EXHIBIT 99.1
Contact: Max Kuniansky
Director of Investor Relations
561-791-5000
B/E AEROSPACE ANNOUNCES RESULTS FOR FOURTH QUARTER, FULL YEAR;
CONFIRMS EARNINGS GUIDANCE
WELLINGTON, FL, April 10, 2002 - B/E Aerospace, Inc. (Nasdaq: BEAV) today
announced financial results for the fourth quarter and full fiscal year ended
February 23, 2002.
HIGHLIGHTS
- ----------
o Facility consolidation and cost reduction program on track
o Company expects superior returns on equity and assets in current fiscal
year, with strong growth in profitability beginning in third quarter
"Results for the second half of the year were in line with guidance
issued in October," said Mr. Robert J. Khoury, president and chief executive
officer of B/E Aerospace. "With effective implementation of our cost reduction
program, we delivered approximately breakeven results for the second half of the
year, after excluding facility consolidation and workforce reduction costs. B/E
is on course for a solidly profitable current year, fiscal 2003, even at the
significantly lower level of projected revenues. We expect a surge in earnings
in the second half of the year, driven by margin improvements from our facility
consolidation, lean manufacturing and continuous improvement initiatives. With a
full year of benefits from those initiatives, next year (fiscal 2004) should be
a year of substantially greater profitability."
"Looking further ahead, while it is not yet clear when demand will
return to normal, we expect airline upgrade and refurbishment activity to drive
our revenue growth well before the upturn in new aircraft orders," Mr. Khoury
said. "When demand does return to normal, we will have greatly enhanced earnings
power as a result of our cost reduction initiatives."
FOURTH QUARTER RESULTS
- ----------------------
For the fourth quarter of fiscal 2002, B/E reported a net loss of
$(5.2) million. As expected, the net loss includes $4.8 million of transition
costs related to the company's facility consolidation program. Excluding the
transition costs, the company recorded a net loss of ($0.5) million, or ($0.01)
per share (diluted) for the quarter just ended. Transition costs are the
expenses of operating facilities scheduled for closure, which must be treated as
normal operating expenses until plant shutdown has been completed.
For the prior year, fiscal 2001, B/E's fourth quarter net earnings were
$3.2 million, including $8.3 million of costs related to acquisitions and the
termination of an initial public offering for B/E's semiconductor manufacturing
equipment subsidiary. Excluding such costs, earnings for the fourth quarter a
year ago were $10.6 million or $0.40 per share (diluted).
EBITDA substantially exceeded net earnings, highlighting one measure of
the company's strong cash flow. EBITDA (earnings excluding interest, taxes,
depreciation and amortization) was $27.2 million for the fourth quarter of
fiscal 2002 on a net loss of ($0.5) million, after excluding the transition
costs from both figures.
LOWER SALES A KEY FACTOR
- ------------------------
Lower sales and greater interest expense were key factors affecting the
adjusted earnings per share of ($0.01) for the fourth quarter compared to the
same period a year ago. Net sales were down by $14 million or 8 percent for the
fourth quarter compared to the same period a year ago. Excluding acquisitions
completed after the third quarter of fiscal 2001, sales decreased by $47 million
or 28 percent compared to the fourth quarter a year ago.
"Our fourth quarter sales reflect the worldwide downturn in the airline
industry," said Mr. Khoury. "Due to a weak economy and the aftermath of the
September 11 terrorist attacks, air travel worldwide is well below last year's
levels. The airlines - our principal customers - have reported record losses.
Responding to the difficult operating conditions, airlines have parked over
2,000 airplanes and implemented severe cash conservation
2
measures. This has constrained demand for our products, a situation which we
expect to continue for some time."
COST REDUCTION PROGRAM ON TRACK
- -------------------------------
Responding to lower projected demand, in October 2001 B/E announced
plans to close five facilities and reduce its workforce by about 1,000 people or
22 percent. These actions are intended to position B/E for a profitable fiscal
2003, as well as a substantially more profitable 2004, even at the significantly
lower level of sales, and stronger performance when demand returns to normal.
"Our facility consolidation program is on schedule," Mr. Khoury said.
"Plant closures and cutbacks have reduced our workforce by about 570 positions
as of the end of February. We expect to achieve a workforce reduction of about
830 positions by the end of April.
"As stated in the past, we anticipate reaching our workforce reduction
goal of 1,000 positions by the middle of this fiscal year," Mr. Khoury stated.
"These initiatives, while painful, are necessary to create a stable work
environment and a profitable company, fulfilling our obligations to B/E's
remaining employees as well as its shareholders."
