growth through innovation · expands r&d and technical capabilities; customer collaboration...
TRANSCRIPT
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Investor Presentation | July 27, 2020
Growth Through Innovation
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Forward Looking InformationCertain statements contained or incorporated by reference herein, including those that express management’s expectations or estimates of future developments or AirBoss of America Corp.’s and its subsidiaries and affiliates (collectively “AirBoss”) future performance, constitute “forward-looking information” or “forward-looking statements” within the meaning ofapplicable securities laws, and can generally be identified by words such as “will”, “may”, “could” “expects”, “believes”, “anticipates”, “forecasts”, “plans”, “intends” or similarexpressions. These statements are not historical facts but instead represent management’s expectations, estimates and projections regarding future events and performance.
Statements containing forward-looking information are necessarily based upon a number of opinions, estimates and assumptions that, while considered reasonable by management at the time the statements are made, are inherently subject to significant business, economic andcompetitiverisks, uncertainties and contingencies.AirBosscautions that such forward-looking information involves known and unknown contingencies, uncertainties and other risks that may cause AirBoss’ actual financial results, performance or achievements to be materially different from its estimated future results, performance or AirBoss’
actual financial results, performance or achievements to be materially different from its estimated future results, performanceorachievements expressed or implied by the forward-
looking information. Numerous factors could cause actual results to differ materially from those in the forward-looking information, including without limitation: impact of general economic conditions; dependence on key customers; cyclical trends in the tire and automotive, construction, mining and retailindustries; sufficient availability of raw materials at economical costs; weather conditions affecting raw materials, production and sales; AirBoss’ ability to maintain existing customers or develop new customers in light of increased competition; AirBoss’ ability to successfully integrate acquisitions of other businesses and/or companies or to realize on the anticipated benefits thereof, changes in accounting policies and methods, including uncertainties associated with critical accounting assumptions and estimates; changes in the value of the Canadian dollar relative to the US dollar; changes in tax laws and potential litigation; ability to obtain financing onacceptable terms; environmental damage and non-compliance with environmental laws andregulations; impact of global health situations; potential product liability and warranty claims and equipment malfunction. COVID-19 could also negatively impact
AirBoss’ operations and financial results in future periods. There is increased uncertainty associated with future operating assumptions and expectations as compared to prior periods. As such, it is not possible to estimate the impacts COVID-19 will have on AriBoss’ financial position or results of operations in future periods. This list is not exhaustive of the factors that may affect any of AirBoss’ forward-looking information.
All of the forward-looking information in this investor presentation is expressly qualified by these cautionary statements. Investors are cautioned not toput undue reliance on forward-looking information. All subsequent written and oral forward-looking information attributable to AirBoss or personsacting on its behalf are expressly qualified in their
entirety by this notice. Forward-looking information contained herein is made as of the date of this investor presentation and, whether as a result of new information, future events or otherwise, AirBoss disclaims any intent or obligation to update publicly this forward-looking information except as required by applicable laws. Risks and uncertainties about AirBoss’ business are more fully discussed underthe heading “Risk Factors” in our most recent Annual
Information Form and are otherwise disclosed in ourfilings with securities regulatory authorities which areavailable on SEDARat www.sedar.com.
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Disclaimers
This presentation has been prepared by AirBoss of America Corp. (“AirBoss”) for
the sole purpose of providing preliminary information regarding AirBoss and its
subsidiaries, and is not intended to provide all available information about AirBoss.
The material presented is not intended to modify, qualify, supplement or amend
any information disclosed under corporate and securities legislation of any
jurisdiction and should not be relied upon as a representation of any matter that a
potential investor should consider in evaluating AirBoss or used for the purposes
of making investment decisions concerning AirBoss Securities.
This presentation is not intended as and shall not constitute an offer, invitation,
solicitation, or recommendation with respect to the purchase or sale of any
securities of AirBoss in anyjurisdiction.
Non-IFRS Financial Measures
Within this presentation, AirBoss may disclose financial measures such as
EBITDA, Adjusted EBITDA and Adjusted Earnings Per Share. These measures do
not have any standardized meanings prescribed by IFRS. Such measures are
neither required by, nor calculated in accordance with IFRS, and therefore are
considered Non-IFRS financial measures. AirBoss discloses these measures as
financial measurements used by interested parties and investors to monitor the
ability of an issuer to generate cash from operations for debt service, financing
working capital and capital expenditures and paying dividends. Such measures
should not be considered as an alternative to, or more meaningful than, net
income (or any other IFRS financial measure) as an indicator of the company’s
performance.
