Esterline Acquisition of Barco s Defense, Aerospace & Training Business. February 2015

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Everett McDaniel
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1 Esterline Acquisition of Barco s Defense, Aerospace & Training Business February 2015

2 Acquisition Timeline Overview In Sept. 2014, Esterline announced that the company would acquire strategic portions of Belgium-based Barco NV, a leading worldwide visual display provider Acquisition includes Barco s defense, aerospace and training visualization capabilities The transaction closed Jan. 31, 2015 Acquisition of Barco s Defense, Aerospace & Training Business 1

Barco NV, a leading worldwide visual display provider Acquisition includes Barco s defense,

3 Key Investment Highlights Strategic bolt-on acquisition with complementary technology to several Esterline businesses Similar market balance and key capabilities including human-machine interface and harshenvironment standards Strong integration opportunity many synergies Effective use of cash transaction fits well with our capital allocation strategy Acquisition of Barco s Defense, Aerospace & Training Business 2

harshenvironment standards Strong integration opportunity many synergies Effective use of cash

4 Acquisition Rationale Esterline & Barco have a long-standing relationship as both partners and competitors and hold a strong mutual respect for each other Adding Barco s Defense, Aerospace & Training capabilities to Esterline offers customers a greater range of solutions and offers the combined business a wider global customer reach and new program opportunities Combined business strength creates a strong, world-leading displays company. Acquisition of Barco s Defense, Aerospace & Training Business 3

greater range of solutions and offers the combined business a wider global customer reach and new program opportunities

5 Acquired Pieces of Barco NV Defense and Aerospace Division Training & Simulation portion of Simulation Division Control rooms Defense & Aerospace Corporate AV Digital cinema Healthcare Media & entertainment Simulation & virtual reality Broadcast Emergency operations centers Oil & gas Security/CCTV Telecom Traffic management Utilities & process control Air traffic control (ATC) & management Avionics C4ISR Command centers Movie theater Theater lobby Postproduction Dentistry Mammography Pathology Radiology Surgery Point of care Clinical specialties DOOH (advertising) Branding & retail Rental & staging Sports & venues Visitor attractions Automotive Oil & gas Science Training & simulation Acquisition of Barco s Defense, Aerospace & Training Business * Equity Market Capitalization plus Long-Term Debt less Cash 4

Avionics C4ISR Command centers Movie theater Theater lobby Postproduction Dentistry Mammography Pathology Radiology Surgery Point of care Clinical specialties DOOH (advertising) Branding & retail

6 Products and Technologies Rugged Displays & Consoles ATC Displays & Training & Simulation Avionics Displays 5

7 Defense, Aerospace & Training Key Stats. Founded in the 1980s, the Defense, Aerospace & Training business is now the largest independent Tier 3 display provider with best in class positions within its core markets By Geography DEFENSE, AEROSPACE & TRAINING FY 13 Revenue M Defense Avionics Air Traffic Control Training & Simulation Global provider of rugged displays, computers and consoles for the naval, shelter, UAV and ground army segments Global, independent leader in cockpit displays, middleware and computers for the Civil and Military aircraft Leader in main radar, auxiliary and tower displays for the Air Traffic Control segment Global, independent leader in Training and Simulation systems providing to Tier 1 simulator integrators N. America W. Europe APAC Emerging No.1 in market No.3 in market No.1 in market No.2 in market Acquisition of Barco s Defense, Aerospace & Training Business 6

AEROSPACE & TRAINING FY 13 Revenue - 149.

8 Defense, Aerospace & Training Key Stats. Approx. 600 employees at production facilities in Belgium, Israel, France, Singapore and U.S. Worldwide sales presence in strategic hubs Senior management with an average of 20 years of experience Access to senior management at key system integrators through global network Acquisition of Barco s Defense, Aerospace & Training Business 7

9 Strategic Fit SCALE SCOPE SKILLS SPEED SKILLS - Experienced management team and strong display technology talent to fill resource gaps SCALE - Excellent fit with complementary products SCOPE - Helps grow strategic displays business SPEED - Accelerates technology roadmap progress Acquisition of Barco s Defense, Aerospace & Training Business 8

complementary products SCOPE - Helps grow strategic displays business SPEED -

10 Strong Portfolio of Complementary Products Avionics Displays CMA-2082F Electronic Warfare CMA-9000 FMS 4x5, 5x7, 6x8 Multifunction Displays KDM1040S, KDM640S, & KDM340S (3ATI) CMA-5025 TacView Portable Mission Display ESL Synergistic Products ATC Displays & Training & Simulation Rugged Displays & Consoles ESL Complementary Cockpit Solutions Acquisition of Barco s Defense, Aerospace & Training Business 9

Portable Mission Display ESL Synergistic Products ATC Displays & Training & Simulation Rugged

11 Combined Markets, Global Customer Reach Civil Fixed Wing Business & Regional Military Fixed Wing Military Ground Helicopters Unmanned Systems Air Traffic Control Training & Simulation Esterline A&C Segment Newly Acquired Products Highly complementary markets served by the combined product families of Esterline and the new Defense, Aerospace & Training products. Provides new opportunities to reach existing customers and generate additional business growth. Acquisition of Barco s Defense, Aerospace & Training Business 10

markets served by the combined product families of Esterline and the new Defense, Aerospace & Training products.

