Holt aerospace & defense industry

Aviation & Aerospace Industry Manufacturing Summit (AAIMS) Setting the Stage Rob Spingarn Credit Suisse Aerospace & Defense Equity Research (212) 538-1895, [email protected] October 16, 2013

DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION™

Client-Driven Solutions, Insights, and Access

Credit Suisse has decided not to enter into business relationships with companies that Credit Suisse has determined to be involved in the development, manufacture or acquisition of anti-personnel mines and cluster munitions. For Credit Suisse's position on the issue, please see https://www.credit-suisse.com/responsibility/doc/policy_summaries_en.pdf.

Date: 10/31/2013 Slide 2

My Role as a Sell-side Equity Analyst

Source: Credit Suisse research

• We form the Investment Theses for Stocks/Industries in a Coverage Universe • Traditional sell-side firms such as Credit Suisse (CS) have analyst teams that

cover ~50+ industries. • Aerospace & Defense is 1 of 60 sector teams at CS

• We provide investment recommendations through the following mechanisms: • Buy/Sell/Hold Ratings • Target Prices to value the equity embedded in a company • Earnings & Cash Flow forecasts to define a path to the Target Price value

• Our clients are mutual funds, pension funds, and hedge funds that own and trade stocks. They are collectively known as the “buy side”.

3

Your Role as Aerospace & Defense Suppliers Defense Primes BizJets

Raytheon Company Bombardier Inc.Northrop Grumman Corporation Embraer S.A.Lockheed Martin Corporation Textron Inc.General Dynamics Corporation Dassault Systemes SAHuntington Ingalls Industries, Inc. EnginesAlliant Techsystems Inc. Rolls-Royce Holdings plc

Defense Tier 1 United Technologies CorporatioExelis Inc. MTU Aero Engines AGL-3 Communications Holdings, Inc. Tier 1 CommercialCubic Corporation Honeywell International Inc.

Government Services United Technologies CorporatioBooz Allen Hamilton Holding Corporation Spirit AeroSystems Holdings, InCACI International Inc Triumph Group, Inc.ManTech International Corporation WOODWARD, INC.Leidos Holdings Inc. Zodiac Aerospace SAEngility Holdings, Inc. Safran SAICF International, Inc. B/ E Aerospace Inc.

The KEY W Holding Corporation AftermarketUS Space TransDigm Group Incorporated

Orbital Sciences Corporation HEICO CorporationAlliant Techsystems Inc. Meggitt PLCMacDonald, Dettwiler and Associates AAR CORP.GenCorp Inc. Tier 2 Commercial

European Defense Primes Esterline Technologies CorporaBAE Systems plc Anaren, Inc.Finmeccanica S.p.A. Aeroflex Holding Corp.Saab AB Moog Inc.Thales SA Duocommun Incorporated

European Defense Tier 1 Astronics CorporationChemring Group PLC Curtiss-Wright CorporationRheinmetall AG CrossoverUltra Electronics Holdings plc Rockwell Collins, Inc.

Large Commercial Harris CorporationThe Boeing Company FLIR Systems, Inc.European Aeronautics Defence & Space CAE Inc.

Regional JetsBombardier Inc.Embraer S.A.

Company Company

-50%

0%

50%

100%

150%

200%

1/5/2009 1/5/2010 1/5/2011 1/5/2012 1/5/2013Commercial Aerospace Defense Government Services S&P 500

Date: 10/31/2013 Slide 4

Aerospace & Defense – Stock Performance Absolute Performance - Commercial Aerospace vs Defense vs Government Services vs S&P 500

Source: Factset

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13Defense Gov't Services Aerospace

Date: 10/31/2013 Slide 5

Absolute Performance by Year – Commercial Aerospace vs Defense vs Government Services

Source: Factset

Aerospace & Defense – Stock Performance

Commercial Aerospace

Date: 10/31/2013 Slide 7

Commercial Aerospace – Two Sub-Cycles Original Equipment (OE) is Late-Cycle; Aftermarket is Early-Cycle

