Lawrence Sills - Executive Chairman Eric Sills - CEO Jim Burke - CFO.

Welcome to today’s program. At this time all participants are in a listen-only model, later you have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call maybe recorded and I will be standing by, should you need any assistance. It is now my pleasure to turn the conference over to Mr.

Larry Sills, Executive Chairman of Standard Motor Products. Please go ahead, sir..

Good morning everybody. We welcome you to the fourth quarter conference call and thank you for taking the time to attend. Attending from the company is Eric Sills, President and CEO; Jim Burke, Executive Vice President and Chief Financial Officer; and myself Larry Sills, Executive Chairman.

Our agenda for the day will be first Jim will begin by reviewing the numbers, Eric will review our progress and some of our major initiatives, and then we’ll open it for questions. So without further ado, Mr.

Burke?.

Okay. Thank you, Larry. To begin, 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 a discussion of the risks and uncertainties that could cause our actual results to differ from our forward-looking statements.

Overall, we are very pleased to report our financial performance for 2016, which reflected record sales and earnings, strong cash flows and many initiatives launched to strengthen us into the future. Looking at the P&L, consolidated net sales in Q4 '16 were $229.8 million, up $24.8 million, or 12.1%.

Excluding $21.7 million in the quarter from our Wire acquisition completed in May 2016, our consolidated net sales were up $3.1 million, or 1.5%. Consolidated net sales for the full year 2016 were $1.585 billion up $86.5 million, or 8.9%.

Excluding $52.9 million from our wire acquisition, our consolidated net sales increased $33.6 million or 3.5%, which is within our stated expectations for low single-digit growth.

By segment, Engine Management net sales in Q4 '16 were $185.2 million, up $17.6 million, or 10.5% and without Wire acquisition sales of $21.7 million we're down $4.1 million, or 2.4%. our Engine Management sales in Q4 were impacted primarily by customer order patterns and returns. More positively, our customers POS sales were up 2% in the quarter.

We believe it is more important to evaluate the business on an annual basis, which balances out quarterly ups and downs. Engine Management net sales for the full year 2016 were $765.5 million up $67.5 million or 9.7% and without Wire acquisition sales of $52.9 million or up $14.6 million or 2.1%.

The 2.1% growth is within our low single-digit expectations. However, the Wire product category is expected to decline at the rate of 5% to 7% per year, when we extract total Wire sales of $149 million our remaining ignition omissions and fuel system parts of $616.5 million for the year grew at the rate of 3.1%.

Temperature control net sales in Q4 '16 were $42.7 million up $6.6 million or 18.3% and year-to-date we're $283.7 million up $19.3 million or 7.3%. Here again, we caution evaluating a single quarter with an 18.3% increase. The full year increase of 7.3% is indicative of the 2016 warm summer season.

Our customer POS sales were slightly higher at roughly 9% which would be a benefit to kick off the 2017 season. However, the true test will be how hot the 2017 summer will be. Consolidated gross margin dollars in Q4 '16 were up $4 million at 29.1%, down 1.5 points, and year-to-date were up $41.5 million at 30.5%, up 1.6 points.

I will discuss the margin point changes by segment, Engine Management gross margin in Q4 ‘16 was 27.9%, down 3.6 points, and year-to-date was 31.3%, up 0.9 points.

The fourth quarter was negatively impacted by lower customer sales, higher returns than anticipated and lastly reduced overhead absorption as we are in various stages of shifting production related to our plant moves.

The key is we believe, the full year gross margin at 31.3% is a good run rate would additional savings to be achieved when our plant moves are completed. Temperature control gross margin in Q4 '16 was 28.4% up 7.5 points and year-to-date was 25.6% up 3.7 points.

Our temp control margins in Q4 benefitted from higher sales in the quarter and lower customer returns then accrued earlier in the year. The full year margin at 25.6% is reflective of our cost reduction initiatives and increased overhead absorption with higher production levels from the hot 2016 season.

