WIRECO WORLDGROUP LENDER … Excellence – Data-driven decisions and rigorous continuous...
Transcript of WIRECO WORLDGROUP LENDER … Excellence – Data-driven decisions and rigorous continuous...
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Public Version
July 2016
WIRECO WORLDGROUP
LENDER
PRESENTATION
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Disclaimer
1
This presentation and information contained herein constitutes confidential information and is provided to you on the condition that you will hold it in strict
confidence and not reproduce, disclose, forward or distribute it in whole or in part without the prior written consent of the WireCo WorldGroup Inc. (“WireCo”).
Certain information in this presentation is based upon management forecasts and reflects prevailing conditions and management’s views as of this date, all of
which are subject to change. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of
all information available from public sources or which was provided to us by third parties. The information contained herein is as of this date and is subject to
change, completion or amendment and we are not under any obligation to keep you advised of such changes.
This presentation and the information contained herein have been prepared to assist interested parties in making their own evaluation of WireCo and the facilities
and does not purport to be all-inclusive or to contain all of the information that a prospective participant may consider material or desirable in making its decision to
become a lender. Each recipient of the information and data contained herein should take such steps as it deems necessary to assure that it has the information it
considers material or desirable in making its decision to become a lender and should perform its own independent investigation and analysis of the facilities or the
transactions contemplated thereby and the creditworthiness of WireCo. The recipient represents that it is sophisticated and experienced in extending credit to
entities similar to WireCo. The information and data contained herein are not a substitute for the recipient's independent evaluation and analysis and should not be
considered as a recommendation that any recipient enter into the facilities.
Forward-Looking Statements
All statements, other than statements of historical facts, included in this presentation that address activities, events or developments which are expected or
anticipated to occur or which may occur in the future are forward-looking statements. Forward-looking statements convey the current expectations relating to the
anticipated financial condition, results of operations, plans, objectives, future performance and businesses of WireCo. These statements can be identified by the
fact that they do not relate strictly to historical or current facts. They are subject to uncertainties and factors relating to the operations and business environment of
the businesses that will together comprise WireCo, all of which are difficult to predict and many of which are beyond the control of these businesses. Factors that
might cause such a difference include those discussed in WireCo’s filings with the Securities and Exchange Commission, which include its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. For more information, see the sections entitled “Cautionary Information Regarding
Forward-Looking Statements” and “Risk Factors” contained WireCo’s Annual Report on Form 10-K and in other filings. Such uncertainties and factors could cause
WireCo’s actual results to differ materially from those stated in the forward-looking statements. Further, any forward-looking statement speaks only as of the date
on which it is made, and no obligation is assumed to update any forward-looking statement to reflect events or circumstances after the date on which it is made or
to reflect the occurrence of anticipated or unanticipated events or circumstances.
Market Data Information
Certain market data information in this presentation is based on estimates. The industry, market and competitive position data used throughout this presentation
were obtained from internal estimates and research as well as from industry publications and research, surveys and studies conducted by third parties. The
estimates are believed to be accurate as of the date of this presentation. However, this information may prove to be inaccurate because of the method by which it
was obtained or because this information cannot always be verified due to the limits on the availability and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties. No representation, warranty or undertaking whatsoever is given or made regarding such information and
the recipient should inform itself as to the accuracy of such data and the reasonableness of such forecasts and their appropriateness for WireCo.
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Today’s Presenters
Chris Ayers, WireCo, President and CEO
Joined WireCo in July 2013
Previously Executive Vice President and President of Global Primary Products at Alcoa
Formerly Executive Vice President at Alcoa Inc., President of the PCC Forgings Division of Precision Castparts Corporation, and President of
Wyman Gordon Forgings
Bachelor's and Master’s degrees in Aerospace Engineering from the Georgia Institute of Technology and an MBA from the University of
Connecticut
Brian Block, WireCo, Senior Vice President and CFO
Joined WireCo in July 2010, served as VP of Business Development and then SVP of Finance, became CFO in May 2013
As CFO responsible for financial management and executing M&A
Previously Director at Paine & Partners for 8 years during which was a member of numerous Board of Directors, including of WireCo’s board
Formerly Associate at CIBC World Markets in the leveraged finance group
Bachelor of Science degree in Management from Tulane University’s A.B. School of Business
Gary Gluzberg, WireCo, Vice President of Finance
Joined WireCo in December 2014 as Vice President of Finance, previously member of WireCo’s Strategic Operations group from 2 010-2011
Associate at Paine & Partners from 2008-2010 prior to joining WireCo’s Strategic Operations group
Began career at William Blair & Company as an investment banking analyst in the consumer retail group
Bachelor’s from Michigan State University and an MBA from Harvard Business School
Kosty Gilis, Onex Partners, Managing Director
Joined Onex in 2004 and has 16 years of private equity experience
Onex transactions include the acquisitions of Emerald Expositions, Tomkins plc and Allison Transmission
Currently serves on the board of Emerald Expositions
Previously worked at Willis Stein & Partners and formerly was a management consultant at Bain & Company
B.S., Economics from The Wharton School of the University of Pennsylvania and an MBA from Harvard Business School
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Section I | Company Overview
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WireCo’s Corporate Strategy
Mission Statement
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Corporate Vision
Supported by Strategic
Action Points
Team Approach – Passionate team-oriented workforce collaborating to develop the organization and people every day 1
Innovation at Every Level – Innovate at all levels of our organization: products, solutions, services, internal processes,
environment 2
Customer Focused Growth – Gain market share by putting customers as the main driver for decisions and developments 3
Operational Excellence – Data-driven decisions and rigorous continuous improvement create safe, reliable and cost
effective operations 4
Generation of Earnings and Cash – Strong financial performance attracts and rewards the best employees, customers,
shareholders and suppliers 5
WireCo WorldGroup strives to build strong relationships with its customers by delivering high quality, value added
products and services on a timely basis to meet the needs of end users in the industries it serves. As a technical and
market leader, WireCo innovates in all areas of the Company for the benefit of its customers, to offer its owners a return on
their investment and to provide its employees a safe, challenging and rewarding work environment.
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Introduction to WireCo
Source: WireCo management 1 Based on midpoint of publicly disclosed ranges of $155.5 – 157.5 million for Q2
Revenue and $26.0 – 27.0 million for Q2 Adj. EBITDA. See Appendix for EBITDA
reconciliation. 2 Based on LTM Q1 2016 Revenue.
