2018 q1 tooling barometer - oesa.org

1 Copyright © 2018 Harbour Results, Inc

2018 Q1 Tooling BarometerMarch 28, 2018


Purpose and MethodologyHarbour Results, Inc. regularly conducts market research within the tooling industry to examine key trends, benchmarks, and forecast indicators. Over 100 tooling manufacturers and automation suppliers in 8 countries participated in this study, along with 60 production companies. The HRI team carefully analyzed the data from this study and reached out to companies when questions arose. In appreciation of your facility taking the time to be involved in this report, HRI is sending out this output for personal use. If any questions, comments, or suggestions arise when reading the following content, please reach out to the following individuals:

Kayla ZurawskiHarbour IQ Analyst

[email protected]

Laurie HarbourHRI President and CEO

[email protected]


95%90% 90%

75%70% 73%

81% 80% 81%

40%

50%

60%

70%

80%

90%

100%

110%

120%

Design Machining Assembly

Mold Builder Capacity Utilization

High/Low Quartile Average

Methodology - Quartile Example

50% of the data points are between the top and low quartile points. The remaining 50% split above and below the points – 25% fall above the top quartile and 25% fall

below the bottom quartile data point.

The average can be closer to one of the quartile end points. In this example the average is closer to the lower quartile as more data points

in the bottom 25% are more closely clustered to a lower percentage.


Respondent Demographics: 102 Shops

Region % of Total

United States 56%

Canada 37%

Europe 5%

Asia 2%

Location

Questions: What was your annual revenue for 2017? What is your Facility’s Primary Focus? Please identify your company’s geographic location.

Mold Builder69%

Die Builder18%

Other14%

Shop Type

Other Contains: Equipment Suppliers - Automation Equipment Suppliers - Gauge/Fixture

4%

19%

25%23%

16%14%

0%

5%

10%

15%

20%

25%

30%

Revenue Range (USD)


Sentiment Increases, Still Down 5 Points from Peak

Question: Over the next three months, what is the general outlook for your facility? Shop Type: Mold and Die Builders

Sentiment % of Respondents

% Change from Q3 2017

Very Pessimistic 0% -1%

Pessimistic 2% -2%

Neutral 18% -1%

Optimistic 57% +1%

Very Optimistic 23% +3%

The first quarter saw a 1 point increase in overall sentiment and remains overwhelmingly positive.

68%73%

79% 79%85%

80% 78% 79% 80%

40%

50%

60%

70%

80%

90%

100%

2018 Tooling Sentiment Index

Sentiment Positive Threshold

Mold Builder: 80%Die Builder: 79%


17.9%

12.2%

13.9%

9.3%

11.8%

8.4%

11.0%

0%

4%

8%

12%

16%

20%

Average Work On Hold

Average Work On Hold Linear (Average Work On Hold)

Work On Hold Continues Downward Trend • Mold Shops are seeing higher

levels of work on hold with an average of 12% ($2.3M).

• Die Shops are experiencing lower work on hold levels with an average of 8% ($1M) on hold.

• Work on hold increased from previous quarter following cyclical trends but long-term trend continues to decrease.

Question: What percentage of jobs have you been awarded are currently on hold due to reasons outside of your control? Shop Type: Mold and Die Builders

Barring any unforeseen shocks to the system, 2018 should remain relatively flat between 7-11%


Mold Builders Maintaining Larger Back Logs

• The gray shaded area represents what HRI believes to be a targeted level for back log – between 3 and 9 months of annual revenue. This provides enough work to remain busy while reducing the need to outsource work or incur unexpected overtime hours.

• The best shops have a longer term horizon to future work.

Question: What was your annual revenue for 2017? What is your facility’s current back log? Shop Type: Mold and Die Builders

Back Log Value

Annual RevenueBack Log Ratio =

5.3

4.1

0123456789

101112

Mold Builder Die Builder

Mon

ths o

f Bac

k Lo

g

Calendarized Average Back Log


Back Log Varies Substantially by Shop Size

Question: What was your annual revenue for 2017? What is your facility’s current back log? Shop Type: Mold and Die Builders

1.7

3.54.2

5.86.3

0123456789

101112

<$5M $5-10M $10-20M $20-40M >$40M

Mon

ths o

f Bac

k Lo

g

Calendarized Average Back Log

75% of shops presently have a back log valued between 1

month and over 10 months of their annual revenue.

Back log levels are not indicators of a company’s profitability or

efficiency but correlated strongly with a company’s size.


Capacity Utilization Forecasted to Remain Stable

• Over the last 12 months, die and mold builders alike have experienced relatively strong build volumes.

• The shaded light gray area on the graph represents the range in which the majority (50%) of mold and die shops report their current and future utilization rates.

