FORWARD-LOOKING STATEMENTS

Transcription

1 INTRODUCTION TO HÉROUX-DEVTEK February 11, 2015

2 FORWARD-LOOKING STATEMENTS In the interest of providing shareholders and potential investors with information regarding Héroux-Devtek, including management s assessment of future plans and operations, certain statements in this presentation are forwardlooking statements subject to risks, uncertainties and other important factors that could cause the Company s actual performance to differ materially from those expressed in or implied by such statements. Such factors include, but are not limited to: the impact of general economic conditions, particularly in Canada and the United States; industry conditions including changes in laws and regulations; increased competition; the lack of availability of qualified personnel or management; availability of commodities and fluctuations in commodity prices; foreign exchange or interest rates fluctuations; stock market volatility; and the impact of accounting policies issued by Canadian, US and international standard setters. Some of these factors are further discussed under Risks and Uncertainties in the Company s MD&A, but readers are cautioned that the list of factors that may affect future growth, results and performance is not exhaustive, and undue reliance should not be placed on forward-looking statements. Although the Company believes that the expectations conveyed by the forward-looking statements are based on information available to it on the date such statements were made, there can be no assurance that such expectations will prove to be correct. All subsequent forward-looking statements, whether written or orally attributable to the Company or persons acting on its behalf, are expressly qualified in their entirety by these cautionary statements. Unless otherwise required by applicable securities laws, the Company expressly disclaims any intention, and assumes no obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 2

3 HÉROUX-DEVTEK PROFILE Canadian Public Company listed on the Toronto Stock Exchange since 1986 (ticker symbol HRX) 70 years of Aerospace manufacturing experience Third largest landing gear company worldwide Trailing 12 months sales of $350.1 million for the period ended December 31, 2014 Approximately 1,400 employees in Canada, the U.S. and the U.K. 14 facilities totalling close to 900,000 sq.ft. 3

4 Sales in $M of Canadian dollars HÉROUX-DEVTEK PROFILE 10-year sales comparison Sales by employee (in '000s) Compound annual growth rate of 12% for the last 10 years Aerospace Sales ($M) Sales by employees ('000s) Trailing 12 months 150 4

5 Adjusted EBITDA in $M of Canadian dollars HÉROUX-DEVTEK PROFILE 10-year adjusted EBITDA comparison 3.9% 5.4% 11.7& 13.2% 12.7% 14.9% 13.7% - N1 15.3% 12.8% 13.2% - N1 12.9% - N1 Foreing exchange - Canadian $/1 US $ equivalent 50 Compound annual growth rate of 26% for the last 10 years Adjusted EBITDA ($M) FX Canadian $ / 1 US $ equivalent Percentages presented in the column chart represent EBITDA / sales ratio N1 Trailing 12 Excluding acquisition-related costs and restructuring charges. months

6 MAJOR MILESTONES 1942 Company founded Began manufacturing of aerospace components 1960s Designed and manufactured first landing gear systems (Canadair CL-215 and DHC-6) Manufactured the Apollo lunar module landing gear 1970 First major landing gear R&O contract for Hill Air Force Base (USAF) 1985 Management buy out and first major military landing gear manufacturing contracts (C-130, F-4, F-15, KC-135R) 1987 Acquired McSwain Manufacturing (Ohio). Foundation of Industrial product line 1999 Creation of Aerostructure product line 2000 Merged with Devtek Corporation 2004 Acquired Progressive Inc. (Texas) 2010 Acquired Eagle Tool & E2 Precision Products (Ohio) 2012 Sale of substantially all Aerostructure and Industrial operations 2013 Multi-year contract to manufacture complete landing gear systems for B-777 and B-777X 2014 Acquisition of APPH 6

7 HÉROUX-DEVTEK TODAY Approximately 1,400 employees in Canada, the U.S. and the U.K. 14 facilities in 12 cities totalling close to 900,000 sq.ft. 7

8 MAJOR SHAREHOLDERS Principal holders of voting securities as of February 2015 Caisse de dépôt et placement du Québec 13.4% Deans Knight Capital Management Ltd. 13.5% Directors, officers and key management 11.7% Total Shares Outstanding: approx. 35.9M as at February

9 Market Segment Penetration (Commercial, Military) GLOBAL LANDING GEAR MARKET Corporation believes that it can achieve sales of approximately $500 million by its 2019 fiscal year #3 U.T.A.S. (Goodrich) #2 #1 #4 Liebherr Messier- Bugatti- Dowty #5 Fokker $100 M $500 M $1 G 9

