4 q 2014 presentation final (1)
TRANSCRIPT
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LIGHT VEHICLE COMMERCIAL INDUSTRIAL
Metaldyne Performance Group
Fiscal Year 2014 Fourth Quarter and Full Year Earnings PresentaHon
March 12, 2015
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Disclaimer
This presenta,on and any related statements contains certain “forward-‐looking statements” about MPG’s financial results and es,mates and business prospects within the meaning of the Private Securi,es Li,ga,on Reform Act of 1995. Forward-‐looking statements may be iden,fied by words such as “expects,” “intends,” “an,cipates,” “plans,” “project,” “believes,” “seeks,” “targets,” “forecast,” “es,mates,” “will” or other words of similar meaning and include, but are not limited to, statements regarding the outlook for the Company’s future business, prospects, and financial performance; the industry outlook, our backlog and our 2015 financial guidance. Forward-‐looking statements are based on management’s current expecta,ons and assump,ons, which are subject to inherent uncertain,es, risks, and changes in circumstances that are difficult to predict. Actual outcomes and results may differ materially due to global poli,cal, economic, business, compe,,ve, market, regulatory, and other factors and risks, including, but not limited to, the following: vola,lity in the global economy impac,ng demand for new vehicles and our products; a decline in vehicle produc,on levels, par,cularly with respect to plaUorms for which we are a significant supplier, or the financial distress of any of our major customers; seasonality in the automo,ve industry; our significant compe,,on; our dependence on large-‐volume customers for current and future sales; a reduc,on in outsourcing by our customers, the loss or discon,nua,on of material produc,on or programs, or a failure to secure sufficient alterna,ve programs; our failure to offset con,nuing pressure from our customers to reduce our prices; our inability to realize all of the sales expected from awarded business or fully recover pre-‐produc,on costs; our failure to increase produc,on capacity or over-‐expanding our produc,on in ,mes of overcapacity; our reliance on key machinery and tooling to manufacture components for powertrain and safety-‐cri,cal systems that cannot be easily replicated; program launch difficul,es; a disrup,on in our supply or delivery chain which causes one or more of our customers to halt produc,on; work stoppages or produc,on limita,ons at one or more of our customer’s facili,es; a catastrophic loss of one of our key manufacturing facili,es; failure to protect our know-‐how and intellectual property; the disrup,on or harm to our business as a result of any acquisi,ons or joint ventures we make; a significant increase in the prices of raw materials and commodi,es we use; the damage to or termina,on of our rela,onships with key third-‐party suppliers; our failure to maintain our cost structure; the incurrence of significant costs if we close any of our manufacturing facili,es; poten,al significant costs at our facility in Sandusky, Ohio; the failure of or disrup,ons in our informa,on technology networks and systems, or the inability to successfully implement upgrades to our enterprise resource planning systems; the incurrence of significant costs, liabili,es, and obliga,ons as a result of environmental requirements and other regulatory risks; extensive and growing governmental regula,ons; the adverse impact of climate change and related energy legisla,on and regula,on; the incurrence of material costs related to legal proceedings; our inability to recruit and retain key personnel; any failure to maintain sa,sfactory labor rela,ons; pension and other postre,rement benefit obliga,ons; risks related to our global opera,ons; compe,,ve threats posed by global opera,ons and entering new markets; foreign exchange rate fluctua,ons; increased costs and obliga,ons as a result of becoming a public company; the failure of our internal controls to meet the standards required by Sarbanes-‐Oxley; our substan,al indebtedness; our inability, or the inability of our customers or our suppliers, to obtain and maintain sufficient debt financing, including working capital lines; our exposure to a number of different tax uncertain,es; the mix of profits and losses in various jurisdic,ons adversely affec,ng our tax rate; disrup,on from the combina,on of our opera,ons and diversion of management’s aZen,on; our limited history of working as a single company and the inability to integrate HHI, Metaldyne, and Grede successfully and achieve the an,cipated benefits.