Question: What is your facility's current overall capacity utilization? What is your facility's expected 2018 overall capacity utilization? Shop Type: Mold and Die Builders

91% 89%87%

81%

85%88% 89%

83%87%

84%

89% 90% 90%

84%

77%79% 79%

76%

67%

76% 77% 76%

81%83%

81% 81% 81%85%

60%

70%

80%

90%

100%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2F Q3F Q4F

2015 2016 2017 2018

Capacity Utilization Trend by Shop Type

Die Builder Mold Builder


Die Shops Seeing Higher UtilizationDie Design Indicates Potential Leveling of Utilization

Question: Based on your shift structure and hours, what is your facility’s Design/Engineering, Machining and Assembly Capacity Utilization? Shop Type: Mold and Die Builders

95%

90% 90%

75%70%

73%

81% 80% 81%

60%

70%

80%

90%

100%

110%


Mold Builder Capacity Utilization


93%

105%

100%

75%78%

83%79%

90% 89%

60%

70%

80%

90%

100%

110%


Die Builder Capacity Utilization


Quarter of mold shops less than 75% utilizedDesign as a lead indicator is showing a

softening in future utilization.


$132

$158 $166

$143 $149

$170

$50

$70

$90

$110

$130

$150

$170

$190

<$10M $10-20M >$20M

Thou

sand

s

Average Throughput


Die Shops Seeing Higher Efficiency Levels

Question: For calendar year 2017, what was your facility’s Profit and Loss Statement Average Hours worked for Hourly Employees. Number of Full-time Hourly Employees, Number of Salaried Employees. Shop Type: Mold and Die Builders

Revenue – Subcontracting

Full Time Equivalents

HRI views throughput as a sign of efficiency which is strongly correlated to profitability –

the gray shaded area represents strong throughput.

A shops ability to improve throughput should translate directly to their bottom line.

Throughput =


$140 $150

$179 $182

$210

$106 $121

$136 $147 $152

$124 $137

$155 $152

$177

$50

$75

$100

$125

$150

$175

$200

$225

<$5M $5-10M $10-20M $20-40M >$40MTh

ousa

nds

Throughput


Larger Shops See Higher Levels of Efficiency

• Shops greater than $30M in annual revenue see higher levels of efficiency in their throughput with an average of $168k.

• Smaller shops are seeing lower levels of efficiency, below the target of $150k.

• Shops over $20M are investing in the next stair step of growth, impacting their throughput performance.

Question: For calendar year 2017, what was your facility’s Profit and Loss Statement (in raw dollars)? Average Hours worked for Hourly Employees. Number of Full-time Hourly Employees, Number of Salaried Employees. Shop Type: Mold and Die Builders

Above average throughput range


Tooling Significantly Improving Design Efficiency

$1.9M $1.8M

$1.7M

$1.9M

$1.9M

$2.3M

$1.6M $1.5M$1.4M

$1.8M

$2.0M

$2.3M

$1.3M

$1.5M

$1.7M

$1.9M

$2.1M

$2.3M

$2.5M

2012 2013 2014 2015 2016 2017

Revenue Per Designer

Mold Die

Question: What was your annual revenue for 2017? Employees in the following departments: Design, Machining and Toolmaking. Shop Type: Mold and Die Builders


Mold Depending On Higher Headcount in Machining

$1.0M $1.1M

$1.1M$.9M $.8M

$1.0M$.9M $.9M

$1.1M

$1.5M $1.5M$1.3M

$.0M

$.5M

$1.0M

$1.5M

$2.0M

2012 2013 2014 2015 2016 2017

Revenue Per Machinist

Mold Die

The transition in the mold industry toward more machinists has largely been a strategic effort aimed at reducing labor requirements in tool building and tryout.

Question: What was your annual revenue for 2017? Employees in the following departments: Design, Machining and Toolmaking. Shop Type: Mold and Die Builders


Mold Assembly Efficiency Improving Significantly

$.91M$.85M $.79M

$.99M$1.09M

$1.27M

$.53M $.54M$.67M

$.58M

$.56M$.63M

$.0M

$.2M

$.4M

$.6M

$.8M

$1.0M

$1.2M

$1.4M

2012 2013 2014 2015 2016 2017

Revenue Per Toolbuilder

Mold DieQuestion: What was your annual revenue for 2017? Employees in the following departments: Design, Machining and Toolmaking. Shop Type: Mold and Die Builders


6.5%

3.6%5.0%

3.3%

1.3%

1.2%

0.9%

1.3%

7.7%

4.8%5.9%

4.6%

0%

2%

4%

6%

8%

10%

12%

2017 2018 2017 2018


Capital Expenditure Trends

Machine Capex Other Capex

Shops Planning to Invest Less in 2018

• On average mold builders investing more than die shops. Particular investment in automation and new high speed cutting equipment.

• Nearly all tool suppliers planning a decline from significant investment in 2017. A great deal of investment has already taken place and HRI suspects this will continue to slow.

