aerospace, defense and government services first quarter 2013 · first quarter 2013 . 1 first...

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Aerospace, Defense and Government Services

Quarterly Industry Update

First Quarter 2013

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1

First Quarter 2013

% Change

4 Weeks Q1 2013 52 Weeks

Defense Prime Index 7.0% 3.3% 6.7%

Government Services Index 6.9% 15.6% 15.6%

Defense Systems Index 1.5% 6.0% 5.3%

Middle Market D&G Services Index 11.8% 14.0% 15.5%

Large Cap Aerospace Index 5.8% 11.9% 13.4%

Mid Cap Aerospace Index 7.4% 13.0% 5.4%

Small Cap Aerospace Index 2.8% 9.3% 4.8%

S&P 500 3.4% 10.0% 11.4%

Notable Quarterly M&A Activity Capital Markets

ManTech acquired Alta Systems (1/9/13)

Triumph Group acquired Goodrich Pump & Engine

Control Systems from United Technologies (3/18/13)

DC Capital Partners acquired CompSec (1/29/13)

Teledyne acquired Reson A/S (3/1/13)

Arlington Capital Partners acquired MB Aerospace

Holdings (3/18/13)

Ericson Air-Crane plans to acquire Evergreen

Helicopters (3/19/13)

Industry News Quarterly Summary

On March 1, President Obama issued an order putting sequestration into effect. Shortly after, the House and Senate agreed to a

continuing resolution (CR) to fund federal agencies through September 30, 2013, maintaining the cuts from sequestration but avoiding

a government shutdown. The CR extends the federal civilian workers’ pay freeze for a third consecutive year and specifies funding

for several key agencies’ respective appropriations bills. Congress now turns its focus to the FY 2014 budget.

President Barack Obama signed an executive order, titled Improving Critical Infrastructure Cybersecurity, aiming to strengthen the

nation's critical infrastructure through cross-sector information-sharing.

Secretary of Defense Chuck Hagel announced plans to bolster US missile defenses in response to "irresponsible and reckless

provocations" by North Korea, which last week threatened a pre-emptive nuclear strike against the US. Secretary Hagel’s plans

included deploying 14 new anti-missile interceptors at Fort Greely, AK and a second missile-defense radar in Japan.

On February 12, Italian police arrested Finmeccanica Chairman and CEO, Giuseppe Orsi on allegations that while heading the

Company’s AugustaWestland unit he bribed Indian officials to secure the sale of 12 helicopters, a deal valued at a $753 million.

After a series of embarrassing malfunctions including an onboard fire stemming from battery issues, the Boeing 787 Dreamliner fleet

was grounded globally by aviation authorities on January 16. Solutions to the problem are currently undergoing testing.

The CEOs of CACI and Spirit AeroSystems were replaced by former Lockheed Martin executives. In February, CACI’s board replaced

Dan Allen with Ken Asbury after just one year and in March, Spirit announced that Larry Lawson would replace Jeff Turner.

Quarterly Industry Snapshot

Source: Public Filings; Capital IQ as of 03/31/13

2

First Quarter 2013

53 42 4829

4746 45

4543

52

5951

74

2010 2011 2012 2013

Q1 Q2 Q3 Q4

Quarterly Aerospace Transaction Activity

M&A Analysis

TMG tracked 29 announced Defense and Government Services sector

transactions and 27 Aerospace transactions during 2013’s first quarter.

Transaction activity in both sectors declined significantly vs. Q4 2012,

when an unusually high level of activity reflected companies’ race to

close transactions before 2013 tax hikes took effect. Continued market

uncertainty, exacerbated by Sequestration, also dampened deal

volume vs. prior quarters. During Q1 2013, financial buyers accounted

for 36% of Aerospace, Defense, and Government Services M&A

activity vs. 29% in 2012. The decrease in transaction volume, lack of

material share repurchase or special dividends as well as an increase

in financial buyer activity suggest that in Q1 strategic buyers were

largely holding onto “dry powder”.

The Defense and Government Services sector saw considerable Q1

2013 international deal activity as strategics sought to “buy growth”

outside the US due to US budgetary constraints and a weaker

domestic economy. Both Cubic and Teledyne acquired internationally

with respective purchases of Australia based, PS Management

Consultants and Denmark based Reson A/S. J.F. Lehman was a very

active financial buyer, announcing two acquisitions: IMECO, Inc. and,

through portfolio Company Drew Marine, Alexander/Ryan Marine &

Safety Co. Inc.

Aerospace sector activity was most noteworthy for Curtiss-Wright’s

and Moog’s Q1 2013 announcements of two acquisitions each.

Meanwhile, Arlington Capital’s acquisition of MB Aerospace

represented its first foray into the sector. Arlington Capital plans to

operate MB Aerospace as a global platform in aerospace

manufacturing, engineering and supply chain management, with future

acquisitions likely.

Defense and Government Services Transaction Activity

Source: InfoBase; Capital IQ as of 03/31/13

???

