Company Records Non-Cash Goodwill Impairment Charge; 2008 Record Sales up 26%; 2008 Record Operating Earnings up 43%; Q4 Sales up 14%; Q4 Adjusted EPS $0.53; All Exclusive of Goodwill Impairment Charge; Q4 Free Cash Flow $58 Million
WELLINGTON, Fla.--(BUSINESS WIRE)--
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 fourth quarter and
full year 2008 financial results.
Except as otherwise noted, the fourth quarter and full year commentary
in this release excludes the impact of the estimated non-cash goodwill
impairment charge (GWIC) as described below.
FULL YEAR 2008 AND FOURTH QUARTER
HIGHLIGHTS
-
Record 2008 net sales of $2.1 billion increased 25.8 percent as
compared with 2007.
-
Record 2008 operating earnings of $353.8 million increased $106.8
million, or 43.2 percent, as compared with 2007.
-
Record 2008 net earnings of $200.6 million and record net earnings per
diluted share of $2.12. 2008 net earnings and net earnings per diluted
share include acquisition,
integration and transition (AIT) costs, and severance costs and debt
prepayment costs of $15.3 million, or $0.10 per diluted share.
-
Fourth quarter net sales of $526.8 million increased 13.7 percent as
compared with the fourth quarter of 2007, reflecting the inclusion of
Honeywell’s Consumables Solutions distribution business (HCS), which
was acquired on July 28, 2008.
-
Fourth quarter operating earnings of $90.8 million increased $22.9
million, or 33.7 percent, as compared with the prior year period.
Operating earnings include $6.1 million of AIT costs related to HCS,
and approximately $2.0 million of severance costs associated with the
company’s commercial aircraft and business jet segments (collectively
the “fourth quarter charges”).
-
Fourth quarter operating earnings adjusted to exclude the fourth
quarter charges of $8.1 million increased 45.7 percent to $98.9
million as compared with the prior year period. Adjusted operating
margin was 18.8 percent.
-
Fourth quarter net earnings of $46.4 million and net earnings per
diluted share of $0.47 include the fourth quarter charges.
-
Fourth quarter net earnings and net earnings per diluted share
adjusted to exclude the fourth quarter charges were $51.9 million and
$0.53 per diluted share, respectively, as compared with $42.3 million
and $0.46 per diluted share, respectively, in prior year period.
-
The company generated free cash flow for the fourth quarter of $58.5
million.
FOURTH QUARTER CONSOLIDATED RESULTS (excludes
non-cash goodwill impairment charge)
Net sales for the fourth quarter of $526.8 million increased 13.7
percent as compared with the fourth quarter of the prior year. The $63.3
million increase in consolidated revenues was driven by a $132.5
million, or 132.5 percent, increase in revenues at the distribution
segment as a result of the HCS acquisition and a $4.3 million, or 7.6
percent, increase at the business jet segment, partially offset by a
$73.5 million, or 24.0 percent, decrease in revenues at the commercial
aircraft segment. Proforma consolidated revenues declined 12.6 percent.
The 33.7 percent increase in operating earnings as compared with the
fourth quarter of last year was driven primarily by the 13.7 percent
increase in revenues and a 260 basis point expansion in operating margin
to 17.2 percent of sales. The 260 basis point improvement in operating
margin was achieved despite the fourth quarter charges. Exclusive of the
fourth quarter charges, operating margin for the fourth quarter of 2008
would have been 18.8 percent.
Net earnings were $46.4 million or $0.47 per diluted share. Net
earnings, adjusted to exclude the fourth quarter charges, were $51.9
million and $0.53 per diluted share, respectively.
The company generated free cash flow for the fourth quarter of $58.5
million.
Commenting on the company’s recent performance, Amin J. Khoury, Chairman
and Chief Executive Officer of B/E Aerospace, Inc. said, “In spite of
deteriorating global economic conditions beginning in the second half of
the year, 2008 was a record year for the company in terms of sales,
operating earnings, net earnings, earnings per share, bookings and
backlog. We are also pleased with the company’s fourth quarter earnings
and cash flow performance, particularly in light of the deterioration in
global economic conditions which negatively impacted demand for our
higher margin aftermarket products.”
Amounts presented in this earnings release on a proforma basis have been
calculated as though HCS had been acquired at the beginning of the prior
year period.
AIT costs referred to in this news release are expenses related to the
integration of the HCS business with our existing distribution business.