Question: How much did your facility contribute toward new capital expenditures in 2017 and how much is planned for 2018: Total, Machine, Other? Shop Type: Mold and Die Builders

Average Investment per Shop $2.2M $1.6M


$.4M $.2M$.6M

$.3M

$1.0M$.8M

$1.3M$1.6M

$4.3M

$2.4M

10%

5%8%

4%

6%5%

6%5%

4%3%

0%

2%

4%

6%

8%

10%

12%

$.0M$.5M

$1.0M$1.5M$2.0M$2.5M$3.0M$3.5M$4.0M$4.5M

2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

<$5M $5-10M $10-20M $20-40M >$40M


Machine Capex Other Capex Average Percent

Large Shops Drive Investment by DollarHowever, Smaller Shops Invest Most as a Percentage

Question: How much did your facility contribute toward new capital expenditures in 2017 and how much is planned for 2018: Total, Machine, Other? Shop Type: Mold and Die Builders

$20-40M shops are the only group planning to increase investment for 2018 as they work to reach their next stair step of growth


Mold and Die Shops See Similar P&L Statements

Question: For calendar year 2017, what was your facility’s Profit and Loss Statement? Shop Type: Mold and Die Builders

Die Builders’ labor content offset by higher subcontracting by Mold Builders.

24% 25%

52% 50%

14% 15%

10% 11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Profit and Loss Summary

Materials Other COGS SG&A EBIT

24% 25%

23% 27%

15% 11%

4% 5%

0%

20%

40%

60%

80%

100%


Manufacturing Detail

Materials Labor Subcontracting Depreciation


P&L Breakdown Varies Significantly by Shop Size


• Larger shops typically see higher cost of goods sold (COGS) but can better leverage SG&A costs.

• EBIT performance for larger shops were more impacted in 2018 by outsourcing.

• As $20-40M shops invest to reach their next stair step of growth their profitability dips.

71% 75% 76% 79% 81%

19% 17% 12% 12% 7%

11% 9% 12% 9% 12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

<$5M $5-10M $10-20M $20-40M >$40M

Profit and Loss Summary

Total COGS SG&A EBIT


Smallest and Largest Shops Outsourcing the Most

• Small shops are seeing labor costs double those of the largest shops due to less automation and older equipment.

• Smaller shops outsource for capability (i.e. gun drill, EDM, etc.) while larger shops outsource more for capacity constraints.


15%23% 25%

32%23%

32%27% 22%

20%

16%

17% 13%11%

11%

21%

8% 4%4%

4% 3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

<$5M $5-10M $10-20M $20-40M >$40M

Manufacturing Detail

Materials Labor Subcontracting Depreciation


2.77

1.85

2.53

2.28

1.04

0.00 0.50 1.00 1.50 2.00 2.50 3.00

<$5M

$5-$10M

$10-$20M

$20-$40M

>$40M

Average Current Ratio

Larger Shops Have Low Current Ratios• General Guidelines:

<1: Too Low1.5-3: Excellent>3: Too High

• Current ratio looks at the liquidity of the business – enough current assets needed to cover current liabilities

– If too high, poorly leveraged assets or too much cash

– If too low, risk not being able to meet current liabilities

Question: : For calendar year 2017, what was your facility’s current assets and current liabilities? Shop Type: Mold and Die Builders

Current Ratio = Current AssetsCurrent Liabilities

Excellent Too Low


Over $40M Most Impacted by Terms & Investment

• Quick ratio – a liquidity ratio that further refines the current ratio by measuring the level of most liquid current assets to cover current liabilities.

• Unique factors to a company and industry impact the quick ratio: timing of capital expenditures, financial policies, timely payment from customers, ability to receive progressive payment terms and outsourcing

Question: For calendar year 2017, what was your facility’s cash, accounts receivable, and current liabilities? Shop Type: Mold and Die Builders

1.6

1.0

1.6

1.9

0.6

2.8

1.9

2.52.3

1.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

<$5M $5-10M $10-20M $20-40M >$40M

Average Liquidity Ratios

Quick Ratio Current Ratio


Progressive Payments see a Sharp Decline

Question: Over the past three months, approximately what percent of your new booked business includes progressive payment terms and accounts receivables were being paid within contract terms. Shop Type: Mold and Die Shops

Progressive Payment Terms see a sharp decrease in 2018 Q1

Reduction in progressive payments will continue to

increase as shop utilization levels return to more historic

norms and outsourcing is reduced.

62% 62% 62% 62% 68% 67%

59%55%

51%

57% 57%61% 61%

71%69%

62% 61% 60%

35%

45%

55%

65%

75%

Progressive Payment Terms and AR Paid On Time

Percent Progressive Terms Percent of AR Paid On-Time


Largest Shops Receiving Least Payment Terms

Question: For calendar year 2017, what was your facility’s cash, accounts receivable, and current liabilities? Shop Type: Mold and Die Builders

• Small shops command more progressive terms to survive and they have received them from large shops during outsourcing.

