Transdigm Group Inc. · NYSE:TDG
Transdigm — Investor Day (June 2016)
112 slides from Transdigm's investor day presentation, Jun 23, 2016
Slide 1: 2016 Analyst Day
2016 ANALYST DAY JUNE 23, 2016
Slide 2: Agenda
Agenda Time Event Presenter 8:30 Registration 9:00 Start TDG Overview Nick Howley Management Process & Value Creation Kevin Stein Business Unit Structure & Process Jorge Valladares Mergers & Acquisitions Bernie Iversen Recent Acquisitions & Integration Bob Henderson Break Product Presentations Break
Slide 3: Forward Looking Statements
Forward Looking Statements This presentation contains forward‐looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including information regarding our guidance for future periods. These forward‐looking statements are based on management’s current expectation
Slide 4: Special Notice Regarding Pro Forma and Non-GAAP Information
Special Notice Regarding Pro Forma and Non‐GAAP Information This presentation sets forth certain pro forma financial information. This pro forma financial information gives effect to certain recently completed acquisitions. Such pro forma information is based on certain assumptions and adjustments a
Slide 5: TransDigm Overview
TRANSDIGM OVERVIEW NICK HOWLEY
Slide 6: Experienced Senior Management Team with Proven Track Record
Experienced Senior Management Team with Proven Track Record EXECUTIVE TITLE Proven track record Officers: Nick Howley Chairman & CEO Managed the business through Kevin Stein COO - Power multiple cycles Bob Henderson COO- Airframe Terry Paradie Executive VP – CFO Experienced with a leveraged Be
Slide 7: Superior Stock Price Performance
Superior Stock Price Performance TDG 5 YR & 10 YR Return CAGR ≈ 30% Aero Peers 5 YR & 10 YR Return CAGR ≈ 10% 35% 32% 30% 30% 25% 20% 15% 12%12% 10% 10% 6% 5% 0% 10 YR Return CAGR 5 YR Return CAGR (1) (2) (3) TDG S&P 500 Aero Peers (1) TransDigm adjusted for dividends paid of $67.50 in 10-year perio
Slide 8: Private Equity-Like Growth in Value
Our Objective “Private Equity-Like Growth in Value with Liquidity of a Public Market” + 15% - 20% /year on average 7
Slide 9: Unique & Consistent Business Strategy Private & Public
Unique & Consistent Business Strategy Private & Public TransDigm’s Consistent Goal – “Private Equity-Like” Returns to Shareholders Proprietary Aerospace Products with Significant Aftermarket 3-Part Value-Based Operating Strategy Decentralized, Organization/ Aligned with Shareholders Focused
Slide 10: Key Business Events Since Last Investor Day
Key Business Events Since Last Investor Day Continued, Consistent Outstanding Value Creation Six Acquisitions for a Total Purchase Price of ≈ $3 Billion New Debt and/or Refinanced ≈ $5 Billion Purchased 1.5 Million TDG Shares Created ≈ $5 Billion of Shareholder Value 9
Slide 11: Company Overview
Company Overview Business Snapshot ($ in millions) PF LTM 4/2/16 % 2014 2015 with DDC (2) Change Revenue $ 2,373 $ 2,707 $3,289 + 39% EBITDA as Defined (1) $ 1,073 $ 1,234 $1,477 + 38% EBITDA as Defined margin 45% 46% 45% FYE Share Price $184 $212 $259 (4) + 41% Enterprise Value ≈ $23 Billion (3) (1
Slide 12: Diverse Products, Platforms and Markets
Diverse Products, Platforms and Markets 11
Slide 13: TransDigm – Expanding Global Footprint
TransDigm – Expanding Global Footprint 12
Slide 14: Consistent Record of Growth and Margin Expansion
Consistent Record of Growth and Margin Expansion Revenue EBITDA as Defined and margin ($ in millions) (1) ($ in millions) $3,289 (1) $1,477 $2,707 $1,234 $2,373 $1,073 $900 $1,924 $809 $1,700 $590 $1,206 $412 $828 $375 $762 $333 $714 $593 $275 $435 $194 $374 $164 $293$301 $124$139 $249 $98 $201 $151
Slide 15: Significant Barriers to Entry
Significant Barriers to Entry Selection / Qualification Process FAA Certification Niche Markets Risk / Reward Trade-Off 14
Slide 16: Recurring Stream of Profitable Aftermarket Revenue
