Phase 1 PresentationAerospace Forging – California Drop Forge

Board of DirectorsNovember 20, 2014

Review the entire document

2

Introduction

3

What is our game plan?

Our focus is on critical aerospace forging applications using sophisticated materials that are highly complex metallurgically, where there is a strong barrier to entry, and where value can be added beyond the forging.

We focus on stainless, titanium and nickel materials where often there is not enough industry capability.

We add value through post forging operations (blasting, machining, heat treatment).

We focus on applications with current and potential customers where there are customer approval barriers or quality requirements (NADCAP, AS9100)

4

Auxiliary Power Unit (APU)Forged Titanium impeller for the exhaust section

Forged titanium inlet compressor section

Engine

We provide forgings for the following applications

5

Aircraft Structural

Landing gear

Closed die Forging for the engine attach pylon from 15-5ph steel

Closed die forging for landing gear strut from 300 Maraging Steel

We provide forgings for the following applications

6

Flight ControlForged high strength 17-4 ph steel for flight control actuators

We provide forgings for the following applications

7

0

20

40

60

2006

14.4

11.0

9.5

4.74.5

46

2007

20.7

12.0

10.3

5.24.9

54

2008

18.2

9.5

7.2

5.8

5.9

47

2009

7.9

4.35.64.1

25

2010

9.1

4.14.44.0

24

2011

11.2

5.6

6.63.0

29

2012

12.3

3.96.43.3

29

2013

12.6

5.7

4.83.2

28

2014FC

14.5

4.74.9

28

We have lost share in the aerospace market since the recession in 2009. We have been flat since 2011.

Sales History – California Drop Forge

CAGR 1.6% (2009 – 2014FC)$M

’09-’14CAGR

10.7%

1.9%

-1.9%

APUs

EnginesAirframe Medical

-13.5%Landing Gear

1.6%Total

We have been growing well in APUs, but have been challenged in other areas.

In Medical, we lost to low cost competition and are not focused on growing there due to a wealth of opportunity in aerospace.

-12%

Market growth rate 5% YOY

FCS 0%

8

Margins grow markedly over timeCDF Gross Margins by Product Line

Gross margins improve overall by 610 basis points since 2005

12 mos 12 mos 12 mos 12 mos 12 mos 12 mos 12 mos 12 mos 12 mos 9 mos2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Product LineAPUs 24.3% 23.3% 30.1% 26.8% 30.0% 22.4% 18.4% 16.8% 20.9% 26.5%Engines 18.2% 22.3% 33.0% 34.3% 31.5% 27.0% 22.5% 24.4% 27.7% 31.3%Airframe Structural 20.7% 34.9% 44.3% 49.2% 52.9% 51.8% 44.4% 40.5% 45.3% 47.3%Medical 34.2% 25.3% 27.0% 27.8% 42.4% 51.1% 38.4% 38.9% 38.1% 31.7%Landing Gear 11.3% 29.8% 32.6% 31.7% 30.5% 23.9% 21.1% 29.1% 27.2% 28.9%Flight Control 19.4% 21.6% 49.0% 43.7% 39.4% 35.9% 21.9% 27.7% 29.1% 32.0%Die Fab 17.1% 25.2% N.A. 25.7% 42.0% -7.8% 27.5% 54.4% 46.2% 28.8%Total 25.4% 26.3% 33.6% 32.6% 37.8% 33.4% 27.4% 27.0% 29.0% 31.5%

9

0

10

20

2009

7.3

3.5

1.5

15

2010

7.1

3.5

0.9

1.3

15

2011

9.2

2.3

2.3

1.41.3

1.4

20

2012

9.8

1.9

2.8

1.01.1

1.4

20

2013

9.6

1.7

2.6

1.2

19

2014FC

12.7

2.4

1.61.01.10.8

21

We have grown in our top customers because of Honeywell (which is labelled as Honeywell, LPI and Aeronamic below)

Sales History – Cal Drop.For Top-10 Customers$M

Honeywell

Lockheed

Total

Due to responsiveness, we have grown Honeywell significantly. Beckman declines because of our share loss to Chinese competition. We have lost many customers such as CT Tool, Berkshire, Capo, Northstar Aero, BTL due to

inflexibility of our T’s & C’s. We lost at Ducommun due to a design change to composites. We will drill into our lost historical customers to determine root cause and corrective action.

