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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
financial results for the first quarter of 2007.
HIGHLIGHTS
-- Record first quarter revenues of $387.8 million reflect 56.9
percent year-over-year growth; organic revenue growth was 44.5
percent.
-- First quarter operating earnings of $56.4 million were 81.4
percent higher than the same period in the prior year.
-- First quarter operating margin of 14.5 percent expanded by 190
basis points versus the same period in the prior year, and by
110 basis points on a sequential quarterly basis.
-- Earnings before income taxes were $45.8 million, which was
more than double pre-tax earnings in the same period in the
prior year.
-- Net earnings for the current quarter were $32.1 million as
compared to $13.8 million in the first quarter of the prior
year. Net earnings increased by $18.3 million or 133 percent
over the prior year. First quarter 2007 diluted earnings per
share were $0.40 per share as compared to $0.18 per share in
the first quarter of the prior year. Diluted earnings per
share increased by $0.22 per share, or 122 percent, and was
$0.08 per share, or 25 percent, greater than the consensus
estimate of $0.32 per share.
-- Bookings for the quarter ended March 31, 2007 were strong,
totaling approximately $450 million, and represent a
book-to-bill ratio of approximately 1.2:1. Backlog at March
31, 2007 was approximately $1.85 billion, an increase of 34
percent as compared to backlog at March 31, 2006.
-- Full year 2007 financial guidance has again been revised
upward to approximately $1.55 per share.
FIRST QUARTER PERFORMANCE
The 81.4 percent growth in operating earnings as compared to the
first quarter of last year was driven by the 56.9 percent increase in
revenues and a 190 basis point expansion in operating margin. Revenue
growth was driven primarily by strong retrofit program deliveries
reflecting significant market share gains. The 190 basis point
expansion in first quarter operating margin to 14.5 percent as
compared to the same period last year was driven primarily by a
significant increase in the seating segment operating margin as a
result of the high quality of B/E's record backlog and the operating
leverage at the higher sales volume. Organic sales and operating
earnings growth for the first quarter of 2007, presented as if the
acquisitions of Draeger Aerospace GmbH and New York Fasteners Corp.
had occurred on January 1, 2006, were 44.5 percent and 87.4 percent,
respectively.
Interest expense for the first quarter of 2007 was $10.6 million
and was slightly higher than the interest expense recorded in the same
period in the prior year reflecting the 2006 acquisitions and further
working capital investments, particularly in B/E's distribution
segment.
The provision for income taxes was $13.7 million or 30 percent of
earnings before taxes, which was the same rate applied in the prior
year and reflects approximately $3.4 million of one-time catch-up
research and development tax credits.
Net earnings for the first quarter of 2007 were $32.1 million, or
$0.40 per diluted share versus net earnings of $13.8 million, or $0.18
per diluted share in the first quarter of 2006, representing increases
in net earnings and diluted earnings per share of 133 percent and 122
percent, respectively.
FIRST QUARTER SEGMENT DISCUSSION
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Net sales by segment were as follows:
NET SALES
----------------------------------------
Three Months Ended March 31,
($ in millions)
----------------------------------------
Percent
2007 2006 Change Change
--------- --------- --------- ----------
Seating $144.4 $81.2 $63.2 77.8%
Interior Systems 81.1 56.3 24.8 44.0%
Distribution 96.9 53.7 43.2 80.4%
Business Jet 44.1 39.9 4.2 10.5%
Engineering Services 21.3 16.1 5.2 32.3%
--------- --------- --------- ----------
Total $387.8 $247.2 $140.6 56.9%
========= ========= ========= ==========
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The 77.8 percent increase in sales volume for the seating segment
was driven by a substantially higher level of aftermarket, retrofit
and refurbishment activity, as well as demand created by new aircraft
deliveries, and reflects additional market share gains. The interior
systems segment revenue growth of 44.0 percent reflected the higher
level of new aircraft deliveries as well as substantial aftermarket
revenue growth. The interior systems segment organic revenue growth
rate was 27.9 percent.
