Government, Aerospace & Defense Industry Update August 2012

Transcription

1 Integrity Expertise Results John Hill Senior Managing Director (813) John McDonald Senior Managing Director (813) Keith Hodgdon Senior Vice President (813) Government, Aerospace & Defense Industry Update August 2012 Jeff Bridge Vice President (813) Michael Mariani Associate (813) Jennifer Paul Associate (813) Hyde Park Capital Advisors, LLC 701 N. Franklin Street Tampa, FL Tel: Member FINRA/SIPC

2 Government, Aerospace & Defense Industry Update Commentary As of August 14, 2012 the industry sectors of Government, Aerospace & Defense varied in their public stock market performance for the trailing twelve month period: Aerospace & Defense (up 21.4%), Defense Technology (up 7.7%), and Consulting & Other Services (down 1.2%). The Defense Technology sector was the industry s strongest performer in terms of valuation as of August 14, 2012, trading at 8.6x LTM EBITDA. The Aerospace & Defense and Consulting & Other Services sectors followed at 7.4x and 7.2x, respectively. As illustrated below, a number of fixed-income and follow-on equity public offerings have been completed in the Government, Aerospace & Defense industry since the beginning of 2012 as industry leaders use the proceeds to strengthen balance sheets and provide flexibility to pursue both organic and acquisition growth strategies. Select Debt & Equity Transactions ($ in millions) Offer Date Issuer Treansaction Type Offering Size 07/20/12 Exelis, Inc. Fixed-Income $650 07/09/12 B/E Aerospace, Inc. Fixed-Income $816 06/12/12 United Technologies Corp. Composite Units $1,000 05/24/12 United Technologies Corp. Fixed-Income $3,457 05/24/12 United Technologies Corp. Fixed-Income $2,298 05/24/12 United Technologies Corp. Fixed-Income $1,499 05/24/12 United Technologies Corp. Fixed-Income $1,000 05/24/12 United Technologies Corp. Fixed-Income $999 05/24/12 United Technologies Corp. Fixed-Income $500 05/09/12 Kratos Defense & Security Solutions, Inc. Follow-on Equity $100 04/12/12 Freedom Group, Inc. Fixed-Income $250 03/08/12 B/E Aerospace, Inc. Fixed-Income $500 02/21/12 Ducommun, Inc. Fixed-Income $200 02/03/12 Huntington Ingalls Industries, Inc. Fixed-Income $1,200 01/13/12 AAR Corp. Fixed-Income $172 Stock Market Performance (LTM) 140% 130% 21.4% 120% 16.6% 110% 7.7% 100% 90% 1.2% 80% 70% 60% Aug-11 Nov-11 Feb-12 May-12 Aug-12 S&P 500 Aerospace & Defense Defense Technology Consulting & Other Services Public Company Market Performance by Sector Average Change in Stock Price Enterprise Value / LTM Industry Sector 3 Months 12 months Revenue EBITDA Aerospace & Defense 4.0% 21.4% 7.4x Defense Technology 0.9% 7.7% 2.4x 8.6x Consulting & Other Services 14.8% (1.2%) 0.7x 7.2x 2

3 Government, Aerospace & Defense M&A Activity Commentary As detailed in the chart on the right, overall U.S. M&A activity or deal volume in the Government, Aerospace & Defense industry remains on pace to exceed last years totals with 59 closed transactions during the year-to-date period ending August 14 th, Strategic buyers continue to be active across all sectors of the Government, Aerospace & Defense industry with transactions announced by blue-chip companies such as CACI International, GenCorp, Mantech International, Precision Castparts Corp., and TransDigm. The