B/E Aerospace's Fourth Quarter and Full Year Earnings Exceed Expectations.Business Editors WELLINGTON Wellington, city (1996 pop. 157,647; urban agglomeration 334,051), capital of New Zealand, extreme S North Island, on Port Nicholson, an inlet of Cook Strait. , Fla.--(BUSINESS WIRE)--April 3, 2001 Company Confirms Outlook for Strong EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. Growth This Year, Next Year B/E B/E abbr. 1. bill of entry 2. bill of exchange Aerospace, Inc. (Nasdaq:BEAV BEAV Binary Editor and Viewer ) today announced financial results for the fiscal 2001 fourth quarter and full year which ended on February February: see month. 24, 2001. HIGHLIGHTS -- conversion of passenger aircraft to freighter use, -- continuous improvement of B/E's manufacturing capabilities company-wide, and -- capitalizing on trends towards consolidation of the component manufacturing supplier base and the outsourcing of manufacturing and assembly by the airframe manufacturers. "Fiscal 2001 was a pivotal year for B/E Aerospace," said Mr. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. J. Khoury Khoury (occasionally Khouri or Coury; Arabic: خوري) is an Arabic surname that is unique to Arab Christians. The term Khoury means "priest" in Arabic. , Vice Chairman and Chief Executive Officer. "About a year ago, we stated that we expected strong earnings growth in fiscal 2001, driven by a turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. in our seating business and sequential quarterly expansion in our gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. . We indicated that the second half of the year would be substantially stronger than the first half. Those are in fact the results which we have delivered for fiscal 2001. "As our financial performance indicates, fiscal 2001 was a year of many accomplishments. Our shareholders benefited as investors recognized these accomplishments, with B/E's common stock price increasing over 100 percent since the end of the prior fiscal year. We are grateful to our employees for their efforts this past year." FOURTH QUARTER RESULTS B/E earned $10.6 million or $0.40 per share (diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ) for the fourth quarter of fiscal 2001, excluding $5.8 million of previously announced costs related to recently completed acquisitions and $2.5 million of costs attributable to the termination of B/E subsidiary Advanced Thermal Sciences' initial public offering. Including such costs, net earnings were $3.2 million and $0.12 per share (diluted) in the quarter just ended. For the fourth quarter of the prior year, fiscal 2000, B/E reported a net loss of ($9.9) million, or ($0.40) per share. The loss was due to costs associated with manufacturing problems in the company's seating business. Excluding the seating-related costs, the company earned $9.2 million and $0.37 per share in the fourth quarter a year ago. As expected, sales were lower in the fourth quarter of fiscal 2001 compared to the fourth quarter a year ago. The decrease in revenues is consistent with the year-over-year reduction in new aircraft deliveries, last year's problems in the seating business and last year's decision to exit certain products and services. SEQUENTIAL GROWTH IN MARGINS, EARNINGS Fourth quarter earnings per share, excluding the previously mentioned costs, were the highest posted in any quarter during fiscal 2001, increasing 33% compared to the third quarter. The strong fourth quarter results were largely due to a better gross margin and lower operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. relative to sales.
