AWPA Annual Meeting Economic Discussion February 19, 2018 C O N F I - - PowerPoint PPT Presentation

AWPA Annual Meeting Economic Discussion

Member FINRA/SIPC

S T R I C T L Y P R I V A T E A N D C O N F I D E N T I A L

February 19, 2018

Investment Bankers Los Angeles • San Francisco

2

Table of Contents Section Content Page I Introduction to TSG 3 II Macroeconomic Filter 6 III Competitive Outlook 23 IV Capital Markets 32 V Consolidation 39

Introduction to TSG I

Industrial Growth

Extensive Partner Experience

OEM / Aftermarket / Performance Metals / Fabricated Metal Products Transportation & Logistics

• John co-founded TSG and has over 25 years of Investment Banking

experience covering public and private Technology, Industrial Growth and Business Services companies

• Prior to TSG, John was a Managing Director and co-founder of the

West Coast Corporate Finance Group of Banc of America Securities

• John also co-founded General Finance Corporation, a public rental

services company, as Chief Operating Officer in 2005 and led 14 acquisitions totaling nearly $400 million John O. Johnson Managing Director Los Angeles Office (626) 204-6380 | Direct (213) 706-0317 | Mobile jojohnson@spartanTSG.com

Introduction to TSG Senior Investment Bankers: Industrial Growth and Business Services

4

Macroeconomic Filter II

Historical World GDP

69.5 71.3 73.3 75.2 77.1 79.3 30.0 40.0 50.0 60.0 70.0 80.0 90.0 2012 2013 2014 2015 2016 2017

Months of Economic Expansion following Indicated Trough

 Since the end of World War II, there have been four global recessions, all lasting a year, followed by expansion cycles that lasted 120 months, on average  The current cycle is 103 months long (since June 2009)  We are currently in a period of harmonized global growth

81 87 193 103+ 50 100 150 200 250 Mar 1975 Dec 1982 Mar 1991 Jun 2009

Macroeconomic Filter Global Historic Recession Trends

______________________________________________________________________ Source: IMF

6

Macroeconomic Filter Metal Prices, as of 2/16/2018

______________________________________________________________________ Source: InfoMine

7

Aluminum

$0.98/LB

Copper

$3.22/LB

Platinum

$1010.60/LB

Nickel

$6.42/LB

Lead

$1.18/LB

8

World Price of Steel Index

Macroeconomic Filter

Source: IBISWolrd

50 100 150 200 250 300 350 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

 For developing countries, exports are the main element of production  Export volume and pricing are primarily determined by the following:  Import dynamics in other countries: at what price and volume are neighboring countries receiving their imports (economic health and relative currencies)  “Hindering Factors” - Trade barriers, transportation costs, cultural discrepancies  Exports are ergative and not always in line with GDP cycles, as they are heavily dependent on other countries

Macroeconomic Filter Export Demand and Pricing

______________________________________________________________________ Source: Economic Web Institute, World Bank

9

15% 17% 19% 21% 23% 25% 27% 29% 31% 33% 2000 2002 2004 2006 2008 2010 2012 2014 2016

World Exports as % of World GDP

Months of Economic Expansion following Indicated Trough

 The technical indicator of a recession is two consecutive quarters of decreasing GDP  Since the end of World War II, U.S. business expansion cycles have lasted 58 months, on average  The current business cycle is 103 months long (since June 2009)  A recent survey of people in the real estate industry conducted by PwC reported sentiment in the market is at its lowest value at 69%. The same survey reported an 84% positive sentiment six months ago

Macroeconomic Filter U.S. Historic Recession Trends

______________________________________________________________________ Source: Bloomberg, U.S. Department of Commerce, Fortune, Investopedia

37 45 39 24 106 36 58 92 14 120 103 20 40 60 80 100 120 140 Oct 1949 May 1954 Apr 1958 Feb 1961 Nov 1970 Mar 1975 Jul 1980 Nov 1982 Mar 1991 Nov 2001 Jun 2009

10

Macroeconomic Filter International Economic Development

China Brazil Mexico Turkey

______________________________________________________________________ Source: Federal Reserve Bank of St. Louis.

0% 10% 20% 30% 40% 50% $- $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 ($ in Millions) GDP % Exports 0% 5% 10% 15% 20% $- $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 ($ in Millions) GDP % Exports 0% 5% 10% 15% 20% 25% 30%

