current state of america's transportation manufacturing market 2015

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Transportation Manufacturing Research Report 1

About the AuthorLee Mashburn is an accomplished business-to-business marketing and product management executive who has helped companies like SAP, SSA Global, and Honeywell to transform and grow into market leadership positions.

Currently, Lee is Vice president of Global Marketing for Spinnaker Support, a leading provider of third-party maintenance and managed services for SAP and Oracle software applications.

Lee has captained numerous corporate-wide strategic and marketing planning processes. Leveraging available market research data, Lee and his teams have astutely analyzed to uncover the optimal market targets to attack.

Lee has developed his “Mashburn Report” series in order to provide a more insightful and cost-effective product for business professionals and investors who wish to supplement the market data they have traditionally used - in order to make more informed, confident, and timely business decisions.

The Mashburn Reports are available for:‣ Durable Goods Manufacturing Overview Report‣ Primary Metals Manufacturing‣ Fabricated Metals Manufacturing‣ Machinery Manufacturing‣ Computer & Electronic Product Manufacturing‣ Electrical Equipment Manufacturing‣ Transportation Equipment Manufacturing

‣ Nondurable Goods Manufacturing Overview Report‣ Food Product Manufacturing‣ Beverage & Tobacco Product Manufacturing‣ Paper Product Manufacturing‣ Petroleum & Coal Product Manufacturing‣ Chemical Product Manufacturing‣ Plastics & Rubber Product Manufacturing

2Transportation Manufacturing Research Report

3

Introduction

This report addresses questions like:‣ What is the current state of America’s

transportation product manufacturing industry?

‣ How does the transportation product manufacturing sector rank against other durable and nondurable goods manufacturing industries?

‣ Which key financial and performance metrics are important to track? Why? What are the current states of those key metrics? How have they trended over the past decade - and particularly in 2014?

‣ What data sources have been leveraged to support the information contained in this Mashburn Report?

‣ What is the MASHBURN RATING? How is it used to monitor and compare the current health of various manufacturing industry segments?

Mashburn Reports empower those involved with manufacturing markets:‣ Finance, procurement, and IT executives‣ Marketers and product managers‣ Business analysts‣ Strategic and operational planners‣ Industry consultants‣ Venture capitalists

Transportation Manufacturing Research Report

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WHOLESALE TRADE RETAIL TRADEMANUFACTURING

Merchant, Durable Goods•Motor Vehicles, Parts, & Supplies•Furniture & Home Furnishing•Lumber & Construction Materials•Pro & Commercial Equipment•Metal & Mineral•Household Appliances & Electronics•Hardware, Plumbing, & Heating•Machinery Equipment & Supplies•Miscellaneous

Merchant, Nondurable Goods• Paper & Paper Products• Drugs, Druggists, Sundries• Apparel, Piece Goods, Notions• Grocery & Related Products• Farm Product Raw Material• Chemical & Allied Products• Petroleum, Petroleum Products• Alcoholic Beverage• Miscellaneous

Wholesale, Electronic Market•Business-to-Business•Trade Agents & Brokers

Durable Goods•Wood•Nonmetallic Mineral•Primary Metals•Fabricated Metals•Machinery•Computer & Electronics•Electric Equipment, Appliances

•Transportation•Furniture•Miscellaneous

In-Store•Motor Vehicles, Parts, & Supplies•Furniture & Home Furnishing•Electronics & Appliances•Building & Garden Equipment•Food & Beverage•Health & Personal Care•Gasoline Stations•Clothing & Clothing Accessories•Sporting Goods, Hobbies, Games•General Merchandise•Miscellaneous

Non-Store•Electronic Shopping•Mail Order Houses•Vending Machine Operators•Direct Selling Fuel Dealers

Nondurable Goods•Food•Beverage & Tobacco•Textile Mills & Products•Apparel•Leather•Paper•Printing•Petroleum & Coal•Chemical•Plastics & Rubber


Sample of Data Sources

‣Manufacturers’ Shipments, Inventories, and Orders (M3)

‣Quarterly Financial Report (QFR)

