Standard Motor Products, Inc. (SMP) - stainless steel gas grill

WASHINGTON, D. C.
Forms 10 k (20549)Mark One)
Annual Report submitted under Section 13 or 15 (d)
1934 Securities Trading Act or transition report for the fiscal year ended December 31, 2018 under Section 13 or 15 (d)
According to the Securities Trading Act 1934, the Commission file number from ___ to ___ during the trading period: 1-4743 Standard Automobile Products Company(
The exact name of the registrant specified in the articles of association)New York 11-1362020 (
State or other jurisdiction registered or organized)(I. R. S.
Employer identity number)37-
18 North Avenue
Long Island City, N. Y. 11101 (
Main executive office address)(Zip Code)
The registrant's telephone number, including the area code :(718)392-
0200 securities registered under article 12 (b)
Title of the act: each class name of each exchange registered for common stock, with a face value of $2.
00 New York Stock Exchange securities per share registered under 12 articles (g)
Key points of the bill: no one indicates by check mark whether the registrant is a well or not
Well-known experienced issuers as defined in Rule 405 of the Securities Act.
Yes. ☑No. ☐Indicate by check mark whether the registrant does not need to submit a report under Section 13 or section 15 (d)of the Act.
Yes. ☐No. ☑Indicate by check mark whether the registrant (1)
All reports requested by Article 13 or 15 have been submitted (d)
Securities Trading Act of 1934 within the first 12 months (
Or a short period of time required for the registrant to submit such reports), and (2)
This filing requirement has been bound for the last 90 days.
Yes. ☑No. ☐Indicate by check mark whether the registrant has submitted each Interactive Data File as required by S-regulation 405th electronicallyT (§232.
This Chapter 405)
Within the first 12 months (
Or within a shorter period of time when the registrant is required to submit such documents).
Yes. ☑No. ☐By checking marks, it is indicated that, to the best of the registrant's knowledge, it is disclosed under section S-K 405th of the regulations whether the circumstances of the default declarant are not included or not, in the final agency or information statement referenced in part 10 k III of this form or incorporated in any modification to this Form 10 k.
☑Indicate by check mark whether the registrant is a large accelerated file manager, a non-accelerated file manager
A smaller reporting company, or an emerging growth company.
See the definition of "large accelerated reporting companies", "Small reporting companies" and "emerging growth companies" in rule 12b
2 of the Trading Act.
Big speed Filer☑Speed up Filer☐Non
Speed up Filer☐Small Reporting Company☐Emerging growth companies☐If an emerging growth company, please indicate by check mark whether the registrant chooses not to use the extended transition period to comply with any new or revised financial accounting standards provided under section 13 (a)
The Trading Act.
☐Indicate whether the registrant is a shell company by check mark (
Defined in Rule 12b-2 of the Act).
Yes. ☐No. ☑The total market value of voting ordinary shares based on the closing price of the New York Stock Exchange on June 30, 2018 (
The last working day of the second fiscal season recently completed by the registrant)of $48.
34 per share not held
The registrant's affiliates are $970,447,467.
For the purposes of the above calculations alone, all directors and executives are treated as affiliates, but the registrant denies that any of them are affiliates.
As of February 15, 2019, 22,434,727 shares of the registrant's common stock had been issued at a par value of $2. 00 per share.
Reference to included documents the information required in Part III of this report is incorporated into this report by reference to the registrant's final agency statement on the annual meeting of shareholders to be held on May 16, 2019.
Standard Automotive Products LimitedINDEX PART I. Page No. Item 1.
Business 3 project 1A.
Risk factors for project 1B 12.
Unresolved staff comments item 19 2.
Project 3 Property 20.
Item 4 of legal procedure 21.
The second part of the mine safety disclosure. Item 5.
Market 21 item 6 of the registrant's common stock, related shareholder matters and the issuer's purchase of equity securities.
24 Selected Financial Data 7.
Management Discussion and Analysis of Financial Position and operational results
44 Quantitative and Qualitative Disclosures on market risk 8.
45 financial statements and supplementary materials 9.
Changes in accounting and financial disclosure 92 item 9A and differences with accountants.
92 control and procedures for Item 9B.
Third part of other information 93. Item 10.
93 Project 11 directors, executive officers and corporate governance.
Item 12 of administrative compensation 93.
93 item 13 secured ownership of certain beneficial owners and management and related shareholders.
Certain relationships and related party transactions of item 14.
93 Main accounting expenses and services in Part IV. Item 15.
Annex, financial statements schedule 94 signature 98 2 Annual Report Part 1 of form 10
K, "Standard Motor Products", "we" and "Company" refer to the Standard Motor Products Company
And its subsidiaries, unless otherwise required by the context.
This report, including the documents contained in the references, contains the following
Looking forward to the statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Trading Act of 1934. Forward-
Forward-looking statements in this report are expressed in terms of "expectation", "belief", "intention", "plan", "estimate", "project", etc, "strategy" and similar expressions.
These statements represent our expectations based on current information and assumptions, and there are risks and uncertainties in itself.
Our actual results may differ materially from those expected or predicted due to certain risks and uncertainties, including, but not limited to, changes in business relationships with key customers, and the time, scale and continuation of customer projects;
Changes in our accounts receivable factoring arrangements, such as changes in terms, termination of the contract and/or the impact of an increase in interest rates;
Customer's ability to achieve expected sales;
Competitive products and pricing pressures;
Increase in production or material costs, including procurement costs resulting from higher tariffs that cannot be recovered in product pricing;
Performance of after-sales market, heavy duty, industrial equipment and original equipment market;
Changes in product mix and distribution channel mix;
Economic and market conditions;
Successful integration of acquisition business;
Our ability to benefit from cost-saving schemes;
Product responsibility and environmental matters (
Including, but not limited to, asbestos-related-
Related or contingent liabilities and remediation costs for certain properties);
As well as other risks and uncertainties, such as the risks and uncertainties described under Risk Factors, Quantitative and Qualitative Disclosures about market risks, and information that is detailed from time to time in the documents submitted by the company to the SEC. Forward-
The outlook statement is issued only on the date of this agreement and the company is not obliged to update or amend the forward
Reports can be viewed for new information, future events, or other reasons.
