Standard Motor Products : 2017 Q3 Earnings Release

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James J. Burke Standard Motor Products, Inc.

(718) 392-0200

New York, NY, October 26, 2017......Standard Motor Products, Inc. (NYSE: SMP), an automotive replacement parts manufacturer and distributor, reported today its consolidated financial results for the three months and nine months ending September 30, 2017.

Consolidated net sales for the third quarter of 2017 were $281.1 million, compared to consolidated net sales of $300.8 million during the comparable quarter in 2016. Earnings from continuing operations for the third quarter of 2017 were $17.1 million or 74 cents per diluted share, compared to $21.1 million or 91 cents per diluted share in the third quarter of 2016. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the third quarter of 2017 were $17.2 million or 74 cents per diluted share, compared to $21.3 million or 92 cents per diluted share in the third quarter of 2016.

Consolidated net sales for the nine month period ended September 30, 2017, were $876.2 million, compared to consolidated net sales of $828.7 million during the comparable period in 2016.

37-18 Northern Blvd., Long Island City, NY 11101 (718) 392-0200

www.smpcorp.com

Earnings from continuing operations for the nine month period ended September 30, 2017, were

$51.7 million or $2.22 per diluted share, compared to $53.6 million or $2.32 per diluted share in the comparable period of 2016. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the nine months ended September 30, 2017, and 2016 were $53.2 million or $2.28 per diluted share and

$54.1 million or $2.35 per diluted share, respectively.

Loss from discontinued operations, net of income taxes, in the third quarter of 2017 was $4 million compared to $425 thousand in the comparable period last year. The discontinued operation relates to asbestos-related indemnity claims and legal expenses from a brake business divested in 1998.

Annually, in the third quarter, the Company engages an independent actuary to assess the Company's asbestos-related liability exposure. The actuary has estimated that the Company's gross undiscounted potential exposure for indemnity claims from September 2017 through 2060 will range from $35.2 million to $54 million, and legal expenses will range from $44.3 million to $79.6 million. In the third quarter of 2017, the Company recorded a non-cash $6 million provision, $3.6 million net of taxes, to increase the asbestos-related indemnity liability to $35.2 million. Legal expenses are expensed as incurred.

Mr. Eric P. Sills, Standard Motor Products' Chief Executive Officer and President stated, "There were two basic reasons for the shortfall in sales and profits in the third quarter, both of which are short-term in nature. First was the decline in Temperature Control sales, which was the result of a cool summer following a very warm 2016; second was a reduction in Engine Management gross margin, which was largely due to the temporary costs of plant moves, which, when complete, will make us a much stronger company.

"First, Temperature Control sales. 2016, you will recall, was a very warm summer, and our customers reported sales increases in our line of 9%. As a result, their pre-season orders this year were very strong, and our first half Temperature Control sales were up 9%.

"2017 has proven to be a cool summer, and our customers have focused on reducing their Temperature Control inventories during the third quarter. Our sales were down 16% in the third quarter, but year-to-date they are down only 1%. This is still slightly better than our customers' reported year-to-date sales decrease of 5%, and as a result we are anticipating a potential further decline in their purchases in the fourth quarter, as they continue to bring their inventories into line.

"However, despite the decline in sales, we were able to improve Temperature Control gross margin to 26.8% in the third quarter and 26.2% year-to-date, both ahead of 2016 figures. This is primarily the result of the relocation of production from Grapevine, TX, to our low-cost plant in Reynosa, Mexico, which will be complete by the end of 2017, and continuous improvement in our joint venture in Foshan, China.

"Our Engine Management sales decreased in the third quarter by 2% as compared to 2016. Year-to-date, Engine Management sales are up 8.8%; however, adjusting for the General Cable ignition wire business, acquired in May of 2016, our year-to-date Engine Management sales are ahead of the prior year by 2.2%. This increase is within our stated expectations of low single- digit organic growth.

"Our Engine Management gross margins continue to be impacted by the multiple facility moves that began in 2016. Two moves - ignition coils from Greenville, SC, to Poland, and diesel products from Grapevine, TX, to Greenville - are physically complete, with the receiving locations doing well but still working towards achieving run-rate efficiencies.

"Two moves are still underway. The largest is the consolidation of the General Cable wire assembly operation from Nogales, Mexico, to Reynosa, a move involving 500 people. We have also begun the relocation of our electronics plant in Orlando, Florida, to our Independence, Kansas, facility. These moves are on schedule and due to be complete by mid-2018. Until then, as we have discussed, we are incurring substantial temporary costs relating to ramp-up inefficiencies, duplication of overhead, and the hiring and training of hundreds of employees. These costs, temporary in nature, are the primary reason for the decline in Engine Management gross margin.

"These moves have been a major effort for our company, involving many of our locations and many of our people. When complete, they will result in the closing of three facilities - Grapevine, Texas; Orlando, Florida; and Nogales, Mexico. Once the receiving locations achieve run-rate efficiencies, we anticipate annualized corporate-wide savings of $16-18 million from today's costs.

"During the third quarter, despite the drop in volume, we were able to reduce SG&A expenses nearly a full point, from 20.4% to 19.5%. A major component was the integration of General Cable distribution and sales function into SMP as well as overall management of controllable costs and reduced incentive compensation expenses.