Shiloh Industries, Inc. (NASDAQ:SHLO) Q4 2015 Results Earnings Conference Call January 14, 2016 8:00 AM ET
Gary DeThomas - Principal Accounting Officer, Vice President, Controller
Ramzi Hermiz - President, Chief Executive Officer, Director
Tom Dugan - Vice President of Finance, Treasurer
Kurt Caramanidis - Carl Henning
Edward Hemmelgarn - Shaker Investments
George Kaspar - Private Investor
Justyn Putnam - Talanta Investment
Greetings and welcome to Shiloh Industries' fourth quarter and full year 2015 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Gary DeThomas. Thank you. You may now begin.
Thank you, operator and thank you all for participating in Shiloh Industries' fourth quarter 2015 conference call. I am joined on today's call by Ramzi Hermiz, our President and Chief Executive Officer, Jay Potter, our newly appointed Senior Vice President and Chief Financial Officer and Tom Dugan, Vice President, Finance and Treasurer.
I will begin by reviewing our legal disclosure regarding forward-looking statements. I would like to remind all participants that certain statements made during this conference call may constitute forward-looking statements. Although such statements reflect our current reasonable judgment regarding the direction of our business, actual results might differ materially from those in forward-looking statements. You can find information concerning why the actual results might differ from statements made today and in our management discussion and analysis of financial condition as well as the results of operations in our annual report on Form 10-K for the year ended October 31, 2015 and other filings with the SEC.
Our earnings press release was issued earlier this morning and has been posted to our website at shiloh.com on our Media Center page. The press release contains reconciliations of certain non-GAAP numbers presented on this call today, including EBITDA, adjusted EBITDA, adjustments to the adjusted EBITDA, gross margin and SG&A on Form 10-K is expected to be filed with the SEC later today. A replay of today's call will be available. Instructions for the replay are included in this morning's press release.
I will now turn the call over to Ramzi Hermiz, our President and Chief Executive Officer. Ramzi?
Thank you, Gary and I would like to welcome everyone who's dialed in today's call and those of you listening via the webcast. I will begin Shiloh's call with an update on the progress we have made on our strategic priorities followed by an overview of our fourth quarter and full-year highlights and results. I will then turn the call over to Tom Dugan who will walk you through the financials in more detail. I will come back to provide some closing comments, including some initial thoughts on 2016. We will then open the lines and take your questions.
To put Shiloh' strategy in perspective, it is important to understand the key megatrends currently transforming the automotive industry, lightweighting focused on fuel efficiency and emissions, safety and autonomous driving. These global drivers should impact the industry in the years ahead regardless of the underlying cyclical swings in production and sales volumes. The company believes our products and services are well aligned with all three of these trends. We directly provide technology solutions for lightweighting and safety products and we enhanced many of the technologies that support the transition to autonomous driving. As the automakers add content to the vehicle to improve safety, technology, comfort and entertainment, they tend to simultaneously add weight. This content to weight correlation is also seen in the industry's move towards autonomous driving. Shiloh continues to capitalize on this trend by collaborating with our OEM and Tier 1 partners to lightweight the vehicle effectively offsetting the weight of additional technology-rich content. I am pleased to report that we continue to move forward on our strategy to develop and commercialize new proprietary technology, expand our suites of products and establish a global presence.
We ended our fiscal year with momentum in our business despite the presence of several headwinds that have recently challenged us. During the fourth quarter and over the course of the year, we had a number of positive developments which reaffirm our lightweighting strategy and market acceptance and significant business awards. First, there is market demand for our solutions. The company believes our suite of products is well aligned with a desirable mix of vehicles ranging from crossovers and SUVs to hybrids and electric cars. We made significant progress further advancing the breadth in technology of our product offering. We expect to continue to leverage this technological advantage in the coming years.
Second, our customer diversification is moving in the right direction. In 2012, our sales were concentrated with two customers, representing nearly half our revenue. In 2015, the same customer concentration improved to 33%, while growing their business with us by 43%. Now, our top five customers represent approximately half of our total revenue. We feel good about the progress that we have made to better balance the customer mix.
Third, our industry and market opportunities continue to expand. We see more and more customers seeking lightweighting solutions for their vehicles with products manufactured from aluminum, magnesium and steel. Shiloh continues to develop its lightweighting portfolio and now has a product offering inclusive of each of these materials. Our ability to design, engineer and deliver a multimaterial solution is critical for future vehicle platforms. An example is the new Volvo XC90, which was awarded Motor Trend's SUV of the Year for 2016 and also won North American Truck of the Year earlier this week. In total, Shiloh has more than $130 worth of content per vehicle ranging from steel brackets and aluminum shield to magnesium cross car beams. Very few suppliers have the capability to deliver this type of comprehensive solution set, a set that we believe has enabled Shiloh to achieve global success.
