Miscor Presentation 2008 (final)
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Investor Presentation | 2008 OTC: MIGL
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, please see MISCOR Group’s publicly available filings with the Securities and Exchange Commission (SEC) at www.sec.gov. MISCOR Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as the results of new information, future events or otherwise. All information should be read in conjunction with the historical financial statements contained in MISCOR Group’s Form S-1, reports on Form 10-Q and Form 8-K and public announcements of financial information. These reports, as well as a financial overview, are available on the Investor Relations page of MISCOR Group’s website, located at www.miscor.com. 2
The MISCOR Story Vision Statement To become a leading provider of integrated mechanical and electrical industrial services and products by delivering unmatched experience, quality and innovation, while creating long-term relationships and tangible value for our employees, customers and shareholders.
Strategic Advantage
Leading provider of industrial services for blue-chip customers serving the domestic and international markets
Track record of organic and acquisition growth
82% compounded annual sales growth (two-time Inc. 500 company)
Highly experienced management team
Leverage opportunity inherent in the fragmented services market 3
Unique Corporate Model
Blue-Chip Customer Base Leverage Existing Crossover Potential
Breadth of Geographic Reach National, Multi-Industrial Services Provider Best-in-Class Management
Skilled Workforce Strategic Acquisition Strategy
4
Management Team John Martell, PE President and Chief Executive Officer
20+ years experience in electrical contracting and industrial services
A founding shareholder of Trans Tech Electric, Inc., which became a founding member of Quanta Services, Inc., (NYSE: PWR)
BS in electrical engineering, Notre Dame; Certificate in Executive Management, Notre Dame
Richard Mullin VP, Chief Financial Officer
Richard Tamborksi EVP, Chief Operating Officer
20+ years experience in senior finance positions in public accounting and industry
CFO at NASDAQ-listed Starcraft Corporation, former VP of Finance and President of Wells Electronics, Inc.
MBA from Notre Dame
Former VP of Operations for Alstrom Transports Train Life Services in the U.S.A. and Canada, a division of Paris, Francebased Alstrom Former VP of Global Sourcing and Logistics for NYSE-listed Wabtec, Corp. BS from Lake Erie College
James Lewis VP, General Counsel
13+ years experience in corporate law firm; focus in contract, litigation and product liability law
Former adjunct professor of law at Notre Dame
JD from Notre Dame 5
Management Team
Bernard DeWees President, Magnetech
J. Cullen Burdette Vice President, HK Engine Components
Anthony Nicholson Vice President, Martell Electric
29+ years of industry experience
20+ years experience in electrical contracting and construction management
President of 3-D Service, former VP Operations at ABB Services and Grand Eagle, Inc.
13+ years experience in diesel engine components, manufacturing and repair
Former General Manager of Hatch & Kirk
Former COO of Ed Nicholson & Assoc.
BS in electrical engineering from the University of Maryland
MBA from Notre Dame
Duke University, Fuqua School of Business, Executive Business Management Program
6
Diversified Services with Crossover Potential
Percent of Total Revenue Contribution (2007)
Construction and Engineering Services (CES)
Repair, Remanufacturing, Manufacturing Services (RRM)
28%
72%
American Motive Power 7
Midwest Work Ethic | Global Reach Providing global industrial solutions through two segments: Repair, Remanufacture and Manufacturing Services Construction and Engineering Services RRM Growth
$50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0
$43,202
$37,916
$34,637
$32,088
Expanding services through acquisitions and organic growth $24,405
$11,792
$14,820
$3,271
2001
2002
2003
2005
2006
2006 9mo.
2007 9mo.