Y/Y Change in Aircraft Production Y/Y Change in Traffic Demand

Source: IATA Traffic & Capacity Data, Credit Suisse research

-40%-30%-20%-10%

0%10%20%30%40%50%60%

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

-4%

0%

4%

8%

12%

16%

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

Commercial Original Equipment

Date: 10/31/2013 Slide 9

Commercial OE – What Drives OE Original Equipment is Primarily Driven by Orders

Source: Credit Suisse Research

Orders

Fleet Replacement

Fleet Expansion

High Fuel Costs Warranties

Cheap Financing

Air Traffic Demand

Cheap Financing

2475

2074

1743

1380

1123

1270 1614

1750

1792

1513

1614

1357

1151

1109

1095 18

10 2451 34

28 3714

3375

3443 3771 44

24 485710

34

950

836

667

615 578 75

4 1009 1313

1445 1626

1575

1523

1467

1505

2180 25

31

3420 37

15

3488

3554 44

36 4683 52

02

0

1

2

3

4

5

6

7

8

9

10

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Boeing Backlog Airbus Backlog Backlog Coverage

Date: 10/31/2013 Slide 10

Commercial OE – Key Positive Considerations

Source: Ascend, Credit Suisse research

Record Backlogs - High oil prices combined with low interest rates, new aircraft warranties and a weak US$ have driven record demand

Date: 10/31/2013 Slide 11


Source: IATA, Credit Suisse research

High fuel prices may be the single most important driver % of Operating

CostsAverage Price per

Barrel of CrudeBreak-even Price

per BarrelTotal Fuel

Cost (US$B)2003 14% $28.80 $23.40 $44 2004 17% $38.30 $34.50 $65 2005 22% $54.50 $51.80 $91 2006 26% $65.10 $68.30 $117 2007 28% $73.00 $82.20 $135 2008 33% $99.00 $82.50 $189 2009 26% $62.00 $58.90 $125 2010 26% $79.40 $91.70 $139 2011 28% $111.20 $116.70 $176 2012 32% $111.80 $116.40 $210 2013E 31% $108.00 $115.60 $214

13,557

7,372

1,673

6,082

504

11,734

3,736

934

3,780

553

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Africa Asia &Middle East

Europe Latin America &Caribbean

NorthAmerica

2002 2012

Date: 10/31/2013 Slide 12



Globalization

People Per Aircraft Seat by region

Date: 10/31/2013 Slide 13



And technological advances More fuel efficient engines (GTF, Leap) Lighter weight composites Improved avionics and information

technology

Date: 10/31/2013 Slide 14


Source: Boeing

Still-favorable borrowing environment

527 606 572 409

312 256 271 375

564 620 492 527

381 281 285 290

398 441 375 481 462 477

601 666 757 766 733

95

163 157

138 123

124 126

182

229 294

311 325

303 305 320 378

434 453

483

498 510 534

588 612

624 640 631

0

200

400

600

800

1,000

1,200

1,400

1,600

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014E 2016E

Num

ber o

f Airc

raft

Boeing Deliveries Airbus Deliveries

Down 51% Over 4 Years

Down 36% Over 4 Years

2012A-2015E CAGR of 5.3%

Date: 10/31/2013 Slide 15



And the result is, record deliveries

Date: 10/31/2013 Slide 16

Commercial OE


But, there are some watch items

Date: 10/31/2013 Slide 17

Commercial OE – Key Concerns


Competition from new entrants Bombardier CSeries COMAC 919 Russian & Japanese Regional Jets

3.0 2.74.7

3.8 4.05.3

3.5 3.44.4 4.4 3.9

3.2 3.54.2

3.14.2 4.0 3.7 4.3

3.0 3.6 3.05.0 4.4

3.54.5 4.3

5.8 5.5 5.26.7

11.7 12

.217

.6

-

2

4

6

8

10

12

14

16

18

20

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Average Order Size Average Order Size 1980-2010

2004-2010 Average Order Size = 4.1 Aircraft

Date: 10/31/2013 Slide 18



Boeing and Airbus have responded by aggressively selling aircraft For the first time in 30 years average sale quantities are rising rapidly

Date: 10/31/2013 Slide 19



We expect that these large orders reflect, to some extent, aggressive pricing, which is causing the OEMs to review their cost structure. At Boeing, this is called “Partnering for Success” So suppliers will need to learn how to raise the bar on quality, value and innovation while lowering prices.

