SMP - Earnings call transcript Q4 2019 | Standard Motor Products, Inc.

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Operator

Good day, everyone, and welcome to today's Standard Motor Products Fourth Quarter Earnings Release. 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 may be recorded.

And it is now my pleasure to turn the call over to Larry Sills. ahead. go Please

Larry Sills

And conference everyone. Standard Products Motor Good and welcome we quarter call, attending. thank fourth morning, to you for

the Sills, Executive President Sills, Operating Chief company, Jim Chairman. Officer; for Financial Larry Chief Iles, Officer; and myself, and Burke, Nathan Here CEO; Eric

Burke key of Eric today, Jim our XXXX, some strategic early about will XXXX, and then then it results, Nathan few go we'll of a for for by reviewing some emphasize Agenda XXXX issues and questions. of will into our operational begin then will the highlights open thoughts

So with that, let’s go to Nathan.

Nathan Iles

Larry. you, Thank

preliminary to statements of discussing some I financial our a As will may today note, expected would regarding point out be we material like business that forward-looking include and the results.

believe, forward-looking are anticipate, expect, When words estimate statements. we generally like these or use

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

read also the risks Commission a could our with should to statements. from You Exchange our cause the uncertainties that differ forward-looking discussion and actual Securities for results of and our filings

to for results the turn the company. we'll Now financial

$XXX.X sales QX P&L, million the XXXX X.X% Looking at down or in last QX million consolidated net $X.X were versus year.

year, full Pollak the were for acquisition $X.X As business from QX the from the $XX.X XXXX. the acquired million discussed Stoneridge throughout of Pollak million we sales on April Incremental Xst year. and in

$X.XX increase acquisition $XX.X or $XXX.X but year X.X%, X.X%. XXXX higher consolidated full in Our the billion, of down million for net sales an million $XX.X or excluding at were million QX the Pollak finished

as or and $XXX.X $X.X and QX, million, excluding Engine sales, in their noted segment, sales million Management coming sales in our were call. By but with last POS Wire line Cable customers down Pollak net X.X%, in

finishing $XX.X year. the for full X.X% million, million XXXX $XXX.X last were or year up However sales over

and X.X%, million the sales QX $X.X year were $XXX.X $XX.X $XXX.X year. in year QX the or essentially which for million, million, XXXX with were down is million million, Cable for flat down net or and were $XX.X net sales Control in and $XX full down the XX.X%, were Wire prior $X.X full Temperature million, or million X.X%.

Temperature full following We very hottest cooler the on by strong despite some control quarter XXXX and be to of sales to one year anticipated record, fourth in stay our pre-season the ordering XXXX. pleased line volumes in seen we down our first-half customers have are was Further, temperatures. summers

XX.X% was X.X was XX% the points, XX.X% Consolidated full up up last X.X for gross XXXX in last year, points. margin and versus year QX XX.X% versus year,

last the full XX.X% gross QX at segments, up Engine versus versus up full XXXX XX.X% nicely year at the point. was was last in XX.X% X.X margin points, Looking year, for and Management XX.X% one very year

at our costs, The sourcing. were from completion Engine improvement the driven and of partially impact manufacturing which business, gross reduction low-cost of in-house margin the continuous margin in Management efforts tariff the General a pass-through for by dampening was by as from cost These percentages. significant wire as well offset slight improvements on have improvements Cable

XX.X% Control for points. Temperature and XXXX the points, full was QX down year, X.X XX.X% XX.X% X.X was margins versus XX.X% gross last in versus year year, XXXX last down

percentages have primarily gross are year As quarter and a margins on and Control in slightly the had dampening tariffs result of in segment, Engine Temp effect we margin lower the this the noted the our effect. full

up net year last were XXXX XX.X% $XXX.X down QX the $XX.X were year. consolidated XX.X% million SG&A million, sales net for year million at and XX.X% expenses in at $X.X $X.X versus of XX.X% SG&A, of million, sales to Looking last versus full

Temp our year the Pollak other volumes. from year, the quarter to expenses incremental and full expenses the offsetting and related Control increase acquisition variable savings business. these we reduction our Partially continue sales to higher savings both see overall an of in for full SG&A in For were distribution expenses on

