Standard Motor Products, Inc Wall Street Analyst Forum

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Presentation transcript:

Standard Motor Products, Inc. 2010 Wall Street Analyst Forum March 12, 2010

Forward Looking Statements You should be aware that except for historical information, the matters discussed herein are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements, including projections and anticipated levels of future performance, are based on current information and assumptions and involve risks and uncertainties which may cause actual results to differ materially from those discussed herein. You are urged to review our filings with the SEC and our press releases from time to time for details of these risks and uncertainties. 2

Investment Rationale Company and Industry Fundamentals Standard Motor Products is an aftermarket pure play 93% of sales are aftermarket Attractive automotive aftermarket fundamentals provide stable growth, with potential upside driven by industry trends Declining new car sales Aging vehicle fleet Closing car dealerships Lower fuel prices leads to increased mileage Most repairs are non-discretionary Continued margin improvement driven by recent restructuring actions Low-cost production in Mexico and closure of Puerto Rico and Long Island City facilities Production in low cost facilities expected to reach a goal of 55% in 2010, up from 38% in 2008 and 47% in 2009 Purchases from low cost suppliers expected to reach a goal of 52% in 2010, up from 47% in 2008 and 49% in 2009 3

Investment Rationale Opportunity for Investor Returns SMP market position yields attractive margins and high quality earnings Leading market positions in Engine Management and Temperature Control Strong customer relationships SMP has flexibility to pursue strategic opportunities Financial flexibility will allow SMP to take full advantage of opportunities to acquire products / production lines as other vendors rationalize their businesses 4

SMP is an Aftermarket Pure Play 2009 Sales Based on 250 million vehicles on the road Highly stable Slow and steady growth Tens of thousands of SKUs Not affected by rise and fall of new car production Higher margins Export 2% Special Markets 5% OES 4% OE 7% Traditional 44% Retail 38% 5

Favorable Macro Trends for Aftermarket Impact on Aftermarket New Car Sales Down Aging Fleet of Vehicles Car Dealerships Closing Fuel Prices Stabilized Increases average age of vehicles driven Increases demand for replacement parts Independent distributors and repair shops will become only option in many areas Miles driven has begun to increase Increasing miles driven creates demand for replacement parts 6

United States Vehicles in Use Size of U.S. Motor Vehicle Aftermarket Large and Stable Market Predictable Top-line Performance with Attractive Upside United States Vehicles in Use Average Age of US Cars CAGR: 1.5% Miles Driven Size of U.S. Motor Vehicle Aftermarket CAGR: 1.8% Source: U.S. Department of Transportation, AAIA, and RL Polk & Co. 7

Focused Business Strategy Focused on Two Major Product Lines #1 in each Temperature Control 27% European Group 4% Other 1% Engine Management 68% 8

Focused Business Strategy Engine Management Division #1 Position in Engine Management Point Set and Condenser Distributor Cap & Rotor Business Strengths #1 market position High brand loyalty Predictable top-line performance High margin product category Distributorless Ignition System Module Fuel Injectors 9

Focused Business Strategy Temperature Control Division #1 Position in Temperature Control Business Strengths Temperature Control Products #1 market position Top-line growth Recent wins in 2009 (AutoZone, CSK, Pep Boys) Cost reduction as a result of plant relocations to Reynosa, Mexico Significant operating leverage 10

Excellent Customer Relationships Traditional Retail Most Independents Car Dealerships 11

Strategic Initiatives 2003-2005 Dana Engine Management Acquisition and Integration 2006-2007 Exit UK Manufacturing Establish Low Cost Poland Manufacturing Site 2007 - 2008 Exit high-cost manufacturing facilities (Puerto Rico & LIC) Expand low-cost manufacturing in Reynosa, MX Begin remanufacturing compressors in Reynosa, MX 2009 Continued shift to three manufacturing facilities in Reynosa, MX Acquired Federal Mogul Wire Product Line Sale of European Distribution business 12

Move to Low Cost Environment Manufacturing Purchasing % production labor hours in low cost facilities % purchased from low cost suppliers 13

2008 - 2009 Operational Improvements Inventory Reduction Reduced by 14%, or $33mm, over last 12 months Inventory Turns increased from 2.4x to 2.8x Accounts Receivable Reduction Reduced by 28%, or $50mm, over last 12 months DSO reduced from 108 to 73 days SG&A Reduction $20mm in savings achieved 2009 vs. 2008 Reduced 10% of salaried positions over last 12 months 14

Standard Motor Products, Inc. SMP Overview 40,000 Ft Level 15

SMP Overview Restructuring Impact on EBITDA w/o Special Items Key Takeaway is Health of Core Business in $50 MM + Range Excluding Integration Years 2002 Pre Dana 2003-05 Integration 2006-07 2008 2009 EBITDA $50 MM $38-41 MM $53-57 MM $31 MM $46 MM 16

SMP Overview Debt Load 2002 2003-05 2006-07 2008 2009 December $177 MM Debt Reduction <$61 MM > <$118 MM> Debt/EBITDA 3.5 (x) 5.7-6.1 (x) 4.2-4.9 (x) 6.2 (x) 1.7 (x) 17

Financial Overview 18

2009 Income Statement Non-GAAP (Excluding Non-Operational Gains and Losses) 19

Substantial Margin Improvement 2008 2009 Target Engine Management Gross Margin % 23.3% 24.7% 27-28% Temperature Control Gross Margin % 19.3% 19.7% 23-24% 20

Debt Reduction & Cash Flow (US$ in millions) Total Debt Key Achievements $102mm of operating cash flow in 2009 driven by: Improved working capital position Factoring program with key accounts $94mm of liquidity as of Dec 2009 $11mm in cash $83mm available in revolver Cash Flow from Operations 21

Condensed Balance Sheet Improved free cash flow Inventory management – Reduced by $33mm from Dec ’08 A/R factoring – Reduced A/R by $50mm from Dec ’08 Reduced debt by $118mm Retired $32mm balance of convertible bonds Issued $12.3mm in convertible subordinated debentures and $5.4mm in unsecured promissory notes Debt to total capitalization ratio of 28.3% vs. 54.3% in Dec ‘08 22

Appendix 23

Reconciliation of GAAP and Non-GAAP Measures 24

Reconciliation of GAAP and Non-GAAP Measures (cont’d) 25

Standard Motor Products, Inc.