NEW YORK — Standard Motor Products has reported its consolidated financial results for the three months and six months ended June 30.
Consolidated net sales for the second quarter of 2008 were $215.3 million, compared to consolidated net sales of $217 million during the comparable quarter in 2007. Losses from continuing operations for the second quarter of 2008 were $772,000 or 4 cents per diluted share, compared to $5.7 million or 30 cents per diluted share in the second quarter of 2007. Excluding restructuring expenses for previously announced facility moves, a deferred gain from the sale and leaseback of its corporate facilities in Long Island City, N.Y., results from continuing operations for the second quarter 2008 were essentially breakeven compared to earnings in the second quarter 2007 of $6 million or 32 cents per diluted share.
Consolidated net sales for the six-month period ended June 30 were $423.4 million, compared to consolidated net sales of $416.8 million during the comparable period in 2007. Earnings from continuing operations for the six month period were $12.6 million or 68 cents per diluted share, compared to $8.6 million or 46 cents per diluted share in the comparable period of 2007. Excluding restructuring expenses for previously announced facility moves, a gain from the sale and leaseback of its corporate facilities in Long Island City, and the associated defeasance costs on the building mortgage, earnings from continuing operations for the six months ended 2008 and 2007 were $3 million or 16 cents per diluted share and $9.4 million or 50 cents per diluted share, respectively.
The second quarter 2008 provision for taxes was negatively impacted with the increase in the full year effective tax rate to 42.6 percent. The 2008 tax rate is higher due to the tax impact from the gain on the sale of the Long Island City property, the tax impact of the non-deductible portion of a retirement plan distribution and tollgate taxes on undistributed earnings related to the closure of our Puerto Rico operations.
Commenting on the results, Lawrence Sills, Standard Motor Products’ chairman and chief executive officer, stated, "The primary negative factor in the second quarter was the drop in Engine Management gross margin, which fell from $37.1 million or 26.9 percent in 2007 to $30 million or 21.7 percent in 2008. This was almost entirely attributable to the closing of Long Island City and Puerto Rico operations and the move to Reynosa, Mexico. During the quarter we continued to incur costs in Long Island City and Puerto Rico, with minimal productive hours, while Reynosa was just beginning to ramp up.
"Long Island City and Puerto Rico are now completely closed, while Reynosa continues to increase production. As a result, we anticipate a gradual improvement in gross margin in the third quarter, further improvement in the fourth quarter, with the full benefits of the moves hitting in 2009. This is in line with our original forecast.
"As a side benefit we continue to reduce the bridge inventory we built during 2007. Engine Management inventory was down approximately $8 million for the six months, with an additional $3 million drop in July.
"Sales held up reasonably well in a weak market. Engine Management net sales are about 2 percent ahead for the year, with most of the growth coming from new OES business. Temperature Control sales started slowly, but began to pick up in June with the hot weather, and July sales are ahead of the prior year.
"We continue to make progress in OES. We previously announced that we had agreed to acquire various sensor lines from Continental. The first production line from Continental’s plant in upstate New York has now been moved to Independence, K.S., facility, and the balance of the lines will be moved by year end. Sales, which are estimated at $10 to 12 million annually, will begin towards the end of 2008.
"Further, we recently concluded an agreement with Lear to acquire a portion of their OE/OES business, which we estimate at approximately $3 million annually. This equipment will also be relocated to Independence. As a result of both of these transactions we are gaining access to a host of OE and OES accounts, both domestic and import.
"We have also undertaken significant cost reduction initiatives. In the last several months we have eliminated approximately 60 salaried positions, or 5 percent of our salaried workforce. Further, on May 30 we made a change to our postretirement medical plan. Our exposure is now capped and this action resulted in a $24.5 million reduction in our liability to be recognized over 3.8 years effective June 1, 2008."
In addition Standard’s board of directors has approved payment of a quarterly dividend of 9 cents per share on the common stock outstanding. The dividend will be paid on Sept. 2 to stockholders of record on Aug. 15.