Profit margins were adversely impacted by the large reduction in
revenues and the facility consolidation transition costs. Operating margin was
10.7 percent for the fourth quarter compared to 15.1 percent for the same period
a year ago, excluding the facility consolidation costs in the quarter just ended
and the acquisition and IPO costs in the prior-year period.
Management expects the operating margin to return to a level exceeding
15 percent by the second half of the current fiscal year.
FISCAL 2002 REVIEW
- ------------------
"Fiscal 2002 was a year of unexpected external events which interrupted
our earnings growth trend," Mr. Khoury said. "We delivered solid financial
performance for the first
3
half of the year. But the events of September 11, and the airline industry
turmoil which followed, required us to shift gears and respond to a new business
environment. Our response, reducing capacity and workforce, required a $99
million charge in the third quarter, of which about $16 million was cash. Even
though the vast majority of the charge did not affect cash, it caused a net loss
for the year."
B/E recorded a net loss of ($104.1) million for the full fiscal year
2002. The net loss includes charges and transition costs related to the facility
consolidation program ($104.7 million), acquisition-related expenses ($6.8
million) and debt extinguishment costs ($9.3 million). Excluding those items,
the company earned $16.7 million, or $0.49 per share (diluted).
For the prior year, fiscal 2001, B/E earned $20.3 million, including
$8.3 million of costs related to acquisitions and the IPO. Excluding such costs,
B/E earned $27.7 million or $1.07 per share (diluted) for fiscal 2001.
EBITDA was $125.9 million for fiscal 2002, compared to $127.7 million
for fiscal 2001, excluding the aforementioned cost items from both periods.
Net sales were up 2 percent for the year just ended compared to the
prior year. Sales from businesses owned throughout both fiscal 2001 and fiscal
2002 decreased by 13 percent for fiscal 2002 compared to fiscal 2001, reflecting
the difficult operating conditions experienced by B/E's airline customer base,
particularly in the second half of the year.
4
B/E's gross profit margin for the year just ended, excluding the
facility consolidation costs, was 37.5 percent, unchanged compared to 37.5
percent for the prior year. Operating margin was 11.6 percent for the year just
ended compared to 12.7 percent for the prior year, excluding the facility
consolidation, acquisition and IPO costs described herein from both periods.
Higher selling, general and administrative expenses reflected recent
acquisitions, which increased costs for the year just ended but not the prior
year. "When costs are put on a comparable basis, with the expenses of recent
acquisitions reflected in both periods, selling, general and administrative
expenses actually decreased for the year just ended," Mr. Khoury said. "We
expect this trend to continue during fiscal 2003."
RESULTS BY SEGMENT
- ------------------
Substantially lower sales in the commercial aerospace segment were the
primary driver of lower overall revenues.
NET SALES ($ millions): 4th QUARTER FULL YEAR
--------------------------------------------------------------------
Commercial aerospace $111 $550
Business jet products 19 86
Fastener distribution 22 44
--------------------------------------------------------------------
TOTAL $152 $680
Despite the adverse industry conditions, each of B/E's segments had
solid EBIT (earnings before interest and taxes) for the fourth quarter,
providing a sound foundation for future growth. As expected, commercial
aerospace was the segment most significantly affected by the difficult operating
conditions during the fourth quarter. For the full year, excluding facility
consolidation charges and costs, each of B/E's three segments had positive
earnings before interest and taxes.
5
CASH BALANCES INCREASED
- -----------------------
Liquidity remained strong during the fourth quarter. B/E's cash balance
grew to about $160 million at the end of February, up $24 million since November
2001. Effective working capital management and the timing of interest payments
contributed to the favorable trend.
Management expects healthy cash flow throughout the coming year.
Management expects to use some cash in the first quarter due to the timing of
interest payments and cash outflows associated with facility consolidation
charges already recorded.
Net debt was $695 million, or 85% of capital, at the end of February
2002.
STRATEGIC AND OPERATING HIGHLIGHTS
- ----------------------------------
"We made substantial progress on both strategic and operating items in
fiscal 2002 despite the unexpected external events," Mr. Khoury said.
Accomplishments for the year included:
o Nearly doubled the size of the addressable market with the acquisition
of M & M Aerospace, a leading aftermarket supplier of aerospace
fasteners.
o Received The Boeing Company's Q-100 designation, signifying that B/E is
one of Boeing's top 100 suppliers worldwide. This award places B/E in
the top 3% of all Boeing suppliers.
o Awarded new vendor performance rating by Cessna, receiving highest
possible score in every category rated.
o Reduced cycle time per seat by 41% and reduced plant-wide overtime by
85% at Miami business jet seating facility.
o Achieved a 25% reduction in labor hours per unit and a 28% reduction in
floor space required for assembly of Boeing 777 crew rest products.
