Attached files
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| 8-K - 8-K - Commercial Vehicle Group, Inc. | a8-kroadshow06072017.htm |
Commercial Vehicle Group, Inc.
June 2017
Patrick Miller
President and CEO
Tim Trenary
Chief Financial Officer
Terry Hammett
Treasurer and VP Investor Relations
Forward Looking Statement
pg | 1
This presentation contains forward-looking statements that are subject to risks and uncertainties. These statements often include words such as "believe," "expect,"
"anticipate," "intend," "plan," "estimate," or similar expressions. In particular, this presentation may contain forward-looking statements about Company
expectations for future periods with respect to its plans to improve financial results and enhance the Company, the future of the Company’s end markets, Class 8
North America build rates, performance of the global construction equipment business, expected cost savings, enhanced shareholder value and other economic
benefits of the consulting services, the Company’s initiatives to address customer needs, organic growth, the Company’s economic growth plans to focus on certain
segments and markets and the Company’s financial position or other financial information. These statements are based on certain assumptions that the Company has
made in light of its experience in the industry as well as its perspective on historical trends, current conditions, expected future developments and other factors it
believes are appropriate under the circumstances. Actual results may differ materially from the anticipated results because of certain risks and uncertainties,
including but not limited to: (i) general economic or business conditions affecting the markets in which the Company serves; (ii) the Company's ability to develop or
successfully introduce new products; (iii) risks associated with conducting business in foreign countries and currencies; (iv) increased competition in the heavy-duty
truck, construction, aftermarket, military, bus, agriculture and other markets; (v) the Company’s failure to complete or successfully integrate strategic acquisitions;
(vi) the impact of changes in governmental regulations on the Company's customers or on its business; (vii) the loss of business from a major customer or the
discontinuation of particular commercial vehicle platforms; (viii) the Company’s ability to obtain future financing due to changes in the lending markets or its
financial position; (ix) the Company’s ability to comply with the financial covenants in its revolving credit facility and term loan facility; (x) fluctuation in interest
rates relating to its term loan facility and revolving credit facility; (xi) the Company’s ability to realize the benefits of its cost reduction and strategic initiatives; (xii)
a material weakness in our internal control over financial reporting which could, if not remediated, result in material misstatements in our financial statements; (xiii)
volatility and cyclicality in the commercial vehicle market adversely affecting us; (xiv) the geographic profile of our taxable income and changes in valuation of our
deferred tax assets and liabilities impacting our effective tax rate; (xv) changes to domestic manufacturing initiatives impacting our effective tax rate related to
products manufactured either in the United States or in international jurisdictions; (xvi) implementation of tax changes, by the United States or another international
jurisdiction, related to products manufactured in one or more jurisdictions where we do business; and (xvii) various other risks as outlined under the heading "Risk
Factors" in the Company's Annual Report on Form 10-K for fiscal year ending December 31, 2016. There can be no assurance that statements made in this
presentation relating to future events will be achieved. The Company undertakes no obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes to future operating results over time. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by such cautionary statements.
23 Facilities
9 Countries
2016 sales $662M
NASDAQ CVGI
Global Presence
pg | 2
North America 12 facilities
Europe 5 facilities
Asia Pacific 6 Facilities
Mexico
Australia
Ohio
United
Kingdom
Belgium
Czech Republic
Ukraine
India
China
Products
pg | 3
Seats & Seating
Systems
Cabs and Sleeper BoxesWiper Systems,
Mirrors & Controls
Wire Harnesses &
Controls
Interior Trim
2016 Sales - $662 Million
pg | 4
78%
11%
11%
N. America
EMEA
APAC
42%
19%
5%2%
18%
14% OEM Truck
OEM Construction
OEM Bus
OEM Agriculture
Aftermarket
Other
42%
23%
20%
9%
6%
Seats
Wire Harnesses
Trim
Structures
Wipers / Mirrors
17%
15%
10%
7%6%
6%
39%
Volvo
Daimler
Paccar
Caterpillar
John Deere
Navistar
All Other
Region End Market
Product Customer
2016 Business Segment Sales¹
pg | 5
1. Before intercompany sales eliminations
62%
19%
8%
2%
9% MD/HD Truck
OEMs
Aftermarket and
OE Service
Bus OEMs
Construction
OEMs
Other
Global Truck and Bus
$416 Million (62%)
47%
16%
14%
8%
5%
3%
7% Construction
Aftermarket and
OE Service
Automotive
Truck
Military
Agriculture
Other
Global Construction and Agriculture
$254 Million (38%)
Industry Outlook – North America Truck
pg | 6
North American Truck Build Rates 2016 CVG Sales by End Market
(‘000s of units)
297 323 228 228 265 294 295
2014A 2015A 2016A 2017E 2018E 2019E 2020E
Heavy-Duty Truck (Class 8)
227 237 233
245 248 255
270
2014A 2015A 2016A 2017E 2018E 2019E 2020E
42%
19%
5%
2%
18%
14%
OEM Truck
OEM Bus
OEM
Agriculture
Aftermarket*
Other
OEM Construction
Market Observations
Indicators point to steady growth in medium-duty truck market
Medium-Duty Trucks (Class 5-7)
Source: Company website and filings, LMC Automotive, ACT Research, and Wall Street Research.
