Trimas Corporation · NASDAQ:TRS
Trimas — Investor Day (May 2015)
90 slides from Trimas's investor day presentation, May 21, 2015
Slide 1: Investor & Analyst Day Presentation
Investor & Analyst Day Presentation May 21, 2015 New York City
Slide 2: Welcome
Welcome Sherry Lauderback, VP, Investor Relations
Slide 3: Forward-Looking Statement
Forward-Looking Statement Forward-Looking Statement Any "forward-looking" statements contained herein, including those relating to market conditions or the Company's financial condition and results, expense reductions, liquidity expectations, business goals and sales growth, involve risks and uncert
Slide 4: Agenda
Agenda 9:00 a.m. Registration and Continental Breakfast 9:30 a.m. Welcome: Sherry Lauderback, VP, Investor Relations 9:35 a.m. Opening Remarks/The “New TriMas”: Dave Wathen, President & CEO 9:50 a.m. Packaging: David Pritchett, President 10:05 a.m. Energy: Kurt Allen, President 10:20 a.m. Q & A 10:3
Slide 5: Corporate Leadership in Attendance
Corporate Leadership in Attendance Sherry Lauderback VP, Investor Relations Joined TriMas in 2007 Josh Sherbin VP, General Counsel Joined TriMas in 2005 Paul Swart VP, Controller & CAO Joined TriMas in 2003 Colin Hindman VP, Human Resources Joined TriMas in 2002 5 Dave Wathen President & CEO Joined
Slide 6: Business Unit Leadership
Business Unit Leadership Tom Aepelbacher President, Aerospace Years of Service Industry – 1; TriMas – 12 Kurt Allen President, Energy Years of Service Industry – 31; TriMas – 18 David Pritchett President, Packaging Years of Service Industry – 19; TriMas – 19 Len Turner President, Arrow Years of Serv
Slide 7: Cequent Spin-Off Update
Cequent Spin-Off Update • Spin-off to result in two independent, publicly traded companies with increased strategic flexibility • Filed initial S-1 Registration Statement on March 31st • Capital structuring in process • Expect TriMas to receive a tax-free dividend for consideration • Transition serv
Slide 8: Opening Remarks
Opening Remarks Dave Wathen, President & CEO
Slide 9: Key Messages
Key Messages • Highly-engineered products serving defensible, focused markets • Positioned to take advantage of macro trends • Business units managed by experienced leaders • Cequent spin-off simplifies and improves TriMas • Key initiatives aligned with “New TriMas” vision and strategic priorities •
Slide 10: Business Overview
Business Overview (Dollars in millions; from continuing operations – All figures are for Full Year 2014) P AC K AG I N G Revenue: $337.7 Op. profit margin(1): 23.9% aa E N E R GY Revenue: $206.7 Op. profit margin(1): 3.1% a AE R O S P AC E Revenue: $121.5 Op. profit margin(1): 15.2% E N G I N EE R E
Slide 11: Common Attributes Across Businesses
Common Attributes Across Businesses • Proprietary, highly-engineered products • Focused markets with leading market positions • Strong brand names • Well-established customer relationships (B2B) • Barriers to entry include intellectual property and long-term customer contracts • Opportunities for gr
Slide 12: Diversified Business and Customers
Packaging 38% Energy 23% Aerospace 14% Engineered Components 25% By Segment U.S. (domestic) 75% U.S. (export) 11% Europe 8% Asia Pacific 3% Other Americas 3% By Geography Diversified Business and Customers 2014 Revenue Breakdown Broad Blue-Chip Customer Base Across End Markets Geographic diversifica
Slide 13: The "New TriMas"
The “New TriMas” Dave Wathen, President & CEO
Slide 14: Global Macroeconomic Perspectives
May-14 Jul-14 Sep-14 Dec-14 Feb-15 May-15 $0.1590 $0.1603 $0.1615 $0.1628 $0.1640 2.2% 2.4% 2.5% 2.5% 2.2% 2013A 2014A 2015E 2016E 2017E Global Macroeconomic Perspectives Source: IMF, U.S. Federal Reserve and FactSet as of 5/1/2015. Selected Real GDP Data Key Considerations • Growth outlook improvin
Slide 15: Global Macroeconomic Perspectives (cont.)
