Exhibit 99.1
CONTACT: Max Kuniansky
Director of Investor Relations
B/E Aerospace, Inc.
(561) 791-5000 ext. 1440
max_kuniansky@beaerospace.com
B/E AEROSPACE REPORTS FINANCIAL RESULTS
FOR THIRD QUARTER
WELLINGTON, FL, December 17, 2002 - B/E Aerospace, Inc. (Nasdaq: BEAV)
today announced financial results for its third fiscal quarter ending November
23, 2002.
HIGHLIGHTS
o Reported third quarter net loss of ($0.64) per share, including charges and
transition costs. Excluding such items, third quarter net loss was ($0.10)
per share.
o Year-over-year margins improved despite lower sales.
o Cash on hand totaled $130 million as of November 23, providing operating
flexibility.
o Cost reduction initiatives continue.
"Sales for the third quarter met the reduced revenue expectations we
communicated in October," said Mr. Robert J. Khoury, President and Chief
Executive Officer of B/E Aerospace. "But demand for our cabin interior products
remains severely depressed by the well-known problems in the airline industry,
and as reported in October, the downturn has spread to the business jet sector.
"We have worked very hard over the past year to align our cost structure
with the reduced level of demand for our products," he stated. "Much progress
has been made, as demonstrated by the profit margin improvements we report
today. We expect to complete our cost reduction efforts by mid-2003, by which
time we will have taken about a year and a half to achieve our goal of closing
five facilities and eliminating about 1,400 positions. The total projected cost
of the consolidation effort is nearly $150 million, of which about $59 million
is cash.
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"With severe financial distress in the airline industry and political
turmoil in the Middle East, the outlook is uncertain," he continued. "At this
point, it appears that we can reduce costs sufficiently to deliver break-even
bottom-line results on depressed revenues of approximately $575 - $600 million
for calendar 2003. This outlook assumes no further deterioration in revenue
trends. Breakeven financial performance would permit the company to generate
EBITDA (earnings before interest, taxes, depreciation and amortization) of
approximately $100 million.
"We are operating in unusually turbulent industry conditions," Mr. Khoury
stated. "Under these circumstances, there is more than the usual amount of
uncertainty associated with the financial outlook we are communicating to
investors today."
THIRD QUARTER RESULTS
For the third fiscal quarter ended November 23, 2002, B/E reported a net
loss of ($22.4) million, or ($0.64) per share (diluted). By comparison, the
company had a net loss of ($106.2) million, or ($3.08) per share for the third
quarter of the prior year.
The net loss reported today includes $17.8 million of charges and other
costs associated with B/E's facility and workforce consolidation program.
Excluding the consolidation costs, B/E reported a net loss of ($3.6) million, or
($0.10) per share, for the quarter just ended.
Results for the third quarter a year ago included $99.9 million of facility
and personnel consolidation costs. Excluding those costs and acquisition-related
expenses of $6.8 million, B/E reported net earnings of $0.5 million, or $0.01
per share for the third quarter a year ago.
"Substantially lower sales, greater interest expense and higher foreign
income taxes were the principal reasons for the year-over-year decrease in our
third quarter earnings," said Mr. Khoury, comparing the "as adjusted" loss of
($0.10) per share for the quarter just ended to the "as adjusted" earnings of
$0.01 for the same period a year ago. Reconciliations of "as adjusted" amounts
to amounts reported on a GAAP basis are presented at the end of this news
release.
Net sales were $145.5 million for the quarter just ended, down 16 percent
compared to the same period a year ago. Net sales were down 29 percent compared
to pro forma figures for the same period two years ago, underscoring the effect
of the current industry downturn on B/E's business. Pro forma figures treat
companies acquired last year as though acquired at the beginning of the third
quarter two years ago, improving comparability with the period just ended.
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PROFIT MARGINS EXPANDED YEAR-OVER-YEAR
"Despite substantially lower sales, we expanded margins on a year-over-year
basis, illustrating the success of our cost reduction efforts," Mr. Khoury said.
