[BE AEROSPACE LOGO] [GRAPHIC OMITTED]
News Release
#04-10 CONTACT:
FOR IMMEDIATE RELEASE Ed Harper
Director of Investor Relations
B/E Aerospace, Inc.
(561) 791-5000
B/E AEROSPACE REPORTS FIRST QUARTER FINANCIAL RESULTS, REAFFIRMS
FULL-YEAR 2004 GUIDANCE
WELLINGTON, FL, April 21, 2004 - B/E Aerospace, Inc. (Nasdaq: BEAV),
the world's leading manufacturer of aircraft cabin interior products and a
leading aftermarket distributor of aerospace fasteners, today announced results
for the quarter ended March 31, 2004.
HIGHLIGHTS
o Reported first quarter sales of $175 million, representing strong
year-over-year growth of 13 percent.
o Operating earnings increased by $6 million or 81 percent versus the
first quarter of the prior year despite a more than $2 million
negative impact from foreign exchange. Operating earnings growth was
driven by the continuing recovery at B/E's commercial aircraft segment
and a broad-based increase in revenues and earnings at the company's
fastener distribution segment.
o Net loss for the quarter narrowed to $7.6 million or $0.21 per share
versus a net loss of $10.8 million or $0.31 per share in the prior
year, notwithstanding the more than $2 million negative impact from
foreign exchange and a year-over-year increase of $3 million in
interest expense.
o Bookings for the quarter were very strong at $187 million, a $39
million or 26 percent increase over the prior year period.
Book-to-bill ratio for the quarter was 1.07:1 despite the 13 percent
increase in revenues. Backlog was $515 million, up 18 percent from
$435 million in the first quarter of 2003 and up $12 million versus
the backlog level at December 31, 2003.
o Liquidity remains strong with cash balances of $153 million at quarter
end, as compared to $148 million at December 31, 2003.
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o A very important customer win for the quarter was Boeing's selection
of B/E to design, certify and manufacture Connexion installation kits
for Boeing 737 aircraft. The Connexion system enables commercial
aircraft operators to deliver in-flight broadband Internet, data, and
entertainment connectivity to passengers. In addition, B/E was
selected by Sukhoi Civil Aircraft Company to provide turnkey interior
cabins for Sukhoi's new family of Russian Regional Jets. These program
wins represent a potential value of approximately $150 - $200 million
over a multi-year period beginning late in 2005, none of which has
been recorded in the company's backlog as of March 31, 2004.
"We are very pleased with the ongoing financial and operational
turnaround, which is currently underway at our commercial aircraft segment, and
the recent strong sales and profit growth at our distribution segment," said
Robert J. Khoury, President and Chief Executive Officer of B/E. "The turnaround
at commercial aircraft, which began in the fourth quarter of 2003, continued in
the first quarter of this year. In addition, our distribution segment is
delivering the double-digit improvement in sales and profits indicated in our
earlier guidance. Our business jet segment continues to operate in a challenging
and difficult, though somewhat more stabilized, environment. While B/E's overall
financial performance for the quarter was somewhat stronger than our earlier
expectations, we remain committed to executing our plan, and our 2004 financial
targets remain unchanged."
FIRST QUARTER CONSOLIDATED RESULTS
For the first quarter, consolidated sales were $175 million, a 13
percent increase over the first quarter of 2003.
Net sales by segment were as follows:
NET SALES
------------------------------------------------
$ Millions, Three Months Ended
------------------------------------------------
March 31, March 31, Percent
2004 2003 Change
------------------------------------------------
Commercial aircraft $126.2 $110.6 14%
Distribution 33.8 25.7 32%
Business jet 15.1 18.4 (18%)
------------------------------------------------
Total $175.1 $154.7 13%
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Gross profit for the quarter increased by $7.2 million or 16 percent
to $53.6 million, as compared to $46.4 million in the first quarter of 2003.
