EXHIBIT 99.1
[BEAEROSPACE LOGO OBJECT OMITTED]
#03-12 News Release
FOR IMMEDIATE RELEASE 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 FIRST QUARTER OF 2003, COMMENTS ON OUTLOOK
WELLINGTON, FL, April 21, 2003 - B/E Aerospace, Inc. (Nasdaq: BEAV)
today announced financial results for the three months ended March 31, 2003. The
company also commented on recent developments, including the war in Iraq and
Severe Acute Respiratory Syndrome (SARS). B/E expects these developments' impact
on the airlines to adversely affect the company's financial results for at least
the next 6 to 12 months.
This news release contains certain non-GAAP financial measures as
defined under the rules of the Securities and Exchange Commission. Where noted,
the results discussed herein have been adjusted to exclude the effect of certain
facility and workforce consolidation costs. 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 (earnings before interest, taxes, depreciation and
amortization) as additional measures of operating performance and our ability to
service our debt. 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 generally accepted accounting principles
(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 similarly titled measures furnished by other
companies. As required by the SEC, we provide tables at the end of this release
reconciling non-GAAP measures to the most directly comparable amounts reported
under GAAP.
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HIGHLIGHTS
o Reported net loss of $0.31 per share for three months ended March 31, 2003.
Excluding consolidation costs, net loss was $0.11 per share.
o Maintained adequate liquidity. Cash and available bank credit totaled
$126.2 million at quarter-end.
o On track to close Dafen (Wales) facility and achieve planned reductions in
workforce during second quarter. Planning further cost reduction
initiatives.
o Financial results for calendar 2003 expected to be below prior guidance due
to industry developments.
"As anticipated, demand for our products remains depressed due to the
continuing downturn in the airline and business jet industries," said Mr. Robert
J. Khoury, President and Chief Executive Officer of B/E Aerospace. "Airline
industry conditions are unusually volatile, with the war in Iraq and concern
over SARS affecting international air travel. In addition, business jet industry
conditions have deteriorated further, as airframe manufacturers have again
significantly cut production forecasts. In this demanding operating environment,
financial forecasting is difficult both for our customers and for B/E Aerospace.
We remain focused on conserving cash and reducing costs."
FINANCIAL RESULTS: AS REPORTED
For the three months ended March 31, 2003, B/E reported a net loss of
$10.8 million, or $0.31 per share. By comparison, for the three-month period
ended March 31, 2002 the company reported a net loss of $5.9 million, or $0.17
per share.
Both periods include transition costs related to B/E's facility and
workforce consolidation program. Transition costs totaled $6.8 million for the
period ended March 2003 and $5.6 million for the period ended March 2002.
Transition costs are the expenses of operating facilities scheduled for closure
and integrating transferred operations into the remaining facilities. Under
GAAP, such costs are expensed as incurred until plant shutdown is complete.
FINANCIAL RESULTS: AS ADJUSTED
Excluding transition costs, B/E would have reported a net loss of $4.0
million, or $0.11 per share for the period ended March 31, 2003, as compared to
$0.3 million, or $0.01 per share for the period ended March 31, 2002.
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"The first quarter results we report today fell short of our
expectations," Mr. Khoury said. "We incurred start-up costs to begin
manufacturing plastic components in our seating spares business. This occurred
because our principal supplier of plastic parts ceased operations. We have
purchased certain of the supplier's manufacturing assets and have begun to
establish in-house production of plastic seating components. The start-up
resulted in higher manufacturing costs and lower sales of seating spares.
"Poor operating performance at our Dafen galley manufacturing facility
also adversely impacted margins as we moved towards the wind-up of operations
there," Mr. Khoury continued. "In addition, we experienced somewhat greater
unabsorbed overhead costs due to the mix of products manufactured during the
quarter.
"We expect that these factors will continue to affect our results for
another quarter, as we complete the shutdown of the Dafen plant and finish
integrating plastics manufacturing into our operations," he said.
Net sales were $154.7 million for the period ended March 2003, up 6
percent compared to the three-month period ended March 2002. Sales for both
periods were negatively impacted by the airline industry crisis. B/E estimates
that its sales are down approximately 30 percent compared to annualized
pre-September 2001 levels, adjusted for acquisitions.
SEGMENT RESULTS AND BACKLOG
Sales in B/E's largest segment, commercial aircraft products, increased
7 percent compared to the quarter ended March 2002. The business jet segment
experienced a significant reduction in demand, with sales down 10 percent
compared to the same period a year ago.
