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

Good afternoon, ladies and gentlemen. I'm Larry Sills, Chairman of Standard Motor Products. Welcome to our 2021 annual meeting of shareholders. I hereby call the meeting to order. In ordinary times, we would be gathered together in person to conduct our annual meeting. However, in these extraordinary times, we thought it's prudent to conduct this meeting online in a virtual format to ensure the health and safety of our shareholders. Nevertheless, we are pleased to connect with you and glad that you are able to join us. I would like to begin by introducing the executive officers who are joining me today. Eric Sills, Chief Executive Officer and President; Jim Burke, Chief Operating Officer; Dale Burks, Chief Commercial Officer; and Nathan Iles, Chief Financial Officer. I would also like to introduce the members of our Board of Directors who are all present today as well as our Emeritus directors Bill Turner, John Gethin, Pamela Forbes Lieberman, Patrick McClymont, Joe DcDonnell, Alisa Norris, Eric Sills, [ Stiff ] Ward, Arthur Sills, Emeritus' Director; Peter Sills, Emeritus' Director. In addition, Roger Widman, who is retiring after this meeting is with us. And finally, I would like to welcome representatives of KPMG, our independent auditors to this meeting. Rules of conduct for the meeting have been made available to you and are posted on our meeting website. In fairness to all shareholders and the interest of an orderly meeting we ask that you abide by these rules. Let us start with the necessary formalities. Shareholders of record at the close of business on April 9, 2021, and 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 21, 2021, and will be made available if any shareholder wishes to examine it. The notice and Affidavit will be filed with the minutes of this meeting. A list of all registered shareholders of the company as of the record date and the respective number of shares entitled to vote at the meeting will also be made available if any shareholder wishes to examine the list. The list will be filed with the minutes of this meeting. Carmine Broccole, our secretary, has been appointed as the inspector of election to access this meeting or at any adjournment. He has taken an oath to act as inspector of election, and this oath will be filed with the minutes of the meeting. The inspector of election reports that we have received votes by proxy for 21,091,873 shares of common stock of the company out of a total of 22,833,298 shares of stock outstanding and entitled to vote as of the record date, April 9, 2021. The shareholders who are logged into this meeting website and who have not yet submitted their proxy to vote, may vote now by clicking on the vote on the bottom of your screen. The inspector has advised that a quorum is present at the meeting, so I declare the meeting duly and lawfully convened. We would now like to attend to the 4 formal items of business to be addressed at today's meeting. Matters raised for a discussion, which do not relate to these agenda items, will be referred until the informal part of these proceedings at which time, representatives of the company will be available for discussion. Our shareholders may ask questions at the appropriate time by submitting their question in the chat box provided on the meeting website. Proposal 1. The first item of business to come before this meeting is the election of 9 directors to hold office until the 2022 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, [ Dick ] Ward and myself, Larry Sills. I call for a vote on proposal number one. If you have not already voted or if you wish to change your vote, please do so at this time. We will announce the results on all 4 proposals at the end. Proposal #2. The second item of business that come before the #2. The second item of business that come before this meeting is management's proposal to approve amended and restated 2016 omnibus incentive plans. Are there any questions or comments on this proposal?

Larry, there are no questions on this proposal.

Thank you. I call for a vote by ballot on proposal #2. If you have not already voted or if you wish to change your vote, please do so at this time. The third item of business that 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 ended December 31, 2021. A representative of KPMG is present and available to answer appropriate questions. Are there any questions or comments on this proposal?

Larry, there are no questions on this proposal.

Thank you 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. The fourth 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?

There are no questions on this proposal, Larry.

Thank you. I call for a vote on proposal #4. If you have not already voted or if you wish to change your vote, please do so at this time. I now declare the polls closed with respect to all proposals. 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 numbers 2, 3 and 4 have been approved. I request that the final report of the inspector of election be filed with the minutes of this meeting. I would now like to turn the floor over to Eric Sills, our Chief Executive Officer and President; questions will be answered at the completion of his remarks. Okay, Eric.

Thank you, Larry, and good afternoon, everybody. It's good to be with you today. As we emerge from the COVID crisis and the challenges that it created both through business and at home, I want to begin my comments by reflecting back on the previous year, how our industry fared and how we have emerged, I believe, a stronger company than ever. Then I'll speak to the exciting future that lies ahead for SMP. Needless to say, the last year has been a true roller coaster. It began in mid-March of 2020 when the country went into coded stay at home lockdowns, cars went into driveways and revenues dropped dramatically. But within a few short months, we experienced a rapid recovery by junior sales had normalized and what followed was a second half where demand surged past previous levels with the entire supply chain struggling to keep up. These trends have continued into 2021 with few signs of abating. In fact, as vaccinations increase, cars are getting back on the road and miles driven is normalizing, which is one of the key drivers for industry demand. So as we emerge from a year unlike any other, we have reaffirmed once again what a resilient industry we are in. As was determined early on in the pandemic, the auto care industry is truly essential. Americans rely heavily on our vehicles for everything from life critical matters such as emergency response to the mundane of running areas and everything in the tweet. Our industry from the repair shops up through the distributors and parts manufacturers, keep these vehicles operating safely and efficient. While the pandemic certainly disrupted the industry, the addressable market did not fundamentally change. We still have 280 million cars in the U.S. They spent some time idled but are now back on roads and being maintained. As for S&P, we believe that we've been able to retain a key position within the industry. Our core business strategy remains as relevant as ever. We are in 2 critical nondiscretionary and healthy category and gen management and temperature control. Our go-to-market value proposition of being the best full line, full-service provider of these critical categories continues to resonate with our channel partners. Our national brands continue to be sought after by professional installers who are looking for professional grade products in a company that stands behind us. From an operational standpoint, we're pleased that our manufacturing footprint is diverse and favors NAFTA countries in Poland over the Far East. Which, no doubt, has helped us to better control our supply chain. We're also very pleased with the progress we have made in diversifying our business, both organically and through acquisitions. We have quietly grown our original equipment business to well over $150 million with a focus on commercial vehicle and heavy-duty segments. We believe this is highly complementary with our core market, providing access to newer technologies as well as enforcing the quality rigors these customers demand. And so I'll close the same way I opened by stating that we truly believe we have emerged from the pandemic a stronger company, both operationally and financially. We have the wind at our back. Industry trends are favorable. Our business is robust our customer relationships are strong, and we continue to invest in our company. And as such, we are truly excited about the future. So with that, we'd be happy to take any questions that you may have. I hand it back over to the moderator.

Eric, we do not have any questions at this time.

All right. Thank you very much. And so then back to you, Larry, to close this up.

Thank you. 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 very much.