UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the quarterly period
ended November 30, 1996
Commission File No. 0-18348
BE AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1209796
(State of Incorporation) (I.R.S. Employer Identification No.)
1400 Corporate Center Way
Wellington, Florida 33414
(Address of principal executive offices)
(561) 791-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES[X] NO[ ]
The registrant has one class of common stock, $ .01 par value, of which
21,750,525 shares were outstanding as of December 18, 1996.
<PAGE>
BE AEROSPACE, INC.
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands, except share data)
November 30, February 24,
1996 1996
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 13,670 $ 15,376
Receivables - trade, less allowance for doubtful
accounts of $5,236 (November 30, 1996)
and $4,973 (February 24, 1996) 70,155 54,242
Inventories, net 89,419 72,569
Other current assets 4,365 7,621
------- -------
Total current assets 177,609 149,808
PROPERTY AND EQUIPMENT, net 88,110 86,357
INTANGIBLES AND OTHER ASSETS, net 193,039 197,421
--------- ---------
$ 458,758 $ 433,586
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 46,996 $ 45,102
Accrued expenses 47,849 56,400
Current portion of long-term debt 5,821 6,482
-------- --------
Total current liabilities 100,666 107,984
LONG-TERM DEBT 282,107 273,192
DEFERRED INCOME TAXES 2,189 1,257
OTHER LIABILITIES 7,431 6,996
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding
Common stock, $.01 par value; 30,000,000 shares
authorized; 17,622,564 (November 30, 1996)
16,392,994 (February 24, 1996) issued 167 164
Additional paid-in capital 133,375 121,366
Retained deficit (68,568) (75,995)
Cumulative foreign exchange translation adjustment 1,391 (1,378)
--------- --------
Total stockholders' equity 66,365 44,157
--------- ---------
$ 458,758 $ 433,586
========= =========
</TABLE>
<PAGE>
BE AEROSPACE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
November 30, November 25,
1996 1995
<S> <C> <C>
NET SALES $107,823 $ 58,188
COST OF SALES 71,313 40,462
------ ------
GROSS PROFIT 36,510 17,726
OPERATING EXPENSES:
Selling, general and administrative and other expenses 13,365 12,804
Research, development and engineering 8,602 12,483
Amortization expense 2,507 2,221
----- -----
Total operating expenses 24,474 27,508
OPERATING EARNINGS (LOSS) 12,036 (9,782)
INTEREST EXPENSE, net 7,446 4,239
----- -----
EARNINGS (LOSS) BEFORE INCOME TAXES 4,590 (14,021)
INCOME TAXES 459 (0)
--- --
NET EARNINGS (LOSS) $ 4,131 $(14,021)
======== ========
EARNINGS (LOSS) PER COMMON SHARE:
NET EARNINGS (LOSS) PER COMMON SHARE $ 0.23 $ (0.87)
======== ========
COMMON AND COMMON EQUIVALENT SHARES 18,295 16,118
====== ======
</TABLE>
<PAGE>
BE AEROSPACE, INC.
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Nine Months Ended
November 30, November 25
1996 1995
<S> <C> <C>
NET SALES $ 308,151 $ 171,233
COST OF SALES 204,655 116,387
--------- ---------
GROSS PROFIT 103,496 54,846
OPERATING EXPENSES:
Selling, general and administrative and other expenses 37,619 29,547
Research, development and engineering 27,759 37,257
Amortization expense 8,021 6,871
-------- --------
Total operating expenses 73,399 73,675
OPERATING EARNINGS (LOSS) 30,097 (18,829)
INTEREST EXPENSE, net 21,845 12,388
-------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 8,252 (31,217)
INCOME TAXES 825 --
--- -----
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 7,427 (31,217)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- (23,332)
------ -------
NET EARNINGS (LOSS) $ 7,427 $ (54,549)
========= =========
EARNINGS (LOSS) PER COMMON SHARE:
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE $ 0.42 $ (1.94)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- (1.45)
------ -----
NET EARNINGS (LOSS) $ 0.42 $ (3.39)
========= =========
COMMON AND COMMON EQUIVALENT SHARES 17,786 16,111
========= =========
</TABLE>
<PAGE>
BE AEROSPACE, INC.
