3 q final
- 1. Third Quarter 2016 Earnings Presentation November 3, 2016
- 2. Disclaimer This presentation and any related statements contain certain “forward-looking statements” about MPG’s financial results and estimates and business prospects within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by words such as “expects,” “intends,” “anticipates,” “plans,” “projects,” “believes,” “seeks,” “targets,” “forecasts,” “estimates,” “will” or other words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company’s future business, prospects and financial performance; the industry outlook, our backlog and our 2016 financial guidance. Forward-looking statements are based on management’s current expectations and assumptions, which are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global political, economic, business, competitive, market, regulatory, and other factors and risks, among them being: volatility in the global economy impacting demand for new vehicles and our products; a decline in vehicle production levels, particularly with respect to platforms for which we are a significant supplier, or the financial distress of any of our major customers; cyclicality and seasonality in the light vehicle, industrial and commercial vehicle markets; our significant competition; our dependence on large-volume customers for current and future sales; a reduction in outsourcing by our customers, the loss or discontinuation of material production or programs, or a failure to secure sufficient alternative programs; our failure to offset continuing pressure from our customers to reduce our prices; our inability to realize all of the sales expected from awarded business or fully recover pre-production costs; our failure to increase production capacity or over-expanding our production in times of overcapacity; our reliance on key machinery and tooling to manufacture components for powertrain and suspension l systems that cannot be easily replicated; program launch difficulties; a disruption in our supply or delivery chain which causes one or more of our customers to halt production; the damage to or termination of our relationships with key third-party suppliers; work stoppages or production limitations at one or more of our customer’s facilities; a catastrophic loss of one of our key manufacturing facilities; failure to protect our know-how and intellectual property; the disruption or harm to our business as a result of any acquisitions or joint ventures we make; a significant increase in the prices of raw materials and commodities we use; our failure to maintain our cost structure; the incurrence of significant costs if we close any of our manufacturing facilities; potential significant costs at our facility in Sandusky, Ohio; the incurrence of significant costs, liabilities, and obligations as a result of environmental requirements and other regulatory risks; extensive and growing governmental regulations; the incurrence of material costs related to legal proceedings; our inability to recruit and retain key personnel; any failure to maintain satisfactory labor relations; pension and other postretirement benefit obligations; risks related to our global operations; competitive threats posed by global operations and entering new markets; foreign exchange rate fluctuations; our substantial indebtedness; our inability, or the inability of our customers or our suppliers, to obtain and maintain sufficient debt financing, including working capital lines; our exposure to a number of different tax uncertainties; the mix of profits and losses in various jurisdictions adversely affecting our tax rate. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this press release and in our public filings, including under the heading “Risk Factors” in our filings that we make from time to time with the Securities and Exchange Commission. You should not consider any list of such factors to be an exhaustive statement of all the risks, uncertainties, or potentially inaccurate assumptions that could cause our current expectations or beliefs to change. Further, any forward- looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law. 2
