10-Q 1 brhc10043283_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended September 30, 2022

or

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission file number:  001-04743

Standard Motor Products, Inc.
(Exact name of registrant as specified in its charter)

New York
 
11-1362020
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

37-18 Northern Blvd., Long Island City, New York
 
11101
(Address of principal executive offices)
 
(Zip Code)

(718) 392-0200
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $2.00 per share
SMP
New York Stock Exchange LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑     No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☑     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 
Large Accelerated Filer  ☑
Accelerated Filer ☐
 
Non-Accelerated Filer   ☐
Smaller reporting company   ☐
 
Emerging growth company    ☐
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐     No ☑

As of the close of business on October 27, 2022, there were 21,570,097 outstanding shares of the registrant’s Common Stock, par value $2.00 per share.

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

INDEX

PART I - FINANCIAL INFORMATION

   
Page No.
Item 1.
Consolidated Financial Statements:
  
     
   3
 

   4
 

   5
 

  6
 

  7
 

 
9
     
Item 2.
31
     
Item 3.
45
     
Item 4.
46

PART II – OTHER INFORMATION

Item 1.
47

   
Item 2.
47

   
Item 6.
48
     
49

2
PART I - FINANCIAL INFORMATION

ITEM 1.
CONSOLIDATED FINANCIAL STATEMENTS

STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
(In thousands, except share and per share data)
  
2022
    
2021
    
2022
    
2021
  
   
(Unaudited)
    
(Unaudited)
  
Net sales
  
$
381,373
    
$
370,310
    
$
1,063,616
    
$
988,939
  
Cost of sales
    
274,589
      
265,105
      
770,641
      
700,678
  
Gross profit
    
106,784
      
105,205
      
292,975
      
288,261
  
Selling, general and administrative expenses
    
73,199
      
66,509
      
204,551
      
183,316
  
Restructuring and integration expenses
    
—
      
166
      
44
      
166
  
Other income, net
     30       8       43       8  
Operating income
    
33,615
      
38,538
      
88,423
      
104,787
  
Other non-operating income, net
    
1,513
      
780
      
4,889
      
2,247
  
Interest expense
    
3,656
      
652
      
6,282
      
1,356
  
Earnings from continuing operations before taxes
    
31,472
      
38,666
      
87,030
      
105,678
  
Provision for income taxes
    
8,280
      
9,481
      
22,407
      
26,315
  
Earnings from continuing operations
    
23,192
      
29,185
      
64,623
      
79,363
  
Loss from discontinued operations, net of income taxes
    
(14,294
)
    
(5,122
)
    
(17,076
)
    
(7,139
)
Net earnings
    
8,898
      
24,063
      
47,547
    

72,224
  
Net earnings attributable to noncontrolling interest
    
52
      
13
      
129
      
32
  
Net earnings attributable to SMP (a)
  
$
8,846
    
$
24,050
    
$
47,418
    
$
72,192
  
                                 
Net earnings attributable to SMP
                                
Earnings from continuing operations
  
$
23,140
    
$
29,172
    
$
64,494
    
$
79,331
  
Discontinued operations
    
(14,294
)
    
(5,122
)
    
(17,076
)
    
(7,139
)
Total
  
$
8,846
    
$
24,050
    
$
47,418
    
$
72,192
  
                                 
Per share data attributable to SMP
                                
Net earnings per common share – Basic:
                                
Earnings from continuing operations
  
$
1.08
    
$
1.32
    
$
2.97
    
$
3.57
  
Discontinued operations
    
(0.67
)
    
(0.23
)
    
(0.79
)
    
(0.32
)
Net earnings per common share – Basic
  
$
0.41
    
$
1.09
    
$
2.18
    
$
3.25
  
                                 
Net earnings per common share – Diluted:
                                
Earnings from continuing operations
  
$
1.06
    
$
1.29
    
$
2.91
    
$
3.50
  
Discontinued operations
    
(0.66
)
    
(0.22
)
    
(0.77
)
    
(0.32
)
Net earnings per common share – Diluted
  
$
0.40
    
$
1.07
    
$
2.14
    
$
3.18
  
                                 
Dividend declared per share
  
$
0.27
    
$
0.25
    
$
0.81
    
$
0.75
  
                                 
Average number of common shares
    
21,427,393
      
22,090,195
      
21,719,281
      
22,201,398
  
Average number of common shares and dilutive common shares
    
21,847,602
      
22,543,781
      
22,153,348
      
22,678,114
  

(a) Throughout this Form 10-Q, “SMP” refers to Standard Motor Products, Inc. and subsidiaries.