EBITDA represents earnings before interest income, interest expense, income
taxes and depreciation andamortization.
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RUBBER
EVERYWHERE
ESSENTIAL
SUSTAINABLE
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ExtrudeRubber shaped through adie
MoldRubber cast into finalshape
VulcanizeHeat and sulphur enhancestrength and flexibility offinished product
RecycleAirBoss repurposesrubber to reducescrap
Transforming Rubber
SustainablyGrowRubber trees commercially grown on a plantation
HarvestTrees tapped forsap
RefineRaw rubber consolidated for export
StrainRemoves impurities forspecialty applications
FormatRubber sized to customerspecs
CalendarCompounded rubberflattened
CompoundMixing creates friction and
heat
FormulateAdd Carbon Black,Accelerators, Chemicals, Oils
AirBoss adds significant value to
raw rubber through compounding
FinishedProducts
AirBoss makes finished anti-
vibration & defense products
CompoundedRubber
RawRubber
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Leveraging our Compounding Capabilities
One of RubberSolutions
largest customersAnti-Vibration
Defense
3rd party custom compounding &
tolling for a diverse
customer baseNorth America’s
2nd largest
custom
compounder
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Strong North American Presence
North American custom rubber compounding market valued at $2 billion and growing at ~4% annually1
High QualityAssetBase
Newmarket, ON
Kitchener, ON
Auburn Hills, MI
Landover, MD
Scotland Neck, NC
Acton-Vale, PQ
Bromont, PQ
Head Office
Research Facility
Compounding/Mixing
Engineered Products
AirBoss Defense Group
1Global Info Research
Kuala Lumpur,
Malaysia
Charleston, SC
Facility Square Feet (000’s)
Own/Lease
Newmarket, ON 6 Lease
Kitchener, ON 1,000 Own
Acton-Vale, PQ 260 Own
Bromont, PQ 13 Own
Auburn Hills, MI 275 Lease
Landover, MD 78 Lease
Scotland Neck, NC 150 Own
Charleston, SC 15 Lease
Kuala Lumpur 300 JV
Total 2,097 -
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North America’s 2nd Largest CustomCompounder
MILLIONpound capacity
17.5%in 2019
Increased capacity
450+ 2,000+proprietary
compounds
25-year operating history
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Diverse and Growing CustomerBase
150+customers
Significantvolume from
blue chipcustomers
Volume by Sector – 2019
No customer accounts for more than ~10% of net sales
Rubber solutions
19%
19%
16%12%
7%
7%
6%5%
5%4%
Major Tires
OTR/Retread
Conveyor Belts
Resources
Anti-Vibration
Track
Other
Infrastructure
Defense
Industrial
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Customer RankIncrease in Volume
2019 vs 2018 Length of Relationship
1 4% 25 years
2 45% 20 years
3 110% 30 years
4 -4% 20 years
5 30% 30 years
6 -10% 20 years
7 -10% 20 years
8 8% 30 years
9 9% 10 years
10 22% 25 years
30+ newcustomerssince the
beginning of2019
Sticky, multi-decade relationships with key customers
Largest Customers Growing their VolumesRubber solutions
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State-of-the-Art R&D/Technical Centre
R&D & innovation are a key differentiator for AirBoss
Supports collaboration
with customers on new
compounds/products
Aids attraction and retention
of best talent to buildrubber
science leadership
R&D and innovation are key differentiators for AirBoss
Reflects ongoing
commitment to innovative,
higher margin products
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2
Engineered products
Anti-Vibration
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3Engineered products
Anti-Vibration
Suspension Powertrain & Drive
Steering Chassis & Exhaust
90%
Leader in anti-vibration & noise-reductionsolutions
HybridRubber/MetalEssential anti-vibration,noise and harshnesscomponents
of components produced by AirBoss
are for light trucks, SUVs & minivans
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Launched firstnon-automotive product
Extensive outreachto sector leaders
Engineered products
Anti-Vibration Growth Strategy
Heavy Truck
Bus Construction Mining AgricultureMotorcycle
& ATV
Cross-selling toexisting customer base
Expanding into non-automotive sectors
Dedicated non-auto team
in place
Balance contribution from automotive segment by diversifying into adjacent sectors
Defense
GROMMETS
DUST
BOOTS
JOUNCE
BUMPER
SPRING
ISOLATOR
MASS
DAMPER
STABILIZER
BAR
BUSHINGS
EXHAUST
MOUNTING
SHOCK
BUSHINGS
TOP
MOUNT
CONTROL
ARM
BUSHINGS
