Standard Motor Products Inc. (SMP), an automotive replacement parts manufacturer and distributor, has reported its consolidated financial results for the three months and nine months ended Sept. 30, 2016.
Consolidated net sales for the third quarter of 2016 were $300.8 million, compared to consolidated net sales of $270 million during the comparable quarter 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 third quarter of 2016 were $21.3 million or 92 cents per diluted share, compared to $18.4 million or 80 cents per diluted share in the third quarter of 2015.
Consolidated net sales for the nine month period ended Sept. 30, 2016, were $828.7 million, compared to consolidated net sales of $767 million during the comparable period 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 nine months ended September 30, 2016, and 2015 were $54.1 million or $2.35 per diluted share and $41.3 million or $1.78 cents per diluted share, respectively.
Eric Sills, Standard Motor Products’ CEO and president, stated, “We are pleased with the results for the third quarter and year-to-date. For the quarter, consolidated net sales increased 11.4 percent, inclusive of $22.8 million from the acquisition of the General Cable North American ignition wire business. Excluding this, net sales were ahead 2.9 percent for the quarter.
“Our margins were higher as well. Gross margin increased from 30.2 percent to 31.8 percent for the quarter, while non-GAAP operating income before restructuring expenses grew roughly 16 percent. Some of the improvement is a function of increased sales, but much is the result of continuous operating improvement in all our locations. We compliment all our people for their efforts and achievements in this area.
“Turning to the operating divisions, Engine Management net sales increased 13.8 percent for the quarter. Excluding the wire acquisition, Engine Management sales were ahead approximately 1 percent. However, year-to-date, excluding the wire acquisition, net sales are up 3.5 percent, in line with our low to mid-single digit forecasts. As we have previously noted, sales can vary in any particular quarter, based on special one-time events, but over time they balance out.
“Temperature Control sales increased 6.8 percent for the quarter and 5.5 percent year-to-date. By contrast, our key customers reported POS sales increases through September of about 9 percent aided by the first warm summer in three years. This would indicate that our customers were able to reduce inventory during this time, much of which was carried over from the two prior cool summers. This should be a positive factor heading into 2017.
“Year-to-date results were positive for the company as a whole. Total consolidated net sales were up 8 percent (4 percent excluding the wire acquisition). Gross margin increased from 28.4 percent to 30.9 percent and non-GAAP operating income before restructuring expenses increased by approximately 33 percent. As you recall, we incurred approximately $10 million of one-time costs during the full year 2015 for our diesel enhancement program, unfavorable Temperature Control variances and postretirement medical expenses. Adjusting for the $9.5 million of these expenses incurred in the first nine months of 2015, our non-GAAP operating income improved roughly 16 percent.
“We have two major operating initiatives in progress and both are proceeding on schedule and on budget. The first is the integration of the wire acquisition. In October, we completed the consolidation of the General Cable Altoona, Pennsylvania, distribution center into our existing wire distribution center in Edwardsville, Kansas. We are now announcing our plan to relocate all production from the acquired Nogales, Mexico, wire set assembly operation to our existing wire assembly business in Reynosa, Mexico. We anticipate completion by the end of 2017, at which point we will close the Nogales plant.
“The second initiative includes the closing of our Grapevine, Texas, facility and the relocation of the production lines to Greenville, South Carolina, and Reynosa, Mexico. We are also relocating certain production lines from Greenville, to Bialystok, Poland. We anticipate that all will be complete by the end of 2017 and will result in significant synergies and cost savings.”
