Outline and Strategy of the Americas Business pptx · Vendor Finance Outline Company name Creekridge Capital LLC Location Edina, Minnesota, the US Type of business Vendor finance

© Hitachi Capital America Corp. 2016. All rights reserved.

Hitachi Capital America Corp.Chairman & CEO

Chihiro Shirai

Outline and Strategy of the Americas Business

November 28, 2016

Contents


1. Overview of HCA2. Business Results and

Review of Recent Years3. Future Business Strategy4. Conclusion

1

【Abbreviations】(HCA): Hitachi Capital America Corp.(HCC): Hitachi Capital Canada Corp.(CLE): CLE Canadian Leasing Enterprises Ltd.

© Hitachi Capital America Corp. 2016. All rights reserved. 2

1-1. Overview of HCA: Outline and Organization

Company name Hitachi Capital America Corp.

Establishment October 23, 1989

Capital 48 million USD

ShareholderHitachi Capital Corporation 100%

DirectorsChihiro ShiraiRyan CollisonHironori Tozawa (part-time)

Number of business bases

The US: 4Canada: 2

Number of employee

317 (As of September 30, 2016)

Chairman & CEO Chihiro Shirai

President & COO Ryan Collison

SVP, General Counsel Doug Hirai

President Automotive & EVPRobert Otto

SVP & GM, Commercial Finance Mark Duncan

SVP & COO, Credit & OperationsSue Santos

EVP & CFO Terry Hatfield

President of CLE (Canada Business)Francois Nantel

● Outline ● Organization chart


0

600

1,200

1,800

2,400

3,000

1H of FY20163

1-2. Overview of HCA: Description of Business

(Millions of dollars)

2,811

Breakdown of operating assets

【New business】Vendor finance for medical equipment, etc.

【Commercial business】・Factoring(Approx. 80% of the commercial business)

・Finance for IT devices and medical equipment

【Transportation business】(Truck finance)

【Canada】(Mainly truck finance)

■Factoring:・Started mainly retail factoring in 2012・Expansion of large-scale factoring led to expansion of both

factoring businesses■IT devices:

Purchase of lease receivables from alliance partners and captive insurer

■Medical equipment:Engage mainly in indirect sales through our affiliate finance company

Business in the Americas and its current operating assetsBusiness in the Americas and its current operating assets

New business domain started in 1H of FY2016 following the business transfer from Creekridge Capital LLC

・Provide loans to end users referred to by us in truck sales by dealers and floor plans for dealers (inventory finance)

・Orders from Mitsubishi Fuso, Isuzu, and Hino Motors account for 60% of the total orders

・Truck finance accounts for 60% of business portfolio・Expand business with acquisition of CLE in FY2014・Expand truck finance, main business, based on relationships with truck manufactures (HCA)


- 30

- 20

- 10

0

10

20

30

40

0

500

1,000

1,500

2,000

2,50019

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

15

Volume of business (left axis)Profit before tax (right axis)

4


Review of recent years

2016-2018The 2nd stage of Growth strategy

Record high for volume of business and profit before tax

Turned to red figures


2-1. Business Results and Review of Recent Years

Growth stage

Established in 1989

2008-2009 Decline in business results• Loans to construction machinery and

medical sector turned to non-performance loans due to economic crisis triggered by the collapse of Lehman Brothers

• Recorded first loss since its establishment

• Started structural reform

2010-2011 Structural reform• Exited large scale medical equipment

business• Exited construction machinery

business• Reduced headcount

2012-2015 Growth strategy• Expanded factoring business• Accelerated M&A strategies• Expanded Canada business


Structural reform was not enough to increase topline. Needed to take a next step toward sustainable growth

5

2012-2015 Growth Strategy• Exited construction machinery and large-scale medical equipment business after the structural reform, resulting in decline

of topline (volume of business and revenues)• Required business diversification to secure stable growth as dependence on truck finance increased • Required growth strategy to increase top line

M&AAcquired Hennessey Capital (present Michigan Office)

