psix presentation - ohio state university - 10.18.14

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Power Solutions International (NASDAQ: PSIX)

Connor Cross • Connor Rehm • Zach Riedy • Mike Sabeiha

October 18, 2014

T H E O H I O S T A T E U N I V E R S I T Y AG

EN

DA

Agenda

Investment Thesis 7

Value Drivers 9

Valuation 16

Risks and Other Considerations 22

Appendix 26

Company Overview 2

Conclusion 24

1

T H E O H I O S T A T E U N I V E R S I T Y OV

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$83 $101

$155

$202 $238

$349

2009 2010 2011 2012 2013 2014E

Company Overview

Business Description

Power Systems International is the largest alternative

fuel engine supplier in the world, with clean-running

products powered by natural gas, propane, flare and

wellhead gas, and biofuels. The company designs,

manufactures, distributes, and supports power system

solutions for original equipment manufacturers of

industrial vehicles and equipment.

Sales2

Market Data1

(in millions)

Key Operating Statistics

2011 2012 2013 2014E

Sales $155.0 $202.3 $237.8 $349.9

Growth 30.6% 17.5% 47.1%

EBIT $9.8 $11.9 $15.0 $25.2

Growth 21.0% 26.1% 68.1%

Margin 6.3% 5.9% 6.3% 7.2%

Adj. EBITDA $10.6 $13.0 $16.5 $27.5

Growth 22.1% 27.5% 66.1%

Margin 6.9% 6.4% 7.0% 7.9%

Current Price: $56.27 per share

Market Cap: $625.1M

Current FY EPS: $1.40

52 week range: $52.30 – $88.96

(1) As of 10/17/2014 market close

(2) 2014E based on analyst consensus; see appendix for 5 year projections

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Competitive Landscape

• Wide range of innovative, unique products

offered to a multitude of end markets

• Superior technology allows for highly

customizable solutions for all customer needs

• Flexibility of engines to run on many fuel

sources including natural gas, propane, flare

and wellhead gas, as well as biofuels

• Pre-approval and certification of all engines by

the EPA; significant cost barrier for competitors

• First-mover advantage in smaller markets and

flare / wellhead gas power generation

“We are the world’s largest manufacturer of engines that run on natural gas

and alternative fuels”

– Eric Cohen, Chief Operating Officer1

3

Industry and Competitors Power Solution’s Competitive Advantage

• Alternative fuel system manufacturing industry is

rapidly growing

• Systematic tailwinds from regulation and macro-

economic factors are driving industry growth

• Primary competitors:

• Motorcar Parts of America

• Capstone Turbine

• Woodward Innovations, Inc.

• Clean Energy Fuels

• Fuel Systems Solutions

(1) Q2 2014 Earnings conference call


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• Off-Road

• Agriculture, construction, and other

industrial engines

• On-Road

• Buses and industrial vehicles

• Materials Handling

• Forklift contracts in Asia and North

America

Business Segments Overview

• Generators / Compression

• Certified 1-22 Liter power generators

• Oil and fuel pumps

• U.S. energy expansion

• Natural gas compression

• Aerial work platforms

• Arbor products

• Power take-off clutch assemblies

• Customizable OEM subsystems, kits, and

components

Power Systems

Power Generation

Other

4

Power

Systems

Other Power

Generation


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Growth Catalysts

Economics

Environment

Regulation

Oil & Gas

Materials

Handling

On-Road

• O&G producers are switching

to power generation rather than

flaring excess capacity

• Large vehicles such as trucks

and buses adopting alternative

fuel powered engines

• Partnership with Mattel and

increased penetration of

alternative fuel engines in

materials handling markets

Macro Trend Toward Alternative Fuels… …Increasing Customer Demand

• With rising prices for natural

gas, it is becoming more

costly for producers to flare

excess capacity

• Restrictions on emissions

and fuel efficiency standards

are driving widespread

adoption of alternative fuel

systems

• EPA mandates and

increasing global

environmental

consciousness

Power Solutions is well-positioned to solidify itself as the industry leader in

the rapidly growing alternative fuel systems market

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Agenda

Investment Thesis 7

Value Drivers 9

Valuation 16


Appendix 26

Company Overview 2

Conclusion 24

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T H E O H I O S T A T E U N I V E R S I T Y IN

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Investment Thesis

Power Solutions is well-positioned to capitalize on increasing regulations

and changing environmental policies across various markets

Rapid

Growth

PPPI

Acquisition

Increasing

Regulation

Under-

Valued

Acquisition of PPPI gives Power Solutions a strong presence in the

growing O&G power generation market

Entrance into the on-road market and strong performance of off-road

OEM business are additional catalysts for continued, rapid growth

Market is not currently reflecting the intrinsic value of Power Solutions

Our price target range of $100 - $110 represents an upside of 77% - 95%1

7



EN

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Agenda

Investment Thesis 7

Value Drivers 9

Valuation 16


Appendix 26

Company Overview 2

Conclusion 24

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T H E O H I O S T A T E U N I V E R S I T Y VA

