B/E Aerospace (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
second quarter 2010 financial results.
SECOND QUARTER 2010 HIGHLIGHTS
VERSUS SECOND QUARTER PRIOR YEAR
- Revenues of $483.9 million
increased 1.9 percent.
- Operating earnings of $78.8
million increased 6.6 percent. Operating margin of 16.3 percent
expanded 70 basis points.
- Earnings before income taxes,
exclusive of the $2.5 million non-cash debt prepayment charge,
increased 14.6 percent.
- Net earnings and earnings per
diluted share, exclusive of a $2.5 million or $0.02 per share
non-cash debt prepayment charge, were $39.0 million, or $0.39 per
share, and increased 12.4 percent and 11.4 percent,
respectively.
- Free cash flow was $46.5 million
and represented a free cash flow conversion ratio of 125
percent.
- The second quarter book-to-bill
ratio was 1.1 to 1 and was in excess of one for the third
consecutive quarter.
- Full-year 2010 earnings per
diluted share guidance raised by $0.05 per share to approximately
$1.50 per share (exclusive of non-cash debt prepayment
charge).
SECOND QUARTER CONSOLIDATED
RESULTS
Second quarter 2010 revenues of $483.9 million increased $9.1
million, or 1.9 percent, as compared with the same period of the
prior year. The increase in consolidated revenues was due to a
higher level of commercial aircraft segment revenues.
Second quarter 2010 operating earnings of $78.8 million
increased 6.6 percent on the aforementioned 1.9 percent increase in
revenues. Operating margin in the current quarterly period was 16.3
percent and expanded by 70 basis points as compared with the prior
year period.
Second quarter 2010 earnings before income taxes, exclusive of
the $2.5 million non-cash debt prepayment charge, were $58.9
million and increased 14.6 percent as compared with the prior year
period.
Second quarter 2010 net earnings, exclusive of non-cash debt
prepayment charge, were $39.0 million, or $0.39 per diluted share,
and increased 12.4 percent and 11.4 percent, respectively, as
compared with the prior year period. During the second quarter of
2010 the company prepaid $75 million of long-term debt resulting in
a $2.5 million non-cash debt prepayment charge (approximately $0.02
per diluted share). Second quarter 2010 earnings per diluted share,
including the non-cash debt prepayment charge, were $0.37.
Second quarter 2010 free cash flow was $46.5 million,
representing a free cash flow conversion ratio of 125 percent.
Commenting on the company’s recent performance, Amin J. Khoury,
Chairman and Chief Executive Officer of B/E Aerospace said, “Our
second quarter earnings growth was driven by significant margin
expansion at both our consumables management segment (CMS) and our
commercial aircraft segment (CAS). Our CMS operating margin
expanded by 160 basis points to 19.8 percent while our CAS
operating margin expanded by 140 basis points to 15.5 percent.
Overall, operating earnings increased 7 percent on a 2 percent
increase in revenues. Exclusive of a $2.5 million or $0.02 per
share non-cash debt prepayment charge, pretax earnings, net
earnings and earnings per share increased 14.6 percent, 12.4
percent and 11.4 percent, respectively. Our free cash flow
conversion ratio was 125 percent, we prepaid $75 million of
long-term debt and for the third consecutive quarter our backlog
grew. This, together with an expected continued increase in global
passenger traffic, underscores our expectation for stronger
operating results in 2010 and significant improvements thereafter.
As a result, we are raising our 2010 EPS guidance by $0.05 per
diluted share to approximately $1.50 per diluted share (exclusive
of the non-cash debt prepayment charge).”
Earnings before income taxes exclusive of non-cash debt
prepayment charge, net earnings exclusive of debt prepayment
charge, adjusted earnings per diluted share exclusive of debt
prepayment charge, free cash flow and free cash flow conversion
ratio are non-GAAP financial measures. For more information see
"Reconciliation of Non-GAAP Financial Measures."
SECOND QUARTER SEGMENT
RESULTS
The following is a tabular summary and commentary of revenues
and operating earnings by segment:
REVENUES Three Months Ended June 30, ($ in
millions) 2010 2009
% Change Consumables management $ 193.1 $ 196.6 -1.8
% Commercial aircraft 236.4 223.9 5.6 % Business jet 54.4
54.3 0.2 % Total $ 483.9 $ 474.8 1.9 %
OPERATING
EARNINGS Three Months Ended June 30, ($ in
millions) 2010 2009
% Change Consumables management $ 38.2 $ 35.8 6.7 %
Commercial aircraft 36.6 31.6 15.8 % Business jet 4.0
6.5 -38.5 % Total $ 78.8 $ 73.9 6.6 %
Second quarter 2010 consumables management segment (CMS)
revenues of $193.1 million were 1.8 percent lower as compared with
the second quarter of 2009. Sequentially, second quarter 2010 CMS
revenues increased 3.8 percent as compared with the first quarter
of 2010. Second quarter 2010 CMS operating earnings of $38.2
million increased 6.7 percent and operating margin of 19.8 percent
expanded 160 basis points as compared with the second quarter of
2009.
