Standard Motor Products, Inc. (SMP) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Standard Motor Products Annual Shareholders' Meeting. Executive Chairman, Larry Sills will now begin.

Good afternoon, ladies and gentlemen. I'm Larry Sills, Executive Chairman of Standard Motor Products. Welcome to our annual meeting of shareholders. And I hereby call the meeting to order. In ordinary times, we'd be gathered together in person. But in these extraordinary times due to public health impact and our concern for the health and safety of the shareholders, we are conducting this meeting online in a virtual format. We will conduct it -- we hope -- we're still pleased to connect with you and glad that you can join us. And hopefully, next year, we'll return to a normal format. I'd like to begin by introducing the executive officers who are joining me today. We have Eric Sills, Chief Executive Officer and President; Jim Burke, Chief Operating Officer; Dale Burks, Chief Commercial Officer; and Nathan Iles, our Chief Financial Officer. I'd like also to introduce the members of our Board of Directors who are here today as well as our Emeritus Directors. They are Bill Turner, John Gethin, Pamela Forbes Lieberman, Patrick McClymont, Joe McDonnell, Alisa Norris, Eric Sills, Rick Ward, Roger Widmann, and 2 Emeritus Directors, Arthur Sills and Peter Sills. Finally, I welcome representatives of KPMG, our independent auditors. We distributed the rules of conduct and they're available on our website. We request that in order to have an orderly meeting, we ask that you abide by these rules. Let's start with the necessary formalities. Shareholders of record at the close of business on April 7, 2020, we sent notice of the annual meeting, along with our proxy statement, former proxy and annual report. A copy of the notice and an affidavit of Broadridge Financial Solutions, which states that the notice and related proxy materials were distributed to shareholders on April 17, 2020, will be made available if any shareholder wishes to examine it. The notice and Affidavit will be filed with the minutes of the meeting. A list of all registered shareholders in the company as of the record date and their respective numbers of shares entitled to vote will also be made available if any shareholder wishes to examine the list. This list will also be filed with the minutes of this meeting. Carmine Broccole, our Secretary has been appointed as the Inspector of Election to act at this meeting or at any adjournment. He has taken an oath to act as Inspector of Election, and this oath will also be filed with the minutes of the meeting. The Inspector of Election reports that we have received votes by proxy of 21,452,205 shares of common stock of the company out of a total of 22,969,891 shares of stock outstanding entitled to vote as of the record date, April 7. Shareholders who are logged into the meeting website and who have not yet submitted their proxy to vote, may vote now by clicking on the vote here button on the screen. I'll give you a second. [Voting]

The Inspector has advised that a quorum is present at the meeting, so I declare the meeting duly and lawfully convened. We'd now like to attend to the 3 formal items of business to be addressed today. Matters have -- raised for discussion, which do not relate to these items will be deferred until the informal portion of these proceedings, at which time, representatives of the company will be available for discussion. Our shareholders and guests in attendance may ask questions at the appropriate time by submitting their questions either in the chat box provided on the meeting website or through the operated assisted dial-in number posted on the meeting website. Okay. Let's go. Proposal #1. The first item of business to come before this meeting is the election of 10 directors to hold office until the 2021 Annual Meeting of Shareholders and until their successors are elected and have qualified. The nominees for directors are John Gethin, Pamela Forbes Lieberman; Patrick McClymont, Joe McDonnell, Alisa Norris, Eric Sills, Bill Turner, Rick Ward, Roger Widmann, and myself, Larry Sills. Does any person wish to make further nominations? Take a second. Carmine or [ anyone ], have we heard anything? I take it...

Please proceed.

I'm sorry?

Please proceed.

Please proceed. Okay. Thank you. Okay. So there being no further nominations, I declare the nominations closed and call for a vote on Proposal #1. If you have not already voted or if you wish to change your vote, please do so at this time. [Voting]

I now declare the polls closed with respect to Proposal #1. We will announce the results on all 3 proposals at the end. Proposal #2. The second item of business to come before this meeting is management's proposal to ratify the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. A representative of KPMG is present and available to answer appropriate questions. Are there any questions or comments on this proposal? I'm hearing, nothing.

There are none.