‣Employment Situation Report

‣Job Openings and Labor Turnover

‣Producer Price Index

‣Consumer Price Index

‣Labor Productivity and Cost

‣ Import/Export Price Index

‣Gross Domestic Product

‣Personal income

‣ Industrial Production

‣Capacity Utilization


Performance Indicators Tracked

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Mashburn Reports analyze and chart dozens of key financial and operational performance indicators, including:

Employment Situation‣Employment level

‣Average hours worked

‣Average earnings

‣Job openings

‣Labor turnover

Consumer Spend‣Personal consumption expenditures

‣Personal income

Output & Inventories‣New & unfilled orders

‣Value of shipments

‣ Inventory levels

‣ Industrial productivity

‣Capacity utilization

Financial Statements‣Net sales

‣Cost of sales & operations

‣Operating & net income

‣Assets & liabilities

‣Shareholders’ equity

‣Net working capital

Price & Cost Indexes‣Consumer price

‣Producer price

‣Labor productivity & cost

‣ Import/export price

Misc. Metrics‣Cash-to-cash cycle

‣Current ratio

‣Quick ratio

‣Return on assets‣Return on sales


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Brief Overview of America’s Manufacturing Market

MASHBURN REPORT

January 2015


America’s Manufacturing Market Size, 2014

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Durable Goods48.3%

Nondurable Goods48.3%

By Value of Shipmentsper the M3 report

$5.98 trillion2.5% y-o-y growth

Durable Goods47.8%


By Total Salesper the QFR report


By Employee Levelper the BLS employment report

12.24 million1.5% y-o-y growth

Durable Goods63.4%



Sub-market NAICS2014 Shareper value of shipments

Key words

Wood Products 321 3.3% sawmills, veneer, truss, wood containers, pre-fab

Nonmetallic Mineral Products 327 3.7% clay, pottery, glass, cement, gypsum

Primary Metals 331 11.2% iron and steel mills, aluminum, foundries

Fabricated Metal Products 332 12.4% forging, stamping, cutlery, hand tools, boilers, tanks

Machinery 333 15.0% agriculture, mining, industrial

Computer & Electronic Products 334 12.0% computer, peripheral, communications, audio, video

Electrical Equipment & Appliances 335 4.3% lighting, household appliance, electrical equipment

Transportation 336 29.5% motor vehicle and parts, aerospace, railroad, ships

Furniture & Related Products 337 2.4% household and office furniture, kitchen cabinets, window treatments

Miscellaneous 339 6.1% medical equipment and supplies, jewelry, silverware, sporting goods

Durable Goods Manufacturing Market

9

Durable goods are products designed to last at least three years; bigger ticket items like automobiles, televisions, and refrigerators. These products account for roughly 15% of consumer spending.


Nondurable Goods Manufacturing Market

10

Soft drinks, vegetables, shoes, paper bags, soap, and motor vehicle tires. These are examples of manufactured nondurable goods. These goods are typically designed to last less then three years. Nondurables account for about 25% of all personal spending. In contrast to the volatility found in durable goods sales, nondurables orders grow at a more stable rate during both good and bad economic times.

Sub-market NAICS 2014 Share per Value of Shipments Key Terms

Food Products 311 25.6% animal food, grain, sugar, vegetable, dairy, seafood

Beverage & Tobacco Products 312 4.6% soft drinks, bottled water, brewery, tobacco

Textile Mills 313 1.0% fiber, yarn, fabric, thread

Textile Products 314 0.8% carpet, rugs, linen, rope

Apparel Manufacturing 315 0.5% hosiery, socks, cut and sew

Leather & Allied Products 316 0.2% leather, hide, footwear, handbag, purse

Paper Manufacturing 322 5.6% pulp, paper, paper bags, stationary, sanitary

Printing & Related Activities 323 2.5% commercial printing, books

Petroleum & Coal Products 324 27.3% refineries, asphalt paving, roofing, lubricants

Chemical Manufacturing 325 24.5% petrochemical, resin, pharmaceutical, paint, soap, ink

Plastics & Rubber Products 326 7.4% plastics, pipe, foam, plastic bottles, tires, hoses