For the reasons described above, we cau,on you against relying on any forward-‐looking statements, which should also be read in conjunc,on with the other cau,onary statements that are included elsewhere in this press release and in our public filings, including under the heading “Risk Factors” in our filings that we make from ,me to ,me with the Securi,es and Exchange Commission and Annual Report on Form 10-‐K for the year ended December 31, 2014 to be filed in the next few days. You should not consider any list of such factors to be an exhaus,ve statement of all of the risks, uncertain,es, or poten,ally inaccurate assump,ons that could cause our current expecta,ons or beliefs to change. Further, any forward-‐looking statement speaks only as of the date on which it is made, and we undertake no obliga,on to update or revise any forward-‐looking statement to reflect events or circumstances acer the date on which the statement is made or to reflect the occurrence of unan,cipated events, except as otherwise may be required by law.
Non-‐GAAP Financial Measures
Adjusted EBITDA
We define Adjusted EBITDA as net income (loss) before interest expense, provision for (benefit from) income taxes and depreciaLon and amorLzaLon, with further adjustments to reflect the addiLons and eliminaLons of certain income statement items, including (i) gains and losses on foreign currency and fixed assets and debt transacLon expenses, (ii) stock-‐based compensaLon and other non-‐cash charges, (iii) sponsor management fees and other income and expense items that we consider to be not indicaLve of our ongoing operaLons, (iv) specified non-‐recurring items and (v) other adjustments.
We believe Adjusted EBITDA is used by investors as a supplemental measure to evaluate the overall operaLng performance of companies in our industry. Management uses Adjusted EBITDA (i) as a measurement used in comparing our operaLng performance on a consistent basis, (ii) to calculate incenLve compensaLon for our employees, (iii) for planning purposes, including the preparaLon of our internal annual operaLng budget, (iv) to evaluate the performance and effecLveness of our operaLonal strategies and (v) to assess compliance with various metrics associated with our agreements governing our indebtedness. Accordingly, we believe that Adjusted EBITDA provides useful informaLon to investors and others in understanding and evaluaLng our operaLng performance in the same manner as our management. For a reconciliaLon of Adjusted EBITDA to net income, the most directly comparable measure determined under U.S. generally accepted accounLng principles (“GAAP”), see “RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW”.
Adjusted Free Cash Flow
We define Adjusted Free Cash Flow as Adjusted EBITDA less capital expenditures. Capital expenditures can be found in our consolidated statements of cash flows as a component of cash flows from invesLng acLviLes. We present Adjusted Free Cash Flow because our management considers it to be a useful, supplemental indicator of our performance. When measured over Lme, Adjusted Free Cash Flow provides supplemental informaLon to investors concerning our results of operaLons and our ability to generate cash flows to saLsfy mandatory debt service requirements and make other non-‐discreLonary expenditures. For a reconciliaLon of Adjusted Free Cash Flow to net income, the most directly comparable GAAP measure, see “RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND ADJUSTED FREE CASH FLOW”.
