Dauch Corporation · NYSE:DCH
Dauch — American Axle & Manufacturing Holdings — Deutsche Bank Global Auto Industry Conference 2018
37 slides from Dauch's conference presentation, Jan 17, 2018
Slide 1: Deutsche Bank Global Auto Industry Conference January 17, 2018
DEUTSCHE BANK GLOBAL AUTO INDUSTRY CONFERENCE JANUARY 17, 2018
Slide 2: Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these sta
Slide 3: Agenda
• Diversification and Value Creation • Technology Leadership • Financial Highlights and Targets • Appendix – Industry Data, 2018 Walkdowns and Non-GAAP Measures Agenda 3
Slide 4: About AAM
About AAM 4 AAM is a premier, global leader in design, engineering, validation and manufacturing of driveline, metal forming, powertrain and casting technologies for automotive, commercial and industrial markets AAM is Delivering POWER through world-class quality, technology leadership and operation
Slide 5: Driving Long-Term Shareholder Value
Driving Long-Term Shareholder Value Potential for Multiple Expansion and Share Appreciation SOLID FOUNDATIONAL BUSINESS Concentrated in the strongest vehicle segments of light trucks, SUVs and crossovers INNOVATIVE TECHNOLOGY LEADERSHIP Focused on electrification, lightweighting, fuel efficiency, an
Slide 6: Diversification and Value Creation
DIVERSIFICATION AND VALUE CREATION
Slide 7: Comprehensive Solutions from Engine to Driveline
Comprehensive Solutions from Engine to Driveline 7 DRIVELINE Rear and front axles Rear drive modules Power transfer units Driveshafts Transfer cases Electric drive units METAL FORMING Ring / pinion gears Axle / transmission shafts Differential gears Transmission gears CVT compo
Slide 8: MPG Acquisition Update – 2017 Results
MPG Acquisition Update – 2017 Results Acquisition Benefit FY 2017 Result Greater scale and financial profile Expected Pro forma sales of over $6.9 billion Accelerated business diversification Non-GM sales made up more than 50% of total sales Larger presence with commercial and industrial business
Slide 9: Synergy Achievement Progress from MPG Acquisition
Synergy Achievement Progress from MPG Acquisition 9 $38 $54 October 2017 July 2017 January 2018 $73 Synergy Achievement Gauge (Annual Run Rate in millions) $100 – $120 1Q 2019 Target Sources of Cost Savings Targeted Annual Profit Impact Overhead Optimize operating structure Elimination of redund
Slide 10: AAM's Gross New and Incremental Business Backlog
AAM’s Gross New and Incremental Business Backlog As of January 17, 2018 $1.5 BILLION: 2018-2020 Backlog by Global MarketBacklog by Vehicle Segment ≈80% of new business backlog relates to Non-GM business Passenger Cars 15% Crossover Vehicles 55% Full-size Light Truck and SUV 25% Commercial and Other
Slide 11: Continued Customer Diversification
Continued Customer Diversification GM 41% Ford 7% FCA 14% Other Top 15 Global OEMs 10% Other 28% AAM 3Q 2017 Sales By Customer AAM will continue to diversify its customer concentricity through the backlog period 11 GM 31% Ford 14% FCA 15% Other Top 15 Global OEMs 13% Other 27%
Slide 12: Backlog and Impact of GM's Sourcing Decision
Backlog and Impact of GM’s Sourcing Decision 12 Dollars in Millions 2018 2019 2020 $450 ($150) $600 ($100-$200)* $450 ($175) ($275) ≈$300 - 400 2018-2020 AAM’s gross new business backlog Estimated sales impact to AAM of GM’s Next-Gen full- size truck sourcing Net impact for the three year period of
Slide 13: Technology Leadership
TECHNOLOGY LEADERSHIP
Slide 14: Additional Electrification New Business Award
