1) Aerospace & Defense
Market Monitor
Winter 2016
MOSS ADAMS CAPITAL LLC
2) Aerospace in January 2016

Low Oil Prices are leading to record profits for the airlines. While it will likely bring competitive
price pressure, the lower fuel costs will be a net positive for the carriers.

On-Going Demand for Fuel Efficiency. The airline industry remains extremely competitive, and
new aircraft, with new fuel efficient engines, are crucial for the major carriers to remain competitive.

Success for the 737Max and A320neo. Boeing rolled out its 737Max and the first test flight went
as planned. Airbus A320neo is flying as well. These two single-aisle aircraft, with new fuel-efficient
engines, account for 64% of new orders, and 56% of the backlog at the end of 2015.

Record Deliveries for Boeing. Boeing delivered a record 762 aircraft in 2015. Production rates are
increasing for most aircraft, while new orders are slowing.

Valuations Remain Higher than Overall Market. Valuations of small-cap aerospace companies are
still ahead of the general S&P500, but investor concerns about the global market and slowing orders
has taken about a 1x EBITDA multiple off values. As an example, Boeing stock was at roughly $120 at
end of January compared to $145 at end of 2015.

Aerospace M&A Remains Active.
Both strategic and financial investors remain aggressive in
consolidating suppliers within both the commercial and defense aerospace markets. Private-equity
backed companies have emerged as strategic buyers themselves as they consolidate multiple
suppliers and gain efficiencies.

You Will Get Calls. The owners of private aerospace suppliers will continue to get unsolicited calls
from inquiring buyers. Being ready and prepared will protect value.
Aerospace & Defense
2
MOSS ADAMS CAPITAL LLC
3) Production Rates Rise as Orders Head Down
New Aircraft Orders
Single-aisle
Widebody
Total
Orders in 2012
2,192
286
2,478
Orders in 2013
2,498
689
3,187
Orders in 2014
2,834
605
3,439
Orders in 2015
1,632
385
2,017
Change in 2015
(1,202)
(220)
(1,422)
Order
Intake is
falling.
Delivered in 2012
870
319
1,189
Delivered in 2013
933
341
1,274
Delivered in 2014
975
377
1,352
Delivered in 2015
986
411
1,397
Change in 2015
11
34
45
Deliveries
continue
to rise.
Backlog Dec. 31, 2015
10,676
2,655
13,331
Change in 2015
499
(92)
407
Growth in
backlog is
slowing.
Aircraft Deliveries
Single-aisle
Widebody
Total
Aircraft Backlog
Single-aisle
Widebody
Total
Backlog Dec. 31, 2012 Backlog Dec. 31, 2013 Backlog Dec. 31, 2014
7,327
8,636
10,177
2,352
2,661
2,747
9,679
11,297
12,924
•
Valuations for publicly-traded aerospace companies are down from mid-year 2015.
•
Volatility in January 2016 has placed additional pressure on valuations.
Source: Aerospace Market News, January 2016.
Aerospace & Defense
3
MOSS ADAMS CAPITAL LLC
4) Single-Aisle Dominates the Backlog.
•
Single-aisle demand is driven by new-engine options … the largest gains are for A320neo, 737 MAX, and the A319neo.
•
Nearly 60% of the backlog is A320neo and 737 MAX (with over 6,100 aircraft). This is up from beginning of year.
•
The rate of order intake is slowing in 2015 compared to prior years.
•
Boeing production rate still rising for 737. Suppliers are keeping pace.
•
In the U.S., suppliers to the 737 program have 7-8 years of predictable backlog ahead.
Source: Aerospace Market News, December 2015.
Aerospace & Defense
4
MOSS ADAMS CAPITAL LLC
5) Valuation Alert: January Volatility – Impacting Aerospace Valuations

Public market valuations are down over a one year period, and in particular, over the last two weeks, due to uncertainty about earnings growth,
China’s economy, oil prices, currencies, and long-term interest rates.

