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Proliance International, Inc. <br/>(AMEX: PLI)<br/><br/>Annual Stockholders Meeting
May 3, 2007
Presented by:
Charley Johnson – President and CEO
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FORWARD-LOOKING STATEMENTS
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Agenda
2006 Review
Market
Actions
Results
2007 Outlook
Performance Factors
Goals
Outlook
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2006: Market Conditions
Soft market for heat exchange and A/C products, due to weather conditions and high fuel costs, which impacted miles driven and consumer buying?
Soft market for heat exchange and A/C products, due to weather conditions and high fuel costs, which impacted miles driven and consumer buying?
Resulted in higher inventories than desirable at the end of the selling season and caused us to cut back our plants
Did achieve goal of lower inventory at end of 2007 compared to end of 2006, even with $10 million in embedded higher material costs
Record-high raw material costs, which were not recoverable with price actions, impacted automotive and light truck radiators
Strong local competition at the branch level, driven by new competitive market entries, impacted the radiator and A/C markets
Shift in radiator sales unit mix from branches toward wholesale customers caused lower average margins
Changes in customer acceptance of lower quality or different radiator product designs also drove new competitive challenge
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2006 Key Initiatives
First quarter 2006: High material costs caused us to announce an initiative to reengineer certain radiator products from copper/brass construction to aluminum/plastic construction.
First quarter 2006: High material costs caused us to announce an initiative to reengineer certain radiator products from copper/brass construction to aluminum/plastic construction.
August 2006: Announced initiatives to better align costs with demand at Mexico City plant, as a result of the product shift away from copper/brass products.
September 2006: Undertook initiatives to further align branch structure with selling strategy, net reduction in number of branches from 123 to 94.
September 2006: Began reduction of inventory, due to soft selling season.
December 2006: Consolidated administrative functions formerly located in Racine, Wisconsin into our New Haven, Connecticut corporate office, as a part of continued cost-reduction efforts.
2006 total restructuring charges of $3.1 million. In total, $13.6 million of originally anticipated $14 million was incurred at year-end.
2006 total restructuring charges of $3.1 million. In total, $13.6 million of originally anticipated $14 million was incurred at year-end.
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2006 Financial Overview
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2006 Financial Overview
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Domestic Business Segment
Heat Exchange
Heat Exchange
Dollar sales decline, but unit volume improves
Shift to wholesale distribution
Impact of competitive pricing pressure
Impacted by effect of
high fuel costs on miles
driven by consumers
Mild winter season
New local competition
Temperature Control
Temperature Control
Grew in 2006 driven by customer additions
Strong pre-season orders in 2006
Impacted by short summer season
Impacted by effect of high fuel costs on miles driven by consumers
New local competition
Heavy Duty OEM
Heavy Duty OEM
Grew in 2006 fueled by strong industrial activity
Strong demand allowed ability to pass through material costs
New product lines gained traction
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International Business Segment
MexPar
MexPar
Impacted by restructuring activities related to decline of copper/brass production
NRF
NRF
Increased demand in markets served
Strong demand allows ability to pass through costs
New product lines gained traction
Stronger Euro
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2006 Objectives
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We Exit 2006 Better Positioned?
Product competitiveness? radiators and A/C cost improvements? results not yet seen? will improve margins as we go through the year
Product competitiveness? radiators and A/C cost improvements? results not yet seen? will improve margins as we go through the year
Reduced SG&A overhead costs
Improved supply flexibility to reduce inventory and excess inventory risk
Outstanding product cataloging and breadth of product offering
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2007: Factors Impacting Outlook
Continued price-down pressure in heat exchange products driven by global availability? our product engineering capabilities are a strength
Continued price-down pressure in heat exchange products driven by global availability? our product engineering capabilities are a strength
Continued high and “variable” raw material costs will continue to challenge margins
High fuel costs will challenge consumers? we have improved our supply flexibility and speed in order to limit excess inventory risk
Retail and wholesale customers continue to grow their share of the market, however, we also have a better postured branch system to serve specific local customer groups more effectively
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2007 Goals
Serve customers well
Serve customers well
Improve inventory turns
Continue to sharpen our branch distribution model
Implement additional product cost improvement actions that will improve margins, even in the face of a competitive marketplace, and continue to reduce overhead
Achieve profitability for the full year 2007
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2007 Outlook
First quarter loss a bit greater than 2006, as higher-cost inventory works its way through to market and other cost-reduction initiatives begin to take hold? first quarter 2006 benefited from higher preseason A/C orders
First quarter loss a bit greater than 2006, as higher-cost inventory works its way through to market and other cost-reduction initiatives begin to take hold? first quarter 2006 benefited from higher preseason A/C orders
Margin and expense improvement expected in second and third quarters, as seasonal sales kick in with higher margins and lower overhead levels. Second quarter results will be impacted by previously announced restructuring costs.
Strong improvement in fourth quarter results
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Proliance International, Inc. <br/>(AMEX: PLI)