See accompanying notes to consolidated financial statements (unaudited).

3
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
  
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
(In thousands)
  
2022
    
2021
    
2022
    
2021
  
   
(Unaudited)
    
(Unaudited)
  
 
                        
Net earnings
  
$
8,898
    
$
24,063
    
$
47,547
    
$
72,224
  
Other comprehensive income (loss), net of tax:
                                
Foreign currency translation adjustments
    
(8,279
)
    
(2,466
)
    
(15,445
)
    
(1,905
)
Derivative instruments
     4,199       —       4,304       —  
Pension and postretirement plans
    
(2
)
    
(4
)
    
(11
)
    
(13
)
Total other comprehensive income, net of tax
    
(4,082
)
    
(2,470
)
    
(11,152
)
    
(1,918
)
Total Comprehensive income
    
4,816
      
21,593
      
36,395
      
70,306
  
Comprehensive income (loss) attributable to noncontrolling interest, net of tax:
                                
Net earnings
    
52
      
13
      
129
      
32
  
Foreign currency translation adjustments
    
(115
)
    
20
      
(176
)
    
(2
)
Comprehensive income (loss) attributable to noncontrolling interest, net of tax
    
(63
)
    
33
      
(47
)
    
30
  
Comprehensive income attributable to SMP
  
$
4,879
    
$
21,560
    
$
36,442
    
$
70,276
  

See accompanying notes to consolidated financial statements (unaudited).

4
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (In thousands, except share and per share data)
  
September 30,
2022
    
December 31,
2021
  
 
  
(Unaudited)
        
ASSETS
            
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
17,525
    
$
21,755
  
Accounts receivable, less allowances for discounts and expected credit losses of $5,900 and $6,170 for 2022 and 2021, respectively
    
230,442
      
180,604
  
Inventories
    
534,310
      
468,755
  
Unreturned customer inventories
    
21,485
      
22,268
  
Prepaid expenses and other current assets
    
25,911
      
17,823
  
Total current assets
    
829,673
      
711,205
  
 
                
Property, plant and equipment, net of accumulated depreciation of $234,062 and $227,788 for 2022 and 2021, respectively
    
104,199
      
102,786
  
Operating lease right-of-use assets
    
47,168
      
40,469
  
Goodwill
    
130,727
      
131,652
  
Other intangibles, net
    
99,756
      
106,234
  
Deferred income taxes
    
34,484
      
36,126
  
Investments in unconsolidated affiliates
    
42,648
      
44,087
  
Other assets
    
30,071
      
25,402
  
Total assets
  
$
1,318,726
    
$
1,197,961
  
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
CURRENT LIABILITIES:
                
Current portion of revolving credit facility
  
$
52,100
    
$
125,298
  
Current portion of term loan and other debt
    
6,036
      
3,117
  
Accounts payable
    
103,894
      
137,167
  
Sundry payables and accrued expenses
    
54,215
      
57,182
  
Accrued customer returns
    
53,857
      
42,412
  
Accrued core liability
    
23,845
      
23,663
  
Accrued rebates
    
42,378
      
42,472
  
Payroll and commissions
    
37,539
      
45,058
  
Total current liabilities
    
373,864
      
476,369
  
                 
Long-term debt
    
211,400
      
21
  
Noncurrent operating lease liabilities
    
38,618
      
31,206
  
Other accrued liabilities
    
20,637
      
25,040
  
Accrued asbestos liabilities
    
63,820
      
52,698
  
Total liabilities
    
708,339
      
585,334
  
                 
Commitments and contingencies
    
     
 
                 
Stockholders’ equity:
                
Common stock – par value $2.00 per share:
                
