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2013 Current State of American Durable Goods Manufacturing Sector

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Detailed research and analysis. Current health of America's durable goods manufacturing industries. Rating and comparison of primary metals, fabricated metal products, machinery manufacturing, computer and electronic products, electrical equipment, and transportation equipment. Growth trends. Employment situation. Financial statements. Jobs. Output and Inventories. Productivity and capacity utilization. Import and Export. PPI. CPI.

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THE MASHBURN REPORT August 2013 Current State of America’s Durable Goods Manufacturing Sector
Foreword, from the Author My name is Lee Mashburn. I am a degreed manufacturing technologist who has engaged in various process and application engineering roles across a myriad of manufacturing industries. Since my engineering days, I have worked almost 20 years as marketer and product manager for recognized and respected technology corporations such as Honeywell, SAP, and SSA Global. My teams have scoped and launched innovative new software solutions, adopted by thousands of global manufacturers to increase growth, drive profit, reduce costs, and improve operational efficiency. These products helped clients drive better decisions faster to gain a competitive advantage in their market places. To drive differentiating solutions to market, one must expertly analyze the market to pinpoint gaps, spot trends, quantify potential, and then execute winning go-to-market plans. Few humans have exerted more passion, time, and effort than me to perfect this process. Over the years, I have amassed a unique set of skills and processes to more consistently attack the optimal target market with the right product at the right time. Throughout my career, I have relentlessly sought better market data to support critical go-to-market initiatives. In many cases I have been underwhelmed, disappointed, and frustrated. Raw intelligence is out there but it can be hard to find and is often not cost-effective. Additionally, most of the raw data simply trends stand-alone variables and requires heavy lifting to convert information into concrete action steps. To help you overcome these obstacles, I have created the Mashburn Report series. Whether you are an executive, analyst, strategic planner, product manager, or marketer, Mashburn Reports are designed as powerful yet cost- effective tools to supplement your market sizing and analysis efforts. Mashburn Reports uniquely integrate and visualize choice content from more than a dozen market-moving reports. Information contained in my reports is not the typical “cut and paste data into Excel and then create simple trend charts.” This specific report on the state of America’s durable goods manufacturing market contains more than 140 pages of charts, tables, infographics, and industry benchmarks that won’t be found in other documents - at any price point. I believe you will greatly benefit. I hope you enjoy!
About the Author Lee Mashburn is an accomplished business-to-business marketing and product management executive who has helped companies like SAP, SSA Global, and Honeywell to transform and grow into market leadership positions. Lee has captained numerous corporate-wide strategic and marketing planning processes. Leveraging available market research data, Lee and his teams have astutely analyzed to uncover the optimal market targets to attack. Lee has developed his “Mashburn Report” series in order to provide a more insightful and cost-effective product for business professionals and investors who wish to supplement the market data they have traditionally used - in order to make more informed and confident decisions. Mashburn Reports: Durable Goods Manufacturing Nondurable Goods Manufacturing Retail Trade (in process) Wholesale Trade (in process)
Table of Contents Section 1: Report Introduction & Overview ! ! ! ! Pages 1-21 • Introduction • List of manufacturing and trade sectors, industries, and sub-industries • Data sources used for this report • List of performance metrics tracked in this report • Overview of the Mashburn Industry Health Monitor Rating • Comparison of manufacturing industries according to the Mashburn Rating Section 2: Durable Goods Manufacturing Overview ! ! Pages 22- 38 • Table of durable goods manufacturing industries and sub-industries • Market share by sales, value of shipments, and employment level • Consolidated financial statements - income and balance sheets • Employment situation - level, hours worked, hourly earnings • Return per employee • Job openings, hires, and separations • National output & inventories - orders, value of shipments, inventories • Industrial productivity and capacity utilization • Import and export indexes • Producer price indexes
Table of Contents - continued Section 3: Primary Metal Manufacturing ! ! ! ! ! ! Pages 39-51 Section 4: Fabricated Metal Product Manufacturing! ! ! Pages 52-64 Section 5: Machinery Manufacturing! ! ! ! ! ! ! Pages 65-82 Section 6: Computer & Electronic Product Manufacturing! ! Pages 83-99 Section 7: Electrical Equipment, Appliances, & Component! Pages 100-117 Section 8: Transportation Equipment Manufacturing! ! ! Pages 118-135
Introduction 1 This report addresses questions like: ‣ What industry segments are encompassed under the nondurable goods manufacturing super sector? ‣ What are the relative market sizes and growth rates of nondurable goods manufacturing industry segments? ‣ Which key financial and performance metrics are important to track? Why? What are the current states of those key metrics? How have they trended over the past decade what are they doing in 2013? Are there multivariable interrelationships that can expose useful insights? ‣ What data sources are used to support the information contained in this Mashburn Report? ‣ What is the MASHBURN RATING? How is it used to monitor and compare the current health of various manufacturing industry segments? Mashburn Reports empower those involved with manufacturing markets: ‣ Marketers and product managers ‣ Business analysts ‣ Strategic and operational planners ‣ Industry consultants ‣ Venture capitalists
WHOLESALE TRADE RETAIL TRADE Merchant, Durable Goods •Motor Vehicles, Parts, & Supplies •Furniture & Home Furnishing •Lumber & Construction Materials •Pro & Commercial Equipment •Metal & Mineral •Household Appliances & Electronics •Hardware, Plumbing, & Heating •Machinery Equipment & Supplies •Miscellaneous Merchant, Nondurable Goods • Paper & Paper Products • Drugs, Druggists, Sundries • Apparel, Piece Goods, Notions • Grocery & Related Products • Farm Product Raw Material • Chemical & Allied Products • Petroleum, Petroleum Products • Alcoholic Beverage • Miscellaneous Wholesale, Electronic Market •Business-to-Business •Trade Agents & Brokers Durable Goods •Wood •Nonmetallic Mineral •Primary Metals •Fabricated Metals •Machinery •Computer & Electronics •Electric Equipment, Appliances •Transportation •Furniture •Miscellaneous In-Store •Motor Vehicles, Parts, & Supplies •Furniture & Home Furnishing •Electronics & Appliances •Building & Garden Equipment •Food & Beverage •Health & Personal Care •Gasoline Stations •Clothing & Clothing Accessories •Sporting Goods, Hobbies, Games •General Merchandise •Miscellaneous Non-Store •Electronic Shopping •Mail Order Houses •Vending Machine Operators •Direct Selling Fuel Dealers Nondurable Goods •Food •Beverage & Tobacco •Textile Mills •Textile Products •Apparel •Leather •Paper •Printing •Petroleum & Coal •Chemical •Plastics & Rubber MANUFACTURING 2
Samples of the financial & economic publications referenced in Mashburn Reports ‣Manufacturers’ Shipments, Inventories, and Orders (M3) ‣Quarterly Financial Report (QFR) ‣Employment Situation Report ‣Job Openings and Labor Turnover ‣Producer Price Index ‣Consumer Price Index ‣Labor Productivity and Cost ‣Import/Export Price Index ‣Gross Domestic Product ‣Personal income ‣Industrial Production & Capacity Utilization 3
Performance Indicators and metrics that are presented in the Mashburn Reports This Mashburn Report analyzes and charts dozens of key economic and financial indicators (view list below) for most manufacturing and trade market segments - typically showcasing 10-year trends. Employment Situation ‣Employment level ‣Average hours worked ‣Average earnings ‣Job openings ‣Labor turnover Consumer Spend ‣Personal consumption expenditures ‣Personal income Output & Inventories ‣New & unfilled orders ‣Value of shipments ‣Inventory levels ‣Industrial productivity ‣Capacity utilization Financial Statements ‣Net sales ‣Cost of sales & operations ‣Operating & net income ‣Assets & liabilities ‣Shareholders’ equity ‣Net working capital Price & Cost Indexes ‣Consumer price ‣Producer price ‣Labor productivity & cost ‣Import/export price Misc. Metrics ‣Cash-to-cash cycle ‣Current ratio ‣Quick ratio ‣Return on assets ‣Return on sales 4
Mashburn Index 2013 Health Monitor Manufacturing Industries The Mashburn Index provides a repeatable process for rating and ranking the relative financial and operational health of durable and nondurable goods manufacturing industry segments. A total of thirteen (13) key performance indicators are analyzed and scored to derive a set of numerical indexes that are then compared. Current index scores range from 50% (poorest health) to 83% (best health) as illustrated below. Transportation Equipment is in the best financial and operational health as of June 2013 with Primary Metals trailing the pack. Plastics & rubber products and food manufacturing rank #2 and #3 to lead the nondurables cause. 5
Transportation #1 B- Plastics & Rubber #2 C+ Food Products #3 C Machinery #4 C- Fabricated Metals #5 D+ Computer & Electronics #6 D Beverage & Tobacco #7 D- Chemical #10 F Electrical #9 F Petroleum & Coal #8 D- Paper #11 F Primary Metals #12 F MASHBURNHEALTHMONITOR August2013 6
Mashburn Index - sample from dashboard 2013 Health Monitor for Manufacturing Industries Variables Used to Create Mashburn Index • Operating Profit • Return on Sales • Cash Cycle • Return on Assets • Industrial Production • Capacity Utilization • Return per Employee • Growth Rates, ’13 vs. ’12 • Employment Level • Intangibles 7
The Mashburn Index Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 8 Transportation is the healthiest of all top manufacturing industries! 45.0%! 55.0%! 65.0%! 75.0%! 85.0%! Primary Metals! Paper! Chemical! Electrical Equipment! Petroleum & Coal! Beverage & Tobacco! Computer & Electronics! Fabricated Metal Products! Machinery! Food! Plastics & Rubber! Transportation!
The Mashburn Index Comparing Manufacturing Industries 9
Value of Shipments Growth Rate, 2013 vs. 2012 Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable -4%! -2%! 0%! 2%! 4%! 6%! 8%! Computer & Electronics! Paper! Primary Metals! Chemical! Electrical Equipment! Petroleum & Coal! Beverage & Tobacco! Fabricated Metal Products! Plastics & Rubber! Food! Machinery! Transportation! Data source: M3 Report, U.S. Census Bureau Figures reflect calendar year 2012 results 10
Return on Sales (ROS) Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 11 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results ROS = (net pre-tax income / net sales) * 100 0%! 5%! 10%! 15%! 20%! 25%! Machinery! Food! Paper! Plastics and Rubber! Primary Metals! Petroleum & Coal! Transportation! Fabricated Metals! Electrical! Chemical! Computer & Electronic! Beverage & Tobacco!
Value of Shipments, in millions Comparing Durable and Nondurable Goods Manufacturing Industries Data source: M3 Report, U.S. Census Bureau Figures reflect calendar year 2012 results Nondurable Durable 12 $0! $200! $400! $600! $800! $1,000! Electrical! Beverage & Tobacco! Paper! Plastics and Rubber! Primary Metals! Computer & Electronic! Fabricated Metals! Machinery! Food! Transportation! Chemical! Petroleum & Coal!
Net Sales, in billions Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 13 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results $0! $400! $800! $1,200! $1,600! Paper! Beverage & Tobacco! Plastics and Rubber! Electrical! Primary Metals! Fabricated Metals! Machinery! Computer & Electronic! Food! Chemical! Transportation! Petroleum & Coal!
Operating Margin, % of sales Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 14 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results Operating margin = (operating income / net sales) * 100 0%! 5%! 10%! 15%! 20%! Petroleum & Coal! Electrical! Transportation! Primary Metals! Paper! Food! Chemical! Plastics and Rubber! Fabricated Metals! Machinery! Computer & Electronic! Beverage & Tobacco!
Cash-to-Cash Cycle (C2C), days Comparing Durable and Nondurable Goods Manufacturing Industries Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results C2C = (accounts recievable days + inventory days) - accounts payable days 15 Nondurable Durable 0! 10! 20! 30! 40! 50! 60! 70! 80! Electrical Equipment! Transportation! Fabricated Metals! Primary Metals! Chemical! Machinery! Beverage & Tobacco! Paper! Food! Plastics and Rubber! Computer & Electronic! Petroleum & Coal!
Return on Assets (ROA) Comparing Durable and Nondurable Goods Manufacturing Industries 16 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results ROA = (net income / total assets) * 100 Nondurable Durable 3%! 4%! 5%! 6%! 7%! 8%! 9%! 10%! Paper! Food! Transportation! Electrical Equipment! Plastics & Rubber! Chemical! Machinery! Computer & Electronics! Beverage & Tobacco! Petroleum & Coal! Fabricated Metal Products!
Inventories to Shipments Ratio Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 17 Data source: M3 Report, U.S. Census Bureau Figures reflect calendar year 2012 results 0.0! 0.5! 1.0! 1.5! 2.0! Machinery! Beverage & Tobacco! Transportation! Fabricated Metals! Computer & Electronic! Electrical! Primary Metals! Chemical! Plastics and Rubber! Paper! Food! Petroleum & Coal!
Employment Level, in thousands Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 18 Data source: Employment Situation Report, U.S. Bureau of Labor Statistics Figures reflect calendar year 2012 results 0! 300! 600! 900! 1200! 1500! Petroleum & Coal! Beverage & Tobacco! Electrical! Paper! Primary Metals! Plastics and Rubber! Chemical! Computer & Electronic! Machinery! Food! Fabricated Metals! Transportation!
Hourly Earnings Comparing Durable and Nondurable Goods Manufacturing Industries Data source: Employment Situation Report, U.S. Bureau of Labor Statistics Figures reflect calendar year 2012 results Nondurable Durable 19 $0! $7! $14! $21! $28! $35! Food! Plastics and Rubber! Fabricated Metals! Beverage & Tobacco! Primary Metals! Paper! Machinery! Electrical! Chemical! Transportation! Computer & Electronic! Petroleum & Coal!
Industrial Productivity Index Comparing Durable and Nondurable Goods Manufacturing Industries Data source: G17 Report, U.S. Federal Reserve Figures reflect end of calendar year 2012 results An economic indicator that measures changes in output. High levels of industrial production can lead to uncontrolled levels of consumption and rapid inflation. Nondurable Durable 20 0! 20! 40! 60! 80! 100! 120! 140! Paper! Chemical! Plastics and Rubber! Electrical! Beverage & Tobacco! Fabricated Metals! Petroleum & Coal! Primary Metals! Machinery! Food! Transportation! Computer & Electronic!
Capacity Utilization Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 21 Data source: G17 Report, U.S. Federal Reserve Figures reflect end of calendar year 2012 results Considered a leading indicator of inflation and future capital spending. Shows the level at which U.S. industry is performing relative to potential. 65%! 70%! 75%! 80%! 85%! Beverage & Tobacco! Food! Plastics and Rubber! Transportation! Primary Metals! Computer & Electronic! Chemical! Machinery! Paper! Electrical! Fabricated Metals! Petroleum & Coal!
