Good day, everyone, and welcome to today's call. [Operator Instructions]. Please note, today's conference is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn today's program over to Larry Sills, Executive Chairman. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to Standard Motor Products' second quarter conference call, and we thank you for attending. Here for the company, Eric Sills, CEO and President; Jim Burke, Chief Operating Officer and CFO; and myself, Larry Sills, Executive Chairman. Agenda will be Jim Burke will review the second quarter financial results, then Eric will highlight a few key areas. And finally, we will open for questions. So again, thank you, and let's begin.

Okay. Thank you, Larry. 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 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. Looking at the P&L, our consolidated net sales in the second quarter were $305.2 million, up $18.5 million or 6.5%. As previously discussed, we acquired the Pollak business from Stoneridge back on April 1, 2019. Incremental sales from the acquisition in the second quarter were $10.7 million. Eric will provide additional color around the Pollak acquisition and also the integration. Excluding the Pollak sales, our consolidated net sales in Q2 were up $7.8 million or 2.7%. Our first half consolidated net sales were $588.9 million, up $40.5 million or 7.4%, and excluding the acquisition, were up $29.8 million or 5.4%. By segment, Engine Management net sales, excluding wire, in Q2 were $181.8 million, up $19.4 million or 11.9%. Excluding the Pollak acquisition sales, Engine Management sales without wire were up $8.7 million or 5.3%. For the 6 months, Engine Management sales without wire and without Pollak were up $23.6 million or 7.3%. Our wire and cable net sales in Q2 were $36.2 million, down $4.8 million or 11.6% and first half sales were $73.3 million, down $6 million or 7.6%. Our…

Thank you, Jim, and good morning, everybody. Well, Jim went through the numbers, so I'll only add some color on a few pieces and then provide an update on our latest acquisition. Overall, as you've heard, we are very pleased with the quarter. Both divisions performed quite well, posting strong sales and profits, and this reflects recovery from some of our recent short-term challenges previously discussed and positive momentum from our various initiatives. I'll review each division separately, starting with Engine Management. Overall, our divisional sales remained strong for the quarter. Our wire and cable business continue to track downwards, reflecting the ongoing decline of the product category. However, excluding wire, the rest of the Engine Management business was up almost 12% in the quarter, a gain of almost $20 million. There are a few components here. First and the largest is the contribution from our recent acquisition of the Pollak business. This deal closed on April 1, so we had it for the entire quarter. It contributed a bit more than half of the entire gain. I'll speak more about the acquisition a bit later in my remarks, but we are quite pleased so far. Excluding Pollak, our non-wire Engine Management business was up a bit over 5% for the quarter. This strong performance is a combination of a few elements. First, we enjoyed strong demand within our OE business. That said, this segment can be somewhat volatile, and while the first half has been favorable, we expect a slight softening for the second half. Secondly, as previously stated, we have been passing through tariffs and have also achieved some nominal price increases. Beyond that, ongoing aftermarket demand is keeping pace with our expected low single-digit growth. Our customer sell-through in the quarter was also up in the low…

[Operator Instructions]. We'll take our first question from Bret Jordan with Jefferies.

This is Mark Jordan on for Bret. So thinking about the Engine Management sales increase ex the Pollak acquisition and the wire and cable is up above 5%, low single digit organic. So I'm thinking about how much of that was from pricing and how much of it was from OE.

We don't get into the specifics of the different segments within it, but if you look at the general growth, as mentioned, we did have a little bit from pricing and tariffs, and so it's a balance between organic unit volume growth and some of the benefits of pricing and tariffs.

Okay. Great. And it looks like the Reynosa facility is now up and running pretty efficiently. Should we expect to see gross margin benefits going forward in the segment? And then how should we think about the Pollak volumes transitioning down there? Should it maintain the same productivity?

Okay. Yes. This is Jim Burke. And just to be clear on Reynosa, we basically have three facilities, and they are separated between the different plants. So this is separate than the wire plant, which now we feel is humming along at historic productivity levels. This is going into our other Engine Management facility that's there. And from a margin standpoint, we are anticipating healthy margin improvements from the Pollak acquisition as we transfer the bulk of this from Canton, Mass down to our Reynosa facility, a smaller portion of it to our Independence, Kansas location and part of it is moving from one of Stoneridge's locations in Mexico -- Juárez over to Reynosa. But we're anticipating a very nice margin improvements from this business. When we put Pollak all together, we believe the operating margins will be very strong, matching or exceeding our Engine Management margins.

And then just one quick question for the Engine Management gross margin, what is it that we're expecting this year? I think I missed it when you mentioned it earlier.

Well, we have targeted for the full year to be in the 29% to 30% range as we're looking for our longer-term guidance and state that -- then for next year, we'll be looking to get back into the 30% and hopefully, look for continued in-house manufacturing and low-cost sourcing to stay above 30% and grow it.