27

40

28

3229

Q1 2013Q4 2012Q3 2012Q2 2012Q1 2012

3

First Quarter 2013 Industry Trends (Defense and Gov. Services)

Source: Public Filings; Industry Newswires and Capital IQ as of 03/31/13

Company Since Feb 28 YTD

3.7% 1.8%

6.1% 5.6%

9.7% 4.6%

6.8% 3.8%

7.7% 2.1%

5.0% -3.4%

14.0% 5.2%

2.5% 22.9%

8.3% 3.6%

14.6% 19.7%

S&P 500 3.6% 10.0%

Stock Performance

Operating Performance

YOY Revenue Operating Margin2

Index Change1 CY2011 CY2012

Defense Prime (1.4%) 11.6% 10.5%

Gov. Services 0.9% 6.4% 7.0%

Def. Systems (0.6%) 11.8% 11.7%

Middle Market 5.5% 6.0% 5.8%

1Calculated on total index revenue of CY2012 & CY2011

2Displays the median operating margin of the index

Sequestration dominated the headlines in 2013’s first quarter while remaining the

fundamental issue influencing government contractors today. On March 1, President

Obama issued an order putting sequestration into effect. Shortly after, the House and

Senate agreed to a continuing resolution (CR) to fund federal agencies through

September 30, 2013, maintaining sequestration but avoiding a government shutdown.

The CR extends the federal civilian workers’ pay freeze for a third consecutive year

and specifies funding for several key agencies’ respective appropriations bills.

Congress now turns its focus to the FY 2014 budget while agencies face a continuing

challenge: cut costs to meet sequestration imperatives. As a result, nearly every

agency will face furloughs of unknown scope and scale.

Meanwhile, equity markets are thriving in the post-sequestration economy. Since

sequester cuts began on March 1, our Defense Prime, Government Services and

Middle Market custom indices have risen 7.0%, 7.2% and 10.8%, respectively and 15

of our 21 custom index companies have outperformed the S&P’s 3.6% gain. Our

Government Systems Index – our sole S&P underperformer – rose 1.5%.

From an operating perspective, corporate earnings reflected a difficult business

environment. Most of our custom index companies reported flat or declining YOY

CY2012 revenues. Only our Middle Market index reported substantial growth.

Additionally, with the exception of Government Services, our custom indices’ median

operating margins all declined YOY.

Looking forward, budget discussions will continue to influence government

contractors. In addition, escalating threats by North Korea likely will impact missile

defense discussions and budgeting. The US recently demonstrated its commitment to

missile defense on several fronts, including its deployment of a THAAD anti-missile

defense system in Guam, reaffirming its ability and its determination to deploy funding

rapidly in response to geopolitical exigencies.

4

First Quarter 2013

3/31/2013 A320 Family A330/A340/A350 A380

4,948 3,889 898 161

Industry Trends (Aerospace)

Company Orders as of Unfilled Orders by Aircraft Model Total Orders

3/31/2013 737 747 767 777 787

4,445 3,125 64 64 352 840

Boeing began 2013 by reclaiming the title of World’s No. 1 Airplane Manufacturer from Airbus for the first time in a decade, having delivered

585 commercial jets in 2012. During 2012, Boeing’s backlog swelled to more than $390 billion. Despite its great start to 2013, Boeing took a

hit when defective lithium ion batteries in its new 787 Dreamliner grounded the aircraft worldwide. Boeing’s new battery system has been

tested successfully under “normal and non-normal flight conditions” and Boeing has yet to witness 787 cancelations. Meanwhile, Boeing

737 sales witnessed continuing growth in 2013 when it signed a huge, 200 plane order with Ireland’s Ryanair, valued at $18 billion.

In the civilian space, Airbus closed 2012 with an industry

record setting backlog of 4,583 aircraft valued at more than

$638 billion (based on list prices). Sales largely were

driven by 1,734 bookings in Airbus’ single aisle A320

family along with sales of 58 A330s, 27 A350s and 9

A380s. Airbus has maintained its momentum in 2013 by

winning the largest order in aircraft industry history: a $24

billion, 234 aircraft purchase by Indonesia's Lion Air.

Drones continued to dominate headlines this quarter. Controversy surrounding the use of lethal drones swirled during nomination hearings

of newly appointed CIA Director John Brennan. In the wake of those hearings, the CIA’s lethal targeting program likely will be transferred to

DoD. Most recently, the Navy announced the launch of its highly anticipated Unmanned Carrier-Launched Airborne Surveillance and Strike

(UCLASS) system. The Navy will pay Boeing, General Atomics, Lockheed Martin and Northrop Grumman to provide the technical specs for

their respective designs for a stealthy, jet-powered, lethal drone designed to be deployed from aircraft carriers and to fly alongside the latest

manned fighters. The winning design, scheduled to be announced in 2015, will serve as the program’s backbone. Conversely, the market

for smaller surveillance drones continues to decline, hobbled by a shrinking US military presence in the Middle East, decreased defense

spending and a limited domestic market. AeroVironment, once the Pentagon’s top drone supplier, saw its share price fall 20.0% during Q1

due to poor Q4 earnings results and its severe dependency on federal spending.

X-47 Sea Avenger Sea Ghost Phantom Ray

5

First Quarter 2013

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

Company Quarter

Ending Revenue EPS

12/31/2012 -8.3% -26.5%

12/31/2012 2.8% 6.1%

12/31/2012 8.4% -4.9%

12/31/2012 2.3% 22.3%

12/31/2012 0.4% 23.1%

12/31/2012 -2.6% 8.6%

12/31/2012 -2.9% 3.0%

12/28/2012 0.8% 24.2%

12/31/2012 -8.2% -19.1%

01/31/2013 0.0% 5.9%

12/31/2012 -1.0% -32.9%

12/31/2012 1.1% 0.0%

12/31/2012 -2.4% 4.0%

12/28/2012 -1.5% 4.2%

12/30/2012 2.8% 8.3%

12/31/2012 -2.3% -66.7%

12/31/2012 -0.7% 0.0%

12/31/2012 -2.6% 0.0%

12/30/2012 1.2% 25.0%

12/31/2012 0.4% 36.4%

12/31/2012 -7.7% 7.0%

Most Recent Quarterly Financial Results (Defense and Gov. Services)