To enhance comparability, the company is furnishing the following figures, which
compare "as adjusted" figures for the quarter just ended and "as adjusted"
figures for the third quarter a year ago, excluding the aforementioned
consolidation costs from both periods, and the acquisition-related expenses from
the third quarter a year ago:
o Gross profit margin improved to 37.7 percent, up from 35.9 percent a year
ago.
o Operating expenses decreased by $5.6 million, with $4.1 million of the
decrease due to lower amortization resulting from new accounting rules.
Despite favorable year-over-year margin comparisons, the adjusted net loss
of ($0.10) per share did not meet management's expectations for the third
quarter. A lower-margin mix of products sold, together with higher foreign
income taxes, contributed to the shortfall.
WORKFORCE AND FACILITY CONSOLIDATION UPDATE
In October 2001, B/E announced a series of actions designed to position the
company for profitability at lower demand levels. The original cost reduction
program called for closing five facilities and reducing headcount by 1,000
positions. Management later expanded the program to encompass 1,400 positions.
The downsizing program has required B/E to record $112 million in charges
and $28 million in transition costs since the third quarter of last year. Future
transition costs are estimated at about $8 million. The total estimated cost of
the consolidation effort is nearly $150 million, of which approximately $59
million is cash.
Achievements to date include closing four manufacturing facilities. The
fifth plant closure is scheduled for the first half of calendar 2003. Headcount
has been reduced by about 1,000 positions.
During the quarter just ended, the company recorded the following
consolidation costs:
o a $6.0 million charge related to the expansion of the cost reduction
program, as announced in October 2002,
o a $7.0 million non-cash charge for obsolete inventory, reflecting the
increased number of parked aircraft which will likely not return to
service, and
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o $4.8 million of transition costs related to facility consolidations.
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.
"This consolidation effort amounts to a major reconfiguration of our
operations and cost structure," Mr. Khoury stated. "Our workforce
consolidations, when complete, will eliminate nearly one out of every three
positions in B/E's workforce prior to the September 11, 2001 terrorist attacks.
Because this downsizing has been so significant in size, the implementation cost
has been substantial.
"Our consolidation program has been painful for employees and their
families," Mr. Khoury said. "Unfortunately, it was necessary to offset the
adverse impact of the industry downturn."
YEAR-TO-DATE RESULTS
For the nine months ended November 23, 2002, B/E reported a net loss of
($30.1) million, or ($0.86) per share (diluted). By comparison, the company had
a net loss of ($98.9) million, or ($3.08) per share for the same period last
year.
For the nine months just ended, B/E recorded consolidation costs totaling
$35.3 million. For the same period last year, consolidation costs,
acquisition-related expenses and debt extinguishment costs totaled $116 million.
Excluding all the aforementioned items in both periods, B/E earned $5.2
million, or $0.15 cents per share for the nine months just ended, compared to
net earnings of $17.1 million, or $0.53 per share, for the nine-month period a
year ago. The decrease in earnings per share was largely due to lower sales and
increased interest expense, partly offset by an improved gross profit margin.
To enhance comparability, the company is furnishing the following
comparison of "as adjusted" figures for the nine months just ended, which
exclude the aforementioned consolidation costs, compared to "pro forma" figures
for the same period a year ago. The pro forma figures for the nine-month period
a year ago treat companies acquired last year as though acquired at the
beginning of last year, improving comparability with the period just ended, and
also exclude the aforementioned consolidation costs, acquisition-related
expenses and debt extinguishment costs. Comparing the "as adjusted" and pro
forma amounts:
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o Net sales were down $135.0 million, or 23 percent, compared to the
nine-month period a year ago.
o Operating expenses decreased by $28.7 million, reflecting cost reduction
efforts and a $15.0 million decrease in amortization expense due to new
accounting rules.
RESULTS BY SEGMENT; BACKLOG
Third quarter sales in B/E's largest segment, commercial aircraft products,
dropped by 20 percent compared to the same period a year ago. Sales in all
segments decreased sequentially compared to the immediately preceding quarter.