Over a one year period, equity investments in small and mid-Cap aerospace companies have lost 14% versus a loss of 7% for the overall S&P 500
index, and a loss of 4% for Boeing.

Trading multiples for Small and Mid-Cap aerospace suppliers are at an average of 10.9x EBITDA, while the S&P 500 is trading at 9.8x EBITDA and
Boeing at 8.4x.
EBITDA Multiples
Small / Mid Cap Aerospace Stock Performance
25%
14.0x
20%
13.0x
10%
EV / EBITDA
Market Performance
15%
5%
0%
-5%
-10%
-15%
12.0x
Small / Mid Cap
11.0x
Boeing
Aerospace
10.9x
-4%
10.0x
S&P 500
-7%
S&P 500
9.8x
Small / Mid Cap
9.0x
Aerospace
-14%
Boeing
8.4x
-20%
8.0x
Note: Small and Mid-Cap Aerospace companies are composed of the public companies included on slide 5.
Source: Capital IQ as of 1/19/16.
Aerospace & Defense
5
MOSS ADAMS CAPITAL LLC
6) Small/Mid-Cap Aerospace Firms: Valuations
($US in millions, except where noted and per share amounts)
1/19/2016
Company Name
Share
Price
TTM Data
52 week High/Low
Market
Cap
Enterprise
Value
Sales
EBITDA
NTM Est. Growth
EBITDA
Margin
Sales
EBITDA
EV Multiple
TTM
Sales
TTM
EBITDA
NTM
Sales
NTM
EBITDA
Small/Mid Cap Aerospace
B/E Aerospace Inc.
$38.01
$64.58 / $37.35
$3,973
$5,842
$2,708
$514
19.0%
4.2%
16.6%
2.2x
11.4x
2.1x
9.7x
TransDigm Group Incorporated
220.82
244.90 / 200.00
13,446
21,234
2,707
1,204
44.5%
16.2%
19.5%
7.8x
17.6x
6.7x
14.8x
Spirit AeroSystems Holdings, Inc.
43.98
57.99 / 41.46
5,997
6,096
6,609
1,033
15.6%
2.9%
4.2%
0.9x
5.9x
0.9x
5.7x
Hexcel Corp.
38.93
54.72 / 38.46
3,678
4,232
1,868
398
21.3%
4.1%
14.5%
2.3x
10.6x
2.2x
9.3x
Esterline Technologies Corp.
74.68
120.45 / 69.77
2,211
2,911
1,936
280
14.5%
5.9%
20.2%
1.5x
10.4x
1.4x
8.7x
Teledyne Technologies Inc.
77.01
111.81 / 76.49
2,729
3,371
2,320
382
16.5%
(0.5%)
0.4%
1.5x
8.8x
1.5x
8.8x
Triumph Group, Inc.
32.04
70.68 / 31.20
1,580
3,145
3,912
351
9.0%
0.0%
81.1%
0.8x
8.9x
0.8x
4.9x
Moog Inc.
52.40
77.28 / 51.02
1,923
2,690
2,526
337
13.3%
1.3%
2.8%
1.1x
8.0x
1.1x
7.8x
Curtiss-Wright Corporation
65.75
77.57 / 58.00
3,006
3,717
2,190
381
17.4%
3.3%
20.6%
1.7x
9.7x
1.6x
8.1x
HEICO Corporation
52.37
63.73 / 47.24
3,219
3,728
1,189
278
23.4%
9.2%
8.6%
3.1x
13.4x
2.9x
12.4x
AAR Corp.
21.88
34.24 / 18.39
767
838
1,598
61
3.8%
9.5%
151.1%
0.5x
13.8x
0.5x
5.5x
Astronics Corporation
32.23
77.35 / 31.70
825
1,011
701
129
18.4%
2.0%
5.7%
1.4x
7.8x
1.4x
7.4x
Ducommun Inc.