Most Recent Quarterly Earnings Suprise1


GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

DRCO

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

NCIT

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

Cubic

Defense Prime IndexDefense Systems IndexGovernment Services IndexMiddle Market Index

Most Recent Quarterly Earnings Suprise1

1Earnings Surprise is calculated as the difference of a Company’s most recent

quarterly financial results from Capital IQ analyst consensus estimates

6

First Quarter 2013

PCP

Boeing

Hexcel

Spirit

B/E

Triumph

AstronicsLMI

Rockwell

HEICOWesco

UTC

Ametek

AAR

Curtis-WrightTextron

Bombardier

Moog

-15.0%

15.0%

-6.0% 6.0%

EPS

Revenue

Company Quarter

Ending Revenue EPS

12/31/2012 -3.2% 2.1%

12/31/2012 4.1% 1.4%

12/31/2012 0.3% 8.5%

12/31/2012 -5.5% -9.1%

12/30/2012 -2.6% -6.1%

12/31/2012 2.2% 4.4%

12/29/2012 -1.9% -12.3%

12/31/2012 -1.0% 1.0%

02/28/2013 2.8% 4.5%

12/31/2012 -0.5% -12.9%

01/25/2013 -1.7% 33.3%

12/31/2012 -1.3% -5.3%

12/29/2012 -2.2% -7.4%

12/31/2012 -1.0% 38.1%

12/31/2012 4.6% 4.9%

12/31/2012 -1.0% 3.5%

01/26/2013 -47.0% -55.3%

12/31/2012 -4.8% -5.1%

11/30/2012 12.6% 0.0%

12/31/2012 12.2% 28.6%

12/31/2012 4.6% 157.1%

01/31/2013 -4.8% -7.5%

12/31/2012 -0.5% -5.0%

12/31/2012 -2.6% -7.4%

Most Recent Quarterly Financial Results (Aerospace)


PCP

Boeing

Hexcel

Spirit

B/E

Triumph

AstronicsLMI

Rockwell

HEICOWesco

UTC

Ametek

AAR


Bombardier

Moog

-15.0%

15.0%

-6.0% 6.0%

EPS

Revenue

Esterline

PCP

Boeing

Hexcel

Spirit

B/E

Triumph

AstronicsLMI

Rockwell

HEICOWesco

UTC

Ametek

AAR


Bombardier

Moog

-15.0%

15.0%

-6.0% 6.0%

EPS

Revenue

Orbital

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

AVAV

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

Digital Globe

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

Gilat

GD

Raytheon

Lockheed

Teledyne

Harris

Northrop

L-3

Booz

CACI

CSC

KEYW

FLIR

ManTech

ICF Exelis

ITT

Kratos

SAIC

VSE

-30.0%

30.0%

-9.0% 9.0%

EPS

Revenue

Gencorp

Large Cap Aerospace IndexMid Cap Aerospace IndexSmall Cap Aerospace Index

Most Recent Quarterly Earnings Suprise1 Most Recent Quarterly Earnings Suprise1

1Earnings Surprise is calculated as the difference of a Company’s most recent

quarterly financial results from Capital IQ analyst consensus estimates

7

First Quarter 2013

Defense

Systems Index 81% 85% 96% 89% 100%

Defense Prime

Index 95% 99% 100% 98% 99%

Capital Markets: Overview (Defense and Gov. Services)

Last 52 Weeks Custom Index Performance

Government

Services Index 70% 92% 97% 77% 99%

Middle Market

Index 61% 98% 98% 81% 61% 95%

Index Constituents and Stock Price as a % of 52 Week High


6.7%

15.6%

15.5%

5.3%

11.4%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013 Mar 2013

Defense Prime Index Government Services Index

Middle Market Defense & Government Services Index Defense Systems Index

S&P 500 Index

8

First Quarter 2013

13.4%

5.4%4.8%

11.4%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Feb 2013 Mar 2013

Large Cap Aerospace Index Mid Cap Aerospace Index Small Cap Aerospace Index S&P 500 Index

Capital Markets: Overview (Aerospace)

Last 52 Weeks Custom Index Performance

Large Cap

Aerospace

Index 100% 100% 99% 93% 97% 98% 95% 99%

Mid Cap

Aerospace

Index 90% 92% 97% 96% 97% 99% 73% 98%

Small Cap

Aerospace

Index 65% 84% 96% 95% 92% 91% 90% 87%

Index Constituents and Stock Price as a % of 52 Week High


9

First Quarter 2013

(10.9%)

(5.4%)

(3.4%)

(3.4%)

0.0%

1.8%

1.9%

2.0%

2.1%

3.2%

3.6%

3.8%

4.6%

5.2%

5.6%

10.0%

16.0%

16.6%

19.7%

20.5%

22.9%

27.1%

(20%) (10%) 0% 10% 20% 30% 40%

Cubic

Harris

Booz

Exelis

Kratos

General Dynamics

Dynamics Research

VSE

Raytheon

NCI

ManTech

Northrop

Lockheed

CACI

L-3

S&P 500

ICF

FLIR

SAIC

Teledyne

CSC

KEYW

First Quarter 2013

(38.2%)

(24.3%)

(22.0%)

(21.1%)

(13.0%)

(9.6%)

(7.1%)

(5.8%)

(3.9%)