X.X the pleased operating However, full of expense to we leverage for points see year. favorable were very

Consolidated expenses or was and or QX over point before up other over sales, integration of XXXX one income net year and income operating in of sales, full was X.X restructuring XXXX. for full and X.X% million $XX.X net points XXXX QX up net $XX.X million the X.X%

share income, in per of $X.XX $X.XX operating year year. we versus earnings GAAP full QX versus non- diluted $X.XX last As for earnings reconciliation our note resulted $X.XX XXXX GAAP per the diluted on to last our share of of performance and year

acquisition in impacted well was Temperature The margin Management as in as higher result sales Management profit lower increase of our as the a the SG&A of Engine business, in gross in full by improvements Control. year Pollak and Engine expenses partly operating

property. million Texas receivable from our Looking down of XXXX the $XXX.X sale Accounts accounts since now at Grapevine, XXXX. were million sheet, the in receivable balance $XX December $X included million

Excluding as the that receivable accounts result versus year. during XXXX sales item, QX mainly of a lower declined prior

million Inventory Pollak with up $XXX.X of from at business. $XX.X levels the the the increase the XXXX finished acquisition coming December million, year primarily from

level at was XX, impact of which from of activities XXXX totaled in debt XXXX. of December million $XX debt million December XXXX The million, increase levels. Total slightly acquisition includes an reflecting $X.X $XX.X higher the

of and to expenditures, was and acquisition million $XX repurchases. incremental received capital cash Our generated statement in million million the of for from $X used $XX all facility million million Pollak Texas totals of and million $X $XX cash to of million operations, cash sale the dividends from borrowings, Grapevine, $XX of which $XX million and CYJ investment, reflects share $XX fund flow of paid our

full we or reflecting system. gross Temp pleased strong automated improvements are volumes, sales summary, higher and year consolidation manufacturing our with higher distribution very performance results, and In XXXX margins significant operating Control and wire our from

Thank the some call over will turn provide our color and your attention to I on you to for now Jim additional results.

Jim Burke

books record in reflecting the was sales new XXXX, Nathan. highs you, and earnings. for Thank Okay.

strong in Management were each back look Engine the year we As first of half analyze both sales best is It Temperature for Control. at the XXXX and segment volumes very to separately.

three the our and customer's wire acquisition quarters excluding sales first exceeded the Pollak over cable sales. POS XXXX Management and of Engine

were that large closer the orders. assortment to customers and this in their times to During is demand deploying reflected base. serve installer better period, broadening pipeline inventory Many

The sales three in the growth first quarters and were XXXX X.X% of X.X%. X.X%, sequentially

sales As our out customer trends. earlier our on that with we we pointed calls, expect in POS fall line back to

against X.X%, were expect Management, X.X% last sales disclosures low trend this single ’XX, and excluding In to quarter which mild to and a first digits. cable QX year with Again, pipeline the in orders our the downward to mirror growth term, customer public still first we Engine due soft QX, up of In as we acquisitions for was comp demand the in expect of POS X.X% continue, our above quarter XXXX, down long conditions. full in year. large customer year pointing we and wire our to customer's the weather are POS

very flat This QX and Temperature in Control pre-season XXXX QX large and very strong XXXX we in were essentially reflecting to orders XX% hot better sales half the of QX. as XXXX, X% sales the trend second summer than reversed in following QX levels. were Temps in XXXX finished up season.

levels we orders. at more Going not were same normal of early the anticipate customers do magnitude inventories into and XXXX, our pre-season

the sales last are up be better than we quarter down ‘XX We expect to comp XX% year. first against the as

hot will Temp digit depend a variables term XXXX growth sales get we forecast with we other Ultimately summer low long how and all single equal.

X% in secular on the basis. are to that sales, we continue in and forecast decline the wire Lastly on range to to decrease an annual cable sales X%

in two Turning to our improvements XXXX critical reflects This areas. record earnings performance.

