B/E Aerospace Earnings Meet Expectations; Orders Up 50 Percent; Increasing Guidance For Next Year.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)--June 18, 2002 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 first quarter of fiscal 2003. Management also increased earnings guidance for next year, the fiscal year ending in February February: see month. 2004. HIGHLIGHTS -- Seasoned leadership: The management team has successfully implemented two other major facility and personnel consolidation programs. -- Strong liquidity: The company had about $145 million of cash on hand as of the end of May. As expected, during the first quarter B/E was a net user of cash due to cash costs associated with the facility consolidations and the timing of interest payments. -- Financial flexibility: B/E's bank credit facility requires no principal payments until maturity in 2006. And B/E's publicly traded debt securities require no principal payments until 2008 through 2011. -- Strong cash flow: B/E expects to generate free cash flow of about $50 million in fiscal 2003, excluding cash expenditures associated with transition costs and last year's facility consolidation charges. Such cash expenditures should be offset by positive changes in working capital and proceeds from asset dispositions. B/E defines free cash flow as EBITDA less capital expenditures, interest and taxes. "B/E remains on course for a solidly profitable current year, fiscal 2003," 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. , President and Chief Executive Officer of B/E Aerospace. "Although airline demand for our products remains constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. , our cost reduction initiatives are on schedule, giving us confidence in our earnings outlook for this year. "For the following year, fiscal 2004, we are increasing earnings guidance to reflect expected continuing margin expansion from our cost reduction programs, as well as revenue growth of about 4 percent based on our current outlook for 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 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 work," he said. FIRST QUARTER RESULTS For the three-month period ended May 25, 2002, B/E reported earnings of $4.2 million, or $0.12 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. ), excluding $6.2 million of transition costs related to the company's facility consolidation program. Transition costs are the expenses of operating facilities scheduled for closure. Such costs must be treated as normal expenses until plant shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down has been completed. Including transition costs, the company reported a net loss of $(1.5) million, or $(0.04) per share. For the first quarter of the prior year, B/E earned $7.8 million, or $0.25 per share (diluted), excluding a $9.3 million (net of taxes) extraordinary item related to early extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt. Including such costs, the company reported a net loss of $(1.5) million or $(0.05) per share for the first quarter a year ago. "Earnings per share are down 52 percent compared to the first quarter a year ago, excluding the unusual items in both periods," said Mr. Khoury, comparing $0.12 per share for the quarter just ended to $0.25 per share earned in the first quarter a year ago. "Substantially lower sales and higher interest expense were the principal factors which caused the decrease in earnings." SALES IN LINE WITH EXPECTATIONS Reported sales of $154.3 million were down 13 percent for the first quarter compared to the same period last year. However, on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, sales were down $55 million, or 26 percent, compared to the same period a year ago. Pro forma sales treat companies acquired during fiscal 2002 as though acquired at the beginning of fiscal 2002, improving comparability with the quarter just ended. "Sales decreased in line with our expectations," said Mr. Khoury. "We are experiencing lower demand from our airline customers, who continue to report poor financial performance in the aftermath of the September September: see month. 11 terrorist attacks and a weak economy, both of which have kept air travel below normal levels." COST REDUCTION PROGRAM ON SCHEDULE Responding to lower projected demand, in October October: see month. 2001 B/E announced plans to close five facilities and reduce its workforce by about 1,000 people or 22 percent. "Our consolidation program is proceeding according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. plan," Mr. Khoury said. "B/E has reduced its headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. by about 900 positions since we announced the facility and workforce consolidations. The vast majority of our consolidation program should be complete by the end of the second quarter. "This downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing has been very painful, affecting employees and their families," Mr. Khoury stated. "Nevertheless, these actions are necessary to return the company to a healthy level of profitability, fulfilling our obligation to the balance of our workforce and to our shareholders." For the quarter just ended, B/E's gross and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: were 38.3 percent and 14.0 percent respectively, excluding the transition costs in both cases. The 14.0 percent operating margin expanded by 120 basis points compared to the same period a year ago. On a pro forma basis, B/E's gross margin excluding transition costs expanded by 50 basis points for the quarter just ended compared to the first quarter a year ago, while 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. decreased by $11.0 million, reflecting a $6.8 million reduction in actual operating expenses and a $4.2 million reduction in amortization expense resulting from new accounting rules. Pro forma figures treat companies acquired during fiscal 2002 as though acquired at the beginning of fiscal 2002. Pro forma gross margin and operating expenses were 37.8 percent and $48.5 million, respectively, for the first quarter a year ago. RESULTS BY SEGMENT "As expected, our commercial aircraft products segment experienced a substantial decrease in revenues compared to last year," Mr. Khoury said. "Year-over-year sales decreased by 31 percent in this segment. However, our 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. has now stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. and demand is showing improvement in each of our segments, as indicated by recent trends in orders, backlog and customers' requests for quotations on new programs."