0.7%

2.7%

2.8%

2.8%

7.2%

7.4%

11.4%

11.4%

14.3%

14.8%

24.4%

64.4%

108.1%

(75%) (50%) (25%) 0% 25% 50% 75% 100% 125%

Dynamics Research

NCI

ManTech

Booz

Exelis

Cubic

CACI

Kratos

General Dynamics

VSE

SAIC

FLIR

Harris

ICF

Lockheed

Raytheon

S&P 500

L-3

Northrop

Teledyne

CSC

KEYW

Last 52 Weeks

Capital Markets: Stock Performance (Defense and Gov. Services)

Defense Prime Index Government Services Index Defense Systems Index

Middle Market Defense & Government Services Index S&P 500 Index


10

First Quarter 2013

(16.6%)

(3.0%)

(1.6%)

0.1%

5.7%

7.2%

7.3%

7.5%

7.6%

8.5%

10.0%

11.4%

11.7%

11.9%

13.9%

13.9%

15.4%

18.3%

19.0%

20.2%

20.3%

21.2%

22.0%

30.3%

45.4%

(30%)(20%)(10%) 0% 10% 20% 30% 40% 50%

AeroVironment

HEICO

AAR

Percision Castparts

Curtis-Wright

Bombardier

Gilat

LMI Aerospace

Hexcel

Rockwell Collins

S&P 500

Wesco Aircraft Holdings

Moog

Spirit AeroSystems

Boeing

UTC

Ametek

DigitalGlobe

Esterline

Triumph

Textron

Orbital Sciences

B/E Aerospace

Astronics

GenCorp

First Quarter 2013

(32.4%)

(22.4%)

(14.7%)

(9.1%)

(6.2%)

(2.7%)

0.8%

5.2%

5.9%

6.9%

7.1%

9.7%

9.7%

11.4%

12.6%

14.2%

15.4%

20.8%

25.3%

26.9%

29.7%

34.1%

41.1%

87.3%

116.7%

(60%) (30%) 0% 30% 60% 90% 120% 150%

AeroVironment

Spirit AeroSystems

Astronics

Wesco Aircraft Holdings

Curtis-Wright

Bombardier

AAR

HEICO

Esterline

Moog

Textron

Rockwell Collins

Percision Castparts

S&P 500

UTC

LMI Aerospace

Boeing

Hexcel

Triumph

Orbital Sciences

B/E Aerospace

Ametek

Gilat

GenCorp

DigitalGlobe

Last 52 Weeks

Capital Markets: Stock Performance (Aerospace)

Large Cap Aerospace Mid Cap Aerospace Small Cap Aerospace Index


11

First Quarter 2013

2.3%

2.0%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Mar 2012 Apr 2012 May 2012 Jun 2012 Jul 2012 Aug 2012 Sep 2012 Oct 2012 Nov 2012 Dec 2012 Jan 2013 Jan 2013 Feb 2013 Mar 2013

Defense and Government Services Aerospace

Short Interest (Aerospace, Defense and Gov. Services)

Last 52 Week Median Short Interest

Defense and Government Services

1.5% 5.3% 2.5% 4.7% 1.9% 1.9% 16.4% 2.0%

9.8% 3.7% 0.3% 2.0% 11.6% 8.3% 0.5% 1.2%

2.1% 1.4% 2.9% 4.4% 2.0%

Aerospace

0.6% 0.8% 1.3% 0.0% 0.8% 6.0% 6.3% 1.2%

3.9% 1.3% 1.7% 5.0% 2.3% 2.6% 0.7% 3.7%

4.2% 1.9% 16.6% 2.3% 0.0% 3.7% 1.6% 1.5%

Short Interest as of March 28, 2013


12

First Quarter 2013

Defense Systems Index

3x LTM EBITDA $425.3 $2,130.0 $1,100.5 $3,361.8 $990.6

Less LT Debt 32.4 649.0 248.3 1,929.9 558.2

Plus Cash 174.1 292.0 321.7 328.1 45.8

Dry Powder $567.0 $1,773.0 $1,174.0 $1,760.0 $478.2

Middle Market Defense & Government Services Index

3x LTM EBITDA $93.0 $269.3 $86.9 $306.6 $52.9 $219.8

Less LT Debt 89.1 105.0 89.7 650.6 17.5 168.3

Plus Cash 0.0 14.7 5.6 49.0 0.8 1.5

Dry Powder $3.9 $179.0 $2.9 ($295.0) $36.2 $53.0

Defense Prime Index

3x LTM EBITDA $11,208.0 $4,806.0 $15,579.0 $10,920.0 $10,032.0

Less LT Debt 3,909.0 3,653.0 6,308.0 3,935.0 4,731.0

Plus Cash 3,296.0 349.0 1,898.0 3,862.0 3,188.0

Dry Powder $10,595.0 $1,502.0 $11,169.0 $10,847.0 $8,489.0

Government Services Index

3x LTM EBITDA $1,572.0 $1,008.0 $5,490.0 $674.2 $2,694.0

Less LT Debt 1,726.4 706.0 2,629.0 200.0 1,298.0

Plus Cash 317.6 37.5 2,198.0 134.9 736.0

Dry Powder $163.2 $339.5 $5,059.0 $609.1 $2,132.0

Dry Powder Calculations (Defense and Gov. Services)

($ millions)


