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,
CONFIRMS EARNINGS GUIDANCE FOR CALENDAR 2003
WELLINGTON, FL, March 4, 2003 - B/E Aerospace, Inc. (Nasdaq: BEAV) today
announced financial results for the 10-month transition period ended December
31, 2002 and confirmed its earnings guidance for calendar year 2003.
Because the company changed its fiscal year, results announced today are
for a 10-month transition period from February 24, 2002 through December 31,
2002. The company will report on a calendar year basis going forward.
Where noted, the results discussed herein have been adjusted to exclude
the effect of certain facility and workforce consolidation costs, as well as
certain unusual or nonrecurring items that are discussed below and in the
accompanying footnotes. By presenting "as adjusted" results, management intends
to provide a better understanding of the core results and underlying trends from
which to consider past performance and prospects for the future. See the tables
at the end of this news release for a reconciliation of "as adjusted" amounts to
amounts reported under generally accepted accounting principles (GAAP). Users of
this financial information should consider the types of events and transactions
for which adjustments have been made. We also present operating earnings and
EBITDA (earnings before interest, taxes, depreciation and amortization) as
additional measures of our operating performance and our ability to service our
debt, respectively. Neither operating earnings, EBITDA nor "as adjusted"
information should be viewed as a substitute for or superior to net earnings or
other data prepared in accordance with GAAP as measures of our profitability or
liquidity. Neither EBITDA nor the "as adjusted" information are determined using
GAAP. Therefore, such information is not necessarily comparable to other
companies.
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HIGHLIGHTS
- - Reported net loss of ($2.03) per share. Excluding consolidation costs and
non-cash charge, net loss was ($0.05) per share.
- - Amended bank credit facility.
- - Completed majority of cost reduction initiatives.
"2002 was a year of turmoil for our airline customers," said Mr. Robert
J. Khoury, President and Chief Executive Officer of B/E Aerospace. "It was a
year in which airlines' financial distress became acute, sharply reducing demand
for our products. As the year wore on, the downturn spread to our business jet
segment. Despite these challenges, we kept our focus and executed our plan to
size the company for lower demand.
"Both the scope and the cost of this downsizing have been substantial,"
he said. "However, we believe that most of the consolidation effort and costs
are now behind us."
FINANCIAL RESULTS
For the period February 24, 2002 through December 31, 2002, B/E reported
a net loss of ($70.8) million, or ($2.03) per share. The ($70.8) million net
loss includes:
- - Charges and transition costs totaling $39.5 million related to B/E's facility
and workforce consolidation program. Transition costs are the expenses of
operating facilities scheduled for closure and integrating transferred
operations into the remaining facilities. Under GAAP, such costs must be
treated as normal expenses until plant shutdown has been completed.
- - A $29.5 million non-cash charge due to a recently announced arbitration
decision regarding the 1999 sale of B/E's in-flight entertainment business,
as more fully described in the company's February 10, 2003 news release.
For the comparable 10-month period ended December 31, 2001, the company
had a pro forma net loss of ($90.0) million, or ($2.78) per share. The pro forma
figures for the period a year ago include consolidation costs, acquisition-
related expenses and debt extinguishment costs totaling $116.5 million, and
treat companies acquired in 2001 as though acquired at the beginning of 2001,
improving comparability with the period just ended.
Excluding all the aforementioned costs in the respective periods in
which they occurred, B/E would have reported a net loss of ($1.8) million, or
($0.05) cents per share for the period ended December 2002, compared to net
earnings of $26.5 million, or $0.79 per share for the same period a year
earlier.
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"Substantially lower sales and greater interest expense were the
principal reasons for the year-over-year decrease in our results. Our 37.9
percent gross profit margin - achieved despite a 22 percent decline in sales --
and lower operating expenses reflect our cost reduction efforts," said Mr.
Khoury, comparing the "as adjusted" loss of ($0.05) per share for the transition
period just ended to the "as adjusted" figure of $0.79 per share for the same
period a year ago.
Net sales were $503.6 million for the period ended December 2002, down
22 percent compared to pro forma figures for the same period a year ago. The
results for the period a year ago were also negatively impacted by the airline
industry downturn and the events of September 11, 2001.
THE YEAR IN REVIEW
"The tragic events of September 11, 2001, occurring in what was already
a bad year for the airline sector, changed the landscape for our industry," Mr.
Khoury said. "In the industry downturn which ensued, substantially lower sales
have severely affected our financial performance. From the outset, we knew that
we could do little to curb the company's revenue decline in the face of our
customers' financial distress. Instead, we focused on reducing costs. We
announced a major facility and workforce consolidation program just six weeks
after the September 2001 terrorist attacks.
