Standard Motor Products (SMP) has reported its consolidated financial results for the three months and six months ending June 30, 2015.
Consolidated net sales for the second quarter of 2015 were $269.4 million, compared to consolidated net sales of $272.5 million during the comparable quarter in 2014. Earnings from continuing operations for the second quarter of 2015 were $13.8 million or 59 cents per diluted share, compared to $11.2 million or 48 cents per diluted share in the second quarter of 2014. The second quarter of 2014 included a one-time, non-recurring litigation charge. Excluding the litigation charge and other 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 2015 were $13.6 million or 59 cents per diluted share, compared to $17.7 million or 76 cents per diluted share in the second quarter of 2014.
Consolidated net sales for the six month period ended June 30, 2015, were $497 million, compared to consolidated net sales of $505.3 million during the comparable period in 2014. Earnings from continuing operations for the six-month period were $23.1 million or $1 per diluted share, compared to $23.6 million or $1.02 per diluted share in the comparable period of 2014. The six-month period ended June 30, 2014, included a one-time, non-recurring litigation charge. Excluding the litigation charge and other non-operational gains and losses identified on the attached reconciliation of GAAP and non-GAAP measures, earnings from continuing operations for the six months ended June 30, 2015, and 2014 were $22.9 million or 98 cents per diluted share and $30.1 million or $1.30 per diluted share, respectively.
Commenting on the results, Lawrence Sills, Standard Motor Products’ chairman and CEO, stated, “We are obviously disappointed in our results for the first six months of the year, as we are behind 2014 in both sales and profit. However, we believe that the worst is behind us and we anticipate a stronger final six months.
“Turning first to sales, net sales in [our] Engine Management [segment] were $9.4 million below 2014 through June. During this same period, our customers were reporting, on average, a slight increase in their sales of Engine Management. The difference is typically caused by a variety of factors inventory consolidation as a result of acquisitions, different timing of pipeline orders, and other short-term events. In time, these have balanced out, and we anticipate a return to low single digit increases in Engine Management.
“In Temperature Control, we are finally having a warm summer after two cool summers in a row. Sales began to pick up in the latter part of June, and sales in July have been strong. We anticipate a sales increase in Temperature Control sales for the year.”
Sills added that there were three events that had a significant impact on the company’s profit shortfall for the first six months, all of which where short-term in nature.
“The three are as follows: First is the incremental unfavorable manufacturing variances in our Temperature Control group related to reduced production in 2014 to bring inventory down after two cool seasons in a row,” Sills noted. “These carry forward variances have been fully recognized in our first half results. We are now achieving favorable variances, as we ramp up production to keep up with the increase in sales.
“Second are the one-time costs incurred as we revamped our rebuilt diesel fuel injection line, acquired from Pensacola Fuel Injection last year. This exercise is now mostly complete, and we are very optimistic about the future of this business.
“Third is the unfavorable non-cash change in prior service costs resulting from winding down of our retiree medical program. The program will end in December 2016.
“The total of all three in the first six months of the year was roughly $8.5 million which accounted for the bulk of the shortfall in profit.
“Our cash flow generated from operations was roughly $40 million in the second quarter and $26 million year to date. Cash generated in the quarter was used to reduce debt roughly $19 million and initiate $7 million in share repurchases. In a separate release today we announced that our Board of Directors approved an additional $10 million increase in our share repurchase program from $10 million to $20 million.
“In summary, we are optimistic about the second half of 2015. Our market position remains strong; our recent acquisitions continue to show improvement; industry demographics are positive; some major one-time costs are behind us; and sales are improving. We look forward to the balance of the year,” Sills concluded.
