Standard Motor Products Inc. (SMP) has reported its consolidated financial results for the three months and for the year ended Dec. 31, 2016.
Consolidated net sales for the fourth quarter of 2016 were $229.8 million, compared to consolidated net sales of $205 million during the comparable quarter in 2015. Earnings from continuing operations for the fourth quarter of 2016 were $8.8 million or 38 cents per diluted share, compared to $5.8 million or 25 cents per diluted share in the fourth quarter of 2015.
Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the fourth quarter of 2016 were $9.8 million or 42 cents per diluted share, compared to $8.1 million or 35 cents per diluted share in the fourth quarter of 2015.
Consolidated net sales for 2016 were $1,058.5 million, compared to consolidated net sales of $972 million during the comparable period in 2015. Earnings from continuing operations for 2016 were $62.4 million or $2.70 per diluted share, compared to $48.1 million or $2.08 per diluted share in 2015. Excluding non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the year ended December 31, 2016, and 2015 were $63.9 million or $2.77 per diluted share and $49.4 million or $2.13 per diluted share, respectively.
Eric Sills, Standard Motor Products’ CEO and president, stated, “We are very pleased with our 2016 results, as we set company records for both sales and profit. For the year, net sales were up 8.9 percent (excluding the mid-year acquisition of General Cable’s North American automotive ignition wire business, net sales were ahead 3.5 percent). Gross margin for the year increased from 28.9 percent to 30.5 percent, and net earnings and earnings per share were up roughly 30 percent.
“Engine Management sales increased 9.7 percent for the year (excluding the General Cable acquired business they were ahead 2.1 percent, in line with our low single digit forecasts). Gross margin for the year increased almost a full point, from 30.4 percent to 31.3 percent.
“Our Temperature Control division benefited from the first warm summer in three years, and net sales increased roughly 7 percent. Our key customers reported their POS sales increase at closer to 9 percent, which would indicate a healthy start to 2017. However, the key determining factor for the year will be the weather during the summer months.
“The Temperature Control division achieved a major improvement in gross margin for the year, from 21.9 percent to 25.6 percent – the result of increased volume and increased efficiency throughout the division.
“Overall, the fourth quarter came in slightly below our expectations, though we did achieve an increase in both sales and profit vs. the fourth quarter of 2015. The main shortfall was in Engine Management gross profit, which fell from 31.5 percent to 27.9 percent for the quarter.
“This reduction was primarily the result of several factors – lower sales (excluding sales from the General Cable acquired business), based on the ordering patterns of a few large accounts; higher than anticipated returns; and a drop in overhead absorption as we are in the process of relocating several manufacturing operations. We believe that the 12-month figure of 31.3 percent is a better indication of our current Engine Management gross margin rate.
“Turning to operations, we are quite pleased with the General Cable acquired business results to date. We have maintained the customer base and improved the shipping performance. The integration is proceeding on schedule. Sales and administration functions are essentially integrated, and distribution has been relocated to our wire distribution facility in Edwardsville, Kansas. All have resulted in significant savings. We are beginning the task of relocating the General Cable wire assembly operation from Nogales, Mexico to our existing assembly facility in Reynosa, Mexico. We plan to complete this move by the end of Q1 2018, and expect substantial synergies when the integration is complete.
“We have decided to close our electronics operation in Orlando, Florida, and consolidate it into an existing facility in Independence, Kansas. This was a difficult decision to make. We have been operating in Orlando since 1996, with an excellent work force. Unfortunately, the primary product produced in Orlando, electronic ignition modules, has not been on new vehicles for several years. With diminishing sales, it was increasingly difficult to sustain this as a stand-alone operation, and we decided it was best to merge it with our Independence facility, where we have available capacity and complementary skills.
“We anticipate the total restructuring costs at $3.7 million, with annual savings of $3 million. The move should be complete within 12 to 24 months.
“With our roughly $98 million cash generated from operations, we were able to fund our General Cable ignition wire acquisition for $67 million as well as our capital expenditures and dividends with only a slight increase of $7 million in debt. Our total debt outstanding at year-end was $55 million leaving us with ample liquidity to fund our cash needs going forward.
“In total, we are pleased with our results for 2016 and thank all of our dedicated team members for their accomplishments. We look to build on these accomplishments in 2017,” said Sills.
In a separate announcement today, the SMP board of directors has authorized the purchase of up to $20 million of SMP common stock under a new stock repurchase program.