WHITE PLAINS, N.Y., Aug. 8 /PRNewswire-FirstCall/ -- K & F Industries Holdings, Inc. (NYSE: KFI) today reported its financial results for the second quarter and six months ended June 30, 2006 .
'2006 continues to progress towards a record year for sales, bookings and Adjusted EBITDA,' stated Kenneth M. Schwartz, president and CEO of K & F Industries. 'I remain very optimistic about our future given the strength in customer orders, as bookings exceeded revenues during the quarter by 22 percent, 78 percent and 30 percent in our commercial, general aviation and military market sectors, respectively. As a result of this accelerating aftermarket demand for our products, we are increasing our forecast for the year.'
Results for Second Quarter 2006 Compared with Second Quarter 2005
-- Sales rose by 14% to $103 million
-- Aircraft Braking Systems (ABSC) sales increased $10 million, or 14%
to $84 million
-- Engineered Fabrics (EFC) sales rose $2 million, or 11% to $18
million
-- Adjusted EBITDA increased 12% to $38 million or 37% of revenue as
compared to $34 million or 38% of revenue a year ago
-- Included in Adjusted EBITDA was a charge for a retroactive price
increase of certain materials purchased over the last twelve months
partially offset by a favorable settlement of past due royalties.
Excluding these items, Adjusted EBITDA as a percentage of second
quarter revenue was 38%.
-- Net interest expense was $13 million compared to $17 million a year ago
-- Income applicable to common stockholders was $11 million or $0.28 per
diluted share, compared to $3 million or $0.18 per diluted share in the
prior year
-- Bookings increased 54% to a record $139 million and backlog was up 39%
to $225 million
-- Second quarter consolidated market sector revenue performance was as
follows:
-- Military sales increased 44% to $32 million
-- General aviation sales were up 6% to $20 million
-- Commercial transport sales grew 3% to $50 million
-- Cash and cash equivalents was $17 million after the use of $16 million
in cash for the acquisition of Nasco
See the attached tables for a reconciliation of net income to EBITDA and Adjusted EBITDA for the 2006 and 2005 periods.
Recent Highlights
-- Embraer (Empresa Brasileira de Aeronautica S.A.) selected ABSC to
supply the wheels, brakes and brake control system for its new
Phenom 100 very light category business jet. Over the life of the
program, the agreement is expected to generate an estimated $250
million in sales for the company. This agreement represents a
significant step in establishing K & F's presence in the growing and
potentially large 'Air Taxi' market.
-- ABSC acquired Nasco Aircraft Brake, Inc., a FAA-certified supplier of
aircraft wheel and brake components for the military and commercial
aircraft markets for approximately $19 million. The acquisition
augments the company's existing aircraft wheel and brake manufacturing
capacity and provides access to aircraft programs not currently
utilizing ABSC products. Nasco products are installed on a variety of
aircraft produced by airframe manufacturers such as Boeing, Fokker,
Northrop Grumman, Lockheed Martin, and General Dynamics.
-- Construction of the company's NuCarb facility remains on schedule with
production expected to begin in the fourth quarter of this year.
Capital expenditures of $8 million have been spent on this project
year-to-date and are estimated to total approximately $14 million at
year-end.
Results for Six Months ended June 30, 2006 Compared with the Six Months
ended June 30, 2005
-- Sales increased 8% to $194 million
-- ABSC sales increased $13 million or 8% to $160 million
-- EFC sales rose $2 million or 7% to $34 million
-- Adjusted EBITDA increased $8 million to $74 million or 38% of sales
-- Net interest expense was $26 million compared to $35 million a year ago
-- Income applicable to common stockholders was $22 million or $0.54 per
diluted share
-- Bookings increased 39% to $261 million
-- Consolidated sector revenues:
-- Military sales were $57 million, up 24%
-- General aviation sales increased 9% to $40 million
-- Commercial transport revenues were $97 million, level with the prior
year
2006 Guidance
Based on the first half results and strength of orders for delivery of products in upcoming quarters coupled with continuing progress in productivity initiatives, the company has increased its expectations for its 2006 financial performance as follows:
-- Revenues for the year are expected to increase to between $415 million
and $423 million, up 8% to 10% over the prior year
-- Adjusted EBITDA is expected to be between $162 million and $166
million, representing an increase of 10% to 13% versus calendar year
2005
-- Diluted earnings per share is expected to reach between $1.24 and $1.29
-- Free cash flow(1) is expected to be approximately $40 million
Relative to guidance provided by the company on May 11, 2006 , this revision reflects an increase of two percent in growth expectations for revenues, Adjusted EBITDA and diluted earnings per share at the top end of the range. The free cash flow expectation remains level with previous guidance.
Conference Call
K & F Industries Holdings, Inc. will conduct its quarterly conference call, hosted by President and CEO, Kenneth M. Schwartz, beginning at 10:00 a.m. ET today. To participate, please dial (719) 457-2637 approximately 15 minutes prior to the scheduled start of the call. A replay will be available beginning approximately two hours after the call ends through 11:59 p.m. on August 14, 2006 by dialing (719) 457-0820, access code: 4717867.
A live audio webcast of the conference call will be accessible through a link at K & F Industries' website at http://www.kandfindustries.com. Please visit the site fifteen minutes prior to the call to download and install any necessary audio software.