Global Macroeconomic Perspectives (cont.) Source: IHS, EuroMonitor, Airline Monitor (Feb 2015) and FactSet as of 5/1/2015. Note: Non-durable goods consumer expenditure converted to US$ using spot exchange rate for INR and CNY. (1) Bloomberg, Baker Hughes website, Wall Street research. Horizontal rig
Slide 16: Longer-Term Market Trends
Longer-Term Market Trends • Growing global middle class at 4%+ CAGR with India and China leading the way • Record aircraft backlogs with delivery growth of more than 7% through 2018 – ongoing conversion to composites • Environmentally friendly packaging and dispensing solutions – new innovations foc
Slide 17: Vision and Strategic Priorities
Vision and Strategic Priorities VISION To be a trusted global leader in delivering innovative, engineered product solutions to our customers with superior quality, speed and value. 17 Strategies in place to drive increased shareholder value and returns. Be a Workplace of Choice for Great People Driv
Slide 18: Strategic Priorities: Drive Profitable Growth
Strategic Priorities 18 Increased focus on margin and return on growth initiatives. Drive Profitable Growth • Invest in higher-margin, higher-return products and end markets • Collaborate with customers to develop value-added, innovative solutions • Protect and increase market share through barriers
Slide 19: Strategic Priorities: Enhance Margins
Strategic Priorities 19 Applying all tools and tactics to drive margin improvement. Enhance Margins • Grow higher-margin businesses faster, while exiting lower-margin products and markets • Optimize flexible and lower-cost footprint • Leverage and drive synergies from acquisitions • Implement Lean a
Slide 20: Strategic Priorities: Optimize Resource and Capital Allocations
Strategic Priorities 20 Disciplined capital and resource deployment. Optimize Resource and Capital Allocations • Deploy resources and capital based on highest expected risk-adjusted returns • Leverage balance sheet and capital structure to enhance total shareholder returns • Balance organic and acqu
Slide 21: Strategic Priorities: Be a Workplace of Choice
Strategic Priorities 21 Our most important asset is our people. Be a Workplace of Choice for Great People • Attract, develop and retain the best talent • Recognize and reward employees to drive the desired performance • Communicate effectively throughout the organization • Foster a culture of integr
Slide 22: Strategic Takeaways
Strategic Takeaways • Establishing metrics for “New TriMas” for growth, profitability and returns • Businesses have profitable growth plans for product and geographic expansion • Each business has achievable margin improvement plans through cost-out, productivity, business mix and Lean initiatives •
Slide 23: Packaging
Packaging David Pritchett, President
Slide 24: Packaging Overview
Packaging Overview • Products designed to enhance customers’ ability to store, transport, process and dispense • Diverse products and customer base • Key markets include industrial, food and beverage, health and beauty, and home care • Unique solutions focused on solving customer needs and consumer
Slide 25: Packaging Overview: Geography, Product, End Market
Approximate 2014 Net Sales(1): (1) Based on management estimates. Packaging Overview • Globalize product offering • Leverage global customer relationships • Focus on geographies with increased industrialism and consumerism Geography • Acquisitions of Arminak and Lion Holdings significantly increased
Slide 26: Packaging Key Initiatives
Packaging Key Initiatives 26 1. Reorganize globally to end market focus 2. Develop new products 3. Optimize global footprint
Slide 27: Reorganize globally to end market focus
27 1. Reorganize globally to end market focus Reorganizing by market and rebranding drives top-line growth – all customers, all products and all regions. Packaging Key Initiatives Verticals: Shift from products to markets • Bring breadth of product portfolio to customers and focus on unique solution
Slide 28: Reorganize globally: project pipeline
28 1. Reorganize globally to end market focus Packaging Key Initiatives A strong pipeline to profitable growth in each market. Convert Current Projects • Each vertical has a strong pipeline of current and potential business opportunities • Future growth not relying on only a few opportunities • Divi
Slide 29: Develop new products
Packaging Key Initiatives 29 2. Develop new products Continue to differentiate and drive growth through solving customer problems with intellectual property. People Tools Process Pipeline Flawless Launch • Increase global new product development staffing • Collaborate with customers to develop new s
Slide 30: Globalizing innovation capability
Packaging Key Initiatives 30 2. Develop new products Globalizing innovation capability – local to markets around the world. • Asia • United Kingdom • Americas • Product Lifecycle Management • In-house stereolithography (components and tooling) • Value engineering • Common processes • Common lab equi
Slide 31: Optimize global footprint
Packaging Key Initiatives 31 3. Optimize global footprint Working with global customers to provide unique product solutions – follow customers in growing markets.