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Overview
The leading global manufacturer of steel and synthetic rope, specialty wire and engineered products
— Top market shares in all products and end markets
— LTM Q2 2016 Revenues of $635 million and Adjusted EBITDA of $108 million (17.0% margin)1
“Mission-critical" products used in heavy lifting, pulling, mooring, supporting and suspension
Comprehensive portfolio of highly engineered products
Diverse range of end markets, geographies and customers
— Industrial / infrastructure, fishing, mining, maritime, structures, and oil and gas (offshore and onshore)
— ~6,000 customers; products sold into 119 countries
— 11 go-to-market brands with reputation for premium quality and performance in their respective niche markets
— ~6,000 individual SKUs
Product performance, quality and safety are of utmost importance to customers
Consumable products and rigid replacement cycles; significant recurring revenue base
Global footprint
— 24 manufacturing facilities in eight countries
— 39 distribution centers and sales offices globally
— ~3,900 employees and 80 engineers
Product Mix2 Geographic Mix2
Steel Rope46%
Synthetic Rope24%Specialty
Wire / Yarns20%
Engineered Products10%
Europe48%North
America35%
South America
8%
Asia / Middle East7%
Africa2%
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Source: WireCo management
Note: Product and end market mixes based on LTM Q1 2016 sales; Steel Rope includes EMC. Other includes Wire and Yarn sales; Engineered Products included within end markets.
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Rope (70% of Sales)
Broad Portfolio of Products and Diverse End
Markets
Engineered Products
10% of Sales
Engineered plastic moldings and
sheets made from a mix of
recycled and new materials;
products replace steel and wood
with a more durable material
Applications include infrastructure,
offshore platforms, conveyor belts,
pipe systems, railroad ties,
offshore buoys, etc.
Specialty Wire/Yarns
20% of Sales
Products include specialty wire
with high strength characteristics,
and yarns used in various
industrial applications
Wire and yarn are the key inputs
used in the manufacturing process
for steel and synthetic rope,
respectively (satisfies ~85% of the
Company’s internal wire needs,
providing control over quality,
supply, and cost of inputs)
Steel Rope
46% of Sales
Highly engineered specialty
products, general purpose steel
wire ropes, and electrical signal
transmission cable (EMC)
Applications include mission-
critical lifting solutions
Synthetic Rope
24% of Sales
Highly engineered synthetic ropes
and technical products that have
the strength characteristics of
steel but are lighter, more
compact, and corrosion resistant
Applications include ship assist
and towing and commercial
fishing
Industrial
40%
Maritime
7%
Fishing
13% O&G - Onshore
9%
O&G - Offshore
13%
Mining
6%
Other
11%
Highly Diversified End Markets
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History of WireCo
Source: WireCo management
End Market Mix Evolution
2006A
LTM Q1 2016
Story of Market Leadership, Diversification and Growth
Industrial60%
O&G Onshore
30%
Mining10%
Brazil
expansion
Expanded
Brazil and
Poland
operations
1931 2005
2015 2013 2014
2009 2011 2010 2012
2007
Acquired Endenburg
B.V. and opened WireCo
Crane Center in the
Netherlands
Establishment of
Operational
Excellence program
Appointed new CEO
with new team of
CFO, CCO, CTO, CIO
and CAO
Acquired
Acquired
Acquired
Acquired
Growth, Integration and Operational Excellence
Wire Rope
Corporation of
America, Inc.
("WRCA") founded
as a spin-off from
Wire Machinery
Corporation of
America
Acquired
Portfolio Buildup
$371-743mm Revenue
Acquired
Wireline
Works
Acquired
WRCA acquired
by Paine and
Partners
Purchased
U.S.
Reel
Formation
Up to $60mm Revenue
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Industrial40%
Fishing13%
O&G Offshore13%
O&G Onshore9%
Maritime7%
Mining6%
Other11%
2016
Onex agreed
to investment
in WireCo to
drive growth
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Section II | Key Investment Highlights
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Key Credit Highlights
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“Mission-Critical” Consumable Products with
Premium Brand Recognition 2
Long Standing, Diversified Customer Base 5
Flexible Operating Model Affords Ability to Generate Free Cash Flow in
All Market Conditions 6
Highly Diversified Business Mix 4
Leading Global Player with Extensive Market Reach 1
Experienced Management Team with Proven
Ability to Deliver Results 7
Engineering Leader Driving Differentiated, Value-Added
Customer Proposition 3
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Leading Global Player with Extensive Market Reach
Source: WireCo management
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Sales and Distribution
Wire Manufacturing Facilities
Engineered Products Manufacturing Facilities
Steel and Synthetic Rope Manufacturing Facilities
With 24 manufacturing facilities, 39 distribution centers / sales offices and a 129 person technical sales force, WireCo’s
global manufacturing and distribution network is a key competitive advantage
1
Global Manufacturing and Sales Footprint with Ability to Provide Local Customer Service
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“Mission-Critical” Consumable Products with
Premium Brand Recognition
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WireCo’s products are mission critical across a variety of industries serving applications with high cost of failure
Key
Brands
2
Arrestor Cable
Industrial
Fishing
Fishing Net
Rig Drill Line
Onshore Oil and Gas
NASA Parachute
Cables
Other
Surface Mining Drag Line
Mining
Barge Crane
Maritime
George Washington
Bridge
Industrial
Drill Line
Riser Tensioner (MRT)
and Pull In Lines
Crane Ropes
Mooring Lines
(Underwater)
Offshore Oil and Gas
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“Mission-Critical” Consumable Products
with Premium Brand Recognition
1. Product longevity
2. Overall quality of product
3. Timely technical service
4. Honesty and trustworthiness
5. Overall perceived product value
6. Expertise of technical representatives
7. Supplier accessibility and response time
8. Technical representatives product
knowledge
9. Partnership and commitment from supplier
10. Proactive communication
11. Competitive pricing
Source: WireCo management 1 Represents percentage of sales that constitute replacement business. 2 Based on a WireCo Customer Survey.
Buyer Purchasing Decisions2
2
End Market
Example
Product
Primary
Application
Purchase
Price Range
Cost of
Failure
(per day)
Estimated
Replacement
Cycle
Estimated
Avg. %
Replacement
Industrial &
Infrastructure Hoist Lines Cranes
~$1k -
$250k
$20k -
$2mm
1-4
years ~70%-80%
Fishing Tuna Nets Commercial
Fishing ~$5k - $1mm
$10k -
$1.5mm 2-4 years ~90%
Oil & Gas
(Offshore)
Synthetic
Mooring Line Production
$50k -
$15mm $75k - $650k
1-25
years ~95%
Oil & Gas
(Onshore) Drill Lines Exploration
~$25k -
$150k $12k - $15k
6-18
months ~95%
Maritime Tug Lines Ship assist
and Towing
$5k -
$150k $10k - $15k
12-18
months ~90%
Mining Shovel Hoists Coal and
Copper ~$20k - $250k
$350k-
$5mm
2 months -
2 year ~95%
Serving price-inelastic buyers focused on quality and avoidance of cost of downtime / failure
Leading brand recognition
Reputation for superior quality
Unique technical support drives
customer loyalty and market share
opportunities
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1
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Engineering Leader Driving Differentiated, Value-
Added Customer Proposition
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Consistently designs products to meet
the most stringent requirements in the
industry
More global quality certifications than any
supplier in the industry
Continued focus on quality testing throughout
the manufacturing process
First-time yield of 98%
Ability to clearly demonstrate superior product
performance
Partnership with customers in
development of next generation
products
Ability to customize products for
customer-specific needs
R&D team continually focused on delivering
“longer, lighter, stronger” product
enhancements
75 actionable pipeline projects
Dedicated engineering and R&D organization with 80
product engineers on staff (over 1/3 have
advanced degrees)
Industry leading materials science experts
Breadth of manufacturing experience and
know-how across the product spectrum
and enhancements
Leading field response team in each product category /
end market
Market leading operational support software
and customer training capabilities
On-site service driving customer
solution focused product development
Involvement of engineering personnel across development, sales, and technical service organizations defines customer
experience, enhancing WireCo’s value proposition
World Class
Engineering Capabilities
with Field Engineering Teams
Offering Ongoing Technical Support
3
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Highly Diversified Business Mix
Source: WireCo management
Note: Product, end market and geographical pies based on LTM Q1 2016 sales. Steel Rope includes EMC.
