Standard Motor Products, Inc. Annual Meeting of Shareholders May 17 th , 2018 1
2018 Annual Meeting of Shareholders AGENDA • Larry Sills – Executive Chairman – Introduction • Eric Sills – Director, CEO & President – Industry and Business Overview – Strategic Initiatives • Jim Burke – EVP Finance & CFO – 2017 Results – Q1 2018 Results • Q & A 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
Industry and Business Overview 4
SMP Snapshot 99 Years in Business • Founded 1919 • $1.12 Billion 2017 Sales • 4,200 Employees Worldwide LAWRENCE I. SILLS ERIC P. SILLS JAMES J. BURKE DALE BURKS Executive Chairman Director, CEO EVP Finance and EVP and Chief Board of Directors and President Chief Financial Officer Commercial Officer Sales by Market Sales by Product Line 2017 Sales Engine Mgmt Aftermarket Breakdown 25% Temp Control 12% OE / OES 88% 75% Major Product Engine Management Temperature Control Categories • Ignition Products • A/C Compressors • Emissions Products • Other A/C System Components • Fuel Delivery • Engine Cooling Products • Vehicle Electronics • Blower & Radiator Fan Motors • Wire & Cable • Window Lift Motors 5
SMP Snapshot Professionally Recognized Brands Significant Supplier to All Major Distributors 6
SMP Facilities – Worldwide Global Footprint 3 Million sq. ft. • 12 Manufacturing Plants • 5 Distribution Centers • 9 Offices 7
Favorable Industry Trends Vehicle Population Continues to Age Miles Driven is Increasing Annual Miles Driven, 2006-2017 Average Age of Cars and Light (Percent Change from Previous Year) 4.0% Trucks 3.5% 11.4 11.5 11.6 11.7 11.2 12.0 11.0 3.0% 10.7 10.4 10.0 2.0% 1.1% 1.3% 8.0 1.2% 1.2% 0.8% 1.0% 6.0 0.5% 0.3% 0.3% 4.0 0.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2.0 -0.6% -1.0% -0.7% 0.0 2010 2011 2012 2013 2014 2015 2016 2017 -2.0% -1.9% DIFM Revenue Continues to Grow Age Mix of Vehicles VIO (11 and Older) VIO (6-10 yrs) VIO (0-5 yrs) $250 DIFM DIY 100% $200 26.1% 25.1% 25.1% 27.6% 27.1% 29.7% 28.6% 29.7% 32.0% 33.5% 80% Billions $150 60% 30.1% 29.0% 25.9% 23.5% 21.8% 30.6% 30.9% 31.1% 30.8% 30.2% $100 40% $50 48.0% 48.5% 45.9% 47.1% 44.8% 20% 43.2% 41.6% 39.2% 37.2% 36.3% $0 0% 2012 2013 2014 2015 2016 2017 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 8
Strategy Overview 9
Strategic Objectives • External programs that provide real value to our customers Premium Value • Best-in-class full-line, full-service supplier of premium Proposition engine management and temperature control products • Internal programs that make us a stronger company Drive for • Investment in increased manufacturing Continuous • Increase in low-cost footprint Improvement • Global sourcing without compromise to quality • Strategic expansion of our business Successful • Complementary product lines Growth • Complementary markets, geographies and channels Programs • Strategic acquisitions Return to • Dividend Increase Shareholders • Treasury Stock Buyback Program 10
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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 – Integration of General Cable • Low Cost Sourcing – Hong Kong Engineering & Sourcing Office – Rigorous U.S. product qualification 12
Successful Growth Programs Complementary Product Lines - Examples • Diesel / Turbochargers – The most comprehensive diesel / turbo program in the industry – Significant program expansion into Medium/HD trucks • 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 • Tire Pressure Monitoring Systems (TPMS) – SMP TPMS sensors are now NSF registered • NG (Natural Gas) Injectors – Compressed or Liquid NG injectors mfr’d at our Greenville, SC facility • 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 13
