Transdigm Group Inc. · NYSE:TDG
Transdigm — Debt Investor Presentation (November 2010)
51 slides from Transdigm's debt investor presentation, Nov 3, 2010
Slide 1: $1,200,000,000 Senior Secured Credit Facilities Presentation to Public Lenders
0 $1,200,000,000 Senior Secured Credit Facilities Presentation to Public Lenders November 3, 2010 Exhibit 99.1
Slide 2: Safe Harbor Statement
1 Safe Harbor Statement This presentation contains forward-looking statements that involve substantial risks and uncertainties. You can identify forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “should,” “will,” “would” or s
Slide 3: Special Notice
2 Special Notice This presentation contains certain financial and other information regarding McKechnie Aerospace Holdings, Inc. ("McKechnie"), which TransDigm has agreed to acquire, as discussed in further detail below and in the Company's filings with the SEC. The interim unaudited and year-end au
Slide 4: Definitions
3 Definitions TransDigm EBITDA As Defined – excludes inventory purchase adjustments, non-cash compensation and deferred compensation charges, acquisition integration costs and one-time IPO related costs as defined in TransDigm’s existing credit agreement. McKechnie EBITDA - excludes management fees
Slide 5: Agenda
4 Transaction Overview Credit Suisse TransDigm & McKechnie Overview TransDigm Nick Howley, Chief Executive Officer Key Credit Considerations TransDigm Nick Howley, Chief Executive Officer Pro Forma Financial Overview TransDigm Greg Rufus, Chief Financial Officer TransDigm Financial Overview TransDig
Slide 6: Innovative Aerospace Solutions
INNOVATIVE AEROSPAGE SOLUTIONS:
Slide 7: Executive Summary
6 Executive Summary TransDigm Inc. (“TransDigm” or the “Company”) intends to raise $1,980 million in financing ($1,680 million funded) to support its acquisition of McKechnie Aerospace Holdings, Inc. (“McKechnie” or the “Target”) and refinance a portion of existing debt. The new financing will consi
Slide 8: Sources & Uses and Pro Forma Capitalization
7 Sources Uses Actual Cum. EBITDA Pro forma Cum. EBITDA % of. 7/3/2010 multiple 7/3/2010 multiple Capitalization Maturity Sources & Uses and Pro Forma Capitalization Sources and Uses (As of July 3, 2010) ($ in millions) Pro Forma Capitalization (As of July 3, 2010) ($ in millions) (1) New $300 milli
Slide 9: TransDigm & McKechnie Overview
8 TransDigm & McKechnie Overview
Slide 10: Business Overview and Distinguishing Characteristics
9 DISTINGUISHING CHARACTERISTICS BUSINESS 7/3/10 (1) Highly engineered aerospace components Proprietary and sole source products Significant aftermarket content High free cash flow conversion ($ in millions) Business Overview Pro forma TransDigm Standalone Pro forma TransDigm with McKechnie Revenue
Slide 11: TransDigm – Diverse Products, Platforms and Markets
10 Ignition Systems Pumps Valves Motors, Actuators & Controls Water Faucets & Systems Quick Disconnects & Couplings Batteries, Chargers & Power Conditioning Aircraft Cockpit Security Systems Composites & Elastomers Audio Systems Lighting & Displays TransDigm – Diverse Products, Platforms and Markets
Slide 12: McKechnie Products: Latches, Rods, Fasteners, Electromechanical
11 Latches Rods Fasteners Electromechanical Approximately 80% of revenue Approximately 20% of revenue Leading market position in proprietary latches Produces over 20,000 types of latches for engine cowlings, nacelles and thrust reversers, as well as interior and exterior access panels, cargo doors a
Slide 13: McKechnie – Deep Relationships with Premier Blue-Chip Aerospace Customers
12 Commercial Military Rotorcraft Regional jet Business jet Commercial Length of Relationship McKechnie – Deep Relationships with Premier Blue-Chip Aerospace Customers Long-standing relationships with all major aerospace players - Routinely selected to serve as design partner for development of new
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Slide 18: TransDigm & McKechnie – Major Locations
17 TransDigm & McKechnie – Major Locations McKechnie Aerospace TransDigm Global Headquarters