Foreign exchange negatively impacted financial comparisons, on a year-over-year
and sequential basis, by $2.0 million and $1.1 million, respectively. Had
exchange rates remained at first quarter of 2003 levels, B/E's gross profit
would have been $55.6 million or 32 percent of sales as compared to 30 percent
of sales in the prior year period. B/E is subject to fluctuations in foreign
exchange rates due to significant sales from its European facilities,
substantially all of which are denominated in U.S. dollars, while the
corresponding labor, material and overhead costs are denominated in British
pounds or euros.
Despite the impact of a weakened dollar on B/E's financial results for
the quarter, operating earnings were $12.7 million, an increase of 81 percent
versus the prior year period. The increase in operating earnings was driven by
the continuing turnaround at B/E's commercial aircraft segment combined with a
broad-based increase in sales and earnings at the distribution segment.
The net loss for the quarter narrowed to $7.6 million or $0.21 per
share, in spite of the $2.3 million negative effect of foreign exchange and a
$3.0 million increase in interest expense arising from the October 2003 sale of
$175 million of senior notes, as compared with a loss of $10.8 million or $0.31
per share in the prior year period.
The following is a summary of operating earnings by segment:
OPERATING EARNINGS
-------------------------------------------
$ Millions, Three Months Ended
-------------------------------------------
March 31, March 31,
2004 2003
-------------------------------------------
Commercial aircraft $ 8.4 $ 1.0
Distribution 6.3 4.3
Business jet (2.0) 1.7
-------------------------------------------
Total $12.7 $ 7.0
FIRST QUARTER RESULTS BY SEGMENT
- --------------------------------
The commercial aircraft segment continued its turnaround during the
first quarter. Operating earnings for this segment increased by $7.4 million to
$8.4 million on a $15.6 million increase in sales. Operating margin improved to
6.7 percent, a 580 basis point increase over the prior year period. On a
constant dollar basis, assuming the same dollar/pound exchange rate as the first
quarter of 2003, commercial aircraft's 2004 operating profit would have been
$10.7 million or 8.5 percent of sales. The improved operating results at
commercial aircraft, while primarily related to ongoing manufacturing
efficiencies, were also aided by stronger sales and improved product mix.
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B/E's distribution segment generated record sales of $33.8 million,
which were 32 percent better than the first quarter of the prior year. The
growth in sales was driven by a broad-based increase in demand for aftermarket
aircraft fasteners as well as significant market share gains. Operating earnings
for this segment were $6.3 million, which was 47 percent greater than the prior
year.
For the quarter, the business jet segment reported sales of $15.1
million, an 18 percent decrease from the prior year period. This segment
reported an operating loss of $2 million for the quarter as compared to an
operating profit of $1.7 million in the prior year. As previously reported,
deliveries of new business jets fell by about 32 percent in 2003 from prior year
levels and about 42 percent from the peak delivery rates in 2001. The business
jet segment continues to operate at a low level of capacity utilization as new
business jet deliveries continue to remain at low levels. However, we believe
recent international super first class awards and a more stable business jet
sector provide the foundation for a return to profitability at this segment on a
quarterly basis before the end of 2004.
IMPACT OF FOREIGN EXCHANGE
- --------------------------
As described above, B/E is subject to fluctuations in foreign exchange
rates due to significant sales from its European facilities. The following is a
summary of average exchange rates, which highlights the significant decline of
the U.S. dollar versus the British pound that occurred primarily over the last
twelve months:
Dollar vs. Pound Exchange Rate
------------------------------
Three Months
Ended March 31, Year Ended December 31,
-------------------------- -----------------------------------
2004 2003 2003 2002 2001
-------------- ----------- ----------- ----------- -----------
$1.84 $1.60 $1.63 $1.50 $1.44
B/E is engaged in a comprehensive program aimed at mitigating the
negative impact of foreign exchange on the company's profitability. This program
involves establishing new U.S. based suppliers to our foreign manufacturing
operations, performing quality reviews of each such supplier, negotiating new
supply contracts, and coordinating the transfer of production in a manner
consistent with efficient production and timely delivery of high quality
products. The program also involves identifying opportunities to negotiate new
customer programs in British pounds or euros where appropriate.