0

200

400

600

800

1000

1200

1400

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Orders Deliveries

Date: 10/31/2013 Slide 20



While all of this is happening, the business jet industry remains in a five-year slump with all of the associated pricing and cost issues without the up-cycle

Commercial Aftermarket

Date: 10/31/2013 Slide 22

Commercial Aftermarket – Traffic & Capacity IATA Forecasts Traffic Growth of 5.3% in 2013 and Capacity Growth of 4.3%

Source: IATA Traffic & Capacity Data

-10%

-5%

0%

5%

10%

15%

20%Ma

y-09

Aug-

09

Nov-0

9

Feb-

10

May-1

0

Aug-

10

Nov-1

0

Feb-

11

May-1

1

Aug-

11

Nov-1

1

Feb-

12

May-1

2

Aug-

12

Nov-1

2

Feb-

13

May-1

3

Aug-

13

Y/Y Traffic Growth Y/Y Capacity Growth

0

50

100

150

200

250

300

350

22

23

24

25

26

27

28

29

# of Retirements (Right Axis) Average Age at Retirement (Left Axis)

Date: 10/31/2013 Slide 23

Commercial Aftermarket


With all of these new aircraft deliveries, retirements are accelerating, and retirement age is dropping, putting viable aircraft & parts to rest

Date: 10/31/2013 Slide 24

Commercial Aftermarket – Surplus Parts Glut


This is creating a two-pronged problem for some suppliers: 1. As fleets get younger, parts for older aircraft are

seeing a demand shortfall. 2. As older aircraft are parked to make room for newer

ones, their parts can cannibalize spares from the original component supplier.

So, suppliers of parts for older aircraft are experiencing pressure that could linger for a while

Defense & Government Services

Defense19%

Medicare & Medicaid

24%

Social Security

20%

Discretionary18%

Other Mandatory

13%

Net Interest6%

North America

37%

Central & South

America4%

Europe25%

Middle East8%

Asia & Oceania

24%

Africa2%

Date: 10/31/2013 Slide 26

Defense – Global Defense Markets

U.S. Defense Spending in the Context of the Federal Budget

The U.S. Accounts for ~Half of Global Defense Spending

Source: SIPRI; The White House

Even with domestic budgetary pressures, the onset of Sequestration, and continued growth in military expenditure by China, the U.S easily remains the biggest defense spender in the world.

Defense accounts for almost 20% of the total US federal budget, and almost half of discretionary spending.

Source: Credit Suisse research, US DOD

Date: 10/31/2013 Slide 27

Defense – Key Positive Considerations


Continued strong cash flows are supporting earnings and keeping shareholders interested International demand has been holding up as the threat environment requires a high level of vigilance everywhere Furthering that point, let’s take a look at Chinese spending on the next slide

Date: 10/31/2013 Slide 28

Defense – Key Positive Considerations


0

350

700

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

2012$669

$158

Berlin Wall down

Sequestration

9/ 11

0%

3%

6%

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

4.4%

2.0%

China US

Emerging peer China could be a major driver of US defense growth

China’s 10-year growth rate 19.1% compares to 1.8% for the US, with less than half the GDP percentage

Date: 10/31/2013 Slide 29

Defense


But, obviously, there are major issues facing the Defense markets too

Date: 10/31/2013 Slide 30

Defense – Historical & Forecast US Defense Spending

In constant dollars, the FYDP suggests relatively flat topline between FY’14 & FY’18. But, it also implies that the defense topline stays ~$150B above historical troughs. Source: US DOD

0

100

200

300

400

500

600

700

800

FY 48

FY 50

FY 52

FY 54

FY 56

FY 58

FY 60

FY 62

FY 64

FY 66

FY 68

FY 70

FY 72

FY 74

FY 76

FY 78

FY 80

FY 82

FY 84

FY 86

FY 88

FY 90

FY 92

FY 94

FY 96

FY 98

FY 00

FY 02

FY 04

FY 06

FY 08

FY 10

FY 12

FY 14

FY 16

FY 18

KoreaVietnam

ReaganBuild-up

Iraq / Afghanistan

Date: 10/31/2013 Slide 31

Defense – The Budget Deficit

Annual Federal Revenues ~$2.6T Annual Federal Expenditures ~$3.7T Equals an annual ~$1.1T Federal Budget Deficit Sequester may not make a dent in anything but industry