12.89
33.45 / 12.59
143
391
697
51
7.4%
(5.1%)
34.9%
0.6x
7.6x
0.6x
5.6x
9.13
14.79 / 9.09
121
391
374
39
10.3%
5.1%
24.3%
1.0x
10.1x
1.0x
8.1x
Median
$3,258
$2,063
$344
16.0%
3.7%
18.0%
1.4x
9.9x
1.4x
8.1x
Average
$4,257
$2,238
$388
16.7%
4.2%
28.9%
1.9x
10.3x
1.8x
8.3x
LMI Aerospace Inc.
as of January 19, 2016
Note: Not meaningful (NM) if EV/Sales is greater than 10x, or EV/EBITDA is greater than 20x. NA if denominator is 0, for
percentages and multiples, or if estimates are not available. NTM figures are based on the median estimate of Wall St. analysts.
Source: Capital IQ as of 1/19/16.
Aerospace & Defense
6
MOSS ADAMS CAPITAL LLC
7) Recent A&D Transactions with Disclosed Value
$ in millions
Transaction
Value
Announced Acquirer/Investor
Target
Target Description
02/03/16
Liberty Hall Capital Partners, L.P.
AIM Aerospace, Inc.
Designs, manufactures, and supplies interiors, composites, ducting and tooling products to
airlines and original equipment manufacturers worldwide.
$220.0
01/08/16
GE Aviation
Convergence Fuel Systems, LLC
Designs and manufactures fuel systems for commercial aerospace applications
$323.4
12/21/15
HEICO Electronic Technologies Corp.
Robertson Fuel Systems, LLC
Develops, manufactures, and markets primary and auxiliary fuel systems for rotary and fixed
wing aircraft and ground combat vehicles.
$255.0
11/19/15
Senior plc (LSE:SNR)
STEICO Industries Inc.
Manufactures precision tube and welded assemblies for aerospace companies
11/19/15
TransDigm Group Incorporated
(NYSE:TDG)
Breeze-Eastern Corporation (AMEX:BZC)
10/22/15
Benchmark Electronics Inc. (NYSE:BHE)
10/13/15
Metric
$75.0
2.03x Rev
Designs, develops, manufactures, sells and services engineered mission equipment.
$197.0
1.8x Rev; 8.0x EBITDA
Secure Communication Systems Inc.
Designs and manufactures tactical mission computing products
$230.0
L-3 Communications Holdings Inc.
(NYSE:LLL)
L-3 ForceX
Provides navigation, surveillance, tracking, command and control, and situational
awareness solutions to customers in security and defense industries.
$60.0
09/25/15
Kolon Glotech, Inc.
DACC Co., Ltd
Manufactures carbon / carbon-composites for aircraft brake disks, as well as high
temperature jigs and fixtures.
$22.3
0.9x Rev
09/23/15
BBA Aviation plc (LSE:BBA)
Landmark Aviation, L.L.C.
Provides end-to-end services for business and general aviation customers. One of the largest
FBO networks in the world.
$2,065.0
2.9x Rev; 18.0x EBITDA
09/22/15
Meggitt (Rockmart), Inc.
EDAC Composites LLC
Produces composites for the aerospace & defense industries.
$340.0
2.9x Rev; 10.6x EBITDA
09/16/15
Aerojet Rocketdyne Holdings, Inc.
(NYSE:AJRD)
United Launch Alliance, LLC
Provides space launch services.
09/09/15
Versar Inc.
Johnson Controls Security Systems, LLC
Serves Federal clients by designing, installing and supporting physical security, network
security, and facilities management systems.
08/27/15
The Carlyle Group LP
Novetta Solutions, LLC
Provides advanced analytics software and solutions to detect threat and fraud, for
government and commercial enterprises worldwide.
$2,000.0
$20.0
0.6x Rev
$650.0
14.4x EBITDA
Source: Capital IQ as of 02/03/16.
Aerospace & Defense
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MOSS ADAMS CAPITAL LLC
8) Recent A&D Transactions with Disclosed Value (continued)
$ in millions
Transaction
Value
Metric
$37,916.7
3.7x Rev; 13.9x EBITDA
Announced Acquirer/Investor
Target
Target Description
08/10/15
Berkshire Hathaway Inc. (NYSE:BRK.A)
Precision Castparts Corp. (NYSE:PCP)
Manufactures and sells metal components and products to the aerospace, power, and
general industrial markets.