- 3. Non-GAAP Financial Measures Combined Net Sales We define Combined Net Sales as the Net Sales of MPG plus the Net Sales of Grede prior to our acquisition of Grede. We present Combined Net Sales because our management considers it to be a useful, supplemental indicator of our performance when comparing periods before and after our acquisition of Grede. For a reconciliation of Combined Net Sales to Net Sales, the most directly comparable U.S. generally accepted accounting principles “GAAP” measure, see Appendix to this presentation. Adjusted EBITDA and Combined Adjusted EBITDA We define Adjusted EBITDA as net income (loss) before interest expense, provision for (benefit from) income taxes and depreciation and amortization, with further adjustments to reflect the additions and eliminations of certain income statement items, including (i) gains and losses on foreign currency and fixed assets and debt transaction expenses, (ii) stock-based compensation and other non-cash charges, (iii) sponsor management fees and other income and expense items that we consider to be not indicative of our ongoing operations, (iv) specified non-recurring items and (v) other adjustments. We define Combined Adjusted EBITDA as Adjusted EBITDA plus the Adjusted EBITDA of Grede prior to our acquisition of Grede. We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operating performance of companies in our industry. Management uses Adjusted EBITDA (i) as a measurement used in comparing our operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes, including the preparation of our internal annual operating budget, (iv) to evaluate the performance and effectiveness of our operational strategies and (v) to assess compliance with various metrics associated with our agreements governing our indebtedness. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating performance in the same manner as our management. We present Combined Adjusted EBITDA because our management considers it to be a useful, supplemental indicator of our performance when comparing periods before and after our acquisition of Grede. For a reconciliation of Adjusted EBITDA and Combined Adjusted EBITDA to income before tax, the most directly comparable measure determined under GAAP, see Appendix to this presentation. Adjusted Free Cash Flow We define Adjusted Free Cash Flow as Adjusted EBITDA less capital expenditures. Capital expenditures are on an accrual basis of accounting and can be calculated by taking the capital expenditures found in the investing section of our consolidated statements of cash flows and adjusting for the change in the period of the capital expenditure in accounts payables found in the supplemental cash flow information on our consolidated statements of cash flows. We present Adjusted Free Cash Flow because our management considers it to be a useful, supplemental indicator of our performance. When measured over time, Adjusted Free Cash Flow provides supplemental information to investors concerning our results of operations and our ability to generate cash flows to satisfy mandatory debt service requirements and make other non-discretionary expenditures. For a reconciliation of Adjusted Free Cash Flow to income before tax, the most directly comparable GAAP measure, see Appendix to this presentation. Free Cash Flow We define Free Cash Flow as net cash provided by operating activities, as stated on the Company’s condensed consolidated statement of cash flows, less capital expenditures, as stated on the Company’s condensed consolidated statement of cash flows. Adjusted EPS We define Adjusted EPS as Adjusted Net Income Attributable to Stockholders, defined as net income attributable to stockholders before the after-tax impact of (i) gains and losses on foreign currency transactions, including the re-measurement of the Company’s Euro denominated term loan (the “Euro Term Loan”), (ii) specific non-recurring items, and (iii) other adjustments, divided by the weighted average number of shares outstanding for the period on a diluted basis. For a reconciliation of Adjusted EPS to diluted EPS, the most directly comparable measure determined under GAAP, see "RECONCILIATION OF ADJUSTED EPS TO US GAAP DILUTED EPS”. 3