Slide 19: Innovative Aerospace Solutions
INNOVATIVE AEROSPAGE SOLUTIONS:
Slide 20: Key Credit Considerations
19 MULTIPLE GROWTH PATHS PROVEN OPERATING STRATEGY ATTRACTIVE MARKET POSITION Consistent Cash Generation and Long-Term Performance Key Credit Considerations Experienced management team Demonstrated value generation Proven acquisition / integration Market growth High margins Acquisitions Low Capex St
Slide 21: Steady Growth in Passenger Traffic Drives Stable Aftermarket Sales
20 20 Steady Growth in Passenger Traffic Drives Stable Aftermarket Sales… Worldwide Revenue Passenger Miles (billions of miles)
Slide 22: With OEM Production Rebounding
21 Commercial Transports Regional & Business Jets 1,000 1,200 '96 '98 '00 '02 '04 '06 '08 '10E '12E 1,000 1,200 1,400 '96 '98 '00 '02 '04 '06 '08 '10E '12E Regional Jet Business Jet …With OEM Production Rebounding (units delivered) (units delivered) Source: Wall Street Research / Airline Monitor / M
Slide 23: Stable Outlook for Military Spending
22 O&M Base Budget O&M Base + Supplemental Budget $297 $317 $249 $252 $259 $264 $0 $100 $200 $300 $400 '10 '11 '12 '13 '14 '15 Stable Outlook for Military Spending ($ in billions) $185 $200 $212 $221 $231 $240 $0 $50 $100 $150 $200 $250 $300 '10 '11 '12 '13 '14 '15 Source: U.S. Department of Defense
Slide 24: Significant Barriers to Entry
23 Significant Barriers to Entry Selection / Qualification Process FAA Certification Niche Markets Risk / Reward Trade-Off
Slide 25: TransDigm and McKechnie – Strong Focus on High-Margin Aftermarket
24 Aftermarket ~60% OEM ~40% Aftermarket ~40% OEM ~60% New OEM business and strong aftermarket presence give the Pro forma Company steady revenues from new and existing platforms. Comm Aftmkt 41% Def Aftmkt 19% Comm OEM 27% Def OEM 13% Comm Aftmkt 36% Def OEM 9% Def Aftmkt 4% Comm OEM 51% TransDigm
Slide 26: Combined Strong Focus on High-Margin Aftermarket
25 Approximately 55% of pro forma net sales and a much higher percentage of EBITDA As Defined are from the stable, high-margin aftermarket. OEM Aftermarket Comm Aftmkt 40% Comm OEM 33% Def OEM 12% Def Aftmkt 15% Combined Pro Forma NET SALES Pro Forma EBITDA As Defined Combined Strong Focus on High-M
Slide 27: Significant Proprietary and Sole Source Revenue Base
26 Proprietary and sole source products represent a significant barrier to entry and a stable, recurring revenue stream. TransDigm PROPRIETARY SALES Based on TransDigm Management estimates of pro forma sales for the fiscal year ended 9/30/09 and McKechnie financials for the fiscal year ended 12/31/0
Slide 28: Top Platforms – Strong Positions on Diverse and Growing Platforms
27 McKechnie TransDigm Top 10 Platforms – Strong Positions on Diverse and Growing Platforms TransDigm: Two year average based on Management estimates of pro forma sales for the fiscal years ending 9/30/08 and 9/30/09. McKechnie: TransDigm Management estimates of pro forma sales for the fiscal year e
Slide 29: Proven Operating Strategy
28 Proven Operating Strategy 3 VALUE DRIVERS Profitable new business Productivity and cost improvement Value-based pricing
Slide 30: Proven Record of Acquisition & Integration
29 With McKechnie, TransDigm has acquired 34 businesses since 1993, including 19 since its IPO. 1993 – 2001 2002 – 2006 2006 – 2009 Adel Aeroproducts Wiggins Controlex Marathon Adams Rite Aerospace Christie Champion Honeywell Lube Pump Fuelcom Norco Avionic Instruments Skurka Fluid Regulators Eaton
Slide 31: Pro Forma Financial Overview
30 Pro Forma Financial Overview
Slide 32: Consistent Historical Growth and Performance
31 $0 $150 $300 $450 $600 Net Sales EBITDA As Defined and Margin $48 $52 $57 $63 $78 $111 $131 $151 $201 $249 $293 $301 $374 $435 $593 $714 $762 $1,154 TransDigm McKechnie $10 $10 $13 $17 $25 $44 $51 $54 $72 $98 $124 $139 $164 $194 $275 $333 $375 $504 TransDigm McKechnie % margin 20% 19% 23% 27% 31%
Slide 33: Proven Performance
32 Proven Performance 0% 10% 20% 30% 40% 50% 60% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 EBITDA As Defined Margin Source: Company materials.
