OREANDA-NEWS. B/E Aerospace, Inc. (the “Company”) (NASDAQ: BEAV), the world’s leading manufacturer of aircraft cabin interior products, announced its fourth quarter and full year 2015 financial results, increased its 2016 guidance and reaffirmed its 2017 outlook. The following full year 2015 highlights are presented exclusive of the third quarter charge associated with the Company’s cost reduction program. For comparability purposes, the fourth quarter and full year 2014 results are presented on an adjusted basis as detailed below.

FOURTH QUARTER 2015 HIGHLIGHTS

  • Revenues increased 3 percent (4 percent constant currency) as compared with the prior year period
  • Operating earnings increased 12 percent and operating margin of 18.8 percent expanded 150 basis points as compared with the prior year period
  • Net earnings per diluted share of $0.81 increased 33 percent as compared with the prior year period
  • Free cash flow conversion ratio was approximately 132 percent
  • During the fourth quarter the Company repurchased $90 million of its shares, bringing full year 2015 repurchases to $150 million

2015 FULL YEAR HIGHLIGHTS

  • Revenues increased 5 percent (6 percent constant currency) as compared with the prior year
  • Operating earnings increased 8 percent and record operating margin of 18.4 percent expanded 50 basis points as compared with the prior year
  • Net earnings per diluted share of $3.03 increased 21 percent as compared with the prior year
  • Free cash flow conversion ratio was approximately 76 percent of net earnings
  • During the year the Company repurchased $150 million of its shares, paid $79 million in dividends and repaid $136 million of its outstanding term loan

For comparability purposes, except as otherwise noted, this press release presents 2015 results excluding the Company’s third quarter charge associated with its cost reduction program. Unless otherwise noted, this press release presents 2014 results, excluding discontinued operations, representing the consumables management segment (“CMS”) which was spun-off in December 2014 (the “spin-off”). 2014 results are also adjusted, unless otherwise noted, to exclude 2014 debt prepayment, spin-off related, business repositioning, expedited development, and acquisition related costs, and certain 2014 expenses previously allocated to CMS, and to present 2014 income tax expense based on the fourth quarter and full year 2015 effective tax rates for comparability purposes. These items are described in “Reconciliation of Non-GAAP Financial Measures.”

“I am pleased to report that 2015 earnings per share of $3.03 exceeded our guidance of $3.00 per share and represents a 21 percent increase over the prior year. In addition, we reported a record operating margin of 18.4 percent, and generated $240 million of free cash flow, reflecting a 76 percent free cash flow conversion ratio. These results were achieved in spite of significant macro headwinds that we confronted over the course of the year. These included adverse foreign exchange impacts and the collapse in oil prices which negatively impacted our business with Russia and other emerging countries, as well as our business jet and helicopter OEM customers. As a result of these headwinds the Company’s revenues fell short of our expectations. However, our operating margins, earnings per share and free cash flow generation exceeded our initial guidance as a result of aggressive cost reductions and disciplined expense management throughout the year. Through it all we were able to deliver strong financial results in 2015, and position the Company for profitable growth in 2016, 2017 and beyond,” said Amin J. Khoury, Executive Chairman of B/E Aerospace.

“In addition, 2015 was another strong year for awards and bookings for both our commercial aircraft and business jet segments. These awards and bookings strengthen our backlog and lay the foundation for sustained revenue and operating earnings growth, and strong free cash flow over the next several years.”

“Given our expectation of continued strong free cash flow generation, as well as the attractive value that our shares represent, we accelerated our share repurchase program by repurchasing $90 million of our shares in the fourth quarter, bringing our full year share repurchases to $150 million. Therefore, we are now targeting approximately $150 million of additional share repurchases in 2016 and more than $200 million in 2017. In total, we expect to repurchase more than $500 million of our shares during the 2015 to 2017 three-year period. We remain comfortable with our current level of debt given our expectation of continued strong free cash flow generation. We have set a long?term leverage ratio target of approximately 2.5 times net debt to EBITDA which we expect to achieve primarily as a result of EBITDA growth, rather than further debt repayment. Our free cash flow conversion ratio is expected to move toward 100 percent over the next couple of years with our capital allocation near term priority on share repurchases. In addition, we expect to increase our dividend by approximately 10 percent to approximately $0.84 per share in 2016,” Mr. Khoury stated.

FOURTH QUARTER 2015 CONSOLIDATED RESULTS

Fourth quarter 2015 revenues of $659.2 million increased 3.4 percent (4.0 percent constant currency) as compared with the prior year period.

Operating earnings of $124.1 million increased 12.3 percent and operating margin was 18.8 percent, an increase of 150 basis points. Net earnings and net earnings per diluted share were $83.4 million and $0.81 per share, representing increases of 31.8 percent and 32.8 percent, respectively, as compared with the prior year period.

During the fourth quarter the Company won programs valued at approximately $1.1 billion which included both buyer furnished equipment (“BFE”) and supplier furnished equipment (“SFE”) wins. The SFE wins included awards to supply passenger oxygen systems and toilets for the Boeing 777X as well as an extension of the Company’s exclusive agreement to supply LED lighting systems for the Boeing 737 MAX.

