B/E Aerospace (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 2010 financial results.
THIRD QUARTER 2010 HIGHLIGHTS VERSUS
THIRD QUARTER PRIOR YEAR
- Revenues of $495.0 million increased
7.7 percent.
- Operating earnings of $83.4 million
increased 19.8 percent. Operating margin of 16.8 percent expanded
170 basis points.
- Earnings before income taxes increased
32.0 percent.
- Net earnings and earnings per diluted
share were $41.0 million and $0.41 per share, up 13.6 percent and
13.9 percent, respectively.
- Free cash flow was $62.8 million and
represented a free cash flow conversion ratio of 153 percent.
- The third quarter book to bill ratio
was 1.1 to 1 and was in excess of one for the fourth consecutive
quarter.
- The company issued $650 million of 6
7/8 percent senior unsecured notes due 2020 on September 16,
2010.
- The company signed definitive
agreements to acquire the TSI Group, Inc. (TSI) on October 4, 2010
and Satair’s aerospace fastener distribution business on October
25, 2010.
- The company raises 2010 full-year
adjusted operational net earnings per diluted share guidance to
approximately $1.56 per share (see outlook section of news
release).
- The company issues full-year 2011 net
earnings per diluted share guidance of approximately $1.90 - $1.95,
an increase of approximately 25 percent as compared with expected
2010 adjusted net earnings per share.
THIRD QUARTER CONSOLIDATED
RESULTS
Third quarter 2010 revenues of $495.0 million increased $35.2
million, or 7.7 percent, as compared with the same period of the
prior year. The increase was due to a higher level of revenues
generated by both the consumables management and commercial
aircraft segments which was partially offset by a decline in
business jet segment revenues.
Third quarter 2010 operating earnings of $83.4 million increased
19.8 percent on the aforementioned 7.7 percent increase in
revenues. Operating margin in the current quarterly period was 16.8
percent and expanded 170 basis points as compared with the prior
year period. Operating earnings growth and operating margin
expansion were driven by the higher revenue level, an improved
revenue mix and ongoing operational efficiency initiatives.
Third quarter 2010 earnings before income taxes were $61.9
million and increased 32.0 percent as compared with the prior year
period. Third quarter 2010 net earnings were $41.0 million, or
$0.41 per diluted share, and increased 13.6 percent and 13.9
percent, respectively, reflecting a 33.8 percent tax rate in 2010
as compared with a 23.0 percent tax rate in the prior year
period.
Third quarter 2010 free cash flow was $62.8 million,
representing a free cash flow conversion ratio of 153 percent.
Commenting on the company’s recent performance, Amin J. Khoury,
Chairman and Chief Executive Officer of B/E Aerospace said, “Our
third quarter consolidated operating earnings growth of 19.8
percent was driven by solid revenue growth and substantial margin
expansion at both our consumables management segment (CMS) and our
commercial aircraft segment (CAS). CMS revenues and operating
earnings increased 6.7 percent and 20.9 percent, respectively,
while CAS revenues and operating earnings increased 12.4 percent
and 29.9 percent, respectively. Third quarter pretax earnings
increased 32.0 percent year-over-year, free cash flow conversion
ratio was 153 percent and our backlog grew for the fourth
consecutive quarter.”
“We issued $650 million of 6 7/8 percent senior unsecured notes
due 2020 on September 16, 2010. In addition, we signed definitive
agreements to acquire two companies; TSI on October 4, 2010 and
Satair’s aerospace fastener distribution business on October 25,
2010, for an aggregate purchase price of approximately $475
million, excluding costs and expenses. Both acquisitions are
expected to be neutral to earnings per share in 2011 and to be
accretive thereafter.”
“Based on our record backlog, our expectation of continued
growth in passenger travel and higher levels of wide-body aircraft
deliveries beginning in 2011, we expect strong full-year 2011
earnings per diluted share growth of approximately 25 percent to
approximately $1.90 - $1.95 per diluted share.”
Mr. Khoury continued, “Looking further ahead and taking into
consideration our record backlog, the expected robust wide body
delivery cycle beginning in 2011 and continued healthy demand
growth for passenger travel, we expect continued strong growth in
earnings per share for the next few years.”