THE MASHBURN REPORT August 2013 Current State of America’s Durable Goods Manufacturing Sector 22
Durable goods are products designed to last at least three years; bigger ticket items like automobiles, televisions, and refrigerators. These products account for roughly 15% of consumer spending. Industries that fall under the durable goods manufacturing sector umbrella: Sub-market NAICS 2012 Share per value of shipments Key words Wood Products 321 3% sawmills, veneer, truss, wood containers, pre-fab Nonmetallic Mineral Products 327 4% clay, pottery, glass, cement, gypsum Primary Metals 331 11% iron and steel mills, aluminum, foundries Fabricated Metal Products 332 13% forging, stamping, cutlery, hand tools, boilers, tanks Machinery 333 15% agriculture, mining, industrial Computer & Electronic Products 334 13% computer, peripheral, communications, audio, video Electrical Equipment & Appliances 335 5% lighting, household appliance, electrical equipment Transportation 336 29% motor vehicle and parts, aerospace, railroad, ships Furniture & Related Products 337 2% household and office furniture, kitchen cabinets, window treatments Miscellaneous 339 5% medical equipment and supplies, jewelry, silverware, sporting goods 23
Market Segmentation America’s Durable Goods Manufacturing Takeaway: ‣ Over 70% of the durable goods manufacturing market share consists of transportation, computer & electronics, machinery, and fabricated metals. Transportation garners #1 share for all three metrics. By Total Sales per the QFR report By Value of Shipments per the M3 report By Employment Level per the Employment Situation report Transportation 31% Computer & Electronic 19% Machinery 14% Fabricated Metal 10% All Other 26% Transportation 28% Computer & Electronic 13% Machinery 15% Fabricated Metal 13% All Other 31% Transportation 20% Computer & Electronic 14% Machinery 15% Fabricated Metal 19% All Other 32% 24
•$3.1 trillion in annual sales •Sales and costs up, and net income down •More cash on hand, greater investment level •Total assets up 6.5%, total liabilities up 7.4% •Stockholders’ equity up 5.4% 2012 vs. 2011 Year Over Year Summary 25 Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau
Employment Situation - Employment Level Durable Goods Manufacturing Sector, USA The Employment Situation Report, produced monthly by the United States Bureau of Labor Statistics (BLS), is the source of raw data used to complete this section of the Mashburn Report. The BLS surveys approximately 145,000 businesses and agencies that span over 500,000 U.S. worksites to determine employment, hours, and earnings figures at detailed industry levels. Note the key figures and charts below: 2.3% 3-year cumulative annual growth rate in employment level for the durable goods manufacturing sector. 7.5 million Employment level as of May 2013 for the durable goods manufacturing sector. 12.3 million The employment level of the durable goods manufacturing sector in June 1979. Employment Level, 2003-2012 Durable Goods Manufacturing Sector 6,900! 7,400! 7,900! 8,400! 8,900! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! inthousands! Employment Level, since 1940 Durable Goods Manufacturing Sector 2010 Now 1940 5,000! 6,000! 7,000! 8,000! 9,000! 10,000! 11,000! 12,000! inthousands! 26
Employment Situation - Hours & Earnings Durable Goods Manufacturing Sector, USA The Employment Situation Report, produced monthly by the United States Bureau of Labor Statistics (BLS), is the source of raw data used to complete this section of the Mashburn Report. The BLS surveys approximately 145,000 businesses and agencies that span over 500,000 U.S. worksites to determine employment, hours, and earnings figures at detailed industry levels. Note the key figures and charts below: 41.1 Average number of hours worked by durable goods manufacturing employees. $25.55 Average hourly earnings by durable goods manufacturing employees in May 2013. $21.94 Average hourly earnings by durable goods manufacturing employees - after inflation. 38.5! 39.0! 39.5! 40.0! 40.5! 41.0! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! HY 2013! Average Weekly Hours Worked Durable Goods Manufacturing Sector $20.00! $21.00! $22.00! $23.00! $24.00! $25.00! $26.00! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! HY 2013! USD,perhour! Average Hourly Earnings! Average Hourly Earnings, adjusted for inflation! Average Hourly Earnings Durable Goods Manufacturing Sector 27
Return per Employee Durable Goods Manufacturing Sector, USA 47% Increase in value of shipments per employee since CY 2003 61% Increase in net sales per employee since CY 2003 $230! $250! $270! $290! $310! $330! $350! $370! $390! $410! $430! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! $,inthousands! Net Sales per Employee! Value of Shipments per Employee! How Long ... ... can manufacturing companies sustain these increases? 28
Job Openings, Hires, & Separations, JOLTS Report Durable Goods Manufacturing Sector, USA Job Openings Index Separations Index Hires Index CY 2012 CY 2003 -43% Decrease in total separations from 2003 to 2012 -29% Decrease in new hires from 2003 to 2012 45% Increase in job openings from 2003 to 2012. 29
Reasons for Job Separations, JOLTS Report Durable Goods Manufacturing Sector, USA I Quit! Job quits have nearly doubled since the recession ended 0%! 20%! 40%! 60%! 80%! 100%! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! PercentofTotalJobSeparations! Layoffs & Discharges! Other Separations! Quits! 30
National Output & Inventories - New Orders Durable Goods Manufacturing Sector, USA New orders is a great indicator of durable goods manufacturing sector growth and productivity. This measurement is tracked and published on a monthly basis by the U.S. Census Bureau in the Manufacturers’ Shipments, Inventories, and Orders (M3) report. Statistical data from the M3 report covers current economic conditions and indicators of future production commitments in the manufacturing sector. $2.6 trillion Amount of new durable goods manufacturing orders - per the M3 report - in CY 2012. 12.5% 3-year compound annual growth rate (CAGR) for new durable goods manufacturing orders. 3-year CAGR for new durable goods manufacturing orders - excluding transportation & defense industries. 7.0% $1.0! $1.2! $1.4! $1.6! $1.8! $2.0! $2.2! $2.4! $2.6! $2.8! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,intrillions! New Orders! New Orders minus Transportation & Defense! New Orders Durable Goods Manufacturing Sector New orders reflect the very latest demand and a surge in orders will keep factories busy. But one large military or aircraft order can inflate the new orders metric - which is why it’s important to track new orders that exclude defense and/or transportation. 31
National Output & Inventories - M3 Report Variables Durable Goods Manufacturing Sector, USA In addition to new orders, the M3 report also features statistics for unfilled orders, value of shipments, and inventory levels. ‣ Shipments are products that have been ordered and that are being delivered right now. ‣ Unfilled orders signify backlog that can keep factories busy. An increase is good as long as the factory can fill the orders without chronic delays that create unhappy customers. ‣ When factory output exceeds orders, inventories can balloon and lead to corporate financial headaches. A buildup of unwanted goods can be quite costly. As inventory mounts, plants can be forced to slash output, shut down plants, and layoff employees. $2.7 trillion Value of durable goods manufacturing shipments - per the M3 report - in CY 2012. 11.7 trillion Value of durable goods manufacturing unfilled orders - per the M3 report - in CY 2012. 374 billion CY 2012 value of total inventories within the durable goods manufacturing sector. 2.6! 3.1! 3.6! 4.1! 4.6! 5.1! 5.6! Jan-03! Jun-03! Nov-03! Apr-04! Sep-04! Feb-05! Jul-05! Dec-05! May-06! Oct-06! Mar-07! Aug-07! Jan-08! Jun-08! Nov-08! Apr-09! Sep-09! Feb-10! Jul-10! Dec-10! May-11! Oct-11! Mar-12! Aug-12! Jan-13! Ratio! Unfilled Orders to Value of Shipments Ratio! Recession 0.4! 0.5! 0.5! 0.6! 0.6! 0.7! 0.7! 0.8! 0.8! Jan-03! Jun-03! Nov-03! Apr-04! Sep-04! Feb-05! Jul-05! Dec-05! May-06! Oct-06! Mar-07! Aug-07! Jan-08! Jun-08! Nov-08! Apr-09! Sep-09! Feb-10! Jul-10! Dec-10! May-11! Oct-11! Mar-12! Aug-12! Jan-13! Ratio! Value of Shipments to Total Inventories Ratio! Recession 32
Total inventories represent the value of the end-of-month stocks regardless of stage of fabrication (whether in the form of purchased materials and supplies, work in process, or finished goods). These inventories are valued at cost using any valuation method other than LIFO. Inventories associated with the non-manufacturing activities of your company are excluded. ‣ Materials-and-Supplies Inventory - All unprocessed raw and semi-fabricated commodities and supplies for which you have title. ‣ Work-in-Process Inventory - Accumulated costs of all commodities undergoing fabrication within your plants and long-term contracts where the inventory costs are for undelivered items and the value of work done that has not been reported in sales. ‣ Finished Good Inventory - The value of all completed products ready for shipment and all inventories and goods bought for resale requiring no further processing or assembly. No accumulation of finished goods inventories should occur with long-term contracts unless the total sales receipts are not recorded until the time of delivery. National Output & Inventories - Inventories Durable Goods Manufacturing Sector, USA Percentage of Total Inventories by Stage of Completion Durable Goods Manufacturing Sector, USA 26%! 28%! 30%! 32%! 34%! 36%! 38%! 40%! 42%! Mar-03! Sep-03! Mar-04! Sep-04! Mar-05! Sep-05! Mar-06! Sep-06! Mar-07! Sep-07! Mar-08! Sep-08! Mar-09! Sep-09! Mar-10! Sep-10! Mar-11! Sep-11! Mar-12! Sep-12! Mar-13! PercentofTotalInventories! Materials & Supplies! Work in Process! Finished Goods! 33
National Output & Inventories - Industrial Productivity (IP) & Capacity Utilization (CU) Durable Goods Manufacturing Sector, USA The Federal Reserve Board produces a monthly report of production and capacity utilization indexes for the industrial sector. The industrial sector, per the Federal Reserve Board, covers manufacturing, mining, and electric and gas utilities. The industrial sector, combined with the construction industry, accounts for the bulk of the variation in national output over the course of the business cycle. Ongoing production and capacity measurement helps illuminate structural developments in the economy. The production index measures real output and is expressed as a percentage of real output in a base year, currently 2007. On a monthly basis, the individual indexes of industrial production are constructed from two main types of source data: (1) output measured in physical units and (2) data on inputs to the production process, from which output is inferred. Data on physical products, such as tons of steel or barrels of oil, are typically obtained from private trade associations and from government agencies; data of this type are used to estimate monthly industrial production wherever possible and appropriate. The Federal Reserve Board constructs estimates of capacity and capacity utilization for industries in manufacturing, mining, and electric and gas utilities. For a given industry, the capacity utilization rate is equal to an output index (seasonally adjusted) divided by a capacity index. The Federal Reserve Board's capacity indexes attempt to capture the concept of sustainable maximum output-the greatest level of output a plant can maintain within the framework of a realistic work schedule, after factoring in normal downtime and assuming sufficient availability of inputs to operate the capital in place. 34 IP & CU Index Comparison Durable Goods Manufacturing Sector, USA 55! 65! 75! 85! 95! 105! Mar-03! Aug-03! Jan-04! Jun-04! Nov-04! Apr-05! Sep-05! Feb-06! Jul-06! Dec-06! May-07! Oct-07! Mar-08! Aug-08! Jan-09! Jun-09! Nov-09! Apr-10! Sep-10! Feb-11! Jul-11! Dec-11! May-12! Oct-12! Mar-13! Index,2007! Industrial Productivity! Capacity Utilization!
Import and Export Indexes Durable Goods Manufacturing Sector, USA Transportation Equipment 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! Computer & Electronic Products 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! Machinery Manufacturing 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! Fabricated Metal Products 35
Producer Price Indexes, PPI The Producer Price Indexes (PPIs) are a family of indexes that measure changes in the selling prices received by domestic producers of goods and services. The PPI sample includes over 25,000 establishments providing approximately 100,000 price quotations per month for products specified through a process called disaggregation. Producer Price Indexes are usually made available during the second full week of the month following the reference date. The PPI family of indexes consists of several major classification systems, each with its own structure, history, and uses. However, indexes in all classification systems draw from the same pool of price information provided to the BLS by cooperating company reporters. The three most important classification structures are (1) industry, (2) commodity, and (3) Stage of Process (SOP). ‣ A Producer Price Index for an industry is a measure of changes in prices received for the industry’s net output sold outside the industry. Measures—or indexes—of price change classified by industry form the basis of the program. These indexes reflect the price trends of a constant set of goods and services that together represent the total output of an industry. ‣ The commodity classification structure of the PPI organizes products by similarity of end use or material composition, regardless of whether the products are classified as primary or secondary in their industry of origin. ‣ PPI are calculated for the three stages of process; crude, intermediate, and finished goods. Finished goods are defined as commodities that are ready for sale to the final-demand user—either an individual consumer or a business firm. Intermediate materials, supplies, and components consists partly of already processed commodities that require further processing. Crude materials for further processing are defined as unprocessed commodities not sold directly to consumers. Source: Bureau of Labor Statistics www.bls.gov 36
Producer Price Indexes, PPI Durable Goods Manufacturing Sector, USA Transportation Equipment 113.0! 113.5! 114.0! 114.5! 115.0! 115.5! 116.0! 116.5! PPI! Jan - Jun ’12 Jan - Jun ’13 Computer & Electronic Product 88.4! 88.6! 88.8! 89.0! 89.2! 89.4! 89.6! 89.8! 90.0! PPI! Jan - Jun ’12 Jan - Jun ’13 1.3% Increase in PPI when comparing 2013 versus 2012 115.6 Most recent PPI, 15.6% increase vs. Dec ’03 -0.3% Increase in PPI when comparing 2013 versus 2012 89.5 Most recent PPI, 10.5% decrease vs. Dec ’03 37
Producer Price Indexes, PPI Durable Goods Manufacturing Sector, USA Machinery Manufacturing 123.5! 124.0! 124.5! 125.0! 125.5! 126.0! 126.5! 127.0! 127.5! 128.0! 128.5! PPI! Jan - Jun ’12 Jan - Jun ’13 1.4% Increase in PPI when comparing 2013 versus 2012 127.6 Most recent PPI, 27.6% increase vs. Dec ’03 Fabricated Metal Products 183.5! 184.0! 184.5! 185.0! 185.5! 186.0! 186.5! 187.0! PPI! Jan - Jun ’12 Jan - Jun ’13 0.5% Increase in PPI when comparing 2013 versus 2012 186.3 Most recent PPI, 86.3% increase vs. Dec ’03 38
The Current State of America’s Primary Metals Manufacturing Market 39
Primary Metals Manufacturing NAICS 331 WORLDWIDE OVERVIEW Companies in this industry engage in smelting and refining of ferrous and nonferrous metals and include iron and steel mills, rolled steel shape manufacturers, aluminum producers, and copper foundries. The global primary metals manufacturing industry generates annual revenue of more than $3 trillion. China leads all nations in crude steel and aluminum production by a wide margin. Other top steel producers include Japan, the US, India, Russia, and South Korea. Other major aluminum suppliers include Canada, Russia, and Australia. Modest growth is forecast for the United States over the next two years. Key growth drivers include durable goods orders and nonresidential construction spending. Demand comes largely from manufacturers of durable goods such as motor vehicles, machinery, containers, and construction steel. The profitability of individual companies depends largely on efficient operations, because most products are commodities sold based on price. Big companies have large economies of scale in production. Accordingly, most producers of secondary products buy raw metal from the large producers. Small companies can compete by serving regional markets or producing specialty products. SOURCE: Hoovers $3 trillion Annual revenue generated by all global primary metals manufacturers 16% Approximate U.S. share of worldwide primary metals manufacturing market 3,500 Number of United States primary metals manufacturing companies 40
Primary Metal Manufacturing NAICS 331 +2.7% $296b USA 2012 11% 2013 share of durable goods manufacturing market 2013 vs. 2012 Jan-July new orders New Orders Market Share Growth Rate Iron and Steel Mills, Ferroalloy Manufacturing Steel Product MFG, from Purchased Steel ‣ Pipe & tube ‣ Rolled steel ‣ Steel wiring Alumina & Aluminum Production & Processing ‣ Alumina refining ‣ primary aluminum production ‣ Smelting & alloying ‣ Sheeting, plating, rolling, drawing, & extrusion Nonferrous Metal (Except Aluminum) Production & Processing ‣ Smelting & refining ‣ Copper rolling, drawing, extruding, & alloying Foundries ‣ Ferrous metal ‣ iron ‣ Steel ‣ Nonferrous metal ‣ Nonferrous metal die-casting 41
Primary Metal Manufacturing New Orders by Sub-Industry $0! $20! $40! $60! $80! $100! $120! $140! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,inbillions! Aluminum & Nonferrous Ferrous Metal Foundries Iron & Steel Mills, Ferro Alloy +2.4% 2013 vs. 2012 new orders $296b USA 2012 New Orders Growth Rate 42
Primary Metal Manufacturing Market Share per New Orders Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau Aluminum & Nonferrous 52% Iron & Steel Mills, Ferro Alloy & Steel 41% *Ferrous Metal **Foundries 7% $151b Jan - June ’13 $296b USA 2012 New Orders New Orders 43 *Ferrous metals contain appreciable amounts of iron. **A foundry is a factory that produces metal castings.