First, efficiencies. has cable integration our been completed, achieving wire general historic

of stable the training and the to improvement the One hiring, drivers key of retaining a workforce. was

and in the XXXX. pleased team's wire very are performance efforts We by

Lewisville, area warehouse second the Texas of driving reduction our in costs, controlled temperature was our at distribution a system facility. The automated earnings installation an improvement following our

on IT system During the season, that our reduced times. enhancements turnaround developed significantly improved our off cost many and customer teams distribution

in These low manufacturing contributors, two other areas including many sourcing. that our were but were there results XXXX, in-house major and cost drove

emphasis is go Our improvement. on continuous forward

higher drop to third to tend the gross incremental quarter in margins. see to lower into our in the back prior and we quarter each progressed hence first fourth Normally we and Looking year margins year production improvements costs. levels of reflective gross XXXX, quarters the second tend as

segment, target Engine plus will on just QX explained, the Management annual I as is And margin XX% below gross margins XXXX. By the an year target. basis start for annual XX%

targeting For gross full will are in Temperature for Control, we year, lower. range start XX$ QX high again, the margins levels the

million should expenses SG&A the range per projected our in to in XXXX. $XX $XX quarter be Lastly, million

beyond. year an XXXX dedicated In excellent with into optimistic and summary, are employees, looking we XXXX and our was

Thank your over attention. I call Eric. for the will you turn And to

Eric Sills

at by terrific a and congratulate year, Products Standard highs sales I'd everybody. to morning good for of and Jim helping you profits. the new achievement here like thanking all. record open all thank a It's you folks for and deliver to setting breaking both I Well, Motor

Jim what's and and numbers hit reviewed up few so open Nathan I'll the topics just then them, a questions. behind the on and it

Corona First, we the stand let with virus situation. where me address

the Poland, of difficult And timing majority from do fortunate. our the China. North Although significant situation, base and was have manufacturing a product comes for we and America a supply in

we is as and built our inventory the good such always we do, shape. of position As shutdown, New ahead Year inventory in Chinese

than Furthermore, has for Division Control China to our winter Temp does. our which season slowest exposure is higher Management Engine

side. Control joint pleased three and back ventures you're say to We're disruption. of in are speed full that China As don't all up them to and have expect any now the Temperature aware, all in are coming reopened we we

great with Regarding won't to constant uncertainty from online. third this at But therefore any feel we coming time being party situation. in communication what a been there back and are we've China said, of this suppliers, near-term continues disruption. remains that they know we them that address as reasonably We have all deal confident

to it is difficult longer implications. So very predict term

business is I'd Pollak with an sold acquisitions, sensors To remind to the XX on channel. - vehicle Pollak XXXX plus connectors in switches, aftermarket original various like with about of into million heavy we XX% the update where with is give acquired commercial two April. you, you for equipment a for largely starting our duty $XX it like to and percent applications, next selling remaining are

manufactured majority Juarez, products Massachusetts, the in Mexico. two in the were The Stoneridge balance in with plants, Canton,

relocated existing We mostly to Reynosa, manufacturing the all of locations Mexico. have into S&P now

with visibly all The the lines the process of customers. approval through busily and recommissioned we're have been going -

our up the production we'll take low to savings, several the plants, months to so full expect we next cost in that is significant Now productivity. get

to we excited most ability the the what about are business. But is grow

both We applying opportunity sides believe to resources are the nice very there ahead. and is a aftermarket OEM

mostly are like of very and are we at vehicles. excited is electric to I'd CYJ, manufacturer quite in to this that's which last discuss Chinese compressors is have small, us. and Next, a to new the a The Chinese CYJ for major into growth but still electric young ground level. our manufacturers, August customers car bus investment one area and entered

manufacture OE two all penetrating in to with markets, Control able U.S. In product our addition to fits roads, many to China hybrids. the other their And it utilize with capabilities complementary well for the Chinese other synergies. compressors additionally electric be including products vehicles the on very we'll JVs of Temp and

that are while still the in days, delighted joined they have family. we S&P early So the we are

that we to happy our we This our increases dividend increase shareholders. commitment in $X.XX. have to Lastly, XXth value returning announced are consecutive this the year believe marks to an of to our and shows

future. we pleased are strong within those all where lumpiness be fundamentals closing, up, earnings in overall aftermarket are and there margins you industry. some positioned when Sales, always standing the quite year while as are we together period-to-period the can are add with So the and quite it for the remain and

of new two providing both We our year continue deals diversification to done markets, acquisitive with products geography. core nice while be which into business, and strategically last also complement us

about feel future. And so we our very good

the turn to That prepared questions. and up open it moderator for we'll I With concludes will remarks. our that, it back