Recurring Stream of Profitable Aftermarket Revenue Profitability % Aftermarket OE Production 5 10 15 20 25 30 35 40 45 50 55 60 65 70 Airframe Program Life Cycle (Years) 15
Slide 17: Strong Focus on High-margin Aftermarket
Strong Focus on High‐margin Aftermarket Pro Forma with DDC FY 2015 Pro Forma Revenues (excluding the non-aviation segment)(1) EBITDA As Defined (1) Defense Commercial OEM 33% aftermarket 36% Aftermarket Commercial OEM 31% Aftermarket: 55% OEM: 45% (1) Pro forma revenue is for the fiscal year ended 9
Slide 18: Significant Proprietary and Sole Source Revenue Base
Significant Proprietary and Sole Source Revenue Base Pro Forma with DDC Proprietary Revenue Sole Source Revenue Non- proprietary ~10% Non-sole source 20% Proprietary ~90% Sole source ~80% Results in strong market positions and a stable, recurring revenue stream Note: Based on management estimates o
Slide 19: Steady Growth in Passenger Traffic and Installed Base Drives Stable Aftermarket Sales
Steady Growth in Passenger Traffic and Installed Base Drives Stable Aftermarket Sales Worldwide Installed Base Growth 33,000 30,000 27,000 4.1% CAGR 24,000 21,000 18,000 15,000 12,000 9,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Slide 20: Commercial Aftermarket Trends
Commercial Aftermarket Trends Commercial Aftermarket Growth Last Five Years 5 Yr Avg 2 Yr Avg 25.0% TDG 10.1% 8.1% Peer Group 7.8% 4.2% 20.0% 15.0% 10.0% 5.0% 0.0% Global Long-Term Avg Annual Growth (RPM's) Installed Base Avg Annual Long-Term Growth Peer Group Growth Rolling 4Qtr (%) TransDigm Growt
Slide 21: TransDigm's Addressed Market for Commercial Aftermarket
TransDigm’s Addressed Market for Commercial Aftermarket Global Airline Operating Expenses Global Maintenance Spend TDG Addressed Market 2015 Total = $660B 2015 Total = $64.3B 2015 Total = $30.6B Global TDG Other 33% TDG Commercial Maintenance Addressed Aftermarket $64.3B Others $30.6B ≈ $1.1B 52% Ot
Slide 22: TransDigm's Diverse Commercial Aftermarket Revenue Base
TransDigm’s Diverse Commercial Aftermarket Revenue Base Total FY 2015 Commercial Top 15 Airlines Aftermarket Worldwide Revenue by Annual Sales $ Per Part American Airlines Delta Airlines > $2 million United Continental Sales per year ≈ 10% Air France-KLM Emirates Airlines British Airways/Iberia Luft
Slide 23: Commercial OEM Market
Commercial OEM Market (units delivered) Trough to Commercial Transport Deliveries Commercial Transport Deliveries Current ≈12 (Boeing, Airbus & Regionals) (55 Year History) Years 1800 1600 Trough to 1400 Peak ≈7 Years 2,000 Trough to 1200 Peak Trough to ≈7 Years 1,800 Peak 1000 ≈5 Years 1,600 Trough
Slide 24: Military Outlook – Flat to Modestly Up
Military Outlook – Flat to Modestly Up 2016 - 2021 TransDigm Base Military Revenue Forecast* $ Millions (Constant $) 1,000 900 800 700 600 500 400 Aftermarket 300 OEM 200 100 0 2015 2016 2017 2018 2019 2020 2021 A400M and F-35 are Major Military Growth Platforms *Excludes price increase and initial
Slide 25: Strong Positions on Diverse and Growing Platforms
Strong Positions on Diverse and Growing Platforms TOP PLATFORMS B737 A320 B777 ≈30% Sales A330/A340 B787 B757/B767 A380 C130 B747 ≈18% Sales Blackhawk A400M A350 Gulfstream Series Note: Based on Management estimates of sales for 2015. 24
Slide 26: Organizational Philosophy
Organizational Philosophy CORPORATE Corporate Local Control Autonomy Value Generation Strategy OPERATING UNIT Economy Mgmt Local Emp- Central loyees of Scale Resources Control Autonomy Owners Structure Execution Motivation 25
Slide 27: Unique Compensation Concept – Think/act like an owner
Unique Compensation Concept – “Think/act like an owner” TDG Ownership Low ` High Low ` High Cash Compensation Equity Based Compensation 100% Performance Vesting Very High Shareholder Alignment 26
Slide 28: Reproducible Corporate Structure