Aeronamic

Beckman

.

LPI

ALP

’09-’14CAGR

12%

29%

-6%

9%

7%

66%

NMF

10

We have not penetrated new aircraft platforms. This causes a problem for us in the future because the growth in

Aerospace is on these new programs

We have content on the 787 on the APU, but no other content on the 787 or other new aircraft (E2, A350, C-Series, A320-NEO, A330-NEO, 737-MAX, 777-X, JSF)

Some Content No Content

Boeing 787

Embraer E2

Airbus A350

Bombardier C-Series

Airbus A320/330 Neo

Boeing 737-Max

Boeing 777-X

11

The diagrams below show forging applications on an aircraft. CDF can provide most of the items below. PMP

can do items in red (up to 80 pounds).

APUFuel Injection NozzleRotor CompressorShroudsShaftImpeller

EnginesHot Zone Combuster Discs Bliscs ShaftCold Zone Compressor Rings Discs Impeller Gear Box Blades/Vanes

12

Landing GearNoseDrag BraceMain ShaftSide BraceCylindersStrutTorque ArmsWheel Axle

Airframe/Structural (see next page)PylonRudder Flap TrackStiffenersNacelle

Flight ControlsActuatorsServocylindersThrust Reversers

The diagrams below show forging applications on an aircraft. CDF can provide most of the items below. PMP

can do items in red (up to 80 pounds).

13

This is another view of the forging content on an aircraft

14

0

20

40

60

80

100%

APU Engines

Precision Cast Parts

Sifco

Alcoa

Allegheny

631

Landing Gear

Precision Cast Parts

Alcoa

Schultz

VSMPO

1,184

Airframe/Structural

Precision Cast Parts

Alcoa

Weber

SchultzVSMPOBoehler1,411

HBD

36

HBD

HBD

Boehler

HBD

Flight Control

HBD

29

Total = 3,291

This is the market for all forged products in Aerospace

Forgings in the Aerospace Market

HBD is a small player focused on APUs. We win because others have difficulty doing complex forgings.

We believe we can extend into engines and airframes without much difficulty (target is Precision Cast Parts)

15

0

20

40

60

80

100%

APU Engines

GE

Rolls Royce

Snecma

631

Landing Gear

Honeywell

Safran

HerouxELEB

1,184

Airframe/Structural

Magellan

OEMs

Spirit

GKN

Triumph

1,410

Honeywell

UTC

36

UTC

UTC

Flight Control

Parker

Moog

30

Total = 3,290.4

This the market for forgings by customer. We have a position in APUs, but little outside APUs despite having

capability to compete.

Customers in the Aerospace Market

We already have approvals at Spirit (because we are Boeing approved), UTC and Honeywell. For many parts we already have tooling. We believe we can grow with these customers.

We need to get on approval lists elsewhere, but believe we can win at GE, Spirit, Safran and Rolls-Royce

We believe there is also an opportunity to supply the hard metal machining suppliers to the Tier 1 suppliers highlighted above.

16

We have 3000 dies in our CDF warehouse that could be used to capture existing forgings on existing programs.

Example Dies in Inventory

We need to review our 3000 dies to determine which are still active.

We have 175 dies for Boeing alone (737, 747, 777, F-22, F-15, F-18, C-17, Apache AH-64, CH-47). We may be able to capture content with these dies (particularly 737, 777).

17

This the market for forgings by press type Press type in the Aerospace Forging Market

HBD plays in the $380M Drop Hammer market. This process creates high fracture toughness.

