UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2010
TransDigm Group Incorporated
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
001-32833
(Commission File Number)
41-2101738
(IRS Employer Identification No.)
| 1301 East 9th Street, Suite 3710, Cleveland, Ohio | 44114 | |
| (Address of principal executive offices) | (Zip Code) |
(216) 706-2960
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants’ under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 | Regulation FD Disclosure |
TransDigm Group Inc. (the “Company”) has prepared presentation materials (the “Presentation Materials”) that it intends to use on or after November 3, 2010 in presentations to potential lenders in connection with certain planned financing transactions, as described in the Company’s Current Report on Form 8-K, furnished to the Securities and Exchange Commission on October 29, 2010. The Presentation Materials are furnished as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by reference. The Presentation Materials are also posted in the Investor Relations section of the Company’s website, www.transdigm.com.
The information in this Current Report on Form 8-K and in the Presentation Materials shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933, as amended.
The Presentation Materials contain certain non-GAAP financial information. The reconciliation of such non-GAAP financial information to GAAP financial measures is included in the Presentation Materials. Further, the Presentation Materials contain statements intended as “forward-looking statements,” all of which are subject to the cautionary statement about forward-looking statements set forth therein.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit |
Description | |
| 99.1 | Presentation to Public Lenders by TransDigm Group Inc. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TRANSDIGM GROUP INCORPORATED | ||
| By: | /s/ Gregory Rufus | |
| Gregory Rufus | ||
| Executive Vice President, Chief | ||
| Financial Officer and Secretary | ||
Date: November 3, 2010
Exhibit Index
| Exhibit |
Description | |
| 99.1 | Presentation to Public Lenders by TransDigm Group Inc. | |
 0
$1,200,000,000
Senior Secured Credit Facilities
Presentation to Public Lenders
November 3, 2010
Exhibit 99.1 |
 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
similar
words.
You
should
consider
these
statements
carefully
because
they
discuss
our
plans,
targets,
strategies,
prospects
and
expectations
concerning
our
business,
operating
results,
financial
condition
and
similar
matters.
We
believe
that
it
is
important
to
communicate
our
future
expectations
to
our
current
and
potential
investors.
There
will
be
events
in
the
future,
however,
that
we
are
not
able
to
predict
accurately
or
control.
Our
actual
results
may
differ
materially
from
the
expectations
we
describe
in
our
forward-looking
statements.
Factors
or
events
that
could
cause
our
actual
results
to
materially
differ
may
emerge
from
time
to
time,
and
it
is
not
possible
for
us
to
accurately
predict
all
of
them.
You
should
be
aware
that
the
occurrence
of
any
such
event
could
have
a
material
adverse
effect
on
our
business,
results
of
operation
and
financial
position.
Any
forward-looking
statement
in
this
presentation
speaks
only
as
of
the
date
on
which
we
make
it.
We
undertake
no
obligation
to
update
or
revise
any
forward-looking
statements,
whether
as
a
result
of
new
information,
future
events
or
otherwise,
except
as
required
by
law. |
 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
audited
financial
information
relating
to
McKechnie
has
been
prepared
without
the
Company's
participation.
Further,
the
other
disclosure
related
to
McKechnie
contained
in
this
presentation
is
based
on
preliminary
information,
as
the
acquisition
of
McKechnie
has
not
yet
been
consummated.
As
such,
TransDigm
can
provide
you
with
no
assurances
as
to
the
accuracy
of
such
financial
and
other
disclosure
regarding
McKechnie
contained
in
this
presentation.
This
presentation
also
sets
forth
certain
pro
forma
financial
information.
This
pro
forma
financial
information
gives
effect
to
the
acquisition
of
McKechnie
as
well
as
certain
other
recently
completed
acquisitions.
Such
pro
forma
information
is
based
on
certain
assumptions
and
adjustments
and
does
not
purport
to
present
TransDigm's
actual
results
of
operations
or
financial
condition
had
the
transactions
reflected
in
such
pro
forma
financial
information
occurred
at
the
beginning
of
the
relevant
period,
in
the
case
of
income
statement
information,
or
at
the
end
of
such
period,
in
the
case
of
balance
sheet
information,
nor
is
it
necessarily
indicative
of
the
results
of
operations
that
may
be
achieved
in
the
future.
In
addition,
the
assumptions
underlying
certain
pro
forma
financial
information
related
to
the
acquisition
of
McKechnie
reflects
projected
cost
savings.
