EXHIBIT 99.1
CONTACT:
Max Kuniansky
Director of Investor Relations
B/E Aerospace, Inc.
(561) 791-5000
B/E AEROSPACE REPORTS FINANCIAL RESULTS
FOR SECOND QUARTER
WELLINGTON, FL, September 18, 2002 - B/E Aerospace, Inc. (Nasdaq: BEAV)
today announced financial results for its second fiscal quarter ending August
24, 2002. Management also commented on the earnings outlook for this year and
next year.
HIGHLIGHTS
o Earned $0.13 per share excluding transition costs; net loss of ($0.18)
including such costs
o Backlog increased slightly to about $505 million
o Significant increase in profitability expected in second half of this year,
driven by facility and workforce consolidations
o Industry downturn recently accelerated, expected to adversely impact future
results
"B/E Aerospace remains on course to earn a solid profit for this fiscal
year," said Mr. Robert J. Khoury, President and Chief Executive Officer of B/E
Aerospace. "Our facility and workforce consolidation initiatives are nearing
completion, although the one-time costs of implementing those initiatives will
be greater than originally anticipated. We expect a significant improvement in
profitability in the second half of this year, driven by our consolidation
initiatives.
"The airlines' financial distress has recently turned substantially worse,
with the most recent capacity reductions by American and Continental, US
Airways' recent bankruptcy filing and other domestic carriers struggling with
lower yields and record losses," he said. "We expect
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these worsening industry trends to adversely impact our financial results."
B/E's current fiscal year ends in February 2003.
SECOND QUARTER RESULTS
For the three-month period ended August 24, 2002, B/E reported a net loss of
($6.2) million, or ($0.18) per share (diluted), including $11.3 million of
transition costs related to the company's facility consolidation program.
Excluding transition costs, the company reported net earnings of $4.6 million,
or $0.13 per share, in line with expectations. For the second quarter of the
prior year, B/E reported net earnings of $8.9 million, or $0.27 per share
(diluted).
Transition costs are the expenses of operating facilities scheduled for
closure and integrating transferred operations into the remaining facilities.
Under generally accepted accounting principles, such costs must be treated as
normal expenses until plant shutdown has been completed.
"Substantially lower sales and greater interest expense, partly offset by
higher profit margins, were the principal factors driving B/E's second quarter
earnings," said Mr. Khoury, comparing "as adjusted" earnings of $0.13 per share
for the quarter just ended to $0.27 per share as reported for the same period a
year ago. "The results we report today reflect the continuing difficulties being
experienced by our customers, the world's airlines. U.S. carriers lost $2.7
billion in the first half of this year, after losing $6.2 billion last year. To
stimulate demand, airlines have reduced ticket prices to levels not seen since
1988. With such low yields, the U.S. airline industry is headed for record
losses for the full year 2002. In response, airlines continue to severely limit
spending. Our sales reflect the diminished demand."
Reported sales were $154.8 million, down 14 percent for the second quarter
compared to the same period last year. To enhance comparability, the company is
furnishing the following additional figures, which compare results "as adjusted"
by excluding transition costs for the quarter just ended, and "pro forma"
figures for the second quarter a year ago. All pro forma
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figures in this news release treat companies acquired last year as though
acquired at the beginning of last year, improving comparability with the period
just ended. Comparing the as adjusted and pro forma amounts:
o Sales were down $53.2 million, or 26 percent, resulting in a $20.1 million
reduction in gross profit;
o operating earnings were $7.9 million lower despite cost reduction efforts
and lower amortization, which together generated a $12.2 million decrease in
total operating expenses; and
o operating earnings were $21.8 million for the quarter just ended.
CONSOLIDATION PROGRAM NEARING COMPLETION
Responding to lower demand, in October 2001 B/E announced plans to eliminate
five of 16 principal production facilities and reduce workforce by about 1,000
people, or 22 percent.