10 STRATEGIC OBJECTIVES To be a world-class organization in our core Landing Gear market Leverage our engineering skills to provide customers with integrated solutions Focus on value-added products and services Design and development programs Complete and complex sub-assemblies Be an active industry consolidator Strategic acquisitions that will further complement our product and service portfolio as well as provide new technologies, such as APPH 10

11 STRATEGIC OBJECTIVES (continued) Maintain a solid financial position and achieve above average return compared to industry peers Maintain and build on our culture of entrepreneurship through the participation, dedication and commitment of our people Achieve a balanced product mix between: Civil and military / New component manufacturing and aftermarket products and services / Built-to-print vs. proprietary products Héroux-Devtek Fiscal 2014 Total Revenue: C$257M (1) APPH Fiscal 2014 LTM Total Revenue: C$83M (2) Combined Corporation Fiscal 2014 LTM Total Revenue: C$340M 3% Proprietary Products 13% 10% Built-to-Print 31% 5% 16% Proprietary Products 27% 28% Aftermarket 36% 26% 11% OEM 54% Built-to-Print 87% 51% 15% Proprietary Products 69% Built-to-Print 73% 45% (1) Héroux-Devtek actual revenue for the last 12 months for the period ended March 31, 2014, excluding APPH contribution. (2) APPH total revenue if the acquisition had occurred on April 1,

12 MAJOR CUSTOMERS END USERS O.E.M.s TIER I 12

13 PRODUCT OVERVIEW COMMERCIAL MARKET Business/Regional Jets/Turboprops and Helicopters Jetstream 31/32/41 Legacy 500 EC 175 Advance Light Helicopter Saab 340/2000 Citation Jet Legacy 450/500 Learjet 45 Falcon 5x 13

14 PRODUCT OVERVIEW COMMERCIAL MARKET Large Commercial Jets Boeing 737 Boeing 777 Airbus 320 B777 NLG Piston Boeing 787 Airbus 330 Boeing B-777 Landing Gears 14

15 PRODUCT OVERVIEW MILITARY MARKET C-130J CH-47 KC390 F-35 Gripen NG KC-135 C-27J Hawk CH-53K AW

16 BOEING 777 LANDING GEAR CONTRACT Long-term contract signed with Boeing on December 2013 to supply complete landing gear systems for the B-777 and B-777X programs Deliveries should begin in early calendar 2017, with an option to extend the contract through 2028 The B-777 is the world's most successful twin-engine, airplane with 1,827 orders and a backlog of 564 aircraft as at December 31, 2014 Capital investment plan $105 million spanning our 2015 and 2016 fiscal year in addition to regular maintenance investments of $30 million over these fiscal years Main elements: Expansion of the existing facility network Investments in leading-edge machinery and equipment (automation) 16

17 COMMERCIAL AEROSPACE MARKET Large commercial aircraft market should maintain its momentum Revenue-Passenger-Kilometer should grow 7.0% in calendar 2015 (IATA) Boeing forecasts an annual average traffic increase of 5% over the next 20 years Commercial aviation is resilient 4 recessions 2 financial crisis 2 Gulf wars SARS outbreak One petroleum shock 9-11 events All had temporary effects, but none impaired the long-term progression The growing wealth of emerging nations is the driving force 17

18 Air trips per person per year TRAVEL GROWS WITH INCOME Source: Boeing 2014 Current Market Outlook Income per capita 18

19 WORLDWIDE FLEET TO DOUBLE IN 20 YEARS Source: Boeing 2014 Current Market Outlook 19

20 LARGE COMMERCIAL AIRCRAFT DELIVERIES AND BACKLOGS 36,770 aircraft average of more than 1,800 per year Order backlog (December 31, 2014) 20

21 BUSINESS JET MARKET Market is recovering Shipments increased by 9.3% in the first ninth months of 2014 (GAMA) 4.0% increase in aircraft movements in the U.S. in 2014 Decrease in used jets for sale as a percentage of the fleet Lowest percentage since the recession (Jetnet) Growth expected to be sustained over up to five years Héroux-Devtek will benefits from 2 new business aircrafts Legacy 450 and 500 Dassault 5X Business Aircraft Shipments Source: Teal Group 21

22 MARKET TRENDS MILITARY AEROSPACE Market expected to remain difficult U.S. FY15 budget funding similar to previous year Héroux-Devtek is affected by budget restrictions Sequestration cuts eliminated through FY15, but funding request for FY16 exceeds sequestration caps by US$36 billion Must proactively optimize asset utilization and adapt supply to demand, as shown by workforce reductions announced in January Diversified military portfolio Participation on many leading U.S. and Canadian military programs (CH-47, JSF, C-130) and further diversification in the European territory that has very little exposure to the U.S. military market (Hawk, AW 101, C-27J, Gripen, KC-390) Good balance between new component manufacturing as well as aftermarket products and services 22