<TABLE>
<CAPTION>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
November 30, November 25,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 7,427 $(54,549)
Adjustments to reconcile net earnings (loss)
to net cash flows provided by operating activities:
Depreciation and amortization of intangibles 16,325 14,003
Amortization of deferred financing fees 1,161 526
Cumulative effect of
change in accounting principle -- 23,332
Deferred income taxes 637 (94)
Non cash employee benefit plan contributions 783 1,062
Changes in operating assets and liabilities:
Accounts receivable (15,193) 3,541
Inventories (15,106) (5,248)
Other current assets 3,266 (72)
Accounts payable 1,370 (1,495)
Other liabilities (9,683) (3,460)
-------- --------
Net cash flows used in operating activities (9,013) (22,454)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,675) (13,654)
Change in intangibles and other assets - net (3,338) (3,112)
-------- --------
Net cash flows used in investing activities (12,013) (16,766)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of credit 7,903 36,310
Proceeds from issuances of stock 11,229 --
-------- --------
Net cash flows provided by financing activities 19,132 36,310
Effect of exchange rate changes on cash flows 188 (61)
------- -------
Net decrease in cash and cash equivalents (1,706) (2,971)
Cash and cash equivalents, beginning of period 15,376 8,319
-------- --------
Cash and cash equivalents, end of period $ 13,670 $ 5,348
======== ========
Supplemental disclosures of cash flow information:
Cash paid during period for interest $ 20,935 $ 15,355
Cash paid during period for income taxes, net $ 1,183 $ 104
</TABLE>
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS AND NINE MONTHS ENDED NOVEMBER 30, 1996 AND NOVEMBER 25, 1995
Note 1. Basis of Presentation:
The information set forth in these consolidated condensed financial
statements as of November 30, 1996 and for the nine and three month periods
ended November 30, 1996 and November 26, 1995 is unaudited and may be subject
to normal year-end adjustments. In the opinion of management, the unaudited
consolidated condensed financial statements reflect all adjustments,
consisting only of normal recurring adjustments necessary to present fairly
the financial position of BE Aerospace, Inc. (the "Company" or "B/E") for the
periods indicated. Results of operations for the interim periods ended
November 30, 1996 and November 26, 1995 are not necessarily indicative of the
results of operations for the full fiscal year. For further information,
including information with regard to conditions in the airline industry and
their possible impact on the Company, please refer to the Company's annual
report on Form 10-K for the fiscal year ended February 24, 1996 and its
prospectus on Form S-3 dated December 12, 1996.
The accompanying consolidated condensed financial statements consolidate
all of the Company's subsidiaries.
Certain information normally included in footnote disclosures to the
annual financial statements has been condensed or omitted in accordance with
the rules and regulations of the Securities and Exchange Commission.
Note 2. Subsequent Event
On December 18, 1996, the Company sold four million shares of common
stock to the public at a price of $25.00 per share. The net proceeds of the
offering were approximately $94 million. The Company used approximately $58
million of the net proceeds to repay the outstanding balances under various
credit facilities. The remainder of the net proceeds will be used for general
corporate purposes.
Had this sale and the corresponding repayment of the credit facilities
taken place on February 25, 1996, earnings per common and common equivalent
shares would have been $.24 and 22,292, respectively, for the three months
ended November 30, 1996 and $.52 and 21,786, respectively, for the nine months
ended November 30, 1996.
[Remainder of page intentionally left blank]
<PAGE>
BE AEROSPACE, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(Dollars in thousands, except per share data)
The following discussion and analysis addresses the results of the
Company's operations for the three months ended November 30, 1996, as compared
to the Company's results of operations for the three months ended November 25,
1995. The discussion and analysis then addresses the results of the Company's
operations for the nine months ended November 30, 1996 as compared to the
Company's results of operations for the nine months ended November 25, 1995.
The discussion and analysis then addresses the liquidity and financial
condition of the Company.
THREE MONTHS ENDED NOVEMBER 30, 1996, AS COMPARED TO THE THREE MONTHS ENDED
NOVEMBER 25, 1995.
Sales for the three months ended November 30, 1996 were $107,823, or 85%,
higher than sales of $58,188 for the comparable period in the prior year. The
increase in sales is attributable to substantially higher unit volume
shipments of all the Company's products as a result of improving industry
conditions. Of the $49,635 increase in sales for the three month period,
$26,600 was due to increased revenues directly related to the acquisition of
Burns Aerospace Corporation ("Burns"). Excluding the effect of the Burn's
acquisition, sales increased 40% from the comparable period in the prior year.
At November 30, 1996, the Company's backlog was approximately $530,000,
up from $450,000 at February 24, 1996. New order bookings in the three months
ended November 30, 1996 of approximately $158,000 were $119,000 greater than
new order bookings of approximately $39,000 for the comparable period in the
prior year.
Gross profit was $36,510, or 33.9% of sales, for the three months ended
November 30, 1996 and was $18,784 higher than gross profit for the comparable
period in the prior year of $17,726, which represented 30.5% of sales. The
increase in gross profit is primarily the result of the higher sales volumes.
