Dauch Corporation · NYSE:DCH
Dauch — American Axle & Manufacturing Holdings — Merger or Acquisition (March 2017)
54 slides from Dauch's merger presentation, Mar 7, 2017
Slide 1: American Axle & Manufacturing Holdings, Inc. Investor Presentation March 2017
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC. INVESTOR PRESENTATION MARCH 2017
Slide 2: Today's Presenters
Today’s Presenters * David Dauch – Chairman of the Board & Chief Executive OfficerChristopher May – Vice President & Chief Financial OfficerShannon Curry – TreasurerJason Parsons – Director, Investor Relations American Axle
Slide 3: Agenda
Transaction Overview2016 AAM Highlights2017 AAM TargetsAAM’s 2017 – 2019 New Business BacklogTechnology LeadershipAcquisition of MPGQuestions Agenda *
Slide 4: Transaction Overview
Opie TRANSACTION OVERVIEW
Slide 5: Transaction Summary
Transaction Summary * On November 3, 2016, American Axle (“AAM” or the “Company”) announced it had signed a definitive merger agreement to acquire Metaldyne Performance Group (“Metaldyne” or “MPG”) for ≈$1.6 billion in cash and stock, plus the assumption of $1.7 billion in net debtAAM is a global ma
Slide 6: Sources and Uses – MPG Acquisition
* Sources and Uses – MPG Acquisition 1 Capitalization Table 3 Sources ($ in millions) Sources ($ in millions) New Term Loan A 100 New Term Loan A 100 New Term Loan B 1,550 New Term Loan B 1,550 Senior Unsecured Notes 1,200 Senior Unsecured Notes 1,200 Cash from balance sheet 180 Cash from balance sh
Slide 7: AAM Highlights and Targets
One AAM HIGHLIGHTS AND TARGETS
Slide 8: Forward-Looking Statements
Some of the information presented in this document and discussions that follow, including, without limitation, statements with respect to the proposed acquisition of Metaldyne Performance Group, Inc (“MPG”) and the anticipated consequences and benefits of the acquisition, the targeted close date for
Slide 9: Important Information for Stockholders and Investors
Important Information for Stockholders and Investors This presentation is provided for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell shares of AAM or MPG. In connection with the proposed acquisition of MPG, AAM has filed a Registration Stateme
Slide 10: 2016 AAM Highlights
2016 AAM Highlights Net Debt* / Adj. EBITDA≈ 1.5x AAM Financial Records Improved Net Leverage Net Sales Adjusted EBITDA* Strong Cash Flow Generation Net Debt* / Adj. EBITDA ≈ $3.95B Over $600M ≈ 1.5x * For definitions of terms, please see the attached appendix. *
Slide 11: 2016 AAM Financial Performance
* 2016 Actuals Net Sales $3.95B Adjusted EBITDA* $619.4M or 15.7% of sales Adjusted Free Cash Flow* $198.6M 2016 AAM Financial Performance * For definitions of terms, please see the attached appendix. Adjusted EBITDA and Adjusted Free Cash Flow exclude the impact of restructuring and acquisition-rel
Slide 12: Sales Growth and Operational Performance
* Sales Growth and Operational Performance Three straight years of record sales and operating profits Dollars in millions $123.1 $189.5 Dollars in millions * For definitions of terms, please see the attached appendix.
Slide 13: Free Cash Flow & Leverage
* Free Cash Flow (FCF) & Leverage Generating robust free cash flow Rapid deleveraging of the balance sheet Dollars in millions $123.1 $189.5 * For definitions of terms, please see the attached appendix.
