BEIQ Bei Technologies (MM)

BEI Technologies, Inc. Reports Record Second Quarter 2005 Revenue and Earnings SAN FRANCISCO, May 3 /PRNewswire-FirstCall/ -- BEI Technologies, Inc. (NASDAQ:BEIQ), an established manufacturer of electronic sensors and motion control products, announces record second quarter 2005 revenue and earnings. Fiscal 2005 Second Quarter compared with Fiscal 2004 Second Quarter: -- Revenues increased 19.5% to $87.8 million with automotive revenue of $54.2 million, an increase of 22.0% -- Net income increased 33.5% to $4.679 million from $3.504 million -- EPS increased 33.3% to $0.32 from $0.24 per share Quarterly Results Charles Crocker, Chairman and Chief Executive Officer stated, "Revenue for the quarter increased by $14.3 million compared with the prior year second quarter with increases in all market sectors. Automotive revenue increased to $54.2 million with GyroChip(R) sensor shipments of 1.57 million units and the recognition of $2.3 million of previously deferred revenue. Revenue from industrial sensors, actuators and motors increased in the quarter to $26.5 million from $23.7 million in the prior year second quarter primarily due to the inclusion of Newall linear encoders partly offsetting lower actuator sales. Government, Aerospace and Defense revenue increased to $7.1 million compared with $5.4 million in the prior year second quarter." Gross margin increased to 27.7% in the fiscal 2005 second quarter from 25.3% in the prior year second quarter. Average gross margin percentages improved in automotive products and aerospace and defense products compared to the prior year quarter. Automotive margins increased due to improved operating efficiency and the increase of nugget shipments associated with the new contract. The prior year second quarter was favorably impacted by vendor scrap recovery. Selling, general and administrative (SG&A) expense increased in the second quarter 2005 to $12.4 million compared with the prior year second quarter of $9.6 million. The inclusion of Newall SG&A added approximately $1.3 million in spending not in the prior year. The second quarter 2005 spending also included accruals associated with Sarbanes-Oxley Section 404 compliance of approximately $0.9 million. Research and development expense in the second quarter increased to $4.3 million compared with $3.4 million in the prior year second quarter due to the inclusion of Newall spending and increased spending associated with the quartz gyro development. Also, during the quarter we included approximately $450,000 of legal, accounting and other costs in SG&A related to a potential acquisition that we are no longer pursuing. During the second quarter 2005 our operations generated $9.3 million in cash. Cash generated from operations resulted primarily from net income of $4.7 million, a decrease in accounts receivable of $1.6 million and a $3.4 million increase in accruals including the amounts related to the Company's preparation for fiscal year 2005 Sarbanes-Oxley Section 404 reporting. Purchases of property, plant and equipment of $7.1 million, primarily to increase GyroChip production at Systron Donner Automotive, were major factors in a $6.2 million use of cash from investing activities. Cash used for financing of $2.1 million was affected primarily by changes in the Company's line of credit during the quarter. The Company's cash balance at second quarter end was $5.9 million, with an outstanding balance on the Company's $35.0 million line of credit of $12.2 million. Crocker continued, "Systron Donner Automotive continues to successfully meet customer demand and increase its capacity. As previously stated we have reached our goal of 6.0 million units of annual capacity for sensors and in coordination with our customers, we are working toward production capacity of 10 million nuggets annually by September 2005." Six Months Results For the six month period ended April 2, 2005, the Company reported consolidated after tax net income of $8.3 million, or $0.56 per share, versus $5.5 million, or $0.38 per share, in the comparable period of fiscal 2004. Revenue in the six month period ended April 2, 2005 was $164.8 million, compared to $142.3 million reported in the comparable period of the prior year. Automotive revenue increased 16.8% to $101.6 million and Industrial revenue increased 18.4% to $50.5 million. Gross margin increased to 27.6% from 23.7% in the prior year period with higher revenue and improved operating efficiency. SG&A spending for the six month period ended April 2, 2005 was $23.1 million, above the previous year spending of $17.9 million with higher activity levels and the inclusion of Newell and Sarbanes-Oxley Section 404 compliance costs. Research and development spending year to date of $8.5 million increased from $6.7 million in the prior year period as a result of higher spending associated with quartz gyro development and commercializing licensed technologies, and the inclusion of Newall spending. Crocker concluded, "Automotive production in both Europe and North America softened during the second quarter of 2005 but the market trend for penetration of stability control systems