Primary Metal Manufacturing Employment Level as of June 2013 Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics 0! 20! 40! 60! 80! 100! 120! 140! Nonferrous Production & Processing! Alumina & Aluminum Production! Steel Product MFG from Purchased Steel! Iron & Steel Mills, Ferro Alloy! Foundries! Employment Level, in thousands! -0.3% 0.9% Growth Rate 2013 vs. 2012 -2.6% -2.8% -6.1% 394k June 2013 Employment Level 44
Primary Metal Manufacturing Employment Situation Index Comparison +3.9% -15.1% Since March ’06 +2.2% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 45
66 106 99.1 Industrial Production 49% 84% 73.7 Capacity Utilization -3.3% 11.2% 6.3% Operating Profit -4.2% 12.6% 6.7% Return on Sales -2.0% 10.4% 5.2% Return on Assets 57 86 66.3 Cash Cycle, days 0.83 1.51 Quick Ratio 1.37 1.42 2.25 2.18 Current Ratio Primary Metal Manufacturing Dashboard 46 Mashburn Ranking: 12/12 50%
103.0 196.5 163.0 Import Index 102.2 187.8 158.9 Export Index 1.34 2.39 1.42 Inventory to Shipment Ratio 1.25 1.95 1.43 Unfilled Order to Shipment Ratio 117.7 233.5 196.9 Producer Price Index 347k 496k 392k Employment Level $284k $655k $608k Net Sales per Employee $297k $758k Value of Shipments per Employee $758k 47 Primary Metal Manufacturing Dashboard Mashburn Ranking: 12/12 50%
2012 vs. 2011 Year Over Year Summary Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau •$242 billion in annual sales, down 1.2% from prior year •Operating income and net income significantly down •Less cash, flat investment level •Inventories up 5.4% •Net working capital up almost 5% 48
Primary Metals Manufacturing M3 Report Major Index Comparison, Jan 2012 - May 2013 +4.6% -6% Drop in both unfilled orders and total inventories since Jan ’12 -4.6% Decrease in inventories-to- shipments ratio Rise in new orders since Jan ’12 49 Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index Jul ’13 Jan ’12
Primary Metal Manufacturing Producer Price Index by Sub-industry, Index July ’09 Steel MFG from purchased steelNonferrous production & processing Iron & steel mills, ferro alloy Aluminum production Raw data extracted from the July 2013 Producer Price Index Report, produced by the U.S. Census Bureau June 2013 July 2009 Post Recession 50
Primary Metal Manufacturing Import & Export Price Index Comparison 110! 120! 130! 140! 150! 160! 170! 180! 190! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Import Index! Export Index! 51
The Current State of America’s Fabricated Metal Product Manufacturing Market 52
Fabricated Metal Product Manufacturing NAICS 332 WORLDWIDE OVERVIEW Companies in this industry transform purchased metals into intermediate or end-use products by forging, stamping, bending, forming, welding, machining, and assembly. Because of the special manufacturing processes involved for individual parts, most companies make a limited range of products. Globally, the fabricated metal product manufacturing industry generates nearly $2 trillion in annual revenue. Top producers include the US, China, Japan, Germany, Italy, and Canada. The US fabricated metal product manufacturing industry includes about 55,000 companies with more than $325 billion in combined annual revenue and is expected to see moderate growth over the next two years. Key growth drivers include gains in US industrial production and rising demand for durable goods. Demand is driven largely by the needs of other industrial companies and is therefore linked to economic growth. The profitability of individual companies depends on technical expertise and efficient manufacturing. SOURCE: Hoovers $2 trillion Annual revenue generated by all global fabricated metal products manufacturers 16% Approximate U.S. share of worldwide fabricated metal products manufacturing market 55,000 Number of United States fabricated metal products manufacturing companies 53
Fabricated Metal Product Manufacturing NAICS 332 -12.1% $348b USA 2012 13% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate Forging & Stamping ‣ Iron & steel forging ‣ Nonferrous forging ‣ Roll forming Cutlery & Handtool ‣ Cutlery & handtool ‣ Metal kitchen cookware & utensils ‣ Saw blade Boiler, Tank, & Shipping Container ‣ Power boilers, heat exchangers ‣ Metal tanks ‣ Metal cans & boxes Architectural & Structural ‣ Plate work ‣ Ornamental ‣ Metal windows & doors ‣ Sheet metal Hardware Manufacturing Machine Shops, Turned Products ‣ Machine shops ‣ Turned products ‣ Screws, nuts, & bolts Coating, Engraving, Heat Treating Other Fabricated Metal Product ‣ Metal, industrial, & fluid power valve ‣ Plumbing fixture & pipe fitting ‣ Ball & roller bearing ‣ Guns & ammunition 54
Fabricated Metal Product Manufacturing Market Share per Revenue Data Source: Hoovers Forging, Stamping, Boilers, & Tanks 34% Architectural & Structural 22% Machine Shops 12% Hardware 9% All Other 23% Metal Valves & Pipefitting 9% Coating, Engraving, & Heat Treating 8% Cutlery, Hand Tools, & Ammo 6% 55
Fabricated Metal Product Manufacturing Employment Level by Sub-Industry 0! 50! 100! 150! 200! 250! 300! 350! 400! Hardware! Cutlery & Hand Tools! Spring & Wire Products! Boilers & Tanks! Forging & Stamping! Coating & Engraving! All Other! Architectural & Structural! Machine Shops! Employee Level, in thousands! 0.1% 2.1% 2.8% 1.0% 2.6% -0.6% 0.0% -2.5% 4.8% Growth Rate 2013 vs. 2012 1,437k Employment Level June ’13 56
Fabricated Metal Product Manufacturing Employment Situation Index Comparison +7.3% -7.1% Since March ’06 -0.7% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 57
2012 vs. 2011 Year Over Year Summary •$745 billion in annual sales, up 6.3% •Op income and net income up •More cash on hand, less investment level •Every balance sheet variable was up in 2013 Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 58
Fabricated Metal Product Manufacturing Income Statement Index Comparison 5.2x 45% Amount of net sales increase from CY ’03 to CY ’12 2.1x Operating income has grown at a rate of 2.1 times faster than has revenue Net income has grown at a rate of 5.2 times faster than has revenue Operating Income Index Net Sales Index Net Income Index CY 2012 CY 2003 59
72 102 94.6 Industrial Production 62% 86% 84.6 Capacity Utilization 3.7% 10.5% 10.2% Operating Profit 3.6% 10.6% 10.0% Return on Assets 65 88 75 Cash Cycle, days 1.11 1.45 Quick Ratio 1.27 1.68 2.16 1.96 Current Ratio Fabricated Metal Product Dashboard 60 2.2% 11.0% 9.7% Return on Sales Mashburn Ranking: 5/12 72%
$167k $240k $240k Value of Shipments per Employee $138k $208k $208k Net Sales per Employee 101.3 130.7 128.2 Import Index 102.0 132.3 131.4 Export Index 1.41 1.83 1.64 Inventory to Shipment Ratio 2.06 3.12 3.12 Unfilled Order to Shipment Ratio 132.7 186.3 186.3 Producer Price Index 1,256k 1,568k 1,437k Employment Level 61 Fabricated Metal Product Dashboard Mashburn Ranking: 5/12 72%
Producer Price Indexes, PPI Fabricated Metal Product Manufacturing Fabricated Metal Products 183.5! 184.0! 184.5! 185.0! 185.5! 186.0! 186.5! 187.0! PPI! Jan - Jun ’12 Jan - Jun ’13 0.5% Increase in PPI when comparing 2013 versus 2012 186.3 Most recent PPI, 86.3% increase vs. Dec ’03 62
Fabricated Metal Product Manufacturing Producer Price Index by Sub-industry, Index July ’09 Forging & Stamping Machine shops Boiler, tank, shipping container Architectural, structural Raw data extracted from the July 2013 Producer Price Index Report, produced by the U.S. Census Bureau June 2013 July 2009 Post Recession 63
Fabricated Metals Manufacturing M3 Report Major Index Comparison, Jan 2012 - May 2013 Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index May 2013Jan 2012 2.1% 14.6% Increase in unfilled orders index since January 2012 Flat 0.3% increase in value of shipments over last 17 months Increase in both new orders and total inventories since 1/12 64
The Current State of America’s Machinery Manufacturing Market 65
Machinery Manufacturing NAICS 333 WORLDWIDE OVERVIEW Companies in this industry manufacture various kinds of machinery used in agriculture, mining, construction, or manufacturing. The global machinery manufacturing industry generates more than $2 trillion in annual revenue. Top producers include China, Germany, Japan, the US, and South Korea. Industry experts are forecasting low growth over the next two years. Demand for machinery depends on overall industrial activity and on the health of sectors such as agriculture, construction, manufacturing, oil and gas exploration and production, and power generation. The profitability of individual companies depends on engineering expertise and efficient production. Large companies have economies of scale in purchasing. Small companies can compete effectively by specializing. SOURCE: Hoovers $2 trillion Annual revenue generated by all global machinery manufacturers 19% Approximate United States share of worldwide machinery manufacturing market 20,000 Number of United States machinery manufacturing companies 66
Machinery Manufacturing NAICS 333 Agriculture, Construction, & Mining Machinery ‣ Agriculture & farm ‣ Lawn & garden ‣ Construction ‣ Mining, oil & gas Industrial Machinery ‣ Industrial ‣ Food product ‣ Semiconductor ‣ Wood, paper, & prinitng Commercial & Service Industry Machinery ‣ Optical instrument & lens ‣ Photograph & photocopy Ventilation, Heating, Air Conditioning, & Commercial Refrigeration Machinery Engine, Turbine, & Power Equipment Metalworking Machinery ‣ Industrial mold ‣ Die & tool ‣ Cutting & machine tools ‣ Rolling mill Other General Purpose Machinery ‣ Pumps & compressors ‣ Material handling ‣ Elevators ‣ Conveyors ‣ etc. 67 6.3% $384b USA 2012 15% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate
Machinery Manufacturing Market Share per Value of Shipments Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau All Other Machinery 31% Agricultural, Construction, & Mining 27% Power Transmission 12% Ventilation, Heat, Air, & Refrigeration 11% Industrial Machinery 10% Metalworking Machinery 9% 68
Machinery Manufacturing Market Share per Employment Level Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics Other General Purpose Machinery 23% Agriculture, Construction, & Mining Machinery 22% Metalworking Machinery 16% HVAC & Commercial Refrigeration 12% Industrial Machinery 9% Turbine & Power Transmission 9% Commercial & Service Industry 8% 69
Machinery Manufacturing Employment Level as of June 2013 Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics 0! 50! 100! 150! 200! 250! 300! Commercial & Service Industry! Turbine & Power! Industrial! HVAC & Commercial Refrigeration! Metalworking! Agriculture, Construction, & Mining! All Other! Employment Level, in thousands! 0.9% Growth Rate 2013 vs. 2012 -2.1% 1.2% 0.2% 2.6% -4.3% -3.8% 70
Machinery Manufacturing Employment Situation Index Comparison Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 71 9.9% -6.9% Since March ’06 Flat Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau
Machinery Manufacturing Employee Situation Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Agriculture, construction, mining Metalworking HVAC & commercial refrigeration Industrial Employee Level Index CY 2013 CY 2003 Hourly Earnings Index CY 2013 CY 2006 72
2012 vs. 2011 Year Over Year Summary •$432 billion in annual sales •Operating and net income up over 13% versus CY 2011 •Less cash on hand, slightly greater investment level •Inventory is largest contributor to rise in current assets •Stockholders’ equity rose significantly in 2012 Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 73
Machinery Manufacturing Income Statement Index Comparison 6.4x 74% Amount of net sales increase from CY ’03 to CY ’12 3.2x Operating income has grown at a rate of 3.2 times faster than has revenue Net income has grown at a rate of 6.4 times faster than has revenue Operating Income Index Net Sales Index Net Income Index CY 2012 CY 2003 74
2.3% 7.7% 6.8% Return on Assets 28 77 77 Cash Cycle, days 2.1% 13.3% 8.9% Return on Sales 2.7% 10.4% 7.4% Operating Profit 73 103 103.3 Industrial Production 60% 84% 81.1 Capacity Utilization 0.74 1.11 Quick Ratio 0.87 1.16 1.55 1.38 Current Ratio 75 Machinery Manufacturing Dashboard Mashburn Ranking: 4/12 73%
$227k $361k $361k Value of Shipments per Employee $216k $371k $371k Net Sales per Employee 100.0 122.4 121.5 Import Index 100.0 122.0 122.0 Export Index 1.66 2.32 1.90 Inventory to Shipment Ratio 2.22 4.60 3.31 Unfilled Order to Shipment Ratio 121.4 135.3 135.2 Producer Price Index 975k 1,198k 1,100k Employment Level 76 Machinery Manufacturing Dashboard Mashburn Ranking: 4/12 73%
Producer Price Indexes, PPI Machinery Manufacturing Sector, USA Machinery Manufacturing 123.5! 124.0! 124.5! 125.0! 125.5! 126.0! 126.5! 127.0! 127.5! 128.0! 128.5! PPI! Jan - Jun ’12 Jan - Jun ’13 1.4% Increase in PPI when comparing 2013 versus 2012 127.6 Most recent PPI, 27.6% increase vs. Dec ’03 77
Machinery Manufacturing Producer Price Index by Sub-industry, Index July ’09 Agriculture, construction, mining Metalworking HVAC & commercial refrigeration Industrial Raw data extracted from the July 2013 Producer Price Index Report, produced by the U.S. Census Bureau June 2013 July 2009 Post Recession 78
Machinery Manufacturing M3 Report Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index Q2 2013 Q1 2012 79 2.8% -9.3% Q2 ’13 vs. Q1 ’12 +8.8% Q2 ’13 vs. Q1 ’12 Unfilled Orders Value of Shipments Q2 ’13 vs. Q1 ’12 New Orders
80 Agricultural, Construction, and Mining Value of Shipments 12.4% $106b CY 2012 27.4% 2013 share of machinery manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate $7,800! $8,300! $8,800! $9,300! $9,800! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Machinery Manufacturing
Turbines, Generators, & Power Transmission Value of Shipments $3,400! $3,600! $3,800! $4,000! $4,200! $4,400! $4,600! $4,800! $5,000! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 81Machinery Manufacturing -1.7% $48b CY 2012 +11.5% 2013 share of machinery manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate
Industrial Machinery Manufacturing Value of Shipments $2,700! $2,900! $3,100! $3,300! $3,500! $3,700! $3,900! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 82Machinery Manufacturing +16.4% $40b CY 2012 +10.5% 2013 share of machinery manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate
The Current State of America’s Computer & Electronic Product Manufacturing Market 83
Computer & Electronic Product Manufacturing NAICS 334 WORLDWIDE OVERVIEW Companies in this industry manufacture computers, computer peripherals, telecommunications, audio and video, semiconductor, measurement and control, and other related equipment. The global computer & electronic product (C&EP) manufacturing industry generates more than $2 trillion in annual revenue. Top producers include China, USA, and Germany. Industry experts are forecasting moderate growth over the next two years. Demand across the broad CP&E manufacturing sector depends on technological advancement, level of consumer spending, and ever-expanding data storage requirements of both businesses and consumers. SOURCE: Hoovers $2 trillion Annual revenue generated by all global C&EP manufacturers 16% Approximate United States share of worldwide C&EP manufacturing market 12,500 Number of United States C&EP manufacturing companies 84
Computer & Electronic Products NAICS 334 Navigational, Measurement & Control Instruments, and Electromedial ‣ Electromedial & electrotherapeutic apparatus ‣ Search, detection, navigational, aeronautical, & nautical systems ‣ Automatic environmental control ‣ Industrial process control instrumentation ‣ Laboratory instruments ‣ Fluid meters & electricity testing devices Magnetic & Optical Media ‣ Optical recording ‣ Software, compact discs, tapes, etc. Computer & Peripherals ‣ Electronic computer ‣ Computer storage devices ‣ Computer terminals Communications Equipment ‣ Telephone Apparatus ‣ Radio & TV broadcasting ‣ Wireless communications equipment Audio & Video Equipment Semiconductor & Other Electronic Components ‣ Semiconductor ‣ Printed circuit boards ‣ Capacitors, resistors, & connectors -0.1% $262b USA 2012 10% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate 85
Transportation Equipment Value of Shipments, by sub industry, 2013 (Jan - May) Computer & Electronic Equipment Market Share per Value of Shipments Computer & Peripheral 8.4% Navigational, Measurement & Control, and Electromedial 37.4% Communications 14.3% Semiconductor & All Other 39.9% Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau 86
Computer & Electronic Products Market Share per Employment Level Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics Other 4% Communications 10% Computers & Peripheral Equipment 15% Semiconductors & Electronic Components 35% Electronic Instruments 37% 87
2012 vs. 2011 Year Over Year Summary Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau •$597 billion in annual sales, down 1.3% from prior year •Operating income up substantially, net income down sharply •Stockholders’ equity rose significantly in 2012 Increased net working capital 88
Computer & Electronic Products Income Statement Index Comparison Operating Income Index Net Sales Index Net Income Index Dec 2013 Dec 2003 Net Sales 4.4x +134% Dec ’12 to Dec ’03 4.0x 4.0 times faster growth rate than has revenue since ’03 4.4 times faster growth rate than has revenue since ’03 Op Income Net Income 89
57 134 133.6 Industrial Production 63% 80% 74.6 Capacity Utilization 0.8% 10.1% 9.2% Operating Profit 3.9% 24.4% 23.2% Return on Sales 1.3% 9.3% 7.7% Return on Assets 39 63 47 Cash Cycle, days 1.28 1.57 Quick Ratio 1.39 1.54 1.86 1.68 Current Ratio Computer & Electronic Products Dashboard 90 Mashburn Ranking: 6/12 64%
$267k $316k $314k Value of Shipments per Employee $337k $550k $550k Net Sales per Employee 81.0 100.0 81.0 Import Index 88.6 100.0 88.7 Export Index 1.26 1.71 1.71 Inventory to Shipment Ratio 4.58 7.32 7.31 Unfilled Order to Shipment Ratio 88.9 100.0 89.5 Producer Price Index 1,082k 1,413k 1,082k Employment Level 91 Computer & Electronic Products Dashboard Mashburn Ranking: 6/12 64%
Computer & Electronic Products Employment Situation Report Major Index Comparison Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 -2.2% -17.2% Since March ’06 +1.0% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings 92
Computer & Electronic Product Employee Situation Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Hourly Earnings IndexEmployee Level Index Computer & peripherals Communications Electronic instruments Semiconductors May 2013 Mar 2006 May 2013 Mar 2006 93
