Standard Motor Products, Inc. Q3 2019 Investor Presentation 1 - - PowerPoint PPT Presentation

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Standard Motor Products, Inc. Q3 2019 Investor Presentation 1 - - PowerPoint PPT Presentation

May 21, 2023 246 likes •538 views

Standard Motor Products, Inc. Q3 2019 Investor Presentation 1 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

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SLIDE 1

Standard Motor Products, Inc.

Q3 2019 Investor Presentation

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SLIDE 2

Forward Looking Statements

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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

  • f 1995. Forward looking statements,

including projections and anticipated levels of future performance, are based

  • n 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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SLIDE 3

Industry and Business Overview

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SLIDE 4

Why Invest in SMP?

Longstanding business led by experienced management team Leader in engine management and temp control aftermarket Significant share of stable industry with positive outlook Proven strategy for long-term outperformance Superior shareholder returns Financial results demonstrate success

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SLIDE 5

SMP Snapshot

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88% 12%

Sales by Market Aftermarket OE / OES

74% 26%

Sales by Product Line Engine Mgmt Temp Control

2018 Sales Breakdown

  • Founded 1919
  • $1.1 Billion 2018 Sales
  • 4,400 Employees

Worldwide

Major Product Categories 100 Years in Business

  • Ignition Products
  • Emissions Products
  • Fuel Delivery
  • Vehicle Electronics
  • Wire & Cable
  • A/C Compressors
  • Other A/C System Components
  • Engine Cooling Products
  • Blower & Radiator Fan Motors
  • Window Lift Motors

Engine Management Temperature Control

LAWRENCE I. SILLS Executive Chairman Board of Directors ERIC P. SILLS Director, CEO and President JAMES J. BURKE Chief Operating Officer DALE BURKS EVP and Chief Commercial Officer NATHAN ILES Chief Financial Officer

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SLIDE 6

SMP Snapshot

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Professionally Recognized Brands Significant Supplier to All Major Distributors

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SLIDE 7

SMP Facilities – Worldwide

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Global Footprint

3 Million sq. ft. • 13 Manufacturing Plants • 6 Distribution Centers • 9 Offices

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SLIDE 8

Favorable Industry Trends

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Miles Driven is Increasing 12-Years+ vehicles continues to grow

249 249 253 258 264 270 272 278

200 240 280

2012 2013 2014 2015 2016 2017 2018 2019

Millions

Total Light Vehicles

U.S. Light Vehicle Parc

Vehicle Population is increasing

2.95 2.97 2.99 3.03 3.10 3.17 3.21 3.22

2.0 2.5 3.0 3.5

2011 2012 2013 2014 2015 2016 2017 2018

Millions

Annual Miles Driven, 2011-2018 Age Mix of Vehicles – Year Range Categories

15% 14% 16% 17% 18% 19% 19% 19% 19% 25% 24% 21% 19% 18% 17% 19% 20% 22% 24% 24% 24% 23% 23% 21% 19% 17% 15% 36% 38% 39% 40% 41% 42% 43% 44% 44%

0% 20% 40% 60% 80% 100%

2011 2012 2013 2014 2015 2016 2017 2018 2019 VIO 0-3 yrs VIO 4-7 yrs VIO 8-11 yrs VIO 12+ yrs

$191 $196 $203 $212 $220 $228 $238 $48 $50 $52 $54 $57 $58 $58 $0 $50 $100 $150 $200 $250

2012 2013 2014 2015 2016 2017 2018

Billions

DIFM DIY

DIFM Revenue Continues to Grow

Source: IHS Markit Source: U.S. Department of Transportation / Federal Highway Administration Source: Auto Care Association / Modern Tire Dealer Source: IHS Markit

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SLIDE 9

Strategy Overview

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SLIDE 10

Strategic Objectives

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  • External programs that provide real value to our customers
  • Best-in-class full-line, full-service supplier of premium

engine management and temperature control products

Premium Value Proposition

  • Internal programs that make us a stronger company
  • Investment in increased manufacturing
  • Increase in low-cost footprint
  • Global sourcing without compromise to quality

Drive for Continuous Improvement

  • Strategic expansion of our business
  • Complementary product lines
  • Complementary markets, geographies and channels
  • Strategic acquisitions

Successful Growth Programs

  • Dividend Increase
  • Treasury Stock Buyback Program

Return to Shareholders

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SLIDE 11

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SLIDE 12

Drive for Continuous Improvement

  • Increased Manufacturing

– Engineering resources up >30% from 2013 – 80% of capital budget for tooling projects – Acquisitions: a great “shortcut”