industry focus was on smaller deals, as looming uncertainty over the budget made larger deals less attractive. Some of the more notable transactions announced by strategic buyers and financial sponsors since the beginning of 2012 are highlighted in the table on the right, including GenCorp s pending acquisition of Pratt & Whitney Rocketdyne, Inc., a leading provider of propulsion products such as launch vehicles, missile defense, and hypersonic propulsion, for $550 million. Rocketdyne s parent company, United Technologies Corp., announced it was selling Rocketdyne to help finance its purchase of Goodrich Corp. which was completed on July 26 th, 2012 for over $18.6 billion. Other notable pending M&A transactions in the Government, Aerospace & Defense industry announced during the past few months include Superior Aviation Beijing Co. s proposed acquisition of Hawker Beechcraft Acquisition Co., LLC, a manufacturer of business, special mission, light attack and trainer aircraft, for over $3.8 billion; Macdonald Dettwiler & Associates proposed acquisition of satellite provider Space Systems/Loral, Inc. for $875 million; and Wynchurch Capital s $70 million buyout of Northstar Aerospace, Inc., a manufacturer of flight-critical parts for military and commercial aircraft applications. With defense growth slowing, aerospace companies continue to earn a premium in terms of valuation over traditional defense companies. Completed U.S. M&A Transactions Aerospace & Defense Strategic Financial YTD 8/14/ Notable M&A Transactions Enterprise Closed Date Target Buyer Value ($mm) Revenue EBITDA 07/23/12 Pratt & Whitney Rocketdyne, Inc. GenCorp, Inc. $550.0 NA NA 07/09/12 Hawker Beechcraft Acquisition Co., LLC Superior Aviation Beijing Co., Ltd. $3,879.6 NM 06/26/12 Space Systems/Loral, Inc. Macdonald Dettwiler & Associates $875.0 NA 06/21/12 Delta Solutions and Technologies, Inc. CACI International, Inc. NA NA NA 06/14/12 Northstar Aerospace, Inc. Wynnchurch Capital $ x 2.7x 06/04/12 AMPAC-ISP Corp. Moog, Inc. $ x NA 05/14/12 VT Group, Inc. The Jordan Co. $ x NA 05/14/12 PRV Aerospace, LLC Court Square Capital Partners NA NA NA 05/02/12 Safariland, LLC Kanders & Co., Inc. $124.0 NA 04/24/12 Skandia, Inc. Graycliff Partners NA NA NA 03/12/12 Tronair, Inc. Levine Leichtman Capital Partners NA NA NA 02/27/12 HBGary, Inc. ManTech International Corp. $23.8 NA NA 01/20/12 AmSafe, Inc. TransDigm Inc. $ x 12.4x 01/17/12 Procerus Technologies, LLC Lockheed Martin Corp. NA NA NA 01/09/12 UFC Aerospace Corp. BE Aerospace, Inc. $400.0 NA 9.5x 3

4 Government, Aerospace & Defense M&A Activity Select M&A Transactions Closed Date Target Business Description Buyer Enterprise Value ($mm) Revenue EBITDA 08/02/2012 CSI Aerospace, Inc. Provides maintenance, repair and overhaul services of pitot tubes, pitot-static tubes and total air temperature sensors. HEICO Aerospace Holdings Corp. NA NA NA 08/02/2012 3PSC, LLC Operates and maintains the United States Navy s military sealift command oceanographic survey ships on contract. Maersk Line, Ltd. NA NA NA 07/31/2012 Max-Viz, Inc. Designs, develops, and manufactures enhanced vision systems for the civilian and military aviation industry. Astronics Corp. $ x NA 07/26/2012 OptiMetrics, Inc. Provides specialized research and engineering services. DCS Corp. NA NA