CES Growth
RRM Growth $25,000
$60,000
$21,634
$51,734
$50,000
$20,000
$43,202 $34,637
$40,000
$17,552
$15,000
$11,659
$24,405
$30,000 $20,000 $10,000
2004
$11,792
$10,000
$14,820
$4,492
$5,000
$3,271
$675
$0
$0
2001
2002
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
8
Repair, Remanufacture and Manufacturing Services (RRM) Provide maintenance and repair services on industrial electric motors, lifting magnets, engineering of power assemblies, engine parts and other components related to large diesel engines. Industrial Services
End Markets: Rail, Utility, Maritime, Offshore Drilling
Value Proposition
Core competencies include both electrical and mechanical repair Largest non-OEM manufacturer of power assemblies for EMD diesel engines Multi-location capability with locations throughout the Midwest Complete industrial repair services On-site repair capabilities Predictive and preventative maintenance programs Tier 0 Certification with the EPA for power assemblies Repair services for growing Wind power industry, hydroelectric, others Control complete supply chain for the manufacturing process with in-house factory Redesigned various features to improve on the original product design Highly trained workforce
Sales $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0
$37,228 $38,528 $25,389
$11,792
$29,721
$15,323
$3,271 2001
2002
2003
2004
2005
2006
2007
Diesel Engine
Sales $13,206
$14,000 $12,000
$9,672
$10,000 $8,000
$6,321
$6,000 $4,000 $2,000 $0 2005
2006
2007
9
RRM – Growth Strategy
Acquisitions: pursue targeted acquisitions to expand geographic reach, customer base
Organic: expand repair services, grow geographically with customers
Position as “service provider of choice” for all industrial maintenance, diesel engine repair/maintenance needs
Leverage existing magnet customer base as a platform for cross-selling services
Continue to take advantage of outsourcing trends, documented ROI benefits Service Areas
Cross-sell services across internal business divisions
Pursue additional EPA certifications –
only non-OEM with Tier 0 Certification 10
Global Wind Market Opportunity
Wind power is now the world's fastest growing source of energy
For the last ten years worldwide wind turbine sales have grown approximately 29% annually
Expected to expand for the next twenty years at double-digit rates
The global market for all turbines predicted to jump from $83.6 billion in 2007 to about $106 billion in 2012
American Wind Energy Association the National Renewable Energy Laboratory believe 20% of the nation's electricity can come from renewable wind energy within the next twenty years resulting in cumulative wind turbine sales of over $250 billion
11
Global Wind Market Opportunity
12
U.S. Wind Market Opportunity
The market for wind power in the U. S. has been erratic and largely dependent on the availability of the federal production tax credit (PTC)
In 2001, the industry installed about 1,800 MW of new windpower capacity
In 2007, coupled with the huge spike in petroleum prices, new installed wind capacity rose to more than 5,200 MW, shattering all previous U.S. records
U.S. has led the world in new wind-power capacity installed for each of the last three years 13
U.S. Wind Market Opportunity
14
Magnetech Industrial Services Business Model Provide maintenance and repair services to industry, including: Industrial electric motors Lifting magnets Engineering services Wind power services
Services
AC and DC motor repair Manufacturing, remanufacturing and repair of electrical lifting magnets Turbine generator repair Support services – Field services – Magnetrac Asset Management – Reliability-centered maintenance – Predictive and preventative maintenance – Education and training
15
3-D System (Acquired Nov. 2007) Business Model Specialize in the repair, remanufacture and maintenance for a variety of commercial and industrial equipment, including a unique expertise in wind generation repair, to extend service life, increase performance and reliability, while minimizing downtime.
Services
Electric motors and generators Steam, combustion and hydroelectric turbines Repair services for renewable wind generation facilities Class I light rail generators, motors, etc. Navy and marine duty motors Nuclear reactor coolant pump motors Drives, drive systems, printed circuit boards Power systems Plant site services New equipment
Renewable Wind Generation Repair Services
16
HK Engine Components Business Model Provides manufacturing, remanufacturing, repair and engineering of power assemblies, engine parts and other components related to large diesel engines for multiple industries, including: Rail Maritime Offshore drilling
Services
Manufacture and remanufacture power assemblies for 710, 645 and 547 EMD diesel engines Only non-OEM with Tier 0 Certification from the Environmental Protection Agency (EPA) for power assemblies Component parts for engines 1/3 of the production exported to customers outside North America
Power Assembly
17
American Motive Power (Acquired Jan. 2008) Business Model Provider of a wide range of services to the railroad industry, including the reconditioning, remanufacturing and manufacturing of locomotives. The 240,000-square-foot, East Coast-based facility has the capacity to service up to 20 locomotives simultaneously, as well as offering wreak repair to quickly put assets back into service.
