B/E Aerospace, Inc. (Nasdaq:BEAV), the world�s leading
manufacturer of aircraft cabin interior products and the world�s
leading distributor of aerospace fasteners and consumables, today
announced first quarter 2009 financial results.
FIRST QUARTER
HIGHLIGHTS
- 2009 first quarter net sales of
$523.7 million increased 10.7 percent as compared with first
quarter 2008, reflecting the inclusion of Honeywell�s Consumables
Solutions distribution business (HCS), which was acquired on July
28, 2008. Revenues declined 15.6 percent as compared with first
quarter 2008 proforma revenues. (Proforma first quarter 2008
results include the HCS acquisition).
- 2009 first quarter operating
earnings, excluding $3.7 million of acquisition, integration and
transition (AIT) costs related to the HCS acquisition, were $84.4
million (16.1 percent of sales) and declined by 9.2 percent, as
compared with first quarter 2008 proforma operating earnings.
- 2009 first quarter net earnings
and net earnings per diluted share were $37.9 million and $0.38,
respectively, ($40.3 million and $0.41, respectively, as adjusted
to exclude AIT costs).
FIRST QUARTER CONSOLIDATED
RESULTS
Net sales for the first quarter of $523.7 million increased by
$50.5 million, or 10.7 percent as compared with the first quarter
of the prior year. The $50.5 million increase in consolidated
revenues was the result of a $117.4 million, or 96.2 percent,
increase in revenues at the consumables management segment
(formerly the distribution segment), due to the HCS acquisition,
partially offset by a $52.6 million, or 18.9 percent, decrease in
revenues at the commercial aircraft segment, and a $14.3 million,
or 19.7 percent, decrease in revenues at the business jet
segment.
Operating earnings of $80.7 million increased by $3.3 million,
or 4.3 percent, as compared with first quarter of the prior year.
Operating earnings and operating margin, exclusive of AIT costs,
were $84.4 million and 16.1 percent, respectively. Including the
HCS acquisition in both periods and excluding AIT costs in the
current period, first quarter 2009 adjusted operating earnings of
$84.4 million declined 9.2 percent as compared with first quarter
2008 proforma operating earnings of $93.0 million.
Net earnings were $37.9 million or $0.38 per diluted share. Net
earnings, adjusted to exclude AIT costs, were $40.3 million or
$0.41 per diluted share.
Commenting on the company�s recent performance, Amin J. Khoury,
Chairman and Chief Executive Officer of B/E Aerospace, Inc. said,
�The first quarter of 2009 presented a number of challenges
including retrofit program deferrals and substantially lower
commercial aircraft segment spares and consumables revenues.
Commercial aircraft segment spares revenues and consumables
revenues were depressed due to reduced air travel, reduced fleet
capacity as a result of aircraft groundings, and airline cash
conservation measures.�
Amounts presented in this earnings release on a proforma basis
have been calculated as if the HCS acquisition had occurred on
January 1, 2008. See the table in �First Quarter Segment Results�
for a presentation of the actual and proforma amounts for the first
quarter of 2008. Additionally, adjusted operating earnings,
adjusted net earnings, and adjusted net earnings per diluted share,
in each case, excluding AIT costs are non-GAAP financial measures.
See "Reconciliation of Non-GAAP Financial Measures."
AIT costs referred to in this news release are acquisition,
integration and transition expenses related to the integration of
the HCS business with the company�s existing consumables management
segment.
FIRST QUARTER SEGMENT
RESULTS
The following is a tabular summary and commentary of net sales
and operating earnings by segment on an as reported and proforma
basis:
� �
NET SALES Three Months Ended March 31, ($ in
millions) 2009 � �
2008 � �
2008 � �
%
Change �
As Reported Proforma Proforma
Consumables Management $ 239.4 $ 122.0 $ 269.4 -11.1 % Commercial
Aircraft 225.9 278.5 278.5 -18.9 % Business Jet � 58.4 � 72.7 �
72.7 -19.7 % Total $ 523.7 $ 473.2 $ 620.6 -15.6 % �
OPERATING
EARNINGS Three Months Ended March 31, ($ in
millions) 2009 2008 2008 % Change �
As Reported Proforma Proforma Consumables
Management $ 47.4 $ 35.3 $ 50.9 -6.9 % Commercial Aircraft 28.5
31.5 31.5 -9.5 % Business Jet � 4.8 � 10.6 � 10.6 -54.7 % Total $
80.7 $ 77.4 $ 93.0 -13.2 %
Including the HCS acquisition in both periods, consumables
management segment revenues were $239.4 million or 11.1 percent
lower than 2008 proforma revenues of $269.4 million. Consumables
management segment operating earnings, which include $3.7 million
of AIT costs, were $47.4 million. First quarter 2009 operating
earnings, adjusted to exclude AIT costs were $51.1 million (21.3
percent of sales) as compared with first quarter 2008 proforma
operating earnings of $50.9 million (18.9 percent of sales). First
quarter 2009 adjusted operating margin expanded 240 basis points as
compared with proforma operating margin in the prior year period
primarily due to lower margins in the HCS business in the prior
year period, more efficient purchasing in the current period and
initial synergies arising from the HCS acquisition.
