B/E Aerospace Reports Results for Second Quarter.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)--Sept. 14, 2000 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 its second fiscal quarter ended August 26, 2000. HIGHLIGHTS: SECOND QUARTER -------------------------- -- Lean manufacturing: B/E has dedicated a team of experts to facilitate implementation of lean manufacturing at the company's principal manufacturing facilities. -- Information technology: B/E implemented shared platforms for information management, financial reporting and engineering design last year. These initiatives enable B/E to simplify and standardize business practices, implement lean manufacturing and launch an e-commerce initiative. Implementation of the information technology systems increased depreciation expense for the second quarter of this year. Net earnings were $4.7 million, or $0.19 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 second quarter of fiscal 2001, as compared to $13.7 million and $0.55 per share for the second quarter a year ago. "We are pleased to report another solid profit and continued recovery from last year's operating problems," stated 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. "As expected, we again increased 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. , despite lower sales this year from our seating and 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. structure product lines. "We expect strong quarterly earnings comparisons during the second half of this fiscal year," Mr. Khoury explained. "We also expect earnings in the second half of this year to be stronger than in the first half, driven by substantial additional margin improvement." SALES TREND AS EXPECTED ----------------------- As expected, lower 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 were the primary reason that earnings for the second quarter were less than the $0.55 per share B/E reported for the second quarter a year ago. Sales were lower compared to the second quarter a year ago due to last year's manufacturing problems in the seating business, which have since been resolved; lower sales of galley structures, in line with the year-over-year reduction in new aircraft deliveries; and B/E's decision, made last year, to exit certain low-margin products and services. IMPROVING GROSS MARGIN ---------------------- B/E's gross profit margin increased to 37.0% for the second quarter, up from the prior two quarters:
Gross Profit Margin
-------------------
Quarter ended:
-- August 2000 37.0%
-- May 2000 36.4%
-- February 2000 24.6%
The improvement in gross margin has come primarily from the 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 B/E's seating business, together with the positive impact of B/E's information technology investments 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. and continuous improvement programs. These initiatives have enabled B/E to make continued progress in reducing costs, improving productivity and quality and accelerating order fulfillment Order fulfillment (in BE also: order fulfilment) is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes Order fulfillment . 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. ON TARGET ---------------------------- Selling, general and administrative expenses for the quarter increased by $2.6 million compared to the second quarter a year ago. The increase, which was included in B/E's financial plan for the year, reflects two important initiatives: -- Lean manufacturing: B/E has dedicated a team of experts to facilitate implementation of lean manufacturing at the company's principal manufacturing facilities. -- Information technology: B/E implemented shared platforms for information management, financial reporting and engineering design last year. These initiatives enable B/E to simplify and standardize business practices, implement lean manufacturing and launch an e-commerce initiative. Implementation of the information technology systems increased depreciation expense for the second quarter of this year. UPDATE ON NEW ORDERS -------------------- Each of B/E's strategic business units was profitable in the second quarter, with positive operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . The seating business met its financial plan, winning orders from eight customers during the quarter. 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. was approximately $450 million as of August 2000, essentially unchanged compared to backlog at the end of May 2000. B/E's book-to-bill ratio Book-to-Bill Ratio The technology industry's demand-to-supply ratio for orders on a "firm's book" to number of orders filled. Notes: This ratio tells whether the company has more orders than it can deliver (if greater than 1), has the same amount of orders that it can was approximately 1 to 1 for the three months ended August 2000. B/E recently unveiled its new e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. system, which has been activated activated a state of being more than usually active. In biological systems this is usually brought about by chemical or electrical means. Commonly said of pharmaceutical and chemical products. for one airline customer on a pilot basis. Initial results have been favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. , and B/E plans to begin rolling out the system for other customers later in this fiscal year. SIX-MONTH EARNINGS REVIEW ------------------------- Net earnings were $9.2 million, or $0.36 per share (diluted) for the first half of fiscal 2001, as compared to $25.1 million and $1.01 per share for the same period a year ago. Although lower sales was the primary factor affecting B/E's six-month earnings, operating expenses increased by $6.5 million for the first half of fiscal 2001. The main causes of the expense increase were lean manufacturing and information technology initiatives and product