Acquired CLE in Canada

Hitachi business

Started energy saving business in collaborationwith Hitachi Consulting

Secured highly skilled human resources

Expanded to Canada

Established Hitachi Capital Canada

Implemented measures as growth strategies


Actions to

achieve growth

High dependence on truck finance

Focus mainly on organic strategy

Heavy commercial truck field was untouched

Hitachi business

Business development in the West Coast

Business expansion to neighboring countries

Challenges in the late stage of structural reform

Secure highly skilled human resources

Diversified business domains

Started factoring business

Started large commercial truck finance

Explored local companies through CLE in Canada

Recruited personnel with sales network

Became a growth driver of factoring business

Recruited personnel with experience at competitors



550 756

1,433

1,958

0

500

1,000

1,500

2,000

2,500

FY2012 FY2013 FY2014 FY2015

Volume of business(Millions of dollars)

10.1 11.9

19.5

29.4

0

10

20

30

40

FY2012 FY2013 FY2014 FY2015

Profit before tax2.9 times vs FY2012


-

500

1,000

1,500

2,000

2,500

FY2012 FY2013 FY2014 FY2015

Canada business

Transportation business

Commercial finance business

Operating assets(Millions of dollars)

Launched Canada business

Acquisition of CLE

Started large commercial truck

finance

3.0 times vs FY2012

694803

1,475

2,053

3.6 times vs FY2012

Started large-scale factoring

Full operationFull operationin large-scale

factoring


• Expand the existing business domains

• Diversify the business domains (new business)

� Expand vendor finance

� Develop Vehicle Solution Business

� Research the market in Mexico・ Business development in the West Coast :

Expand Hitachi business

• Aim to grow into a company level matching the size of US economy • Play the role as a “growth engine” to drive the growth of Hitachi Capital Group

7

3-1. Future Business Strategy: Targets

Basic policy of the Americas in 2018 Mid-Term Management Plan

2018 Mid-Term Management Plan Targets ( ): vs FY2015

Expand business through strategic investment (M&A, human resources)

・Profit growth rate:・ROA:・Operating assets:

over 20%* over 2.0% (+0.3%)360 billion yen (+60%)

* Average annual growth rate of profit before tax (FY2015 to FY2018)

0

800

1,600

2,400

3,200

FY2015 FY2018

Canada business Transportation business

Commercial finance business New domains

Operating assets

Transportationbusiness

(including Canada)


■ Direction of the strategy

(HCA) Group business strategy(HCA) Group business strategy


Established four business bases in the US, two business bases in Canada and ten other home offices (HO) in North America.� Allocate over 300 human resources in the US and Canada

8

Minnesota Office (63)

Michigan Office (12)

California Office (2)

Connecticut Office (114)

Quebec Office (84)

Ontario Office (42)

The US

Headquarters of the US businessStructured finance business

Commercial truck businessMedical equipment business

Headquarters of the US businessStructured finance business

Commercial truck businessMedical equipment business

Former Creekridge Capital

Vendor financeFormer Creekridge Capital

Vendor finance

Factoring

Former Hennessey Capital

Factoring

Former Hennessey Capital

Business area: other regions in Canada

(HCC), (CLE) OntarioBusiness area: other regions in Canada

(HCC), (CLE) Ontario

Headquarters of Canada business

Business area: Quebec(CLE) Quebec

Headquarters of Canada business

Business area: Quebec(CLE) Quebec

Major business bases in the US and Canada

Hitachi Group BusinessBusiness with Japanese companies

Hitachi Group BusinessBusiness with Japanese companies

3-2. Future Business Strategy: Promoting System

・Figures in parentheses show the number of personnel

・HO Personnel is included in Connecticut Office, etc.