$- $200,000 $400,000 $600,000 $800,000 $1,000,000

2000 2002 2004 2006 2008 2010 2012 2014 2016 ($ in Millions) GDP % Exports 0% 10% 20% 30% 40% $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 ($ in Millions) GDP % Exports

 It is likely that the U.S. is at or near its economic peak, and demand is expected to decline  The question is whether this decline will correlate with BRIC economies and/or European economies

11

Macroeconomic Filter Weakening U.S. Dollar

______________________________________________________________________ Source: U.S. Census Bureau, U.S. Bureau of Labor Statistics, Forbes

 The U.S. dollar has already decreased more than 1% in 2018, and it saw a 10% decrease in 2017  The weakening of the U.S. dollar will lead to a rise in commodity prices, having a negative impact on wire producers  As domestic rod prices go up, a margin compression for the wire producers/converters, especially the those that do not own their own rod mills  This decrease is due to several factors, including higher wages, U.S. political uncertainty and higher economic growth in in the BRIC Countries and Europe, particularly Germany and France  Estimates show that world GDP grew 3.75% in 2017  However, it is important to put this in perspective: developed economies are growing at a slower pace of 2%-2.5%

12

20 30 40 50 60 70 80 90 100 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018P 2020P 2022P

World GDP ($ in trillion)

Macroeconomic Filter Weakening U.S. Dollar

______________________________________________________________________ Source:IBISWorld, Trading Economics

 The BRIC economies experienced significant growth, fueled by the E.U.’s and the U.S.’s increased demand for BRIC’s manufactured goods  From the years 2015 to 2017, Brazil, Russia, India, and China GDP experienced a compounded average annual growth rate of 7.5%, 3.7%, 8.0%, and 3.1%, respectively  With China focusing on manufacturing (25%+ of country’s GDP) and India specializing in the service industry (61% of GDP), both countries’ middle classes are doing exceptionally well  As of 2015, 8% of India’s population is middle class, an eight fold increase from 15 years ago

BRIC Countries Annual GDP ($ in trillion) 13

$4 $5 $6 $7 $8 $9 $10 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018P 2020P 2022P 2024P

U.S. National Average Minimum Wage

5,000 10,000 15,000 20,000 25,000 30,000 Brazil Russia India China Total BRIC

Macroeconomic Filter U.S. 2017 Construction Employment and Costs

______________________________________________________________________ Source: Federal Highway Administration

 As of December 2017, construction employment increased in 75% of metro areas (“MSA’s”) in the U.S.  The largest increase occurred in Riverside-San Bernardino-Ontario, CA, which saw 14,300 added construction jobs (15% increase); the second largest was Las Vegas-Henderson-Paradise, which saw an increase of 10,800 construction jobs (18% increase)  Construction employment hit an all time high in December 2017 for 38 MSA’s, and no MSA’s saw an all time low in employment; however, 89 MSA’s saw a decrease in construction employment  Highway construction prices increased 4.2% from March to June 2017 and 3.4% from June to September 2017  These are the largest quarterly increases since September 2014

0.6 0.8 1 1.2 1.4 1.6 1.8 2 March September March September March September March September March September March September March September March September March September March September March September March September March September March September March September 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Highway Construction Cost Index 14

40 50 60 70 80 90 100 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018P 2020P 2022P 2024P

Federal Funding for Transportation ($ in billions)

Macroeconomic Filter Historical Infrastructure Spending

______________________________________________________________________ Source: Federal Highway Administration

15 U.S. State and Local Capital Spending as % of GDP 2.11% 2.34% 2.19%2.12%2.14%2.25% 2.38% 2.51% 2.38% 2.17%2.06% 1.94%1.91% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2000 2002 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Macroeconomic Filter Historical Infrastructure Spending

______________________________________________________________________ Source: Federal Highway Administration

16 Public Infrastructure Spending as a Share of GDP

50 100 150 200 250 300 350 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 State and Local Governments Federal Government

2.0% 2.2% 2.4% 2.6% 2.8% 3.0% 3.2% 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Annual % of GDP Average

