B/E Aerospace Reports Second Quarter Earnings Up 89 Percent, Comments On Earnings Outlook.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. 19, 2001 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 second quarter of its fiscal year 2002 and commented on the company's earnings outlook for fiscal 2002 and 2003. HIGHLIGHTS: SECOND QUARTER - generated $38 million of net cash flow from operations for the quarter, up from $14 million last year and significantly exceeding reported earnings of $8.9 million; - improved liquidity, increasing cash on hand by almost $15 million for the quarter, and established a new 5-year, $150 million bank credit facility; - strengthened its balance sheet, reducing net debt to 73 percent of net capital as compared to 90 percent one year ago; and - announced a strategic expansion into the aerospace fastener distribution market with the acquisition of M & M Aerospace Hardware, Inc. for an initial purchase price of $177 million. The M & M acquisition was completed after the end of the second quarter. Consequently, M & M's revenues and expenses are not included in the financial results announced today. SECOND QUARTER RESULTS Net earnings were $8.9 million for the second quarter of fiscal 2002, up 89 percent compared to $4.7 million in the second quarter a year ago. Earnings 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. ) were $0.27 for the second quarter of fiscal 2002, a 42 percent increase compared to $0.19 for the same period last year. Cash basis earnings, at $0.44 per share, were substantially higher than reported earnings. Cash basis earnings exclude amortization and related tax effects. Shares outstanding increased to 33.2 million (weighted average for the quarter), reflecting the common stock offering completed in May 2001. Higher revenues and improved profit margins drove the strong second quarter results. Sales increased by 9 percent compared to the same quarter last year, reflecting higher sales of both commercial aircraft products and business jet products. Sales for the quarter increased by 6 percent 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 compared to last year. Pro forma sales include sales from acquisitions completed in fiscal 2001 and 2002, but exclude prior-year revenues from the service operations, which were discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: as earlier reported. Pro forma sales also exclude both current and prior-year revenues from the company's Advanced Thermal Sciences Thermal science is the combined study of thermodynamics, fluid mechanics, and heat transfer. This umbrella-subject is typically designed for non-engineering students and functions to provide a general introduction to each of three core heat-related subjects. subsidiary. MARGIN IMPROVEMENT CONTINUES B/E continued to improve its profit margins in the second quarter. The company's operating profit margin Operating profit margin The ratio of operating profit to net sales. increased by 180 basis points compared to the same period last year, and by 40 basis points compared to the quarter ended May 2001.
OPERATING GROSS
MARGIN MARGIN
Current fiscal year:
- Second quarter 13.2% 38.5%
- First quarter 12.8% 37.3%
Prior fiscal year:
- Second quarter 11.4% 37.0%
B/E has increased its gross margin by 730 basis points since fiscal 1996, after adjusting for merger and consolidation costs. The improvement reflects the effective rationalization rationalization, in psychology: see defense mechanism. of product lines and facilities, and the success of management's continuous improvement and lean manufacturing Lean manufacturing is the production of goods using less of everything compared to mass production: less human effort, less manufacturing space, less investment in tools, and less engineering time to develop a new product. initiatives. Aided by effective leveraging of information technology systems, these initiatives are enabling operating management to drive down costs and improve both quality and productivity. B/E's commercial aircraft products segment performed well in the second quarter, with sales up 12 percent and operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: up 300 basis points compared to the second quarter of last year. The business jet and engineering services segments generally performed in line with management's expectations. Sales of business jet products increased by 10 percent, while the engineering services segment expanded its 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 by 5 percent. SIX-MONTH REVIEW Net earnings for the first half of fiscal 2002 excluding an extraordinary item (debt 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. costs) were $16.7 million, an 82 percent increase compared to the same period last year. Earnings per share excluding the extraordinary item were $0.52, up 44 percent compared to the same period a year ago. Common shares outstanding increased by 27 percent compared to last year. Higher sales and improved profit margins contributed to the substantial increases in earnings before the extraordinary item. OTHER ACHIEVEMENTS B/E's other achievements include: - generated $38 million of net cash flow from operations for the quarter, up from $14 million last year and significantly exceeding reported earnings of $8.9 million; - improved liquidity, increasing cash on hand by almost $15 million for the quarter, and established a new 5-year, $150 million bank credit facility; - strengthened its balance sheet, reducing net debt to 73 percent of net capital as compared to 90 percent one year ago; and - announced a strategic expansion into the aerospace fastener distribution market with the acquisition of M & M Aerospace Hardware, Inc. for an initial purchase price of $177 million. The M & M acquisition was completed after the end of the second quarter. Consequently, M & M's revenues and expenses are not included in the financial results announced today. AIRLINES FACE DIFFICULT OPERATING ENVIRONMENT In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. "The U.S. airline industry is experiencing its