HYDRAULIC
BUSHINGS
HYDRAULIC
MOUNTS
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More technically sophisticated parts generate higher margins
Engineered products
Anti-Vibration Focus on Innovation
Advance
products
up the
technical
curve
Leverage
automation for
high-volume
lower margin
parts
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AirBoss Defense Group
Defense
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Gas Masks& Filters
Collective Protection
Route Clearance
AirBoss Defense Group
Survivability Solutions PlatformGlobal Leader in
Wearables for CBRN
Largest U.S. DoDbudget request in
history
$750billion
for 2020
Bidding on additional multi-million dollar contractsglobally
Global Leader in Route Clearance
Wearable
Products
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Global Leader in CBRN WearablesSole supplier to U.S. DoD for chemical, biological, radioactive, nuclear (CBRN) boots and gloves
US$51.5
million*contract with U.S.Department of
Defense
Extreme Cold Vapor Barrier (“Bunny”) Boot
US$36.5
million*contract with U.S.Department of
Defense
C$29.8
million*contract with Canadian National
Department of Defense
US$11.0
million*contract with Australian Defense Force
Molded AirBoss Lightweight Overboot (“MALO”)
AirBoss MoldedGlove
Low BurdenMask
US$26.7
million*contract with U.S.Department of
Defense
*Contract maximum value if all units delivered
AirBoss Defense Group
Contracts valued at up to US$380 million awarded since October 2018
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9AirBoss Defense Group
COVID-19 Protective Solutions
Growing demand for protection of medical personnel and first responders
Personal
Protective
Equipment
Powered Air
Purifying
RespiratorISO-POD™ Shelters
Two Major PPE Awards
FEMA
US$96.4
millionto be completed
early Q3 2020
HHS
US$121
milliondelivery through
Q1 2021
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0
A Dedicated Platform for Strategic Growth
R&D & innovation are a key differentiator for AirBoss
Cross-market existing
product lines to
expanded customer base
Identify acquisitions and/or
partnerships to accelerate
platform growth
Supplement organic growth with strategic acquisitions in defense and first responder markets
Develop/source
next-generation survivability
products to bring to market
AirBoss Defense Group
New Products
New Geographies
New Customers
Wearable Blast Gauge® measures
soldier exposure to blast overpressure
and wireless data supports assessment
of overall health and combat readiness
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Transforming the Business for Long-TermGrowth
Upgrading teams with hundreds of years of specific industry expertise to support evolving vision
Rubber Solutions Defense Anti-Vibration
Key New Leadership Changes Over Last 24 Months
• Strengthened management team
• Implemented CI and 5S programs
• Mitigating raw material costs
• Investing in new technical/R&D facilities
• Added new mixing line inNC
• Added colour/white capacity in
Kitchener
• Added tilt mixing line in Kitchener
VP & GM
VP, Research & Development
Director, Finance
Director, Human Resources
Director, Continuous Improvement
Director, Maintenance
• Significant recent contract awards
• Closed ADG transaction to createfocused defense business and strong platform for growth
• Increasing penetration of first responder and healthcare markets
VP & GM
VP Finance
Director, Engineering
Manager, Human Resources
Director, Continuous Improvement
Incoming CSI Team
• Strengthened management team
• Aggressive cost reduction program
• Increased cross-selling toexisting customers
• New engineering and sales teamsfocused on non-automotive products
• Leveraging opportunities to manufacturein lower-cost jurisdictions
• Contract defense manufacturing
VP & GM
VP, Sales
Director, Engineering
Director, Finance
Director, Human ResourceDirector, Continuous Improvement
Director, OperationsNon-Automotive Sales & EngineeringTeam
CFO Corporate VP Purchasing EVP & General Counsel Corporate VP Information Technology
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Investing in Future Growth
2019 Capex Program
Key Financial Metrics
Project
Kitchener, ON R&D/Technical Centre Upgrade
Kitchener, ON New Non-Black/Colour Mixing Line
Scotland Neck, NC New Mixing Line
New Product Development
New Presses and Robotic Work Cell for Anti-Vibration Business
2019 Capex Spend
Benefit