Slide 32: Leverage flexible manufacturing advantage
Packaging Key Initiatives 32 Leverage flexible manufacturing advantage around the world. 3. Optimize global footprint
Slide 33: Optimize global supply chain
Packaging Key Initiatives 33 Optimize global supply chain – leverage current assets, add new capacity when required and optimize distribution. . 3. Optimize global footprint Leverage Current Capacity Manage the Global Footprint Optimize Logistics & Distribution Proactive Supplier Management • Update
Slide 34: Building world-class global manufacturing capability
Packaging Key Initiatives 34 3. Optimize global footprint Building world-class capability and global manufacturing flexibility – upgrading and expanding our facilities to create a competitive advantage and support growth. y . • Support key customer opportunities in higher growth regions • Drive oper
Slide 35: Packaging Takeaways
Packaging Takeaways 35 Drive consistent top-line growth, while maintaining strong margins. Be a Workplace of Choice for Great People Drive Profitable Growth Enhance Margins Optimize Resource and Capital Allocations • Pursue growing end markets • Reposition to a market focus to capture additional opp
Slide 36: Energy
Energy Kurt Allen, President
Slide 37: Energy Overview
Energy Overview • Provider of gaskets and bolts for use in refineries and petrochemical plants • Unique global “go to market” model includes both gaskets and bolts, manufacturing and distribution, and standards and specials • Long-term contracts with major customers • Recent delays in scheduled refi
Slide 38: Energy Overview: Geography, Product, End Market
Approximate 2014 Net Sales(1): (1) Based on management estimates. Energy Overview • Market leader in North America • Global branches located close to customers’ facilities Geography North America Europe Asia Pacific South America Other • Manufacturer of both standard and specialty gaskets and bolts
Slide 39: Energy Key Initiatives
Energy Key Initiatives 39 1. Improve operational efficiency at all locations 2. Optimize global footprint 3. Increase sales of higher margin products
Slide 40: Improve operational efficiency at all locations
• Recently augmented and aligned Lamons operational team globally • Accelerate implementation of the TriMas Operating System (TOS) at all locations – Includes Kaizen activities, value stream mapping, standardization, root cause analysis, etc. • Implement SIOP (Sales, Inventory and Operating Plan) pr
Slide 41: Enhanced vertical integration efficiency
41 1. Improve operational efficiency at all locations Enhanced vertical integration efficiency will improve margins. Sheet Jointing Leverage prior acquisitions and product development to drive efficient vertical integration • Acquired Basrur in India in 2013 • Moved to larger, more efficient facilit
Slide 42: Optimize global footprint
• Shift levels of Houston production to Mexico – Mexico operation in early stages – Relieves Houston of longer lead items – Lowers Houston operational costs • Currently moving more product types to lower cost countries • Consolidate less profitable operations • Establish Lamons UK Wolverhampton loca
Slide 43: Continued optimization of global footprint
43 Hub Branch 2. Optimize global footprint Continued optimization of global footprint to improve margins. Energy Key Initiatives
Slide 44: Increase sales of higher margin products
• Focus on engineered and specialty products • Differentiate through customer education of unidentified needs – increasing customer plant efficiencies • Expansion plans include: – Implementing Regional Engineering Product Managers – Training programs for all sales people – Developing pipeline of new
Slide 45: Increase sales of higher margin products: new products
• Grow subsea fastener market share in Europe and U.S. with API20E certification • Gaskets for critical applications (HF acid, heat exchangers, offshore, corrosion, isolation, critical applications) • Newer products: – WRI-LP Gaskets – Inhibitor Gaskets – IsoTek Gaskets™ – Intelligent Bolts – CorruK
Slide 46: Energy Takeaways