Fourth, we had a record year for new business wins and product launches and that momentum continued through the fourth quarter. For the full year, new business wins exceeded $1.3 billion life of program with more than 60% focused on lightweighting technologies such as cast aluminum transmission components, ultra lightweight magnesium cross car beams and laser welded frames. Shiloh secured new customer wins in Asia, Europe and North America during the fourth quarter with leading global OEMs such as Honda, Volvo, Ford, GM, FCA and other Tier 1 partners. These wins build on the momentum from the third quarter with Jaguar Land Rover, Mercedes and BMW just to name a few, again leveraging our global footprint. In addition, we had a record 527 product launches and production approvals in 2015 compared to 175 in 2014.
And fifth, we continue to build and strengthen our leadership team. We have recently enhanced our sales and engineering teams to support our global product launches, as well as brought on Jay Potter, our New Senior Vice President and Chief Financial Officer. Jay brings with him strong financial discipline and operation excellence. I am excited to have him on the team and you will be hearing more from Jay in the future.
Another important step in our strategy is the transformation from a processing company to a product company. This is not an easy or quick transition, but it is a critical one for Shiloh. Our portfolio is transforming one program and one vehicle platform at a time. As we discussed in prior calls the transformation in our portfolio means that we continue to prioritize the higher value add and technology driven products that can be produced at greater scale, while deemphasizing some of the more commoditized legacy products that have less attractive returns. We are starting to make progress, but there is more work to be done on this front and it remains a top priority to management in 2016. We have a clear strategy for lightweight and safety products and our solutions align with the industry's move towards technology rich vehicle content. We continue to develop the technology and build the manufacturing footprint that we believe is necessary to be successful in this industry.
As a leadership team, we are very positive around business prospects and technology opportunities and we see evidence that the automotive industry is increasingly embracing our lightweighting technology and safety product solutions. While we have great momentum, we remain focused on the need to carefully manage the growth of the business and the challenges we face. Our immediate challenges include three headwinds, one, scrap metal market pricing decline, two, foreign currency exchange and three select operational inefficiencies as we ramp up for new product launches. I have characterized first two items as macro driven and therefore difficult to manage in the short-term. However, we are pursuing strategies to deal with scrap pricing, which I will discuss shortly. In addition, we have applied more resources to address the operational inefficiencies and I will outline some of the additional steps that we have taken on that front.
First scrap metal pricing declines impacted earnings by approximately $5.5 million for the fourth quarter and nearly $14 million for the full year. As a reminder, scrap sales fall right to our bottom line. So the impact to sales is the same as the impact to our EBITDA or pretax profit. Market prices have declined by more than 60%, falling from $387 per ton at the end of 2014 to approximately $150 per ton in the current spot market. We are operating under the assumption that scrap stays at these low levels in the near-term. Therefore, we are proactively taking steps to reduce this exposure including changing the way we structure agreements in order to protect the profitability of new business wins. We are also attempting to address the issue in current contracts. As you can imagine, this is a difficult process. We will continue to keep you updated as we make progress.
Briefing on FX, the negative revenue impact from foreign currency translation was $4.7 million during the fourth quarter and $14.5 million for the full year. As discussed in previous calls, a select few of our facilities are struggling with the operational inefficiencies created by the significant number of new product launches. For the full year, as mentioned earlier, we have 527 product launches and production approvals compared to 175 in 2014. While this record volume is expected to bring long-term positive gains, it did result in significant launch cost in 2015 that will persist into fiscal 2016.
We have increased the number of resources in the organization that are focused on identifying and implementing improvements for these facilities. Going forward, we are becoming more selective with our new business pursuits focusing our efforts on larger programs that we can leverage across greater volume. Some of the current inefficiencies come from this sheer number of changeovers at our plants to accommodate our new product launches. Those inefficiencies typically persist for about four to six months before normalizing. We expect continued efficiency improvements as the year progresses.
Even with these challenges, it is important to note that the demand is still there. On the new business front, we had a number of wins during the quarter with a dozen different customers. Notably, we have content on five out of six cars and trucks that were nominated for the 2016 North American Car and Truck of the Year, two of the three cars and three for three on the trucks. The winners were announced this past Monday and the winners were Honda Civic and the Volvo XC90, both have Shiloh content. Congratulations to our partners.
