Executive Summary- May 2006

Based on the responses of die casting companies to this survey, both the industry shipments  and profitability declined over 2005. Pounds shipped decreased 7% since 2004. Profits remain positive, but weak with a median net profit of 2.97% for all respondents. Another measure of profitability, Income Before Interest, Taxes, Depreciation, and Amortization (IBITDA) increased since last year.  Efficiency as measured by output per employee increased by approximately 18% compared to 2004.  The 8.4% IBITDA shows an upturn compared to the 2004 where there was no change.  As economic conditions improve, these negative figures are predicted to slowly turn upward in 2005.

Details

Eighteen (18) diecasting industry companies participated in this year's survey with all results based on the most recently ended fiscal year of each participant. Companies with multiple plants are identified with their headquarters location if the plants did not report separately.  The total number of die casting facilities represented by this survey was 26.

Of the 18 participants, 3 companies had Net Sales under $11.5 million/company, 4 companies had Net Sales between $11.5 and $26.3 million/company and 11 had Net Sales over $26.3 million/company. Median, upper and lower quartile results for 2005 and the median ratios for 2004 are listed on Attachment A.  The ratio medians for three size categories of annual sales are shown in Attachment B. The companies are split into three groups by annual sales volume: companies under $11.5 million, $11.5 to $26.3 million and over $26.3 million.

A ten-year comparison of medians is included as Attachment C.   Additionally, a history of each ratio’s median, upper quartile and lower quartile can be viewed online.  These charts can be used as the benchmark for the actual values from each participant.

Medians and Quartiles

The median ratio is defined as the middle ratio ranking values from highest to lowest. When there are an even number of ratios then the median is the average of the two middle ratios. The median is considered characteristic of the sample, since half the companies are above it, and half are below it. It is more accurate than averages for small groups such as the one being evaluated in the Annual Financial Survey. The upper and lower quartile ratios define the spread of results and contain 50% of all companies reporting. Ratios falling above and below the quartile limits are the best and the worst performance ratios, respectively.

Accuracy of Data

To collect this data, a standard form and instructions were designed to ensure consistency in reporting. While it is believed that the reporting is accurate, it cannot be guaranteed. Also, minor discrepancies may have resulted from variations in accounting practices. 

Overall, it is believed that the aggregate information contained herein gives a valid picture of the die-casting industry's financial performance for the current period.

SUMMARY COMMENTS ON MEDIANS – Attachment A

Return on Investment Components

The score card of any business is measured and evaluated by studying the ratios affecting the Return on Investment (ROI) and Return on Assets (ROA) and by determining reasons for the deviations or changes in those components.

ROI Success(Ratio 10) = Profitability(Ratio 20) x Control(Ratio 30) x Risk(Ratio 40)

ROA(Ratio 11) = Profitability(Ratio 20) x Control(Ratio 30)

As shown in Table I, the ROI (Ratio 10) has decreased this year due, in part, to lower Profit Margins; 2005 Pretax Profit (Ratio 20) decreased from the 2004 percentage. The Turnover of Assets (Ratio 30) increased slightly, and the Contribution Margin (Ratio 24) increased from 2004.

Period Costs (Ratio 25) decreased as a percentage of sales. Income Before Interest, Taxes, Depreciation and Amortization (IBITDA) (Ratio 21)---another measure of profitability---shows an increase from the previous year.   A ten-year trend in these two values can be seen in the graph below.  Profits have remained flat over this period while IBITDA has fallen moderately.

Return on Assets-Pretax (Ratio 11) is a better performance measurement of operating results, since it eliminates the leverage factor from the ROI formula. The 2005 median ratio of 5.10% shows a decrease in operations, compared to 2004's median ratio of 6.68%.

 Control and Risk Ratios

Median Asset Turnover (Ratio 30) increased to 1.87X from 1.85X in 2004, while collection of Receivables (Ratio 32) decreased to 51 days compared to 58 days in 2004.  Accounts payable is at 39 days. The median Leverage Ratio (Ratio 40) increased slightly to 2.12 in 2005 from 2.03 in 2004, while long-term debt as a percent of equity increased significantly from 2004.

Profitability and Growth Ratios

The median of the Pretax Profitability Ratio (Ratio 20) decreased in 2005.  Tooling Net Sales as a % of Sales (Ratio 25D1) has shown an increase for the first time in four years.  Sales (Ratio 50) and Pounds Shipped (Ratio 50A) decreased from the prior year with an 8% loss in sales volume, and a 7% decrease in pounds shipped.

Miscellaneous Ratios

The productivity ratios of Sales per Total Employees (Ratio 60) and Sales per Hourly Manufacturing Employees (Ratio 61) both showed increases from the 2004 medians indicating a gain in manufacturing efficiency.  Total Payroll as a % of Sales (Ratio 62) decreased slightly since 2004.  Manufacturing Payroll Percent of Sales (Ratio 62A) decreased to 24.81 in 2005 from 26.83 in 2004.  The trend over the past eight years is positive as shown in the graph below.  Pension & Profit Sharing is calculated as a percent of total payroll and increased compared to 2004.

 Conversion Costs

 In comparing the Conversion Cost elements by the three size categories (see Table II), Direct Conversion only slightly changes as companies get larger, and large companies appear to have the lowest labor cost as a percent of sales.

Metals Cast

Reporting companies cast a variety of alloy types with the majority casting multiple alloys. The largest group casts both Aluminum and Zinc (80%) alloys. The breakdown is as follows: