Good day, everyone, and welcome to today's Standard Motor Products' Third Quarter Earnings Release. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during a Q&A session. (Operator Instructions) Please note, this call is being recorded and I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Jim Burke. Please go ahead, sir.

Okay. Thank you, Elisa. Good morning and welcome to Standard Motor Products' third quarter 2014 conference call. In attendance from the company are Larry Sills, Chief Executive Officer and myself, Jim Burke, Chief Financial Officer. 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. I will review the financial highlights and then turn it over to Larry followed by Q&A. The key driver this quarter were disappointing sales. Temperature Control was impacted by a cool summer season and Engine Management impacted by customer ordering patterns. Again, I'll review the quarter and the nine months results and Larry will address sales and operations in more detail. Looking at the P&L, consolidated net sales in Q3 2014 were 257 million, down 7.1 million or 2.7%, and year-to-date were 762.3 million, down 2.7 million or 0.3%. By segment, Engine Management net sales in Q3 '14 were 169.9 million, down 8 million or 4.5%, and year-to-date were 533.4 million, down 2.1 million or 0.4%. Again, Larry will provide further analysis on sales. Temperature Control net sales in Q3 '14 were 82.2 million, down 2.7 million or 3.1%, and year-to-date were 219.3 million, down 4.9 million or 2.2%.…

Good morning, everybody. Jim has reviewed the numbers and I assume you have all seen the release. I would like to expand on just three topics. The first is sales. First we'll start with Temperature Control. Now the third quarter of the year represents the main quarter for the year for the Temperature Control business and July and August are typically the two biggest months. 2013 was a cool summer, 2014 was even cooler. Now the the Temp business can vary plus or minus 20% based on the temperature and so obviously this cool summer affected us in lower sales. That's two years in a row now. Statistics would say that next year will be better, because three years in a row is unlikely. But of course one cannot promise that. Engine Management, the sales tend to be more stable and more predictable and with a business that has an estimated annual growth of roughly low to mid single digits based on demographics with an aging vehicle population. Now our customers have been achieving that. They've had sales increases in our line in the 3% to 5% range, both in 2013 and in 2014. But their purchases have varied from that, some up, some down. Now in 2013 we had a volume increase of 7% for the year and actually 14% in the fourth quarter alone. In 2014, we've been essentially flat. Now the difference is really a result of one-time events. Now in 2013, as we reported to everybody, several of our customers invested in inventory to broaden their coverage to better compete for the commercial business. Now this was not repeated in 2014, so obviously that affected the comparative results. Plus we have seen a bit of inventory reduction going on in this year. And frankly, that's a…

(Operator Instructions) Our first question comes from John Lovallo with Bank of America Merrill Lynch. Please go ahead.

The first question is, I mean, obviously, the weather is a big impact on temperature. I guess the question is, is there anything -- any actions you guys can take, I mean whether it's through acquisitions or expanded product lines, that could somehow reduce some of the seasonality there?

Well, we said that our goal is -- that's a good question. We've said that our goal -- we can't control the weather. But what we want to make ourselves is so that if it's a lousy year, sales year, we do pretty good. And if it's a good product in hot summer, we do extremely well. And we just suffered two mediocre ones in a row. But I think we are working well towards positioning ourselves in that area. We now have all of our, most of our compressor manufacturing in Mexico. With the joint venture in China with Gwo Yng, that covers most of the rest of the product line. So, our cost in that end of the business is quite low and we feel we can compete with really anybody. And the Annex acquisition actually gives us an opening for a new business, which is heat of course. So that's obviously anti-air conditioning season. It's a business we're just beginning in. We're very, very early stages. But that is an area which will be -- give you some winter business to match the summer. So we think we're taking the steps to improve this.

And then, one follow up, there's growing concern in the market that some of the customers are exerting more pressure, whether it's on pricing or on payment terms. And I realize that this is always a part of the business. But have you guys seen anything more recently where there's been increasing pressure on those fronts?

Not really. We deal with it, we're in a highly competitive position business. And we've been doing this for years and years, so we continue to do it. We continue to try to be a very wonderful supplier and keep our cost down to do well within this difficult environment. But frankly, we haven't seen really significant changes.

Thank you. We'll go next to Scott Stember with Sidoti and Company. Please go ahead. Scott Stember - Sidoti & Company: The last couple of quarters you talked about how you were streamlining and cutting costs in your Temperature Control business. Assuming that we go back to normalized demands, let's say, second and third quarter of 2015, can you maybe talk about some of the incremental margin opportunities you can get in that segment?

