Standard Motor Products, Inc. Q Investor Presentation

Transcription

1 Standard Motor Products, Inc. Q Investor Presentation 1

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 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

3 Industry and Business Overview 3

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 4

5 SMP Snapshot 98 Years in Business Founded 1919 $1.06 Billion 2016 Sales 4,100 Employees Worldwide LAWRENCE I. SILLS Executive Chairman Board of Directors ERIC P. SILLS Director, CEO and President JAMES J. BURKE EVP Finance and Chief Financial Officer DALE BURKS EVP and Chief Commercial Officer 2016 Sales Breakdown Sales by Market 89% 11% Aftermarket OE / OES Sales by Product Line 27% 73% Engine Mgmt Temp Control Major Product Categories Engine Management Ignition Products Emissions Products Fuel Delivery Vehicle Electronics Wire & Cable Temperature Control A/C Compressors Other A/C System Components Engine Cooling Products Blower & Radiator Fan Motors Window Lift Motors 5

6 SMP Snapshot Professionally Recognized Brands Significant Supplier to All Major Distributors 6

7 SMP Facilities Worldwide Global Footprint 3 Million sq. ft. 14 Manufacturing Plants 5 Distribution Centers 9 Offices 7

8 Favorable Industry Trends Vehicle Population is increasing Miles driven is increasing Millions U.S. Light Vehicle Parc 72.5% 73.8% 74.9% 74.9% 73.0% 71.5% 2.0% 1.0% 0.0% 0.9% 0.8% 0.5% Annual Miles Driven, (Percent Change from Previous Year) 0.3% 0.3% 0.6% 0.5% 1.7% Total Light Vehicles Light Vehicles 6+ Years -1.0% -2.0% -1.9% -0.6% -0.7% Vehicle population continues to age Average Age of Cars and Light Trucks Millions DIFM revenue continues to grow Auto Care Industry Segmentation $250,000 DIFM DIY $200,000 $150,000 $100,000 $50,000 $ *2017*2018*2019* 8

9 Strategy Overview 9

10 Strategic Objectives Premium Value Proposition Drive for Continuous Improvement Successful Growth Programs 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 Internal programs that make us a stronger company Investment in increased manufacturing Increase in low-cost footprint Global sourcing without compromise to quality Strategic expansion of our business Complementary product lines Complementary markets, geographies and channels Strategic acquisitions Return to Shareholders Dividend Increase Treasury Stock Buyback Program 10

11 Premium Value Proposition Best-in-Class Full-Line, Full-Service Supplier Of Premium Engine Management and Temperature Control Products Our premium brands meet all the commercial customers needs Premium Quality Customer Training Premium Brands Field Sales Support Full-Line Coverage Marketing Support Supply Chain Excellence 11

12 Drive for Continuous Improvement Increased Manufacturing Investment in manufacturing is key to development of existing & new product categories Engineering resources 10 fully equipped design & development centers 200 engineers, techs & designers up 30% from 2013 Capital spending 80% of capital budget goes to new part development for manufacture Acquisitions Great shortcut for new technologies Orange Electronics, Pensacola Fuel Injection, Gwo Yng 12

13 Drive for Continuous Improvement Cost Reduction Initiatives Low-Cost Manufacturing Low-Cost Purchasing % of Production in Low Cost Plants 78% % of Spend with Low Cost Suppliers 60% 62% 64% 52% 56% 42% 28% Recent Announcement of Mfg. Moves Grapevine plant closure Expansion of Mexico for TCD products Relocation of coils to Poland Orlando merge into Independence, KS Global Sourcing Infrastructure Hong Kong Procurement Office Utilization of in-house labs for validation Rigorous Product Qualification 13

14 Successful Growth Programs Complementary Product Lines - Examples Diesel / Turbochargers The most comprehensive diesel / turbo program in the industry Exclusive aftermarket distributor of Pure Power Technology NEW diesel injectors Electronic Throttle Bodies (ETB) 100% NEW (Not Reman) with the best coverage in the aftermarket Basic ETB manufacturing in Reynosa facility Variable Valve Timing (VVT) Components Most complete VVT Solenoids / Sprockets coverage in industry Basic manufacturing and high-tech testing in Poland facility NG (Natural Gas) Injectors Compressed or Liquid NG injectors mfr d at our Greenville, SC facility Original Equipment Heavy Duty markets in Asia NEW Mass Air Flow (MAF) Sensors Only supplier offering OE or Better quality in full line NEW MAF program SMP difference: 100% calibrated and computer-tested for precise output 14

