Standard Motor Products has consolidated financial results for the three months and for the year ended Dec. 31, 2017.
Consolidated net sales for the fourth quarter of 2017 were $240 million, compared to consolidated net sales of $229.8 million during the comparable quarter in 2016. Earnings (Loss) from continuing operations for the fourth quarter of 2017 were ($8.1) million or (36) cents per diluted share, compared to $8.8 million or 38 cents per diluted share in the fourth quarter of 2016. Excluding non-operational gains and losses and the impact of the Tax Cuts and Jobs Act, earnings from continuing operations for the fourth quarter of 2017 were $12.4 million or 54 cents per diluted share, compared to $9.8 million or 42 cents per diluted share in the fourth quarter of 2016.
Consolidated net sales for 2017 were $1,116.1 million, compared to consolidated net sales of $1,058.5 million during the comparable period in 2016. Earnings from continuing operations for 2017 were $43.6 million or $1.88 per diluted share, compared to $62.4 million or $2.70 per diluted share in 2016. Excluding non-operational gains and losses and the impact of the Tax Cuts and Jobs Act identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the year ended Dec. 31, 2017, and 2016 were $65.6 million or $2.83 per diluted share and $63.9 million or $2.77 per diluted share, respectively.
Eric Sills, Standard Motor Products’ CEO and president, stated, “We are pleased with our results in the fourth quarter, as both net sales and non-GAAP diluted earnings per share from continuing operations were ahead of the fourth quarter of 2016. For the year as a whole, comparable net sales and non-GAAP earnings were also ahead of the prior year, though results were negatively impacted by a mild Temperature Control season and the one-time costs of plant moves.
“Engine Management net sales were up 8.3 percent for the year. However, excluding the effect of the General Cable ignition wire acquisition – we acquired this business in May 2016, and thus we had the benefit of a full year sales in 2017 compared to seven months in 2016 – Engine Management sales were up 3.3 percent in line with our long-term expectations. Temperature Control sales were down 1.6 percent for the year because of a cool summer. However, our customers experienced sales declines closer to 4 percent. We anticipate that this will lead to lower pre-season orders this year as they are entering 2018 with heavier than normal inventories.
“For the full year, our Engine Management gross margin fell nearly two points in 2017 – from 31.3 percent in 2016 to 29.4 percent in 2017, primarily because of the cost of the plant moves, discussed below. Temperature Control gross margin, despite the lower sales, increased from 25.6 percent to 26.2 percent, as our operations in Reynosa, Mexico, and Foshan, China, continue to show improvement.
“Looking beyond the numbers, we are pleased that during 2017 we continued to make progress towards achieving our long-term strategic goals. We made strong strides in our ambitious programs of plant consolidations and relocations. We exited our factory in Grapevine, Texas, moving some of the operations to Greenville, South Carolina, and others to Reynosa, Mexico. We are closing our electronics facility in Orlando, Florida, and relocating it to Independence, Kansas. And as a result of the General Cable ignition wire acquisition, we are relocating their assembly operations from Nogales, Mexico, to our facility in Reynosa.
“Some of the moves are complete, and the balance will be done by the second half of 2018. In the short run, these moves entail a significant amount of time, effort and cost, but in the long run they will make us a stronger company. We thank all our people for their immense efforts here,” said Sills.
Sills continued, “We also made progress in our goal of strategic acquisitions. At the end of November, we entered into a joint venture with Foshan Guangdong Automotive Air Conditioning Co., Ltd. (FGD), a compressor manufacturer in Foshan, China. We look to them to be a high-quality, low-cost supplier to our North American business, and, in the future, to be an integral part of our plan to develop our Temperature Control business in China.
“Looking ahead to 2018, we are anticipating some headwinds in the first half of the year. In Temperature Control, we had a very strong start to the year in 2017, up 24 percent in the first quarter and 9 percent for the half, as our customers rebuilt their inventories after a hot 2016. This was followed by a mild 2017 summer, leaving our customers with higher than normal inventory levels. We therefore expect pre-season Temperature Control orders to be significantly lower than the prior year. However, the full year results will be determined, as always, by the weather during the season itself. In addition, within Engine Management, two of the plant moves will not be complete until the second half of the year, and we will continue to incur additional costs during the first and second quarters.
“However, these are essentially short-term issues. In the long run, with a strong market position, a healthy balance sheet, a growing and aging vehicle population – and most of all, a dedicated and talented workforce – we look forward to the future.”
Sills added that the company also is increasing quarterly dividend from 19 cents to 21 cents payable on March 1, 2018, representing the ninth consecutive year of dividend increases.