Additional Electrification New Business Award 14 AAM’s new business award is for a rear eDrive unit on a high performance, hybrid passenger car launching with a second e-AAM customer in 2020 AAM expects our e-AAM products to account for between $100 - $200 million of revenue by 2021 – with the poten
Slide 15: AAM's Capabilities for Hybrid and Electric Vehicles
P1 P2 P3 P4 - AAM Powertrain and Driveline Content: Components and Sub-systems - AAM Powertrain and Driveline Content: Components and Fully integrated systems AAM’s Capabilities for Hybrid and Electric Vehicles Launching eDrive in 2020 Launching eDrive in 2018 Content per vehicle opportunities > $2,
Slide 16: Electric Powertrain Integrator
Electric Powertrain Integrator 16 ICE Powertrain Components AAM’s AWD Electric Drive Units Engine Transmission Axle Each unit integrates an electric motor, gear box and differential to deliver power to the vehicle e-AAM products provide content- per-vehicle opportunity of over $2,500 Electric Dr
Slide 17: Competitive Advantage in Electric Powertrains
Competitive Advantage in Electric Powertrains Ability to engineer and integrate the electric powertrain into a single eDrive unit1 Continued commitment and investment in next generation eDrive innovations3 Global footprint and launch capabilities4 Product in the market place in 20185 Expertise in hi
Slide 18: QUANTUM Technology
QUANTUM™ Technology Industry first technology along with a revolutionary design Significant mass reduction (up to 35%) In combination, additional efficiency and weight reduction can deliver 1% to 1.5% improved vehicle fuel economy Scalable across multiple applications— without loss of perfor
Slide 19: AAM Financial Highlights and Targets
AAM FINANCIAL HIGHLIGHTS AND TARGETS
Slide 20: AAM's 2017 Financial Update
AAM’s 2017 Financial Update 2017 Full Year Estimates AAM’s Consolidated Sales ≈ $6.25 billion Adjusted EBITDA* ≈ $1.1 billion Adjusted Free Cash Flow* ≈ $330 – $340 million * For definitions of terms, please see the attached appendix We achieved record financial performance in 2017 . . . MPG’s pre-
Slide 21: AAM's 2018 Financial Targets
AAM’s 2018 Financial Targets 2018 Full Year Targets Sales ≈ $7 billion Adjusted EBITDA* Margin ≈ 17.5% - 18% Adjusted Free Cash Flow* ≈ 5% of sales * For definitions of terms, please see the attached appendix . . . and expect another record year in 2018! Based on the anticipated launch schedule of
Slide 22: Free Cash Flow Generation Has Just Begun
Free Cash Flow Generation Has Just Begun! We expect to generate cumulative adjusted free cash flow of over $1.5 billion in the 4 year period 2017 – 2020 AAM expects Adjusted EBITDA* margins to be in the range of 17% to 18% of sales through 2020 Starting in 2019, AAM should benefit from: Lowe
Slide 23: Capital Allocation Priorities
Capital Allocation Priorities Debt Paydown *For definitions of terms, please see the attached appendix Maintain Appropriate Liquidity* 2.98 2 June 30, 2017 December 31, 2017 Target Net Leverage Ratio* X X September 30, 2017 December 3 , 2019 target Plan to Delever • > $1.3 billion at December 31, 20
Slide 24: Well Positioned in a Potential Downside Scenario
Well Positioned in a Potential Downside Scenario 24 17.2 2017E Breakeven US SAAR (units in millions) Highly variable cost structure allows for flexibility during periods of lower volumes AAM has track record of reducing fixed costs through facility and labor efficiency initiatives during previou
Slide 25: Power Starts Here.
