B/E Aerospace Reports Second Quarter 2005 Financial Results; Revenues of $208 Million Up 12.0 Percent; Earnings Per Diluted Share of $0.14 Exceed Expectations; Record Bookings and Backlog Improve Outlook.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 its financial results for the quarter ended June June: see month. 30, 2005. HIGHLIGHTS --Reported second quarter revenues of $207.6 million, representing year over year growth of 12 percent. --Second quarter gross margin of 35.1 percent expanded by 170 basis points versus the same period of the prior year. --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 $24.1 million were nearly 35 percent higher than the same period of the prior year. Second quarter operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 11.6 percent expanded by 190 basis points versus the same period of the prior year and was up 150 basis points compared to the immediately preceding quarter. Operating earnings growth was driven primarily by expanding margins at the commercial aircraft segment, as well as continued growth in revenue and earnings at both our business jet and distribution segments. --Net earnings for the quarter were $8.4 million, or $0.14 per 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. share, representing increases of $10.8 million and $0.20 per diluted share, respectively, versus the same period in the prior year and were double those of the immediately preceding quarter. --Record 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, 2005 stood at $820 million, an increase of 33 percent from backlog at June 30, 2004 and an increase of $60 million or 8 percent as compared to the immediately preceding quarter. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. bookings for the six months through June 30, 2005 were $524 million and were a record for any six month period. SECOND QUARTER SEGMENT SALES AND OPERATING EARNINGS For the 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: sales were $207.6 million, a $22.3 million or 12.0 percent increase over the second quarter of 2004. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight by segment were as follows:
NET SALES
----------------------------------------
Three Months Ended June 30
($ in millions)
----------------------------------------
Percent
2005 2004 Change Change
----------------------------------------
Commercial aircraft $136.4 $128.4 $8.0 6.2%
Distribution 45.0 37.1 7.9 21.3%
Business jet 26.2 19.8 6.4 32.3%
----------------------------------------
Total $207.6 $185.3 $22.3 12.0%
The commercial aircraft segment generated revenues of $136.4 million in the second quarter of 2005, up 6 percent versus the same period of the prior year, primarily due to a higher level of shipments of seating products and food and beverage F&B is a common abbreviation in the United States and Commonwealth countries, including Hong Kong. F&B is typically the widely accepted abbreviation for "Food and Beverage," which is the sector/industry that specializes in the conceptualization, the making of, and delivery of foods. preparation and storage equipment. The distribution segment delivered strong revenue growth of 21 percent in the second quarter of 2005, driven by 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 aftermarket demand for aerospace fasteners and continued market share gains. In the business jet segment, revenues increased by 32 percent in the second quarter of 2005, reflecting the nascent nascent /nas·cent/ (nas´ent) (na´sent) 1. being born; just coming into existence. 2. just liberated from a chemical combination, and hence more reactive because uncombined. recovery within the business jet industry and initial shipments of super first class products. Operating earnings for the second quarter of 2005 of $24.1 million increased by nearly 35 percent, as compared to the same period last year. The operating margin of 11.6 percent in the second quarter of 2005 was 190 basis points greater than the operating margin realized in the second quarter of 2004, and 150 basis points greater as compared to the immediately preceding quarter. The substantial increase in operating earnings was driven primarily by significant margin expansion at the commercial aircraft segment, as well as continued growth in revenue and earnings at both the business jet and distribution segments. The following is a summary of the change in operating earnings by segment:
OPERATING EARNINGS
----------------------------------------
Three Months Ended June 30
($ in millions)
----------------------------------------
Percent
2005 2004 Change Change
----------------------------------------
Commercial aircraft $14.2 $10.5 $3.7 35.2%
Distribution 9.0 7.0 2.0 28.6%
Business jet 0.9 0.4 0.5 125.0%
----------------------------------------
Total $24.1 $17.9 $6.2 34.6%
Interest expense for the second quarter of 2005 of $15.0 million was $4.9 million lower than interest expense recorded in the same period of the prior year. Interest expense decreased in the second quarter of 2005 as a result of the early retirement of $200 million of senior subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. notes during the fourth quarter of 2004. The interest coverage ratio, which is determined by dividing the sum of operating earnings plus depreciation and amortization by interest expense, was 2.1:1 for the second quarter of 2005, as compared to 1.2:1 in the second quarter of 2004 and 1.8:1 in the immediately preceding quarter. Net earnings for the second quarter were $8.4 million or $0.14 per diluted share, a $10.8 million or $0.20 per diluted share improvement as compared to the same period of the prior year, and double the level of earnings reported in the immediately preceding quarter. SECOND QUARTER SEGMENT DISCUSSION The commercial aircraft segment's ("CAS") operating results and order book continued to improve during the second quarter of 2005. Compared to the second quarter of 2004, CAS operating earnings of $14.2 million increased by 35 percent on a 6 percent increase