- 4. 1. Combined Adjusted EBITDA / Combined Net Sales (Non-GAAP) 2. See reconciliation in Appendix 3. See definition of Adjusted Free Cash Flow 4. Net cash provided by operating activities less capital expenditures Q3 2016 Q3 YTD 2016 Net Sales $676 $2,144 Adjusted EBITDA2 $114 $386 Adjusted EBITDA margin 16.8% 18.0% Free Cash Flow4 $18 $51 Adjusted Free Cash Flow3 $71 $254 Adjusted Free Cash Flow margin 10.5% 11.8% Fully Diluted EPS 0.28 1.15 Adjusted EPS2 0.33 1.37 $ in million USD rounded except EPS o Continued strong cash conversion and EBITDA margins o On-going headwinds from industrial and class 8 markets o Light vehicle unfavorable mix (Ford and FCA) o Strong new business awards $589 million YTD: significantly exceeding our $400 million goal 4 Key Financial Highlights Adjusted EBITDA Margin1 2013 2014 2015 YTD 2016 16.7% 17.3% 17.7% 18.0% 1 1
- 5. Accelerating Profitable Growth 1. New business is peak annual Net Sales. Programs generally launch and ramp up over the next 5 years. 2. Combined Metaldyne, HHI, and Grede 2014 New Business Awards 3. Through September 30, 2016 5 $672 $727 $589 ~$700 2014 2015 2016 $400 2016 Goal 2016 Forecast YTD Clutch Modules Peak Sales Differential Assemblies Peak Sales Connecting Rods Peak Sales On pace to book over $2 billion of New Business Awards New Business Awards Key Wins Balance Shaft Assemblies Peak Sales Damped Scissor Gear Peak Sales In millions $
- 6. $(14) ~$10 $(6) Initial Acquisition 2017 Adj. EBITDA Forecasted Brillion Impact Brillion Acquisition – Industry consolidation; similar equipment, process, and products as MPG Castings – Acquisition highlights: • Book of business Transition targeted to be completed by year end 2016 • Recent Brillion equipment investments have potential to offset ~$20 million of future MPG capital investment • Strong return on investment $158 $109 $132 $95 $66 $33 $20 $6 $9 -$2 -$9 -$4 -10 -5 0 5 10 15 20 25 -50 0 50 100 150 200 2012 2013 2014 2015 2016 LTM 2016 YTD Sales Adj. EBITDA 1.LTM and YTD financials as of Q2 2016 2.All financial info from ACW company presentations 3. At current volumes Select Customers 1 Brillion Sales and EBITDA 6 $ in millions 1 BackgroundStrategy&Impact In million USD 3 Acquisition Price Start up costs
- 7. Financial Results Third Quarter Third Quarter YTD 2016 2015 2016 2015 Net Sales $676 $747 $2,144 $2,312 Adjusted EBITDA1 $114 $129 $386 $415 Adjusted EBITDA margin 16.8% 17.3% 18.0% 17.9% Capital Expenditures2 $42 $51 $133 $149 Free Cash Flow3 $18 $40 $51 $43 Adjusted Free Cash Flow2 $71 $78 $254 $266 Adjusted Free Cash Flow margin 10.5% 10.4% 11.7% 11.5% Fully Diluted EPS 0.28 0.41 1.15 1.52 Adjusted EPS1 0.33 0.40 1.37 1.52 1. See Appendix for reconciliation to GAAP 2. Capital Expenditures on an accrual basis, See definition of Adjusted Free Cash Flow 3. Net cash provided by operating activities less capital expenditures 7 $ in million USD rounded except EPS Strong financial results despite market headwinds and planned attrition
- 8. 2016 Commentary Q2 2016 Guidance Net Sales $2.75 – $2.95 billion Income before Tax $131 – $171 million Adjusted EBITDA1 $500 – $540 million Capital Expenditures 2 $190 – $210 million Net Cash Provided by Operating Activities $335 – $355 million Free Cash Flow3 ~$145 million Adjusted Free Cash Flow4 $310 – $330 million 1. See Appendix for reconciliation to GAAP 2. Capital Expenditures on an accrual basis 3. Net cash provided by operating activities less capital expenditures on cash basis. Based on the midpoint of the guidance / outlook. 4. See definition of Adjusted Free Cash Flow 8 Q3 Commentary • Metrics generally tracking to lower end of guidance • Volume headwinds from Class 8, Industrial and unfavorable light vehicle mix (Ford/FCA) • Continued strong margins and cash flow • Excludes Brillion acquisition
- 9. APPENDIX
- 10. 320 229 225 264 270 237 241 246 248 255 557 470 471 512 525 2015 2016 2017 2018 2019 FTR Class 8 ACT Class 5-7 17.5 17.9 18.0 18.1 18.5 2015 2016 2017 2018 2019 20.9 21.4 21.8 22.1 22.5 2015 2016 2017 2018 2019 Mixed Outlook for Primary Markets 1. Vehicle Production in millions: IHS October 2016 2. Based on 2015 Net Sales country of origin 3. Production in thousands, FTR/ACT September 2016 4. Production in thousands, Yengst October 2016 5. Based on 2015 Net Sales 6. Current class 5 – 7 and class 8 mix ~30%, ~70% respectively 7. UK contributes ~1% of MPG Net Sales MPG Geographic Footprint2 North American Light Vehicle Production1 European Light Vehicle Production1 Market Outlook North America 84% EU7 12% Rest of World 4% North American Construction Equipment4 North American Class 5-8 Vehicle Production3 Light Vehicle 83% Commercial6 10% Industrial 7% MPG End Market Contribution5 10 199 176 184 197 209 2015 2016 2017 2018 2019
