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Standard Motor Products, Inc.
Wall Street Analyst ForumNovember 11, 2010
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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.
Standard Motor Products, Inc.
90+ Years in Business
A Leading Automotive Aftermarket Company
Major Player in Two Product Segments Engine Management
Temperature Control
Well Positioned for the Future
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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 55% in 2010, an
increase of 30%+ over the last 5 years Purchases from low cost suppliers expected to reach a goal of 49% in 2010, an
increase of 15% over the last 5 years
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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
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
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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
Traditional44%
Retail38%
OE7%
OES4%
Export2%
SpecialMarkets
5%
2009 Sales
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Favorable Macro Trends for Aftermarket
New Car Sales Down
Aging Fleet of Vehicles
Car Dealerships Closing
Increases average age of vehicles driven
Increases demand for replacement parts
Independent distributors and repair shops will become only option in many areas
Trend Impact on Aftermarket
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Large and Stable MarketPredictable Top-line Performance with Attractive Upside
Source: U.S. Department of Transportation, AAIA, and RL Polk & Co.* Estimate
Miles Driven
2.4 2.5 2.6 2.72.9
2.6 2.7 2.8 2.9 2.9 2.93.0 3.0 3.0 3.0
1.0
1.5
2.0
2.5
3.0
3.5
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
MIle
s dr
iven
(tril
lions
)
100
130
160
190
220
250
280
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
(mill
ions
)
United States Vehicles in Use
10.210.09.89.79.59.49.19.08.98.98.8
7.07.58.08.59.09.5
10.010.5
99 00 01 02 03 04 05 06 07 08 09
(yea
rs)
Average Age of U.S. Light Vehicles
$0
$50
$100
$150
$200
$250
99 00 01 02 03 04 05 06 07 08 09 10* 11* 12*
$ bi
llion
Size of U.S. Motor Vehicle Aftermarket
$230
$149
250
205
$178$195 $207
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Focused Business Strategy
Focused on Two Major Product Lines #1 in each
EngineManagement
72%
TemperatureControl
27%Other1%
Note: Based on 2010 Forecasted Revenues
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Focused Business StrategyEngine 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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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
R4 Compressor
H6 Compressor
Accumulator
Orifice Tubes
Evaporator
Fan Clutch
Condenser Fan
Hose Assembly
Blower Motor
Power Window Motor
Pulley Water Outlet
Belt Tensioner Expansion
ValveLubricant Additive
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Excellent Customer Relationships
Traditional Retail
Most Independents
Car Dealerships
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Key Priorities – As Per 2009
► Generate ► Generate Cash
► Reduce Debt
► Redeem Convertible Debentures Original Issue $90 MM 6.75% Coupon 10 Year Life Due July 15, 2009
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Actions Taken
► Sold LIC Building
► Reduced Inventory $30 MM in 2009 $20 MM in 2008
► Reduced Accounts Receivable $50 MM
► Suspended Dividend Reinstated in 2010
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Actions Taken
► Hiring Freeze/Early Retirement Reduced Salaried Staff
► 100 People► 10% of Total
► Reduced Capital Expenditures $7.2 MM 2009 $11.5 MM Historical
Average
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Actions Taken
► Exited Two Businesses Blue Streak Electronics European Distribution
► Rolled Over $17 MM Bonds 2 Years 15% Interest
► Raised Additional Equity 3,450,000 Shares $27.5 MM (Net of Expenses)
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Result
► 2009 Debt Reduction $118 MM
► Redeemed Balance of Bonds
► Debt : EBITDA Ratio 2008: 6.2 (x) 2009: 1.7 (x) 2010: 1.3 (x) (LTM 9/10)
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Result
(Total Debt – US$ in millions)
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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
2010 Hong Kong transition from manufacturing to Procurement Operation Hayden fan clutch consolidation into Grapevine, TX
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Other Accomplishments
21%
27% 28%
38%
49%
55%58%
2005 2006 2007 2008 2009 2010Est.
2011Goal
Low Cost Manufacturing
% production labor hours in low cost facilities (Mexico and Poland)
Note: Prior years restated to exclude Europe
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Other Accomplishments
34%38%
42%47% 49% 49% 50%
2005 2006 2007 2008 2009 2010Est.