Services
Locomotive reconditioning and rebuilding Engine rebuilding, with an emphasis on EMD 645 and 710 power assemblies Wreak repair services Technological enhancements 104-foot paint shop with air scaffolding system Truck repair (locomotive undercarriages)
18
Construction and Engineering Services Provide a wide range of electrical contracting and HVAC services, mainly to industrial and institutional customers, as well as commercial builders/contractors
Value Proposition
A market leader in locations served Recent entry into industrial HVAC market through Ideal Consolidated acquisition Highly trained workforce High level of design/build competency Specialists in fast-track construction methods Key relationships with all major general contractors serving our regional footprint
Electrical Contracting
Sales $25,000
$21,634
$20,000 $14,207
$15,000 $10,254
$10,000 $3,508
$5,000 $0
$174 2003
2004
2005
2006
2007
19
CES – Growth Strategy
Acquisitions: pursue targets that expand geographic reach, customer base
Organic: expand existing customer repair services
Expand footprint throughout Midwest; grow with key general contractors
Replicate national expansion led by management members in the 1990’s Current Service Hubs
Align with suppliers to leverage partnership opportunities in current and target markets
Target Service Hubs
Market Opportunity
20
Martell Electric Business Model Provide a wide range of electrical contracting services, mainly to industrial and institutional customers, as well as commercial builders and contractors
Services
Design/Build and Plan/Specification Methods Commercial, industrial and institutional construction Telecommunications Traffic 24/7 service department Three locations in Northern Indiana
Hilton Regional Laundry Facility, Portage, Ind. 34.5 KV High Voltage Switchgear Upgrade
21
Magnetech Power Services
Business Model Maintenance and repair services to industry, including: Engineering Power system studies Transformer services Circuit breakers Locomotive controls
Services
Design/build mechanical solutions Circuit breaker reconditioning 24/7 service Total circuit breaker management programs Onsite repair capabilities Predictive and preventative maintenance programs
22
Ideal Consolidated (Acquired Oct. 2007)
Business Model Provide a wide range of mechanical contracting services, mainly to industrial and institutional customers, as well as commercial builders and contractors
Services
Design/Build, Design Assist and Plan/Specification Methods Commercial, industrial and institutional construction Service department Predictive and preventative maintenance
University of Notre Dame Football Stadium
23
MISCOR Growth Story – Organic & Acquisitions Total Growth Total Acquisition
Total Organic
$100.0 $80.0 $60.0
82% CAGR
$40.0 $20.0 $2000
2001
2002
2003
2004
2005
2006
2007
Acquisition Timeline Organic
Ideal Consolidated
Acquisition
South Bend
2000
Huntington
Boardman
Mobile
Martell S.B .
Hammond
Indy
Merrillville
2001
2002
2003
M artell Elk.
2004
HKEC: Weston
Martell Valpo.
HKEC: Haggerstow
Sarland
2005
2006
3-D Service Cincinnati 3-D Service Massillon
2007
AMP Canada AMP USA
2008
24
Growth Summary Employees
21
Includes 3-D Service
385
84 American Motive Power
68 17 86
MIGL TOTAL
Square Ft.