14
4
Product Mix Geographic Mix
Diversity across products, end markets, geographies, and customers provides ability to capitalize on positive
secular trends and mitigates against volatility in any particular end market
End Markets
All Others
80%
Steel Rope46%
Synthetic Rope24%
Specialty Wire/Yarns
20%
Engineered Products
10%
Europe48%North
America35%
South America8%
Asia / Middle East7%
Africa2%
Industrial40%
Fishing13%
Other11%Maritime
7%
O&G Offshore
13%
O&G Onshore
9%
Mining6%
Stable EndMarkets(71% of
Revenue)
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Longstanding, Diversified Customer Base
Source: WireCo management
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Customer Highlights
~6,000 customers globally
— 20+ years working with key
customers
Highly fragmented customer base
— No single customer represents more
than 3% of sales
Customers are “sticky,” ranking quality,
performance and service as their highest
priorities as opposed to price
Customers rely on product quality and
customer service to avoid the significant
costs from downtime or failure of
products
WireCo’s strong customer relationships
are driven by:
— Exceptional product quality and
safety
— Value-added customer service
provided through its extensive field
engineering and R&D organization
Deep, longstanding, “sticky” relationships with premier customers with runway for further growth
Selected Customers
WireCo’s Top 20 Customers Represent Only ~20% of Sales
Average tenure of top 20 customers:
20 years
Largest customer represents only
3% of sales All Others
80%
5
North
America Europe Other
Ind
ustr
ial
(Distributor)
(Distributor / OEM)
(Distributor, Mexico)
(OEM)
(OEM, NA & EU)
(OEM, China)
Fis
hin
g
(Distributor)
(Distributor, Global)
(End User)
Oil &
Gas
/
(Distributor)
(Distributor, NA & EU)
(Distributor, Global)
(OEM)
(OEM / Distributor, Global)
Mari
tim
e
(Distributor)
(End User)
(End User)
(OEM, Global)
Min
ing
(Distributor)
(Distributor, South America)
(End User)
(End User, Global)
Oth
er
(Wir
e)
(OEM)
(OEM)
(OEM, Mexico)
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Flexible Operating Model to Manage Costs
for Market Conditions
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Strong Financial Fundamentals Summary Financial Performance
Source: WireCo management; $ in millions
Note: Constant currency figures reflect EUR FX rate of 1.138 1 Unlevered Free Cash Flow calculated using EBITDA less capital expenditures less change in NWC.
Re
cu
rrin
g R
eve
nu
es
H
igh
Co
ns
iste
nt
Ma
rgin
s
Mission critical components in customers’ operations
Global manufacturing base provides proximity to customers,
which is a competitive advantage as it reduces cost of freight
Non-discretionary spending and rigid replacement cycles
Product and end market diversity insulates WireCo from
volatility in any particular market
Proactive management of operational cost base, supported by
small underlying percentage of total costs being fixed: ~13%
Commodity price pass through mechanisms and
steel surcharges fixed at the time of shipment
Premium pricing with historical proven stability due to customer
focus on product quality, service quality, reputation and safety
Str
on
g F
ree
Ca
sh
Flo
w
Expansive global manufacturing base with proximity to
customers provides flexible cost structure
Low maintenance capex requirements
(~$10-$15mm annually)
Focused strategy on working capital management to obtain best
in class metrics in all categories
Fundamental characteristics of WireCo’s business model support consistent margins
Adj. EBITDA Margin (Constant Currency)
Unlevered Free Cash Flow1
% Margin
6
Mission critical nature supports price inelastic customer, with
demonstrated stability in 2015, despite energy markets decline
Consumable products (6-24 month useful life) operating
in rigorous conditions need frequent replacement
16.5 %
17.6 %
17.0 % 17.0 %
2013A 2014A 2015A LTM Q1 2016
$ 130 $ 125
$ 100
$ 112
15.8 %
14.6 % 14.7 %
17.1 %
2013A 2014A 2015A LTM Q1 2016
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$ 369
$ 299
$ 150
$ 120
$ 68
$ 52
$ 34
$ 26
$ 39
$ 34
$ 29
$ 22
$ 17
$ 18
$ 706
$ 570
2014 2015
12%
88%
Fixed Costs(% of Total Costs)
Variable Costs(% of Total Costs)
13%
87%
Flexible Cost Structure
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6
Management successfully maintained EBITDA margin at 2014 levels as a result of highly variable cost structure and
management of expenses
Fixed v. Variable Cost Summary1 Cost Structure Highlights
Approximately 87% of total costs are
variable, with raw materials and freight
accounting for nearly 50% of total cost
structure
Management proactively manages fixed
cost base by implementing ongoing
productivity and SG&A initiatives to right
size operations for changing market
conditions
— Successfully eliminated $11 million of
fixed costs in 2015
— Monthly rolling forecast process
allows for quick response to market
conditions
$ in millions
Source: WireCo management 1 EBITDA adjustments allocated to respective line items, as appropriate.
$85mm Fixed
Costs
(10% of sales)
$620mm
Variable
Costs
(72% of sales)
$74mm
Fixed
Costs
(11% of
sales)
$496mm
Fixed
Costs
(72% of
sales)
Freight - Variable
SG&A - Variable
Plant Costs - Variable
Raw Material Costs - Variable
Distribution Center Expenses - Fixed
SG&A - Fixed
Plant Costs - Fixed
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Experienced Management Team with
Proven Ability to Deliver Results
Source: WireCo management
18
Key Management Initiatives
Name Title
Total Years of
Experience Former Roles
Chris Ayers President - Chief Executive Officer 27
Joined WireCo in July, 2013
Formerly an Executive Vice President at Alcoa Inc, President of the Forgings Division
of Precision Castparts Corporation, and President of Wyman Gordon Forgings
Holds Bachelor's and Master’s degrees in Aerospace Engineering from the Georgia
Institute of Technology and an MBA from the University of Connecticut
Jose Gramaxo SVP - Chief Commercial Officer 35
Joined WireCo in July 2012 as Senior Vice President of Global Synthetics, following
the acquisition of Lankhorst; leads WireCo’s sales and marketing efforts
Previously President and CEO, as well as Vice President and Chief Operations
Officer, of Lankhorst
Brian Block SVP - Chief Financial Officer 17
Joined WireCo in July 2010; served previously as VP of Strategy and SVP of Finance
Previously, he was a Director at Paine and Partners for 8 years during which he was a
member of the Board of Directors of WireCo
Holds a Bachelor of Science degree in Management from Tulane University’s A.B.