steepest financial decline of the past 35 years, " 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. "This year has seen airlines unfavorably impacted by high labor and fuel costs, compounded by a steep drop in business travel. U.S. airlines lost almost a billion dollars in the second quarter. For the usually strong third quarter, analysts were projecting losses of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $450 million even before the tragic events of last week. "In the wake of last week's events, U.S. airlines face a period of protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. and severe financial stress and decreased air travel. Clearly, the airline industry is headed for its largest annual loss ever in calendar 2001. "Airframe manufacturers will likely see new aircraft deliveries decrease significantly for the next several years," Mr. Khoury said. "B/E is primarily an aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. company, and is likely to be less impacted than most by fluctuations in new aircraft deliveries. However, our airline customers will undoubtedly implement emergency cash conservation measures which will have a negative impact on our business." EARNINGS OUTLOOK "Although the decline in airline financial results has been swift and sharp, B/E's business remains fundamentally sound," said Mr. Khoury. "Each of our segments is solidly profitable. Each is benefiting from our ongoing continuous improvement and lean manufacturing initiatives. "We have strengthened our balance sheet in the past year and have good liquidity, with cash and available bank credit of $156 million as of the end of August and adjusted for completion of the M & M acquisition. "Our management team has honed its skills during comparable airline industry conditions in the early 90's. In addition, we are not solely dependent on the U.S. airline industry. B/E is truly a global supplier, doing business with all the world's major airlines and we have a substantial presence in the business jet cabin interior market as well. "With these attributes, and the largest installed product base in the industry, we expect to emerge from this downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. with strengthened market shares. However, given the unprecedented conditions in the airline industry, we are unlikely to achieve the level of earnings growth anticipated in our previous guidance, either this year or next. "At the present time, we don't don't 1. Contraction of do not. 2. Nonstandard Contraction of does not. n. A statement of what should not be done: a list of the dos and don'ts. have enough information to provide quantitative quantitative /quan·ti·ta·tive/ (kwahn´ti-ta?tiv) 1. denoting or expressing a quantity. 2. relating to the proportionate quantities or to the amount of the constituents of a compound. guidance on the earnings outlook," Mr. Khoury concluded. "Within 3 to 6 months, we expect to have a clearer picture of how the airlines' austerity Austerity See also Asceticism, Discipline. Amish conservative Christian group in North America noted for its simple, orderly life and nonconformist dress. [Am. Hist. measures will impact our business. However, with our market leadership, lean manufacturing culture, seasoned management team and excellent liquidity, we believe we will be able to remain profitable and cash flow positive through the downturn." 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 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. With annual revenues exceeding $700 million, the company employs more than 4,000 people worldwide. For more information, visit B/E's web site at http://www.beaerospace.com.
B/E AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
------------------
August 25, August 26,
(In thousands, except per share data) 2001 2000
----------------------------------------------------------------------
Net sales $179,093 $164,116
Cost of sales 110,113 103,358
-------- --------
Gross profit 68,980 60,758
Gross margin 38.5% 37.0%
Operating expenses:
Selling, general and administrative 27,896 23,941
Research, development and engineering 10,973 12,228
Amortization 6,412 5,847
-------- --------
Total operating expenses 45,281 42,016
-------- --------
Operating earnings 23,699 18,742
Operating margin 13.2% 11.4%
Interest expense, net 13,790 13,488
-------- --------
Earnings before income taxes 9,909 5,254
Income taxes 991 525
-------- --------
NET EARNINGS $ 8,918 $ 4,729
======== ========
NET EARNINGS PER COMMON SHARE:
Diluted $ 0.27 $ 0.19
Cash basis (1) $ 0.44 $ 0.39
Common shares (weighted average and
potentially dilutive) 33,227 25,367
(1) Excludes tax-effected amortization expense
B/E AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
SIX MONTHS ENDED
----------------
August 25, August 26,
(In thousands, except per share data) 2001 2000
----------------------------------------------------------------------
Net sales $355,926 $333,241
Cost of sales 221,040 210,930
-------- --------
Gross profit 134,886 122,311
Gross margin 37.9% 36.7%
Operating expenses:
Selling, general and administrative 52,779 47,982
Research, development and engineering 23,053 25,209
Amortization 12,761 11,715
-------- --------
Total operating expenses 88,593 84,906
-------- --------
Operating earnings 46,293 37,405
Operating margin 13.0% 11.2%
Interest expense, net 27,764 27,219
-------- --------
Earnings before income taxes 18,529 10,186
Income taxes 1,853 1,019
-------- --------
Earnings before extraordinary item 16,676 $ 9,167
Extraordinary item (1) 9,309 --
-------- --------
NET EARNINGS $ 7,367 $ 9,167
======== ========
EARNINGS PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM:
Diluted $ 0.52 $ 0.36
Cash basis (2) $ 0.88 $ 0.78
NET EARNINGS PER COMMON SHARE:
Diluted $ 0.23 $ 0.36
Cash basis (2) $ 0.59 $ 0.78
Common shares (weighted average and
potentially dilutive) 32,063 25,168
(1) Expenses related to early extinguishment of 9.875% Senior
Subordinated Notes and bank credit facility.
(2) Excludes tax-effected amortization expense
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