in sales, driven by a 220 basis point expansion in operating margin to 10.4 percent of sales. The margin expansion was primarily a result of an improved mix of products sold and ongoing manufacturing efficiencies. Commercial aircraft segment gross margin, bookings and backlog all showed strong improvements versus the same quarter of the prior year. Bookings for the second quarter of 2005 were up nearly 100 percent versus the same period last year and backlog during the second quarter of 2005 reached a record level. The distribution segment generated record revenues of $45.0 million in the second quarter of 2005, which were 21 percent greater than the same period in the prior year. Operating earnings at the distribution segment in the second quarter of 2005 were a record $9.0 million, 28.6 percent higher than the same period last year and represented a 20.0 percent operating margin. The business jet segment generated second quarter revenues of $26.2 million, up 32 percent as compared to second quarter of 2004. Operating earnings at the business jet segment during the quarter of $0.9 million were $0.5 million or 125 percent higher than operating earnings in the same period last year. The substantial increase in operating earnings reflects the higher level of revenues associated with an improving business jet industry and initial shipments of super first class products. Operating earnings, although substantially improved versus the second quarter of the prior year, reflected lower than normal earnings on the initial shipments of super first class products. SIX-MONTH CONSOLIDATED RESULTS For the six months ended June 30, 2005, B/E reported consolidated sales of $404.1 million, a 12.1 percent increase over the same period last year. Gross profit of $140.8 million for this six-month period was 22 percent higher versus the same period in the prior year, as gross margin expanded by 280 basis points to 34.8 percent. Operating earnings of $44.0 million for the six-month period were up 44 percent compared to the same period last year, primarily due to a 240 basis point expansion in operating margin to 10.9 percent of sales. Interest expense of $30.1 million for the current six-month period decreased by $9.6 million versus the same period in the prior year. Net earnings for the current six-month period were $12.5 million or $0.21 per diluted share, increases of $22.5 million and $0.48 per diluted share versus the same period last year. For the six months ended June 30, 2005 compared to the same period in 2004, the commercial aircraft segment's operating earnings of $23.2 million were up 23 percent on a 4 percent increase in sales, primarily due to a 140 basis point expansion in operating margin to 8.8 percent of sales. The margin expansion was primarily due to an improved mix of products sold and ongoing manufacturing efficiencies. For the six months ended June 30, 2005 compared to the same period in 2004, distribution segment operating earnings of $17.8 million were up 34 percent on a 24 percent increase in sales. Similarly, for the six months ended June 30, 2005 compared to the same period in 2004, business jet segment operating earnings of $3.0 million were up $5.0 million on a $17.2 million or 49 percent increase in sales. LIQUIDITY, BALANCE SHEET AND CASH FLOWS At the end of the quarter, the company's liquidity remained solid with cash balances totaling approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $75 million, up $11.6 million from the first quarter balance of $63.4 million. Net debt at the end of the second quarter stood at approximately $605 million, which represents total debt of $680 million less cash and cash equivalents of approximately $75 million. The company has no debt maturities until 2008. RECENT PROGRAM WINS, RECORD BACKLOG, STRENGTHEN OUTLOOK Strong bookings for the second quarter of $269 million drove backlog at June 30, 2005 to another record level of approximately $820 million, which was 33 percent greater versus the company's June 30, 2004 backlog and was up eight percent on a sequential One after the other in some consecutive order such as by name or number. quarterly basis. Orders for the quarter were driven both by strong international fleet 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 and the first major North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. coach class 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 program since the events of September September: see month. 11, 2001. "Our investments in new product development over the past several years continue to convert into market share gains and backlog growth," 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 Aerospace, Inc. These investments have generated a host of new products including: --Electric lie-flat seats --The MiniPod(R) seating product suite for wide-body aircraft -- selected by 14 major international carriers --Super first class compartments In developmental biology, compartments are fields of cells of distinct cell lineage, cell affinity, and genetic identity. In a developing organ, all cells within a compartment possess similar affinities, and so intermingle with each other. -- selected by 5 international airlines to date --Next generation steam oven  It has been suggested that , , , , and be merged into this article or section. -- selected by 10 airlines including
the first four A380 customers