Real Infrastructure Spending by Federal vs State & Local Governments

Macroeconomic Filter Expected Growth Until 2020 of 50 MSAs by GMP

______________________________________________________________________ Source: TSG Research, United States Conference of Mayors

17

Tampa-St Petersburg- Clearwater: 3.4% San Jose- Sunnyvale-Santa Clara: 3.9% Nashville-Davidson-Murfreesboro- Franklin: 3.3% Jacksonville: 3.3% NY-Northern NJ- Long Island: 2.4% LA-Long Beach-Santa Ana: 2.9% Chicago-Joliet-Naperville: 2.6% Houston-Sugarland- Baytown: 4.0% Washington-Arlington- Alexandria: 3.2% Dallas-Fort Worth- Arlington: 4.0% San Francisco-Oakland- Fremont: 3.2% Philadelphia-Camden- Wilmington: 2.5% Boston-Cambridge- Quincy: 2.8% Atlanta-Sandy Springs-Marietta: 3.6% Miami-Ft. Lauderdale-Pompano Beach: 3.4% Seattle-Tacoma-Bellevue: 3.0% Minneapolis-St. Paul- Bloomington: 2.9% Detroit- Warren- Livonia: 2.1% Phoenix-Mesa- Glendale: 4.0% San Diego-Carlsbad-San Marcos: 3.5% Denver-Aurora- Broomfield: 3.5% Baltimore-Towson: 2.7%

• St. Louis:

2.4% Charlotte-Gastonia-Rock Hill: 3.5% Pittsburg: 2.3% Kansas City: 2.8% Indianapolis-Carmel: 2.6% Riverside-San Bernardino-Ontario: 4.2% Cleveland-Elyria-Mentor: 2.1% Cincinnati-Middletown: 2.5% Orlando-Kissimmee-Sanford: 4.1% Austin-Round Rock-San Marcos: 4.4% Columbus: 2.9% Sacramento-Arden Arcade- Roseville: 3.8% Las Vegas- Paradise: 3.8% San Antonio-New Braunfels: 3.7% Milwaukee- Waukesha-West Allis: 2.2% Bridgeport- Stamford- Norwalk: 2.7% Hartford-West Hartford-East Hartford: 2.2% Virginia Beach-Norfolk- Newport News: 2.2% New Orleans- Metairie- Kenner: 2.4% Salt Lake City: 3.7% Richmond: 78.7 Providence-New Bedford- Fall River: 2.4% Memphis: 2.7% Louisville-Jefferson County: 2.6% Oklahoma City: 2.9% Raleigh-Cary: 4.3% Portland-Vancouver- Hillsboro: 4.0% Birmingham- Hoover: 2.6%

3-3.5% 2-3% 3.5%+

Expected Growth Until 2020 of Top 50 MSAs by GMP

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Top 50 MSAs by Expected GMP Growth Until 2020

Macroeconomic Filter

Source: TSG Research, United States Conference of Mayors

4.1%+

Salt Lake City: 3.7% Houston-Sugarland- Baytown: 4.0% Dallas-Fort Worth- Arlington: 4.0% Atlanta-Sandy Springs-Marietta: 3.6% Phoenix-Mesa- Glendale: 4.0% San Diego-Carlsbad-San Marcos: 3.5% Sacramento-Arden Arcade- Roseville: 3.8% Denver-Aurora- Broomfield: 3.5% Tampa-St Petersburg- Clearwater: 3.4% Riverside-San Bernardino-Ontario: 4.2% Orlando-Kissimmee-Sanford: 4.1% Austin-Round Rock-San Marcos: 4.4% San Jose-Sunnyvale- Santa Clara: 3.9% Las Vegas- Paradise: 3.8% San Antonio-New Braunfels: 3.7% Jacksonville: 3.3% Raleigh-Cary: 4.3% Portland-Vancouver- Hillsboro: 4.0% Midland : 5.8% Greeley: 4.8%

• St. George:

