SCHEDULE 14A
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LADISH CO., INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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SLIDE 1
LADISH CO., INC.
INVESTOR
PRESENTATION
May 2003
SLIDE 2
Forward Looking Statements
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Certain statements made in this presentation and other written or oral
statements made by or on behalf of the company may constitute "forward-looking
statements" within the meaning of the federal securities laws. Statements
regarding future events and developments and the company's future performance,
as well as management's expectations, beliefs, intentions, plans, estimates or
projections relating to the future, are forward-looking statements within the
meaning of these laws. Management believes that these forward-looking
statements are reasonable; however, you should not place undue reliance on
such statements. These statements are based on current expectations and speak
only as of the date of such statements. The company undertakes no obligation
to publicly update or revise any forward-looking statement, whether as a
result of future events, new information or otherwise. Among the factors that
might impact the company's performance are market conditions and demand for
the company's products; competition; interest rates and capital costs;
technologies; continued impact upon the commercial aerospace industry from the
September 11, 2001 terrorist attacks; raw material and energy prices; unstable
governments and business conditions in emerging economies; taxes; and legal,
regulatory and environmental issues. These and other important risk factors
regarding the company are included under the caption "Forward Looking
Statements" in the company's Annual Report on Form 10-K for the year ended
December 31, 2002 and may be discussed in subsequent filings with the SEC. The
company and certain other persons may be deemed participants in the
solicitation of proxies from shareholders in connection with the Company's
2003 Annual Meeting of Shareholders. Information concerning such participants
is available in the company's Proxy Statement filed with the Securities and
Exchange Commission on April 2, 2003. Shareholders are advised to read the
company's Proxy Statement and other relevant documents when they become
available, because they contain or will contain important information.
Shareholders may obtain, free of charge, copies of the company's Proxy
Statement and any other documents filed by the company with the SEC in
connection with the 2003 Annual Meeting of Shareholders at the SEC's website
at (http://www.sec.gov) or by contacting the company at the number listed
below.
(414) 747-2611
SLIDE 3
Introduction
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Ladish's current Board and management are committed to
enhancing value for all shareholders.
o Ladish is executing an effective business plan and positioning the
company for future growth
o Both the Board and management have extensive direct industry experience
to guide the Company through the current cycle
o The existing Board is highly-qualified, independent-minded and committed
to good corporate governance and enhancing the Boards independence
o We believe Graces interests are not aligned with other shareholders
SLIDE 4
Company Highlights
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o Leading Market Position in Forging Products (#2 Supplier)
o Advanced Equipment and Manufacturing Capabilities
o Led Development "One-Stop-Shop" Approach to Engine Suppliers
o Excellent Relationships with Blue Chip Customer Base
o Long-term Contracts Represent 65% of Current Backlog, Providing Revenue
Visibility when Market Recovers
o Strong, Experienced Management Team with a Highly-Skilled Workforce
o Strong Financial Position
SLIDE 5
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BUSINESS OVERVIEW
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SLIDE 6
Company Overview
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o Founded in 1905
o "One-Stop-Shop" capabilities
- Cudahy Forging (Cudahy, WI): manufactures technically advanced
forging for aerospace and industrial customers
- Stowe Machine (Windsor, CT): provides precision machining services,
primarily for aerospace customers
- Pacific Cast Technologies (Albany, OR): produces large, complex
investment cast titanium components for aerospace customers
o Balanced mix of domestic and international revenue
o Metallurgical experts for a variety of aerospace materials
o Engineering leader in forging products
o Maintaining profitability in difficult industry cycle
o Debt / Book Capital has averaged 13.3%
Historical Revenue
- ------------------
($ in millions)
CAGR(1) '96 - '01:9.3%
[graphic omitted]
Year Revenue Deliveries
- ---- ------- ----------
1996 $162.0 397
1997 $209.8 557
1998 $226.8 792
1999 $170.2 914
2000 $230.1 800
2001 $252.4 842
2002 $188.5 684
- ----------
(1) CAGR represents compounded annual growth rate.
SLIDE 7
Leading Supplier to Aerospace Markets
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Ladish has focused on becoming a leading supplier of large, engineered
specialty metal components for critical applications in the commercial and
military aerospace engine and select other end markets
o Ladish primary manufacturing end markets:
o Jet engines
o Commercial aircraft
o Defense aircraft
o Helicopters
o Launch Vehicles
o Heavy-duty off-road vehicles
o Industrial and marine turbines
[graphic omitted]
2002 Sales Breakdown
- --------------------
Engines 74%
Aerospace 20%
General Industrial 6%
Note: Aerospace defined as satellite, rocket and aircraft components other
than jet engines.