12 Business Integration ESTERLINE TECHNOLOGIES Headquarters: Bellevue, Washington Public company (NYSE: ESL) founded in 1967 Employees: >12,000 Revenue: $2B Avionics & Controls Segment Sensors & Systems Segment Advanced Materials Segment Avionics Systems Control & Communication Systems Interface Technologies Advanced Sensors Connection Technologies Power Systems Defense Technologies Engineered Materials The Barco businesses will join and report through two Esterline business platforms. Avionics and Training & Simulation businesses will integrate into the Avionics Systems platform which is headquartered in Montreal, Canada. Defense and ATC business will integrate into the Control & Communication Systems platform which is headquartered in Everett, Washington. Acquisition of Barco s Defense, Aerospace & Training Business 11

Materials The Barco businesses will join and report through two Esterline business platforms.

13 Avionics Systems Business Integration Avionics & Controls Segment Control & Communication Systems Esterline Avionics Systems Platform Specializes in avionics displays and cockpit systems integration Highly complementary product and customer portfolio with the Avionics group Training & Simulation provides some read across to cockpit systems integration work Esterline Control & Communication Systems Platform Specializes in ruggedized displays and human-machine interface control systems Well suited for the defense and air traffic control product applications Wider military presence with key U.S. defense contractors Continued integration of the newly acquired products and the two Esterline platforms will continue once the acquisition has been fully absorbed with crosssegment interaction ongoing for key activities such as R&D, Sales & Marketing, and Procurement. Acquisition of Barco s Defense, Aerospace & Training Business 12

Systems Platform Specializes in ruggedized displays and human-machine interface control systems Well suited for the defense and air traffic control product applications Wider military presence with

14 Business Potential Stable base revenue supported by attractive foundational market presence - Defense: Displays for naval C4ISR / combat systems, Unmanned Aircraft Systems ground control - Avionics: Displays for popular business jets and military aircraft in full rate production - ATC: High market share grounded in major US FAA display modernization program - Training & Simulation: Long-term relationships with leading simulator OEMs (e.g., CAE, L-3, etc.) Growth driven by both specific programmatic positions and overall market uplift Defense: Annual armored vehicle sales growth due to six well-supported programs (Saudi Royal Guard, UK Scout, German PUMA and Boxer, Singaporean Terrex / Bionix and U.S. JLTV) Avionics: High-end business jets and new model introductions (e.g., PC-24, C919) drive growth in out years ATC: ISIS-4 with new screen creates differentiation during period of sustained ~6% CAGR global ATM growth Training & Simulation: Growth stems from non-us growth in tactical military aircraft sales Portfolio and product positions include potentially significant upside Training & Simulation: US T-X trainer program beginning to ramp in Opportunity where company has strong relationships with simulator providers (i.e., CAE, L-3, Saab/Boeing, LMT) Defense: U.S. JLTV program; U.S. GCV program (or alternative); General Atomics UAS GCS networking upgrade Acquisition of Barco s Defense, Aerospace & Training Business 13

relationships with leading simulator OEMs (e.g., CAE, L-3, etc.

15 Business Potential Integration into Esterline s Avionics & Controls Segment will sharpen the focus on this business, allowing stronger performance and greater returns Strengths Superior brand recognition considered the highest standard of display & projector solutions High barrier to entry with relatively low competitive base Solid relationships with key Avionics Integrators (i.e. Honeywell) Extensive presence in Europe and Asia Acquisition of Barco s Defense, Aerospace & Training Business 14

display & projector solutions High barrier to entry with relatively low competitive base Solid relationships with key

16 Creating a Better Combined Business $50M+ Displays Business 4,000+ Displays Annually $250M+ Displays Business 8,000+ Displays Annually Top Tier OEMs & System Integrators Regional Customer Base Top Tier OEMs & System Integrators Worldwide Customer Base Before After Acquisition of Barco s Defense, Aerospace & Training Business 15

Integrators Regional Customer Base Top Tier OEMs & System Integrators Worldwide

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ELBIT SYSTEMS. Jefferies Global Industrials Conference - August 2014. Joseph Gaspar EVP & CFO ELBIT SYSTEMS Jefferies Global Industrials Conference - August 2014 Joseph Gaspar EVP & CFO AT A GLANCE HEADQUARTED ISRAEL with International Operations 11,700 EMPLOYEES 50% engineers TEL AVIV & NASDAQ