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): February 7, 2013
TransDigm Group Incorporated
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 001-32833 | 41-2101738 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 1301 East 9th Street, Suite 3000, Cleveland, Ohio | 44114 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (216) 706-2960
Not Applicable
(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 registrant under any of the following provisions:
¨ 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.
On February 7, 2013, TransDigm Group Incorporated (“TransDigm Group” or the “Company”) issued a press release announcing that TransDigm Group will host a conference call (the “Lender Presentation”) to discuss a refinancing of the Company’s senior credit facility on February 8, 2013, beginning at 10:00 a.m., Eastern Time.
The Company has prepared presentation materials (the “Presentation Materials”) that it will present during the Lender Presentation and in other presentations to potential lenders in connection with the refinancing of the Company’s senior credit facility. The Presentation Materials are furnished as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by reference.
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.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| 99.1 | Presentation to Public Lenders by TransDigm Group Incorporated |
SIGNATURE
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 | |
|
| ||
| Name: Gregory Rufus Title: ExecutiveVice President, Chief Financial Officer and Secretary | ||
Date: February 8, 2013
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Presentation to Public Lenders by TransDigm Group Incorporated |
Exhibit 99.1
Exhibit 99.1
$2,510,000,000
Senior Secured First Lien Credit Facility Refinancing
Presentation to Public Lenders
February 8, 2013
Forward Looking Statements
This presentation contains forward-Looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-Looking statements are based on management’s current expectations and beliefs, as well as a number of assumptions concerning future events, many of which are outside of our control. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-Looking statement. These risks and uncertainties include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; future terrorist attacks; our reliance on certain customers; the U.S. defense budget and risks associated with being a government supplier; failure to maintain government or industry approvals; failure to complete or successfully integrate acquisitions; our substantial indebtedness; potential environmental liabilities; and other factors. Further information regarding the important factors that could cause actual results to differ materially from projected results can be found in TransDigm Group’s Annual Report on Form 10-K and other reports that TransDigm Group or its subsidiaries have filed with the Securities and Exchange Commission.
You are cautioned not to place undue reliance on our forward-Looking statements. TransDigm Group Incorporated assumes no obligation to and to, expressly disclaims any obligation to, update or revise any forward-Looking statements, whether as a result of new information, future events or otherwise.
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Special Notice Regarding Non-GAAP Information
This presentation sets forth certain pro forma financial information. This pro forma financial information gives effect to certain recently completed acquisitions and divestitures. 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.
This presentation also sets forth certain non-GAAP financial measures. A presentation of the most directly comparable GAAP measures and a reconciliation to such measures are set forth in the appendix.
Definition:
EBITDA As Defined: Excludes inventory purchase adjustments, non-cash compensation charges, acquisition integration costs and one-time IPO related costs as defined in TransDigm’s existing credit agreement.
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Agenda
Transaction Overview
Financial Overview
TransDigm Overview
Syndication Overview & Timetable
Public Q&A
Credit Suisse
Hayes Smith, Managing Director
TransDigm
Greg Rufus, Executive Vice President
& Chief Financial Officer
TransDigm
Nick Howley, Chairman and Chief Executive Officer
Greg Rufus, Executive Vice President
& Chief Financial Officer
Credit Suisse
Jeff Cohen, Managing Director
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Transaction Overview
Executive Summary
TransDigm (NYSE: TDG) (“TransDigm” or the “Company”) 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 ending December 29, 2012, the Company generated LTM 12/29/12 GAAP Revenues and
EBITDA As Defined of $1,778 million and $836 million (47% EBITDA margin), respectively
TransDigm is seeking to refinance its existing Senior Secured First Lien Credit Facility with a new $310 million, 5 year
Revolving Credit Facility (the “Revolver”) and $2,200 million, 7 year First Lien Term Loan (the “Term Loan”)
- L + 2.75%, 0.75% LIBOR floor; 101 softcall re-pricing protection for 1 year
TransDigm is also seeking the following amendments to its Existing Revolver and Term Loan Credit Agreements:
- Unlimited Restricted Payments basket if Net Leverage below 5.75x as long as Revolver is undrawn and minimum
pro forma cash balance of $200 million
- Revolver covenant set to 6.00x Net Leverage and Interest Coverage Ratio covenant removed
- Allow for an Accounts Receivable Securitization basket of up to $250 million
Commitments and Required Lender consents are due by 12 PM EST on February 13, 2013
Note: EBITDA As Defined is a non-GAAP financial measure. For a historical reconciliation of EBITDA As Defined to Net Income, please see the appendix.
