Commercial Vehicle Group, Inc. · NASDAQ:CVGI
Commercial Vehicle — Investor Day (September 2014)
74 slides from Commercial Vehicle's investor day presentation, Sep 17, 2014
Slide 1: Forward Looking Statement
Exhibit 99.1 FORWARD LOOKING STATEMENT 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 press re
Slide 2: Agenda
AGENDA Wednesday, September 17, 2014 8:00 to 9:00 AM BREAKFAST 9:00 to 9:20 AM STRATEGY 9:20 to 9:40 AM FINANCIAL 9:40 to 9:50 AM Q&A 9:50 to 10:05 AM GLOBAL BUS & TRUCK 10:05 to 10:20 AM GLOBAL CON | AG | MIL 10:20 to 10:30 AM BREAK 10:30 to 10:40 AM ASIA-PACIFIC 10:40 to 10:50 AM EUROPE, MIDDLE EA
Slide 3: Presenters and topics
raw © 4 STRATEGY zune @ | 9 FINANCIAL cae en ie ASIA-PACIFIC seme @) G EUROPE, MIDDLE EAST & AFRICA va warenee (QA 7 PRODUCT INNOVATION ssuoms fy § MARGIN ENHANCEMENT __ umes AML Q TALENT | CULTURE
Slide 4: Strategy
nh LAV ah STRATEGY
Slide 5: Our Background
• CVG was founded in 2000 as a privately-held company providing trim, wiper, mirror, and seating for medium and heavy duty trucks • IPO in 2004 • Over the past 14 years, CVG pursued growth largely through acquisition of companies providing commercial vehicle components, on and in the cab STRATEGY Ou
Slide 6: Our Executive Leadership Team
Our Executive Leadership Team STRATEGY
Slide 7: Our Global Footprint
Our Global Footprint STRATEGY
Slide 8: 2013 Sales
2013 Sales Product End-Market Customers Region STRATEGY
Slide 9: Our Opportunity is Significant
$5M $3.5B $5.6B $416M $176M $2.6B $1.2B $32M CVG has about 5% share of the addressable market – significant opportunity to drive profitable organic growth across our end markets and penetrate our addressable market with current products $3.5B $3.2B $5.6B Truck $5.0B Construction $2.6B $2.8B Bus $1.2
Slide 10: Our Focus is to Drive Profitable Organic Growth
Our Focus is to Drive Profitable Organic Growth • We intend to achieve sales and earnings targets commensurate with companies delivering top-quartile total shareholder returns • We will invest in products and capabilities that will strengthen our right-to-win with our core products in our end market
Slide 11: CVG 2020 Diversification: Sales Breakdown
67% 16% 17% 72% 16% 12% 7% 20% 21% 47% 20% 22% 4% 42% 24% Wire Harnesses CVG 2020 | Region | Product | End-Market Diversification Sales Breakdown Region Product End-Market 2020 67% 16% 17% 2013 72% 16% 12% NALA EMEA APAC 2020 2013 Seats Trim Structures Wipers 7% 10% 20% 21% 47% 20% 22% 7% 4% 42% STR
Slide 12: Regions, End-Markets and Products Focus
REGIONS NA EMEA APAC REGIONS END- MARKETS CORE PRODUCTS COMPLEMENTARY PRODUCTS NA Seats Trim Wire Harnesses Mirrors Office Seats Structures Wipers Truck X X Construction X X X Agriculture X X X Bus X X Aftermarket X X EMEA Truck X Construction X X Agriculture X X Bus X Aftermarket X APAC Truck X X C
Slide 13: Vision
VISION The preferred provider of innovative component systems to _ the commercial vehicle and equipment m ‘ow the core pret busmasson + + Selecrty grow nto new geographies Total parce Shareholder + Shennan or sles a tang epee ‘ ngagement Return o Clenn evelopment OPACC improvement INNOVATION INTEGRI
Slide 14: What You're Going To See
What You’re Going To See • A compilation of plans that we believe will deliver top-quartile EBITDA performance • A pure organic growth strategy Revenue and EBITDA growth driven by differentiated, customer focused product designs Sales capabilities that extend our reach and deepen our penetration acr
Slide 15: Financial
ief Financial Officer
Slide 16: Sales and Operating Income Margin
Sales and Operating Income Margin FINANCIAL Q1 Q2 Q3 Q4 Q1 Q2 Sales (millions) OI Margin 2014 2013 (0.2)% 1.1% 2.3% (1.8)% 2.1% 4.4% 4.2% 5% 4% 3% 1% 2% 0% (1)% (2)% (3)% 2.8% 3.3% See appendix for reconciliation of GAAP to non-GAAP financial measures – adjusted OIM Sales OIM Adjusted OIM
Slide 17: CVG 2020 – The Process