However,
our
ability
to
achieve
these
cost
savings
will
depend
upon
the
success
we
have
in
integrating
McKechnie
into
our
business,
and
we
cannot
assure
you
that
these
cost
savings
will
be
realized
within
the
time
frames
we
expect,
or
at
all
and
we
may
incur
unexpected
costs
in
integrating
McKechnie
that
offset
these
expected
cost
savings. |
 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
and
expenses,
unrealized
gains
and
losses
on
interest
rate
swaps,
foreign
exchange
gains
and
losses,
and
expenses
incurred
in
connection
with
the
sale
of
the
business.
Pro
forma
EBITDA
As
Defined
–
reflects
full
year
impact
of
recent
TransDigm
acquisitions. |
 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
TransDigm
Greg Rufus, Chief Financial Officer
McKechnie Financial Overview
TransDigm
Greg Rufus, Chief Financial Officer
Syndication Overview & Timetable
Credit Suisse
Public Q&A
Agenda |
 5
Transaction Overview |
 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 consist of:
-
$300 million Revolving Credit Facility
-
$900 million Term Loan B
-
$780 million Senior Subordinated Notes
On
September
27
th
,
TransDigm
announced
its
acquisition
of
McKechnie
for
$1,265
million,
approximately
12.9x
6/30/10
LTM
EBITDA
of
$98
million.
-
Proceeds
will
be
used
to
fund
the
acquisition,
pay
associated
fees
and
expenses,
refinance
a
portion
of
existing
debt
and
to
add
cash
to
the
balance
sheet.
TransDigm
(NYSE:
TDG)
is
a
leading
supplier
of
highly
engineered
aircraft
components
for
use
on
nearly
all
commercial
and
military
aircraft
in
service
today.
-
For
the
LTM
period
ended
July
3,
2010,
the
Company
generated
pro
forma
Revenue
and
Pro
forma
EBITDA
As
Defined
of
$855
million
and
$402
million
(47.0%
EBITDA
margin),
respectively.
McKechnie
is
a
leading
supplier
of
innovative
aerospace
products
for
use
primarily
on
commercial
transport
aircraft.
-
For
the
LTM
period
ended
June
30,
2010,
McKechnie
generated
Revenues
and
EBITDA
of
$299
million
and
$98
million
(1)
(32.8%
EBITDA
margin),
respectively.
TransDigm
currently has the following debt outstanding:
-
Existing Term Loan of $780 million (~1.9x LTM 7/3/10 Pro forma EBITDA As
Defined) -
$1,000 million of 7.75% Senior Subordinated Notes (total leverage of ~ 4.4x Pro
forma LTM EBITDA As Defined) The transaction is expected to close in December
2010. (1)
Before cost synergies of $4 million. |
 7
Sources & Uses and Pro Forma Capitalization
Sources and Uses (As of July 3, 2010)
($ in millions)
Pro Forma Capitalization (As of July 3, 2010)
($ in millions)
(1)
New $300 million Revolving Credit Facility.
(2)
Includes OID on New Term Loan and New Revolving Credit Facility.
(1)
Replace existing $200 million Revolver with new $300 million Revolving Credit
Facility. (2)
Cash
balance
is
net
of
$70.6
million
consideration
for
Semco
Instruments
acquisition.
(3)
Pro
forma
for
the
Semco
Instruments,
Dukes
Aerospace,
McKechnie
and
other
recent
acquisitions.
(2)
(3)
Sources
Uses
Revolver
(1)
–
McKechnie
Purchase Price
$1,265.0
New Term Loan
900.0
Refinance First Lien Term Loan
280.0
New Senior Sub Notes
780.0
Excess cash to Balance Sheet
84.4
Transaction expenses
(2)
50.7
Total sources
$1,680.0
Total uses
$1,680.0
Actual
Cum. EBITDA
Pro forma
Cum. EBITDA
% of.