"We are very pleased with the execution of our consolidation program.
This has been a monumental effort, undertaken in the midst of the worst-ever
crisis in the airline industry. We are proud of our accomplishments and grateful
to our employees who have worked so hard to size the business appropriately.
"Our employees have accomplished a great deal under very demanding
circumstances. We closed four plants. We eliminated about 1,000 positions. By
the middle of this year, we will have closed a fifth plant and brought our
cumulative workforce reduction to about 1,400 positions. To put this into
perspective: we will have closed nearly one-third of our principal manufacturing
facilities and downsized our workforce by approximately 30% by the time these
actions are complete.
"We deeply regret the human toll which these actions have taken on
employees, their families and their communities. Yet we have no choice but to
cut costs to a level that should enable us to maintain our liquidity while our
customers work through their difficulties," Mr. Khoury said. "We see evidence
that we are making progress, based on the gross margin and lower operating
expenses we report today."
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The company furnishes the following "as adjusted" figures to enhance
comparability. For the period ended December 2002, these figures exclude the
consolidation costs and charge related to the arbitration decision. For the same
period a year ago, these figures treat companies acquired in 2001 as though
acquired at the beginning of 2001 and exclude consolidation, acquisition-related
and debt extinguishment costs.
- - Gross profit margin was essentially unchanged at 37.9 percent despite the
significant decline in sales.
- - Operating expenses decreased by $28.1 million, driven by both management's
austerity measures and a decrease in amortization resulting from new
accounting rules.
- - As a result, despite the $139.9 million decrease in sales, gross margin was
maintained at 37.9 percent, but nevertheless gross profit decreased by $51.8
million. Operating earnings decreased by only $23.7 million, reflecting both
lower manufacturing costs and lower operating expenses.
Management expects the consolidation effort to cost nearly $155 million,
of which approximately $65 million are cash costs. Consolidation costs already
incurred since inception of the program total $144.1 million ($104.6 million in
the fiscal year ended February 2002 and $39.5 million in the 10-month transition
period ended December 2002). Of the $144.1 million total, approximately $55
million were cash costs.
RESULTS BY SEGMENT; BACKLOG
Sales of commercial aircraft products, B/E's largest segment, dropped by
26 percent for the period ended December 2002 compared to the same period a year
ago. Sales in B/E's business jet and fastener distribution segments also reflect
constrained demand due to the aviation industry downturn.
NET SALES ($ MILLIONS)
PRO FORMA
10-MONTH PERIOD 10-MONTH PERIOD
FROM FEB. 24, 2002 FROM FEB. 25, 2001
TO DEC. 31, 2002 TO DEC. 31, 2001
------------------------------------------------------------------------
Commercial aircraft products $354.5 $479.3
Business jet products 71.1 75.7
Fastener distribution 78.0 88.5
------------------------------------------------------------------------
TOTAL $503.6 $643.5
Total backlog decreased to about $450 million as of the end of December
2002, down from approximately $480 million at the end of February 2002.
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LIQUIDITY
As previously announced, B/E recently amended its bank credit facility.
The bank facility now provides for aggregate borrowings of $135 million,
following a $15 million reduction in commitments. Net debt (total debt less cash
and cash equivalents) at December 31, 2002 stood at $696.0 million, virtually
unchanged as compared to $695.3 million at February 23, 2002.
OUTLOOK
"We have made no changes to our financial guidance since our last
earnings release," Mr. Khoury stated. "However, industry conditions remain
sobering at best. U.S. carriers alone lost $11 billion for 2002, following large
losses the year before. Fuel prices, airlines' largest operating cost after
labor, are very high, while ticket prices remain low. Consequently, many
carriers are in precarious financial condition. Their plight could become worse
if there is a war in the Middle East. To cut costs, airlines have idled nearly
2,200 aircraft. All of this has sharply reduced demand for our products.
"Under these circumstances, there is more than the usual amount of
uncertainty associated with any forecast of financial performance. That includes
the outlook we communicate today," Mr. Khoury said.
For calendar 2003, management continues to expect:
- - sales of approximately $575 - $600 million,
- - approximately break-even bottom-line results before taxes and excluding
approximately $10 million of transition costs associated with closure of the
fifth facility and integration of transferred operations in the first half of
2003,
- - a net loss of approximately $12 million after taxes and transition costs,
- - EBITDA of about $100 million excluding transition costs, and
- - a modest amount of free cash flow. B/E defines free cash flow as EBITDA less
interest, taxes and capital expenditures.