Reproducible Corporate Structure CEO CFO COO EVP & M&A EVP EVP EVP EVP EVP 6‐8 Op Units 6‐8 Op Units 6‐8 Op Units 6‐8 Op Units 6‐8 Op Units 27
Slide 29: 3 Value Drivers
Proven Operating Strategy Profitable Productivity Value Based New and Cost Pricing Business Improvements 3 Value Drivers 28
Slide 30: Proven Record of Acquisition & Integration
Proven Record of Acquisition & Integration Privately Held NYSE 1993 – 2006 2006 – 2010 2011 – 2012 2013 - 2016 Adel Sweeney Hartwell Beams Aeroproducts Electra-Motion Electromech Aerosonic CDA InterCorp. McKechnie Wiggins Tyee Arkwin Controlex Avtech TAC Whippany Actu
Slide 31: TransDigm Delevering Profile
TransDigm Delevering Profile (Net Debt / PF EBITDA As Defined) Refi & Dividend 7.0x Telair, Franke and Pexco DDC 6.5x Acquisition Special & GCP Dividend Warburg McKechnie 6.0x Pincus Acquisition Recap 5.5x IPO Special 5.0x Dividend Recap & AmSafe Dividend Acquisition 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x 07
Slide 32: Consistent Strategy & Value Creation
Consistent Strategy & Value Creation Proprietary Aerospace and Aftermarket Value Based Operating Strategy “Private Equity- Like” Returns with Decentralized Organization / Aligned with Public Liquidity Shareholders Disciplined Acquisition Strategy Efficient Capital Structure 31
Slide 33: Management Process & Value Creation
MANAGEMENT PROCESS & VALUE CREATION KEVIN STEIN
Slide 34: Corporate Structure
Corporate Structure Nick Howley President & CEO Terry Paradie Kevin Stein Greg Ruu Bob Henderson Bernie Iversen CFO COO-Power Senior EVP COO-Airframe EVP – M&A Roger Jones Jim Skulina Pete Palmer Joel Reiss Jorge Valladares John Leary EVP EVP EVP EVP EVP EVP Target EVP to Have 6-8 Businesses 33
Slide 35: Executive Vice President Role
Executive Vice President Role EVP EVP - Value Creation Driver/Culture Carrier Op Unit 1 Op Unit Business Guidance • Quarterly Reviews • Presidential “coaching” Op Unit 2 • Value Driver Emphasis Op Unit 3 Talent Development New • President/Staff President • Weed & Feed Last Year Acquisition Acquisiti
Slide 36: Operating Unit Philosophy
Operating Unit Philosophy Structure Execution Motivation Small Operating Units Significant Local Think Like Owner Autonomy Focus on Products and Create Value Customers Local Decisions Lower Cash Comp & Few Management Front Line Value Higher Equity Layers Generation Product Line Discipline Price Prod
Slide 37: Division Organizational Structure
Division Organizational Structure President Director Director Director Sales & Controller Operations Engineering Marketing Business Unit Business Manager Unit Team Business Unit Business Manager Unit Team Business Unit Teams •Co-Located Business Unit Business •Detail Value Focused Manager Unit Team
Slide 38: 31+ Operating Units, 80+ Business Units
Business Unit Value Focus 31+ Operating Units 80+ Business Units 37
Slide 39: Proven Operation Strategy: 3 Value Drivers
Proven Operation Strategy 3 Value Drivers Operating Unit Accountability Profitable new business Value driven down through each Business Unit Productivity and cost improvement Mid-quarter and quarter-end reporting Emphasize value creation, Value-based ownership and accountability pricing
Slide 40: Management Focus – Product Line Value Reporting Tools
Management Focus – Product Line Value Reporting Tools Consistent Product Line Metrics Accountability Budgets Pricing Product Line Income % Quarterly Statement Reviews Market Segments Projects Savings Mid-Year Machinery $ Site Visits Outsourcing $ $ Automation $ $$ New Business Orders Productivity Pr
Slide 41: Productivity
Productivity YTD YTD Full Yr Full Yr PROJECTS 2nd Source Motors Enacted 29 Plan 54 Forecast 58 Plan 108 Product Line Titanium Purchase 47 35 70 71 Volume Discount 5 5 10 12 Sales Per Head (less Price) $400 Vendor LTAs 10 0 25 0 Outside Processing (OSP) 170 $346 $352 Purchasing Savings 91 94 163 191