Operator

go And Inc. Certainly. Imbro [Operator our ahead. first Stephens comes Instructions] from from Daniel question Please

Unidentified Analyst

you forward have here first mentioned that Hey. up in thinking the Pollak line This are about and Andrew product release? integrated, with of a I after you is question on expansion guys. My quarter, on going is for is follow the Congrats in Daniel. terms how

Eric Sills

aftermarket, Appreciate limited a the as - look offering which of smaller duty, the this are which need piece XX%. from of way duty. with of to the NAPAs relatively to that participating the the the what it, it. the as into also different sits They question It's is but heavy alongside a I'll two very channel it's in you it's is about typically segments heavy at those the think not mentioned of Andrew and by it, product O'Reillys going a guys aftermarket we the and world, sits But aftermarket. traditional had into the separately. is that channel adjacent market start

that have of it accordingly. resources add build to within portfolio be we're market. can already that go product to is and brand we our that our portfolio going management But lot a that channel suitable And products needs Pollak we are out that after applying additional to legacy and the see then what some also

So we're with production that really moved, all business, get growing pretty to attention the just - into business. close turn the to and now we'll our the integrate

what's much with business there discussions are development several very many new discussions. OE We've been and be honest already were lot for a the Stoneridge, their opportunities the had To it, of came On actively There and about acquisition on. own were been customers side us. in so really us, next. customers existing of we're by them of product others this in had investing new the that going in of not really to so admission with stopped

So early to the still of, much while is go chapter we're to start integrate next to business. that taken that days got and it's and sure are growing what the pretty make and customers care first all we've job ready again

So we're potential. excited about the

Unidentified Analyst

you of That's thanks. similar here very some your success automation, with follow or elsewhere? DCs warehouse then All is, see engine right, seem upgrades helpful. do my And some the and for potential management any up there

Jim Burke

had system for that in It’s upgrading facility, We're This automation the Lewisville. Burke. mirrors that But Yes, a one common Virginia is in put in. more enhancements for of this also. already was the enhancements Lewisville, it have. was operation in good a we have Jim the whereas Texas, in we what morning. we other Texas Lewisville, - manual our The - put facilities

not other significant would not - facilities. in our distribution I a anticipate would So I change

Unidentified Analyst

question, my right, answering All great. Thanks guys. for

Eric Sills

you, Thank Andrew. right. All

Operator

comes Our Instructions] from [Operator next go Stember ahead. from C.L. Scott question King. Please

Scott Stember

for questions, my guys. Thanks taking morning. Good

Eric Sills

morning, Good Scott.

Scott Stember

you Jim was seen the the I guess, or POS the the you making side end demand. the in you context about how Have Can that running any about talked about it are softer on late customers even pullback, still it how the Management fourth in talk know, if comments as quarter? guess in of Engine or actual you Eric, as sounds, talking in your of particularly quarter? fourth singles. about we're performed I low

Eric Sills

but This certainly it entire POS XXXX that is still digits, it very - see was but It customer base, the overall was where positive of we was positive, as a market. see. is it coming continuing we soft to don't single always representative quarter, believe. It was We low get remains reflective cadence. our information we're into but it from

Scott Stember

it. got Okay,

Eric Sills

fourth it's mentioned you it's and and and as wire irrelevant. -- X or on minus continues cable, control, on Control, temperature so Temp really And wire is cable largely quarter

Scott Stember

doing of in as these product a I Pollak, is aftermarket, growth industry be and mirror to growth over for the know I would - of forecasting a that But the you're kind guess within year Pollak well. the what year to ownership? you full rates moving extensions we one obviously And probably of would what expect - some

Eric Sills

really at inherited no which largely steady point this We're we growth. - what was state,

In couple fact, coming to the couple, a I a contracts of OE as a were close. I have believe, there that were and stated,

start we until to refresh we're near-term at not really point this offering So any projecting growth. the

Scott Stember

XXXX? tariff have least changes exposure with the front, at steady to Or is on going it And forward there? it. your state a Got be seen any expected you for

Nathan Iles

are before is this refund any but this as steady had state been to would back some small Nathan. requests very, the customer. noted filed, and Yes, a There exclusion we've very go really at they're Scott, it's point.