7/3/2010
multiple
7/3/2010
multiple
Capitalization
Maturity
Cash
$258.4
$272.1
Revolver
(1)
–
–
–
–
–
November 2015
First Lien Term Loan
780.0
2.0x
500.0
1.0x
15.7%
June 2013
New Term Loan
–
2.0x
900.0
2.8x
28.3%
November 2016
Total senior secured debt
$780.0
2.0x
$1,400.0
2.8x
44.0%
Senior Sub Notes
1,000.0
4.6x
1,000.0
4.8x
31.4%
July 2014
New Senior Sub Notes
–
4.6x
780.0
6.3x
24.5%
November 2018
Total debt
$1,780.0
4.6x
$3,180.0
6.3x
100.0%
Net Debt to EBITDA
3.9x
5.8x
LTM Pro forma EBITDA
$390.0
$504.2 |
 8
TransDigm
& McKechnie
Overview |
 9
Highly engineered aerospace components
Proprietary and sole source products
Significant aftermarket content
High free cash flow conversion
($ in millions)
DISTINGUISHING
CHARACTERISTICS
BUSINESS 7/3/10
(1)
Business Overview
Pro forma
TransDigm
Standalone
Pro forma
TransDigm with
McKechnie
Revenue
(2)
:
$855
$1,154
EBITDA As Defined
(3)
:
$402
$504
EBITDA As Defined Margin:
47.0%
43.7%
Formed:
1993
(1)
Revenue and EBITDA information for pro forma TransDigm Standalone is for the LTM period ending 7/3/10
and includes the full year impact of recent completed acquisitions. EBITDA in this
presentation for pro forma TransDigm standalone refers to EBITDA As Defined which excludes inventory purchase adjustments, non-cash
compensation and deferred compensation charges, acquisition integration costs and one-time IPO
related costs. (2)
Based on TransDigm’s pro forma revenue, including the full year impact of recent completed
acquisitions, of $855 million and for Pro forma TransDigm with McKechnie, McKechnie’s LTM
6/30/10 revenue of $299 million. (3)
Based on TransDigm's pro forma standalone EBITDA As Defined (including recently completed
acquisitions) of $402 million and, for Pro forma TransDigm with McKechnie, McKechnie's LTM
6/30/10 EBITDA of $98 million and $4 million of projected first year cost savings associated with the McKechnie acquisition.
|
 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 |
 11
Latches
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 and
interior stowage bins
Rods
Leading market position in
custom engineered control rods
Source for high quality, custom
engineered, control, structural
and system rods
Fasteners
First-choice supplier of
specialized engineered
fasteners for aircraft airframe
and engine applications.
Provides
-
Specialty engine fasteners
-
High strength, high
temperature nickel alloy
specialty engine fasteners
-
Airframe bolts
-
Slotted entry bearings
Electromechanical
Brands
Brands
Brands
Brands
Designs and manufactures
various electromechanical
components, including
-
Blowers
-
Motors
-
Actuators
-
Valves
-
Generators
-
Liquid level sensors
-
Smart systems
McKechnie –
Diverse Products, Platforms and Markets
Approximately 80% of revenue
Approximately 20% of revenue |
 12
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
products,
creating
entrenched positions
-
Balanced portfolio of Airbus and Boeing platforms
-
Well-positioned on new platforms, including Boeing 787 and 747-8 and Airbus
A350 and A380 Commercial
Military
Rotorcraft
Regional jet
Business jet
Narrow-body
Fighter aircraft
Light
ERJ 145
G150 - G650
737
F-35 JSF
Bell 407 / 412
ERJ 170
Challenger 300
A320 Family
F/A-18
Bell 206
ERJ 190
Challenger 600
Wide-body
F-15
Eurocopter
CRJ700
Challenger 850
747
F-16
Medium lift
CRJ900
Falcon 7X
767
Hawk
MH / UH-60
CRJ1000
Falcon 900
777
Transport aircraft
Eurocopter
DHC-8-400
Falcon 2000
787
A400M
UH-1Y
ATR42 / 72
Global Express
A330
C-17
S-92
ARJ21
Learjet Family
A340
C-27J
Heavy lift
Phenom 100 / 300
A350
C-130J
V-22 Osprey
A380
CN-295
CH-47 / 53
Eurocopter
Presence on Key Platforms Across All Market Segments
Commercial
Length of Relationship
Over 20 years
Over 40 years
15 years
Over 15 years
Over 15 years
Over 40 years
~25 years
~40 years
30 years
Over 25 years
Selected Customers
Based on Management estimates as of 12/31/09. |
          13
McKechnie –
Latches Overview
Description
Representative Products
Headquartered in Placentia, CA
Mission is to remain the industry’s first choice in the design and
manufacture of quick access latching systems for aircraft
Utilized for both interior and exterior applications on almost every
commercial platform flying today
Robust and expanding aftermarket business supported by high
level of proprietary products and rapid delivery capability
Provide industry’s most rapid response for prototypes and “first to
market”
concepts
Offers a portfolio of products to operators and MROs that help
reduce stocking and infrastructure requirements, lower costs, as
well as simplify logistics
Latches