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Regulation and Policy Impact All Business Segments

Restriction: Diesel Engines

• Short / intermediate / long distance cargo

• Transit, recreation, and utility vehicles

Growing Segment: School buses / logistics

• Manufacturers moving to adopt ecologically

efficient energy systems

• Technological advancements make the

implementation of high-powered fuel-flex engines

an attractive option

Restriction: Carbon Emissions

• Power Generation

• Industrial Support Systems

• Materials Handling

Growing Segment: Forklifts

• Long ignored industrial support equipment

transferring to alternative fuel engine platforms

Restriction: Flaring

• Crude oil extraction

• Natural gas extraction

Growing Segment: O&G Compression Systems

• New regulations require extraction sites to cease

the long practiced act of flaring

• Rapidly expanding US energy market underpins

this burgeoning market

Materials Handling On-Road

Oil & Gas

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Expanding Markets: Materials Handling Segment

• Purchases engines from GM and Mitsubishi and utilizes IP and technology to customize engines for customers

• PSI currently has contracts to provide forklifts to eight of the top ten Chinese OEM’s for forklifts

• Joint venture with Mattel in China to target the Asian forklift market which currently manufactures 364,000

units/year compared to the U.S. 220,000 units/year

• New agreement with NACCO to provide the 2.0-liter and 2.4-liter alternatively-fueled power systems which has

been in production for two years

220

364

US China

Annual Forklift Sales1 PSI Forklift Revenue1

$34.9

$72.7

2014E 2015E

(in thousands of units) (in millions)

Operations

10 (1) See appendix for breakdown of projections


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Expanding Markets: On-Road Segment

• Recent certification of wholly owned 8.8-liter

engine for on-road use allows OEM customers to

avoid emissions testing or other expensive

solutions

• Well-funded grant programs towards research for

natural gas fueled engines which cuts PSI R&D

Product and Customers Shift to Alternative Fuel Fleets

• Many on-road customers are switching to

alternative fuel fleets given environmental

constraints and current fuel economics

• Deal with Capacity Trucks, which supplies trucks

to UPS, will begin shipping the 8.8-liter engine in

December

0.5M

1.0M

3.0M

2009 2012 2015E

(in millions of units)

Natural Gas Vehicle Market in China1

• First on-road OEM program with IC Bus, a

division of Navistar, which has roughly 40% of the

25,000 unit/year bus market

• With stable volume of sales from Navistar, this

could bring in an increase of about $70 million in

revenue for PSI

Navistar Contract

11 (1) Source: International Association for Natural Gas Vehicles, ClimateWire


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Flaring Regulation in the Oil & Gas Market

• Regulations effective January 1, 2015 restrict

flaring

• Currently 290,000 wells are flared or vented2

• Imposition of royalty included

• Natural gas flared will cost producers the

equivalent of concurrent prices per MMBtu

• Inadequate infrastructure prevents sale or storage

• Rapid solution necessary for producers wishing to

avoid royalty fee

• Flaring is a process by which oil extraction

platforms burn off unusable natural gas

• Due to lack of infrastructure nearly 30% natural

gas produced in Bakken is burned off

• Equivalent to 2.3% of oil output in region

EPA Regulations

Power Solutions Strategy What is Flaring?

• Flare / Wellhead gas fueled power generation

• Saves O&G producers money

• Compliant with federal regulations

• Acquisition of Professional Power Products

(PPPI)

$48 $65 $74 $104

$140 $31

$90

$126

$170

2013 2014E 2015E 2016E 2017E

O&G PPPI

Oil & Gas Sales1

(in millions)

(1) See appendix for segmented revenue projections

(2) Source: 2014 Investor Relations presentation

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Cost of Flaring

• Based on historic prices, savings on

royalty costs make fuel-flex engines

feasible

• Natural gas prices expected to increase

with harsh winter 2014-2015

• Projections of natural gas prices based on

commodities curve make implementation

evermore attractive

• Cost covered within 12-18 months

• Producers forced to utilize natural gas

output immediately

Projections

$20

$25

$30

$35

$40

$45

2012 2013 2014 2015 2016 2017 2018 2019 2020

Historic Cost per Well

Projected Cost per Well

Options

• Sell Excess

• Impractical due to infrastructure

• Flare Excess

• Governmental restrictions

• Conform to Regulations

• Cheap and quick

13

70%

increase

in cost

Cost of Flaring per Well per Year1

($ in thousands)

(1) Source: Short-Term Energy Outlook, September 2014 with modifications


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Professional Power Products (PPPI) Acquisition