4,000
325,784
70,576
250,000 6,000 41,004
Locations
1
Organic Starts
Operating Acquisitions
N/A
N/A
3 2000, ‘04, ‘07
7 ‘01, ’02(3), ’06, ’07(2)
N/A
2 ‘05(2)
1
N/A
1 2008
1
1 2004
N/A
3
2 ‘03, ’05
1 2004
9
3
41
15,360
1
N/A
1 2007
702
712,724
19
6
12
25
Growth Driver: End-Market Diversification Rail $144 billion
Marine $4 billion
Transit $65 billion Construction $24 billion
Utilities $554 billion Petrochemical $101 billion
Energy/ Renewable Power $204 billion
Steel $574 billion 26
Leveraging Complementary Business Units Divisional Cross-Selling – – – –
Diversified business segments offer customers a wide range of industrial-based services “One-stop-shop” for Blue Chip customers Increased penetration reduces cost for customers, drives MISCOR profitability Case Study: Australia Rail Group
Aggregating Specialized Talent – – – – – –
Training programs for customers = cost savings, loyalty Shrinking talent pool of industrial services workforce creates competitive advantage Average employee has 15+ years experience Attracting talent through aggressive growth Training and education programs Case Studies: Magnetrac Asset Management, Beta Steel
27
Sizing the Market Potential Electrial Contracting Market
Fragmented, legacy-based industries create numerous acquisition and expansion opportunities
Total U.S. Market $76 Billion
Balance of U.S. $20B
Midwest $56B
Midwest location, combined with a global reach, provides a strategic advantage for increasing market share
Diesel Engine Power Assembly Market
Motor & Magnet
Total World Market $370 Million
Total U.S. Market $8 Billion
U.S.A., $3.5 Eastern U.S.A., $4.5
U.S.A. $223M
World $137.0M
28
Evolution of a National Leader Long-Term Plan
2005 – 2007 Accelerated Growth
2000 – 2004 Company Formation
2000 – MISCOR Founded
Addition of Martell Electric 6 acquisitions, 12 new locations
Seasoned core management Proven track record Focused service offerings Target blue-chip customers
Build management Leverage industry trends Expand service offerings Grow customer base Inc. 500
IPO •Industry recognition •Continued acquisitions •Strengthen management team
•$500 million diversified services provider •National exchange listing •Leverage public company currency •“Service provider of choice” •Live the strategic vision •Strengthen management team
•Building national image •Execute strategic vision •Acquisitions and organic growth •Bring Company story to the Street
•Achieve national reputation •Continue organic and acquisition growth •Build a following on the Street
•Team in place •Leverage industry trends •Expand service offerings •Strong customer base
•Team in place •Leverage industry trends •Expand service offerings •Strong customer base
Profitability & Increasing Revenue Growth
2008 – Beyond: Our Future
29
Favorable Industry Tailwinds
Outsourcing non-core industrial services can create significant cost savings
Internal utilization of skilled employees will never be at 100%: The mounting costs of training skilled employees, maintaining a satisfactory safety record and complying with rapidly changing government regulations are driving outsourcing
Breadth of Geographic Coverage Remains Critical: National and multi-site industrial companies prefer to simplify vendor management, work with larger providers with broad geographic coverage
Aging U.S. Industrial Base: As equipment and motors continue to age, companies turn to preventative, predictive and remanufactured goods as a valuable cost-saving tool
Industry Succession Plans: Fragmented legacy-based industry lacks succession planning, resulting in attractive acquisition targets with unrealized potential In response to these trends, we have made strategic business acquisitions to consolidate fragmented service providers in the Midwest, resulting in significant revenue growth and geographic expansion
30
Financial Overview
Gross Profit
Sales $6,000
$35,000 $30,000
$5,000
$25,000
$4,000
$20,000
$3,000
$15,000
$2,000
$10,000
$1,000
$5,000
$0
$0 3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q06
3Q08
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q07
1Q08
2Q08
3Q08
EBITDA
Operating Income $2,000
$1,200
$1,800
$1,000
$1,600 $1,400
$800
$1,200 $1,000
$600
$800
$400
$600 $400
$200
$200 $0
$0 3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
3Q06
4Q06
1Q07
2Q07
3Q07
31
Investment Catalysts Leading industrial services and manufacturing company in growing niche markets Established, nationwide blue-chip customer base Highly-trained workforce with niche expertise amid limited pool of talent Industry Tailwinds: The aging “industrial backbone” needs maintenance; repairs are a fraction of the replacement cost Highly experienced management team with proven track record Diversified end-market exposure Balance of organic and acquisition growth Fragmented legacy-based industry creates attractive acquisition targets with untapped potential 32
Investor Presentation | 2008
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, please see MISCOR Group’s publicly available filings with the Securities and Exchange Commission (SEC) at www.sec.gov. MISCOR Group disclaims any intention or obligation to update or revise any forward-looking statements, whether as the results of new information, future events or otherwise. All information should be read in conjunction with the historical financial statements contained in MISCOR Group’s Form S-1, reports on Form 10-Q and Form 8-K and public announcements of financial information. These reports, as well as a financial overview, are available on the Investor Relations page of MISCOR Group’s website, located at www.miscor.com. 2
The MISCOR Story Vision Statement To become a leading provider of integrated mechanical and electrical industrial services and products by delivering unmatched experience, quality and innovation, while creating long-term relationships and tangible value for our employees, customers and shareholders.