School of Business
Forward-looking organization
Ground floor of developing culture of operational excellence
Customer centric organization
Global leadership structure with focus on accountability within the organization
Strong earnings and cash flow
Investing in a sustainable platform for growth
Operate as one global WireCo
2
7
4
1
6
5
3
7
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Section III | Industry Overview
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Key Industry Highlights
20
Value-Add Steel and Synthetic Rope Market
¹ Management estimate.
Large Core Addressable Market with Fragmented Competitive Landscape 1
~$4.8bn1 addressable value-add steel and synthetic rope market
Highly fragmented and localized competitive landscape
…with Favorable Supplier and Customer Dynamics 2
Proliferated supplier base and commoditized nature of inputs allow for bargaining power
Broad and diverse customer base limits concentrated exposure to any one customer or end market
…and Barriers to Entry with Limited Customer Incentives to Switch 3
Mission-critical/safety nature of products combined generate real customer stickiness
Significant advantages of scale, long sales cycle and high capital requirements
Strong brand reputation leads to significant customer loyalty and limited switching
…Serving End Markets with Long Term Growth Expectations 4
Well-positioned to capitalize on expected growth in end markets
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Addressable Market
Source: WireCo Management 1 WireCo company estimates for Kiswire value-add rope sales (includes Verope).
Large & Fragmented Value-Add Steel and Synthetic Rope Industry
Global Value-Add Wire Rope Market
~$4.8 billion estimated global addressable rope market
growing to $5.5 billion by 2020
Represents value-add steel and synthetic rope only (does
not include wire or Engineered Products)
~65% of the Company’s sales and 75% of gross profit are
derived from end markets where WireCo is either the
number one or two player
21
1
Select Competitors
Company
Estimated Value-Add Rope
Revenue ($ mm)
$ 475
Glo
ba
l
~450
~130
~120
~120
Lo
ca
l
Local Players / “Mom and Pops”
(100+ Companies) ~3.3bn
Highly fragmented: 100+, primarily local, players make up
global value-add rope market
Market includes global competition (~18% of market) and
local, specialized manufacturers that operate in niche
specialty markets with historically stable market shares
― Customers require proximity
― Low customer incentive to switch absent severe supply
disruption
Highly Fragmented Landscape Large Addressable Market
1,668 1,795
1,097 1,511
539
539 852
926 682
764 $ 4,838
$ 5,534
2015E 2020E
Industrial O&G Mining Maritime Fishing
1
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Commentary Key Metrics
2 Supplier / Customer Dynamics Favorable Bargaining Position with Suppliers and Customers
Supplier
Dynamics
Highly proliferated supplier base creates strong
bargaining position
― WireCo’s sophistication serves as advantage in
developing global procurement strategy to drive
cost savings
WireCo has over 10 rod and polymer
suppliers; no supplier larger than 12%
Relatively limited differentiation in suppliers with
minimal switching costs due to commodity nature
of raw material
Qualification period of only 3-6 months to
switch rod supplier
Customer
Dynamics
Highly proliferated customer base limits
concentration risk
WireCo has ~6,000 customers; no
customer larger than 3% (end user base
much larger given distribution model in
several end markets)
“Mission-critical” nature and small % cost of total
application creates limited price sensitivity
Oil & gas and mining maintained stable in
margins in 2015
Substantial daily cost of failure
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23
3 Barriers to Entry Several Barriers Against Competitive Entrants
Safety / mission critical applications insulated with premium value proposition
― High risk to try new competitor if product fails
Loyalty to existing brands
― End user pull-through in distribution channel
Investment in broad sales force to have presence in every market
― Ability to penetrate new end markets more rapidly and react quickly when customer needs
support
Investment in engineering team to maintain local presence in every market
― Drives engineering support in the case of application failure and creates sustainable
competitive advantage through innovation
Difficult to expand with one product line
― Customers prefer a full array of products to limit proliferation of suppliers
Cost advantages from larger scale:
― Ability to invest in Operational Excellence team
― Negotiating leverage with raw material suppliers
― Difficult to maintain cost competitiveness without global factory presence; freight costs from
Asia to Houston are $140 per ton (~10-15% of total cost structure) higher than average cost of
shipping from WireCo’s U.S. factories
Customer
Stickiness
Advantages
of Scale
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24
3 Barriers to Entry (Cont’d) Several Barriers from Competitive Entrants
Long lead time to establish brand awareness in new markets and entice end users to try new
product when cost of failure is substantial
― Several distributor customers who only have one product qualified
Up to 5 Year new market placement cycle:
Significant capital requirements to build new rope factory
― WireCo acquired Drumet for $105 million; cost to purchase new equipment would have been
~$250 million
Large
Capital
Requirements
Long
Adoption
Cycle Hire Sales
Force
Train /
Educate
Sales Force
Develop
Approach to
Access
Customers /
Market
Research
Educate the
Market /
Convince of
Value
Proposition
Customer
Trial
Applications
9 Months 6 Months 12 Months 18-24 Months 6-12 Months
More manageable for global player with process know-how and established global sales force
WireCo South Africa Mining Case Study
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End Mkt.
(% of Sales) Key Mkt. Drivers End Market Data Supports Growth
Industrial
(40%)
GDP growth
Non-residential construction
Industrial production
Oil and Gas
(22%)
US oil and gas rig count
Offshore deep water platform construction
Fishing
(13%)
Global fish production
Fish farming growth
Maritime
(7%)
Shipping activity
Global seaborne trade
Global fleet size
New vessel construction
Mining
(6%)
Global coal production
Global copper production
Global iron ore production
Source: WireCo Management
¹ GS Research. 2 Wall Street Research. 3 OECD. Million tonnes of fish. 4 Clarkson’s. Million TEU lifts. 5 Wall Street Research and Wood Mackenzie.