Second quarter 2010 commercial aircraft segment (CAS) revenues
of $236.4 million increased 5.6 percent as compared with the prior
year period. CAS spares revenues in the second quarter of 2010
increased at a double digit rate as compared with the second
quarter of 2009. CAS second quarter 2010 operating earnings were
$36.6 million, or 15.5 percent of revenues, an increase of 15.8
percent as compared with the prior year. Second quarter 2010
operating margin expanded 140 basis points as compared with the
prior year period primarily due to a higher level of spares
revenues and ongoing operational efficiencies.
Second quarter 2010 business jet segment revenues of $54.4
million were flat as compared with the prior year period. Operating
earnings of $4.0 million decreased $2.5 million or 38.5 percent as
compared with the prior year period primarily as a result of an
unfavorable mix of product revenues in the current year period.
SIX-MONTH CONSOLIDATED
RESULTS
For the six months ended June 30, 2010, revenues of $947.4
million declined 5.1 percent as compared with the prior year period
as a result of lower revenues in the first quarter of 2010 as
compared with the first quarter of 2009.
For the six months ended June 30, 2010, operating earnings of
$150.8 million declined 2.5 percent as compared with the prior year
period as a result of 5.1 percent lower revenues in the current
period. Operating margin in the current period of 15.9 percent
expanded 40 basis points as compared to the prior year period.
For the six months ended June 30, 2010, net earnings were $71.1
million, or $0.71 per diluted share, as compared with $72.6
million, or $0.73 per diluted share, in the prior year period.
During the second quarter of 2010 the company prepaid $75 million
of long-term debt resulting in a debt prepayment charge of
approximately $0.02 per diluted share. Exclusive of the charge,
earnings per diluted share for the 2010 period were $0.72 per
diluted share.
SIX-MONTH SEGMENT
RESULTS
The following is a tabular summary and commentary of revenues
and operating earnings by segment:
REVENUES Six Months Ended June 30, ($ in
millions) 2010 2009 % Change
Consumables management $ 379.2 $ 436.0 -13.0 % Commercial
aircraft 466.5 449.8 3.7 % Business jet 101.7 112.7
-9.8 % Total $ 947.4 $ 998.5 -5.1 %
OPERATING
EARNINGS Six Months Ended June 30, ($ in
millions) 2010 2009 % Change
Consumables management $ 75.0 $ 83.2 -9.9 % Commercial aircraft
70.4 60.1 17.1 % Business jet 5.4 11.3 -52.2 % Total
$ 150.8 $ 154.6 -2.5 %
For the six months ended June 30, 2010, CMS revenues of $379.2
million declined 13.0 percent as compared with the prior year
period, primarily as a result of lower revenues in the first
quarter of 2010 as compared with the first quarter of 2009. CMS
bookings in the first half of 2010 increased more than 10 percent
sequentially as compared with the second half of 2009. First half
2010 operating earnings declined 9.9 percent as compared with the
prior year period. The first half 2010 CMS operating margin of 19.8
percent increased 70 basis points as compared with the prior year
period primarily due to ongoing operational efficiencies. CMS
operating earnings in the first half of 2010 increased 10.6 percent
on a 4.7 percent increase in revenues sequentially as compared with
the second half of 2009.
For the six months ended June 30, 2010, CAS revenues of $466.5
million increased 3.7 percent as compared with the prior year
period. CAS spares revenues and bookings in the first half of 2010
increased at a healthy double digit rate sequentially as compared
with the second half of 2009. First half 2010 CAS operating
earnings were $70.4 million, or 15.1 percent of revenues, an
increase of 17.1 percent as compared with the prior year period.
Current period operating margin expanded 170 basis points as
compared with the prior year period primarily as a result of a
higher level of spares revenues and ongoing operational
efficiencies.
For the six months ended June 30, 2010, business jet segment
revenues of $101.7 million declined 9.8 percent and operating
earnings of $5.4 million decreased $5.9 million or 52.2 percent as
compared with the prior year period, as a result of lower revenues,
an unfavorable mix of product revenues and the negative impact of
reduced operating leverage in the current year period.
