BEAV

B/E Aerospace, Inc. (BEAV)

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BE Aerospace (BEAV)

Q2 2011 Earnings Call

July 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

Analysts

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

Gautam Khanna - Cowen and Company, LLC

Eric Hugel - Stephens Inc.

Howard Rubel - Jefferies & Company, Inc.

F. Leake - BB&T Capital Markets

Richard Safran - Buckingham Research Group, Inc.

Robert Spingarn - Crédit Suisse AG

Noah Poponak - Goldman Sachs Group Inc.

Myles Walton - Deutsche Bank AG

Troy Lahr - Stifel, Nicolaus & Co., Inc.

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 Second Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded this day, July 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 results for the second quarter ended June 30, 2011. By now, you should have received a copy of the news release we issued earlier today. If you haven't received it, you will 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've prepared a few slides to help you follow our discussion. You can find our presentation on the Investor Relations page at the B/E Aerospace website at www.beaerospace.com. 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 CFO. 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, Jessica will provide instructions. Please limit your questions to no more than 2 at a time so that we can get to everyone. And now I will turn the call over to Amin Khoury.

Amin Khoury

Thank you, Greg, and good morning, everyone. We are very pleased to have been able to announce results, which were above earlier expectations. Our second quarter results included record quarterly bookings up 45%, representing a book-to-bill ratio of 1.3:1. In addition, revenues were up 26%, operating earnings were up 35%, earnings per share were up 46% and the free cash flow conversion ratio was in excess of 100% of net earnings.

The record bookings performance was driven by strong orders for a broad range of aircraft interior equipment for both new-buy and aftermarket programs. In fact, aftermarket programs accounted for almost half of the orders in the quarter. The 120 basis point expansion in operating margin was driven by margin improvements in each of our 3 businesses. Based on our record backlog, both booked and awarded but unbooked, of approximately $6.5 billion, our expectations for continued growth in passenger travel and attendant increase in capacity, and our expectation of significantly higher levels of wide-body aircraft deliveries, we expect the second half of 2011 to be stronger than the first half of 2011. And accordingly, we've raised our full year 2011 guidance to approximately $2.10 per diluted share.

Our current EPS guidance is now $0.20 per share or 10% higher than our original guidance of $1.90 per share.

I'd like to spend a few minutes discussing the current market environment, then we'll discuss our results for the quarter, and we'll complete our prepared remarks with a review of our financial guidance for 2011.

Let's briefly discuss the current market environment. The global economy and global passenger traffic continue to recover, notwithstanding the upward pressure on oil prices. Global airlines passenger traffic was up in excess of 8% quarter-to-date through May 2011 as compared with the prior year period. International passenger traffic was up 8.4% year-to-date. In addition, premium international travel is quite strong. May premium travel was up 9.5% and is now up 9% year-to-date through May.

Our airline customers have been carefully managing capacity and passing on cost increases in an orderly fashion. As a result, I ought to expect the global airline industry to turn in a solidly profitable year with approximately $4 billion of profits on a global basis.

Let's turn to Slide 2 and discuss our second quarter financial results. I'm pleased to report that all 3 of our operating segments performed well during the quarter.

The bar chart on Slide 2 reflects our second quarter 2011 financial performance compared to the second quarter of 2010. Revenues increased 26% to $609 million. Operating earnings of $107 million increased 35%. Operating margin expanded 120 basis points to 17.5%. Earnings per share of $0.54 increased 46%. Free cash flow at $59 million, represents the free cash flow conversion ratio of 108% of net earnings.

Let's review Slide 3, which summarizes our current bookings and backlog status. Second quarter bookings of approximately $800 million were a record for any quarter and were approximately 45% higher than the same period of the prior year. The book-to-bill ratio was 1.3:1 for the quarter.

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