EARNINGS GROSS OPERATING
PER SHARE PROFIT MARGIN PROFIT MARGIN
Fiscal 2001:
Fourth quarter $ 0.40(a) 38.6 % 15.1 %(a)
Third quarter $ 0.30 38.0 % 13.4 %
Second quarter $ 0.19 37.0 % 11.4 %
First quarter $ 0.18 36.4 % 11.0 %
(a) excludes acquisition-related expenses and write-off of
subsidiary's IPO costs
"Two principal factors drove sequential growth in earnings and margins in fiscal 2001: the turnaround in our seating business, and the success of our continuous improvement and lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. initiatives," Mr. Khoury said. "Aided by information technology investments, these initiatives have substantially improved both quality and productivity. Our gross and operating profit margins Operating profit margin The ratio of operating profit to net sales. have improved as a result." RECENT ACQUISITIONS AND SUBSIDIARY IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. As announced in March 2001, B/E recently completed the acquisition of three companies which manufacture precision-machined components and assemblies for the aerospace industry. The company also recently acquired an additional precision machining business, Maynard Precision, Inc., rounding out B/E's capabilities in this important area. B/E acquired Maynard for $12.1 million, essentially all of which was paid in B/E stock. Like the other precision machining acquisitions, Maynard Precision has a long history of providing high quality parts to the aerospace industry. Maynard currently holds The Boeing Company's prestigious Bronze supplier rating Supplier rating (or vendor rating as it sometimes referred) is a business term used to describe the process of measuring an organizations supplier capabilities and performance. Supplier rating often forms part of an organizations supplier relationship management program. . Less than four percent of Boeing's suppliers are currently rated Bronze or higher. The four acquisitions were strategically focused on opportunities involving: -- conversion of passenger aircraft to freighter use, -- continuous improvement of B/E's manufacturing capabilities company-wide, and -- capitalizing on trends towards consolidation of the component manufacturing supplier base and the outsourcing of manufacturing and assembly by the airframe manufacturers. For financial reporting purposes, B/E has accounted for the acquisitions as having been completed as of February 24, 2001 and while the operating results and cash flows of the acquired companies are not included in B/E's fiscal 2001 results, their assets and liabilities, the shares B/E issued and the cash B/E paid are all reflected in the year-end balance sheet. In connection with the four acquisitions, the company recorded $5.8 million of transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). and expenses during the fourth quarter of fiscal 2001. With the dramatic decline in semiconductor equipment stock prices since last fall, B/E decided not to proceed with the initial public offering of its Advanced Thermal Sciences Thermal science is the combined study of thermodynamics, fluid mechanics, and heat transfer. This umbrella-subject is typically designed for non-engineering students and functions to provide a general introduction to each of three core heat-related subjects. subsidiary at this time. Consequently, $2.5 million of costs associated with the offering were written off during the fourth quarter. B/E may re-initiate the IPO when market conditions are more favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. for semiconductor capital equipment suppliers. 12-MONTH REVIEW B/E earned $27.7 million, or $1.07 per share (diluted), for the full fiscal year 2001, excluding the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. acquisition and IPO costs. Including such expenses, net earnings were $20.3 million and $0.78 per share (diluted) for fiscal 2001. For the previous fiscal year, fiscal 2000, B/E reported a net loss of ($50.8) million, or ($2.05) per share. The loss was due to costs associated with manufacturing problems in its seating business. Excluding such costs, the company earned $40.6 million, or $1.62 per share. Sales for the fiscal year just ended reflect lower revenues from seating, galley galley, long, narrow vessel widely used in ancient and medieval times, propelled principally by oars but also fitted with sails. The earliest type was sometimes 150 ft (46 m) long with 50 oars. structures and services compared to the prior year. The revenue trend is consistent with the year-over-year reduction in new aircraft deliveries, last year's problems in the seating business and last year's decision to exit certain products and services. B/E had strong cash flow in fiscal 2001. Net cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses was a healthy $40.3 million. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
NET DEBT DECREASED TO 81 PERCENT OF CAPITAL B/E financed its four recent acquisitions largely by issuing common stock, which strengthened the company's balance sheet. After giving effect to the acquisitions, net debt at February 24, 2001 was $559.4 million, or 81 percent of total capital, down from 90 percent as of the end of the prior fiscal year. Before giving effect to the acquisitions as of February 24, 2001, net debt would have been $544.7 million, down $39.8 million compared to the end of the prior fiscal year and exceeding B/E's net debt reduction goal for the year. A YEAR OF ACCOMPLISHMENTS In addition to strong financial results and strategic acquisitions, B/E's accomplishments in fiscal 2001 included: -- completed turnaround of seating business, announcing a number of important seating product orders during second half of year, as well as significantly improving quality, on-time delivery and profitability, -- increased total backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. to $600 million (including $75 million from recently-acquired companies) as of the end of the fiscal year, up from a low of $450 million as of August 2000, reflecting 17 percent organic backlog growth and 33 percent overall backlog growth over the past six months, -- continued implementation of lean manufacturing and continuous improvement efforts company-wide, earning a supplier performance award from one of the world's major aircraft manufacturers and the highest supplier excellence score ever awarded by one of world's largest airlines, -- rated No. 1 for seat comfort in both international first class and long-haul coach class in a 6,000-person survey conducted by Skytrax Research, an independent United Kingdom-based research firm, -- continued efforts to expand revenues and stimulate retrofits through roll-out of new products (refrigeration refrigeration, process for drawing heat from substances to lower their temperature, often for purposes of preservation. Refrigeration in its modern, portable form also depends on insulating materials that are thin yet effective. system, steam oven, wine chiller chill·er n. 1. One that chills. 