* Each segment has aftermarket exposure.
Order levels have been consistently stronger in the North American
heavy-duty truck market
Inventories are down to normal operating ranges
Average age of Class 8 fleet remains above historical averages
Heavy-duty Build rates projected to increase at 9.0% CAGR
2017 - 2020
Industry Outlook – Global Construction
pg | 7
Global Sales of Heavy-Duty Construction Equipment
(‘000s of units)
2016 CVG Sales by End Market
42%
19%
5%
2%
18%
14%
OEM Truck
OEM Bus
OEM
Agriculture
Aftermarket*
Other
Market Observations
CAGR
6.8%
4.7%
5.7%
7.7%
OEM Construction
Source: Millmark Associates (Oct 2016), VDMA (2016), Customer S&OP data, and Wall Street Research.
Reflects select platforms in Crane, Earthmoving equipment, and Paving.
* Each segment has aftermarket exposure.
927
1,075
1,139
1,186
1,216
Positive outlook for Housing and U.S. construction with expected
tailwinds from increased infrastructure spending under new
administration
Excess inventories have normalized and rental utilization has increased
Non-residential spending is 1% below 2008 peak and growing, although
potential headwinds exist from rising rates
Political climate creating uncertainty; however, the European
Construction PMI is at its highest level in three years
Expected growth in construction spending of 6.9% in 2017 and 6.0% in
2018 driven by fiscal stimulus for construction projects
Strategies to Improve the Core
pg | 8
18% Fewer Sales
18% Fewer Sales
18% Fewer
Sales
Restructuring and cost reductions
SGA reductions fully implemented
Footprint and operational changes announced – target completion by end of 2017
CVG Digital - Digitize processes, design, production, and products
Updating manufacturing and support processes
Benefits – Increased efficiency, quality, and reduction of working capital
Process investments
Proprietary automated processes for interior trim in North America
Updated high volume seat assembly cells in US and UK
Expanding wire harness capability – Europe and North America
Ongoing Cost Focus
Lean OpX program - Over 600 belts granted in the past two years, including 47
black belts. Another 600 belts planned for 2017
Supply Chain - Increasing standardization and optimizing supply landed cost
Examples of CVG Digital Actions
pg | 9
18% Fewer Sales
18% Fewer Sales
18% Fewer
Sales
Virtual Wiring Boards for high
proliferation
Built in Quality –
Digital error
proofing and smart
processes
Real Time
process
monitoring
and data
tracking
Digital Design and validation -
speeds product development
Improving the Foundation
pg | 10
18% Fewer Sales
18% Fewer Sales
18% Fewer
Sales
Institutionalizing
Lean Culture
Reducing
Working Capital
Cost Focus to lower
Break-Even
Investing in
Innovation
Next Gen Product
Growth Initiatives
Customer Support
CVG Digital
Actions
Optimizing
Manufacturing
Footprint
Stronger
Performance
throughout
the Cycle
pg | 11
Recent Customer Awards
• 2016 Caterpillar Supplier Quality Excellence Awards
• CVG Czech Republic – Platinum (3 years in a row)
• CVG China – Gold Award
• CVG Mexico – Bronze Award
• 2016 John Deere
• Partner Award - CVG Mexico
• Global Supplier Excellence - CVG Wire Harness
• 2016 Cummins Partner Award
• CVG Wire Harness
• 2017 Ashok Leyland Best Debutant
• CVG India
Working cooperatively with our customers to meet needs
pg | 12
Targets for Growth
Global Truck and Bus
Next Gen seat products targeted for North America, India, and China.
Expand interior trim and wiper options in Europe.
Wire harnesses – Europe and North America
Expanding capacity in Wire harness – Growing in – construction,
agriculture, truck, and power generation. Exploring extension into
digital components.
New off-road seating product lines
Construction and Ag seats available now (“SCIOX”); currently in
development programs with major OEMs. Modular product allows
customization.