The distribution segment delivered revenue growth of 80.4 percent,
reflecting a significant expansion in products offered, a broad-based
increase in aftermarket demand for aerospace fasteners, a channel
shift from OEM's to subcontractors which tend to acquire fasteners
from distributors, and continued market share gains. The organic
revenue growth rate for the distribution segment was 42.9 percent.
Business jet segment revenues increased by 10.5 percent, reflecting
A380 pushouts, which negatively impacted shipments of super first
class products. Engineering services segment revenue growth of 32.3
percent reflects the higher level of engineering design, program
management and certification activities.
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The following is a summary of operating earnings performance by
segment:
OPERATING EARNINGS
----------------------------------------
Three Months Ended March 31,
($ in millions)
----------------------------------------
Percent
2007 2006 Change Change
--------- --------- --------- ----------
Seating $16.9 $5.8 $11.1 191.4%
Interior Systems 14.6 10.5 4.1 39.0%
Distribution 19.7 11.8 7.9 66.9%
Business Jet 4.4 3.8 0.6 15.8%
Engineering Services 0.8 (0.8) 1.6 NM
--------- --------- --------- ----------
Total $56.4 $31.1 $25.3 81.4%
========= ========= ========= ==========
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Operating earnings at the seating segment of $16.9 million in the
first quarter of 2007 increased by $11.1 million or 191.4 percent
versus the same period in the prior year. The seating segment
operating margin of 11.7 percent expanded by 460 basis points versus
the same period in the prior year due to the $63.2 million or 77.8
percent increase in revenues, an improved product mix, operating
leverage at the higher sales volume and continuous improvement
initiatives. Operating earnings at the interior systems segment of
$14.6 million increased $4.1 million, or 39.0 percent, versus the same
period in the prior year. As expected, the operating margin at the
interior systems segment of 18.0 percent although strong, was
negatively impacted by the temporarily lower Draeger margin, and
integration costs and expenses related to the 2006 Draeger
acquisition. The interior systems segment operating margin is expected
to improve in 2008 and beyond as the Draeger acquisition integration
activities are completed.
Distribution segment operating earnings in the first quarter of
2007 were $19.7 million, which was 66.9 percent greater than the same
period last year and represented a 20.3 percent operating margin. The
distribution segment operating margin was negatively impacted by New
York Fastener's temporarily lower margins, and integration costs and
expenses related to the 2006 acquisition of New York Fasteners. The
distribution segment operating margin is expected to improve in 2008
and beyond as these acquisition integration activities are completed.
Operating earnings at the business jet segment increased 15.8
percent during the first quarter reflecting an improvement in both
manufacturing efficiency and operating leverage. Operating earnings at
the engineering services segment improved by $1.6 million, reflecting
the 32.3 percent increase in revenues and an improved mix of program
revenues.
RECENT EQUITY OFFERING, LIQUIDITY AND BALANCE SHEET METRICS
Cash at March 31, 2007 was $413.1 million and included
approximately $369 million in cash proceeds from the company's March
2007 common stock offering. The company issued a notice to the holders
of its $250 million of 8 7/8 percent senior subordinated notes due
2011 to redeem all of the senior subordinated notes on May 1, 2007. In
addition, in April 2007, B/E prepaid $100 million of its bank term
debt. The company's cash, long term debt, total stockholders equity
and debt to capital ratio as of March 31, 2007 on a pro forma basis
giving effect to the redemption of the senior subordinated notes and
the repayment of $100 million of the bank term debt as if these two
events occurred on March 31, 2007 would have been as follows:
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Pro Forma
-------------------------
Cash $63 million
Long-term debt $153 million
Stockholders' equity $1.1 billion
Debt-to-capital ratio 12 percent
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Working capital at March 31, 2007 was approximately $878 million
and includes $369 million of proceeds from the recent common stock
offering. This compares with working capital of approximately $456
million at December 31, 2006. Exclusive of the proceeds from the
recent common stock offering, at March 31, 2007 working capital was
approximately $509 million. On this basis, working capital increased
by $53 million and is primarily due to higher levels of accounts
receivable arising from the substantially higher revenue level, and
higher amounts of inventories required to support the expected
continued strong revenue growth. Depreciation and amortization for the
first quarter of 2007 was $8.1 million as compared to approximately
$7.0 million in the same period in the prior year.