Net earnings and net earnings per diluted share presented in this press
release excludes the impact of the estimated GWIC, which are non-GAAP
financial measures. Additionally, operating earnings, net earnings, and
net earnings per diluted share, in each case, excluding AIT costs and
severance costs and debt prepayment costs, and free cash flow are also
non-GAAP financial measures. See “Reconciliation of Non-GAAP Financial
Measures.”
The results reported in this release are subject to the finalization of
the GWIC described below that the company expects to complete in
connection with the filing of its Annual Report on Form 10-K for the
year ended December 31, 2008.
FOURTH QUARTER SEGMENT RESULTS (excludes
non-cash goodwill impairment charge)
The following is a tabular summary and commentary of net sales and
operating earnings by segment:
|
|
NET SALES
|
|
|
Three Months Ended December 31,
|
|
|
($ in millions)
|
|
|
2008
|
|
2007
|
|
Percent Change
|
Distribution
|
|
$
|
232.5
|
|
$
|
100.0
|
|
132.5
|
%
|
Commercial Aircraft
|
|
|
233.2
|
|
|
306.7
|
|
-24.0
|
%
|
Business Jet
|
|
|
61.1
|
|
|
56.8
|
|
7.6
|
%
|
Total
|
|
$
|
526.8
|
|
$
|
463.5
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
|
OPERATING EARNINGS
|
|
|
Three Months Ended December 31,
|
|
|
($ in millions)
|
|
|
2008
|
|
2007
|
|
Percent Change
|
Distribution
|
|
$
|
49.5
|
|
$
|
22.6
|
|
119.0
|
%
|
Commercial Aircraft
|
|
|
33.5
|
|
|
38.2
|
|
-12.3
|
%
|
Business Jet
|
|
|
7.8
|
|
|
7.1
|
|
9.9
|
%
|
Total
|
|
$
|
90.8
|
|
$
|
67.9
|
|
33.7
|
%
|
Distribution segment revenues increased 132.5 percent to $232.5 million
reflecting the acquisition of the HCS business. Proforma revenues
declined 2.9 percent. Distribution segment operating earnings, which
include $6.1 million of AIT costs, were $49.5 million. Operating margin
in the distribution segment declined 130 basis points to 21.3 percent
primarily due to the aforementioned AIT costs.
Commercial aircraft segment revenues of $233.2 million decreased 24.0
percent and reflect retrofit program push outs, reduced aircraft
deliveries as a result of the Boeing strike, and reduced spares revenues
as a result of airline and MRO cash conservation measures. Operating
earnings were $33.5 million and operating margin was 14.4 percent, an
increase of 190 basis points as compared with the same period in the
prior year, reflecting synergies associated with the integration of the
Draeger acquisition, improved efficiencies associated with major seating
programs and successful cost reduction activities.
Business jet segment revenues increased 7.6 percent to $61.1 million and
operating earnings increased by $0.7 million or 9.9 percent.
FULL YEAR 2008 CONSOLIDATED RESULTS (excludes
non-cash goodwill impairment charge)
Record net sales for the year ended December 31, 2008 of $2.1 billion
increased 25.8 percent while record operating earnings of $353.8 million
increased 43.2 percent, both as compared with 2007. The 43.2 percent
increase in operating earnings was driven primarily by the 25.8 percent
increase in revenues and the 210 basis point expansion in operating
margin. The 16.8 percent operating margin reflects a 60 basis point
increase in operating margin at the distribution segment, a 100 basis
point margin expansion at the commercial aircraft segment and a 340
basis point margin expansion at the business jet segment.
2008 operating earnings include $9.7 million of AIT costs related to the
acquisition of HCS and approximately $2.0 million of severance costs
associated with cost reduction actions in the company’s commercial
aircraft and business jet segments (collectively the “2008 charges”).
2008 operating earnings adjusted to exclude the 2008 charges increased
48.0 percent to $365.5 million as compared with the prior year period.
Adjusted operating margin increased by 260 basis points to 17.3 percent.
Record net earnings for 2008 of $200.6 million, or $2.12 per diluted
share, increased 36.2 percent and 27.7 percent, respectively, as
compared with the prior year. Net earnings for 2008 include the 2008
charges and debt prepayment costs of $3.6 million. Net earnings and net
earnings per diluted share, adjusted to exclude the 2008 charges and
debt prepayment costs, were $210.8 million and $2.22 per diluted share,
respectively, and increased 43.1 percent and 33.7 percent, respectively,
as compared with 2007.