Free cash flow and free cash flow conversion ratio are non-GAAP
financial measures. For more information see "Reconciliation of
Non-GAAP Financial Measures."
THIRD QUARTER SEGMENT
RESULTS
The following is a tabular summary and commentary of revenues
and operating earnings by segment:
REVENUES Three Months Ended September 30,
($ in millions) 2010 2009 %
Change Consumables management $ 193.1 $ 181.0 6.7 % Commercial
aircraft 250.2 222.5 12.4 % Business jet 51.7 56.3
-8.2 % Total $ 495.0 $ 459.8 7.7 %
OPERATING EARNINGS
Three Months Ended September 30, ($ in millions)
2010 2009 % Change Consumables management $
40.5 $ 33.5 20.9 % Commercial aircraft 38.7 29.8 29.9 % Business
jet 4.2 6.3 -33.3 % Total $ 83.4 $ 69.6 19.8 %
Third quarter 2010 consumables management segment (CMS) revenues
of $193.1 million increased 6.7 percent as compared with the third
quarter of 2009. Third quarter 2010 CMS operating earnings of $40.5
million increased 20.9 percent and operating margin of 21.0 percent
expanded 250 basis points year-over-year primarily due to an
improved revenue mix, the higher revenue level, and ongoing
operational efficiency initiatives.
Third quarter 2010 commercial aircraft segment (CAS) revenues of
$250.2 million increased 12.4 percent as compared with the prior
year period. CAS third quarter 2010 operating earnings of $38.7
million increased 29.9 percent and operating margin of 15.5 percent
expanded 210 basis points as compared with the prior year period,
primarily due to an improved revenue mix, including a higher level
of spares sales, and ongoing operational efficiency
initiatives.
Third quarter 2010 business jet segment revenues of $51.7
million decreased 8.2 percent as compared with the prior year
period. Operating earnings of $4.2 million decreased $2.1 million
or 33.3 percent as compared with the prior year period, primarily
as a result of an unfavorable revenue mix in the current year
period.
NINE-MONTH CONSOLIDATED
RESULTS
For the nine months ended September 30, 2010, revenues of $1.442
billion declined 1.1 percent as compared with the prior year period
as the revenue increases in the second quarter and third quarter
were not sufficient to completely offset the revenue decline in the
first quarter of 2010 as compared with the first quarter of
2009.
For the nine months ended September 30, 2010, operating earnings
of $234.2 million increased 4.5 percent as compared with the prior
year period. Operating margin in the current period of 16.2 percent
expanded 80 basis points as compared to the prior year period.
For the nine months ended September 30, 2010, net earnings were
$112.1 million, or $1.11 per diluted share, as compared with $108.7
million, or $1.10 per diluted share, in the prior year period.
NINE-MONTH SEGMENT
RESULTS
The following is a tabular summary and commentary of revenues
and operating earnings by segment:
REVENUES Nine Months Ended September 30, ($
in millions) 2010 2009 %
Change Consumables management $ 572.3 $ 617.0 -7.2 % Commercial
aircraft 716.7 672.3 6.6 % Business jet 153.4 169.0
-9.2 % Total $ 1,442.4 $ 1,458.3 -1.1 %
OPERATING
EARNINGS Nine Months Ended September 30, ($ in
millions) 2010 2009 % Change Consumables
management $ 115.5 $ 116.7 -1.0 % Commercial aircraft 109.1 89.9
21.4 % Business jet 9.6 17.6 -45.5 % Total $ 234.2 $
224.2 4.5 %
For the nine months ended September 30, 2010, CMS revenues of
$572.3 million declined 7.2 percent as compared with the prior year
period, primarily as a result of lower revenues in the first
quarter of 2010 as compared with the first quarter of 2009. CMS
operating earnings of $115.5 million declined 1.0 percent on the
7.2 percent lower level of revenues and operating margin of 20.2
percent increased 130 basis points.