Fastener distribution sales increased 14 percent compared to the prior
period. B/E has been successful in expanding its market share in fastener
distribution, and the company expects continued revenue growth in this segment.
NET SALES
$ Millions, Three Months Ended:
MARCH 31, MARCH 31,
2003 2002
--------------------------------------------------------------------
Commercial aircraft products $110.6 $103.1
Business jet products 18.4 20.4
Fastener distribution 25.7 22.5
--------------------------------------------------------------------
TOTAL $154.7 $146.0
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Total backlog as of March 31, 2003 was $435 million, down from
approximately $450 million at December 31, 2002, reflecting the continued
difficult conditions in the airline and business jet sectors.
LIQUIDITY REMAINS ADEQUATE
B/E's cash and available bank credit was $126.2 million as of March 31,
2003, down $31.1 million compared to December 2002 balances. The decrease is in
line with management's expectations and was largely due to:
o a previously-announced $15.0 million payment due to a reduction in
commitments under B/E's bank credit facility, and
o a net $12.0 million increase in accounts receivable, inventories and other
assets.
"We are comfortable with our liquidity position. Cash and available
bank credit of nearly $130 million should be adequate to meet operating needs
and service our debt obligations," Mr. Khoury stated. "Our December 2002 cash
position was higher than usual, enabling us to reduce bank borrowings by $50
million in the first quarter. The voluntary $50 million payment, made after we
amended our bank credit facility, will reduce interest expense and assist in
returning B/E to profitability. Our amended bank credit facility gives us the
flexibility to borrow the funds again should we need to do so."
Net debt (total debt less cash and cash equivalents) was $712.1 million
at March 31, 2003, as compared to $696.0 million at December 31, 2002. EBITDA
was $95.9 million on an "as adjusted" basis for the twelve months ended March
31, 2003, excluding consolidation costs and the legal settlement.
UPDATE ON AIRLINE INDUSTRY CONDITIONS
The airline industry downturn, now well into its second year, will
likely go on record as the most severe ever experienced. U.S. airlines have lost
over $18 billion in the past two years. A sluggish economy, the September 2001
terrorist attacks and high fuel and labor costs all contributed to the losses.
In response, carriers worldwide have limited discretionary spending and reduced
fleet sizes. These austerity measures have adversely affected demand for B/E's
cabin interior products since late 2001.
To re-position B/E for profitability at the lower demand levels,
management launched a cost reduction program soon after the 2001 terrorist
attacks. By mid-2003, B/E expects to achieve its goal of closing five factories
and eliminating about 1,400 positions.
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"The plight of the worldwide airline industry worsened during the first
quarter of 2003," Mr. Khoury said. "With war in Iraq and the SARS outbreak in
Asia, most major carriers have experienced sharply lower air travel in recent
weeks, compared to prior-year figures which were already depressed by the
industry downturn. The duration of these trends is hard to predict at the
moment, but it is clear that they have exacerbated a situation which was already
difficult for our airline customers."
U.S. airlines reported trans-Atlantic and trans-Pacific traffic down 20
percent in late March and April. The reduced air travel is forcing carriers
worldwide to make further cuts in capacity and workforce. 10,000 airline jobs
were eliminated in the first week of the war alone. Air Canada (the world's 11th
largest carrier) and Hawaiian Air sought Chapter 11 bankruptcy protection in the
past month. Estimates indicate that U.S. airlines could lose nearly $11 billion
this year.
Carriers serving the Pacific Rim are experiencing substantially lower
traffic and advance bookings. In response, airlines such as Northwest Airlines,
Cathay Pacific, Qantas, Singapore Airlines and Japan Airlines have cut flights
by as much as 25 percent on certain routes in Asia.
"We continue to monitor industry conditions very closely," Mr. Khoury
said. "We now expect to implement further cost reduction initiatives in the
commercial aircraft products segment. In this regard, we are fortunate to have a
flexible cost structure. Over two-thirds of our costs are variable."
COST REDUCTION INITIATIVES ALSO PLANNED IN BUSINESS JET SEGMENT
"The downturn in the business jet industry continues to unfold," Mr.
Khoury stated. "In recent weeks, several aircraft manufacturers have notified us
of plans to further reduce production of new business jets."
B/E expects new business jet deliveries to be at least 20 percent lower
for calendar 2003 as compared to calendar 2002, and about 35 percent lower
compared to 2001. In the second half of the current year, B/E expects about 250
new business jet deliveries, an annualized decrease of about 45 percent compared
to the 900 new aircraft delivered in 2001, and about 33 percent lower than last
year.