development efforts for certain leading airline customers. CASH BASIS EARNINGS ------------------- B/E's net earnings reflect non-cash amortization expense, which is a systematic write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of goodwill and other 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. . Excluding the non-cash amortization expense and related tax effects, B/E's cash basis earnings were $0.39 per share for the second quarter, and $0.78 per share for the six-month period. MARGIN EXPANSION AND EARNINGS OUTLOOK ------------------------------------- "We expect strong quarterly earnings comparisons beginning in the third quarter of this year," Mr. Khoury stated. B/E expects to continue to grow its gross and operating profit margins Operating profit margin The ratio of operating profit to net sales. during the balance of the current fiscal year, re-establishing the 3-year margin growth track record that was interrupted in·ter·rupt v. in·ter·rupt·ed, in·ter·rupt·ing, in·ter·rupts v.tr. 1. To break the continuity or uniformity of: Rain interrupted our baseball game. 2. last year. The expected expansion in margins will be driven by lean manufacturing initiatives and continuous productivity improvements from recent information technology investments. "Looking further ahead, several factors indicate healthy demand for cabin interior products," Mr. Khoury continued. "The airlines continue to demonstrate strong demand for aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. products; a number of our major customers are planning significant 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 programs. In addition, The Boeing (language) BOEING - An early system on the IBM 1130. [Listed in CACM 2(5):16, May 1959]. Company recently increased its forecast of new commercial aircraft to be delivered in calendar 2001 and 2002. These factors, coupled with the operating improvements we have made to date and expect through the balance of this year, form the basis for the outlook for healthy growth in B/E's earnings for the balance of this year and in fiscal 2002," he concluded. FOCUS ON DEBT REDUCTION ----------------------- In August, B/E announced that its wholly-owned subsidiary Advanced Thermal Technologies filed a registration statement to effect an initial public offering of 4 million newly-issued shares at an estimated price range of $9-$11 per share. Following this offering, B/E will own the remaining 10 million shares of ATT ATT ammonia tolerance test. stock, assuming no exercise of the underwriters' over-allotment option, and expects to receive a $15 million payment from ATT. These proceeds have been earmarked for further reduction of B/E's debt. 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. This press 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. which involve risks and uncertainties, including the future benefits of corrective actions A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or in B/E's seating business, implementation and expected benefits of lean manufacturing and continuous improvement programs, B/E's dealings with customers and partners, the consolidation of facilities, productivity improvements from recent information technology investments, the roll-out of B/E's e-commerce system, completion of and expected benefits derived from the expected initial public offering of Advanced Thermal Technologies, and the reduction of debt. 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 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 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. , as well as future events that may have the effect of reducing B/E's available operating income and cash balances.
B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
THREE MONTHS ENDED
-----------------------
August 26, August 28,
2000 1999
-----------------------
Net sales $164,116 $191,895
Cost of sales 103,358 121,558
-------- --------
Gross profit 60,758 70,337
Gross margin 37.0% 36.7%
Operating Expenses:
Selling, general and administrative 23,941 21,295
Research, development and engineering 12,228 12,280
Amortization 5,847 5,856
-------- --------
Total operating expenses 42,016 39,431
-------- --------
Operating earnings 18,742 30,906
Operating margin 11.4% 16.1%
Equity in losses of unconsolidated subsidiary -- 562
Interest expense, net 13,488 13,195
-------- --------
Earnings before income taxes 5,254 17,149
Income taxes 525 3,429
-------- --------
NET EARNINGS $ 4,729 $ 13,720
======== ========
NET EARNINGS PER COMMON SHARE:
DILUTED $0.19 $0.55
===== =====
BASIC $0.19 $0.56
===== =====
CASH BASIS(1) $0.39 $0.74
===== =====
Common shares (weighted average and
potentially dilutive) 25,367 25,018
====== ======
(1) Excludes tax-effected amortization expense
B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except share data)
SIX MONTHS ENDED
-----------------------
August 26, August 28,
2000 1999
-----------------------
Net sales $333,241 $376,927
Cost of sales 210,930 240,003
-------- --------
Gross profit 122,311 136,924
Gross margin 36.7% 36.3%
Operating Expenses:
Selling, general and administrative 47,982 43,323
Research, development and engineering 25,209 23,525
Amortization 11,715 11,552
-------- --------
Total operating expenses 84,906 78,400
-------- --------
Operating earnings 37,405 58,524
Operating margin 11.2% 15.5%
Equity in losses of unconsolidated subsidiary -- 1,289
Interest expense, net 27,219 25,817
-------- --------
Earnings before income taxes 10,186 31,418
Income taxes 1,019 6,283
-------- --------
NET EARNINGS $ 9,167 $ 25,135
======== ========
NET EARNINGS PER COMMON SHARE:
DILUTED $0.36 $1.01
===== =====
BASIC $0.36 $1.02
===== =====
CASH BASIS(1) $0.78 $1.38
===== =====
Common shares (weighted average and
potentially dilutive) 25,168 24,949
====== ======
(1) Excludes tax-effected amortization expense
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