Authorized – 30,000,000 shares; issued 23,936,036 shares
    
47,872
      
47,872
  
Capital in excess of par value
    
104,411
      
105,377
  
Retained earnings
    
562,135
      
532,319
  
Accumulated other comprehensive income
    
(19,145
)
    
(8,169
)
Treasury stock – at cost (2,366,339 shares and 1,911,792 shares in 2022 and 2021, respectively)
    
(95,886
)
    
(75,819
)
Total SMP stockholders’ equity
    
599,387
      
601,580
  
Noncontrolling interest
    
11,000
      
11,047
  
Total stockholders’ equity
    
610,387
      
612,627
  
Total liabilities and stockholders’ equity
  
$
1,318,726
    
$
1,197,961
  

See accompanying notes to consolidated financial statements (unaudited).

5
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 
(In thousands)
  
Nine Months Ended
September 30,
  
 
  
2022
    
2021
  
 
  
(Unaudited)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net earnings
  
$
47,547
    
$
72,224
  
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
                
Depreciation and amortization
    
20,895
      
20,160
  
Amortization of deferred financing cost
    
294
      
171
  
Increase (decrease) to allowance for expected credit losses
    
(561
)
    
381
  
Increase (decrease) to inventory reserves
    
4,354
      
(443
)
Equity income from joint ventures
    
(3,553
)
    
(2,419
)
Employee stock ownership plan allocation
    
1,722
      
1,885
  
Stock-based compensation
    
6,327
      
7,189
  
Decrease in deferred income taxes
    
245
      
1
  
Loss on discontinued operations, net of tax
    
17,076
      
7,139
  
Change in assets and liabilities:
                
(Increase) in accounts receivable
    
(51,887
)
    
(15,343
)
(Increase) in inventories
    
(75,300
)
    
(52,742
)
(Increase) decrease in prepaid expenses and other current assets
    
(6,270
)
    
2,324
  
Increase (decrease) in accounts payable
    
(31,844
)
    
24,228
  
Increase in sundry payables and accrued expenses
    
3,807
      
18,905
  
Net change in other assets and liabilities
    
(8,327
)
    
(4,522
)
Net cash provided by (used in) operating activities
    
(75,475
)
    
79,138
  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Acquisitions of and investments in businesses
    
—
      
(124,663
)
Capital expenditures
    
(19,499
)
    
(19,406
)
Other investing activities
    
12
      
29
  
Net cash used in investing activities
    
(19,487
)
    
(144,040
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
Borrowings under the term loan
     100,000       —  
Repayments of the term loan
     (1,250 )     —
  
Net borrowings under revolving credit facilities
    
44,452
      
118,938
  
Net borrowings (repayments) of other debt and capital lease obligations
    
(1,745
)
    
2,916
  
Purchase of treasury stock
    
(29,656
)
    
(26,518
)
Payments of debt issuance costs
    (2,128 )     —  
Increase (decrease) in overdraft balances
    
(54
)
    
455
  
Dividends paid
    
(17,602
)
    
(16,678
)
Net cash provided by financing activities
    
92,017
      
79,113
  
Effect of exchange rate changes on cash
    
(1,285
)
    
(555
)
Net increase (decrease) in cash and cash equivalents
    
(4,230
)
    
13,656
  
CASH AND CASH EQUIVALENTS at beginning of period
    
21,755
      
19,488
  
CASH AND CASH EQUIVALENTS at end of period
  
$
17,525
    
$
33,144
  
                 
Supplemental disclosure of cash flow information:
                
Cash paid during the period for:
                
Interest
  
$
5,828
    
$
1,094
  
Income taxes
  
$
21,837
    
$
18,361
  

See accompanying notes to consolidated financial statements (unaudited).