NA 07/23/2012 Pratt & Whitney Rocketdyne, Inc. Offers propulsion products, including launch vehicles, missile defense, and hypersonic propulsion. GenCorp, Inc. $550.0 NA NA 07/23/2012 DigitalGlobe, Inc. Provides commercial earth imagery products and information services worldwide. GeoEye, Inc. NA NA NA 07/20/2012 AeroTech Corp. Operates as a aerospace/defense services contractor. Tactical Air Defense Services, Inc. NA NA NA 07/17/2012 DM Petroleum Operations Co. Provides management and operating services to the U.S. Department of Energy on the Strategic Petroleum Reserve (SPR) project. Jacobs Engineering Group, Inc. NA NA NA 07/09/2012 Hawker Beechcraft Acquisition Co., LLC Engages in the design, manufacture, and service of business and general aviation, training, and special mission aircraft worldwide. Superior Aviation Beijing Co., Ltd. $3,879.6 NM 07/02/2012 Space Computer Corp. Produces real time signal processing systems, software and algorithms for exploitation of hyperspectral sensor data. ITT Exelis Geospatial Systems NA NA NA 07/01/2012 Klune Industries, Inc. Provides manufactured solutions for the aerospace and defense industries in the United States and internationally. Precision Castparts Corp. NA NA NA 06/26/2012 Space Systems/Loral, Inc. Designs and manufactures satellites and satellite systems for commercial and government customers worldwide. Macdonald Dettwiler & Associates Ltd. $875.0 NA 06/21/2012 Delta Solutions and Technologies, Inc. Provides federal financial management and technology solutions customized to the U.S. government. CACI International, Inc. NA NA NA 06/14/2012 Northstar Aerospace, Inc. Manufactures flight-critical parts for military and commercial aircraft applications, and non-flight-critical parts for commercial aircraft. Wynnchurch Capital $ x 2.7x 06/08/2012 International Development Solutions, LLC Provides integrated security services to the United States Government in support of missions worldwide. ACADEMI NA NA NA 06/04/2012 AMPAC-ISP Corp. Manufactures and supplies propulsion systems for commercial and military satellites, launch vehicles, and missile defense. Moog, Inc. $ x NA 05/30/2012 Next Giant Leap, LLC Engages in designing an integrated system for taking small payloads to the moon commercially. Moon Express, Inc. NA NA NA 05/29/2012 Ice Industries Columbus, Inc. Manufactures, sells, and supplies spare parts to the U.S. Military. Ice Industries, Inc. NA NA NA 05/20/2012 Dickson Testing Co., Inc. and Aerocraft Heat Treating Co., Inc. Provide commercial heating and testing services to aerospace material producers. Precision Castparts Corp. NA NA NA 05/14/2012 VT Group, Inc. Provides base operations and facilities management services for military bases in the United States and internationally. The Jordan Co. $ x NA 05/14/2012 PRV Aerospace, LLC Supplies components, assemblies, and repair services to original equipment manufacturers of aircraft and other defense platforms. Court Square Capital Partners NA NA NA 05/14/2012 MacLean Sky, LLC Manufactures fasteners for the aerospace industry. MacLean-Fogg Component Solutions, LLC NA NA NA 05/02/2012 Safariland, LLC Manufactures law enforcement and security products. Kanders & Company, Inc. $124.0 NA 04/30/2012 Millennium Systems Services, Inc. Provides logistical and programmatic