Slide 42: New Business Modeling
New Business Modeling Analytical Approach EXAMPLE ONLY Data Driven New Business Model Excerpt Realistic OEM Production Rates 2016 2017 2018 2019 2020 2021 Annual Data Historical NRE Investment Estimates Production Sales NRE $494 $740 $987 $1,234 $1,481 Production COS ($422) ($435) ($640) ($830
Slide 43: Value Creation Focus - Acquisitions
Value Creation Focus ‐ Acquisitions Narrow Acquisition Target Yields Strong Potential Value Creation Proprietary, Sole Source Aerospace Businesses with Significant Aftermarket Analyze Target & Model Value Negotiate Purchase & Raise Cash Acquire & Create Value Restructure into Product Lines
Slide 44: Talent Development
Talent Development TRANSDIGM 43
Slide 45: Growing Value Requires Growing Talent
Growing Value Requires Growing Talent Talent Demand Organic Growth Acquired Growth & Mgt. Turnover & Mgt. Transitions Growth Requires Talent 44
Slide 46: Talent Distribution
Talent Distribution Talent Pool Weed-out or Promote Develop Expand Test Weed-out Promote Low Individual Efficacy High 45
Slide 47: Succession, Development, Promotion
Succession, Development, Promotion President President Dir of HR, QC Dir of HR, QC Dir of Eng Dir of Mfg Controller Dir of Eng Dir of Mfg Controller S&M Other S&M Other Biz Unit Biz Unit Eng Lead Mfg Mgr Eng Lead Mfg Mgr Mgr Mgr Key Positions Dir S&M Dir Mfg Biz Unit Mgr Mfg Mgr New Acquisition OR E
Slide 48: Talent Development - Structured
Talent Development‐ Structured Financial Competency Value Creation Income Balance Statement Sheet Value Pricing New Business Productivity Modeling Management Planning & Leadership Contracting & Negotiations Risk Management I.P. Protection Aftermarket Access Forecasting Leadership Pricing Tools Skill
Slide 49: Talent Development - Operational
Talent Development‐ Operational Quarterly Business Unit Reviews & Forums Job Rotations & Promotions President Dir of HR, QC Dir of Eng Dir of Mfg Controller S&M Other Biz Unit Eng Lead Mfg Mgr Mgr Site Visits & Operational Reviews LTM Promotions Source External 25% Internal 75% 48
Slide 50: Performance Stability
Performance Stability Solid Value Growth Process Consistent Value Creation Strategy Product Line Detail Focus Active Talent Growth Disciplined Acquisition Integration 49
Slide 51: Business Unit Structure and Process
BUSINESS UNIT STRUCTURE AND PROCESS JORGE VALLADARES
Slide 52: 31+ Operating Units, 80+ Business Units
Business Unit Value Focus 31+ Operating Units 80+ Business Units 51
Slide 53: Business Unit Value Creation
Business Unit Value Creation Business Unit Teams Grouping of Related Products Integrated Cross Functional Team Business Unit Manager Drives Performance Value Driver Focus Profitable New Business Productivity and Cost Improvement Value-based Pricing Accountability Standardized Business
Slide 54: SAMPLE Business Unit – Income Statement
SAMPLE Business Unit – Income Statement Prior Year % to Q3 % to YTD % to YTD % to Actual Sls Actual Sls Actual Sls Plan Sls 36,814 100.0% Sales 9,819 100% 26,216 100% 25,974 100% Product Costs: 8,870 24.1% Material 2,326 23.7% 6,229 23.8% 6,284 24.2% 2,812 7.6% Direct Labor 730 7.4% 1,984 7.6% 1,924
Slide 55: SAMPLE Business Unit – YTD Sales
SAMPLE Business Unit – YTD Sales Prior Actual Actual Actual Prior Actual Actual Actual OEM Year Plan Actual vs Plan vs Plan vs PY Aftermarket Year Plan Actual vs Plan vs Plan vs PY Commercial 10.0 10.3 10.3 0.0 0% 3% Commercial 13.5 14.0 14.5 0.5 4% 7% Reg/Biz Jet 3.7 3.9 3.9 0.0 0% 5% Defense 5.8 5
Slide 56: SAMPLE Business Unit – YTD Bookings
SAMPLE Business Unit – YTD Bookings Prior Actual Actual Actual Prior Actual Actual Actual OEM Year Plan Actual vs Plan vs Plan vs PY Aftermarket Year Plan Actual vs Plan vs Plan vs PY Commercial 10.5 10.8 10.7 (0.1) -1% 2% Commercial 14.0 15.0 15.2 0.2 1% 9% Reg/Biz Jet 4.0 4.1 4.2 0.1 2% 5% Defense
Slide 57: SAMPLE YTD Booking Margins