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CONSOLIDATION PROGRAM UPDATE
- ----------------------------
The company completed its consolidation program at the end of 2003.
This effort, which was developed in response to the rapid change in industry
conditions following the events of September 11, 2001, initially called for the
reduction of 1,000 positions and the consolidation of 5 principal manufacturing
operations. At that time, the company estimated that the cost savings associated
with this effort would total approximately $30 million. Subsequently, the
company expanded this program by nearly 50 percent, which ultimately resulted in
the reduction of approximately 1,500 positions. Annual cost savings associated
with this program, which were initially targeted at $30 million and later
targeted at $45 million, are now estimated at $60 million, about equally split
between operating expenses and manufacturing costs.
LIQUIDITY, BALANCE SHEET AND CASH FLOW
- --------------------------------------
Regarding the company's liquidity, Mr. Khoury stated, "We were able to
maintain strong cash balances during the quarter since essentially all of our
net loss was offset by non-cash expenses, and because the increase in accounts
receivable and inventories was offset by increases in accounts payable and
accrued expenses." "At quarter end, our accounts receivable were in very good
condition with DSO of 44 days. In addition, net debt at quarter end was about
$730 million, which represents total debt of $882.3, less cash and cash
equivalents of $152.5, essentially unchanged from December 31, 2003 levels.
Importantly, none of our long-term debt matures until 2008, and we have no bank
borrowings outstanding," added Mr. Khoury.
B/E's cash balances at March 31, 2004 stood at $153 million, up nearly
$5 million over the December 31, 2003 level.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the three and twelve month periods ending March 31, 2004 was $19.6
million and $53.9 million, respectively. EBITDA for the quarter was
approximately $5 million or 37 percent higher than the prior year period.
Depreciation and amortization for the three month and twelve month periods
ending March 31, 2004 was $6.9 million and $27.9 million, respectively.
Indenture EBITDA for the three and twelve months ended March 31, 2004, as
calculated under the company's senior notes indenture, was $19.8 million and
$74.3 million, respectively.
FINANCIAL GUIDANCE FOR 2004 AND 2005
- ------------------------------------
Financial guidance for 2004 and 2005 is as follows:
o 2004 consolidated sales are now expected to increase up to
approximately 10 percent over 2003 revenues with significant margin
expansion expected over the next several quarters; 2005 revenues
should increase by a further 5 to 10 percent driven by solid growth in
our commercial aircraft and fastener distribution businesses. Our
business jet segment is also
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expected to generate solid revenue growth in 2005 as a result of
strong bookings in the super international first class area.
o Continued strong market share gains for our fastener distribution
segment should lead to double-digit growth in sales and earnings for
that segment in 2004.
o Full year 2004 sales at our business jet segment should be flat,
year-over-year, and we expect this segment to operate at an
approximate breakeven level of profitability in 2004, driven by the
recent international super first class awards, a more stable business
jet environment, and the cost savings benefit from ongoing lean
manufacturing and continuous improvement initiatives. We expect the
business jet segment to return to profitability on a quarterly basis
in 2004 and to be solidly profitable in 2005.
o Consolidated operating earnings should improve by 150 to 200 percent
in 2004 versus 2003 levels with further strong increases in 2005.
o Consolidated EBITDA in 2004 should increase by 65 to 90 percent versus
2003 levels with further strong increases in 2005.
o The company expects full year 2004 EBITDA to be somewhat below the sum
of interest expense, capital expenditures, and income taxes. The
company expects to use some cash in its operations during the second
quarter of 2004, primarily due to the timing of interest payments, and
to generate some free cash flow in the second half of 2004. The
company also expects to be strongly cash flow positive (as measured on
the same basis) in 2005.
Commenting on the company's outlook, Mr. Khoury stated, "We are
pleased with the progress we have seen over the past two quarters. Our
commercial aircraft segment is executing its operational plan at a level
slightly above our earlier expectations, and our distribution segment is
beginning to deliver on prior forecasts. While we believe it will take some time
for industry conditions to improve appreciably in the business jet sector, we
are pleased to see more stable demand. Recent program awards coupled with our
previously announced international super first class wins, should provide the
basis for this segment to return to quarterly profitability this year and return
to growth and profitability for all of 2005."