• Large shops have more ability to accept fewer progressive terms and need to keep business full to manage the size of their costs.

• With a potential market adjustment large shops will reduce outsourcing and the terms they are providing which may improve their liquidity.

• While smaller shops may see a reduction in revenue and potentially their liquidity.

58% 62% 44% 45% 46%67% 65% 49% 63% 50%

2.77

1.89

2.472.28

1.04

0.0

0.5

1.0

1.5

2.0

2.5

3.0

<$5M $5-10M $10-20M $20-40M >$40M0%

10%

20%

30%

40%

50%

60%

70%

Average Liquidity Ratios

Progressive Payments AR Paid On Time Current Ratio


Vehicle Forecasts Still Indicate Potential Softening

Source: LMC Automotive Forecast

$6.5B

$9.9B$11.0B $8.5B

$6.7B$8.2B

$.0B

$2.0B

$4.0B

$6.0B

$8.0B

$10.0B

$12.0B

$14.0B

2016 2017 2018 2019 2020 2021

Tool Sourcing Spend Estimate

Forecast Low Forecast High Harbour Estimate


CUSTOMER ANALYTICS: MOLDERS AND STAMPERS


Mold Builders More Utilized than Customers

Question: What is your facility's current overall capacity utilization? What is your facility's expected 2018 overall capacity utilization? What is your facility's utilization by Operational Department? Shop Type: Mold Builders, Plastic Molders

90% 90%

80%85%

70% 70%

53%56%

82% 81%

67% 68%

40%

50%

60%

70%

80%

90%

100%

2017 2018 2017 2018

Mold Builder Plastic Molder

Overall Capacity Utilization


62%

67%

72%

80%

79%

81%

0% 25% 50% 75% 100%

Assembly/Secondary

Machining/Production

Design/Engineering

Function Capacity Utilization



Molders Capital Expenditures are Flat

• Capital Expenditures need to be matched to the life span of the equipment to remain competitive.

• The flatter demand for plastic molders lends itself to more consistent capital investment. Shops are replacing old equipment with new mold machines.

Question: How much did your facility contribute toward new capital expenditures in 2017 and how much is planned for 2018: Total, Machine, Other? Shop Type: Mold Builders, Plastic Molders

6.5%

3.6% 3.1% 3.7%

1.3%

1.2% 1.6%2.0%

7.7%

4.8% 4.7%5.7%

0%

2%

4%

6%

8%

10%

12%

2017 2018 2017 2018




Average Investment Per Shop$2.2M $2.3M


Die Builders More Utilized than Customers

Question: What is your facility's current overall capacity utilization? What is your facility's expected 2018 overall capacity utilization? What is your facility's utilization by Operational Department? Shop Type: Die Builders, Stampers

63%

71%

77%

89%

91%

76%

0% 25% 50% 75% 100%

Assembly/Secondary

Machining/Production

Design/Engineering

Function Capacity Utilization

Die Builder Stamper

95%100%

75%

65%

80% 80%

55%60%

88% 90%

65%63%

40%

50%

60%

70%

80%

90%

100%

110%

2017 2018 2017 2018

Die Builder Stamper

Overall Capacity Utilization



5.0%3.3% 3.5%

4.7%

0.9%

1.3% 0.7%

1.7%5.9%

4.6% 4.2%

6.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2017 2018 2017 2018

Die Builder Stamper



Stamping Capital Expenditures are Up

• Stampers have older equipment than molders and are now rebuilding presses and purchasing new high tonnage presses to meet the changing product needs.

• Die builders may not investing enough to stay competitive with the changing market.

Question: How much did your facility contribute toward new capital expenditures in 2017 and how much is planned for 2018: Total, Machine, Other? Shop Type: Die Builders, Stampers

Average Investment Per Shop$1.6M $6.2M


Summary • Market remains strong looking in to 2018 – sentiment, back logs,

and utilization levels all positive.• Throughput trends with shop size; the largest shops are the most

efficient. Variance in throughput is significant though, with shops at both extremes of efficiency at all sizes.

• The stair steps of growth for shops between $20-40M is evident in the data – profit, investment and throughput all demonstrate the challenges these shops face.

• As tooling demand returns to less aggressive levels, A/R paid on time and progressive payments trend down. Large shops may see these trends result in a liquidity shortage.

• While we believe 2018 will be a strong sourcing year, some data points show symptoms of a return to normal sourcing levels.


Harbour Results Partners


Thank you for the opportunity

Laurie [email protected]

www.harbourresults.com248-552-8400@HarbourResults

Company Page: Harbour Results, Inc.

2018 q1 tooling barometer - oesa.org

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