• Closed acquisition of Professional Power

Products (PPPI) on April 1, 2014 for $46 million in

cash

• PPPI is a leading designer and manufacturer of

large, custom-engineered, integrated electrical

power generation systems

• PPPI’s assets give Power Solutions a strong

foothold in the diesel and natural gas power

generation market

• Ability to leverage existing supply chain provides

$1M in cost savings

2014E 2015E 2016E 2017E 2018E 2019E

Power Systems PPPI

Growth Catalysts Overview

Products and Markets Served

14

Projected Results1

• Large engine platforms for power generation and

other industrial / commercial uses

• Extensive customer support and field engineering

team

• Strong traction with growing client base

particularly in oil and gas markets

$349 $507

$684

$890

$1,112

$1,335

(1) See appendix for base case segmented projections


EN

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Agenda

Investment Thesis 7

Value Drivers 9

Valuation 16


Appendix 26

Company Overview 2

Conclusion 24

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11.4x

9.5x

7.4x

27.0x

10.5x

22.8x

0.0x 10.0x 20.0x 30.0x

EV / 2013A EBITDA

EV / 2014E EBITDA

EV / 2015E EBITDA

(1) See appendix for list of public comparables

(2) Based on 2015E EV / Sales; base case projections

(3) Based on 2015E EV / EBITDA; base case projections

(4) Narrow range due to non-recurring expense for Capstone Turbine

1.86x

1.75x

1.51x

2.76x

2.51x

2.05x

1.00x 1.50x 2.00x 2.50x 3.00x

EV / 2013A Sales

EV / 2014E Sales

EV / 2015E Sales

EV / Sales EV / EBITDA

16

15.6x 3 1.16x 2

Comparable Companies Valuation Analysis1

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(1) LTM revenue; source: CapitalQ

Revenue Growth1

25%

7%

5%

-2%

-10%

28%

-20% -10% 0% 10% 20% 30% 40%

17

Commentary

• Power Solutions’ topline growth is

outpacing competitors

• 70% of LTM growth was organic;

remainder due to PPPI acquisition

• PSI is poised for continued, rapid

growth as they continue to lead the

nascent alternative fuel power solution

market

Market is not currently pricing in PSI’s

revenue growth trajectory

Comparable Companies Operating Analysis


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Discounted Cash Flow Analysis: Output (Base Case)

Assumptions

• Valuation as of 12/31/2014E1

• WACC: 10.00% - 11.00%

• EBITDA Exit Multiple: 11.0x –

13.0x

• Change in NWC decreasing 0.5%

of sales each year

• CapEx equivalent to D&A over

projection period

• Other Income/(Expense) assumed

to be zero over projection period

• Gross margin held constant at

18%; Operating margin constant

at 7%

Operating Projections

2014E 2015E 2016E 2017E 2018E 2019E

Sales $350 $507 $685 $890 $1,113 $1,336

% Growth - 45.0% 35.0% 30.0% 25.0% 20.0%

EBITDA $33.9 $48.2 $65.1 $84.6 $105.7 $126.9

% Margin 9.7% 9.5% 9.5% 9.5% 9.5% 9.5%

% Growth - 42.1% 35.0% 30.0% 25.0% 20.0%

EBIT $25.2 $35.5 $47.9 $62.3 $77.9 $93.5

% Margin 7.2% 7.0% 7.0% 7.0% 7.0% 7.0%

% Growth - 41.1% 35.0% 30.0% 25.0% 20.0%

Share Price

EBITDA Exit Multiple

11.0x 11.5x 12.0x 12.5x 13.0x

10.01% $77.43 $80.99 $84.54 $88.10 $91.65

10.26% $76.50 $80.02 $83.53 $87.05 $90.56

WACC 10.51% $75.59 $79.06 $82.54 $86.01 $89.49

10.76% $74.68 $78.12 $81.55 $84.99 $88.43

11.01% $73.79 $77.19 $80.58 $83.98 $87.38

($ in millions)

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(1) 2014E based on analyst consensus estimates


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Discounted Cash Flow Analysis: Output (Bull Case)