During the quarter, our new business wins totaled a life of program contract value of approximately $159 million or $32 million on an annual revenue, of which 79% were market share gains for the company. Nearly 60% of the value of these wins in lightweighting solutions using our aluminum, magnesium casting products for body structures and interior systems. In addition, we are innovating new multimaterial products. For example, we developed and were awarded a hybrid oil pan utilizing an aluminum casted upper pan technology with a steel stamped lower structure incorporating our ShilohCore laminate technology. This solution leverages three different Shiloh processes and is another example of the differentiated solutions that we bring to market.
Finally, more than one third of every business award was one with a disruptive proprietary technology solution. For the full year, the life of program contract value for new wins is approximately $1.3 billion or nearly $220 million on an annualized basis. The top 10 customers accounted for approximately 78% of the value of these wins. More than 63% of the full year life of program wins are market share gains, of which 68% are from disruptive technologies. Many of these wins are new to market solutions for our proprietary ShilohCore, ThinTech, laser welding and squeeze casting technologies.
We are making progress at our new strategically located casting facility in Clarksville, Tennessee. We continue to ramp up for the recent BMW and Mercedes program wins, which will be manufactured from our structural magnesium technology here in North America for the first time. Importantly, many of the new awards, including those for Clarksville, are high-tech, high-value added programs that are expected to provide Shiloh the opportunity to generate meaningful higher margins.
We are also making progress on a key focus of ours, benefiting the environment through our products and processes. In addition to the environmental benefits lightweighting brings to improving fuel economy and emission standards, our manufacturing facilities continue to pursue environmental responsible operations. As an example, our 11th manufacturing facility recently achieved landfill free status. From the production of raw materials to the delivery of product to our customers, Shiloh continues to look for ways to improve the environmental impact of our supply chain by reducing emissions, increasing recyclability and increasing sustainable. The impact of reducing on vehicle weight can improve fuel economy for internal combustion engine vehicles or extend the battery life of electrical vehicles, all while reducing CO2 emissions.
Our leading technology also reduces the gross tonnage of material required in the entire manufacturing value stream, which lowers energy consumption and produces less greenhouse gases from reduced mill production volumes and reduced transportation volumes, positively impacting the supply chain and demonstrating Shiloh's focus on the environment. I continue to be very excited about Shiloh's position in the marketplace and our long-term opportunities and remain confident in our ability to offset the near-term challenges facing our company.
Looking at results. We ended the year with good momentum on the topline. For the fourth quarter, we achieved strong revenue growth of 10% as total revenue approached $300 million. To put this in perspective, North American auto production increased by 3%, so we are significantly outpacing the growth of the overall industry. Growth continues to be driven by demand for our lightweighting technology solutions, including strong performance through our North American and European CastLight products. Gross profit also achieved solid year-over-year growth of over 8% increasing to more than $20 million. We faced headwinds from weak scrap metal market pricing, foreign currency exchange and operating inefficiencies due to heavy volume launched. As discussed during our last call, it will take a few quarters to work through these launch issues and we are making the expected progress.
We generated adjusted EBITDA of $8.9 million which excludes one-time expenses associated with the Wellington investigation and financing charges of $2.5 million. If we were to further adjust for negative scrap metal impact of $5.5 million, then adjusted EBITDA was $14.4 million, compared to $11.5 in the year ago quarter.
Briefly looking at the full year, we reported sales revenue of $1.1 billion, an increase of 26% year-over-year, while adjusted EBITDA was $60 million. Our adjusted EBITDA would have increased to more than $73 million if we excluded the $14 million negative impact from scrap pricing. This compares favorably to the 2014 adjusted EBITDA of $59 million. Despite some of the challenges during the year, the company believes it is well positioned to achieve profitable growth and strong financial results over the long-term. We will continue to pursue our strategic objectives with a culture that is focused on innovation, speed and profitable growth.
With that, I will turn it over to Tom Dugan, who will walk you through the quarter results in more detail. Tom?
Thank you, Ramzi and good day to everyone. As Ramzi mentioned earlier, sales revenue for the fourth quarter of fiscal 2015 increased to $296.9 million, a 10% improvement compared with the fourth quarter of fiscal 2014, despite headwinds from scrap and currency. Our performance was driven in part by our CastLight and StampLight business in North America as our casting and stamping technologies generated above market growth. We have now fully anniversaried the two acquisitions that we completed in 2014, including Radar Industries, which closed on September 30, 2014 and contributed an additional two months to our fourth quarter results.