LIQUIDITY AND BALANCE SHEET
METRICS
Second quarter 2010 free cash flow of $46.5 million represents a
free cash flow conversion ratio of 125 percent. During the second
quarter of 2010 the company prepaid $75 million of long-term debt
and has prepaid $175 million of long-term debt since the fourth
quarter of 2009. Net debt as of June 30, 2010 was $819.5 million
and the company’s net debt-to-net capital ratio was 35.5 percent,
an improvement of 610 basis points since June 30, 2009. The company
has no borrowings outstanding on its $350 million revolving credit
facility and no debt maturities until 2014.
BOOKINGS
Bookings during the second quarter of 2010 were strong at
approximately $550 million reflecting solid bookings with respect
to both new aircraft and aftermarket programs. The book-to-bill
ratio was 1.1 to 1 for the quarter, and for the third consecutive
quarter represented a book-to-bill ratio in excess of one. Backlog
at the end of the quarter was approximately $2.8 billion, an
increase of approximately 4 percent as compared with the company’s
June 30, 2009 backlog and supplier furnished equipment programs
awarded expanded to $2.62 billion. As a result, total backlog,
booked and unbooked expanded to a record $5.4 billion.
OUTLOOK
Commenting on the company’s outlook, Mr. Khoury stated, “As a
result of our better than expected performance during the first
half of 2010, improving global air traffic, and improving airline
yields, we are raising our 2010 full year earnings per share
guidance by $0.05 per diluted share to approximately $1.50 per
diluted share (exclusive of non-cash debt prepayment charge). 2010
revenues are now expected to be about equal to 2009 revenues of
approximately $1.94 billion. In addition, we expect to generate
free cash flow in excess of 100 percent of net earnings for the
full year 2010. Importantly, based upon our expectation of a
continued expansion in orders and backlog and a continued recovery
in our commercial aircraft segment spares and consumables
businesses during 2010 as well as higher levels of wide-body
aircraft deliveries in 2011, we expect a significant increase in
revenues, earnings and cash flows beginning in 2011.”
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
B/E Aerospace 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 approximately
50 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 website
at www.beaerospace.com.
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS (UNAUDITED)
(In Millions, Except Per Share
Data)
THREE MONTHS ENDED SIX MONTHS
ENDED June 30, June 30, June 30,
June 30, 2010 2009
2010 2009 Revenues $ 483.9 $
474.8 $ 947.4 $ 998.5 Cost of sales 309.6 309.5 605.3 656.5
Selling, general and administrative 70.0 68.1 138.7 140.1
Research, development and
engineering
25.5 23.3 52.6
47.3 Operating earnings 78.8 73.9 150.8 154.6
Operating earnings, as a
percentage of revenues
16.3 % 15.6 % 15.9 % 15.5 % Interest expense, net 19.9 22.5
40.7 45.0 Debt prepayment costs 2.5 --
2.5 -- Earnings before income
taxes 56.4 51.4 107.6 109.6 Income taxes 19.1
16.7 36.5 37.0 Net
earnings $ 37.3 $ 34.7 $ 71.1 $ 72.6
Net earnings per common share: Basic $ 0.37 $
0.35 $ 0.71 $ 0.74 Diluted $ 0.37 $
0.35 $ 0.71 $ 0.73 Weighted average
common shares: Basic 99.5 98.3 99.5 98.3 Diluted 100.7 99.1
100.6 98.9
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(In Millions)
June 30, December 31,
2010 2009 ASSETS Current assets:
Cash and cash equivalents $ 123.9 $ 120.1 Accounts receivable, net
251.2 222.5 Inventories, net 1,259.9 1,247.4 Deferred income taxes,
net 0.4 12.1 Other current assets 23.4 20.5 Total
current assets 1,658.8 1,622.6 Long-term assets 1,177.1
1,217.5 $ 2,835.9 $ 2,840.1
LIABILITIES AND
STOCKHOLDERS’ EQUITY Total current liabilities $ 365.8 $
335.7 Total long-term liabilities 980.6 1,056.9 Total stockholders'
equity 1,489.5 1,447.5
$
2,835.9 $ 2,840.1
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
SIX MONTHS ENDED June 30,
June 30, 2010 2009 CASH FLOWS
FROM OPERATING ACTIVITIES: Net earnings $ 71.1 $ 72.6
Adjustments to reconcile net earnings to net cash flows provided
by(used in) operating activities: Depreciation and
amortization 25.0 24.1 Provision for doubtful accounts 1.0 0.6
Non-cash compensation 13.9 11.5 Debt prepayment costs 2.5 -- Loss
on disposal of property and equipment 0.5 1.8 Tax benefits realized
from prior exercises of employee stock options (5.4 ) -- Deferred
income taxes 24.7 26.4 Changes in operating assets and liabilities:
