B/E Aerospace Reports Second Quarter; Financial Results Exceed Expectations; Sales up 22 Percent; Record Bookings of $285 Million.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. -- B/E B/E abbr. 1. bill of entry 2. bill of exchange Aerospace, Inc. (Nasdaq:BEAV BEAV Binary Editor and Viewer ), 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 and a leading aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. distributor of aerospace fasteners fasteners In construction, connectors between structural members. Bolted connections are used when it is necessary to fasten two elements tightly together, especially to resist shear and bending, as in column and beam connections. , today announced results for the quarter ended June June: see month. 30, 2004. HIGHLIGHTS --Reported second quarter sales of $185.3 million, representing year over year growth of 22 percent. --Second quarter 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 of $17.9 million were nearly four times higher than the prior year, despite a $2.1 million negative impact from foreign exchange. Operating earnings growth was driven by the continuing 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. at B/E's commercial aircraft segment, a broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased increase in revenues and earnings at the company's distribution segment and a significantly lower cost structure resulting from B/E's recently completed consolidation program. --Net loss for the quarter narrowed to $2.4 million or $0.06 per share as compared to a net loss of $14.1 million or $0.39 per share in the prior year. The quarter's financial results were affected by a $2.1 million negative impact of foreign exchange and a year over year increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.7 million in interest expense. --Bookings for the quarter of approximately $285 million were a record for any quarter in the company's history and were about $70 million or 33 percent greater than the same quarter of the prior year. 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. at June 30, 2004 of approximately $615 million, was up 23 percent from the June 30, 2003 backlog of $500 million, despite the 22 percent increase in revenues. --Important customer wins for the quarter include Emirates Airline “Emirates” redirects here. For other uses, see Emirates (disambiguation). Emirates Airline (shortened form: Emirates) (Arabic: طيران الإماراتTayarān al-Imārāt and Qantas Airways airways Anatomy The 'pipes'–trachea, bronchi, bronchioles–through which air passes to and from the alveoli. See Small airways. , where B/E has been awarded contracts to design, manufacture and install luxurious first class cabin interiors on Emirates and Qantas A380 wide body long-haul long haul n. 1. A long distance: It is a long haul from New York to Los Angeles. 2. A long period of time: Over the long haul the candidates performed well. aircraft. These awards, in addition to the previously announced Thai and Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. Airlines programs, demonstrate a growing demand for high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. , premium cabin interiors for international super first class travel. The combined initial value of these four awards aggregate over $225 million, exclusive of option aircraft. Product deliveries are scheduled to begin in the second half of 2005. "Our performance during the second quarter confirms that the recovery in our business, which began in the fourth quarter of 2003, is continuing and gaining momentum," said 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. 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. "Each of our businesses is delivering planned operational improvements, our investments in product line extensions Product line Extensions and Patient safety In a world of product line extensions, there are many different products with similar names. Examples of these include oxycodone versus oxycontin (oycodone CR), buproprion vs buprion SR vs bruproprion XL, codeine versus codeine contin and in new product development are expanding our market shares, and our bookings and backlog continue a very positive trend. We believe we are on track to achieve our 2004 financial goals and are well positioned to deliver strong growth in revenues and profitability in 2005 and 2006," Mr. Khoury concluded. SECOND QUARTER CONSOLIDATED con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: RESULTS For the second quarter, consolidated sales were $185.3 million, a 22 percent increase over the second quarter of 2003. 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 by segment were as follows:
NET SALES
------------------------------
$ Millions, Three Months Ended
------------------------------
June 30, June 30, Percent
2004 2003 Change
------------------------------
Commercial aircraft $128.4 $107.9 19.0 %
Distribution 37.1 25.8 43.8 %
Business jet 19.8 18.1 9.4 %
------------------------------
Total $185.3 $151.8 22.1 %
Gross profit for the quarter of $61.8 million increased by $22.0 million or 55 percent, as compared to $39.8 million in the second quarter of 2003. Foreign exchange negatively impacted financial comparisons, on a year over year basis, by $2.1 million. B/E is subject to fluctuations in foreign exchange rates due to significant sales from its European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. facilities, substantially all of which are denominated in U.S. dollars, while the corresponding labor, overhead and certain material costs are denominated in British pounds or euros. Even after considering the negative effects of foreign exchange, B/E's gross margin for the quarter of 33.4 percent improved by 280 basis points sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen , reflecting the significant cost savings from B/E's cost reduction programs and an improvement in product mix. Despite the impact of a weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. dollar on B/E's financial
results for the quarter, operating earnings were $17.9 million or 9.7
percent of sales versus $3.8 million or 2.5 percent of sales for the
same quarter last year. The substantial increase in operating earnings
was driven by the continuing turnaround at B/E's commercial
aircraft segment combined with a broad-based increase in sales and
earnings at the distribution segment and, importantly, significant cost
reductions resulting from B/E's consolidation program, which was
completed during 2003. As previously reported, management believes the
consolidation program is generating annual cash savings of about $60
million.
