BE Aerospace (BEAV)

Q4 2011 Earnings Call

February 01, 2012 9:00 am ET

Executives

Greg Powell - Vice President of Investor Relations

Amin J. Khoury - Co-Founder, Executive Chairman and Chief Executive Officer

W. Lieberherr - President and Chief Operating Officer

T. P. McCaffrey - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treausrer

Analysts

David E. Strauss - UBS Investment Bank, Research Division

Noah Poponak - Goldman Sachs Group Inc., Research Division

Robert Spingarn - Crédit Suisse AG, Research Division

Eric Hugel - Stephens Inc., Research Division

Troy J. Lahr - Stifel, Nicolaus & Co., Inc., Research Division

Gautam Khanna - Cowen and Company, LLC, Research Division

Myles A. Walton - Deutsche Bank AG, Research Division

J. B. Groh - D.A. Davidson & Co., Research Division

F. Carter Leake - BB&T Capital Markets, Research Division

Presentation

Operator

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Good morning. My name is Kevin Weibreit, and I will be your conference facilitator today. At this time, I'd like to welcome everyone to the B/E Aerospace Fourth Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, the conference is being recorded this day, February 1, 2012. Thank you. I'd now like to introduce B/E Aerospace's Vice President of Investor Relations, Greg Powell. Mr. Powell, you may begin your conference.

Greg Powell

Thank you, Kevin. Good morning, and thank you for joining us this morning. Today, we are here to discuss our financial results for the fourth quarter and year ended December 31, 2011. By now, you should have received a copy of the news release we issued earlier today. If you haven't received it, you'll find a copy on our website.

We will begin this morning with remarks from Amin Khoury, our founder, Chairman and Chief Executive Officer, and then we will take your questions.

For today's call, we prepared a few slides to help you follow along with our discussion. You can find our presentation on the Investor Relations page of the B/E Aerospace website at beaerospace.com.

In addition, copies of the slides will be posted on our website for you to refer to after the call. Joining us this morning for the call are Werner Lieberherr, President and Chief Operating Officer; and Tom McCaffrey, Senior Vice President and Chief Financial Officer.

I may remind you, as always, in our prepared remarks and in responses to your questions, we rely on the Safe Harbor exemptions under the various securities acts and our Safe Harbor statements in the company's filings with the Securities and Exchange Commission. We will address questions following our prepared remarks. [Operator Instructions] Now I will turn the call over to Amin Khoury.

Amin J. Khoury

Thank you, Greg, and good morning everyone. We had an extremely successful and productive 2011. I'm pleased to report that our 2011 results were the best in the company's history. It was a year in which we set new records for sales, earnings, cash flow, bookings and backlog. In addition, the company's operating margin expanded 120 basis points to 17.1% or 17.3% on an adjusted basis. Throughout the year, our businesses had solid market successes in all 3 of our segments. We generated more than $2.9 billion of bookings, an increase of 30% as compared to 2010, and representing a book-to-bill ratio of almost 1.2:1.

Importantly, in what might well had been our most significant award ever, Boeing selected B/E Aerospace as its exclusive manufacturer of modular lavatory systems for the Boeing 737 NG family of airplanes, as well as the Boeing 737 MAX. The estimated value of the award is in excess of $800 million, exclusive of retrofit orders which are expected to be substantial. With this award, the value of SFE programs which the company has won, now totals approximately $4.4 billion, and our total backlog, both booked and awarded but unbooked is almost $8 billion.

Our SFE programs, including our oxygen PSU systems, our wastewater systems, the 737 lav, the A350 galleys and a variety of thermal management chassis for control of primary and secondary power distribution in the Boeing 787 substantially increased our revenue potential on new build aircraft and provide us with excellent visibility with respect to future revenue growth.

In addition, we recently strengthened our Consumables Management segment by acquiring UFC Aerospace Corp., an innovative provider of complex supply chain management and inventory logistics solutions for $400 million. The acquisition of UFC substantially expands our capability to offer creative and differentiated supply chain solutions, value-added inventory logistics services such as 3PL and 4PL programs, and customized kitting solutions, as well as further expanding our broad consumables product offerings. This acquisition supports the company's commitment to provide the best and broadest portfolio of aerospace consumables products and services to our customers.

Given the solid outlook for our business, today, we are confirming our recently raised 2012 EPS guidance of approximately $2.75 per diluted share, an increase of 23%. And on a comparable tax rate basis, the increase is approximately 27%.

Now let's briefly discuss the current commercial aerospace market environment. Despite the fiscal challenges experienced in the U.S. and Europe, the airline industry in 2011 had a pretty good year. Passenger traffic was up approximately 6%, capacity remain in check, load factors are near all-time highs, premium international traffic remains strong and was up about 6%. 2011 global airline industry profits are expected to have been approximately $7 billion.

Boeing and Airbus are further increasing their production rates on legacy platforms A320 and 330 and the B737 and 777, and each have new models entering into service, all supported by a record backlog of approximately 8,000 aircraft.

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