PPI versus CPI, Index 2009 -July Computer and Peripheral Products Consumer Price Index, CPI Producer Price Index, PPI June 2013 July 2009 -29.4% Decrease since recession PPI -17.9% Decrease since recession CPI Takeaway: the cost to produce computer & peripheral products has decreased more than the price passed on to consumers has decreased 94
Computer & Electronic Products M3 Report Major Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index Q2 2013 Q1 2012 -0.8% +6.2% Q2 ’13 vs. Q4 ’11 -5.0% Q2 ’13 vs. Q4 ’11 Unfilled Orders New Orders Q2 ’13 vs. Q4 ’11 Value of Shipments 95
$9,500! $10,000! $10,500! $11,000! $11,500! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! -9.4% $131b CY 2012 37.4% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing Navigational, Measurement & Control, and Electromedical Value of Shipments 96
$3,500! $3,600! $3,700! $3,800! $3,900! $4,000! $4,100! $4,200! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 5.1% $45b CY 2012 14.3% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing Communications Equipment Manufacturing Value of Shipments 97
Computer & Peripheral Equipment Value of Shipments $2,100! $2,200! $2,300! $2,400! $2,500! $2,600! $2,700! $2,800! $2,900! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! -8.6% $30b CY 2012 8.4% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing 98
Semiconductor & All Other C&EP Value of Shipments $9,300! $9,800! $10,300! $10,800! $11,300! $11,800! $12,300! $12,800! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 1.7% $135b CY 2012 39.9% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing 99
The Current State of America’s Electrical Equipment, Appliance, & Component Manufacturing Market 100
Electrical Equipment, Appliance, & Component Manufacturing NAICS 335 WORLDWIDE OVERVIEW Electric Lighting: Companies in this industry manufacture electric light bulbs and tubes as well as lighting fixtures, lamp shades, and other components and parts. Demand depends primarily on residential, industrial, and commercial construction activity. The industry is concentrated: the largest 50 companies account for about 70 percent of revenue. The US lighting equipment manufacturing industry includes about 1,000 companies with combined annual revenue of about $12 billion. High growth is forecast for the next two years. Key growth drivers include an increase in new construction and renovations, as well as growing popularity of energy-efficient lighting. Household Appliances: Companies in this industry manufacture large appliances such as stoves, ovens, refrigerators, and washers and dryers, and small appliances including vacuum cleaners, fans, humidifiers, and dehumidifiers, and toaster ovens. The global household manufacturing industry generates about $160 billion in annual revenue. The European Union accounts for about $73 billion; China for about $13 billion. The US household appliance manufacturing industry consists of about 300 companies with combined annual revenue of about $18 billion. The output of the appliance manufacturing industry is expected to grow at a low rate over the next two years. Competition from low-cost imports is a major challenge. Demand is driven by growth in consumer income and by home sales. Electrical Equipment: Companies in one segment of this industry manufacture electric motors, power generators, and motor generator sets. The global motor and generator manufacturing industry has revenue of about $100 billion annually. Another segment manufactures industrial controls and control accessories such as relays and motor starters and controllers. Top countries for industrial control products manufacturing include China, Germany, Japan, South Korea, and the US -- countries with strong levels of overall industrialization. However, developing markets are gaining in worldwide market share. SOURCE: Hoovers $1 trillion Annual revenue generated by all global EEA&C manufacturers 11% Approximate U.S. share of worldwide EEA&C manufacturing market >3,000 Number of United States EEA&C manufacturing companies 101
Electric Lighting Equipment ‣ Lamp bulbs & parts ‣ Lighting fixtures Household Appliances ‣ Small electrical appliances ‣ Major appliances ‣ Cooking appliances ‣ Refrigerators & home freezers ‣ Laundry equipment Electrical Equipment ‣ Power, distribution, & transformer ‣ Motor & generator ‣ Switchgear & switchboard apparatus ‣ Relay & industrial control Other Electrical Equipment & Components ‣ Battery ‣ Communication & energy wire & cable ‣ Fiber optic cable ‣ Wiring devices ‣ Carbon & graphite products 0.3% $123b USA 2012 5% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate Electrical Equipment, Appliance, & Component Manufacturing NAICS 335 102
Electrical Equipment, Appliances, & Components Market Share per Value of Value of Shipments, USA Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau All Other 34% Electrical Equipment 32% Household Appliance 16% Battery Manufacturing 10% Electric Lighting 8% CY 2012 Value of Shipments $123 billion 103
Electrical Equipment, Appliances, & Components Market Share per Employment Level, USA Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau June ʼ13 Employment Level 389 thousand All Other 32% Electrical Equipment 36% Household Appliance 14% Battery Manufacturing 7% Electric Lighting 12% 104
Electrical Equipment, Appliances, & Components Value of Shipment by Sub-Industry $10.0! $10.5! $11.0! $11.5! $12.0! $12.5! $13.0! $13.5! $14.0! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! Electric Lighting Equipment! $17.5! $18.5! $19.5! $20.5! $21.5! $22.5! $23.5! $24.5! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! Household Appliance! $28.0! $30.0! $32.0! $34.0! $36.0! $38.0! $40.0! $42.0! $44.0! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! Electrical Equipment! $33.0! $38.0! $43.0! $48.0! $53.0! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! All Other! 105
2012 vs. 2011 Year Over Year Summary •$196 billion in annual sales, slightly up over 2011 •Modest increases in operating and net income margin •More cash on hand, more investment level •Gains in Stockholders’ equity NWC Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 106
Electrical Equipment, Appliances, & Components Income Statement Index Comparison Net Sales 20% +7% Dec ’12 to Dec ’03 20% 3 times faster growth rate than has revenue since ’03 3 times faster growth rate than has revenue since ’03 Op Income Net Income Operating Income Index Net Sales Index Net Income Index Dec 2013 Dec 2003 107
73 101 87.3 Industrial Production 66% 89% 80.7 Capacity Utilization 58 80 74.4 Cash Cycle, days 0.65 0.86 Quick Ratio 0.86 1.00 1.32 1.31 Current Ratio Electrical Equipment, Appliances, & Components Dashboard 108 5.2% 12.8% 6.5% Operating Profit 8.6% 17.9% Return on Sales 14.3% 4.8% 10.5% Return on Assets 5.7% Mashburn Ranking: 9/12 58%
100.6 119.8 119.4 Import Index 100.0 114.2 113.7 Export Index 100.0 139.0 138.5 Producer Price Index 354k 475k 364k Employment Level $405k $512k $489k Net Sales per Employee $221k $334k Value of Shipments per Employee $334k 109 1.30 1.69 1.61 Inventory to Shipment Ratio 1.80 2.50 2.40 Unfilled Order to Shipment Ratio Electrical Equipment, Appliances, & Components Dashboard Mashburn Ranking: 9/12 58%
Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index +39% +52% CY 2012 vs. CY 2003 +24% CY 2012 vs. CY 2003 Unfilled Orders New Orders CY 2012 vs. CY 2003 Total Inventories Electrical Equipment, Appliances, & Components M3 Index Comparison, 2003 through 2012 90! 100! 110! 120! 130! 140! 150! 160! 170! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! M3Index,2003! 110
Electrical Equipment, Appliances, & Components M3 Index Comparison, 2013 vs. 2012 Q2 2013 Q1 2012 Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index +2.3% +1.3% Q2 ’13 vs. Q1 ’12 +1.6% Q2 ’13 vs. Q1 ’12 Unfilled Orders New Orders Q2 ’13 vs. Q1 ’12 Total Inventories 111
Electrical Equipment, Appliances, & Components Total Inventory by Stage, 2003 through 2012 20%! 25%! 30%! 35%! 40%! 45%! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! PercentofTotalInventory! Material & Supplies Inventory! Work in Process! Finished Goods! Trending down since ‘07 Work in Process Trending up since ‘07 Materials & Supplies Flat since ‘07 Finished Goods 112
Electrical Equipment, Appliances, & Components Employment Situation Report Major Index Comparison +30% -16% Since March ’06 Flat Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 113
Electrical Equipment, Appliances, & Components Employment Level Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Electrical equipment All other EEA&C Electric lighting Household appliances June 2013 Mar 2006 Employee Level Index 114
Electrical Equipment, Appliances, & Components Producer Price Index (PPI) Trend +34% Since Dec ’04 PPI 100! 105! 110! 115! 120! 125! 130! 135! 140! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! 115
Electrical Equipment, Appliances, & Components Producer Price Index (PPI) versus Consumer Price Index (CPI) +20% Since Dec ’04 PPI +2% Since Dec ’04 CPI Household Appliance CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! PPI, Household Appliance MFG! CPI, Household Appliances! Further separation between PPI and CPI continues in 2013 Mar-12! May-12! Jul-12! Sep-12! Nov-12! Jan-13! Mar-13! May-13! PPI, Household Appliance MFG! CPI, Household Appliances! 116
Electrical Equipment, Appliances, & Components Producer Price Index (PPI) versus Consumer Price Index (CPI) +16% CY ’12 vs. CY ’06 Import Index +11% CY ’12 vs. CY ’06 Export Index CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Import Index! Export Index! 117
The Current State of America’s Transportation Equipment Manufacturing Market 118
Transportation Equipment Manufacturing NAICS 336 WORLDWIDE OVERVIEW Companies in this industry manufacture transportation equipment, including motor vehicles and parts, aircraft and other aerospace products, ships and boats, and railroad rolling stock. The global transportation equipment manufacturing industry generates as much as $4 trillion in annual revenue. Leading transportation equipment-producing countries include Brazil, China, France, Germany, India, Italy, Japan, South Korea, and the US. Low growth is forecast for the next two years. Demand is driven by employment and interest rates, growth in consumer income, military budgets, and the overall economic climate. The profitability of individual companies depends on manufacturing efficiency, technical expertise, and product quality. Large companies enjoy economies of scale in manufacturing and purchasing, as well as advantages in marketing and distribution. Small companies can compete by specializing in niche markets. SOURCE: Hoovers $4 trillion Annual revenue generated by all global transportation equipment manufacturers 20% Approximate U.S. share of worldwide transportation equipment manufacturing market 12,000 Number of United States transportation equipment manufacturing companies 119
Motor Vehicle ‣ Automobile ‣ Light truck & utility ‣ Heavy duty truck Motor Vehicle Body & Trailer ‣ Body ‣ Truck trailer ‣ Motor home ‣ Travel trailer & camper Motor Vehicle Parts ‣ Engine ‣ Electrical ‣ Steering & suspension ‣ Brake system ‣ Transmission ‣ Seating & interior ‣ Metal stamping Aerospace Product & Parts ‣ Aircraft ‣ Aircraft engine ‣ Guided missile & space vehicle Railroad Rolling Stock Other Transportation Equipment ‣ Motorcycle & bicycle building ‣ Military armored vehicle Ship & Boat Building Transportation Equipment Manufacturing NAICS 336 4.3% $805b USA 2012 28% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate 120
Transportation Equipment Manufacturing Market Share per Value of Shipments Auto 16% Misc 7% Other 14% Bodies & Parts 28% Light Truck 19% Nondefense Aircraft 16% Defense Aircraft 7% Ships & Boats 4% Heavy Truck 3% Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau 121
Transportation Equipment Manufacturing Market Share per Employment Level Aerospace Product & Parts 34% Motor Vehicle Parts 33% Motor Vehicle 12% Ships & Boats 12% Motor Vehicle Bodies & Trailers 8% Railroad Stock 4% Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics 122
2012 vs. 2011 Year Over Year Summary •$745 billion in annual sales •Sales costs, and op income up, and net income down •More cash on hand, less investment level •Total assets up 9.1%, total liabilities up 12.8% •Stockholders’ equity is flat Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 123
Transportation Equipment Manufacturing Income Statement Index Comparison Operating Income Index Net Sales Index Net Income Index Dec 2013Dec 2003 Net Sales 1.4x +28% Dec ’12 to Dec ’03 4.2x 4.2 times faster growth rate than has revenue since ’03 1.4 times faster growth rate than has revenue since ’03 Op Income Net Income 124
0.58 0.82 Quick Ratio 0.74 0.96 1.36 1.27 Current Ratio -3.7% 7.1% 6.2% Operating Profit -7.6% 8.6% 7.6% Return on Sales 49 112 74 Cash Cycle, days -2.9% 8.1% 5.3% Return on Assets 68 104 103.4 Industrial Production 55% 81% 73.8 Capacity Utilization Transportation Equipment Dashboard 125 Mashburn Ranking: 1/12 83%
$372k $518k $518k Value of Shipments per Employee $432k $659k $659k Net Sales per Employee 99.9 112.6 111.8 Import Index 100.0 118.0 117.9 Export Index 1.09 2.02 1.70 Inventory to Shipment Ratio 7.62 19.47 14.68 Unfilled Order to Shipment Ratio 99.8 116.0 115.6 Producer Price Index 1,309k 1,805k 1,496k Employment Level 126 Transportation Equipment Dashboard Mashburn Ranking: 1/12 83%
Transportation Equipment Manufacturing Employment Situation Index Comparison Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 17.0% -16.1% Since March ’06 +2.2% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings 127
Transportation Equipment Manufacturing Employee Situation Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Hourly Earnings Index May 2013 Mar 2006 May 2013 Mar 2006 Employee Level Index Motor vehicle bodies & trailers Motor vehicle parts Motor vehicle Aerospace 128
Consumer Price Index, CPI Producer Price Index, PPI June 2013 July 2009 New & Used Motor Vehicles PPI versus CPI 123.0! 125.0! 127.0! 129.0! 131.0! 133.0! 135.0! 137.0! 139.0! 107.0! 108.0! 109.0! 110.0! 111.0! 112.0! 113.0! 114.0! Motor Vehicle Parts June 2013 July 2009 Consumer Price Index, CPI Producer Price Index, PPI +5.6% +8.5% Increase since recession PPI Increase since recession CPI +4.7% +9.5% Increase since recession PPI Increase since recession CPI 129
Autos, Trucks, & SUVs Manufacturing M3 Report Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index May 2013 Jan 2012 3.4% +18.4% May ’13 vs. Jan ’12 +21.8% May ’13 vs. Jan ’12 New Orders Value of Shipments May ’13 vs. Jan ’12 Total Inventories 130
Motor Vehicle Bodies, Trailers, & Parts M3 Report Major Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index May 2013 Jan 2012 +4.0% +5.7% May ’13 vs. Jan ’12 -4.4% May ’13 vs. Jan ’12 New Orders Unfilled Orders May ’13 vs. Jan ’12 Value of Shipments 131
$17,900! $18,100! $18,300! $18,500! $18,700! $18,900! $19,100! $19,300! $19,500! $19,700! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Motor Vehicle Bodies, Trailers, & Parts Value of Shipments Transportation Equipment Manufacturing 3.7% $221b CY 2012 28.4% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 132
Automobile Manufacturing Value of Shipments $7,500! $8,000! $8,500! $9,000! $9,500! $10,000! $10,500! $11,000! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Transportation Equipment Manufacturing 24.8% $107b CY 2012 15.8% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 133
Light Truck & Utility Vehicle Manufacturing Value of Shipments $10,000! $10,500! $11,000! $11,500! $12,000! $12,500! $13,000! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Transportation Equipment Manufacturing 13.0% $136b CY 2012 18.5% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 134
Nondefense Aircraft Manufacturing Value of Shipments $9,200! $9,700! $10,200! $10,700! $11,200! $11,700! $12,200! $12,700! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Transportation Equipment Manufacturing 3.9% $127b CY 2012 16.0% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 135

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2013 Current State of American Durable Goods Manufacturing Sector

  • 1. THE MASHBURN REPORT August 2013 Current State of America’s Durable Goods Manufacturing Sector
  • 2. Foreword, from the Author My name is Lee Mashburn. I am a degreed manufacturing technologist who has engaged in various process and application engineering roles across a myriad of manufacturing industries. Since my engineering days, I have worked almost 20 years as marketer and product manager for recognized and respected technology corporations such as Honeywell, SAP, and SSA Global. My teams have scoped and launched innovative new software solutions, adopted by thousands of global manufacturers to increase growth, drive profit, reduce costs, and improve operational efficiency. These products helped clients drive better decisions faster to gain a competitive advantage in their market places. To drive differentiating solutions to market, one must expertly analyze the market to pinpoint gaps, spot trends, quantify potential, and then execute winning go-to-market plans. Few humans have exerted more passion, time, and effort than me to perfect this process. Over the years, I have amassed a unique set of skills and processes to more consistently attack the optimal target market with the right product at the right time. Throughout my career, I have relentlessly sought better market data to support critical go-to-market initiatives. In many cases I have been underwhelmed, disappointed, and frustrated. Raw intelligence is out there but it can be hard to find and is often not cost-effective. Additionally, most of the raw data simply trends stand-alone variables and requires heavy lifting to convert information into concrete action steps. To help you overcome these obstacles, I have created the Mashburn Report series. Whether you are an executive, analyst, strategic planner, product manager, or marketer, Mashburn Reports are designed as powerful yet cost- effective tools to supplement your market sizing and analysis efforts. Mashburn Reports uniquely integrate and visualize choice content from more than a dozen market-moving reports. Information contained in my reports is not the typical “cut and paste data into Excel and then create simple trend charts.” This specific report on the state of America’s durable goods manufacturing market contains more than 140 pages of charts, tables, infographics, and industry benchmarks that won’t be found in other documents - at any price point. I believe you will greatly benefit. I hope you enjoy!