NET SALES, QUARTERS ENDED:
$ millions: MAY 25, 2002 FEB. 23, 2002 MAY 26, 2001
----------------------------------------------------------------------
Commercial aircraft
products $107 $111 $155
Business jet products 23 19 22
Fastener distribution(a) 24 22 0
----------------------------------------------------------------------
TOTAL $154 $152 $177
(a) B/E acquired fastener distribution business in September 2001
ORDERS INCREASE 50 PERCENT; BACKLOG UP $20 MILLION B/E booked orders of about $175 million for the quarter just ended, up sequentially by 50 percent compared to the quarter ended February 2002. Backlog increased to about $500 million as of the end of May 2002, up from about $480 million at the end of February 2002. "A number of airlines have begun to make significant investments in cabin interior upgrade programs, even though air travel has not yet returned to normal," said Mr. Khoury, referring to new program awards announced by B/E on May 22, 2002. OUTLOOK: FISCAL 2003 "We continue to have confidence in our outlook. B/E is on course for a solidly profitable current year, fiscal 2003," Mr. Khoury said. "We expect a surge in earnings in the second half of the year, driven by margin improvements from our facility consolidation, 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. and continuous improvement initiatives." Management expects the operating margin to return to a level well in excess of 15 percent by the second half of this fiscal year, which ends in February 2003. For the full fiscal year 2003, management expects: -- Seasoned leadership: The management team has successfully implemented two other major facility and personnel consolidation programs. -- Strong liquidity: The company had about $145 million of cash on hand as of the end of May. As expected, during the first quarter B/E was a net user of cash due to cash costs associated with the facility consolidations and the timing of interest payments. -- Financial flexibility: B/E's bank credit facility requires no principal payments until maturity in 2006. And B/E's publicly traded debt securities require no principal payments until 2008 through 2011. -- Strong cash flow: B/E expects to generate free cash flow of about $50 million in fiscal 2003, excluding cash expenditures associated with transition costs and last year's facility consolidation charges. Such cash expenditures should be offset by positive changes in working capital and proceeds from asset dispositions. B/E defines free cash flow as EBITDA less capital expenditures, interest and taxes. As previously announced, expected current-year results exclude approximately $12 million of transition costs associated with facility consolidations. B/E expects to record the vast majority of these costs in the first half of the year. The company incurred $6.2 million of transition costs for the quarter just ended. "The sequential trend in orders and earnings strengthens our confidence in the future," Mr. Khoury said. "Orders increased by 50 percent for the quarter just ended compared to the quarter ended February 2002. Earnings increased by $0.13 per share, excluding transition costs, over the same period. "We have expanded gross margin by 50 basis points and reduced actual operating expenses by $6.8 million, both compared to last year on a pro forma basis. Importantly, we continue to make progress in reducing costs, supporting our expectation for margin-driven earnings growth in the second half of this year," said Mr. Khoury. INCREASING GUIDANCE FOR FISCAL 2004 For fiscal 2004, B/E expects: -- Seasoned leadership: The management team has successfully implemented two other major facility and personnel consolidation programs. -- Strong liquidity: The company had about $145 million of cash on hand as of the end of May. As expected, during the first quarter B/E was a net user of cash due to cash costs associated with the facility consolidations and the timing of interest payments. -- Financial flexibility: B/E's bank credit facility requires no principal payments until maturity in 2006. And B/E's publicly traded debt securities require no principal payments until 2008 through 2011. -- Strong cash flow: B/E expects to generate free cash flow of about $50 million in fiscal 2003, excluding cash expenditures associated with transition costs and last year's facility consolidation charges. Such cash expenditures should be offset by positive changes in working capital and proceeds from asset dispositions. B/E defines free cash flow as EBITDA less capital expenditures, interest and taxes. "We expect strong earnings growth in fiscal 2004, driven by solid margin expansion this year and better top-line performance next year," Mr. Khoury said. "We expect fiscal 2004 margins to benefit from a full year's worth of savings from our facility and workforce consolidations, compared to only six months' worth this year. The fiscal 2004 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. reflects our current outlook for cabin interior 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 work. Among other factors, the sales forecast takes into account a trend we are already witnessing: a number of airlines, particularly in Asia, have resumed using cabin interior upgrades as a way to compete for the lucrative premium class passenger." As announced on May 22, 2002: -- Seasoned leadership: The management team has successfully implemented two other major facility and personnel consolidation programs. -- Strong liquidity: The company had about $145 million of cash on hand as of the end of May. As expected, during the first quarter B/E was a net user of cash due to cash costs associated with the facility consolidations and the timing of interest payments. -- Financial flexibility: B/E's bank credit facility requires no principal payments until maturity in 2006. And B/E's publicly traded debt securities require no principal payments until 2008 through 2011. -- Strong cash flow: B/E expects to generate free cash flow of about $50 million in fiscal 2003, excluding cash expenditures associated with transition costs and last year's facility consolidation charges. Such cash expenditures should be offset by positive changes in working capital and proceeds from asset dispositions. B/E defines free cash flow as EBITDA less capital expenditures, interest and taxes. In addition, Hong n. 1. A mercantile establishment or factory for foreign trade in China, as formerly at Canton; a succession of offices connected by a common passage and used for business or storage. Kong-based Cathay Pacific Cathay Pacific Airways Limited (HKSE: 0293 ) is an airline based in Hong Kong, operating scheduled passenger and cargo services to over 104 destinations worldwide. It is the flag carrier of Hong Kong with its main base at the Hong Kong International Airport. [1]. Airways airways Anatomy The 'pipes'–trachea, bronchi, bronchioles–through which air passes to and from the alveoli. See Small airways. is proceeding with a long-standing long-stand·ing adj. Of long duration or existence: a long-standing friendship. long-standing Adjective existing for a long time program to retrofit their wide-body aircraft with 1,200 of B/E's patented steam ovens. "We expect airline upgrade and refurbishment activity to rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective well before the upturn in new aircraft orders," Mr. Khoury said. "With our aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. focus, B/E should be a leading indicator Leading Indicator A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy, but are not always accurate. of the commercial aerospace sector's recovery. Cabin interior upgrades and refurbishments generate almost two-thirds of our revenue. Accordingly, we expect the resurgence re·sur·gence n. 1. A continuing after interruption; a renewal. 2. A restoration to use, acceptance, activity, or vigor; a revival. in the aftermarket to drive our revenue growth." Several key value drivers will aid B/E on the road ahead, including: -- Seasoned leadership: The management team has successfully implemented two other major facility and personnel consolidation programs. -- Strong liquidity: The company had about $145 million of cash on hand as of the end of May. As expected, during the first quarter B/E was a net user of cash due to cash costs associated with the facility consolidations and the timing of interest payments. -- Financial flexibility: B/E's bank credit facility requires no principal payments until maturity in 2006. And B/E's publicly traded debt securities require no principal payments until 2008 through 2011. -- Strong cash flow: B/E expects to generate free cash flow of about $50 million in fiscal 2003, excluding cash expenditures associated with transition costs and last year's facility consolidation charges. Such cash expenditures should be offset by positive changes in working capital and proceeds from asset dispositions. B/E defines free cash flow as EBITDA less capital expenditures, interest and taxes. "We expect to have greatly enhanced earnings power when demand returns to more normal levels," said Mr. [pilcrow (paragraph sign)] Khoury. "Our facility and workforce reductions are substantially improving our cost structure, facilitating significantly better profit margins as sales increase. After closing five principal locations, we expect that our remaining, streamlined asset base will have the capacity to generate annual revenues of approximately $1 billion without significant additional capital investment. This will be possible largely because we are now reaping the benefits from efforts begun several years ago: our lean manufacturing initiatives, continuous improvement programs and standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. information systems." As previously announced, B/E will hold a conference call to discuss its financial results on Tuesday Tuesday: see week. , June June: see month. 18 at 10:30 a.m. Eastern time. To listen to the conference call live via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the , visit the Investors section of B/E's website at http://www.beaerospace.com and follow the Webcasts link. 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. , Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and Form 10-Q Form 10-Q See 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 Form 10-K and in other filings. B/E Aerospace, Inc. is the world's leading manufacturer of aircraft cabin interior products, and a leading aftermarket distributor of aircraft component parts. With a global organization selling directly to the world's airlines, B/E designs, develops and manufactures a broad product line for both commercial aircraft and business jets and provides cabin interior design, reconfiguration and conversion services. Products for the existing aircraft fleet -- the aftermarket -- provide almost two-thirds of sales. For more information, visit B/E's website at http://www.beaerospace.com.