Energy Takeaways 46 Plans in place to improve business to historical levels. Be a Workplace of Choice for Great People Drive Profitable Growth Enhance Margins Optimize Resource and Capital Allocations • Increase revenue at newer branches to leverage costs • Develop and increase sales of new products
Slide 47: Question and Answers
SS TriMas Question and Answers
Slide 48: Aerospace
Aerospace Tom Aepelbacher, President
Slide 49: Aerospace Overview
Aerospace Overview • Provider of highly-engineered machined components and mechanical fasteners for temporary and permanent applications in fixed and rotary wing aircraft • Expanded aerospace fastener product lines to increase content and applications per aircraft • Positive end market trends includ
Slide 50: Aerospace Overview: Channel, Business, Product
Approximate 2014 Net Sales(1): (1) Adjusted for a full-year of Allfast Fastening Systems and based on management estimates. Aerospace Overview • Aftermarket is served primarily through distribution channel • Current distribution channel volatility caused by OE supply chain changes and industry conso
Slide 51: Aerospace Key Initiatives
Aerospace Key Initiatives 51 1. Launch and leverage one aerospace platform 2. Further develop new products and expand product lines 3. Improve operational efficiency at all locations
Slide 52: Launch and leverage aerospace platform
• Created new organizational structure leveraging best of all four companies – a single aerospace platform retaining the strong brands • Hired new sales and operational leads across platform • One salesforce to the customer – integrated selling process makes businesses more important to large custom
Slide 53: Position TriMas Aerospace as supplier of choice
53 Complexity and Price Industry Volume Higher Higher Lower Lower Composi-Lok Rotary Blind Bolts OSI Bolts Solid Rivets Blind Rivets Blind Bolts Temporary Fasteners Standards 12-Point Fasteners PMA Fasteners 1. Launch and leverage one aerospace platform Position TriMas Aerospace as the aerospace fas
Slide 54: Develop new products and expand product lines
54 Significant opportunity to grow within related product sets. Aerospace Key Initiatives 2. Further develop new products and expand product lines Product Category Market Size(1) Market Share(1) Opportunity Collars (Monogram) $190 million 3% +++ Solid Rivets (Allfast) $75 million 50% ++ Blind Rivets
Slide 55: Collaborate with customers to expand products
• Upgrade new product innovation as core competency • Develop and protect intellectual property • Complete development of new blind bolt for future launches • Continue to develop new products for composite aircraft assembly • Qualify standard hardware at OEMs • Obtain qualifications on all collar pr
Slide 56: Improve operational efficiency at all locations
• New operational leadership in place • Leverage the manufacturing expertise of the Allfast team, including prior owner • Increase sales at Mac Fasteners and Martinic to improve efficiency and margins • Continue progress of operational improvements at Monogram • Insource key manufacturing processes
Slide 57: Implement TriMas Operating System
• Implement the TriMas Operating System (TOS) at all locations • Attack all drivers causing on-time-delivery (OTD) issues • Implement strategic manufacturing center highlighting all customer requirements • Revamp SIOP (Sales, Inventory and Operating Plan) process • Institute capacity planning (daily
Slide 58: Aerospace Takeaways
Aerospace Takeaways 58 Combination of consistent growth and margin expansion will create value. Be a Workplace of Choice for Great People Drive Profitable Growth Enhance Margins Optimize Resource and Capital Allocations Strategic Priorities Mid-to-high single- digit growth, complemented by acquisiti
Slide 59: Engineered Components
Engineered Components Dave Wathen, President & CEO
Slide 60: Engineered Components Overview
Engineered Components Overview 60 25% By Revenue 24% By Operating Profit(2) $73 $113 $175 $200 $185 $221 2009 2010 2011 2012 2013 2014 Net Sales 6.0% 11.2% 15.8% 14.0% 10.5% ($ in millions) Net Sales & Operating Profit Margins(2) 15.4% Maintain profitability at Norris Cylinder, while mitigating cycl
Slide 61: Engineered Components Takeaways