08/07/15
Sunvair Aerospace
Aviation Avionics & Instruments, Inc.
Aircraft repair company.
$29.0
08/06/15
Rockwell Collins Inc.
International Communications Group, Inc.
Designs, develops, and manufactures communications systems and solutions for aerospace
& defense industry.
$50.0
07/30/15
Sensata Technologies Holding NV
Custom Sensors & Technologies, Inc.
Comprised of sensing product lines and brands, including Kavlico, BEI, Crydom, and Newall.
$1,000.0
07/28/15
TransDigm Group Incorporated
(NYSE:TDG)
PneuDraulics, Inc.
Develops and manufactures precision hydraulic components for the aerospace industry.
$325.0
07/28/15
GKN plc
Fokker Technologies Group B.V.
Supplies aerostructures, electrical wiring systems, landing gear, etc. for the military and
business jet end markets.
$778.3
0.8x Rev; 9.2x EBITDA
07/27/15
Precision Castparts Corp. (NYSE:PCP)
Noranco Inc.
Manufactures aerostructures, landing gear systems, and aero engine precision components.
$560.0
10.0x EBITDA
07/20/15
Lockheed Martin Corporation (NYSE:LMT) Sikorsky Aircraft Corporation
Designs, manufactures, and services commercial and military helicopters.
$9,000.0
1.2x Rev; 13.0x EBITDA
06/30/15
H-D Advanced Manufacturing Company
Firstmark Corporation
Manufactures and sells components and sub-assemblies for aerospace and defense
applications.
$84.0
06/29/15
Ballard Power Systems Inc.
Protonex Technology Corporation
Manufactures power management products.
$25.1
06/19/15
Astro-Med, Inc.
RITEC Corporation
Designs and manufactures computer and related peripheral products for the military and
aerospace industries.
06/09/15
Global Defense & National Security
Systems, Inc.
STG Incorporated
Provides a variety of services including cyber security and intelligence solutions.
$165.5
0.8x Rev; 9.0x EBITDA
06/01/15
Handy & Harman Group Ltd.
JPS Industries, Inc.
Manufactures materials for highly engineered products.
$110.7
0.7x Rev
3.1x Rev
1.8x Rev
$7.4
Source: Capital IQ as of 02/03/16.
Aerospace & Defense
8
MOSS ADAMS CAPITAL LLC
9) Recent A&D Transactions with Disclosed Value (continued)
$ in millions
Transaction
Value
Metric
$1,037.0
1.0x Rev; 12.0x EBITDA
Manufactures systems, subsystems, and components for electronic warfare, missile, radar,
intelligence surveillance, and reconnaissance programs.
$265.0
1.2x Rev:12.0x EBITDA
CTC Aviation Group Ltd
Operates as an airline training organization.
$218.5
2.5x Rev
Veritas Capital
StandardAero Business Aviation Services, LLC
Provides MRO services and custom solutions for aircraft and rotorcraft engines.
$2,275.0
1.3x Rev; 11.9x EBITDA
05/21/15
Cyberit Ltd.
NICE Systems Ltd., Cyber and Intelligence
Division
Provides cyber and intelligence solutions.
$157.9
2.0x Rev
05/15/15
Magellan Aerospace Corp.
Euravia Engineering & Supply Co. Ltd
Operates as an aviation company that provides repair and overhaul services for a range of
gas turbines, and engine and airframe components.
$47.0
2.2x Rev
05/18/15
Ametek Inc.
Global Tubes
Manufactures precision engineered tube products.
$500.0
1.7x Rev
04/30/15
TransDigm Group Incorporated
(NYSE:TDG)
Pexco LLC, Aerospace Business
Designs, fabricates, and delivers custom plastic extrusion products for specialty uses in
industries including aerospace and defense.