Doors
Hinges
Safety
Security
Latch
Selected Platforms
A320
Challenger 850
NH90-TTH
B777
B747-8
B787
V-22
Bell 407
F-35 |
       14
McKechnie –
Rods Overview
Description
Representative Products
Headquartered in Everett, WA
Premier supplier of highly engineered solutions and manufacturer
of structural components, assemblies of close tolerance metal
components and systems, including
-
Rods, struts and tubular components
-
Custom mechanical controls and structural assemblies
Recognized as a fast source for high quality, custom engineered,
control, structural and system rods
Supplies products on almost every commercial aircraft, regional
and business jet, helicopter, military and space program
Used in various applications including securing engines, floor
beams and kitchen galleys, and transferring pilot inputs to control
surfaces
Selected Platforms
Engine Rods
Carbon Fiber
Rods
Tie Rods
Struts
Force Sensor
Rods
Control Rods
End Fittings
B737
A320
B787
A380
EC-135
Gulfstream G550 |
         15
McKechnie –
Electromechanical Overview
Description
Representative Products
Headquartered in Wichita, KS
Efficiently designs and develops custom, high performance rotating
equipment and tools
Premier supplier of custom-engineered AC electrical motors, with
over 100 years serving the industrial, commercial and OEM
markets
Patented motor designs are renowned for their high-reliability and
resistance to harsh environments
Unique position as the only battery dedicated distributor and
servicing company in the world
Utilizes numerous strategic locations worldwide to supply batteries
and spares, battery servicing equipment, battery-shop training and
AOG support
Selected Platforms
Actuators
Blowers
Partial Motors
Motors
AC Induction Motors
Sikorsky UH-60
Blackhawk
Piaggio Avanti
USAF E-4B
C-17
Quest Kodiak RQ
Cessna Citation X
RQ-4B Global
Hawker Beechcraft
King Air |
          16
McKechnie
–
Fasteners Overview
Description
Representative Products
Headquartered in Sylmar, CA
Offers
a
broad
line
of
engine
fasteners,
airframe
bolts,
slotted
entry
bearings used by both major domestic and international airframe
companies and military aircraft manufacturers
Mission is to be the first-choice supplier of specialized and
engineered fasteners for airframe applications
Recognized for its 100% on-time delivery to commit dates
Renowned for low lead times and low acquisition costs created by
its tailored customer service programs
Strong relationships with more than 100 customers worldwide and
well positioned for growth
Selected Platforms
Airframe fasteners
Engine fasteners
Slotted bearings
Steel bolts and screws,
including stainless
Lockbolts
Titanium bolts and screws
A320
B777
B747-8
B787
CH-47
F-16
B737
C-17
C130J |
 17
TransDigm & McKechnie –
Major Locations
McKechnie Aerospace
TransDigm
Global Headquarters |
 18
Key Credit Highlights |
 19
Key Credit Considerations
MULTIPLE
GROWTH PATHS
PROVEN
OPERATING
STRATEGY
Experienced management team
Demonstrated value generation
Proven acquisition / integration
Market growth
High margins
Acquisitions
Low Capex
Strong free cash flow
ATTRACTIVE
MARKET
POSITION
Niche market positions
High margin aftermarket
Diverse mix
Favorable long-term industry
dynamics
Consistent Cash Generation and Long-Term Performance
|
 20
20
Steady Growth in Passenger Traffic Drives Stable
Aftermarket Sales…
Worldwide Revenue Passenger Miles
(billions of miles) |
 21
0
200
400
600
800
1,000
1,200
'96
'98
'00
'02
'04
'06
'08
'10E
'12E
0
200
400
600
800
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)
Commercial Transports
Regional & Business Jets
Source:
Wall Street Research / Airline Monitor / Management estimates.
|
 22
$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
O&M Base Budget
O&M Base + Supplemental Budget
Source:
U.S. Department of Defense, Wall Street research and Management estimates.
|
 23
Significant Barriers to Entry
Selection / Qualification Process
FAA Certification
Niche Markets
Risk / Reward Trade-Off |
 24
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
NET SALES
McKechnie
NET SALES
TransDigm:
Based on Management estimates for the fiscal year ended 9/30/09.
McKechnie:
Based on McKechnie
financials and TransDigm
Management estimates for the fiscal year ended 12/31/09.
TransDigm
and McKechnie
–
Strong Focus on High-Margin Aftermarket
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. |
 25
OEM
Aftermarket
Comm
Aftmkt
40%
Comm
OEM
33%
Def OEM
12%
Def Aftmkt
15%
Approximately 55% of pro forma net sales and a much higher percentage of
EBITDA As Defined are from the stable, high-margin aftermarket.
