SMP - Earnings call transcript Q2 2018 | Standard Motor Products, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone, and welcome to the Standard Motor Products Quarter Two Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note, this call maybe recorded. It is now my pleasure to turn the call over to Mr. Chairman. Executive Sills, Larry ahead. go Please

Lawrence Sills

good morning, conference the our quarter welcome to everyone, And we and call. taking to thank attend. second Well, you time for

Burke, Sills, Here Larry myself, Chairman. and is the Executive President Eric from CEO; CFO; Company Sills, Jim Executive and Vice and President

Our this more open certain into of we'll subjects in call begin review we'll Jim, who'll go plan second Eric quarter questions. will And for detail. for then, the financial is with results; then these

started. get let's that, with So

start Jim. we'll So with

James Burke

you, Thank morning. Okay. and Larry, good

As some these note, use forward-looking we expected I generally are today will out a and would preliminary When expect, include like of be words forward-looking statements. point like to statements may we business results. that regarding anticipate, our the believe, material financial or discussing estimate

that us, in us assure available we currently statements we these on are by the to you they they Although prove reflected made forward-looking and based assumptions expectations correct. reasonable, are will information that cannot and certain believe

the provide read Engine were on net I'll our and orders based a XXXX cause discussion sales the right, the million prior color segment looking were P&L. Eric You data. $XXX.X million, should million X.X%. down were risks Within or half statements. million in were – for were breakdown, cable wire reflecting Exchange $XX.X provide million and sales of QX or differ net Management sales, or our net customer XXXX, Management, additional X.X%. down down or million sales for $XXX.X cable million, The first year sales could the that consolidated mix $XXX.X QX in Management $XX.X down forward-looking balance net first POS and half sales our million, balance $XX.X X.X%. X.X%. QX or million and at our And $XXX.X of the or million, X.X%. in Management were down Engine will sales the in excluding $XX down pipeline $XX.X and of were and Securities Engine X.X%. $XX.X XXXX million also begin, Wire from the wire, uncertainties The XX.X%, All $XX.X XX% $X.X and results of sales, Engine or down million sales QX, Commission Engine to actual Management in to were down or the X.X%. with the filings XXXX

in In versus will margin basis million, Temperature segment, Consolidated Eric $X QX QX. Eric million versus As XX.X% on earlier, for versus half, control expand down one sales sales XXXX XX.X%, XXXX further net QX XX.X%, XX.X% in margin Management the down gross points Engine X.X million stated half, or and Management gross our against The the XXXX margin in Control X%. to QX million, XX.X%, points, QX in was Engine half, down elaborate XX%, on or first X.X the XX.X% XX.X% point, was XX.X% sales. were down temp for results. points. were first By will $XX.X improved points. the gross X.X XX.X%. $XXX.X down $XX.X in from was XX XX.X% further down and

and half XX.X% down versus versus accelerated progress was of as XX.X% down was XX.X%, the expect the gross XXXX XX.X%, points. QX we into for margin We improvement second X.X points, Temp margin in half, XXXX. control X.X

of at the the we lower end production last As XXXX. Call, burdened discussed at Investor our margin was levels XX.X% in from QX

savings million expenses were at on were in XX.X% were million, of and normalized volumes As million Consolidated in $XX.X production SG&A variable savings QX of half, our the net going $X.X and reduced $XXX.X again, a year-to-date. lower the and range. $X.X of net quarter based a for XXXX, levels million, targeted expenses QX sales sales. margins sales, of rebounded to XX.X% into annual our within XXXX SG&A XX.X%

XXXX addition, expenses of was margin of as was for We of X.X into In for The other sales. gross our $X.XX spending reported on for income in performance half from down on operating higher integration and to was and higher per net margins leverage X.X the the and half curtailed down XXXX XXXX. our X.X% of operational X% $X.XX in QX last net reconciliation net income year sales, $X.XX all share versus second the effect half months, first Consolidated versus diluted percentages operating points, QX sales, of of before the EPS restructuring controllable and and diluted anticipate net earnings was non-GAAP points. $X.XX SG&A six expenses. improve

our last Looking reflects on at $XX.X million of accounts revenue since of gross inventory sheet, pronouncement, receivable reduced at the of but increased inventory Inventories December customers. recognizing versus decreased sales last due year lower million the anticipated June returns year. seasonality but at June of levels December our increased held customer slightly recognition million $X.X to Unreturned review balance customer from recording and $XX.X the million versus $XX.X business volumes.