The net loss for the quarter narrowed to $2.4 million or $0.06 per share, notwithstanding the $2.1 million negative effect of foreign exchange and a $2.7 million increase in interest expense, as compared with a loss of $14.1 million or $0.39 per share in the prior year period. The following is a summary of operating earnings by segment:
OPERATING EARNINGS
------------------------------
$ Millions, Three Months Ended
------------------------------
June 30, June 30,
2004 2003
------------------------------
Commercial aircraft $10.5 ($6.6)
Distribution 7.0 4.4
Business jet 0.4 (0.3)
Divestiture settlement, net of charges -- 6.3
------------------------------
Total $17.9 $3.8
SECOND QUARTER RESULTS BY SEGMENT The commercial aircraft segment continued its turnaround during the second quarter. The improved operating results at commercial aircraft were primarily driven by a strong increase in seating and 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. product revenues and lower costs resulting from B/E's recently completed consolidation program. Operating earnings for this segment of $10.5 million increased by $17.1 million on a $20.5 million increase in sales. The operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved to 8.2 percent of sales, up from an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $6.6 million in the prior year period. B/E's distribution segment delivered record sales of $37.1 million, approximately 44 percent better than the second quarter of the prior year. The growth in sales was driven by market share increases and a broad-based increase in demand for aftermarket aircraft fasteners. Operating earnings for this segment of $7.0 million were $2.6 million or 59 percent greater than the same period in the prior year. For the quarter, the business jet segment reported sales of $19.8 million, a 31 percent increase over the sales level in the first quarter of 2004 and 9 percent above the prior year period. Operating earnings for this segment of $0.4 million were $2.4 million greater than the first quarter of 2004, reflecting the 31 percent increase in sales volume and successful cost reduction initiatives; operating earnings increased by $0.7 million as compared to the same period in the prior year. The business jet segment will be the largest beneficiary beneficiary Person or entity (e.g., a charity or estate) that receives a benefit from something (e.g., a trust, life-insurance policy, or contract). A primary beneficiary receives proceeds from a trust or insurance policy before any other. of the four recently awarded international super first class programs. These four programs, which are initially valued at over $225 million, exclusive of option aircraft, are expected to begin deliveries in the second half of 2005 and to substantially improve the outlook for the business jet segment beginning in 2005 and accelerating thereafter. SIX-MONTH CONSOLIDATED RESULTS For the six months ended June 30, 2004, B/E reported consolidated sales of $360.4 million, an 18 percent increase over the same period last year. Operating earnings were $30.6 million for the six months just ended, up 183 percent compared to last year. The net loss for the current six month period was $10.0 million or $0.27 per share, reflecting a $4.4 million negative impact of foreign exchange and a $5.7 million increase in interest expense arising from the October October: see month. 2003 sale of $175 million of senior notes. For the same period last year, the net loss was $24.9 million or $0.70 per share. LIQUIDITY, BALANCE SHEET AND CASH FLOW At quarter end, B/E's liquidity remained very solid with cash balances of $132.5 million and no debt maturities until 2008. The $15 million reduction in B/E's cash balance from the December December: see month. 31, 2003 level was due primarily to two minor acquisitions to expand the company's product offerings ($13 million). Net debt at quarter end was $748.5 million, which represents total debt of $881 million, less cash and cash equivalents of $132.5 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.