Strategic Advantage
Leading provider of industrial services for blue-chip customers serving the domestic and international markets
Track record of organic and acquisition growth
82% compounded annual sales growth (two-time Inc. 500 company)
Highly experienced management team
Leverage opportunity inherent in the fragmented services market 3
Unique Corporate Model
Blue-Chip Customer Base Leverage Existing Crossover Potential
Breadth of Geographic Reach National, Multi-Industrial Services Provider Best-in-Class Management
Skilled Workforce Strategic Acquisition Strategy
4
Management Team John Martell, PE President and Chief Executive Officer
20+ years experience in electrical contracting and industrial services
A founding shareholder of Trans Tech Electric, Inc., which became a founding member of Quanta Services, Inc., (NYSE: PWR)
BS in electrical engineering, Notre Dame; Certificate in Executive Management, Notre Dame
Richard Mullin VP, Chief Financial Officer
Richard Tamborksi EVP, Chief Operating Officer
20+ years experience in senior finance positions in public accounting and industry
CFO at NASDAQ-listed Starcraft Corporation, former VP of Finance and President of Wells Electronics, Inc.
MBA from Notre Dame
Former VP of Operations for Alstrom Transports Train Life Services in the U.S.A. and Canada, a division of Paris, Francebased Alstrom Former VP of Global Sourcing and Logistics for NYSE-listed Wabtec, Corp. BS from Lake Erie College
James Lewis VP, General Counsel
13+ years experience in corporate law firm; focus in contract, litigation and product liability law
Former adjunct professor of law at Notre Dame
JD from Notre Dame 5
Management Team
Bernard DeWees President, Magnetech
J. Cullen Burdette Vice President, HK Engine Components
Anthony Nicholson Vice President, Martell Electric
29+ years of industry experience
20+ years experience in electrical contracting and construction management
President of 3-D Service, former VP Operations at ABB Services and Grand Eagle, Inc.
13+ years experience in diesel engine components, manufacturing and repair
Former General Manager of Hatch & Kirk
Former COO of Ed Nicholson & Assoc.
BS in electrical engineering from the University of Maryland
MBA from Notre Dame
Duke University, Fuqua School of Business, Executive Business Management Program
6
Diversified Services with Crossover Potential
Percent of Total Revenue Contribution (2007)
Construction and Engineering Services (CES)
Repair, Remanufacturing, Manufacturing Services (RRM)
28%
72%
American Motive Power 7
Midwest Work Ethic | Global Reach Providing global industrial solutions through two segments: Repair, Remanufacture and Manufacturing Services Construction and Engineering Services RRM Growth
$50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0
$43,202
$37,916
$34,637
$32,088
Expanding services through acquisitions and organic growth $24,405
$11,792
$14,820
$3,271
2001
2002
2003
2005
2006
2006 9mo.
2007 9mo.