In addition, historical information should not be considered as an indicator of future performance. ITEM 1.
Business Overview we are a leading independent manufacturer and distributor of advanced replacement parts for automotive engine management and temperature control systems in the automotive aftermarket industry, with a focus on heavy duty, industrial equipment and original equipment markets.
We are divided into two operations.
Every market segment is committed to providing comprehensive services to our customers.
Production line coverage for quality engine management or temperature control products, as well as a full range of free services tailored to customer's business needs and drive terminals
The user's demand for our products.
We mainly sell our products to automotive after-sales retailers, project distribution groups, warehouse distributors, original equipment manufacturers and original equipment service parts operations in the United States, Canada, Mexico, Europe, asian and other Latin American countries.
Our company is based on ethics, integrity, common etiquette and values of respect for others.
These values are reflected in our code of ethics, which has been adopted by the board of directors of the company as a statement of principles guiding our decision-making --
Make and strengthen our commitment to these values in all aspects of our business.
We believe that our commitment to the company, our employees and the communities we operate results in high employee satisfaction, low employee turnover, and our commitment to our customers, suppliers and business groups have already received high customer satisfaction, as evidenced by the customer awards we often win and customer satisfaction for decades
Long term customer relationship.
We also seek ways to make a positive contribution to the local community by operating our facilities, protecting the environment, holding charity events, becoming good neighbors.
The automotive aftermarket industry consists of a large number of different manufacturers, which vary in product specialization and scale.
In addition to manufacturing, aftermarket companies must allocate resources to efficient distribution processes to maintain the flexibility and responsiveness that customers rely on.
After-sales market manufacturers must be efficient producers of small batches and must distribute products with fast turnaround times for almost all domestic and imported vehicles on the road today.
The replacement parts business in the automotive aftermarket is very different from the OEM parts business.
Unlike the OEM parts business, which mainly follows the new car production trend, the replacement parts business of the car after-sales market mainly tends to follow different trends, such as: the number of vehicles on the road;
3 index average age of vehicles on roads;
And the total mileage of each year.
Our mission is to be the best-in-class, full-line, full-
Service provider for quality engine management and temperature control products.
The key elements of our strategy are as follows: maintain our strong competitive position in the engine management and temperature control business.
We are a leading independent manufacturer and distributor serving North America and other geographic areas in the core business of engine management and temperature control.
We believe that our success is due to our emphasis on product quality, the breadth and depth of our domestic and imported vehicle product lines, and our reputation for excellence --added services.
In order to maintain our strong competitive position, we continue to work on the following aspects: providing comprehensive services to our customers
Line coverage for high quality engine management and temperature control products, supported by the highest value level-added services;
Continue to maximize the efficiency of our production, supply chain and distribution;
Continue to improve our cost situation by increasing global sourcing, increasing our low cost manufacturing
Cost factory and strategic transaction with manufacturercost regions;
Focus on our engineering development efforts, including the introduction of more product manufacturing-house.
Deliver exceptional value
Increased availability of services and products.
Our goal is to increase sales to existing and new customers by leveraging our skills to quickly fill out orders, maintain a high level of product availability, and provide a portfolio of products that fully covers all vehicle applications.
In addition, our marketing support provides insightful customer category management, technical support, and rewards.
Our skilled sales staff provide our customers with product selection, classification and application support, as well as technical training in the diagnosis and repair of vehicles equipped with complex systems related to our products.
Expand our product line.
We intend to increase the range of engine management and temperature control products we provide to our customers by continuing to develop in-house or through potential acquisitions.
We are committed to investing the necessary resources to maintain and expand our technical capabilities to manufacture product lines that contain the latest technologies, including those related to safety, advanced driver assistance and collision avoidance systems.
Expand our customer base.
Our goal is to increase our customer base (a)
Leveraging our manufacturing capabilities, operating through OEMs and equipment manufacturers and their service components, as well as our existing customer base for large retailers, project distribution groups, warehouse distributors, get more customers from other manufacturers and exports worldwide, and (b)
Support service component operations of vehicle and equipment manufacturers with value
Added service and product support for the life of the parts.
Improve operational efficiency and cost.
Our management attaches great importance to improving our financial performance by improving operational efficiency and asset utilization while maintaining product quality and high customer order fill rate.
We intend to continue to improve operational efficiency and cost status through internal development to improve cost-effective vertical integration of key product lines;
Focus on inventory planning integrating supply chain management, customer collaboration and supplier management;
· Assess additional opportunities to move manufacturing to our low endcost plants;
Maintain and improve our cost-effectiveness and competitive responsiveness to better serve our customer base, including sourcing certain materials and products from low-cost areas such as Asia without compromising product quality;
Strengthening company-wide plans for manufacturing and distribution efficiency;
Focus on the company-wide cost reduction plan for overhead and operating costs.
Cash utilization.
We intend to use any excess cash flow generated by operations and working capital management primarily to reduce our outstanding debts, pay dividends to shareholders, and expand our product line by investing in new tools and equipment, increase revenue by potentially acquiring and buying back shares of our common stock.
Our product and service engine management our engine management department manufactures and distributes a full set of key components for ignition, electrical, emissions, fuel and safety
Motor vehicle related systems.