SAMPLE YTD Booking Margins YTD Bookings PLAN ACTUAL Base Business 51% 53% New Business 32% 35% Total YTD 45% 47% PLAN FORECAST Full Yr Forecast 46% 48% Margin Comments Product Z strong YTD bookings Q1-Q3 New Business bookings light on high margin product X 56
Slide 58: SAMPLE Business Unit – A/B List
SAMPLE Business Unit – A/B List 3 Year Current Year Status Customer Platform Program Description Sponsor Name Potential $ Plan $ YTD Act $ A Customer A Audio Product 3,326 1,854 1,236 A Customer B Lavatory Product 768 432 440 A Customer C Cargo Product 673 75 55 A Customer D Engine Product 576 213 1
Slide 59: SAMPLE Business Unit – New Business Bookings
SAMPLE Business Unit – New Business Bookings A/B Trend 16 10,000 A B 3 Yr Potential ($000) 14 Prototype Trend 8,000 12 6,000 10 8 4,000 6 2,000 4 2 0 0 2Q15 3Q15 4Q15 1Q16 2Q16 2Q15 3Q15 4Q15 1Q16 2Q16 New Business as a % of Sales 12% 10% 10% 9% 8% 8% 8% 7% 6% 6% 4% 2% 0% FY13 FY14 FY15 YTD YTD 4 Yr
Slide 60: SAMPLE Productivity Summary
SAMPLE Productivity Summary ($000) Full Yr Project Description YTD Enacted YTD Plan Full Yr Plan Forecast Raw Material LTA $688 $600 $688 $600 PCBA second source $420 $420 $420 $420 Connector LTA $64 $24 $64 $24 S92 Housing casting second source $166 - $166 $166 Spring multi-year buy - - $50 $50 Oth
Slide 61: SAMPLE Business Unit – Pricing
SAMPLE Business Unit – Pricing YTD Product Line “A” Pricing Results Percent Increase Comm Trans OEM Reg Bus Jet OEM Defense OEM Comm Aftmkt Gov Aftmkt Total YTD FY Plan Inflation 60
Slide 62: SAMPLE Business Unit – Forecast
SAMPLE Business Unit – Forecast ($000's) QTR QTR FY FY Fcst Plan ∆ Fcst Plan ∆ Bookings 12,300 12,000 300 40,850 40,000 850 Sales 10,750 10,500 250 40,125 39,375 750 EBITDA 5,075 4,800 275 18,535 18,400 135 EBITDA % 47% 46% 1% 47% 46% 1% 61
Slide 63: Business Unit Structure – Driving Value Creation
Business Unit Structure – Driving Value Creation Consistent Value Generation Detailed Accountability Clear Metrics Value Creation Focus 62
Slide 64: Mergers & Acquisitions
MERGERS & ACQUISITIONS BERNIE IVERSEN
Slide 65: FY15 and FY16 in Review
FY15 and FY16 in Review… Invested almost $3B in acquiring ≈ $760M in Revenue and ≈ $230M in EBITDA Stayed within Acquisition Criteria March 2015 March 2015 May 2015 Price: $725 M Price: $75 M Price: $496 M Seller: Strategic Seller: Strategic Seller: Private Equity August 2015 January 2016 FY16 Price
Slide 66: DDC Overview
DDC Overview Military ~650 employees 75% HQ/Main plant in Bohemia, NY. Commercial ~25% Aftermarket ~70% OEM ~30% Announced signing of Merger Agreement on 5/24/16 Market leader in providing proprietary data bus components Dominant worldwide standard for military avionics Product Line Breakdown
Slide 67: DDC Applications
DDC Applications Large Installed Base of Existing Applications Emerging Applications Where Military Aircraft Commercial Aircraft Weapons Systems Military Vehicles Space Prioritizes, delivers and manages Coordinates Forms data Forms a data from connected onboard information links between common data
Slide 68: Products are on Hundreds of Different Platforms
Products are on Hundreds of Different Platforms Company Products Company Products Data SSPC/Power Motion Data Power Supplies Motion Platform Bus Supply Feedback Other Platform Bus & Controllers Feedback Other A320 F‐15 A330 F‐16 A330 F‐18 A340 F‐22 A350XWB F
Slide 69: DDC Value Creation Plan
DDC Value Creation Plan Target EBITDA Bridge High aftermarket content Revise Spares and R&O Pricing Productivity – Plant consolidations & Restructuring Good New Business Growth Push the TDG Value Transition 2016 Price Productivity New Biz & 2021 Market (Volume) 68
Slide 70: M&A Organizational Structure
M&A Organizational Structure Exceptionally strong and stable team B. Iversen EVP – M&A and Business Development Rotational Director role Director – M&A Director – M&A General Counsel Utilize Brokers for US & Europe Rotational Spot U.S. Broker European Broker 69