K & F Industries Holdings, Inc., is a worldwide leader in the manufacture of wheels, brakes and brake control systems for commercial transport, general aviation and military aircraft and is a major producer of aircraft fuel tanks, de-icing equipment and specialty coated fabrics used for storage, shipping, environmental and rescue applications for commercial and military use.
Forward Looking Statements
Some statements and information contained herein are not historical facts, but are 'forward-looking statements,' as that term is defined in the Private Securities Litigation Reform Act of 1995. In addition, the Company or its representatives have made and may continue to make forward-looking statements, orally, in writing or in other contexts, such as in reports filed with the SEC or in press releases. These forward-looking statements may be identified by the use of forward-looking terminology, such as 'believes,' 'expects,' 'may,' 'should' or the like, the negative of these words or other variations of these words or comparable words, or discussion of strategy that involves risk and uncertainties. We caution you that these forward-looking statements are only predictions, and actual events or results may differ materially as a result of a wide variety of factors and conditions, many of which are beyond our control. Some of these factors and conditions include: (i) government or regulatory changes, (ii) dependence on our subsidiary, Aircraft Braking Systems Corporation, for operating income, (iii) competition in the market for our products, and (iv) our substantial indebtedness. For more information see the section entitled 'Risk Factors' contained in our Form 10-K and information in our other periodic reports filed with the SEC. We undertake no obligation to revise these statements following the date of this press release.
(1) Represents cash flow from operations less capital expenditures.
K & F INDUSTRIES HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
Net Sales $102,653 $90,302 $193,715 $178,992
Cost of Sales(3) 57,479(1) 48,199 106,680(1) 108,665(2)
Gross Profit 45,174 42,103 87,035 70,327
Independent Research
and Development Costs 3,838 3,753 7,877 7,586
Selling, General and
Administrative Expenses 10,167 7,537 17,309 15,085
Amortization of
Intangible Assets 1,005 3,014 2,715 6,028
Operating Income 30,164 27,799 59,134 41,628
Interest Income 1,388 254 1,709 317
Interest Expense (14,165) (17,395) (27,601) (35,770)
Income Before Income
Taxes 17,387 10,658 33,242 6,175
Income Tax Provision (6,099) (3,788) (11,655) (2,277)
Net Income 11,288 6,870 21,587 $3,898
Preferred Stock Dividends -- (3,784) -- (6,847)
Income (Loss) Applicable
to Common Stockholders $11,288 $3,086 $21,587 $(2,949)
Basic Earnings (Loss)
Per Common Share $.28 $.18 $ .54 $(0.19)
Basic Weighted Average
Common Shares 39,631 17,086 39,617 15,193
Diluted Earnings (Loss)
Per Common Share $.28 $.18 $ .54 $(0.19)
Diluted Weighted Average
Common Shares 40,230 17,544 40,214 15,193
(1) Included in cost of sales for the three and six months ended June 30,
2006 is an inventory purchase accounting charge of $587,000.
(2) Included in cost of sales for the six months ended June 30, 2005 is an
inventory purchase accounting charge of $12,084,000.
(3) Included in cost of sales is amortization of Program Participation
Costs and other Intangible Assets of, $3,107 and $631 for the three
months ended 6/30/06 and 6/30/05, respectively, and $5,250 and $1,190
for the six months ended 6/30/06 and 6/30/05, respectively.
K & F INDUSTRIES HOLDINGS, INC.
SELECTED FINANCIAL DATA
(In thousands)
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
Capital Expenditures $6,008 $2,711 $12,304 $3,129
Bookings 139,038 90,243 261,441 187,880
Backlog 225,490 162,123
Cash and Cash Equivalents 16,598 63,668
Accounts Receivable 48,997 42,765
Inventory 70,596 58,348
Accounts Payable 18,937 14,306
Total Debt 751,577 829,037
Stockholders' Equity 366,986 319,487
K & F INDUSTRIES HOLDINGS, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP EARNINGS BEFORE
INTEREST EXPENSE, INCOME TAXES, DEPRECIATION AND AMORTIZATION, INVENTORY
PURCHASE ACCOUNTING CHARGES AND STOCK-BASED COMPENSATION
(ADJUSTED EBITDA)
(In thousands)
Three Months Six Months
Ended Ended
June 30, June 30,
2006 2005 2006 2005
Adjusted EBITDA $38,149 $34,035 $74,185 $66,146
Less Adjustments:
Stock-Based Compensation 263 -- 575 65
Inventory Purchase
Accounting Charges 587 -- 587 12,084
EBITDA 37,299 34,035 73,023 53,997
Less:
Depreciation and
Amortization 7,135 6,236 13,889 12,369
Operating Income 30,164 27,799 59,134 41,628
Less:
Interest Expense, net 12,777 17,141 25,892 35,453
Income Tax Provision 6,099 3,788 11,655 2,277
Net Income $11,288 $6,870 $21,587 $3,898
EBITDA represents net income before interest expense, net, income taxes
and depreciation and amortization. Adjusted EBITDA is EBITDA as further
adjusted to exclude inventory purchase accounting adjustments and stock-
based compensation. These definitions of EBITDA and Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.
Neither of these calculations is a measure of financial performance under
accounting principles generally accepted in the United States of America.
We believe they provide a basis to measure our operating performance,
apart from the expenses associated with our physical plant or capital
structure, but neither should be considered in isolation or as a
substitute for operating income, cash flows from operating activities or
other measures of performance. A reconciliation of EBITDA and Adjusted
EBITDA is presented above.
SOURCE K & F Industries Holdings, Inc.