We look to maintain temp control margins in the 25% range assuming an average summer season and build on those levels once our Grapevine facility closure is complete.

The two segments experience significant gross margin swings in the quarter and we believe the full year Engine Management 0.9 point improvement and temp control 3.7 point improvement reflect excellent performance with additional savings to come.

Consolidated SG&A expenses in Q4 '16 were $52.6 million, up $2.7 million at 22.9% of net sales versus 24.4% in Q4 '15. The Q4 '15 comparison excludes the $3.5 million customer bankruptcy charge recorded last year.

The SG&A spend level was significantly below our $61.3 million spend in Q3 '16 with higher sales and our Q4 target of $57 million to $59 million forecast in our last earnings call. Savings were achieved from our wire acquisition integration efforts and variable expense reductions on lower sales.

Consolidated SG&A expenses for the full year were $221.7 million up $18.9 million at 20.9% of net sales matching the 20.9% level last year, excluding the bankruptcy charge incurred in '15.

Consolidated operating income before restructuring and integration expenses and other income net in Q4 '16 was $14.1 million at 6.2% of net sales versus $12.9 million at 6.3% of net sales last year and full year was $100.8 million at 9.5% of net sales versus $78.2 million at 8% of net sales last year.

In 2015, we identified $9.9 million of onetime cost that negatively impacted 2015 results related to Engine Management diesel enhancements, temp control unfavorable variances from prior year and post retirement amortization expense.

Our $22.6 million full year operating income improvement reflects the reduction of those $9.9 million expenses highlighted last year and an incremental $12.7 million improvement generated in 2016. Other non-operating income expense improved $1.6 million in the quarter and $2.3 million for the full year.

The Q4 '15 quarter included $0.8 million deferred financing fee write-off related to our new five year bank revolver not repeated in 2016 and approximately $0.8 million improvements from our JV investments.

For the full year the favorable $2.3 million was comprised of the same two highlighted items in the quarter plus $0.5 million favorable foreign currency adjustment.

The net effect of our operational results is reported on our non-GAAP reconciliation was Q4 '16 diluted EPS of $0.42 versus $0.35 in Q4 '15 and the year-to-date diluted EPS of $2.77 versus $2.13 last year.

Looking at the balance sheet, AR increased $10.8 million from December '15 level, reflecting higher sales in Q4 '16 primarily from our wire acquisition receivables. Inventories increased $26.7 million from December '15, which reflects inventory from our wire acquisition and inventory bridge builds related to our facility restructuring initiatives.

Goodwill and other intangibles increased $47 million from December '15. This increase was related to $55 million increase from our wire acquisition less intangibles amortization. Total debt increased roughly $7 million over December '15, as we were able to basically fund our $67 million wire acquisition through operating cash flows.

Looking last at the cash flow statement, our cash generated from operations was $97.8 million in 2016 versus $65.2 million in 2015. The improvement from operations reflects net earnings generated and an increase in fund payables and accrued expenses.

The increase in payables and accrued expenses reflects accrued plant shut down costs, and compensation accruals that will be paid in 2017. This will be a slight drag on cash from operations in 2017, when it’s paid.

We are very pleased with our operational performance in 2016 and very optimistic for the future based on our multiple restructuring efforts to be completed over the next 12 to 24 months.

In closing, I’m also pleased to report as previously announced that our board of directors increased our quarterly dividend roughly 12% from $0.17 to $0.19 beginning in 2017 and also authorized the $20 million share repurchase program. Thank you for your attention. And I will turn the call over to Eric..

Thank you, Jim and good morning, everybody. Jim has covered the numbers and as you’ve heard, although we had some one-offs in the quarter in our Engine Management division it was a record year overall for both divisions, both in terms of our revenue gains and our improvements and profit.

And it’s also great to hit that billion dollar mark for the first time in our company’s history, we’ve been flirting with that number from the last few years and to finally hit it is terrific and to note that we would…[Call ends abruptly].

On behalf of our client, I would like to thank you for joining us. This concludes our presentation..

End of Q&A:.