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Agenda
IntroducLon Paul Suber Vice President of Investor RelaLons
2014 Highlights and Accomplishments George Thanopoulos Chief ExecuLve Officer
Market Outlook George Thanopoulos
Financial Results Mark Blaufuss Chief Financial Officer and Treasurer
2015 Guidance George Thanopoulos
Q & A Session Mark Blaufuss George Thanopoulos
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2014 HIGHLIGHTS AND ACCOMPLISHMENTS
Metaldyne Performance Group
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October 2014 MPG debt consolidaLon
August 2014 HHI, Metaldyne and Grede merge to form MPG
2014 Highlights
December 12, 2014 MPG IPO Metaldyne Performance Group Becomes Public
o Key Strategy Points o Capturing expected growth in
powertrain and safety-‐criLcal components
o Delivering strong profitability and cash flow generaLon
o Capitalizing on our global scale and cross-‐selling opportuniLes
o On-‐Going IntegraLon
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▫ Capture specifically idenLfied opportuniLes ▫ Balance resources and opportuniLes ▫ Manage process and tangible savings
IntegraLon Process
Process Update o Stage one opportuniLes
▫ Benefits of combined business leverage -‐ insurance, fees and other captured
o Stage two opportuniLes ▫ Larger scale items such as IT, healthcare and benefits
o CoordinaLon of Cross-‐Selling ▫ Cohesive teams across all three operaLng segment formed to coordinate customer and quoLng acLvity
Strategic
Process Overview
Regimented CommunicaLon and CoordinaLon
Thomas Amato
George Thanopoulos Doug Grimm Mark Blaufuss
IntegraLon Steering CommiYee
▫ President’s Council ▫ Commercial Council ▫ Technical Council ▫ EH&S Council
Leadership Councils IntegraLon Steering CommiYee
TacHcal
o MPG has implemented integraLon teams o Each team collaborates to find potenLal synergies and opportuniLes within the three business segment
o Sharing best pracLces across the three business segment
Business Unit Leadership
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$43
$122
$156
4.9% 6.0% 5.7%
2012 2013 2014
$886
$2,017
$2,717
2012 2013 2014
Net Sales
$143
$363
$479
16.1%
17.9%
17.6 %
2012 2013 2014
11.3% 11.9% 11.9% $100
$241
$322
$-‐
$50
$100
$150
$200
$250
$300
$350
$400
$450
2012 2013 2014
Adjusted EBITDA / % of Net Sales
Adjusted Free Cash Flow 1 / % of Net Sales CapEx / % of Net Sales
Net Sales
Note: Dollars in millions | 1. Defined as Adjusted EBITDA less CapEx | 2012 figures include both predecessor and successor periods
Financial History -‐ GAAP Basis
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$129
$162 $168
4.2% 5.3% 5.4%
2012 2013 2014
$3,057 $3,053 $3,144
2012 2013 2014
$472 $509
$545
15.4% 16.7%
17.3 %
2012 2013 2014
11.2% 11.4% 12.0%
$343 $347 $377
$-‐
$50
$100
$150
$200
$250
$300
$350
$400
$450
2012 2013 2014
Combined Adjusted EBITDA 1 / % of Combined Net Sales (non-‐GAAP)
Combined Adjusted Free Cash Flow 1,4 / % of Combined Net Sales (non-‐GAAP) Combined CapEx 1,3 / % of Combined Net Sales (non-‐GAAP)
Combined Net Sales (non-‐GAAP) 1,2
Note: Dollars in millions | 1. See Appendix slides for reconcilia,on to GAAP 2. Defined as MPG Net Sales plus pre-‐acquisi,on Net Sales of Grede 3. Defined as MPG Capital Expenditures plus pre-‐acquisi,on Capital Expenditures of Grede 4. Defined as Adjusted EBITDA less CapEx
Financial History – Combined Non-‐GAAP Basis
’12 – ‘14E CAGR: 7.5%
’12 – ‘14E CAGR: 4.8%
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MARKET OUTLOOK Metaldyne Performance Group
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17.0 17.4 17.9 18.3 18.6
2014 2015 2016 2017 2018
North America Light Vehicle ProducLon1
Industry Growth
20.1 20.1 20.5 21.3
22.1
2014 2015 2016 2017 2018
294 320 266 263 270
219 220 233 245 247
513 540 499 508 517
2014 2015 2016 2017 2018
FTR Class 8 ACT Class 5-‐7
European Light Vehicle ProducLon1
North America Class 5-‐8 Vehicle ProducLon2
45.0 46.6
48.8 50.7
52.3
2014 2015 2016 2017 2018
Asian Light Vehicle ProducLon1
PosiHve Outlook for Primary Regions and Markets
1. Vehicle Produc,on in millions: IHS January 2015 2. Vehicle Produc,on in thousands: FTR and ACT December 2014
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455 1,750
400
2,700
1,400
2014 2018E 8-‐Speed 9-‐Speed 10-‐Speed
240 Hp 289 Hp
240 (lb-‐k) 284 (lb-‐k)
2005 2013 2005 2013
Source: IHS, LMC Automo,ve, ICCT , Yengst Associates, ACT Research and FTR. 1. LMC Automo,ve as of December 2014 2. ICCT as of May 2014. 3. Source: IHS. Note: Amounts reflect weighted average horsepower and torque for North American engines produced.