Remaining open to M&A options that could
facilitate our targets for growth
FINANCIAL UPDATE
Financial Results
pg | 14
Outlook for medium
and heavy duty truck
production (000’s)*
Class 8 Class 5-7
* Source: ACT Research
See appendix for reconciliation of GAAP to non-GAAP financial measures
(Dollars in millions) Q1 2016 Q4 2016 Q1 2017
Sales $ 180.3 $ 150.0 $ 173.4 Reflects Q1 market improvement
Gross Profit $ 25.7 $ 18.3 $ 21.5
Margin 14.3 % 12.2 % 12.4 %
SG&A $ 16.8 $ 14.0 $ 16.6 Litigation settlement
Operating Income $ 8.6 $ 3.9 $ 4.6
Margin 4.8 % 2.6 % 2.6 %
Adjusted Operating Income $ 9.5 $ 5.1 $ 8.0
Margin 5.3 % 3.4 % 4.6 % 120 bps improvement from Q4
N.A. Class 8 Production (000's) 64 47 51 Up 9% from Q4
N.A. Class 5 - 7 Production (000's) 64 54 64 Up 19% from Q4
Business Segments¹
pg | 15
1. Before intercompany sales eliminations
See appendix for reconciliation of GAAP to non-GAAP financial measures
(Dollars in millions)
Global
Truck & Bus
Global
Construction
& Agriculture
Sales $ 102.1 $ 73.5
Gross Profit $ 14.0 $ 7.8
Margin 13.7 % 10.6 %
SG&A $ 5.5 $ 4.5
Operating Income $ 8.3 $ 3.3
Margin 8.1 % 4.5 %
Adjusted Operating Income $ 9.3 $ 3.4
Margin 9.1 % 4.6 %
Three Months Ended March 31, 2017
See appendix for reconciliation of GAAP to non-GAAP financial measures
Capital Structure
pg | 16
Capital Allocation: 1.) liquidity 2.) growth 3.) de-leverage 4.) return capital to shareholders
Proforma
LTM Q1 Q1 2017
(Dollars in millions) 2015 2016 2017 (Refinancing)
Satisfaction & Discharge Filed - April 2017
Debt $ 235 $ 235 $ 235 $ 175
Less: Cash 92 130 119 41
Net Debt $ 143 $ 105 $ 116 $ 134 Principal Balance $ 175
Interest LIBOR + 600
Adjusted EBITDA $ 58 $ 46 $ 44 $ 44 Maturity April 2023
Adjusted Gross Leverage 4.1 X 5.1 X 5.3 X 4.0 X Interest Rate Swap $ 80
Adjusted Net Leverage 2.5 X 2.3 X 2.6 X 3.0 X Interest 8.07%
Maturity April 2022
Liquidity:
Cash $ 41 Commitment $ 65
ABL Borrowing Base 64 Availability $ 64
Less: LOC (2) Letters of Credit $ 2
Liquidity $ 103 Accordion $ 40
* Effective April 2017
Moody's B2 / Stable
S&P B / Stable
New Term Loan*
New Asset Based Credit Facility*
Agency Ratings
7.875% Senior Secured Notes
GAAP to Non-GAAP Reconciliation
APPENDIX
pg | 18
GAAP to Non-GAAP Reconciliation
Adjusted Operating Income Reconciliation
Q1 Q4 Q1
(Dollars in millions) 2016 2016 2017
Operating Income $ 8.6 $ 3.9 $ 4.6
Margin 4.8 % 2.6 % 2.6 %
Special Items:
Restructuring & Related 0.3 1.2 1.1
Litigation Settlement 2.3
Impaired Asset 0.6
Adjusted Operating Income $ 9.5 $ 5.1 $ 8.0
Margin 5.3 % 3.4 % 4.6 %
EBITDA & Adjusted EBITDA Reconciliation
pg | 19
GAAP to Non-GAAP Reconciliation
FY FY Q2 Q3 Q4 Q1 LTM
(Dollars in millions) 2015 2016 2016 2016 2016 2017 Q1 2017
Net Income $ 7.1 $ 6.8 $ 2.7 $ 1.2 $ 0.4 $ 0.6 $ 4.9
Interest Expense 21.4 19.3 4.9 5.0 4.5 4.9 19.3
Tax Provision (Benefit) 9.8 0.8 (1.5) (0.4) (0.6) (1.7)
Depreciation 16.4 15.2 3.7 3.8 3.6 3.6 14.7
Amortization 1.3 1.3 0.3 0.3 0.3 0.3 1.2
EBITDA $ 56.0 $ 42.6 $ 12.4 $ 8.8 $ 8.4 $ 8.8 $ 38.4
Restructuring & Related 2.3 3.5 0.5 1.5 1.2 1.1 4.3
Insurance Recovery (0.7) (0.7) (0.7)
Litigation Settlement 2.3 2.3
Impaired Asset 0.6
Adjusted EBITDA $ 58.3 $ 46.0 $ 12.9 $ 10.3 $ 8.9 $ 12.2 $ 44.3
pg | 20
GAAP to Non-GAAP Reconciliation
Business Segment Adjusted Operating Income Reconciliation
Three Months Ended March 31, 2017
(Dollars in millions)
Global Truck
& Bus
Global
Construction
& Agriculture
Operating Income $ 8.3 $ 3.3
Special Items:
Restructuring & Related 1.0 0.1
Adjusted Operating Income $ 9.3 $ 3.4
Margin 9.1 % 4.6%