Standard Motor Products (SMP) has reported today its consolidated financial results for the three and six months ended June 30, 2022.
Net sales for the second quarter of 2022 were $359.4 million, compared to consolidated net sales of $342.1 million during the comparable quarter in 2021. Earnings from continuing operations for the second quarter of 2022 were $20.8 million or $0.93 cents per diluted share, compared to $28.0 million or $1.23 cents per diluted share in the second quarter of 2021. Excluding 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 2022 were $20.8 million or $0.93 cents per diluted share, compared to $28.6 million or $1.26 per diluted share in the second quarter of 2021.
Consolidated net sales for the six months ended June 30, 2022, were $682.2 million, compared to consolidated net sales of $618.6 million during the comparable period in 2021. Earnings from continuing operations for the six months ended June 30, 2022, were $41.4 million or $1.85 per diluted share, compared to $50.2 million or $2.21 per diluted share in the comparable period of 2021. Excluding 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, 2022, and 2021, were $41.4 million or $1.85 per diluted share and $50.7 million or $2.23 per diluted share, respectively.
Eric Sills, Standard Motor Products’ CEO and president, stated, “Although we faced a challenging macroeconomic environment in the second quarter, we are pleased with our sales results, particularly against the record sales in the comparable period last year. Our sales improved 5.1% over last year’s strong second quarter, with particular strength in our Temperature Control division.
“By division, Engine Management sales increased 3.7% in the quarter, driven largely by acquisitions made in 2021 as well as price increases that were implemented during the quarter. Customer POS remained solid throughout the quarter against record levels from 2021, excluding Wire and Cable, which has returned to its secular decline.
“Turning to Temperature Control, an early start to the summer season provided a favorable tailwind against the challenging comparison from last year. Sales grew 7.5% year over year due to a combination of new business wins, price increases, and solid customer demand. Record heat has continued into the 3rd quarter across the country, and while weather trends are hard to predict, we are hopeful for ongoing strong customer demand, although we face a difficult comparison relative to last year’s long, hot summer.
“We were also pleased with the performance of our specialized non-aftermarket channels. To remind you, this focuses on custom-engineered products for niche end markets such as medium and heavy-duty vehicles, construction and agricultural equipment, power sports, and others. Over the past few years, we have doubled this business to a run rate of $300 million. We continue to make progress integrating our recent acquisitions and are making inroads as we identify cross-selling opportunities.
“Consolidated operating margins were below expectations at 7.8% in the second quarter. Inflationary pressures across many cost inputs remain a headwind, and we continue to implement price increases in an effort to offset these higher costs. Additionally, the rapid rise in interest rates has resulted in increased costs related to customer supply chain finance programs. We are actively pursuing initiatives to help offset these elevated operating costs.
“Given this year’s inflationary and supply chain challenges, we expect our consolidated gross margin will be lower than originally anticipated at approximately 27% for the full year. We also note that with the projected interest rate hikes and the associated impact on our factoring program expenses, we expect our operating profit will be in the range of 7-8% of net sales.
“As previously announced, during the quarter we entered into a new five-year $500 million credit facility that includes a $100 million term loan and $400 million revolving credit facility. In addition, SMP entered into an interest rate swap agreement to fix the interest rate on $100 million of borrowings under the new facility. This new credit facility is expected to afford us the flexibility we need to support our growth and continue to execute on strategic priorities. The new facility should also allow for our continued focus on returning value to our shareholders with quarterly dividends and opportunistic share repurchases.
“To that point, the board of directors has approved payment of a quarterly dividend of 27 cents per share on the common stock outstanding, which will be paid on September 1, 2022, to stockholders of record on August 15, 2022. Furthermore, we repurchased shares of our common stock in the amount of $19.6 million during the quarter. To date as of this release, we have exhausted the remaining balance of the prior $30 million share repurchase authorization. As a result, the Board of Directors has authorized a new $30 million common share repurchase plan.
“Lastly, as recently announced, we were deeply saddened by the passing of John Gethin, a director for the company since 2016. Prior to that, John was a long-tenured leader at SMP, including many years as our chief operating officer and president. He will be sorely missed. In connection with John’s passing, the board of directors decreased the size of the board from 10 to nine directors, effective as of July 28, 2022.
“In closing, there remains much uncertainty as we head into the second half of 2022 with respect to inflation, interest rates and the increasing risk of potential recession. Yet we remain confident in our business and the industry’s resilience based on performance during past turbulent markets. Underlying tailwinds including an aging fleet, limited new vehicle availability and favorable summer weather to date should help offset some of the potential near-term challenges that may persist. Furthermore, we believe our go-to-market strategy of being a full-line full-service supplier of professional grade products continues to resonate with our customers, and our favorable manufacturing footprint which relies less on the Far East than many of our peers provides us with structural advantages to better control our supply chain. We also remain bullish on our expansion into new markets and see vast potential in growing this business. Finally, we thank all of our people for their effort in working with us through challenging times.”