Develop Customized and InnovaHve Products For Powertrain and Safety-‐CriHcal Components
o Light weighLng through stronger products that reduce size and weight
o Advanced transmissions with more gears and conLnuously variable transmissions
o Smaller engines; turbocharged to improve power and performance
Horsepower Torque
Capture Expected Growth in Powertrain and Safety-‐CriLcal Components
34
53 45 55
U.S. Japan
45 61
E.U. 2012 2021E
2012 2020E
2012 2020E
5,850
855
Improving Fuel Economy and Safety to Meet Consumer Preferences and Regulatory Standards
N.A. Higher Speed Transmission ProducLon Forecast 1 (units in thousands)
Higher Fuel Efficiency Standards 2 (Miles per gallon)
N.A. 6 Cylinder Engine Torque and Horsepower Growth 3
32% 4% 36% 20% Increase
18% Increase
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FINANCIAL RESULTS Metaldyne Performance Group
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Full Year Selected Financial Data -‐ GAAP
($ in Millions) Metaldyne Performance Group
2013 2014 Difference Net Sales $2,017.3 $2,717.0 $699.7 Gross Profit 308.6 422.9 114.3
Percentage of Net Sales 15.3% 15.6% Adjusted EBITDA1 363.1 478.6 115.5
Percentage of Net Sales 18.0% 17.6% Capex 122.3 156.4 34.1 Adjusted Free Cash Flow2 240.8 322.2 81.4
Net Debt3 1,211.8 1,805.3 593.5 Trade Working Capital4 223.1 264.1 41.0
1 See Appendix for reconcilia,on to GAAP 2 Defined as Adjusted EBITDA less CapEx
3 Defined as debt (current and long-‐term) capital lease obliga,ons less cash and cash equivalents 4 Defined as Total Receivables, net plus Inventories, less Accounts Payable
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MPG Fourth Quarter Financial Results -‐ GAAP
($ in Millions) Fourth Quarter
2013 2014 Difference
Net Sales $511.4 $762.2 $250.8
Adjusted EBITDA1 92.0 125.7 33.7
Percentage of Net Sales 18.0% 16.5%
Capex 35.4 54.2 18.8
Adjusted Free Cash Flow2 56.6 71.5 14.9
1. See Appendix for reconcilia,on to GAAP 2. Defined as Adjusted EBITDA less CapEx
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Full Year Combined Non -‐ GAAP Results
($ in Millions) Metaldyne Performance Group
2013 2014 Difference Combined Net Sales (non-‐GAAP)1 $3,052.9 $3,144.0 $91.1 Combined Gross Profit (non-‐GAAP)1 486.0 497.6 11.6
Percentage of Combined Net Sales (Non-‐GAAP) 15.9% 15.8%
Combined Adjusted EBITDA1 508.8 545.1 36.3 Adjusted EBITDA % 16.7% 17.3%
Combined Capex1 161.7 168.2 6.5 Combined Adjusted Free Cash Flow1,2 347.1 376.9 29.8
1 See Appendix for reconcilia,on to GAAP 2 Defined as Adjusted EBITDA less CapEx
Financial informa,on is presented on a combined non-‐GAAP basis to give effect to the combina,on of the three business segments as of January 1, 2013
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MPG Fourth Quarter Combined Non -‐ GAAP Results
($ in Millions) Fourth Quarter
2013 2014 Difference
Combined Net Sales1,2 $755.1 $762.2 $7.1
Combined Adjusted EBITDA1 128.6 125.7 (2.9)
Percentage of Net Sales 17.0% 16.5%
Combined CapEx1 44.5 54.2 9.7
Combined Adjusted Free Cash Flow 1,3 84.1 71.5 (12.6)
1 See Appendix for reconcilia,on to GAAP 2 2014 Net Sales is a GAAP amount, 2013 is a non-‐GAAP amount 3 Defined as Adjusted EBITDA less CapEx
Financial informa,on is presented on a combined non-‐GAAP basis to give effect to the combina,on of the three business segments as of January 1, 2013
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Financial Results by Segment
($ in Millions) HHI Metaldyne Grede1
2013 2014 2013 2014 2013 2014
Net Sales $916.5 $977.6 $1,112.0 $1,177.5 $1,035.6 $999.1