Scott Stember

I Got right, Okay. have all for now. Thank All it. that's you.

Eric Sills

you. Thank

Operator

question next our And Bret comes Please Jefferies. go ahead. from Jordan from

Ethan Huntley

Thanks morning. for This is my Ethan good Hey, Huntley Brett. for on questions. taking

just year. here of the know percent. XX.X% the XX one for margins, sort First Management on Engine I plus you've guided

percent even plus here? see ’XX what sort of ‘XX the maybe XX of sort into moving we higher quarters Following a the two bit changes range something in Management, and consecutive I guess, XX are Engine of or

Jim Burke

we We Point there. to look that's year Burke. always the moving per all with be to in Jim there out again margins first build to on we X.X that's be or variables look is the back in and forward. quarter always, the This that step point thereabouts going

always the I then and first high the others. while on beyond hurdle the XX moving have So hopes for up work for beyond I'll get that - XX and let the XX me to me year over let

Ethan Huntley

Fair. And again Control Management? trying of either just Temperature segment here, or then gauge of the impact just in sort the to in seeing mild sort you're other I'm Engine winter,

Eric Sills

Control, some is It's we're but that has that summer a line summer. the really of that related Control Temperature of business. related more Temperature and portion that's we're been category On heating a hot small very our do portion we hopeful so to have going a nice soft, of somewhat have and all

As impacted, or it wiper in and winter have to product have impact they're seen and blades does the from some on batteries reported Engine it as us. type therefore, or POS lines what say, our we're of on as we but not that temperature relates Management, true reflected purchasing an customer categories,

seeing we seeing we dramatic a softness, softness. it's little bit but So of not softness, are are some

Ethan Huntley

all Okay, I taking that's got. for great. And my Thanks questions.

Eric Sills

Thank you, Ethan.

Operator

Robert from our And Performance from Investing. and next ahead. Please Center Smith comes question for go

Robert Smith

additional that in joint broaden the Thanks feel jumping give joint point Thanks. through to or looking line Do in for vehicles penetrate venture the for of China? a you this thinking joint my venture ventures see a over you're market? taking a for product morning. you you question. are that what Can me Good electric to as as

Jim Burke

really and question. great answer the is both. morning, Robert Good And

with see start for CYJ. what we let's So

pursue market as very vehicle electric the technology new. in as very for have world. to suitable As small the products there elsewhere and They the the have to mentioned, it's well EVs

they where resources in JVs and on very we care with you and with our really was What come our to we in our China. combine product that horsepower Temperature Control build think didn't a Control categories we're the in to have and strong. portfolio the Temperature combination of so starting take out the two Then that's other stability region, really becomes

we're appropriate have what very we of seeing are Beyond to that, But our strategy. certainly we we're we're for what see there market, as investments in look terms HVAC area in our opportunity opportunities the continuing to that be strategy, our continue region, fit we very are in investigating. forever nice careful the We and especially acquisition it is objectives we out. That select. other car demonstrated really needs a And strategic there. for Chinese and always the to build OE us in to

Robert Smith

much. Thanks very luck. Good

Jim Burke

sir. Thank you,

Operator

And that does questions this it there phone are appear at the further no over time.

Eric Sills

call. conference you for This right. very much Thank our quarter concludes All fourth attending.

Jim Burke

Bye-bye. you. Thank

Operator

does conclude This your participation. for program. today's Thank you

at time. disconnect may any You

Standard Motor Products (SMP) 19 Feb 202019 Q4 Earnings call transcript