2. A frightening story, especially one involving violence, evil, or the supernatural; a thriller. chiller Noun 1. , full face crew oxygen mask oxygen mask n. A masklike device that is placed over the mouth and nose and through which oxygen is supplied from an attached storage tank. and LED reading light), -- expanded market share in business jet seating, winning programs with Embraer, Galaxy Aerospace and Lufthansa Technik's 20-aircraft Boeing Business Jet The Boeing Business Jet series are factory conversions of Boeing airliners for the corporate jet market, initially the 737 series airliners. This aircraft usually seats between 25 and 50 passengers within a luxurious configuration. program, and -- selected to convert three 747-200 combi aircraft to freighter use, including engineering, program management and delivery of conversion kit. OUTLOOK: EARNINGS UP 40% IN FISCAL 2002 AND 2003 BEFORE ACCOUNTING RULE CHANGE Throughout fiscal 2002, B/E expects quarterly earnings to compare very favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to the year just ended. Earnings are projected to be substantially stronger in the second half of fiscal 2002 than in the first half, reflecting the timing of product deliveries associated with large orders booked in the second half of fiscal 2001. "We expect net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of about $725 to $750 million for fiscal 2002. As we reported in December and March, with higher sales, higher margins and modest accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the from our recent acquisitions, we expect to increase earnings per share by 40 percent in fiscal 2002. "Looking further ahead, we expect to grow earnings per share by an additional 40 percent in the following year, fiscal 2003, reflecting a projected double-digit percentage increase in sales," Mr. Khoury said. "Our strong sales forecast Sales forecast A key input to a firm's financial planning process. External sales forecasts are based on historical experience, statistical analysis, and consideration of various macroeconomic factors. is primarily due to strong retrofit ret·ro·fit v. ret·ro·fit·ted or ret·ro·fit, ret·ro·fit·ting, ret·ro·fits v.tr. 1. To provide (a jet, automobile, computer, or factory, for example) with parts, devices, or equipment not in and refurbishment re·fur·bish tr.v. re·fur·bished, re·fur·bish·ing, re·fur·bish·es To make clean, bright, or fresh again; renovate. re·fur demand by major airlines worldwide. Driven by marketing and pricing strategies There are many ways in which the price of a product can be determined. The following are the foremost strategies that businesses are likely to use. Competition-based pricing Setting the price based upon prices of the similar competitor products. , most of the world's major international carriers are planning to substantially upgrade passenger comfort and space in premium classes of service, resulting in a compression of the premium class refurbishment cycle to only three or four years. This has substantially strengthened our backlog and improved our booking opportunities. "The trend in premium class upgrades, together with the recent growth in our backlog and customer requests for proposals, all point to continued booking strength in calendar year 2001. It is primarily on the basis of these dynamics that we feel comfortable with our revenue and earnings outlook for the next two years," Mr. Khoury concluded. PROPOSED CHANGE IN ACCOUNTING RULE WOULD INCREASE EPS Expected reductions in amortization expense from a pending accounting rule change would provide further growth in earnings per share for both fiscal 2002 and 2003. The accounting rule change, as currently proposed by the Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). , would eliminate the amortization of goodwill and certain acquired intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . If enacted as proposed, the new rule would go into effect for the third quarter of fiscal 2002, adding about $0.30 per share to earnings in the second half of the year. Including the effect of the accounting rule change, earnings per share growth is expected to total 70 percent for fiscal 2002, providing earnings per share of approximately $1.80. Earnings growth for fiscal 2003 would total 50 percent, including a full year's impact of the new accounting rule. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements involve risks and uncertainties, and B/E's actual experience may differ materially from that anticipated in such statements. Factors that might cause such a difference include those discussed in B/E's filings with the Securities and Exchange Commission, including but not limited to its most recent proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. and Forms S-3, 10-K and 10-Q. For more information, see the section entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Forward-Looking Statements" contained in B/E's Forms S-3 and 10-K and in other filings. B/E Aerospace, Inc. is the world's leading manufacturer of aircraft cabin An aircraft cabin is the section of an aircraft in which passengers travel, often just called the cabin. At cruising altitudes, the surrounding atmosphere is too thin to breathe without an oxygen mask, so cabin pressurization adapts the cabin to atmospheric pressures. interior products, serving virtually all the world's airlines and aircraft manufacturers. B/E designs, develops, manufactures, sells and services a broad line of passenger cabin interior products for both commercial and business/VIP aircraft and provides interior design, reconfiguration and conversion services to its customers throughout the world. Information on B/E is available on the World Wide Web at www.beaerospace.com.