  • 3. About the Author Lee Mashburn is an accomplished business-to-business marketing and product management executive who has helped companies like SAP, SSA Global, and Honeywell to transform and grow into market leadership positions. Lee has captained numerous corporate-wide strategic and marketing planning processes. Leveraging available market research data, Lee and his teams have astutely analyzed to uncover the optimal market targets to attack. Lee has developed his “Mashburn Report” series in order to provide a more insightful and cost-effective product for business professionals and investors who wish to supplement the market data they have traditionally used - in order to make more informed and confident decisions. Mashburn Reports: Durable Goods Manufacturing Nondurable Goods Manufacturing Retail Trade (in process) Wholesale Trade (in process)
  • 4. Table of Contents Section 1: Report Introduction & Overview ! ! ! ! Pages 1-21 • Introduction • List of manufacturing and trade sectors, industries, and sub-industries • Data sources used for this report • List of performance metrics tracked in this report • Overview of the Mashburn Industry Health Monitor Rating • Comparison of manufacturing industries according to the Mashburn Rating Section 2: Durable Goods Manufacturing Overview ! ! Pages 22- 38 • Table of durable goods manufacturing industries and sub-industries • Market share by sales, value of shipments, and employment level • Consolidated financial statements - income and balance sheets • Employment situation - level, hours worked, hourly earnings • Return per employee • Job openings, hires, and separations • National output & inventories - orders, value of shipments, inventories • Industrial productivity and capacity utilization • Import and export indexes • Producer price indexes
  • 5. Table of Contents - continued Section 3: Primary Metal Manufacturing ! ! ! ! ! ! Pages 39-51 Section 4: Fabricated Metal Product Manufacturing! ! ! Pages 52-64 Section 5: Machinery Manufacturing! ! ! ! ! ! ! Pages 65-82 Section 6: Computer & Electronic Product Manufacturing! ! Pages 83-99 Section 7: Electrical Equipment, Appliances, & Component! Pages 100-117 Section 8: Transportation Equipment Manufacturing! ! ! Pages 118-135
  • 6. Introduction 1 This report addresses questions like: ‣ What industry segments are encompassed under the nondurable goods manufacturing super sector? ‣ What are the relative market sizes and growth rates of nondurable goods manufacturing industry segments? ‣ Which key financial and performance metrics are important to track? Why? What are the current states of those key metrics? How have they trended over the past decade what are they doing in 2013? Are there multivariable interrelationships that can expose useful insights? ‣ What data sources are used to support the information contained in this Mashburn Report? ‣ What is the MASHBURN RATING? How is it used to monitor and compare the current health of various manufacturing industry segments? Mashburn Reports empower those involved with manufacturing markets: ‣ Marketers and product managers ‣ Business analysts ‣ Strategic and operational planners ‣ Industry consultants ‣ Venture capitalists
  • 7. WHOLESALE TRADE RETAIL TRADE Merchant, Durable Goods •Motor Vehicles, Parts, & Supplies •Furniture & Home Furnishing •Lumber & Construction Materials •Pro & Commercial Equipment •Metal & Mineral •Household Appliances & Electronics •Hardware, Plumbing, & Heating •Machinery Equipment & Supplies •Miscellaneous Merchant, Nondurable Goods • Paper & Paper Products • Drugs, Druggists, Sundries • Apparel, Piece Goods, Notions • Grocery & Related Products • Farm Product Raw Material • Chemical & Allied Products • Petroleum, Petroleum Products • Alcoholic Beverage • Miscellaneous Wholesale, Electronic Market •Business-to-Business •Trade Agents & Brokers Durable Goods •Wood •Nonmetallic Mineral •Primary Metals •Fabricated Metals •Machinery •Computer & Electronics •Electric Equipment, Appliances •Transportation •Furniture •Miscellaneous In-Store •Motor Vehicles, Parts, & Supplies •Furniture & Home Furnishing •Electronics & Appliances •Building & Garden Equipment •Food & Beverage •Health & Personal Care •Gasoline Stations •Clothing & Clothing Accessories •Sporting Goods, Hobbies, Games •General Merchandise •Miscellaneous Non-Store •Electronic Shopping •Mail Order Houses •Vending Machine Operators •Direct Selling Fuel Dealers Nondurable Goods •Food •Beverage & Tobacco •Textile Mills •Textile Products •Apparel •Leather •Paper •Printing •Petroleum & Coal •Chemical •Plastics & Rubber MANUFACTURING 2
  • 8. Samples of the financial & economic publications referenced in Mashburn Reports ‣Manufacturers’ Shipments, Inventories, and Orders (M3) ‣Quarterly Financial Report (QFR) ‣Employment Situation Report ‣Job Openings and Labor Turnover ‣Producer Price Index ‣Consumer Price Index ‣Labor Productivity and Cost ‣Import/Export Price Index ‣Gross Domestic Product ‣Personal income ‣Industrial Production & Capacity Utilization 3
  • 9. Performance Indicators and metrics that are presented in the Mashburn Reports This Mashburn Report analyzes and charts dozens of key economic and financial indicators (view list below) for most manufacturing and trade market segments - typically showcasing 10-year trends. Employment Situation ‣Employment level ‣Average hours worked ‣Average earnings ‣Job openings ‣Labor turnover Consumer Spend ‣Personal consumption expenditures ‣Personal income Output & Inventories ‣New & unfilled orders ‣Value of shipments ‣Inventory levels ‣Industrial productivity ‣Capacity utilization Financial Statements ‣Net sales ‣Cost of sales & operations ‣Operating & net income ‣Assets & liabilities ‣Shareholders’ equity ‣Net working capital Price & Cost Indexes ‣Consumer price ‣Producer price ‣Labor productivity & cost ‣Import/export price Misc. Metrics ‣Cash-to-cash cycle ‣Current ratio ‣Quick ratio ‣Return on assets ‣Return on sales 4
  • 10. Mashburn Index 2013 Health Monitor Manufacturing Industries The Mashburn Index provides a repeatable process for rating and ranking the relative financial and operational health of durable and nondurable goods manufacturing industry segments. A total of thirteen (13) key performance indicators are analyzed and scored to derive a set of numerical indexes that are then compared. Current index scores range from 50% (poorest health) to 83% (best health) as illustrated below. Transportation Equipment is in the best financial and operational health as of June 2013 with Primary Metals trailing the pack. Plastics & rubber products and food manufacturing rank #2 and #3 to lead the nondurables cause. 5
  • 11. Transportation #1 B- Plastics & Rubber #2 C+ Food Products #3 C Machinery #4 C- Fabricated Metals #5 D+ Computer & Electronics #6 D Beverage & Tobacco #7 D- Chemical #10 F Electrical #9 F Petroleum & Coal #8 D- Paper #11 F Primary Metals #12 F MASHBURNHEALTHMONITOR August2013 6
  • 12. Mashburn Index - sample from dashboard 2013 Health Monitor for Manufacturing Industries Variables Used to Create Mashburn Index • Operating Profit • Return on Sales • Cash Cycle • Return on Assets • Industrial Production • Capacity Utilization • Return per Employee • Growth Rates, ’13 vs. ’12 • Employment Level • Intangibles 7
  • 13. The Mashburn Index Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 8 Transportation is the healthiest of all top manufacturing industries! 45.0%! 55.0%! 65.0%! 75.0%! 85.0%! Primary Metals! Paper! Chemical! Electrical Equipment! Petroleum & Coal! Beverage & Tobacco! Computer & Electronics! Fabricated Metal Products! Machinery! Food! Plastics & Rubber! Transportation!
  • 14. The Mashburn Index Comparing Manufacturing Industries 9
  • 15. Value of Shipments Growth Rate, 2013 vs. 2012 Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable -4%! -2%! 0%! 2%! 4%! 6%! 8%! Computer & Electronics! Paper! Primary Metals! Chemical! Electrical Equipment! Petroleum & Coal! Beverage & Tobacco! Fabricated Metal Products! Plastics & Rubber! Food! Machinery! Transportation! Data source: M3 Report, U.S. Census Bureau Figures reflect calendar year 2012 results 10
  • 16. Return on Sales (ROS) Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 11 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results ROS = (net pre-tax income / net sales) * 100 0%! 5%! 10%! 15%! 20%! 25%! Machinery! Food! Paper! Plastics and Rubber! Primary Metals! Petroleum & Coal! Transportation! Fabricated Metals! Electrical! Chemical! Computer & Electronic! Beverage & Tobacco!
  • 17. Value of Shipments, in millions Comparing Durable and Nondurable Goods Manufacturing Industries Data source: M3 Report, U.S. Census Bureau Figures reflect calendar year 2012 results Nondurable Durable 12 $0! $200! $400! $600! $800! $1,000! Electrical! Beverage & Tobacco! Paper! Plastics and Rubber! Primary Metals! Computer & Electronic! Fabricated Metals! Machinery! Food! Transportation! Chemical! Petroleum & Coal!
  • 18. Net Sales, in billions Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 13 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results $0! $400! $800! $1,200! $1,600! Paper! Beverage & Tobacco! Plastics and Rubber! Electrical! Primary Metals! Fabricated Metals! Machinery! Computer & Electronic! Food! Chemical! Transportation! Petroleum & Coal!
  • 19. Operating Margin, % of sales Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 14 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results Operating margin = (operating income / net sales) * 100 0%! 5%! 10%! 15%! 20%! Petroleum & Coal! Electrical! Transportation! Primary Metals! Paper! Food! Chemical! Plastics and Rubber! Fabricated Metals! Machinery! Computer & Electronic! Beverage & Tobacco!
  • 20. Cash-to-Cash Cycle (C2C), days Comparing Durable and Nondurable Goods Manufacturing Industries Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results C2C = (accounts recievable days + inventory days) - accounts payable days 15 Nondurable Durable 0! 10! 20! 30! 40! 50! 60! 70! 80! Electrical Equipment! Transportation! Fabricated Metals! Primary Metals! Chemical! Machinery! Beverage & Tobacco! Paper! Food! Plastics and Rubber! Computer & Electronic! Petroleum & Coal!
  • 21. Return on Assets (ROA) Comparing Durable and Nondurable Goods Manufacturing Industries 16 Data source: Quarterly Financial Report, U.S. Census Bureau Figures reflect calendar year 2012 results ROA = (net income / total assets) * 100 Nondurable Durable 3%! 4%! 5%! 6%! 7%! 8%! 9%! 10%! Paper! Food! Transportation! Electrical Equipment! Plastics & Rubber! Chemical! Machinery! Computer & Electronics! Beverage & Tobacco! Petroleum & Coal! Fabricated Metal Products!
  • 22. Inventories to Shipments Ratio Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 17 Data source: M3 Report, U.S. Census Bureau Figures reflect calendar year 2012 results 0.0! 0.5! 1.0! 1.5! 2.0! Machinery! Beverage & Tobacco! Transportation! Fabricated Metals! Computer & Electronic! Electrical! Primary Metals! Chemical! Plastics and Rubber! Paper! Food! Petroleum & Coal!
  • 23. Employment Level, in thousands Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 18 Data source: Employment Situation Report, U.S. Bureau of Labor Statistics Figures reflect calendar year 2012 results 0! 300! 600! 900! 1200! 1500! Petroleum & Coal! Beverage & Tobacco! Electrical! Paper! Primary Metals! Plastics and Rubber! Chemical! Computer & Electronic! Machinery! Food! Fabricated Metals! Transportation!
  • 24. Hourly Earnings Comparing Durable and Nondurable Goods Manufacturing Industries Data source: Employment Situation Report, U.S. Bureau of Labor Statistics Figures reflect calendar year 2012 results Nondurable Durable 19 $0! $7! $14! $21! $28! $35! Food! Plastics and Rubber! Fabricated Metals! Beverage & Tobacco! Primary Metals! Paper! Machinery! Electrical! Chemical! Transportation! Computer & Electronic! Petroleum & Coal!
  • 25. Industrial Productivity Index Comparing Durable and Nondurable Goods Manufacturing Industries Data source: G17 Report, U.S. Federal Reserve Figures reflect end of calendar year 2012 results An economic indicator that measures changes in output. High levels of industrial production can lead to uncontrolled levels of consumption and rapid inflation. Nondurable Durable 20 0! 20! 40! 60! 80! 100! 120! 140! Paper! Chemical! Plastics and Rubber! Electrical! Beverage & Tobacco! Fabricated Metals! Petroleum & Coal! Primary Metals! Machinery! Food! Transportation! Computer & Electronic!
  • 26. Capacity Utilization Comparing Durable and Nondurable Goods Manufacturing Industries Nondurable Durable 21 Data source: G17 Report, U.S. Federal Reserve Figures reflect end of calendar year 2012 results Considered a leading indicator of inflation and future capital spending. Shows the level at which U.S. industry is performing relative to potential. 65%! 70%! 75%! 80%! 85%! Beverage & Tobacco! Food! Plastics and Rubber! Transportation! Primary Metals! Computer & Electronic! Chemical! Machinery! Paper! Electrical! Fabricated Metals! Petroleum & Coal!