Combined Pro Forma NET SALES
Pro Forma EBITDA As Defined
Combined Strong Focus on High-Margin Aftermarket |
 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 12/31/09.
McKechnie (w/o Fasteners)
PROPRIETARY SALES
Significant Proprietary and Sole Source Revenue Base
Proprietary
95%
Non-
Proprietary
5%
Proprietary
95%
Non-
Proprietary
5% |
 27
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 ending
12/31/09. B737
C130
B777
A320 Family
B747
CRJ Family
Black Hawk Helicopter
B767
A330/A340
Gulfstream Family
B737
A320 Family
B777
A330/A340
B747
Gulfstream Family
Black Hawk Helicopter
Raytheon BizJet
Family
A380
CRJ Family
McKechnie
TransDigm |
 28
Proven Operating Strategy
3 VALUE DRIVERS
Profitable new business
Productivity and cost improvement
Value-based pricing |
 29
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 Motors
Dukes
Semco
Hartwell
Electromech/
Welco
Tyee
TAC
Linread
Valley-Todeco
2010 –
2011
Sweeney
Electra-
Motion
CDA
InterCorp.
Avtech
ADS/
Transicoil
Bruce
CEF
Unison/GE
APC/GE
Acme
Woodward
HRT
Proven Record of Acquisition & Integration
Privately Held
NYSE
With McKechnie, TransDigm has acquired 34 businesses since 1993,
including 19 since its IPO. |
 30
Pro Forma
Financial
Overview |
 31
$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
$0
$150
$300
$450
$600
TransDigm
McKechnie
% margin
20%
19%
23%
27%
31%
40%
39%
36%
36%
39%
42%
46%
44%
45%
46%
47%
49%
44%
Consistent Historical Growth and Performance
($ in millions)
($ in millions)
(2)
(3)
Net Sales
EBITDA As Defined and Margin
Source:
Company materials.
(1)
TransDigm’s and McKechnie’s fiscal year ends are September 30 and December 31, respectively.
FY10 numbers for TransDigm are for the LTM period ending 07/03/10 and McKechnie’s are for
the LTM period ending 6/30/10. (2)
Based on TransDigm’s pro forma estimated revenue, including the full year impact of recent
completed acquisitions of $855 million and McKechnie’s LTM 6/30/10 revenue of $299
million. (3)
Based on TransDigm’s estimated Pro forma EBITDA As Defined of $402 million, adjusted for the full
year impact of recent completed acquisitions, McKechnie's LTM 6/30/10 EBITDA of $94 million and
$4 million of projected cost savings associated with the acquisition.
|
 32
Proven Performance
0%
10%
20%
30%
40%
50%
60%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
EBITDA As Defined Margin
Source:
Company materials. |
 33
Adams Rite
Duke’s Aerospace
Proven Ability to Realize Value
TransDigm
has
been
very
successful
in
realizing
EBITDA
growth
in
each
of
its
acquisitions.
Norco
2009
Price
Productivity
Volume
Target
Year 0
Price
Productivity
Volume
Year 6
Year 0
Price
Productivity
Volume
Year 2
Source:
Company materials. |
 34
TransDigm
& McKechnie
–
Combined as of LTM 7/3/2010
Combined financial metrics continue to be very attractive.
($ in millions)
Pro Forma Revenue
Pro Forma EBITDA
Pro Forma EBITDA Margin
TransDigm
74%
McKechnie
26%
McKechnie
20%
TransDigm
80%
$855
TransDigm
$402
$299
McKechnie
$102
$1,154
Combined
$504
34.1%
43.7%
47.0%
TransDigm
McKechnie
Combined
TransDigm
McKechnie
Combined
Source:
Company materials.
(1)
(2)
(1)
Based on TransDigm’s 7/3/10 pro forma revenue, including the full year impact of recent completed
acquisitions, of $855 million and McKechnie’s LTM 6/30/10 revenue of $299 million.
(2)
Based on TransDigm’s LTM 7/3/10 Pro forma EBITDA As Defined of $402 million, adjusted for the
full year impact of recent completed acquisitions, McKechnie's LTM 6/30/10 EBITDA of $98
million, including $4 million of projected first year cost savings associated with the acquisition.
|
 35
Pro Forma Financial Highlights
LTM Period Ended July 3, 2010
TransDigm Pro forma
McKechnie
Pro forma Combined
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 Defined Margin
47.0%
34.1%
43.7%
Balance Sheet
Total Assets
$2,628
$1,095
$4,209
Total Debt
$1,780
$458
$3,180
($ in millions)
(1)
EBITDA As Defined is a non-GAAP financial measure presented here as
supplemental disclosures to net income and reported results. For a presentation of the
most directly comparable GAAP measure and a reconciliation of EBITDA As Defined,
please see Pg. 43 and Pg. 46. (2)
Includes $4 million of projected first year cost savings associated with the
acquisition. (2)
Source:
Company materials. |
  36
($ in millions)
Free Cash Flow
The Pro forma Company is expected to generate significant free cash flow.
