B/E AEROSPACE Investor Presentation Creating Two Industry-Leading Companies | ![]() |
B/E Aerospace Investor Conference Call Amin Khoury Founder, Chairman and Co-CEO Tom McCaffrey Senior Vice President and CFO B/E Aerospace Management Team Strategic Rationale Overview of Manufacturing Co. Overview of Services Co. Transaction Overview Questions & Answers | ![]() |
Strategic Rationale | ![]() |
Compelling Strategic Rationale Introducing Two Separate Industry-Leading Companies - one Focused on Aircraft Cabin Interior Equipment - Design, Development, Manufacturing, Certification and Direct Sales on a Global Basis ("Manufacturing Co.") and the other, a Distribution, Logistics & Technical Services Company Serving the Aerospace and Energy Services Markets ("Services Co.") B/E Aerospace to separate into two distinct market leading companies, in a tax-free separation, each with the potential to enter into significant combination transactions in the future Response to diverging business dynamics The Management teams and Boards of Directors of each business, upon separation, will determine the optimal capital structure, free cash flow allocation policy, growth strategy, compensation system and performance measurement metrics Reflects continued focus on addressing the distinct needs of each of our businesses and optimizing long-term shareholder value creation This separation is a continuation of our review of strategic alternatives, and we will continue to aggressively pursue strategic alternatives to maximize shareholder value | ![]() |
Overview of Manufacturing Co. | ![]() |
Manufacturing Co. - Overview Consists of Commercial Aircraft and Business Jet Segments Largest global manufacturer of a broad portfolio of aircraft cabin interior equipment for commercial airliners and business jets Customers include airlines, leasing companies, commercial and business jet OEMs and aircraft completion centers 60% OEM, 40% aftermarket Industry's largest global product support, engineering and sales & manufacturing organizations 2013 Segment Revenues 19% 81% CAS Business Jet $2.2 billion 2013 Revenues by Geography 39% 36% 25% US Europe Other | ![]() |
Manufacturing Co. Investment Highlights Global Market Leadership World's leading manufacturer of aircraft cabin interior products for both commercial airliners and business jets Leading global market shares for all major product categories Largest industry installed base drives retrofit, refurbishment and spares revenues Intimate Customer Relationships Intimate relationship with senior leadership at leading airlines, leasing companies and major OEMs Compelling Growth Prospects Favorable industry dynamics including strong traffic growth, record airline profitability, load factors and yields driving record OEM aircraft deliveries and backlog Record backlog, leveraged to wide body aircraft growth (~12% CAGR over next 4 years) and ~$5bn of awarded but unbooked supplier furnished equipment ("SFE") programs Attractive Financial Profile Strong revenue growth and margin expansion | ![]() |
Commercial Aircraft Segment Leading global manufacturer of aircraft interior equipment Seating Products First, business class and lie-flat seats/beds Main cabin and premium economy Food and Beverage Preparation and Storage Equipment Coffee and beverage makers, water boilers Ovens - steam, convection, high heat, warming, microwave Wine and beverage chillers, refrigerators/freezers, galley air chilling systems Cabin Lighting Systems Full spectrum digital LED lighting Mood lighting, reading lights and accent lighting Oxygen Systems Storage, distribution, delivery Passenger and crew Interior Structures Modular Lavatory Systems Galley Systems Crew rest compartments Engineering Services Aircraft cabin design/modification/ integration, power management, program management and certification | ![]() |
Business Jet Segment Leading global manufacturer of business jet aircraft interior equipment Executive Aircraft Seating Civilian Helicopter Seating VIP Aircraft Seating Cabin Lighting Systems Full spectrum digital LED lighting Mood lighting, reading lights and accent lighting Super First Class Cabins Lay flat comfort beds Dining for two Large screen entertainment systems Personal refrigerators Multiple lighting systems Engineering Certification & Power Management Services | ![]() |
Record Bookings and Backlog Support Future Growth Backlog ~$3.0 billion as of March 31, 2014 (Excludes ~$5.0 billion of awarded, but unbooked SFE programs) Record Q1 2014 bookings ~$766 million, up almost ~45%, and reflect book-to-bill of 1.2 to 1 Q1 2014 most successful awards quarter ever achieved Backlog is Well Disbursed Geographically Europe 29% North America 27% Asia, Pacific Rim & Middle East 44% Total Manufacturing Co. Backlog ($ in billions) ~$7.3 ~$4.5 ~$2.8 ~$8.0 ~$5.0 ~$3.0 March 31, 2013 March 31, 2014 Booked Backlog Unbooked Backlog Total backlog, both booked and awarded but unbooked, ~$8.0 BN | ![]() |
Recent Acquisitions in Business Jet Segment EMTEQ EMTEQ is a leading global manufacturer of aircraft interior and exterior lighting systems, as well as aircraft cabin management and power systems Business jets Commercial airliner retrofits VIP completions Fischer Fischer is the leading manufacturer and supplier of seating products for civilian helicopters, including crashworthy civilian crew and passenger seats to helicopter OEMs | ![]() |
