Standard Motor Products Inc. (NYSE:SMP) Q1 2018 Earnings Conference Call - Preliminary Transcript

May 03, 2018 • 11:00 am ET

Previous

Standard Motor Products Inc. (NYSE:SMP) Q1 2018 Earnings Conference Call - Preliminary Transcript

Share
Close

Loading Event

Loading Transcript

Presentation
Operator
Operator

Good day everyone and welcome the Standard Motor Products First Quarter Earnings Release Conference Call. (Operator Instructions). Please note this call may be recorded. It's now my pleasure to throw the conference over to the Executive Chairman of Standard Motor Products, Mr. Larry Sills. Please go ahead.

Executive
Larry Sills

Good morning everyone and welcome to Standard Motor Products First Quarter Conference Call. We appreciate your taking the time to attend. Here for the company is Eric Sills, President and CEO; Jim Burke, Executive Vice President and CFO; and myself, Larry Sills, Executive Chairman.Our agenda today, Jim burke will review the financial results of the first quarter, Eric will then go into a bit more depths on some of the key subjects and then we will open for questions, so let's begin.

Executive
James Burke

Okay. Thank you, Larry. As a preliminary note I would like to point out that some of the material we will be discussing today may include forward-looking statements regarding our business and expected financial results. When we use words like anticipate, believe, estimate or expect, these are generally forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available to us and certain assumptions made by us and we cannot assure you that they will prove correct.

You should also read our filings with the Securities and Exchange Commission for discussion of the risks and uncertainties that could cause our actual results to differ from our forward-looking statements. Looking at the P&L, consolidated net sales in Q1 '18 were $261.8 million, down $20.6 million or 7.3%. By segment, Engine Management net sales in the first quarter were a $199.5 million, down $11.8 million or 5.6%. By major product group wire and cable net sales were $38.8 million, down $7.4 million or 16%.

We forecast a more normalized decline in wire and cable to be in the 6% to 8% range on an annual basis. Engine Management net sales as a whole excluding wire and cable were $160.7 million down $4.4 million or 2.7%. We anticipate this product group will grow in the low to mid- single digits on an annualized basis. Eric will provide additional color around our customer order patterns and customer POS sales.

Temperature Control net sales in the first quarter were $60.2 million, down $10.1 million or 14.3%. This decline was anticipated and communicated during our last earnings call based on a mild 2017 summer season and higher customer ending inventorial levels. Also sales in the first quarter '17 were up 24% following the very hot 2016 season. But looking back at history our first quarter '18 sales of $60.2 million or $3.4 million over the first quarter '16 sales at $56.8 million.

Consolidated gross margin was 27.7% versus 29.8%, down 2.1 points. By segment Engine Management gross margin was 28.3% versus 30.3%, down two points. We anticipate margins will improve over the balance of 2018 as plant moves are completed, eliminating costs and inefficiencies incurred during the