Slide 71: European Expansion
European Expansion 2011 2016 European Broker Focus on United Kingdom and Germany Building relationships within other countries too 70
Slide 72: Active Acquisition Process
Active Acquisition Process Typical Results Typical Multiple: 9 – 12x EBITDA Post Acquisition: 50%+ multiple reduction 71
Slide 73: Proven Record of Acquisition & Integration
Proven Record of Acquisition & Integration Privately Held NYSE 1993 – 2006 2006 – 2010 2011 – 2012 2013 - 2016 Adel Sweeney Hartwell Beams Aeroproducts Electra-Motion Electromech Aerosonic CDA InterCorp. McKechnie Wiggins Tyee Arkwin Controlex Avtech TAC Whippany Actu
Slide 74: Acquisition Sourcing – Since IPO
Acquisition Sourcing – Since IPO Number of Businesses EBITDA at Time of Acquisition 22% 23% 34% 16% 62% 43% Strategic Private Holder Private Equity Note: Statistics include businesses acquired but later divested. 73
Slide 75: Acquisition Metrics – Weighted Historical Values
Acquisition Metrics – Weighted Historical Values (Excluding Divestitures) Sole Source 100% 88% 89% 87% 84% 80% 83% 81% 74% 78% 80% 71% 66% 60% 40% 20% 0% FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 Avg. Commercial vs. Military OEM vs. Aftermarket 100% 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% 0%
Slide 76: What We Don't Look For
What We Don’t Look For • Synergy • Bigger is better • Market share • Globalization • Fill out product line • Diversify • Excess capacity • Consolidating Industry • Access to markets • Spend $ to make $ • Blah, Blah, blah • Blah, Blah, blah • Get fee • Name in Paper • Get promoted • Increase salary •
Slide 77: What We DO Look For
What We DO Look For Increase Shareholder Value 76
Slide 78: Actual Performance – Example 1
Actual Performance – Example 1 Acq. Target EBITDA Bridge Act/Fcst EBITDA Bridge 2011 Price Productivity New Biz & 2016 2011 Price Productivity New Biz & 2016 Fcst Market Market (Volume) (Volume) EBITDA considerably ahead of the model creating significant value 77
Slide 79: Actual Performance – Example 2
Actual Performance – Example 2 Acq. Target EBITDA Bridge Act/Fcst EBITDA Bridge 2012 Price Productivity New Biz & 2017 2012 Price Productivity New Biz & 2016 Fcst Market Market (Volume) (Volume) EBITDA targeted to be just under the 5-year model in 4 years 78
Slide 80: Acquisition Integration Process
ACQUISITION INTEGRATION PROCESS BOB HENDERSON
Slide 81: Now That We Own It, What Do We Do?
Acquisition Integration Process Now That We Own It WHAT DO WE DO?! 80
Slide 82: Acquisition Integration Process - General
Acquisition Integration Process ‐ General Basics – All Acquisitions are Different • Past Operating History Impacts Model and Integration Needs/Process • Different Value Generation Approaches in Acquisition Model • Consolidate or Stand Alone – Productivity Opportunities • Contractual Opportunities &
Slide 83: Acquisition Integration Process - Timeline
Acquisition Integration Process ‐ Timeline Time After Actions ‐ General Acquisition (days) Present TransDigm, Our Culture and Value Generation Strategy ………………. 0 ‐ 15 Control Working Capital and Establish Financial Plan ………………………………… 0 ‐ 90 Evaluate Key Staff Personnel Competency …………………………………
Slide 84: Telair Cargo Group
Telair Cargo Group March 2015 Price: $725 M Main Locations: Miesbach, Germany, Goldsboro, NC and Holmstrand , Norway Employees: Just over 600 Seller: Strategic 83
Slide 85: Aerospace Business of Franke Aquarotter
Aerospace Business of Franke Aquarotter March 2015 Price: $75 M Main Location: Ludwigsfelde, Germany Employees: ≈ 50 Seller: Strategic 84
Slide 86: Aerospace Business of Pexco
Aerospace Business of Pexco May 2015 Price: $496 M Main Location: Yakima, WA Employees: ≈ 300 Seller: Private Equity 85
Slide 87: PneuDraulics, Inc.
