B/E Aerospace Third Quarter 2013 Results Exceed Expectations; Provides 2014 Guidance

23-Oct-2013

B/E Aerospace, Inc. (NASDAQ: BEAV), the world's leading manufacturer of aircraft cabin interior products and the world's leading provider of aerospace fasteners, consumables and logistics services, today announced its third quarter 2013 financial results.

THIRD QUARTER 2013 HIGHLIGHTS VERSUS THIRD QUARTER PRIOR YEAR

Revenues increased 16 percent.
Operating earnings increased 19 percent.
Earnings per diluted share increased 25 percent.
Full-year 2013 guidance raised to $3.52 per diluted share (excludes current period acquisition expenses).
The Company established its full-year 2014 guidance of approximately $4.25 per diluted share, representing a year-over-year increase of approximately 21 percent.

THIRD QUARTER CONSOLIDATED RESULTS

Third quarter 2013 revenues of $888.1 million increased $121.4 million, or 15.8 percent, as compared with the prior year period.

Third quarter 2013 operating earnings were $160.1 million, an increase of 19.2 percent, and operating margin of 18.0 percent increased 50 basis points as compared to the prior year period. Acquisition, integration and transaction (AIT) costs in the third quarter were approximately $6.9 million, including expenses associated with the Blue Dot Energy Services LLC (Blue Dot) acquisition. Operating earnings, adjusted to exclude AIT costs, were $167.0 million, an increase of 20.2 percent, and adjusted operating margin of 18.8 percent increased 70 basis points compared to the prior year similarly adjusted to exclude AIT costs.

Third quarter 2013 net earnings and earnings per diluted share were $92.7 million and $0.89 per share, increases of 26.5 percent and 25.4 percent, respectively, as compared with the prior year period, as adjusted to exclude third quarter 2012 debt prepayment costs and adjusting the third quarter 2012 tax rate to the higher third quarter 2013 tax rate for comparability purposes.

Commenting on the Company's third quarter 2013 performance, Amin J. Khoury, Chairman and Chief Executive Officer of B/E Aerospace said, "Today's third quarter 2013 results include record quarterly revenues, bookings, and operating earnings. Our revenue growth this quarter was driven by a double-digit increase in aftermarket demand, as well as a double-digit increase in demand related to the strong commercial aircraft delivery cycle. In addition, we are pleased to report that the consumables management segment aftermarket business experienced an accelerating growth rate in both revenues and orders during the quarter."

THIRD QUARTER SEGMENT RESULTS

Third quarter 2013 commercial aircraft segment (CAS) revenues increased 18.4 percent while operating earnings of $82.4 million increased 22.4 percent as compared with the prior year period, and operating margin of 18.0 percent expanded 50 basis points, due to operating leverage at the higher revenue level and ongoing operational efficiency initiatives.

Third quarter 2013 consumables management segment (CMS) revenues increased 7.3 percent while operating earnings, adjusted to exclude AIT costs of $6.9 million, were $65.7 million, an increase of 11.0 percent as compared with the prior year similarly adjusted to exclude AIT costs. Adjusted operating margin was 20.7 percent, an increase of 70 basis points as compared with the prior year period. CMS pro forma aftermarket revenues and bookings, giving effect to acquisitions as if they occurred on January 1, 2012, increased at a double-digit rate during the quarter. CMS pro forma revenues increased 5.3 percent, exclusive of sales to its defense and business jet customers. On a GAAP basis, operating earnings, including AIT costs of $6.9 million, were $58.8 million and increased 7.7 percent and were 18.5 percent of sales.

Third quarter 2013 business jet segment (BJS) revenues increased 33.8 percent while operating earnings of $18.9 million increased 52.4 percent as compared with the prior year period. Operating margin of 16.6 percent expanded 210 basis points as compared with the prior year period, reflecting the increase in revenues, an improved mix of revenues and ongoing operational efficiency initiatives.

NINE MONTH CONSOLIDATED RESULTS

For the nine months ended September 30, 2013, revenues of $2.58 billion increased 13.1 percent as compared with the prior year period.

Operating earnings of $472.4 million increased 17.5 percent as compared with the prior year period. Operating margin in the current period of 18.3 percent expanded 70 basis points as compared with the prior year period.