--Spectrum(R) platform seats, including first class, tourist (jargon) tourist - A guest on the system, especially one who generally logs in over a network from a remote location for comm mode, electronic mail, games and other trivial purposes. A tourist is one step below a luser. class and regional jets -- selected by nearly 50 customers --New ICON(TM) 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. , wide-body tourist class seat -- successfully launched with two major international carriers --LED lighting systems -- selected by over 80 customers --New beverage making systems -- selected by over 20 customers, and --B/E's new patent-protected Pulse Oxygen(R) system -- which was recently selected by Boeing (language) BOEING - An early system on the IBM 1130. [Listed in CACM 2(5):16, May 1959]. for installation on all 787 Dreamliner aircraft We believe the many customer program awards we have won during the quarter support our belief that our new product innovations are contributing to our recent results in the marketplace. Some of the programs awarded during the quarter include the following: Air Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of selected B/E to upgrade its fleets of narrow-body Noun 1. narrow-body - a commercial airliner with a single aisle narrow-body aircraft, narrowbody aircraft airliner - a commercial airplane that carries passengers , wide-body and regional jets with B/E's Spectrum seats in a program valued in excess of $50 million. This represents the product launch for our Spectrum first class seat, which is a product line extension of the existing Spectrum platform which has now been ordered by nearly 50 customers for their narrow-body aircraft Noun 1. narrow-body aircraft - a commercial airliner with a single aisle narrow-body, narrowbody aircraft airliner - a commercial airplane that carries passengers . Under this program, B/E will manufacture and deliver its Spectrum family of coach class and first class seating products for all of Air Canada's Airbus and Boeing narrow-body aircraft as well as its fleet of Bombardier regional jets. In addition, B/E will also retrofit Air Canada's fleet of wide-body aircraft with its coach class Spectrum product. Mr. Khoury commented, "Air Canada is the first North American airline to undertake a major fleet-wide retrofit program since the events of September 11, 2001." During the second quarter the company also successfully launched ICON, its next generation long-haul wide-body, tourist class seat with two major international carriers in programs initially valued at approximately $50 million. This premium coach seat platform includes numerous product innovations designed to increase passenger comfort while reducing airlines' total cost of ownership. We believe this new product and these two programs favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. position B/E for future upgrade opportunities in the emerging long-haul coach class seating segment. In addition, during the second quarter, Boeing selected B/E's recently developed, patent-protected aircraft oxygen system, the Pulse Oxygen system, for all Boeing 787 Dreamliners. The Pulse Oxygen system utilizes B/E's proprietary technology. This award enhances B/E's competitive position and sets the stage for additional future awards on other new generation aircraft platforms. Mr. Khoury commented, "This clearly is the most vibrant marketing period in our history. The company has been generating record backlogs over the past twelve months, while reporting substantial revenue and earnings growth, all at the outset of the recovery in our industry. The second quarter has been our best quarter ever in terms of customer program awards, totaling approximately $375 million, and, as a result, we expect to continue to see robust growth in our backlog during the balance of 2005, which we believe will result in new records for backlog at the end of the third and fourth quarters and rising to approximately $1 billion by year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . We are increasingly confident in our ability to generate revenues in excess of $800 million during 2005 and to generate revenues in excess of $900 million in 2006. The company is maintaining 2005 earnings guidance of $0.50 per share in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite overperformance on revenue, bookings and backlog, electing to spend more on product development and marketing. In addition, as announced on June 20, 2005, the company is raising its 2006 earnings guidance to a range of $1.00 - $1.10 per share." FINANCIAL GUIDANCE FOR 2005 AND 2006 Financial guidance for 2005 and 2006 is now as follows: --For the full year 2005, management expects revenue in excess of $800 million, a 45 percent increase in operating earnings driven by both revenue growth and additional margin expansion, and full year earnings of approximately $0.50 per share. Based on second quarter awards, several of which will book in the second half of the year, management expects full year 2005 bookings to exceed $1 billion, and for year-end backlog to approximate ap·prox·i·mate v. To bring together, as cut edges of tissue. adj. 1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate. 2. Close together. $1 billion. The company's 2005 earnings performance is expected to be driven by substantially expanded margins in the commercial aircraft segment, significant revenue growth and margin expansion in the business jet segment and strong revenue and earnings growth in the distribution segment. --The company's calendar year 2006 outlook has improved due to recent marketing wins. Management expects revenue in excess of $900 million, and to report earnings of approximately $1.00 to $1.10 per share for the full year. Orders and backlog are expected to continue to be strong in 2006 consistent with the new aircraft delivery cycle. 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 range of products for both commercial aircraft and business jets. B/E manufactured products include seating, lighting, oxygen, and food and beverage preparation and storage equipment. The company also provides cabin interior design, reconfiguration and passenger-to-freighter conversion services. Products for the existing aircraft fleet -- the aftermarket -- generate 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. 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. The forward-looking statements included in this news release are made only as of the date of this news release and, except as required by federal securities laws, we do not have any obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or .