  • 27. THE MASHBURN REPORT August 2013 Current State of America’s Durable Goods Manufacturing Sector 22
  • 28. Durable goods are products designed to last at least three years; bigger ticket items like automobiles, televisions, and refrigerators. These products account for roughly 15% of consumer spending. Industries that fall under the durable goods manufacturing sector umbrella: Sub-market NAICS 2012 Share per value of shipments Key words Wood Products 321 3% sawmills, veneer, truss, wood containers, pre-fab Nonmetallic Mineral Products 327 4% clay, pottery, glass, cement, gypsum Primary Metals 331 11% iron and steel mills, aluminum, foundries Fabricated Metal Products 332 13% forging, stamping, cutlery, hand tools, boilers, tanks Machinery 333 15% agriculture, mining, industrial Computer & Electronic Products 334 13% computer, peripheral, communications, audio, video Electrical Equipment & Appliances 335 5% lighting, household appliance, electrical equipment Transportation 336 29% motor vehicle and parts, aerospace, railroad, ships Furniture & Related Products 337 2% household and office furniture, kitchen cabinets, window treatments Miscellaneous 339 5% medical equipment and supplies, jewelry, silverware, sporting goods 23
  • 29. Market Segmentation America’s Durable Goods Manufacturing Takeaway: ‣ Over 70% of the durable goods manufacturing market share consists of transportation, computer & electronics, machinery, and fabricated metals. Transportation garners #1 share for all three metrics. By Total Sales per the QFR report By Value of Shipments per the M3 report By Employment Level per the Employment Situation report Transportation 31% Computer & Electronic 19% Machinery 14% Fabricated Metal 10% All Other 26% Transportation 28% Computer & Electronic 13% Machinery 15% Fabricated Metal 13% All Other 31% Transportation 20% Computer & Electronic 14% Machinery 15% Fabricated Metal 19% All Other 32% 24
  • 30. •$3.1 trillion in annual sales •Sales and costs up, and net income down •More cash on hand, greater investment level •Total assets up 6.5%, total liabilities up 7.4% •Stockholders’ equity up 5.4% 2012 vs. 2011 Year Over Year Summary 25 Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau
  • 31. Employment Situation - Employment Level Durable Goods Manufacturing Sector, USA The Employment Situation Report, produced monthly by the United States Bureau of Labor Statistics (BLS), is the source of raw data used to complete this section of the Mashburn Report. The BLS surveys approximately 145,000 businesses and agencies that span over 500,000 U.S. worksites to determine employment, hours, and earnings figures at detailed industry levels. Note the key figures and charts below: 2.3% 3-year cumulative annual growth rate in employment level for the durable goods manufacturing sector. 7.5 million Employment level as of May 2013 for the durable goods manufacturing sector. 12.3 million The employment level of the durable goods manufacturing sector in June 1979. Employment Level, 2003-2012 Durable Goods Manufacturing Sector 6,900! 7,400! 7,900! 8,400! 8,900! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! inthousands! Employment Level, since 1940 Durable Goods Manufacturing Sector 2010 Now 1940 5,000! 6,000! 7,000! 8,000! 9,000! 10,000! 11,000! 12,000! inthousands! 26
  • 32. Employment Situation - Hours & Earnings Durable Goods Manufacturing Sector, USA The Employment Situation Report, produced monthly by the United States Bureau of Labor Statistics (BLS), is the source of raw data used to complete this section of the Mashburn Report. The BLS surveys approximately 145,000 businesses and agencies that span over 500,000 U.S. worksites to determine employment, hours, and earnings figures at detailed industry levels. Note the key figures and charts below: 41.1 Average number of hours worked by durable goods manufacturing employees. $25.55 Average hourly earnings by durable goods manufacturing employees in May 2013. $21.94 Average hourly earnings by durable goods manufacturing employees - after inflation. 38.5! 39.0! 39.5! 40.0! 40.5! 41.0! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! HY 2013! Average Weekly Hours Worked Durable Goods Manufacturing Sector $20.00! $21.00! $22.00! $23.00! $24.00! $25.00! $26.00! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! HY 2013! USD,perhour! Average Hourly Earnings! Average Hourly Earnings, adjusted for inflation! Average Hourly Earnings Durable Goods Manufacturing Sector 27
  • 33. Return per Employee Durable Goods Manufacturing Sector, USA 47% Increase in value of shipments per employee since CY 2003 61% Increase in net sales per employee since CY 2003 $230! $250! $270! $290! $310! $330! $350! $370! $390! $410! $430! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! $,inthousands! Net Sales per Employee! Value of Shipments per Employee! How Long ... ... can manufacturing companies sustain these increases? 28
  • 34. Job Openings, Hires, & Separations, JOLTS Report Durable Goods Manufacturing Sector, USA Job Openings Index Separations Index Hires Index CY 2012 CY 2003 -43% Decrease in total separations from 2003 to 2012 -29% Decrease in new hires from 2003 to 2012 45% Increase in job openings from 2003 to 2012. 29
  • 35. Reasons for Job Separations, JOLTS Report Durable Goods Manufacturing Sector, USA I Quit! Job quits have nearly doubled since the recession ended 0%! 20%! 40%! 60%! 80%! 100%! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! PercentofTotalJobSeparations! Layoffs & Discharges! Other Separations! Quits! 30
  • 36. National Output & Inventories - New Orders Durable Goods Manufacturing Sector, USA New orders is a great indicator of durable goods manufacturing sector growth and productivity. This measurement is tracked and published on a monthly basis by the U.S. Census Bureau in the Manufacturers’ Shipments, Inventories, and Orders (M3) report. Statistical data from the M3 report covers current economic conditions and indicators of future production commitments in the manufacturing sector. $2.6 trillion Amount of new durable goods manufacturing orders - per the M3 report - in CY 2012. 12.5% 3-year compound annual growth rate (CAGR) for new durable goods manufacturing orders. 3-year CAGR for new durable goods manufacturing orders - excluding transportation & defense industries. 7.0% $1.0! $1.2! $1.4! $1.6! $1.8! $2.0! $2.2! $2.4! $2.6! $2.8! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,intrillions! New Orders! New Orders minus Transportation & Defense! New Orders Durable Goods Manufacturing Sector New orders reflect the very latest demand and a surge in orders will keep factories busy. But one large military or aircraft order can inflate the new orders metric - which is why it’s important to track new orders that exclude defense and/or transportation. 31
  • 37. National Output & Inventories - M3 Report Variables Durable Goods Manufacturing Sector, USA In addition to new orders, the M3 report also features statistics for unfilled orders, value of shipments, and inventory levels. ‣ Shipments are products that have been ordered and that are being delivered right now. ‣ Unfilled orders signify backlog that can keep factories busy. An increase is good as long as the factory can fill the orders without chronic delays that create unhappy customers. ‣ When factory output exceeds orders, inventories can balloon and lead to corporate financial headaches. A buildup of unwanted goods can be quite costly. As inventory mounts, plants can be forced to slash output, shut down plants, and layoff employees. $2.7 trillion Value of durable goods manufacturing shipments - per the M3 report - in CY 2012. 11.7 trillion Value of durable goods manufacturing unfilled orders - per the M3 report - in CY 2012. 374 billion CY 2012 value of total inventories within the durable goods manufacturing sector. 2.6! 3.1! 3.6! 4.1! 4.6! 5.1! 5.6! Jan-03! Jun-03! Nov-03! Apr-04! Sep-04! Feb-05! Jul-05! Dec-05! May-06! Oct-06! Mar-07! Aug-07! Jan-08! Jun-08! Nov-08! Apr-09! Sep-09! Feb-10! Jul-10! Dec-10! May-11! Oct-11! Mar-12! Aug-12! Jan-13! Ratio! Unfilled Orders to Value of Shipments Ratio! Recession 0.4! 0.5! 0.5! 0.6! 0.6! 0.7! 0.7! 0.8! 0.8! Jan-03! Jun-03! Nov-03! Apr-04! Sep-04! Feb-05! Jul-05! Dec-05! May-06! Oct-06! Mar-07! Aug-07! Jan-08! Jun-08! Nov-08! Apr-09! Sep-09! Feb-10! Jul-10! Dec-10! May-11! Oct-11! Mar-12! Aug-12! Jan-13! Ratio! Value of Shipments to Total Inventories Ratio! Recession 32
  • 38. Total inventories represent the value of the end-of-month stocks regardless of stage of fabrication (whether in the form of purchased materials and supplies, work in process, or finished goods). These inventories are valued at cost using any valuation method other than LIFO. Inventories associated with the non-manufacturing activities of your company are excluded. ‣ Materials-and-Supplies Inventory - All unprocessed raw and semi-fabricated commodities and supplies for which you have title. ‣ Work-in-Process Inventory - Accumulated costs of all commodities undergoing fabrication within your plants and long-term contracts where the inventory costs are for undelivered items and the value of work done that has not been reported in sales. ‣ Finished Good Inventory - The value of all completed products ready for shipment and all inventories and goods bought for resale requiring no further processing or assembly. No accumulation of finished goods inventories should occur with long-term contracts unless the total sales receipts are not recorded until the time of delivery. National Output & Inventories - Inventories Durable Goods Manufacturing Sector, USA Percentage of Total Inventories by Stage of Completion Durable Goods Manufacturing Sector, USA 26%! 28%! 30%! 32%! 34%! 36%! 38%! 40%! 42%! Mar-03! Sep-03! Mar-04! Sep-04! Mar-05! Sep-05! Mar-06! Sep-06! Mar-07! Sep-07! Mar-08! Sep-08! Mar-09! Sep-09! Mar-10! Sep-10! Mar-11! Sep-11! Mar-12! Sep-12! Mar-13! PercentofTotalInventories! Materials & Supplies! Work in Process! Finished Goods! 33
  • 39. National Output & Inventories - Industrial Productivity (IP) & Capacity Utilization (CU) Durable Goods Manufacturing Sector, USA The Federal Reserve Board produces a monthly report of production and capacity utilization indexes for the industrial sector. The industrial sector, per the Federal Reserve Board, covers manufacturing, mining, and electric and gas utilities. The industrial sector, combined with the construction industry, accounts for the bulk of the variation in national output over the course of the business cycle. Ongoing production and capacity measurement helps illuminate structural developments in the economy. The production index measures real output and is expressed as a percentage of real output in a base year, currently 2007. On a monthly basis, the individual indexes of industrial production are constructed from two main types of source data: (1) output measured in physical units and (2) data on inputs to the production process, from which output is inferred. Data on physical products, such as tons of steel or barrels of oil, are typically obtained from private trade associations and from government agencies; data of this type are used to estimate monthly industrial production wherever possible and appropriate. The Federal Reserve Board constructs estimates of capacity and capacity utilization for industries in manufacturing, mining, and electric and gas utilities. For a given industry, the capacity utilization rate is equal to an output index (seasonally adjusted) divided by a capacity index. The Federal Reserve Board's capacity indexes attempt to capture the concept of sustainable maximum output-the greatest level of output a plant can maintain within the framework of a realistic work schedule, after factoring in normal downtime and assuming sufficient availability of inputs to operate the capital in place. 34 IP & CU Index Comparison Durable Goods Manufacturing Sector, USA 55! 65! 75! 85! 95! 105! Mar-03! Aug-03! Jan-04! Jun-04! Nov-04! Apr-05! Sep-05! Feb-06! Jul-06! Dec-06! May-07! Oct-07! Mar-08! Aug-08! Jan-09! Jun-09! Nov-09! Apr-10! Sep-10! Feb-11! Jul-11! Dec-11! May-12! Oct-12! Mar-13! Index,2007! Industrial Productivity! Capacity Utilization!
  • 40. Import and Export Indexes Durable Goods Manufacturing Sector, USA Transportation Equipment 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! Computer & Electronic Products 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! Machinery Manufacturing 81! 91! 101! 111! 121! 131! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Export Index! Import Index! Fabricated Metal Products 35
  • 41. Producer Price Indexes, PPI The Producer Price Indexes (PPIs) are a family of indexes that measure changes in the selling prices received by domestic producers of goods and services. The PPI sample includes over 25,000 establishments providing approximately 100,000 price quotations per month for products specified through a process called disaggregation. Producer Price Indexes are usually made available during the second full week of the month following the reference date. The PPI family of indexes consists of several major classification systems, each with its own structure, history, and uses. However, indexes in all classification systems draw from the same pool of price information provided to the BLS by cooperating company reporters. The three most important classification structures are (1) industry, (2) commodity, and (3) Stage of Process (SOP). ‣ A Producer Price Index for an industry is a measure of changes in prices received for the industry’s net output sold outside the industry. Measures—or indexes—of price change classified by industry form the basis of the program. These indexes reflect the price trends of a constant set of goods and services that together represent the total output of an industry. ‣ The commodity classification structure of the PPI organizes products by similarity of end use or material composition, regardless of whether the products are classified as primary or secondary in their industry of origin. ‣ PPI are calculated for the three stages of process; crude, intermediate, and finished goods. Finished goods are defined as commodities that are ready for sale to the final-demand user—either an individual consumer or a business firm. Intermediate materials, supplies, and components consists partly of already processed commodities that require further processing. Crude materials for further processing are defined as unprocessed commodities not sold directly to consumers. Source: Bureau of Labor Statistics www.bls.gov 36
  • 42. Producer Price Indexes, PPI Durable Goods Manufacturing Sector, USA Transportation Equipment 113.0! 113.5! 114.0! 114.5! 115.0! 115.5! 116.0! 116.5! PPI! Jan - Jun ’12 Jan - Jun ’13 Computer & Electronic Product 88.4! 88.6! 88.8! 89.0! 89.2! 89.4! 89.6! 89.8! 90.0! PPI! Jan - Jun ’12 Jan - Jun ’13 1.3% Increase in PPI when comparing 2013 versus 2012 115.6 Most recent PPI, 15.6% increase vs. Dec ’03 -0.3% Increase in PPI when comparing 2013 versus 2012 89.5 Most recent PPI, 10.5% decrease vs. Dec ’03 37
  • 43. Producer Price Indexes, PPI Durable Goods Manufacturing Sector, USA Machinery Manufacturing 123.5! 124.0! 124.5! 125.0! 125.5! 126.0! 126.5! 127.0! 127.5! 128.0! 128.5! PPI! Jan - Jun ’12 Jan - Jun ’13 1.4% Increase in PPI when comparing 2013 versus 2012 127.6 Most recent PPI, 27.6% increase vs. Dec ’03 Fabricated Metal Products 183.5! 184.0! 184.5! 185.0! 185.5! 186.0! 186.5! 187.0! PPI! Jan - Jun ’12 Jan - Jun ’13 0.5% Increase in PPI when comparing 2013 versus 2012 186.3 Most recent PPI, 86.3% increase vs. Dec ’03 38
  • 44. The Current State of America’s Primary Metals Manufacturing Market 39
  • 45. Primary Metals Manufacturing NAICS 331 WORLDWIDE OVERVIEW Companies in this industry engage in smelting and refining of ferrous and nonferrous metals and include iron and steel mills, rolled steel shape manufacturers, aluminum producers, and copper foundries. The global primary metals manufacturing industry generates annual revenue of more than $3 trillion. China leads all nations in crude steel and aluminum production by a wide margin. Other top steel producers include Japan, the US, India, Russia, and South Korea. Other major aluminum suppliers include Canada, Russia, and Australia. Modest growth is forecast for the United States over the next two years. Key growth drivers include durable goods orders and nonresidential construction spending. Demand comes largely from manufacturers of durable goods such as motor vehicles, machinery, containers, and construction steel. The profitability of individual companies depends largely on efficient operations, because most products are commodities sold based on price. Big companies have large economies of scale in production. Accordingly, most producers of secondary products buy raw metal from the large producers. Small companies can compete by serving regional markets or producing specialty products. SOURCE: Hoovers $3 trillion Annual revenue generated by all global primary metals manufacturers 16% Approximate U.S. share of worldwide primary metals manufacturing market 3,500 Number of United States primary metals manufacturing companies 40
  • 46. Primary Metal Manufacturing NAICS 331 +2.7% $296b USA 2012 11% 2013 share of durable goods manufacturing market 2013 vs. 2012 Jan-July new orders New Orders Market Share Growth Rate Iron and Steel Mills, Ferroalloy Manufacturing Steel Product MFG, from Purchased Steel ‣ Pipe & tube ‣ Rolled steel ‣ Steel wiring Alumina & Aluminum Production & Processing ‣ Alumina refining ‣ primary aluminum production ‣ Smelting & alloying ‣ Sheeting, plating, rolling, drawing, & extrusion Nonferrous Metal (Except Aluminum) Production & Processing ‣ Smelting & refining ‣ Copper rolling, drawing, extruding, & alloying Foundries ‣ Ferrous metal ‣ iron ‣ Steel ‣ Nonferrous metal ‣ Nonferrous metal die-casting 41
  • 47. Primary Metal Manufacturing New Orders by Sub-Industry $0! $20! $40! $60! $80! $100! $120! $140! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,inbillions! Aluminum & Nonferrous Ferrous Metal Foundries Iron & Steel Mills, Ferro Alloy +2.4% 2013 vs. 2012 new orders $296b USA 2012 New Orders Growth Rate 42
  • 48. Primary Metal Manufacturing Market Share per New Orders Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau Aluminum & Nonferrous 52% Iron & Steel Mills, Ferro Alloy & Steel 41% *Ferrous Metal **Foundries 7% $151b Jan - June ’13 $296b USA 2012 New Orders New Orders 43 *Ferrous metals contain appreciable amounts of iron. **A foundry is a factory that produces metal castings.