Net Sales, Quarters Ended:
$ millions: NOV. 23, 2002 AUG 24, 2002 NOV. 24, 2001
---------------------------------------------------------------------------
Commercial aircraft products $ 102.0 $ 110.5 $ 128.2
Business jet products 20.6 21.1 21.5
Fastener distribution 22.9 23.2 23.1*
---------------------------------------------------------------------------
TOTAL $ 145.5 $ 154.8 $ 172.8
* B/E acquired fastener distribution business in mid-September 2001
Backlog decreased during the third quarter. The decrease reflects depressed
demand from airlines and business jet customers. Difficult operating conditions
in both sectors have caused several customers to cancel or defer orders. B/E's
backlog stood at about $460 as of the end of November, down from approximately
$500 million at the end of August 2002 and $520 million at the end of November
2001.
OUTLOOK: NEXT YEAR
"We are managing through unprecedented industry conditions," Mr. Khoury
said. "The U.S. airline industry lost $7 billion last year, and is likely to
lose a similar amount this year. The double-barreled impact of weak air travel
and low ticket prices continues to ravage domestic carriers' financial
condition. To cut costs, airlines worldwide have reduced their fleet sizes,
idling nearly 2,200 aircraft. With conditions like these, this industry downturn
shows no signs of improving any time soon.
"Under these circumstances, there is more than the usual amount of
uncertainty associated with any forecast of financial performance, including the
outlook we are communicating to investors today," said Mr. Khoury.
For next year, calendar 2003, management expects:
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o sales of approximately $575 - $600 million, assuming no significant
deterioration in current revenue trends,
o approximately break-even bottom-line results, excluding approximately $8
million of transition costs associated with closure of the fifth facility
in the first half of 2003,
o net losses in the first and second quarters, reflecting the transition
costs mentioned above,
o improving bottom-line performance in the third and fourth quarters, and
o EBITDA of about $100 million excluding transition costs.
"We believe we have the cash flow and financial flexibility to manage
through these demanding conditions," Mr. Khoury said. "With over $130 million of
cash on hand, liquidity is more than adequate to meet operating needs and
service our debt obligations. Our bank credit facility requires no principal
payments until 2006. Our publicly traded notes require no principal payments
until 2008-2011. The non-amortizing nature of this debt gives us substantial
financial flexibility.
"We are not dependent solely on U.S. airlines," he continued. "Our market
presence is truly global. Over 40 percent of last year's sales came from outside
the U.S. Our competitive position is very strong, with dominant worldwide market
shares in many product lines.
"Our distinctive business model should enable us to ride out this downturn
and prosper when conditions improve," Mr. Khoury stated. "More than 60 percent
of our sales come from the aftermarket, which we expect to rebound well before
new aircraft deliveries. The cost reductions we are now realizing will provide
substantial operating leverage and enhanced earnings power when demand
stabilizes. In the meantime, we have a seasoned executive team which has managed
through prior downturns."
BANK CREDIT UPDATE; CHANGE IN FISCAL YEAR
"We are currently in compliance with the financial covenants of our bank
credit agreement," Mr. Khoury said. "However, it will be necessary to begin the
process of amending those covenants, which are scheduled to ramp up in the first
quarter of next year. We hope to complete this effort in the near term."
As previously announced, B/E plans to change its fiscal year to a calendar
year, effective December 31, 2002. Results for periods ended December 31, 2002
are scheduled for release in early calendar 2003. Thereafter, B/E will begin
reporting on a calendar year basis. The company will post condensed financial
data for calendar years 2001 and 2002 on its website in the near future.
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As previously announced, B/E will hold a conference call to discuss its
financial results on Tuesday, December 17 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.