Selling, general and administrative and other expenses were $13,365, or
12.4% of sales, for the three months ended November 30, 1996. This was $561
higher than selling, general and administrative and other expenses for the
comparable period in the prior year of $12,804, or 22% of sales, principally
due to the increase in revenues and the acquisition of Burns.
Research, development and engineering expenses were $8,602, or 8% of
sales, for the three months ended November 30, 1996. For the comparable period
in the prior year, research and development expense was $12,483 or 21.5% of
sales. The decrease in expenses during the current year is the result of a
decrease in the level of activity associated with MDDS, partially offset by an
increase in product development activity in the Seating Products Division.
Amortization expense of $2,507 for the quarter ended November 30, 1996,
was $286 more than the amount recorded in the quarter ended November 25, 1995,
as a result of the Burns acquisition.
Net interest expense was $7,446 for the three months ended November 30,
1996, or $3,207 higher than the net interest expense of $4,239 recorded for
the comparable period in the prior year, and is due to the increase in the
Company's long-term debt outstanding as a result of the Burns acquisition and
the upturn in the Company's business.
<PAGE>
BE AEROSPACE, INC.
THREE MONTHS ENDED NOVEMBER 30, 1996, AS COMPARED TO THE THREE MONTHS ENDED
NOVEMBER 25, 1995. (Continued)
Earnings before income taxes of $4,590 for the three months ended
November 30, 1996 were $18,611 greater than the loss before taxes of $(14,021)
in the prior year.
Income taxes for the three months ended November 30, 1996 were $459, or
10% of earnings before income taxes, as compared to no tax provision for the
prior year period.
Net earnings were $4,131, or $.23 per share, for the three months ended
November 30, 1996, as compared to a net loss of $(14,021), or $(.87) per
share, for the comparable period in the prior year.
NINE MONTHS ENDED NOVEMBER 30, 1996, AS COMPARED TO THE NINE MONTHS ENDED
NOVEMBER 25, 1996.
Sales for the nine months ended November 30, 1996 were $308,151, or 80%,
higher than sales of $171,233 for the comparable period in the prior year. The
increase in sales is attributable to substantially higher unit volume
shipments of all the Company's products as a result of improving industry
conditions. Of the $136,918 increase in sales for the nine month period,
approximately $80,400 was due to increased revenues directly related to the
acquisition of Burns. Excluding the effect of the Burns acquisition, revenues
increased 33% from the comparable period in the prior year.
At November 30, 1996, the Company's backlog was approximately $530,000,
up from approximately $450,000 at February 24, 1996. New order bookings in the
nine months ended November 30, 1996 of approximately $388,000 were $231,000
greater than new orders bookings of approximately $157,000 for the comparable
period in the prior year.
Gross profit was $103,496 or 33.6% of sales for the nine months ended
November 30, 1996 and was $48,650 higher than gross profit for the comparable
period in the prior year of $54,846, which represented 32.0% of sales. The
increase in gross profit is the result of the higher sales volumes.
Selling, general and administrative and other expenses were $37,619, or
12.2% of sales, for the nine months ended November 30, 1996. This was $8,072
higher than selling, general and administrative and other expenses for the
comparable period in the prior year of $29,547, or 17.3% of sales, principally
due to the substantial increases in revenues and the acquisition of Burns.
Research, development and engineering expenses were $27,759, or 9% of
sales, for the nine months ended November 30, 1996. For the comparable period
in the prior year, research and development expense was $37,257 or 21.8% of
sales. The decrease in expense during the current year is the result of a
decrease in the level of activity associated with MDDS, partially offset by an
increase in product development activity in the Seating Products Division.
Amortization expense of $8,021 for the nine months ended November 30,
1996 was $1,150 more than the amount recorded in the comparable period for
fiscal 1996, as a result of the Burns acquisition.
<PAGE>
BE AEROSPACE, INC.
Net interest expense was $21,845 for the nine months ended November 30,
1996, or $9,457 higher than the net interest expense of $12,388 recorded for
the comparable period in the prior year, and is due to the increase in the
Company's long-term outstanding debt as a result of the Burns acquisition and
the upturn in the Company's business.
Earnings before income taxes of $8,252 for the nine months ended November
30, 1996 were $39,469 more than the loss before income taxes of $(31,217) in
the prior year.
Income taxes for the nine months ended November 30, 1996 were $825, or
10% of earnings before income taxes, as compared to no tax provision for the
prior period.