An operational and financial roadmap – by regions | end-markets | products - to guide resource allocation and other decision making to achieve our 2020 goals • A six month, bottom up process • Interviews of Directors, senior management and certain mid- level management gave rise to Imperatives An Im
Slide 18: CVG 2020 – The Process: PLM Imperatives
• PLM Imperatives – e.g., improve the core, grow share, new / adjacent markets, new geographies • Collection of about 60 PLM initiatives and associated financial modeling – sales, costs and investments – for the years 2015 to 2020 • Product portfolio map based on market opportunity and right to win
Slide 19: Top Quartile Total Shareholder Return
Stock Appreciation & Dividends EBITDA Growth Multiple Top Quartile Total Shareholder Return Correlation to ~13% EBITDA CAGR We intend to achieve sales and earnings targets commensurate with companies delivering top-quartile total shareholder returns Sample of Fortune companies for some part of the p
Slide 20: CVG 2020 Financial Objectives
Sales 2014 to 2020 EBITDA as may be adjusted from time-to-time for special items (such as asset impairments, restructuring, etc.) CVG 2020 Financial Objectives EBITDA Compound Annual Growth Rate 13% – 17% 6% – 8% • We serve cyclical industries • Many of our customers (the OEMs) have 2-3 year program
Slide 21: OPACC is our Measure
• Positive OPACC = Value Creation • Negative OPACC = Value Erosion • Higher profit without corresponding asset growth • Reduce assets without corresponding profit drop • Invest when project OPACC exceeds the ROC hurdle rate Operating Profit (EBIT) Less: Capital Charge x OPACC is our Measure Operatin
Slide 22: Managing Through the Cycle
Objective Managing Through the Cycle • Playbook for down and up cycles • Enhanced focus on shareholder value • Consistent execution lends to credibility • Act strategically and opportunistically What Does That Mean FINANCIAL
Slide 23: Capital Structure / Leverage
Senior Secured Notes Principal Balance $ 250 Interest 7.875% Due Apr 2019 Asset Based Credit Facility Commitment $ 40 Availability $ 37 Letters of Credit $ 3 Accordion Option $ 35 Agency Rating / Outlook Moodys B2 | Stable S&P B | Negative LTM 2013 Q2 2014 Cash $ 73 $ 70 Debt Net Debt $ 177 $ 180 EB
Slide 24: Slide 24
Slide 25: Global Truck & Bus Addressable Market
37% 54% 19% 21% 27% 42% 42% 45% 44% 38% 30% 28% 20% 35% 37% 33% 29% 19% 37% APAC NALA $ 1.2B 27% $ 5.6B EMEA Region EMEA NALA Seats 28% $0.8B Trim Structures APAC Wipers $ 3.3B 35% $2.4B 37% $0.3B 29% Product Addressable Market Truck Bus GLOBAL TRUCK & BUS • GTB addressable market is approximately $
Slide 26: Product Strategy
Seats Trim Product Strategy Aftermarket North America • Market shifting from soft to hard trim • Shape design and program management capabilities to shifting market • Invest in new equipment in the right places to shift with market • Seize opportunity in North America and India • Top two seat brands
Slide 27: Global Market Strategy
• High growth focus • Design to market expectations • Leverage global OEM relationships • Expand domestic OEM participation • Euro seat line expansion • Initial focus – mid size Truck OEMs • Develop bus and aftermarket business Global Market Strategy • Improve our market leading seat and trim positi
Slide 28: Operational Transformation
• Investments | Margin enhancement – Next Gen seat and trim programs quoted / won - SOP 2017 / 2018 – Proprietary headliner processing for current and next gen platforms - target launch 2015 – India infrastructure – Upgrade facilities, assembly cells, and seat validation assets • Capabilities | Syst
Slide 29: In Summary
• We are only 5% of the global addressable market • Focused growth efforts on Seating, Trim, and Aftermarket • Leveraging strength in North America with Global OEMs in emerging markets • Enhancing margins with new products and processes In Summary GLOBAL TRUCK & BUS