SLIDE 8
Ladish's Strategic Platform
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Multi-Path Plan for Broadening Product Offerings
------------------------------------------------
Ladish --------> Precision Machining --------> NDE
-------------------
Expanded Capabilities Specialty Machining
Cudahy Forging --------> Large Hyd Press
-------
o Weber Low cost Small Press/ Hammer
o HSW Rings
Forging Investment Casting --------> Complementary
----------------- Materials (Al, Ni, Mn)
o Expanded capabilities
Pre 1997 1997 to Date
SLIDE 9
A "One-Stop-Shop" Solution
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PRECISIONS MACHINING
DISCS SEALS & SPACERS CASES & RINGS
(PREP)
[graphic omitted]
FANS DISCS VANES CASES FRAMES
FORGINGS CASTINGS
SLIDE 10
Recent Achievements
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Management has taken the requisite steps to successfully position the
Company for a recovery in its key end markets.
Productive Capital Investments o Investments have positioned the
Company for growth and upcycle
margin improvement
o New isothermal press technology and
patented "Super Cooler" technology
Cost Reductions o Employment costs, manufacturing
subcontracting costs, controllable
expenses and utilities expenses down
significantly in 2002 versus 2001
o Lower heath care costs and work
rules improvement with union labor
forces
Acquisition Integration o Successful integration of Stowe,
Adco and PCT have provided a broader
market presence and cross-selling
opportunities (United Technologies,
P&W, Rolls-Royce)
Recent Customer Wins o Long-term contracts with GE,
Rolls-Royce and Pratt & Whitney
SLIDE 11
More Opportunities for Growth and Profitability
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o Broaden Product Offering / Expansion of Capabilities
o Significant New Programs / Customers
o Pursue Further Cost Reductions
o Selectively Pursue Acquisitions
o Enhance Global Presence
SLIDE 12
Broaden Product Offering / Expand Capabilities
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...Through Acquisition ...And Organic Growth
o Complementary capabilities to o Additional European
Cudahy aerospace platforms
Forging -----> - Unique equipment & processes
- Enhance competitive advantage o Military land
through technology acquisition systems
o Next generation
engine material R&D
for customer base
o Niche process capabilities o Opportunities to add
new engine frame plat-
Casting -----> forms
o Diversity of materials
(e.g. non-titanium metals) o New opportunities in
military weaponry
Value-Added o Supplemental precision o Selective sub-assembly
Services-----> machining and non-destruct work
testing
o New machining capabil-
ities for existing
customers
SLIDE 13
New Programs / Customers
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Business Comments
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> 4 New Engine Programs
Cudahy -----> > 2 New Customers
> 2 New Launch Vehicles
> 1 Airframe
> 2 Boeing Airframe Programs
PCT -----> > 4 New Engine Programs
> 1 New Military Weapon
Program
Stowe -----> > 2 New Programs
> 4 New Customers
SLIDE 14
Cost Reduction - Employee Cost Control
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Cudahy Forging Sales Per Employee
- ---------------------------------
o Continue with Proven Outsourcing Model
- Manages employee headcount through cycles
- Significantly decreases costs during cyclical lows
o Ongoing Initiatives
- Rationalization of non-core competency services through outsourcing
- Productivity gains through capital investments to further automation
Indexed to 12/31/86
- -------------------
[graphic omitted]
Year Sales / Employee
- ---- ----------------
86 100.0%
87 103.0%
88 102.0%
89 103.0%
90 114.9%
91 105.9%
92 96.0%
93 101.0%
94 105.0%
95 105.9%
96 151.5%
97 191.1%
98 199.0%
99 157.4%
00 205.9%
01 217.8%
02 185.1%
1999 - Major equipment
failure accounted for
significant loss of revenue
SLIDE 15
Selectively Pursue Acquisition Opportunities
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Casting
- -------
|X| Niche process / materials capabilities
Value-Added Services
- --------------------
|X| Supplemental precision machining
Forging
- -------
|X| Complementary capabilities to Cudahy
|X| International expansion
SLIDE 16
Enhance Global Presence
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Ladish is seeking to continue to position itself internationally to more
effectively meet its customers demands and improve its cost structure.