Source:
Company materials.
LTM 7/3/10
Pro forma Combined
EBITDA
$504.2
Capital Expenditures
(19.5)
Cash Interest Expense
(204.2)
Cash Taxes
(56.5)
Free Cash Flow Before WC
$224.0
% of EBITDA
44.4% |
 37
TransDigm Financial
Overview |
 38
Consistent Track Record of Financial Success
TransDigm’s sales have grown every year since its founding.
($ in millions)
$48
$52
$57
$63
$78
$111
$131
$151
$201
$249
$301
$374
$435
$714
$762
$593
$802
$293
$0
$300
$600
$900
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
LTM
7/3/10
EBITDA
margin
20%
19%
23%
27%
31%
39%
39%
36%
36%
39%
42%
46%
44%
45%
46%
47%
49%
49%
Source:
Company materials. |
 39
Industry-Leading Financial Performance
TransDigm’s EBITDA and net income margins are at the top of the
aerospace sector.
7.1%
48.6%
19.3%
16.7%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
EBITDA %
Net Income %
Industry Peers
TransDigm
Source:
Factset and Company financials.
Note:
TransDigm margins as of LTM 7/3/10. Industry Peers average margins as of LTM
6/30/10. Industry Peers include: AAR, B/E Aerospace, Barnes Group,
Curtiss-Wright, Ducommun, Esterline, Goodrich, Heico, Hexcel, Meggitt, Moog, Precision Castparts, Rockwell Collins, Spirit
AeroSystems, Triumph Group, and Woodward Governor. |
 40
TransDigm Financial Highlights
($ in millions)
Source:
Company materials.
Fiscal Year Ended September 30,
LTM
CAGR
2005
2006
2007
2008
2009
7/3/2010
2005-2009
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
$449.1
23.5%
% Sales
49.2%
50.9%
52.1%
54.1%
56.4%
56.0%
Selling and administrative expenses
38.9
48.3
62.9
74.6
80.0
91.5
Amortization of intangibles
7.8
6.2
12.3
12.0
13.9
15.3
Refinancing costs
–
48.6
–
–
–
–
Income from operations
$137.6
$118.2
$233.8
$299.3
$335.4
$342.4
24.9%
% Sales
36.8%
27.2%
39.4%
41.9%
44.0%
42.7%
Net interest expense
80.3
76.8
91.7
92.7
84.4
$104.7
Income before income taxes
$57.3
$41.4
$142.1
$206.6
$251.0
$237.6
Income tax provision
22.6
16.3
53.5
73.5
88.1
83.2
Net income
$34.7
$25.1
$88.6
$133.1
$162.9
$154.4
47.2%
% Sales
9.3%
5.8%
14.9%
18.6%
21.4%
19.3%
Other financial information:
EBITDA As Defined
$164.2
$194.4
$274.7
$333.1
$374.7
$390.0
22.9%
As % of sales
43.9%
44.7%
46.3%
46.7%
49.2%
48.6%
Capital expenditures
8.0
8.4
10.3
10.9
13.2
13.9
EBITDA As Defined - CapEx
156.2
186.0
264.4
322.2
361.5
376.1
23.3%
As % of sales
41.7%
42.7%
44.6%
45.1%
47.5%
46.9%
Balance sheet information:
Total assets
$1,427.7
$1,416.7
$2,061.1
$2,255.8
$2,454.4
$2,616.0
Total debt
889.8
925.0
1,357.9
1,357.2
1,356.8
1,780.0 |
 41
Fiscal Year Ending September 30,
LTM
2005
2006
2007
2008
2009
7/3/2010
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 Taxes
(19.2)
(8.3)
(18.6)
(39.9)
(75.3)
(59.7)
Free Cash Flow Before WC
$91.0
$102.8
$155.1
$187.2
$204.0
$235.3
% of EBITDA
55.4%
52.9%
56.5%
56.2%
54.4%
60.3%
($ in millions)
TransDigm Free Cash Flow
TransDigm standalone generates significant free cash flow.
