standard motor products, inc. 2009 annual automotive aftermarket symposium november 2 - 4, 2009
TRANSCRIPT
Standard Motor Products, Inc.2009 Annual Automotive Aftermarket
SymposiumNovember 2 - 4, 2009
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.
3
Investment RationaleCompany 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
4
Investment RationaleOpportunity 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
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
Traditional47%
Retail33%
OE7%
OES5%
Export3%
SpecialMarkets
5%
2008 Sales2008 Sales
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
TrendTrendTrendTrend Impact on AftermarketImpact on AftermarketImpact on AftermarketImpact on Aftermarket
7
Focused Business Strategy
Focused on Two Major Product Lines
#1 in each
EngineManagement
68%
EuropeanEuropeanGroupGroup
6%6%
TemperatureTemperatureControlControl
25%25%
OtherOther1%1%
8
Focused Business StrategyEngine Management Division
#1 market position
High brand loyalty
Predictable top-line performance
High margin product category
#1 Position in Engine Management#1 Position in Engine Management#1 Position in Engine Management#1 Position in Engine Management
Distributor Cap & RotorDistributor Cap & Rotor
Distributorless Ignition Distributorless Ignition System ModuleSystem Module
Business StrengthsBusiness Strengths
Fuel InjectorsFuel Injectors
Point Set and CondenserPoint Set and Condenser
9
Focused Business Strategy Temperature Control Division
Temperature Control ProductsTemperature Control Products
#1 Position in Temperature Control#1 Position in Temperature Control#1 Position in Temperature Control#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 StrengthsBusiness Strengths
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
11
20%
26%29%
38%
46%
55%
2005 2006 2007 2008 2009Estimate
2010Goal
34%38%
42%
47%50%
52%
2005 2006 2007 2008 2009Estimate
2010Goal
Move to Low Cost Environment
PurchasingPurchasing
% purchased from low cost suppliers% production labor hours in low cost facilities
ManufacturingManufacturing
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 $18mm in savings achieved YTD Reduced 10% of salaried positions over last 12 months
13
Financial Overview
14
September YTD Income Statement Non-GAAP (Excluding Non-Operational Gains and Losses)
($ in Millions)
Amount % of Sales Amount % of Sales
Net Sales 575.3$ 100.0% 626.4$ 100.0%
Gross Profit 137.1 23.8% 148.6 23.7%
SG&A Expenses 109.6 19.1% 127.5 20.4%
Operating Profit 27.5 4.8% 21.1 3.4%
Other Income/Loss 1.1 -
Interest Expense 7.2 11.0
Income Taxes 8.3 6.6
Earnings from Continuing Ops. 13.1$ 3.5$
Diluted EPS 0.70$ 0.19$
Sept. 2009 YTD Sept. 2008 YTD
15
Condensed Balance Sheet
Improved free cash flowInventory management – Reduced
by $40mm from Sep ‘08A/R factoring – Reduced by $68mm
from Sep ‘08
Reduced debt by $119M Retired $32mm balance of convertible bondsIssued $12.3mm in convertible subordinated debentures and $5.4mm in unsecured promissorynotesDebt to total capitalization ratio of
39.0% vs. 52.6% in Sep ‘08
($ in Millions)
Condensed Balance Sheet Sep '09
Current Assets 410.5$ PP&E 63.9 Other Assets 63.3
Total Assets 537.7$
Current Liabilities 186.2$ Debt 110.9 Other Liabilities 67.5 Shareholders Equity 173.1
Total Liabilities and Shareholders' Equity 537.7$
16
Debt Reduction & Cash Flow
$255
$194
$111
Dec 2007 Dec 2008 3Q 2009
$45
($8)
$142
Dec 2007 Dec 2008 LTM 3Q 2009