Gross profit was $20.2 million or 6.8% as a percent of sales compared with $18.7 million or 6.9% as a percent of sales for the fourth quarter of fiscal 2014. Gross profit was impacted by scrap metal pricing, negative foreign currency translation and plant inefficiencies at select facilities due the ramp up of a significant number of new product launches. Scrap pricing alone was a $5.5 million headwind or approximately 185 basis point as a percent of sales. Therefore, excluding the change in scrap, the gross margin, would have expanded by 180 basis points to 8.7%.
Selling, general and administrative costs were $20.3 million or 6.8% of sales revenue compared with $17.3 million or 6.4% of sales revenue in the prior year. The 40 basis point year-over-year increase in SG&A as a percentage of sales was impacted by $2.5 million of one-time expenses related to our Wellington facility and financing charges. Excluding these items, SG&A would have improved by 40 basis points to 6% of sales versus the prior year. As previously communicated, we continue to make strategic investments in the company's infrastructure to support the growth of the organization. Excluding significant one-time items, we continue to expect our SG&A to be in a range of approximately 5.5% to 6% of sales going forward or largely consistent with industry averages.
We define EBITDA, a non-GAAP measure as net income plus taxes, net interest depreciation and amortization expense and other non-cash expenses. Adjusted EBITDA reflects certain significant one-time differences between comparative periods. Full-year adjusted EBITDA was $59.5 million compared to $58.6 million in 2014. Adjusted EBITDA for the fourth quarter of 2015 was $8.9 million compared to $11.5 million a year ago.
Net loss for the quarter was $2.5 million or $0.14 per diluted share compared with $1 million or $0.05 per diluted share in the prior year quarter. The loss was driven by lower operating income and higher interest expense. The fourth quarter pretax loss generated a tax benefit. The prior year quarter results included one-time reversal of the Mexico deferred tax asset valuation of $2.4 million or $0.14 per diluted share.
As of October 31, 2015, cash and cash equivalents were $13.1 million, total debt was $301 million and stockholders' equity was $140.9 million. In October, we completed an amendment to our credit facility that provided increased balance sheet flexibility as we continue to pursue our growth initiatives, including support for our product launches and development of new technologies.
As we mentioned earlier, we plan to file our 10-K later today, which would provide you with additional details on our financial statements.
I will now turn the call back to Ramzi for some summary remarks. Ramzi?
Thank you, Tom. We are confident we have the right strategy in place to deliver profitable growth. As you can see, fiscal 2015 was a transition year as we integrated acquisitions, won a significant amount of new business and prepared the company to deliver future growth. As we look forward into 2016, we expect the first quarter to be our most challenging quarter, but also represent an inflection point. We anticipate improvement in profitability as we progress through the remainder of the year and we begin to see the benefit of our improving mix of business.
We will continue to transition the portfolio away from lower margin commodity products and execute our strategy of focusing on higher margin, higher value added products. While a critical step, it will take time to transition. This transition starts with the new business wins. Our successful new business pursuits in 2015 were focused on platforms and products that we are building our strategy around. We currently have 238 launches planned for 2016. This will allow for more focused and efficient launches while keeping our revenue trajectory aligned with growth forecasts for auto production.
In closing, we are excited about the opportunities in front of us. The industry continues to embrace our leading solutions in lightweighting and safety products and we believe we are better positioned as an organization more than ever to capitalize on these opportunities. In the coming year, we will remain focused on our challenges and continue to serve our customers, while delivering products that are safe, silent, strong and sustainable.
Operator, we are now ready to go to Q&A.
Thank you. We will now be conducting the question-and-answer session. [Operator Instructions]. Thank you. Our first question is from the line of Kurt Caramanidis with Carl Henning. Please proceed with your question.
Hi guys. Question, where was scrap in Q2 compared to now? Was it pretty similar? It seems like the whole year scrap has been down, but I am just trying to measure that.
First of all, good morning, Kurt. Just from a trend, if you at where scrap was in quarter one of 2015, it was roughly $367 a gross ton. Currently the spot market is around $150. And so you saw a steady decline through the course of the year. So quarter two probably was more in the roughly $250. $250 range would be a best guess and we exited closer to $200 and now currently at about $150.
Oh, wow. So it has been dropping. So okay, because when I looked at, I am trying to square how to even come up with what profitability might be, in Q2 the main reasons were new products, the Ford coming back online and productivity initiatives and now it seems like our challenges are new products, but not the Ford thing. Productivity clearly isn't a benefit right now. It's clearly holding us back. So that's what I was trying to square on how we go forward. You are saying another quarter of straightening out a couple of problem plants and then those new product initiatives will start dropping to the bottom line?