Source:
Company materials. |
 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
07/03
FY2003
FY2004
FY2005
4/06
FY2006
FY2007
FY2008
FY2009
10/09
LTM
7/3/10
(1)
(3)
(2) |
 43
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 were charged to cost of sales when the inventory was sold. (2)
Represents costs incurred to integrate acquired businesses and product lines into TD
Group’s operations, facility relocation costs and other acquisition-related costs. (3)
Represents the expenses recognized by the Company under their stock option plans and their
deferred compensation plans. The amount reflected above for the fiscal year ended September 30, 2006
includes (i) a reversal of previously recorded amounts charged to expense of $3.8 million resulting
from the termination of two of their deferred compensation plans during such period and (ii) expense
recognized by us under a new deferred compensation plan adopted by us during such period.
(4)
Represents the aggregate amount of one-time special bonuses paid on November 10, 2005 to members of
management. On November 10, 2005, the Company entered into an amendment to their former senior
secured credit facility pursuant to which the lenders thereunder agreed to exclude these one-time special bonus payments from the calculation of EBITDA As Defined.
(5)
Represents the amount recognized for an earnout payment pursuant to the terms of the retention
agreement entered into in connection with the acquisition of substantially all of the assets of Skurka
Engineering Company in December 2004. Pursuant to the November 10, 2005 amendment to the Company’s
former senior secured credit facility described above, the lenders thereunder agreed to exclude
earnout payments and deferred purchase price payments made in connection with certain permitted acquisitions from the calculation of EBITDA As Defined.
(6)
Represents costs incurred in connection with the refinancing in June 2006, including the premium paid
to redeem the Company’s 8 3/8% senior subordinated notes of $25.6 million, the write off of debt
issue costs of $22.9 million, and other expenses of $0.1 million.
(7)
Represents costs and expenses incurred by TD Group related to the initial public offering in March 2006
or the secondary offering in May 2007. Fiscal year ended September 30,
LTM
2005
2006
2007
2008
2009
7/3/2010
Net income
$34.7
$25.1
$88.6
$133.1
$162.9
$154.4
Add:
Depreciation and amortization
17.0
16.1
24.0
25.3
27.5
29.7
Interest expense, net
80.3
76.8
91.7
92.7
84.4
104.7
Provision for income taxes
22.6
16.3
53.4
73.5
88.1
83.2
Inv. purchase accounting adjustments
(1)
1.5
0.2
6.4
1.9
2.3
5.6
Acquisition integration costs
(2)
1.3
1.0
2.0
0.4
3.4
4.3
Non-cash comp and deferred comp costs
(3)
6.7
1.0
5.5
6.2
6.1
6.6
Acquisition transaction related expenses
–
–
–
–
–
1.5
One-time special payments
(4)
–
6.2
–
–
–
–
Acquisition earnout
costs
(5)
0.1
0.5
0.8
–
–
–
Refinancing costs
(6)
–
48.6
–
–
–
–
Public offering costs
(7)
–
2.6
1.8
–
–
–
Writedown
of certain property for sale
–
–
0.5
–
–
–
EBITDA As Defined
$164.2
$194.4
$274.7
$333.1
$374.7
$390.0 |
 44
McKechnie
Financial
Overview |
 45
McKechnie Financial Highlights
($ in millions)
Source:
McKechnie financials and Company estimates.
Fiscal Year Ended December 31,
LTM
CAGR
2007
2008
2009
06/30/10
2007-2009
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 profit
$48.4
$125.6
$123.0
$118.0
NM
% sales
14.6%
35.5%
38.7%
39.5%
Selling and administrative expenses
45.4
50.4
47.4
43.2
Operating income
3.0
75.2
75.6
74.8
Other income
–
6.4
–
–
Net interest expense
(53.3)
(70.9)
(24.9)
(39.0)
Foreign exchange (loss) gain
3.0
12.6
(2.7)
(1.0)
Income before income taxes
($47.3)
$23.4
$48.0
$34.7
NM
% sales
(14.2%)
6.6%
15.1%
11.6%
Income tax provision
(17.3)
4.0
12.3
8.9
(Loss) income from discontinued operations
0.3
(0.8)
–
–
Net income
($29.6)
$18.7
$35.6
$25.8
NM
% sales
(8.9%)
5.3%
11.2%
8.6%
Other financial information:
EBITDA
$83.0
$98.0
$99.0
$97.9
9.2%
As % of Sales
25.0%
27.7%
31.2%
32.8%
Capital expenditures
8.7
5.2
4.9
5.2
EBITDA - CapEx
74.3
92.8
94.1
92.7
As % of Sales
22.4%
26.2%
29.7%
31.0%
Balance sheet information:
Total assets
$1,094.5
$1,084.9
$1,086.6
$1,094.8
Total debt
505.6
478.3
477.1
457.6 |
 46
McKechnie EBITDA Reconciliation
($ in millions)
Source:
McKechnie financials and Company estimates.
