B/E Aerospace Reports Third Quarter 2005 Financial Results
October 26 2005 - 2:00AM
Business Wire
B/E Aerospace, Inc.: -- Revenues of $217 Million up 18 Percent,
Diluted EPS of $0.16 Exceeds Consensus -- Record Backlog Reaches $1
Billion -- Confirms 2006 Guidance and Establishes Preliminary 2007
Earnings Guidance 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 its financial results for the three and nine-month
periods ended September 30, 2005. HIGHLIGHTS -- Reported third
quarter revenues of $217.1 million, representing year- over- year
organic growth of approximately 18 percent. -- Third quarter gross
margin of 35.3 percent expanded by 250 basis points versus the same
period in the prior year. -- Third quarter operating earnings of
$25.4 million were 45 percent higher than the same period in the
prior year. Third quarter operating margin of 11.7 percent expanded
by 220 basis points versus the same period in the prior year. The
45 percent operating earnings growth rate was driven by continued
revenue and earnings growth at each of B/E's commercial aircraft,
business jet and distribution segments. -- Net earnings for the
quarter were $10.0 million, or $0.16 per diluted share (versus
consensus estimates of $0.15 per diluted share) and represents
increases of $12.7 million and $0.23 per diluted share,
respectively, versus the same period in the prior year. -- Record
backlog at September 30, 2005 stood at over $1 billion, an increase
of approximately 63 percent from backlog at September 30, 2004 and
an increase of over $180 million or approximately 22 percent as
compared to the immediately preceding quarter. Bookings for the
three and nine month periods ended September 30, 2005 were in
excess of $400 million and $900 million, respectively. --
Management expects, for 2006, revenues and earnings per share of
approximately $1 billion and $1.10, respectively; and for 2007,
earnings per share to grow at a double digit rate, on a fully taxed
(35 percent rate) basis, driven by strong revenue growth and
additional margin expansion. THIRD QUARTER SEGMENT SALES AND
OPERATING EARNINGS For the third quarter, consolidated sales were
$217.1 million, a $33.6 million or 18.3 percent increase over the
third quarter of 2004. Net sales by segment were as follows: -0- *T
NET SALES -------------------------------------------- Three Months
Ended September 30 ($ in millions)
-------------------------------------------- Percent 2005 2004
Change Change --------------------------------------------
Commercial aircraft $140.6 $126.0 $14.6 11.6% Distribution 43.0
36.6 6.4 17.5% Business jet 33.5 20.9 12.6 60.3%
-------------------------------------------- Total $217.1 $183.5
$33.6 18.3% *T The commercial aircraft segment generated revenues
of $140.6 million in the third quarter of 2005, up 11.6 percent
versus the same period in the prior year, primarily due to a higher
volume of commercial aircraft passenger cabin equipment and
engineering, integration and certification services. The
distribution segment delivered strong revenue growth of 17.5
percent in the third quarter of 2005, driven by a broad-based
increase in aftermarket demand for aerospace fasteners and
continued market share gains. In the business jet segment, revenues
increased by 60.3 percent in the third quarter of 2005, reflecting
the ongoing recovery of the business jet industry and initial
shipments of super first class products. Operating earnings for the
third quarter of 2005 of $25.4 million increased by 45 percent, as
compared to the same period last year. The operating margin of 11.7
percent in the third quarter of 2005 was 220 basis points greater
than the operating margin realized in the third quarter of 2004.