4 End Market Growth Summary
Glo
bal G
DP
Gro
wth
1
US
Rig
Co
un
t2
Aq
uacu
ltu
re
Pro
du
cti
on
3
Glo
bal
Sh
ipp
ing
Dem
an
d4
Co
al &
Co
pp
er5
Industry Data Supports Long Term Growth
25
1.7% 1.7%2.6%
1.8% 2.1%3.1%
Europe United States Global
2016 2017
Global CopperMine Production (Mt)
% Growth
19.519.8
20.1
1.5 % 1.5 %
2015 2016 2017
670 696
729
3.9% 4.6%
2015 2016 2017
Container Activity % Growth
75 78 80 82 84
2.7 % 4.0 % 2.6 % 2.5 % 2.4 %
2015 2016 2017 2018 2019Aquaculture Production % Growth
978
490 711
(49.9)% 45.1%
2015 2016 2017
Rig Count % Growth
768
776 780
2015 2016 2017
US Coal Production (Mt)
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Section IV | Historical Financial Summary
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A. Historical Financial Review
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Demonstrated track record of maintaining attractive margins across cycles through effective cost
management, highly variable cost structure, and relatively price inelastic customers
― Specialized value-add product offering and differentiated customer service drive premium pricing
which translates into higher margins
17.6% Adj. EBITDA
margin vs. median
of ~10.5% for peers1
~87% of cost base is
variable2
Strong operating performance in 2015, despite revenue decline, due to diverse end market exposure and
numerous Company-driven initiatives to mitigate impact of cyclicality in end markets
― Growth potential from rebound in markets
― 2015 revenue decline primarily driven by slump in onshore oil & gas markets which now represents
~9% of revenue
Onshore oil & gas
end market
accounts for less
than 10% of total
revenue3
Proven ability to drive high cash flow conversion
― High return on investment capital expenditures
― Focus on working capital management to achieve best-in-class metrics results in consistent cash flow
generation
~85% unlevered
free cash flow
conversion2
Financial Highlights
Source: WireCo management 1 As of 2014 FYE.
2 As of 2015 FYE. Unlevered free cash flow conversion calculated as unlevered free cash flow divided by Adj. EBITDA. 3 As of LTM Mar 2016.
Key Metrics
1
2
3
28
Management consistently achieved strong performance through initiatives, while servicing cyclical growth markets
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Historical Financial Review
29
$ in millions
Source: WireCo Management 1 Based on midpoint of publicly disclosed ranges of $155.5 – 157.5 million for Q2 Revenue and $26.0 – 27.0 million for Q2 Adj. EBITDA. See Appendix for EBITDA reconciliation. 2 Unlevered Free Cash Flow calculated using EBITDA less capital expenditures less change in NWC. 2 Constant currency figures reflect EUR FX rate of. 1.138.
Historical Financial Performance Historical Revenue in Constant Currency2
Historical EBITDA & Margin in Constant
Currency2
$ 122
$ 135
$ 116 $ 111
16.5 %
17.6 %17.0 % 17.0 %
2013A 2014A 2015A LTM Q1 '16
$602 $622 $607 $593
$136$145
$73 $60
$739$767
$680$652
2013A 2014A 2015A LTM Q1 '16
Other Onshore O&G
2013A 2014A 2015ALTM
Q1 2016
LTM
Q2 2016
Total Revenue (CC) $ 739 $ 767 $ 680 $ 652 N/A
% Growth 3.8 % (11.3)% - -
Adjusted EBITDA (CC) $ 122 $ 135 $ 116 $ 111 N/A
% Margin 16.5 % 17.6 % 17.0 % 17.0 % -
Total Revenue1
$ 825 $ 857 $ 684 $ 653 $ 635
% Growth 3.9 % (20.2)% - -
Gross Profit $ 235 $ 248 $ 188 $ 182
% Margin 28.5 % 28.9 % 27.4 % 27.9 %
SG&A $ 95 $ 97 $ 81 $ 79
% Revenue 11.6 % 11.3 % 11.9 % 12.2 %
Adjustments $ 0 $ 0 $ 10 $ 9
Adj. EBITDA1
$ 139 $ 151 $ 117 $ 111 $ 108
% Margin 16.9 % 17.6 % 17.1 % 17.1 % 17.0 %
Maintenance Capex N/A 19 16 14
Growth Capex N/A 8 14 12
Capital Expenditures $ 29 $ 27 $ 30 $ 26 N/A
% of Sales 3.6 % 3.2 % 4.4 % 3.9 %
∆ in NWC $ 20 $ 2 $ 24 $ 35
% of Sales 2.5 % 0.2 % 3.5 % 5.3 %
Unlevered Free Cash Flow2
$ 130 $ 125 $ 100 $ 112 N/A
% Margin 15.8 % 14.6 % 14.7 % 17.1 % -
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$151 $135
$117
$16
$40
$9 $2 $15
$14
2014AAdjustedEBITDA
FX 2014A CCEBITDA
O+GConsumables
Mining /OEMCrane
OtherMarkets
OperationalInitiatives
SG&A Savings 2015AAdjustedEBITDA
Commercial
2014A-2015A Adjusted EBITDA Bridge
$ in millions
Source: WireCo Management
FX: FX impact driven by strengthening US dollar against WireCo’s basket of currencies, primarily the Euro
Commercial: Volume decrease associated primarily with declining oil and gas markets, as well as decline in mining and OEM crane end markets
Operational Initiatives: Realization of purchasing benefits as a result of implemented procurement strategy in end of 2014
SG&A: Driven by labor and headcount reductions, HQ Relocation, negotiated 3rd party costs (audit) and disciplined expense management (i.e. T&E,
relocation/recruiting, advertising)
B
D
A
C
30
A B C D
FX and Oil & Gas responsible for $56 million of EBITDA decline; Management executed $29 million in cost
savings to offset FX / O&G impact
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B. 2016 Year-to-Date Performance Update
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Year-to-Date Update
$ in millions 1 Based on midpoint of publicly disclosed ranges of $155.5 – 157.5 million for Q2 Revenue and $26.0 – 27.0 million for Q2 EBITDA. See Appendix for EBITDA reconciliation.
32
Sales: Q2 started to see sequential growth over Q1 driven by pickup in macro activity and commercial initiatives
EBITDA:
— Achieved stronger than forecasted margins by 0.8%
— Driven by more favorable product mix and operational savings in procurement, plant and SG&A activities
2nd quarter was first quarterly sequential improvement in sales and EBITDA since downturn began
Sales1 Adjusted EBITDA1
Margin 17% 17% 17%
Actual¹ Actual¹
Unadjusted Adjusted
$149.0
$156.5
$305.5
Q1 Q2F YTDF
$23.5$25.7
$49.1
$2.3
$0.8
$3.2
$25.8
$26.5
$52.3
Q1 Q2F YTDF
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2016 Cost Initiatives
Several cost initiatives across entire cost structure planned for FY 2016 to offset lower volumes from 2015 levels
— Only includes actions executed in Q1/Q2 or already in process
Results in realized 2016 cost initiatives of $17.9 million (annualized $23.3mm) which will favorably offset margin impact from lower volume of
high margin O&G and lower NMV from less volume resulting in overall flat margin in 2016 versus 2015
$7.1mm of initiatives already executed in Q1 / Q2 (or $16.6mm annualized)
— Remaining initiatives to be achieved in Q3-Q4 already commenced
33
Cost Initiative Q1 – Q2 Q3 – Q4 Realized Initiatives
in 2016
Annualized 2016
Initiatives Commentary
Pla
nt
/ D
Cs
ROI Capex Projects - $1.4 $1.4 $2.8 High speed re-spooler in Germany /
Madavs in U.S.
Consolidation of overlapping DCs
Closure of high cost facility in the U.S.