- 11. $747 $718 $676 (1) (7) (21) (4) (28) (10) Q3 2015 Foreign Currency Metals Planned Attrition of Non-Core Wheel Bearings Q3 2015 Adj. for Macro Effects and Planned Attrition Price Industrial/ Commercial Light Vehicle Q3 2016 Third Quarter Bridge 2015 – 2016 NetSalesAdjustedEBITDA1 11 Macro Effects $129 $119 $114 (10) (4) (8) 7 Q3 2015 Foreign Currency and Metals Planned Attrition of Non-Core Wheel Bearings Q3 2015 Adj. for Macro Effects and Planned Attrition Price All Other Vol/Mix Net Perf/Econ/Cost Red/Other Q3 2016 1. See Appendix for reconciliation to GAAP $ in million USD rounded
- 12. $2,312 $2,184 $2,144 (4) (62) (62) (18) (75) 53 Q3 YTD 2015 Foreign Currency Metals Planned Attrition of Non-Core Wheel Bearings Q3 2015 Adj. for Macro Effects and Planned Attrition Price Industrial/ Commercial Light Vehicle Q3 YTD 2016 Third Quarter YTD Bridge 2015 – 2016 NetSalesAdjustedEBITDA1 12 Macro Effects $415 $390 $386 7 (32) (18) 1 13 Q3 YTD 2015 Foreign Currency & Metals Planned Attrition of Non-core wheel bearings Q3 YTD 2015 Adj. for Macro Effects and Planned Attrition Price All other Vol/Mix Net Perf/Econ/Cost Red Q3 YTD 2016 1. See Appendix for reconciliation to GAAP $ in million USD rounded
- 13. $168.2 $366.5 $151.1 386.4 (60.1) (63.5) (55.9) (8.6) (145.4) (11.7) (18.7) (25.6) (14.0) Beginning Balance Adj. EBITDA Trade Working Capital Cash Interest Cash Taxes FX & Other Capital Expenditures Debt Repayments Dividends Share Repurchase Program Brillion Acquisition Ending Balance MPG Year to Date Cash Flow 13 $198.3 1. Other relates to Adjusted EBITDA addbacks, FX and accruals Total Before Capital Allocation 1 $ in million USD
- 14. Metal Markets and Currency Trends 14 1. Scrap Price Bulletin October 2016 2. AMM October 2016 3. Depending on volume and related index 4. OANDA.com Metal Markets USD to Euro4 $425 $405 $405 $425 $425 $425 $475 $495 $480 $470 $470 $450 $425 $180 $150 $150 $170 $170 $200 $250 $280 $280 $280 $270 $240 $210 $0 $100 $200 $300 $400 $500 $600 Oct. 2015 Nov. 2015 Dec. 2015 Jan. 2016 Feb. 2016 March 2016 April 2016 May 2016 June 2016 July 2016 Aug. 2016 Sept. 2016 Oct. 2016 SPB Pittsburgh Punchings & Plate GT High SPB Chicago #1 Bundles 1.12 1.10 1.06 1.09 1.12 1.10 1.14 1.14 1.13 1.11 1.11 1.12 1.12 0.95 1 1.05 1.1 1.15 1.2 Sept. 2015 Oct. 2015 Nov. 2015 Dec. 2015 Jan. 2016 Feb. 2016 March 2016 April 2016 May 2016 June 2016 July 2016 Aug. 2016 Sept. 2016 1 2 • Commodities pricing recovering from recent low point in 2015 • A $1 movement in metals market index can range from ~$200 -$400K3 in annual Net Sales impact • A 10% change in the Euro to U.S. dollar exchange rate has an impact of ~$27mm on our annual Net Sales • A 1% change in EUR/USD rate would result in an after- tax FX gain/loss of ~$1.4M related to the Euro loan
- 15. Reconciliation of Adjusted EPS to U.S. GAAP Diluted EPS 15 METALDYNE PERFORMANCE GROUP INC. RECONCILIATION OF ADJUSTED EPS TO US GAAP DILUTED EPS (In millions except per share amounts) Quarter Ended Nine Months Ended October 2, 2016 September 27, 2015 October 2, 2016 September 27, 2015 Net income attributable to stockholders $ 19.3 28.2 79.7 104.7 Weighted average shares outstanding - Diluted 69.2 69.0 69.2 69.0 Net income per share attributable to stockholders - Diluted $ 0.28 0.41 $ 1.15 1.52 Adjustments to Arrive at Adjusted Net Income Attributable to Stockholders Loss (gain) on re-measurement of Euro Term Loan $ 2.2 0.6 $ 7.7 (3.5) Loss (gain) on foreign currency transactions - other 0.4 (3.4) 1.1 (8.2) Loss on debt extinguishment — — — 0.4 Debt transaction expenses — — — 1.7 Non-recurring acquisition related items (1.4) 1.3 2.0 1.4 Non-recurring operational items (1) 3.3 0.9 9.3 8.0 Tax impact of adjustments to net income attributable to stockholders (1.2) 0.2 (5.2) 0.1 Adjusted Net Income Attributable to Stockholders $ 22.6 27.8 $ 94.6 104.6 Weighted average shares outstanding - Diluted 69.2 69.0 69.2 69.0 Adjusted EPS $ 0.33 0.40 $ 1.37 1.52 (1) Included in non-recurring operational items are impairment charges and exit costs associated with the closures of Grede's Berlin, Wisconsin, and Bessemer, Alabama facilities.