The substantial increase in operating earnings was driven by
continued revenue and earnings growth at each of B/E's commercial
aircraft, distribution and business jet segments. Interest expense
for the third quarter of 2005 of $14.8 million was $4.9 million
lower than interest expense recorded in the same period in the
prior year. Interest expense decreased in the third quarter of 2005
as a result of the early retirement of $200 million of senior
subordinated notes during the fourth quarter of 2004. The interest
coverage ratio, which is determined by dividing the sum of
operating earnings plus depreciation and amortization by interest
expense, was 2.2:1 for the third quarter of 2005, as compared to
1.3:1 in the third quarter of 2004. Net earnings for the third
quarter were $10.0 million or $0.16 per diluted share, a $12.7
million or $0.23 per diluted share improvement as compared to the
same period in the prior year. THIRD QUARTER SEGMENT DISCUSSION The
following is a summary of the change in operating earnings by
segment: -0- *T OPERATING EARNINGS
----------------------------------------------- Three Months Ended
September 30 ($ in millions)
----------------------------------------------- Percent 2005 2004
Change Change -----------------------------------------------
Commercial aircraft $14.0 $11.3 $2.7 23.9% Distribution 8.7 6.2 2.5
40.3% Business jet 2.7 --- 2.7 NM
----------------------------------------------- Total $25.4 $17.5
$7.9 45.1% *T The commercial aircraft segment's ("CAS") operating
results and order book continued to improve during the third
quarter of 2005. Compared to the third quarter of 2004, CAS
operating earnings of $14.0 million increased by 23.9 percent on an
11.6 percent increase in sales. The operating margin for the
quarter expanded to 10.0 percent, a 100 basis point improvement
over the same period in the prior year. This margin expansion was
primarily the result of an improved mix of products sold and
ongoing manufacturing efficiencies. CAS bookings for the third
quarter of 2005 nearly tripled versus the same period last year as
backlog during the third quarter of 2005 reached a record level.
The distribution segment generated revenues of $43.0 million in the
third quarter of 2005, which were 17.5 percent greater than the
same period in the prior year. Operating earnings at the
distribution segment in the third quarter of 2005 were $8.7
million, 40.3 percent higher than the same period last year and
represented a 20.2 percent operating margin. The distribution
segment's excellent performance was in spite of three lost days of
operations and sales due to hurricane activity in the third
quarter. The business jet segment generated third quarter revenues
of $33.5 million, up 60.3 percent as compared to the third quarter
of 2004. Operating earnings at the business jet segment during the
quarter were $2.7 million higher than operating earnings in the
same period last year. The substantial increase in operating
earnings reflects the higher level of revenues associated with an
improving business jet industry and operational improvements in the
new super first class product line. NINE-MONTH CONSOLIDATED RESULTS
For the nine months ended September 30, 2005, B/E reported
consolidated sales of $621.2 million, a 14.2 percent increase over
the same period last year. Gross profit of $217.4 million for this
nine-month period was 23.9 percent higher versus the same period in
the prior year, as gross margin expanded by 270 basis points to
35.0 percent. Operating earnings of $69.4 million for the
nine-month period were up 44 percent compared to the same period
last year, primarily due to the 14 percent increase in revenues and
a 240 basis point expansion in operating margin to 11.2 percent of
sales. Interest expense of $44.9 million for the current nine-month
period decreased by $14.5 million versus the same period in the
prior year. Net earnings for the nine-month period were $22.5
million or $0.37 per diluted share, increases of $35.2 million and
$0.71 per diluted share versus the same period last year. For the
nine months ended September 30, 2005 compared to the same period in
2004, CAS generated operating earnings of $37.2 million, an
increase of 23.2 percent on a 6.3 percent increase in sales,
reflecting a 130 basis point expansion in operating margin to 9.2
percent of sales. The margin expansion was primarily due to an
improved mix of products sold and ongoing manufacturing
efficiencies. For the nine months ended September 30, 2005 compared
to the same period in 2004, distribution segment operating earnings
of $26.5 million were up 35.9 percent on a 21.9 percent increase in
sales. Similarly, for the nine months ended September 30, 2005
compared to the same period in 2004, business jet segment operating
earnings of $5.7 million were up $7.3 million on a $29.8 million or
53 percent increase in sales. LIQUIDITY, BALANCE SHEET AND CASH
FLOWS At the end of the quarter, the company's liquidity remained
solid with cash balances totaling approximately $87 million, up $11
million from the December 31, 2004 balance. Net debt at the end of
the third quarter stood at approximately $592 million, which
represents total debt of approximately $680 million less cash and
cash equivalents of approximately $87 million. The company has no