Okay. Thank you, Carmine. Okay. I call for a vote on Proposal #2. If you have not already voted or if you wish to change your vote, please do so at this time. [Voting]

I now declare the polls closed with respect to Proposal #2. Proposal #3. The third item of business to come before this meeting is to consider and vote upon a nonbinding advisory resolution approving the compensation of our named executive officers. Are there any questions or comments on this proposal? Again, I'm not hearing anything, Carmine. Okay?

Nothing.

All right. We'll proceed. I call for a vote on Proposal #3. If you have not already voted or if you wish to change your vote, please do so at this time. [Voting]

I now declare the polls closed with respect to Proposal #3. The votes have been counted and the preliminary report of the Inspector of Election indicates that the directors standing for election were elected, and proposals #2 and 3 have been approved. I request that the final report of the Inspector of Election be filed with the minutes of this meeting. Okay. Well, that's the formal part of our meeting. And so I would now like to turn the floor over to Eric Sills, our Chief Executive Officer and President. And after he's finished, we'll be open for questions. So -- okay, Eric.

All right. Well, thank you, and good afternoon, everybody. As mentioned, this year's annual shareholder meeting is certainly unique, different from past meetings. So we felt it was appropriate to tailor our presentation accordingly. So I'm going to restrict my opening remarks just to the impact of the current coronavirus crisis, how we're navigating our way through it, and then, as mentioned, we'll open it up to questions, which we do encourage you to ask us about anything that's on your mind. Okay. So when the crisis began, our industry, the auto care industry, was deemed to be essential as America's vehicles are a vital part of our transportation infrastructure. And so our entire supply chain from the repair shops up to the part stores and distributors and then up to manufacturers like us, we remained operational throughout. So remaining in operation meant that the safety and well-being of our employees was the most important thing to us, and so we implemented countless new programs and protocols in all of our locations here in the U.S. and around the world, which address new hygiene measures, social differencing measures and everything we could to keep all of our people safe. And thankfully, these measures have proven to be effective. We've had very few employees who have tested positive. I have no reason to believe that any of them contracted the virus at work. We very much thank all of our employees for sticking with us through this challenging time, and they're really the heroes through this. So although we were deemed essential, we did recognize that there would be a temporary slowdown in the business, and we entered the crisis very healthy financially with a strong balance sheet, a long history of stability and conservative way that we manage our cash. We did choose to undertake a handful of measures to cut some costs and conserve additional cash. All the measures that we have taken were short term in nature, none of them will affect our long term because we knew this -- I know this is not going to be a long-term strategically shifting event. But we did do some things and some of the larger ones among them, we did cut pay for all of our senior executives as well as the Board of Directors. We suspended our stock buyback program, and we temporarily suspended our dividend. And this last one, the suspension of the dividend was an especially difficult decision. We've enjoyed 11 straight years of dividend increases dating back to coming out of the Great Recession. And it remains a key part of how we return value to our shareholders, return value to you guys. However, out of an abundance of caution, we felt that this was the prudent course, and we'll revisit the stance in the quarters that follow, but we felt it was the prudent thing to do at this time. But our industry does -- it's very resilient, and we're already showing strong signs of recovery. The fundamentals have remained largely unchanged. So we service the hundreds of millions of vehicles that are out there on our roads, mostly with nondiscretionary -- discretionary repair parts. And while many of these cars were idled when the country went into its stay-at-home restrictions, they're now coming back onto the roads. They were there -- the repairs are beginning again. And so the business is starting to bounce back as we knew it would. So as such, we look forward to continuing with our strategy, our strategy that we always tell you about in these annual meetings of being the best full-line, full-service supplier of premium parts within our categories. We're entering our second century of business as strong as ever, and we very much look forward to the future. So with that, that wraps up my prepared remarks, I'm looking at the website, there appear to be no questions that have been entered there. So I'm going to turn it back over to the moderator who will field any questions that you may have on the phone. Jasmine, back to you.

[Operator Instructions] There are no calls and no questions in the queue at this time.

Okay. Thank you.

All right. I'll send it back to you guys.

All right. Thank you. Well, there being no further questions or comments, I declare the meeting to be adjourned. I want to thank all of you for attending today's meeting and for your continued support of the company. Thank you.

All right. Thank you, everybody.

Ladies and gentlemen, this concludes your call. You may disconnect at this time.