Management's expectations for interim results during calendar 2003
remain as follows:
- - net losses in the first and second quarters, and
- - a small profit in the second half of the year.
"B/E Aerospace has a number of attributes that should enable us to
maintain adequate liquidity during the downturn," Mr. Khoury said. "We have
adequate liquidity to meet operating needs and service our debt obligations. Our
$135 million bank credit facility, which will decrease by $15 million in
December 2004, requires no further
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principal payments until maturity in August 2006. All other long-term debt
requires no additional principal payments until 2008 through 2011.
"Our customer base is truly global," he continued. "Over 40 percent of
last year's sales came from outside the U.S. Our competitive position is very
strong, with leading worldwide market shares in many product lines.
"With our aftermarket focus, we should be an early beneficiary of the
industry recovery," he said. "Aftermarket demand should lead the recovery,
because refurbishing existing aircraft is much less expensive than buying new
aircraft.
"When demand improves, we will have enhanced earnings power through
substantial operating leverage. We believe that our factories have the capacity
to generate revenues of up to $1 billion without significant additional capital
investment. In the meantime, we have a seasoned executive team which has
navigated prior downturns," Mr. Khoury concluded.
As previously announced, B/E will hold a conference call to discuss its
financial results on Wednesday, March 5 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.
Because results reported today are for a 10-month transition period, we
present results for the comparable 10-month period of the prior year for
comparison purposes. Audited results for the full 12-month period ended February
23, 2002 are also included herein. Users of this financial information should
consider all financial information included in this news release.
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/A and Form 10-Q. For more information, see the section entitled
"Forward-Looking Statements" contained in B/E's Form 10-K/A 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 aerospace
fasteners. 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
------------------------------
AS AS AS
REPORTED ADJUSTED ADJUSTED AS
Period From Period From Period From REPORTED
Feb. 24, 2002 Feb. 24, 2002 Feb. 25, 2001 Year Ended
To To To February
Dec. 31, 2002 Dec. 31, 2002 Dec. 31, 2001 23, 2002
(Dollars In millions, except per share data) (3)
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 503.6 $ 503.6 $ 643.5 $ 680.5
Cost of sales (1)(2) 352.3 312.8 400.9 530.1
------- ------- ------- -------
Gross profit 151.3 190.8 242.6 150.4
Gross margin 30.0% 37.9% 37.7% 22.1%
Operating expenses:
Selling, general and administrative (2) 98.5 98.5 124.0 139.4
Research, development and engineering 34.1 34.1 36.7 43.5
Legal settlement (1) (4) 29.5 -- -- --
------- ------- ------- -------
Total operating expenses 162.1 132.6 160.7 182.9
Operating (loss) earnings (10.8) 58.2 81.9 (32.5)
Operating margin -- 11.6% 12.7% --
Interest expense, net 57.3 57.3 53.5 60.5
------- ------- ------- -------
(Loss) earnings before income taxes (68.1) 0.9 28.4 (93.0)
Income taxes 2.7 2.7 1.9 1.8
------- ------- ------- -------
(Loss) earnings before extraordinary item (70.8) (1.8) 26.5 (94.8)
Extraordinary item (2)(5) -- -- -- 9.3
------- ------- ------- -------
NET (LOSS) EARNINGS (70.8) (1.8) 26.5 (104.1)
NET (LOSS) EARNINGS PER COMMON SHARE:
Before extraordinary item $ (2.03) $ (0.05) $ 0.79 $ (2.90)
Net (loss) earnings $ (2.03) $ (0.05) $ 0.79 $ (3.18)
Common shares:
Weighted average and potentially dilutive 34.9 34.9 33.5 32.7
End of period 35.2 35.2 35.3 34.4
------------------------------
(1) "As reported" 10-month period ended Dec. 31, 2002 includes the following
consolidation costs: transition costs totaling $26.5, $6.0 charge related
to October 2002 expansion of cost reduction program and inventory
impairment charge of $7.0. "As adjusted" figures for the same period
exclude such costs and the legal settlement.
(2) "As adjusted" 10-month period ended Dec. 31, 2001 excludes consolidation
costs of $100.4, acquisition-related expenses of $6.8 and debt
extinguishment costs of $9.3. Year ended Feb. 23, 2002 includes
consolidation costs of $104.6, acquisition-related expenses of $6.8 and the
debt extinguishment costs mentioned above.