FULL YEAR 2008 SEGMENT RESULTS (excludes
non-cash goodwill impairment charge)
The following is a tabular summary and commentary of net sales and
operating earnings by segment:
|
|
NET SALES
|
|
|
Year Ended December 31,
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
Percent Change
|
Distribution
|
|
$
|
697.3
|
|
$
|
386.5
|
|
80.4
|
%
|
Commercial Aircraft
|
|
|
1,138.7
|
|
|
1,098.1
|
|
3.7
|
%
|
Business Jet
|
|
|
274.0
|
|
|
193.1
|
|
41.9
|
%
|
Total
|
|
$
|
2,110.0
|
|
$
|
1,677.7
|
|
25.8
|
%
|
|
|
|
|
|
|
|
|
|
OPERATING EARNINGS
|
|
|
Year Ended December 31,
|
|
|
($ in millions)
|
|
|
2008
|
|
2007
|
|
Percent Change
|
Distribution
|
|
$
|
158.5
|
|
$
|
85.5
|
|
85.4
|
%
|
Commercial Aircraft
|
|
|
158.0
|
|
|
141.8
|
|
11.4
|
%
|
Business Jet
|
|
|
37.3
|
|
|
19.7
|
|
89.3
|
%
|
Total
|
|
$
|
353.8
|
|
$
|
247.0
|
|
43.2
|
%
|
Distribution segment revenues increased 80.4 percent and operating
earnings increased 85.4 percent as compared with the prior year.
Proforma revenue growth was approximately 13.0 percent. Operating margin
increased by 60 basis points to 22.7 percent in spite of $9.7 million of
AIT costs.
Commercial aircraft segment revenues increased 3.7 percent and operating
earnings increased 11.4 percent as compared with the prior year.
Operating margin increased 100 basis points to 13.9 percent in spite of
the sudden decrease in higher margin aftermarket revenues during the
fourth quarter of 2008.
Business jet segment operating earnings increased 89.3 percent, as
compared with the prior year, reflecting the 41.9 percent increase in
revenues and the 340 basis point increase in operating margin to 13.6
percent.
GOODWILL IMPAIRMENT CHARGE
During the fourth quarter of 2008, the company recorded an estimated
non-cash, after-tax charge of approximately $300 million for impairment
of goodwill (approximately $390 million on a pre-tax basis), in
accordance with Statement of Financial Accounting Standards 142
“Goodwill and Other Intangible Assets.” The estimated impairment charge
is primarily driven by adverse equity market conditions that caused a
decrease in current market multiples and the company’s stock price as of
December 31, 2008.
The estimated non-cash GWIC does not impact operations or any of the
company’s financial covenants. The charge is not expected to change the
tax deductibility of goodwill.
Reflecting the estimated $390 million pre-tax goodwill impairment charge
(approximately $300 million on an after-tax basis), fourth quarter
operating loss, net loss and net loss per diluted share are expected to
be ($299.2) million, ($253.6) million and ($2.59) per diluted share,
respectively.
Reflecting the estimated $390 million pre-tax goodwill impairment charge
($300 million on an after-tax basis), 2008 operating loss, net loss, and
net loss per diluted share are expected to be ($36.2) million, ($99.4)
million and ($1.05) per share, respectively.
LIQUIDITY AND BALANCE SHEET METRICS
As of December 31, 2008, the company’s net debt-to-net-capital ratio was
43.1 percent. Net debt was $955.1 million, which represents total debt
of $1,123.2 million, less cash and cash equivalents of $168.1 million.
There were no borrowings outstanding on the company’s $350 million
revolving credit facility. The company has no debt maturities until 2014.
Working capital as of December 31, 2008 was $1,169.3 million. Compared
with December 31, 2007, working capital increased $457.7 million as a
result of the acquisition of HCS and related investments in distribution
segment inventories. Free cash flow generation for the fourth quarter
was $58.5 million.
BOOKINGS AND ORDERS
Bookings during the fourth quarter were approximately $450 million and
reflect a book-to-bill ratio of approximately 0.85 to 1. Backlog at the
end of the quarter was approximately $2.9 billion and represents an
increase of approximately 32 percent as compared with the company’s
December 31, 2007 backlog. Approximately 9 percent of the backlog
represents orders from U.S. airlines, while approximately 55 percent is
from international customers.