4.6% Provo-Orem: 4.6% Naples-Marco Island: 4.5% Laredo: 4.3% Palm Coast: 4.3% Fayetteville- Springdale- Rogers: 4.2% Bakersfield-Delano: 4.1% Durham-Chapel Hill: 4.3% Logan: 4.0% Cape Coral-Fort Myers: 4.0% Wilmington: 3.9% Ogden-Clearfield: 3.9% Myrtle Beach-North Myrtle Beach-Conway: 3.8% Las Cruces: 3.7% Visalia-Porterville: 3.7% Port St. Lucie: 3.7% Fargo: 3.6% Madera-Chowchilla: 3.6% Ocala: 3.6% Grand Junction: 3.6% Charlotte-Gastonia-Rock Hill: 3.5% Modesto: 3.5% Ocean City: 3.5% Stockton: 3.5% Gainesville: 3.5% Odessa: 3.4% Merced: 3.5% North Port-Bradenton- Sarasota: 3.4% Vallejo-Fairfield: 3.4% Prescott: 3.4%

3.8-4.0% 3.4-3.7%

Top 50 MSAs by Expected GMP Growth Until 2020

______________________________________________________________________ Source: TSG Research, United States Conference of Mayors

Industrial Construction Revenue

(Dollars in Millions)

Trade Weighted Index  The Rod & Wire industry performance is sensitive to industrial building construction in the U.S.  Revenue in the U.S. industrial building construction industry is expected to grow 4.2% to $41.2 billion at an annual compounding growth rate during the next five years. This is a substantial decrease of the five years to 2017 growth

• f 7.6%

 The Federal Reserve is expected to continue raising interest rates throughout 2018, making borrowing costs more expensive and limiting expansion of inflation rates.  These forecasts never include a recession

19

Macroeconomic Filter U.S. Industrial Building Outlook

Source: IBISWolrd

10,000 20,000 30,000 40,000 50,000 60,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

70.0 75.0 80.0 85.0 90.0 95.0 100.0 105.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Global Automobile Manufacturing

(Units in Millions)

U.S. Automobile Manufacturing

(Units in Millions)

 The Rod & Wire industry performance is also impacted by the number of new vehicles produced and demand for automobile parts.  Global demand from the Car and Automobile Manufacturing industry is expected to increase at an annual compounding growth rate of 1.5% during the next five years to 2022; this is a $2.5 trillion industry  U.S. demand from the Car and Automobile Manufacturing industry is expected to decline at an annual compounding growth rate of -0.3% during the next five years to 2022  However, total U.S. transportation construction and related market activity, which includes investment in highways, bridges, public transit, rail, ports, waterways, airports, roads, and parking was expected to see 1.3% growth in 2017

20

Macroeconomic Filter Car & Automobile Manufacturing Outlook

Source: IBISWolrd

10 13 15 18 20 2010 2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P 2020P Actual Projected 70 80 90 100 110 2010 2011 2012 2013 2014 2015 2016P 2017P 2018P 2019P 2020P Actual Projected

Macroeconomic Filter NAFTA

______________________________________________________________________ Source: New York Time

 Implemented between 1994 and 2008, NAFTA eliminated tariffs on products traded in between Canada, Mexico, and the United States  Although there are many benefits to the agreement, the deal has become a point of discussion for many political candidates, including President Trump  President Trump has also threatened to completely withdraw from NAFTA, leading to serious consequences for the U.S., these include  3.5% tariffs per WTO rules, a portion of which consumers will pay for  Disruption of current North American supply chains that take advantage of differing costs and resources  In May 2017, NAFTA renegotiations started between the three countries  Although specific details have yet to be released, it has been said that the U.S. will focus on reducing the U.S. trade deficit, tightening rules-of-origin requirements, reforming the investor-state dispute resolution mechanism, and updating the pact for digital services and intellectual property

21

Macroeconomic Filter Section 232

______________________________________________________________________ Source: New York Time

22

 President Trump is possibly moving with his pledge to protect domestic steelmakers against unfairly priced steel imports with Section 232  Anti-China sentiment, which is currently the U.S.’s 11th largest source of steel imports, is thought to be a primary reason for the campaign pledge  Because many countries could be affected by the blanket Section 232 ruling, European countries, particularly the U.K., worry supplies from their region will have to deal with duties that could hit their steelmakers disproportionately hard  Canada and Mexico are both in the top five steel exporters to the U.S., along with Brazil, South Korea, and Turkey  81% of U.S. imports come from ten countries

Canada 17% Brazil 13% South Korea 12% Mexico 9% Turkey 7% Japan 7% Russia 6% Germany 4% Taiwan 3% Vietnam 3% Rest of World 19%