OUTLOOK
- -------
"Our sales forecast for fiscal 2003 reflects constrained demand for
B/E's products due to current industry conditions. Nevertheless, we remain
confident in our earnings outlook," Mr.
6
Khoury said. "Our cost reduction program is beginning to take hold and is
delivering the results we expected.
"We expect sales of about $650 million for fiscal 2003, down about $92
million or 12 percent compared to prior-year pro forma sales," he said. Pro
forma sales treat companies acquired during fiscal 2002 as though acquired at
the beginning of fiscal 2002, improving comparability with fiscal 2003.
"Our backlog stands at about $480 million as of the end of February
2002, down about $155 million or 24 percent since the end of August 2001. About
50 percent of this backlog is deliverable within 12 months. Our backlog, coupled
with our large aftermarket business, gives us confidence that our revenue
forecast will be achieved or surpassed."
B/E expects to earn about $0.85 per share for fiscal year 2003
(February 24, 2002 through February 22, 2003), with about $0.60 of the projected
earnings per share occurring in the second half of the year. Earnings per share
should be roughly equal in the first and second quarters.
EBITDA is projected at about $135 million for fiscal 2003, several
times greater than projected net earnings of about $31 million. The $31 million
of expected earnings represents a projected return on equity in excess of 20
percent.
7
As previously announced, expected current year results exclude
approximately $10 - $12 million of transition costs associated with facility
consolidations, the vast majority of which will be incurred in the first half of
the year. Expected results also include estimated benefits from implementing
Financial Accounting Standard 142 regarding amortization of goodwill and
intangible assets. B/E continues to assess the impact the new accounting
standard and expects to conclude this assessment in May 2002.
AFTERMARKET EXPECTED TO LEAD RECOVERY
- -------------------------------------
"At present, airlines are deferring refurbishment of cabin interiors
and have parked over 2,000 aircraft, creating pent-up demand," Mr. Khoury said.
"Air travel will eventually return to normal, enabling our airline customers to
normalize the size of their fleets and to begin strengthening their financial
condition. As the airlines rebuild their financial strength, spending on cabin
refurbishment and upgrades will no doubt be their first priority, because it
requires much less cash than purchasing new aircraft. We are well positioned to
benefit from this trend, since the aftermarket -- including cabin interior
upgrades and refurbishments - generates almost two-thirds of our revenue."
Several key value drivers will aid B/E in the year ahead, including:
o Seasoned leadership: senior management team has successfully
implemented two other major facility and personnel consolidation
programs.
o Financial flexibility: B/E has about $160 million of cash on hand and
is generating cash from operations. The company's bank credit facility
requires no principal payments until maturity in 2006, and B/E's
publicly traded securities require no principal payments until 2008
through 2011.
o Strong cash flow: B/E expects to generate free cash flow of over $50
million in fiscal 2003. 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. Khoury. "Even after closing five principal
locations, we expect that our restructured remaining facilities will have the
capacity to generate annual revenues of approximately $1 billion, due largely to
the successful implementation of our lean manufacturing and continuous
improvement programs of the last two years."
As previously announced, B/E will hold a conference call to discuss its
financial results on Wednesday, April 10 at 10:30 a.m. Eastern time. To listen
to the conference call live via the Internet, visit the Investors section of
B/E's website at www.beaerospace.com and follow the Conference Calls link.
8
This news release contains forward-looking statements as defined in the
Private Securities Litigation Reform Act 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, Form 10-K and Form 10-Q. For more information, see the section
entitled "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 web site at www.beaerospace.com.