POWER _ STARTS HERE. 000
Slide 26: Appendix – Industry Data, 2018 Walkdowns and Non-GAAP Measures
APPENDIX – INDUSTRY DATA, 2018 WALKDOWNS AND NON-GAAP MEASURES
Slide 27: Production and Sales Volume Assumptions
2018 2019 - 2020 Global Light Vehicle Production ≈ 97M units ≈ 2% annual growth North America Light Vehicle Production ≈ 17.5M units Flat US SAAR 16.8 – 17M units 16.5 – 17M units Europe Light Vehicle Production ≈ 23M units Flat China Light Vehicle Production ≈ 28M units ≈ 4-5% annual growth North A
Slide 28: Powertrain Projections
Powertrain Projections North America 0 5 10 15 M ill ion s Greater China Europe 0 5 10 15 20 25 30 35 M ill ion s 0 5 10 15 20 25 M ill ion s 17M 32M 23MICE ICE ICE IHS Production Forecasts as of December 4, 2017 0 20 40 60 80 100 M ill ion s ICE Global 100M For at least the next decade, the interna
Slide 29: Projected LV Production Mix
Projected LV Production Mix IHS Forecasts as of December 4, 2017 Vehicle mix is trending favorably for AAM in all of our key markets 45% 38% 32% 55% 62% 68% 2012 2016 2020 North America 64% 56% 51% 36% 44% 49% 2012 2016 2020 Europe 58% 44% 39% 42% 56% 61% 2012 2016 2020 China 29
Slide 30: 2018 Sales Walkdown
2018 Sales Walkdown (in millions) $6,250 $6,975 $7,000 ≈$725 $450 ($150) ($175) ($100) AAM's Estimated 2017 Sales 1Q 2017 MPG Pro Forma 2017 Full Year Sales New Business Backlog Expiring Programs / Attrition GM Next-Gen Sourcing Impact Volume, Mix & Other AAM's 2018 Sales Target Strong backlog offse
Slide 31: 2018 Adjusted EBITDA Walkdown
2018 Adjusted EBITDA* Walkdown (in millions) 31 $1,100 $1,225 $1,243** ≈$125 ($25) $70 ($27) AAM's Estimated 2017 Adj. EBITDA 1Q 2017 MPG Adj. EBITDA 2017 Pro forma Volume & Mix Synergies Project Expense & Other AAM's 2018 Adj. EBITDA target * For definitions of terms, please see the attached append
Slide 32: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures In addition to the results reported in accordance with accounting principles generally accepted in the United States of America (GAAP) included within this presentation, we have provided certain information, which includes non-GAAP financial measures. Such informa
Slide 33: EBITDA and Adjusted EBITDA Reconciliation
Supplemental Data 2017 2016 2017 2016 Net income attributable to AAM 86.2$ 61.7$ 230.8$ 193.8$ Interest expense 57.5 23.2 139.9 70.2 Income tax expense 5.7 17.8 15.6 53.8 Depreciation and amortization 122.6 49.9 303.4 150.4 EBITDA 272.0$ 152.6$ 689.7$ 468.2$ Restructuring and acquisition-related cos
Slide 34: Free Cash Flow and Adjusted Free Cash Flow Reconciliation
Supplemental Data 2017 2016 2017 2016 Net cash provided by operating activities 207.5$ 107.5$ 420.7$ 291.0$ Purchases of property, plant and equipment, net of proceeds from sale of property, plant and equipment and government grants (139.9) (52.9) (277.0) (155.2) Free cash flow 67.6$ 54.6$ 143.7$ 13
Slide 35: EBITDA and Adjusted EBITDA for the Trailing Twelve Months
Supplemental Data Trailing Twelve Months Ended December 31, March 31, June 30, September 30, September 30, 2016 2017 2017 2017 2017 Net income attributable to AAM 46.9$ 78.4$ 66.2$ 86.2$ 277.7$ Interest expense 23.2 25.5 56.9 57.5 163.1 Income tax expense 4.5 7.5 2.4 5.7 20.1 Depreciation and amorti
Slide 36: Net Debt and Net Leverage Ratio
Supplemental Data Trailing Twelve Months Ended September 30, 2017 Current portion of long term debt 6.8$ Long-term debt, net 4,169.3 Total debt, net 4,176.1 Less: Cash and cash equivalents 549.6 Net debt at end of period 3,626.5$ Pro forma Adjusted EBITDA 1,217.1$ Net Leverage Ratio 2.98 Net Debt an
Slide 37: Definition of Non-GAAP Measures
Definition of Non-GAAP Measures EBITDA and Adjusted EBITDA We define EBITDA to be earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding the impact of restructuring and acquisition-related costs, debt refinancing and redemption c
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