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 and EBITDA as additional measures
of our operating performance. Neither 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 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
ITEMS NOTED AS
AS BELOW REPORTED
REPORTED November November
November 23, 2002 24, 2001
(In millions, except per share data) 23, 2002 (1) (2)
- --------------------------------------------------------------------------------
Net sales $ 145.5 $ 145.5 $ 172.8
Cost of sales 108.5 90.7 217.5
------- ------- -------
Gross profit 37.0 54.8 (44.7)
Gross margin 25.4% 37.7% --%
Operating expenses:
Selling, general and administrative 28.9 28.9 35.0
Research, development and engineering 11.0 11.0 10.5
------- ------- -------
Total operating expenses 39.9 39.9 45.5
------- ------- -------
Operating (loss) earnings (2.9) 14.9 (90.2)
Operating margin --% 10.2% --%
Interest expense, net 16.8 16.8 16.0
------- ------- -------
Loss before income taxes (19.7) (1.9) (106.2)
Income taxes 2.7 1.7 --
------- ------- -------
NET LOSS $ (22.4) $ (3.6) $(106.2)
======= ======= =======
DILUTED NET LOSS PER COMMON SHAR $ (0.64) $ (0.10) $ (3.08)
Common shares:
Weighted average 35.0 35.0 34.5
End of period 35.1 35.1 35.2
(1) Cost of sales excludes the following consolidation costs: $6.0 charge
related to October 2002 expansion of cost reduction program, inventory
impairment charge of $7.0 and transition costs totaling $4.8.
(2) Cost of sales includes $99.9 of consolidation costs and $6.8 of
acquisition-related expenses.
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B/E Aerospace, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
NINE MONTHS ENDED
------------------------------------------------
EXCLUDING
ITEMS NOTED AS
AS BELOW REPORTED PRO FORMA
REPORTED November November November
(In millions, except per share data) November 23, 2002 24, 2001 24, 2001
23, 2002 (1) (2) (2)(3)
- ---------------------------------------------------------------------------------------------
Net sales $ 454.6 $ 454.6 $ 528.7 $ 589.6
Cost of sales 315.6 280.3 438.5 475.5
-------- -------- -------- --------
Gross profit 139.0 174.3 90.2 114.1
Gross margin 30.6% 38.3% 17.1% 19.4%
Operating expenses:
Selling, general and administrative 86.3 86.3 100.6 111.1
Research, development and engineering 29.7 29.7 33.6 33.6
-------- -------- -------- --------
Total operating expenses 116.0 116.0 134.2 144.7
-------- -------- -------- --------
Operating earnings (loss) 23.0 58.3 (44.0) (30.6)
Operating margin 5.1% 12.8% --% --%
Interest expense, net 50.4 50.4 43.7 48.4
-------- -------- -------- --------
(Loss) earnings before income taxes (27.4) 7.9 (87.7) (79.0)
Income taxes 2.7 2.7 1.9 2.8
-------- -------- -------- --------
(Loss) earnings before extraordinary item (30.1) 5.2 (89.6) (81.8)
Extraordinary item(4) -- -- 9.3 9.3
-------- -------- -------- --------
NET (LOSS) EARNINGS $ (30.1) $ 5.2 $ (98.9) $ (91.1)
======== ======== ======== ========
DILUTED NET (LOSS) EARNINGS PER COMMON SHARE:
Before extraordinary item $ (0.86) $ 0.15 $ (2.79) $ (2.55)
Net (loss) earnings $ (0.86) $ 0.15 $ (3.08) $ (2.84)
Common shares:
Weighted average and potentially dilutive 34.8 35.7 32.1 32.1
End of period 35.1 35.1 35.2 35.2
(1) Cost of sales excludes the following consolidation costs: transition costs
totaling $22.3, $6.0 charge related to October 2002 expansion of cost
reduction program and inventory impairment charge of $7.0.
(2) Cost of sales includes consolidation costs of $99.9 and acquisition-related
expenses of $6.8.
(3) 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.
(4) Expenses related to early extinguishment of 9.875% Senior Subordinated
Notes and bank credit facility.
