Standard Motor Products, Inc. Q4 2018 Investor Presentation 1 - PowerPoint PPT Presentation

Standard Motor Products, Inc. Q4 2018 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 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. 2

Industry and Business Overview 3

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

SMP Snapshot 100 Years in Business • Founded 1919 • $1.09 Billion 2018 Sales • 4,400 Employees Worldwide LAWRENCE I. SILLS ERIC P. SILLS JAMES J. BURKE DALE BURKS Executive Chairman Director, CEO Chief Operating EVP and Chief Board of Directors and President Officer Commercial Officer Sales by Market Sales by Product Line 2018 Sales Engine Mgmt Aftermarket Breakdown 26% Temp Control 12% OE / OES 88% 74% 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 is increasing Vehicle population continues to age U.S. Light Vehicle Parc Average Age of Cars and Light Trucks 280 Millions 11.4 11.5 11.6 11.7 11.7 11.2 12.0 11.0 240 10.0 200 8.0 160 120 6.0 80 4.0 40 2.0 - 2012 2013 2014 2015 2016 2017 2018 0.0 2012 2013 2014 2015 2016 2017 2018 Total Light Vehicles Miles Driven is Increasing DIFM Revenue Continues to Grow Annual Miles Driven, 2006-2017 (Percent Change from Previous Year) DIFM DIY 4.0% 3.5% $250 3.0% $200 Billions 2.0% $150 1.1% 1.3% 1.2% 1.2% 0.8% 1.0% 0.5% $100 0.3% 0.3% 0.0% $50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 -1.0% -0.6% -0.7% $0 2013 2014 2015 2016 2017 2018 -2.0% -1.9% 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 % of Hrs in Low Cost Plants 82% 70% – Closure of Grapevine and Orlando 56% 25% – China expansion – Integration of General Cable 2006 2010 2014 2018 • Low Cost Sourcing – Hong Kong Engineering & Sourcing Office – Rigorous U.S. product qualification 12

Successful Growth Programs Committed to Growing Technology Categories • 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 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 $0.92 $0.84 $0.76 $0.68 $0.60 $0.52 $0.44 $0.36 $0.28 2011 2012 2013 2014 2015 2016 2017 2018 2019 Forecast 2019 Note: $0.92 based on quarterly dividend of $0.23 announced Feb 2019 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 $39.3M 853,551 $46.00 15

SMP Cash Utilization 120 Buybacks 0.4 Cash Acquisitions 100 4.1 Dividends Cash Uses ($M) 80 Capital 67.3 10.0 Expenditures 5.0 24.4 60 14.9 70.5 6.8 37.7 9.9 19.6 40 38.6 6.9 17.3 18.9 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 20.1 18.0 13.9 11.8 11.0 11.4 10.8 7.2 - 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Uses of Cash: Invest for Growth 100% 74% 89% 79% 59% 70% 35% 85% 43% 47% (Capex + M&A) Return to Investors 0% 26% 11% 21% 41% 30% 65% 15% 57% 53% (Buybacks + Dividends) 16

December 2018 YTD Results 17

Year-Over-Year Performance Measures Consolidated Net Sales ($M) Gross Margin 31.0% $1,200 30.5% 30.0% $1,116.1 $1,000 $1,092.1 $1,058.5 $972.0 29.0% 29.3% $800 28.9% 28.6% 28.0% $600 27.0% $400 26.0% $200 25.0% $- 24.0% 2015 2016 2017 2018 2015 2016 2017* 2018* EBITDA (w/o Special Items) ($M) Diluted EPS (w/o Special Items) $3.00 $140.0 $2.83 $2.77 $120.0 $129.6 $2.50 $123.5 $2.55 $100.0 $107.0 $2.00 $2.13 $96.4 $80.0 $1.50 $60.0 $1.00 $40.0 $0.50 $20.0 $- $0.00 2015 2016 2017* 2018* 2015 2016 2017* 2018* 18 * Includes Wire Integration Costs Incurred From Nogales to Reynosa Move

Substantial Gross Margin Improvement Engine Management Target: 30-31% 34% 31.3% 32% 31.0% 30.7% 30.4% 29.4%* 30% 28.6%* 28.2% 28% 26.2% 25.6% 25.6% 26% 25.0% 24.3% 25.3% 23.5% 24% 23.1% 21.6% 21.9% 22.1% 21.8% 22% 19.7% Temperature Control 20% Target: 25-26% 18% 16% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 19 * Includes Wire Integration Costs Incurred From Nogales to Reynosa Move

Income Statement Non-GAAP ($ in millions) December 2018 YTD December 2017 YTD Amount % of Sales Amount % of Sales Net Sales $ 1,092.1 100.0% $ 1,116.1 100.0% Gross Profit 312.8 28.6% 326.7 29.3% SG&A Expenses 231.3 21.2% 224.2 20.1% Operating Profit 81.5 7.5% 102.4 9.2% Other Income/(Loss) 1.4 3.3 Interest Expense 4.0 2.3 Income Taxes 20.4 37.8 Earnings from Continuing Ops. $ 58.5 $ 65.6 Diluted Earnings Per Share: Continuing Operations $ 2.55 $ 2.83 Diluted Shares (000's) 22,932 23,198 20

Condensed Balance Sheet Actual Q4 2018, Q4 2017 ($ in millions) Dollars Ratios 2018 2017 2018 2017 Cash and Equivalents $ 11.1 $ 17.3 Accounts Receivable/DSO 157.5 140.1 57 54 Inventory/Turns 349.8 326.4 2.4 2.4 Unreturned Customer Inventory 20.5 - Other Assets 304.2 303.8 Total Assets $ 843.1 $ 787.6 Current Liabilities $ 263.5 $ 224.2 Total Debt/Debt to Cap Ratio 49.2 61.8 9.5% 12.0% Other Liabilities 63.2 47.9 Total Liabilities $ 375.9 $ 333.9 Equity/Debt to Equity Ratio 467.2 453.7 0.11 0.14 Total Liabilities and Equity $ 843.1 $ 787.6 21 * Jan 1, 2019 Added $38M in Offsetting Operating Lease Right-Of-Use-Assets and Liabilities

Condensed Statement of Cash Flows December YTD (IN MILLIONS) 2018 2017 NET INCOME $43.0 $38.0 DEPRECIATION & AMORTIZATION 24.1 23.9 ACCOUNTS RECEIVABLE (13.7) (5.1) INVENTORY (30.2) (13.9) ACCOUNTS PAYABLE 16.9 (7.2) OTHER OPERATING ACTIVITIES 30.2 28.9 OPERATING CASH FLOW 70.3 64.6 CAPITAL EXPENDITURES (20.1) (24.4) ACQUISITIONS (9.9) (6.8) NET BORROWINGS (PAYMENTS) (12.2) 6.3 DIVIDENDS (18.9) (17.3) REPURCHASE OF COMMON STOCK (14.9) (24.4) OTHER CHANGES (0.5) (0.5) NET CHANGE IN CASH $ (6.2) $ (2.5) FREE CASH FLOW $ 31.3 $ 22.9 22