2014 were $272.5 million, compared to consolidated net sales of $270.1 million during the comparable quarter in 2013.  Earnings from continuing operations for the second quarter of 2014 were $11.2 million or 48 cents per diluted share, compared to $16.4 million or 71 cents per diluted share in the second quarter of 2013. The current quarter includes a one-time, non-recurring litigation charge discussed below. Excluding the litigation charge and other non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the second quarter of 2014 were $17.7 million or 76 cents per diluted share, compared to $16.4 million or 70 cents per diluted share in the second quarter of 2013.

Consolidated net sales for the six month period ended June 30, 2014 were $505.3 million, compared to consolidated net sales of $500.8 million during the comparable period in 2013.  Earnings from continuing operations for the six month period ended June 30, 2014 were $23.6 million or $1.02 per diluted share, compared to $26 million or $1.12 per diluted share in the comparable period of 2013.  Excluding the litigation charge and other non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the six months ended June 30, 2014 and 2013 were $30.1 million or $1.30 per diluted share and $26 million or $1.12 per diluted share, respectively.

The results for the second quarter of 2014 include a one-time, non-recurring litigation charge of $10.6 million, $6.4 million net of taxes, relating to a tentative settlement of a legal proceeding with a third party. The legal proceeding arose from a former supplier's default of their commercial loan and Standard Motor Products' subsequent purchases of products from a third party that was alleged to be a controlled company of the original supplier. The $10.6 million settlement is expected to be paid in the third quarter 2014.

Commenting on the results, Mr. Lawrence I. Sills, Standard Motor Products' Chairman and Chief Executive Officer, stated, "We are pleased that, as a result of ongoing improvements, we are able to achieve continued increases for the three month and six month periods in  2014—exclusive of the one-time litigation expense—in operating income and earnings per share.

"In the second quarter, non-GAAP operating income increased 4.9%, and similarly earnings per diluted share increased 8.6% to 76 cents per diluted share.  Year-to-date non-GAAP operating income grew 12.5% while earnings per diluted share rose from $1.12 to $1.30, an increase of 16%.

"Engine Management gross margin continues to improve—a result of increased manufacturing, savings in purchasing, and the benefits of recent acquisitions. This increase has been offset by a decline in Temperature Control gross margin, as we have scaled back production to bring inventories into line. We look for Temperature Control gross margins to improve in the second half of the year.

"We have also achieved reductions in SG&A, as we strive for improved efficiency and cost control in all areas.

"Sales, however, have been somewhat disappointing. Overall, we are up marginally for the year, slightly less than one percent, including a slight decline in Temperature Control. On a positive note, we see that our customers are achieving increases in the low to mid-single digits in both Engine Management and Temperature Control. Typically, this leads to increased purchases from us in the future.

"In our previous press release, we announced three acquisitions finalized earlier in the year. The three were: Pensacola Fuel Injection, Inc., a remanufacturer of diesel fuel injectors; Annex Manufacturing, an importer and distributor of Temperature Control products; and the establishment of a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd., a China-based manufacturer of Temperature Control products.

"The integration of all three is proceeding on schedule, and, as previously announced, all three are expected to be accretive to earnings in 2014, exclusive of one-time transition costs.

Further, as a result of our positive cash flow, we have absorbed the combined investment of $37.7 million for all three acquisitions, and our total debt at the end of the second quarter is lower than the comparable figure from the prior year."

The Board of Directors has approved payment of a quarterly dividend of thirteen cents per share on the common stock outstanding. The dividend will be paid on September 2, 2014 to stockholders of record on August 15, 2014.

Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Wednesday, July 30, 2014.  The dial in number is 866-952-7523 (domestic) or 785-424-1828 (international). The playback number is 800-723-2156 (domestic) or 402-220-2660 (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



SIX MONTHS ENDED





JUNE 30,



JUNE 30,





2014





2013



2014





2013





(Unaudited)



(Unaudited)

NET SALES



$    272,540





$    270,126



$    505,292





$    500,834























COST OF SALES



195,141





192,330



359,983





357,210























GROSS PROFIT



77,399





77,796



145,309





143,624























SELLING, GENERAL & ADMINISTRATIVE EXPENSES



48,847





50,588



96,441





100,198

LITIGATION CHARGE



10,650





-



10,650





-

RESTRUCTURING AND INTEGRATION EXPENSES



555





200



726





618

OTHER INCOME , NET



273





212



533





442























OPERATING INCOME 



17,620





27,220



38,025





43,250























OTHER NON-OPERATING INCOME (EXPENSE), NET



307





(64)



(106)





(260)