"Regrettably, these developments necessitate further cost reduction
initiatives, including workforce reductions, in our business jet operations,"
Mr. Khoury said. Implementation of the new initiatives will begin in the second
quarter.
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CONSOLIDATION COSTS
Prior to the actions announced today, B/E's consolidation effort -
closing five facilities and eliminating 1,400 positions - was projected to cost
nearly $155 million, including cash costs of approximately $65 million. New
actions announced today in the commercial aircraft products and business jet
products groups are expected to add $3 - $5 million to the consolidation costs.
Consolidation costs already incurred since inception of the program
total about $150 million, including approximately $60 million of cash costs.
OUTLOOK
"It is clear that recent trends in the airline and business jet
industries will adversely affect B/E's performance. We expect financial results
for calendar 2003 to be below prior guidance," said Mr. Khoury. "We are managing
through unusually volatile industry conditions. Forecasting is particularly
difficult in this demanding environment, both for our customers and for B/E
Aerospace. Accordingly, for the time being we have elected not to give specific
guidance on sales and earnings."
Financial guidance for calendar 2003 is now as follows:
o For the second quarter ending June 2003, profit margins and bottom-line
results will reflect continued impact from the manufacturing start-up of
the plastics operations mentioned herein and continued excess manufacturing
costs at the Dafen galley facility until its closure at the end of the
second quarter.
o For the third quarter and beyond, improvements in margins and bottom-line
results will be driven largely by the previously announced closure of the
Dafen facility, integration of the plastics operations and achievement of
B/E's original headcount reduction goal (originally a 1,400-position
reduction, excluding planned actions announced today).
o Calendar 2003 consolidation costs will be $3 - $5 million greater than
prior guidance of $10 million due to the new cost reduction actions
announced today in the commercial aircraft products and business jet
segments. Essentially all of such costs will have been incurred by the end
of the third quarter of 2003.
o Despite the deterioration in industry conditions during the past quarter,
B/E's goal is to achieve profitable operations on a quarterly basis by the
end of this calendar year.
"Looking ahead, B/E Aerospace has a number of attributes that should
enable us to maintain adequate liquidity during the downturn," Mr. Khoury said.
"Our $135 million bank credit facility, which will decrease by $15 million in
December 2004, requires no further principal payments until maturity in August
2006. All other long-term debt requires no additional principal payments until
2008 through 2011.
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"Our customer base is truly global," he continued. "Over 45 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, the cost reductions we have already achieved
should give us substantial operating leverage and enhanced earnings power. 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 Tuesday, April 22 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 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.
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 about 60 percent of sales. For more information, visit
B/E's website at www.beaerospace.com.
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
AS REPORTED: AS ADJUSTED:
THREE MONTHS ENDED THREE MONTHS ENDED
- --------------------------------------------------------------------------------------------- -------------------------------
March 31, March 31, March 31, March 31,
(Dollars in millions, except per share data) 2003 2002 2003 2002
- --------------------------------------------------------------------------------------------- -------------------------------
Net sales $ 154.7 $ 146.0 $ 154.7 $ 146.0
Cost of sales (1) (2) 108.3 96.9 101.5 91.3
-------- -------- --------- --------
Gross profit 46.4 49.1 53.2 54.7
Gross margin 30.0% 33.6% 34.4% 37.5%
Operating expenses:
Selling, general and administrative 28.5 28.6 28.5 28.6
Research, development and engineering 10.9 9.8 10.9 9.8
-------- -------- --------- --------
Total operating expenses 39.4 38.4 39.4 38.4
-------- -------- --------- --------
Operating earnings 7.0 10.7 13.8 16.3
Operating margin 4.5% 7.3% 8.9% 11.2%
Interest expense, net 16.8 16.6 16.8 16.6
-------- -------- --------- --------
Loss before income taxes (9.8) (5.9) (3.0) (0.3)
Income taxes 1.0 -- 1.0 --
-------- -------- --------- --------
NET LOSS $ (10.8) $ (5.9) $ (4.0) $ (0.3)
======== ======== ========= ========
NET LOSS PER COMMON SHARE $ (0.31) $ (0.17) $ (0.11) $ (0.01)
Common shares:
Weighted average and potentially dilutive 35.4 34.5 35.4 34.5
End of period 35.7 34.6 35.7 34.6
(1) "As reported" period ended March 31, 2003 includes $6.8 of consolidation
costs in cost of sales. "As adjusted" period ended March 31, 2003 excludes
such costs.
