Jason Sandefur

B/E Aerospace said it expects to report revenue gains of 35% and operating earnings growth of 65% for the third quarter of 2008, “well in excess of consensus expectations.” The company plans to release its Q3 financial results on October 27, 2008.

“We expect to report excellent financial results for the third quarter of 2008, but the near-term outlook has significantly deteriorated,” commented CEO Amin Khoury. “The weakened global economy, the impact of the high cost of energy on consumers, high jet fuel costs, and high ticket prices are negatively impacting global passenger air travel.”

Khoury said airlines are significantly reducing capacity and “implementing tough cash conservation measures.” Likewise, the business jet industry has taken a financial hit, hurt by lower corporate profitability, high fuel costs and “difficulty arranging new aircraft financing.

These factors have led B/E Aerospace to lower its financial guidance through 2010, with 2009 revenue reaching $2.5 billion and results in 2010 topping that. More details are expected when the company reports its Q3 earnings.

But there is a bright spot in B/E’s acquisition activities. “The recently completed acquisition of HCS has significantly strengthened our strategic position in the distribution market,” Khoury commented. “We continue to believe the outlook for B/E Aerospace is substantially improved as a result of the acquisition of HCS.”

In late July B/E Aerospace completed its acquisition of Honeywell’s aerospace fastener distribution business, Honeywell Consumable Solutions, for $1.05 billion, transforming B/E Aerospace into one of the largest distributors of aerospace fasteners in the world.

The combined businesses are expected to generate more than 50% of B/E Aerospace’s operating earnings beginning in 2009, and to steadily increase the distribution segment’s percentage contribution to B/E Aerospace’s operating earnings in 2010 and 2011.

B/E Aerospace closed the deal with $1.4 billion of new debt financing.

With a combination of $901.4 million in cash and six million shares of common stock, B/E paid about twice HCS’ $524 million in revenue last year reportedly about double the aerospace and defense sector’s price-to-sales ratio of 1.1 to 1. Integrating the two units is expected to take three years. Web: beaerospace.com �2008 FastenerNews.com