Slide 30: Global CON | AG | MIL
Slide 31: Addressable Market
Addressable Market • Addressable market is approximately $6.1B • Agricultural market of $3.5B • Two global product lines • Three regional product lines GLOBAL CON | AG | MIL APAC NALA EMEA Region Wire Harnesses $0.1B Product $2.1B $1.0B $1.5B $1.4B $2.6B $3.5B CON AG APAC NALA EMEA Seats Structures
Slide 32: Product Strategy
Seats Wire Harnesses Trim Seats Wire Harnesses Trim • Apply construction equipment know-how to agriculture equipment market • Replicate construction model for energy generation market • Expand into high-voltage cabling with new product offering • Expand into China • Apply North American truck know-h
Slide 33: Global Market Strategy
• Enhance construction equipment seat offering and grow market share • Penetrate the agriculture market – seating & wiring • Grow our construction equipment seat market share • Develop seats for agriculture market expectations • Establish a beach- head – wire harnesses Global Market Strategy • Stren
Slide 34: Operational Transformation
Operational Transformation • Investments / Margin enhancement • Standardized, smart production lines for built-in-quality • Capabilities / Systems – System upgrades – CVG Operating System, ERP improvements – Momentum in building out PLM organization • Footprint actions underway – Extended value stre
Slide 35: In Summary
In Summary • An approximately $6.1B addressable market in which we can credibly show right-to-win • A $3.6B agricultural playing field – With “familiar” right-to-win prospects for CVG – As we fill out our seats product line, we address this broader market • Logical opportunities exist for wire harne
Slide 36: Asia-Pacific
carernce @ 5 ASIA-PACIFIC
Slide 37: APAC Addressable Market
28% 15% 36% 20% 19% 17% 40% 22% 7% 47% 43% 77% 20% Ag Con Wipers Structures Wire Harnesses Trim Seats Bus Truck 28% 15% 36% 20% $ 2.4B $ 1.2B $ 0.7B $ 1.3B 1% 3% 2% 3% 19% 17% 40% 22% 7% 47% 43% 77% 20% Addressable Market APAC • Approximately a $5.6B addressable market opportunity • As with any good
Slide 38: Product Strategy
Seats Wire Harnesses Aftermarket Product Strategy • Establish joint venture or acquire wire harness business to accelerate growth and achieve economy of scale • Leverage OEM construction equipment seat relationships to penetrate the market • Develop truck seat market share • Penetrate the driver and
Slide 39: CVG Sales Playbook
Participation Closure Retention Recommendation Address customer key challenges Increase the closure rate Develop Customer Loyalty Leverage existing customer base Product Launch (awareness) Customer Care Program Referral Program Build brand and product awareness Brand Promotion (online, print) Market
Slide 40: In Summary
In Summary • We have a vast addressable market opportunity to take advantage of • Designing product that is in tune to the varying requirements on durability, valued features and price • Execution of a process driven CVG Sales Playbook will expand our ability to both grow and capture addressable mar
Slide 41: Europe, Middle East & Africa
ee @6 EUROPE, MIDDLE EAST & AFRICA
Slide 42: EMEA Region Addressable Market
16% 14% 19% 14% Ag Con EMEA Region Wipers Structures Wire Harnesses Trim Seating Bus Truck Addressable Market $0.2B $0.7B $1.2B $1.3B 52% 71% 16% 15% 1% 10% 5% 26% 26% 31% 46% 35% • Total addressable “white space” of $3.4B, over $1.3B of that in seating and wire harnesses • Grow seat business from s
Slide 43: Product Strategy
Seats Wire Harnesses Product Strategy • Build customer portfolio, especially with construction equipment OEMs • Further strengthen design capabilities as a service offering • Truck / bus seat market size is attractive – must meet European standards and take on entrenched competitors • Expand range o
Slide 44: Manufacturing Footprint