U.S. Steel Imports – Top Sources 2016

Competitive Outlook IV

Competitive Outlook U.S. Rod Market Volumes in units

2,064,763 1,715,265 2,065,286 402,045 382,000 450,213 1,343,294 1,350,222 1,446,082 (102,122) (94,686) (94,649) 3,707,980 3,352,801 3,866,932

(500,000) 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 2015 2016 2017 US Rod Shipments US Mini-Mill Consumption Rod Imports Rod Exports

*

*2017 annualized based on January - October

______________________________________________________________________ Source: American Wire Producers Association

24

25

Locations of U.S. Carbon Rod Mills

Rod Mill Competitive Landscape – Upstream Producers

Competitive Outlook

Source: TSG Research Note: Long carbon steel mills include ArcelorMittal, Cascade Steel, CMC, EVRAZ, Gerdau, Nucor and Timken.

Limited greenfield additions: volume increases through productivity expansion

26

Intermediate Rod/Wire Processors

Competitive Outlook

Representative Examples

Carbon Steel

Leading Processors – by Wire Product Type

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Stainless Steel Aluminum Copper Electrical Other

(Nickel, Titanium, Brass, etc.)

Specialty Steel

(Annealed, bright, galvanized, etc.)

Wire Products – Finished Products/End Markets

Competitive Outlook

Source: TSG Research

Leading Processors – by Wire Product Type (Green = generally higher margins)

28

Wire Products – Finished Products/End Market

Competitive Outlook

Low Carbon Plating Quality Galvanized Straight & Cut High Carbon Mesh Deformed Wire Lacing Wire

Source: TSG Research, Green boxes indicate high margin categories.

29

Wire Products – Finished Products/End Market

Competitive Outlook

Leading Processors – by Wire Product Type (cont.) (Green = generally higher margins)

Music Wire Cold Heading Welding Wire Wire Rope Shapes CF Bar PC Strand

Source: TSG Research, Green boxes indicate high margin categories

30

Two Different Growth Strategies

Competitive Outlook

Source: Wall Street research

Vertical Integration End Market Concentration

• >60% capacity from owned

specialty fabricators located near rod-mills

• More reliable and projectable

shipments and revenue

• Control over input prices
• Fabricators dispersed around

the U.S. or near customers

• Obtain long term supply

agreements with customers/mills

• Just-In-Time delivery, low

shipping costs

Precision Wire Products, Inc.

31

Growth Strategies Drivers - Currencies

Competitive Outlook

Source: XE Corporation, U.S. Census Bureau

• A weak dollar means U.S. currency purchases less of another country’s products or services
• This leads to an increase in import pricing
• A weak dollar could lead to more competitive export pricing for the U.S., which can create

U.S. jobs, if capacity existed

• China, like many other government controlled economies, manages its currency, making its

export products more attractive

• Currency conflicts can lead to trade wars and import tariffs, which are often

counterproductive

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Goods Services Total

U.S. $ to EUR U.S. Imports ($ in millions)

Capital Markets V

 The financial system facilitates economic growth by providing four basic services:  Facilitating trade;  Facilitating risk management for various individuals and businesses;  Mobilizing resources; and  Obtaining information, evaluating businesses and individuals based on this information, and allocating capital  As businesses grow they can access both debt and equity financing, and the mix of these two, called the “capital structure” decision, is an important choice every business makes  A rich diversity of financing sources is provided by the U.S. financial system.  This diversity helps U.S. consumers and businesses to better manage their risks and lowers their cost of capital, but is cyclical  The ability of businesses to access debt and equity financing is tied strongly to the economy  During periods of economic growth, access to capital is readily available  On the contrary, during recessions, finding capital investments is much more restricted

Capital Markets Availability of Capital is Tied to the Economy

______________________________________________________________________ Source: IMF

33

 Mergers and acquisitions volume is driven by companies’ desire for continued growth (“Inorganic growth”)  Also, often large, well-established companies, as well as smaller companies, turn to M&A in need of long-term growth  M&A is often undertaken with the intention to expand customer base, geographic, scale/expansion, and vertical

• r horizontal integration (“investment themes”)

 Companies must simultaneously exploit existing profitable business models to run their core business and also explore new products, markets, and models to drive growth  The intention, quite reasonably, is that the resulting combination of products, people and pipelines will grow ROIC/ROE  Revenue synergies also alter the competitive balance of power and create opportunities to change market dynamics, sell more products, or raise prices