Key product categories in our engine management portfolio include: electronic ignition control modules, fuel injection devices, including diesel injection devices and pumps (
New and re-manufactured)
Ignition line, coil, switch, relay, recycling valve, distributor cover and rotor, mainly measuring various sensors of temperature, pressure and position in many vehicle systems (
Such as: Cam, crankshaft position, fuel pressure, speed, mass airflow sensor, etc)
Safety-keyless entry transmitter, electronic throttle body
Related components, such as-lock brake (ABS)
Tire pressure monitoring sensor (TPMS)
In addition to many other engine management components, sensors and parking assist sensors.
We continue to expand our products to provide comprehensive services to our customers. line coverage.
We recently expanded our products by adding delays
For new and evolving vehicle technologies, including VVT solenoid and sprocket, diesel injector, pumps and components, turbochargers, model coverage for existing product categories and new product categories, exhaust temperature sensors, active Grille blinds, battery current sensor, third brake light, components of evaporation emission control system, advanced driving assistance system (ADAS)
Components including blind spot detection sensors, cruise control distance sensors, lane departure sensor cameras, and parking assist backup cameras.
Products for ignition, emission control, fuel and safety related systems.
Replacement parts for ignition, emissions, fuel and safety-related systems account for approximately $648.
We combined 3 million of net sales in 2018, or 59%, to approximately $657.
3 million of our net sales in 2017, or 59%, was about $616.
5 million of our net sales in 2016, or 58%.
5 kinds of wire and cable products.
Wire and Cable parts account for about $155.
We combined 2 million of net sales in 2018, or 14%, to approximately $172.
In 2017 we combined 1 million of net sales, or 15%, and in 2016 we combined about $0. 149 billion, or 14%.
These products include ignition (spark plug)
Wires, battery cables, pigtails, sockets and a variety of wires, terminals, connectors and tools used to repair the electrical system of the car.
In May 2016, we acquired GM's North American automotive FireWire business ("General Cable ").
The acquisition includes GM cable's automotive ignition wire business in the United States, Canada and Mexico.
For more information about our integration work related to acquisitions, refer to the information under the heading "integration costs" in Note 5 to the consolidated financial statements of item 8 of this report. Computer-
Control technology.
Almost all new cars are equipped with computer-controlled engine management systems for monitoring ignition, emissions, fuel economy, transmission and many other car systems.
On-board computers monitor inputs from many types of sensors located throughout the vehicle and control countless valves, solenoid, coils, switches and motors to manage engine and vehicle performance. Computer-
The controlled engine management system enables the engine to operate at higher fuel efficiency and lower emission levels.
As automakers equip their cars with more sophisticated engine management systems, sales of our sensors, valves, solenoid and related components have increased.
Government regulations on emissions and fuel economy have been implemented throughout the United States.
The Clean Air Act, which sets strict emission control test standards for existing and new vehicles, remains outstanding legislation in the field of vehicle emissions.
As many countries have implemented the necessary inspection/maintenance tests, EPA has also encouraged manufacturers and drivers to reduce vehicle emissions through its rulemaking capabilities.
Cars must now comply with emission standards from the date of manufacture until the last day of use.
This law and other government emission laws and fuel economy regulations have a positive impact on the sale of our ignition devices, since vehicles without these laws may need to use the parts we sell for repairs, so emissions control and fuel delivery parts.
Safety, driver assistance and anti-collision systems.
More and more new cars are leaving the factory-
Government-
Safety devices specified, such as-
Lock brake system and airbag.
As these systems mature and require repair and maintenance, we expect sales opportunities for many products such as ABS sensors, TPMS sensors and traction control products to increase.
Newer automotive systems include advanced driver assistance systems and anti-collision systems that alert drivers of potential problems or avoid collisions by implementing safeguards.
Many uses in these systems-
Board Computer for monitoring the input of the sensing device located on the entire vehicle.
As the use and complexity of these systems continue to evolve and spread, we expect to discover and benefit from new sales opportunities in this category.
Temperature Control part our temperature control department is divided into temperature control manufacturing and distribution of key components across the board (
Air conditioning and heating)
The system of the car, the engine cooling system, the accessories of the electric window and the windshield cleaning system.
Key product categories in our temperature control portfolio include: air conditioning compressors (
New and re-manufactured)
, Air conditioning compressor repair kit, clutch assembly, blower and radiator fan motor, Filter dryer, evaporator, accumulator, hose assembly, thermal expansion device, heater valve, heater core, air conditioning service tools and chemicals, fan assembly, fan clutch, oil cooler, window lift motor, window regulator and assembly, and windshield cleaning pump.
We are constantly seeking to improve our cost situation through strategic transactions with manufacturers in low-cost regions.
In November 2017, we set up another joint venture with Foshan Guangdong Automobile Air Conditioning Co. , Ltd. , Ltd. , a China-
Air conditioning compressor manufacturer based in auto aftermarket and OE market in China.
In April 2014, we formed a joint venture with Gwo Yng Enterprise Co. , Ltd. , a China-
Manufacturer of air conditioning accumulators, filter drivers, hose assemblies and switches.
We believe that these transactions will enhance our fundamental position.
Cost manufacturers and leading suppliers of temperature control components in the aftermarket also provide us with growth opportunities in the Chinese market.
6 exponential compressors.
The cost of the compressor is about $148.
We combined 4 million of net sales in 2018, or 14%, to approximately $148.
4 million of our net sales in 2017, or 13%, was about $148.
6 million of our net sales in 2016, or 14%.
Other parts of climate control.
Other climate control part accounted for we 2018 Consolidated net sales of about 0. 13 billion beauty yuan the 12% about 130 dollars.
8 million of our net sales in 2017, or 12%, was about $135.
1 million of our net sales in 2016, or 13%.
For financial information about our operations department, for other information related to our operations department, and for net sales of operations by geographical region, major product groups and major sales channels, please see note 22, "industry segmentation and geographic data" and Note 2, "net sales" respectively, notes to consolidated financial statements in item 8 of this report.
Our brand we believe our brand is an important part of our value proposition and differentiate our quality engine management and temperature control products from those of our competitors.