11.0x 11.5x 12.0x 12.5x 13.0x

10.01% $105.57 $110.31 $115.05 $119.79 $124.54

10.26% $104.32 $109.01 $113.70 $118.39 $123.08

WACC 10.51% $103.10 $107.73 $112.37 $117.01 $121.64

10.76% $101.89 $106.47 $111.05 $115.64 $120.22

11.01% $100.69 $105.22 $109.76 $114.29 $118.82

Share Price Assumptions


• WACC: 10.00% - 11.00%


13.0x


of sales each year


projection period



• Gross margin projected to expand

0.25% per year; 19.0% in 2019E

• Operating margin projected to

expand 0.25% per year; 8.0% in

2019E


2014E 2015E 2016E 2017E 2018E 2019E

Sales $350 $525 $735 $992 $1,290 $1,612

% Growth - 50.0% 40.0% 35.0% 30.0% 25.0%

EBITDA $33.9 $49.9 $71.6 $99.2 $132.2 $169.2

% Margin 9.7% 9.5% 9.8% 10.0% 10.3% 10.5%

% Growth - 47.0% 43.7% 38.5% 33.3% 28.0%

EBIT $25.2 $36.7 $53.3 $74.4 $99.9 $129.0

% Margin 7.2% 7.0% 7.3% 7.5% 7.8% 8.0%

% Growth - 46.0% 45.0% 39.7% 34.3% 29.0%

($ in millions)

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Valuation Summary

$52.30

$73.92

$100.69

$52.50

$74.24

$87.24

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$100.00

$110.00

$120.00

$130.00

52 Week TradingRange

DCF Bull Case DCF Bear Case DCF EV / 14ERevenues

EV / 15ERevenues

($ per share)

1 1

(1) Based on public comparable company data


$88.96 $91.82

$124.54

$65.54

$108.77

$120.93

Current Price 2: $56.27

Target High: $110.00

Target Low: $100.00

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Agenda

Investment Thesis 7

Value Drivers 9

Valuation 16


Appendix 26

Company Overview 2

Conclusion 24

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T H E O H I O S T A T E U N I V E R S I T Y RIS

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Risks and Other Considerations

• Regulatory and Environmental Policies • Market opportunity is largely driven by regulatory and environmental policies that incentivize

alternative fuel system adoption

• Less restrictive regulations would negatively impact traction in the alternative fuel market

• Commodity Price Fluctuations • Relative advantage of natural gas over diesel could decline in the future if crude oil prices fall

• Integration of PPPI • Failure of integration could lead to negative financial results

• Customer and Supplier Concentration • Relationships with Perkins and Caterpillar make up the bulk of diesel power systems revenue

• Loss of one major customer or supplier would have a sizable impact on revenue / earnings

• End-Market Economic Cyclicality • Customers demand for PSIX’s products is highly dependent on economic climate

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Agenda

Investment Thesis 7

Value Drivers 9

Valuation 16


Appendix 26

Company Overview 2

Conclusion 24

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T H E O H I O S T A T E U N I V E R S I T Y CO

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Conclusion

• A price target range of $100.00 - $110.00 is appropriate given:

• Expansion in both the on-road and materials handling segments

• Improving macro backdrop for alternative fuel system adoption

• Strong, defensible market position created by the acquisition of PPPI, Inc.

• Current market valuation suggests significant potential upside of 77% - 95%1

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EN

DA

Agenda

Investment Thesis 7

Value Drivers 9

Valuation 6


Appendix 26

Company Overview 2

Conclusion 24

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T H E O H I O S T A T E U N I V E R S I T Y AP

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Growth of Bakken

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11

11

12

12

13

13

14

5

10

15

20

25

30

35

40

Th

ou

san

ds

Wells

Bbls/Well

Well Count Increasing:

• +156% 2012 - 14

• +33% Y/y 4Q 2014

Rate of Growth:

• CAGR: 8.15%

Expectation:

• +40% Y/y 4Q 2015

Potential for PSIX

Client Base:

• Every active and newly developed well

represents a potential client for PSIX

Organic Market Expansion:

• Annual increase of 8.15%

• ~10,000 potential clients

2015 Estimates:

• Sale of 140 - 150 61L units

Projections

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Oil Output by Well


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Global Industrial Engine Market Growth1

2013 2019E

Diesel

Units

5.2M Diesel

Units

4.8M

224K

890K

Alternative Units

Alternative Units

27

(1) Source: Second Quarter Investor Presentation


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Weighted Average Cost of Capital Calculation

Current Capital Structure

Value Weight Cost Tax Rate

Total Debt 74.9 9.7% 6.0% 40.00%

Total Market Value of Equity1 625.1 90.3% 11.3%

Total Capital 700.3

Cost of Debt

Cost of Debt to Firm 6.0%

Cost of Equity

Risk-Free Rate2 2.20%

Historical Market Return 10.00%

Market Risk Premium 7.40%

Observed Beta (Levered) 1.17

WACC 10.51%

28


(2) 10 year treasury rate as of 10/17/14


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Comparable Companies Analysis1

Ticker

Company

Price as of

10/17/2014

% of 52-

week high

Enterprise

Value

($mm)