The company’s bookings performance for 2008 was broad based and included
a number of significant awards. The company’s strategic focus on OEM
direct, or supplier furnished equipment (SFE), for new aircraft
platforms was particularly successful. This new, significant component
of B/E Aerospace’s business is expected to substantially increase
revenue content per aircraft on a number of major new aircraft
platforms. Most noteworthy, during the third quarter of 2008 the company
announced its largest award ever, a $1.0 billion A350 XWB galley award.
This award taken together with other awards such as the company’s award
to equip the A350 XWB with B/E Aerospace’s patented passenger oxygen
system, and B/E Aerospace’s oxygen/PSU award for the B787, provide
excellent long-term platforms for revenue stability over the coming
years for the commercial aircraft segment. The revenue outlook within
the business jet segment is expected to be fortified by the introduction
of several new business jet aircraft types. The company has been
selected to deliver major new programs for a number of these new
aircraft types. The company’s exceptionally strong position on these new
aircraft platforms bodes well for the future. While the value of the
company’s long-term OEM direct, or SFE, awards currently totals over
$2.3 billion, only a very small portion has been included in the
company’s backlog.
WORKFORCE REALIGNMENT, COST REDUCTIONS
AND CASH ENHANCEMENT ACTIONS
Commenting on actions taken by the company in response to the global
recession and airline cash conservation measures, Mr. Khoury stated,
“Earlier in 2008 the company initiated contingency planning to address
the various actions that might be required in the event that industry
conditions continued to deteriorate. Fortunately, we were well
positioned to address the sudden decline in demand for our products as
the global economy worsened in the third quarter.”
Mr. Khoury continued, “The steps we have taken, while painful, affecting
employees and their families, are expected to enable the company to
protect its balance sheet and cash flow during, what may well be, a
prolonged downturn, while at the same time allowing the company to
continue to invest in new products and technologies in order to expand
our global market leadership position. These cost reduction actions,
when fully implemented, are expected to provide substantial savings in
2009 and significantly more savings in 2010 and beyond. We believe these
cost reduction initiatives along with our healthy financial position,
strong management team, market leadership positions, record backlog and
an excellent and growing position on many new aircraft platforms,
position us to sustain profitability and positive cash flow throughout
the downturn and to emerge from the downturn as a significantly stronger
business.”
OUTLOOK
“The weakened global economy has caused rapid declines in global air
travel and it is expected that air traffic will continue its decline in
2009. Declining air travel is negatively impacting our customer base.
The airline industry is parking aircraft, delaying new aircraft
purchases, pushing out retrofit programs and depleting existing
inventories. The business jet market is also expected to be severely
impacted by both the recession and by declining corporate profits. Tough
cash conservation measures implemented by our customers are clearly
having an impact on the demand for our products,” Mr. Khoury stated.
“We were among the first to recognize the coming downturn. We quickly
responded to changing market conditions by reducing our cost structure.
In addition, we expect that our strategic business decision to alter our
business mix so that approximately half of our business is related to
non-discretionary consumables demand, along with our strategic focus on
OEM direct, or SFE programs, will have a profound impact on our business
in the future. Based on these factors, and in spite of the current
economic environment, we are cautiously optimistic about the next two
years. Our expectation for 2009 is that revenues and earnings should be
approximately in-line with our record 2008 results,” concluded Mr.
Khoury.
As such the company’s 2009 financial guidance is as follows:
-
2009 revenues are expected to be slightly higher compared with 2008 or
approximately $2.25 billion, reflecting the inclusion of HCS for the
full year. On a proforma basis, giving effect to the inclusion of the
HCS business for all of 2008, 2009 revenues are expected to decline by
approximately 8 percent.
-
2009 net earnings per diluted share are expected to be slightly lower
compared with 2008 at approximately $2.00 per diluted share, excluding
AIT costs of approximately $0.10 per diluted share, reflecting a
deterioration in mix due to lower sales of higher margin aftermarket
products, reduced shipments associated with new aircraft deliveries as
a result of the Boeing strike and decreased retrofit shipments.
-
During 2009 the company expects to invest approximately an additional
$75 million in distribution segment inventories to facilitate the
transition of the HCS business to the company’s inventory stocking
business model. The company expects to generate significant free cash
flow over the course of the year even after investments of
approximately $75 million in distribution segment inventory and
approximately $40 million in capital expenditures. The company expects
to end the year with a cash balance in excess of $250 million.