6
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended September 30, 2022
(Unaudited)

 (In thousands)
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at June 30, 2022
  
$
47,872
    
$
109,117
    
$
559,069
    
$
(15,178
)
  
$
(99,294
)
  
$
601,586
    
$
11,063
    
$
612,649
  
Net earnings
    
—
      
—
      
8,846
      
—
      
—
      
8,846
      
52
      
8,898
  
Other comprehensive income, net of tax
    
—
      
—
      
—
      
(3,967
)
    
—
      
(3,967
)
    
(115
)
    
(4,082
)
Cash dividends paid
    
—
      
—
      
(5,780
)
    
—
      
—
      
(5,780
)
    
—
      
(5,780
)
Purchase of treasury stock
    
—
      
—
      
—
      
—
      
(3,160
)
    
(3,160
)
    
—
      
(3,160
)
Stock-based compensation
    
—
      
(4,706
)
    
—
      
—
      
6,568
      
1,862
      
—
      
1,862
  
Balance at September 30, 2022
  
$
47,872
    
$
104,411
    
$
562,135
    
$
(19,145
)
  
$
(95,886
)
  
$
599,387
    
$
11,000
    
$
610,387
  

Three Months Ended September 30, 2021
(Unaudited)

(In thousands) 
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at June 30, 2021
  
$
47,872
    
$
107,062
    
$
500,620
    
$
(5,102
)
  
$
(66,836
)
  
$
583,616
    
$
11,501
    
$
595,117
  
Net earnings
    
—
      
—
      
24,050
      
—
      
—
      
24,050
      
13
      
24,063
  
Other comprehensive income, net of tax
    
—
      
—
      
—
      
(2,490
)
    
—
      
(2,490
)
    
20
      
(2,470
)
Cash dividends paid     —       —       (5,544 )     —       —       (5,544 )     —       (5,544 )
Purchase of treasury stock     —       —       —       —       (15,422 )     (15,422 )     —       (15,422 )
Stock-based compensation
    
—
      
2,513
      
—
      
—
      
295
      
2,808
      
—
      
2,808
  
Balance at September 30, 2021
  
$
47,872
    
$
109,575
    
$
519,126
    
$
(7,592
)
  
$
(81,963
)
  
$
587,018
    
$
11,534
    
$
598,552
  

See accompanying notes to consolidated financial statements (unaudited).

7
STANDARD MOTOR PRODUCTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Nine Months Ended September 30, 2022
(Unaudited)

(In thousands)
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at December 31, 2021
  
$
47,872
    
$
105,377
    
$
532,319
    
$
(8,169
)
  
$
(75,819
)
  
$
601,580
    
$
11,047
    
$
612,627
  
Net earnings
    
—
      
—
      
47,418
      
—
      
—
      
47,418
      
129
      
47,547
  
Other comprehensive income, net of tax
    
—
      
—
      
—
      
(10,976
)
    
—
      
(10,976
)
    
(176
)
    
(11,152
)
Cash dividends paid
    
—
      
—
      
(17,602
)
    
—
      
—
      
(17,602
)
     —
      
(17,602
)
Purchase of treasury stock
    
—
      
—
      
—
      
—
      
(29,656
)
    
(29,656
)
    
—
      
(29,656
)
Stock-based compensation
    
—
      
(1,335
)
    
—
      
—
      
7,662
      
6,327
      
—
      
6,327
  
Employee Stock Ownership Plan
    
—
      
369
      
—
      
—
      
1,927
      
2,296
      
—
      
2,296
  
Balance at September 30, 2022
  
$
47,872
    
$
104,411
    
$
562,135
    
$
(19,145
)
  
$
(95,886
)
  
$
599,387
    
$
11,000
    
$
610,387
  

Nine Months Ended September 30, 2021
(Unaudited)

(In thousands)
 
  
Common
Stock
    
Capital in
Excess of
Par Value
    
Retained
Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
    
Treasury
Stock
    
Total
SMP
    
Non-
Controlling
Interest
    
Total
  
Balance at December 31, 2020
  
$
47,872
    
$
105,084
    
$
463,612
    
$
(5,676
)
  
$
(60,656
)
  
$
550,236
    
$
—
    
$
550,236
  
Noncontrolling interest acquired     —       —       —       —       —       —       11,504       11,504  
Net earnings
    
—
      
—
      
72,192
      
—
      
—
      
72,192
      
32
      
72,224
  
Other comprehensive income, net of tax
    
—
      
—
      
—
      
(1,916
)
    
—
      
(1,916
)
    
(2
)
    
(1,918
)
Cash dividends paid
    
—
      
—