Sourcing arrangements aimed at improving competitive advantage
|X| Existing titanium material sourcing through supply agreements in
China and Russia
|X| Beginning to establish sales presence in China
Opportunities in Poland
|X| Exploring broadening presence through JVs and potentially through
acquisitions
- Access lower cost manufacturing
- Enhance EU growth opportunities
SLIDE 17
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INDUSTRY ENVIRONMENT
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SLIDE 18
Challenging Industry Environment
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Current Environment Industry Impact
- ------------------- ---------------
|X| Airline Losses |X| Cyclical Demand at Low Point
|X| Weak Passenger Traffic
|X| Airline Bankruptcies
|X| Pricing Pressures
|X| Increases in Military
Appropriations
Supply Chain Drivers |X| Reduced Volumes
- --------------------
|X| Load Factors
|X| Military "Flow Down" Materializing
|X| Airline Profitability
|X| Commercial Aircraft Orders
|X| Military Demand
SLIDE 19
Global Commercial Aircraft Deliveries
|X| Industry estimates predict a slowing recovery in deliveries in 2004/2005
|X| Ladish revenues tend to lead the delivery cycle by 6 to 12 months
Historical and Projected Large Commercial Aircraft Deliveries
-------------------------------------------------------------
50% Decrease 37% Decrease
Year Deliveries
1985 329
1986 374
1987 406
1988 478
1989 508
1990 622
1991 767
1992 729
1993 546
1994 434
1995 380
1996 397
1997 557
1998 792
1999 914
2000 800
2001 842
2002 684
2003P 580
2004E 611
2005E 652
SLIDE 20
Industry Overview - Ladish Position
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|X| Ladish continues to fare well in "We continue to regard Ladish as an
the competitive environment indispensable participant in a greatly
consolidated aerospace supply chain."
|X| Ladish competes in a number of
ways - Thomas J. Lewis, C.L. King & Associates
(4/14/03)*
- Cost: lean manufacturing, excellent
purchasing and employee cost "The balance sheet remains in decent shape,
management through the cycles in our view (which should help the company
endure the commercial aerospace downturn)."
- Focus on customer service and
responsiveness - Adam B. Weiner, Credit Suisse First Boston
(1/30/03)*
- Superior technology, forging,
machining and precision casting "In our estimation, Ladish is doing about as well
expertise as can be expected in the difficult aerospace
environment at this time, generating positive
- Continued international penetration cash flow and holding on to market share."
o International sales represent - Thomas J. Lewis, C.L. King & Associates
50% of the Company's total (2/3/03)*
* Permission to use quotation neither sought nor obtained.
SLIDE 21
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MANAGEMENT AND BOARD
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SLIDE 22
Strong, Experienced Management Team
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Ladish Executive Management
---------------------------
Kerry Woody
President & CEO
29 yrs. Industry Experience
Wayne Larsen Gene Bunge George Groppi Dave Provan
VP, Law / Finance & Secretary VP, Engineering VP, Quality & Metallurgy VP, Materials Management
23 yrs. Industry Experience 36 yrs. Industry Experience 35 yrs. Industry Experience 25 yrs. Industry Experience
Gary Vroman Larry Hammond Randy Turner Bill Lazzari
VP, Sales & Marketing VP, Human Resources President, PCT President, Stowe
22 yrs. Industry Experience 24 yrs. Industry Experience 27 yrs. Industry Experience 28 yrs. Industry Experience
Segment Management
------------------
|X| Cudahy Forging |X| Pacific Cast Technologies |X| Stowe Machine
-------------- ------------------------- -------------
- Executive staff of six - Management staff of six - Management staff of five
- 140+ years industry - 80+ years of industry - 70+ years of industry
experience experience experience
SLIDE 23
Qualified, Knowledgeable Board
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|X| Substantial industry experience
|X| Interests aligned with all Ladish shareholders
|X| Independent board
o 3 Independent Representatives
o 2 Grace Representatives
o 2 Company Representatives
|X| Track record of successfully managing the company through industry
cycles
|X| Plan for capturing market opportunities and enhancing shareholder
value
|X| As in the past, will continue to consider all strategic opportunities
that are presented to the company
SLIDE 24
Ladish Performs in the Top Half of its Peers. . .