B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
THREE MONTHS ENDED
-------------------------
February 24, February 26,
2001 2000
----------------------------------------------------------------------
Net sales $ 165,793 $ 181,844
Cost of sales 101,834 137,093
--------- ---------
Gross profit 63,959 44,751
Gross margin 38.6% 24.6%
Operating Expenses:
Selling, general and administrative 21,382 24,315
Research, development and engineering 11,635 13,739
Amortization 5,873 6,377
Acquisition and initial public
offering costs 8,276 --
--------- ---------
Total operating expenses 47,166 44,431
--------- ---------
Operating earnings 16,793 320
Operating margin 10.1% 0.2%
Interest expense, net 13,253 13,214
--------- ---------
Earnings (loss) before
income taxes 3,540 (12,894)
Income taxes (benefit) 354 (3,000)
--------- ---------
NET EARNINGS (LOSS) $ 3,186 $ (9,894)
========= =========
NET EARNINGS (LOSS) PER COMMON SHARE:
DILUTED $ 0.12 $ (0.40)
BASIC $ 0.12 $ (0.40)
CASH BASIS(a) $ 0.32 $ (0.18)
OTHER DATA: BEFORE ACQUISITION AND
INITIAL PUBLIC OFFERING COSTS
EARNINGS (LOSS) $ 10,634 $ (9,894)
EARNINGS (LOSS) PER COMMON SHARE :
DILUTED $ 0.40 $ (0.40)
CASH BASIS(a) $ 0.59 $ (0.18)
Common shares (weighted average and
potentially dilutive) 26,840 24,895
(a) Excludes tax-effected amortization expense
B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
TWELVE MONTHS ENDED
-----------------------------
February 24, February 26,
2001 2000
----------------------------------------------------------------------
Net sales $ 666,444 $ 723,349
Cost of sales 416,626 543,682
--------- ---------
Gross profit 249,818 179,667
Gross margin 37.5% 24.8%
Operating Expenses:
Selling, general and
administrative 92,541 94,891
Research, development
and engineering 48,898 54,004
Amortization 23,408 24,076
Acquisition and initial
public offering costs 8,276 --
--------- ---------
Total operating expenses 173,123 172,971
--------- ---------
Operating earnings 76,695 6,696
Operating margin 11.5% 0.9%
Equity in losses of
unconsolidated subsidiary -- 1,289
Interest expense, net 54,170 52,921
--------- ---------
Earnings (loss) before income taxes 22,525 (47,514)
Income taxes 2,253 3,283
--------- ---------
NET EARNINGS (LOSS) $ 20,272 $ (50,797)
========= =========
NET EARNINGS (LOSS) PER COMMON SHARE:
DILUTED $ 0.78 $ (2.05)
BASIC $ 0.80 $ (2.05)
CASH BASIS(a) $ 1.60 $ (1.22)
OTHER DATA: BEFORE ACQUISITION AND
INITIAL PUBLIC OFFERING COSTS
EARNINGS (LOSS) $ 27,720 $ (50,797)
EARNINGS (LOSS) PER COMMON SHARE:
DILUTED $ 1.07 $ (2.05)
CASH BASIS(a) $ 1.88 $ (1.22)
Common shares (weighted average and 25,889 24,764
potentially dilutive)
(a) Excludes tax-effected amortization expense
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