B/E Aerospace Reports Third Quarter 2012 Financial Results; EPS $0.74 Excluding Debt Prepayment Costs; Raises 2012 Guidance and Provides 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 third quarter 2012 financial results.

THIRD QUARTER 2012 HIGHLIGHTS VERSUS THIRD QUARTER PRIOR YEAR

Revenues of $766.7 million increased 20.6 percent.
Operating earnings, adjusted to exclude acquisition, integration and transition (AIT) costs, were $138.9 million, an increase of 23.9 percent, and adjusted operating margin of 18.1 percent increased 50 basis points. Operating earnings, on a GAAP basis to include AIT costs, were $134.3 million.
During the quarter, the Company strengthened its balance sheet by issuing $800 million of senior unsecured notes due 2022, priced to yield 4.9 percent, and redeemed its $600 million issue of 8.5 percent senior unsecured notes due 2018. In connection with the third quarter notes redemption, the Company recorded debt prepayment costs of $82.1 million or $0.56 per diluted share.
Net earnings and earnings per diluted share, adjusted to exclude both one-time debt prepayment costs and AIT costs, were $79.2 million and $0.77 per diluted share, increases of 21.1 percent and 20.3 percent, respectively.
Net earnings and earnings per diluted share, on a GAAP basis to include one-time debt prepayment costs and AIT costs, were $18.5 million and $0.18 per share, respectively.
The Company expects full-year 2012 EPS of approximately $2.82 per diluted share, inclusive of AIT costs but exclusive of debt prepayment costs, representing a year-over-year increase of approximately 26 percent.
The Company established its full-year 2013 guidance of approximately $3.38 per diluted share, representing a year-over-year increase of 20 percent.

THIRD QUARTER CONSOLIDATED RESULTS

Third quarter 2012 revenues of $766.7 million increased $130.7 million, or 20.6 percent, as compared with the same period of the prior year. Organic revenue growth, excluding 2012 acquisitions, was 10.5 percent.

Operating earnings, adjusted to exclude $4.6 million of AIT costs, were $138.9 million, an increase of 23.9 percent, and operating margin of 18.1 percent increased 50 basis points as compared to the prior year period. 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, on a GAAP basis to include AIT costs, were $134.3 million or 17.5 percent of sales.

Net earnings and earnings per diluted share, adjusted to exclude both one-time debt prepayment costs and AIT costs, were $79.2 million and $0.77 per diluted share, increases of 21.1 percent and 20.3 percent, respectively, as compared to the prior year period. Net earnings and net earnings per diluted share, adjusted to exclude the one-time debt prepayment costs, were $76.0 million and $0.74 per diluted share.

Commenting on the Company’s third quarter 2012 performance, Amin J. Khoury, Chairman and Chief Executive Officer of B/E Aerospace said, “Our revenue growth continues to be driven primarily by the robust new aircraft delivery cycle. Approximately 61 percent of third quarter revenues were driven by demand for products for new-buy aircraft reflecting both robust new aircraft deliveries and weaker aftermarket demand. In addition, as a result of our operational outperformance which has resulted in record operating earnings for the nine-month year-to-date period, and successfully executed tax planning initiatives we have been able to raise our 2012 earnings guidance to $2.82 per share. The $2.82 per share guidance represents a $0.17 per share increase as compared to our original guidance of $2.65 per share.”

“For 2013, we are expecting top line growth of approximately 10 percent driven primarily by the demand for our products for new-buy aircraft. Our initial 2013 guidance of approximately 10 percent revenue growth and approximately 20 percent earnings per share growth is based primarily on our high quality backlog and the expectation of strong wide-body deliveries that are expected to continue for the next several years. We believe we are well positioned to generate double-digit revenue growth for the next several years, based on our total backlog of $8.25 billion, both booked and awarded but unbooked, rapidly growing revenues from our supplier furnished equipment (SFE) program deliveries, our expectation for a 14 percent CAGR in wide-body aircraft deliveries over the next three years, the expectation for continued growth in global passenger travel, and the attendant increases in capacity.”

THIRD QUARTER SEGMENT RESULTS

Third quarter 2012 commercial aircraft segment (CAS) operating earnings of $67.3 million increased 18.9 percent as compared with the prior year period. Operating margin of 17.5 percent expanded 50 basis points, due to leverage at the higher revenue level and ongoing operational efficiency initiatives.

Third quarter 2012 consumables management segment (CMS) operating earnings, adjusted to exclude AIT costs, were $59.2 million an increase of 24.4 percent as compared with the prior year period. Operating margin, adjusted to exclude AIT costs, was 20.0 percent and expanded 10 basis points. On a GAAP basis, to include AIT costs of $4.6 million, operating earnings were $54.6 million.

Third quarter 2012 business jet segment (BJS) operating earnings of $12.4 million increased 57.0 percent as compared with the prior year period. Operating margin of 14.5 percent expanded 220 basis points as compared with the prior year period, reflecting the 32.9 percent increase in revenues, an improved mix of revenues and ongoing operational improvements.