support services to U.S. government customers. Systems Products and Solutions, Inc. NA NA NA 04/26/2012 Commerce Overseas Corp. Manufactures and supplies military aviation parts. Merex, Inc. NA NA NA 04/24/2012 Skandia, Inc. Provides aircraft interior products and services. Graycliff Partners NA NA NA 04/23/2012 Ticom Geomatics, Inc. Develops large scale enterprise ISR systems and QRCs for precision geolocation. Six3 Systems, Inc. NA NA NA 04/19/2012 Tri Aerospace, LLC Manufactures precision machined components to the aviation, military/defense, and specialty markets. Model 2 Machine Group NA NA NA 04/16/2012 Moritz Aerospace, Inc. Designs and manufactures aircraft instrumentation. Radiant Power Corp. NA NA NA 04/15/2012 Swift-Cor Aerospace, Inc. Manufactures precision CNC machined and sheet metal parts and assemblies for various aerospace platforms. Venture Aircraft, Inc. NA NA NA 04/14/2012 NTE Aviation, Ltd. Provides parts for turboprop and turbofan aircraft and engines for independent overhaul shops and operators. Waveland Investments NA NA NA 04/05/2012 Wood Group Turbopower, LLC Provides overhaul and repair services to military operations, commuter airlines, business aviation, and utility freight markets. CPR Aerospace, Inc. NA NA NA. 4

5 Government, Aerospace & Defense M&A Activity Select M&A Transactions Closed Date Target Business Description Buyer Enterprise Value ($mm) Revenue EBITDA 04/04/2012 Xollai, LLC Provides robotic vision and sensory solutions. ReconRobotics, Inc. NA NA NA 04/02/2012 Excaliber Precision Manufacturing, LLC Engages in the precision machining and assembly of aerospace parts for aerospace and defense. Thunderbird, LLC NA NA NA 03/27/2012 Nassau Tool Works, Inc. Engages in fabrication of parts, sub-assemblies, and complete landing gear systems for military fighter aircraft. Air Industries Group, Inc. $ x NA 03/22/2012 Hill AeroSystems, Inc. Manufactures and supplies parts and assemblies for military and commercial aircrafts. AGC Composites Group NA NA NA 03/19/2012 Ramona Research, Inc. Manufactures Radio Frequency (RF) and microwave amplifiers, transmitters and receivers used to support military communications. HEICO Electronic Technologies Corp. NA NA NA 03/12/2012 Tronair, Inc. Engages in designing, manufacturing, and distributing aircraft ground support equipment for the aerospace industry. Levine Leichtman Capital Partners NA NA NA 03/07/2012 Artis, LLC Designs and develops technologies for defense systems and health science applications. Plasan North America, Inc. NA NA NA 03/06/2012 Epic AIR, LLC Designs and produces aircrafts. Engineering, LLC NA NA NA 03/05/2012 AeroRepair Corp. Provides overhaul services for aircraft components. The Weinberg & Bell Group NA NA NA 03/05/2012 Pemco World Air Services, Inc. Provides maintenance, repair, and overhaul (MRO) services for wide and narrow body aircraft, and regional jets around the world. Avion Services Holdings, LLC $37.8 NA NA 02/28/2012 LAI International, Inc. Offers precision-engineered finished parts, components, and subassemblies for aerospace, defense, and other technology industries. Monroe Capital LLC / RLJ Equity Partners NA NA NA 02/27/2012 HBGary, Inc. Develops security software for enterprise incident response and advanced persistent threats (APT) malware