BEAV

B/E Aerospace, Inc. (BEAV)

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Industry: Consumer Durables
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BE Aerospace (BEAV)

Q1 2011 Earnings Call

April 25, 2011 9:00 am ET

Executives

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

Greg Powell - Vice President of Investor Relations

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

W. Lieberherr - President and Chief Operating Officer

Analysts

J. B. Groh - D.A. Davidson & Co.

Gautam Khanna - Cowen and Company, LLC

Amit Mehrotra - Deutsche Bank AG

Eric Hugel - Stephens Inc.

Howard Rubel - Jefferies & Company, Inc.

Robert Spingarn - Crédit Suisse AG

Noah Poponak - Goldman Sachs Group Inc.

Rama Bondada - RBC Capital Markets, LLC

David Strauss - UBS Investment Bank

Peter Arment - Gleacher & Company, Inc.

Presentation

Operator

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 First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, the conference is being recorded this day, April 25, 2011. 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 result for the first quarter ended March 31, 2011. By now, you should have received a copy of the news release we issued earlier this morning. If you haven't received it, a copy is available 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've prepared a few slides to help you follow along our discussion. You can find the presentation on our Investor Relations page 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 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. At that time, the operator will provide instructions. [Operator Instructions]

Now I will turn the call over to Mr. Amin Khoury, our Chairman and CEO.

Amin Khoury

Thank you, Greg, and good morning, everyone. We are very pleased with the results, which we announced earlier this morning. Our financial results were well above earlier expectations. Essentially, all of the important financial metrics, which we reported this morning, were at near-record levels, which is quite a feat, particularly given the difficult global conditions encountered during the period.

Our first quarter results included revenues up 30%, record quarterly bookings up 48%, operating earnings up 39% and earnings per share up 44%. The record bookings performance was driven by strong orders for a broad range of aircraft interior equipment for both new-buy and aftermarket retrofit program and a double-digit growth rate in consumables orders. 30% revenue growth was driven by 35% revenue growth for the Commercial Aircraft segment, 24% growth for the Consumables Management segment. The 120-basis-point expansion in operating margin was driven by significant margin improvement in both the Commercial Aircraft and Business Jet segments and the better-than-expected margin performance for our Consumables Management segment, which reported only a 50 basis points decline in spite of the margin drag from the Satair acquisition.

Based on our record backlog, both booked and awarded but unbooked, of approximately $6 billion, our expectation for continued growth in passenger travel and attendant increases in capacity and on our exportation of high levels of wide-body aircraft deliveries in 2011, today, we raised our full year 2011 guidance to approximately $2 per diluted share.

Today, I'd like to spend a few minutes discussing the current market environment. In addition, we'll provide an update on the recent Hamburg, Germany Aircraft Interiors Exposition, which was our most successful expo ever. And we will discuss our results for the quarter, and lastly, we will review our current financial guidance for 2011.

Now let's briefly discuss the current market environment. The economic recovery is gaining momentum. The IMS recently updated its world economic outlook and is still forecasting a healthy 2011 global GDP growth rate and for GDP growth to remain healthy in 2012, despite the tragic Japanese earthquakes and upward pressures on commodity prices.

February year-to-date global airline revenue growth approximately 5.5% year-to-date. International traffic was up 7.3% for the first 2 months of the year. And importantly, premium international traffic also continues to rise and was up 7.9% for the first 2 months of the year.

The rising price of oil is something that our customers are watching very closely. And to date, the airlines have responded rationally by carefully managing capacity and passing on cost increases in an orderly fashion. U.S. airlines have successfully implemented 8 fare increases so far this year, more or less offsetting the higher cost of fuel. Clearly, however, the environment has changed; unrest in the Middle East, tragedies in Japan and rising oil prices are problematic. Nevertheless, we remain optimistic because the airlines are well prepared, have managed capacity growth and successfully raised fares and fees. And importantly, higher fuel costs does drive demand for more efficient new aircraft. Finally, global traffic did increase by a healthy 4.5% in February with premium traffic much stronger.

Read the rest of this transcript for free on seekingalpha.com