Date: 10/31/2013 Slide 32

Credit Suisse Budget Scenarios

400

450

500

550

600

650

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

FY12 FYDP

BCA 2011

FY13 FYDP

FY14 FYDP

Full Sequester

Boiling Frog

Source: US DOD, Credit Suisse research

Date: 10/31/2013 Slide 33

Defense – Quarterly Orders Are Weakening Book:Bills Running Below 1.0x in 2013 As Sequester Slows Order Pipeline

Source: Credit Suisse research, Company data

0.00x

0.20x

0.40x

0.60x

0.80x

1.00x

1.20x

1.40x

1.60x

1.80x

Q1'10Q2'10Q3'10Q4'10Q1'11Q2'11Q3'11Q4'11Q1'12Q2'12Q3'12Q4'12Q1'13Q2'13

Defense Primes Gov't Services

Date: 10/31/2013 Slide 34

Defense – Key Concerns Summarized


• US combat operations in southwest Asia are ending, eliminating a big driver of US defense spending

• Resources are dwindling with the big federal deficit. • These dwindling resources are already pressuring order flow, and

will eventually impact long-cycle platform and product businesses and are already affecting short-cycle services activity

• Rising interest rates are mitigating the yield trade

HOLT Analysis

2-year forward consensus sales growth Market-implied sales growth(1)

HOLT Shows the Market Expects Better Returns from Defense, with Less Predictability of Growth

Returns on Capital – Next twelve months CFROI

Source: HOLT CFROI framework and global database, FactSet. (1) Sales growth embedded in current market valuation based on consensus sales growth estimates and HOLT DCF model.

Sales growth

23.6%

15.7% 15.4% 15.0% 14.8% 14.5% 14.4% 11.2% 11.2% 10.3%

8.2% 7.7% 7.6% 6.1%

Aftermarket Engines GovernmentServices

US DefensePrimes

US DefenseTier 1

Tier 1Commercial

Crossover USSpace

Tier 2Commercial

EuropeanDefensePrimes

LargeCommercial

BizJets EuropeanDefenseTier 1

Regional Jets

5-year median CFROI:

20.4% 14.0% 21.5% 15.0% 19.3% 13.3% 14.9% 11.9% 10.8% 10.5% 6.9% 6.8% 8.4% 5.5%

7.8% 7.1% 6.7% 6.1%

5.2% 5.1% 5.0% 4.8%

4.0% 2.8%

1.1%

(2.1%) (2.4%) (2.8%)

6.6%

4.0% 5.3% 5.5% 5.4% 4.9% 5.3%

7.7%

4.4%

2.5%

5.9%

2.5%

6.0%

4.0%

RegionalJets

US Space BizJets LargeCommercial

Tier 1Commercial

Tier 2Commercial

Engines Aftermarket Crossover EuropeanDefense Tier

1

EuropeanDefensePrimes

US DefensePrimes

GovernmentServices

US DefenseTier 1

Median: 12.8%

Commercial Defense Mixed

36

HOLT

US Defense Primes

US Defense Tier 1Government Services

US Space

European Defense Primes

European Defense Tier 1

Large CommercialBizJets

EnginesTier 1 Commercial

Tier 2 Commercial

Crossover

Regional Jets

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0%

Value creation driver: CFROI

Next twelve months CFROI spread(2)

HO

LT c

urre

nt p

rice/

book

(1)

Source: HOLT CFROI framework and global database as of October 2013. (1) HOLT price/book is equivalent to current enterprise value/net capital invested which is defined as ([market

value of equity + debt] / [inflation adjusted net assets, including capitalized operating leases]). (2) Defined as CFROI less the cost of capital; next twelve months (NTM) CFROI based on consensus EPS

estimates.

Peer regression R² = 90%

S&P 500 regression R² = 83%

Valuation

Aftermarket (18.3%, 4.72x)

Commercial Defense Mixed

37

The Market Indicates that Defense has Potential for Upside, while Commercial is Already Highly Valued

HOLT

Appendix

Date: 10/31/2013 Slide 39

Aerospace & Defense Valuations

Source: Company data, Credit Suisse research, Factset 7.94x

6.0%3.5x 7.3%

13.6x 15.1x 16.6x 12.3x 8.12x 8.15x 1.8x 1.7x 1.5x 7.4x 6.9x 7.0x 8.9%0.5 41.0% 21.6% 12.1% 3.4x 1.7%