"We have already exceeded our original workforce reduction goal, having
eliminated slightly more than 1,000 positions," said Mr. Khoury. "We expect to
eliminate about 200 additional positions by the time this consolidation is
completed. We have closed four facilities, including two in Florida, one in
California and one in Connecticut. A fifth factory, in Wales, is targeted for
closure early in calendar 2003.
"This downsizing has been painful," Mr. Khoury stated. "Industry conditions
necessitated closing plants which had already achieved significant productivity
improvements. We deeply regret the adverse impact on employees and their
families. Unfortunately, these actions were necessary to return the company to a
healthy level of profitability, fulfilling our obligation to our remaining
workforce and our shareholders."
B/E's gross and operating profit margins, excluding transition costs,
expanded by 50 basis points and 90 basis points respectively for the second
quarter compared to last year's reported results despite significantly lower
sales. Total operating expenses decreased by $12.2 million for the second
quarter compared to pro forma figures for the same period last year; $5.3
million of
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this reduction was lower amortization due to an accounting rule change
(Statement of Financial Accounting Standard No. 142).
TRANSITION COSTS WERE GREATER THAN ORIGINAL BUDGET
The completion of the facility consolidation and personnel reduction plan is
taking longer and costing more than originally planned. Transition costs
associated with the facility and workforce consolidations were $11.3 million for
the quarter. Management now expects total transition costs to be about $22
million for the full year, of which $17.6 million have already been incurred.
"At $22 million, the estimated one-time transition costs are greater than we
expected. However, even when combined with the $16 million cash restructuring
charge recorded last year, they compare favorably with the ongoing $30 million
annualized cost reduction we expect to deliver," said Mr. Khoury. "Our
consolidation effort will provide long-term benefits that far outweigh the
one-time implementation costs. We remain very confident in our ability to
deliver the cost structure improvements called for in our plan."
Contributing to the transition costs were decisions to extend the closing
date for the facility in Wales and temporarily retain selected staff from other
plants to complete the integration of newly combined operations. In addition,
management has expanded its cost reduction plan and expects to eliminate
approximately 200 additional positions, including a number of administrative and
management personnel.
SIX-MONTH RESULTS
For the six months ended August 24, 2002, B/E reported a net loss of ($7.7)
million, or ($0.22) per share (diluted), including $17.6 million of transition
costs. Excluding transition costs, the company reported net earnings of $8.9
million, or $0.25 per share, in line with expectations.
For the first six months of last year, B/E reported net earnings of $7.4
million, or $0.23 per share. Excluding an extraordinary item for early
extinguishment of debt, net earnings for the first six months of last year were
$16.7 million, or $0.52 per share.
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Lower sales and increased interest expense, partly offset by higher profit
margins, were the key factors affecting six-month results before transition
costs. To enhance comparability, the company is furnishing the following
figures, which compare results "as adjusted" by excluding transition costs for
the six-month period just ended, and "pro forma" figures for the same period a
year ago which include acquisitions in last year's results as if they were made
at the beginning of the year. Comparing the as adjusted and pro forma amounts:
o revenues were down $107.7 million or 25.8 percent compared to the six-month
period last year, resulting in a $39.3 million reduction in gross profit;
o operating earnings were $16.2 million lower, despite cost reduction efforts
and lower amortization, which generated a $23.1 million combined reduction
in operating costs; and
o operating earnings were $43.5 million for the six-month period just ended.
RESULTS BY SEGMENT; BACKLOG
Second quarter sales in B/E's largest segment, commercial aircraft products,
increased slightly compared to the immediately preceding quarter, but decreased
by about 28 percent compared to the same quarter a year ago.
NET SALES, QUARTERS ENDED:
$ MILLIONS: AUG. 24, 2002 MAY 25, 2002 AUG. 25, 2001
- -------------------------------------------------------------------------------------------
Commercial aircraft products $110.5 $107.1 $154.0
Business jet products 21.1 22.8 25.1
Fastener distribution* 23.2 24.4 -0-
- -------------------------------------------------------------------------------------------
TOTAL $154.8 $154.3 $179.1
* B/E acquired fastener distribution business in September 2001
Each segment produced a solid operating profit excluding transition costs.