Gross Profit 151.0 164 .4 157.6 173.4 177.4 159.8 Percentage of Net Sales 16.5% 16.8% 14.2% 14.7% 17.1% 16.0%
Adjusted EBITDA 175.0 193.5 188.1 202.3 145.7 149.3 Percentage of Net Sales 19.1% 19.8% 16.9% 17.1% 14.1% 14.9%
Note: The above revenue figures do not include the elimina,on of intersegment revenue 1 Grede results shown on a combined, non-‐GAAP basis
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Debt and Dividends
o MPG Net Debt
▫ $1,805.3 million of net debt outstanding at 12/31/14
▫ $250 million line of credit, $235 million available ($15 million of leYers of credit outstanding)1
o Voluntary Prepayment of Term Debt
▫ Q4 2014 – The Board of Directors approved and MPG executed a voluntary repayment of $10 million of its outstanding Term Loan in December 2014
▫ Q1 2015 – The Board of Directors approved a voluntary repayment of an addiLonal $10 million of its outstanding Term Loan before the end of the first quarter of 2015
o Dividends ▫ On March 10th, The Board of Directors declared a 1st quarter $.09/share dividend payable
on May 26, 2015 to stockholders of record as of May 12, 2015
1 Depending on the ,ming of cash flows from opera,ons, capital spending, taxes and debt service, the Company may draw on the Company’s line of credit
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2015 GUIDANCE Metaldyne Performance Group
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AssumpLons
Industry ProducLon / AssumpLons 2015E Reference Rate Light Vehicle SAAR North America1 ~2.5%
Light Vehicle SAAR Europe1 ~0%
Light Vehicle SAAR Asia1 ~3.5%
NAFTA Heavy Truck Class 5-‐82 ~5%
AMM – Chicago #1 Bundles3 $251 per gross ton $347 per gross ton
FX Rate3
Euro/USD 1.12 1.22
USD/Mexican Peso 14.94 14.78
USD/Chinese Yuan 6.16 6.14
USD/Korean Won 1,100 1,096 1 IHS January 2015 2 FTR and ACT December 2014 3 2015 es,mate AMM and FX rates as of 2/10/15 and February month end, respec,vely; AMM Reference Rate as of 12/18/14; FX Reference Rate as of 12/31/14
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2015 Guidance Ranges
Guidance 2015E
Net Sales $3.0 -‐ $3.15 billion
Adjusted EBITDA1 $520 -‐ $560 million
Capital Expenditures $210 -‐ $225 million
Adjusted Free Cash Flow2 $310 -‐ $335 million
1 See appendix for reconcilia,on to GAAP
2 Defined as Adjusted EBITDA less CapEx, u,lizing consistent high and low ends of EBITDA and CapEx
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Q & A SESSION Metaldyne Performance Group
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APPENDIX Metaldyne Performance Group
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GAAP ReconciliaLon Slides Full Year
Metaldyne Performance Group (MPG) Adjustments to Reconcile Net Income to EBITDA
Consolidation Full Year Full Year 12/31/2014 12/31/2013
Net income attributable to stockholders $72.8 57.6 Income attributable to noncontrolling interest 0.4 0.3 Net income 73.3 57.9
Addbacks to Arrive at Unadjusted EBITDA Interest expense 99.9 74.7 Loss on debt extinguishment 60.7 - Income tax (benefit) expense (19.1) 35.0 Total depreciation and amortization 210.8 163.4 Unadjusted EBITDA 425.6 331.0
Adjustments to Arrive at Adjusted EBITDA Foreign currency (gains) losses (15.7) 2.3 (Gain) loss on fixed asset disposition 2.1 1.4 Debt transaction expenses 3.0 6.0 Stock-based compensation 17.3 6.2 Sponsor management fee 5.1 4.0 Non-recurring acquisition and purchase accounting related items (1) 23.0 10.5 Non-recurring operational items (2) 18.2 1.7 Adjusted EBITDA $478.6 363.1
(1) Acquisition and related purchase accounting items including transaction costs, adjustments to inventory step-ups and other.