13

First Quarter 2013

Mid Cap Aerospace Index

3x LTM EBITDA $656.1 $823.6 $1,071.6 $874.5 $1,025.8 $456.0 $351.3 $2,020.4

Less LT Debt 722.8 880.2 814.4 256.6 759.2 150.7 1,176.2 1,174.9

Plus Cash 47.4 112.0 202.8 32.6 152.1 232.3 440.7 33.5

Dry Powder ($19.3) $55.4 $460.0 $650.5 $418.8 $537.6 ($384.2) $879.0

Small Cap Aerospace Index

3x LTM EBITDA $139.2 $118.6 $186.3 $689.4 $88.9 $577.3 $119.3 $513.1

Less LT Debt 0.0 30.2 708.1 483.6 52.2 254.9 260.7 617.4

Plus Cash 64.0 7.4 140.7 246.2 67.0 19.1 4.3 39.7

Dry Powder $203.2 $95.8 ($381.1) $452.0 $103.6 $341.5 ($137.1) ($64.6)

Dry Powder Calculations (Aerospace)

Large Cap Aerospace Index

3x LTM EBITDA $2,554.0 $1,896.6 $23,550.0 $3,012.0 $6,667.8 $3,213.0 $4,101.0 $29,043.0

Less LT Debt 1,453.8 1,960.5 10,409.0 5,405.0 3,825.7 1,122.0 3,995.0 23,221.0

Plus Cash 158.0 513.7 10,341.0 2,896.0 483.3 337.0 1,378.0 4,819.0

Dry Powder $1,258.2 $449.8 $23,482.0 $503.0 $3,325.4 $2,428.0 $1,484.0 $10,641.0

($ millions)


14

First Quarter 2013

Closed Closed Closed

January 2, 2013 January 2, 2013 January 2, 2013

Notes Notes Notes

Moog acquired Broad Reach

Engineering Company (BRE), a

leading designer and manufacturer

of spaceflight electronics and

software located in Golden, CO.

The transaction adds to Moog’s

space products portfolio and

provides a team of experienced

individuals. The purchase price

was $48.0 million, including $37.0

million in cash, a $6.0 million note

payable and a $5.0 million potential

earn out payment.

Heilind Electronics, Inc. acquired

Interstate Connecting Components

(ICC), a New Jersey-based

distributor of electronic components

for the military and aerospace

industries. ICC, founded in 1985,

sells to leading defense contractors

and commercial manufacturers

world-wide, serving first-, second-,

and third-tier OEMs in the

aerospace, shipbuilding, avionics,

telecommunications, and broadcast

markets.

CACI International acquired IDL

Solutions, Inc., a leading provider

of Information Technology (IT)

solutions, applications and

mission-critical systems support to

healthcare IT clients and other

civilian agencies. IDL Solutions has

over 100 employees and leverages

"big data" analytics to help

healthcare organizations gain new

insights from large volumes of

health data.

has acquired has acquired has acquired

MRO Business

Source: Capital IQ and InfoBase as of 03/31/13

Selected First Quarter Transaction Activity

15

First Quarter 2013



Notes Notes Notes

The Berger Group acquired

Hawthorne Services, Inc.

Hawthorne Services is a provider

of full lifecycle aircraft fuel services

and facilities operations and

maintenance services across the

southeast United States for the

Defense Logistics Agency-Energy

(DLA-E) and the state of South

Carolina. The acquisition follows

the 2012 Berger Group acquisition

of the enterprises that now form

Louis Berger Services, Inc.

PRV Aerospace, LLC, a portfolio

company of Court Square Capital

Partners, acquired all of the

outstanding stock of Astro Spar,

Inc. Astro Spar is a manufacturer of

complex, precision-machined

components and assemblies for the

commercial and military aerospace

industries. The Company’s products

are manufactured using aluminum

alloys and include spars, door

beams, stringers, webs, chords,

longerons, chines, wing formers

and seat tracks.

J.F. Lehman announced that

certain of its investment affiliates

have acquired IMECO, Inc., a

leading provider of turnkey marine

electro-mechanical solutions for

US Government and commercial

customers. The Company's

integrated maritime solutions

include the design, engineering,

planning, procurement and

installation of HVAC, cargo

handling, electric steering,

propulsion and fire suppression

systems.


MRO Business



16

First Quarter 2013



Notes Notes Notes

The Riverside Company acquired

Bohemia Interactive Simulations.

Bohemia is a developer and

provider of games for training

technology and interactive

simulation systems sold to

defense, emergency and mission-

critical customers. Bohemia

supplies the U.S. Department of

Defense, UK Ministry of Defense,

Australian Defense Force and a

range of other international clients.

Vistronix acquired Technology

Associates International

Corporation. Technology

Associates provides IT support

services to the Marine Corps, Navy,

Air Force, Department of Health

and Human Services and U.S.

Strategic Command. The Company

develops highly specialized

geospatial and data visualization

software applications and systems.

CRGT Inc., a Veritas Capital

portfolio company, acquired

Guident Technologies, Inc. Guident

provides end-to-end data analytics

strategy and planning services,

along with data warehouse, data

management and business

analytics solutions. Guident’s

customers include the EPA, DOT,

SEC and the U.S. Patent and

Trademark Office.


MRO Business



17

First Quarter 2013

Announced Closed Closed


Notes Notes Notes

Lockheed Martin announced its

acquisition of certain assets of the

engine maintenance, repair and

overhaul (MRO) business of Aveos

Fleet Performance, Inc., located in

Montreal, Canada. The assets will

provide capabilities to perform a

range of services on the CF34 and

CFM56 engine families and the

Airbus 320 family.

Behrman Capital acquired Tresys

Technology, a provider of

cybersecurity products, services

and solutions to government and

commercial customers. Tresys

offers services and products that

address computer network defense,

focusing primarily on platform

security, assured information

sharing and security engineering.