15 Successful Growth Programs Strategic Acquisitions Nine Acquisitions in Recent Years Primary Focus Bolt-on: acquire competitors Vertical integration: acquire suppliers New but related business Rationale Demonstrable and measurable synergies with minimal risk Contributes to other strategic objectives Increased manufacturing Low-cost manufacturing Allows us to provide enhanced value to our customers Helps with Full-Line, Full-Service model Economies of scale allows further investment Helps address part complexity / SKU proliferation headwind 15

16 SMP Cash Utilization 120 Buybacks 100 Cash Acquisitions 80 Dividends 4% Cash Uses ($M) Capital Expenditures 77% 8% 61% 17% 14% 51% 38% 65% 20-17% 31% 15% 41% 27% 13% 15% 22% 16% 23% 12% 35% 24% 39% 30% 26% 7% 13% 25% 64% 35% 20% 50% 34% 61% 48% 48% 36% 62% 12% 19% 28% 19% Invest for Growth 65% 34% 61% 60% 70% 100% 74% 89% 79% 59% 70% 35% 85% (Capex + M&A) Return to Shareholders 35% 66% 39% 40% 30% 0% 26% 11% 21% 41% 30% 65% 15% (Buybacks + Dividends) 16

17 Return to Shareholders Dividend Increase $0.28 $0.36 Annual Dividend $0.60 $0.52 $0.44 $0.68 $ Forecast 2017 Note: $0.76 based on quarterly dividend of $0.19 announced Jan 2017 Treasury Stock Buyback Program Year Spend Shares Avg. Price 2011 $4.1M 322,250 $ $5.0M 380,777 $ $6.9M 209,973 $ $10.0M 284,284 $ /16 $20.0M 561,926 $ /2017 YTD * $5.3M 108,291 $48.77 * $20.0M Authorized FY

18 Return to Shareholders SMP Stock Price Appreciation (CAGR*) 40% Through December 31 st, 2016 SMP 30% 20% 10% Russell 2000 S&P 500 0% 25 Years 10 Years 5 Years 3 Years 1 Year SMP 7.0% 13.5% 21.6% 13.1% 39.9% S&P % 4.7% 12.2% 6.6% 9.5% Russell % 5.6% 12.9% 5.3% 19.5% * Excludes dividends 18

19 June 2017 YTD Results 19

20 5 Year Performance Measures Consolidated Net Sales ($M) Gross Margin $1,100 UP 8.9% 31.0% $983.7 $980.4 $972.0 $1,058.5 $ % $ % 29.5% 29.5% 28.9% $650 UP 12.7% 28.0% $500 $ % $500.8 $505.3 $497.0 $527.9 $ % 30.5% 29.4% $ % $ % /2017 YTD June YTD Full Year EBITDA (w/o Special Items) ($M) UP 28.1% $125.0 $123.5 $100.0 $111.5 $106.8 $96.4 $75.0 UP 13.0% $70.3 $50.0 $62.2 $57.2 $51.6 $45.0 $25.0 Diluted EPS (w/o Special Items) $3.00 UP 30.0% $2.50 $2.77 $2.52 $2.00 $2.32 $2.13 $1.50 $1.00 $1.12 $1.43 $1.30 $0.98 $0.50 UP 7.7% $1.54 $ June YTD Full Year $ June YTD Full Year 20

21 Substantial Gross Margin Improvement 34% Engine Management Target: 31-32% 32% 30% 28% 26% 24% 22% 24.3% 25.0% 23.1% 25.6% 23.5% 28.2% 21.8% 22.1% 30.7% 31.0% 30.4% 21.6% 21.9% 31.3% 29.8% 25.6% 25.9% 20% 18% 19.7% Temperature Control Target: 25-26% 16% /17 YTD 21

22 June 2017 YTD Income Statement Non - GAAP ($ in millions) June 2017 YTD June 2016 YTD Amount % of Sales Amount % of Sales Net Sales $ % $ % Gross Profit % % SG&A Expenses % % Operating Profit % % Other Income/(Loss) Interest Expense Income Taxes Earnings from Continuing Ops. $ 36.0 $ 32.8 Diluted Earnings Per Share: Continuing Operations $ 1.54 $ 1.43 Diluted Shares (000's) 23,332 22,989 22

23 Condensed Balance Sheet Actual June 2017, 2016 ($ in millions) Dollars Ratios Cash and Equivalents $ 16.4 $ 12.4 Accounts Receivable/DSO Inventory/Turns Other Assets Total Assets $ $ Current Liabilities $ $ Total Debt/Debt to Cap Ratio % 19.2% Other Liabilities Total Liabilities $ $ Equity/Debt to Equity Ratio Total Liabilities and Equity $ $