PneuDraulics, Inc. August 2015 Price: $325 M Main Location: Rancho Cucamonga, CA Employees: ≈ 275 Seller: Privately Held 86
Slide 88: Breeze-Eastern Corporation
Breeze‐Eastern Corporation (1) January 2016 Price: $206 M Main Location: Whippany, NJ Employees: ≈ 175 Seller: Public Company 87
Slide 89: Product Presentation Breakout
Product Presentation Breakout Presentations Starting Location Roger Jones Breeze-Eastern EVP Herb Mardany Pexco Aerospace President, Pexco Aerospace Group – A Pete Palmer PneuDraulics EVP Ballroom Harry Ray AvtechTyee President, AvtechTyee Group – B Mike Couitt Hartwell President, Hartwell Ballroom
Slide 90: New Business & Innovation
NEW BUSINESS & INNOVATION JOEL REISS
Slide 91: New Business Overview
New Business Overview Drives Organic Growth Customer-Driven Business Opportunities Focus on Profitable Innovative State of the Art Solutions New Business Responsive and Agile Development 90
Slide 92: New Business "How We Do It"
New Business “How We Do It” Focused Engagement with Procurement and Engineering Identify Opportunities Establish Sponsorship Contracting Initial Focus Design and Development Contract Award Key Business Decision Gates Full Scale Development Negotiate Final Terms and Conditions Qualification and Certi
Slide 93: New Business "How We Do It" – Customer Relationships
New Business “How We Do It” Customer Relationships Strong Operational Performance Engineer to Engineer Selling Existing Part with Solve Customer Technical Issues New Customer New Part New Part Contracting Focus with with Existing New Strong Attention to Detail Customer Customer Control IP/
Slide 94: New Business "How We Do It" – Team Based Development
New Business “How We Do It” Team Based Development Business Unit Teams Cross-functional Partner with Suppliers Design Reviews Informal Meetings Formal Gate Process New Business Focus Rapid Prototype Development New Technologies New Processes 93
Slide 95: New Business Modeling
New Business Modeling Analytical Approach EXAMPLE ONLY Data Driven New Business Model Excerpt Realistic OEM Production Rates Annual Data 2016 2017 2018 2019 2020 2021 Production Sales NRE $494 $740 $987 $1,234 $1,481 Historical NRE Investment Estimates Production COS ($422) ($435) ($640) ($830
Slide 96: New Business Innovation
New Business Innovation People Strong Engineering Talent Customer Idea Feedback Generation Cross-functional Teams Management Focus Rapid Rapid Design Approach Prototyping Prototyping Solution Focused Iterative Design Approach Multiple Alternative Designs Iterative Customer Design Feedbac
Slide 97: Major New Business Content: Commercial New Aircraft
Major New Business Content: Commercial New Aircraft $ / Shipset Growth Over Prior Platforms B787 A350 A380 C-Series +62% +61% +96% +90% Prior Platforms B787 Prior Platforms A350 Prior Platforms A380 Prior Platforms C-Series 96 96
Slide 98: Major New Business Content: Commercial Re-Engining
Major New Business Content: Commercial Re‐Engining $ / Shipset Growth Over Prior Platforms B777X A320neo B737Max E2 +4% +13% +14% +91% Prior Platforms B777X Prior Platforms A320neo Prior Platforms B737max Prior Platforms E2 97
Slide 99: Airbus 350 Content
Airbus 350 Content • Composite dielectric isolators and hinges • APU Hamilton Sundstrand igniter • Cockpit door module • Composite dielectric isolator • Passenger seat belts • Trent 1000 engine valve • Interior bin latches tubes • Airbag seat belts • Hydraulic system , landing gear • Lavatory mechan
Slide 100: Boeing 787 Content
Boeing 787 Content • Composite dielectric isolators • Thrust reverser latches • Lav finish surfaces • Main engine lube system • Engine and electrical system • Crew escape and cargo door • Galley finish surfaces • Hydraulic filtration manifold elastomeric high temp/high latches • Premium seats • UV w