Total Debt Total Debt Total Debt Total Debt
Cash Flow from OperationsCash Flow from OperationsCash Flow from OperationsCash Flow from Operations
(US$ 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 AchievementsKey AchievementsKey AchievementsKey Achievements
17
SMP Capitalization
GE Revolving Credit Facility $90.0 31.7% $66.3 23.4%
15% Convertible Subordinated Debentures 12.3 4.3 12.3 4.3
15% Unsecured Promissory Notes 5.4 1.9 5.4 1.9
Other (Europe 2.5, Other 0.7) 3.2 1.1 3.2 1.1
Total Debt $110.9 39.0% $87.2 30.7%
Book Value of Equity 173.1 61.0% 196.8 69.3%
Total CapitalizationTotal Capitalization $284.0$284.0 100.0100.0%% $284.0$284.0 100.0100.0%%
Debt / LTM EBITDA(a) 2.9x 2.2x
LTM Interest Coverage 4.0x 4.4x
% of Total % of Total
Amount Capitalization Amount Capitalization
As of September 30, 2009(US$ 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
18
Appendix
19
2004 2005 2006 2007 2008 LTM 9/09
Earnings from Continuing Operations $(8.9) $(1.8) $9.2 $5.4 $(21.1) $(22.9)
+ Income Taxes (3.6) 1.4 6.5 2.8 (8.1) (13.0)
+ Interest Expense 15.1 18.5 20.9 19.1 13.6 9.8
+ Depreciation & Amortization 19.0 17.4 15.5 15.2 14.7 14.8
== EBITDAEBITDA $21.6$21.6 $35.5$35.5 $52.1$52.1 $42.5$42.5 $(0.9)$(0.9) $(11.3)$(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 Charge 6.4 – – – 39.3 39.3
+ Restructuring & Integration Expenses 11.4 5.3 1.8 10.9 16.9 16.4
== Adjusted EBITDAAdjusted EBITDA $39.4$39.4 $40.8$40.8 $57.1$57.1 $52.6$52.6 $31.1$31.1 $38.8$38.8
Reconciliation of EBITDA
20
Reconciliation of GAAP and Non-GAAP Measures
($ in thousands, except per share amounts)
EARNINGS FROM CONTINUING OPERATIONS 2009 2008 2009 2008
GAAP EARNINGS FROM CONTINUING OPERATIONS 4,724$ 397$ 11,149 12,972
RESTRUCTURING AND INTEGRATION EXPENSES (NET OF TAX) 2,042 1,204 3,871 3,734 GAIN FROM SALE OF PREFERRED STOCK INVESTMENT (NET OF TAX) - - (1,402) - LOSS FROM EXTINGUISHMENT OF DEBT (NET OF TAX) - - - 882 GAIN FROM SALE OF BUILDING (NET OF TAX) (157) (160) (472) (13,180) GAIN FROM DEBENTURE REPURCHASE (NET OF TAX) - (942) (24) (942) NON-GAAP EARNINGS FROM CONTINUING OPERATIONS 6,609$ 499$ 13,122$ 3,466$
DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONSGAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 0.25$ 0.02$ 0.59$ 0.70$ RESTRUCTURING AND INTEGRATION EXPENSES (NET OF TAX) 0.11 0.07 0.21 0.20 GAIN FROM SALE OF PREFERRED STOCK INVESTMENT (NET OF TAX) - - (0.07) - LOSS FROM EXTINGUISHMENT OF DEBT (NET OF TAX) - - - 0.05 GAIN FROM SALE OF BUILDING (NET OF TAX) (0.01) (0.01) (0.03) (0.71) GAIN FROM DEBENTURE REPURCHASE (NET OF TAX) - (0.05) - (0.05)
NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 0.35$ 0.03$ 0.70$ 0.19$
MANAGEMENT BELIEVES THAT EARNINGS FROM CONTINUING OPERATIONS AND DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS BEFORE SPECIAL
ITEMS, WHICH ARE NON-GAAP MEASUREMENTS, ARE MEANINGFUL TO INVESTORS BECAUSE THEY PROVIDE A VIEW OF THE COMPANY WITH RESPECT TO ONGOING
OPERATING RESULTS. SPECIAL ITEMS REPRESENT SIGNIFICANT CHARGES OR CREDITS THAT ARE IMPORTANT TO AN UNDERSTANDING OF THE COMPANY'S OVERALL
OPERATING RESULTS IN THE PERIODS PRESENTED. SUCH NON-GAAP MEASUREMENTS ARE NOT RECOGNIZED IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES AND SHOULD NOT BE VIEWED AS AN ALTERNATIVE TO GAAP MEASURES OF PERFORMANCE.
NINE MONTHS ENDEDSEPTEMBER 30, SEPTEMBER 30,
(Unaudited)
THREE MONTHS ENDED
Standard Motor Products, Inc.