 Breeze-Eastern Update
Breeze-Eastern Shareholders Meeting
Brad Pedersen, CEO & President
September 14, 2012
Whippany, NJ
Thank you for joining us this morning.
I’m going to provide an overview of our company, financial performance and
achievements in fiscal 2012, and an environmental update.
At the end, I’ll open the floor for questions.
Exhibit 99.1
1 |
 INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This
presentation
contains
forward-looking
statements
within
the
meaning
of
Section
27A
of
the
Securities
Act
of
1933
as
amended,
and
Section
21E
of
the
Securities
Exchange
Act
of
1934,
as
amended,
regarding
our
future
operating
performance,
financial
results,
events,
trends
and
plans.
All
statements
in
this
presentation
other
than
statements
of
historical
facts
are
forward-looking
statements.
Forward-looking
statements
involve
numerous
risks
and
uncertainties.
We
have
attempted
to
identify
any
forward-looking
statements
by
using
words
such
as
“anticipates,”
“believes,”
“could,”
“expects,”
“intends,”
“may,”
“should”
and
other
similar
expressions.
Although
we
believe
that
the
expectations
reflected
in
all
of
our
forward-looking
statements
are
reasonable,
we
can
give
no
assurance
that
such
expectations
will
prove
to
be
correct.
Such
statements
are
not
guarantees
of
future
performance
or
events
and
are
subject
to
known
and
unknown
risks
and
uncertainties
that
could
cause
our
actual
results,
events
or
financial
positions
to
differ
materially
from
those
included
within
the
forward-looking
statements.
Such
factors
include,
but
are
not
limited
to
competition
from
other
companies;
changes
in
applicable
laws,
rules,
and
regulations
affecting
the
Company
in
the
locations
in
which
it
conducts
its
business;
interest
rate
trends;
a
decline
or
redirection
of
the
United
States
government
defense
budget,
the
failure
of
Congress
to
approve
a
budget
or
continuing
resolution,
changes
in
spending
allocation
or
the
termination,
postponement,
or
failure
to
fund
one
or
more
significant
contracts
by
the
United
States
government
or
other
customers;
changes
in
our
sales
strategy
and
product
development
plans;
changes
in
the
executive
management
team;
status
of
labor
relations;
competitive
pricing
pressures;
market
acceptance
of
our
products
under
development;
delays
in
the
development
of
products;
determination
by
us
to
dispose
of
or
acquire
additional
assets;
general
industry
and
economic
conditions;
events
impacting
the
U.S.
and
world
financial
markets
and
economies;
and
those
specific
risks
disclosed
in
our
Annual
Report
on
Form
10-K
for
the
fiscal
year
ended
March
31,
2012,
Quarterly
Reports
on
Form
10-Q,
and
other
filings
with
the
Securities
and
Exchange
Commission.
We
undertake
no
obligation
to
update
publicly
any
forward-looking
statements,
whether
as
a
result
of
new
information
or
future
events.
2
I won’t read this legal fine print aloud in detail.
Everything presented and discussed today is based on facts and other inputs as we
understand them today and our current interpretation of those factors and
business judgment based on them. There is uncertainty and some degree of
risk in all forward-looking statements. |
 Sales and Operating Income
3
We reported record sales of almost $85 million in fiscal 2012.
Our operating income, however, did not set a record as engineering product development expenses
continued at a high level, we expensed product development discontinuance and estimated product
delivery delay costs, plus we wrote-off obsolete engineering qualification units. |
 EBITDA $ and % of Sales
4
Our EBITDA in fiscal 2012 was also reduced by continuing higher engineering product
development costs as well as expensing engineering product discontinuance,
qualification unit obsolescence, and estimated product delivery delay
costs. EBITDA $
$ Mil
EBITDA % of Sales |
 1Q13 Versus 1Q12
5
In the fiscal first quarter of 2013 we reported lower sales and income.
We expected this from lower orders in fiscal 2012 and continued high
engineering new product development costs.