analysis. ManTech International Corp. $23.8 NA NA 02/21/2012 World Technical Services, Inc. Provides range operations and maintenance, base operations support, and logistics and maintenance services. Primus Solutions, Inc. NA NA NA 02/17/2012 Federal Resources Safe Measures Distributes military products worldwide. KLH Capital NA NA NA 02/13/2012 Elcom Technologies, Inc. Designs and manufactures RF modules and broadband subsystems for aerospace defense and commercial markets. Frequency Electronics, Inc. NA NA NA 02/07/2012 Summit Tool Corp. Manufactures aerospace engine components. Summit Aerospace USA, Inc. NA NA NA 02/07/2012 Aaxico, Inc. Distributes products to commercial airlines. Kirkhill Aircraft Parts Co. NA NA NA 02/03/2012 Burtek Enterprises, Inc. Engages in the design, manufacture, and assembly of ground-based mobile military equipment. Wynnchurch Capital / Stone River Capital Partners NA NA NA 02/02/2012 Weber Technologies, Inc. Provides manufacturing solutions for the aerospace industry from the component level to complete assemblies. Enginetics Aerospace Corp. NA NA NA 02/01/2012 Louis Berger Services, Inc. Focuses on acquiring and developing companies operating in aerospace, defense, and aviation services sectors. Berger Group Holdings, Inc. NA NA NA 01/31/2012 Radian Precision, Inc. Engages in the manufacture of precision machined parts and assemblies for aerospace, defense, and transportation industries. TAG Holdings, LLC NA NA NA 01/30/2012 Para USA, Inc. Manufactures pistols and handguns for law enforcement professionals. Freedom Group, Inc. NA NA NA 01/25/2012 Fitz Aerospace, Inc. Manufactures and supplies precision aerospace components. Novaria Group, Inc. NA NA NA 01/23/2012 ATA Defense Industries, Inc. Offers automated targeting systems for military and commercial uses. Action Target, Inc. NA NA NA 01/20/2012 AmSafe, Inc. Manufactures safety and securement equipment for aerospace, defense, and ground transportation industries. TransDigm, Inc. $ x 12.4x 01/18/2012 Aviation Manufacturing Group, LLC Manufactures precision-machined parts for the aerospace industry. JLL Partners NA NA NA 01/17/2012 Procerus Technologies, LLC Develops and markets autopilot systems for mini and micro unmanned aerial vehicles (UAVs). Lockheed Martin Corp. NA NA NA 01/11/2012 Ops-Core, Inc. Manufactures protective equipment for soldiers. Gentex Corp. NA NA NA 01/09/2012 UFC Aerospace Corp. Provides aerospace logistics integrated supply chain solutions globally. BE Aerospace, Inc. $400.0 NA 9.5x Average 1.3x 8.2x Median 9.5x. 5

6 Aerospace & Defense ($ in millions, except per share) Public Company Analysis Enterprise Value / Closing Price % of 52 Equity Enterprise LTM LTM Margins LTM Company Ticker 8/14/12 Week High Value Value Revenue Gross Profit EBITDA Gross Profit EBITDA Revenue EBITDA The Boeing Co. BA $ % $55,952 $56,990 $76,670 $13,243 $7, % 10.3% 0.7x 7.2x Honeywell International, Inc. HON $ % $46,014 $49,367 $37,513 $8,243 $3, % 10.1% 1.3x 13.0x Lockheed Martin Corp. LMT $ % $30,095 $32,786 $47,544 $5,396 $4, % 10.4% 0.7x 6.6x General Dynamics Corp. GD $ % $22,949 $24,342 $32,501 $5,965 $4, % 13.8% 0.7x 5.4x Raytheon Co. RTN $ % $19,212 $21,071 $24,534 $5,357 $3, % 14.1% 0.9x 6.1x Northrop Grumman Corp. NOC $ % $18,030 $18,814 $25,590 $5,561 $3, % 14.4% 0.7x 5.1x