Slide 34: Proven Ability to Realize Value
33 Adams Rite Duke’s Aerospace TransDigm has been very successful in realizing EBITDA growth in each of its acquisitions. Norco Proven Ability to Realize Value 2009 Price Productivity Volume Target Year 0 Price Productivity Volume Year 6 Year 0 Price Productivity Volume Year 2 Source: Company materi
Slide 35: TransDigm & McKechnie – Combined as of LTM 7/3/2010
34 Combined financial metrics continue to be very attractive. Pro Forma Revenue Pro Forma EBITDA Pro Forma EBITDA Margin (1) (2) TransDigm & McKechnie – Combined as of LTM 7/3/2010 ($ in millions) TransDigm 74% McKechnie 26% McKechnie 20% TransDigm 80% $855 TransDigm $402 $299 McKechnie $102 $1,154
Slide 36: Pro Forma Financial Highlights
35 LTM Period Ended July 3, 2010 TransDigm Pro forma McKechnie Pro forma Combined Pro Forma Financial Highlights Sales $855 $299 $1,154 Gross Profit Percentage 54.2% 36.8% 51.9% Income From Operations $348 $61 $409 Operating Margin 40.7% 20.4% 35.4% EBlTDA As Defined (1) $402 $102 $504 EBITDA As Def
Slide 37: TransDigm
TRANSDIGM
Slide 38: TransDigm Financial Overview
37 TransDigm Financial Overview
Slide 39: Consistent Track Record of Financial Success
38 TransDigm’s sales have grown every year since its founding. Consistent Track Record of Financial Success ($ in millions) $48 $52 $57 $63 $78 $111 $131 $151 $201 $249 $301 $374 $435 $714 $762 $593 $802 $293 $0 $300 $600 $900 FY93 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY0
Slide 40: Industry-Leading Financial Performance
39 TransDigm’s EBITDA and net income margins are at the top of the aerospace sector. Industry-Leading Financial Performance 7.1% 48.6% 19.3% 16.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% EBITDA % Net Income % Industry Peers TransDigm Source: Factset and Company financials. Note: TransDigm margins a
Slide 41: TransDigm Financial Highlights
40 Fiscal Year Ended September 30, LTM CAGR 2005 2006 2007 2008 2009 7/3/2010 2005-2009 TransDigm Financial Highlights ($ in millions) Source: Company materials. Income statement information: Net sales $374.3 $435.2 $592.8 $713.7 $761.5 $801.9 19.4% Gross profit $184.3 $221.3 $309.0 $385.9 $429.3 $4
Slide 42: TransDigm Free Cash Flow
41 Fiscal Year Ending September 30, LTM 2005 2006 2007 2008 2009 7/3/2010 TransDigm standalone generates significant free cash flow. EBITDA $164.2 $194.4 $274.7 $333.1 $374.7 $390.0 CapEx (8.0) (8.4) (10.3) (10.9) (13.2) (13.9) Cash Interest Expense (46.0) (74.9) (90.7) (95.1) (82.2) (81.1) Cash Tax
Slide 43: TransDigm Deleveraging Profile
42 TransDigm Deleveraging Profile (Total Debt / EBITDA) Source: Company materials. (1) Change of ownership to Warburg Pincus on 7/23/03. (2) LTM leverage at recapitalization. (3) Recapitalization October 2009. 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 F
Slide 44: TransDigm EBITDA As Defined Reconciliation
43 Fiscal year ended September 30, LTM 2005 2006 2007 2008 2009 7/3/2010 TransDigm EBITDA As Defined Reconciliation ($ in millions) Source: Company materials. (1) Represents purchase accounting adjustments to inventory associated with the acquisitions of various businesses and product lines that wer
Slide 45: McKechnie Financial Overview
44 McKechnie Financial Overview
Slide 46: McKechnie Financial Highlights
45 Fiscal Year Ended December 31, LTM CAGR 2007 2008 2009 06/30/10 2007-2009 McKechnie Financial Highlights ($ in millions) Source: McKechnie financials and Company estimates. Income statement information: Net sales $332.2 $354.2 $317.4 $298.8 (2.3%) Cost of sales 283.8 228.7 194.4 180.8 Gross profi
Slide 47: McKechnie EBITDA Reconciliation
46 Fiscal Year Ended December 31, LTM 2007 2008 2009 6/30/2010 McKechnie EBITDA Reconciliation ($ in millions) Source: McKechnie financials and Company estimates. Net Income (loss) ($29.6) $18.7 $35.6 $25.8 Add: Loss (income) from discontinued operations (0.3) 0.8 – – Interest expense, net 53.3 70.9
Slide 48: Syndication Overview & Timetable
47 Syndication Overview & Timetable
Slide 49: Preliminary Transaction Timeline
48 Su Mo Tu We Th Fr Sa Su Mo Tu We Th Fr Sa October 2010 November 2010 Key date Holiday Preliminary Transaction Timeline
Slide 50: Summary Terms
49 Summary Terms Borrower: TransDigm Inc. (the "Company" or the "Borrower", and together with all subsidiaries, the "Credit Group") Arrangers: Credit Suisse and UBS (collectively the “Arrangers” and each an “Arranger”) Administrative agent: Credit Suisse (the “Administrative Agent”) Facilities: $300
Slide 51: Innovative Aerospace Solutions
INNOVATIVE AEROSPAGE SOLUTIONS:
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