Yes, Kurt. We do see that. When we look at where and one of the issues we talk about and we said quarter one is really an inflection point, when you look at where scrap is now versus where it was a year ago, that's obviously a most significant gap. So that's obviously going to put some pressure there. The productivity actions, the implementation of the product launches, a significant number of those launches happen in the second half of 2015 quarter three and quarter four. So we see those working their way through. One of the reasons I highlighted the number of launches in 2016 is while we still feel strong growth momentum, the number of launches are more than half. So this is why we feel that the ability again to further drive productivity is there to manage the implementation, to manage the transition, we feel much more confident about how we see 2016 progressing.
Okay. Is that Wellington, I don't really know what that was, is that done now? Or is that ongoing?
That was, if you recall, there was a restatement on Q2, some financing discrepancies. So that's best associated to that.
Thank you, Kurt.
Thank you. [Operator Instructions]. The next question is from the line of Edward Hemmelgarn with Shaker Investments. Please go ahead with your question.
Yes, sure. I have got a couple of questions. One, can you give me, both really the scrap prices, but what was the losses on scrap in the first, second and third quarter?
The fourth quarter was $5.5 million. First quarter of last year $1 million. Give me a couple of seconds and we will give you and roughly about $3 million to $4 million per quarter after that, with quarter four being the largest at $5.5 million. So it was progressing through each quarter. But quarter one was the smallest.
Okay. Then my question was this, as you been getting new contracts, have you been able to eliminate this benefit that the auto manufacturers are receiving from the better pricing that they got because of the assumed profits that you were driving from the sales of scrap, now that you are obviously not getting any profits from the sales of scrap to speak of? With your new contracts that you are negotiating have you been able to eliminate any scrap impact?
Yes. As we are structuring them, really what we are focusing on and this is where it ties in a number of different ways to go about it. One, we are driving more to across product oriented approach versus a process oriented approach. So when we were designing a product, we are removing that and pricing the product accordingly for the value and the technology that it's bringing. In addition, we are removing scrap as part of the equation, not trying to make money on it and just manage it through. So that's the focus. And we are being successful. So when we look at the transition of the products, you look at what we are doing, it is by selling the, let's say, a cross car beam.
The technology and the design, we are building that into the price. We are building that into the profit of the product. We are removing the variations of scrap price out of it. That risk is not borne by us or it's more borne by the customer as they are managing the raw material on the top end, because they are buying off for resale. They will also need to bear the risk on the scrap side, where right now they are getting the favorable PPD and then we are bearing the brunt of the lower scrap price. So it's putting more where the sharing is in the right place and are both owned by the customer. In that front, we get compensated for the technology in the product that we are delivering.
Right. How long do you think, how many years will it take for these prior contracts to roll off such that you eliminate the impact of scrap? And what do you estimate the effect on this coming or the current year you are in right now and in the next, say, three or four years?
While I would say there is a theoretical floor to scrap. And we had always said that, if you look at oil, nobody would have said we will be back to $30 a barrel in oil. But similar to that, there is a floor on scrap. We think we are at the floor where we are at around those $150 mark. When you look at what's going on in the industry, when you look at the capacity, we see the industry removing capacity and they have been right now. So we think we are at a floor. Now that floor is at $150 right now, where we are at roughly and that's still further than where we exited quarter four roughly at $200 a ton.
So we have seen some movement since the end of the year. We feel we have hit that floor. When you look at your primary question of when you see the roll off, roughly you would say most of those programs that were structured in those contracts were four to five year programs. So you are starting to see, let's say, about a 20% falloff on those per year. But it is also important to stress that we haven't waited till now to start changing that portfolio. When you look at a lot of the new business that we won last year and, end of, let's say, 2015 through 2015 and with the growth of the business, a lot of the growth and a lot of the new contracts are, what we say product oriented 60% or so are product oriented.
So a lot more of the growth is with solutions that are not relying on scrap. What we have seen in our diecasting products and our cross car beams, shock towers, that balances already there that scrap reliance has moved. So each year our percent of our EBITDA that's reliant on scrap has been reducing. So we continue just to drive that down. So the market, I will say, was caught relatively offguard at how rapidly scrap declined. When you look at $367 to $150, greater than 50% reduction, that type of, even in 2008, 2009 and the great recession, the scrap did not fall below this level.