INTEREST EXPENSE



457





646



765





1,218























EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES



17,470





26,510



37,154





41,772























PROVISION FOR INCOME TAXES



6,301





10,110



13,578





15,806























EARNINGS FROM CONTINUING OPERATIONS



11,169





16,400



23,576





25,966























LOSS FROM DISCONTINUED OPERATION, NET OF INCOME TAXES



(529)





(357)



(1,211)





(749)























NET EARNINGS 



$      10,640





$      16,043



$      22,365





$      25,217





































































































































NET EARNINGS PER COMMON SHARE:











































   BASIC EARNINGS FROM CONTINUING OPERATIONS



$           0.49





$           0.71



$           1.03





$           1.13

   DISCONTINUED OPERATION



(0.02)





(0.01)



(0.05)





(0.03)

   NET EARNINGS PER COMMON SHARE - BASIC



$           0.47





$           0.70



$           0.98





$           1.10













































   DILUTED EARNINGS FROM CONTINUING OPERATIONS



$           0.48





$           0.71



$           1.02





$           1.12

   DISCONTINUED OPERATION



(0.02)





(0.02)



(0.06)





(0.03)

   NET EARNINGS PER COMMON SHARE - DILUTED



$           0.46





$           0.69



$           0.96





$           1.09













































WEIGHTED AVERAGE NUMBER OF COMMON SHARES



22,874,002





22,981,337



22,910,419





22,917,769

WEIGHTED AVERAGE NUMBER OF COMMON AND DILUTIVE SHARES



23,196,713





23,261,118



23,219,055





23,190,091

    

STANDARD MOTOR PRODUCTS, INC.

Segment Revenues and Operating Income





















































(In thousands)













































































THREE MONTHS ENDED





SIX MONTHS ENDED







JUNE 30,





JUNE 30,







2014





2013





2014





2013







(unaudited)





(unaudited)



Revenues

























Engine Management



$ 184,181





$ 182,050





$ 363,475





$ 357,559



Temperature Control



85,660





86,660





137,145





139,388



All Other



2,699





1,416





4,672





3,887







$   272,540





$   270,126





$   505,292





$   500,834





























Gross Margin

























Engine Management



$   56,059

30.4%



$   54,380

29.9%



$ 109,254

30.1%



$ 106,094

29.7%

Temperature Control



18,299

21.4%



20,342

23.5%



30,184

22.0%



31,328

22.5%

All Other



3,041





3,074





5,871





6,202







$     77,399

28.4%



$     77,796

28.8%



$   145,309

28.8%



$   143,624

28.7%



























Selling, General & Administrative

























Engine Management



$   28,447

15.4%



$   29,614

16.3%



$     57,098

15.7%



$     60,175

16.8%

Temperature Control



13,260

15.5%



13,414

15.5%



24,532

17.9%



24,773

17.8%

All Other



7,140





7,560





14,811





15,250







$     48,847

17.9%



$     50,588

18.7%



$     96,441

19.1%



$   100,198

20.0%





















































Operating Income

























Engine Management



$   27,612

15.0%



$   24,766

13.6%



$     52,156

14.3%



$     45,919

12.8%

Temperature Control



5,039

5.9%



6,928

8.0%



5,652

4.1%



6,555

4.7%

All Other



(4,099)





(4,486)





(8,940)





(9,048)







28,552

10.5%



27,208

10.1%



48,868

9.7%



43,426

8.7%

Litigation Charge



(10,650)

-3.9%



-

0.0%



(10,650)

-2.1%



-

0.0%

Restructuring & Integration



(555)

-0.2%



(200)

-0.1%



(726)

-0.1%



(618)

-0.1%

Other Income, Net



273

0.1%



212

0.1%



533

0.1%



442

0.1%





$     17,620

6.5%



$     27,220

10.1%



$     38,025

7.5%



$     43,250

8.6%

    



STANDARD MOTOR PRODUCTS, INC.

Reconciliation of GAAP and Non-GAAP Measures

















































































(In thousands, except per share amounts)



















THREE MONTHS ENDED





SIX MONTHS ENDED





June 30,





June 30,





2014



2013





2014



2013



(Unaudited)



(Unaudited)

EARNINGS FROM CONTINUING OPERATIONS







































GAAP EARNINGS FROM CONTINUING OPERATIONS



$ 11,169



$ 16,400





$ 23,576



$ 25,966





















LITIGATION CHARGE (NET OF TAX)



6,390



-





6,390



-

RESTRUCTURING AND INTEGRATION EXPENSES (NET OF TAX)



333



120





436



371

GAIN FROM SALE OF BUILDINGS (NET OF TAX)



(157)



(157)





(315)



(315)

NON-GAAP EARNINGS FROM CONTINUING OPERATIONS



$ 17,735



$ 16,363





$ 30,087



$ 26,022









































DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS







































GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS



$    0.48



$    0.71





$    1.02



$    1.12





















LITIGATION CHARGE (NET OF TAX)