ManTech acquired Alta Systems,

Inc., an IT and professional

services company with applications

in healthcare systems and capital

planning. ALTA provides a broad

range of IT and professional

services to government and private

industry in three major practice

areas: capital planning and

investment control; system design,

development and operation; and

fraud detection and statistical

analysis.

plans to acquire has acquired has acquired

MRO Business

Certain Assets of



18

First Quarter 2013

Announced Closed Announced


Notes Notes Notes

EIT, LLC announced its acquisition

of Suntron Corp’s Methuen, MA

manufacturing facility. The facility,

which has an aerospace

certification, represents the last of

Suntron’s manufacturing capability.

The sale allows Suntron to better

focus on its high reliability and

mission and safety critical

customers in key industries

including defense, aerospace, and

medical devices. The addition of

the facility will add to EIT’s

manufacturing capabilities and

grow its presence in the Northeast.

Web Industries acquired CAD Cut,

Inc. Based in Vermont, CAD Cut

utilizes the latest in computer

controlled laser and knife cutting

systems and specializes in

providing composite ply kits to

aerospace, aviation, defense, and

industrial markets. Synergies are

especially strong in the aerospace

sector, where Web is a recognized

leader in providing precision

composite slit tape for automated

manufacturing.

Curtiss-Wright Corp. announced its

acquisition of German based

Phönix Group in a $106 million

cash deal. Founded in 1910,

Phönix Group is a leading designer

and manufacturer of high

performance valves and related

support services to global

chemical, petrochemical and power

markets. Phönix will become part

of Curtiss-Wright's Flow Control

segment and expand Curtiss-

Wright's severe-service valve

franchise into new markets.

plans to acquire has acquired plans to acquire



19

First Quarter 2013



Notes Notes Notes

Cubic Defense Australia, the

Australian-based defense systems

business of Cubic Corporation

agreed to acquire PS Management

Consultants Pty Ltd (PSMC), an

Australian defense firm with strong

ties to the training, simulation,

communications, and range safety

customers. This was Cubic’s

second training and simulation

acquisition in a month (it acquired

NEK Special Programs Group on

December 17th 2012).

The Atlas Group, a portfolio

company of PE firm Graham

Partners, acquired Brenner

Aerostructures, LLC. Brenner

specializes in bonding metals,

anodizing of phosphoric acids, and

stretch-forming for the aerospace

industry. The bolt-on acquisition is

expected to help Atlas win new

business, in-source production, and

streamline complex assemblies.

AtHoc, Inc. acquired Alerting

Solutions, Inc., (ASI) a provider of

warning systems for homeland

security and infrastructure

protection used by national, state

and local governments around the

world. The ASI acquisition extends

AtHoc’s product offerings, which

combine the latest advances in

mobile, cloud, multi-media and

social networks to enable unified

emergency communications for the

defense, homeland security and

government markets.


PS Management

Consultants Pty Ltd



20

First Quarter 2013



Notes Notes Notes

Network Designs, Inc. (NDi)

announced that it has successfully

completed a merger with cyber

security experts, BitSec Global

Forensics. Beginning immediately,

BitSec will operate as a division of

NDi, expanding NDi’s cyber

solutions to the commercial and

government market. BitSec Global

Forensics is a worldwide leader in

digital forensics, electronic

discovery, data breach

investigations, and training. The

merger brings almost two decades

of combined experience to NDi.

Greenwich AeroGroup, Inc., a

Berkley Capital portfolio company,

acquired Aero Precision Industries,

LLC. Aero Precision is based in

Livermore, CA and is a leading

supplier of aftermarket original

equipment manufacturer (OEM)

parts, systems and custom logistic

support services for military aircraft

operators worldwide. The

acquisition expands AeroGroup’s

capabilities in international military

and government markets.

Kidd & Company, LLC (KCO), in

collaboration with Centerfield

Capital Partners, acquired

Imaginetics, Inc. Based in Auburn,

WA, Imaginetics manufacturers

precision metal components and

assemblies for the aerospace

industry. The Company’s current

customer base includes Boeing

Commercial Airplanes, Boeing

Defense Services, Hexcel

Corporation, Spirit Aerosystems

and Zodiac Aerospace, among

others.

has merged with has acquired has acquired

&



21

First Quarter 2013



Notes Notes Notes

TriMas Corporation acquired

Martinic Engineering, Inc. for $19

million. Founded in 1978 and

located in Stanton, California,

Martinic manufactures highly-

engineered, precision machined,

complex parts for commercial and

military aerospace applications,

including auxiliary power units, as

well as electrical, hydraulic and

pneumatic systems. Martinic

generated approximately $13

million in revenue for 2012.

DC Capital Partners acquired

Computer Security Solutions, Inc.

(CompSec). CompSec is an IT

solutions provider based in

McLean, VA supporting the

Intelligence Community (IC) and

Washington DC based agencies.

The deal is expected to expand

CompSec’s customer base through

relationships with existing

companies in D.C. Capital's

portfolio. The McLean Group

served as the exclusive M&A

advisor to CompSec.

Carlyle Group portfolio company,

Dynamic Precision Group,

acquired Paradigm Precision

Holdings (PPH) from American

Capital Ltd. PPH is a

Massachusetts based provider of

highly engineered components for

turbine engines serving the

commercial aerospace, defense

and energy end markets. PPH’s

manufacturing capabilities include

a diverse range of turbine engine

products, close tolerance parts and

multi-level, highly complex

assemblies.