Mr. Khoury added, "Airline interest in retrofit programs continues to
improve, as evidenced by both the recent number and size of requests for
proposals. We continue to expect to win our share of new program awards and for
our backlog to continue to grow in 2004 and 2005. Recent meetings with airlines
at industry trade shows in both Asia and Europe were more upbeat than at any
time since the tragic events of September 11, 2001. With our consolidation
effort completed and our operational turnaround well underway at commercial
aircraft, record revenues at our distribution segment and an apparent increase
in customer demand for essentially all cabin interior products, it appears that
we have created a solid foundation for the turnaround of our business."
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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. 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. B/E sells its
products through its own global direct sales organization. For more information,
visit B/E's website at www.beaerospace.com.
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*T*
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS ENDED
---------------------------------
March 31, March 31,
(In millions, except per share data) 2004 2003
- --------------------------------------------------------------------------------
Net sales $ 175.1 $ 154.7
Cost of sales 121.5 108.3
-------- -------
Gross profit 53.6 46.4
Gross margin 30.6% 30.0%
Operating expenses:
Selling, general and administrative 28.7 28.5
Research, development and engineering 12.2 10.9
-------- -------
Total operating expenses 40.9 39.4
-------- -------
Operating earnings 12.7 7.0
Operating margin 7.3% 4.5%
Interest expense, net 19.8 16.8
-------- -------
Loss before income taxes (7.1) (9.8)
Income taxes 0.5 1.0
-------- -------
NET LOSS $ (7.6) $ (10.8)
======== =======
NET LOSS PER COMMON SHARE $ (0.21) $ (0.31)
Common shares:
Weighted average 36.9 35.4
End of period 37.0 35.7
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions)
March 31, December 31,
2004 2003
------------------ -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 152.5 $ 147.6
Accounts receivable, net 83.9 80.3
Inventories, net 176.9 168.7
Other current assets 14.5 10.6
---------- -----------
Total current assets 427.8 407.2
Long-term assets 641.8 645.3
---------- -----------
$ 1,069.6 $ 1,052.5
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $ 154.3 $ 132.9
Long-term liabilities 888.5 887.7
---------- -----------
1,042.8 1,020.6
Total stockholders' equity 26.8 31.9
---------- -----------
$ 1,069.6 $ 1,052.5
========== ===========
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*T*
B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in millions)
THREE MONTHS ENDED
---------------------------------------
March 31, March 31,
2004 2003
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7.6) $ (10.8)
Adjustments to reconcile net loss to net cash flows
provided by (used in) operating activities:
Depreciation and amortization 6.9 7.3
Non-cash employee benefit plan contributions 0.5 0.6
Changes in operating assets and liabilities, net of
acquisitions 5.8 (12.0)
--------- ---------
Net cash flows provided by (used in) operating activities 5.6 (14.9)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2.7) (3.6)
Proceeds from sale of property and equipment 0.2 2.3
Change in other assets, net 0.6 (1.1)
--------- ---------
Net cash flows used in investing activities (1.9) (2.4)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES 1.0 (64.5)
--------- ---------
Effect of exchange rate changes on cash flows 0.2 0.8
--------- ---------
Net increase (decrease) in cash and cash equivalents 4.9 (81.0)
Cash and cash equivalents at beginning of period 147.6 156.9
--------- ---------
Cash and cash equivalents at end of period $ 152.5 $ 75.9
========= =========
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B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
This news release includes EBITDA and Indenture EBITDA, non-GAAP
financial measures as defined in the Securities and Exchange Commission's
Regulation G. We include these measures primarily because investors have
expressed an interest in this information, and because they are additional
measures of our operating performance and our ability to service our debt. We
also include Indenture EBITDA because certain covenants in the indentures
governing our publicly traded notes are tied to ratios based on this measure. We
use EBITDA and Indenture EBITDA, among other things, to evaluate our operating
performance, to value prospective acquisitions and as one of several components
of incentive compensation targets for certain management personnel. These
measures are among the primary indicators used by management as a basis of its
planning and forecasting of future periods. We believe these measures are
important indicators of our operational strength and the performance of our
business because they provide a link between profitability and operating cash
flow. We believe the presentation of these measures is relevant and useful for
investors because it allows investors to view performance in a manner similar to
the method used by our management, helps improve their ability to understand our
operating performance and makes it easier to compare our results with other
companies that have different financing and capital structures or tax rates. In
addition, we believe these measures are among the primary measures used
externally by our investors, analysts and peers in our industry for purposes of
valuation and comparing the operating performance of our company to other
companies in our industry. Presentation of Indenture EBITDA also allows
investors to assess, among other things, our ability to incur additional debt
and our liquidity.