Company Ticker P/E Ratio EV/Sales EV/EBIT EV/EBITDA PEG ROA ROE ROIC P/Book Div Yield FCF Yield2012A 2013E 2014E 5-Yr Avg 2012A 2013E 2014E 2012A 2013E 2014E 2012A 2013E 2014E 2013E 2013E 2013E 2013E 2013E 2013E 2013E

Boeing BA 23.4x 18.4x 17.1x 19.5x 1.10x 1.04x 0.96x 14.2x 11.8x 11.1x 11.1x 9.5x 9.0x 1.9 55.1% 56.8% 27.3% 15.4x 1.5% 5.0%Bombardier BBDb.TO 11.1x 12.6x 10.1x 11.1x 0.54x 0.53x 0.51x 11.2x 9.0x 8.8x 7.8x 6.7x 6.5x 0.5 79.6% 29.9% 9.7% 8.5x 2.4% -3.6%EADS EAD.PA 33.3x 16.1x 12.1x 19.0x 0.49x 0.47x 0.44x 18.1x 11.7x 9.3x 10.5x 8.1x 6.9x 0.6 N/A N/A N/A 3.8x 2.2% 9.8%Embraer ERJ N/A 17.8x 13.0x 14.4x 0.87x 0.87x 0.80x 8.8x 9.5x 8.2x 6.0x 6.4x 5.7x 0.8 37.0% 15.3% 6.9% 2.0x 2.0% 11.2%Textron TXT 20.8x 14.1x 11.9x 20.8x 0.81x 0.79x 0.77x 9.0x 11.4x 9.7x 7.2x 7.6x 6.9x 1.5 40.3% 15.6% 9.2% 2.5x 0.3% 23.4%Commercial OEM 22.2x 15.8x 12.8x 16.9x 0.76x 0.74x 0.70x 12.3x 10.7x 9.4x 8.5x 7.7x 7.0x 1.1 53.0% 29.4% 13.3% 6.4x 1.7% 9.1%MTU Aero Engines MTXGn.DE 15.6x N/A N/A 13.3x N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 2.9x 2.0% N/ARolls-Royce RR.L 14.7x 10.5x 9.6x 10.8x 1.81x 1.44x 1.36x 14.7x 12.1x 11.3x 11.1x 9.7x 9.0x 1.1 N/A N/A N/A 3.1x 3.1% 6.6%Safran SAF.PA 25.6x 16.0x 13.8x 20.5x 1.47x 1.35x 1.26x 19.3x 15.6x 13.6x 13.9x 11.8x 10.5x 1.1 N/A N/A N/A 2.8x 2.7% 8.7%United Technologies UTX 20.0x 17.4x 15.5x 16.3x 2.01x 1.83x 1.79x 15.1x 12.4x 11.2x 12.6x 10.6x 9.7x 1.6 44.0% 20.1% 11.9% 3.8x 2.0% 5.5%Commercial Engine Suppliers 19.0x 14.6x 13.0x 15.2x 1.76x 1.54x 1.47x 16.4x 13.4x 12.1x 12.5x 10.7x 9.7x 1.3 44.0% 20.1% 11.9% 3.2x 2.5% 6.9%AAR Corp. * AIR 16.8x 15.0x 13.2x 12.7x 0.84x 0.81x 0.79x 13.3x 11.4x 10.9x 8.2x 7.5x

3.05x 2.77x0.0% 11.1%7.0x 2.0 38.2% 8.2% 3.6% 1.2x

BE Aerospace BEAV 27.1x 21.7x 18.0x 21.7x 2.41x 17.4x 14.8x 12.3x 15.3x 13.1x1.55x 1.56x

0.0% 3.0%11.1x 1.1 47.4% 16.5% 6.4% 3.7xEsterline * ESL 22.1x 14.8x 12.9x 14.7x 1.50x 12.9x 13.4x 11.2x 8.9x 9.1x 7.9x 1.1 34.1% 12.0% 4.5% 1.5x 0.0% 7.7%Heico * HEI 41.8x 35.9x 31.6x 32.9x 3.95x 3.56x 3.25x 21.7x 19.9x 17.6x 18.3x 16.4x 14.9x 2.8 17.5% 12.7% 10.4% 5.7x 0.2% 3.5%Hexcel HXL 25.7x 22.5x 19.6x 22.2x 2.68x 2.51x 2.31x 17.6x 16.0x 13.8x 14.2x 13.0x 11.4x 1.6 19.2% 16.0% 14.4% 4.0x 0.0% 1.7%Honeywell HON 21.2x 17.4x 15.5x 17.2x 1.85x 1.78x 1.70x 21.0x 11.4x 10.8x 16.3x 10.0x