FINANCIAL GUIDANCE AND OUTLOOK FOR 2004 AND 2005 Financial guidance for 2004 and 2005 is as follows: --The outlook for the company has significantly improved. Management now expects continued strong quarterly revenue comparisons with significant additional margin expansion expected over the next several quarters. Management also expects to be at a near-breakeven level of earnings by the fourth quarter of 2004. --Full year 2005 operating earnings should increase by about 40 - 50 percent over the 2004 results driven by significant additional margin expansion and a 5 - 10 percent increase in revenues. Backlog should continue to grow at double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. rates through 2005. --Revenues should grow at a double-digit rate in 2006, based on the recent $225 million of international super first class program awards, expected follow-on fol·low-on adj. Following as a related or consequent aspect or development: "Such contracts involve follow-on sales of maintenance services" Christian Science Monitor. orders for the company's international super first class product offerings and the current high level of RFQ's, essentially all of which are from foreign carriers. --The business jet segment, which returned to profitability in the current quarter, will be the largest beneficiary of the international super first class program awards, and should be solidly profitable in 2005 with accelerating revenue and earnings growth beginning in 2006 as these programs begin to deliver in volume. "The outlook for the company is rapidly improving. We continue to experience significant RFQ RFQ Request For Quote RFQ Request For Quotation RFQ Request for Qualifications (part of a potential client's preliminary selection process) RFQ Radio Frequency Quadrupole (accelerator technology) activity and we expect further backlog expansion during 2004 and 2005. RFQ's from major international carriers currently total about $1 billion. Our recent market share gains in the emerging international super first class market and expected follow-on orders coupled with anticipated orders for our market leading cabin interior products should grow our backlog by double-digit rates through 2005. Backlog from international super first class programs, initially valued at over $225 million, exclusive of option aircraft, will begin to convert into top-line revenues during 2005, improving the growth outlook for both our commercial aircraft and business jet segments," commented Mr. Khoury. "We expect our revenues to grow solidly during 2005 with an acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of revenue and profit growth in 2006, driven in large part by the recent international super first class awards, expected follow-on orders and the current large volume of RFQ's. These programs should allow us to leverage our product and service offerings across the entire enterprise, increase our capacity utilization Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. and further expand our margins. Combined with our distribution segment's successful performance, recent market share gains and the lower cost structure resulting from our consolidation program, B/E is poised to deliver to our shareholders strong growth in profitability through 2007," said Mr. Khoury. 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. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties. 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 aerospace fasteners. 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 about 60 percent of sales. B/E sells its products through its own global direct sales organization. For more information, visit B/E's website at http://www.beaerospace.com.
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED
-----------------------------
June 30, June 30,
(In millions, except per share data) 2004 2003
----------------------------------------------------------------------
Net sales $185.3 $151.8
Cost of sales 123.5 112.0
------ ------
Gross profit 61.8 39.8
Gross margin 33.4% 26.2%
Operating expenses:
Selling, general and administrative 29.9 26.1
Research, development and engineering 14.0 9.9
------ ------
Total operating expenses 43.9 36.0
------ ------
Operating earnings 17.9 3.8
Operating margin 9.7% 2.5%
Interest expense, net 19.9 17.2
------ ------
Loss before income taxes (2.0) (13.4)
Income taxes 0.4 0.7
------ ------
NET LOSS $(2.4) $(14.1)
====== ======
NET LOSS PER COMMON SHARE $(0.06) $(0.39)
====== ======
Common shares:
Weighted average 37.0 35.8
End of period 37.3 36.0
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
SIX MONTHS ENDED
-----------------------------
June 30, June 30,
(In millions, except per share data) 2004 2003
----------------------------------------------------------------------
Net sales $360.4 $306.5
Cost of sales 245.0 220.3
------ ------
Gross profit 115.4 86.2
Gross margin 32.0% 28.1%
Operating expenses:
Selling, general and administrative 58.6 54.6
Research, development and engineering 26.2 20.8
------ ------
Total operating expenses 84.8 75.4