In addition, our sales volume in the fiscal first quarter of 2013 had an
unfavorable product mix of more new equipment and less spare parts which
hurt profit margins. Op Income
$ Mil
Revenue
$ Mil
EBITDA
$ Mil |
 Cash and Debt
$ Mil
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13-Q1
6
We continue to be a strong cash generator from operations and working capital
management. We used our growing cash balance to pre-pay our term
loan more than one year early in the first quarter of fiscal 2013.
|
 Net
Debt $ Mil
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13-Q1
7
Looking at debt net of cash shows we were cash positive by the end of fiscal 2012;
whereas at one time we had $60 million in net debt.
|
 BZC
Stock Price 8.68
11.19
9.29
8.17
6.49
8
Our stock price has declined since the beginning of fiscal 2012.
There are many influences on stock price beyond company control for an explanation
on price changes. Our focus is continuing to improve our customer
satisfaction which will increase financial performance to maximize
shareholder value which should ultimately be reflected in a higher stock
price. Our higher engineering product development costs are tied to meeting
customer commitments. |
 FY2012: Recent Accomplishments
Record-high sales in FY 2012
Significant cash generation and debt reduction
Successful CEO transition (May 2012)
Signed U.S. Army Multi-Year-VIII with Sikorsky
Keeps competitor off the Black Hawks for 5 more years
9
As
we
showed
in
the
previous
charts,
we
had
record
high
sales
in
fiscal
2012
and
used
our
continued strong cash flow to eliminate our debt.
We also successfully negotiated a contract with Sikorsky that keeps our rescue
hoist, cargo hook and probe hoists securely on the Blackhawk family for the
next five years while preventing our competitors from gaining market
share. |
 Breeze-Eastern Products and Services
“Heroes use our equipment to save lives every day”
Military
and
commercial
helicopters:
rescue
hoists,
cargo
hooks,
cargo
winches
Military cargo aircraft: cargo winches and parachute line retrieval
winches Full service supplier including:
Overhaul and repair
Spares
Training
10
We are proud that we make life saving products and essential equipment that
allow soldiers and first responders to safely and effectively complete their
missions. Breeze-Eastern
products
have
an
unmatched
reputation
for
being
reliable
and
dependable.
This
is
critical
because
during a rescue mission or transporting heavy external loads, the workload on the
flight crew is enormous and the flight conditions are the most dangerous the
crews will ever experience. We also provide full life cycle support
including, overhaul & repair, spares, and training to keep the aircraft flying and
mission ready. |
 Breeze-Eastern Customers
Global original equipment manufacturers (OEM) and operators of helicopters
Utility mission
Search and rescue
Shipboard operators
Global manufacturers and operators of military cargo aircraft
U.S. Military: Army, Navy, Air Force, Coast Guard, National Guard, Border
Patrol International military organizations
State/county police, fire, and rescue departments
Other global aerospace/defense companies
11
I will let you read this chart and summarize in this way.
Our largest customers are the manufacturers of rotary wing and fixed wing
aircraft. It is important for Breeze-Eastern to maintain its
excellent relationship with the OEM’s so their aircraft are accepted in the market.
The OEM customers demand that our products be delivered on-time, and that we
support our products in the field because if there is a deficiency in our
equipment, the OEM’s reputation will also suffer. Our customer base is
also made up of single aircraft operators who cannot afford to have their aircraft sitting on the
ground
waiting
for
hoist
or
hook
repairs.
We
have
to
treat
each
customer
like
they
are
our
largest
in
order
to
maintain
our
reputation and market share.
Our equipment is in use all around the world making customer support a complex
proposition. Breeze-Eastern has an extensive
network
of
distributors
and
service
centers
around
the
world
to
ensure
total
customer
satisfaction. |
 U.S. Military Platforms
Rescue
Cargo
Cargo
Weapons
Service
OEM
Platform
Hoist
Hook
Winch
Handling
Other
Army
Sikorsky
UH/HH-60
Black Hawk
MH-60
Black Hawk
Boeing
CH-47
Chinook
MH-47
Chinook
Lockheed-Martin
M142
HIMARS
M270
MLRS
Air Force
Alenia
C-27 JCA
Spartan
Boeing
C-17
Globemaster
Retrieval Winch
Lockheed-Martin
F-35
Lightning
General Atomics
Predator C
Sikorsky
HH-60
Pavehawk
Navy
Sikorsky
MH-60R
Seahawk
Probe Hoist
MH-60S
Knighthawk
SH-60B/F
Seahawk
Probe Hoist
Marine Corps
Sikorsky
CH-53
Sea Stallion
CH-53K
Super Stallion
Bell/Boeing
V-22
Osprey
12
We are proud to be supporting all of the U.S. Armed services. Our equipment has
been used extensively and effectively in Afghanistan and Iraq. The
Sikorsky
UH-60
family
of
aircraft
are
flown
at
a
greater
rate
than
any
other
aircraft
in
the
US
inventory.
