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Standard Motor Products, Inc. 2009 Annual Automotive Aftermarket Symposium November 2 - 4, 2009
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2 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.
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3 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 46% in 2009 and 55% in 2010, up from 38% in 2008 Purchases from low cost suppliers expected to reach a goal of 50% in 2009 and 52% in 2010, up from 47% in 2008
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4 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 Transaction gives SMP 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
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5 SMP is an Aftermarket Pure Play 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 Traditional 47% Retail 33% OE 7% OES 5% Export 3% Special Markets 5% 2008 Sales
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6 Favorable Macro Trends for 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 TrendTrend Impact on Aftermarket
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7 Focused Business Strategy Focused on Two Major Product Lines #1 in each Engine Management 68% EuropeanGroup6% TemperatureControl25% Other1%
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8 Focused Business Strategy Engine Management Division #1 market position High brand loyalty Predictable top-line performance High margin product category #1 Position in Engine Management Distributor Cap & Rotor Distributorless Ignition System Module Business Strengths Fuel Injectors Point Set and Condenser
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9 Focused Business Strategy Temperature Control Division Temperature Control Products #1 Position in Temperature Control #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 Business Strengths
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10 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 Potential sale of European Distribution business
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11 Move to Low Cost Environment Purchasing % purchased from low cost suppliers% production labor hours in low cost facilities Manufacturing
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12 2008 - 2009 Operational Improvements Inventory Reduction Reduced by 17%, or $40mm, over last 12 months Accounts Receivable Reduction Reduced by 28%, or $68mm, over last 12 months SG&A Reduction $18mm in savings achieved YTD Reduced 10% of salaried positions over last 12 months
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13 Financial Overview
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14 September YTD Income Statement Non-GAAP (Excluding Non-Operational Gains and Losses)
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15 Condensed Balance Sheet Improved free cash flow Inventory management – Reduced by $40mm from Sep ‘08 A/R factoring – Reduced by $68mm from Sep ‘08 Reduced debt by $119M Retired $32mm balance of convertible bonds Issued $12.3mm in convertible subordinated debentures and $5.4mm in unsecured promissory notes Debt to total capitalization ratio of 39.0% vs. 52.6% in Sep ‘08
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16 Debt Reduction & Cash Flow Total Debt Cash Flow from Operations (US$ in millions) $97mm of operating cash flow in YTD 3Q 2009 driven by: Improved working capital position Factoring program with key accounts $86mm of liquidity as of 3Q 2009 $10mm in cash $76mm available in revolver Key Achievements
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17 SMP Capitalization GE Revolving Credit Facility$90.031.7%$66.323.4% 15% Convertible Subordinated Debentures12.34.312.34.3 15% Unsecured Promissory Notes5.41.95.41.9 Other (Europe 2.5, Other 0.7)3.21.13.21.1 Total Debt$110.939.0%$87.230.7% Book Value of Equity173.161.0%196.869.3% Total Capitalization$284.0100.0%$284.0100.0% Debt / LTM EBITDA(a)2.9x2.2x LTM Interest Coverage4.0x 4.4x % of Total AmountCapitalizationAmountCapitalization As of September 30, 2009 (US$ in millions) Note: Assumes equity offering of 3.0mm shares at offering price of $8.50; 5.00% gross spread and $0.5mm of other fees (a)LTM Adjusted EBITDA of $38.8mm as of 30-Sep-2009. Pro Forma
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18 Appendix
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19 20042005200620072008LTM 9/09 Earnings from Continuing Operations$(8.9)$(1.8)$9.2$5.4$(21.1)$(22.9) +Income Taxes(3.6)1.46.52.8(8.1)(13.0) +Interest Expense15.118.520.919.113.69.8 +Depreciation & Amortization19.017.415.515.214.714.8 =EBITDA$21.6$35.5$52.1$42.5$(0.9)$(11.3) +Loss from Divestiture of Europe TC Business – – 3.2 –– – - Gain on Sale of Fort Worth Texas Building –––(0.8) –– - Gain on Sale of LIC Building––––(20.4)(1.0) - Gain from Repurchase of Bonds–– – –(3.8)(2.3) - Gain on Sale of GPI Stock–– –– –(2.3) +Goodwill and Intangible Impairment Charge6.4 – – –39.339.3 +Restructuring & Integration Expenses11.45.31.810.916.916.4 =Adjusted EBITDA$39.4$40.8$57.1$52.6$31.1$38.8 Reconciliation of EBITDA
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20 Reconciliation of GAAP and Non-GAAP Measures
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Standard Motor Products, Inc.
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