Expands R&D and technical capabilities; customer collaboration
Added 20 million pounds capacity; new products
Added 50 million pounds capacity
New anti-NVH products, LBM 2.0
Reduces cycle times and labor costs
$19.5 million
Strong balance sheet and access to capital to fund ongoing capex
Metric
Working Capital (at March 31, 2020)
Net Debt to TTM EBITDA (at March 31, 2020)
Available Under Revolving Loan Facility (at March 31, 2020)
TTM EBITDA Interest Coverage Ratio
Value
$74.3 million
1.5 times
$60.0 million (undrawn)
7.8 times
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Compounding Value
Multiple ways to drive value in the near, mid and longer-term
Increase cash flow to fund expanded
capital allocation
Drive revenue growth
Deliver on
contracts won
in 2018/19
Certify Auburn Hills
to manufacture
defense products
Prepare for already
tendered defense
contracts
Source / develop / acquire
new defense and first
responder products
Identify and tender
new defense
contracts
Leverage investment in
automation / advanced
manufacturing
Develop and launch
new non-automotive
products
Move products up the
technical curve to solve more
complex customer challenges
Fill new capacity
in Kitchener &
Scotland Neck
Develop new specialty
compounds
Expand operations in
selected high-growth
markets
Leverage enhanced
scale to improve raw
material buying power
Near-Term Value Drivers Longer-Term Value Drivers
Identify acquisitions –
traditional and specialty
compounders
Improve
margins
Driving continuous
improvement initiatives
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Q1 ResultsIn millions of USD except per share amounts Q1 2019 Q1 2020 % change TTM
Net Sales $82,575 $94,197 14.1% $339,748
Gross Profit $12,406 $18,841 49.0% $54,829
EBITDA $7,895 $7,435 (5.8%) $31,622
Adjusted EBITDA $8,511 $9,728 14.3% $33,413
Net Income $2,926 ($520) (117.8%) $6,773
Adjusted Net Income $3,480 $1,773 (49.1%) $9,239
Diluted EPS $0.12 ($0.02) (116.7%) $0.30
Adjusted Diluted EPS $0.15 $0.08 (46.7%) $0.40
Gross Margin 15.0% 19.6%
EBITDA Margin 9.5% 7.9%
Adjusted EBITDA Margin 10.3% 10.3%
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Solid Top-Line Growth
Rubber Solutions PoundsSold
(millions)
By Segment External Net Sales (US$)
(millions)
Q1 2020 External Net Sales
Breakdown
Focus on long-term growth
2016 2017 2018 2019
$114.3 $120.2 $118.8
$129.3 $124.9 $123.9
$72.9$83.0 $97.0
$0
$50
$100
$150
$200
$250
$300
$350
2018 2019 TTM
Rubber Solutions Engineered Products ADG
32%
32%
34%
Rubber Solutions Engineered Products ADG
$328.1$316.6
$339.7
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EBITDA & Dividends
EBITDA(US$)
(millions)
Dividend per Share (C$) & Payout Ratio
Dividend up 460% over the last decade
A history of delivering consistent dividends
$0.20
$0.24
$0.26
$0.28 $0.28 $0.28
30%
34% 33%
40%
59%
48%
0%
10%
20%
30%
40%
50%
60%
70%
$-
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
2014 2015 2016 2017 2018 2019
$29.6
$27.7
$25.7
$32.1
$0
$5
$10
$15
$20
$25
$30
$35
2016 2017 2018 2019
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Experienced Board and Management Team
Management Board of Directors
1 Member of Audit Committee 2Member of Compensation Committee 3Member of Nominating and Corporate Governance Committee
P. Gren Schoch
MSc(A), P.Eng
CEO & Chairman
Founded and chaired Petromet Resources in 1982; sold to Talisman for
$900 million
Co-founder Aurora Oil & Gas; sold for $2.6 billion in 2014
Founded AirBoss in 1989; Chairman 1989, CEO 2013
Chris Bitsakakis
BSc, MBA
President & COO
More than 25 years in the rubber and automotive industries
Extensive operational experience in the North America, Mexico, South
America, Europe and Asia
Frank Ientile
BA, CA, CPA
CFO
30 years of progressive financial leadership experience
Significant diversified industrials experience including the automotive,
heavy trucking and construction sectors
Chris Figel
BASc, LLB
EVP and General Counsel
10 years in private practice with a major Canadian law firm focused on
M&A and Corporate Finance
P. Gren Schoch
MSc(A), P.Eng
CEO & Chairman
Founded and chaired Petromet Resources in 1982; sold to Talisman
for $900 million
Co-founder Aurora Oil & Gas; sold for $2.6 billion in 2014
Founded AirBoss in 1989; Chairman 1989, CEO 2013
Anita Antenucci
Director
25+ years investment banking experience in aerospace/
defense/government services
Senior Managing Director Houlihan Lokey Inc.