9
B/E AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
--------------------------------------
February 23, February 24,
(In thousands, except per share data) 2002 2001
- --------------------------------------------------------------------------------------------------
Net sales $151,748 $ 165,793
Cost of sales(1) 98,423 101,834
-------- ---------
Gross profit(1) 53,325 63,959
Gross margin(1) 35.1% 38.6%
Operating expenses:
Selling, general and administrative 26,063 29,658
Research, development and engineering 9,885 11,635
Amortization 5,920 5,873
-------- ---------
Total operating expenses 41,868 47,166
-------- ---------
Operating earnings 11,457 16,793
Operating margin 7.6% 10.1%
Interest expense, net 16,748 13,253
-------- ---------
(Loss) earnings before income taxes (5,291) 3,540
Income taxes (benefit) (54) 354
-------- ---------
NET (LOSS) EARNINGS $ (5,237) $ 3,186
======== =========
NET (LOSS) EARNINGS PER COMMON SHARE:
Diluted $(0.15) $ 0.12
Cash basis(2) $(0.00) $ 0.32
OTHER DATA: BEFORE ITEMS NOTED BELOW(3)
(Loss) Earnings $ (481) $ 10,634
(Loss) earnings per common share:
Diluted $(0.01) $ 0.40
Cash basis(2) $ 0.15 $ 0.59
Common shares:
Weighted average and potentially dilutive 34,725 26,840
End of period 34,426 28,461
(1) Period ending February 23, 2002 includes $4.8 million of facility
consolidation costs. Excluding such costs, gross profit and gross
margin would be $58.1 million and 38.3%, respectively.
(2) Excludes tax-effected amortization expense.
(3) Excludes facility consolidation, acquisition-related and initial public
offering costs.
10
B/E AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
--------------------------------------
February 23, February 24,
(In thousands, except per share data) 2002 2001
- --------------------------------------------------------------------------------------------------
Net sales $680,462 $ 666,444
Cost of sales(1) 530,087 416,626
-------- ---------
Gross profit(1) 150,375 249,818
Gross margin(1) 22.1% 37.5%
Operating expenses:
Selling, general and administrative 114,340 100,817
Research, development and engineering 43,514 48,898
Amortization 24,997 23,408
-------- ---------
Total operating expenses 182,851 173,123
-------- ---------
Operating earnings (loss) (32,476) 76,695
Operating margin - 11.5%
Interest expense, net 60,478 54,170
-------- ---------
(Loss) earnings before income taxes
and extraordinary item (92,954) 22,525
Income taxes 2,253
-------- ---------
1,854
(Loss) earnings before extraordinary item (94,808) 20,272
Extraordinary item(2) 9,309 -
-------- ---------
NET (LOSS) EARNINGS $(104,117) $ 20,272
========= =========
NET (LOSS) EARNINGS PER COMMON SHARE:
Diluted $ (3.18) $ 0.78
Cash basis(3) $ (2.49) $ 1.60
OTHER DATA: BEFORE ITEMS NOTED BELOW(4)
Earnings $ 16,688 $ 27,720
Earnings per common share:
Diluted $ 0.49 $ 1.07
Cash basis(3) $ 1.16 $ 1.88
Common shares:
Weighted average and potentially dilutive 32,753 25,889
End of period 34,426 28,461
(1) Period ending February 23, 2002 includes $104.7 million of facility
consolidation costs. Excluding such costs, gross profit and gross
margin would be $255.0 million and 37.5%, respectively.
(2) Expenses related to early extinguishment of debt.
(3) Excludes tax-effected amortization expense.
(4) Excludes extraordinary item and costs related to facility
consolidations, acquisitions and initial public offering.
11
B/E AEROSPACE, INC.
SELECTED FINANCIAL DATA - AS ADJUSTED
PERIODS ENDED FEBRUARY 23, 2002
Our news release includes certain financial information which has been presented
on a pro forma basis to give effect to the exclusion of one-time costs and
expenses. Management has presented this data in this manner as it believes it is
necessary to gain a full understanding of our operating results. In addition, we
have presented EBIT (earnings before interest and taxes) as a measure of our
operating performance. We have also presented EBITDA (earnings before interest,
taxes, depreciation and amortization) as a supplemental measure of our ability
to service our debt. However, neither EBITDA nor the pro forma information
included in this press release are determined using generally accepted
accounting principles and, therefore, are not necessarily comparable to other
companies. Neither EBITDA nor pro forma financial data should be viewed as a
substitute for net income or other data prepared in accordance with generally
accepted accounting principles or as measures of our profitability or liquidity.
Impact of Impact of Impact of
Acquisition- Facility Debt
As Related Consolidation Extinguishment As
(In thousands) Reported Expenses Activities Costs Adjusted
- ------------------------------------------------------------------------------------------------------------------------------
Three Months:
Sales $151,748 $151,748
Gross profit 53,325 $4,756 58,081
EBIT 11,457 4,756 16,213
Net earnings (5,237) 4,756 (481)
EBITDA $ 22,464 $4,756 $27,220
Twelve Months:
Sales $680,462 $680,462
Gross profit 150,375 $104,656 255,031
EBIT (32,476) $6,840 104,656 79,020
Net earnings (104,117) 6,840 104,656 $9,309 16,688
EBITDA $ 14,357 $6,840 $104,656 $125,853
# # #
12