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THE PRODUCTS YOU KNOW
THE PROFESSIONALS YOU TRUST
PROLIANCE INTERNATIONAL, INC.
(AMEX: PLI)
GABELLI 29TH ANNUAL AUTOMOTIVE
AFTERMARKET SYMPOSIUM
NOVEMBER 1, 2005
PRESENTED BY:
CHARLEY JOHNSON - PRESIDENT AND CEO
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AGENDA
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o Proliance at a Glance
o Product Overview
o Market Overview
o A Better Positioned Proliance
- Transaction Overview
o Operations
o Distribution
o International
o Benefits
o Integration and Synergies
o Financial Overview
o Key Objectives
o Investment Merits
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FORWARD-LOOKING STATEMENTS
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o Statements included in this presentation, which are not historical in
nature, are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Statements relating to the future financial performance of the Company are
subject to business conditions and growth in the general economy and
automotive and truck business, the impact of competitive products and
pricing, changes in customer product mix, failure to obtain new customers
or retain old customers or changes in the financial stability of customers,
changes in the cost of raw materials, components or finished products and
changes in interest rates. Such statements are based upon the current
beliefs and expectations of Proliance management and are subject to
significant risks and uncertainties. Actual results may differ from those
set forth in the forward-looking statements. When used in this presentation
the terms "anticipate," "believe," "estimate," "expect," "may,"
"objective," "plan," "possible," "potential," "project," "will" and similar
expressions identify forward-looking statements.
o In addition, the following factors relating to the merger with the Modine
Manufacturing Company aftermarket business, among others, could cause
actual results to differ from those set forth in the forward-looking
statements: (1) the risk that the businesses will not be integrated
successfully; (2) the risk that the cost savings and any revenue synergies
from the transaction may not be fully realized or may take longer to
realize than expected; (3) disruption from the transaction making it more
difficult to maintain relationships with clients, employees or suppliers;
(4) the transaction may involve unexpected costs; (5) increased competition
and its effect on pricing, spending, third-party relationships and
revenues; (6) the risk of new and changing regulation in the U.S. and
internationally; (7) the possibility that Proliance's historical businesses
may suffer as a result of the transaction and (8) other uncertainties and
risks beyond the control of Proliance. Additional factors that could cause
Proliance's results to differ materially from those described in the
forward-looking statements can be found in the Annual Report on Form 10-K
of Proliance (formerly known as Transpro, Inc.), in the Quarterly Reports
on Forms 10-Q of Proliance, and Proliance's other filings with the SEC. The
forward-looking statements contained in this presentation are made as of
the date hereof, and we do not undertake any obligation to update any
forward-looking statements, whether as a result of future events, new
information or otherwise.
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PROLIANCE AT A GLANCE
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o Leading manufacturer and supplier of heat transfer and temperature
control products for the automotive and heavy duty aftermarket
o Broadest coverage in the industry marketing under leading brands:
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o One of the largest aftermarket distribution networks serving all
channels of the aftermarket
- Retailer
- Warehouse distribution
- Specialty parts
- Professional technician
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PROLIANCE AT A GLANCE
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o Global company with manufacturing and distribution in North and
Central America and in Europe
o World-class production facilities in Mexico strengthened by exclusive
supplier relationships in China
- Engineering-driven in design, process and quality controls
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MOST COMPLETE OFFERING OF
HEAT EXCHANGE PRODUCTS
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o RADIATORS
o A/C COMPONENTS
o HEATERS
o CHARGE AIR COOLERS
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THE AUTOMOTIVE AND HEAVY DUTY
AFTERMARKETS
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o $2 billion (est.) aftermarket
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HEAT EXCHANGE $1.5 BILLION
A/C PRODUCTS $0.5 BILLION
SOURCE: PROLIANCE ESTIMATE
o Demand influencers
- Vehicles-in-operation
- Miles-driven
- Age of fleet
- Weather extremes
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THE AUTOMOTIVE AFTERMARKET INDUSTRY
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U.S. MOTOR VEHICLE REGISTRATIONS
(IN MILLIONS)
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80.5 83.6 87.3 92.5 <-------2.5% GROWTH RATE (2001-2004)