[Operator Instructions]. And we'll take our next question from Robert Smith [ph].

Yes. So looking ahead, longer term, you see OEM contributing a greater share of your total mix. Is it the amount it accounts for?

Are you asking if that's a growing trend? If you are, Robert, yes, it's -- with Pollak being largely OE, that does move the needle a bit. Prior to that, it was tracking at about 12%. So now maybe it brings it up to about 14% of our overall business. I think it is -- and as it does grow, I think it's worth, perhaps, defining it a little bit more clearly than perhaps we have in the past. Much of our OE business, it's not your typical selling to the car manufacturers, light vehicle markets. A lot of what we're doing is more in niche areas, commercial vehicle, heavy-duty industrial, farm, agricultural, et cetera, so it's a slightly different business than what most people think of when they think of OE. The life cycles tend to be a bit longer and technology changes don't occur quite as rapidly. So we are seeing this as a nice area for growth for us. The Pollak piece fits very nicely within that strategy, and we do hope to continue to grow it.

Are you looking for further opportunities to acquire?

Well, both through acquisition as well as organic growth. Our -- as I mentioned in my prepared remarks, when we acquired Pollak, the intent was not to milk it. The intent was to grow it. And so we're putting resources behind it. It brought some very blue chip accounts with it. Some of which we had already doing -- been doing business with, others were newer to us. We'll be adding technical resources and expect to be able to capitalize on it

And then a further thought, longer-term in nature. Do you have any thoughts about the on-demand car services that are -- seem to be gaining more visibility and popularity as far as the population of cars themselves go?

On demand, you're referring to ride share services, Uber and Lyft in the area?

Yes. Things like that. The car side.

Yes. It is growing. It still represents a very small percentage of total miles driven, partially because it's mostly an urban phenomenon at this point. There's a lot of speculation of what it will do to vehicle park versus total miles driven. You will need potentially fewer of them, but they're going to get worked much harder. So does that -- do those cancel each other out in terms of replacement parts demand? That's some of the speculation. We see this as just another one of the very long-term, slow moving, evolutionary trends that the whole industry is watching to see how it's going to play out. We don't anticipate it as a negative or a positive for us, certainly not in the near-term.

Yes. Can you comment on any other trends that you see in your particular industry that might not be that apparent to us?

Again, just to reiterate what I just said, nothing happens particularly quickly in the aftermarket, which is -- it means we're not going to have any dramatic ups, but it also means we're not going to have any dramatic downs. It's very stable and predictable and slow moving. So yes, there's always these ongoing evolutionary trends of automotive technology, some of which presents challenges. Others present opportunities, more parts to be sold, more different types of emissions controls and safety-related devices and systems cooling products. So while some of it is creating us to develop some new muscles, there's as much upside to it as there is downside. So it's just an ongoing trends that you see everybody talking about whether it's technology trends, customer purchasing behavior trends, and we roll with it as we have for the last 100 years.

And we'll move next to Kyle Kavanaugh with Palisade Capital.

I had a question on the Temperature Control side. Could you give a little bit more color as to some of your assumptions? Like, if the weather stays where it is, you remain cautious or you need the weather to get hotter for it to kind of -- comment differently? And I don't know if you can put any numbers on different scenarios like if trends are what they are right now, you would expect in the third quarter -- and maybe implications on margins as well? And I think you've -- in the past, you've talked about the long-term goals on margins and does that remain the same?

This is Jim Burke speaking. Maybe first on the sales. Really, at this point, many of the -- on the POS, which if it stays hot, it should stay strong, but they'll be eating out of the distributors' inventories. Hopefully, it lasts longer and we get the replacement orders that are in there, but I still -- we still stand behind that Q3 '18 was a very large quarter that we're going up against. So we remain cautious on that. Regarding margins, we have had the benefit of inventory growth that's there, so your productivity and your absorption, you get benefits on that. We -- dependent upon -- we're cautious now, so we'll curtail inventory a little bit. That can change dependent on the orders. But if it's as we predict, production levels will be lower. That means our unit costs will be slightly higher. The bulk of that will probably be felt in Q4 and a little bit as a similar patterns in the past into Q1 of next year because what's going to hit the cost of sales for Q3 of next quarter is what we've been building so far. So we think Temperature Control gets back to 25%, 26% versus the high 26.7%, I think, in Q2, and then into 2019, we're very pleased with our operations. On a balanced basis, we think that we exceed the 26% and grow the margins in Temperature Control. Hopefully -- does that answer all your questions?

Yes. That was very helpful.

[Operator Instructions]. And we have no further questions over the phone at this time. I'll return the floor back to our speakers.

Okay, folks. That concludes our second quarter conference call. Thank you all for attending.

Okay. Goodbye.

This will conclude today's program. Thank you, again, for your participation. You may now disconnect, and have a wonderful day.