B/E Aerospace Reports Fourth Quarter and Full Year 2012 Financial Results; Fourth Quarter 2012 EPS Up 30%; Full Year 2012 EPS Up 26% Excluding Debt Prepayment Costs; Raises 2013 Guidance

WELLINGTON, Fla.—(BUSINESS WIRE)—B/E Aerospace, Inc. (Nasdaq: BEAV), the world’s leading manufacturer of aircraft cabin interior products and the world’s leading distributor of aerospace fasteners and consumables, today announced fourth quarter and full year 2012 financial results.

FOURTH QUARTER 2012 HIGHLIGHTS VERSUS FOURTH QUARTER PRIOR YEAR

Revenues of $803.2 million increased 22.7 percent.
Operating earnings were $138.1 million, an increase of 26.6 percent, and operating margin of 17.2 percent increased 50 basis points.
Net earnings and earnings per diluted share were $75.2 million and $0.73 per share, increases of 31.2 percent and 30.4 percent, respectively.
FULL YEAR 2012 HIGHLIGHTS VERSUS FULL YEAR 2011

Revenues of $3.085 billion increased 23.4 percent.
Operating earnings were $540.0 million, an increase of 26.2 percent, and operating margin of 17.5 percent increased 40 basis points.
Net earnings and earnings per diluted share, adjusted to exclude debt prepayment costs, were $291.3 million and $2.83 per share, reflecting increases of 27.9 percent and 26.3 percent, respectively.
Net earnings and earnings per diluted share, on a GAAP basis to include debt prepayment costs, were $233.7 million and $2.27 per share.
2013 FINANCIAL GUIDANCE

The Company is increasing its 2013 earnings per share (EPS) guidance by $0.07 per share to approximately $3.45 per diluted share, representing an increase in EPS of approximately 22 percent as compared to 2012 EPS (2012 EPS adjusted to exclude debt prepayment costs).

FOURTH QUARTER CONSOLIDATED RESULTS

Fourth quarter 2012 revenues of $803.2 million increased $148.5 million, or 22.7 percent, as compared with the prior year period.

Operating earnings were $138.1 million, an increase of 26.6 percent, and operating margin of 17.2 percent increased 50 basis points. The growth in operating earnings and the improvement in operating margin occurred primarily as a result of operating leverage at the higher sales volume and ongoing operational efficiency initiatives. Operating earnings and operating margin, adjusted to exclude acquisition, integration and transition (AIT) costs, were $142.2 million and 17.7 percent.

Net earnings and earnings per diluted share were $75.2 million and $0.73 per share, increases of 31.2 percent and 30.4 percent, respectively.

Commenting on the Company’s fourth quarter and full year 2012 performance, Amin J. Khoury, Chairman and Chief Executive Officer of B/E Aerospace said, “I am pleased to report, our 2012 results which were the best in the Company’s history. 2012 revenues, operating earnings, operating margin, bookings and backlog were all records, and net earnings and EPS, adjusted to exclude debt prepayment costs, were also records. Our revenue growth continues to be driven primarily by the robust new aircraft delivery cycle. Approximately 61 percent of fourth quarter and full year 2012 revenues was driven by demand for products for new-buy aircraft reflecting both robust new aircraft deliveries and weaker aftermarket demand.”

“Our 2013 guidance of approximately 22 percent earnings per share growth is based primarily on our high quality backlog, the expectation of strong wide-body deliveries, a modest recovery in the aftermarket and significant continuing margin expansion,” stated Mr. Khoury.

FOURTH QUARTER SEGMENT RESULTS

Fourth quarter 2012 commercial aircraft segment (CAS) revenues increased 13.9 percent while operating earnings of $68.6 million increased 17.9 percent as compared with the prior year period, and operating margin of 17.2 percent expanded 60 basis points, due to operating leverage at the higher revenue level and ongoing operational efficiency initiatives.

Fourth quarter 2012 consumables management segment (CMS) operating earnings were $54.8 million, an increase of 28.6 percent, and operating margin of 18.2 percent was flat as compared with the prior year period. Operating margin, adjusted to exclude AIT costs, was 19.5 percent.

Fourth quarter 2012 business jet segment (BJS) operating earnings of $14.7 million increased 77.1 percent as compared with the prior year period. Operating margin of 14.3 percent expanded 250 basis points as compared with the prior year period, reflecting the 45.8 percent increase in revenues, an improved mix of revenues and ongoing operational improvements.

FULL YEAR CONSOLIDATED RESULTS

For the year ended December 31, 2012, revenues of $3.085 billion increased 23.4 percent as compared with the prior year period.