  • Low Cost Manufacturing

– Closure of Grapevine and Orlando – China expansion (Gwo Yng, FGD, CYJ) – Integration of General Cable – Integration of Pollak (2019)

  • Low Cost Sourcing

– Hong Kong Engineering & Sourcing Office – Rigorous U.S. product qualification

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25% 56% 70% 82%

2006 2010 2014 2018

% of Hrs in Low Cost Plants

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SLIDE 13

Successful Growth Programs

  • Electronic Throttle Bodies (ETB) – Basic manufacturing in Reynosa
  • EGT / ETS (Exhaust Gas Temperature) – Manufactured in Bialystok
  • Anti-lock Brake (ABS) Sensors – 4 per vehicle; 2400+ SKUs
  • TPMS – NSF registered, an aftermarket exclusive
  • Evaporative Emissions Components (EVAP) – 1,000+ SKUs
  • ADAS Components – Market leader in ADAS
  • Interior Switches – 10,000 engine, multi-function, & driver-operated switches
  • Brushless Motors (BLDC) – Modular electronics adaptable to various models
  • Thermostat Assemblies and Housings – improved design over the OE
  • Water Outlets – Industry leading catalog and coverage
  • Blend Door Actuators – Multiple functionality with up to six per vehicle
  • Electric A/C Compressors for EVs – Manufactured by CYJ

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Committed to Growing Technology Categories

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SLIDE 14

Successful Growth Programs

  • 12 Acquisitions in Recent Years
  • Primary Focus

– Bolt-on: acquire competitors – Vertical integration: acquire suppliers – New but related business

  • Rationale

– Demonstrable synergies with minimal risk – Contributes to other strategic objectives

  • Growth and diversification / OES and Heavy Duty
  • Rapid entry to new technologies
  • Increased / low-cost manufacturing

– Provides enhanced value to our customers

  • Helps with Full-Line, Full-Service model
  • Economies of scale allows further investment
  • Helps address part complexity / SKU proliferation

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Strategic Acquisitions

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SLIDE 15

Return to Shareholders

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$0.28 $0.36 $0.44 $0.52 $0.60 $0.68 $0.76 $0.84 $0.92

2011 2012 2013 2014 2015 2016 2017 2018 2019 Forecast

Annual Dividend

Year Spend Shares

  • Avg. Price

2011 $4.1M 322,250 $12.84 2012 $5.0M 380,777 $13.13 2013 $6.9M 209,973 $32.69 2014 $10.0M 284,284 $35.18 2015/16 $20.0M 561,926 $35.59 2017/18 $39.3M 853,551 $46.00 9/30/19 YTD $10.7M 221,748 $48.43 2011 – 9/30/19 $96.0M 2,834,509

2019 Note: $0.92 based on quarterly dividend of $0.23 announced Feb 2019

Dividend Increase Treasury Stock Buyback Program

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SLIDE 16

SMP Cash Utilization

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Total Cash Usage 20.0 17.3 92.0 63.6 41.2 73.5 51.3 104.0 72.9 63.8 599.8

Uses of Cash: Invest for Growth 100% 74% 89% 79% 59% 70% 35% 85% 43% 47% 68% (Capex + M&A) Return to Investors 0% 26% 11% 21% 41% 30% 65% 15% 57% 53% 32% (Buybacks + Dividends)

7.2 10.8 11.0 11.8 11.4 13.9 18.0 20.9 24.4 20.1 149.7

(CapEx)

4.5 6.4 8.2 10.1 11.9 13.7 15.4 17.3 18.9 106.4

(Dividends)

12.8 2.0 70.5 38.6 12.8 37.7 67.3 6.8 9.9 258.4

(Acquisitions)

4.1 5.0 6.9 10.0 19.6 0.4 24.4 14.9 85.3

(Buybacks)

20 40 60 80 100 120 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 '09-'18

Cash Uses ($M)

Buybacks Cash Acquisitions Dividends Capital Expenditures

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SLIDE 17

September 2019 YTD Results

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SLIDE 18

Year-Over-Year Performance Measures

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Consolidated Net Sales ($M) Gross Margin EBITDA (w/o Special Items) ($M) Diluted EPS (w/o Special Items)

* Includes Wire Integration Costs Incurred From Nogales to Reynosa Move $767.0 $828.7 $876.2 $845.1 $896.7 $972.0 $1,058.5 $1,116.1 $1,092.1 $- $200 $400 $600 $800 $1,000 $1,200