STRONG FIRST QUARTER BOOKINGS PUSH BACKLOG TO ANOTHER RECORD LEVEL
Order activity during the first quarter was strong at
approximately $450 million and represented a book to bill ratio of 1.2
to 1. We believe most major international airlines are in the process
of, or are developing plans to upgrade the cabin interiors of their
fleets of wide-body aircraft as well as planning for the delivery of
new wide-body aircraft. Backlog at the end of the quarter was
approximately $1.85 billion, representing an increase of approximately
34 percent, as compared to the company's backlog at March 31, 2006.
RECENT BUSINESS STRENGTH EXPECTED TO CONTINUE
Commenting on the recent performance of B/E Aerospace, Amin J.
Khoury, Chairman and Chief Executive Officer of B/E Aerospace said,
"We are very pleased with the exceptionally strong performances by
each of our business segments. The first quarter of 2007 was another
record quarter for B/E Aerospace; revenues, operating earnings, net
earnings, EPS, and backlog were all quarterly records, and each
exceeded both our expectations and the consensus estimate. Our
operating margin for the current quarter increased by 190 basis points
versus the same period in the prior year and increased by 110 basis
points on a sequential quarterly basis. This margin expansion reflects
the high quality of our record backlog, the operating leverage
inherent in our business and the productivity improvements from our
lean and six sigma initiatives. In addition to our strong business
performance, the company significantly strengthened its financial
position and enhanced its financial flexibility by successfully
raising approximately $369 million through a public equity offering of
its common stock."
Mr. Khoury, continued, "Demand for all of our products and
services is obviously very strong; in fact it is at record levels.
And, with strong global aftermarket retrofit and refurbishment demand
from international airlines continuing, the new-buy aircraft cycle for
wide-body aircraft just beginning to ramp up and the demand for our
spare parts and fasteners at record levels, we expect continued strong
revenue and earnings growth. Each of these factors, together with our
record high-in-quality backlog provide the company with excellent
multi-year revenue visibility and serve as the foundation for our
expectation for continued strong revenue and earnings growth for the
next several years," concluded Mr. Khoury.
FINANCIAL GUIDANCE
The company announced that it is raising its full year 2007
financial guidance to approximately $1.55 per diluted share, from its
previously raised financial guidance of approximately $1.45 to $1.47
per diluted share. The raised financial guidance reflects the improved
earnings growth outlook for 2007, and also takes into account the
larger number of shares outstanding following the company's recent
successful common stock offering.
The following is a summary of the key full year 2007 financial
guidance updates that B/E Aerospace has provided this year:
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(in millions, except per share data and
excludes debt prepayment costs)
February 5, 2007 March 14, 2007 April 30, 2007
---------------- -------------- --------------
Operating earnings approx. $212 approx. $217 approx. $226
Net earnings approx. $113 approx. $117 approx. $137
Weighted average shares approx. 80.0 approx. 80.0 approx. 88.5
Earnings per share $1.40 - $1.42 $1.45 - $1.47 approx. $1.55
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Mr. Amin J. Khoury, Chairman and Chief Executive Officer of B/E
Aerospace, Inc., commented, "The first quarter of 2007 came in well
ahead of both our internal plan and the consensus estimate, and is
being driven by the performance in all five of our segments. As a
result, for the second time this year, we are again raising our full
year 2007 financial guidance. We are also on track to exceed our
current 2008 earnings and margin expansion targets. During 2008 we
anticipate significant margin expansion in each of our five segments.