Capital Markets Mergers & Acquisitions Driven by Need for Growth

______________________________________________________________________ Source: Hinge Marketing

34

Capital Markets Mergers & Acquisitions Driven by Need for Growth

______________________________________________________________________ Source: Hinge Marketing

35

Internal M&A Drivers External M&A Drivers Customer base Regulation Geography Energy costs Economies of scale Environmental Vertical integration Labor Horizontal integration Currency fluctuations Product/service expansion Technology Retail synergies

Pursue cost/scale synergies

Expand customer base in existing geographic market

Enter new geographic markets Expand products/services Obtain bargain-priced assets Talent acquisition Technology acquisition Digital strategy Fall 2017 Fall 2016

36 Extensive Partner Experience Broad Capabilities

Wilshire Total Market And U.S. GDP

Capital Markets

• 50%
• 40%
• 30%
• 20%
• 10%

0% 10% 20% 30% 40% 13,000 13,500 14,000 14,500 15,000 15,500 16,000 16,500 17,000 17,500 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 U.S. GDP ($ in billions) S&P Annual Return

Capital Markets GDP, Private Investment and the Federal Funds Rate

______________________________________________________________________ Source: Federal Reserve Bank of St. Louis.

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 $18,000 $20,000 2000 2000 2001 2002 2003 2003 2004 2005 2006 2006 2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 2018 ($ in Billions) US GDP US Private Investment Federal Funds Rate  Lower interest rates encourage investment spending, boosting the economy in times of slow growth  The Federal Reserve Board sets the interest rates to increase and decrease demand for services  Recently the U.S. has been periodically increasing the interest rate, and that trend is expected to continue  During the 2008, the Fed lowered rates to 0.25% and it remained there until the end of 2015, when it was raised to 0.5%  The Federal Reserve is expected to increase the rate to 2% in 2018, 2.5% in 2019, and 3% in 2020

Capital Markets Metals and Mining M&A Summary

______________________________________________________________________ Source: Pitchbook.

850 713 $26.30 $35.90 $0 $5 $10 $15 $20 $25 $30 $35 $40 600 650 700 750 800 850 900 # Deals Average Deal Size ($ in mm)

Consolidation III

40 Focused Approach Broad Capabilities

Industry Historical ROI

Consolidation

Source: CapitalIQ

• 10%
• 5%

0% 5% 10% 15% 20% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 North American Wire Fabricators Global Wire Fabricators S&P 500

41 Focused Approach Broad Capabilities

 Rod and wire investing themes are cyclical, as the industry is heavily influenced by commodity prices, the health of the U.S. and global economy, government policy, and foreign exchange rates  Moving forward, product price improvements will help increase capital flows, as will the shift of demographics in age as well as movement to the Sun Belt  The wire market should experience increased consolidation, particularly in the U.S., in order to improve margins, reduce excess capacity and diversify product mix, but only after baby-boomer ownership looks to retire and seek liquidity  Organic growth in upstream/intermediate is very difficult as the market is over capacitated with swing imports (limited Greenfields)  The current trade environment and weakening U.S. Dollar will lead to consolidation  Energy, wage and regulatory costs make it harder for domestic wire manufacturers to remain profitable  Companies will need to scale to effectively leverage the rod market at various price points

Trends and Opportunities – Rod and Wire

Consolidation

Source: Market Research, IBISWorld and TSG Research.

Ownership # Enterprises Public 2,466 Sponsor-Backed 814 Independent 18,933 Total 22,213 U.S. and Canada Metal and Mining Companies

* Primary contacts. The Spartan Group LLC 16 N. Marengo Ave, Suite 307 Pasadena, CA 91101 Telephone: +1 (626) 204-6376 Fax: +1 (626) 204-6377 John Johnson* Managing Director +1 (626) 204-6380 JoJohnson@SpartanTSG.com Peter Morgan* Managing Director +1 (415) 388-5684 Peter@SpartanTSG.com Juan Mondragón Senior Vice President +1 (626) 204-6386 JMondragon@SpartanTSG.com Benjamin Tillis Analyst +1 (626) 204-6373 BTillis@SpartanTSG.com