We sell and distribute our products under our own brand, for example: engine management product temperature control products. We also distribute our products to customers for resale with private labels and the following cooperation
Label: Engine Management 7 index we have also developed our product and brand strategy to support our customers to launch plans for a tiered portfolio of products designed to meet the needs of the terminal
User preferences for quality and value.
We believe that through this cooperation, we can become a valuable partner of our customers.
Our customers mainly sell our products to auto after-sales retailers such as O'Reilly Automotive, Inc. (“O’Reilly”)
Advanced Auto Parts Co. , Ltd. (
Run under the trade name Advance Auto Parts, Auto part International, Carquest and world pac)(“Advance”), AutoZone, Inc. (“AutoZone”)
Tire Canada Limited.
Distributors of auto aftermarket including warehouse distributors and planned distributors such as Genuine Parts Company
National Association of auto parts (“NAPA”)
, Auto Value and all Pro/Bumper to Bumper (
Auto Parts Alliance)
National Pronto Association Automobile Distribution Network Co. , Ltd (“Pronto”)
United auto parts dealers(“Federated”)
Auto parts service group or group, and Icahn Automobile Group Co. , Ltd (
Doing business as Pep Boys, Auto Plus, AAMCO and Precision Tune Auto Care).
· Original equipment manufacturers and original equipment service parts such as General Motors operate, FCA US LLC (
Original Chrysler Group Limited)Ford Motor Company.
And red dot.
In 2018, our five largest individual customers accounted for about 70% of our combined net sales, 2017 and 2016, respectively.
In 2018 O'Reilly, Napa, advance payment and AutoZone accounted for 22%, 17%, 16% and 11% of our combined net sales, respectively.
Our engine management and temperature control departments have reported net sales for these customers.
We mainly compete based on product quality, product availability, value
Increased service, product coverage, order turnaround time, order fill rate, technical support and price.
We believe that we mainly distinguish ourselves from our competitors through: value-added and knowledgeable sales teams;
Cooperate with leading brands in the market to expand product coverage;
Strict Product Certification standards to ensure that our parts meet or exceed strict performance specifications;
· A complex part catalog system, including catalogs provided online through our website and our mobile applications;
Sufficient inventory level and logistics system to meet customer fast delivery requirements;
The breadth of manufacturing capabilities; and · award-
Win marketing, sales support and technical training.
We are one of the leading independent manufacturers and distributors serving North America and other geographic regions in the core business of engine management and temperature control.
In the field of engine management, we compete with ACDelco, Delphi Technologies PLC, Denso, Continental, Hitachi.
, Robert Bosch Co. , Ltd. , vishitong, NGK Spark Plug Co. , Ltd. , Ltd.
Dolman Products Co. , Ltd.
And a few private ones.
Companies that mainly import products from Asia.
In the field of temperature control, we compete with the following companies: ACDelco, MAHLE GmbH, Behr Hella Service Co. , Ltd. , Denso, automotive, Sunden International
Mainland companies and several private companiesOwn company.
After-sales market competition is fierce, we are facing fierce competition in all the markets we serve.
Our success in the market depends on our ability to execute the key elements of the above-mentioned business strategy.
Some of our competitors may have more financial, marketing and other resources than we do.
In addition, we are facing competition from car manufacturers who supply many of the replacement parts we sell, although these manufacturers usually only supply parts for cars they produce through OE dealers.
Sales and Distribution in after-sales market channels, we sell our products to warehouse dealers and retailers.
Our customers buy directly from us and sell directly to wholesaler stores, professional technicians and "do-it-
"Your own person" who makes car repairs to personal vehicles ".
In recent years, warehouse distributors have merged with other distributors, and more distributors have their own wholesaler stores or sales channels to professional technicians.
Retailers are also merging with other retailers and are beginning to step up sales to professional technicians, adding "do-it-for-
Or the professional and technical personnel department of our industry.
As auto parts and systems become more complex,it-
"Your own people" are unlikely to serve their own vehicles and may be more dependent on professional technicians.
In the original equipment and original equipment service channel, we sell the products to the original equipment manufacturer (“OEMs”)
Used to produce vehicles or distribute to technical personnel of independent dealers and service dealers within their distribution network.
In addition to selling new cars, auto dealers also sell parts and service vehicles.
We also sell our products to first-class suppliers of OEMs.
We mainly sell our products in the US and have additional sales in Canada, Mexico, Europe, Asia and other Latin American countries.
Our sales are basically US-denominated. S. dollars.
Information on income and long-term income
For live assets by geographical region, see note 22, "industry sector and geographic data" to item 8 of this report consolidated financial statements ".
The structure of our sales team is to meet the needs of customers across the distribution channel, allowing us to deliver value
We think our competitors can't match the additional services.
We also believe that as we have concentrated our highly qualified, trained sales staff, our sales staff are the main direct sales staff of our product line.
Our recruitment focuses on candidates with technical background and rich sales experience, and our training agency in Irving, Texas provides extensive guidance and continuing education to sales staff, this allows our sales staff to stay up to date on trouble shooting and repair techniques.
Continuing Education courses and a monthly supplementary network
Basic training is an integral part of our sales team development strategy.
Our customers begin to rely on our sales staff as a reliable source of technical information and assist in sales to customers (e. g.
, Wholesaler stores and professional technicians).
In this way, we lead a large part of the sales work to customers to generate demand for our products, we believe, the structure of our sales force facilitates these efforts by enabling us to implement our sales and marketing plans in a unified manner throughout the distribution channel.
One of the ways we generate this demand is by providing
30 personnel training workshops on different topics teach about 60,000 technicians every year how to diagnose and repair vehicles equipped with complex systems related to our products.
We also offer-
Online demand training webinars on 144 different topics.
Approximately 14,000 technicians registered for such meetings in 2018.
We offer a variety of strategic customer discounts, allowances and incentives to increase customer purchases of our products.