Volume driven reductions primarily in
U.S. and Mexico
U.S. DC Closure - $0.3 $0.3 $0.5
St. Joseph Facility
Closure - $0.8 $0.8 $3.0
Other Plant Savings $0.7 $1.3 $2.0 $2.6
Total Plants $0.7 $3.8 $4.4 $8.9
Procurement $3.1 $3.4 $6.6 $6.9
Switching suppliers, leveraging volumes
Monthly negotiation process
Hired consultants to advise on utility bid
process
SG&A $3.3 $3.9 $6.9 $7.5
Headcount reductions
Lower T&E associated with reduced
headcount
Review all contracts (Software, data,
accounting, etc.)
Total Savings $7.1 $11.1 $17.9 $23.3
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Section V | Syndication Detail
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Summary Terms & Conditions ABL Revolver
Borrowers WireCo WorldGroup Inc. (“US Borrower”), Casar Drahtseilwerk Saar GmbH (“German Borrower”), WireCo
WorldGroup B.V. (“WireCo BV”) and certain subsidiaries of WireCo WorldGroup (Cayman), Inc. organized within
the Netherlands (collectively with WireCo BV, “Dutch Borrowers”)
Ranking Senior Secured
Security 1st priority lien on receivables, inventory, cash and certain other assets (the “ABL Collateral”)
3rd priority lien on non-ABL Collateral (the “Term Facility Priority Collateral”)
Amount $100 million
Available to the US Borrower with two $15 million subfacilities (“Subfacilities”) available to the German Borrower
and the Dutch Borrowers, respectively
Maturity 5 years
Indicative Pricing L + 175 – 225, based on excess availability
LIBOR Floor None
OID N/A
Call Protection None
Amortization None
Borrowing Base
85% of eligible trade accounts receivables, plus
85% of NOLV of eligible inventory, plus
100% of cash on deposit in account subject to the control of the Administrative Agent, less
Availability reserves
Mandatory Repayment
Must prepay loans advanced under each Subfacility when the sum of the loans, unreimbursed drawings under
Letters of Credit issued and the undrawn amount of all outstanding Letters of Credit exceeds the lesser of (i) the
commitment level for such Subfacility and (ii) the Borrowing Base then in effect for such Subfacility
Cash Dominion Event
Financial Covenants Springing fixed charge coverage ratio of 1.0x triggered when excess availability is less than the greater of (x)
10% of the line cap and (y) $8.5mm
Affirmative / Negative
Covenants Standard and customary for facilities of this type
35
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Summary Terms & Conditions (Cont’d) First Lien Term Loan
Borrowers WireCo WorldGroup Inc.
WireCo WorldGroup Finance LP (“Tower Borrower”)
Ranking Senior Secured
Security 1st priority lien on Term Facility Priority Collateral
2nd priority lien on ABL Collateral
Amount $410mm
Ratings Corporate: B3 / B
Tranche: B2 / B+
Maturity 7 years
Indicative Pricing [ ]
LIBOR Floor 1.00%
OID [ ]
Call Protection 101 soft call for 6 months
Amortization 1.00% per annum
Mandatory
Repayment
Asset sales, insurance proceeds and incurrence of indebtedness
50% excess cash flow sweep subject to step downs
Financial Covenants None
Affirmative / Negative
Covenants Standard and customary for facilities of this type
36
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Summary Terms & Conditions (Cont’d) Second Lien Term Loan (Funded by Onex)
Borrowers Same as First Lien Term Loan
Ranking Senior Secured
Security 2nd priority lien on Term Facility Priority Collateral
3rd priority lien on ABL Collateral
Amount $185mm
Ratings Tranche: Caa2 / B-
Maturity 8 years
Indicative Pricing 12.0 %
LIBOR Floor N/A
OID None
Call Protection None
Amortization None
Mandatory
Repayment
Substantially the same as the First Lien with modifications for second lien status
None required until First Lien Term Loans paid in full, except for declined mandatory prepayments
under the First Lien Term Loan
Financial Covenants None
Affirmative / Negative
Covenants
Substantially the same as the First Lien Term Loan with modifications for Second Lien status
Cushions on thresholds and baskets 25% greater than the First Lien Term Loan
37
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Indicative Transaction Timeline
Expected Date Key Events
July 13 Lender meeting
July 22 Commitments due
Aug-Oct Fund & close
U.S. Market Holiday
38
July 2016
S M T W T F S 1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
31
Key Date
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Section VI | Appendix
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WireCo
WorldGroup B.V.
Pro Forma Corporate Structure
40
Public
Onex
Partners IV
WireCo WorldGroup
(Cayman), Inc.
(CAYCO)
WRCA (Luxembourg)
Holdings S.à.r.l.
(LUXCO)
WireCo WorldGroup US
Holdings Inc. (US
HOLDINGS)
WireCo
WorldGroup Inc.
(US OPCO)
~29% ~71%
Bidco Canco
(Canadian Corp.)
LP GP
Onex Corporation
Paine
Funds
Casar
Drahtseilwerk
Saar GmbH
Equity
Tower
Loan
Tower Borrower
(Delaware LP)
Co-borrower under ABL Facility
Co-borrower under First Lien Term Facility and Second Lien Term Facility
Guarantor under ABL Facility
Guarantor under First Lien Term Facility and Second Lien Term Facility
Tower LLC
(Delaware LLC)
Wholly-Owned
Foreign Restricted
Subsidiaries
Material Wholly-
owned Foreign
Restricted
Subsidiaries
Certain Operating
Subsidiaries
Organized within
Netherlands
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63
47
178
181
182
59
110
143
227
190
66
235
124
53
0
134
97
178
118
178
243
227
129
North American Oil & Gas Market
41
Note: Data ranges from 1/2/2015 – 7/8/2016
Source: Baker Hughes
The North American onshore oil and gas market is at an extreme cyclical low with rig counts at their lowest point
since 1987 in May 2016
Current U.S. Rig Count of 440 is 77% below the most recent peak of 1,919 in 2012
After consecutive weekly declines in rig count since August 2015, activity is now beginning to pick up with growth
from the low of 404 rigs at the end of May to the current amount of 440
Management believes that the expected continued recovery in rig counts provides a significant area of financial
upside as increased drilling activity is the primary driver of WireCo’s onshore oil & gas revenues
Weekly U.S Rig Count
March – July 2016
Denotes Stability / Increase in Weekly Rig Count
480
476
464
450
443
440
431
420
415
406
404
404
408
414
424
421
431
440
350
400
450
500
Mar-16 May-16 Jun-16
1,8
11
1,7
50
1,6
76
1,6
33
1,5
43
1,4
56
1,3
58
1,3
10
1,2
67
1,1
92
1,1
25
1,0
69
1,0
48
1,0
28
988
954
932
905
894
888
885
875
868
859
857
859
862
863
857
876
874
884
884
885
877
864
848
842
838
809
795
787
787
775
771
767
757
744
737
709
709
700
698
664
650
637
619
571
541
514
502
489
480
476
464
450
443
440
431
420
415
406
404
404
408
414
424
421
431
440
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jun-16
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134
97
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243
227
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Consistent Cash Flow Generation
42
$ in millions
Source: WireCo Management 1 Unlevered Free Cash Flow calculated using EBITDA less capital expenditures less change in NWC.