Manufacturing Co. Historical Growth & Margin Profile Years Ended December 31, Revenue ($ in millions) CAGR: 19.0% Operating Earnings ($ in millions) CAGR: 26.0% $1,556 $1,914 $2,203 2011 2012 2013 $245 $323 $389 15.7% 16.9% 17.7% 2011 2012 2013 2013 Results Revenues of $2,203 million with 2-year CAGR of 19.0% Operating earnings of $389 million with 2-year CAGR of 26.0% Operating margin of 17.7% expanded by 200 basis points from 2011 | ![]() |
Manufacturing Co. Future Growth and Profit Drivers Commercial Aircraft Segment Industry Drivers Increasing global air travel expected to continue to drive demand Record airline profitability, load factors and yields driving record OEM aircraft deliveries and backlog Company Specific Drivers Record backlog from strong bookings driven by product innovations and market share gains SFE revenues growing significantly with ~$5bn of awarded but unbooked programs Leveraged to increasing demand for wide-body aircraft with expected ~12% CAGR over next 4 years Continued margin expansion Quality backlog Supply chain, LCC sourcing Operational excellence / LEAN Business Jet Segment Super first class market share leader Strong positions globally, including Asia, Middle East, and Europe Ongoing bespoke new product development, a major differentiator Continued market share gains Long-term revenues secured by major program wins and backlog 2013 business jet deliveries turned positive for first time since 2008 2014 inventories at lowest level in five years Growing VIP completions business Continued margin expansion Quality backlog Supply chain, LCC sourcing Operational excellence / LEAN | ![]() |
Overview of Services Co. | ![]() |
Services Co. - Overview Leading provider of aerospace fasteners, consumables and logistics services to the airline and aerospace industries Growing provider of technical & logistics services and associated rental equipment for remote oil & gas drilling sites 2013 Segment Revenues 2% 98% Distribution, Logistics & Services Technical Services & Associated Rental Equipment $1.3 billion 2013 Revenue by Geography 15% 27% 58% US Europe Other 2013 PF Segment Revenues(1) 20% 80% Distribution, Logistics & Services Technical Services & Associated Rental Equipment $1.6 billion 2013 PF Revenue by Geography(1) 12% 22% 66% US Europe Other (1) Pro Forma for all energy acquisitions made since January 2013 as if each acquisition was made on Jan 1, 2013. | ![]() |
Services Co. Investment Highlights Global Market Leader Leading provider of aerospace fasteners, consumables and logistics services to the airline and aerospace industries Unmatched Depth & Breadth of Products & Services Broadest and deepest product portfolio in the world with over 1,000,000 SKU's valued over $1 billion Wide array of value-add services that aid in developing and maintaining customer relationships Premier Technology & Logistics Platform Unrivaled management information systems allowing for optimal execution of customer orders Growing market position in the provision of technical & logistics services and associated rental equipment to the oilfield services industry Long-Standing Customer Partnerships Diverse customer base that includes all major commercial, business jet and military OEMs, aftermarket MROs and airlines Partnerships with key E&P companies, which have a high demand for Service Co.'s oilfield services and associated rental equipment Strong Supplier Relationships Authorized distributor for more than 200 manufacturers including every major fastener manufacturer and represents products for more than 3,000 manufacturers Balanced, Global Footprint Balanced geographical footprint with sales, marketing, customer service and program management specialists in 60 countries globally | ![]() |
Creation of Services Co. Selected Acquisitions and Historical Revenue Growth Since 2001, B/E has acquired a number of businesses within Services Co. for a total of ~$2.8 billion Since 2004, Services Co. revenue has grown at 27% CAGR Energy Acquisitions PF: ~$1,600(1) HCS (Honeywell) (2008) (2001) $37 $97 $104 $144 $174 $252 $387 $697 $798 $773 $944 $1,171 $1,280 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Note: Dollars in millions. Pro Forma for all energy acquisitions made since January 2013 as if each acquisition was made on Jan 1, 2013. | ![]() |
Aerospace Consumables - Key Product Families Fasteners Adhesive, clips, fittings, nuts, screws, rivets, washers Bearings Airframe control, ball, ceramic, roller, thrust Honeywell Proprietary Consumables Supporting: APUs, environmental systems, fuel controls, hydraulic controls, engines, wheels and brakes Hardware Latches, plastic components, struts Chemicals, hazardous and non-hazardous Electrical and Electro-Mechanical Components Lighting Tooling Seals and O-Rings | ![]() |