Fiscal Year Ended December 31,
LTM
2007
2008
2009
6/30/2010
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
24.9
39.0
Provision for income taxes (benefit)
(17.3)
4.0
12.3
8.9
Less:
Foreign exchange gain (loss)
3.0
12.6
(2.7)
(1.0)
Other income
–
6.4
–
–
Operating Profit/(Loss)
$3.0
$75.2
$75.6
$74.8
Add:
Depreciation and amortization
35.2
18.3
18.2
18.5
Inv. Purchase accounting adjustments
(2)
39.8
–
–
–
Aquistion integration costs
(3)
2.9
–
–
–
Management Service Fee
(4)
1.8
3.0
3.1
2.9
Non-cash comp
(5)
0.3
1.7
1.8
1.7
First year cost synergies
4.4
EBITDA
$83.0
$98.2
$98.6
$102.3
(1)
Includes $27K of Amortized Intangible Assets
(2)
Represents purchase accounting adjustments to inventory associated with the
acquisition of McKechnie from Melrose PLC. (3)
Represents costs incurred to integrate McKechnie.
(4)
Represents the expenses recognized by McKechnie under the agreement with JLL
Partners. (5)
Represents the expenses recognized by McKechnie under their stock option plan.
(1) |
 47
Syndication Overview &
Timetable |
 48
October 2010
November 2010
Su
Mo
Tu
We
Th
Fr
Sa
Su
Mo
Tu
We
Th
Fr
Sa
1
2
1
2
3
4
5
6
3
4
5
6
7
8
9
7
8
9
10
11
12
13
10
11
12
13
14
15
16
14
15
16
17
18
19
20
17
18
19
20
21
22
23
21
22
23
24
25
26
27
24
25
26
27
28
29
30
28
29
30
31
Key date
Holiday
Preliminary Transaction Timeline |
 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 million Revolving Facility (the “Revolver”)
(1)
and $900 million Term Loan (the "Term Loan")
Ratings:
S&P (B+ (Corporate) and BB- (Facility)) and Moody’s (B1 (Corporate) and Ba2 (Facility))
Maturities:
2015 (Revolver) and 2016 (Term loan); springing maturity of April 2014 if existing 7.75% Senior
Subordinated Notes not refinanced
Interest rate:
L + 375-400 on Revolver and Term Loan
Upfront fee / issue price:
1.0 point on Revolver and 99 on Term Loan
Unused commitment fee :
50 bps (on Revolver); subject to one leveraged based step-down to 37.5 bps
LIBOR floor:
1.5%
Incremental facility:
$500 million subject to pro forma senior secured leverage of 4.0x and 50 bps of MFN
Term loan amortization:
1% per annum with bullet in final year of maturity
Security and guarantees:
All of the obligations of the Borrower under the Senior Secured Credit Facilities will be
unconditionally guaranteed by TransDigm Group Inc. (the “Parent Company”), the
Company and by each existing and subsequently acquired or organized material domestic
subsidiary of the Company, subject to limited exceptions (the “Subsidiary
Guarantors”). The Senior Secured Credit Facilities will be secured by a first priority
perfected lien on substantially all of the property and assets (tangible and intangible) of
the Parent Company, the Borrower and the Subsidiary Guarantors, including a pledge of 100% of
the capital stock of the Borrower and each domestic subsidiary of the Parent Company and the
Borrower, and 65% of the stock of each 1st tier material non-U.S. subsidiary of the Parent
Company, the Borrower and each Subsidiary Guarantor. Mandatory
prepayments: 50% excess cash flow (subject to leveraged based step-downs); 100% net
proceeds of asset sales and insurance and condemnation events; and 100% from the issuance of
debt Affirmative covenants:
Substantially the same as existing facilities
Negative covenants:
Usual for facilities of this type, including limitations on indebtedness, liens, guarantees, mergers
and acquisitions (subject to leverage condition TBD), asset sales, restricted payments,
transactions with affiliates, and investments Financial covenants:
(i)
Maximum total leverage ratio
(ii)
Minimum interest coverage ratio
(1)
Up to $125 million will be available in a Letter of Credit Sub Facility.
|
 50
Public Q&A |