  • 49. Primary Metal Manufacturing Employment Level as of June 2013 Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics 0! 20! 40! 60! 80! 100! 120! 140! Nonferrous Production & Processing! Alumina & Aluminum Production! Steel Product MFG from Purchased Steel! Iron & Steel Mills, Ferro Alloy! Foundries! Employment Level, in thousands! -0.3% 0.9% Growth Rate 2013 vs. 2012 -2.6% -2.8% -6.1% 394k June 2013 Employment Level 44
  • 50. Primary Metal Manufacturing Employment Situation Index Comparison +3.9% -15.1% Since March ’06 +2.2% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 45
  • 51. 66 106 99.1 Industrial Production 49% 84% 73.7 Capacity Utilization -3.3% 11.2% 6.3% Operating Profit -4.2% 12.6% 6.7% Return on Sales -2.0% 10.4% 5.2% Return on Assets 57 86 66.3 Cash Cycle, days 0.83 1.51 Quick Ratio 1.37 1.42 2.25 2.18 Current Ratio Primary Metal Manufacturing Dashboard 46 Mashburn Ranking: 12/12 50%
  • 52. 103.0 196.5 163.0 Import Index 102.2 187.8 158.9 Export Index 1.34 2.39 1.42 Inventory to Shipment Ratio 1.25 1.95 1.43 Unfilled Order to Shipment Ratio 117.7 233.5 196.9 Producer Price Index 347k 496k 392k Employment Level $284k $655k $608k Net Sales per Employee $297k $758k Value of Shipments per Employee $758k 47 Primary Metal Manufacturing Dashboard Mashburn Ranking: 12/12 50%
  • 53. 2012 vs. 2011 Year Over Year Summary Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau •$242 billion in annual sales, down 1.2% from prior year •Operating income and net income significantly down •Less cash, flat investment level •Inventories up 5.4% •Net working capital up almost 5% 48
  • 54. Primary Metals Manufacturing M3 Report Major Index Comparison, Jan 2012 - May 2013 +4.6% -6% Drop in both unfilled orders and total inventories since Jan ’12 -4.6% Decrease in inventories-to- shipments ratio Rise in new orders since Jan ’12 49 Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index Jul ’13 Jan ’12
  • 55. Primary Metal Manufacturing Producer Price Index by Sub-industry, Index July ’09 Steel MFG from purchased steelNonferrous production & processing Iron & steel mills, ferro alloy Aluminum production Raw data extracted from the July 2013 Producer Price Index Report, produced by the U.S. Census Bureau June 2013 July 2009 Post Recession 50
  • 56. Primary Metal Manufacturing Import & Export Price Index Comparison 110! 120! 130! 140! 150! 160! 170! 180! 190! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Import Index! Export Index! 51
  • 57. The Current State of America’s Fabricated Metal Product Manufacturing Market 52
  • 58. Fabricated Metal Product Manufacturing NAICS 332 WORLDWIDE OVERVIEW Companies in this industry transform purchased metals into intermediate or end-use products by forging, stamping, bending, forming, welding, machining, and assembly. Because of the special manufacturing processes involved for individual parts, most companies make a limited range of products. Globally, the fabricated metal product manufacturing industry generates nearly $2 trillion in annual revenue. Top producers include the US, China, Japan, Germany, Italy, and Canada. The US fabricated metal product manufacturing industry includes about 55,000 companies with more than $325 billion in combined annual revenue and is expected to see moderate growth over the next two years. Key growth drivers include gains in US industrial production and rising demand for durable goods. Demand is driven largely by the needs of other industrial companies and is therefore linked to economic growth. The profitability of individual companies depends on technical expertise and efficient manufacturing. SOURCE: Hoovers $2 trillion Annual revenue generated by all global fabricated metal products manufacturers 16% Approximate U.S. share of worldwide fabricated metal products manufacturing market 55,000 Number of United States fabricated metal products manufacturing companies 53
  • 59. Fabricated Metal Product Manufacturing NAICS 332 -12.1% $348b USA 2012 13% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate Forging & Stamping ‣ Iron & steel forging ‣ Nonferrous forging ‣ Roll forming Cutlery & Handtool ‣ Cutlery & handtool ‣ Metal kitchen cookware & utensils ‣ Saw blade Boiler, Tank, & Shipping Container ‣ Power boilers, heat exchangers ‣ Metal tanks ‣ Metal cans & boxes Architectural & Structural ‣ Plate work ‣ Ornamental ‣ Metal windows & doors ‣ Sheet metal Hardware Manufacturing Machine Shops, Turned Products ‣ Machine shops ‣ Turned products ‣ Screws, nuts, & bolts Coating, Engraving, Heat Treating Other Fabricated Metal Product ‣ Metal, industrial, & fluid power valve ‣ Plumbing fixture & pipe fitting ‣ Ball & roller bearing ‣ Guns & ammunition 54
  • 60. Fabricated Metal Product Manufacturing Market Share per Revenue Data Source: Hoovers Forging, Stamping, Boilers, & Tanks 34% Architectural & Structural 22% Machine Shops 12% Hardware 9% All Other 23% Metal Valves & Pipefitting 9% Coating, Engraving, & Heat Treating 8% Cutlery, Hand Tools, & Ammo 6% 55
  • 61. Fabricated Metal Product Manufacturing Employment Level by Sub-Industry 0! 50! 100! 150! 200! 250! 300! 350! 400! Hardware! Cutlery & Hand Tools! Spring & Wire Products! Boilers & Tanks! Forging & Stamping! Coating & Engraving! All Other! Architectural & Structural! Machine Shops! Employee Level, in thousands! 0.1% 2.1% 2.8% 1.0% 2.6% -0.6% 0.0% -2.5% 4.8% Growth Rate 2013 vs. 2012 1,437k Employment Level June ’13 56
  • 62. Fabricated Metal Product Manufacturing Employment Situation Index Comparison +7.3% -7.1% Since March ’06 -0.7% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 57
  • 63. 2012 vs. 2011 Year Over Year Summary •$745 billion in annual sales, up 6.3% •Op income and net income up •More cash on hand, less investment level •Every balance sheet variable was up in 2013 Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 58
  • 64. Fabricated Metal Product Manufacturing Income Statement Index Comparison 5.2x 45% Amount of net sales increase from CY ’03 to CY ’12 2.1x Operating income has grown at a rate of 2.1 times faster than has revenue Net income has grown at a rate of 5.2 times faster than has revenue Operating Income Index Net Sales Index Net Income Index CY 2012 CY 2003 59
  • 65. 72 102 94.6 Industrial Production 62% 86% 84.6 Capacity Utilization 3.7% 10.5% 10.2% Operating Profit 3.6% 10.6% 10.0% Return on Assets 65 88 75 Cash Cycle, days 1.11 1.45 Quick Ratio 1.27 1.68 2.16 1.96 Current Ratio Fabricated Metal Product Dashboard 60 2.2% 11.0% 9.7% Return on Sales Mashburn Ranking: 5/12 72%
  • 66. $167k $240k $240k Value of Shipments per Employee $138k $208k $208k Net Sales per Employee 101.3 130.7 128.2 Import Index 102.0 132.3 131.4 Export Index 1.41 1.83 1.64 Inventory to Shipment Ratio 2.06 3.12 3.12 Unfilled Order to Shipment Ratio 132.7 186.3 186.3 Producer Price Index 1,256k 1,568k 1,437k Employment Level 61 Fabricated Metal Product Dashboard Mashburn Ranking: 5/12 72%
  • 67. Producer Price Indexes, PPI Fabricated Metal Product Manufacturing Fabricated Metal Products 183.5! 184.0! 184.5! 185.0! 185.5! 186.0! 186.5! 187.0! PPI! Jan - Jun ’12 Jan - Jun ’13 0.5% Increase in PPI when comparing 2013 versus 2012 186.3 Most recent PPI, 86.3% increase vs. Dec ’03 62
  • 68. Fabricated Metal Product Manufacturing Producer Price Index by Sub-industry, Index July ’09 Forging & Stamping Machine shops Boiler, tank, shipping container Architectural, structural Raw data extracted from the July 2013 Producer Price Index Report, produced by the U.S. Census Bureau June 2013 July 2009 Post Recession 63
  • 69. Fabricated Metals Manufacturing M3 Report Major Index Comparison, Jan 2012 - May 2013 Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index May 2013Jan 2012 2.1% 14.6% Increase in unfilled orders index since January 2012 Flat 0.3% increase in value of shipments over last 17 months Increase in both new orders and total inventories since 1/12 64
  • 70. The Current State of America’s Machinery Manufacturing Market 65
  • 71. Machinery Manufacturing NAICS 333 WORLDWIDE OVERVIEW Companies in this industry manufacture various kinds of machinery used in agriculture, mining, construction, or manufacturing. The global machinery manufacturing industry generates more than $2 trillion in annual revenue. Top producers include China, Germany, Japan, the US, and South Korea. Industry experts are forecasting low growth over the next two years. Demand for machinery depends on overall industrial activity and on the health of sectors such as agriculture, construction, manufacturing, oil and gas exploration and production, and power generation. The profitability of individual companies depends on engineering expertise and efficient production. Large companies have economies of scale in purchasing. Small companies can compete effectively by specializing. SOURCE: Hoovers $2 trillion Annual revenue generated by all global machinery manufacturers 19% Approximate United States share of worldwide machinery manufacturing market 20,000 Number of United States machinery manufacturing companies 66
  • 72. Machinery Manufacturing NAICS 333 Agriculture, Construction, & Mining Machinery ‣ Agriculture & farm ‣ Lawn & garden ‣ Construction ‣ Mining, oil & gas Industrial Machinery ‣ Industrial ‣ Food product ‣ Semiconductor ‣ Wood, paper, & prinitng Commercial & Service Industry Machinery ‣ Optical instrument & lens ‣ Photograph & photocopy Ventilation, Heating, Air Conditioning, & Commercial Refrigeration Machinery Engine, Turbine, & Power Equipment Metalworking Machinery ‣ Industrial mold ‣ Die & tool ‣ Cutting & machine tools ‣ Rolling mill Other General Purpose Machinery ‣ Pumps & compressors ‣ Material handling ‣ Elevators ‣ Conveyors ‣ etc. 67 6.3% $384b USA 2012 15% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate
  • 73. Machinery Manufacturing Market Share per Value of Shipments Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau All Other Machinery 31% Agricultural, Construction, & Mining 27% Power Transmission 12% Ventilation, Heat, Air, & Refrigeration 11% Industrial Machinery 10% Metalworking Machinery 9% 68
  • 74. Machinery Manufacturing Market Share per Employment Level Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics Other General Purpose Machinery 23% Agriculture, Construction, & Mining Machinery 22% Metalworking Machinery 16% HVAC & Commercial Refrigeration 12% Industrial Machinery 9% Turbine & Power Transmission 9% Commercial & Service Industry 8% 69
  • 75. Machinery Manufacturing Employment Level as of June 2013 Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics 0! 50! 100! 150! 200! 250! 300! Commercial & Service Industry! Turbine & Power! Industrial! HVAC & Commercial Refrigeration! Metalworking! Agriculture, Construction, & Mining! All Other! Employment Level, in thousands! 0.9% Growth Rate 2013 vs. 2012 -2.1% 1.2% 0.2% 2.6% -4.3% -3.8% 70
  • 76. Machinery Manufacturing Employment Situation Index Comparison Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 71 9.9% -6.9% Since March ’06 Flat Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau
  • 77. Machinery Manufacturing Employee Situation Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Agriculture, construction, mining Metalworking HVAC & commercial refrigeration Industrial Employee Level Index CY 2013 CY 2003 Hourly Earnings Index CY 2013 CY 2006 72
  • 78. 2012 vs. 2011 Year Over Year Summary •$432 billion in annual sales •Operating and net income up over 13% versus CY 2011 •Less cash on hand, slightly greater investment level •Inventory is largest contributor to rise in current assets •Stockholders’ equity rose significantly in 2012 Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 73
  • 79. Machinery Manufacturing Income Statement Index Comparison 6.4x 74% Amount of net sales increase from CY ’03 to CY ’12 3.2x Operating income has grown at a rate of 3.2 times faster than has revenue Net income has grown at a rate of 6.4 times faster than has revenue Operating Income Index Net Sales Index Net Income Index CY 2012 CY 2003 74
  • 80. 2.3% 7.7% 6.8% Return on Assets 28 77 77 Cash Cycle, days 2.1% 13.3% 8.9% Return on Sales 2.7% 10.4% 7.4% Operating Profit 73 103 103.3 Industrial Production 60% 84% 81.1 Capacity Utilization 0.74 1.11 Quick Ratio 0.87 1.16 1.55 1.38 Current Ratio 75 Machinery Manufacturing Dashboard Mashburn Ranking: 4/12 73%
  • 81. $227k $361k $361k Value of Shipments per Employee $216k $371k $371k Net Sales per Employee 100.0 122.4 121.5 Import Index 100.0 122.0 122.0 Export Index 1.66 2.32 1.90 Inventory to Shipment Ratio 2.22 4.60 3.31 Unfilled Order to Shipment Ratio 121.4 135.3 135.2 Producer Price Index 975k 1,198k 1,100k Employment Level 76 Machinery Manufacturing Dashboard Mashburn Ranking: 4/12 73%
  • 82. Producer Price Indexes, PPI Machinery Manufacturing Sector, USA Machinery Manufacturing 123.5! 124.0! 124.5! 125.0! 125.5! 126.0! 126.5! 127.0! 127.5! 128.0! 128.5! PPI! Jan - Jun ’12 Jan - Jun ’13 1.4% Increase in PPI when comparing 2013 versus 2012 127.6 Most recent PPI, 27.6% increase vs. Dec ’03 77
  • 83. Machinery Manufacturing Producer Price Index by Sub-industry, Index July ’09 Agriculture, construction, mining Metalworking HVAC & commercial refrigeration Industrial Raw data extracted from the July 2013 Producer Price Index Report, produced by the U.S. Census Bureau June 2013 July 2009 Post Recession 78
  • 84. Machinery Manufacturing M3 Report Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index Q2 2013 Q1 2012 79 2.8% -9.3% Q2 ’13 vs. Q1 ’12 +8.8% Q2 ’13 vs. Q1 ’12 Unfilled Orders Value of Shipments Q2 ’13 vs. Q1 ’12 New Orders
  • 85. 80 Agricultural, Construction, and Mining Value of Shipments 12.4% $106b CY 2012 27.4% 2013 share of machinery manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate $7,800! $8,300! $8,800! $9,300! $9,800! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Machinery Manufacturing
  • 86. Turbines, Generators, & Power Transmission Value of Shipments $3,400! $3,600! $3,800! $4,000! $4,200! $4,400! $4,600! $4,800! $5,000! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 81Machinery Manufacturing -1.7% $48b CY 2012 +11.5% 2013 share of machinery manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate
  • 87. Industrial Machinery Manufacturing Value of Shipments $2,700! $2,900! $3,100! $3,300! $3,500! $3,700! $3,900! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 82Machinery Manufacturing +16.4% $40b CY 2012 +10.5% 2013 share of machinery manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate
  • 88. The Current State of America’s Computer & Electronic Product Manufacturing Market 83
  • 89. Computer & Electronic Product Manufacturing NAICS 334 WORLDWIDE OVERVIEW Companies in this industry manufacture computers, computer peripherals, telecommunications, audio and video, semiconductor, measurement and control, and other related equipment. The global computer & electronic product (C&EP) manufacturing industry generates more than $2 trillion in annual revenue. Top producers include China, USA, and Germany. Industry experts are forecasting moderate growth over the next two years. Demand across the broad CP&E manufacturing sector depends on technological advancement, level of consumer spending, and ever-expanding data storage requirements of both businesses and consumers. SOURCE: Hoovers $2 trillion Annual revenue generated by all global C&EP manufacturers 16% Approximate United States share of worldwide C&EP manufacturing market 12,500 Number of United States C&EP manufacturing companies 84
  • 90. Computer & Electronic Products NAICS 334 Navigational, Measurement & Control Instruments, and Electromedial ‣ Electromedial & electrotherapeutic apparatus ‣ Search, detection, navigational, aeronautical, & nautical systems ‣ Automatic environmental control ‣ Industrial process control instrumentation ‣ Laboratory instruments ‣ Fluid meters & electricity testing devices Magnetic & Optical Media ‣ Optical recording ‣ Software, compact discs, tapes, etc. Computer & Peripherals ‣ Electronic computer ‣ Computer storage devices ‣ Computer terminals Communications Equipment ‣ Telephone Apparatus ‣ Radio & TV broadcasting ‣ Wireless communications equipment Audio & Video Equipment Semiconductor & Other Electronic Components ‣ Semiconductor ‣ Printed circuit boards ‣ Capacitors, resistors, & connectors -0.1% $262b USA 2012 10% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate 85
  • 91. Transportation Equipment Value of Shipments, by sub industry, 2013 (Jan - May) Computer & Electronic Equipment Market Share per Value of Shipments Computer & Peripheral 8.4% Navigational, Measurement & Control, and Electromedial 37.4% Communications 14.3% Semiconductor & All Other 39.9% Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau 86
  • 92. Computer & Electronic Products Market Share per Employment Level Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics Other 4% Communications 10% Computers & Peripheral Equipment 15% Semiconductors & Electronic Components 35% Electronic Instruments 37% 87
  • 93. 2012 vs. 2011 Year Over Year Summary Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau •$597 billion in annual sales, down 1.3% from prior year •Operating income up substantially, net income down sharply •Stockholders’ equity rose significantly in 2012 Increased net working capital 88
  • 94. Computer & Electronic Products Income Statement Index Comparison Operating Income Index Net Sales Index Net Income Index Dec 2013 Dec 2003 Net Sales 4.4x +134% Dec ’12 to Dec ’03 4.0x 4.0 times faster growth rate than has revenue since ’03 4.4 times faster growth rate than has revenue since ’03 Op Income Net Income 89
  • 95. 57 134 133.6 Industrial Production 63% 80% 74.6 Capacity Utilization 0.8% 10.1% 9.2% Operating Profit 3.9% 24.4% 23.2% Return on Sales 1.3% 9.3% 7.7% Return on Assets 39 63 47 Cash Cycle, days 1.28 1.57 Quick Ratio 1.39 1.54 1.86 1.68 Current Ratio Computer & Electronic Products Dashboard 90 Mashburn Ranking: 6/12 64%