$336.0
2.2x Rev; 10.0x EBITDA
04/28/15
ManTech Interational Corporation
Welkin Associates, Ltd
Provides systems engineering and technical assistance support (SETA) to the US
government and commercial clients.
$34.0
1.0x Rev
04/23/15
API Technologies Corp.
Aeroflex/Inmet Inc. and Aeroflex / Weinschel,
Inc.
A portfolio of aerospace parts manufacturers and test equipment.
$80.0
1.6x Rev
04/14/15
Sparton Corp.
Hunter Technology Corporation
Provides electronic design and manufacturing services for a variety of industries, including
A&D.
$68.0
0.8x Rev
04/09/15
Insitu, Inc.
2d3 Inc.
Provides science solutions for industrial, defense, and entertainment applications.
$24.8
3.0x Rev
04/01/15
Adams Rite Aerospace, Inc.
Adams Rite Aerospace, Inc.
Designs and manufactures control and security systems for customers in the commercial,
military, and general aviation aerospace markets.
$75.0
1.7x Rev; 8.3x EBITDA
Announced Acquirer/Investor
Target
Target Description
06/01/15
Apollo Global Management, LLC
OM Group Inc.
Develops and manufactures magnetic materials, chemicals, batteries, and battery
management systems.
06/01/15
Ultra Electronics Defense, Inc.
Kratos Defense & Security Solutions, Inc.,
Electronic Products Division
05/28/15
L3 Communications Holdings, Inc.
05/26/15
Source: Capital IQ as of 02/03/16.
Aerospace & Defense
9
MOSS ADAMS CAPITAL LLC
10) Recent A&D Transactions with Disclosed Value (continued)
Transaction
Value
Target
04/01/15
ITT Corporation
Hartzell Aerospace Group
Designs and manufactures a variety of products for use in the aerospace industry.
03/26/15
Roller Bearing Company of America, Inc.
Avborne Accessory and Sonic Industries and
Sargent Aerospace Canada
Provides repair and overhaul services to the commercial and military aviation industry
worldwide.
03/20/15
Better Capital PCC Limited
CAV Aerospace Limited
Manufactures aerostructures and ice protection systems.
03/09/15
Alcoa Inc. (NYSE:AA)
RTI International Metals, Inc. (NYSE:RTI)
Supplies titanium mill products for the commercial aerospace sector, along with other
industries.
03/01/15
Science Applications International
Corporation
Scitor Corporation
02/23/15
TransDigm Group Incorporated
(NYSE:TDG)
02/06/15
1.6x Rev; 8.5x EBITDA
$500.0
Target Description
Metric
$53.1
Announced Acquirer/Investor
2.6x Rev; 9.4x EBITDA
$59.7
$1,821.0
1.9x Rev; 12.9x EBITDA
Provides engineering and integration services for a range of industries including aerospace.
$790.0
1.3x Rev; 15.2x EBITDA
Telair International GmbH and Nordisk Aviation
Products
Manufactures, and supports on-board baggage and cargo handling systems for wide and
narrow body aircrafts.
$725.0
2.4x Rev; 12.1x EBITDA
Harris Corporation (NYSE:HRS)
Exelis Inc.
Provides (C4ISR) electronics and systems in the United States and internationally.
$5,193.2
1.4x Rev; 9.1x EBITDA
01/26/15
CAE Inc. (TSX:CAE)
Bombardier Inc., Military Aviation Training
Provides military aviation training activities.
01/12/15
Onex Corporation (TSX:OCX)
Survitec Group Limited
Manufactures survival and safety equipment for marine, offshore and aviation industries.
01/06/15
Meggitt PLC
Precision Engine Controls Corporation
Manufactures industrial turbine control systems and related components.
01/05/15
Chart Acquisition Corp. (OTCPK:CACG)
Tempus Applied Solutions, LLC
Offers aircraft engineering, integration and operations solutions to support missions of the
U.S.
$15.9
$680.0
1.8x Rev
$44.2
$100.2
Deal
Revenue
EBITDA
Size
Multiple
Multiple
Transactions Represented
50
32
20
Median
$219.3
1.7x
11.3x
Mean
$1,432.2
1.8x
11.4x
Source: Capital IQ as of 02/03/16.