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Financial Overview
Pro Forma Capitalization Table
($ in millions)
Actual Cum. EBITDA Pro forma Cum. EBITDA Interest
12/29/2012 multiple 12/29/2012 multiple rate Ratings Maturity
Estimated Cash $554 $554
Existing Revolver $0 0.0x $0 0.0x L + 3.75% Ba2 / BB- December 2015
New Revolver(1) 0 0.0x 0 0.0x L + 2.75% Ba2 / BB- February 2018
Existing First Lien Term Loan B-1 due 2017 1,523 1.8x 0 0.0x L + 3.00% Ba2 / BB- February 2017
Existing First Lien Term Loan B-2 due 2017 646 2.6x 0 0.0x L + 3.00% Ba2 / BB- February 2017
New First Lien Term Loan due 2020(1) 0 2.6x 2,200 2.6x L + 2.75% Ba2 / BB-(2) February 2020
Total senior secured debt $2,169 2.6x $2,200 2.6x
Senior Subordinated Notes due 2020 550 3.3x 550 3.3x 5.50% B3 / B- October 2020
Senior Subordinated Notes due 2018 1,600 5.2x 1,600 5.2x 7.75% B3 / B- December 2018
Total debt $4,319 5.2x $4,350 5.2x
Net Debt to EBITDA 4.5x 4.5x
12/29/12 LTM EBITDA as Defined $836 $836
(1) Assumes LIBOR floor of 0.75% on the new Revolver and First Lien Term Loan.
(2) Assumes ratings on the new Senior Secured Credit Facility remain the same as existing facility.
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TransDigm Overview
Business Overview
Business
($ in millions)
FY 2013
LTM 12/29/12 Guidance Mid-
Actual Point(1)
Revenue: $1,778 $ 1,850
EBITDA As Defined: $836 $ 888
EBITDA As Defined
Margin: 47.0% 48.0%
Enterprise Value(2) ~ $11 Billion
DISTINGUISHING
CHARACTERISTICS
Highly engineered aerospace components
Proprietary and sole source products
Significant aftermarket content
High free cash flow
“Private equity-like” business model
Note: EBITDA As Defined is a non-GAAP financial measure. For a historical reconciliation of EBITDA As Defined to Net Income and to Net Cash Provided by Operating Activities, please see the appendix.
(1) Revenue and EBITDA As Defined information for FY13 Guidance Mid-Point is for the fiscal year ending 9/30/13 that was given on February 4, 2013. The Company only updates guidance quarterly and this presentation does not confirm or update guidance now.
(2) Enterprise value calculated as of 12/29/2012 equals equity value (shares outstanding as of 12/29/12 multiplied by the TDG closing stock price on 2/1/13) plus total net debt (total debt less cash).
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Diverse Products, Platforms and Markets
10
Consistent Record of Growth and Margin Expansion
Revenue
($ in millions)
EBITDA As Defined and Margin
$ $ $ $ $
$—$ $ $ $ $ 1,100 1,300 1,500 1,700 1,900 100 100 300 500 700 900 1993 $48 1994 $52 1995 $57 1996 $63 1997 $78 1998 $111 1999 $131 2000 $151 2001 $201 2002 $249 2003 $293 2004 $301 2005 $374 2006 $435 2007 $593 2008 $714 2009 $762 2010 $828 2011 $1,206 2012 $1,700 LTM 12/31/12 $1,778
20%% 1993 $10
of
19% 1994 $10
23% Revenue 1995 $13
27% 1996 $17 31% 1997 $25 39% 1998 $44 39% 1999 $51 36% 2000 $54 36% 2001 $72 39% 2002 $98 2003 42% $124 46% 2004 $139 2005 44% $164 45% 2006 $194 46% 2007 $275 47% 2008 $333 49% 2009 $375 50% 2010 $412
49% 2011 $590
48% 2012 $809 47% LTM 12/31/12 $836
Note: EBITDA As Defined is a non-GAAP financial measure. For a historical reconciliation of EBITDA As Defined to Net Income, please see the appendix.
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Key Credit Considerations
ATTRACTIVE MARKET POSITION
Niche market positions High margin aftermarket Diverse mix
Favorable long-term industry dynamics
PROVEN OPERATING STRATEGY
Experienced management team Demonstrated value generation Proven acquisition / integration
MULTIPLE GROWTH PATHS
Market growth High margins Acquisitions Low Capex Strong free cash flow
Consistent Cash Generation and Long-Term Performance
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Strong Focus on High-Margin Aftermarket
Pro Forma Revenues (Excluding Ground Transportation)(1)
Defense Aftmkt 13%
Defense OEM
11%
Comm Aftmkt 44%
Comm OEM 32%
EBITDA as Defined
OEM
Aftermarket
Aftermarket ~57% OEM ~43%
Approximately 57% of FY2012 pro forma revenues and a much higher percentage of EBITDA As Defined are from the stable, high-margin aftermarket.