EV / Revenue EV / EBITDA

2014E 2015E 2014E 2015E

MPAA Motorcar Parts of

America $24.56 84.7% $529.8 1.84x 1.57x 9.52x 7.45x

CPST Capstone Turbine Corp. $0.81 39.6% $305.3 2.18x 1.51x NA 22.78x

WWD Woodward Innovations $46.60 84.2% $3,645.2 1.75x 1.65x 10.54x 9.55x

CLNE Clean Energy Fuels

Corp. $6.35 51.0% $997.4 2.51x 2.05x NA NA

FSYS Fuel Systems Solutions $8.75 45.1% $93.4 0.27x 0.26x 32.89x 6.73x

PSIX $56.27 73.0% $766.0 1.51x 1.12x 22.59x 15.89x

High 84.7% $3,645.2 2.51x 2.05x 32.89x 22.78x

Mean 64.9% $1,369.4 1.71x 1.41x 17.65x 11.63x

Median 67.6% $763.6 1.84x 1.57x 10.54x 8.50x

Low 39.6% $305.3 1.8x 1.5x 9.52x 6.73x

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(1) Market data as of 10/17/2014 close


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Discounted Cash Flow Analysis: Operating Projections

(Base Case)

2014E 2015E 2016E 2017E 2018E 2019E

Sales $350 $507 $685 $890 $1,113 $1,336

% Growth - 45.0% 35.0% 30.0% 25.0% 20.0%

EBITDA $33.9 $48.2 $65.1 $84.6 $105.7 $126.9

% Margin 9.7% 9.5% 9.5% 9.5% 9.5% 9.5%

% Growth - 42.1% 35.0% 30.0% 25.0% 20.0%

EBIT $25.2 $35.5 $47.9 $62.3 $77.9 $93.5

% Margin 7.2% 7.0% 7.0% 7.0% 7.0% 7.0%

% Growth - 41.1% 35.0% 30.0% 25.0% 20.0%

Unlevered Free Cash Flow $3.6 $8.2 $15.1 $24.5 $36.1

% Margin - 0.7% 1.2% 1.7% 2.2% 2.7%

% Growth - - 131.4% 84.2% 61.8% 47.3%

D&A $8.7 $12.7 $17.1 $22.3 $27.8 $33.4

% Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

CapEx $8.8 $12.7 $17.1 $22.3 $27.8 $33.4

% Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

(Increase/Decrease) in NWC $14.4 $17.8 $20.5 $22.3 $22.3 $20.0

% Sales 4.1% 3.5% 3.0% 2.5% 2.0% 1.5%

EV / EBITDA1 22.59x 15.89x 11.77x 9.06x 7.24x 6.04x

EV / Sales1 2.19x 1.51x 1.12x 0.86x 0.69x 0.57x

30

(1) EV as of 10/17/2014 market close


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Projected Segmented Revenues (Base Case)

2014E 2015E 2016E 2017E 2018E 2019E

Power Generation $106.99 $143.12 $193.34 $251.34 $314.17 $377.00

Oil & Gas $64.84 $86.74 $117.17 $152.32 $190.41 $228.49

Materials $81.05 $110.38 $149.12 $193.85 $242.31 $290.78

Power Systems Int’l. Total $252.87 $340.24 $459.63 $597.51 $746.89 $896.27

Other $65.43 $106.76 $144.23 $187.50 $234.37 $281.24

PPPI $30.70 $60.00 $81.05 $105.37 $131.71 $158.06

Total Revenue $349.00 $507.00 $684.91 $890.38 $1,112.98 $1,335.57

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(Bear Case)

2014E 2015E 2016E 2017E 2018E 2019E

Sales $350 $490 $637 $796 $955 $1,098

% Growth - 40.0% 30.0% 25.0% 20.0% 15.0%

EBITDA $33.9 $46.5 $58.9 $71.6 $83.6 $93.4

% Margin 9.7% 9.5% 9.2% 9.0% 8.8% 8.5%

% Growth - 37.2% 26.6% 21.6% 16.7% 11.7%

EBIT $25.2 $34.3 $43.0 $51.7 $59.7 $65.9

% Margin 7.2% 7.0% 6.7% 6.5% 6.3% 6.0%

% Growth - 36.3% 25.4% 20.4% 15.4% 10.4%


% Margin - 0.7% 1.0% 1.4% 1.8% 2.1%

% Growth - - 95.0% 66.7% 50.0% 38.0%

D&A $8.7 $12.2 $15.9 $19.9 $23.9 $27.5

% Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

CapEx $8.8 $12.2 $15.9 $19.9 $23.9 $27.5

% Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%


% Sales 4.1% 3.5% 3.0% 2.5% 2.0% 1.5%

EV / EBITDA1 22.59x 16.46x 13.00x 10.69x 9.16x 8.20x

EV / Sales1 2.19x 1.56x 1.20x 0.96x 0.80x 0.70x

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Projected Segmented Revenues (Bear Case)