This
secures
our
overhaul
and
repair
and spares business for decades to come.
As I mentioned earlier, the helicopter is essential for supplying soldiers and
sailors in the field with food, water and ammunition. It is also essential
for evacuating casualties and rescuing downed aircrew.
Our hooks and hoists are critical to these missions and therefore must be
operational and well maintained. |
 Current Market Conditions
U.S. Department of Defense spending uncertain and may
be reduced
•
Specific impact not predictable
•
Less vulnerable are high-value rescue and special ops missions
•
We may have a slight buffer due to our platform diversity and aftermarket
service and parts
European and international markets have a stable and
consistent demand
OEMs continue to develop new aircraft
Potential to grow in markets such as China and India
13
Current market conditions are stable but the future is uncertain. The US
Military strategy will continue to focus on fighting conflicts
in
remote
and
austere
locations.
The
US
military
must
have
equipment
that
can
respond
rapidly
to
conflicts
around
the world.
Rotary wing aircraft will continue to be the backbone of the US Military for
utility and downed aircrew rescue missions. Breeze-Eastern
maintains a close relationship with our OEM customers and has insight into their anticipated demands for
12
to
18
months
in
the
future.
Even
though
we
are
unsure
of
how
the
US
Defense
budget
will
be
funded,
we
do
not
anticipate a big impact on our business.
Commercial helicopter development by the OEM’s is still strong.
Breeze-Eastern is working closely with the OEM’s on new
opportunities for new medium lift commercial helicopters. The OEM’s are
focusing on foreign military sales, gas and oil exploration as well as other
missions. |
 Environmental Site Status
14
During fiscal 2012, we closed two more environmental sites; thus, more than
half of our environmental sites are now closed. Our objectives are to
reach exit agreements for all sites, and we are actively working this plan.
In fiscal 2012 we spent $1.2 million on environmental matters out of our
environmental liability reserve which did not impact income, and we
anticipate the same in fiscal 2013. Our environmental liability reserve of
$13.4 million and operating cash flow are sufficient to cover our anticipated future
environmental costs. |
 Current Focus
Complete CEO transition
Hire VP of Engineering
Strengthen new product development and program management
processes
Improve global customer service and support
Leverage balance sheet strength
15
Our focus is simple. Support our OEM customers with quality equipment,
on-time, and at a competitive price. We will support our products
that are currently in service. We will support them efficiently and effectively with spare parts,
training, and overhaul and repair services.
Breeze-Eastern will keep its current product lines relevant by improving
operational effectiveness and reliability to support our customer’s
missions Breeze-Eastern will also develop future products to serve the
utility, cargo, search and rescue, and other markets. In order to accomplish
this, we need to strengthen our engineering and program management processes. We are developing
complex solutions for state-of-the-art aircraft and highly demanding
customers. In order to meet all of our customers cost, technical and
schedule requirements, our engineering leadership skills will be improved and new people will be brought on-
board who are experts at completing development programs.
Our strong balance sheet opens up several opportunities to improve and grow the
business. |
 Breeze-Eastern Strengths
Respected global leader in hoists, winches, cargo hooks, and
weapons handling
Highly-reliable products
Full-service provider –
design, build, repair, and maintenance
Established and growing product base for aftermarket spare
parts and overhaul & repair
Strong cash flow and balance sheet
16
Breeze-Eastern continues to be a respected leader in our market with
highly-reliable products and an established product base to drive
profitable aftermarket business. Our strengths are our reliability, lower
acquisition costs and being able to respond quicker and more effectively to our
customers in the field.
Once an aircraft has been certified with our products, there is a significant
barrier to entry for our competition to take market share due to the cost of
recertification. Many of our customers, like the US Army, only want
one system for their entire fleet so they eliminate the maintenance and
logistics challenges of supporting multiple configurations in the field. Our
strong cash flow funds new product development and allowed us to pay off all of our debt ahead of schedule.
Thank you again for attending today and I will now answer any questions that you
may have. |
 Questions ?
17
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