B/E Aerospace, Inc. (BEAV)

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B/E Aerospace (BEAV)

Q4 2012 Earnings Call

January 31, 2013 9:00 am ET


Greg Powell - Vice President of Investor Relations

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

Werner Lieberherr - President and Chief Operating Officer

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


Howard A. Rubel - Jefferies & Company, Inc., Research Division

Robert Spingarn - Crédit Suisse AG, Research Division

David E. Strauss - UBS Investment Bank, Research Division

Noah Poponak - Goldman Sachs Group Inc., Research Division

Robert Stallard - RBC Capital Markets, LLC, Research Division

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Myles A. Walton - Deutsche Bank AG, Research Division



Good morning. My name is Jessica Morgan, and I'll be your conference facilitator today. At this time, I'd like to welcome everyone to the B/E Aerospace Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, the conference is being recorded this day, January 31, 2013. Thank you.

I would 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, Jessica. Good morning, and thank you for joining us this morning. Today, we are here to discuss our financial results for the fourth quarter and full year ended December 31, 2012.

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 have prepared a few slides to help you follow our discussion. You can find our presentation on the Investor Relations page of the B/E Aerospace website at In addition, copies of the slides will be posted on our website for you to refer to after the call.

Joining us for the call this morning are Werner Lieberherr, President and Chief Operating Officer; and Tom McCaffrey, Senior Vice President and Chief Financial Officer.

As always, in our prepared remarks and our 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 SEC. We will address questions following our prepared remarks. [Operator Instructions]

Now I will turn the call over to Mr. Amin Khoury. Amin?

Amin J. Khoury

Thank you, Greg, and good morning, everyone. We are pleased this morning to be able to discuss our excellent 2012 financial results. Our full year 2012 results were the best in the company's history. We achieved records for sales, operating earnings, operating margin, bookings and backlog, and net earnings and earnings per share, adjusted to exclude debt prepayment costs, were also records. Our full year 2012 results include revenue growth of 23%, operating earnings growth of 26% and an operating margin of 17.5%, representing a 40-basis point increase. EPS adjusted to exclude debt prepayment costs increased 26%.

Throughout the year, each of the company's segments had solid market successes, as indicated by record bookings of approximately $3.2 billion, an increase of approximately 10% as compared with 2011. And full year 2012 total bookings, including awarded but unbooked programs, were in excess of $3.3 billion. Our revenue growth continues to be driven primarily by the robust new aircraft delivery cycle. Approximately 61% of full year 2012 revenues was driven by demand for products or new-buy aircraft, reflecting both robust new aircraft deliveries and weaker aftermarket demand.

Today, we increased our 2013 EPS guidance by $0.07 per share to $3.45 per diluted share, representing an increase of approximately 22% as compared to 2012 EPS and is based upon our high-quality backlog, the expectation of strong wide-body deliveries, a modest recovery in the aftermarket and significant continuing margin expansion. Our guidance does also reflect the recent changes in tax legislation.

Before discussing details of our fourth quarter and full year 2012 financial performance, I would like to spend a few minutes discussing the current market environment. In addition, I will ask Werner to briefly review some of the important operating and marketing highlights during the year for each of our businesses, and lastly, we will review our financial guidance for 2013.

Now let's briefly discuss the current commercial aerospace market environment. In spite of high full year average fuel prices and a slowing world economy, 2012 airline profits were better than expected. Historically, when GDP growth has fallen below 2%, the airline industry had generated losses. However, during 2012, the airlines cut costs and carefully managed capacity and accordingly have generated better-than-expected financial performance. In December, IATA made a second upward revision to its financial outlook for the global airline industry. For 2012, airlines are now expected to report a profit of approximately $6.7 billion, up from the IATA October forecast of $4.1 billion and up from the March forecast of $3 billion. Overall, performance has been positively impacted by strong passenger traffic growth of approximately 5.3%, near-record load factors of about 80% and continuing yield improvement that reflects both steadily increasing load factors and a 22.7% increase in the airfare CPI over the last 3 years.

For 2013, IATA expects global airline profits to improve to $8.4 billion or 25% higher than 2012 and extremely importantly, reversing a 3-year trend of declining profits. The 2013 IATA forecast is based on 2013 global passenger traffic of around 4.5% growth and capacity growth of about 4%.

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