2014E 2015E 2016E 2017E 2018E 2019E


Oil & Gas $64.84 $101.47 $132.14 $165.17 $198.20 $227.94

Materials $81.05 $95.84 $124.81 $156.02 $187.22 $215.30


Other $65.43 $94.26 $122.76 $153.44 $184.13 $211.75

PPPI $30.70 $30.00 $39.07 $48.83 $58.60 $67.39

Total Revenue $349.00 $489.00 $636.80 $796.00 $955.20 $1,098.48

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Discounted Cash Flow Analysis: Output (Bear Case)

34


11.0x 11.5x 12.0x 12.5x 13.0x

10.01% $55.17 $57.79 $60.40 $63.02 $65.64

10.26% $54.49 $57.08 $59.66 $62.25 $64.84

WACC 10.51% $53.82 $56.38 $58.93 $61.49 $64.05

10.76% $53.15 $55.68 $58.21 $60.74 $63.27

11.01% $52.50 $55.00 $57.50 $60.00 $62.50

Share Price Assumptions


• WACC: 10.00% - 11.00%


13.0x


of sales each year


projection period



• Gross margin projected to

decrease 0.25% per year; 17.0%

in 2019E

• Operating margin projected to

decrease 0.25% per year; 6.0% in

2019E


2014E 2015E 2016E 2017E 2018E 2019E

Sales $350 $490 $637 $796 $955 $1,098

% Growth - 40.0% 30.0% 25.0% 20.0% 15.0%

EBITDA $33.9 $46.5 $58.9 $71.6 $83.6 $93.4

% Margin 9.7% 9.5% 9.2% 9.0% 8.8% 8.5%

% Growth - 37.2% 26.6% 21.6% 16.7% 11.7%

EBIT $25.2 $34.3 $43.0 $51.7 $59.7 $65.9

% Margin 7.2% 7.0% 6.7% 6.5% 6.3% 6.0%

% Growth - 36.3% 25.4% 20.4% 15.4% 10.4%

($ in millions)



PE

ND

IX


(Bull Case)

2014E 2015E 2016E 2017E 2018E 2019E

Sales $350 $525 $735 $992 $1,290 $1,612

% Growth - 50.0% 40.0% 35.0% 30.0% 25.0%

EBITDA $33.9 $49.9 $71.6 $99.2 $132.2 $169.2

% Margin 9.7% 9.5% 9.8% 10.0% 10.3% 10.5%

% Growth - 47.0% 43.7% 38.5% 33.3% 28.0%

EBIT $25.2 $36.7 $53.3 $74.4 $99.9 $129.0

% Margin 7.2% 7.0% 7.3% 7.5% 7.8% 8.0%

% Growth - 46.0% 45.0% 39.7% 34.3% 29.0%


% Margin - 0.7% 1.4% 2.0% 2.7% 3.3%

% Growth - - 170.0% 100.0% 72.3% 55.7%

D&A $8.7 $13.1 $18.4 $24.8 $32.2 $40.3

% Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

CapEx $8.8 $13.1 $18.4 $24.8 $32.2 $40.3

% Sales 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%


% Sales 4.1% 3.5% 3.0% 2.5% 2.0% 1.5%

EV / EBITDA1 22.59x 15.36x 10.69x 7.72x 5.80x 4.53x

EV / Sales1 2.19x 1.46x 1.04x 0.77x 0.59x 0.48x

35



PE

ND

IX

Projected Segmented Revenues (Bull Case)

2014E 2015E 2016E 2017E 2018E 2019E


Oil & Gas $64.84 $73.99 $103.75 $140.06 $182.07 $227.59

Materials $81.05 $124.92 $175.17 $236.48 $307.42 $384.27


Other $65.43 $113.01 $158.47 $213.94 $278.12 $347.65

PPPI $30.70 $90.00 $126.20 $170.37 $221.48 $276.85

Total Revenue $349.00 $524.00 $734.77 $991.94 $1,289.52 $1,611.89

36


PE

ND

IX

Key Members of Management

• Gary Winemaster – President & Chief Executive Officer • Founder of PSI, developed an organization and management group capable of providing

superior technology and product offerings to the marketplace

• Ken Winemaster – Senior Vice President • Co-founder of PSI, brings operations expertise and oversees raw material procurement,

assembly, and shipping

• Eric Cohen – Chief Operating Officer • Held senior management positions at General Electric, Ampere Automotive, Midwest Air

Technologies and Power Plant Services

• Managed a private equity firm and worked extensively with the investment community at

William Harris Investors, a SEC registered investment advise

• Daniel Gorey – Chief Financial Officer • Previously Senior Vice President of Finance for PSI