(3) Pro forma for acquisitions. Pro forma figures treat companies acquired
during 2001 as though acquired at the beginning of 2001. The pro forma
results are presented for informational purposes 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 2001, nor are they necessarily indicative of future operating
results.
(4) Represents impact of arbitration decision related to amounts due B/E in
connection with 1999 sale of in-flight entertainment business.
(5) Costs 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
(Dollars in millions)
DECEMBER 31, FEBRUARY 23,
2002 2002
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 156.9 $ 159.5
Accounts receivable - trade, less allowance for doubtful
accounts of $3.9 (December 31, 2002)
and $4.9 (February 23, 2002) 73.8 93.3
Inventories, net 163.2 157.0
Other current assets 22.8 46.6
-------- --------
Total current assets 416.7 456.4
Long-term assets 650.4 671.9
-------- --------
$1,067.1 $1,128.3
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 153.8 $ 151.6
Long-term liabilities 844.0 855.6
-------- --------
997.8 1,007.2
Total stockholders' equity 69.3 121.1
-------- --------
$1,067.1 $1,128.3
======== ========
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
PERIOD
FROM
FEB. 24, 2002 YEAR
TO ENDED
DEC. 31, 2002 FEB. 23, 2002
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (70.8) $(104.1)
Adjustments to reconcile net loss to net cash flows
provided by operating activities:
Extraordinary item -- 9.3
Depreciation and amortization 24.7 46.8
Non-cash employee benefit plan contributions 1.8 2.6
Loss on disposal of property and equipment 0.5 --
Impairment of property and equipment, inventories,
intangibles and other assets 7.0 83.3
Legal settlement 29.5 --
Changes in operating assets and liabilities, net of
acquisitions (6.2) 20.0
------- -------
Net cash flows (used in) provided by operating activities (13.5) 57.9
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (6.5) (207.9)
Capital expenditures (17.4) (13.9)
Proceeds from real estate sales 33.4 --
Change in intangible and other assets (2.6) (9.2)
------- -------
Net cash flows provided by (used in) investing activities 6.9 (231.0)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES 0.7 272.9
------- -------
Effect of exchange rate changes on cash flows 3.3 (0.6)
------- -------
Net (decrease) increase in cash and cash equivalents (2.6) 99.2
Cash and cash equivalents at beginning of period 159.5 60.3
------- -------
Cash and cash equivalents at end of period $ 156.9 $ 159.5
======= =======
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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 exclude the effect of certain items as described herein. By
presenting "as adjusted" results, management intends to provide a better
understanding of the core results and underlying trends from which to consider
past performance and prospects for the future. Users of this financial
information should consider the types of events and transactions for which
adjustments have been made.
We also present operating earnings and EBITDA as additional measures of
our operating performance and our ability to service our debt, respectively.
Neither operating earnings, EBITDA nor "as adjusted" information should be
viewed as a substitute for or superior to net income or other data prepared in
accordance with GAAP as measures of our profitability or liquidity. Neither
EBITDA nor the "as adjusted" information are determined using GAAP. Therefore,
such information is not necessarily comparable to other companies.
10-Month Period from February 24, 2002 to December 31, 2002
- ---------------------------------------------------------------------------------------------------
IMPACT OF IMPACT OF
AS CONSOLIDATION LEGAL AS
(In millions, except per share data) REPORTED COSTS SETTLEMENT ADJUSTED
- ---------------------------------------------------------------------------------------------------
Net sales $ 503.6 $ -- $ -- $ 503.6
Gross profit 151.3 39.5 -- 190.8
Operating expenses 162.1 -- 29.5 132.6
Operating (loss) earnings (10.8) 39.5 29.5 58.2
EBITDA 13.9 39.5 29.5 82.9
Net (loss) earnings (70.8) 39.5 29.5 (1.8)
Net (loss) earnings per share (2.03) 1.13 0.85 (0.05)
10-Month Period from February 25, 2001 to December 31, 2001
- ---------------------------------------------------------------------------------------------------
IMPACT OF
CONSOLIDATION,
ACQUISITION-
RELATED AND DEBT
EXTINGUISHMENT AS
(In millions, except per share data) PRO FORMA COSTS ADJUSTED
- -------------------------------------------------------------------------------------------------
Net sales $ 643.5 $ -- $ 643.5
Gross profit 142.2 100.4 242.6
Operating expenses 167.5 6.8 160.7
Operating (loss) earnings (25.3) 107.2 81.9
EBITDA 14.8 107.2 122.0
Net (loss) earnings (90.0) 116.5 26.5
Net (loss) earnings per share (2.78) 3.57 0.79
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