(2) "As reported" period ended March 31, 2002 includes $5.6 of consolidation
costs in cost of sales. "As adjusted" period ended March 31, 2002 excludes
such costs.
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; dollars in millions)
MARCH 31, DECEMBER 31,
2003 2002
--------------------- --------------------
ASSETS
Current assets:
Cash and cash equivalents $ 75.9 $ 156.9
Accounts receivable - trade, less allowance for doubtful
accounts of $3.8 (March 31, 2003)
and $3.9 (December 31, 2002) 81.2 73.8
Inventories, net 171.9 163.2
--------- -----------
Other current assets 17.4 22.8
Total current assets 346.4 416.7
Long-term assets 645.6 650.4
--------- -----------
$ 992.0 $ 1,067.1
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 137.0 $ 153.8
Long-term liabilities 793.9 844.0
--------- -----------
930.9 997.8
Total stockholders' equity 61.1 69.3
--------- -----------
$ 992.0 $ 1,067.1
========= ===========
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; dollars in millions)
THREE MONTHS ENDED
------------------------------------------
MARCH 31, MARCH 31,
2003 2002
------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (10.8) $ (5.9)
Adjustments to reconcile net loss to net cash flows
provided by operating activities:
Depreciation and amortization 7.3 10.0
Non-cash employee benefit plan contributions 0.6 0.6
Changes in operating assets and liabilities, net of
acquisitions (12.0) 9.2
---------- ----------
Net cash flows (used in) provided by operating activities (14.9) 13.9
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3.6) (2.9)
Change in intangible and other assets, net 1.2 2.2
---------- ----------
Net cash flows used in investing activities (2.4) (0.7)
---------- ----------
CASH FLOWS USED IN FINANCING ACTIVITIES (64.5) --
---------- ----------
Effect of exchange rate changes on cash flows 0.8 (0.3)
---------- ----------
Net (decrease) increase in cash and cash equivalents (81.0) 12.9
Cash and cash equivalents at beginning of period 156.9 139.3
---------- ----------
Cash and cash equivalents at end of period $ 75.9 $ 152.2
========== ==========
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B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited; dollars in millions, except per share data)
This news release includes non-GAAP financial measures as defined in
the Securities and Exchange Commission's Regulation G. Where noted, the 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 readers with a better understanding of
the core results and underlying trends from which to consider past performance
and prospects for the future. We also present operating earnings and EBITDA as
additional measures of our operating performance and our ability to service our
debt, respectively.
Management uses these non-GAAP financial measures to evaluate
underlying trends affecting the company's past performance, future prospects and
ability to service its debt. Users of this financial information should consider
the types of events and transactions for which adjustments have been made.
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 similarly titled measures
provided by other companies.
Pursuant to the requirements of Regulation G, we provide the following
tables which reconcile the non-GAAP financial measures presented in this release
to the most directly comparable GAAP measures.
THREE MONTHS ENDED MARCH 31, 2003
-----------------------------------------------------------------------------------
IMPACT OF
AS CONSOLIDATION AS
REPORTED COSTS ADJUSTED
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $ 154.7 $ -- $ 154.7
Gross profit 46.4 6.8 53.2
Operating expenses 39.4 -- 39.4
Operating earnings 7.0 6.8 13.8
EBITDA 14.3 6.8 21.1
Net (loss) earnings (10.8) 6.8 (4.0)
Net (loss) earnings per share (0.31) 0.20 (0.11)
THREE MONTHS ENDED MARCH 31, 2002
- -------------------------------------------------------------------------------------------------------------------------------
IMPACT OF
AS CONSOLIDATION AS
REPORTED COSTS ADJUSTED
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $ 146.0 $ -- $ 146.0
Gross profit 49.1 5.6 54.7
Operating expenses 38.4 -- 38.4
Operating earnings 10.7 5.6 16.3
EBITDA 20.7 5.6 26.3
Net (loss) earnings (5.9) 5.6 (0.3)
Net (loss) earnings per share (0.17) 0.16 (0.01)
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B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited; dollars in millions)
TWELVE MONTHS ENDED MARCH 31, 2003
- --------------------------------------------------------------------------------
Cash flows used in operations $ (21.1)
Interest expense, net 69.2
Taxes 3.7
Changes in operating assets and liabilities 2.0
Other non-cash adjustments (32.3)
--------
EBITDA 21.5
Facility consolidation costs 44.9
Legal settlement 29.5
--------
EBITDA - as adjusted $ 95.9
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