Engineered Components Takeaways 61 Generate high return on capital and maintain profitability levels. Be a Workplace of Choice for Great People Drive Profitable Growth Enhance Margins Optimize Resource and Capital Allocations • Expand product portfolio • Protect domestic market while looking opportu
Slide 62: Engineered Components – Arrow Engine
Engineered Components – Arrow Engine Len Turner, President
Slide 63: Arrow Engine Overview
Engines Parts Gas Products Compression Chemical Pumps Approximate 2014 Net Sales(1): (1) Based on management estimates. Arrow Engine Overview • Directly impacted by reductions in drilling activity driven by decline in oil prices • Focus on cost and maximizing resources in the short term until market
Slide 64: Arrow Engine Key Initiatives
Arrow Engine Key Initiatives • Continue to lower costs and maximize resources until end market recovery • Variablize the cost structure to respond quickly to end market changes and enhance flexibility • Drive low cost sourcing efforts, productivity and Lean initiatives Current focus is on maximizing
Slide 65: Engineered Components – Norris Cylinder
Engineered Components – Norris Cylinder Jerry Van Auken, President
Slide 66: Norris Cylinder Overview
Approximate 2014 Net Sales(1): (1) Based on management estimates. Norris Cylinder Overview • Only major steel cylinder manufacturer in North America • Won anti-dumping suit in 2012 • Export sales impacted due to currency rate volatility Geography • Asset acquisitions in 2010 and 2013 – increased pro
Slide 67: Norris Cylinder Key Initiatives
Norris Cylinder Key Initiatives • Continue to deploy previously acquired assets in Huntsville and Longview • Increase capacity for both large and small high pressure cylinders Leveraging acquisitions, product development and Lean initiatives to drive future growth in sales and profitability. 67 1. I
Slide 68: TriMas Value Proposition
TriMas Value Proposition Bob Zalupski, Chief Financial Officer
Slide 69: Financial Strategies
Financial Strategies Prioritize capital projects based on highest risk-adjusted return Leverage synergies from prior acquisitions Align financial and operating metrics Acquire and integrate value-accretive businesses Implement revised capital allocation strategy Shareholder Return Enhance Operating
Slide 70: Key Metrics versus Peers
Key Metrics versus Peers • Revenue growth higher • Operating margins lagging • Returns higher historically – Allfast acquisition significantly lowers current level • Free cash flow lower given significant growth investments • Leverage higher as FCF used for organic investments • Multiple significant
Slide 71: Financial Targets
Financial Targets – 3 Year Horizon Grow Packaging and Aerospace sales 2x other businesses; improve Aerospace & Energy margins to historical levels. Segment Target Revenue Growth Target Operating Profit Margin Packaging • Mid single-digit organic growth, complemented by acquisitions 22% – 24% Energy
Slide 72: Bridging Segment Profitability: Packaging
Bridging Segment Profitability • Organic growth plus complementary acquisition(s) • Productivity > inflation • Margin holds with significant investment in R&D and capacity • Price and commodity assumed neutral Significant growth targeted for our most profitable platforms. 72 2014 Operating Profit (1
Slide 73: Bridging Segment Profitability: Aerospace
Bridging Segment Profitability 73 • Highest profit $ growth segment • Organic growth complemented by acquisition(s) • Significant margin expansion with operating efficiencies and productivity • Price and commodity assumed neutral Significant growth targeted for our most profitable platforms. $0.41 2
Slide 74: Bridging Segment Profitability: Energy
• Operating efficiencies and restructuring savings drive margin expansion • Sale of higher-margin products improves mix • Productivity expected to offset inflation 74 2014 Operating Profit (1) Organic Operating efficiencies Restructuring/footprint savings Productivity Inflation 2018 Target Operating
Slide 75: Bridging Segment Profitability: Engineered Components