Martinic

Engineering, Inc.



22

First Quarter 2013


February 4, 2013 February 13, 2013 February 15, 2013

Notes Notes Notes

Drew Marine, a portfolio company

of J.F. Lehman, acquired

Alexander/Ryan Marine and Safety

Inc. Alexander/Ryan is a

manufacturer and distributor of fire,

safety and rescue equipment to the

Offshore and Marine markets.

Alexander/Ryan offers a variety of

high quality products and services,

including personal protection,

lifesaving and firefighting

equipment, life raft systems, new

survival craft, survival craft

refurbishment and technical field

services.

Laird PLC acquired Nextreme

Thermal Solutions, Inc., through its

subsidiary Laird Technologies, Inc.

Nextreme is a Durham, NC based

manufacturer of thin-film

thermoelectric modules and

subsystems. The Company’s

defense/aerospace technology

applications include thermoelectric

cooling for next-generation imaging

sensors. Laird will acquire 100% of

the equity of Nextreme in an all

earn out deal.

Precision Castparts Corp. (PCP)

cquired Protective Coatings, Inc.

(Pro-Coat), a supplier of decorative

and protective finishes for

aerospace, automotive and other

products. Pro-Coat is based in

Portland, Oregon and has 300

employees. Over the years, PCP

has acquired a number of

aerospace subcontractors in the

Portland region that were

customers of Pro-Coat. The terms

of the transaction were not

disclosed.




23

First Quarter 2013

Announced Announced Closed

February 20, 2013 February 22, 2013 February 23, 2013

Notes Notes Notes

The Dewey Electronics

Corporation announced that it has

signed a definitive agreement to

purchase certain assets, rights of

manufacture and intellectual

property from Goodman Ball

Incorporated, a maker of military

equipment that is based in Menlo

Park, California. The purchase of

these assets is part of the ongoing

liquidation of Goodman Ball by its

parent company, C.E. Niehoff &

Co.

Tactical Air Defense Services, Inc.

(TADF) announced it has entered

into an agreement to acquire Air 1

Flight Support, Inc. Air 1 is a

privately-held, Florida based

provider of aircraft maintenance,

refueling, and other support

services to the military and

commercial aircraft industry. TADF

will purchase 100% of the

outstanding shares of Air 1 for

consideration of 5,000,000 shares

of its Series C Preferred stock.

Boeing acquired CPU Technology,

Inc.’s Acalis business. Acalis

provides security-on-a-chip

defending manned and unmanned

aircraft from malware, cloning and

other cyber threats to an aircraft's

systems. Acalis will be integrated

into Boeing Military Aircraft's

Global Strike division. The Acalis

business employs approximately

40 people and is based in

California. CPU Technology was

privately-held and terms of the

transaction were not disclosed.

plans to acquire plans to acquire has acquired



24

First Quarter 2013


February 28, 2013 March 1, 2013 March 4, 2013

Notes Notes Notes

Bulova Technologies Group, Inc.

announced that it received a

significant investment in the form of

both equity and debt through NFC

III, LLC associated with National

Financial Companies, LLC. As part

of the transaction, NFC III, LLC will

appoint two Directors to the

Bulova's Board of Directors.

Teledyne Technologies acquired

RESON A/S, a provider of high-

resolution marine acoustic imaging

and measurement solutions.

RESON’s multibeam sonar systems

range from portable high-resolution

shallow water systems used on

autonomous underwater vehicles

(AUVs) to full ocean depth vessel

mounted oceanographic systems.

The transaction marks Teledyne’s

third acquisition in the last twelve

months focused on 3D imaging.

.

RBC Bearings, Inc. acquired

Western Precision Aero, LLC

(WPA), a privately-held, California-

based manufacturer of precision

components and gears for

aerospace and industrial markets.

The transaction was valued at $2.6

million. WPA's 2012 net sales were

approximately $5.0 million. The

acquisition advances RBC’s

strategy of expanding its product

portfolio into the aerospace and

industrial markets.




25

First Quarter 2013

Closed Closed Announced

March 4, 2013 March 8, 2013 March 14, 2013

Notes Notes Notes

MacAulay-Brown acquired IP and

other assets of Luna Innovations’

Secure Computing &

Communications (SCC) division.

SCC conducts electronic

component R&D and provides

technical services on critical US

military and National Security

applications. SCC and its

employees will be integrated

immediately MacAulay-Brown’s

Advanced Technology Group.

Parsons acquired First Support

Services, Inc., a wholly owned

subsidiary of FirstGroup. First

Support Services is a leading

provider of facility operations and

maintenance (O&M) services,

logistics support, transportation

support, and telecommunications

operations services to the US

government. First Support Services

has more than 175 employees and

more than $50 million in annual

revenues.

Precision Castparts announced its

definitive agreement to acquire the

metallic rods business of Sweden’s

SKF Group for $52 million. The

metallic rods business, as part of

SKF's aerospace segment,

includes operations at SKF sites in

St. Vallier sur Rhône, France and

Monroe, Washington in the US.

The acquisition supports PCP’s

strategy of further developing its

composite technology.

has acquired has acquired plans to acquire

Secure Computing & Communications Division Metallic Rods Business



26

First Quarter 2013



Notes Notes Notes

Greenbriar Equity Group

announced its definitive agreement

to acquire EDAC Technologies for

$104.1 million in cash. EDAC

designs and manufactures jet

engine parts as well as equipment

gauges and special tooling for

engine assembly, manufacturing

and inspection. Greenbriar is

paying $17.75 per share, a 30%

premium over EDAC's average

closing price during the 90 trading

days ending March 15.