2001 2002 2003 2004 [ ] LIGHT TRUCKS
128.7 129. 9 131.1 132.5
[ ] PASSENGER CARS
2001 2002 2003 2004
Source: RL Polk
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U.S. AVERAGE ANNUAL MILES OF TRAVEL
CARS
12,500
12,000
11,500
1.5% CAGR
11,000
10,500
10,000
9,500
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: U.S. Department of Transportation, 2005
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LIGHT VEHICLE FLEET AGE
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AVERAGE
AGE (YEARS) 8.7 8.7 8.6 8.7 8.9
2000 2001 2002 2003 2004
Source: RL Polk
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AVERAGE VEHICLES AGE 1996-2008E
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2005E-2008E 08E
CAGR
----
59.2 63.7 67.3 70.4 72.3 73.1 73.4 73.3 73.9 74.8 76.7 76.8 77.8 1.0% 11+ YEARS
62.6 60.3 58.1 56.9 56.2 58.3 58.7 60.4 61 62.3 64.1 66.2 66.9 2.2% 6 TO 10 YEARS
76.5 77.1 79.6 82.2 84.7 85.7 88 88.6 89.2 88.5 86.4 85.8 85.9 (0.4%) 0 TO 5 YEARS
1996 1997 1998 1999 2000 2001 2002 2003 2004E 2005E 2006E 2007E 2008E ----------------- -----------------
Source: The Monitor Company Group and MEMA
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THE AUTOMOTIVE AND HEAVY DUTY AFTERMARKETS
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Changing market dynamics
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o Automotive and light truck - Radiators
- Increased imports from China and other Asian countries
- Competitive pricing pressure
- Consolidation in radiator market
- Changing customer base - "compressed" channels - big customers
- Customer buying patterns - less pre-buys
- Improved OEM system quality - already happened . . . Not much
improvement in last 5 years in radiators
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THE AUTOMOTIVE AND HEAVY DUTY AFTERMARKETS
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Changing market dynamics (continued)
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o Automotive and light truck - Air Conditioning
- Consolidating customers
- Inventory in marketplace
- Imports
- More new compressors
- Improved OEM quality
o Heavy Duty
- Recent economic recovery fueling industrial growth
- Solid demand allows recovery of raw material cost increases
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THE AUTOMOTIVE AND HEAVY DUTY AFTERMARKETS
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o Macroeconomic factors:
- Raw material costs
- Consumer confidence
- Gasoline pricing . . . Cost factor and impact on miles driven
- Interest rate environment
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MARKET CONCLUSIONS
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o Heat Exchange and Temperature Control markets will experience growth.
o Customer consolidation, competitive price pressure and increased imports
will create greater need for product differentiation and added value.
o Overcapacity and increases in raw material costs will drive the need for
greater efficiencies and low-cost manufacturing.
o Changing customer buying habits and the impact of extreme weather will
force greater flexibility in manufacturing and demand for local
availability.
o Changing Original Equipment designs will require Aftermarket Engineering
strength to keep pace.
...AS A RESULT OF OUR STRONG CHANNEL PENETRATION AND EXTENSIVE DISTRIBUTION
NETWORK, WE ARE KEENLY POSITIONED TO OFFER A VARIETY OF NEW AND
DIFFERENTIATED PRODUCTS.
o Better positioned to respond to these challenges...
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BETTER POSITIONED . . .
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Transaction Overview
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o March 2005: Transpro sold Heavy Duty OEM business to Modine for $17 million
in cash to become a focused aftermarket company
o July 2005: Modine spun off its aftermarket business to its shareholders and
immediately merged the business into Transpro
o Combined company immediately renamed Proliance International, Inc. (AMEX:
PLI)
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TRANSACTION BENEFITS
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Operations
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o Increased scale - revenue base, customer access, sourcing opportunities and
product lines
- Annual revenues in excess of $400 million
o Expanded geographic scope and ability to compete internationally
o Business focused on aftermarket industry with experienced leadership team
Distribution
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o Efficient and effective distribution
- Large warehouse distributors and retailers serviced from North
American central warehouses
- Specialty shops and installers serviced from large branch network
- Mexico
- Europe
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INTERNATIONAL OPPORTUNITIES - MEXPAR
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[MAP OMITTED]
o Monterrey
o Culiacan
o Tampico
o Guadalajara
o Azcapotzalco
o Mexico City
o Coatzacoalcos
o Acapulco
o San Salvador
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INTERNATIONAL OPPORTUNITIES - NRF
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o Daventry, U.K.
o Gdansk, POLAND
o Mill, NETH.