Accounts receivable (36.0 ) 24.3 Inventories (28.8 ) (130.6 ) Other
current assets and other assets 2.4 20.9 Payables, accruals and
other liabilities 25.4 (57.1 ) Net cash
provided by (used in) operating activities 96.3
(5.5 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (17.0 ) (15.5 ) Other, net 0.1
(0.4 ) Net cash used in investing activities (16.9 )
(15.9 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued 1.4 1.6 Tax benefits realized
from prior exercises of employee stock options 5.4 -- Principal
payments on long-term debt (75.2 ) (3.2 ) Net cash
used in financing activities (68.4 ) (1.6 )
Effect of foreign exchange rate changes on cash and cash
equivalents (7.2 ) 1.3
Net increase
(decrease) in cash and cash equivalents 3.8 (21.7 )
Cash and cash equivalents, beginning of period 120.1
168.1
Cash and cash equivalents, end
of period $ 123.9 $ 146.4
BE AEROSPACE,
INC.RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
This release includes the financial
measures “earnings before income taxes exclusive of the non-cash
debt prepayment charge,” “net earnings exclusive of the non-cash
debt prepayment charge,” “net earnings per diluted share exclusive
of the non-cash debt prepayment charge,” "free cash flow" and “free
cash flow conversion ratio,” which are “non-GAAP financial
measures” as defined in Regulation G of the Securities and Exchange
Act of 1934.
The company defines “earnings before
taxes exclusive of the non-cash debt prepayment charge,” “net
earnings exclusive of the non-cash debt prepayment charge,” and
“net earnings per diluted share exclusive of the non-cash debt
prepayment charge,” as earnings before taxes, net earnings or net
earnings per diluted share reported under GAAP, as the case may be,
less the amount of the charge associated with the company’s
prepayment of $75 million of its long-term debt. The company
believes 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 debt prepayment charge. These financial measures
should not be viewed as a substitute for or superior to earnings
before taxes, net earnings and net earnings per diluted share,
respectively, which are the most comparable GAAP measures and as
measures of the company’s operating performance. The debt
prepayment charge, which was a non-cash charge, in the second
quarter of 2010 was $2.5 million, or $0.02 per share.
The company defines "free cash flow" as
net cash flows provided by operating activities, plus tax benefits
from the exercise of stock options, less capital expenditures. The
company uses free cash flow to provide investors with an additional
perspective on the company's cash flow provided by operating
activities after taking into account reinvestments. Free cash flow
does not take into account debt service requirements and therefore
does not reflect an amount available for discretionary purposes.
The company defines “free cash flow conversion ratio” as free cash
flow expressed as a percentage of the company’s net earnings. The
company uses free cash flow conversion ratio to provide investors
with a measurement of its ability to convert earnings into free
cash flow.
Pursuant to the requirements of
Regulation G, the company is providing the following tables which
reconcile the non-GAAP financial measures described above to the
most comparable GAAP measure.
RECONCILIATION OF EARNINGS BEFORE TAXES TO EARNINGS BEFORE
TAXES EXCLUSIVE OF NON-CASH DEBT PREPAYMENT CHARGE
(In Millions, Except Per Share Data)
Three Months Ended
June 30, 2010 Earnings before taxes, as reported $
56.4 Debt prepayment costs 2.5 Earnings before taxes
exclusive of non-cash debt prepayment $ 58.9
RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
EXCLUSIVE OF NON-CASH DEBT PREPAYMENT CHARGE (In
Millions, Except Per Share Data)
Three Months Ended
Six Months Ended
June 30, June 30, 2010 2010
Net earnings, as reported $ 37.3 $ 71.1 Debt prepayment
costs 2.5 2.5 Income taxes on debt extinguishment costs (0.8 ) (0.8
) (33.9% effective tax rate) Net earnings exclusive
of non-cash debt prepayment $ 39.0 $ 72.8 Net
earnings per diluted share exclusive of non-cash debt prepayment $
0.39 $ 0.72 Net earnings per diluted share, as
reported $ 0.37 $ 0.71
RECONCILIATION OF NET CASH
FLOW FROM OPERATIONS TO FREE CASH FLOW (In Millions)
Three Months Ended
June 30, 2010 Net cash flow provided by
operating activities $ 48.8
Add back: tax benefits realized
from prior exercises of employee stock options
5.4 Less: capital expenditures (7.7 ) Free cash flow $ 46.5
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