For example, we offer cash discounts for payment of invoices based on the specified discount terms of the invoice.
We also offer discounts and discounts to our customers as we also offer AD and sales staff allowances, as well as warranty and backlog return allowances.
We believe that these discounts, subsidies and incentives are common practices throughout the automotive aftermarket industry, and we intend to continue to provide services to them in response to competitive pressures, and strategically support the growth of all our products.
Historically, our operating performance fluctuated quarterly, with the largest sales in the second and third quarters of this year, and revenue was generally recognized when shipping.
It is in these quarters that the demand for our products is usually the highest, especially in the temperature control part of our business.
In addition to this seasonality, the demand for our temperature controlled products in the second and third quarters of this year may change significantly with the changes in summer weather and customer inventory.
For example, a warm summer we experienced in 2018 may increase the demand for temperature control products, while a mild summer we experienced in 2017 may reduce that demand.
Due to the seasonality and variability of the demand for our temperature controlled products, our working capital demand usually peaked at the end of the second quarter, due to the inventory accumulation of air-conditioned products being converted into sales, payment for receivables related to such sales has not yet been received.
During this period, our liquidity needs are usually funded by borrowing from our revolving credit facility.
The pressure on automotive aftermarket companies to provide a wide range of SKUs is increasing (
Stocking unit)
Coverage due to the proliferation of parts and brands.
In this regard, we have and will continue to make changes to the inventory management system designed to reduce inventory requirements.
We have a packaging order distribution system that allows us to keep slow moving items in bulk storage before we receive orders for specific brand parts.
The system reduces the volume of a given part in stock.
We have also expanded our inventory management system to improve inventory deployment, strengthen collaboration with customers in forecasting and inventory classification, and further integrate our supply chain with customers and suppliers.
We are facing inventory management issues due to stock backlog.
We allow our customers to return New, undamaged products to us within the scope of their customers
Specific restrictions (
Usually limited to the specific percentage they buy from the US each year)
If they are overstocked.
In addition, the seasonality of our temperature control section requires us to increase our inventory during the winter months to prepare for the summer sales season, and customers who purchase this inventory are entitled to return it.
Due to our portfolio of temperature controlled products, our profitability and working capital needs are seasonal.
Our liquidity demand peaked near the end of the second quarter as inventory accumulation of air-conditioning products was converted to sales and accounts receivable related to such sales have not yet been received.
These increased demand for liquidity is financed by the borrowing of our revolving credit mechanism.
Production and engineering we design and manufacture many parts used in assembly of products.
We also perform our own plastic molding operations, stamping and machining operations, wire extrusion, automated electronic assembly and various other processes.
In the case of re-manufacturing the components, we carry out our own disassembly, diagnosis and reconstruction of air conditioning compressors, diesel syringes and diesel pumps.
We found that this vertical integration level provides an advantage in terms of cost, quality and availability.
We intend to continue to make selective efforts for further vertical integration to ensure consistency in the quality and supply of low-cost components.
In addition, our strategy includes sourcing more and more finished products and components from low-cost areas such as Asia.
We purchase materials through a global supplier network to ensure consistent, high quality and low cost materials and key components are delivered to our product line.
We don't rely on any kind of goods.
The main raw materials we buy include brass, electronic components, artificial copper (
Mainly in the form of magnets and insulated cables)
, Steel magnets, stacks, tubes and shafts, stamped steel parts, copper wire, stainless steel rolls and rods, aluminum rolls, fittings, rods, cast aluminum parts, lead, steel roller bearings, rubber mold plastic, hot solid and hot plastic mold plastic powder and chemicals.
In addition, we use components and cores (used parts)
During the remanufacture process of our air conditioning compressor, diesel injector, diesel oil pump and turbine charger.
In the case of air conditioning compressors, diesel syringes, diesel pumps and turbine chargers, we can obtain from the communication with customers who return to the core after purchasing the re-manufactured parts, it can also be obtained by purchasing directly from the core broker network.
In addition, we obtain certain materials by purchasing products that are resold to the market, especially OEM sources and other domestic and foreign suppliers.
We believe that there is sufficient supply of primary raw materials and cores;
However, in the long run, there is no guarantee that the availability of materials and components or the rise in commodity prices will not have a significant impact on our business or operational results.
As of December 31, 2018, we had about 4,400 employees, 1,800 in the United States and 2,600 in Mexico, Canada, Poland and the United States. K.
Hong Kong and Taiwan.
Of the 4,400 employees, about 2,600 are production employees.
We operate primarily at non-union facilities and enter into binding labor agreements with employees of other union facilities.
We have about 77 production staff in Edward sville, Kansas who are covered by contracts with the American International Union, United Automobile, Aerospace and Agricultural Tool workers (“UAW”)
Expired on April 2019.
We expect to renew this agreement with UAW on the terms agreed by both parties.
We also have about 1,500 employees in Mexico who negotiate union agreements at different intervals.
We are confident that our facilities are in a favourable labor market with sufficient number of skilled and unskilled workers available at all times, and we believe that our relationship with union and non-union employees is good.
Our employees share the values of ethics, integrity, common etiquette and respect for others established by our company since its establishment in 1919.
We are a New York company that was founded in 1919.
Our main administrative office is located at 37-18 North Avenue, Long Island, New York, Zip code: 11101, our main phone number at that location is (718)392‑0200.
Our Internet address is www. smpcorp. com .
We provide a link to our report to the SEC.
However, for those who make requests in writing or electronicallymail (
Finance @ smpcorpcom)
We will provide our annual report free of charge on Form 10
K. our Quarterly Report on Form 10
Q: our Current Report on Form 8
K and any amendments to these reports submitted or provided under section 13 (a)or 15(d)
Securities Trading Act of 1934.
These reports and other information are also available at www for free. sec. gov.
11 index Item 1A.
Risk factors you should carefully consider the risks described below.