Aerospace & Defense
10
MOSS ADAMS CAPITAL LLC
11) Middle Market M&A Volume Declines in Q4 after Historic Q1-Q3 2015
• Overall, 2015 was a record year for M&A with transaction values
totaling $4.7 trillion, according to Thomson Reuters
• EBITDA multiples in middle market transactions in Q4 2015
finished the quarter at 8.3x EBITDA, equal to the 5 year average
for this metric and up from Q2 and Q3 2015.
• In Q4 2015, U.S. middle market M&A deal volumes declined
15% from Q3 2015, and declined 26% from Q4 2015.
• Q4 2015 EBITDA margins of reportable transactions surged also
remained consistent with the 5 year average for this metric.
Reported EBTIDA margins in Q4 2015 were 9%, while the 5 year
average for this metric is 8%.
• U.S. middle market M&A activity, measured by deal values,
remained consistent with prior quarters at $94 billion of
aggregate transaction value closed in Q4.
U.S. MIDDLE MARKET M&A 1
U.S. MIDDLE MARKET M&A VALUATIONS 2
1) Middle market M&A includes transactions with undisclosed values, and disclosed values where EV < $500 million.
2) Middle market M&A includes transactions with disclosed EBITDA, where EV < $500 million and EV/EBITDA between 3.0x and 15.0x. Note: transactions with disclosed EBITDA represent <5% of all transactions.
Source: CapitalIQ.
Aerospace & Defense
11
MOSS ADAMS CAPITAL LLC
12) Moss Adams at a Glance: Leadership through Experience and Results
Moss Adams Capital LLC
Moss Adams LLP
•
•
100+ years old – Founded in
1913
•
Largest accounting firm
headquartered in the western
U.S.
Full-service investment
banking and strategic
advisor services
•
Dedicated industry
specialists
•
Focus on privately owned
and family-held
companies
•
2,200 employees in 28 offices
•
Fully integrated accounting,
tax, and business advisory firm
•
Mergers and acquisitions
•
Middle-market specialists
•
Private debt & equity
placements
•
•
Mezzanine capital
•
Due Diligence preparation
& advisory
The Moss Adams Advantage:
Discrete, highly leverageable
transaction resources and
services
International Presence
•
Aerospace & Defense
Major market affiliates
throughout the U.S. and more
than 100 countries around
world
12
MOSS ADAMS CAPITAL LLC
13) Expert Teams for Aerospace Companies
Industry
Expertise &
Relationships
INDUSTRY KNOWLEDGE MATCHED
WITH AN EXPERIENCED TEAM
IndustrySpecific
Accounting
• Senior-Level Attention
• Commitment to Our Clients
• Professional Excellence
• Objective & Independent Advice
Strategic
Planning &
Exit Advice
Relevant Tax
Expertise
• Creating Value for Owners
• Global Presence & Capabilities
Investment
Banking &
Transaction
Support
Aerospace & Defense
Premier accounting and financial
services advice for middle-market
aerospace companies.
13
MOSS ADAMS CAPITAL LLC
14) Contact Us
Aerospace Team:
Harman Wales
Managing Director
(206) 302-6770
jet.wales@mossadams.com
Kurt Lippmann
Partner
(425) 317-3042
kurt.lippmann@mossadams.com
Scott Porter
Vice President
(206) 302-6326
scott.porter@mossadams.com
Richard Anderson
Managing Director
(949) 221-4006
rich.anderson@mossadams.com
Wiley Kitchell
Managing Director
(206) 302-6780
wiley.kitchell@mossadams.com
Daniel Seubert
Analyst
(206) 302- 6775
daniel.seubert@mossadams.com
Moss Adams Capital LLC
2040 Main Street
Suite 900
Irvine, CA 92614
Aerospace & Defense
999 Third Avenue
Suite 2800
Seattle, WA 98104
14
MOSS ADAMS CAPITAL LLC