Esterline Explained. Third Quarter, Fiscal 2014

Transcription

1 Esterline Explained Third Quarter, Fiscal 2014

2 This presentation may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as anticipate, believe, continue, could, estimate, expect, intend, may, might, plan, potential, predict, should or will, or the negative of such terms, or other comparable terminology. These forward-looking statements are only predictions based on the current intent and expectations of the management of Esterline, are not guarantees of future performance or actions, and involve risks and uncertainties that are difficult to predict and may cause Esterline s or its industry s actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Esterline's actual results and the timing and outcome of events may differ materially from those expressed in or implied by the forward-looking statements due to risks detailed in Esterline's public filings with the Securities and Exchange Commission including its most recent Annual Report on Form 10-K. This presentation may also contain references to non-gaap financial information subject to Regulation G. See Appendix A of this document for reconciliations and definitions. 1

3 Overview Esterline is... A highly diversified, global manufacturer of custom engineered solutions for the aerospace and defense market, operating through three distinct business segments: Advanced Materials Sensors & Systems Avionics & Controls Employees: Approx. 12,500 Enterprise Value: $4.1B* FY2013 Revenue: $2B FY2013 Op. Profit: $238M * Market Capitalization of $3.7B plus Long-Term Debt less Cash as of July

4 Key Investment Highlights Esterline is a highly diversified, balanced business Esterline benefits from a strong, well structured yet flexible organization Track record of financial performance is consistent and compelling Esterline s financial position is excellent Strong balance sheet and cash generation Solid margins and cost controls Many varied opportunities to drive growth and create shareholder value 3

5 Balanced Globally and by End Market Another way to look at ESL: Good Balance 45% Commercial Aerospace 35% Defense 50% 50% United States Outside the US 20% Adjacent Applications using A & D technologies 4

6 3 Business Segments 8 Primary Capabilities Advanced Materials Avionics & Controls Sensors & Systems 5

7 Advanced Materials Segment Two distinct product categories 6

8 Avionics & Controls Segment Tier 1 components and systems provider 7

9 Sensors & Systems Segment World leader in relays, Tier 1 sensor packages, GFI, and connectors 8

10 Dozens of Major Customers 9

11 Hundreds of Programs 10

12 Thousands of Products 11

13 WELL STRUCTURED YET FLEXIBLE ORGANIZATION 12

14 Operational Excellence = Preferred Supplier Efficiencies Create Growth Platform and Segment Synergies Consolidate sales & marketing, backroom functions, LCC initiatives, supply chain, manufacturing and JVs Lean Enterprise Eliminate waste Continuous improvement Create capacity through velocity Globally competitive World Class Performance = Pricing Leverage 13

15 CONSISTENT, COMPELLING FINANCIAL PERFORMANCE 14

16 Revenue Growth Revenue ($ in millions) 14.3% CAGR ( TTM) $1,992 $1,970 $2,100 $1,718 $1,462 $1,407 $1,527 $1,189 $760 $903 $ TTM * Trailing Twelve Months as of July

17 Financial Results Third Quarter Q Q % Change Sales $ 531M $ 478M 11.1% EBITDA (1) 87M 81M 7.4% EBIT 59M 50M 18.0% Adj. EPS * $ 1.38 $ % FCF** 37M 61M 39.3% * From Continuing Operations, Q adj. EPS does not include $0.19 per share of restructuring and incremental compliance costs ** Free cash flow defined as Cash Flow from Operations less CapEx see Appendix A (1) EBITDA from Continuing Operations see Appendix A 16

18 Esterline Capital Structure Strategy: Continue to Fuel Growth with the Flexibility of an Investment Grade Caliber Balance Sheet 17

19 Strong and Consistent Backlog Growth Backlog ($M) Annualized backlog growth from legacy and acquired businesses resulted in a growth rate of roughly 17% $ 1,086 $ 1,074 $ 1,099 $ 1,253 $ 1,317 $ 1,276 $ CAGR 16.5% $ 626 $ 398 $ 462 $

20 Leads to Strong Free Cash Flow Free Cash Flow * ($M) CAGR 14.7% $ $134 $143 $ $93 $80 $ $50 $43 $54 20 $ * Free cash flow defined as Cash Flow from Operations less CapEx... See Appendix A 19

21 MANY, VARIED OPPORTUNITIES TO DRIVE GROWTH AND CREATE SHAREHOLDER VALUE 20

22 Choosing the Right Programs Commercial 787, 737, A320 Defense A400M JSF P-8 Black Hawk 21

23 Important Program Values Program Name Esterline approx. value per ship set Airbus A380 $ 1,000,000 Airbus A400M $ 1,200,000 Beechcraft T-6B and derivatives $ 600,000 Boeing 787 $ 600,000 Boeing P-8 $ 1,000,000 Boeing $ 450,000 Lockheed F-35 $ 900,000 Sukhoi Super Jet 100 $ 775,000 Retrofit: Boeing 737 Black Hawk C

24 Investment in the Future Continued R&D investments are paying off now with more to come Enables competitive position as best-in-class niche provider Positioned for strong production ramp on invested programs and entry into more new programs Future program investments Airbus A350 Embraer KC-390 Boeing 737 MAX Gulfstream biz jets Bombardier C-Series Mitsubishi Regional Jet (MRJ) Embraer E-Jet E2 23

25 Key Investment Highlights Esterline is a highly diversified, balanced business Esterline benefits from a strong, well structured yet flexible organization Track record of financial performance is consistent and compelling Esterline s financial position is excellent Strong balance sheet and cash generation Solid margins and cost controls Many varied opportunities to drive growth and create shareholder value 24

26 Appendix A 1) EBITDA from continuing operations, EBIT, and free cash flow are measurements not calculated in accordance with GAAP. We define EBITDA as earnings from continuing operations plus depreciation and amortization (excluding amortization of debt issuance costs). We define free cash flow as cash flow from operations less capital expenditures. We do not intend EBITDA to represent cash flows from continuing operations or any other items calculated in accordance with GAAP, or as an indicator of Esterline s operating performance. Our definitions of EBITDA, EBIT, and free cash flow from continuing operations may not be comparable with EBITDA from continuing operations as defined by other companies. We believe EBITDA, EBIT, and free cash flow are commonly used by financial analysts and others in the aerospace and defense industries and thus provide useful information to investors. Our management and certain financial creditors use EBITDA as one measure of our leverage capacity and debt servicing ability, and is shown here with respect to Esterline for comparative purposes. EBITDA, EBIT, and free cash flow is not necessarily indicative of amounts that may be available for discretionary uses by us. The following table reconciles operating earnings from continuing operations to EBITDA from continuing operations and cash flow from operations to free cash flow: In Thousands Period Q Q Operating earnings $ 58,641 $ 49,523 Depreciation and amortization 27,965 31,227 EBITDA $ 86,606 $ 80,750 Cash flow from operations $ 50,263 $ 73,595 Capital expenditure 13,712 12,680 Free cash flow $ 36,551 $ 60,915 25