(1) Pro Forma revenue for the fiscal year ended 9/30/12 (excluding Ground Transportation sales of ~$65 million or ~4% of combined sales). Please see the Special Notice Regarding Pro Forma and Non-GAAP Information.
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Significant Proprietary and Sole Source Revenue Base
TransDigm Proprietary Sales
Non-Proprietary ~10%
TransDigm Sole Source Sales
Non-Sole Source ~25%
Proprietary ~90%
Sole Source ~75%
Results in strong market positions and a stable, recurring revenue stream.
Note: Based on management estimates of pro forma TDG sales for the fiscal year ended 9/30/12. Please see the Special Notice Regarding Pro Forma and Non-GAAP Information.
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TransDigm Financial Highlights
($ in millions)
Fiscal year LTM CAGR
2007 2008 2009 2010 2011 2012 12/29/2012 2007-2012
Income statement information:
Net sales $592.8 $713.7 $761.5 $827.7 $1,206.0 $1,700.2 $1,778.1 23.5%
Cost of sales 283.8 327.8 332.2 354.6 544.8 754.5 793.5
Gross profit $309.0 $385.9 $429.3 $473.1 $661.2 $945.7 $984.6
% Sales 52.1% 54.1% 56.4% 57.2% 54.8% 55.6% 55.4%
Selling and administrative expenses 62.9 74.6 80.0 94.9 133.7 201.7 215.0
Amortization of intangibles 12.3 12.0 13.9 15.1 40.3 44.2 42.3
Refinancing costs – – – – 72.5 – –
Income from operations $233.8 $299.3 $335.4 $363.1 $414.7 $699.8 $727.3
% Sales 39.4% 41.9% 44.0% 43.9% 34.4% 41.2% 40.9%
Net interest expense 91.7 92.7 84.4 112.2 185.3 211.9 225.7
Income before income taxes $142.1 $206.6 $251.0 $250.8 $229.4 $487.9 $501.6
Income tax provision 53.5 73.5 88.1 87.4 77.2 162.9 167.6
Net income $88.6 $133.1 $162.9 $163.4 $152.2 $325.0 $334.0
% Sales 14.9% 18.6% 21.4% 19.7% 12.6% 19.1% 18.8%
Other financial information:
EBITDA As Defined $274.7 $333.1 $374.7 $411.6 $589.9 $809.0 $835.8 24.1%
As % of sales 46.3% 46.7% 49.2% 49.7% 48.9% 47.6% 47.0%
Capital expenditures 10.3 10.9 13.2 12.9 18.0 25.2 29.2
EBITDA As Defined—CapEx 264.4 322.2 361.5 398.7 571.9 783.8 806.5
As % of sales 44.6% 45.1% 47.5% 48.2% 47.4% 46.1% 45.4%
Balance sheet information:
Total assets $2,061.1 $2,255.8 $2,454.4 $2,677.8 $4,513.6 $5,459.6 $5,549.6
Total debt 1,357.9 1,357.2 1,356.8 1,771.6 3,138.4 3,619.1 4,319.1
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TransDigm Deleveraging Profile (Total Debt / EBITDA As Defined)
6.5x 6.0x 5.5x 5.0x 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x
Warburg
Pincus McKechnie Recap Acquisition
Special Dividend IPO
Recap & AmSafe Dividend Acquisition
FY00 FY01 FY02 07/03 FY03 FY04 FY05 4/06 FY06 FY07 FY08 FY09 10/09 FY10 12/10 FY11 3/12 FY 12 12/12(1)
Note: Based on management estimates of pro forma TDG sales for the fiscal year ended 9/30/12. Please see the Special Notice Regarding Pro Forma and Non-GAAP Information (1) Total Debt (including new $550 million Senior Subordinated Notes and $150 million Tack-on First Lien Term Loan) divided by EBITDA as Defined.