• Before joining PSI, was Chief Financial Officer and a board member of Quixote Corporation, a

publicly-traded provider of highway crash safety systems. Daniel joined Quixote in 1985, and

assumed the CFO role in 1995

37


PE

ND

IX

Insider Trading

Transaction Type / Date

Current Average Shares /

Price Range Total Holdings 6 Month Return Market Value

Greenawalt Henry Samuel

Purchase

--

1.0K

$66.18 - $66.30 7,800 8/25/14 $66.2K

Purchase

-- $69.50 - $69.50 6,800 5/20/14 $20.9K

Winemaster Gary S

Purchase

-- $75.76 - $75.76 3,872,700 6/13/14

Purchase

--

1.0K

$69.29 - $69.29 3,872,300 12/16/13 $69.3K

Purchase

--

3.3K

$67.42 - $67.42 3,871,300 12/13/13 $222.5K

Cohen Eric A

Sale

--

21.7K

$73.78 - $75.82 -- 6/16/14 $1.6M

Sale

--

21.1K

$75.82 - $75.82 21,750 6/12/14 $1.6M

Sale

--

21.1K

$75.82 - $75.82 21,728 6/12/14 $1.6M

Exercise of Stock Options

--

60.0K

$22.07 - $22.07 21,750 6/11/14 $1.3M


--

60.0K

$22.07 - $22.07 21,728 6/11/14 $1.3M

Sale

--

43.1K

$75.74 - $78.54 -- 6/10/14 $3.3M


--

60.0K

$22.07 - $22.07 -- 6/6/14 $1.3M

Sale

--

54.2K

$52.95 - $54.43 -- 10/11/13 $2.9M

Planned Sale

--

54.2K

-- - -- -- 10/11/13 $3.0M

Landini Kenneth W

Sale -- 4.2K $70.19 - $70.32 19,000

11/15/13 $292.8K

38


PE

ND

IX

Ownership

39

Insider - Based on Last 6 Months 10/12/2014 10/16/2014

21 56.7 56.7

22 0.02 0.02

23 6 6

24 2 2

25 1 1

26 1696 1696

27 85903 85903

28 69.04 69.04

29 75.92 75.92

Top Ownership Type 10/12/2014 10/16/2014

Individual 54.83 54.74

Investment Advisor 38.48 38.57

Hedge Fund Manager 4.53 4.52

Pension Fund 2.04 2.03

Insurance Company 0.06 0.06

Government 0.04 0.04

Holding Company 0.04 0.04

Bank 0 0

43%

57%

Institutional Holdings

Insider Holdings


PE

ND

IX

Projected 2015 Forklift Revenues

40

US

Sales $349,000,000

Materials Handling 20%

Forklifts 10%

Forklift Revenue $34,900,000

OEM 10%

Units/yr US 350,000

PSIX Share of US 35,000

ASP/unit $997

China

Sales $349,000,000

Materials Handling 20%

Forklifts 10%

Forklift Revenue $34,900,000

OEM 10%

Units/yr China 364,000

PSIX Share of China 36,400

ASP/unit $1,018

Total

Revenue China 37,058,216

Revenue US 35,632,900

Total Revenue $72,691,116


PE

ND

IX

Oil and Gas 61-Liter Engine and Navistar Revenue

Projections

O&G Engines

Growth 10,000

Penetration 1%

Clients 100

61L Cost $300,000

Revenue $30,000,000

8.8L Bus Engines

Engine to Navistar

8.8L 25,000

Start Summer 2015 40%

ASP $12,500

NAV Total

Units 10,000

Percent 10%

Revenue $12,500,000


PE

ND

IX

Gas Production and Flaring per Barrel1

42

(1) Bakken Fact Sheet: Energy and Environment Research Center


PE

ND

IX

Crude Oil Prices vs. Natural Gas

43

(1) Source: Bloomberg as of 10/16/2014


PE

ND

IX

Comparable Companies: Gross Margin

44

31%

30%

29%

21%

17%

19%

0% 10% 20% 30% 40%

Gross Margin1

(1) LTM gross margin; source: CapitalQ


PE

ND

IX

Income Statement1,2

45

FY 2011 FY 2012 FY 2013 Q1 2014 Q2 2014

Revenues 154.969 202.342 237.842 66.735 83.378

Cost of Revenue 128.541 168.425 193.316 54.805 67.982

Gross Profit 26.428 33.917 44.526 11.93 15.396

Selling, General & Admin Expense 16.623 21.601 29.559 8.409 9.503

Operating Income 9.805 12.316 14.967 3.521 5.893

Interest Expense 1.34 1.023 0.657 0.099 0.381

Foreign Exchange Losses (Gains) 0 0 0 0 0

Net Non-Operating Losses (Gains) 1.631 0.448 28.311 -0.21 -0.947

Pretax Income 6.834 10.845 -14.001 3.632 6.459