TransportationB

MachineryB

Primary MetalsC+

Plastics & RubberB-

Food ProductsC+

Fabricated MetalsC

Computer & ElectronicsC-

PaperD+

ChemicalD

ElectricalD

Petroleum & CoalF

Beverage & TobaccoD-

2014 Mashburn Industry Health Ratings, Manufacturing

10


Transportation ManufacturingNAICS 336

$4 trillionAnnual revenue generated by all global transportation

manufacturers

20%Approximate United States share

of worldwide transportation manufacturing market

12,000Number of United States

transportation manufacturing companies


WORLDWIDE OVERVIEWCompanies in this industry manufacture transportation equipment, including motor vehicles and parts, aircraft and other aerospace products, ships and boats, and railroad rolling stock. The global transportation equipment manufacturing industry generates as much as $4 trillion in annual revenue. Leading transportation equipment-producing countries include Brazil, China, France, Germany, India, Italy, Japan, South Korea, and the US. Low growth is forecast for the next two years.Demand is driven by employment and interest rates, growth in consumer income, military budgets, and the overall economic climate. The profitability of individual companies depends on manufacturing efficiency, technical expertise, and product quality. Large companies enjoy economies of scale in manufacturing and purchasing, as well as advantages in marketing and distribution. Small companies can compete by specializing in niche markets.SOURCE: Hoovers

2.5%

$949bUSA 2014

29.5%2014 share of durable goods

manufacturing market

2014 vs. 2013new orders

New Orders

Market Share

Growth Rate

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Motor Vehicle‣ Automobile‣ Light truck & utility‣ Heavy duty truck

Motor Vehicle Body & Trailer‣ Body‣ Truck trailer‣ Motor home‣ Travel trailer & camper

Motor Vehicle Parts‣ Engine‣ Electrical‣ Steering & suspension‣ Brake system‣ Transmission‣ Seating & interior‣ Metal stamping

Aerospace Product & Parts‣ Aircraft‣ Aircraft engine‣ Guided missile & space vehicle

Railroad Rolling Stock

Other Transportation Equipment‣ Motorcycle & bicycle building‣ Military armored vehicle

Ship & Boat Building

14



By Value of Shipmentsper the M3 report

$852 million2.5% y-o-y growth

By Total Salesper the QFR report


By Employee Levelper the BLS employment report

1.57 million3.5% y-o-y growth

Motor Vehicles68%Aerospace

26%

Other6%

Motor Vehicles66%

Aerospace24%

Other10%

Motor Vehicles56%Aerospace

30%

Other14%

15

Industry Health Dashboard Key


-18.7% 10.1%

Operating Profit Growth Rate

Performance MetricCurrent Health Status

Trend Indicator and Last Reported Value

10-year High10-year Low

Grade F D C B A

recent trend is neutral

recent trend is positive

recent trend is negative

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TransportationMashburn Ranking: 1/12

B 86%

-1.8% 6.6%

Operating Profit Growth Rate

0.49 1.36

Net Working Capital Ratio

0.14 0.82

Quick Ratio

-10.3% 8.2%

Return on Sales

99.0 49.9

Cash Conversion Cycle

-7.4% 6.3%

Return on Assets

73.2 111.2

Industrial Production

57.1% 79.7%

Capacity Utilization


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Mashburn Ranking: 1/12

B 86%

$368k $546k

Value of Shipment per Employee

$50.6k $64.7k

Average Annual Employee Earnings

1.00 1.08

Export/Import Ratio

$430k $684k

Total Sales per Employee

1.91 1.10

Inventory to Shipment Ratio

99.7 118.6

Producer Price Index

1,308m 1,786m

Employment Level

Unfilled Order to Shipment Ratio

7.62 19.51

Transportation


18

Raw data extracted from the Sept 2014 Quarterly Financial Report, produced by the U.S. Census Bureau

Transportation Manufacturing, USA

Financial StatementsKey Takeaways

The U.S. Census Bureau collects and publishes quarterly aggregate statistics on the financial results and position of U.S. transportation manufacturers - via a report entitled Quarterly Financial Report (QFR). The QFR provides insight into industry health and exposes trends that are useful for benchmarking the performance of individual manufacturers.

The U.S. transportation manufacturing industry grew sales by an enviable 6.3% in 2014, delivering an operating profit margin of 6.0%. Net profit margin before taxes jumped up after a down year in 2013.