Commercial aircraft segment revenues of $225.9 million decreased
18.9 percent reflecting retrofit program push outs and lower spares
revenues. Spares revenues in the current period declined
significantly due to reduced air travel, reduced fleet capacity,
and airline cash conservation measures. Operating earnings in the
2009 period were $28.5 million, or 12.6 percent of sales, an
increase of 130 basis points as compared with the same period in
the prior year, reflecting improved manufacturing efficiencies and
successful cost reduction activities, partially offset by an
unfavorable mix due to the lower level of spares revenues.
Business jet segment revenues decreased by $14.3 million, or
19.7 percent, to $58.4 million and operating earnings decreased by
$5.8 million, or 54.7 percent, reflecting the negative impact of
reduced operating leverage and an unfavorable mix of products sold
in the 2009 period as compared to the same period in 2008.
LIQUIDITY AND BALANCE SHEET
METRICS
As of March 31, 2009, the company�s net debt-to-net-capital
ratio was 43.6 percent. Net debt was $1,006.5 million, which
represents total debt of $1,121.8 million less cash and cash
equivalents of $115.3 million. There were no borrowings outstanding
on the company�s $350 million revolving credit facility and the
company has no debt maturities until 2014. Standard & Poor�s
recently affirmed the company�s BBB- corporate credit rating.
Working capital as of March 31, 2009 was $1,183.1 million, up
$9.4 million as compared with working capital as of December 31,
2008. During the first quarter of 2009 the company successfully
completed its initiative to bring HCS inventories in line with the
B/E Aerospace stocking distribution model. The investment in
inventories at the consumables management segment was the principal
reason for the increase in working capital.
BOOKINGS AND
ORDERS
Bookings during the first quarter of 2009 were approximately
$475 million, a book-to-bill ratio of approximately 0.9 to 1.
Backlog at the end of the quarter was approximately $2.8 billion,
an increase of approximately 22 percent as compared with the
company�s March 31, 2008 backlog, but approximately 3 percent lower
than backlog at December 31, 2008.
Mr. Khoury commented, �The impact of the global economic crisis
on our customers has negatively impacted demand for new aircraft,
for retrofits, and particularly for spares and consumables. Lower
corporate profits, dysfunctional capital markets and negative
political commentary regarding corporate offsite meetings and
business jet utilization have also impacted demand for both air
travel and business jets. These conditions will likely continue to
impede bookings activity during 2009.�
Mr. Khoury continued, �While the near-term prospects for major
new-buy or retrofit programs appears to be at trough levels, we are
pleased with the success of our strategic �OEM direct�, or supplier
furnished equipment (SFE) focus, which will substantially increase
our revenue content per aircraft. These successes include awards
for our next generation galley for the A350 XWB, our patented
passenger oxygen system for the A350 XWB, our oxygen/PSU award for
the B787, our new LED cabin lighting systems award and our new
vacuum waste management systems awards. The value of the long-term
OEM direct program awards, which we have won, now totals over $2.3
billion, only a very small portion of which is included in the
company�s backlog. Our backlog of $2.8 billion along with unbooked
SFE awards is in excess of $5 billion. As we deliver our backlog,
our $7.3 billion installed base is expected to grow very
substantially. This increase in our installed base should
eventually drive a significant increase in the size of our spares
business.�
OUTLOOK
Commenting on the company�s outlook, Mr. Khoury stated, �The
weakened global economy has caused industry conditions to continue
to worsen in 2009. International passenger traffic declined by more
than 10 percent in February 2009 compared with February 2008.