working at Our of December capital needs. fund XXXX XX an $XX.X to total million our debt June increase was $XX million, against seasonal

increase changed cash still margins an XXXX. of $XX use disappointed with as cash million repurchase will summary, and cash Cash expenditures $XX.X In we to a while the Eric. it I'll six by Our to activities $X.X of seasonable and year-end. to of has over funding. million. our the operations half million million additional and results, the from payments forward. your first half statement feel and turn attention, the have tide dividend for capital included $X.X opposed million. We Thank months repurchases cash Financing flow improved sales you receivables million and $X.X use of authorization significantly joint-venture available anticipate share going as in collected from Investing are China for second reflected reflects $X.X operations activities for

Eric Sills

our and give you, morning, I'll spending Thank and time welcome to appreciate then it up you for I us. open prepared with some brief we'll Jim, questions. and your remarks, good you call. everybody,

the the start call with and items or the the in largely quarter were dissatisfied on either we’re and while discussed with declined results last that short-term expected to in nature. and part Management. Engine year I'll are overall, X% large approximately So due Management timing-related earnings in our were Engine sales quarter.

such, wire is shrinking. in included our base This number, However, installed and, is gradual is the this decline. which is older line, cable in and as an technology, product

for business portion of at to XXXX. exiting the end the in small X.X% and down XX% the and a cable relatively the this OE was overall While of a due sales are year-to-date, wire quarter of

shortfall the X% in the X%, our expectations. this that, down stated was not remaining which will were in to business which pipelines that repeat customers And decline we furthermore, call, XXXX Excluding Management a Engine is quarter. entirely due continue of year. sell-through. the our this large The did to On line their last rest in our advised matched of our into in by this customers few you second with

frequently customers' pipeline behind these Engine should our our X% as us. year-to-date, pipelines, the gauge overall lumpiness expectations. customer say That as business quarter-to-quarter certain low we is last sell-through. customers largely quarter-over-quarter. I'm which of that our is inventories, note the Excluding Management as I around remind therefore, improvement with a year this anomaly single-digits, is also that, over their in said, to matches flex we you, always our And and POS will see – our sequential amount happy a better up

drivers. gross bodes Management for margins have So that our believe the future. behind with the Engine a and this pleased few we're well sales historical performance, trend are and remained there

to they end fully compounded impacted Nogales, and of by speed. incur cost be Reynosa. are wire Reynosa the the Cable continued we integration costs and General in which completely to exited associated We of high a production first from by environment. quarter new the has of hires We've as new the First, up hiring focused continue turnover to ignition on temporary by low-unemployment Nogales been getting training employees, relocate with Mexico to

and The for expect and the balance definitely now We close we to on efficiencies. improvements incremental focused are staffed year. improving is the fully behind worst our us, are of

The product related other item an is having to margins impact that's on gross our adverse mix.

seeing in sales record profitability initiatives, in we'll It them. on replacement these categories. that shows run, to new newer are our or hit that and products in track right. reduction have product products the have in positive. a are are as later-application these margins. All we is legacy lower future, them the technologies yet is cycle increase cost Typically, than While are solid our But long the this achieve we a field. cable typical like confident in older we and we wire the tool starting In to resource decline, in an products

Control. Temperature to Turning

inventories, season. into beginning preseason, split be customers are to sees then and where and the June positioning tend are pieces: sales quarter selling the May Second their two still April of

our we by stated This combination on a As wet first above-average call, a then customers headwinds due year inventories. of compounded preseason cool was ending and in orders we the XXXX, record-setting spring. to expected quarter with continued

heavy of May, which However, turn, began country POS customers replenishment to the through heat, continued which gains, the strong triggered June, to our in second half in extremely saw see orders us. and

optimistic this are has of in have about third solid July. remained with continued, to the The into balance the orders rolling quarter. heat we're We some and surge ship able quarter, strong, a

anticipated a impact. minute the about spend to like the I'd talking and recent tariffs Lastly,

American We've As the categories a tranche is were it amount XXX was also of from in first that help in our through. worth X, have divisions fully us which do while customers, both larger the substantial taken several of our long expected Temperature North impact tariffs and Control. July footprint, of And have run. contact product this although we import It's Section so-called will the effect. with the we we significant China, of in pass product will in been affected, that we noting think cost a

temporary. the behind obviously in far, of the but in relatively are are believe thus favorable in as we the year the ongoing our year we enter that strong XXXth and we the dynamics and disappointed get with of short-term So once we the the issues our us, about or industry optimistic either balance position the are future market, these closing, clear, are year. timing-related issues and they And do

your questions. So turn that, we back it with up and it to to will will moderator, open the I

Operator

Matthew we first from Instructions] will question Please [Operator ahead. take go from Gabelli. And Paige our

open. Your line is

Matthew Paige

Do Good look think than them? you in restocking Temperature carry Year to will XXXX? room there just a your touch they the New into inventory is more do from morning. wanted less activity little think you I on Or customer's to Control. for more did