Operating margins were about 12 percent for commercial aircraft products, 22
percent for business jet products and 15 percent for fastener distribution, all
before transition expenses.
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Notable recent accomplishments include:
o Qantas selected B/E premium and coach class seats for a retrofit
program covering about thirty domestic aircraft. B/E will also
provide seats for a number of new Qantas aircraft. The awards
follow the Australian airline's previously announced program to
upgrade international business class on existing aircraft with
B/E's electric lie-flat seats.
o Air China selected B/E's first class and coach class seats for a
number of new Airbus aircraft. The program continues the success
of B/E's new Spectrum coach class seat, which has already been
selected by leasing companies International Lease Finance
Corporation, Bouillion, and debis AirFinance.
o Bombardier selected B/E as the exclusive supplier of passenger
seats for its new Lear 40 and Lear 45 business jets. The new
aircraft will also use B/E oxygen system components. The program
is projected to generate revenues of about $20 million to B/E over
a number of years.
o B/E was selected by three Japanese airlines to provide engineering
services, certification services and equipment for the retrofit of
over 150 Boeing and Airbus aircraft. The retrofit program is
projected to provide revenues to B/E over several years. Future
new aircraft purchases should provide additional revenues.
o Lufthansa Technik designated B/E as a preferred supplier of
business jet seats for both new and aftermarket cabin interior
completions.
o B/E was designated the exclusive supplier of passenger and crew
oxygen systems for the new Eclipse 500 business jet. Production of
the new aircraft is scheduled to begin in 2005.
"We are pleased with these program awards, which increased our backlog
slightly during the second quarter. While demand remains constrained, orders
were up by more than 45 percent for
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the quarter just ended compared to the fourth quarter last year, and were about
equal to orders for the first quarter of this year," said Mr. Khoury. Backlog
was about $505 million as of the end of August 2002, up from about $500 million
at the end of May 2002 and up about $25 million since February 2002. Nearly 40
percent of B/E's current backlog is associated with non-U.S. customers, with the
remainder attributable to domestic customers.
CURRENT YEAR OUTLOOK: INDUSTRY DOWNTURN STILL UNFOLDING
"The latest round of fleet downsizings and US Airways' bankruptcy protection
filing underscore the financial stress many of our customers are feeling," Mr.
Khoury said. "This industry downturn is still unfolding. Recently, we have begun
to see trends in order flow for spare parts which are expected to adversely
affect results for the second half of this year. We now expect earnings per
share to be $0.70 - $0.75 for the current fiscal year, as compared to our prior
estimate of $0.85." The aforementioned earnings expectations exclude transition
costs.
Sales for the full year are now projected to be approximately $10 million
lower than previous expectations. Total expected sales for the full year are now
approximately $640 million.
"Expected earnings of $0.45 to $0.50 per share in the second half of this
year, while lower than our prior expectation, will provide strong growth both
sequentially and compared to the same period last year," Mr. Khoury said.
OUTLOOK: NEXT YEAR
"We continue to expect margin expansion to benefit next year's results," Mr.
Khoury said. "We will benefit from a full year's worth of savings from our
facility and workforce consolidations, compared to only six months' worth this
year.
"Looking further ahead, B/E should be a leading indicator of the commercial
aerospace sector's recovery," said Mr. Khoury. "We expect airline upgrade and
refurbishment activity to rebound well before the upturn in new aircraft orders.
With our aftermarket focus, we are well
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positioned to benefit from the aftermarket resurgence. Cabin interior upgrades
and refurbishments generate almost two-thirds of our revenue."
Several other factors will aid B/E on the road ahead, including:
o SEASONED LEADERSHIP: The management team has successfully implemented two
other major facility and personnel consolidation programs.
o STRONG LIQUIDITY: The company had $148 million of cash on hand as of the end
of August. As expected, B/E had positive cash flow for the second quarter.
o FINANCIAL FLEXIBILITY: B/E's bank credit facility requires no principal
payments until maturity in 2006. The company's publicly traded debt requires
no principal payments until 2008 through 2011.