David Camilleri
Director
25+ years of advanced manufacturing experience (aerospace, NVH)
Former President Noranco; VP Precision Castparts Corp (a
Berkshire Hathaway company)
Mary Matthews (1)(2)(3)
Director
Held numerous senior financial positions with both public and
private companies including EVP at Sprott Asset Management and
VP at CIBC
Robert McLeish (1)(2)(3)
Lead Independent Director
35 years in the investment business, most recently as Vice-
Chairman Merrill Lynch Canada
Former Chairman Dundee Wealth Management Inc.
Brian A. Robbins (1)
Director
President & CEO of Exco Technologies (TSX:XTC); Director of
Heroux-Devtek Inc. (TSX: HRX)
Alan J. Watson (2)(3)
Director
30-year investment banking career with American and U.K.-based
investment banks
Chairman of Pinnacle Investment Management
Significant diversified industrial, defense and public company expertise
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Investment Highlights
Focus on innovationand collaboration with largely blue-chip
customerbase
Leadingplayer in the large & growing North
American rubber
compounding market
Strategyto grow and diversify
anti-vibration business
ADG
transaction
providesstrong
platform to
build defense
business
Largeowned assetbase
Significant capex
investment in capacity and capabilitiesin
2019
A history ofconsistentdividends
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Market Data
Exchange: Ticker TSX: BOS
Recent Share Price (July 20, 2020) $20.55
Shares Outstanding (May 13, 2020) 23.4 million
Market Capitalization $480.9 million
52-week Range $4.60 - $22.39
Board & Management Ownership 26%
Annual Dividend (2019) $0.28
Dividend Yield 1.4%
Analyst Coverage Canaccord Genuity, CIBC, Cormark, Stifel-GMP,
TD
(In Canadian dollars)
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0
Appendix Slides
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1AirBoss Defense Group
ADG Transaction Summary
contribution valued at
US$100 millioncontribution valued at
US$32.7 million
R&D
ENGINEERING
MANUFACTURING
FINANCIAL
STRENGTH
PRODUCTS
KEY GOVERNMENT
RELATIONSHIPS
POST-SALES
SUPPORT
AND SERVICE
DEFENSE
CULTURE
55 % ownership 45 % ownership
AirBoss retains majority stake in a dedicated and expanded defense platform
CSHHoldings
SALES & MARKETING
KNOW-HOW
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Summary P&LIn millions of USD except per share amounts 2013 2014 2015 2016 2017 2018 2019 Q1 2020
Net Sales $236.3 $303.2 $304.9 $267.6 $289.9 $316.6 $328.1 $94.2
Gross Profit $28.7 $45.2 $55.3 $46.6 $44.5 $45.0 $48.8 $18.5
EBITDA $16.6 $28.9 $29.9 $29.6 $27.7 $25.7 $32.1 $7.4
Net Income $6.4 $13.7 $13.3 $13.8 $12.6 $8.5 $10.2 ($520)
Diluted EPS $0.28 $0.60 $0.56 $0.59 $0.54 $0.37 $0.44 ($0.02)
Dividend ($CDN) $0.20 $0.20 $0.24 $0.26 $0.28 $0.28 $0.28 $0.07
Gross Margin 12.1% 14.9% 18.1% 17.4% 15.4% 14.2% 14.9% 19.6%
EBITDA Margin 7.0% 9.5% 9.8% 11.1% 9.5% 8.1% 9.8% 7.9%
Return on Capital Employed 8.6% 14.8% 12.9% 10.5% 9.1% 7.9% 9.5% 7.8%
Return on Equity 7.9% 16.0% 14.0% 13.2% 11.2% 7.2% 8.3% 5.7%