Commentary
Working Capital
Capital
Expenditures
Taxes
Accounts receivable policy implemented during 2014 with organizational accountability driving performance
Consistently best in class Accounts Receivable Days relative to closest peers (~65 days vs 70 days for peers)
Tax assets also available to Company to shield earnings stream
Opportunity to improve effective tax rate with additional support from transfer pricing studies
Relatively low ongoing maintenance capex of $15 million (~2% of revenue)
Stringent ROI hurdles, reflected by $10 million of growth capital spent at <3.5x ROI in both 2015E and as planned for 2016
Unlevered
Free Cash Flow1
Accounts
Receivable
Accounts
Payable
Inventory
Phase 1: Increase large vendor terms to 60 days; ~70% complete
Phase 2: Increase terms with smaller vendors; ~50% complete
Phase 3: Include discounts in terms in purchase agreements and increase terms past 60 days
Lean manufacturing approach allowing for comprehensive inventory management program
— Reduction in inventory while increasing on-time delivery performance of >95%
– Improving from 2.8x inventory turns to best in class metric of 3.9x turns translates into ~$50 million of
annual incremental cash opportunity
— Initial plans underway to allow achievement of working capital productivity over projected period.
– Improving from current 36% to best-in-class metric of 20% results in ~$115 million incremental cash
conversion opportunity
LTM Q1 2016 Unlevered Free Cash Flow margin increased to greater than 17%
$ 130 $ 125 $ 100
$ 112
15.8 %14.6 % 14.7 %
17.1 %
2013A 2014A 2015A LTM Q1 2016
Unlevered Free Cash Flow % Margin
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59
110
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190
66
235
124
53
0
134
97
178
118
178
243
227
129
Breadth of Opportunities to Drive Profitability
Source: WireCo management
Operational Improvements | Plant Productivity & Procurement Initiatives
43
43
Approach
Action Points Top Operational Opportunities
Pro
du
cti
vit
y In
itia
tiv
es
Safety
Hired Head of HSE (June 2015)
Improve monitoring tools and systems
Develop operating procedures and training
Improve workplace conditions
Quality
Standard operating procedures for all critical operations
Operator training and process improvements
Implement supplier scorecards
Delivery
Implement planning tools (MRP, on-time measurement)
Lead time reduction (set-up times, inventory management)
Increase galvanizing capacity
Machine reliability upgrades
Cost
Establish operational excellence team
Improve machine productivity
Energy consumption reduction
Inventory
Inventory planning tools
SKU rationalization
Procurement initiatives
Established new Planning Team leader in mid-2016
Pro
cu
rem
en
t In
itia
tiv
es
Steel Rod
Strategically utilize monthly pricing adjustments to increase or decrease purchasing for incremental savings
Large base of 6 suppliers reduced to 3 primary suppliers in US plants; from 3 to 2 suppliers in Mexico
Monthly negotiations moved to quarterly
Polymers
Price negotiations with largest Nylon supplier introducing competition; retained supplier with concessions
Volume rebate with largest supplier of Polypropylene / Polyethylene
Market based price negotiation with strategic supplier of high end material HMPE
Other
Bid out multiple plastics used in steel ropes to different vendors at reduced costs
Put all fittings volume out to bid reducing volume from higher priced branded fittings providers
Reduced fragmented supplier base for wire and sourced to external supplier at cheaper price with less inventory and shorter lead times
Leveraging Global Network
— Plant consolidation and best practice
sharing
Process Improvements
— Introduce operational excellence
program to develop and manufacture
products at a faster pace with lower
cost
Inventory Reduction
— Release cash without negative impact
to customers
Lead Time Reduction
— Improve production efficiency and
customer service
1
2
3
4
$7mm of FY
‘15 savings
realized
+
$10mm
inventory
reduction
$3mm of
FY ’15
savings
from Plant
& Other
Operational
Initiatives
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227
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Focus on investing both organically and through strategic investments in end markets that maximize ROI and cash generation
Continuously monitor and evaluate business portfolio, industry dynamics / outlook, and customer preferences to ensure investment strategy is aligned
— End market leaders identify initiatives with high degree of certainty to drive sales and capture market share
Rigorous approval mechanism to confirm ROI and promote sound capital allocation
— Investments above $250k require CEO approval to proceed
Breadth of Opportunities to Drive Profitability
Source: WireCo management
Internal Investments and New Products
44
Selection Criteria
Geographic Expansion New Market Expansion Enhancements to Customer
Value Proposition
Expand from historically strong
presence in North America and Europe
The company sees opportunity in
expanding market shares in Asia,
Africa, Russia and South America
Leverage existing technology to
service new markets
— Significant opportunity exists to
leverage EP technologies to
service a variety of industries (i.e.,
railroad casings)
Planned introductions for a number of products across various end markets
Strong customer relationships and continuous company and customer interactions ensure commercially viable products are brought to
market
Ability to leverage existing customer relationships and distribution centers to quickly bring new products to market
Improvements in aftermarket services
and customer contact to improve
satisfaction and increase longevity of
relationship
Commercial Initiatives – Internal Investments
Commercial Initiatives – New Products
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0
134
97
178
118
178
243
227
129
Approximately 60% of WireCo’s sales are direct to end market users, versus 40% through distribution partners
Distribution Model
― Used in markets and with customers that require a one-stop-shop for a number of products beyond ropes (such as western hemisphere onshore oil
and gas and mining)
― Customers in these markets generally require more technical expertise on this broader product portfolio, which distributors can provide or coordinate
Direct Model
― Used in markets where the Company has the capability to be the one-stop-shop for the customer, providing all solutions, which allows full ownership
of the customer (e.g. maritime) or where WireCo sells to an OEM (e.g. industrial crane)
― 39 strategically located company owned / leased distribution and stocking locations to support its direct sales, promoting “stickiness” with customers
45
Go-To-Market Strategy
$ in millions
Note: All sales are 2015 constant currency reflecting EUR FX rate of 1.138
1 Excludes Engineered Products and Wire / Yarns business.
Western Hemisphere Eastern Hemisphere Global
Sales Channel Sales Channel Sales Channel
Sales
Force
Distribution
Centers Distribution / Direct
Sales
Force
Distribution
Centers Distribution / Direct
Sales
Force
Distribution
Centers Distribution / Direct
Industrial 9 4 $ 55 $ 6 21 9 $ 52 $ 52 30 13 $ 107 $ 58
Fishing 1 0 1 6 12 6 61 17 13 6 62 24
Offshore
O&G 1 1 0 34 3 1 0 33 4 2 0 67
Onshore
O&G 11 3 49 8 1 0 12 4 12 3 61 12
Maritime 4 0 3 3 15 5 4 37 19 5 7 40
Mining 8 2 33 4 5 2 0 4 13 4 33 8
Total Rope1 34 10 $ 141 $ 61 57 23 $ 129 $ 148 91 33 $ 270 $ 209
Total WireCo 44 14 $ 141 $ 139 85 25 $ 132 $ 269 129 39 $ 273 $ 408
Go-to-Market Strategy (Distribution vs. Direct)
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66
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0
134
97
178
118
178
243
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Product Level Revenue and Gross Profit
46
$ in millions
Source: WireCo Management
Note: Constant currency reflects EUR FX rate of 1.138.