So this was a really out of the ordinary type of move. But we are building that, our product portfolio, so it is not reliant on that. And even in the existing contracts, while it's a difficult challenge, customers don't like to reopen contracts easily, we are having, I will say, very proactive, collaborative discussions with them on how we can find ways to putting some value added, value engineering solutions and normally they are shared and maybe in this case, we would get a higher percentage of that benefit. So we are not sitting and just waiting to say, we can't do anything until the program rolls off. We are taking and looking at what can be done now.
But it will be, at this price you are probably looking at an impact of maybe %6.5 million or something in a quarter?
Yes. But if you look at the full-year, that would be roughly, call it, $6 million to $7 million impact which we feel that we have, with the productivity initiatives and some other activities, we feel that we have initiatives in place to offset that.
But you could still, that's an additional over and above, but you could still suffer, if you are running $6.5 million, $7 million right now, but you could still be looking at, even with the productivity initiatives, gains that you are seeing for this current year, you could still be looking at a loss of $5.5 million per quarter? Right?
No. I would say, from a year-over-year standpoint since we saw the decline, I would say that $7 million is more a full year over full year. It would be, because if you remember quarter one will be the biggest impact, quarter one of 2015 versus [indiscernible], but as we go through the course of the year that gap is narrowing. So the impact of scrap as we work through 2016 is less and less of a year-over-year impact or quarter-over-quarter.
I would agree with that. And then in next year, not the current year, but next year then you should start to see a benefit as you get old programs rolling off and new programs rolling on?
Okay. All right. Thanks.
Thank you. Our next question is coming from the line of George Kaspar, a private investor. Please proceed with your question, sir.
Thank you. Good morning, everyone.
Good morning, George.
Good morning. I would like to just look at some of the balance sheet numbers. I am a little puzzled by property, plant and equipment year-to-year showing an increase of $6 million to $280 million plus and looking at the investment that's gone into the operation, I know that there is probably adjustments for depreciation in there. But can you explain that in terms of how? If you can give me a figure of what's been invested this year? And your plant operations acquisition wise was minor relative to the previous year. So it was infrastructure expansion in all the plant areas and R&D and whatever. Can you explain the limited amount?
Yes. So, George, good question. When you look at the cash flow statement that we have got out in the release, you will see we have got about $40 million of capital expenditures this year and a significant portion of those capital expenditures are for a lot of the new business launches, some for 2015, but a lot for the 2016 and forward launches as we make those investments. Depreciation expense and amortization is about $34 million. Depreciation there is about $32 million, $31 million, somewhere. So the net of those is where you are getting the growth in the PP&E. There were also a couple other purchase price adjustments as we wrapped up our purchase accounting on the 2014 acquisitions. So it's a net of the new CapEx and the additional depreciation expense for the year.
Okay. All right. Now next question is just going to take it back three years. Your revenue stream and correct me if I am wrong, has increased from about $550 million to the $1.1 billion range. That's basically a double. It's pretty significant, no questions asked about that. The expansion came obviously through the significant acquisitions of plant expenditures, the actual acquisition of facilities. Relative to what you have invested in plant acquisitions now over the last couple of years versus the revenue stream, if you could divide the revenue stream growth from pre-acquisitions to the acquisition plants, how does that compare as far as the growth from existing facilities prior to the acquisitions and then the growth that's coming from the acquisitions themselves? Now maybe that's too complicated question, but can you take a shot at it?
Yes, I can. It's a good question. When you look at where the growth is, part of what the acquisitions were built around is the putting in place the lightweighting and safety strategy. So when we looked at the acquisitions, we looked at acquisitions that when we started with our first one, I would say with our diecasting one in end of 2012 or beginning of 2013, it was focused both around technology and the diecasting, structural lightweighting opportunities. So those business are driving a fair amount of the growth that we put into them. And when we bought the second diecasting opportunity, well that one was we bought a company that had a fair amount of idle capacity.
We had the technology from acquisition one, we needed more footprint in global technology or capacity. So we have been able to leverage that growth. So when you look at our magnesium wins for diecasting, say, for cross car beams, what we have been able to drive in Europe, we have significantly we, in essence, in the last 18 months, are doubling that aspect of the business. We have won global contracts in North America for BMW and Mercedes. And so that was and we talked about some of the initiative that occurred here through the course of 2015, we launched our diecasting plant in Clarksville, Tennessee, we launched our joint venture in China for structural diecasting. And so a lot of the growth is coming from those acquisitions.