Slide 14: Debt Maturities & Liquidity
Debt Maturities & Liquidity * Strong liquidity position and debt maturity profile Liquidity (in $ millions) Debt Maturities (in $ millions) Liquidity = available cash and borrowing capacity on global credit facilities
Slide 15: 2017 AAM Financial Targets
2017 AAM Financial Targets * 2017 Targets US SAAR ≈ 17.5M units Net Sales ≈ $4.1B - $4.2B Adjusted EBITDA* Margin ≈ 15.5% - 16.0% Adjusted Free Cash Flow* ≈ $175M - $200M Capital Expenditures ≈ 6.5% - 7% of sales Adjusted EBITDA margin and Adjusted free cash flow targets include the expected benefit
Slide 16: AAM's New Business Backlog
nweR AAN’S NEW BUSINESS BACKLOG
Slide 17: AAM's New and Incremental Business Backlog
AAM’s New and Incremental Business Backlog $875 MILLION: 2017-2019 Presented on a gross basis as of January 11, 2017 Approximately 60% relates to Non-GM business *
Slide 18: Backlog and Impact of GM's Sourcing Decision
Backlog and Impact of GM’s Sourcing Decision * New business awards exceed the impact of GM’s sourcing decision through the backlog period AAM’s gross new business backlog Estimated sales impact to AAM of GM’s Next-Gen full-size truck sourcing New business backlog, net of GM sourcing impact, for 2017
Slide 19: US SAAR and NA Production Assumptions
US SAAR and NA Production Assumptions * AAM assumes US SAAR to be approximately 17.5 million units over the next three yearsI.H.S / PwC Autofacts estimate an increase in North American production due to growing exportsAAM also assumes a moderate recovery in the commercial vehicle and industrial mark
Slide 20: North America Light Vehicle Production Mix
* 2010 2015 2020 North America Light Vehicle Production Mix Continued strength in pickup trucks/SUVs and increasing demand for crossover vehicles is favorable for AAM IHS Forecasts as of January 6, 2017
Slide 21: Technology Leadership
OnweR TECHNOLOGY LEADERSHIP
Slide 22: Technology Leadership
* Technology Leadership LIGHTWEIGHT AND EFFICIENTQUANTUM™ lightweight axles and drive unitsNew component manufacturing processesAdvanced materialsLube flow improvementsPower density GREEN & EFFICIENT SAFETY & PERFORMANCE CONNECTIVITY & ELECTRIFICATION MECHATRONICS & VEHICLE CONTROLSHybrid and full e
Slide 23: Powertrain Projections
Powertrain Projections * Global North America For at least the next decade, the internal combustion engine (ICE) is expected to be the main source of power for vehicles Greater China Europe 106M 18M 32M 22M ICE ICE ICE ICE IHS Production Forecasts as of January 6, 2017
Slide 24: EcoTrac Disconnecting AWD Systems
* EcoTrac® Disconnecting AWD Systems EcoTrac® Disconnecting PTU KEY ATTRIBUTES EcoTrac® - utilizes electronics and connectivity to improve Fuel Economy, Safety, and Performance
Slide 25: EcoTrac Sales Growth
* EcoTrac® Sales Growth $55M ≈$700M 54% CAGR from 2013 to 2019! Featured on three global programs by 2018 $265M ≈$475M
Slide 26: e-AAM Hybrid & Electric Drivelines
* e-AAM™ Hybrid & Electric Drivelines Power dense design allows for easy integration for multiple vehicle platformsModular solutions for passenger cars / CUVsTorque vectoring provides maximum traction and ride control Benefits:Improves fuel efficiency up to 30% and reduces CO2 emissionsImproved vehi
Slide 27: QUANTUM Technology
* QUANTUM™ Technology Industry first technology along with a revolutionary designSignificant mass reduction (up to 35%)In combination, additional efficiency and weight reduction can deliver 1% to 1.5% improved vehicle fuel economyScalable across multiple applications— without loss of performance or
Slide 28: AAM's Acquisition of MPG (Metaldyne Performance Group)
AAM’S ACQUISITION OF MPG (METALDYNE PERFORMANCE GROUP) Increased Global Scale │ Expanded Product Portfolio │ Accelerated Diversification │ Enhanced Cash Flow Generation
Slide 29: Compelling Strategic Acquisition
Driving growth and long-term value for all key stakeholders Compelling Strategic Acquisition *
Slide 30: Transaction Details
Transaction Details * Consideration For each share of MPG common stock, shareholders will receive $13.50 in cash and 0.5 of a share of AAM common stock Financial Impact Accretive to EPS and free cash flow* in the first full year of ownershipTargeted annual run-rate cost reduction synergies of betwee
Slide 31: MPG's Value Proposition
Expertise in metal forming processes and complex componentsLight-weighting and performance solutionsUnique products for higher growth powertrain applicationsSeamless vertical integration capabilities MPG’s Value Proposition * Powertrain75% Powertrain Content Global Automotive Production Powertrain C
Slide 32: Significantly Enhanced Scale and Profitability
Significantly Enhanced Scale and Profitability Scale(Net Sales $mm*) Profit(Adj. EBITDA Margin*) Cash Generation(Free Cash Flow $mm*) Significant increase in total served marketContent on 90% of light vehicles produced in North America and on all of the top 10 North American platformsAssuming succes