This is Jim Burke. I'll respond to that. Again, for the last two years, we've been cutting production to match the sales levels that we've seen in there. So, if we go back far enough almost to when we did the CompressorWorks acquisition, we had that incremental volume which will help in our margins. So what I pointed out in my comments, we're looking for Temperature Control to get back to the 23% to 24% range. You could see that we were in the 22% range this past quarter and very pleased that we were able to get benefits already from the acquisition that we're seeing from Annex Manufacturing and the joint venture in China. Once production levels improve, I expect to hit the 23%, 24% and hopefully we can even move past that. Scott Stember - Sidoti & Company: Can you just give an update on the TechSmart initiative and how many SKUs you have in the program right now and any gains there recently?

It's a number I don't have on the top of my head. I'm guessing we have maybe 600, 700 SKUs. If I got that wrong, Jim will get back to you. I think it's in that range. We're still in quite the early stages of that business. The main thing is to get our name out there so that installers think of us when they have a funny looking product that they're trying to get. It takes time, but we see we're getting our name out and we're optimistic about the future. Scott Stember - Sidoti & Company: Just last question. What is the percentage of product that was either sourced or produced outside of North America or outside of the U.S. this quarter?

Well, we don't disclose that on either on a quarterly or annual basis. Our manufacturing is upwards to 70% of our sales that are in there.

Thank you. We'll go next to Bret Jordan with BB&T Capital Markets. Please go ahead. Bret Jordan - BB&T Capital Markets: I guess as you look at the Temperature Control specifically and channel inventory levels, we've had a couple of soft years in the category. So I guess could you give us some perspective on, I guess, historically how we're looking right now, what it would take to sort of rebuild to a normalized inventory level in the channel?

You're talking about our inventory or customers' inventory? Bret Jordan - BB&T Capital Markets: Customers' inventory.

Customers' inventory. Well we do track that. And the good news is that our customers are getting quite astute and are very careful. And I'd say that their inventory levels here are not terribly different than they were a couple of years ago. So, if that's what you're thinking, I think that's what we see. Bret Jordan - BB&T Capital Markets: So, you're not seeing an accelerated order cycle for them to get inventory back up if we get a warm season projected for next year?

Well, that wouldn't be happening at this time. If that happens, that would happen early next year. Bret Jordan - BB&T Capital Markets: But my question is, are their inventory levels so low after two weak seasons that they would need to have excess orders to get back to a in-stock position?

No, I'd say that's unlikely. I'd say their inventories are reasonably adequate. Bret Jordan - BB&T Capital Markets: And then, I guess a question on the outsourced product. Is there enough products you can bring back into your production that you could get your operating margins, your margins back up just filling your capacity with products you're otherwise outsourcing? And if we don't get a recovery in temperatures at some point, can we get the gross margins up by just reallocating the production?

You're talking about the Temp business? Bret Jordan - BB&T Capital Markets: Yes.

Or everything? Bret Jordan - BB&T Capital Markets: Total.

They're different. Bret Jordan - BB&T Capital Markets: Everything is good, but specifically the Temp business.

The Temp business, now with the acquisition of -- or the joint venture with Gwo Yng, we're very little outsourced. Again, the compressors are in Mexico, much of the rest of the line is in China. So I would say basically all the popular items -- now we're just starting with the Gwo Yng, all right, we're just starting to see the benefits of that. But there's not much outsourcing going on in Temp, if that was your question. The improvement there we'll see as hopefully the volume picks up and the production picks up and you will start to see the manufacturing volume go up and hence the gross margin. But we are very little outsourced right now in Temp and I think that's a very good thing. We're basic and we're low cost. Bret Jordan - BB&T Capital Markets: Can we think about margin expansion in the outsourced on Engine Management or is that not something we see moving the needle here near term?

Yes, we keep working on that. So we keep making more and more stuff and this is very healthy. It's kind of balanced to some extent by the fact that we add several thousand new part numbers a year, because our requirement is that we keep our customers current on everything and that leads to something like several thousand. Now many of these -- certainly at the beginning we're not going to manufacture them. They're slow moving and the volume isn't really known yet. So those have minimal margins. So on one end of the pie, we're adding a lot of stuff with low margin. On the other end of the pie, we are improving margins. So I think we'll see some improvement, but I think Jim is giving you some forecast for what you're looking for in the gross margin.

And again, Bret, that was on the 23% to 24% range for Temp. And hopefully, we get a good season with good production, we can do better. We're very pleased with the Engine Management margins being now north of 30%. And again, a lot of low-hanging fruit to our low-cost facilities in Mexico and Poland have been achieved. We're always evaluating different product lines. And to move the needle significantly in that area now would be either acquisitions and/or if we bring back a product category that we may have outsourced previously.

Thank you. (Operator Instructions) We'll go next to Walter Schenker with MAZ Partners. Please go ahead.

