B/E Aerospace Reports Full Year and Fourth Quarter 2014 Financial Results

WELLINGTON, Fla.—(BUSINESS WIRE)—B/E Aerospace, Inc. (“the Company”) (NASDAQ: BEAV), the world’s leading manufacturer of aircraft cabin interior products, today announced its fourth quarter and full year 2014 financial results.

2014 Highlights

Annual revenues increased 18 percent and adjusted operating earnings increased 20 percent as compared with the prior year
Annual bookings increased 21 percent as compared with the prior year
Completed spin-off of consumables management segment (“CMS”), which became KLX Inc. (“KLX”), an independent public company on December 16, 2014 (the “spin-off”)
Refinanced capital structures of both “new” B/E Aerospace and KLX
Adopted capital allocation policies specific to both “new” B/E Aerospace and KLX
Announced that the B/E Aerospace Board of Directors authorized both a $0.76 per share annual dividend beginning in 2015 and a $400 million share repurchase program consistent with the Company’s expected strong free cash flow generation
Established 2015 revenue and earnings guidance as well as financial targets for 2015-2017
Amin J. Khoury, Executive Chairman of B/E Aerospace stated, “2014 was a defining year in the history of the Company. We completed the spin-off of KLX, our consumables management segment, which was comprised of the aerospace distribution and energy services businesses.”

“As part of the spin-off, we refinanced our capital structure by redeeming $2.6 billion of debt, issuing $2.2 billion of pre-payable term debt, and putting in place a $600 million revolver, which is currently undrawn. We adopted a capital allocation policy geared toward returning capital to shareholders and paying down debt. This included initiating a $0.76 per share annual dividend in 2015 and authorizing a $400 million share repurchase program. The speed with which we completed the spin-off of KLX enables B/E Aerospace to start 2015 with a compelling value proposition based upon sustained revenue and earnings growth, strong cash generation, excellent multi-year revenue and earnings visibility, and a capital allocation approach geared toward debt reduction and return of capital.”

Mr. Khoury continued, “2014 was a solid year for B/E Aerospace. Exclusive of one-time costs, we reported strong operating results for the year. In addition, we reported record awards and orders for both our commercial aircraft and business jet segments. These bookings and awards strengthen our high quality backlog, and substantially improve revenue and earnings visibility for several years.”

This press release presents standalone financial results for the continuing operations of B/E Aerospace, which reflect the spin-off of KLX, and the restructuring of the Company’s businesses on an adjusted basis, excluding costs as defined, as if it had occurred as of the beginning of the earliest period presented as described in “Reconciliation of Non-GAAP Measures” accompanying this press release.

2014 Full Year Results

2014 revenues of $2.6 billion increased 18.0 percent as compared with the prior year.

2014 adjusted operating earnings were $466.4 million, an increase of 19.8 percent and adjusted operating margin of 17.9 percent increased 20 basis points as compared with the prior year. On a GAAP basis, operating earnings were $384.0 million.

2014 adjusted EBITDA of $571.1 million increased 21.1 percent as compared with the prior year.

2014 adjusted net earnings and adjusted net earnings per diluted share were $261.9 million and $2.51 per share, representing increases of 26.3 percent and 25.5 percent, respectively, as compared with the prior year. On a GAAP basis, net earnings and net earnings per diluted share were $57.7 million and $0.55 per share.

Record bookings for 2014 were more than $2.7 billion and increased 21 percent as compared to the prior year. Backlog as of December 31, 2014 was approximately $3.0 billion, while awarded but unbooked backlog was approximately $5.0 billion, bringing total backlog, both booked and awarded but unbooked, to approximately $8.0 billion.

2014 commercial aircraft segment (“CAS”) revenues of $2.06 billion increased 15.4 percent, adjusted operating earnings of $375.1 million increased 17.1 percent, and adjusted operating margin of 18.2 percent increased 30 basis points, as compared with the prior year. On a GAAP basis, CAS operating earnings were $356.3 million.

2014 business jet segment (“BJS”) revenues of $540.1 million increased 29.0 percent. Adjusted operating earnings were $91.3 million, an increase of 32.1 percent, and adjusted operating margin of 16.9 percent increased 40 basis points, as compared with the prior year. On a GAAP basis, BJS operating earnings were $50.0 million.