Manufacturing Footprint • Global demand patterns and our product and customer mix are shifting and will continue to do so • Ensuring we have the right global manufacturing and distribution footprint is vital to our overall success • We continually evaluate our footprint to ensure that it best allows
Slide 45: In Summary
In Summary • EMEA holds a large amount of “white space” for CVG, creating an opportunity for a renewed phase of growth in the region • We will focus our resources on the most attractive growth opportunities: – Seats for trucks / buses, agriculture and construction equipment – Wire harnesses for cons
Slide 46: Product Innovation
wwveaowce Bt 7 PRODUCT INNOVATION
Slide 47: Product Innovation Strategy
Existing Customers PRODUCT INNOVATION Strategy Existing Customers Addressable Market Available Market Penetrate existing customers Penetrate the addressable market Expand the addressable market into available market
Slide 48: Product Innovation at Work: The Sentinel Seat – Existing Customers
Product Innovation at Work | The Sentinel Seat | Penetrate Existing Customers Target: Light Construction & Agriculture Markets Value proposition • Customer branding for the cab • Upgraded seat / less weight and cost • New features – Operator position sensor – Split trim levels to cover price points
Slide 49: Product Innovation at Work: The Sentinel Seat – Expand Market
Product Innovation at Work | The Sentinel Seat | Expand the Addressable Market Light Construction & Agriculture Available Markets PRODUCT INNOVATION Traditional Suspension Seats – Low Coverage Currently in Market Sentinel Seat Tier 1 | 2 Available 2014 Sentinel Seat Tier 3 | 4 Available Late 2015
Slide 50: Margin Enhancement
usimmmrs J. 9 MARGIN ENHANCEMENT
Slide 51: Global Engineering
MARGIN ENHANCEMENT Global Engineering Enhanced Processes and Discipline Through Centrally Led Engineering
Slide 52: Global Purchasing & Logistics
MARGIN ENHANCEMENT Global Purchasing & Logistics Transition from Tactical / Transactional to Strategic
Slide 53: Operational Excellence
• Commercial Vehicle Group Operating System (CVGOS) – Team based activities focused on the elimination of waste – Increase plant-wide productivity in operations – Reduce work-in-process (WIP) inventory • Sample CVGOS model cell results : – Average productivity improvement of 30% – Floor space reduct
Slide 54: Margin Enhancement Programs: In Summary
Margin Enhancement Programs In Summary MARGIN ENHANCEMENT • Design to value • Modularity & parts rationalization • Supplier consolidation & cost targets • Global logistics strategy & third party logistics consolidation • CVGOS expansion & Lean 6 Sigma
Slide 55: Talent | Culture
Slide 56: CVG 2020 Core Values
• Leadership behavior defines the characteristics and actions that support our Core Values – Help guide our decisions and interactions – Make the core values more meaningful and actionable • Values Oriented Leaders Drive & Deliver Better Results! – Set the Tone from the Top • Involve Everyone – Inco
Slide 57: Talent | Culture
TALENT | CULTURE • Early focus on roles critical to the success of CVG 2020 – Product line management, engineering, manufacturing management • Build a sustainable talent pipeline • Provide training & development for current & future roles • Utilize best practice succession planning tools – Build ben
Slide 58: Wrap-Up
WRAP-UP
Slide 59: Revenue Roadmap by Region, Product, End-Market
APAC NALA EMEA Seats Trim Structures Wire Harnesses Other Wipers $1.2 – $1.3B WRAP-UP Revenue Roadmap by Region | Product | End-Market
Slide 60: What You Can Expect
61 What You Can Expect • Top-quartile total shareholder return • Trusted strategic supply partner with major OEMs in all key industries and best in class competitor • World class product design and introduction capabilities • Manufacturing and assembly facilities that set the industry standard for q
Slide 61: Questions and Discussion
QUESTIONS AND DISCUSSION
Slide 62: Appendix