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; dollars in millions)
November 23, February 23,
2002 2002
-------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 130.4 $ 159.5
Accounts receivable - trade, less allowance for
doubtful accounts of $4.1 (November 23, 2002)
and $4.9 (February 23, 2002) 92.8 93.3
Inventories, net 167.5 157.0
Other current assets 52.6 46.6
---------- ----------
Total current assets 443.3 456.4
Long-term assets 656.5 671.9
---------- ----------
$ 1,099.8 $ 1,128.3
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 133.3 $ 151.6
Long-term liabilities 859.3 855.6
---------- ----------
992.6 1,007.2
Total stockholders' equity 107.2 121.1
---------- ----------
$ 1,099.8 $ 1,128.3
========== ==========
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in millions)
NINE MONTHS ENDED
------------------------------
November 23, November 24,
2002 2001
--------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (30.1) $ (98.9)
Adjustments to reconcile net loss to net cash flows
Provided by operating activities:
Extraordinary item -- 9.3
Depreciation and amortization 22.1 35.8
Non-cash employee benefit plan contributions 1.7 1.9
Loss on disposal of property and equipment 1.4 --
Impairment of property and equipment, inventories,
intangibles and other assets 7.0 83.3
Changes in operating assets and liabilities, net of
acquisitions (37.0) 9.6
------- --------
Net cash flows (used in) provided by operating activities (34.9) 41.0
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (6.5) (265.2)
Capital expenditures (16.2) (11.0)
Proceeds from real estate sales 28.7 --
Change in intangible and other assets (3.9) (19.7)
------- --------
Net cash flows provided by (used in) investing activities 2.1 (295.9)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES 1.1 331.2
Effect of exchange rate changes on cash flows 2.6 (0.9)
------- --------
Net (decrease) increase in cash and cash equivalents $ (29.1) $ 75.4
======= ========
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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 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 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 CONSOLIDATION AS
(In millions, except per share data) REPORTED COSTS ADJUSTED
- --------------------------------------------------------------------------------
Three Months Ended
November 23, 2002:
Net sales $ 145.5 $ -- $ 145.5
Gross profit 37.0 17.8 54.8
Operating (loss) earnings (2.9) 17.8 14.9
Net (loss) earnings (22.4) 18.8 (3.6)
Net (loss) earnings per share (0.64) 0.54 (0.10)
EBITDA 4.7 17.8 22.5
- --------------------------------------------------------------------------------
Nine Months Ended
November 23, 2002:
Net sales $ 454.6 $ -- $ 454.6
Gross profit 139.0 35.3 174.3
Operating earnings 23.0 35.3 58.3
Net (loss) earnings (30.1) 35.3 5.2
Net (loss) earnings per share (0.86) 1.01 0.15
EBITDA 45.1 35.3 80.4
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B/E Aerospace, Inc.
RECONCILIATION OF
"AS REPORTED" TO "AS ADJUSTED" FINANCIAL INFORMATION
(continued)
IMPACT OF
CONSOLIDATION
COSTS AND
(In millions, except per share data) AS ACQUISITION- AS
REPORTED RELATED COSTS ADJUSTED
- --------------------------------------------------------------------------------
Three Months Ended
November 24, 2001:
Net sales $ 172.8 $ -- $ 172.8
Gross profit (44.7) 106.7 62.0
Operating (loss) earnings (90.2) 106.7 16.5
Net (loss) earnings (106.2) 106.7 0.5
Net (loss) earnings per share (3.08) 3.09 0.01
EBITDA (78.4) 106.7 28.3
IMPACT OF
CONSOLIDATION
COSTS AND
AS ACQUISITION- IMPACT OF DEBT AS
REPORTED RELATED COSTS EXTINGUISHMENT ADJUSTED
- ----------------------------------------------------------------------------------------------------
Nine Months Ended
November 24, 2001:
Net sales $ 528.7 $ -- $ -- $ 528.7
Gross profit 90.2 106.7 -- 196.9
Operating (loss) earnings (44.0) 106.7 -- 62.7
Net (loss) earnings (98.9) 106.7 9.3 17.1
Net (loss) earnings per share (3.08) 3.32 0.29 0.53
EBITDA (17.5) 106.7 9.3 98.5
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