Slide 101: C-Series Content
C‐Series Content • Fuel system composite lightning • Passenger seat belts • PW engine ignition system • Main hydraulics priority valves isolators • Airbag seat belts • APU ignition system • PTU select valve • Hydraulic system composite • Flight attendant restraint systems • Fuel system pump valves •
Slide 102: Consistent Value Creation
Consistent Value Creation Profitable New Business Technical Innovation Engineered Solutions Grow Faster Than The Markets We Serve Disciplined Data Driven Approach Business Team Ownership High Sense of Urgency and Responsiveness Key Operating Value Driver 101
Slide 103: Financial Overview
FINANCIAL OVERVIEW TERRY PARADIE
Slide 104: Historical Financial Highlights
Historical Financial Highlights Revenue EBITDA as Defined ($ in millions) ($ in millions) $3,289 $1,477 $2,707 $1,234 $2,373 $1,073 $1,924 $900 $1,700 $809 $1,206 $590 48.9% 47.6% 46.8% 45.2% 45.6% 44.9% 2011 2012 2013 2014 2015 PF LTM 2011 2012 2013 2014 2015 PF LTM 4/2/16 (1) 4/2/16 (1) EBITDA % m
Slide 105: Significant Free Cash Flow
Significant Free Cash Flow Free Cash Flow Before WC Exceeds 50% of EBITDA As Defined (Units) $800 70% $700 60% $600 50% $500 40% $400 30% $300 20% $200 $100 10% $- 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2007 2008 2009 2010 2011 2012 2013 2014 2015 Free Cash Flow Cash Interest Expense Cash T
Slide 106: TransDigm Delevering Profile
TransDigm Delevering Profile (Net Debt / PF EBITDA as Defined) Refi & Dividend 7.0x Telair, Franke and Pexco 6.5x DDC Special Acquisition Dividend & GCP Warburg McKechnie Pincus Acquisition 6.0x Recap 5.5x IPO Special 5.0x Dividend Recap & AmSafe Dividend Acquisition 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x (1
Slide 107: Pro Forma Capitalization Structure
Pro Forma Capitalization Structure Pro forma capitalization Actual Cum. net Pro forma Cum. net ($ in millions) 4/2/16 EBITDA (x) Adj. 4/2/16 EBITDA (x) Rate Cash $612 858 $1,470 $600mm revolver – – – L + 3.00% $350mm A/R securitization facility 200 – 200 L + 0.80% First lien term loan C due 2020 2,0
Slide 108: Sources and Uses of Recent Financing
Sources and Uses of Recent Financing Sources & Uses ($ in millions) Sources Upsize RCF to $600m and extend maturity – New first lien term loan due 2023 1,740 New senior subordinated notes due 2026 950 Total sources $2,690 Uses Pending Acquisition of DDC purchase price $1,000 Repay portion of existin
Slide 109: Debt Maturity Profile and Interest Rates
Debt Maturity Profile and Interest Rates Old Debt Maturity Profile 3,000 Weighted Average ($MM) Interest Rate 550 1,150 2,000 Pre-Financing 1,000 2,025 500 5.3% 1,525 1,200 811 450 0 200 0 0 2016 2017 - 2019 2020 2021 2022 2023 2024 2025 New Pro Forma Debt Maturity Profile Weighted Average Interest
Slide 110: Dry Powder Available for Acquisitions
Dry Powder Available for Acquisitions Dry Powder in Excess of $1.5 B Available Immediately After Recent Financing and Assuming Completion of DDC Acquisition Pro Forma Cash 4/2/2016 ≈ $1,450 Additional Borrowing Available Under Credit Agreement ≈ 400 Dry Powder Available for Acquisitions ≈ $1,850 109
Slide 111: Appendix: Reconciliation of EBITDA and EBITDA As Defined to Net Income
APPENDIX: Reconciliation of EBITDA and EBITDA As Defined to Net Income and Net Income to Adjusted Net Income ($ in millions) LTM 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 4/12/16 Income from continuing ops. ($5) $0 $1 $3 $14 ($17) $
Slide 112: Appendix: Reconciliation of Significant Free Cash Flow
APPENDIX: Reconciliation of Significant Free Cash Flow ($ in millions) Fiscal Year Ended September 30, 2011 2012 2013 2014 2015 EBITDA As Defined $590 $809 $900 $1,073 $1,234 CapEx ($18) ($25) ($36) ($34) ($55) Cash Interest Expense ($156) ($198) ($238) ($320) ($399) Cash Taxes ($88) ($104) ($82) ($