Distribution segment margin expansion is expected to be driven by
strong revenue growth and the completion of New York Fasteners
acquisition integration activities. Interior systems segment margin
expansion is expected to be driven by the large backlog, the
significant number of wide-body aircraft deliveries and the completion
of Draeger acquisition integration activities. We also expect
continued margin expansion in the other three segments. We expect to
provide more specific 2008 financial guidance in July when we report
2007 second quarter results."
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 changes in market
and industry conditions and those discussed in B/E's filings with the
Securities and Exchange Commission, including but not limited to its
most recent 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 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 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 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 sells and supports its products through
its own global direct sales and product support organization. For more
information, visit B/E's website at www.beaerospace.com.
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
THREE MONTHS ENDED
-----------------------
March 31, March 31,
(In millions, except per share data) 2007 2006
----------- -----------
Net sales $387.8 $247.2
Cost of sales 253.5 160.7
----------- -----------
Gross profit 134.3 86.5
Gross margin 34.6% 35.0%
Operating expenses:
Selling, general and administrative 50.7 37.0
Research, development and engineering 27.2 18.4
----------- -----------
Total operating expenses 77.9 55.4
----------- -----------
Operating earnings 56.4 31.1
Operating margin 14.5% 12.6%
Interest expense, net 10.6 9.5
Debt prepayment costs - 1.8
----------- -----------
Earnings before income taxes 45.8 19.8
Income taxes 13.7 6.0
----------- -----------
Net Earnings $32.1 $13.8
=========== ===========
Net Earnings per Common Share
Basic $0.41 $0.18
=========== ===========
Diluted $0.40 $0.18
=========== ===========
Common shares:
Basic
Weighted average 78.9 75.2
End of period 90.6 77.1
Diluted
Weighted average 79.5 76.8
End of period 91.2 78.7
*T
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, December 31,
2007 2006
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents $413.1 $65.0
Accounts receivable, net 197.7 172.9
Inventories, net 480.1 420.9
Deferred income taxes 53.1 53.1
Other current assets 17.3 13.8
------------ -------------
Total current assets 1,161.3 725.7
Long-term assets 765.3 772.0
------------ -------------
$1,926.6 $1,497.7
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Total current liabilities $283.3 $269.7
Long-term liabilities 529.2 522.0
Total stockholders' equity 1,114.1 706.0
------------ -------------
$1,926.6 $1,497.7
============ =============
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B/E Aerospace, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
THREE MONTHS ENDED
--------------------
March 31, March 31,
2007 2006
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $32.1 $13.8
Adjustments to reconcile net earnings to net
cash flows provided by operating activities:
Depreciation and amortization 8.1 7.0
Provision for doubtful accounts 0.8 0.5
Non-cash compensation 2.4 0.2
Deferred income taxes 9.8 5.0
Debt prepayment costs -- 1.8
Changes in operating assets and liabilities,
net of effects from acquisitions (69.9) (9.4)
--------- ----------
Net cash flows (used in) provided by operating
activities (16.7) 18.9
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8.0) (4.4)
--------- ----------
Net cash flows used in investing activities (8.0) (4.4)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock issued 373.4 19.8
Principal payments on long-term debt (0.7) (250.0)
Borrowings on line of credit 30.0 --
Repayments on line of credit (30.0) --
--------- ----------
Net cash flows provided by (used in) financing
activities 372.7 (230.2)
--------- ----------
Effect of foreign exchange rate changes on cash
and cash equivalents 0.1 0.2
--------- ----------
Net increase (decrease) in cash and cash
equivalents 348.1 (215.5)
Cash and cash equivalents, beginning of period 65.0 356.0
--------- ----------
Cash and cash equivalents, end of period $413.1 $140.5
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