Premier Technology Platform Services Co. has invested $100+ million in proprietary IT systems to create an unparalleled technology platform for the Aerospace consumables business Planning and Forecasting Includes Planning Tools customized to support both OEM and aftermarket demand planning for customers Customized System / Database Real-time system across all Services Co. locations to support Warehouse Management, JIT services and Kitting Supplier and Customer Portals Supplier and Customer portals for both to view reports, performance and other important data Electronic Data Exchange (EDI) EDI platform and team links Services Co. systems to customer systems E-Commerce New platform includes industry leading part attribute search features Support of Value-Added Services JIT, 3PL, Kitting, as well as products not in standard packages (part attributions, revision levels, etc.) required to support various customer systems | ![]() |
Energy Technical Services Key Offerings Technical & logistics services and associated rental equipment for remote oil and gas drilling sites Completions Mechanical wireline / slickline; flow control - nipples, valves, plugs; sales and placements of composite bridge, ball-drop, and flow-thru-plugs; packer rentals and sales Machine Shop High tech CNC lathe machines; recut and retreading for tubulars and tool joints; crossover, saver, and lift subs; custom designing and machining Fishing Services and Tools Jars, mills, over shots, taps, magnets, boot baskets, casing patches, cutters, impression blocks, clamps, safety joints Pipe Recovery Solve stuck pipe issues in open hole and cased hole situations; utilize chemical cutters, jet cutter, and split shots BOP Shop Restoration and testing of BOP's and other pressure control equipment, values, choke manifolds, and closing units Drilling and Completion Rental Tools and Equipment | ![]() |
Services Co. Historical Growth & Margin Profile Years Ended December 31, Revenue ($ in millions) CAGR: 16.5% $944 $1,171 $1,280 2011 2012 2013 Operating Earnings(1) ($ in millions) CAGR: 18.5% $188 $234 $264 19.9% 20.0% 20.6% 2011 2012 2013 2013 Results Revenues of $1,280 million with 2-year CAGR of 16.5% Operating earnings(1) of $264 million with 2-year CAGR of 18.5% Operating margin(1) of 20.6% expanded 70 basis points from 2011 (1) Operating Earnings and Operating Margin both adjusted to exclude acquisition, integration and transition (AIT) costs of $24.2 million in 2013, $17.2 million in 2012, and $4.5 million in 2011. | ![]() |
Services Co. Growth & Profit Drivers Aerospace Consumables Distribution, Logistics & Services Long-term global air travel growth of ~5% per year Increasing world-wide aircraft delivery rates and installed base Expanding key positions on important customer platforms Trend towards outsourcing more key elements of the supply chain through complex logistics solutions Customer demand for same day service Opportunities to enhance growth through strategic acquisitions Continued margin expansion through successful acquisition integration, cost reductions, footprint rationalization, product line expansion and operating leverage Energy Technical Services and Associated Rental Equipment ~$15bn market size: 2 to 3x larger and growing at twice the rate of aerospace consumables and logistics services market Industry double-digit growth rate Shale gas and oil discoveries and new methods of extraction have uncovered vast untapped oil and gas reserves: 22 states with current drilling activity Demand for technical and logistics services and associated rental equipment throughout the well life cycle E&P Companies preference to rent vs. own Strong margins and return on invested capital Numerous future acquisition opportunities in highly fragmented market | ![]() |
Transaction Overview | ![]() |
Transaction Overview Transaction Structure Tax-free pro rata distribution to B/E Aerospace shareholders of new Services Co. publicly-traded stock Timing Form-10 filing expected August / September 2014 Transaction expected to be completed Q1 2015 Financial Implications Both companies expected to be well capitalized Transaction expenses excluded from 2014 financial guidance which we today raised to $4.35 per share Closing Conditions Subject to customary closing conditions, including receipt of an opinion of counsel as to the tax-free nature of the transaction Effectiveness of Form-10 registration statement | ![]() |
Free Cash Flow Allocation Policies Allocating Free Cash Flow Through Organic Investment M&A Cash Distributions to Shareholders Manufacturing Co. Capital structure consistent with other commercial aerospace manufacturers Growth opportunities weighted towards organic investment versus M&A Services Co. Capital structure will provide flexibility for continued organic growth as well as stock and/or cash acquisitions No planned material acquisitions for 2H 2014 | ![]() |
B/E Aerospace Continues to Create Value Total Shareholder Return $120 $100 $80 $60 $40 $20 $0 Period B/E S&P500 B/E Relative Performance(1) 10 Year 1,441% 114% +1,327% 5 Year 487% 131% +356% 1 Year 53% 23% +30% +1,441% Global Financial Crisis Jun-04 jun-06 Jun-08 Jun-10 Jun-12 Jun-14 B/E expects to enter the next phase of business optimization and value creation, beginning with the separation announced today Source: FactSet. Market data as of June 6, 2014. (1) Excess / Deficit versus the S&P 500. | ![]() |
Questions & Answers | ![]() |