-
First quarter of 2009 earnings and cash flow are expected to be
particularly weak. The company expects first quarter of 2009 adjusted
earnings per diluted share of approximately $0.40 per diluted share,
as a result of a weak product mix at the commercial aircraft segment
reflecting decreased retrofit shipments, decreased shipments
associated with new aircraft deliveries as a result of the Boeing
strike, and lower spares revenues due to airline cash conservation
measures. In addition, the company expects a particularly weak first
quarter for the business jet segment as a result of super first class
push outs and lower spares revenues. The company expects the second,
third and fourth quarters to have both higher revenues and better
product mix than the first quarter resulting in higher earnings and
cash flows in all three quarters.
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
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
Net sales
|
|
$
|
526.8
|
|
|
$
|
463.5
|
Cost of sales
|
|
|
345.6
|
|
|
|
315.0
|
Selling, general and administrative
|
|
|
61.7
|
|
|
|
45.3
|
Research, development and engineering
|
|
|
28.7
|
|
|
|
35.3
|
Estimated goodwill impairment charge
|
|
|
390.0
|
|
|
|
--
|
Operating (loss) earnings
|
|
|
(299.2
|
)
|
|
|
67.9
|
Interest expense, net
|
|
|
23.1
|
|
|
|
3.1
|
(Loss) earnings before income taxes
|
|
|
(322.3
|
)
|
|
|
64.8
|
Income tax (benefit) expense
|
|
|
(68.7
|
)
|
|
|
22.5
|
Net (Loss) Earnings
|
|
$
|
(253.6
|
)
|
|
$
|
42.3
|
|
|
|
|
|
Net (Loss) Earnings per Common Share
|
|
|
|
|
Basic
|
|
$
|
(2.59
|
)
|
|
$
|
0.46
|
Diluted
|
|
$
|
(2.59
|
)
|
|
$
|
0.46
|
Common shares:
|
|
|
|
|
Basic weighted average
|
|
|
97.9
|
|
|
|
91.4
|
Diluted weighted average
|
|
|
97.9
|
|
|
|
92.1
|
|
|
|
|
|
|
|
|
|
|
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In Millions, Except Per Share Data)
|
|
|
|
|
|
|
|
YEAR ENDED
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
Net sales
|
|
$
|
2,110.0
|
|
|
$
|
1,677.7
|
Cost of sales
|
|
|
1,386.5
|
|
|
|
1,107.6
|
Selling, general and administrative
|
|
|
238.3
|
|
|
|
195.2
|
Research, development and engineering
|
|
|
131.4
|
|
|
|
127.9
|
Estimated goodwill impairment charge
|
|
|
390.0
|
|
|
|
--
|
Operating (loss) earnings
|
|
|
(36.2
|
)
|
|
|
247.0
|
Interest expense, net
|
|
|
48.0
|
|
|
|
20.9
|
Loss on debt extinguishment
|
|
|
3.6
|
|
|
|
11.0
|
(Loss) earnings before income taxes
|
|
|
(87.8
|
)
|
|
|
215.1
|
Income tax expense
|
|
|
11.6
|
|
|
|
67.8
|
Net (Loss) Earnings
|
|
$
|
(99.4
|
)
|
|
$
|
147.3
|
|
|
|
|
|
Net (Loss) Earnings per Common Share
|
|
|
|
|
Basic
|
|
$
|
(1.05
|
)
|
|
$
|
1.67
|
Diluted
|
|
$
|
(1.05
|
)
|
|
$
|
1.66
|
Common shares:
|
|
|
|
|
Basic weighted average
|
|
|
94.3
|
|
|
|
88.1
|
Diluted weighted average
|
|
|
94.3
|
|
|
|
88.8
|
|
|
|
|
|
|
|
|
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In Millions)
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
2008
|
|
2007
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
168.1
|
|
$
|
81.6
|
Accounts receivable, net
|
|
271.4
|
|
|
218.0
|
Inventories, net
|
|
1,197.0
|
|
|
636.3
|
Deferred income taxes
|
|
21.0
|
|
|
62.4
|
Other current assets
|
|
25.8
|
|
|
21.7
|
Total current assets
|
|
1,683.3
|
|
|
1,020.0
|
Long-term assets
|
|
1,248.1
|
|
|
752.0
|
|
$
|
2,931.4
|
|
$
|
1,772.0
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Total current liabilities
|
$
|
514.0
|
|
$
|
308.4
|
Long-term liabilities
|
|
1,154.2
|
|
|
205.5
|
Total stockholders' equity
|
|
1,263.2
|
|
|
1,258.1
|
|
$
|
2,931.4
|
|
$
|
1,772.0
|
|
|
|
|
|
|
|
|
|
|
BE AEROSPACE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Millions)
|
|
|
|
|
|
|
|
YEAR ENDED
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(99.4
|
)
|
|
$
|
147.3
|
|
Adjustments to reconcile net earnings to net cash flows provided
by operating activities, net of effects from acquisitions:
|
|
|
|
|
Estimated goodwill impairment charge
|
|
|
390.0
|
|
|
|
--
|
|
Depreciation and amortization
|
|
|
40.7
|
|
|
|
35.0
|
|
Provision for doubtful accounts
|
|
|
8.7
|
|
|
|
0.6
|
|
Non-cash compensation
|
|
|
15.5
|
|
|
|
11.0
|
|
Deferred income taxes
|
|
|
(13.7
|
)
|
|
|
58.5
|
|
Debt prepayment costs
|
|
|
3.6
|
|
|
|
11.0
|
|
Loss on disposal of property and equipment
|
|
|
0.5
|
|
|
|
0.5
|
|
Changes in operating assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
Accounts receivable
|
|
|
(22.2
|
)
|
|
|
(43.2
|
)
|
Inventories
|
|
|
(262.0
|
)
|
|
|
(212.9
|
)
|
Other current assets and other assets
|
|
|
2.9
|
|
|
|
(19.2
|
)
|
Payables, accruals and other liabilities
|
|
|
50.9
|
|
|
|
33.4
|
|
Net cash flows provided by operating activities
|
|
|
115.5
|
|
|
|
22.0
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
Capital expenditures
|
|
|
(31.7
|
)
|
|
|
(32.1
|
)
|
Acquisitions, net of cash acquired and other
|
|
|
(912.7
|
)
|
|
|
(0.5
|
)
|
Net cash flows used in investing activities
|
|
|
(944.4
|
)
|
|
|
(32.6
|
)
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
Proceeds from common stock issued
|
|
|
2.1
|
|
|
|
386.1
|
|
Proceeds from long-term debt
|
|
|
1,124.1
|
|
|
|
--
|
|
Principal payments on long-term debt
|
|
|
(152.8
|
)
|
|
|
(352.8
|
)
|
Debt origination and prepayment costs
|
|
|
(50.3
|
)
|
|
|
(7.4
|
)
|
Borrowings on line of credit
|
|
|
65.0
|
|
|
|
93.0
|
|
Repayments on line of credit
|
|
|
(65.0
|
)
|
|
|
(93.0
|
)
|
Net cash flows provided by financing activities
|
|
|
923.1
|
|
|
|
25.9
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents
|
|
|
(7.7
|
)
|
|
|
1.3
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
86.5
|
|
|
|
16.6
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
81.6
|
|
|
|
65.0
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
168.1
|
|
|
$
|
81.6
|
|
B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
This release includes the financial measures “net earnings” and “net
earnings per diluted share,” which excludes the impact of the estimated
goodwill impairment charge and the related tax benefits, and includes
operating earnings, net earnings and net earnings per diluted share that
further excludes acquisition, integration and transition costs and
severance costs (which are collectively referred to in the release as
the “fourth quarter charges” and the “2008 charges”) and debt prepayment
costs. Each of these financial measures are “non-GAAP financial
measures” as defined in Regulation G of the Securities and Exchange Act
of 1934. The company uses these non-GAAP financial measures to evaluate
and assess the operational strength and performance of its business. 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
estimated goodwill impairment charge, debt prepayment costs,
acquisition, integration and transition costs and severance costs. These
financial measures should not be viewed as a substitute for or superior
to operating earnings, net earnings or net earnings per diluted share
calculated without these exclusions, the most comparable GAAP measures,
as a measure of the company’s operating performance.
Estimated Goodwill Impairment Charge. The company expects to
record a fourth-quarter non-cash after-tax charge of approximately
$300.0 million for impairment of goodwill.
Acquisition, Integration and Transition Costs. For the fourth
quarter of 2008 and for the full year 2008, the company incurred $6.1
million and $9.7 million, respectively, of acquisition, integration and
transition costs resulting from the integration of the HCS business with
our existing distribution business.
Severance Costs. The company incurred $2.0 million of severance
costs associated with cost reductions actions implemented during the
fourth quarter of 2008.
Debt Prepayment Costs. In the third quarter of 2008, the company
incurred $3.6 million of debt prepayment costs resulting from the
prepayment of $150 million of bank term debt.
In addition, this release includes the financial measure “free cash
flow,” which is also a non-GAAP financial measure. We define “free cash
flow” as estimated net cash flows provided by operating activities less
capital expenditures. The company uses free cash flow to provide
investors with an additional perspective on the company’s cash flows
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.
Pursuant to the requirements of Regulation G, the company is providing
the following tables which reconcile net earnings, net earnings per
diluted share, operating earnings and net cash flow provided by
operating activities, the most directly comparable GAAP measures, to the
adjusted net earnings, the adjusted estimated net earnings per fully
diluted share and the adjusted operating earnings financial measures
described above and to free cash flow, respectively.
B/E Aerospace, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(In Millions)
|
|
|
|
|
|
RECONCILIATION OF NET EARNINGS
|
|
|
|
|
|
|
Quarter Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2008
|
Adjusted net earnings before estimated goodwill impairment charge
|
|
$
|
51.9
|
|
|
$
|
210.8
|
|
Acquisition, integration and transition costs
|
|
|
(6.1
|
)
|
|
|
(9.7
|
)
|
Severance costs
|
|
|
(2.0
|
)
|
|
|
(2.0
|
)
|
Debt prepayment costs
|
|
|
|
|
(3.6
|
)
|
Income taxes on debt prepayment costs and acquisition, integration
and transition costs (using the effective tax rate of 31.5% for
quarter and 33.6% for year)
|
|
|
2.6
|
|
|
|
5.1
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings before estimated goodwill impairment charge
|
|
|
46.4
|
|
|
|
200.6
|
|
|
|
|
|
|
Estimated pre-tax goodwill impairment charge
|
|
|
(390.0
|
)
|
|
|
(390.0
|
)
|
|
|
|
|
|
Income taxes on estimated goodwill impairment charge (using an
effective tax rate of 23.1%)
|
|
|
90.0
|
|
|
|
90.0
|
|
|
|
|
|
|
Net loss
|
|
$
|
(253.6
|
)
|
|
$
|
(99.4
|
)
|
|
|
|
|
|
Adjusted net earnings per share (basic and diluted) before
estimated goodwill impairment charge
|
|
$
|
0.53
|
|
|
$
|
2.22
|
|
|
|
|
|
|
Net earnings per share (basic and diluted) before estimated
goodwill impairment charge
|
|
$
|
0.47
|
|
|
$
|
2.12
|
|
|
|
|
|
|
Net loss per share (basic and diluted)
|
|
$
|
(2.59
|
)
|
|
$
|
(1.05
|
)
|
|
|
|
|
|
RECONCILIATION OF OPERATING EARNINGS
|
|
|
|
|
|
|
Quarter Ended
|
|
Year Ended
|
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2008
|
Operating loss, as reported
|
|
$
|
(299.2
|
)
|
|
$
|
(36.2
|
)
|
Estimated goodwill impairment charge
|
|
|
390.0
|
|
|
|
390.0
|
|
Acquisition, integration and transition costs
|
|
|
6.1
|
|
|
|
9.7
|
|
Severance costs
|
|
|
2.0
|
|
|
|
2.0
|
|
Operating earnings, as adjusted
|
|
$
|
98.9
|
|
|
$
|
365.5
|
|
|
|
|
|
|
RECONCILIATION OF OPERATING CASH FLOW TO FREE CASH FLOW
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
December 31,
|
|
|
|
|
2008
|
|
|
Estimated net cash flows provided by operating activities
|
|
$
|
69.5
|
|
|
|
Capital expenditures
|
|
|
(11.0
|
)
|
|
|
Estimated free cash flow
|
|
$
|
58.5
|
|
|
|
Source: B/E Aerospace, Inc.
B/E Aerospace, Inc., Wellington
Greg Powell, Vice President,
Investor Relations, 561-791-5000 ext. 1450