CES Growth
RRM Growth $25,000
$60,000
$21,634
$51,734
$50,000
$20,000
$43,202 $34,637
$40,000
$17,552
$15,000
$11,659
$24,405
$30,000 $20,000 $10,000
2004
$11,792
$10,000
$14,820
$4,492
$5,000
$3,271
$675
$0
$0
2001
2002
2003
2004
2005
2006
2007
2003
2004
2005
2006
2007
8
Repair, Remanufacture and Manufacturing Services (RRM) Provide maintenance and repair services on industrial electric motors, lifting magnets, engineering of power assemblies, engine parts and other components related to large diesel engines. Industrial Services
End Markets: Rail, Utility, Maritime, Offshore Drilling
Value Proposition
Core competencies include both electrical and mechanical repair Largest non-OEM manufacturer of power assemblies for EMD diesel engines Multi-location capability with locations throughout the Midwest Complete industrial repair services On-site repair capabilities Predictive and preventative maintenance programs Tier 0 Certification with the EPA for power assemblies Repair services for growing Wind power industry, hydroelectric, others Control complete supply chain for the manufacturing process with in-house factory Redesigned various features to improve on the original product design Highly trained workforce
Sales $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0
$37,228 $38,528 $25,389
$11,792
$29,721
$15,323
$3,271 2001
2002
2003
2004
2005
2006
2007
Diesel Engine
Sales $13,206
$14,000 $12,000
$9,672
$10,000 $8,000
$6,321
$6,000 $4,000 $2,000 $0 2005
2006
2007
9
RRM – Growth Strategy
Acquisitions: pursue targeted acquisitions to expand geographic reach, customer base
Organic: expand repair services, grow geographically with customers
Position as “service provider of choice” for all industrial maintenance, diesel engine repair/maintenance needs
Leverage existing magnet customer base as a platform for cross-selling services
Continue to take advantage of outsourcing trends, documented ROI benefits Service Areas
Cross-sell services across internal business divisions
Pursue additional EPA certifications –
only non-OEM with Tier 0 Certification 10
Global Wind Market Opportunity
Wind power is now the world's fastest growing source of energy
For the last ten years worldwide wind turbine sales have grown approximately 29% annually
Expected to expand for the next twenty years at double-digit rates
The global market for all turbines predicted to jump from $83.6 billion in 2007 to about $106 billion in 2012
American Wind Energy Association the National Renewable Energy Laboratory believe 20% of the nation's electricity can come from renewable wind energy within the next twenty years resulting in cumulative wind turbine sales of over $250 billion
11
Global Wind Market Opportunity
12
U.S. Wind Market Opportunity
The market for wind power in the U. S. has been erratic and largely dependent on the availability of the federal production tax credit (PTC)
In 2001, the industry installed about 1,800 MW of new windpower capacity
In 2007, coupled with the huge spike in petroleum prices, new installed wind capacity rose to more than 5,200 MW, shattering all previous U.S. records
U.S. has led the world in new wind-power capacity installed for each of the last three years 13
U.S. Wind Market Opportunity
14
Magnetech Industrial Services Business Model Provide maintenance and repair services to industry, including: Industrial electric motors Lifting magnets Engineering services Wind power services
Services
AC and DC motor repair Manufacturing, remanufacturing and repair of electrical lifting magnets Turbine generator repair Support services – Field services – Magnetrac Asset Management – Reliability-centered maintenance – Predictive and preventative maintenance – Education and training
15
3-D System (Acquired Nov. 2007) Business Model Specialize in the repair, remanufacture and maintenance for a variety of commercial and industrial equipment, including a unique expertise in wind generation repair, to extend service life, increase performance and reliability, while minimizing downtime.
Services
Electric motors and generators Steam, combustion and hydroelectric turbines Repair services for renewable wind generation facilities Class I light rail generators, motors, etc. Navy and marine duty motors Nuclear reactor coolant pump motors Drives, drive systems, printed circuit boards Power systems Plant site services New equipment
Renewable Wind Generation Repair Services
16
HK Engine Components Business Model Provides manufacturing, remanufacturing, repair and engineering of power assemblies, engine parts and other components related to large diesel engines for multiple industries, including: Rail Maritime Offshore drilling
Services
Manufacture and remanufacture power assemblies for 710, 645 and 547 EMD diesel engines Only non-OEM with Tier 0 Certification from the Environmental Protection Agency (EPA) for power assemblies Component parts for engines 1/3 of the production exported to customers outside North America
Power Assembly
17
American Motive Power (Acquired Jan. 2008) Business Model Provider of a wide range of services to the railroad industry, including the reconditioning, remanufacturing and manufacturing of locomotives. The 240,000-square-foot, East Coast-based facility has the capacity to service up to 20 locomotives simultaneously, as well as offering wreak repair to quickly put assets back into service.