Sep YTD Full Year 2015 2016 2017 2018 2019

$78.6 $102.4 $104.6 $84.2 $100.0 $96.4 $123.5 $129.6 $107.0 $- $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 $140.0

Sep YTD Full Year 2015 2016 2017* 2018* 2019

UP 18.8% 28.9% 30.5% 29.3% 28.6% 28.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

2015 2016 2017* 2018* 9/2019 YTD

$1.78 $2.35 $2.28 $2.03 $2.51 $2.13 $2.77 $2.83 $2.55 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00

Sep YTD Full Year 2015 2016 2017* 2018* 2019

UP 23.6% UP 6.1%

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SLIDE 19

Substantial Gross Margin Improvement

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24.3% 25.0% 25.6% 28.2% 30.7% 31.0% 30.4% 31.3% 29.4%* 28.6%* 28.0% 29.3% 30.7% 19.7% 23.1% 23.5% 21.8% 22.1% 21.6%21.9% 25.6% 26.2% 25.3% 23.5% 26.7% 26.0%

16% 18% 20% 22% 24% 26% 28% 30% 32% 34% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 3/19 6/19 9/19

Engine Management

Target: 29-30% (2019) 30% + (Future)

Temperature Control

Target: 25-26% (2019) 26% + (Future)

* Includes Wire Integration Costs Incurred From Nogales to Reynosa Move

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SLIDE 20

Income Statement Non-GAAP

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($ in millions) September 2019 YTD September 2018 YTD Amount % of Sales Amount % of Sales Net Sales 896.7 $ 100.0% 845.1 $ 100.0% Gross Profit 259.0 28.9% 241.2 28.5% SG&A Expenses 180.5 20.0% 175.6 20.8% Operating Profit 78.5 8.8% 65.6 7.8% Other Income/(Loss) 2.3 0.9 Interest Expense 4.3 3.1 Income Taxes 19.2 16.7 Earnings from Continuing Ops. 57.3 $ 46.7 $ Diluted Earnings Per Share: Continuing Operations 2.51 $ 2.03 $ Diluted Shares (000's) 22,814 22,955

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SLIDE 21

Condensed Balance Sheet

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Actual Q3 2019, Q3 2018 ($ in millions) Dollars Ratios 2019 2018 2019 2018 Cash and Equivalents 13.3 $ 27.3 $ Accounts Receivable/DSO 169.0 163.3 50 51 Inventory/Turns 340.2 318.4 2.3 2.4 Unreturned Customer Inventory 20.3 21.3 Other Assets 377.9 306.1 Total Assets 920.7 $ 836.4 $ Current Liabilities 246.2 $ 258.0 $ Total Debt/Debt to Cap Ratio 83.6 51.0 14.5% 9.7% Other Liabilities 96.8 53.3 Total Liabilities 426.6 $ 362.3 $ Equity/Debt to Equity Ratio 494.1 474.1 0.17 0.11 Total Liabilities and Equity 920.7 $ 836.4 $

* Jan 1, 2019 Added $38M in Offsetting Operating Lease Right-Of-Use-Assets and Liabilities

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SLIDE 22

Condensed Statement of Cash Flows

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(IN MILLIONS)

Full Year 2019 2018 2018 NET INCOME $46.4 $39.7 $43.0 DEPRECIATION & AMORTIZATION 19.3 17.7 24.1 ACCOUNTS RECEIVABLE (16.6) (23.4) (13.7) INVENTORY 11.8 2.8 (30.2) ACCOUNTS PAYABLE (24.1) 5.2 16.9 OTHER OPERATING ACTIVITIES 6.3 25.6 30.2 OPERATING CASH FLOW 43.1 67.6 70.3 CAPITAL EXPENDITURES (12.3) (15.6) (20.1) ACQUISITIONS (43.5) (9.9) (9.9) NET BORROWINGS (PAYMENTS) 34.7 (10.5) (12.2) DIVIDENDS (15.4) (14.1) (18.9) REPURCHASE OF COMMON STOCK (10.7) (9.3) (14.9) OTHER CHANGES 6.2 1.8 (0.5) NET CHANGE IN CASH 2.1 $ 10.0 $ (6.2) $ FREE CASH FLOW 15.3 $ 37.9 $ 31.3 $ September YTD

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SLIDE 23

Appendix

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SLIDE 24

Reconciliation of GAAP and Non-GAAP Measures

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($ in thousands, except per share amounts) 2019 2018 2017 2016 2015 (Unaudited) EARNINGS FROM CONTINUING OPERATIONS GAAP EARNINGS FROM CONTINUING OPERATIONS 56,313 $ 44,697 $ 51,736 $ 53,573 $ 42,341 $ RESTRUCTURING AND INTEGRATION EXPENSES (INCOME) 1,469 3,073 3,914 2,127 (49) CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD (144) (144) (463) (235) (571) GAIN FROM SALE OF BUILDINGS

  • (218)

(786) (786) (786) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (382) (742) (1,251) (536) 333 NON-GAAP EARNINGS FROM CONTINUING OPERATIONS 57,256 $ 46,666 $ 53,150 $ 54,143 $ 41,268 $ DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 2.47 $ 1.95 $ 2.22 $ 2.32 $ 1.82 $ RESTRUCTURING AND INTEGRATION EXPENSES (INCOME) 0.06 0.13 0.16 0.09

  • CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD

(0.01) (0.01) (0.02) (0.01) (0.03) GAIN FROM SALE OF BUILDINGS

  • (0.01)

(0.03) (0.03) (0.03) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (0.01) (0.03) (0.05) (0.02) 0.02 NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 2.51 $ 2.03 $ 2.28 $ 2.35 $ 1.78 $ MANAGEMENT BELIEVES THAT EARNINGS FROM CONTINUING OPERATIONS AND DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS, EACH OF WHICH ARE NON- GAAP MEASUREMENTS AND ARE ADJUSTED FOR SPECIAL ITEMS, 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 ENDED SEPTEMBER 30,

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SLIDE 25

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

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($ in thousands) 2019 2018 2017 2016 2015 (Unaudited) EBITDA WITHOUT SPECIAL ITEMS GAAP EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES 74,952 $ 60,498 $ 82,204 $ 85,037 $ 65,110 $ DEPRECIATION & AMORTIZATION 19,261 17,745 17,439 14,829 13,042 INTEREST EXPENSE 4,319 3,137 1,785 1,206 1,238 EBITDA 98,532 81,380 101,428 101,072 79,390 RESTRUCTURING AND INTEGRATION EXPENSES (INCOME) 1,469 3,073 3,914 2,127 (49) GAIN FROM SALE OF BUILDINGS

  • (218)

(786) (786) (786) SPECIAL ITEMS 1,469 2,855 3,128 1,341 (835) EBITDA WITHOUT SPECIAL ITEMS 100,001 $ 84,235 $ 104,556 $ 102,413 $ 78,555 $ TOTAL DEBT 83,568 $ 51,006 $ 73,137 $ 70,178 $ 24,583 $ DEBT TO EBITDA RATIO (TTM) 0.7:1 0.5:1 0.6:1 0.6:1 0.2:1 MANAGEMENT BELIEVES THAT EBITDA WITHOUT SPECIAL ITEMS, WHICH IS A NON-GAAP MEASUREMENT, IS MEANINGFUL TO INVESTORS BECAUSE IT PROVIDES 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 ENDED SEPTEMBER 30,

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SLIDE 26

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

($ in thousands, except per share amounts) EARNINGS FROM CONTINUING OPERATIONS 2019 2018 2019 2018 GAAP EARNINGS FROM CONTINUING OPERATIONS 22,654 $ 19,273 $ 56,313 $ 44,697 $ RESTRUCTURING AND INTEGRATION EXPENSES 825 6 1,469 3,073 CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD (144) (144) (144) (144) GAIN FROM SALE OF BUILDINGS

  • (218)

INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (214) (1) (382) (742) NON-GAAP EARNINGS FROM CONTINUING OPERATIONS 23,121 $ 19,134 $ 57,256 $ 46,666 $ DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 1.00 $ 0.84 $ 2.47 $ 1.95 $ RESTRUCTURING AND INTEGRATION EXPENSES 0.04

  • 0.06

0.13 CERTAIN TAX CREDITS AND PRODUCTION DEDUCTIONS FINALIZED IN PERIOD (0.01) (0.01) (0.01) (0.01) GAIN FROM SALE OF BUILDINGS

  • (0.01)

INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (0.01)

  • (0.01)

(0.03) NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 1.02 $ 0.83 $ 2.51 $ 2.03 $

MANAGEMENT BELIEVES THAT EARNINGS FROM CONTINUING OPERATIONS AND DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS, EACH OF WHICH ARE NON-GAAP MEASUREMENTS AND ARE ADJUSTED FOR SPECIAL ITEMS, 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.

THREE MONTHS ENDED SEPTEMBER 30, (Unaudited) NINE MONTHS ENDED SEPTEMBER 30, (Unaudited)

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SLIDE 27

Thank You

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