into additional platforms continues to increase. The resulting increased quantities are now transitioning to the new contract and the corresponding core technology nugget sale with lower associated selling prices. We adjusted our backlog in the second quarter to reflect this transition." Guidance for Third Quarter 2005 The Company's GyroChip automotive sensor shipments guidance continues to be at least 5.6 million units for the 12 month period ending September 2005. As the Company begins the transition to nugget sales for the GyroChip, the Company expects that the average selling price will reduce and automotive revenue will step down accordingly. The Company does not expect that sensor unit profitability will be affected. The Company expects that revenue for the third quarter will be in the mid to high $70 million range. About BEI Technologies, Inc. BEI Technologies, Inc. (the "Company" or "Technologies") is an established manufacturer of electronic sensors, motors, actuators, rotary optical encoders, linear encoders with associated digital readouts (DROs), and motion control products used for factory and office automation, medical equipment, military, aviation and space systems. In addition, sales to manufacturers of transportation equipment, including automobiles, trucks and off-road equipment, have become a significant addition to the Company's business in recent years. The Company's micromachined quartz rate sensors are being used in advanced vehicle stability control systems and a significant increase in the production of those sensors had been in progress from the middle of 1998 to fiscal year 2005 except for a decrease in production in fiscal 2002 due to increased competition. The Company also manufactures electronic steering wheel position sensors, seat-memory modules, throttle position sensors, inertial navigation systems, and other devices used in transportation systems. Except for historical information, this news release may be deemed to contain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed in this release. Factors that could cause or contribute to such differences include, but are not limited to, the Risk Factors discussed from time to time in the Company's reports to the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for fiscal 2004. BEI TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands) April 2, 2005 October 2,* (Unaudited) 2004 ASSETS Cash and cash equivalents $5,937 $8,218 Investments 4,387 4,299 Trade receivables, net 49,277 45,482 Inventories, net 29,373 29,897 Other current assets 15,624 17,147 Total current assets 104,598 105,043 Property, plant and equipment, net 47,770 39,905 Goodwill 9,268 1,612 Other assets, net 10,285 6,008 $171,921 $152,568 LIABILITIES AND STOCKHOLDERS' EQUITY Trade accounts payable $25,475 $33,698 Accrued expenses and other liabilities 26,613 25,450 Current portion of long-term debt 7,271 7,263 Total current liabilities 59,359 66,411 Long-term debt, less current portion 27,796 10,639 Other liabilities 2,606 2,783 Stockholders' equity 82,160 72,735 $171,921 $152,568 * Based on audited information included on Form 10-K for fiscal year ended October 2, 2004 BEI TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands except per share amounts) Unaudited Quarter Ended Six Months Ended April 2, April 3, April 2, April 3, 2005 2004 2005 2004 Net sales $87,839 $73,531 $164,763 $142,336 Cost of sales 63,549 54,963 119,329 108,621 24,290 18,568 45,434 33,715 Selling, general and administrative expenses 12,356 9,560 23,115 17,888 Research, development and related expenses 4,331 3,390 8,532 6,650 Income from operations 7,603 5,618 13,787 9,177 Other income 273 291 398 281 Interest expense (450) (353) (891) (721) Income before taxes 7,426 5,556 13,294 8,737 Provision for income taxes 2,747 2,052 4,967 3,230 Net income $4,679 $3,504 $8,327 $5,507 BASIC EARNINGS PER COMMON SHARE Net income per common share $0.32 $0.25 $0.57 $0.39 Weighted average shares outstanding 14,556 14,295 14,485 14,259 DILUTED EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Net income per common and common equivalent share $0.32 $0.24 $0.56 $0.38 Weighted average shares outstanding 14,809 14,610 14,780 14,572 BEI TECHNOLOGIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) Unaudited Quarter Ended Six Months Ended April 2, April 3, April 2, April 3, 2005 2004 2005 2004 Net income $4,679 $3,504 $8,327 $5,507 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,393 2,951 4,997 5,550 Other 2,193 1,529 (8,648) 1,805 Net cash provided by operating activities 9,265 7,984 4,676 12,862 Net cash used by investing activities (6,223) (2,361) (23,628) (4,476) Net cash provided (used) by financing activities (2,100) (1,149) 16,671 (7,473) Net increase (decrease) in cash and cash equivalents 942 4,474 (2,281) 913 Cash and cash equivalents at beginning of period 4,995 5,650 8,218 9,211 Cash and cash equivalents at end of period $5,937 $10,124 $5,937 $10,124 DATASOURCE: BEI Technologies, Inc. CONTACT: John LaBoskey, Senior Vice President/CFO of BEI Technologies, Inc., +1-415-956-4477 Web site: http://www.bei-tech.com/

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