PMP has an opportunity in the screw press market for engines (no sales today). We believe that mechanical presses would be a beneficial complement to our drop

hammer competency. Faster cycle time, lower cost.

0

20

40

60

80

100%

APU Engines

Drop Hammer (High Fracture Tough)

Hydraulic Press

Seamless Forge Rings

(Hydraulic Press)

Screw Press

631

Landing Gear

Mechanical Press

Hydraulic Press

1,184

Airframe/Structural

Drop Hammer (High Fracture Tough)

Mechanical Press

Hydraulic Press

1,411

Flight Control

29

Total = 3,291

18

0

25

50

75

100%

APU

Drop Hammer Press

Hydraulic Press

13

Engines

Drop Hammer Press

Hydraulic Press

6 1

Airframe/Structural

Drop Hammer Press

5 1

Landing Gear

Flight Control

Our sales break down into drop hammer presses and hydraulic presses

California Drop Forge Sales by Press Type2013 = $30M

2/3 of our business is in Drop Hammer presses. We developed hydraulic press capabilities in the past 4-5 years because our customer

asked us to for more dimensionally precise requirements PMP has no commercial aerospace sales today, but has capability that we can exploit

for smaller parts that are utilized on engines and APUs (rotating components)

19

The previous slides have shown you that…

• We have grown slower than the Aerospace market in recent years

• We have thwarted our own growth by not having front end resources or by restrictive policies

• We are quoting a lot of business, but not yielding adequate sales

• We are not positioned adequately on new aero programs• We play in a large market where we believe we can win and

grow substantially• We believe we can grow fast with existing customers and their

machining suppliers where we are approved and have dies.• We believe we can be successful at gaining approvals and

share at a short list of Tier 1 and Tier 2 customers where we do not have a position today.

Our Problem Statements and Hypotheses address the items above.

20

Problem Statement 1

21

Problem Statement 1

In the Aerospace market, we face challenges due to a lack of sales and marketing, as well as prohibitive sales policies. We have not seen consistent growth because we have failed to market the company, and potential customers do not know who we are. Additionally, we have had customer unfriendly policies that have caused us to lose business.

22

Hypothesis 1: In Aerospace, there a few major OEMs where we could get significant (10s of millions of dollars) new business. In some OEMs we already have approvals and dies and have a quick path

to growth (Boeing, UTC, Honeywell). In other OEMs we need to get on approval lists, but can gain significant new business relatively easily (GE, Spirit, Safran-Microturbo, Rolls).

Boeing Spirit Bell HelicopterAirbus Rolls Royce GE UTC 0

2

4

6

8

10

12

Opportunities in Millions of Dollars

Current CDF Market Share

$15M target opportunity Opportunity at Aerospace OEMs

23

Hypothesis 2: An expedited path to Aerospace major OEMs (where we are already approved) is through hard metal machining suppliers.

GKN DASCO AMG Cadence TECT Triumph Magellan ASCO LMT0

2

4

6

8

10

12

Opportunities in Millions of DollarsCurrent CDF Market Share

$20M target opportunity Opportunity at Hard Metal Machining Suppliers

24

Hypothesis 3: We can identify $10M in new business on upcoming new aircraft (777x, 737 Max, A320NEO,Bombardier C Series Embraer E2).

C Series

$10M Target Opportunity

25

Hypothesis 5: We can exploit PMP’s capabilities for smaller sized parts that are integrated into larger structures in the Aerospace market (primarily in engine OEMs

once we gain penetration at Pratt, Rolls-Royce, GE).

PMP has the ability and equipment to forge intricate parts that may require the use of specific forging equipment. (hydraulic, screw, mechanical and high velocity presses)

Aerospace quality accreditation (AS 9100)

Compliment CDF capabilities with smaller size forgings. (less than 80 LB)

Blades, vanes and nozzles are components within PMP’s capabilities.

$30M to $40M Opportunity