Income Tax Expense 2.773 4.143 4.759 1.258 2.021

Income Before XO Items 4.061 6.702 -18.76 2.374 4.438

Extraordinary Loss Net of Tax 0 0 0 0 0

Minority Interests 0 0 0 0 0

Net Income 4.061 6.702 -18.76 2.374 4.438

Total Cash Preferred Dividends 0 0 0 0 0

Other Adjustments 2.513 0 0 0 0

Net Inc Avail to Common

Shareholders 1.548 6.702 -18.76 2.374 4.438

Abnormal Loss -19.515 0.509 0.27 0.811 -0.9

Tax Effect on Abnormal Items 6.83025 -0.204 -0.108 -0.324 0.315

Normalized Income -11.13675 7.007 -18.598 2.861 3.853

Comprehensive Income 4.061 6.702 -18.76 2.374 4.438

Comprehensive Income per Share 0.440707 0.739014 -1.918307 0.2252 0.4176

Basic EPS 0.44 0.74 -1.92 0.23 0.42

Diluted EPS 0.44 0.74 -1.92 0.19 0.39

(1) Fiscal year ending 12/31

(2) All data from most recent 10-Q SEC filing

($ in millions)


PE

ND

IX

Balance Sheet1,2

46

FY 2011 FY 2012 FY 2013 6/30/2014

Assets

Cash & Near Cash Items 0 0.543 6.306 5.706

Short-Term Investments 0 0 0 0

Accounts & Notes Receivable 29.523 37.48 42.73 56.299

Inventories 33.393 39.968 55.986 78.598

Other Current Assets 3.105 4.086 4.984 8.493

Total Current Assets 66.021 82.077 110.006 149.096

Long-Term Investments 0 0 0 0

Gross Fixed Assets 9.739 12.636 19.75 25.841

Less: Accumulated Depreciation 6.128 5.491 6.646 7.302

Net Fixed Assets 3.611 7.145 13.104 18.539

Other Long-Term Assets 1.451 1.543 3.509 49.564

Total Long-Term Assets 5.062 8.688 16.613 68.103

Total Assets 71.083 90.765 126.619 217.199

Liabilities & Shareholders' Equity

Accounts Payable 27.574 26.579 24.444 38.636

Short-Term Borrowings 19.689 1.667

Other Short-Term Liabilities 4.579 6.085 7.941 16.812

Total Current Liabilities 51.842 32.664 32.385 57.115

Long-Term Borrowings 0.041 30.942 17.933 73.276

Other Long-Term Liabilities 3.876 4.425 25.88 18.045

Total Long-Term Liabilities 3.917 35.367 43.813 91.321

Total Liabilities 55.759 68.031 76.198 148.436

Total Preferred Equity 0 0 0 0

Minority Interest 0 0 0 0

Share Capital & APIC 10.164 10.872 57.319 68.849

Retained Earnings & Other Equity 5.16 11.862 -6.898 -0.086

Total Shareholders' Equity 15.324 22.734 50.421 68.763

Total Liabilities & Equity 71.083 90.765 126.619 217.199



($ in millions)


PE

ND

IX

Cash Flow Statement1,2

47

FY 2011 FY 2012 FY 2013 LTM 6/30/2014

Cash From Operating Activities

+ Net Income 4.1 6.7 -18.8 -6.9

+ Depreciation & Amortization 0.8 1.1 1.6 1.0

% sales 0.5% 0.5% 0.7%

+ Other Non-Cash Adjustments 0.1 0.5 29.2 19.9

+ Changes in Non-Cash Capital -6.0 -11.2 -24.5 -25.7

Cash From Operations -1.0 -2.9 -12.4 -10.2

Cash From Investing Activities

+ Disposal of Fixed Assets 0.0 0.0 0.0 0.0

+ Capital Expenditures -1.6 -3.9 -6.0 -4.1

+ Increase in Investments 0.0 0.0 0.0 0.0

+ Decrease in Investments 0.0 0.0 0.0 0.0

+ Other Investing Activities 0.0 0.0 -0.5 -45.0

Cash From Investing Activities -1.6 -3.9 -6.5 -48.2

Cash from Financing Activities

+ Dividends Paid 0.0 0.0 0.0 0.0

+ Change in Short-Term Borrowings 1.3 -3.8 0.0 -0.1

+ Increase in Long-Term Borrowings 0.0 4.2 150.6 153.8

+ Decrease In Long-Term Borrowings -7.9 -0.1 -126.8 -79.3

+ Increase in Capital Stocks 18.0 0.2 6.1 7.2

+ Decrease in Capital Stocks -4.3 0.0 -- 0.0

+ Other Financing Activities -4.7 6.8 -5.1 -5.3

Cash from Financing Activities 2.5 7.4 24.7 76.4

Net Changes in Cash 0.0 0.5 5.8 18.0



($ in millions)

psix presentation - ohio state university - 10.18.14

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