EBITDA and Indenture EBITDA should not be viewed as substitutes for or
superior to net loss, cash flow from operations or other data prepared in
accordance with GAAP as a measure of our profitability or liquidity. EBITDA and
Indenture EBITDA are not determined using GAAP. Therefore, they are not
necessarily comparable to similarly titled measures provided by other companies.
Pursuant to the requirements of Regulation G, we provide the following
table which reconciles EBITDA and Indenture EBITDA as presented in this release
to net loss, the most directly comparable GAAP measure. For the reader's
convenience we also reconcile Indenture EBITDA to cash flows from operations.
In addition, this news release also includes gross profit adjusted to
a constant dollar basis and commercial aircraft operating profit adjusted to a
constant dollar basis, both non-GAAP financial measures as defined by Regulation
G. We include these adjusted numbers to allow our investors to have a better
understanding of our gross profit and commercial aircraft profit for the quarter
as compared to prior periods. We believe it is important to show what the change
in profit would have been without the fluctuation in exchange rates since such
fluctuation is an event outside of our control and the adjusted numbers provide
another measure of evaluating our quarterly financial results and assessing
trends in the operational strength and performance of our business.
Pursuant to the requirements of Regulation G, we provide the following
table which reconciles gross profit adjusted to a constant dollar basis in this
release to gross profit, the most directly comparable GAAP measure, and which
reconciles commercial aircraft operating profit adjusted to a constant dollar
basis in this release to commercial aircraft operating profit, the most directly
comparable GAAP measure.
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*T*
B/E Aerospace, Inc.
PERIODS ENDED MARCH 31, 2004
(unaudited; in millions)
-------------------------------
THREE TWELVE
MONTHS MONTHS
-------------------------------
Net loss $(7.6) $(50.3)
Interest expense, net 19.8 73.6
Loss on debt extinguishment -- 1.2
Taxes 0.5 1.5
Depreciation and amortization 6.9 27.9
-------------------------------
EBITDA $19.6 $ 53.9
Non-recurring non-cash charges
and other indenture adjustments 0.2 20.4
-------------------------------
Indenture EBITDA $19.8 $ 74.3
===== ======
Cash flows provided by (used in) operations $ 5.6 $ (5.0)
Interest expense, net 19.8 73.6
Taxes 0.5 1.5
Changes in operating assets and liabilities (5.8) 2.9
Other non-cash adjustments (0.5) (19.1)
-------------------------------
EBITDA $19.6 $ 53.9
Non-recurring non-cash charges
and other indenture adjustments 0.2 20.4
-------------------------------
Indenture EBITDA $19.8 $ 74.3
===== ======
--------------------
THREE
MONTHS
--------------------
Gross profit as reported $53.6
Impact of constant dollar on gross profit 2.0
-----
Gross profit adjusted for a constant dollar $55.6
=====
Gross margin adjusted for a constant dollar 31.8%
Commercial aircraft segment operating earnings
as reported $ 8.4
Impact of constant dollar on operating earnings 2.3
-----
Commercial aircraft segment operating earnings
adjusted for a constant dollar $10.7
=====
Commercial aircraft segment operating margin
adjusted for a constant dollar 8.5%
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