APPENDIX
Slide 63: Richard P. Lavin biography
Richard P. “Rich” Lavin was appointed President and Chief Executive Officer of Commercial Vehicle Group (CVG) effective May 28, 2013. He also serves as a member of CVG’s board of directors. Rich comes to CVG with 28 years of global experience with Caterpillar Inc., where he most recently served as G
Slide 64: C. Timothy Trenary biography
C. Timothy “Tim” Trenary joined CVG in October 2013 as Executive Vice President and Chief Financial Officer with responsibility for Finance, Accounting, Planning & Analysis, Internal Audit and Shared Services. Tim brings years of finance, accounting and operations experience to CVG. Prior to joining
Slide 65: Patrick Miller biography
Patrick Miller Division President, Global Truck and Bus Patrick Miller joined CVG in October, 2005 and currently serves as the President of Global Truck & Bus. Prior to that, he served as the Vice President and General Manager of Structures, Vice President of Operations, Senior Vice President of Sal
Slide 66: Kevin Frailey biography
Kevin R.L. Frailey joined CVG in February, 2007 and currently serves as the President of Global Construction, Agriculture & Military. Prior to that, he served as President and General Manager of Global Electrical Systems. His earlier leadership assignments with CVG included responsibility for Busine
Slide 67: Ulf Lindqwister biography
Ulf Lindqwister Chief Administrative Officer Ulf Lindqwister joined CVG in August, 2014 in the capacity of Chief Administrative Officer. His portfolio of responsibilities includes Global IT, Global Engineering, Global Supply Chain Management, Operational Excellence, Mergers & Acquisitions, Corporate
Slide 68: Laura Macias biography
Laura Macias Chief Human Resource / Public Affairs Officer Laura L. Macias joined CVG in August, 2008 as the Vice President of Corporate Human Resources. Her current responsibilities as Chief Human Resources Officer include global human resources, corporate communications and public affairs. Before
Slide 69: Kevin Lane biography
Kevin Lane Managing Director, EMEA Kevin joined CVG in April, 2014 in the capacity of Managing Director, European, Middle East and African markets . He is based in Zurich, with responsibility for our manufacturing facilities in the UK, Czech Republic, Belgium, and the Ukraine and our sales organizat
Slide 70: Geoff Perich biography
Geoff Perich Managing Director, Asia Pacific Geoff Perich joined CVG in August, 2013 in the capacity of Managing Director for the Asia- Pacific markets. He is based in Shanghai with responsibility for our manufacturing facilities and sales organization in China, India, and Australia. Before joining
Slide 71: Terry Hammett biography
Terry joined CVG in October, 2004 and currently serves in the capacity of Vice President of Tax and Treasury, which includes responsibility for Investor Relations. Prior to that, Mr. Hammett served as the Corporate Director of Finance. Terry has 15 years of prior finance leadership experience at var
Slide 72: John Wehrenberg biography
John Wehrenberg Global Product Manager John Wehrenberg joined CVG in January, 2014 and currently serves as the Vice President of Seat Product Line Management for the Construction, Agriculture, and Military business unit. Before joining CVG, John was a Vice President at Nelson Global Products with re
Slide 73: Reconciliation of GAAP to Non-GAAP Financial Measures
Q1 2014 Q2 2014 RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES Adjusted Operating Income Reconciliation Q1 2013 Q2 2013 Q3 2013 Q4 2013 $ (000's) Net Sales 177,822 198,909 187,942 183,045 198,071 215,996 Cost of Sales 159,737 176,035 169,852 162,364 173,767 187,811 Gross Profit 18,085 22,874
Slide 74: EBITDA Reconciliation
EBITDA Reconciliation RECONCILIATION OF GAAP TO NON- GAAP FINANCIAL MEASURES
Commercial Vehicle Group — Investor Day (September 2014) on 6ix