2011Goal
Low Cost Purchasing
% purchased from low cost suppliers
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2010 Update
Industry Having Strong Sales Year Ageing Car Population Pent Up Demand Closing Down Dealerships
Standard Motor Products Increased Sales Reduced Costs Optimistic About Future
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Future Planned Initiatives
Cost Reduction1. Plant Rationalization2. Global Sourcing3. Poland/Mexico
Revenue Enhancement1. Increase OE/OES Business2. Import Application Market Share3. Selective Acquisitions
Financial Overview
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Continuous Improvement in Yearly Performance
23.8%
24.1%
25.4%
23.0%
23.5%
24.0%
24.5%
25.0%
25.5%
Full Year
Gross Margin
2008
2009
2010
222
LTM
$31.1
$46.1
$58.6
$30
$35
$40
$45
$50
$55
$60
Full Year (Millions)
EBITDA (w/o Special Items)
2008
2009
2010
25 7%27 28%22 9%
LTM ($0.11)
$0.70
$0.98
($0.20)
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
Full Year
Diluted EPS (w/o Special Items)
2008
2009
2010
23 8%222 9%
LTM
25
$775.2
$735.4
$798.1
$700
$720
$740
$760
$780
$800
Full Year (Millions)
Consolidated Net Sales
2008
2009
2010
LTM
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2008 2009 Target
Engine Management Gross Margin %
23.3% 24.7% 27-28%
Temperature Control Gross Margin %
19.3% 19.7% 23-24%
Substantial Margin Improvement
9 Months 2010 Results
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September YTD Income StatementNon-GAAP
(Excluding Non-Operational Gains and Losses)
($ in Millions)
Amount % of Sales Amount % of Sales
Net Sales 637.9$ 100.0% 575.3$ 100.0%
Gross Profit 162.2 25.4% 137.1 23.8%
SG&A Expenses 120.5 18.9% 109.6 19.0%
Operating Profit 41.7 6.5% 27.5 4.8%
Other Income/Loss 0.1 1.1
Interest Expense 5.7 7.2
Income Taxes 14.5 8.3
Earnings from Continuing Ops. 21.6$ 13.1$
Diluted EPS 0.96$ 0.70$
Sept. 2010 YTD Sept. 2009 YTD
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Condensed Balance Sheet
Total Debt Reduction ($36.6MM) Debt to Total Capitalization Ratio of 26.2% (‘10) vs. 39.0% (’09)
($ in Millions)
Condensed Balance Sheet Sep '10 Sep '09
Current Assets 442.4$ 410.5$ PP&E 62.1 63.9 Other Assets 51.8 63.3
Total Assets 556.3$ 537.7$
Current Liabilities 204.2$ 186.2$ Debt 74.3 110.9 Other Liabilities 68.5 67.5 Shareholders Equity 209.3 173.1
Total Liabilities and Shareholders' Equity 556.3$ 537.7$
SMP Capitalization
Revolving Credit Facility $61.7 21.8% March 2013 Maturity
15% Convertible Subordinated Debentures 12.3 4.3 April 2011 Maturity
Other 0.3 0.1
Total Debt $74.3 26.2%
Book Value of Equity 209.3 73.8%
Total Capitalization $283.6 100.0%
Debt / LTM EBITDA(a) 1.3x
LTM Interest Coverage 7.6x
% of Total Amount Capitalization
As of September 30, 2010(US$ in millions)
(a) LTM Adjusted EBITDA of $58.6 Sept 30, 2010.
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Appendix
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Reconciliation of GAAP and Non-GAAP Measures
($ in thousands, except per share amounts)
EARNINGS FROM CONTINUING OPERATIONS 2010 2009 2010 2009
GAAP EARNINGS FROM CONTINUING OPERATIONS 11,097$ 4,724$ 22,025 11,149
RESTRUCTURING AND INTEGRATION EXPENSES (NET OF TAX) 832 2,042 2,058 3,871 LOSS FROM EUROPE DIVESTITURE (NET OF TAX) - - 47 - GAIN FROM SALE OF PREFERRED STOCK INVESTMENT (NET OF TAX) - - - (1,402) REVERSAL OF LT TAX LIABILITY (1,084) - (1,084) - GAIN FROM SALE OF BUILDINGS (NET OF TAX) (1,033) (157) (1,431) (472) GAIN FROM DEBENTURE REPURCHASE (NET OF TAX) - - - (24) NON-GAAP EARNINGS FROM CONTINUING OPERATIONS 9,812$ 6,609$ 21,615$ 13,122$
DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONSGAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 0.48$ 0.25$ 0.97$ 0.59$ RESTRUCTURING AND INTEGRATION EXPENSES (NET OF TAX) 0.03 0.11 0.09 0.21 LOSS FROM EUROPE DIVESTITURE (NET OF TAX) - - - - GAIN FROM SALE OF PREFERRED STOCK INVESTMENT (NET OF TAX) - - - (0.07) REVERSAL OF LT TAX LIABILITY (0.04) - (0.04) - GAIN FROM SALE OF BUILDINGS (NET OF TAX) (0.04) (0.01) (0.06) (0.03) GAIN FROM DEBENTURE REPURCHASE (NET OF TAX) - - - -
NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS 0.43$ 0.35$ 0.96$ 0.70$
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 ONGOINGOPERATING 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 ACCEPTEDACCOUNTING PRINCIPLES AND SHOULD NOT BE VIEWED AS AN ALTERNATIVE TO GAAP MEASURES OF PERFORMANCE.
NINE MONTHS ENDEDSEPTEMBER 30, SEPTEMBER 30,
(Unaudited)
THREE MONTHS ENDED