Bridging Segment Profitability 75 • Consistent margin profile – Arrow returns to 2014 levels • Growth in cylinder business driven by increased capacity • Productivity > inflation 2014 Operating Profit (1) Organic Productivity Inflation 2018 Target Operating Profit (2) Engineered Components ~ 14-16%
Slide 76: Capital Allocation Strategy
Capital Allocation Strategy Available Cash (NOPAT – plus D&A) Growth Capital (Capex & working capital) Annual dividend Debt service (principal & interest) Remainder: Additional debt repayment Bolt-on acquisitions Share repurchase 1 2 3 4 • Consistent hurdle criteria to evaluate deployment of capital
Slide 77: M&A Strategy
M&A Strategy 77 • Target larger, more established companies • Focus on Packaging and Aerospace • Consider opportunistic and value-accretive acquisitions in other segments • Apply consistent return and margin metrics • Hurdle rates set to be accretive • ROIC / RONTA / Operating Profit / Cash Flow • D
Slide 78: Target Sales and Profit Growth
Actual 2014 Target 2018 Net Sales Packaging Aerospace Energy Engineered Components Acquisitions Target Sales and Profit Growth • 3-5% organic growth, complemented by acquisitions • Focused on higher-margin, higher- return products and end markets • Aerospace and Energy margin expansion drives growth
Slide 79: Historical & Target Leverage
Historical & Target Leverage 79 • Leverage increased in 2014 due to funding $360M Allfast acquisition • Significant cash generation supports capital allocation strategy • Ability to fund • Investment growth • M&A • Shareholder returns • Achieve target leverage of 1.5 – 2.0x Expect sufficient cash fl
Slide 80: Future Performance Aligns with Peers
Future Performance Aligns with Peers • Revenue growth expected to be near historical peer levels after consideration of complementary acquisitions • Operating margin at or above historical peer levels • Returns and FCF improving closer to peer levels • Leverage at peer levels • Ability to fund divid
Slide 81: Summary
Summary Dave Wathen, President and CEO
Slide 82: Incentive System Alignment
Incentive System Alignment 82 Short-Term Incentive Compensation Plan Matrix Stock Ownership Guidelines Role Multiple of Base Salary President & CEO 5x CFO; General Counsel 3x Other Execs (as defined) 2x Metric Corporate Office Business Units Sales X X Gross Profit X Operating Profit X X Cash Flow X
Slide 83: Key Messages
Key Messages • Highly-engineered products serving defensible, focused markets • Positioned to take advantage of several macro trends • Business units managed by experienced leaders with industry expertise • Cequent spin-off simplifies and improves TriMas • Key initiatives aligned with “New TriMas” v
Slide 84: Question and Answers
SS TriMas Question and Answers
Slide 85: Closing Remarks
Closing Remarks Dave Wathen, President and CEO
Slide 86: Appendix
SS TriMas Appendix
Slide 87: Company and Business Segment Financial Information
Company and Business Segment Financial Information (Unaudited, dollars in thousands) 87 Twelve months ended December 31, 2009 2010 2011 2012 2013 2014 Packaging Net sales..................................................................................................................................
Slide 88: Company and Business Segment Financial Information (cont.)
88 Company and Business Segment Financial Information (cont.) Twelve months ended December 31, 2009 2010 2011 2012 2013 2014 Cequent APEA Net sales................................................................................................................................................ $ 63,930
Slide 89: Peer Capital Deployment Comparison
Peer Capital Deployment Comparison A sp ir at io na l / P re m ie r- in du st ri al s M id -c ap in du st ri al s M&A + Div + TSR% Share Mkt. cap S&P 5-year cumulative average Repurchase Cequent Dividend payout repurchase ($bn) Ratings capital allocation as % mcap (1) 5-year 3-year LTM spin(2) Yield
Slide 90: Key Metrics
Key Metrics 90 Metric Definition Hurdle Return on Invested Capital NOPAT (excluding amortization) divided by Long-term debt + equity – cash > WACC Return on Net Tangible Assets NOPAT (excluding amortization) divided by Total assets less goodwill & intangibles > 25% Operating Profit Margin Operating