esterline powerpoint template explained... · esterline explained contains no controlled technical...

This presentation contains no controlled

technical data or technology.

Esterline Explained February, 2018

Esterline Explained Contains no controlled technical data or technology.

This presentation may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. 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 Esterlines or

its industrys 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 also contains references to non-GAAP financial information subject

to Regulation G. The reconciliations of each non-GAAP financial measure to its comparable GAAP

measure as well as further information on managements use of non-GAAP financial measures are

included in Esterlines earnings press releases as well as in this presentation.

1


Well positioned to create shareholder value

Overview

Esterline is Key Investment Highlights

a specialized global manufacturer

of custom-engineered solutions

for aerospace & defense.

~13,000 employees

Annual Sales: ~$2 billion

Enterprise Value: ~$3 billion

Three distinct business segments

Highly diversified, balanced

global business

Technology leader in core markets

Commitment to the Esterline

Operating System

Strong cash flow generation

2

Esterline Explained Contains no controlled technical data or technology. 3

A BALANCED AND DIVERSIFIED

GLOBAL COMPANY


United States 50% 50%

Outside the US

Defense

30%

30% 40% Commercial

Aerospace

High-end, non-aero

applications

Geographic and End Market Balance

4


Global Coverage

Strong Global Footprint for Sales and Manufacturing


Product Characteristics Across Markets

6

Aerospace Defense High-End

Non-Aero

High regulatory barriers to entry

Highly reliable products for harsh environments

Critical human-machine interface capabilities

Precision machine-machine system interfaces

Mission-critical subsystems and components


3 Business Segments 8 Primary Capabilities

7

Avionics & Controls Sensors & Systems Advanced Materials


Advanced Materials Segment

8

Highly engineered harsh-environment components


Avionics & Controls Segment

9

Tier 1 components and systems provider


Sensors & Systems Segment

10

World leader in relays, GFI, Tier 1 sensor

packages, and connectors


STRONG BREADTH OF PRODUCT

AND CUSTOMER COVERAGE


Dozens of Major Customers

12


Hundreds of Programs

13

http://wallpapers.free-review.net/r?12


COMMITMENT TO CONTINUOUS

IMPROVEMENT AND CULTURE


Mission-Critical Culture

15


Profitable &

Balanced

Sales Growth

Enterprise

Excellence Leverage the

Enterprise

Employee

Engagement

Regulatory &

Customer

Compliance

Strategic Focus Areas

16


Organic Product experts focused on customer needs

Executive ownership of key customer

relationships across platforms

M&A Bolt-on approach with synergy focus

Completed acquisition-related integration activities

for advanced displays business purchased in 2015

Balanced and Profitable Sales Growth


Company-Wide Efficiency Initiatives Update

18

Ops Excellence Strategic Sourcing Global Footprint

INITIATIVE GOALS

Achieve significant savings in

material and services

Implement standards and tools

for sustainability

100+ engineers now working

in India design center, facility

achieved AS9100 certification

Increasing capacity in

competitive cost centers

to add strategic capability

2017 savings achieved

Wave 3 savings on track

Wave 4 savings launched,

program runs through March 2018

Supplier training materials near

complete and launching in 2018

INITIATIVE GOALS

Enterprise-wide lean transformation

New operating system deployed

Leadership-driven, fully aligned

operational improvements

INITIATIVE GOALS

Leverage global presence for growth

Develop competitive cost structure

Infrastructure supporting

the Esterline Operating System

Customer satisfaction focus

built into operating processes

New enterprise SIOP process

being implemented in 2018

2000 people trained at CIF

Academies by 2017 year-end


RECENT

FINANCIAL HIGHLIGHTS


$1.6

$1.9 $1.9 $2.0 $2.0* $1.993 $2.002

2011 2012 2013 2014 2015 2016 2017

Sales from Cont. Ops. ($ in billions) Recent Revenue Profile

20

* 11-month fiscal year recast to 12 months ended Oct. 2, 2015


Q1 2018 Financial Results Sales of $482 million, up 5.4% over prior-year period

Some timing considerations as customers accelerated deliveries into the

first quarter from Q2

Better Advanced Materials results on higher defense margins and return

to full production in Arkansas business following plant shutdown

GAAP EPS of $(1.13) per diluted share Includes $48.6 million, or $1.62 per share, of discrete tax expenses from

the U.S. Tax Cuts and Jobs Act of 2017 (TCJA)

EPS of $0.49 per share excluding the one-time tax expenses

Book-to-bill of 1.17x

Free cash flow of $49 million*

21 From Continuing Operations

* See Page 1 regarding non-GAAP financial measures.


Q1 2018 Summary

22

Dollars in millions, except EPS Q1 2018

Sales $ 482

Gross Margin $ 150

- % of sales 31.2%

Operating Earnings from

Continuing Operations $ 27

- % of sales 5.7%

Earnings (Loss) from

Continuing Operations $ (34)

Earnings (Loss) Per Diluted

Share from Continuing

Operations $ (1.13)

U.S. Tax Cuts and Jobs Act of 2017

discrete expenses $48.6 million

U.S. Tax Cuts and Jobs Act of 2017

discrete EPS impact $(1.62)


Flexibility to Allocate Capital to Best Use

Solid Balance Sheet Strong Free Cash Flow

Target debt level:

2.0x to 2.5x gross debt to EBITDA

Balance between rate and flexibility

Clear runway - no debt maturities

until 2020

Patient capital - willingness to

retain cash

Consistent free cash flow

conversion

134% Average Free Cash Flow / Net

Earnings in 14 17*

Opportunities to reduce working

capital and improve cash

conversion

23

Solid, Pressure-tested Balance Sheet

* See Page 1 regarding non-GAAP financial measures.

Contains no controlled technical data or technology. Esterline Explained

Balanced Capital Deployment 2014-2017

24

35% R&D Expense Drive long-term organic

growth

20%

Capital Investment Sustain, grow and

reduce cost

Acquisitions: Strategic expansion of

products and capabilities

18%

Share Repurchase Be an opportunistic

buyer using a disciplined

framework

27%

R&D

CAPEX

Acquisitions

Share

Repurchase

.

Goal: Grow

Long-Term

Shareholder

Value


Investing for Growth Commercial

787, 777x, 737MAX

A320 Neo, A350

E2, CSeries, MRJ

Defense JSF, P-8, A400M, KC-390

Adjacent UK nuclear market

High-end medical

Asian rail market

Gaming

25


Stakeholder Commitment

26

Customers

OTD / Quality as committed

Competitive products & services

Partner they depend on

Economics to justify new growth

Shareholders

Peer group leader

Acquisition funding

Higher stock price

Long-term growth

Employees

World-class organization

Financially stable company

Learning and development

Growth opportunities

A high-performing aerospace and defense

company whose engaged employees deliver

value through world-class products, services,

and technologies.

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