It is not just these risks and uncertainties that we face.
Additional risks and uncertainties that we do not currently know, or other factors that we currently believe will not pose significant risks to our business, may also harm our business and operational results.
In the event of any stated risks actually occurring, these risks may have a significant adverse effect on our business, financial position or results of operations.
Risks associated with our operations we rely on a limited number of key customers, as well as losses from any such customers, or significant reductions in purchases from such customers, it may have a significant adverse effect on our business, financial position and operational results.
In 2018, our five largest individual customers accounted for about 70% of our combined net sales, 2017 and 2016, respectively.
In 2018 O'Reilly, Napa, advance payment and AutoZone accounted for 22%, 17%, 16% and 11% of our combined net sales, respectively.
The loss of one or more of these customers, or the substantial reduction in the purchase of our products from any of them, may have a significant adverse impact on our business, financial status and results of operations.
In addition, any integration between our major customers can further increase the risk of our customer concentration.
Also, we don't usually get into long-
Make regular agreements with any of our clients.
Instead, we have signed many purchase order commitments with our customers based on their current or expected needs.
Due to the fierce competition in the automotive after-sales market industry, including pricing pressure, we may lose customers or lose specific product lines of customers in the past and in the future, integrate customer, customer plan or other business considerations purchased directly from a foreign supplier.
The decision of any important customer, whether for competitive conditions, financial difficulties or other reasons, substantially reduces the number of products purchased from us and changes the way they do business with us, or the decision to stop doing business with us, including purchasing products directly from low-cost regions such as Asia, may have a significant adverse impact on our business, financial position and operational results.
Because our sales are very concentrated and the market competition we operate is very fierce, we are under constant pressure from our customers to provide us with lower prices and extend the payment period, increase marketing allowances and other terms that are more beneficial to these customers.
The needs of these customers have put ongoing pressure on our operating profit margins and profitability, leading to regular contract renegotiations, offering more favorable prices and terms to these customers, and significantly increasing
Our industry is highly competitive and our success depends on our ability to compete with automotive aftermarket product suppliers, some of which may have greater financial, marketing and other resources than we do.
After the car market industry competition is fierce, our success depends on our ability to compete with domestic and foreign auto market product suppliers.
In the field of engine management, we compete with ACDelco, Delphi Technologies PLC, Denso, Continental, Hitachi.
, Robert Bosch Co. , Ltd. , vishitong, NGK Spark Plug Co. , Ltd. , LTD.
Dolman Products Co. , Ltd.
And a few private ones.
Companies that mainly import products from Asia.
In the field of temperature control, we compete with the following companies: ACDelco, MAHLE GmbH, Behr Hella Service Co. , Ltd. , Denso, automotive, Sunden International
Mainland companies and several private companiesOwn company.
In addition, car manufacturers supply many replacement parts that we sell.
Some of our competitors may have a larger customer base and greater financial, technical and marketing resources than we do.
These factors may allow our competitors to react faster than we can by investing more resources than we can to develop new or emerging technologies and changes in customer needs, promotion and sales of products and services in the automotive aftermarket;
Engage in broader research and development;
Sell products at a lower price than us;
Carry out more extensive marketing activities;
Provide more attractive services to existing and potential customers and strategic partners.
We cannot assure you that our competitors will not develop products or services equal or superior to ours, nor will the post-auto market industry gain a bigger car than our products or other companies in the future not extend the business to the product line we produce and sell.
Nor can we assure you that more entrants will not enter the automotive aftermarket industry or that companies in the aftermarket industry will not merge.
Any such competitive pressure can cause us to lose market share, or lead to a substantial decline in prices, and may have a significant adverse impact on our business, financial position and operational results.
There is a huge price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure.
There is a huge price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure.
This is the result of some industry trends, including the impact of offshore suppliers on the market (
Especially in China)
Which suppliers do not have infrastructure costs like ours, the combined purchasing power of big customers, and the actions taken by some of our competitors to "win" new business.
In the past, in order to remain competitive, we lowered the price and may have to do so again in the future.
Price cuts affect our sales and profit margins and are expected to do so in the future.
Our future profitability depends to a certain extent on our ability to respond to changes in our portfolio of products and distribution channels, and continues to improve our manufacturing efficiency and reduce costs, including reducing the cost of components purchased from external suppliers and maintaining the cost structure that enables us to offer competitive prices.
We are unable to maintain a competitive cost structure and may have a significant adverse impact on our business, financial position and operational results.
Our business is seasonal and fluctuates a lot every quarter, which affects our quarterly performance and working capital needs.
Historically, our operating performance fluctuated quarterly, with the largest sales in the second and third quarters of this year, and revenue was generally recognized when shipping.
It is in these quarters that the demand for our products is usually the highest, especially in the temperature control part of our business.
In addition to this seasonality, the demand for our temperature controlled products in the second and third quarters of this year may change significantly with the changes in summer weather and customer inventory.
For example, a warm summer we experienced in 2018 may increase the demand for temperature control products, while a mild summer we experienced in 2017 may reduce that demand.
Due to the seasonality and variability of our demand for temperature controlled products, as inventory increases, our working capital demand peaked at the end of the second quarter
The increase in air-conditioning products is converted to sales, and accounts receivable related to such sales have not yet been received.
During this period, our liquidity needs are usually funded by borrowing from our revolving credit facility.
We may suffer material loss and significant cost due to warranty
The relevant returns of our customers exceed the expected amount.
Our products must meet the strict standards of customers and industry.
Many of our products have 90-
Lifetime Limited Warranty, typically covering the results of material or process defects, failure to meet industry published specifications and/or installation errors.
If there are material defects and/or installation errors in the design and manufacture of our products, the affected products may be affected by warranty returns and/or product recalls.
While we maintain a comprehensive quality control plan, we cannot guarantee that there will be no defects or other defects in our products or that we will not have material warranty returns or product recalls in the future.