Sales Growth: CY 1999 - 2002 Net Debt / Enterprise Value(1)
Co. Sales Growth Co. EBITDA Margin
Sifco (11.5%) Titanium Metals 23.2%
Titanium Metals (8.6%) Ladish 25.3%
Allegheny Tech. (6.0%) Precision Castparts 33.6%
Ladish 3.5% Sifco 46.6%
Precision Castparts 15.0% Allegheny Tech. 57.9%
|X| Ladish also ranks #2 in the above peer group, behind Precision
Castparts, in CY 2002 net margin
(1) Net debt / enterprise value where net debt = total debt - cash &
equivalents and enterprise value = fully-diluted equity value
(as of 4/30/03) + net debt.
SLIDE 25
.. . . And Has Outperformed its Peers Since its IPO
[GRAPHIC OMITTED]
Note: Comparable Companies Index includes Allegheny Technologies, Precision
Castparts, Sifco Industries, and Titanium Metals.
Note: Share price as of 4/30/03.
Source: Factset Research Systems.
SLIDE 26
GRACE PROPOSAL
SLIDE 27
Reject Grace's Efforts to Take Control of Your Company
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|X| Grace's interests are not aligned with other shareholders
o Low tax basis of $1.20 per share
o Grace nominees represent the interests of Grace
|X| Grace wants control of your company for free
|X| Grace has no plan for the company
|X| Grace already has proportional board representation
|X| Grace has declined to add mutually acceptable independent
representation to the Board
SLIDE 28
Existing Governance Provisions Promote Shareholder Rights
Ladish is highly ranked by ISS relative to the Russell 3000
and the capital goods sector.
|X| Single-class Board
|X| Independent Board
o 3 Independent Representatives
o 2 Grace Representatives
o 2 Company Representatives
|X| Special meeting called by 10% of voting shares
|X| Action by written consent
|X| Committed to continuing to enhance the Board's independence
SLIDE 29
FINANCIAL OVERVIEW
SLIDE 30
Historical Financial Overview
($ in millions)
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Year Ending December 31,
-----------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
- -------------------------------------------------------------------------------------------------------
Revenue $209.8 $226.8 $170.2 $230.1 $252.4 $188.5
% Growth - 8.1% (24.9%) 35.2% 9.7% (25.3%)
Net Income $18.9 $21.4 $9.7 $12.7 $13.1 $1.6
% Margin 9.0% 9.4% 5.7% 5.5% 5.2% 0.9%
Cash Flow from Operations ($2.1) $15.1 $21.2 $21.5 $17.2 $15.9
Capital Expenditures $9.2 $13.7 $7.8 $12.0 $19.0 $11.5
% of Sales 4.4% 6.0% 4.6% 5.2% 7.5% 6.1%
Total Debt $39.7 $3.5 $0.0 $25.0 $30.0 $30.0
Source: Ladish public filings.
SLIDE 31
YTD Financial Performance
Q1 Highlights
-------------
($ in millions, except per share data)
- -------------------------------------------------
Quarter Ended March 31, |X| Bookings 21%
-----------------------
% |X| Headcount 10%
2002 2003 Change
- -------------------------------------------------- |X| Margin gains offset by:
Revenue $56.156 $47.307 (15.8%)
o Higher natural gas prices
Net Income $0.603 $0.574 (4.8%)
o Expenses associated with new program wins
E.P.S. $0.046 $0.044 (4.3%)
o Customer-related inventory builds
Debt / Capital 22.1% 20.1% -
|X| Increased cash position by $4.7 million
Cash $1.0 $5.7 -
Source: Ladish public filings and press releases.
SLIDE 32
Strong Balance Sheet
Year Debt / Capital
1997 88.8%
1998 4.9%
1999 0.0%
2000 22.3%
2001 19.2%
2002 20.2%
SLIDE 33
Outlook - Key Drivers
Overall Assumptions
o Recovery tied to Boeing / Airbus aircraft orders
o Significant growth in castings / modest growth in forgings and precision
machining
o Continued focus on cost control
Short-to-Medium Term Goals Long-Term Goals
o Maintain positive earnings o Program wins will drive growth
o Maintain positive cash flow o Leverage lower cost base
o Pursue opportunistic acquisitions o Grow higher margin PCT / Stowe businesses
while maintaining balance sheet
flexibility