Standard Motor Products, Inc. (NYSE: SMP), an automotive replacement parts manufacturer and distributor, reported today its consolidated financial results for the three months ending March 31, 2018.
Consolidated net sales for the first quarter of 2018 were $261.8 million, compared to consolidated net sales of $282.4 million during the comparable quarter in 2017. Earnings from continuing operations for the first quarter of 2018 were $8.6 million or 37 cents per diluted share, compared to $16.4 million or 70 cents per diluted share in the first 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 first quarter of 2018 were $10.5 million or 46 cents per diluted share, compared to $17.1 million or 74 cents per diluted share in the first quarter of 2017.
Mr. Eric P. Sills, Standard Motor Products’ Chief Executive Officer and President stated, “Our overall business experienced declines in sales and margins in the first quarter, compared to the first quarter of 2017, with different dynamics affecting each division. The shortfall is largely due to events that are either timing-related or temporary, as described below.
“Engine Management sales decreased by 5.6% in the first quarter, compared to the first quarter of 2017. Excluding our wire and cable business, which is in general decline due to the product life cycle, the Engine Management business was down 2.7%. As previously reported, a few of our large customers placed heavy pipeline orders during the early months of 2017, as they looked to expand their offering in both depth and breadth. This was not repeated in 2018 and that accounts for the entire shortfall.
“Overall, our major customers reported a sales increase in Engine Management in the low single digits during the first quarter, in line with our long-term forecasts. As we have said, our customers’ sales are a better indicator of our results than their purchases, which can vary significantly quarter to quarter based on ordering patterns.
“Our Engine Management gross margins continue to be impacted by temporary costs associated with the multiple plant moves. On a positive note, in March of this year we were able to fully exit both the Orlando and Nogales facilities, and going forward we will have eliminated these duplicate plant expenses. The receiving locations are doing well and showing continuous improvement, but are still working towards returning to historic run-rate efficiencies, which we expect to achieve by year-end.
“Our Temperature Control sales were down 14% compared with the first quarter of 2017. The Temperature Control business in the first quarter is comprised almost entirely of pre-season build orders, which reflect the previous year’s selling season and resulting customer inventory levels. 2016 was a very warm summer, and our customers ended that year with below average inventories. Their first quarter 2017 orders were therefore very strong – up 24% from the first quarter of 2016, which makes the comparisons this year quite difficult. Again, these sales are merely positioning our customers for the summer – ultimately, our year is determined by how hot it gets in-season, and time will tell for 2018.
“Temperature Control gross margin reductions were entirely due to our decreasing of production in response to the cooler 2017 season and the resulting under-absorption of overhead in our factories. Now that the closure of Grapevine is complete and our two Chinese joint ventures are performing well, we expect a return to our more recent healthy margin performance.
“In conclusion, while we are not satisfied with our first quarter results, we believe that the causes are relatively short-term in nature, and that as we continue to implement the initiatives we have begun, we anticipate gradual improvement throughout the balance of the year.”
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 June 1, 2018 to stockholders of record on May 15, 2018.
Standard Motor Products, Inc. will hold a conference call at 11:00 AM, Eastern Time, on Thursday, May 3, 2018. The dial-in number is 877-876-9173 (domestic) or 785-424-1670 (international). The playback number is 800-839-8798 (domestic) or 402-220-6078 (international). The conference ID # is STANDARD.