For the nine months ended September 30, 2010, CAS revenues of
$716.7 million increased 6.6 percent as compared with the prior
year period. CAS operating earnings were $109.1 million, or 15.2
percent of revenues, an increase of 21.4 percent as compared with
the prior year period. Current period operating margin expanded 180
basis points as compared with the prior year period primarily as a
result of an improved revenue mix, including a higher level of
spares sales, and ongoing operational efficiency initiatives.
For the nine months ended September 30, 2010, business jet
segment revenues of $153.4 million declined 9.2 percent and
operating earnings of $9.6 million decreased $8.0 million or 45.5
percent as compared with the prior year period, as a result of
lower revenues, an unfavorable revenue mix and the negative impact
of reduced operating leverage in the current year period.
LIQUIDITY AND BALANCE SHEET
METRICS
Third quarter 2010 free cash flow of $62.8 million represents a
free cash flow conversion ratio of 153 percent. For the nine months
ended September 30, 2010, free cash flow was $142.1 million and the
free cash flow conversion ratio was 127 percent. During the third
quarter B/E Aerospace issued $650 million of 6 7/8 percent senior
unsecured notes due 2020. At September 30, 2010 cash stood at $834
million, net debt, which represents total debt of $1,589 million
less cash, was $755 million and the company’s net debt-to-net
capital ratio was 32.3 percent. The company has no borrowings
outstanding on its $350 million revolving credit facility and no
debt maturities until 2014.
BOOKINGS
Bookings during the third quarter of 2010 were solid at
approximately $545 million. The book-to-bill ratio was 1.1 to 1 for
the quarter, and for the fourth consecutive quarter represented a
book-to-bill ratio in excess of one. Backlog at the end of the
quarter was approximately $2.85 billion, an increase of
approximately 7.5 percent as compared with the company’s September
30, 2009, backlog. Supplier furnished equipment (SFE) awards
expanded to $2.65 billion. As a result, total backlog, booked and
awarded but unbooked, expanded to a record $5.5 billion, an
increase of approximately 7 percent as compared with September 30,
2009.
ACQUISITIONS
The company signed definitive agreements to acquire the TSI
Group, Inc. (TSI), on October 4, 2010, and Satair’s aerospace
fastener distribution business, on October 25, 2010, for an
aggregate purchase price of approximately $475 million excluding
costs and expenses. Both acquisitions are expected to close during
the fourth quarter of 2010, to be neutral to earnings per diluted
share in 2011 and to be significantly accretive thereafter.
TSI is the market leader in the design, engineering and
manufacturing of customized, fully integrated, thermal management
and interconnect solutions that address complex power management
requirements of customers in the aerospace and defense
industries.
Mr. Khoury commented, “TSI is well-positioned to leverage its
market leadership position in the growing thermal management market
and is expected to benefit from the continuing shift towards
increasingly complex power management solutions required by
expanding computing capacity and larger power supplies in smaller
packages. Combining TSI’s thermal management capabilities with
B/E’s internally developed thermal management technologies and our
excellent reputation in the integration, program management and
certification of aircraft interiors, together with B/E Aerospace’s
strong relationships with our commercial aerospace customers, is
expected to further expand TSI’s presence in the commercial
aerospace industry. This product line expansion should enhance our
ability to serve our OEM and global airline customers in the
commercial aerospace industry and is expected to create significant
value for our shareholders.”
The company also signed an agreement to acquire Satair’s
aerospace fastener distribution business, a market leader in the
distribution of consumables to European and Asia-Pacific aerospace
manufacturers and their suppliers.
Mr. Khoury continued, “The Satair aerospace fastener
distribution acquisition substantially expands B/E Aerospace’s
customer base in the European and Asia Pacific regions and also
expands the company’s product offerings to include metric
fasteners, adhesive fasteners, latches, cables, struts, tooling and
lighting products. The Satair business has an excellent
OEM-oriented customer base and is highly complementary to our
consumables management segment. Through expected efficiency
improvement initiatives, we expect to be able to generate margins
in this business approximately equal to the margins which we
currently generate in our consumables management segment.”