Slide 33: Combined Company Business Units
Combined Company Business Units * Rear and front axlesRear drive modulesPower transfer unitsDriveshaftsTransfer casesElectric drive units ≈ $3.7 billion DRIVELINE Ring / pinion gearsAxle / transmission shaftsDifferential gearsTransmission gearsSuspension components ≈ $1.5 billion METAL FORMING Trans
Slide 34: Comprehensive Solutions from Engine to Driveline
Comprehensive Solutions from Engine to Driveline * The integration of our product portfolios and technologies provides exciting opportunities to increase content-per-vehicle
Slide 35: Expanded Product Portfolio
Additional powertrain, forging and casting products build on AAM’s legacy driveline strengthExpands AAM’s reach into commercial vehicle and industrial equipment marketsAAM’s reliance on GM’s full-size truck and SUV segment is significantly reduced Expanded Product Portfolio *
Slide 36: Accelerated Customer Diversification
Accelerated Customer Diversification * * Top 15 Global OEMs determined based on total 2015 sales
Slide 37: Enhanced Geographic Footprint
Combined company grows to over 90 locations in 17 countriesDiversifies global customer base and end marketsAAM’s sales in Europe increase > 4xMPG’s focus on growth in Mexico and China complementary to AAM’s global growth strategyGlobal forging business presents external growth and vertical integrati
Slide 38: Strong Organic Sales Growth Expected
Strong Organic Sales Growth Expected * ≈ $7 billion
Slide 39: Integration Management Office (IMO)
Integration Management Office (IMO) * Successful Integration Steering CommitteeDavid C. Dauch – AAM Chairman & CEOGeorge Thanopoulos – MPG CEOMike Simonte – AAM PresidentDoug Grimm – MPG President & COO IMO LeadershipTim Bowes – AAM Senior Vice President, Strategy & Business DevelopmentPaul Suber –
Slide 40: Anticipated Synergies
Anticipated Synergies * Sources of Cost Savings Targeted Annual Profit Impact OverheadOptimize operating structureElimination of redundant public company costs ≈ $45 - $50 million PurchasingCombine global purchasing to leverage larger scaleDirect and indirect material opportunitiesInsourcing initiat
Slide 41: Combined Pro Forma Financial Targets
Combined Pro Forma Financial Targets * Pro Forma Targets 2017 – 2019 Sales CAGR* Targeting a range of 3% to 5% during the period 2017 – 2019 including the impact of launching over $1 billion of gross new and incremental business backlog Adj. EBITDA* margin Targeting a range of 17% to 18% of sales by
Slide 42: Expected Pro Forma EBITDA vs. Cash Payments
Expected Pro Forma EBITDA vs. Cash Payments * Revenue Growth and Synergy Realization Adjusted EBITDA* Targeting Adjusted EBITDA well above projected cash requirementsVariable cost structure allows for flexibility during periods of lower volumesPositioned to be cash breakeven in a 25% - 30% downturn
Slide 43: Pro Forma Debt Paydown and Net Leverage
* Note: Future performance reflects company estimates; (1) We expect to close in the first half of 2017 – this chart assumes a 3/31/17 close for illustrative purposes; (2) Reflects 2016E Adjusted EBITDA, excluding synergies, pro forma for the acquisition of Brillion by MPG; (3) Reflects combined rev
Slide 44: Enhanced Credit Profile
Enhanced Credit Profile * Stronger Financial Profile and Enhanced Cash Flow Generation Increased size and scaleCustomer and product diversificationEnhanced geographic footprintServed market and content per vehicle expansionStrong profit and free cash flow marginsIdentifiable cost synergies of ≈$100
Slide 45: Powerful Industrial Logic
Powerful Industrial Logic * Logistical and Value Stream Efficiencies Cross-selling Opportunities Cap-ex Avoidance / Capacity Optimization Balanced Tax Strategies Margin Capture through Vertical Integration Productivity and Cost Reductions Working Capital Improvements Numerous value creation opportun
Slide 46: Q&A
@ POWER” POWER Q&A
Slide 47: Appendix
APPENDIX *
Slide 48: Non-GAAP Financial Measures
In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) included within this presentation, we have provided certain information, which includes non-GAAP financial measures. Such information is reconciled to its closest GA
Slide 49: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *
Slide 50: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *
Slide 51: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *
Slide 52: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *
Slide 53: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures *
Slide 54: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA excludes the impact of restructuring and acquisition related-costs, debt refinancing and redemption costs and non-recurring items. We believe EBIT
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