Services
Locomotive reconditioning and rebuilding Engine rebuilding, with an emphasis on EMD 645 and 710 power assemblies Wreak repair services Technological enhancements 104-foot paint shop with air scaffolding system Truck repair (locomotive undercarriages)
18
Construction and Engineering Services Provide a wide range of electrical contracting and HVAC services, mainly to industrial and institutional customers, as well as commercial builders/contractors
Value Proposition
A market leader in locations served Recent entry into industrial HVAC market through Ideal Consolidated acquisition Highly trained workforce High level of design/build competency Specialists in fast-track construction methods Key relationships with all major general contractors serving our regional footprint
Electrical Contracting
Sales $25,000
$21,634
$20,000 $14,207
$15,000 $10,254
$10,000 $3,508
$5,000 $0
$174 2003
2004
2005
2006
2007
19
CES – Growth Strategy
Acquisitions: pursue targets that expand geographic reach, customer base
Organic: expand existing customer repair services
Expand footprint throughout Midwest; grow with key general contractors
Replicate national expansion led by management members in the 1990’s Current Service Hubs
Align with suppliers to leverage partnership opportunities in current and target markets
Target Service Hubs
Market Opportunity
20
Martell Electric Business Model Provide a wide range of electrical contracting services, mainly to industrial and institutional customers, as well as commercial builders and contractors
Services
Design/Build and Plan/Specification Methods Commercial, industrial and institutional construction Telecommunications Traffic 24/7 service department Three locations in Northern Indiana
Hilton Regional Laundry Facility, Portage, Ind. 34.5 KV High Voltage Switchgear Upgrade
21
Magnetech Power Services
Business Model Maintenance and repair services to industry, including: Engineering Power system studies Transformer services Circuit breakers Locomotive controls
Services
Design/build mechanical solutions Circuit breaker reconditioning 24/7 service Total circuit breaker management programs Onsite repair capabilities Predictive and preventative maintenance programs
22
Ideal Consolidated (Acquired Oct. 2007)
Business Model Provide a wide range of mechanical contracting services, mainly to industrial and institutional customers, as well as commercial builders and contractors
Services
Design/Build, Design Assist and Plan/Specification Methods Commercial, industrial and institutional construction Service department Predictive and preventative maintenance
University of Notre Dame Football Stadium
23
MISCOR Growth Story – Organic & Acquisitions Total Growth Total Acquisition
Total Organic
$100.0 $80.0 $60.0
82% CAGR
$40.0 $20.0 $2000
2001
2002
2003
2004
2005
2006
2007
Acquisition Timeline Organic
Ideal Consolidated
Acquisition
South Bend
2000
Huntington
Boardman
Mobile
Martell S.B .
Hammond
Indy
Merrillville
2001
2002
2003
M artell Elk.
2004
HKEC: Weston
Martell Valpo.
HKEC: Haggerstow
Sarland
2005
2006
3-D Service Cincinnati 3-D Service Massillon
2007
AMP Canada AMP USA
2008
24
Growth Summary Employees
21
Includes 3-D Service
385
84 American Motive Power
68 17 86
MIGL TOTAL
Square Ft.