"We expect greatly enhanced earnings power when demand returns to more
normal levels," said Mr. Khoury. "Our facility and workforce reductions are
substantially improving our cost structure, facilitating significantly better
profit margins as sales increase. After closing five principal locations, we
expect that our remaining, streamlined asset base will have the capacity to
generate annual revenues of approximately $1 billion without significant
additional capital investment. This will be possible largely because of efforts
begun several years ago: our lean manufacturing initiatives, continuous
improvement programs and standardized information systems."
As previously announced, B/E will hold a conference call to discuss its
financial results on Wednesday, September 18 at 9:00 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 Webcasts link.
This news release contains forward-looking statements 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, 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.
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This news release presents certain financial information on an "as adjusted"
basis to give effect to the exclusion of unusual costs and expenses. We present
the "as adjusted" data because we believe it is necessary to gain a full
understanding of our operating results by emphasizing the results of core
operations. We also present operating earnings as an additional measure of our
operating performance. Neither operating earnings nor the "as adjusted"
information included in this news release are determined using generally
accepted accounting principles. Therefore, such information is not necessarily
comparable to other companies. Neither operating earnings nor "as adjusted"
financial data should be viewed as a substitute for or superior to net income or
other data prepared in accordance with generally accepted accounting principles
as measures of our profitability or liquidity.
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 website at www.beaerospace.com.
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B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
-------------------------------------------------------------------------------
EXCLUDING TRANSITION
AS AS
REPORTED COSTS REPORTED PRO FORMA
AUGUST 24, 2002 AUGUST 24, 2002 AUGUST 25, 2001 AUGUST 25, 2001
(In millions, except per share data) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 154.8 $ 154.8 $ 179.1 $ 208.0
Cost of sales 105.8 94.5 110.1 127.6
-------- -------- -------- --------
Gross profit 49.0 60.3 69.0 80.4
Gross margin 31.7% 39.0% 38.5% 38.7%
Operating expenses:
Selling, general and administrative 28.9 28.9 34.3 39.7
Research, development and engineering 9.6 9.6 11.0 11.0
-------- -------- -------- --------
Total operating expenses 38.5 38.5 45.3 50.7
-------- -------- -------- --------
Operating earnings 10.5 21.8 23.7 29.7
Operating margin 6.8% 14.1% 13.2% 14.3%
Interest expense, net 16.7 16.7 13.8 16.1
-------- -------- -------- --------
(LOSS) EARNINGS BEFORE INCOME TAXES (6.2) 5.1 9.9 13.6
INCOME TAXES -- 0.5 1.0 1.4
-------- -------- -------- --------
NET (LOSS) EARNINGS $ (6.2) $ 4.6 $ 8.9 $ 12.2
======== ======== ======== ========
DILUTED NET (LOSS) EARNINGS PER COMMON SHARE $ (0.18) $ 0.13 $ 0.27 $ 0.35
COMMON SHARES:
WEIGHTED AVERAGE AND POTENTIALLY DILUTIVE 34.8 35.9 33.2 35.1
END OF PERIOD 34.8 34.8 32.2 34.7
(1) Cost of sales excludes $11.3 million of transition costs.
(2) Pro forma figures treat companies acquired during fiscal 2002 as though
acquired at the beginning of fiscal 2002. The pro forma results are
presented for informational purposes only in order to enhance comparability
and are not necessarily indicative of the operating results that would have
occurred had the transactions actually occurred at the beginning of fiscal
2002, nor are they necessarily indicative of future operating results.