Operating earnings were $540.0 million, an increase of 26.2 percent, and operating margin of 17.5 percent increased 40 basis points as compared with the prior year. Operating earnings and operating margin, adjusted to exclude AIT costs, were $557.2 million and 18.1 percent, increases of 28.8 percent and 80 basis points, respectively, as compared with the prior year.

Net earnings and earnings per diluted share for the year ended December 31, 2012, adjusted to exclude debt prepayment costs of $82.1 million, were $291.3 million and $2.83 per share, increases of 27.9 percent and 26.3 percent, respectively.

FULL YEAR SEGMENT RESULTS

For the year ended December 31, 2012, CAS operating earnings of $271.3 million increased 25.6 percent as compared with the prior year period. Operating margin of 17.5 percent expanded 90 basis points as compared with the prior year period due to operating leverage at the higher revenue level and ongoing operational efficiency initiatives.

For the year ended December 31, 2012, CMS operating earnings, adjusted to exclude AIT costs, were $233.9 million. Adjusted operating margin of 20.0 percent increased 10 basis points.

For the year ended December 31, 2012, BJS operating earnings of $52.0 million increased 79.9 percent as compared with the prior year period. Operating margin of 14.3 percent expanded 290 basis points, reflecting the 42.8 percent increase in revenues, an improved mix of revenues and ongoing operational improvements.

LIQUIDITY AND BALANCE SHEET METRICS

Free cash flow of $110.1 million in the current quarter represents a free cash flow conversion ratio of 146.4 percent of net earnings. For the year ended December 31, 2012, free cash flow of $229.7 million represents a free cash flow conversion ratio of 98.3 percent of net earnings. As of December 31, 2012, cash was $513.7 million, net debt, which represents total long term debt of $1.96 billion less cash, was $1.45 billion and the Company’s net debt-to-net capital ratio was 39.9 percent.

BOOKINGS/BACKLOG

Bookings during the fourth quarter of 2012 were approximately $810 million and reflect a book-to-bill ratio of approximately 1 to 1. Approximately 60 percent of bookings in the current quarter were driven by a higher level of demand for products to outfit new-buy aircraft. Throughout the year, each of the Company’s segments had solid market successes as shown by record bookings of approximately $3.2 billion, an increase of approximately 10 percent as compared with 2011.

Backlog as of December 31, 2012 was approximately $3.75 billion, an increase of approximately 7 percent as compared with 2011 and total backlog, both booked and awarded but unbooked, was a record at approximately $8.25 billion.

OUTLOOK

Commenting on the Company’s outlook, Mr. Khoury stated, “Our raised full-year 2013 guidance of approximately $3.45 per diluted share represents an increase of approximately 22 percent as compared to 2012 EPS and is based upon the expectation of strong operating earnings growth driven by significant margin expansion in each of the Company’s three segments. It also reflects recent changes to tax legislation. Our record total backlog, both booked and awarded but unbooked, of approximately $8.25 billion, our expectation for a 14 percent CAGR in wide-body aircraft deliveries over the next three years, our expectation of rapidly growing revenues from our SFE program deliveries, the expectation for continued growth in global passenger travel, and the attendant increases in capacity all provide a foundation for expected solid revenue growth in 2013, and an acceleration in revenue growth beginning in 2014.”

The Company’s 2013 financial guidance is as follows:

The Company expects continued strong bookings in 2013 driven by the robust wide-body aircraft delivery outlook, bookings from prior SFE awarded programs, and a modest recovery in aftermarket demand, and expects to end the year with a book-to-bill ratio in excess of 1 to 1.
2013 revenues are expected to be approximately $3.35 billion, and, based on scheduled program deliveries, are expected to be stronger in the second half of the year.
The Company expects 2013 EPS of approximately $3.45 per diluted share. The EPS guidance of $3.45 per diluted share represents an increase of approximately 22 percent as compared with 2012 EPS of $2.83 per diluted share (2012 EPS of $2.83 adjusted to exclude 2012 debt prepayment costs). The Company’s 2013 earnings per share guidance is inclusive of approximately $20 million of expected 2013 AIT costs.
2013 free cash flow conversion ratio is expected to be approximately 70 percent of net earnings, weighted more heavily toward the second half of 2013.
Adjusted operating earnings, adjusted operating margin, CMS adjusted operating earnings, CMS adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted share, free cash flow and free cash flow conversion ratio are presented in this press release; these are non-GAAP financial measures. For more information see “Reconciliation of Non-GAAP Financial Measures.”