Bookings during the fourth quarter of 2015 were approximately $690 million and the book-to-bill ratio was approximately 1.05 to 1. Record bookings for full year 2015 were approximately $3.0 billion, an increase of approximately 10 percent as compared to the prior year, representing a book-to-bill ratio of approximately 1.1 to 1.

Backlog as of December 31, 2015 was approximately $3.2 billion, while awarded but unbooked backlog was approximately $5.6 billion which includes the super first class award which was announced during the fourth quarter as well as the recent supplier furnished equipment awards. This represents an increase of approximately $600 million, as compared with the end of the third quarter 2015, and brings total backlog, both booked and awarded but unbooked, to approximately $8.8 billion.

FOURTH QUARTER 2015 SEGMENT RESULTS

The following is a tabular summary and commentary of revenues and operating earnings by segment for the fourth quarter ended December 31, 2015 and 2014:

REVENUES
($ in millions)
Segment   2015   2014   % Change  
Commercial aircraft   $ 525.1   $ 480.4   9.3 %
Business jet     134.1     157.4   -14.8 %
Total   $ 659.2   $ 637.8   3.4 %
             
OPERATING EARNINGS
($ in millions)
Segment   2015   2014   % Change  
Commercial aircraft   $ 102.5   $ 88.3   16.1 %
Business jet     21.6     22.2   -2.7 %
Total   $ 124.1   $ 110.5   12.3 %

Fourth quarter 2015 commercial aircraft segment (“CAS”) revenues of $525.1 million increased 9.3 percent (9.9 percent constant currency). Revenues increased primarily due to higher volumes of buyer furnished equipment. Operating earnings of $102.5 million increased 16.1 percent and operating margin of 19.5 percent increased 110 basis points as compared with the prior year period as a result of a favorable mix of products and aggressive cost reduction actions.

Fourth quarter 2015 business jet segment (“BJS”) revenues of $134.1 million decreased 14.8 percent. Revenues declined primarily as a result of lower sales of super first class seating products, reflecting the timing of the rollout of products from our backlog. Operating earnings were $21.6 million and operating margin of 16.1 percent increased 200 basis points as a result of a favorable mix of products and lower operating expenses as compared with the prior year period.

2015 FULL YEAR CONSOLIDATED RESULTS

For the year ended December 31, 2015, revenues of $2.73 billion increased 5.0 percent (5.8 percent constant currency). Operating earnings of $501.3 million increased 7.5 percent and operating margin of 18.4 percent expanded 50 basis points. Net earnings and net earnings per diluted share were $316.4 million and $3.03 per share, representing increases of 20.8 percent and 20.7 percent, respectively, as compared with the prior year. On a GAAP basis, operating earnings were $452.3 million while net earnings and net earnings per diluted share were $285.7 million and $2.73 per share.

2015 net cash flow from operations, exclusive of the third quarter charge and associated cash payments, was $320.2 million and capital expenditures were $80.5 million resulting in a free cash flow conversion ratio of 75.8 percent of net earnings.

2015 SEGMENT RESULTS

The following is a tabular summary and commentary of revenues and operating earnings by segment for the year ended December 31, 2015 and 2014:

REVENUES
($ in millions)
Segment   2015   2014   % Change  
Commercial aircraft   $ 2,098.3   $ 2,058.9   1.9 %
Business jet     631.3     540.1   16.9 %
Total   $ 2,729.6   $ 2,599.0   5.0 %
             
OPERATING EARNINGS
($ in millions)
Segment   2015   2014   % Change  
Commercial aircraft   $ 396.8   $ 375.1   5.8 %
Business jet     104.5     91.3   14.5 %
Total   $ 501.3   $ 466.4   7.5 %

For the year ended December 31, 2015, CAS revenues of $2.1 billion increased 1.9 percent (2.8 percent constant currency). Operating earnings of $396.8 million increased 5.8 percent and operating margin of 18.9 percent expanded 70 basis points. On a GAAP basis, operating earnings were $367.5 million.

For the year ended December 31, 2015, BJS revenues of $631.3 million increased 16.9 percent. Operating earnings increased 14.5 percent to $104.5 million and operating margin was 16.6 percent. On a GAAP basis, operating earnings were $84.8 million.

OUTLOOK

The Company reaffirmed and further clarified 2016 financial guidance in the context of reported results for 2015, and increased earnings per share guidance as follows:

  • 2016 revenues are expected to be approximately 3 percent higher than 2015 revenues,
  • Operating margin is expected to be in excess of 18 percent,
  • Interest expense is expected to be approximately $92 million,
  • 2016 net earnings per share are expected to increase by approximately 6 percent to approximately $3.20 per diluted share, and
  • 2016 free cash flow conversion ratio is expected to be approximately 75 percent of net earnings.

Mr. Khoury concluded, “Our awards and bookings over the past 3 years have been extraordinarily strong and, as we have previously discussed, a major portion of revenues from these awards is expected to be realized primarily in 2017, 2018, and beyond. The quality of our backlog underlies our confidence in our 2017 expectation of revenue growth of approximately 7.5 percent, and based upon continued disciplined cost management and execution of our capital allocation plan, we expect 2017 earnings per share growth in the low to mid-teens as compared with 2016. As we complete the development phase of our supplier furnished programs and ship higher volumes of equipment, we expect our free cash flow conversion ratio to increase to approximately 100 percent in 2017. In addition, our backlog gives us excellent visibility into solid revenue growth beyond 2017.”