Attached files
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| 8-K - 8-K - Commercial Vehicle Group, Inc. | a8-kroadshow08162017xfinal.htm |
Commercial Vehicle Group, Inc.
August 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, 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)
security breaches and other disruptions to our information systems and our business; (ix) the Company’s ability to obtain future financing due to changes in the
lending markets or its financial position; (x) the Company’s ability to comply with the financial covenants in its revolving credit facility and term loan facility; (xi)
fluctuation in interest rates relating to the Company's term loan facility and revolving credit facility; (xii) the Company’s ability to realize the benefits of its cost
reduction and strategic initiatives; (xiii) a material weakness in our internal control over financial reporting which could, if not remediated, result in material
misstatements in our financial statements; (xiv) volatility and cyclicality in the commercial vehicle market adversely affecting us; (xv) the geographic profile of our
taxable income and changes in valuation of our deferred tax assets and liabilities impacting our effective tax rate; (xvi) changes to domestic manufacturing
initiatives impacting our effective tax rate related to products manufactured either in the United States or in international jurisdictions; (xvii) 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 (xviii)
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 and
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017. 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)
228 245 253 289 295 231 269
2016A 2017E 2018E 2019E 2020E 2021E 2022E
Heavy-Duty Truck (Class 8)
233 245 249
256 271 266
275
2016A 2017E 2018E 2019E 2020E 2021E 2022E
42%
19%
5%
2%
18%
14%
OEM Truck
OEM Bus
OEM
Agriculture
Aftermarket*
Other
OEM ConstructionMedium-Duty Trucks (Class 5-7)
Source: Company website and filings, ACT Research.
* Each segment has aftermarket exposure.
534 625
649 652 630
225
260 273 274 26821
21 21 22 22151
171 181
183 188160
190
202 199 195
2016A 2017E 2018E 2019E 2020E
Asia Pacific Europe Latin America Middle East & Africa North America
(‘000s of units)
Industry Outlook – Global Construction
pg | 7
Global Sales of Construction Equipment 2016 CVG Sales by End Market
42%
19%
5%
2%
18%
14%
OEM Truck
OEM Bus
OEM
Agriculture
Aftermarket*
Other
Market Observations
CAGR
5.6%
1.2%
4.5%
4.2%
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.
1,267
1,325 1,330 1,303
Positive economic fundamentals. Consumer spending, fueled by wage
and job growth will continue to translate into housing demand. Expected
tailwinds from infrastructure spending.
Low machinery inventories and high rental utilization has triggered
demand increase in 2017.
Construction output continues to be supported by consumer spending,
housing recovery, and global trade.
Commodity pricing, housing growth in top tier cities, combined with
stimulus plans resulted in significant machinery growth in 2017.
Continued growth expected through short term outlook.
5.1%1,090
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 – 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 Six Sigma program (Operational Excellence) - 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 landed cost of supply
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 with our customers to meet their needs
pg | 12
Targets for Growth
Global Truck and Bus
Next Gen seat products 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) Q2 2016 Q2 2017
Sales $ 178.3 $ 195.1 Market improvement
Gross Profit $ 24.3 $ 22.7 MX labor shortage - $4 million Q2 '17 impact
Margin 13.6 % 11.6 %
SG&A $ 15.6 $ 14.8 5% improvement
Operating Income $ 8.4 $ 7.6
Margin 4.7 % 3.9 %
Adjusted Operating Income $ 8.9 $ 8.4
Margin 5.0 % 4.3 %
N.A. Class 8 Production (000's) 63 66
N.A. Class 5 - 7 Production (000's) 63 63
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 $ 119.9 $ 78.2
Gross Profit $ 17.1 $ 5.9 MX labor shortage - $4 million Q2 '17 impact
Margin 14.2 % 7.6 %
SG&A $ 5.7 $ 4.0
Operating Income $ 11.1 $ 1.9
Margin 9.2 % 2.5 %
Adjusted Operating Income $ 11.1 $ 2.8
Margin 9.2 % 3.6 %
Three Months Ended June 30, 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
LTM Q1 LTM Q2
1
(Dollars in millions) 2017 2017
Principal Balance $ 175
Debt $ 235 $ 175 Interest LIBOR + 600
Less: Cash 119 52 Maturity April 2023
Net Debt $ 116 $ 123
Interest Rate Swap $ 80
Adjusted EBITDA $ 44 $ 45 Interest 8.07%
Maturity April 2022
Adjusted Gross Leverage 5.3 X 3.9 X
Adjusted Net Leverage 2.6 X 2.7 X
Commitment $ 65
Availability $ 63
Liquidity: Letters of Credit $ 2
Cash $ 52 Accordion $ 40
ABL Borrowing Base 65
Less: LOC (2)
Liquidity $ 115 Moody's B2 / Stable
S&P B / Stable
1
In April 2017 the Company refinanced $235 million in Senior Secured Notes with an Institutional Term Loan
New Term Loan1
New Asset Based Credit Facility
Agency Ratings
GAAP to Non-GAAP Reconciliation
APPENDIX
pg | 18
GAAP to Non-GAAP Reconciliation
Adjusted Operating Income Reconciliation
Q2 Q2
(Dollars in millions) 2016 2017
Operating Income $ 8.4 $ 7.6
Margin 4.7 % 3.9 %
Special Items:
Restructuring & Related 0.5 0.9
Adjusted Operating Income $ 8.9 $ 8.4
Margin 5.0 % 4.3 %
EBITDA & Adjusted EBITDA Reconciliation
pg | 19
GAAP to Non-GAAP Reconciliation
LTM LTM
(Dollars in millions) Q1 2017 Q2 2017
Net Income $ 4.8 $ 2.3
Interest Expense 19.3 21.9
Tax Provision (Benefit) (1.7) (1.8)
Depreciation 14.7 14.5
Amortization 1.3 1.3
EBITDA $ 38.4 $ 38.2
Restructuring & Related 4.3 4.7
Insurance Recovery (0.7) (0.7)
Litigation Settlement 2.3 2.3
Adjusted EBITDA $ 44.3 $ 44.5
pg | 20
GAAP to Non-GAAP Reconciliation
Business Segment Adjusted Operating Income Reconciliation
Global
Global Truck Construction
(Dollars in millions) & Bus & Agriculture
Operating Income $ 11.1 $ 1.9
Margin 9.2 % 2.5 %
Special Items:
Restructuring & Related 0.9
Adjusted Operating Income $ 11.1 $ 2.8
Margin 9.2 % 3.6 %
Three Months Ended June 30, 2017