  • 96. $267k $316k $314k Value of Shipments per Employee $337k $550k $550k Net Sales per Employee 81.0 100.0 81.0 Import Index 88.6 100.0 88.7 Export Index 1.26 1.71 1.71 Inventory to Shipment Ratio 4.58 7.32 7.31 Unfilled Order to Shipment Ratio 88.9 100.0 89.5 Producer Price Index 1,082k 1,413k 1,082k Employment Level 91 Computer & Electronic Products Dashboard Mashburn Ranking: 6/12 64%
  • 97. Computer & Electronic Products Employment Situation Report Major Index Comparison Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 -2.2% -17.2% Since March ’06 +1.0% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings 92
  • 98. Computer & Electronic Product Employee Situation Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Hourly Earnings IndexEmployee Level Index Computer & peripherals Communications Electronic instruments Semiconductors May 2013 Mar 2006 May 2013 Mar 2006 93
  • 99. PPI versus CPI, Index 2009 -July Computer and Peripheral Products Consumer Price Index, CPI Producer Price Index, PPI June 2013 July 2009 -29.4% Decrease since recession PPI -17.9% Decrease since recession CPI Takeaway: the cost to produce computer & peripheral products has decreased more than the price passed on to consumers has decreased 94
  • 100. Computer & Electronic Products M3 Report Major Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index Q2 2013 Q1 2012 -0.8% +6.2% Q2 ’13 vs. Q4 ’11 -5.0% Q2 ’13 vs. Q4 ’11 Unfilled Orders New Orders Q2 ’13 vs. Q4 ’11 Value of Shipments 95
  • 101. $9,500! $10,000! $10,500! $11,000! $11,500! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! -9.4% $131b CY 2012 37.4% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing Navigational, Measurement & Control, and Electromedical Value of Shipments 96
  • 102. $3,500! $3,600! $3,700! $3,800! $3,900! $4,000! $4,100! $4,200! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 5.1% $45b CY 2012 14.3% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing Communications Equipment Manufacturing Value of Shipments 97
  • 103. Computer & Peripheral Equipment Value of Shipments $2,100! $2,200! $2,300! $2,400! $2,500! $2,600! $2,700! $2,800! $2,900! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! -8.6% $30b CY 2012 8.4% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing 98
  • 104. Semiconductor & All Other C&EP Value of Shipments $9,300! $9,800! $10,300! $10,800! $11,300! $11,800! $12,300! $12,800! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! 1.7% $135b CY 2012 39.9% 2013 share of C&EP manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate Computer & Electronic Product (C&EP) Manufacturing 99
  • 105. The Current State of America’s Electrical Equipment, Appliance, & Component Manufacturing Market 100
  • 106. Electrical Equipment, Appliance, & Component Manufacturing NAICS 335 WORLDWIDE OVERVIEW Electric Lighting: Companies in this industry manufacture electric light bulbs and tubes as well as lighting fixtures, lamp shades, and other components and parts. Demand depends primarily on residential, industrial, and commercial construction activity. The industry is concentrated: the largest 50 companies account for about 70 percent of revenue. The US lighting equipment manufacturing industry includes about 1,000 companies with combined annual revenue of about $12 billion. High growth is forecast for the next two years. Key growth drivers include an increase in new construction and renovations, as well as growing popularity of energy-efficient lighting. Household Appliances: Companies in this industry manufacture large appliances such as stoves, ovens, refrigerators, and washers and dryers, and small appliances including vacuum cleaners, fans, humidifiers, and dehumidifiers, and toaster ovens. The global household manufacturing industry generates about $160 billion in annual revenue. The European Union accounts for about $73 billion; China for about $13 billion. The US household appliance manufacturing industry consists of about 300 companies with combined annual revenue of about $18 billion. The output of the appliance manufacturing industry is expected to grow at a low rate over the next two years. Competition from low-cost imports is a major challenge. Demand is driven by growth in consumer income and by home sales. Electrical Equipment: Companies in one segment of this industry manufacture electric motors, power generators, and motor generator sets. The global motor and generator manufacturing industry has revenue of about $100 billion annually. Another segment manufactures industrial controls and control accessories such as relays and motor starters and controllers. Top countries for industrial control products manufacturing include China, Germany, Japan, South Korea, and the US -- countries with strong levels of overall industrialization. However, developing markets are gaining in worldwide market share. SOURCE: Hoovers $1 trillion Annual revenue generated by all global EEA&C manufacturers 11% Approximate U.S. share of worldwide EEA&C manufacturing market >3,000 Number of United States EEA&C manufacturing companies 101
  • 107. Electric Lighting Equipment ‣ Lamp bulbs & parts ‣ Lighting fixtures Household Appliances ‣ Small electrical appliances ‣ Major appliances ‣ Cooking appliances ‣ Refrigerators & home freezers ‣ Laundry equipment Electrical Equipment ‣ Power, distribution, & transformer ‣ Motor & generator ‣ Switchgear & switchboard apparatus ‣ Relay & industrial control Other Electrical Equipment & Components ‣ Battery ‣ Communication & energy wire & cable ‣ Fiber optic cable ‣ Wiring devices ‣ Carbon & graphite products 0.3% $123b USA 2012 5% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate Electrical Equipment, Appliance, & Component Manufacturing NAICS 335 102
  • 108. Electrical Equipment, Appliances, & Components Market Share per Value of Value of Shipments, USA Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau All Other 34% Electrical Equipment 32% Household Appliance 16% Battery Manufacturing 10% Electric Lighting 8% CY 2012 Value of Shipments $123 billion 103
  • 109. Electrical Equipment, Appliances, & Components Market Share per Employment Level, USA Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau June ʼ13 Employment Level 389 thousand All Other 32% Electrical Equipment 36% Household Appliance 14% Battery Manufacturing 7% Electric Lighting 12% 104
  • 110. Electrical Equipment, Appliances, & Components Value of Shipment by Sub-Industry $10.0! $10.5! $11.0! $11.5! $12.0! $12.5! $13.0! $13.5! $14.0! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! Electric Lighting Equipment! $17.5! $18.5! $19.5! $20.5! $21.5! $22.5! $23.5! $24.5! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! Household Appliance! $28.0! $30.0! $32.0! $34.0! $36.0! $38.0! $40.0! $42.0! $44.0! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! Electrical Equipment! $33.0! $38.0! $43.0! $48.0! $53.0! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! USD,billions! All Other! 105
  • 111. 2012 vs. 2011 Year Over Year Summary •$196 billion in annual sales, slightly up over 2011 •Modest increases in operating and net income margin •More cash on hand, more investment level •Gains in Stockholders’ equity NWC Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 106
  • 112. Electrical Equipment, Appliances, & Components Income Statement Index Comparison Net Sales 20% +7% Dec ’12 to Dec ’03 20% 3 times faster growth rate than has revenue since ’03 3 times faster growth rate than has revenue since ’03 Op Income Net Income Operating Income Index Net Sales Index Net Income Index Dec 2013 Dec 2003 107
  • 113. 73 101 87.3 Industrial Production 66% 89% 80.7 Capacity Utilization 58 80 74.4 Cash Cycle, days 0.65 0.86 Quick Ratio 0.86 1.00 1.32 1.31 Current Ratio Electrical Equipment, Appliances, & Components Dashboard 108 5.2% 12.8% 6.5% Operating Profit 8.6% 17.9% Return on Sales 14.3% 4.8% 10.5% Return on Assets 5.7% Mashburn Ranking: 9/12 58%
  • 114. 100.6 119.8 119.4 Import Index 100.0 114.2 113.7 Export Index 100.0 139.0 138.5 Producer Price Index 354k 475k 364k Employment Level $405k $512k $489k Net Sales per Employee $221k $334k Value of Shipments per Employee $334k 109 1.30 1.69 1.61 Inventory to Shipment Ratio 1.80 2.50 2.40 Unfilled Order to Shipment Ratio Electrical Equipment, Appliances, & Components Dashboard Mashburn Ranking: 9/12 58%
  • 115. Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index +39% +52% CY 2012 vs. CY 2003 +24% CY 2012 vs. CY 2003 Unfilled Orders New Orders CY 2012 vs. CY 2003 Total Inventories Electrical Equipment, Appliances, & Components M3 Index Comparison, 2003 through 2012 90! 100! 110! 120! 130! 140! 150! 160! 170! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! M3Index,2003! 110
  • 116. Electrical Equipment, Appliances, & Components M3 Index Comparison, 2013 vs. 2012 Q2 2013 Q1 2012 Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index +2.3% +1.3% Q2 ’13 vs. Q1 ’12 +1.6% Q2 ’13 vs. Q1 ’12 Unfilled Orders New Orders Q2 ’13 vs. Q1 ’12 Total Inventories 111
  • 117. Electrical Equipment, Appliances, & Components Total Inventory by Stage, 2003 through 2012 20%! 25%! 30%! 35%! 40%! 45%! CY 2003! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! PercentofTotalInventory! Material & Supplies Inventory! Work in Process! Finished Goods! Trending down since ‘07 Work in Process Trending up since ‘07 Materials & Supplies Flat since ‘07 Finished Goods 112
  • 118. Electrical Equipment, Appliances, & Components Employment Situation Report Major Index Comparison +30% -16% Since March ’06 Flat Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 113
  • 119. Electrical Equipment, Appliances, & Components Employment Level Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Electrical equipment All other EEA&C Electric lighting Household appliances June 2013 Mar 2006 Employee Level Index 114
  • 120. Electrical Equipment, Appliances, & Components Producer Price Index (PPI) Trend +34% Since Dec ’04 PPI 100! 105! 110! 115! 120! 125! 130! 135! 140! CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! 115
  • 121. Electrical Equipment, Appliances, & Components Producer Price Index (PPI) versus Consumer Price Index (CPI) +20% Since Dec ’04 PPI +2% Since Dec ’04 CPI Household Appliance CY 2004! CY 2005! CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! PPI, Household Appliance MFG! CPI, Household Appliances! Further separation between PPI and CPI continues in 2013 Mar-12! May-12! Jul-12! Sep-12! Nov-12! Jan-13! Mar-13! May-13! PPI, Household Appliance MFG! CPI, Household Appliances! 116
  • 122. Electrical Equipment, Appliances, & Components Producer Price Index (PPI) versus Consumer Price Index (CPI) +16% CY ’12 vs. CY ’06 Import Index +11% CY ’12 vs. CY ’06 Export Index CY 2006! CY 2007! CY 2008! CY 2009! CY 2010! CY 2011! CY 2012! Import Index! Export Index! 117
  • 123. The Current State of America’s Transportation Equipment Manufacturing Market 118
  • 124. Transportation Equipment Manufacturing NAICS 336 WORLDWIDE OVERVIEW Companies in this industry manufacture transportation equipment, including motor vehicles and parts, aircraft and other aerospace products, ships and boats, and railroad rolling stock. The global transportation equipment manufacturing industry generates as much as $4 trillion in annual revenue. Leading transportation equipment-producing countries include Brazil, China, France, Germany, India, Italy, Japan, South Korea, and the US. Low growth is forecast for the next two years. Demand is driven by employment and interest rates, growth in consumer income, military budgets, and the overall economic climate. The profitability of individual companies depends on manufacturing efficiency, technical expertise, and product quality. Large companies enjoy economies of scale in manufacturing and purchasing, as well as advantages in marketing and distribution. Small companies can compete by specializing in niche markets. SOURCE: Hoovers $4 trillion Annual revenue generated by all global transportation equipment manufacturers 20% Approximate U.S. share of worldwide transportation equipment manufacturing market 12,000 Number of United States transportation equipment manufacturing companies 119
  • 125. Motor Vehicle ‣ Automobile ‣ Light truck & utility ‣ Heavy duty truck Motor Vehicle Body & Trailer ‣ Body ‣ Truck trailer ‣ Motor home ‣ Travel trailer & camper Motor Vehicle Parts ‣ Engine ‣ Electrical ‣ Steering & suspension ‣ Brake system ‣ Transmission ‣ Seating & interior ‣ Metal stamping Aerospace Product & Parts ‣ Aircraft ‣ Aircraft engine ‣ Guided missile & space vehicle Railroad Rolling Stock Other Transportation Equipment ‣ Motorcycle & bicycle building ‣ Military armored vehicle Ship & Boat Building Transportation Equipment Manufacturing NAICS 336 4.3% $805b USA 2012 28% 2013 share of durable goods manufacturing market 2013 vs. 2012 new orders New Orders Market Share Growth Rate 120
  • 126. Transportation Equipment Manufacturing Market Share per Value of Shipments Auto 16% Misc 7% Other 14% Bodies & Parts 28% Light Truck 19% Nondefense Aircraft 16% Defense Aircraft 7% Ships & Boats 4% Heavy Truck 3% Raw data extracted from the June 2013 M3 Report, produced by the U.S. Census Bureau 121
  • 127. Transportation Equipment Manufacturing Market Share per Employment Level Aerospace Product & Parts 34% Motor Vehicle Parts 33% Motor Vehicle 12% Ships & Boats 12% Motor Vehicle Bodies & Trailers 8% Railroad Stock 4% Raw data extracted from the June 2013 Employment Situation Report, produced by the U.S. Bureau of Labor Statistics 122
  • 128. 2012 vs. 2011 Year Over Year Summary •$745 billion in annual sales •Sales costs, and op income up, and net income down •More cash on hand, less investment level •Total assets up 9.1%, total liabilities up 12.8% •Stockholders’ equity is flat Raw data extracted from the June 2013 Quarterly Report, produced by the U.S. Census Bureau 123
  • 129. Transportation Equipment Manufacturing Income Statement Index Comparison Operating Income Index Net Sales Index Net Income Index Dec 2013Dec 2003 Net Sales 1.4x +28% Dec ’12 to Dec ’03 4.2x 4.2 times faster growth rate than has revenue since ’03 1.4 times faster growth rate than has revenue since ’03 Op Income Net Income 124
  • 130. 0.58 0.82 Quick Ratio 0.74 0.96 1.36 1.27 Current Ratio -3.7% 7.1% 6.2% Operating Profit -7.6% 8.6% 7.6% Return on Sales 49 112 74 Cash Cycle, days -2.9% 8.1% 5.3% Return on Assets 68 104 103.4 Industrial Production 55% 81% 73.8 Capacity Utilization Transportation Equipment Dashboard 125 Mashburn Ranking: 1/12 83%
  • 131. $372k $518k $518k Value of Shipments per Employee $432k $659k $659k Net Sales per Employee 99.9 112.6 111.8 Import Index 100.0 118.0 117.9 Export Index 1.09 2.02 1.70 Inventory to Shipment Ratio 7.62 19.47 14.68 Unfilled Order to Shipment Ratio 99.8 116.0 115.6 Producer Price Index 1,309k 1,805k 1,496k Employment Level 126 Transportation Equipment Dashboard Mashburn Ranking: 1/12 83%
  • 132. Transportation Equipment Manufacturing Employment Situation Index Comparison Hourly Earnings Index Weekly Hours Index Employment Level Index June 2013 March 2006 17.0% -16.1% Since March ’06 +2.2% Employee Level Since March ’06 Weekly Hours Since March ’06 Hourly Earnings 127
  • 133. Transportation Equipment Manufacturing Employee Situation Indexes by Sub-industry Raw data extracted from the July 2013 Employment Situation Report, produced by the U.S. Census Bureau Hourly Earnings Index May 2013 Mar 2006 May 2013 Mar 2006 Employee Level Index Motor vehicle bodies & trailers Motor vehicle parts Motor vehicle Aerospace 128
  • 134. Consumer Price Index, CPI Producer Price Index, PPI June 2013 July 2009 New & Used Motor Vehicles PPI versus CPI 123.0! 125.0! 127.0! 129.0! 131.0! 133.0! 135.0! 137.0! 139.0! 107.0! 108.0! 109.0! 110.0! 111.0! 112.0! 113.0! 114.0! Motor Vehicle Parts June 2013 July 2009 Consumer Price Index, CPI Producer Price Index, PPI +5.6% +8.5% Increase since recession PPI Increase since recession CPI +4.7% +9.5% Increase since recession PPI Increase since recession CPI 129
  • 135. Autos, Trucks, & SUVs Manufacturing M3 Report Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index May 2013 Jan 2012 3.4% +18.4% May ’13 vs. Jan ’12 +21.8% May ’13 vs. Jan ’12 New Orders Value of Shipments May ’13 vs. Jan ’12 Total Inventories 130
  • 136. Motor Vehicle Bodies, Trailers, & Parts M3 Report Major Index Comparison Unfilled Orders Index New Orders Index Value of Shipments Index Total Inventories Index May 2013 Jan 2012 +4.0% +5.7% May ’13 vs. Jan ’12 -4.4% May ’13 vs. Jan ’12 New Orders Unfilled Orders May ’13 vs. Jan ’12 Value of Shipments 131
  • 137. $17,900! $18,100! $18,300! $18,500! $18,700! $18,900! $19,100! $19,300! $19,500! $19,700! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Motor Vehicle Bodies, Trailers, & Parts Value of Shipments Transportation Equipment Manufacturing 3.7% $221b CY 2012 28.4% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 132
  • 138. Automobile Manufacturing Value of Shipments $7,500! $8,000! $8,500! $9,000! $9,500! $10,000! $10,500! $11,000! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Transportation Equipment Manufacturing 24.8% $107b CY 2012 15.8% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 133
  • 139. Light Truck & Utility Vehicle Manufacturing Value of Shipments $10,000! $10,500! $11,000! $11,500! $12,000! $12,500! $13,000! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Transportation Equipment Manufacturing 13.0% $136b CY 2012 18.5% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 134
  • 140. Nondefense Aircraft Manufacturing Value of Shipments $9,200! $9,700! $10,200! $10,700! $11,200! $11,700! $12,200! $12,700! Jan-12! Feb-12! Mar-12! Apr-12! May-12! Jun-12! Jul-12! Aug-12! Sep-12! Oct-12! Nov-12! Dec-12! Jan-13! Feb-13! Mar-13! Apr-13! May-13! USDmillions! Transportation Equipment Manufacturing 3.9% $127b CY 2012 16.0% 2013 share of transportation equipment manufacturing market 2013 vs 2012 Market Size Market Share Growth Rate 135