Considering the recent historical returns, we accumulate the warranty returns as a percentage of the sale.
While we believe that we have made a reasonable estimate of the warranty return based on the revenue recognition policy, the actual return may be different from our estimate.
As our customers return the product to us for warranty, we have happened in the past, material loss and significant cost may occur in the future-
Related issues that exceed the expected amount.
Future defects or defects of our products may result in warranty returns and product recalls exceeding the expected amount and may have a significant adverse effect on our business, financial position and operational results.
Our profitability may be significantly adversely affected due to excess inventory
The relevant returns of our customers exceed the expected amount.
We allow the stock backlog, either new or non-stock
Defective or defect-free
But we believe we can do it again. sell.
Customers are usually limited to returning the backlog of inventory based on the specific percentage they buy from us each year.
In addition, the client's annual allowance cannot be carried forward to the next year.
Considering recent historical returns, we accumulate backlog returns as a percentage of sales.
While we believe that, based on our revenue recognition policy, we have made reasonable estimates of the backlog of returns, the actual returns may be different from our estimates.
If the return on the backlog is significantly greater than our forecast, our business, financial position and operational results may be significantly adversely affected.
Due to claims for product and other product liability sold by our previous brake business, we may be materially adversely affected by asbestos claims.
At 1986, we acquired a brake business and we subsequently sold it in March 1998.
When we initially acquired this brake business, we assumed future liabilities related to any alleged exposure to asbestos
Contains products manufactured by the seller of the acquired brake business.
Under the relevant purchase agreement, we agree to assume responsibility for all new claims filed after September 2001.
Our final risk will depend on the number of claims filed against us on or after September 2001, and the amount paid to defend these claims.
We do not have insurance for compensation and defense costs related to the claims we face.
As of December 31, 2018, we may be responsible for approximately 1,430 outstanding cases of any relevant liability.
Since its establishment from September 2001 to December 31, 2018, the amount paid for settled claims has been approximately $25. 6 million.
A substantial increase in the number of new claims or an increase in settlement payments or damages may have a significant adverse effect on our business, financial position and results of operations.
In accordance with our policy of conducting an annual actuarial assessment in the third quarter of each year, whenever an event or change of circumstances indicates that additional provisions may be required, actuarial studies were conducted and revised as of August 31, 2018, to reflect the events that occurred before November 20, 2018.
Based on the actuarial study conducted in 2018, we increased the liability for asbestos to $46.
7 million, the low end of the range, and recorded incremental pre-
Tax provisions of $13.
Income 6 million (loss)
Stop operating in the enclosed business statement.
The revised findings include our estimate of undiscounted liabilities for settlement payments and asbestos Awards
Compensation for related damages, excluding legal costs, ranges from $46.
$7 million to $83.
The period ended 2061 was 9 million per cent.
Future legal costs, expenditures and reports in revenue (loss)
According to the revised study, the business stopped from the accompanying business statements is estimated at $45 million to $83. 1 million.
Given the uncertainty of the predicted asbestos, the index-
Future related matters and other factors beyond our control, we cannot guarantee that the number of claims filed against us will not increase substantially, asbestos-
The relevant damages or settlement award will not exceed the amount we have reserved and additional terms will not be required.
Management will continue to monitor the situation of these potential liabilities to determine whether it is necessary to increase the reserve.
We plan to conduct an annual actuarial analysis in the third quarter of each year for the foreseeable future, whenever an event or situation change indicates that additional preparation may be required.
Except asbestos-
Related claims, our product sales involve the risk of participating in other product liability litigation.
We reserve product liability insurance but cannot guarantee that the current or future policy limits are sufficient to cover all possible liability.
In addition, we cannot guarantee that we will continue to receive adequate product liability insurance in the future, nor that such insurance can be maintained at a reasonable cost.
If a successful product liability claim is filed against us, the lack or lack of coverage may have a significant adverse effect on our business, financial position and results of operations.
We may not be able to get the benefits we expect from our cost savings program.
Due to the various initiatives recently completed, we expect to achieve cost savings, including the closure of our facilities in the vines, Texas;
The end of the wire Group assembly operation we recently acquired in Nogales, Mexico;
Closure of the Orlando plant in Florida;
And move some of AmericaS.
Production to other facilities at home and our factories in Mexico and Poland.
Due to factors beyond our control, we may not be able to achieve the level of benefits we expect to achieve in these plans, or, we may not be able to achieve these benefits within the time frame we currently expect.
Our ability to achieve any expected cost savings may be affected by factors such as changes in the amount, time and nature of costs associated with these initiatives, or there is a big delay in completing these plans.
Failure to achieve the benefits of our cost-saving plan can have a significant adverse impact on us.
Maintaining the sales level is also a prerequisite for us to save costs.
Bad weather, natural disasters and other disruptions may adversely affect the operation of our manufacturing and distribution facilities.
Severe weather conditions and natural disasters, such as hurricanes, floods and tornadoes, can damage our property and affect our business, especially our main manufacturing and distribution operations at foreign facilities in Canada, mexico and Poland, as well as our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, and Virginia.
In addition, if these facilities have other serious disruptions due to fire, power outages, power outages, telecom failures, our operations and operations may be subject to significant adverse effects, terrorist attacks or similar incidents
Any of these situations may impair our ability to fully manufacture or supply our customers as all or most of our equipment or inventory is damaged.
If one or more of our manufacturing or distribution facilities is seriously disturbed, we may not be able to effectively transfer the manufacture or delivery of the product to the customer.
If we are unable to purchase raw materials, manufactured components or equipment from our suppliers, our operations will be materially adversely affected.
Because we purchase various types of raw materials, finished products, equipment and parts from suppliers who fail to perform as expected, we may be subject to significant adverse effects. This non-
Performance may include delivery delays or failures caused by production problems or non-delivery
Products that meet the requirements
Non-risk
Bankruptcy or bankruptcy of one or more of our suppliers may also result in performance.