1.32x 1.26x2.0% 5.7%9.5x 1.6 31.2% 23.5% 15.6% 5.2x

Moog * MOG.A 17.7x 17.1x 14.8x 15.5x 1.22x 13.4x 13.0x 11.0x 9.5x 8.1x 8.0x 1.4 32.4% 35.4% 7.9% 2.0x 0.0% 5.2%Precision Castparts * PCP 24.7x 19.8x 16.9x 21.1x 5.22x 4.50x 3.78x 21.1x 17.7x 13.9x 21.1x 17.7x 13.9x 0.9 26.5% 15.3% 13.0% 3.6x 0.0% 3.2%Rockwell Collins * COL 16.6x 15.1x 15.7x 15.0x 1.89x 1.91x 1.76x 9.8x 10.6x 10.1x 8.8x 10.2x 10.1x 3.3 38.2% 29.6% 29.7% 7.8x 1.7% 5.0%Spirit Aerosystems SPR 39.4x 77.8x 9.6x 32.1x 0.75x 0.69x 0.63x 28.4x 21.1x 7.2x 13.2x 11.5x

5.93x 5.27x0.0% -3.1%5.7x 0.4 36.7% 15.1% 1.1% 1.8x

Transdigm * TDG 21.0x 20.5x 18.8x 18.7x 4.75x 14.4x 13.2x 11.2x 12.5x 11.6x 10.1x 1.7 74.4% N/A 7.4% 6.0x 0.0% 5.5%Triumph Group * TGI 14.1x 11.5x 13.2x 11.6x 1.45x 1.35x 1.26x 9.7x 9.4x 9.6x 7.9x 7.5x

1.67x 1.62x0.2% 5.2%7.4x 2.0 35.4% 12.3% 9.8% 1.7x

Woodward * WWD 20.9x 20.5x 18.1x 18.8x 1.56x 13.9x 14.0x 12.1x 10.7x 10.7x2.28x 2.07x

0.8% 2.1%9.4x 1.8 27.4% 12.4% 10.4% 2.8xCommercial Suppliers 23.8x 23.8x 16.8x 19.6x 2.47x 16.5x 14.3x 11.7x 12.7x 11.3x 9.7x 1.7 35.3% 17.4% 10.3% 3.6x 0.4% 4.3%BAE Systems BAES.L 6.1x 6.5x 6.6x 5.6x -- -- -- 1.0x 1.0x 1.0x 8.3x 7.7x 8.1x 6.9 N/A N/A N/AGeneral Dynamics GD N/A 12.5x 11.8x N/A -- -- -- 0.9x 0.9x 0.9x 20.3x 6.9x 6.9x 2.1 25.5% 19.3% -2.0% 2.7x 2.5% 8.6%L-3 Communications LLL 11.8x 11.7x 12.3x 10.3x 11.3x 11.1x 11.6x 0.9x 0.9x 0.9x 7.1x 7.7x 8.3x -6.2 40.1% 13.4% 7.8% 1.6x 2.1% 12.0%Lockheed Martin LMT 14.9x 13.3x 12.4x 11.4x 12.5x 12.0x N/A 0.9x 1.0x 7.8%Northrop Grumman NOC 12.7x 12.6x 12.4x

1.0x 7.9x 7.6x 7.3x0.9x 0.9x

100.5% 40.2% N/A 3.7%2.0 97.0%14.3% 2.5x 2.3% 8.9%1.0x 6.1x 6.1x 6.6x 3.3 29.2%

Defense Primes 18.3x 19.7x 13.7x 15.5x

20.7%10.5x 13.2x 13.2x 14.2x

5.34x 5.13x 4.47x 9.5x 8.5x 6.6x 11.0x 9.5x 8.5x 1.6 41.2% 26.1%Alliant Techsystems * ATK 12.8x 12.2x 11.7x 8.9x

14.1% 3.3%

12.7% 3.3x 1.7% 5.7%

Defense Mid & Small Cap 14.9x 14.6x 12.7x 12.4x 7.55x 7.53x 6.71x 4.0x 3.7x 3.2x 9.1x