------ ------
Operating earnings 30.6 10.8
Operating margin 8.5% 3.5%
Interest expense, net 39.7 34.0
------ ------
Loss before income taxes (9.1) (23.2)
Income taxes 0.9 1.7
------ ------
NET LOSS $(10.0) $(24.9)
====== ======
NET LOSS PER COMMON SHARE $(0.27) $(0.70)
====== ======
Common shares:
Weighted average 37.0 35.6
End of period 37.3 36.0
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions)
June 30, December 31,
2004 2003
---------- -----------
ASSETS
Current assets:
Cash and cash equivalents $132.5 $147.6
Accounts receivable, net 91.1 80.3
Inventories, net 179.9 168.7
Other current assets 14.9 10.6
---------- -----------
Total current assets 418.4 407.2
Long-term assets 649.9 645.3
---------- -----------
$1,068.3 $1,052.5
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $156.1 $132.9
Long-term liabilities 887.5 887.7
---------- -----------
1,043.6 1,020.6
Total stockholders' equity 24.7 31.9
---------- -----------
$1,068.3 $1,052.5
========== ===========
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)
SIX MONTHS ENDED
------------------------
June 30, June 30,
2004 2003
------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(10.0) $(24.9)
Adjustments to reconcile net loss to
net cash flows provided by (used in)
operating activities:
Depreciation and amortization 13.8 14.4
Non-cash employee benefit plan
contributions 1.1 1.2
Loss on disposal of property and equipment -- 1.4
Changes in operating assets and
liabilities, net of acquisitions (1.7) (6.4)
------- -------
Net cash flows provided by (used in)
operating activities 3.2 (14.3)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7.1) (7.3)
Proceeds from sale of property and equipment 0.2 2.3
Acquisitions, net of cash acquired (12.5) --
Other, net 0.1 (3.9)
------- -------
Net cash flows used in investing activities (19.3) (8.9)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES: 1.1 (65.1)
------- -------
Effect of exchange rate changes on cash flows (0.1) 1.3
------- -------
Net decrease in cash and cash equivalents (15.1) (87.0)
Cash and cash equivalents at beginning
of period 147.6 156.9
------- -------
Cash and cash equivalents at end of period $132.5 $69.9
======= =======
B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
This news release includes EBITDA, a non-GAAP financial measure as defined in the Securities and Exchange Commission's Regulation G. We include this measure primarily because investors have expressed an interest in this information, and because it is an additional measure of our operating performance and our ability to service our debt. We use EBITDA, among other things, to evaluate our operating performance, to value prospective acquisitions and as one of several components of incentive compensation targets for certain management personnel. This measure is among the primary indicators used by management as a basis of its planning and forecasting of future periods. We believe this measure is an important indicator Indicator Anything used to predict future financial or economic trends. Notes: In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. of our operational strength and the performance of our business because it provides a link between profitability and operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. . We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by our management, helps improve their ability to understand our operating performance and makes it easier to compare our results with other companies that have different financing and capital structures or tax rates. In addition, we believe this measure is among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing the operating performance of our company to other companies in our industry. EBITDA should not be viewed as a substitute for or superior to net loss, 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 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 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). as a measure of our profitability or liquidity. EBITDA is not determined using GAAP. Therefore, it is not necessarily comparable to similarly titled measures provided by other companies. Pursuant to the requirements of Regulation G, we provide the following table that reconciles EBITDA as presented in this release to net loss, the most directly comparable GAAP measure. For the reader's convenience we also reconcile EBITDA to cash flows from operations.
B/E Aerospace, Inc.
PERIODS ENDED JUNE 30, 2004
(unaudited; in millions)
---------------------
THREE TWELVE
MONTHS MONTHS
---------------------
Net loss $(2.4) $(38.6)
Interest expense, net 19.9 76.3
Loss on debt extinguishment -- 1.2
Taxes 0.4 1.2
Depreciation and amortization 6.9 27.7
---------------------
EBITDA $24.8 $67.8
===== =====
Cash flows used in operations $(2.4) $(8.1)
Interest expense, net 19.9 76.3
Taxes 0.4 1.2
Changes in operating assets and liabilities 7.5 9.1
Other non-cash adjustments (0.6) (10.7)
---------------------
EBITDA $24.8 $67.8
===== =====
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