Fourth Quarter 2014 Results

Fourth quarter 2014 revenues of $637.8 million increased 10.1 percent as compared with the prior year period.

Fourth quarter 2014 adjusted operating earnings were $110.5 million, an increase of 8.4 percent and adjusted operating margin was 17.3 percent. The fourth quarter results reflect a higher level of program spending at our business jet segment to facilitate expedited development of a unique new product suite to support a major customer initiative, as previously disclosed in the Company’s third quarter earnings release. In return for agreeing to these expedited developmental efforts, the customer awarded the Company approximately $600 million of awards and orders. On a GAAP basis, operating earnings were $98.2 million.

Fourth quarter 2014 adjusted EBITDA of $138.4 million increased 11.9 percent as compared with the prior year period.

Fourth quarter 2014 adjusted net earnings and adjusted net earnings per diluted share were $59.8 million and $0.57 per share, representing increases of 8.1 percent and 7.5 percent, respectively, as compared with the prior year period, reflecting the aforementioned business jet segment costs. On a GAAP basis, net loss and net loss per diluted share were $36.0 million and $0.34 per share.

Bookings during the fourth quarter of 2014 were approximately $665 million, an increase of approximately 13 percent, as compared with the prior year period, and the book-to-bill ratio was approximately 1.04 to 1.

Fourth quarter 2014 CAS revenues were $480.4 million, adjusted operating earnings were $88.3 million, and adjusted operating margin of 18.4 percent increased 80 basis points, as compared to the prior year period. On a GAAP basis, CAS operating earnings were $84.5 million.

Fourth quarter 2014 BJS revenues were $157.4 million, adjusted operating earnings were $22.2 million, and adjusted operating margin was 14.1 percent. The results reflect higher sales for the super first class product line while operating earnings were adversely impacted by the aforementioned higher engineering and product launch costs to support expedited deliveries, associated with new business development of a unique new product suite to support a major customer initiative. On a GAAP basis, BJS operating earnings were $19.9 million.

OUTLOOK

Commenting on the Company’s outlook Mr. Khoury concluded, “We have a very attractive business with leading positions in growing markets, a very substantial backlog, strong cash flow generation and proven track record of improving operating margins. Our guidance for 2015 reflects these positive dynamics. Today we are confirming our full year 2015 financial guidance and providing more specific financial guidance for the first quarter of 2015.”

The Company’s 2015 full year financial guidance is as follows:

2015 revenues are expected to be in the range of approximately $2.8 to $2.9 billion reflecting approximately 10 percent growth over the prior year.
Operating margin is expected to be approximately 18 percent.
2015 earnings per share are expected to be approximately $3.00 per diluted share or approximately 20 percent higher than 2014 adjusted earnings per share.
2015 free cash flow conversion ratio is expected to be approximately 75 percent of net earnings.
The Company plans to initiate a $0.76 per share annual dividend in 2015, representing an approximate 25 percent payout ratio.
The Company’s first quarter 2015 financial guidance is as follows:

The Company expects first quarter 2015 revenues to increase approximately 8 percent, operating earnings to increase approximately 10 percent, and EBITDA to increase approximately 13 percent as compared with the first quarter of 2014, and earnings per diluted share of approximately $0.72, an increase of approximately 16 percent.
Adjusted net earnings, adjusted earnings per diluted share, adjusted EBITDA, adjusted operating earnings, adjusted operating margin, CAS adjusted operating earnings, CAS adjusted operating margin, BJS adjusted operating earnings, BJS adjusted operating margin, adjusted free cash flow, free cash flow conversion ratio and payout ratio are presented in this press release and are non-GAAP financial measures. Each of these measures, except free cash flow, free cash flow conversion ratio and payout ratio, exclude a portion of costs previously allocated to the consumables management segment (which are required to be reported as continuing operations and which will not recur post spin-off), loss on debt extinguishment, spin-off related, business repositioning, product rationalization, integration, and acquisition related costs (“costs as defined”) and in the case of adjusted EBITDA, non-cash compensation expense. For more information see “Reconciliation of Non-GAAP Financial Measures.”