(2) Non-recurring operational items including charges for disposed operations, impairment charges, insurance proceeds, curtailment gain and other.
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GAAP ReconciliaLon Slides Q4
Metaldyne Performance Group (MPG) Adjustments to Reconcile Net Income to EBITDA
Consolidation Q4 Q4 12/31/2014 12/31/2013
Net income attributable to stockholders $10.2 4.0 Income attributable to noncontrolling interest 0.2 0.1 Net income 10.4 4.0
Addbacks to Arrive at Unadjusted EBITDA Interest expense 29.6 20.7 Loss on debt extinguishment 60.4 - Income tax (benefit) expense (50.2) 8.4 Total depreciation and amortization 58.4 43.5 Unadjusted EBITDA 108.5 76.6
Adjustments to Arrive at Adjusted EBITDA Foreign currency (gains) losses (4.2) 0.8 (Gain) loss on fixed asset disposition 0.7 0.7 Debt transaction expenses 0.1 1.6 Stock-based compensation 2.8 1.6 Sponsor management fee 1.4 1.0 Non-recurring acquisition and purchase accounting related items (1) 0.2 9.7 Non-recurring operational items (2) 16.1 - Adjusted EBITDA $125.7 92.0
(1) Acquisition and related purchase accounting items including transaction costs, adjustments to inventory step-ups and other.
(2) Non-recurring operational items including charges for disposed operations, impairment charges, insurance proceeds, curtailment gain and other.
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GAAP ReconciliaLon Slides Full Year and Q4
Metaldyne Performance Group (MPG) Adjustments to Reconcile to US GAAP
Consolidation Full Year Full Year Q4 Q4 12/31/2014 12/31/2013 12/31/2014 12/31/2013
Net Sales $2,717.0 2,017.3 762.2 511.4 Grede pre-acquisition Net Sales 427.0 1,035.6 - 243.7 Combined Net Sales (non-GAAP) 3,144.0 3,052.9 762.2 755.1
Gross Profit 422.9 308.6 Grede pre-acquisition Gross Profit 74.7 177.4 Combined Gross Profit (non-GAAP) 497.6 486.0
Adjusted EBITDA 478.6 363.1 125.7 92.0 Grede pre-acquisition Adjusted EBITDA 66.5 145.7 - 36.6 Combined Adjusted EBITDA 545.1 508.8 125.7 128.6
CapEx 156.4 122.3 54.2 35.4 Grede pre-acquisition CapEx 11.8 39.4 - 9.1 Combined CapEx 168.2 161.7 54.2 44.5
Adjusted Free Cash Flows 322.2 240.8 71.5 56.6 Grede pre-acquisition Adjusted Free Cash Flows 54.7 106.3 - 27.5 Combined Adjusted Free Cash Flows $376.9 347.1 71.5 84.1
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GAAP ReconciliaLon Guidance Slide
Metaldyne Performance Group (MPG) Reconciliation of 2015 Guidance of Net Income to Adjusted EBITDA
Consolidation 2015 Guidance 2015 Guidance
Low End of Range High End of
Range
Net income attributable to stockholders
$102.5 127.8 Income attributable to noncontrolling interest 0.5 0.5 Net income 102.9 128.3
Addbacks to Arrive at Unadjusted EBITDA Interest expense, net 117.3 117.3 Income tax expense 50.5 65.1 Depreciation and amortization 234.2 234.2 Unadjusted EBITDA 504.9 544.9
Adjustments to Arrive at Adjusted EBITDA Foreign currency (gains) losses (2.9) (2.9) Stock-based compensation expense 16.6 16.6 Non-recurring operational items (1) 1.4 1.4 Adjusted EBITDA $520.0 560.0
(1) Non-recurring operational items including charges for disposed operations, restructuring costs and other.