Constant Currency 2014 2015
LTM
Q1 2016
Revenue by Segment:
Industrial $ 176 $ 166 $ 160
Fishing 87 85 84
Offshore O+G 53 67 66
Onshore O+G 145 73 60
Maritime 45 47 46
Mining 48 41 41
Total Rope Revenue $ 553 $ 479 $ 456
Gross Profit 186 150 142
Margin (%) 34 % 31 % 31 %
Yarns $ 23 $ 20 $ 20
Wire 114 111 109
Total Yarn & Wire Revenue $ 137 $ 132 $ 129
Gross Profit 22 23 22
Margin (%) 16 % 17 % 17 %
Engineered Products $ 77 $ 70 $ 67
Gross Profit 16 14 12
Margin (%) 21 % 21 % 18 %
Consolidated Revenue $ 767 $ 680 $ 652
Gross Profit 224 187 176
Margin (%) 29 % 27 % 27 %
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118
178
243
227
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EBITDA Adjustments
47
$ in millions
Source: WireCo Management
Description of Adjustments
Foreign currency exchange losses (gains), net: Combination of
cross-currency swap fair value gains, remeasurement of intercompany
loans losses and operational currency exchange gains or losses
Share-based compensation: Non-cash compensation expense
Advisory fees: Primarily shareholder management fees and expenses
Reorganization and Restructuring charges: Primarily related to US
corporate office relocation expenses, financing-related consultant
expenses and unusual severance expense
Non-cash impairment of assets: Expense related to intangible assets
of Phillystran and Lankhorst brands
Brazil Fixed Costs: Company experienced excess downtime in early
2015 at the Brazil manufacturing plant due to the resignation of certain
members of the Board of Directors at Petrobras. Company experienced
a delay in receiving the approved purchase orders resulting in the
factory sitting idle for two months
Brazil Boat Fire: Certain imported raw materials caught fire during
transportation (Company was not at fault or liable) resulting in month of
down time at the Brazil plant as no raw materials were available for
production
Aging Inventory: Initiative to correct historical operational inefficiencies
which generated the unsalable inventory and improve accounting
policies to identify, estimate and reserve for inventory losses in the
period manufactured
Portugal Offshore Factory Change-over: Costs associated with
downtime in Portugal due to changing of machinery capabilities to
accommodate specific customer order
SG&A Reductions: Pro forma savings from implemented SG&A
initiatives
Adjustment Schedule
($ in millions) 2015 LTM Q2'16
Net loss (GAAP) $ (35.5) $ (61.7)
Interest expense, net 70.6 70.1
Income tax expense (benefit) 0.1 10.2
Depreciation and amortization 44.3 43.3
Foreign currency exchange losses (gains), net 1.9 9.4
Share-based compensation 7.5 7.0
Other expense (income), net 0.8 2.5
Advisory fees 3.9 3.4
Reorganization and restructuring charges 8.7 12.9
Non-cash impairment of assets 3.2 3.2
Brazil - Fixed Costs 0.6 -
Brazil - Boat Fire 1.0 -
Pro Forma SG&A Savings 0.7 -
Pro Forma HQ Relo 0.7 -
Aging Inventory 0.5 1.0
Portugal Offshore Factory Change-over - 1.7
NA Labor Reduction 0.5 -
SG&A Reductions 5.5 3.7
Other adjustments 1.8 1.1
Adjusted EBITDA $ 116.8 $ 107.7
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178
118
178
243
227
129
Q2 2016 LTM Q2'16
($ in millions) 2013 2014 Q1 2015 Q2 2015 2015 Q1 2016 Low End of
Range High End of Range LTM Q1'16
Low End of Range
High End of Range
Net loss (GAAP) $(27.0) $(28.8) $(4.1) $(18.1) $(35.5) $(20.5) $(23.3) $(32.5) $(51.9) $(57.1) $(66.3)
Interest expense, net 80.8 78.5 19.0 16.6 70.6 19.0 15.7 16.7 70.6 69.6 70.6
Income tax expense (benefit) 10.5 (15.6) (7.6) 6.7 0.1 4.4 2.8 6.8 12.1 8.2 12.2
Depreciation and amortization 58.5 50.6 11.4 11.1 44.3 10.7 10.5 11.1 43.6 43.0 43.6
Foreign currency exchange losses (gains), net (13.6) 36.3 4.3 5.7 1.9 3.5 12.9 14.9 1.2 8.4 10.4
Share-based compensation 6.0 7.8 1.9 1.9 7.5 1.7 1.6 1.6 7.3 7.0 7.0
Other expense (income), net 0.6 (0.0) 0.3 (0.1) 0.8 (0.1) 1.6 2.2 0.5 2.2 2.8
Advisory fees 4.6 5.4 1.0 1.0 3.9 0.8 0.7 0.7 3.7 3.4 3.4
Reorganization and restructuring charges 9.5 2.2 0.8 1.5 8.7 3.8 2.2 3.2 11.7 12.4 13.4
Loss on extinguishment of debt - 0.6 - - - - - - - - -
Acquisition costs 0.4 1.5 - - - - - - - - -
Purchase accounting (inventory step-up and other) 2.2 - - - - - - - - - -
Non-cash impairment of assets - 1.1 - - 3.2 - - - 3.2 3.2 3.2
Effect of inventory optimization program 3.0 9.2 - - - - - - - - -
Brazil - Fixed Costs - - 0.5 0.1 0.6 - - - 0.1 - -
Brazil - Boat Fire - - - 1.0 1.0 - - - 1.0 - -
Pro Forma SG&A Savings - - 0.7 - 0.7 - - - - - -
Pro Forma HQ Relo - - 0.3 0.3 0.7 - - - 0.3 - -
Aging Inventory - - - - 0.5 0.3 0.2 0.2 0.8 1.0 1.0
Portugal Offshore Factory Change-over - - - - - 1.1 0.6 0.6 1.1 1.7 1.7
NA Labor Reduction - - 0.5 - 0.5 - - - - - -
SG&A Reductions - - 1.4 1.4 5.5 0.9 - - 5.0 3.7 3.7
Other adjustments 3.6 2.2 0.8 0.9 1.8 0.0 0.5 1.5 1.0 0.6 1.6
Adjusted EBITDA (Non-GAAP) $ 139.2 $ 151.0 $ 31.2 $ 30.2 $ 116.8 $ 25.8 $ 26.0 $ 27.0 $ 111.4 $ 107.2 $ 108.2
Non-GAAP Reconciliations
48
Adjusted EBITDA Reconciliation
$ in millions
Source: WireCo Management