SMP(US:SMP)2019-02-17 14:54Financial Data and Key Metrics Changes - Consolidated net sales in Q4 2018 were $247 million, up $7 million or 2.9%, while full-year sales were $1.921 billion, down $24.1 million or 2.2% [4] - Consolidated gross margin in Q4 2018 was 29%, up 0.1 points versus Q4 2017, but for the full year 2018, it was 28.6%, down 0.7 points versus 2017 [5] - Diluted earnings per share were $0.52 in Q4 2018 compared to $0.54 in Q4 2017, and for the full year, it was $2.55 versus $2.83 in 2017 [11] Business Segment Data and Key Metrics Changes - Engine Management net sales in Q4 2018 were $165.6 million, up $7.1 million or 4.5%, while full-year sales were $648.3 million, down $9 million or 1.4% [4] - Wire and cable net sales in Q4 were $37.4 million, down $2.1 million or 5.4%, and for the full year, they were $155.2 million, down $16.9 million or 9.8% [4] - Temperature Control net sales in Q4 were $41.8 million, up $1.5 million or 3.7%, and for the full year, they were essentially flat at $278.5 million compared to $279.1 million in 2017 [5][7] Market Data and Key Metrics Changes - Customer sell-through in Engine Management increased by about 4% both in the quarter and the full year, indicating positive future trends [20] - Point of Sale (POS) for Temperature Control was up 6% to 7%, suggesting stronger demand moving into 2019 [21] Company Strategy and Development Direction - The company is focusing on continuous improvement in gross margins and operational efficiencies, particularly in Engine Management and Temperature Control segments [9][23] - Recent investments in automation and distribution centers are expected to yield significant savings and improved operational capabilities [8][23] - The company is optimistic about growth opportunities in China through joint ventures and expanding into original equipment markets [24][52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2019, citing healthy industry demographics and improvements in operations, particularly in Reynosa, Mexico [16][25] - The company anticipates organic sales increases in the low to mid-single digits and improved gross margin percentages [9][19] Other Important Information - The company amended its $250 million bank revolver, extending the maturity to December 2023 [13] - Asbestos liability increased to $46.7 million due to a recent lawsuit, with plans to appeal the verdict [13][14] Q&A Session Summary Question: Outlook for gross margin in Engine Management - Management indicated that while there are improvements, the first quarter will be lower due to amortization of costs and returns, with expectations to finish the year in the 29% to 30% range [31] Question: Pricing ability in a competitive market - Management noted that there is a more favorable environment for pricing discussions with customers due to rising costs [33] Question: Industry growth expectations - Management is cautiously optimistic about industry growth, noting an increase in customer POS as a positive leading indicator [35] Question: Contribution from inflation versus core growth - Management expects low to mid-single-digit organic growth, with inflation contributing to overall growth [41] Question: Impact of tariffs on costs - Management confirmed that tariffs are being passed through to customers, with a slight impact on margin percentage but no effect on gross profit dollars [68] Question: Stock buyback program - The company has a $20 million stock buyback authorization, with approximately $10.7 million remaining for 2019 [76] Question: Changes to overall 2019 guidance - Management reiterated expectations for Engine Management margins in the 29% to 30% range and Temperature Control margins in the 25% to 26% range [79]