debt maturities until 2008. RECENT PROGRAM WINS, RECORD BACKLOG,
STRENGTHEN OUTLOOK Record bookings for the third quarter of over
$400 million drove backlog levels at September 30, 2005 to a level
in excess of $1 billion, which was 63 percent greater versus the
company's September 30, 2004 backlog and was up 22 percent on a
sequential quarterly basis. Bookings for the quarter were driven by
strong demand for international fleet retrofit and refurbishment
programs, follow-on orders for our super first class products, as
well as other key program awards. Significant bookings during the
quarter included: -- A fleet-wide premium class retrofit program
for a major international carrier. This program is initially valued
at approximately $160 million with deliveries scheduled to start in
mid-2006. -- A major ICON(TM) premium coach class seat retrofit
program for a major international carrier. In addition to
representing the launch customer for the ICON(TM) premium coach
class seat, this $40 million program represents a follow-on award
to a previously awarded $90 million premium class program. -- Two
additional super first class programs initially valued at
approximately $60 million with deliveries scheduled to commence in
2006. -- A major international carrier selected B/E for a
narrow-body fleet-wide seating upgrade on its entire A320 fleet in
a program initially valued at approximately $30 million. This
program is particularly significant in that it represents only the
second major coach class retrofit program in recent years,
potentially signaling the onset of the long-awaited coach class
retrofit cycle. -- Airbus and three major business jet
manufacturers selected B/E Aerospace for oxygen systems in programs
initially valued at approximately $45 million. These programs will
expand B/E's oxygen technology into military platforms and into the
emerging Very Light Jet segment. -- Selected by Boeing for the
integration, certification and kit production of "Connexion by
Boeing"; in-flight, high-speed internet service systems for Boeing
777 and 767 aircraft. There are approximately 1,400 of these
aircraft in service today. "Program awards to date have primarily
consisted of retrofit programs for the existing fleets of wide-body
aircraft with premium products including the introduction of our
super first class product offerings. The coach class seating award
referred to above is particularly significant in that it represents
only the second major coach class retrofit program in recent years,
potentially signaling the onset of the long-awaited coach class
retrofit cycle. Additionally, the international airlines are now
beginning to address not only their coach class retrofit needs but
also premium class and coach class requirements for their new buy
wide-body aircraft. These aircraft are expected to deliver in
volume during the 2007 to 2010 time period. It has been primarily
retrofit activity which has resulted in stronger than expected
orders and a record $1 billion backlog. This activity has enhanced
our visibility into 2008 and is driving our revenue and earnings
expectations upward," stated Robert J. Khoury, President and Chief
Executive Officer of B/E Aerospace, Inc. Mr. Khoury concluded,
"Cabin interiors for wide-body aircraft require five to eight times
the dollar value of the cabin interior equipment used to outfit
narrow-body aircraft. Industry experts anticipate that Boeing and
Airbus will ship approximately 950 wide-body and super wide-body
aircraft over the four year period from 2007 through 2010. The
scheduled deliveries of these wide-body aircraft coupled with the
continued recovery in the business jet sector bode well for
continued strong revenue growth for at least the next three years."
FINANCIAL GUIDANCE Financial guidance is now as follows: -- For the
full year 2005, notwithstanding any negative impacts from the
Boeing strike and several hurricane related lost shipping days at
our distribution segment during the third quarter, management
expects revenue in excess of $800 million and earnings of $0.50 per
share. -- For 2006, management expects revenue of approximately $1
billion and to report earnings of $1.10 per share for the full
year. Orders and backlog are expected to continue to be strong in
2006 consistent with the new aircraft delivery cycle. -- 2007
earnings per share are expected to grow at a double digit rate
(versus 2006) on a fully taxed (35% rate) basis, driven by strong
revenue growth and additional margin expansion. Commenting on the
company's outlook, Mr. Khoury stated, "The addressable aircraft
cabin interior products market is expected to grow at a compounded
annual growth rate of approximately 15% over the 2005 to 2010
period. We expect our CAS revenues to grow at a rate in excess of
the expected compounded annual growth rate for the cabin interior
products market. "We expect to generate revenues and earnings per
share during 2006 of approximately $1 billion and $1.10,
respectively, and expect that our 2007 earnings per share will grow
at a double digit rate on a fully taxed (35% rate) basis, driven by
strong revenue growth and additional margin expansion." 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
range of products for both commercial aircraft and business jets.