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED
--------------------
June 30, June 30,
(In millions, except per share data) 2005 2004
----------------------------------------------------------------------
Net sales $ 207.6 $ 185.3
Cost of sales 134.8 123.5
-------- --------
Gross profit 72.8 61.8
Gross margin 35.1% 33.4%
Operating expenses:
Selling, general and administrative 32.1 29.9
Research, development and engineering 16.6 14.0
-------- --------
Total operating expenses 48.7 43.9
-------- --------
Operating earnings 24.1 17.9
Operating margin 11.6% 9.7%
Interest expense, net 15.0 19.9
-------- --------
Earnings (loss) before income taxes 9.1 (2.0)
Income taxes 0.7 0.4
-------- --------
NET EARNINGS (LOSS) $ 8.4 $ (2.4)
======== ========
NET EARNINGS (LOSS) PER COMMON SHARE
Basic $ 0.15 $ (0.06)
======== ========
Diluted $ 0.14 $ (0.06)
======== ========
Common shares:
Basic
Weighted average 57.1 37.0
End of period 57.7 37.3
Diluted
Weighted average 60.1 37.0
End of period 60.7 37.3
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
SIX MONTHS ENDED
--------------------
June 30, June 30,
(In millions, except per share data) 2005 2004
----------------------------------------------------------------------
Net sales $ 404.1 $ 360.4
Cost of sales 263.3 245.0
-------- --------
Gross profit 140.8 115.4
Gross margin 34.8% 32.0%
Operating expenses:
Selling, general and administrative 63.8 58.6
Research, development and engineering 33.0 26.2
-------- --------
Total operating expenses 96.8 84.8
-------- --------
Operating earnings 44.0 30.6
Operating margin 10.9% 8.5%
Interest expense, net 30.1 39.7
-------- --------
Earnings (loss) before income taxes 13.9 (9.1)
Income taxes 1.4 0.9
-------- --------
NET EARNINGS (LOSS) $ 12.5 $ (10.0)
======== ========
NET EARNINGS (LOSS) PER COMMON SHARE
Basic $ 0.22 $ (0.27)
======== ========
Diluted $ 0.21 $ (0.27)
======== ========
Common shares:
Basic
Weighted average 57.0 37.0
End of period 57.7 37.3
Diluted
Weighted average 59.8 37.0
End of period 60.7 37.3
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions)
June 30, Dec. 31,
2005 2004
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 75.0 $ 76.3
Accounts receivable, net 105.9 91.6
Inventories, net 220.2 197.8
Other current assets 14.8 13.4
-------- --------
Total current assets 415.9 379.1
Long-term assets 623.8 645.7
-------- --------
$1,039.7 $1,024.8
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 160.5 $ 154.1
Long-term liabilities 686.3 687.9
-------- --------
846.8 842.0
Total stockholders' equity 192.9 182.8
-------- --------
$1,039.7 $1,024.8
======== ========
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)
SIX MONTHS ENDED
--------------------
June 30, June 30,
2005 2004
--------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 12.5 $ (10.0)
Adjustments to reconcile net earnings (loss)
to net cash flows (used in) provided by
operating activities:
Depreciation and amortization 14.4 13.8
Provision for doubtful accounts 0.4 0.5
Non-cash employee benefit plan
contributions 1.4 1.1
Changes in operating assets and
liabilities, net of acquisitions (31.1) (2.2)
-------- --------
Net cash flows (used in) provided by
operating activities (2.4) 3.2
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7.1) (7.1)
Proceeds from sale of property and equipment 0.8 0.2
Acquisitions, net of cash acquired -- (12.5)
Other, net 3.0 0.1
-------- --------
Net cash flows used in investing activities (3.3) (19.3)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuances of common stock, net
of expenses 5.9 2.0
Repayment of long-term debt (0.2) (0.9)
-------- --------
Net cash flows provided by financing activities 5.7 1.1
-------- --------
Effect of exchange rate changes on cash flows (1.3) (0.1)
-------- --------
Net decrease in cash and cash equivalents (1.3) (15.1)
Cash and cash equivalents at beginning of period 76.3 147.6
-------- --------
Cash and cash equivalents at end of period $ 75.0 $ 132.5
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