23 LANDING GEAR DESIGN PROGRAMS Embraer Legacy 500: FAA certification obtained in October 2014; first deliveries in fourth quarter of 2014 Legacy 450: flight tests in progress Sikorsky CH-53K Legacy 500 Legacy 450 Dassault Falcon 5X: first flight scheduled for second quarter of calendar 2015 CH-53K Falcon 5x 23

24 LANDING GEAR DESIGN PROGRAMS (continued) BAE Systems Hawk AgustaWestland AW101 SAAB JAS 39 Gripen, Gripen NG, currently in development, and 340/2000 regional jet for SAAB (Sweden) Alenia C27J Spartan aircraft Airbus Helicopters The new EC175 aircraft, ready for service for end-customers since December 2014 Hawk AW101 Gripen NG C27J EC175 24

25 LANDING GEAR DESIGN PROGRAMS Center of excellence for design engineering and technical expertise St-Hubert (Québec) and Runcorn (UK) Regroups all resources for landing gear design, development and testing Involved in all phases leading to certification Grants and financial incentives from government $48.9 million repayable loan with Industry Canada Support our engineering efforts related to R&D of new technologies for complete landing gear systems 25

26 FISCAL 2015 Q3 RESULTS Quarters ended December 31, Sales ($M) EBITDA 1 ($M) Adjusted EBITDA 1,2 ($M) Adjusted EBITDA 1,2 margin 13.1% 13.5% Net income ($M) (1.9) 2.6 Diluted EPS ($) (0.05) 0.08 Adjusted net income 3 ($M) Adjusted diluted EPS 3 ($) Cash flow from operations ($M) (1) Earnings, before interest, taxes, depreciation and amortization. (2) Excluding acquisition-related costs and restructuring charges. (3) Excluding impairment of finite-life intangibles assets, restructuring charges and acquisition-related costs. 26

27 FISCAL 2015 YTD RESULTS Nine months ended December 31, Sales ($M) EBITDA 1 ($M) Adjusted EBITDA 1,2 ($M) Adjusted EBITDA 1,2 margin 12.3% 12.5% Net income ($M) Diluted EPS ($) Adjusted net income 3 ($M) Adjusted diluted EPS 3 ($) Cash flow from operations ($M) (1) Earnings, before interest, taxes, depreciation and amortization. (2) Excluding acquisition-related costs and restructuring charges. (3) Excluding impairment of finite-life intangibles assets, restructuring charges and acquisition-related costs. 27

28 HEALTHY FINANCIAL POSITION As at (in millions of Cdn $) December 31, 2014 March 31, 2014 Cash & cash equivalents Long-term debt (incl. current portion) Net debt-to-equity ratio 0.23:1 0.43:1 Book value per share ($) Cash & cash equivalents of $40.6M, or $1.13 per share Issuance of 4,255,871 common shares as part of a public offering and private placements in June 2014 Net proceeds of $47.9 million used to repay the credit facility 28

29 OUTLOOK In the current fiscal year ending March 31, 2015, Héroux-Devtek will benefit from a full-year contribution from APPH, while internal sales should be relatively stable compared with last year Commercial: Robust activity, mainly in the large commercial aircraft market, should yield internal sales growth Military: Expected internal sales decline due to U.S. budgetary restrictions 29

30 OUTLOOK With the following key drivers, the Corporation believes that it can achieve annual sales of approximately $500 million by its 2019 fiscal year, assuming no further acquisition and stable exchange rates: Initial contribution and subsequent growth of APPH Multi-year contract with Boeing to supply complete landing gear systems for the B-777 and 777X Additional sales from design and development contracts (Embraer Legacy 450/500, Dassault Falcon 5X, Sikorsky CH-53K, Airbus Helicopters EC-175 and SAAB Gripen NG) 30

31 IN SUMMARY We are a world-class player in the landing gear market with a world-class team Leverage the strength of our engineering team by offering fully integrated solutions to our customers Boeing B-777 and B-777X contract proves our capability to be competitive on very large-scale projects Acquisition of APPH provides significant and immediate benefits New market, new programs, new world-class customers Sharing of best practices and cross-selling opportunities We will continue to create value for our shareholders 31

32 THANK YOU 32