Two questions. First, I realize it's non-cash, but it's been hanging out for a long time. On the asbestos, did you change the people who had -- I mean for years it hadn't changed and suddenly this year it changed. I would have thought by now, although they still advertise all the time, the trial lawyers, that most of the people who might be found have been found. Just as a general commentary, why would it suddenly pop now? Do you have any -- just a curiosity, I realize it's not that fundamental. Second question will be a better question.

So, we'll answer the first one. No, we didn't change advisors. We continue to work and deal with this. We get very few, a small amount of cases that are in. I think it's just the cases that we're handling and again it's over a 50-year, almost 40 plus year period that they're looking at, so the amount of the increase of a 40 something years is still small.

Because it hadn't changed the number of years, had it?

Each year they are moving it, they are looking at it plus or minus. We've seen a little bit of noise 2 million or 3 million. As a matter of fact, the previous year we felt that it was targeted maybe to be slightly lower. We didn't adjust the accrual this year slightly above. Again, there's so many variables that are in there and it's over a 40 plus year period that it's very difficult. So we continue to assess it each year and do not think it would be material -- any material change.

In looking at your sales and looking at your major customers, have you seen a material difference in the order patterns because of increased efficiency from a large player in the industry who recently in the last few years had a major acquisition and therefore is operating more efficiently as opposed to your large traditional customer who really just continues to roll along? So the question is, is it a function -- are your sales consistent across your major customers or is it somewhat skewed that the very large customers who've had big acquisitions are becoming more efficient in doing it and therefore are buying a little bit less?

There's always a bunch of different things going on. In the short run, obviously as acquisitions are made, there will always be some closing consolidation of stores and warehouses because they are duplicate. But that's short term. What I've seen -- if you want to say is there a difference, I think we have all gotten much more sophisticated, if that's the right word, in forecasting. And we do a better job; our customers do a better job. We have initiatives with almost all of our major customers where almost on a weekly basis our supply chain people are on the phone with their supply chain people and we go over it, part number by part number by part number. And this is a good thing. Now in many cases, our people will say you have 12 in that store, you don't need 12, you need eight. On this other one you need more. So we're working with them almost down to the individual SKU and in the short-term that can create some returns or just reduced ordering. But in the long run, I think we will all do a much better job of watching the inventories and I think that's a good -- if there is a change, that's the change I've seen.

And just on inventories and your comment, which I think I'm paraphrasing correctly that there has been some reduction in increased efficiency in inventories at your customer level through this year. That has been reflected through the year or that's something you expect might have some impact as we go late in the year and people tend to do some returns?

Well, returns do tend to come in towards the end of the year, but we've accrued for that. Jim can go into that in more detail. But no, the actual analysis is ongoing and we're all learning from it, we're still learning, we're going to get better. We're going to get better.

Thank you. We'll go next to Robert Smith with the Center For Performance Investing. Please go ahead.

So you mentioned, Larry, bring back some manufacturing from China.

Yes.

Could you give us kind of a brief overview of how you see the Chinese economy and business and with particular emphasis on what you're doing?

I guess you're referring to the Gwo Yng joint venture?

Yes.

Which is in its early stages, we've had it about six months now. We think this is going to work out very nicely, but we have work to do.

Meaning what?

The main thing is we have to get them, really bring them up to our standards, which are very high compared to Chinese standards. But we think it's got a good potential. And will it grow in China? I think that is the future. But at the current, our emphasis is really more in getting them -- let's get it exactly right first and then we can look upon growing into China.

And the bringing back of some production back here, or?

No, that's there. That's to be there.

No, you mentioned that you were thinking...

That's in Engine Management. We have some initiatives there, yes. One big product area is coils and we have a fabulous coil operation in Poland. And we're very pleased to see that when we started the initial analysis, we can produce coils in Poland cheaper than we can buy them from China and that's a very good thing. So that's in the future, that's a two-year, three-year project, but we feel good about it.

And how is Orange doing?

Orange is doing fine. To remind everybody, we have a 25% investment in the company. The Orange company themselves are growing quite nicely internationally and are looking to do business in Japan and Taiwan and China, all through that. The product category we refer to it as TPMS, which stands for Tire Pressure Monitoring Systems. So that's the Orange company as a whole. Our own sales of that product, we're in the early stages, because these have been mandated on cars only in the last six years, seven years. And this is a product, which tends to fail every five years, six years, seven years. So we're very early in the cycle, but we have a good product, we have, we're starting to make some nice penetration and we think it has a good future. So on both ends, we think our sales will grow and they will grow more internationally.

If you could, would you increase your ownership?

Again, we have a Board of Directors that are there and that would always be under consideration. But we're working very nicely with the management team there.

Thank you. (Operator Instructions) And gentlemen, it appears we have no further questions at this time. I'll turn it back to you for any final remarks.

Okay. Again, I want to thank everyone for joining our call today. Goodbye.

This does conclude today's program. We appreciate your participation. You may now disconnect.