When you look at some of the core business, the pre-acquisition business on the stamping front and our laser welding technology and laser welding and blanking technology through BlankLight, you see that growth occurring. We launched our ShilohCore product line in China. So now we are in production with our global ShilohCore success, BlankLight success. Now we are supplying this product in North America. We are supplying the product locally produced in China. We are exporting to Korea and North America is currently exporting to Europe.
So you do see growth in the core. Like the core growth making a shift, a lot of the core was built around commodity type of processing product. And you see it where it was very reliant on scrap steel pricing. So if you go back to the question that Edward was asking and even a little bit what Kurt was asking, is part of that transition of we are managing growth carefully in some of the core businesses to make sure we are going towards a technology solution and carefully managing that we don't get caught up in just winning and filling the plants. We need to put capacity and utilize the capacity on product versus just only process.
So the technology play is driving it. We have used the core to support a lot of the footprint. When you look at our customer diversification and this is a long way to answering you, George. So please bear with me. When you look at the customer diversification, in 2012 slightly over 50% of our customers or two customers represented that business. So when we look at 70% of our revenue or 70% to 75% of revenue was with five people, five customers. Today that 75% of revenue is with 10. So what we have also been working on during the course of the last couple of years, in part with the acquisitions is to diversify our customer base, both from, we will say, Asian OEMs, Asian headquartered OEMs to European OEMs and now North American OEMs.
So we have a better distribution. It's not exactly a one-third, one-third, one-third strategy, but it's moving more to that distribution. So it is trying to set the business for a stronger foundation while everybody is confident on 2017, we are a cyclical industry. So we want to make sure we are pretty positioned with that. So a lot of what our actions have been doing is really preparing us for a longer term type of structure. And the footprint expansion, the customer distribution and again even this year, we launched a tech center in China, we launched our new tech center here in North America. So all of these steps have been in part to manage a broader diversification of product, a broader diversification of customer base and a broader distribution of our manufacturing footprint. And so we have used the acquisitions and some of that growth to help drive that positioning.
Great. Okay. And I appreciate that explanation. What I was driving at here and just to give you a scope of what you all have in terms of your future, if you look at the acquisitions that you made, four plants in Europe, two through turn Radar, the new Tennessee facility, other renovations and not counting China and whatever you have got in China already. If you look at the number and I am just -- talked here, it's about $200 million, maybe $200 million, $220 million that's accomplished through either acquisition or expansion and that doesn't include just the normal renovations possibly that you make to plant. Now when you look at that number, that's all been done in two years and then if you divide that by the number of shares outstanding, it looks to me like you all have invested about $11, at least, a share in acquisition and expansion and your stock's $4, a little over $4. It's carrying a market cap of $70 million as of the close yesterday. What you are going through in this transition is so dynamic and the question is and the opportunity obviously is very significant and I think that the Wall Street shareholders are kind of anxious to see clearly you are getting through this scrap metal thing, innovating, getting more into the concentration of your new product developments on to the market. So my specific question on this is, are we looking at a couple of quarters into this year and then we starting to get a significant response from all this investment that you have made?
Well, when you looking, your comment on the stock, I think we clearly see this as we are undervalued in the marketplace. And I think its a messaging that we have to continue to drive and continue to express and educate our shareholder base of where we are going, why we feel that we have the right solution. When you look at our customers themselves, the transition that we have worked with our customers as they understand where we are going in the business, they are working with us. I mean we are now at a point where we have resident engineers with our customers on-site helping them design their product. These are things that we were not in a position to do two years ago. So we are seeing the recognition clearly from our customer base on the types of programs they are awarding. The $1.3 billion of contract, life of program contract wins in 2015 in a very diverse type of products not necessarily processes. When you are winning business for 2018, 2019, we are quoting opportunities for 2020, they are not quoting you on a process, they are buying a product and they are looking for you to help them design a solution and that is where we have made those investments to do it. Is that being appreciated or understood or built into our current stock price? Absolutely it's not, actually it's there. We feel were a great value and great opportunities in front of us.
Okay. And I am taking a lot of time, the last quarter call, there was discussion, in fact, I think I asked a question about this and got answered, magnesium used in the United States, you are bringing it from Europe. If I recall, it was going into the Tennessee plant. Can you can you speak to the technology of bringing magnesium into use in your product lines now?
Yes. When you look at the business that we have been successively growing, so if you look at the Volvo XC90, which won Car and Truck of the Year from Motor Trend and won North American Auto Show had its Truck of the Year that, for example, is using our magnesium cross car beams and also magnesium seat structures, both of which come from Shiloh and our facility in Poland. And then we look at the success that we have had with Jaguar Land Rover on a number of their vehicles, that again magnesium technology of really how do you drive that performance forward. It's much lighter than even aluminum. It has a solution. And so it's driving growth in Europe.