There is really nothing compelling to infer from the industry aggregate balance sheet. The quick and net working capital ratios are healthy and trending in the right direction. The cash conversion cycle has been healthier but is also trending positively. Return on assets looks ok, stockholders’ equity is up slightly, and working capital is level.


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Employment Situation, Index Comparison

Jan 2006 to Dec 2014+2.3%

-1.2%CAGR since Dec ’05

+0.3%

Employee Level

Weekly Hours

Hourly Earnings

CAGR since Dec ’05



Transportation Manufacturing

Emp Level! Hourly Earnings! Weekly Hours!

20

Transportation ManufacturingM3 Report

Jan 2012 to Dec 2014 Jan 2012 to Dec 2014



60,000!

63,000!

66,000!

69,000!

72,000!

75,000!

78,000!

USD,

in m

illion

s!

Value of Shipments!

100,000!

105,000!

110,000!

115,000!

120,000!

125,000!

130,000!

135,000!

USD,

in m

illion

s!

Total Inventories!

50,000!

55,000!

60,000!

65,000!

70,000!

75,000!

80,000!

85,000!

90,000!

USD,

in m

illion

s!

New Orders!

550,000!

575,000!

600,000!

625,000!

650,000!

675,000!

700,000!

725,000!

750,000!

USD,

in m

illion

s!

Unfilled Orders!

21

Income State, Index Comparison

Mar 2006 to Sep 2014+43.4%

+3.5%CAGR since Dec ’05

+75.6%

Net Sales

Op Income

Net Income




Transportation Manufacturing

Sales! Op Income! Net Income before tax!

22




Key Performance IndicatorsTransportation Manufacturing

-6%!

-4%!

-2%!

0%!

2%!

4%!

6%!

8%!

10%!

Operating Margin! Net Pre-tax Margin!

-6%!

-4%!

-2%!

0%!

2%!

4%!

6%!

8%!

10%!

Return on Sales!

-6%!

-4%!

-2%!

0%!

2%!

4%!

6%!

8%!

Return on Assets!

60!

70!

80!

90!

100!

110!

Cash Conversion Cycle (C2C)!


Key Performance IndicatorsTransportation Manufacturing

40!

50!

60!

70!

80!

90!

100!

110!

120!

Industrial Production! Capacity Utilization!



95!

100!

105!

110!

115!

120!

Producer Price Index!

95!

100!

105!

110!

115!

120!

125!

Export Price Index! Import Price Index!

$0!

$100!

$200!

$300!

$400!

$500!

$600!

USD,

in th

ousa

nds!

Value of Shipments per Emp.! Total Sales per Emp.!

ABOUT SPINNAKER SUPPORTSpinnaker Support has steadily emerged as the leading global provider of third-party maintenance and managed services for SAP and Oracle enterprise software applications. Over 400 clients spanning over 70 countries depend on Spinnaker Support services to help them reduce IT and other costs, boost operational and financial performance, and to ensure productive enterprise software applications that maintain alignment with business objectives. A small sampling of our transportation manufacturing clients is displayed below:


APPENDIX


26

Metric DefinitionsOperating income: equals sales (or revenue) minus cost of goods sold, labor, and other day-to-day expenses.

Operating margin: a measure of profitability. It indicates how much of each dollar of revenues is left over after both costs of goods sold and operating expenses are considered. Calculated as, Operating Margin = Operating income / Sales

Return on sales: a metric used to evaluate a company’s operational efficiency; provides insight into how much profit is being produced per dollar of sales. Calculated as Net Income before Taxes divided by Net Sales.

Working capital: a measure of both a company’s efficiency and its short-term financial health. Calculated as Current Assets minus Current Liabilities.

Working capital ratio : indicates whether a company has enough short-term assets to cover its short-term debt. Calculated as Current Assets divided by Current Liabilities. Anything below 1 indicates negative W/C (working capital). While anything over 2 means that the company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is sufficient.

Quick ratio: measures a company’s ability to meet its short-term obligations with its most liquid assets. The higher the quick

ratio, the better the company's liquidity position. Calculated as (Current Assets minus Inventories) divided by Current Liabilities.