For the nine months ended September 30, 2013, net earnings and earnings per diluted share were $275.0 million and $2.65 per share, increases of 23.5 percent and 22.1 percent, respectively, as compared with the prior year period, as adjusted to exclude third quarter 2012 debt prepayment costs and adjusting the nine months ended September 30, 2012 tax rate to the higher nine months ended September 30, 2013 tax rate for comparability purposes.

NINE MONTH SEGMENT RESULTS

For the nine months ended September 30, 2013, CAS operating earnings of $236.3 million increased 16.6 percent as compared with the prior year period. Operating margin of 18.1 percent expanded 50 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 nine months ended September 30, 2013, CMS operating earnings of $184.9 million increased 14.2 percent, and operating margin of 19.3 percent expanded 70 basis points as compared with the prior year period.

For the nine months ended September 30, 2013, business jet segment operating earnings of $51.2 million increased 37.3 percent as compared with the prior year period. Operating margin of 16.2 percent expanded 190 basis points, reflecting the increase in revenues, an improved mix of revenues and ongoing operational efficiency initiatives.

LIQUIDITY AND BALANCE SHEET METRICS

Free cash flow of $64.1 million in the third quarter of 2013 represents a free cash flow conversion ratio of 69.1 percent and reflects capital expenditures of approximately $45.9 million to support the Company's record total backlog, both booked and awarded but unbooked, of approximately $8.8 billion. During the third quarter of 2013 the Company used approximately $75.0 million of cash related to the acquisition of Blue Dot.

As of September 30, 2013, cash was $573.8 million, net debt, which represents total long term debt of $1.96 billion less cash, was $1.39 billion and the Company's net debt-to-net capital ratio was 35.7 percent.

ACQUISITION ACTIVITY

During the third quarter the Company announced that it has initiated an expansion of its consumables management segment into the oil and gas services industry via the acquisition of Blue Dot, a provider of parts distribution, rental equipment, and on-site services. The Company plans to provide products (new and remanufactured after use, and API certified) and a broad range of services to remote drilling sites, using its manufacturing, certification, information technology, and logistics capabilities to properly prepare for deployment, store, locate, and deliver, as needed equipment and services.

The acquisition purchase price including expenses was approximately $75 million. The transaction is expected to be accretive to 2014 earnings per share.

BOOKINGS/BACKLOG

Bookings during the third quarter of 2013 were strong at approximately $900 million, a quarterly record, and reflect a book-to-bill ratio in excess of 1. Backlog at the end of the quarter was approximately $3.8 billion, while awarded but unbooked backlog was approximately $5.0 billion. Total backlog, both booked and awarded but unbooked, was approximately $8.8 billion.

OUTLOOK

Commenting on the Company's outlook, Mr. Khoury concluded, "Our full year 2013 EPS guidance of approximately $3.50 per diluted share ($3.52 excluding current period acquisition expenses) represents an increase of approximately 24 percent as compared to 2012. Our total backlog, both booked and awarded but unbooked, of approximately $8.8 billion, our expectation for a 10 percent compound annual growth rate (CAGR) in wide-body aircraft deliveries over the next three years, our expectation of strong revenue growth from our supplier furnished equipment (SFE) program deliveries, the expectation for continued growth in global passenger travel, and the attendant increases in capacity, all provide a basis for our expectation of continued strong revenue growth over the 2013-2015 time period."

The Company's 2014 financial guidance is as follows:

The Company expects continued strong bookings in 2014 driven by the robust wide-body aircraft delivery outlook, bookings from prior SFE awarded programs, and a recovery in aftermarket demand, and expects to end the year with a book-to-bill ratio in excess of 1 to 1.
2014 revenues are expected to be approximately $4.0 billion, an increase in excess of 15 percent as compared with 2013 revenues.
The Company expects 2014 EPS of approximately $4.25 per diluted share representing an increase of approximately 21 percent as compared with expected 2013 EPS of $3.50 per diluted share.
2014 free cash flow conversion ratio is expected to be approximately 65 percent of net earnings.
Adjusted net earnings, adjusted diluted net earnings per common share, adjusted operating earnings, adjusted operating margin, CMS adjusted operating earnings, CMS adjusted operating margin, 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."