24 Condensed Statement of Cash Flows (IN MILLIONS) June YTD Full Year NET INCOME $33.5 $31.4 $60.4 DEPRECIATION & AMORTIZATION ACCOUNTS RECEIVABLE (51.8) (41.3) (8.6) INVENTORY (26.3) (18.5) (14.8) ACCOUNTS PAYABLE OTHER OPERATING ACTIVITIES NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (6.8) CAPITAL EXPENDITURES (8.8) (10.1) (20.9) ACQUISITIONS (GCA 2016) 0.0 (67.3) (67.3) OTHER INVESTING ACTIVITIES NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8.8) (77.4) (88.0) NET BORROWINGS (PAYMENTS) DIVIDENDS (8.7) (7.7) (15.4) REPURCHASE OF COMMON STOCK (5.2) (0.4) (0.4) OTHER FINANCING ACTIVITIES NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (7.8) EFFECTS OF EXCHANGE RATES ON CASH (1.0) NET CHANGE IN CASH $ (3.4) $ (6.4) $ 1.0 FREE CASH FLOW $ (24.3) $ 5.9 $

25 Reconciliation of GAAP and Non-GAAP Measures ($ in thousands, except per share amounts) EARNINGS FROM CONTINUING OPERATIONS SIX MONTHS JUNE 30, (Unaudited) GAAP EARNINGS FROM CONTINUING OPERATIONS $ 34,628 $ 32,518 $ 23,147 $ 23,576 $ 25,966 LITIGATION CHARGE ,650 - RESTRUCTURING AND INTEGRATION EXPENSES 2,782 1, GAIN FROM SALE OF BUILDINGS (524) (524) (524) (524) (524) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (903) (196) 196 (4,341) (38) NON-GAAP EARNINGS FROM CONTINUING OPERATIONS $ 35,983 $ 32,810 $ 22,850 $ 30,087 $ 26,022 DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 1.48 $ 1.41 $ 1.00 $ 1.02 $ 1.12 LITIGATION CHARGE RESTRUCTURING AND INTEGRATION EXPENSES GAIN FROM SALE OF BUILDINGS (0.02) (0.02) (0.02) (0.02) (0.02) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (0.04) - - (0.19) - NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 1.54 $ 1.43 $ 0.98 $ 1.30 $ 1.12 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. 25

26 Reconciliation of GAAP and Non-GAAP Measures (cont d) ($ in thousands) EBITDA WITHOUT SPECIAL ITEMS SIX MONTHS JUNE 30, (Unaudited) GAAP EARNINGS FROM CONTINUING OPERATIONS BEFORE TAXES $ 55,561 $ 51,756 $ 36,020 $ 37,154 $ 41,772 DEPRECIATION & AMORTIZATION 11,316 9,269 8,552 8,440 8,545 INTEREST EXPENSE 1, ,218 EBITDA 68,067 61,730 45,478 46,359 51,535 LITIGATION CHARGE ,650 - RESTRUCTURING AND INTEGRATION EXPENSES 2,782 1, GAIN FROM SALE OF BUILDINGS (524) (524) (524) (524) (524) SPECIAL ITEMS 2, (493) 10, EBITDA WITHOUT SPECIAL ITEMS $ 70,325 $ 62,218 $ 44,985 $ 57,211 $ 51,629 TOTAL DEBT $ 79,093 $ 100,180 $ 53,054 $ 59,102 $ 68,467 DEBT TO EBITDA RATIO (TTM) 0.6:1 0.9:1 0.5:1 0.5:1 0.7:1 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. 26

27 Reconciliation of GAAP and Non-GAAP Measures (cont d) ($ in thousands, except per share amounts) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, EARNINGS FROM CONTINUING OPERATIONS (Unaudited) (Unaudited) GAAP EARNINGS FROM CONTINUING OPERATIONS $ 18,261 $ 19,862 $ 34,628 $ 32,518 RESTRUCTURING AND INTEGRATION EXPENSES 1, ,782 1,012 GAIN FROM SALE OF BUILDINGS (262) (262) (524) (524) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (389) (205) (903) (196) NON-GAAP EARNINGS FROM CONTINUING OPERATIONS $ 18,845 $ 20,166 $ 35,983 $ 32,810 DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 0.78 $ 0.86 $ 1.48 $ 1.41 RESTRUCTURING AND INTEGRATION EXPENSES GAIN FROM SALE OF BUILDINGS (0.01) (0.01) (0.02) (0.02) INCOME TAX EFFECT RELATED TO RECONCILING ITEMS (0.01) - (0.04) - NON-GAAP DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS $ 0.81 $ 0.88 $ 1.54 $ 1.43 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. 27

28 Thank You 28