Eric Sills

on end is they inventory but not by heavy XXXX they ended by than expectation They selling should Our XXXX XXXX. that season. choice, soft lighter ended the

the will to they it Due was really been last we summer lighter on that expectation, strong the headwinds this so coming XXXX. would hopefully, And would created end then ended will the year, they than that which inventory that and XXXX that what orders. impact preseason continue, we've into year experiencing assume

this and so orders season So what than have as they entered see, effect that we you would but enter can year-over-year of they can this happens we XXXX year. followed expect by you the should anticipate, lighter preseason within compounding only

Matthew Paige

margin. Okay. on touch And then, my second question. I to wanted

You noted business installed rolling shrinks lower margin. the having the is base some of obviously, business, and off older a new as

ramp and new You've of the done, past the it old than pressure off historically, a products. products job in products roll margin invest in to the more on this new as Why good in is has now up? a continuing

Eric Sills

how not slight really, portfolio. sure it. acceleration nothing forever. shift is substantially new Perhaps in a about necessarily This in there I'm different life-cycle there's shift, past. it's a in product there's the But really just it's the if worked, is our that

queue we high their items, typically to our in As from demand them in-house add into new at be and substantial the for the tool up, come slightly savings. bring pick way they them and It may engineering then we a happening and as accelerated they starts cost, work past.

to and We have investments CapEx engineering talent it. in address our up stepped

we be will to up. get caught think And so that able we

we're with it. So not concerned

Matthew Paige

questions. appreciate the I for time. the Thanks answering Okay.

Eric Sills

Matt. you, Thank right. All

Operator

Our Jefferies. Please comes Bret Jordan from from go next question ahead.

is line Your open.

Unidentified Analyst

on taking morning. for for Thanks good Ethan questions. Bret. is This Hey, our

potentially to gain most? And back tariffs. are lower from Just does exposure What in competitors? your the China you to products share impacted position

Eric Sills

could heart part Well, Temperature this tariffs, within air-conditioning is division is round first compressor, XXX caught is largest the harder, specifically, of of get it hit system. the Control the as in that the and which really the net it, of mentioned, of

competitors If of compressors. sell, third portfolio, only you us. a full which all, look new kind have that of of first our at the are of Most our we unique remanufacturing, for is compressors

we what the it we if new Mexico, in then compressors, of not at ourselves majority of is we sell, and is a look and And So chunk do big manufacture what affected. reman that the was safe. you again,

the that So now future. that is the exposure have field to do of down the to be of And business less part can the perhaps that you're than fact our China affected. compressor smaller we the we believe helpful in rest

Unidentified Analyst

Okay, the the with expect then great. next the into just strong Thank sell-through? you. moving that to to Management, regard quarter, And we do sell-through, Engine continue

Eric Sills

and We hope would from overall you sell-through seen be a year. trend that well year-over-year strong to partners that our quarter-to-quarter We're with so. so are continuing nice We've this pretty hearing as pretty seeing are they trading this this year is optimistic far gains.

continue. it'll optimistic we're So

Unidentified Analyst

temperatures, heat warmer just continue how with know that regard Not you then we you. inventory mentioned into to expect thank And Temperature year-on-year. to think you just see and selling year-end, third I Great, about finally, should July If with Control. down the to over come the regard Awesome. quarter? we

James Burke

Burke. from July, This June the on into earlier, comment It's the believe is Eric we'll key have as a again, Right. we is, quarter so third is continued monthly. hot. Temperature good, season periods we even looking Jim for out quarter-over-quarter pointed Control. and future But or strong And at don't warn

Unidentified Analyst

for you Thank our Great. questions. taking

James Burke

welcome. are You

Operator

go question comes Creek. ahead. Sherwood Cooper Please from next Our from Matthew

Your line is open.

Matthew Sherwood

Hey How are doing? guys. you

Eric Sills

Matt. Good morning,

Matthew Sherwood

Good.

was cost reversal you that in So it that. of just and than quick had that expected something nature? on versus in And sustainable more like a sort what accrual, of for a was be the lot savings expectations year? are How bonus sort short-term $XX the much is your of just of million that one range, SG&A lower or – it of balance the to that's the had

James Burke

it Right, isolated, yes. really, This Burke, to Matt. is the Jim quarter. is Again,

down. sales were So

wherever had fees draft expenses. we we also controllable have reduced would expenses. there. So would curtailed incentive comp our We down that be We

sales, probably $XX up So again, I up $XX mark, of $XX quarters had on stronger million for is lower the a million. the two scale we $XX a being it'll in but was million. million said If And high-end is between Maybe range. the it range, still $XX and this to get million again.