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Syndication Overview & Timetable
Preliminary Transaction Timeline
February 2013
Su Mo Tu We Th Fr Sa
1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28
Holiday Key date
Date Event
February 8 Senior Secured Term Loan Facility Lender Call (10
AM EST)
February 13 Commitments / Required Lender consents (due by
12 PM EST)
February 19 Close and fund
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Summary Terms
Borrower: TransDigm, Inc (the “Company” or the “Borrower”, and together with TransDigm Group Incorporated (“Holdings”) and certain of the Company’s subsidiaries, the “Credit Group”) Joint Lead Arrangers & Credit Suisse (“CS”, a “Joint Lead Arranger” and the “Administrative Agent”), UBS (“UBS”, a “Joint Lead Arranger”), Morgan Stanley (“MS”, a Administrative Agent: “Joint Lead Arranger”) and Citigroup (“Citi”, a “Joint Lead Arranger”) Facilities: $310 million revolving credit facility (the “Revolver”) $2,200 million term loan facility (the “Term Loan”).
Tenor: Revolver: 5 years Term Loan: 7 years
Interest rate: LIBOR + 2.75% Term Loan Issue price: Par LIBOR Floor: 0.75% Term loan amortization: 1.00% per year
Call protection: Reset 101 repricing soft call for one year; thereafter at par
Guarantors: Same as existing term loan credit agreement; Holdings and certain of the Borrower’s present and future, direct and indirect domestic subsidiaries (the “Guarantors”).
Security: Same as existing term loan credit agreement; First priority perfected lien on substantially all of the property and assets (tangible and intangible, and including all outstanding capital stock of the Company and each of its subsidiaries (subject to certain customary exceptions)) of the Credit Group. Affirmative covenants: Same as existing term loan credit agreement; Customary for facilities of this type.
Negative covenants: Substantially similar to the existing term loan credit agreement; Customary for facilities of this type with certain modifications outlined in this presentation.
Financial covenants: Revolver: Net leverage ratio Term Loan: None
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Credit Agreement Modifications
In conjunction with the re-pricing, the Company will amend its existing credit facility agreement to:
- Set the Revolving Credit Facility Net Leverage Ratio covenant to 6.00x with no step-downs or Interest Coverage Ratio covenant
- Unlimited RP basket subject to: Net Leverage Ratio test of 5.75x, no drawn amount under the Revolver, and a minimum pro forma cash balance of $200 million
- Allowance for an Accounts Receivable securitization of up to $250 million
- Allow the Company to designate non-core assets at the time of a Permitted Acquisition that can be sold at a later date subject to the paydown provision or reinvestment rights
- Allow required lenders the ability to reject mandatory prepayments associated with asset sales and excess cash flow
- Allow the Company to enter into a joint venture up to $1 bn
- Allow for the ability to repurchase loans below par value
Revolving Credit Facility and First Lien Term Loan will be governed under a single Credit Agreement
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Public Q&A
Appendix
EBITDA As Defined Reconciliation
($ in millions)
Fiscal year ended September 30, LTM
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 12/31/2012
Net Income ($5) – $1 $3 $14 ($17) $11 $14 $31 ($76) $14 $35 $25 $89 $133 $163 $163 $172 $325 $ 334
Less: income from discontinued opeations – – – – – – – – – – – – – – – – – (20) – –
Depreciation and amortization 7 7 7 6 7 6 7 9 13 10 18 17 16 24 25 28 30 61 68 68
Interest expense, net 5 5 5 3 3 23 28 32 37 43 75 80 77 92 93 84 112 185 212 226
Income tax provision (2) – 2 5 13 (2) 8 9 17 (45) 6 23 16 53 74 88 88 77 163 168
Warrant put value adjustment 1 1 2 5 7 – – – – – – – – – – – – – – –
Extraordinary item – – – 2 – – – – – – – – – – – – – – – –
EBITDA $6 $13 $17 $24 $44 $10 $54 $64 $98 ($68) $113 $155 $134 $258 $325 $363 $393 $475 $768 $ 795
Merger expense – – – – – 40 – – – 176 – – – – – – – – – –
Refinancing costs – – – – – – – – – – – – 49 – – – – 72 – –
Acquisition-related costs 4 – – 1 – 1 – 8 – 15 20 2 1 9 2 6 12 30 19 15
Non-cash compensation and
deferred compensation costs – – – – – – – – – 1 6 7 1 6 6 6 7 13 22 26
One-time special bonus – – – – – – – – – – – – 6 – – – – – – –
Public offering costs – – – – – – – – – – – – 3 2 – – – – – –
EBITDA As Defined $10 $13 $17 $25 $44 $51 $54 $72 $98 $124 $139 $164 $194 $275 $333 $375 $412 $590 $809 $836
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Contacts
For business questions please contact:
- Robert Hetu: robert.hetu@credit-suisse.com (212) 325 – 4542
- Kevin Buddhdew: kevin.buddhdew@credit-suisse.com (212) 538 – 4294
For legal questions please contact:
- Brendan Mahan: BMahan@cravath.com (212) 474—1808
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