4,000
325,784
70,576
250,000 6,000 41,004
Locations
1
Organic Starts
Operating Acquisitions
N/A
N/A
3 2000, ‘04, ‘07
7 ‘01, ’02(3), ’06, ’07(2)
N/A
2 ‘05(2)
1
N/A
1 2008
1
1 2004
N/A
3
2 ‘03, ’05
1 2004
9
3
41
15,360
1
N/A
1 2007
702
712,724
19
6
12
25
Growth Driver: End-Market Diversification Rail $144 billion
Marine $4 billion
Transit $65 billion Construction $24 billion
Utilities $554 billion Petrochemical $101 billion
Energy/ Renewable Power $204 billion
Steel $574 billion 26
Leveraging Complementary Business Units Divisional Cross-Selling – – – –
Diversified business segments offer customers a wide range of industrial-based services “One-stop-shop” for Blue Chip customers Increased penetration reduces cost for customers, drives MISCOR profitability Case Study: Australia Rail Group
Aggregating Specialized Talent – – – – – –
Training programs for customers = cost savings, loyalty Shrinking talent pool of industrial services workforce creates competitive advantage Average employee has 15+ years experience Attracting talent through aggressive growth Training and education programs Case Studies: Magnetrac Asset Management, Beta Steel
27
Sizing the Market Potential Electrial Contracting Market
Fragmented, legacy-based industries create numerous acquisition and expansion opportunities
Total U.S. Market $76 Billion
Balance of U.S. $20B
Midwest $56B
Midwest location, combined with a global reach, provides a strategic advantage for increasing market share
Diesel Engine Power Assembly Market
Motor & Magnet
Total World Market $370 Million
Total U.S. Market $8 Billion
U.S.A., $3.5 Eastern U.S.A., $4.5
U.S.A. $223M
World $137.0M
28
Evolution of a National Leader Long-Term Plan
2005 – 2007 Accelerated Growth
2000 – 2004 Company Formation
2000 – MISCOR Founded
Addition of Martell Electric 6 acquisitions, 12 new locations
Seasoned core management Proven track record Focused service offerings Target blue-chip customers
Build management Leverage industry trends Expand service offerings Grow customer base Inc. 500
IPO •Industry recognition •Continued acquisitions •Strengthen management team
•$500 million diversified services provider •National exchange listing •Leverage public company currency •“Service provider of choice” •Live the strategic vision •Strengthen management team
•Building national image •Execute strategic vision •Acquisitions and organic growth •Bring Company story to the Street
•Achieve national reputation •Continue organic and acquisition growth •Build a following on the Street
•Team in place •Leverage industry trends •Expand service offerings •Strong customer base
•Team in place •Leverage industry trends •Expand service offerings •Strong customer base
Profitability & Increasing Revenue Growth
2008 – Beyond: Our Future
29
Favorable Industry Tailwinds
Outsourcing non-core industrial services can create significant cost savings
Internal utilization of skilled employees will never be at 100%: The mounting costs of training skilled employees, maintaining a satisfactory safety record and complying with rapidly changing government regulations are driving outsourcing
Breadth of Geographic Coverage Remains Critical: National and multi-site industrial companies prefer to simplify vendor management, work with larger providers with broad geographic coverage
Aging U.S. Industrial Base: As equipment and motors continue to age, companies turn to preventative, predictive and remanufactured goods as a valuable cost-saving tool
Industry Succession Plans: Fragmented legacy-based industry lacks succession planning, resulting in attractive acquisition targets with unrealized potential In response to these trends, we have made strategic business acquisitions to consolidate fragmented service providers in the Midwest, resulting in significant revenue growth and geographic expansion
30
Financial Overview
Gross Profit
Sales $6,000
$35,000 $30,000
$5,000
$25,000
$4,000
$20,000
$3,000
$15,000
$2,000
$10,000
$1,000
$5,000
$0
$0 3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q06
3Q08
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q07
1Q08
2Q08
3Q08
EBITDA
Operating Income $2,000
$1,200
$1,800
$1,000
$1,600 $1,400
$800
$1,200 $1,000
$600
$800
$400
$600 $400
$200
$200 $0
$0 3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
3Q06
4Q06
1Q07
2Q07
3Q07
31
Investment Catalysts Leading industrial services and manufacturing company in growing niche markets Established, nationwide blue-chip customer base Highly-trained workforce with niche expertise amid limited pool of talent Industry Tailwinds: The aging “industrial backbone” needs maintenance; repairs are a fraction of the replacement cost Highly experienced management team with proven track record Diversified end-market exposure Balance of organic and acquisition growth Fragmented legacy-based industry creates attractive acquisition targets with untapped potential 32
Investor Presentation | 2008
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