Arlington Capital Partners acquired

MB Aerospace Holdings Ltd from

UK private equity group LDC Ltd.

MB Aerospace provides supply

chain integration services and

manufactures and repairs aero

engine components. This was

Arlington Capital’s first overseas

acquisition. Transaction terms

were not disclosed.

Triumph Group, Inc. announced it

will acquire Goodrich Pump &

Engine Control Systems (GPECS)

from United Technologies Corp

(UTC). GPECS supplies aerospace

fuel systems for commercial,

military, helicopter and business jet

markets. The sale of GPECS was

one of the divestitures required as

a condition of UTC’s acquisition of

Goodrich. Triumph is the second

attempted buyer; last month the

DOJ blocked a proposed

acquisition by TransDigm Group.


Pump & Engine Control Systems



27

First Quarter 2013



Notes Notes Notes

Erickson Air-Crane announced its

definitive agreement to acquire

Evergreen Helicopters, Inc. (EHI)

from Evergreen International

Aviation in a transaction valued at

up to $276.3 million. EHI provides

cargo- and personnel-related air

transport services to government

and commercial customers.

Erickson will pay $185 million in

cash and the balance in

promissory notes, preferred stock

and earn outs.

Resilience Capital Partners

acquired Aerospace Products

International, Inc. (API) from First

Aviation Services, a First Equity

Group portfolio company. As a

global aviation parts and equipment

distribution and supply chain

management firm, API’s customers

include manufacturers,

maintenance providers and

operators of widely-used military,

commercial, corporate and general

aviation aircraft. Transaction terms


Moog acquired Aspen Motion

Technologies, a subsidiary of

Pentair, for $34 million in cash.

Aspen designs and manufactures

high-performance permanent

magnet brushless DC motors,

integrated digital controls and

motorized impellers. Aspen also

specializes in custom motor

designs and significant product

enhancements in a variety of high-

performance industrial

applications. Aspen’s 2012

revenue was $36 million.




28

First Quarter 2013

Closed Closed Announced


Notes Notes Notes

The Safariland Group acquired

Mustang Survival Corp. Based in

Canada, Mustang provides

lifesaving equipment for

recreational, military, law

enforcement and industrial users in

the marine and aviation

environments. The acquisition

represents the Safariland’s first

acquisition in the marine and

aviation industries. Terms of the


Overall Capital Partners acquired

Honeycomb Company of America,

Inc. (HCOA). The Florida-based

company manufactures complex,

flight-critical, bonded, composite

assemblies for US military aircraft

platforms. HCOA provided the US

Air Force and various other

commercial suppliers factory-new,

spare parts for maintenance, repair,

and overhaul for more than 50

years.

True North Logistics announced its

agreement to acquire RAMTECH

Support Services, Inc. Based in

Pennsylvania, RAMTECH is a 500-

employee, woman-owned provider

of operations and maintenance and

systems engineering and technical

assistance services, primarily to

the Department of Defense and

other federal agencies. Transaction

terms were not disclosed.

plans to acquire has acquired plans to acquire

Honeycomb Company of America, Inc.



29

First Quarter 2013 About The McLean Group

Mergers & Acquisitions

The McLean Group uses its considerable experience and

expertise in the aerospace, defense and government

services industry to guide its clients through each stage of

the mergers & acquisitions (M&A) process and ultimately

identify the most probable and suitable candidates to

complete transactions under the most favorable terms.

Strategic Consulting

The McLean Group's Strategic Consulting business

provides transaction, financial and interim management

services to companies ranging from start-up entities to

publicly-held corporations across an assortment of

industries.

Capital Formation

The McLean Group arranges private equity, venture capital,

senior debt and subordinated debt to support clients’

expansions, M&A, refinancings, recapitalizations, leveraged

buyouts and other shareholder liquidity objectives.

Business Valuation & Litigation Support

As a core competency and complement to its M&A

business, The McLean Group provides business valuation

services, including intangible asset and financial security

valuations for a variety of transactions, financial reporting

and tax purposes. In addition, The McLean Group has the

experience and credentials necessary to support litigation

proceedings, including quantifying economic damages and

valuing a minority interest in a business.

McLean Securities, a wholly-owned affiliate of The McLean Group, is a registered broker/dealer with the Financial Industry Regulatory

Authority (FINRA) and a Member, Securities Investor Protection Corporation (SIPC).

Founded in 1997, The McLean Group is a national, middle market investment bank with deep expertise in a variety of industry

verticals. Headquartered in McLean, VA, The McLean Group is among the largest independent middle market investment

banks in the region. Our core advisory services include:

30

First Quarter 2013 Recent ADG Advisory Experience

31

First Quarter 2013

Joe Golden

Principal

[email protected]

Cameron Hamilton

Principal

[email protected]

Mitch Martin

Principal

[email protected]

Greg Boucher

Managing Director

[email protected]

Kathleen Crow

Managing Director

[email protected]

Brent Lorenz

Vice President

[email protected]

John Stack

Managing Director

[email protected]

Harry Ward

Director

[email protected]

Disclaimer: The McLean Group does not provide accounting, tax or legal advice. The contents of this document are believed to be reliable, however The

McLean Group, LLC makes no representation as to the accuracy or completeness of this information.

Aerospace, Defense and Government Services Team

The McLean Group

7900 Westpark Drive, Suite A320

McLean, VA 22102

Main: 703.827.0200

Fax: 703.827.0175

Contact Information

mailto:[email protected]








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