Premium traffic was down sharply, declining nearly 20 percent in
the two-month period ended February 2009 compared to the prior year
period. International cargo traffic, which began falling in June
2008, took a further steep decline of 23 percent in the latest
three-month period compared to the same period a year ago. Air
freighters are now being parked at unprecedented rates, and demand
for passenger-to-freighter conversions is expected to be soft for
the foreseeable future. The resulting lower yields for the global
airline industry are causing our customers to increase the number
of parked aircraft and to further defer new aircraft deliveries. In
addition, due to the factors discussed above, business jet
manufacturers have reduced delivery rates, in some cases, by up to
40 percent. We also believe the major commercial airframe
manufacturers will further reduce their delivery rates in 2010. We
have responded to this new, further downdraft in conditions by
initiating further cost reduction efforts.�
�Despite current market conditions we believe we have positioned
the company well for the downturn. We have responded quickly and
decisively to reduce our cost structure. Despite lower near-term
revenue expectations, we expect to be able to maintain or even
slightly expand operating margin driven by the consumables
management and commercial aircraft segments. Margin expansion in
the consumables management segment is expected to be driven by
successful execution of our HCS integration efforts, while further
margin expansion in the commercial aircraft segment is expected to
be driven by our global sourcing initiatives, stringent cost
controls and our continuous improvement initiatives. Our balance
sheet is healthy and we have no debt maturities until 2014. We
believe that our strategic business decision to alter our business
mix so that more than half of our business is related to
consumables and spares demand, along with our strategic focus on
OEM direct, or SFE programs, will have a profound impact on our
business in the future. We believe that 2009 will be the trough
year for B/E Aerospace bookings, backlog and earnings. Our
expectation is that there will be an improvement in order rates and
sales for our consumables and commercial aircraft spares businesses
in 2010, and that beginning in 2010 there will be a strengthening
in orders and an expansion of our backlog due to the conversion of
SFE program awards, that we have already won, to purchase orders,
which will drive revenue growth in 2011 and beyond. Nevertheless,
until we see order rates and shipments for consumables and spares
improve, it is unlikely that quarterly earnings will exceed the
first quarter 2009 level,� concluded Mr. Khoury.
The company�s 2009 financial guidance is as follows:
- 2009 revenues are expected to be
approximately $1.9 billion, or about 23 percent lower than 2008
proforma revenues giving effect to the inclusion of the HCS
business for all of 2008.
- Net earnings per diluted share
are expected to trough in 2009 and are expected to be approximately
$1.50 per diluted share, excluding AIT costs of approximately $0.10
per diluted share, reflecting deterioration in mix due to lower
sales of commercial aircraft segment spares, and consumables.
- The company has now successfully
completed its investments in consumables inventories to bring HCS
in line with the B/E Aerospace inventory stocking distribution
model. As expected, these investments resulted in a substantial use
of cash during the first quarter. Despite the planned use of cash
in the first quarter and the company�s somewhat lower financial
guidance, the company continues to expect positive cash generation
for the balance of the year.
- The company expects a
book-to-bill ratio below one and a decrease in backlog during 2009,
but expects an expansion in orders and backlog beginning in 2010
due to an expected rebound in demand for consumables and spares,
and due to the conversion of unbooked SFE awards to bookings.
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 include, but are not limited to, B/E Aerospace�s
financial guidance and industry expectations for the next several
years and the expected benefits from the HCS acquisition. Such
forward-looking statements involve risks and uncertainties. B/E
Aerospace�s actual experience and results may differ materially
from the experience and results anticipated in such statements.
Factors that might cause such a difference include changes in
market and industry conditions and those discussed in B/E
Aerospace�s filings with the Securities and Exchange Commission,
which include its Proxy Statement, Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. For
more information, see the section entitled �Forward-Looking
Statements� contained in B/E Aerospace�s Annual Report on 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
intend to publicly update or revise any forward-looking statements
to reflect subsequent events or circumstances.
About B/E Aerospace, Inc.
B/E Aerospace, Inc. is the world�s leading manufacturer of
aircraft cabin interior products and the world�s leading
distributor of aerospace fasteners and consumables. B/E Aerospace
designs, develops and manufactures a broad range of products for
both commercial aircraft and business jets. B/E Aerospace
manufactured products include aircraft cabin 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 Aerospace sells and supports its products
through its own global direct sales and product support
organization. For more information, visit the B/E Aerospace, Inc.
website at www.beaerospace.com.
