Standard Motor Products Inc. has reported today its consolidated financial results for the three months and six months ending June 30, 2017.
Consolidated net sales for the second quarter of 2017 were $312.7 million, compared to consolidated net sales of $289 million during the comparable quarter in 2016. Earnings from continuing operations for the second quarter of 2017 were $18.3 million or 78 cents per diluted share, compared to $19.9 million or 86 cents per diluted share in the second 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 second quarter of 2017 were $18.8 million or 81 cents per diluted share, compared to $20.2 million or 88 cents per diluted share in the second quarter of 2016.
Consolidated net sales for the six month period ended June 30, 2017, were $595.1 million, compared to consolidated net sales of $527.9 million during the comparable period in 2016.
Eric Sills, Standard Motor Products’ CEO and president, said, “A key factor in the second quarter was the step back in Engine Management gross margin, from 32.1 percent in 2016 to 29.4 percent this year. This led to a decline in earnings in the second quarter, though we remain ahead of 2016 in both sales and earnings year-to-date. This gross margin decline is primarily the result of the previously announced plant moves. These are proceeding according to plan, and we are pleased with the progress.
“As we move ahead with the integration of the General Cable North American ignition wire acquisition, we have begun transferring all production from the acquired plant in Nogales, Mexico, to our facility in Reynosa, Mexico. In addition, starting last year, we transferred the balance of our ignition coil production to Bialystok, Poland, and diesel fuel injectors and pumps to Greenville, South Carolina, both of which are still in the process of achieving full benefits. Finally, we have begun the move of our electronics plant in Orlando, Florida, to our plant in Independence, Kansas.
“We plan to complete all of these moves, in stages, over the next 9 to 12 months. They will result in the closing of three facilities — Nogales, Mexico; Grapevine, Texas; and Orlando, Florida.
“In the short run, we are incurring additional costs, including ramp-up inefficiencies, duplication of overhead and the expenses resulting from hiring and training hundreds of new employees. This is the primary cause of the decline in gross margin.
“As we work our way through this period, we anticipate a gradual return to our historical Engine Management gross margin of 31 to 32 percent, plus an additional $7 million to $10 million in company-wide operational savings, including SG&A.
“In all other areas, we are pleased with our results. Sales continue to outpace 2016, up 8.2 percent for the quarter and 12.7 percent for the half. Excluding the sales from the incremental General Cable ignition wire business, acquired in May 2016, the quarter and half of 2017 are up over the previous year by 3 percent and 5.5 percent, respectively.
“By segment, Engine Management sales increased 12.3 percent for the quarter and 14.5 percent year-to-date. Excluding the incremental General Cable business, the quarter and half of 2017 increased 4.8 percent and 4.4 percent, respectively. This was partly due to pipeline orders from certain customers, who continue to expand the breadth and depth of their inventories, as well as the growth of some of our newest product categories.
“Our Temperature Control division continues to post strong results. Sales are up 9.3 percent year-to-date, though second quarter sales were essentially flat. This was due to timing of pre-season orders, which hit heavier in the first quarter of 2017 than in the previous year, and therefore the year-to-date numbers are more meaningful. Temperature Control’s second quarter gross margin of 26.4 percent is up almost 300 basis points compared with 2016, as we are seeing the benefits of our recent cost reduction initiatives.
“To conclude, while we are temporarily feeling the impact of costs associated with our strategic restructuring initiatives, we are confident of the benefits, and we are excited about our future,” said Sills. “We are very proud of all of our people, and we thank them for their efforts and dedication as we work through these moves.”