What we are bringing into Tennessee is for BMW and for Mercedes. So that technology, as they look at their localization efforts in North America as they continue to increase their capacity here, that technology is something that they need to further lightweight. When you look at and why I am extremely confident in Shiloh strategy from a lightweighting side, lightweighting and safety, at $2 a gallon gasoline, actually that's driving the shift to larger vehicles, okay. That shift to larger vehicles doesn't remove CAFE requirements. It doesn't remove the requirements to increase your fuel miles per gallon target. So that's even putting more pressure on OEMs to lightweight their larger vehicles.
And so that's, in essence, acknowledgment and move on what Mercedes and BMW, because they are going on more of their SUV type of vehicles is to drive that weight reduction. So we see our step of globalizing our magnesium product lines in the cross car beams and things like that and IP's, instrument panels, on interior side is again, positioning for the business for the longer-term independent of the macroeconomic of where fuel price is. Actually a lower fuel price is going to drive the need to lightweight even more as gas goes up.
We are well situated on the electrical vehicles. When you look at what we are doing with Tesla and the advantages that we are providing them making aluminum lighter but we are on Nissan LEAF, which is again an electrical vehicle, when you go back to the XC90, we are selling product that is steel, we are selling parts that are aluminum, we are selling parts that are magnesium. That mix model solution, Shiloh is one of the few types of companies who can bring a mix model solution to the industry, not only in the material distribution but the process technology distribution. So casting and stamping. So we really feel that magnesium opportunity is a good growth along with what we do in aluminum, along with what we do with our laser welding in our ShilohCore technologies.
Great. Okay. And one quick one. Velocys, your contract or your work on the gas to liquids pouring for their systems. Can you update us on how that's coming on in terms the your manufacture?
From a process standpoint, our process is solid. Obviously as we read across the board, the market price is making it difficult for producers of oil and gas to -- we see a lot of constraints in the industry. So we are positioned to see where what where it goes. Again, we view that as an adage to what we do. It was never going to be the new core of our business, but it's really something that's leveraging our laser welding capabilities and really bringing the value solution in the marketplace.
Okay. Fine. Thank you kindly.
Thank you, George. And we have got time for at least one more question, please.
Yes. That question is coming from the line of Justyn Putnam with Talanta Investment. Please go ahead with your question.
Thank you for taking my questions. So I will just be quick. I only repeat that award from the scrap pricing, but I just want to make sure that I understand what you were saying productivity goals offsetting that throughout the year. So I think you said, assuming we are at the low point for the scrap pricing, is productivity improvements would be on top of that? So by the time you get to the back half of next year, fourth quarter next year, you are looking for $5 million, $6 million, $7 million in productivity improvement on top of where we are now? Is that the right way to think about that?
Justyn, good morning. Yes, if you look at a quarter one, it would be the largest year-over-year gap. So it's going to be difficult to make that impact in quarter one of this year. We do see that as we get through the course of the year, the lean initiatives, the Six Sigma type of initiatives that we are putting in place, we feel that as we work our way through the year, we absorb the launches and we are in more of a full production type of launches versus the prototyping and [indiscernible] type of those, we get through the first half of the year, we see that the crossing that line and as you said, seeing that improvement being realized. So again, back to where we talked about Q1 being really an inflection point.
Did that cover for you, Justyn? I just want to be sure.
Okay. Thank you.
Okay. Thank you. Was there anything else, I am sorry. Okay. With that we have reached, again I want to just to close, at Shiloh, we are extremely confident of where we are at. From a strategy standpoint, from a macroeconomic trends standpoint, as I mentioned even economies vehicles that we are all reading about, they all add weight in this technology, they need to offset that weight. What we have from our safety products, from our lightweighting products, we feel that we have got the right portfolio going forward. We have got to work our way through headwinds. We understand what those headwinds are. We have strategies to address them over the longer term. We have got a great customer base that we are working with that we are going to continue to support. Our global initiatives are making progress. We have had a nice launch of our ShilohCore in China. We will be working at our diecasting launch facility through the course of the year. So again, we have got work ahead of us. We are not saying we don't. We have got a lot of work in front of us nut we feel very, very, confident in what we have as a team as well as the manufacturing and technology base.
So with that, thank you very much. I appreciate everybody's time this morning.
Thank you. This concludes today's conference. Thank you for your participation and you may now disconnect your lines at this time.
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