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS (UNAUDITED)
(In Millions, Except Per Share
Data)
�
THREE MONTHS ENDED March 31, �
March 31, �
2009 � �
2008 � Net sales $ 523.7 $ 473.2 Cost of
sales 347.0 304.1 Selling, general and administrative 72.0 56.3
Research, development and engineering � 24.0 � � 35.4 � Operating
earnings 80.7 77.4 Operating margin 15.4 % 16.4 % Interest expense,
net � 22.5 � � 2.8 � Earnings before income taxes 58.2 74.6 Income
tax expense � 20.3 � � 26.1 �
Net Earnings $ 37.9 � $ 48.5 �
�
Net Earnings per Common Share Basic $ 0.39 � $ 0.53 �
Diluted $ 0.38 � $ 0.53 � Common shares: Basic weighted average
98.3 91.6 Diluted weighted average 98.6 92.0 � �
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(In Millions)
�
March 31, �
December 31, 2009 2008 �
ASSETS � Current assets: Cash and cash equivalents $ 115.3 $
168.1 Accounts receivable, net 297.3 271.4 Inventories, net 1,246.7
1,197.0 Deferred income taxes 8.0 22.1 Other current assets � 21.1
� 24.8 Total current assets 1,688.4 1,683.4 Long-term assets �
1,266.2 � 1,246.7 $ 2,954.6 $ 2,930.1 �
LIABILITIES AND
STOCKHOLDERS� EQUITY � Total current liabilities $ 505.3 $
509.7 Long-term liabilities 1,149.7 1,153.9 Total stockholders'
equity � 1,299.6 � 1,266.5 $ 2,954.6 $ 2,930.1 � �
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
�
THREE MONTHS ENDED March 31, �
March 31, �
2009 � �
2008 �
CASH FLOWS FROM OPERATING
ACTIVITIES: Net earnings $ 37.9 $ 48.5 Adjustments to reconcile
net earnings to net cash flows used in operating activities, net of
effects from acquisitions: Depreciation and amortization 11.8 9.1
Provision for doubtful accounts 0.4 0.4 Non-cash compensation 5.3
3.7 Deferred income taxes 13.7 21.9 Changes in operating assets and
liabilities, net of effects from acquisitions: Accounts receivable
(28.8 ) (60.2 ) Inventories (79.9 ) (46.2 ) Other current assets
and other assets 3.9 2.1 Payables, accruals and other liabilities �
(3.8 ) � (14.2 ) Net cash flows used in operating activities �
(39.5 ) � (34.9 ) �
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures �
(10.0 ) �
(8.5 ) Net cash flows used in investing
activities � (10.0 ) � (8.5 ) �
CASH FLOWS FROM FINANCING
ACTIVITIES: Proceeds from common stock issued - 0.2 Principal
payments on long-term debt (1.4 ) (0.2 ) Borrowings on line of
credit - 22.0 Repayments on line of credit � - � � (22.0 ) Net cash
flows used in financing activities � (1.4 ) � - � � Effect of
foreign exchange rate changes on cash and cash equivalents � (1.9 )
� 2.2 � �
Net decrease in cash and cash equivalents (52.8 )
(41.2 ) �
Cash and cash equivalents, beginning of period �
168.1 � � 81.6 � �
Cash and cash equivalents, end of period
$ 115.3 � $ 40.4 � �
B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
This release includes the financial measures �adjusted operating
earnings� on a consolidated basis and for the consumables
management segment, �adjusted net earnings� and �adjusted net
earnings per diluted share,� which are �non-GAAP financial
measures� as defined in Regulation G of the Securities and Exchange
Act of 1934. We define �adjusted operating earnings� as operating
earnings reported under GAAP less acquisition, integration and
transition costs. We define �adjusted net earnings� and �adjusted
net earnings per diluted share� as net earnings and net earnings
per diluted share reported under GAAP less acquisition,
integration, transition costs.
We use adjusted net earnings, adjusted net earnings per diluted
share and adjusted operating earnings to evaluate and assess the
operational strength and performance of its business. We believe
these financial measures are relevant and useful for investors
because it allows investors to have a better understanding of the
company�s operating performance that were not affected by the
acquisition, integration and transition costs associated with the
HCS acquisition. These financial measures should not be viewed as a
substitute for, or superior to, net earnings per diluted share or
operating earnings, both on a consolidated and on a segment basis,
the most comparable GAAP measures, as a measure of the company�s
operating performance.
Acquisition, Integration and Transition Costs. In the first
quarter of 2009, the company incurred $3.7 million of acquisition,
integration and transition costs relating to the HCS
acquisition.
Pursuant to the requirements of Regulation G, the company is
providing the following tables which reconcile net earnings and net
earnings per diluted share, the most directly comparable GAAP
measures, to adjusted net earnings and adjusted net earnings per
fully diluted share, respectively, and consolidated and consumables
management segment operating earnings, the most directly comparable
GAAP measure, to adjusted operating earnings on consolidated basis
and on a consumables management segment basis.
RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
(In Millions, Except Per Share Data) �
Three Months
Ended March 31, �
2009 � Net earnings, as
reported $ 37.9 Acquisition, integration and transition costs 3.7
Income taxes on acquisition, integration and transition costs (1.3
) (using the 35% effective tax rate) � Adjusted net earnings $ 40.3
� � Adjusted net earnings per diluted share $ 0.41 � � Net earnings
per diluted share, as reported $ 0.38 � �
RECONCILIATION OF
OPERATING EARNINGS TO ADJUSTED OPERATING EARNINGS (In
Millions) Three Months Ended March 31, �
2009 � Operating earnings, as reported $ 80.7 Acquisition,
integration and transition costs � 3.7 � Adjusted operating
earnings $ 84.4 � �
RECONCILIATION OF CONSUMABLES
MANAGEMENT SEGMENT
OPERATING EARNINGS TO ADJUSTED OPERATING EARNINGS (In
Millions) Three Months Ended March 31, �
2009 � Consumables management operating earnings, as
reported $ 47.4 Acquisition, integration and transition costs � 3.7
� Adjusted operating earnings $ 51.1 �
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