Successful Growth Programs Strategic Acquisitions • Ten 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 • 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 14
Return to Shareholders Dividend Increase Annual Dividend $0.84 $0.76 $0.68 $0.60 $0.52 $0.44 $0.36 $0.28 2011 2012 2013 2014 2015 2016 2017 2018 Forecast 2018 Note: $0.84 based on quarterly dividend of $0.21 announced Feb 2018 Treasury Stock Buyback Program 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* $30.0M 652,067 $46.01 * Through May 17, 2018 15
SMP Cash Utilization 120 Buybacks Cash Acquisitions 0.4 100 4.1 Dividends Cash Uses ($M) 80 Capital 67.3 10.0 Expenditures 5.0 24.4 60 70.5 6.8 37.7 19.6 40 38.6 6.9 17.3 15.4 12.8 13.7 20 11.9 2.0 10.1 8.2 6.4 12.8 4.5 24.4 20.9 18.0 13.9 11.8 11.4 10.8 11.0 7.2 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 Uses of Cash: Invest for Growth 100% 74% 89% 79% 59% 70% 35% 85% 43% (Capex + M&A) Return to Investors 0% 26% 11% 21% 41% 30% 65% 15% 57% 16 (Buybacks + Dividends)
March 2018 YTD Results 17
5 Year Performance Measures Consolidated Net Sales ($M) Gross Margin 31.0% $1,200 $1,116.1 30.5% 30.0% $1,058.5 $1,000 $980.4 $972.0 29.5% 29.0% 29.3% $800 28.9% 28.0% $600 27.7% 27.0% $400 26.0% $200 $282.4 $261.8 25.0% $238.9 $232.8 $227.6 $- 24.0% 2014 2015 2016 2017 2018 2014 2015 2016 2017* 3/2018 YTD* Mar YTD Full Year EBITDA (w/o Special Items) ($M) Diluted EPS (w/o Special Items) $3.00 $140.0 $2.83 $2.77 $120.0 $129.6 $2.50 $123.5 $2.52 $111.5 $100.0 $2.00 $2.13 $96.4 $80.0 $1.50 $60.0 $1.00 $40.0 $0.74 $33.3 $0.50 $20.0 $0.55 $24.0 $24.7 $0.53 $20.9 $0.46 $19.1 $0.40 $- $0.00 2014 2015 2016 2017* 2018* 2014 2015 2016 2017* 2018* Mar YTD Full Year Mar YTD Full Year 18 * Due to one-time acquisition integration costs
Substantial Gross Margin Improvement Engine Management Target: 31-32% 34% 32% 31.3% 31.0% 30.7% 30.4% 29.4%* 30% 28.2% 28% 26.2% 25.6% 25.6% 26% 25.0% 24.3% 23.5% 24% 23.1% 22.1% 21.9% 21.8% 21.6% 22% 19.7% Temperature Control 20% Target: 25-26% 18% 16% 2009 2010 2011 2012 2013 2014 2015 2016 2017 19 * Due to one-time acquisition integration costs
Q1 2018 Income Statement Non-GAAP ($ in millions) Q1 2018 Q1 2017 Amount % of Sales Amount % of Sales Net Sales $ 261.8 100.0% $ 282.4 100.0% Gross Profit 72.6 27.7% 84.1 29.8% SG&A Expenses 57.7 22.0% 57.4 20.3% Operating Profit 14.9 5.7% 26.7 9.5% Other Income/(Loss) (0.0) 0.9 Interest Expense 0.6 0.5 Income Taxes 3.7 10.0 Earnings from Continuing Ops. $ 10.5 $ 17.1 Diluted Earnings Per Share: Continuing Operations $ 0.46 $ 0.74 Diluted Shares (000's) 22,967 23,314 20
Condensed Balance Sheet Actual Q1 2018, Q1 2017 ($ in millions) Dollars Ratios 2018 2017 2018 2017 Cash and Equivalents $ 26.2 $ 15.6 Accounts Receivable/DSO 160.6 180.2 51 53 Inventory/Turns 329.8 331.8 2.3 2.5 Unreturned Customer Inventory 18.7 - Other Assets 310.9 301.8 Total Assets $ 846.2 $ 829.4 Current Liabilities $ 242.6 $ 245.8 Total Debt/Debt to Cap Ratio 95.9 82.2 17.3% 15.2% Other Liabilities 48.1 43.8 Total Liabilities $ 386.7 $ 371.8 Equity/Debt to Equity Ratio 459.5 457.6 0.21 0.18 Total Liabilities and Equity $ 846.2 $ 829.4 21
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