- 16. Reconciliation of Income Before Tax to Adjusted EBITDA and Adjusted Free Cash Flow 16 RECONCILIATION OF US GAAP INCOME BEFORE TAX TO ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW (In millions) Quarter Ended Nine Months Ended October 2, 2016 September 27, 2015 October 2, 2016 September 27, 2015 Income before tax $ 22.5 37.1 $ 107.4 145.3 Addbacks to Arrive at Unadjusted EBITDA Interest expense, net 25.7 26.0 78.1 80.5 Depreciation and amortization 55.0 56.9 165.6 172.1 Unadjusted EBITDA $ 103.2 120.0 $ 351.1 397.9 Adjustments to Arrive at Adjusted EBITDA Loss (gain) on foreign currency 2.6 (2.8) 8.8 (11.7) Loss on fixed assets 1.4 1.5 2.6 1.9 Loss on debt extinguishment 0.0 — — 0.4 Debt transaction expenses — — — 1.7 Stock-based compensation expense 4.4 7.9 12.6 15.4 Non-recurring acquisition related items (1.4) 1.3 2.0 1.4 Non-recurring operational items (1) 3.3 0.9 9.3 8.0 Adjusted EBITDA $ 113.5 128.8 $ 386.4 415.0 Capital expenditures 42.2 51.1 132.7 149.0 Adjusted Free Cash Flow $ 71.3 77.7 $ 253.7 266.0 (1) Included in non-recurring operational items are impairment charges and exit costs associated with the closures of Grede's Berlin, Wisconsin, and Bessemer, Alabama facilities.
- 17. 2016 GAAP Reconciliation 17 METALDYNE PERFORMANCE GROUP INC. RECONCILIATION OF 2016 GUIDANCE INCOME BEFORE TAX TO ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW (In millions) 2016 Guidance 2016 Guidance Low End of Range High End of Range Income before tax $ 130.7 170.7 Addbacks to Arrive at Unadjusted EBITDA Interest expense, net 104.4 104.4 Depreciation and amortization 238.4 238.4 Unadjusted EBITDA 473.5 513.5 Adjustments to Arrive at Adjusted EBITDA Stock-based compensation expense 18.0 18.0 Non-recurring operational items (1) 8.5 8.5 Adjusted EBITDA $ 500.0 540.0 Capital expenditures (190.0) (210.0) Adjusted Free Cash Flow $ 310.0 330.0 (1) Non-recurring operational items include charges for disposed operations and other.
- 18. Combined Non-GAAP Financial Information MPG SCHEDULE OF COMBINED NON-GAAP FINANCIAL INFORMATION (In millions) 18 Full Year Ended December 31, 2014 December 31, 2013 Net Sales 2,717.0 2,017.3 Grede pre-acquisition Net Sales 427.0 1,035.6 Combined Non-GAAP Net Sales 3,144.0 3,052.9 Adjusted EBITDA 478.6 363.1 Grede pre-acquisition Adjusted EBITDA 66.5 145.7 Combined Adjusted EBITDA 545.1 508.8