EXHIBIT 99.1
Contact: Max Kuniansky
Director of Investor Relations
561-791-5000
B/E AEROSPACE REDUCES REVENUE AND EARNINGS EXPECTATIONS
Conference Call Scheduled for Friday, October 25, 10:00 a.m. Eastern Time
WELLINGTON, FL, October 24, 2002 - B/E Aerospace, Inc. (Nasdaq: BEAV)
today stated that recent events in the airline and business jet industries are
expected to adversely affect the company's financial results for the current
quarter and beyond. The company also announced plans to change its fiscal year
to a calendar year, effective December 31, 2002.
B/E will hold a conference call to discuss today's announcements on
Friday, October 25 at 10:00 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.
"During the past month, we have received negative news from a broad
cross-section of our customers," said Mr. Robert J. Khoury, President and Chief
Executive Officer of B/E. "It has been an unusual and difficult month, even in
the context of the deepening downturn which is afflicting our airline customers,
and has now spread to the business jet sector.
"During this short span of time, we have experienced some rather
dramatic actions by airlines, business jet manufacturers, business jet operators
and completion centers," Mr. Khoury said. "These actions will adversely affect
demand for our products for the current quarter and beyond.
"Depressed demand for higher-margin business jet products and
commercial airline spares is magnifying the adverse effect on our financial
results," Mr. Khoury said. "Due to lower-than-expected sales and margins, we
expect B/E's results for the current quarter to be
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well below prior expectations and Wall Street estimates." B/E's current quarter
ends on November 23, 2002.
COMMERCIAL AIRCRAFT PRODUCTS
Recent developments which will result in lower demand for the
company's commercial aircraft products include:
o Spare parts orders from major domestic carriers, which dropped significantly
last quarter, further deteriorated from last quarter's levels.
o Seating programs have been deferred, including an important program for a
major U.S. airline.
o Airframe manufacturers and their prime contractors are closely monitoring
their inventories, implementing lower target levels for many of B/E's
machined products.
The driving force behind all of these actions is the downturn in the
airline industry, now entering its second year. Domestic carriers continue to
struggle with below-normal air travel, low ticket prices and high labor and
security costs. Mid-October announcements by several major U.S. airlines
indicate that yet another round of airline cost-cutting measures lies ahead.
American Airlines and Delta Air Lines recently announced plans to defer
deliveries of over 60 new aircraft in 2003 through 2005 and will further
downsize their fleets, grounding some aircraft currently in service.
BUSINESS JET PRODUCTS
Recent developments driving lower demand for B/E's business jet
products include:
o Bombardier, Dassault and Cessna are reducing or, in certain cases,
temporarily halting production of a number of aircraft types. In
Bombardier's case, the production halts begin next month.
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o A major fleet operator has deferred deliveries of new business jets,
including large aircraft with high product content.
o B/E has received notice of significant deferrals and cancellations from
cabin interior completion centers.
All three factors reflect a severe slowdown in demand for business
jets, driven by weak economic conditions and poor corporate profits in the U.S.
EARNINGS OUTLOOK
"These recent developments underscore the fact that the industry
downturn is still unfolding," said Mr. Khoury. "With the airline industry having
lost $7 billion last year, now on track to lose a similar amount this year, and
burning cash at a record pace, airlines are taking dramatic actions to conserve
cash. B/E's revenues and earnings are clearly being affected, and expectations
must be revised downward.
"At the present time, we believe that B/E's revenues for the current
quarter ended November 23 will be approximately $140 to $150 million, which is
$15 to $20 million less than previous expectations," Mr. Khoury said. "The sharp
decline in demand for our highly-profitable business jet products and commercial
aircraft spares magnifies the projected near-term adverse effect on our bottom
line. We currently expect to report a net loss of approximately $10 million for
the current quarter, reflecting a $6 million charge for expanding our cost
reduction program, lower-than-expected sales and margins, and transition costs
associated with previously announced facility consolidations.
"Excluding the above-mentioned consolidation and transition costs, we
expect approximately break-even results for the current quarter, which is well
below our prior expectations and current Wall Street estimates," Mr. Khoury
said.
B/E will announce earnings for the third quarter ended November 23,
2002 in mid-December. Results for periods ended December 31, 2002 are scheduled
for release in
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early calendar 2003. The one-month transition period will enable the company to
begin reporting on a calendar year basis in 2003, aligning B/E's reporting cycle
with that of peer companies.
"We expect to provide updated guidance for next year, calendar 2003,
after we report our third quarter results," said Mr. Khoury. "Clearly, we no
longer expect to achieve earnings of $1.00 to $1.25 per share next year.
However, we do expect to report a profit for calendar 2003, assuming that our
revenues do not deteriorate further."
RESPONSE TO CHANGING INDUSTRY CONDITIONS
"We have worked hard to reduce costs in the past year," Mr. Khoury
said. "After 12 months of effort to downsize the company, we are on track to
achieve the savings we originally expected. Unfortunately, those savings will
not be sufficient to offset the incremental drop in demand we announce today.
Therefore, the company is expanding its cost reduction program. It will be
necessary to reduce our workforce by approximately 200 additional positions over
the next several months. We have already begun implementing these reductions."
Today's actions are the latest in a series of cost reduction
initiatives B/E began implementing after the September 11 terrorist attacks.
Those initiatives were designed to position B/E for profitability at lower
demand levels. Actions completed to date include closing four facilities,
announcing closure of a fifth facility and reducing workforce by 25 percent. The
new actions announced today will bring the cumulative headcount reduction to
approximately 1,400, or nearly one out of every three positions in B/E's
workforce prior to the September 11, 2001 terrorist attacks.
CASH FLOW AND FINANCIAL FLEXIBILITY
"We believe we have the cash flow and financial flexibility to manage
through these demanding conditions," Mr. Khoury said. "Given the factors
affecting our revenues recently, investors may be interested to know where our
break-even point lies. We believe that
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annual revenues of approximately $575 million would enable us to deliver
break-even net earnings, once the additional workforce reductions we announce
today are completed. Breakeven results at this revenue level would permit us to
make investments in research and development, sales and marketing to maintain
and grow our global market leadership position. At that revenue and break-even
point, we would expect to generate positive EBITDA (earnings before interest,
taxes, depreciation and amortization) of approximately $100 million, providing
operating flexibility to ride out this industry downturn.
"Currently, our cash balance is about $140 million, slightly less than
the balance we reported at the end of the last quarter, and more than adequate
to meet operating needs and service our debt obligations," he said.
"Furthermore, B/E's debt structure gives us substantial financial flexibility.
Our bank credit facility requires no principal payments until 2006. Our publicly
traded notes require no principal payments until 2008-2011. We have a seasoned
executive team which has managed through prior downturns. The cost reductions
B/E is now realizing will provide substantial operating leverage and enhanced
earnings power when demand stabilizes."
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.
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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