B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
--------------------------------------------------
EXCLUDING
(In millions, except AS TRANSITION
per share data) REPORTED COSTS
May 25, 2002 May 25, 2002(1) May 26, 2001
--------------------------------------------------
Net sales $ 154.3 $ 154.3 $ 176.8
Cost of sales 101.4 95.2 110.9
------------ ------------- ------------
Gross profit 52.9 59.1 65.9
Gross margin 34.3% 38.3% 37.3%
Operating expenses:
Selling, general
and administrative 28.4 28.4 31.2
Research,
development and
engineering 9.1 9.1 12.1
------------ ------------- ------------
Total operating
expenses 37.5 37.5 43.3
------------ ------------- ------------
Operating earnings 15.4 21.6 22.6
Operating margin 10.0% 14.0% 12.8%
Interest expense,
net 16.9 16.9 14.0
------------ ------------- ------------
(Loss) earnings
before income taxes (1.5) 4.7 8.6
Income taxes -- 0.5 0.8
------------ ------------- ------------
(Loss) earnings
before
extraordinary item (1.5) 4.2 7.8
Extraordinary
item(2) -- -- 9.3
------------ ------------- ------------
NET (LOSS) EARNINGS $ (1.5) $ 4.2 $ (1.5)
============ ============= ============
DILUTED NET (LOSS)
EARNINGS PER
COMMON SHARE:
Before
extraordinary
item $ (0.04) $ 0.12 $ 0.25
Net (loss)
earnings $ (0.04) $ 0.12 $ (0.05)
Common shares:
Weighted average
and potentially
dilutive 34.6 35.7 30.9
End of period 34.8 34.8 32.1
(1) Cost of sales excludes $6.2 million of facility consolidation
costs.
(2) Expenses related to early extinguishment of 9.875% Senior
Subordinated Notes and bank credit facility.
B/E AEROSPACE, INC. SELECTED FINANCIAL DATA - AS ADJUSTED This news release presents certain financial information on a pro forma basis to give effect to the exclusion of unusual costs and expenses. We present the pro forma data because we believe it is necessary to gain a full understanding of our operating results. In addition, we present operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before as a measure of our operating performance, and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (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.
Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . Therefore, such information is not necessarily comparable to other companies. Neither operating earnings, EBITDA nor pro forma financial data should be viewed as a substitute for net income or other data prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles or as measures of our profitability or liquidity. (In millions, IMPACT OF IMPACT OF except per AS FACILITY DEBT AS share data) REPORTED CONSOLIDATIONS EXTINGUISHMENT ADJUSTED ---------------------------------------------------------------------- Three Months Ended May 25, 2002: Sales $154.3 $ -- $ -- $154.3 Gross profit 52.9 6.2 -- 59.1 Operating earnings 15.4 6.2 -- 21.6 Net (loss) earnings (1.5) 5.7(a) -- 4.2 Net (loss) earnings per share (0.04) 0.16 -- 0.12 EBITDA 22.3 6.2 -- 28.5 ---------------------------------------------------------------------- Three Months Ended May 26, 2001: Sales $176.8 $ -- $ -- $176.8 Gross profit 65.9 -- -- 65.9 Operating earnings 22.6 -- -- 22.6 Net (loss) earnings (1.5) -- 9.3 7.8 Net (loss) earnings per share (0.05) -- 0.30 0.25 EBITDA 34.7 -- -- 34.7 (a) net of tax expense of $0.5 |
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