Canada


3-3. Future Business Strategy: Expand Existing Business Domains

Existing Transportation business Commercial finance business

■ Utilize the existing dealer alliance network to expand business domains

■ Expand and enhance the relation with business partners

Expand the car typesTruck finance

Expand the domainsInventory finance

Expand financing for commercial vehicles in addition to existing commercial truck finance

Considering inventory finance for special vehicles (truck body, equipped truck, etc.) in addition to existing truck finance

・Business alliance with mid-sized independent finance companies and intermediary agents

⇒Cooperate by combining each strong field・Build close relationships with partners to deepen business understanding and expand business collaborative fields

Enhance relationships with existing

partners

Enhance relationships with existing

partners

Alliance with new

partners

■ Factoring business: Expand business domains・Engage in movable assets/account receivables financing in addition to factoring business. Aim to expand earnings opportunities by expanding service range


3-4. Future Business Strategy: Diversify Business Domains (1) ( )Expand

Vendor Finance

●OutlineCompany name Creekridge Capital LLC

Location Edina, Minnesota, the US

Type of business Vendor finance for medical equipment, etc.

Establishment 1999

Representative Greg Larson (Co-CEO) Jeff Cowan (Co-CEO)

Employees 60

●Major financial figures and composition of operating assets

Feb. 2005 Started transactions (purchase oftrade receivables)

June 2016 Closing

【Became a business partner】Since the start of transaction, looking for an opportunityfor acquisition by checking financial results regularlywhile maintaining good relation as a business partner

【Proposal for acquisition】• Quality of receivables purchased has been good• Meet our target to reinforce vendor finance service• High profitability with ROA of 3 to 4%• Stable business management, managed to maintain

profitable even after the collapse of Lehman Brothers• Strong in promising areas such as healthcare IT

$ 9 million

(Millions of dollars) FY2015 Results

Volume of business 138

Profit before tax 9

Operating assets 300

FY2015 Result FY2018 Target

$ 9 million

Business expansion in new fields through business transfer from Creekridge Capital

●Background of acquisition●Next approach

Maximize synergy effects to expand business・ Enhance ability to originate lease contract mainly in healthcare

business・ Use know-how and expertise of operating lease in HCA・ Develop the sales finance business for Hitachi Group and

Japanese vendors, with Creekridge as a leading project body

Image of growth of profit before tax

Annual average of double digit growth


3-4. Future Business Strategy: Diversify Business Domains (2) ( )

Fleet managementBusiness management information systemOnline services

Services during the contract periodService ＆ maintenance

Gains on sale of vehicles after the expiration of lease

11

Finance revenues

Impr

ove

RO

A

ROA: over 3%

Evolve from vehicle finance to vehicle solution• Aim of business development of vehicle solution ⇒ Profitability improvement

Develop Vehicle Solution Business

Improve ability to provide value-added services

The US is the world’s largest automobile market

Transform into high value-addedservices not to fall into

interest rate competition

Analyze the auto lease market and develop roadmap

of how to approach business

Plan to acquire a high value-added auto lease companyin 2017


3-5. Future Business Strategy: Business Development in the West Coast (Expand Hitachi business)

Establish a new office on the West Coast, aiming at active and aggressive involvement in

“Social Innovation Business” promoted by Hitachi

●Current major businesses

●Major businesses to be focused in future

(1) Obtain energy saving projects for leading US distributors, telecommunications companies, and financial institutions

(2) Participate in micro-grid projects in North America (3) Finance for sales expansion of IoT-related products

(1) Energy saving projects in cooperation with Hitachi Consulting⇒ Offer energy saving solutions to leading American companies

(2) Factoring for Hitachi Group⇒ US dollar-denominated factoring scheme


4. Conclusion

Develop and expand new business domains･Business transfer from Creekridge Capital: Expand vendor finance in the healthcare sector・Development of Vehicle Solution Business: Plan M&As in FY2017・Market research in Mexico: Considering collaborative advancement with MUL

Expand existing business domains・Transportation business: Utilize the existing dealer alliance network to expand

business domains・Commercial finance: Expand and enhance the relation with business partners, expand

factoring business

Business development in the West Coast: Expansion of Hitachi businessEstablish a new office on the West Coast, aiming at active and aggressive involvement in “Social Innovation Business” promoted by Hitachi for further enhancement of collaboration

Documents

Outline and Strategy of the Americas Business pptx · Vendor Finance Outline Company name Creekridge Capital LLC Location Edina, Minnesota, the US Type of business Vendor finance