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B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
SIX MONTHS ENDED
-------------------------------------------------------------------------------
EXCLUDING TRANSITION
AS AS
REPORTED COSTS REPORTED PRO FORMA
AUGUST 24, 2002 AUGUST 24, 2002 AUGUST 25, 2001 AUGUST 25, 2001
(In millions, except per share data) (1) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
Net sales $ 309.1 $ 309.1 $ 355.9 $ 416.8
Cost of sales 207.1 189.5 221.0 257.9
-------- -------- -------- --------
Gross profit 102.0 119.6 134.9 158.9
Gross margin 33.0% 38.7% 37.9% 38.1%
Operating expenses:
Selling, general and administrative 57.4 57.4 65.5 76.1
Research, development and engineering 18.7 18.7 23.1 23.1
-------- -------- -------- --------
Total operating expenses 76.1 76.1 88.6 99.2
-------- -------- -------- --------
Operating earnings 25.9 43.5 46.3 59.7
Operating margin 8.4% 14.1% 13.0% 14.3%
Interest expense, net 33.6 33.6 27.8 32.5
-------- -------- -------- --------
(LOSS) EARNINGS BEFORE INCOME TAXES (7.7) 9.9 18.5 27.2
INCOME TAXES -- 1.0 1.8 2.7
(LOSS) EARNINGS BEFORE EXTRAORDINARY ITEM (7.7) 8.9 16.7 24.5
EXTRAORDINARY ITEM(3) -- -- 9.3 9.3
-------- -------- -------- --------
NET (LOSS) EARNINGS $ (7.7) $ 8.9 $ 7.4 $ 15.2
======== ======== ======== ========
DILUTED NET (LOSS) EARNINGS PER COMMON
SHARE:
Before extraordinary item $ (0.22) $ 0.25 $ 0.52 $ 0.72
Net (loss) earnings $ (0.22) $ 0.25 $ 0.23 $ 0.45
COMMON SHARES:
WEIGHTED AVERAGE AND POTENTIALLY 34.7 35.8 32.1 34.0
DILUTIVE
END OF PERIOD 34.8 34.8 32.2 33.5
(1) Cost of sales excludes $17.6 million of transition costs.
(2) Pro forma figures treat companies acquired during fiscal 2002 as though
acquired at the beginning of fiscal 2002. The pro forma results are
presented for informational purposes only in order to enhance comparability
and are not necessarily indicative of the operating results that would have
occurred had the transactions actually occurred at the beginning of fiscal
2002, nor are they necessarily indicative of future operating results.
(3) Expenses related to early extinguishment of 9.875% Senior Subordinated Notes
and bank credit facility.
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B/E AEROSPACE, INC.
RECONCILIATION OF
"AS REPORTED" TO "AS ADJUSTED" FINANCIAL INFORMATION
This news release presents certain financial information on an "as adjusted"
basis to give effect to the exclusion of unusual costs and expenses. We present
the "as adjusted" data because we believe it is necessary to gain a full
understanding of our operating results by emphasizing the results of core
operations. In addition, we present operating earnings as an additional measure
of our operating performance. We also present EBITDA (earnings before interest,
taxes, depreciation and amortization) as set forth below because we believe it
is an appropriate supplemental measure of our ability to service our debt.
Neither operating earnings, EBITDA nor the "as adjusted" information included in
this news release are determined using generally accepted accounting principles.
Therefore, such information is not necessarily comparable to other companies.
Neither operating earnings, EBITDA nor "as adjusted" financial data should be
viewed as a substitute for or superior to net income or other data prepared in
accordance with generally accepted accounting principles as measures of our
profitability or liquidity.
IMPACT OF
AS TRANSITION AS
(In millions, except per share data) REPORTED COSTS ADJUSTED
- -----------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
AUGUST 24, 2002:
Net sales $ 154.8 $ -- $ 154.8
Gross profit 49.0 11.3 60.3
Operating earnings 10.5 11.3 21.8
Net (loss) earnings (6.2) 10.8(1) 4.6
Net (loss) earnings per share (0.18) 0.31 0.13
EBITDA 18.1 11.3 29.4
- -----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
AUGUST 24, 2002:
Net sales $ 309.1 $ -- $ 309.1
Gross profit 102.0 17.6 119.6
Operating earnings 25.9 17.6 43.5
Net (loss) earnings (7.7) 16.6(2) 8.9
Net (loss) earnings per share (0.22) 0.47 0.25
EBITDA 40.4 17.6 58.0
(1) Net of tax expense of $0.5
(2) Net of tax expense of $1.0
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