Cash conversion cycle: a financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations. Calculated as (Average inventory processing period plus average receivables collection period) minus average payables payment period.

Inventory to shipment ratio: a key measure of the time, in months, that would be required to exhaust inventories if shipments were to remain at their current level.

Return on assets: the ratio of annual net income to average total assets of a business during a financial year. It is a profitability ratio.

Industrial production index: measures the amount of output from the manufacturing, mining, electric and gas industries. The reference year for the index is 2002 and a level of 100. If the IPI is growing month-over-month for a particular industry, this is a sign that the companies in the industry are performing well.

Capacity utilization: Extent or level to which the productive capacity of a plant, firm, or country is being used in generation of goods and services.

Producer price index: measures the average change over time in the selling prices received by domestic producers for their output.

Export and Import Price Index: Indexes that monitor the prices of goods purchased out of the country but produced in the U.S. (exports) and the prices of goods purchased in the U.S. but produced outside of U.S. (imports).


http://www.investinganswers.com/financial-dictionary/businesses-corporations/revenue-5108

http://www.investinganswers.com/financial-dictionary/businesses-corporations/revenue-5108

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/operating-expense-2792

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/operating-expense-2792

The purpose of the Manufacturers' Shipments, Inventories, and Orders (M3) survey is to provide broad-based monthly statistical data on current economic conditions and indications of future production commitments in the manufacturing sector. The Manufacturers’ Shipments, Inventories, and Orders (M3) Report is released in two stages each month. An advance report, for just durable goods manufacturing, is available about 18 working days after each reporting month. Durable goods, by definition, are products that last for three or more years such as aircraft, automobiles, machinery, and computers. The full M3 report follows about 5 working days later.The M3 is among the most anticipated reports released each month, particularly the advance durable goods portion. It contains nuggets (like new orders for factory goods figures) that provide clues about what might occur in the future. An increase in new orders signals production that will take place in the months ahead, keeping factories and employees busy to satisfy customer demand. A persistent decline in new orders can lead to factory slowdowns, possible employee layoffs, or even build-up of excess inventory. The M3 is based upon data reported from manufacturing establishments with $500 million or more in annual shipments. Units may be divisions of diversified large companies, large homogenous companies, or single-unit manufacturers in 89 industry categories. Survey respondents report four different data sets:

• Value of shipments - Products that have been ordered that are now being delivered. Shipments are a good measure of what’s going on in the economy right now, and this figure is used to help calculate GDP. Calculated after factoring out discounts and before freight charges and excise taxes are added.

• New orders - Qualifies for M3 report if the new order comes with a legally binding agreement to purchase a product for immediate or future delivery.

• Unfilled orders - A favorite measure for economists in that a backlog of unfilled orders typically means that factories will stay busy going forward and can suggest an increase in new jobs and greater spending on capital equipment that factories need to boost output. However, there can be negative consequences to a backlog of unfilled orders as well.

• Total inventories - The M3 report considers all stages of inventory at current cost or market value.

New durable goods orders reflect the very latest demand for U.S.-made products across the world. The volume of new orders can swing dramatically from month to month, primarily due to large transportation or defense orders. A single large military or aircraft order can inflate total new orders and can mislead analysts about the economy’s underlying strength. This is precisely why the Census Bureau reports new orders in total, total excluding transportation orders, and total excluding defense orders.

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What is the M3 Report?


28

BLS Reports

The Bureau of Labor Statistics (BLS) is the principal fact-finding agency for the Federal Government in the broad field of labor economics and statistics. The BLS is an independent national statistical agency that collects, processes, analyzes, and disseminates essential statistical data to the American public, the U.S. Congress, other Federal agencies, State and local governments, business, and labor. The BLS also serves as a statistical resource to the Department of Labor.

Each month the Current Employment Statistics (CES) program surveys approximately 144,000 businesses and government agencies, representing approximately 554,000 individual worksites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls.

The Producer Price Index (PPI) program measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.

The International Price Program (IPP) produces Import/Export Price Indexes (MXP) containing data on changes in the prices of nonmilitary goods and services traded between the U.S. and the rest of the world.


current state of america's transportation manufacturing market 2015

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