o Emmerich, GERMANY
o Aartselaar, BELGIUM
o Valenciennes-Cedex, FRANCE
o Vienna, AUSTRIA
o Urdorf, Zurich, SWITZERLAND
o Prato, ITALY
o Barcelona, SPAIN
o Valencia, SPAIN
o Granada, SPAIN
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TRANSACTION BENEFITS
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Financial
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o Cost savings of more than $30 million annually, following restructuring
program cost of $10 million to $14 million over a 12- to 18-month
integration period, impacted by competitive pricing pressure and higher
material costs
o Merged companies using stock to get assets at a significant discount
- Estimated $18 million one-time benefit from negative goodwill in 2005
- Modine Aftermarket fixed assets written down to zero, resulting in
lower ongoing depreciation charge
o Profitable operating results anticipated in 2006, assuming normalized
market conditions
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TRANSACTION BENEFITS
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Financial
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o Strong Balance Sheet
- Modine Aftermarket Business brought $6.3 million in cash and no debt
to the deal
- $17 million in cash from the sale of OEM business
- Debt-to-total-capitalization ratio improves to 30% from 50%
pre-transaction
o Enhanced stock market liquidity and public company profile
- Shares outstanding increased to 15.3 million from 7.1 million
o Financial Flexibility to:
- Respond to changes in the market place
- Support product development
- Address growth alternatives, including acquisitions
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INTEGRATION ACTIONS - BUFFALO CLOSURE
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[MAP OMITTED]
o BUFFALO Aluminum Heaters
|
|
|
|
v
o NUEVO LAREDO
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INTEGRATION ACTION - EMPORIA CLOSURE
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[MAP OMITTED]
o EMPORIA
--------- Copper/Brass Radiators / --- Aluminum Radiators
| /
| o NUEVO LAREDO <--------/
|
| ---- Copper/Brass Radiators
| |
| |
-----|
|--> to MEXICO CITY
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INTEGRATION ACTION - DISTRIBUTION CONSOLIDATION
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[MAP OMITTED]
o RACINE Headquarters Rationalization
o NEW HAVEN Closed Copper Brass Tube Mill
-- o KANSAS CITY Radiator Distribution
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|
-> o SOUTHHAVEN
-> o Arlington
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|
-- o Orlando Air Conditioner Distribution
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INTEGRATION ACTION -
HEAVY DUTY PLANTS / BRANCHES / DCS
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[MAP OMITTED]
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HEAVY DUTY
AFTERMARKET PLANTS
9 Transpro
4 Modine ----------------------
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13 Total ------------------- DISTRIBUTION CENTERS
-2 Consolidated 4 Total
----------------- BRANCHES -2 Consolidated
11 REMAIN 142 Total ---------------
-22 Consolidated 2 REMAIN
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120 REMAIN ----------------------
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Integration Synergies
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SYNERGY ACTION AMOUNT STATUS
(millions)
Buffalo closure >$ 2 Completed
Emporia closure >$ 8 Near completion
Distribution integration >$ 2 In process
Branch and HD Plant consolidation >$ 4 Branch - Nearly Complete
Plant-Complete
Procurement and other >$14 In process
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TOTAL >$30
====
Cost improvements will roll through inventory into 2006. We are taking action to
accelerate the synergies as much as possible.
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Financial Overview
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o In 2004, Transpro earned $4.8 million pretax, since then the business has
changed as follows:
- In 2005 sold Heavy Duty-OEM that earned $5.7 million pretax in 2004
- Transpro in first six months of 2005 lost $4.4 million pretax
excluding discontinued operations and gain on sale of HD-OEM business
o Transpro and Modine Aftermarket businesses were losing money before the
merger transaction
- Strong price competition
- Commodity price increases
o Merger - July 22, 2005
o 2005 financial results influenced by:
- Price downs, higher material costs
- Restructuring charges
- Acquisition accounting
- Inventory reduction - generate cash flow
o However we are actively dealing with these challenges, as follows:
- Synergies of more than $30 million
- Annual revenue in excess of $400 million
- Profitability in 2006
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PROLIANCE: KEY OBJECTIVES
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Actions to achieve our ultimate performance objectives:
o Highest quality customer service during the business transition process and
beyond
o Achieve projected integration synergies
o Generate cash primarily by selling down inventory
- Projected debt at year-end lower than the previous year
- Improve inventory turns to 4x in 3-year timeframe
o Continue efforts to explore strategic opportunities and rationalize our own
"go to market" capabilities
o Add new and differentiated products to our overall aftermarket business
offering
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INVESTMENT MERITS
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Values Based Company - Five Strategic Values
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o An exemplary corporate citizen
o Employing exceptional people
o Dedicated to world-class quality standards
o Market leadership through superior customer service
o Foundation value: Committed to exceptional financial performance
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INVESTMENT MERITS
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o Business focused on profitable growth in the automotive and heavy duty
aftermarkets
o Undervalued asset base
o Combination of two leaders creates well-positioned market player
- Increased scale
- Greater financial strength and flexibility
- Broadened international reach
o Restructuring program leading to significant potential operational
synergies to balance prior losses, price-downs and higher material cost
- Expect to achieve a low-cost supplier status with these actions
- Product differentiation with competitive cost
o Enhanced financial strength of combined companies to fund future growth
initiatives
o Experienced leadership team
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THE PRODUCTS YOU KNOW
THE PROFESSIONALS YOU TRUST
PROLIANCE INTERNATIONAL, INC.
(AMEX: PLI)