Our supplier's ability to provide us with products is also affected by a number of risks, including availability and cost of raw materials, destruction of facilities or shutdown.
In addition, our failure to pay or order a sufficient quantity of inventory to the supplier in a timely manner may increase the cost of the product we purchased or may result in the supplier refusing to sell the product to us.
Our efforts to prevent and minimize these risks may not always be effective.
Our operations may be adversely affected by computer and information technology system security disruptions or violations.
We rely on the information technology system of the whole organization to carry out daily activities. to-
Including the management of our supply chain and our sourcing, receiving and distribution functions.
We also use our information technology systems frequently to send, receive, store, access and use sensitive data related to our company and its employees, customers, suppliers and business partners, including intellectual property rights, proprietary business information and other sensitive materials.
Our information technology systems have been threatened by networks, including trying to invade our networks and computer viruses.
This hacking and computer virus does not have a significant impact or disruption to our business operations.
When we implement security measures designed to prevent and mitigate the risk of cyber attacks, our information technology systems and the functions we may outsource may continue to be vulnerable to computer viruses, hackers, or unauthorized access caused by employee error or malfeasance.
Taking advantage of any such vulnerability in our information technology system, or the functionality we may outsource, may accidentally compromise the information security of our customers, suppliers and other business partners.
In addition, because the technology used to carry out cyber attacks often changes, in many cases it is not recognized until they are used to attack targets, and we may not be able to anticipate these changes, appropriate precautions cannot also be taken.
If our information technology systems are subject to cyber attacks, such as those involving major or extensive system outages, disruptions, computer viruses, or unauthorized access, we may experience business operations disruptions, and generate substantial remedial costs, which can have a significant adverse effect on our business, our financial position, or the results of our operations.
Risk related to liquidity we are at risk related to the factoring arrangements for accounts receivable.
We have entered into factoring arrangements with financial institutions to sell certain Trade receivables from our customers without recourse.
If we do not reach these factoring arrangements, our financial position, operating results and cash flow may be materially adversely affected by delays or failures in the collection of trade receivables.
In addition, if any financial institution that we have factoring arrangements encounters financial difficulties or otherwise terminates our factoring arrangements, due to the loss of such factoring arrangements and the impact of such losses on our liquidity, we may suffer significant and adverse economic losses, which may have a significant and adverse impact on our financial position, operating results and cash flow.
The utility of our factoring arrangement also depends on LIBOR, as it is an integral part of the discount rate applicable to each arrangement.
If LIBOR increases so that the factoring cost exceeds the cost of repaying Accounts receivable with existing debt, we may not be able to rely on this factoring arrangement, this can have a significant and adverse impact on our financial position, operating results and cash flow.
Increasing our liabilities can have a negative impact on our financial health.
Our existing revolving bank credit line at JPMorgan Chase in New York is $0. 25 billion. A.
As an agent and a lender, syndicate, we call it our revolving credit mechanism throughout the report.
As at December 31, 2018, our total outstanding debt was $49.
2 million, of which $43.
7 million of outstanding debt, about $203.
This circular credit mechanism accounts for 1 million of the total available.
Any significant increase in our liabilities may increase our vulnerability to generally unfavorable economic and industry conditions and limit our flexibility in planning or coping, changes in our business and operations.
In addition, we have granted lenders under our revolving credit mechanism a first priority security interest in most of our personal property and other assets currently owned and acquired in the future.
We also pledged shares of our subsidiaries to these lenders.
Our business may be adversely affected if any of our debt defaults or we are unable to obtain the necessary liquidity.
We may not be able to generate a lot of cash to pay off our debt and fund our future business.
Our ability to pay debt or refinance debt, or to fund Planned capital expenditures and R & D efforts, will depend on our ability to generate cash in the future.
Our ability to generate cash depends to a certain extent on: general economic, financial, competitive, legislative, regulatory and other factors beyond our control;
Our customers are able to pay the amount on our bill in a timely manner;
And our ability to consider Accounts receivable in the draft client plan.
The emergence of any of the above factors can lead to a decrease in cash flow, which may have a significant adverse impact on us.
Based on our current level of operations, we believe that our operating cash flow, available cash and available borrowings under our revolving credit mechanism will be sufficient to meet our liquidity needs for at least the next 12 months.
The basis of this belief is a significant assumption that, among other things, there will be no significant adverse developments in our business, liquidity or capital requirements.
If we are unable to repay our debt, we will be forced to adopt alternative strategies, including actions such as delaying, reducing or canceling future cash dividends;
Reduction or postponement of capital expenditures or restructuring activities;
Reduce or delay R & D work;
Sale of assets;
Delay or avoid the implementation of certain strategic plans and acquisitions;
Refinance our debt;
And seek additional funds.
We cannot assure you that if there is a significant adverse development in our business, liquidity or capital needs, our business will generate sufficient cash flow from operations, or, future borrowings will be made available under our revolving credit mechanism in an amount sufficient for us to pay the principal and interest of the debt or to fund our other liquidity needs.
In addition, if we default on any of our debts or violate any financial covenants in our revolving credit mechanism, our business may be adversely affected.
Risks associated with external factors we conduct manufacturing and distribution operations worldwide and face risks associated with doing business outside the US.
We have manufacturing and distribution facilities in many countries such as Canada, Poland, Mexico and China, and increasing the manufacturing footprint in low-cost areas is an important part of our strategy.
There are many risks associated with doing business in the international arena, including :(a)
Access to local economic and political conditions; (b)
Social unrest such as the risk of terrorism or other hostile acts; (c)
Currency exchange rate fluctuations and currency control; (d)
Impact of potential changes in the United StatesS.
Trade policy and international trade agreements; and (e)
The possibility of a shortage of trained labor.