0.28



-





0.27



-

RESTRUCTURING AND INTEGRATION EXPENSES (NET OF TAX)



0.01



-





0.02



0.01

GAIN FROM SALE OF BUILDINGS (NET OF TAX)



(0.01)



(0.01)





(0.01)



(0.01)





















NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS



$    0.76



$    0.70





$    1.30



$    1.12









































OPERATING INCOME







































GAAP OPERATING INCOME



$ 17,620



$ 27,220





$ 38,025



$ 43,250





















LITIGATION CHARGE



10,650



-





10,650



-

RESTRUCTURING AND INTEGRATION EXPENSES



555



200





726



618

OTHER INCOME, NET



(273)



(212)





(533)



(442)





















NON-GAAP OPERATING INCOME



$ 28,552



$ 27,208





$ 48,868



$ 43,426





























































MANAGEMENT BELIEVES THAT EARNINGS FROM CONTINUING OPERATIONS, DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS AND OPERATING INCOME BEFORE SPECIAL ITEMS, WHICH ARE NON-GAAP MEASUREMENTS, 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)













































June  30,







December 31,





2014







2013





(Unaudited)























ASSETS

















CASH



$      6,217







$           5,559















ACCOUNTS RECEIVABLE, GROSS



151,040







132,170

ALLOWANCE FOR DOUBTFUL ACCOUNTS



6,749







6,969

ACCOUNTS RECEIVABLE, NET



144,291







125,201















INVENTORIES



292,459







269,447

OTHER CURRENT ASSETS



53,376







45,870















TOTAL CURRENT ASSETS



496,343







446,077















PROPERTY, PLANT AND EQUIPMENT, NET



64,724







63,646

GOODWILL AND OTHER INTANGIBLES, NET



92,320







72,866

OTHER ASSETS



48,934







32,934















TOTAL ASSETS



$  702,321







$       615,523





























LIABILITIES AND STOCKHOLDERS' EQUITY































NOTES PAYABLE



$    59,070







$         21,406

CURRENT PORTION OF LONG TERM DEBT



24







59

ACCOUNTS PAYABLE



90,112







71,469

ACCRUED CUSTOMER RETURNS



40,669







31,464

OTHER CURRENT LIABILITIES



103,976







95,918















TOTAL CURRENT LIABILITIES



293,851







220,316















LONG-TERM DEBT



8







16

ACCRUED ASBESTOS LIABILITIES



22,607







23,919

OTHER LIABILITIES



22,301







21,840















 TOTAL LIABILITIES 



338,767







266,091















 TOTAL STOCKHOLDERS' EQUITY 



363,554







349,432















 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 



$  702,321







$       615,523

    



STANDARD MOTOR PRODUCTS, INC.

Condensed Consolidated Statements of Cash Flows































(In thousands)































SIX MONTHS ENDED



JUNE 30,



2014





2013



(Unaudited)











CASH FLOWS FROM OPERATING ACTIVITIES



















NET EARNINGS 

$ 22,365





$ 25,217

ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH









PROVIDED BY (USED IN) OPERATING ACTIVITIES:









DEPRECIATION AND AMORTIZATION

8,440





8,545

OTHER

5,376





8,108

CHANGE IN ASSETS AND LIABILITIES:









ACCOUNTS RECEIVABLE

(16,149)





(53,723)

INVENTORY 

(19,527)





(31,885)

ACCOUNTS PAYABLE

13,847





16,550

OTHER

3,266





14,789

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVTIES

17,618





(12,399)





















CASH FLOWS FROM INVESTING ACTIVITIES



















CAPITAL EXPENDITURES

(6,379)





(5,551)

ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES

(37,726)





(12,760)

OTHER INVESTING ACTIVITIES

11





(596)

NET CASH USED IN INVESTING ACTIVITIES 

(44,094)





(18,907)





















CASH FLOWS FROM FINANCING ACTIVITIES



















NET CHANGE IN DEBT

37,620





27,819

PURCHASE OF TREASURY STOCK

(5,860)





(1,151)

DIVIDENDS PAID

(5,955)





(5,037)

OTHER FINANCING ACTIVITIES

2,033





10,271

NET CASH PROVIDED BY FINANCING ACTIVITIES

27,838





31,902





















EFFECT OF EXCHANGE RATE CHANGES ON CASH

(704)





(1,395)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

658





(799)

CASH AND CASH EQUIVALENTS at beginning of Period

5,559





13,074

CASH AND CASH EQUIVALENTS at end of Period

$   6,217





$ 12,275

 

SOURCE Standard Motor Products, Inc.



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