Standard Motor Products, Inc. (NYSE: SMP), an automotive replacement parts manufacturer and distributor, reported its consolidated financial results for the three months and nine months ending September 30, 2018.
Consolidated net sales for the third quarter of 2018 were $296.6 million, compared to consolidated net sales of $281.1 million during the comparable quarter in 2017. Earnings from continuing operations for the third quarter of 2018 were $19.3 million or 84 cents per diluted share, compared to $17.1 million or 74 cents per diluted share in the third quarter of 2017. 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 2018 were $19.1 million or 83 cents per diluted share, compared to $17.2 million or 74 cents per diluted share in the third quarter of 2017.
Consolidated net sales for the nine month period ended September 30, 2018, were $845.1 million, compared to consolidated net sales of $876.2 million during the comparable period in 2017. Earnings from continuing operations for the nine month period ended September 30, 2018, were $44.7 million or $1.95 per diluted share, compared to $51.7 million or $2.22 per diluted share in the comparable period of 2017. 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, 2018, and 2017 were $46.7 million or $2.03 per diluted share and $53.2 million or $2.28 per diluted share, respectively.
Mr. Eric P. Sills, Standard Motor Products’ Chief Executive Officer and President, stated, “We are pleased with our performance in the quarter. After a challenging first half, which was largely impacted by temporary or timing-related issues, our third quarter showed positive signs of recovery. We believe this trend will continue for the balance of the year.
“Engine Management sales were essentially flat for the quarter. Our Wire and Cable product line, which is in gradual decline, was down 6.7%, while the balance of our Engine Management business showed an increase of 2.3%. Both of these trends are in line with our stated expectations. Meanwhile, excluding Wire and Cable, our customers have been reporting solid POS gains all year, which in the third quarter were up in the mid-single digits over 2017.
“Our Engine Management gross margin in the third quarter showed a 50 basis point improvement over the second quarter, as we are now beginning to see the gradual improvement in our efficiencies as we fully integrate the General Cable operation into our Reynosa, Mexico facility. While there remains much to be done, we are pleased to see this trending in the right direction.
“Year-to-date our Engine Management net sales were 4.9% below 2017 overall, and 3.2% below 2017 excluding Wire and Cable. As previously reported, the shortfall in the first half of the year was due to a few customers placing large pipeline orders in 2017 that were not repeated this year.
“Turning to Temperature Control, sales rebounded very strongly in the quarter, up 18.4% from last year. This was the result of a warm summer, compared to a mild summer in 2017. Sales year-to-date are essentially flat as compared to 2017. As previously reported, our first half sales lagged 2017 by almost 11%, as our customers entered 2018 with above normal inventory levels, and therefore placed substantially lower pre-season orders this year.
“The warm weather continued into autumn, which bodes well not just for this year’s sales, but for next year’s pre-season orders as well, as we expect our customers to end the year with lower than typical inventories.
“Temperature Control gross margin increased to 27.6% for the quarter, up from 26.8% from last year. This reflects the fact that we are now essentially fully low cost in our manufacturing, having exited our Texas operations in 2017. However, much of the gross margin improvement was negated by incremental SG&A associated with higher than usual distribution expenses. These increases were due to a combination of significant additional labor costs to keep up with the surge in sales, as well as start-up costs related to the installation of a new automation project in our distribution center. We believe this project will be complete and fully optimized by year-end, and we will see substantial improvement next year.
“In closing, while we recognize that there is still a great deal of work ahead of us, we are pleased with the quarter, and feel that the temporary issues that have recently had a negative impact on us are either waning or are in the past. Coupled with strong signs of customer sell-through and industry health in general, we are excited about the future.”
The Board of Directors has approved payment of a quarterly dividend of 21 cents per share on the common stock outstanding. The dividend will be paid on December 3, 2018 to stockholders of record on November 15, 2018.
Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Friday, October 26, 2018. The dial-in number is 866-342-8591 (domestic) or 203-518-9713 (international). The playback number is 800-839-5125 (domestic) or 402-220-1502 (international). The conference ID # is STANDARD.