Textron, Inc. TXT $ % $7,934 $11,171 $11,943 $1,941 $1, % 9.7% 0.9x 9.7x L-3 Communications Holdings, Inc. LLL $ % $7,005 $10,768 $14,948 $1,612 $1, % 12.3% 0.7x 5.8x Average 94% $25,899 $28,164 $33,905 $5,915 $3, % 11.9% 7.4x Median 95% $21,081 $22,707 $29,046 $5,479 $3, % 11.4% 0.7x 6.4x Stock Price Performance (LTM) Trading Multiples 140% 10.0x 1.0x 130% 120% 21.4% 9.0x 0.9x 0.9x 110% 16.6% 100% 90% 80% 70% EBITDA 8.0x 7.0x 6.0x 8.2x 8.2x 7.5x 7.1x 7.5x 7.6x 6.6x 6.5x 7.2x 6.9x 0.2x 60% Aug-11 Nov-11 Feb-12 May-12 Aug-12 S&P 500 Aerospace & Defense 5.0x Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1'12 Q2 '12 EBITDA 0.0x 6

7 Defense Technology ($ in millions, except per share) Public Company Analysis Enterprise Value / Closing Price % of 52 Equity Enterprise LTM LTM Margins LTM Company Ticker 8/14/12 Week High Value Value Revenue Gross Profit EBITDA Gross Profit EBITDA Revenue EBITDA United Technologies Corp. UTX $ % $70,212 $86,326 $57,271 $16,164 $9, % 16.9% 1.5x 8.9x Precision Castparts Corp. PCP $ % $23,329 $23,376 $7,509 $2,376 $2, % 27.8% 3.1x 11.2x Rockwell Collins, Inc. COL $ % $7,364 $8,083 $4,756 $1,413 $1, % 21.7% 1.7x 7.8x TransDigm Group, Inc. TDG $ % $3,735 $7,065 $1,581 $904 $ % 47.1% 4.5x 9.5x Harris Corp. HRS $ % $5,233 $6,924 $5,451 $1,882 $1, % 23.1% 1.3x 5.5x Average 82% $21,974 $26,355 $15,314 $4,548 $2, % 27.3% 2.4x 8.6x Median 89% $7,364 $8,083 $5,451 $1,882 $1, % 23.1% 1.7x 8.9x Stock Price Performance (LTM) Trading Multiples 140% 130% 120% 16.6% 10.0x 9.0x 1.7x 1.8x 1.8x 9.5x 9.7x 1.7x 2.0x 110% 100% 90% 7.7% EBITDA 8.0x 7.0x 8.8x 8.8x 8.3x 8.7x 8.7x 8.2x 8.9x 8.5x 1.2x 80% 70% 6.0x 60% Aug-11 Nov-11 Feb-12 May-12 Aug-12 S&P 500 Defense Technology 5.0x Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 EBITDA 0.0x 7

8 Consulting & Other Services ($ in millions, except per share) Public Company Analysis Enterprise Value / Closing Price % of 52 Equity Enterprise LTM LTM Margins LTM Company Ticker 8/14/12 Week High Value Value Revenue Gross Profit EBITDA Gross Profit EBITDA Revenue EBITDA Computer Sciences Corp. CSC $ % $4,861 $6,624 $15,801 $2,507 $1, % 8.8% 4.8x SAIC, Inc. SAI $ % $3,961 $4,645 $10,681 $984 $ % 3.9% 11.0x Booz Allen Hamilton Holding Corp. BAH $ % $2,683 $3,302 $5,845 $1,381 $ % 8.5% 6.7x CACI International, Inc. CACI $ % $1,656 $2,182 $3,789 $1,157 $ % 9.4% 6.1x MAXIMUS, Inc. MMS $ % $1,839 $1,672 $1,000 $272 $ % 14.2% 1.7x 11.8x ManTech International Corp. MANT $ % $802 $877 $2,732 $396 $ % 10.3% 0.3x 3.1x Average 86% $2,634 $3,217 $6,641 $1,116 $ % 9.2% 0.7x 7.2x Median 91% $2,261 $2,742 $4,817 $1,070 $ % 9.1% 0.5x 6.4x Stock Price Performance (LTM) Trading Multiples 140% 10.0x 130% 0.7x 120% 16.6% 8.0x 110% 100% 90% 80% 1.2% EBITDA 6.0x 4.0x 5.6x 5.3x 4.7x 5.1x 5.5x 5.2x 0.5x 4.4x 4.4x 0.5x 5.2x 5.4x 0.2x 70% 60% Aug-11 Nov-11 Feb-12 May-12 Aug-12 S&P 500 Consulting & Other Services 2.0x Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 EBITDA 0.0x 8

9 Integrity Expertise Results John Hill Senior Managing Director (813) Recent Transactions John McDonald Senior Managing Director (813) Keith Hodgdon Senior Vice President (813) Jeff Bridge Vice President (813) Michael Mariani Associate (813) Jennifer Paul Associate (813) Hyde Park Capital Advisors, LLC 701 N. Franklin Street Tampa, FL Tel: Member FINRA/SIPC