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

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).

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).

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).

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).

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).

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