Matthew Sherwood

weaker Okay. side, But that the if sales on is just you think number? sustainable stood a this

James Burke

Yes.

again, other back of So sales can't But sales, there. would million again, here. in quarter, quarter But in higher $XXX that usually, SG&A, about on a about I there down, annual of the and million numbers be there, expenses when Temperature our quarter-to-quarter, $XXX million, season. mean, going one higher variables in third I significant we're speak sales, then again are the are are out of scaling fourth $XXX at that's number yes, in Control

Matthew Sherwood

Thanks Great. a Jim. lot

James Burke

All right.

Eric Sills

Thank you, Matt.

Operator

from Van question FBR. Christopher comes go Horn next B. ahead. with Our Riley Please

open. is line Your

Christopher Van Horn

Thanks questions. morning. taking Good for the

James Burke

Chris. morning, Good

Christopher Van Horn

Or just future? more maybe to the the done come me see there? sure correctly, of the that much off, as there is let So are make understand we of you the business gradual in some and I the decline is rolling cable, legacy pretty wire still

Eric Sills

X% vehicles. we vehicles, are cable, It those new those to where long-term largely just the and product getting trend. be is But lines. a that and life that to some in this no, along contracts. cycle. due fortunate we trend, to is still so, been that's or It of continues it expect is on engineered technology Wire a that's It's some off X%

Christopher Van Horn

benefits we having and this you we're And start the from year, that to the the any trajectory can some Okay, there Or you're sounds build of to moves, going do you're – pretty of way at timing is benefit it opposite great. kind think Thanks. moves? that starting to about to right plant plant those it? like of of see then, spend also by close the of up. to the that end to full going maybe you give Are think Is us? see

James Burke

up. improvements Burke, Yes. now, the over incremental expecting XXXX Jim second and to This is Chris. stepping of We're half see,

So roughly we add to X there quarters at XX.X%. in

against feel we up that. moving So we're

of maybe that a there there XX%. as a XX% our target move would long-term the that that will bit. I of of behind carryover we us XXXX little XX%. feel integrations to And beginning going be XX%, improvements Now inventory, the the because And XXXX, into is goes plant into be But have longer-term, at upwards XX% to we're and little to to at scale XX%. FIFO to moving it targeting then back bulk

Christopher Van Horn

you've of past that count it. technology, of part Thanks have then sort over line line how but what then kind the those seen essentially that product And doubled here, of curious kind on you tracking? see will cars Great. ADAS going, And where of the this have sell-through you part Got And for see the obviously, is you begin – that that where And couple �� that's more months. I'm product more how just your going? and color. on categories?

Eric Sills

in had on have adding familiar, others be is components. active less systems big we controls, the of It for Yes, such adaptive the in may a departure some lane things push call these as, some – categories very those safety cruise still such of coverage technology. new as and

rates the So quite failure low. are

sensor become to benefits been our who wheelhouse offering expanding for it's still have a being low is strong coverage. ones as that as sales. market off. and of shelf the it that We But to be first hope when we take have it we feel there the getting space does guys category, are our the We believe expected will it because and now, to in who

of why it's But small. ourselves. as positioning we're so still And that's now,

Christopher Van Horn

was Okay, question. and my next that

other some this seen you're You because have get area. first here to believe kind suppliers of not I do market into

Eric Sills

on would say, offering. best-in-class but alone there I are shelves, – not out we we're the Well, with

Christopher Van Horn

then Yes, from final okay. me. And

CapEx. that then what of in of any you for from? Just forward? what there going Could of details give of outlook was thinking a more CapEx little sort any bit uptick And you're

James Burke

we our that they into. calls Yes. we're getting more than This again. is as we're said Yes, cost And the investing. scaling prior are Jim opportunities up technologies, Burke newer on have CapEx. These the

for So $XX million we're year probably the of plus. this range on or

Some of basis. should this norm an allocations of But it range million annual had in probably, one related our business. investing in the capital year. was moves capacity But we're that integrations is a plant of and $XX this more with that the be our on we

Christopher Van Horn

time. Okay, great. the much for Thanks so

Eric Sills

you, Thank Chris. of End Q&A

Operator

[Operator appear this any have Instructions] to we And questions at time. not do

Lawrence Sills

you then. for conference concludes This quarter our Thank very attending. second much. very much Okay, Thank call. you

Operator

to On like behalf This client, for us. of I’d our our thank concludes you joining presentation.

Standard Motor Products (SMP) 28 Jul 182018 Q2 Earnings call transcript