--

3.1x 2.3% 7.1%7.8x 7.4x 1.9 43.9% 28.0% 13.2%

CACI * CACI 11.5x 10.8x 12.0x 12.4x -- -- 0.5x 0.5x 0.6x 5.6x 6.1x 6.4x -1.4 16.7% 9.9% 9.5% 1.3x 0.0% 14.3%ManTech MANT 11.3x 13.6x 14.7x 12.2x -- -- -- 0.5x 0.6x 0.6x 6.0x 12.2%SAIC * SAI N/A 29.9x 57.1x N/A --

7.8x 8.2x0.4x 0.4x 0.5x 10.6x

0.9x 2.9%-1.7 14.6% 5.6% 7.2%1.0%

Government Services (Federal I.T.)5.3x 7.7x -1.6 33.1% 9.5% 1.5x-- --

-- -- -- 0.8x 0.9x 0.9x 6.3x 6.6x 6.1x 3.1 39.7% 15.5% 10.8% 2.2x 0.9% 5.3%

Huntington Ingalls HII 21.0x 18.1x 13.9x 15.7x N/A N/A N/A 0.6x 0.6x 0.7x 7.5x 7.1x 6.3x 0.8 71.2% 31.6% 5.7% 5.3x 0.6% 3.6%

Raytheon RTN 13.5x 13.4x 12.8x 11.3x 6.4x 6.4x 6.4x 1.1x 1.1x 1.1x 14.6% 3.1x 2.8% 8.6%7.6x 7.9x 7.7x 1.6 37.1% 21.5%

Booz Allen Hamilton * BAH 11.8x 11.5x 11.5x 14.6x 39.9%-- -- -- 0.7x 0.7x 0.7x

N/A

11.0% 11.6x 2.0% 15.7%8.7x 7.8x 7.5x -5.3 85.5%

Exelis XLS 7.8x 10.3x 9.9x 9.1x 8.6x N/A 0.4x 0.5x 0.5x 3.4x 2.9x 2.4% 12.8%4.1x 4.1x 3.6 39.0% 29.4% 20.6%

Questions?

Companies Mentioned (Price as of 14-Oct-2013) AAR (AIR.N, $27.79) Alliant Techsystems Inc. (ATK.N, $101.55) BAE Systems (BAES.L, 443.8p) BE Aerospace Inc. (BEAV.OQ, $76.78) Boeing (BA.N, $119.46) Bombardier Inc (SVS) (BBDb.TO, C$4.97) Booz Allen Hamilton Holding (BAH.N, $18.96) CACI International, Inc. (CACI.N, $68.37) EADS (EAD.PA, €48.92) Esterline Technologies (ESL.N, $79.47) Exelis (XLS.N, $15.6) General Dynamics Corporation (GD.N, $87.81) Heico Corp (HEI.N, $66.72) Hexcel Corporation (HXL.N, $40.08) Honeywell International Inc. (HON.N, $85.98) Huntington Ingalls (HII.N, $71.3) L-3 Communications (LLL.N, $94.98) Leidos (LDOS.N, $46.27) Lockheed Martin (LMT.N, $127.5) MTU Aero Engines (MTXGn.DE, €70.4) ManTech International Corp. (MANT.OQ, $29.05) Meggitt (MGGT.L, 541.0p) Moby Oil & Gas (MOG.AX, A$0.005) Northrop Grumman Corporation (NOC.N, $98.81) Precision Castparts (PCP.N, $241.51) Raytheon Company (RTN.N, $76.38) Rockwell Collins, Inc. (COL.N, $68.92) Rolls-Royce (RR.L, 1125.0p) Safran (SAF.PA, €45.95) Spirit AeroSystems (SPR.N, $24.71) Textron (TXT.N, $27.29) TransDigm (TDG.N, $140.5) Triumph Group Inc (TGI.N, $71.05) United Technologies Corp (UTX.N, $106.9) Wesco Air Hldg (WAIR.N, $19.76) Woodward Inc (WWD.OQ, $42.07)

Disclosure Appendix

Important Global Disclosures I, Robert Spingarn, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

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Global Ratings Distribution

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only

Holt aerospace & defense industry

Economy & Finance

Transcript of Holt aerospace & defense industry