OUTLOOK
Commenting on the company’s outlook, Mr. Khoury stated, “The
company raised full-year 2010 adjusted operational earnings per
share guidance to approximately $1.56 per share, which excludes
interest on borrowings in excess of funds deployed for
acquisitions, which is estimated to be approximately $0.05 per
share (senior notes issued on September 16, 2010 but acquisitions
not completed until the middle of the fourth quarter 2010), and
one-time costs associated with financing and acquisition
activities.”
Mr. Khoury continued, “We expect strong full-year 2011 earnings
per diluted share growth of approximately 25 percent to
approximately $1.90 - $1.95 per diluted share. Looking further
ahead and taking into consideration our record backlog, the
expected robust wide body delivery cycle and continued healthy
demand growth for passenger travel, we expect continued strong
growth in earnings per share for the next few years.”
The company’s financial guidance for 2011 is as
follows:
- The company expects orders and backlog
to continue to grow in 2011 due to increasing demand for
consumables and commercial aircraft segment spares driven by the
continuing growth in passenger traffic and attendant increase in
capacity, and an expected increase in orders for cabin interior
products arising from the expected acceleration in deliveries of
new wide-body aircraft beginning in 2011.
- 2011 revenues are expected to be
approximately $2.4 billion or approximately 20 percent higher than
2010 revenues, reflecting increased demand for our consumables
management and commercial aircraft segment products, and reflecting
the inclusion of the fourth quarter 2010 acquisitions for the
full-year 2011.
- The company expects full-year 2011 net
earnings per diluted share of approximately $1.90 - $1.95, an
increase of approximately 25 percent as compared with expected 2010
adjusted net earnings per share.
- The 2011 free cash flow conversion
ratio is expected to be approximately 100 percent.
This news release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Such forward-looking
statements involve risks and uncertainties. B/E Aerospace’s actual
experience and results may differ materially from the experience
and results anticipated in such statements. Factors that might
cause such a difference include those related to the completion of
pending acquisitions, and the expected benefits from any pending,
future or completed acquisitions, changes in market and industry
conditions and those discussed in B/E Aerospace’s filings with the
Securities and Exchange Commission, which include its Proxy
Statement, Annual Report on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K. For more information, see the
section entitled “Forward-Looking Statements” contained in B/E
Aerospace’s Annual Report on Form 10-K and in other filings. The
forward-looking statements included in this news release are made
only as of the date of this news release and, except as required by
federal securities laws, we do not intend to publicly update or
revise any forward-looking statements to reflect subsequent events
or circumstances.
About B/E Aerospace
B/E Aerospace is the world’s leading manufacturer of aircraft
cabin interior products and the world’s leading distributor of
aerospace fasteners and consumables. B/E Aerospace designs,
develops and manufactures a broad range of products for both
commercial aircraft and business jets. B/E Aerospace manufactured
products include aircraft cabin seating, lighting, oxygen, and food
and beverage preparation and storage equipment. The company also
provides cabin interior design, reconfiguration and
passenger-to-freighter conversion services. Products for the
existing aircraft fleet – the aftermarket – generate approximately
50 percent of sales. B/E Aerospace sells and supports its products
through its own global direct sales and product support
organization. For more information, visit the B/E Aerospace website
at www.beaerospace.com.
