SMP(US:SMP)2019-07-28 07:48Financial Data and Key Metrics Changes - Consolidated net sales in Q2 were $305.2 million, up $18.5 million or 6.5% compared to the previous year, with incremental sales from the Pollak acquisition contributing $10.7 million [5][6] - Excluding Pollak sales, consolidated net sales in Q2 increased by $7.8 million or 2.7% [6] - Consolidated gross margin in Q2 was 29.1%, up from 28.4%, and for the first half was 28.3%, up from 28.1% [9] - Diluted EPS for Q2 was $0.92 compared to $0.74 last year, and for the first half, it was $1.49 versus $1.20 in the first half of 2018 [12] Business Segment Data and Key Metrics Changes - Engine Management net sales in Q2 were $181.8 million, up $19.4 million or 11.9%, with sales excluding wire up $8.7 million or 5.3% [6][18] - Wire and cable net sales in Q2 were $36.2 million, down $4.8 million or 11.6% [7] - Temperature Control net sales in Q2 were $84.4 million, up $4 million or 5% [8] Market Data and Key Metrics Changes - Engine Management sales excluding wire and acquisitions are expected to grow in the low- to mid-single digits, while wire and cable sales are projected to decline by 6% to 8% per year [7] - Temperature Control sales growth of 9.1% in the first half was against soft comparisons from the previous year [8] Company Strategy and Development Direction - The company is focused on integrating the Pollak acquisition to enhance growth and operational efficiency, with plans to relocate production to existing plants for cost savings [24][25] - The company aims to leverage its resources to grow the Pollak business, which is expected to contribute positively to overall sales and margins [27] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the second half of the year, particularly for Temperature Control, as they face strong comparisons from the previous year [22][45] - The company anticipates healthy margin improvements from the Pollak acquisition as production is relocated to lower-cost facilities [32] Other Important Information - Consolidated SG&A expenses in Q2 were $60.5 million, up $2.8 million over Q2 2018, but as a percentage of sales, it improved to 19.8% from 20.1% [11] - Total debt at June 30 was $135.2 million, reflecting an increase of $86 million since December 2018, primarily due to the Pollak acquisition [14] Q&A Session Summary Question: Engine Management sales increase and its components - Management indicated that the sales increase was a balance between organic unit volume growth and benefits from pricing and tariffs [30] Question: Gross margin benefits from Reynosa facility and Pollak volumes - Management confirmed expectations of healthy margin improvements from the Pollak acquisition as production is transitioned to the Reynosa facility [32] Question: Long-term growth of OEM contribution to total mix - Management noted that with the Pollak acquisition, OEM contribution to overall business is expected to increase from about 12% to 14% [37] Question: Future acquisition opportunities - Management is looking for both acquisition and organic growth opportunities, emphasizing the intent to grow the Pollak business [38] Question: Trends in on-demand car services - Management sees on-demand services as a slow-moving trend that does not pose immediate positive or negative impacts on the business [40] Question: Other industry trends - Management highlighted that the aftermarket is stable and predictable, with ongoing technological trends presenting both challenges and opportunities [41]