SMP(US:SMP)2023-08-02 16:52Financial Performance - Consolidated net sales for Q2 2023 were $353.1 million, a decrease of $6.3 million, or 1.8%, compared to $359.4 million in Q2 2022[127]. - Gross profit for Q2 2023 was $101.3 million, with a gross profit margin of 28.7%, up from 26.8% in Q2 2022[127][129]. - Operating income for Q2 2023 was $27.2 million, resulting in an operating margin of 7.7%, essentially flat compared to 7.8% in Q2 2022[127][131]. - Consolidated net sales for the six months ended June 30, 2023 were $681.1 million, a slight decrease of $1.1 million compared to $682.2 million in the same period of 2022[152]. - Operating income was $47.9 million, or 7% of consolidated net sales, in the first six months of 2023, down from $54.8 million, or 8% of consolidated net sales, in the same period of 2022[161]. - Net earnings during the first six months of 2023 were $21.1 million, down from $38.6 million in the same period of 2022[171]. Segment Performance - The Vehicle Control segment experienced a decrease in net sales due to lower sales from a customer that filed for bankruptcy[128]. - The Engineered Solutions segment saw year-over-year improvement in net sales driven by increased pricing and new business wins[128]. - Vehicle Control's net sales for Q2 2023 decreased slightly to $183.8 million, down from $185.8 million in Q2 2022, primarily due to lower sales to a customer that filed for bankruptcy[138]. - Temperature Control's net sales for Q2 2023 decreased by $8.5 million, or 8.1%, to $97.1 million compared to $105.6 million in Q2 2022, impacted by adverse weather conditions affecting customer orders[139]. - Engineered Solutions' net sales for Q2 2023 increased by $4.2 million, or 6.2%, to $72.2 million compared to $68 million in Q2 2022, driven by increased pricing and new business wins[140]. - Vehicle Control segment net sales increased by $5.4 million, or 1.5%, to $368.4 million for the six months ended June 30, 2023[153]. - Temperature Control segment net sales decreased by $9.2 million, or 5.2%, to $169.5 million for the six months ended June 30, 2023[154]. - Engineered Solutions segment net sales increased by $2.8 million, or 2%, to $143.3 million for the six months ended June 30, 2023[156]. Expenses and Margins - SG&A expenses for Q2 2023 were $73.8 million, or 20.9% of net sales, compared to $68.5 million, or 19% of net sales, in Q2 2022[131]. - Selling, general and administrative expenses (SG&A) were $143.5 million, or 21.1% of consolidated net sales, in the first six months of 2023, compared to $131.4 million, or 19.3% in the same period of 2022[159]. - Interest expense increased to $3.3 million in Q2 2023 from $1.8 million in Q2 2022, due to higher average interest rates on credit facilities[147]. - Interest expense increased to $7.1 million in the first six months of 2023, compared to $2.6 million for the same period in 2022[163]. - Gross margins increased to 28.7% in Q2 2023 from 26.8% in Q2 2022, with Vehicle Control's gross margin rising to 32.7%[141]. Cash Flow and Debt - Cash provided by operating activities was $39.4 million in the first six months of 2023, compared to cash used in operating activities of $95.3 million in the same period of 2022[170]. - Total debt decreased to $223.2 million as of June 30, 2023, down from $267.5 million at the end of 2022[170]. - Cash used in investing activities was $9.4 million in the first six months of 2023, compared to $13.2 million in the same period of 2022[173]. - Material cash commitments as of June 30, 2023, include $223 million in borrowings under the Credit Agreement and $93.6 million in future minimum cash requirements under operating leases[193]. - The Company anticipates that cash flow from operations, available cash, and borrowings will be adequate to meet liquidity needs for at least the next twelve months[194]. Strategic Initiatives - The company anticipates ongoing inflationary cost increases in raw materials, labor, and transportation, but expects to offset much of the impact through cost savings initiatives[129][134]. - The reorganization into three operating segments aims to provide clarity on market dynamics and align with strategic growth opportunities[123][119]. - The Engineered Solutions segment is expected to provide a platform for growth by supplying custom-engineered solutions to diversified global end-markets[119]. - The company remains optimistic about long-term growth potential in the Engineered Solutions segment and is focused on cash flow generation for the remainder of 2023[132]. - The company is closely monitoring the impact of global supply chain disruptions and inflationary cost increases on its operations[134]. Risks and Accounting Policies - The company has identified critical accounting policies related to the valuation of long-lived and intangible assets and asbestos litigation, which are essential for understanding its financial results[196]. - The company is exposed to risks from supply chain disruptions, geopolitical tensions, and inflation, which could materially impact its financial condition and results of operations[198].