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS (UNAUDITED)
(In Millions, Except Per Share
Data)
THREE MONTHS ENDED NINE
MONTHS ENDED September 30, September 30,
September 30, September 30, 2010
2009 2010 2009
Revenues $ 495.0 $ 459.8 $ 1,442.4 $ 1,458.3 Cost of sales 311.1
297.7 916.4 954.2 Selling, general and administrative 71.9 65.2
210.6 205.3 Research, development and
engineering 28.6 27.3 81.2
74.6 Operating earnings 83.4 69.6 234.2
224.2 Operating earnings, as a percentage of revenues 16.8 %
15.1 % 16.2 % 15.4 % Interest expense, net 21.5 22.7 62.2
67.7 Debt prepayment costs -- --
2.5 -- Earnings before income taxes
61.9 46.9 169.5 156.5 Income taxes 20.9
10.8 57.4 47.8 Net
earnings $ 41.0 $ 36.1 $ 112.1 $ 108.7
Net earnings per common share: Basic $ 0.41 $
0.37 $ 1.13 $ 1.10 Diluted $ 0.41 $
0.36 $ 1.11 $ 1.10 Weighted average
common shares: Basic 99.7 98.5 99.5 98.4 Diluted 101.0 99.5
100.7 99.1
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In Millions)
September 30, December 31, 2010
2009 ASSETS Current assets: Cash and
cash equivalents $ 834.1 $ 120.1 Accounts receivable, net 280.7
222.5 Inventories, net 1,281.2 1,247.4 Deferred income taxes, net
-- 12.1 Other current assets 26.9 20.5 Total current
assets 2,422.9 1,622.6 Long-term assets 1,204.7
1,217.5 $ 3,627.6 $ 2,840.1
LIABILITIES AND STOCKHOLDERS’
EQUITY Total current liabilities $ 415.6 $ 335.7 Total
long-term liabilities 1,629.2 1,056.9 Total stockholders' equity
1,582.8 1,447.5
$ 3,627.6
$ 2,840.1
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (UNAUDITED)
(In Millions)
NINE MONTHS ENDED September 30,
September 30, 2010 2009 CASH FLOWS FROM
OPERATING ACTIVITIES: Net earnings $ 112.1 $ 108.7 Adjustments
to reconcile net earnings to net cash flows provided by operating
activities: Depreciation and amortization 37.6 36.9 Provision for
doubtful accounts 1.6 (0.2 ) Non-cash compensation 20.7 17.9 Debt
prepayment costs 2.5 -- Loss on disposal of property and equipment
6.0
2.5 Tax benefits realized from prior exercises of employee stock
options (17.2 ) -- Deferred income taxes 46.5 35.8 Changes in
operating assets and liabilities: Accounts receivable (61.3 ) 37.4
Inventories
(42.5
) (135.6 ) Other current assets and other assets 2.0 14.3 Payables,
accruals and other liabilities 63.3 (95.2 )
Net cash provided by operating activities 171.3
22.5
CASH FLOWS FROM INVESTING
ACTIVITIES: Capital expenditures (29.2 ) (21.8 ) Other, net
(0.1 ) -- Net cash used in investing
activities (29.3 ) (21.8 )
CASH FLOWS FROM
FINANCING ACTIVITIES: Proceeds from common stock issued 0.2 0.8
Tax benefits realized from prior exercises of employee stock
options 17.2 -- Proceeds from long-term debt, net of debt original
issue discount 645.6 -- Principal payments on long-term debt (75.2
) (4.5 ) Debt orgination and prepayment costs (13.7 )
-- Net cash provided by (used in) financing activities
574.1 (3.7 ) Effect of foreign exchange
rate changes on cash and cash equivalents (2.1 ) 0.7
Net increase (decrease) in cash and cash
equivalents 714.0 (2.3 )
Cash and cash equivalents,
beginning of period 120.1 168.1
Cash and cash equivalents, end of period $ 834.1
$ 165.8
BE AEROSPACE, INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
This release includes the financial measures "free cash flow"
and “free cash flow conversion ratio,” which are “non-GAAP
financial measures” as defined in Regulation G of the Securities
and Exchange Act of 1934.
The company defines "free cash flow" as net cash flow provided
by operating activities less capital expenditures. The company uses
free cash flow to provide investors with an additional perspective
on the company's cash flow provided by operating activities after
taking into account reinvestments. Free cash flow does not take
into account debt service requirements and therefore does not
reflect an amount available for discretionary purposes. The company
defines “free cash flow conversion ratio” as free cash flow
expressed as a percentage of the company’s net earnings. The
company uses the free cash flow conversion ratio to provide
investors with a measurement of its ability to convert earnings
into free cash flow.
Pursuant to the requirements of Regulation G, the company is
providing the following table which reconcile the non-GAAP
financial measures described above to the most comparable GAAP
measure.
RECONCILIATION OF NET CASH FLOW PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW (In Millions)
Three Months Ended Nine Months Ended
September 30, September 30, 2010 2010
Net cash flow provided by operating activities $ 75.0 $ 171.3 Less:
capital expenditures (12.2 ) (29.2 ) Free cash flow $
62.8 $ 142.1
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