B/E manufactured products include seating, lighting, oxygen, and
food and beverage preparation and storage equipment. The company
also provides cabin interior design, reconfiguration and
passenger-to-freighter conversion services. Products for the
existing aircraft fleet -- the aftermarket -- generate 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. 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. The
forward-looking statements included in this news release are made
only as of the date of this news release and, except as required by
federal securities laws, we do not have any obligation to publicly
update or revise any forward-looking statements to reflect
subsequent events or circumstances. -0- *T B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (unaudited) THREE
MONTHS ENDED --------------------------- September 30, September
30, (In millions, except per share data) 2005 2004
----------------------------------------------------------------------
Net sales $ 217.1 $ 183.5 Cost of sales 140.5 123.4 ----------
----------- Gross profit 76.6 60.1 Gross margin 35.3% 32.8%
Operating expenses: Selling, general and administrative 34.0 29.8
Research, development and engineering 17.2 12.8 ----------
----------- Total operating expenses 51.2 42.6 ----------
----------- Operating earnings 25.4 17.5 Operating margin 11.7%
9.5% Interest expense, net 14.8 19.7 ---------- -----------
Earnings (loss) before income taxes 10.6 (2.2) Income taxes 0.6 0.5
---------- ----------- NET EARNINGS (LOSS) $ 10.0 $ (2.7)
========== =========== NET EARNINGS (LOSS) PER COMMON SHARE Basic $
0.17 $ (0.07) ========== =========== Diluted $ 0.16 $ (0.07)
========== =========== Common shares: Basic Weighted average 58.2
37.5 End of period 58.5 37.8 Diluted Weighted average 61.2 37.5 End
of period 61.5 37.8 B/E Aerospace, Inc. CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS (unaudited) NINE MONTHS ENDED
---------------------------- September 30, September 30, (In
millions, except per share data) 2005 2004
----------------------------------------------------------------------
Net sales $ 621.2 $ 543.9 Cost of sales 403.8 368.4 ---------
----------- Gross profit 217.4 175.5 Gross margin 35.0% 32.3%
Operating expenses: Selling, general and administrative 97.8 88.4
Research, development and engineering 50.2 39.0 ---------
----------- Total operating expenses 148.0 127.4 ---------
----------- Operating earnings 69.4 48.1 Operating margin 11.2%
8.8% Interest expense, net 44.9 59.4 --------- ----------- Earnings
(loss) before income taxes 24.5 (11.3) Income taxes 2.0 1.4
--------- ----------- NET EARNINGS (LOSS) $ 22.5 $ (12.7) =========
=========== NET EARNINGS (LOSS) PER COMMON SHARE Basic $ 0.39 $
(0.34) ========= =========== Diluted $ 0.37 $ (0.34) =========
=========== Common shares: Basic Weighted average 57.4 37.1 End of
period 58.5 37.8 Diluted Weighted average 60.3 37.1 End of period
61.5 37.8 B/E Aerospace, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in millions) September 30, December 31, 2005 2004
------------- ------------ ASSETS Current assets: Cash and cash
equivalents $ 87.3 $ 76.3 Accounts receivable, net 121.5 91.6
Inventories, net 222.1 197.8 Other current assets 12.8 13.4
----------- ---------- Total current assets 443.7 379.1 Long-term
assets 622.7 645.7 ----------- ---------- $ 1,066.4 $ 1,024.8
=========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Total
current liabilities $ 175.3 $ 154.1 Long-term liabilities 684.8
687.9 ----------- ---------- 860.1 842.0 Total stockholders' equity
206.3 182.8 ----------- ---------- $ 1,066.4 $ 1,024.8 ===========
========== B/E Aerospace, Inc. CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (unaudited; in millions) NINE MONTHS ENDED
--------------------- September September 30, 30, 2005 2004
--------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net
earnings (loss) $ 22.5 $ (12.7) Adjustments to reconcile net
earnings (loss) to net cash flows provided by (used in) operating
activities: Depreciation and amortization 21.7 21.0 Provision for
doubtful accounts 0.5 0.7 Non-cash employee benefit plan
contributions 2.1 1.7 Changes in operating assets and liabilities,
net of acquisitions (37.3) (11.6) ------- ------- Net cash flows
provided by (used in) operating activities 9.5 (0.9) -------
------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures
(10.9) (10.7) Proceeds from sale of property and equipment 0.2 0.5
Acquisitions, net of cash acquired --- (12.5) Other, net 4.0 0.8
------- ------- Net cash flows used in investing activities (6.7)
(21.9) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised 10.0 3.1 Repayment of
long-term debt (0.3) (1.7) ------- ------- Net cash flows provided
by financing activities 9.7 1.4 ------- ------- Effect of exchange
rate changes on cash flows (1.5) --- ------- ------- Net increase
(decrease) in cash and cash equivalents 11.0 (21.4) Cash and cash
equivalents at beginning of period 76.3 147.6 ------- ------- Cash
and cash equivalents at end of period $ 87.3 $ 126.2 =======
======= *T
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