NINE MONTH CONSOLIDATED RESULTS

For the nine months ended September 30, 2012, revenues of $2.28 billion increased 23.7 percent as compared with the prior year period while operating earnings, adjusted to exclude AIT costs, were $415.0 million, and increased 30.1 percent. Operating margin, adjusted to exclude AIT costs, was 18.2 percent and expanded 90 basis points as compared with the prior year period. Operating earnings, on a GAAP basis to include AIT costs, were $401.9 million or 17.6 percent of sales.

Net earnings and earnings per diluted share for the nine months ended September 30, 2012, adjusted to exclude both debt prepayment costs and AIT costs, were $225.2 million and $2.19 per share, increases of 32.1 percent and 31.1 percent, respectively, as compared to the prior year period. Net earnings and earnings per diluted share for the nine months ended September 30, 2012, adjusted to exclude debt prepayment costs, were $216.0 million and $2.10 per share.

On a GAAP basis to include debt prepayment and AIT costs, for the nine months ended September 30, 2012, net earnings and earnings per diluted share, were $158.5 million and $1.54 per share.

NINE MONTH SEGMENT RESULTS

For the nine months ended September 30, 2012, CAS operating earnings of $202.7 million increased 28.5 percent as compared with the prior year period. Operating margin of 17.6 percent expanded 100 basis points as compared with the prior year period due to leverage at the higher revenue level and ongoing operational efficiency initiatives.

For the nine months ended September 30, 2012, CMS operating earnings, adjusted to exclude AIT costs, were $175.0 million an increase of 24.6 percent as compared with the prior year period and adjusted operating margin was 20.1 percent, an increase of 30 basis points. On a GAAP basis, to include AIT costs of $13.1 million, operating earnings were $161.9 million.

For the nine months ended September 30, 2012, BJS operating earnings of $37.3 million increased 81.1 percent as compared with the prior year period. Operating margin of 14.3 percent expanded 310 basis points, reflecting the 41.6 percent increase in revenues, an improved mix of revenues and ongoing operational improvements.

LIQUIDITY AND BALANCE SHEET METRICS

During the quarter the Company strengthened its balance sheet by issuing $800 million of senior unsecured notes due 2022, priced to yield 4.9 percent, and redeemed its $600 million issue of 8.5 percent senior unsecured notes due 2018. In connection with the third quarter notes redemption, the Company recorded debt prepayment costs of $82.1 million or $0.56 per diluted share.

Free cash flow of $48.1 million in the current quarter reflects capital expenditures of $29.9 million and an approximate 19 percent increase in working capital to support the approximately 21 percent third quarter increase in revenues and the Company’s expectation for double-digit revenue growth over the next several years including deliveries of Boeing 737 modular lavatories, A350 galley systems and certain other supplier furnished equipment. As of September 30, 2012, cash was $395 million, net debt, which represents total long term debt of $1.96 billion less cash, was $1.566 billion and the Company’s net debt-to-net capital ratio was 43 percent.

BOOKINGS/BACKLOG

Bookings during the third quarter of 2012 were approximately $800 million, an increase of approximately 21 percent as compared with the third quarter of 2011, and reflect a book-to-bill ratio of approximately 1.05 to 1. Approximately 65 percent of bookings in the current quarter were driven by a higher level of demand for products to outfit new-buy aircraft. Backlog at the end of the quarter was approximately $3.75 billion, while total backlog, both booked and awarded but unbooked, was approximately $8.25 billion, an increase of approximately 19 percent as compared with September 30, 2011.

During the quarter, the Company was awarded four major aircraft cabin interior programs. The awards include: the Company’s first Boeing 777 LED lighting retrofit program for a major global airline; in an additional market share gain, a Pinnacle® main cabin seating program for a successful narrow-body airline to outfit its approximately 30 new-buy aircraft and to retrofit approximately 70 aircraft; a super first class cabin program to outfit a major international Asian airline’s new-buy wide-body fleet; and a long-term agreement to manufacture cabin interior equipment for the new Bombardier Global 7000 and Global 8000 business jets. These awards are initially valued at approximately $400 million.

OUTLOOK

Commenting on the Company’s outlook, Mr. Khoury stated, “We are raising our 2012 full year guidance to $2.82 per diluted share inclusive of AIT costs but exclusive of debt prepayment costs. In addition, we have issued our full-year 2013 guidance of approximately $3.38 per diluted share, representing a year-over-year increase of approximately 20 percent. Our 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 supplier furnished equipment program deliveries, the expectation for continued growth in global passenger travel, and the attendant increases in capacity all provide a solid foundation for double-digit revenue growth for the next several years.”

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 and bookings from prior SFE awarded programs, 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 or approximately 10 percent higher than expected 2012 revenues.
The Company expects 2013 earnings of approximately $3.38 per diluted share. The EPS guidance of $3.38 per diluted share represents an increase of approximately 20 percent as compared with expected 2012 EPS of $2.82 per diluted share (2012 EPS of $2.82 adjusted to exclude 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.

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.”