The Asian import market, combined with unusually cool and damp weather across much of the United States, has contributed to a slow first quarter and a flat second quarter for the automotive replacement parts manufacturer and distributor Standard Motor Products, Inc.
According to a company spokesperson, consolidated net sales for the second quarter of 2007 were $217 million, compared to consolidated net sales of $229.2 million during the comparable quarter in 2006. The shortfall was primarily in the temperature control division. Earnings from continuing operations for the second quarter of 2007 were $5.7 million or 30 cents per diluted share, compared to $5.5 million or 30 cents per diluted share in the second quarter of 2006.
Consolidated net sales for the six month period ended June 30, 2007 were $416.8 million, compared to consolidated net sales of $439.3 million during the comparable period in 2006. Earnings from continuing operations for the six month period ended June 30, 2007 were $8.6 million or 46 cents per diluted share, compared to $8.1 million or 44 cents per diluted share in the comparable period of 2006.
Mr. Lawrence I. Sills, the company's chairman and chief executive officer, further explains the results: "Engine management, our largest division, had a satisfactory quarter. Sales rebounded from a decline in the first quarter, and were essentially flat in the second quarter. Gross margin continues to improve quarter by quarter. We reached 26.9 percent in the second quarter, compared to 26.3 percent in the first quarter, and 24.6 percent for the full year 2006."
Siles also added that the company continues to solicit new business from original equipment (OE) and original equipment service providers (OES). In the last three months, Standard Motor Products has been awarded incremental OE and OES business, which will amount to approximately $10 million annualized and will begin in 2008.
On the other hand, Standard's Temperature Control division had a difficult quarter. Sales were down $8.7 million or 12 percent for the quarter, reflecting a 6 percent decrease for the six months 2007 compared to 2006. According to Siles, the primary reason for this decline was the cool weather conditions in the center of the country, the company's largest air conditioning market, which continued through July. Standard has also experienced some sales erosion to low priced imports from China. However, the company is in the process of relocating its compressor remanufacturing operations from Grapevine, Texas to Reynosa, Mexico, and believes this will enable them to compete aggressively with Chinese imports in the future.
Although European sales showed a decline, the European market continues to improve. Slow sales in Europe were the result of exiting the air conditioning business at the end of 2006. For the first half 2007, gross margin and operating profit are ahead of 2006, and Standard is looking for continued improvements going forward.
Standard also recently announced the sale of its Ft. Worth, Texas facility for $4.5 million, with a pre-tax gain of $0.8 million which will be accounted for in the third quarter. The remaining operations in that location will be transferred to Mexico, outsourced to low cost markets, or relocated to other Four Seasons locations. The proceeds from the sale will be used to reduce the company's bank revolver debt.
The company's board of directors has approved payment of a quarterly dividend of nine cents per share on the common stock outstanding. The dividend will be paid on September 4, 2007 to stockholders of record on August 15, 2007.
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