Net earnings were $7,427, or $.42 per share, for the nine months ended
November 30, 1996 as compared to a net loss of $(54,549) or $(3.39) per share
for the comparable period in the prior year, which includes the cumulative
effect of the accounting change of $23,332.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs and scheduled payments of interest on its indebtedness. As a result of
the Burns acquisition, the Company has significantly increased cash
requirements for the payment of interest on its outstanding borrowings.
B/E's primary requirements for working capital have been directly related
to increased accounts receivable and inventory levels as a result of revenue
growth. B/E's working capital was $76,943, as of November 30, 1996, compared
to $41,824 as of February 24, 1996.
In January 1996 the Company amended its existing credit facilities with
The Chase Manhattan Bank by increasing the aggregate principal amount that may
be borrowed thereunder to $100,000 (the "Bank Credit Facility"). The Bank
Credit Facility consists of a $25,000 Reducing Revolver and a $75,000
Revolving Facility. The amount of the Reducing Revolver will be reduced
automatically by 12.5% on April 19, 1999 and on each of the seven succeeding
quarterly anniversaries of such date. The Reducing Revolver is collateralized
by all of the issued and outstanding capital stock of Acurex, (a wholly owned
subsidiary) and has a five year maturity and the Revolving Facility is
collateralized by all of the Company's accounts receivable, all of its
inventory and substantially all of its other personal property and has a
five-year maturity. The Bank Credit Facility contains customary affirmative
covenants, negative covenants and conditions of borrowing. At November 30,
1996 indebtedness in an aggregate principal amount of approximately $47,000,
plus letters of credit amounting to approximately $5,000 were outstanding
under the Bank Credit Facility.
On December 18, 1996, the Company sold four million shares of common
stock to the public at a price of $25.00 per share. The net proceeds of the
offering were approximately $94 million. The Company used approximately $58
million of the net proceeds to repay the outstanding balances under various
credit facilities. The remainder of the net proceeds will be used for general
corporate purposes including working capital requirements to support increased
sales and possible investments in strategic acquisitions.
At November 30, 1996, the Company's cash and cash equivalents were
$13,670 as compared to $15,376 at February 24, 1996. Cash used in operating
activities during the nine months ended November 30, 1996 was $(9,013), and
cash used in operating activities in fiscal 1996 was $(22,454). The primary
source of cash during the nine months ended November 30, 1996 was net earnings
<PAGE>
BE AEROSPACE, INC.
of $7,425 and non-cash charges for depreciation and amortization of
$16,325 and approximately $11,229 from issuance of common stock which was
offset by a use of cash of $36,687, principally due to increases in
receivables, inventories and property and equipment, as well as decreases in
current liabilities.
The Company's capital expenditures were $8,675 and $13,654 during the
nine months ended November 30, 1996 and November 25, 1995 respectively. These
capital expenditures relate principally to maintenance of operations.
The Company believes that cash flow from operations and availability
under the Bank Credit Facility will provide adequate funds for its working
capital needs, planned capital expenditures and debt service obligations
through the term of the Bank Credit Facility. The Company's ability to fund
its operations and make planned capital expenditures, to make scheduled
payments and to refinance its indebtedness depends on its future operating
performance and cash flow, which, in turn, are subject to prevailing economic
conditions and to financial, business and other factors, some of which are
beyond its control.
This report includes forward-looking statements. Any such statements are
subject to risks and uncertainties that could cause actual results to vary
materially from those anticipated; among these are the Company's dependence
upon conditions in the airline industry, the size and resources of many of the
Company's competitors, the Company's financial leverage, the need for the
Company to continue to effectively integrate acquired businesses and the
ability of the Company to successfully manufacture and deliver technologically
advanced products. Additional information with respect to these and other
factors which could materially affect the Company is included in the Company's
filings with the Securities and Exchange Commission, including its most recent
proxy statement and 10-K, its 10-Q for the fiscal quarter ended August 31,
1996 and the prospectus dated December 12, 1996, relating to the Company's
recent common stock offering.
<PAGE>
BE AEROSPACE, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings. Not applicable.
Item 2. Changes in Securities. Not applicable.
Item 3. Defaults Upon Senior Securities. Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits. None
<PAGE>
BE AEROSPACE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BE AEROSPACE, INC.
Date: December 23, 1996 By: /s/ Robert J. Khoury
Vice Chairman and
Chief Executive Officer
Date: December 23, 1996 By: /s/ Thomas P. McCaffrey
Vice President &
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-22-1997
<PERIOD-END> NOV-30-1996
<CASH> 13,670
<SECURITIES> 0
<RECEIVABLES> 75,391
<ALLOWANCES> (5,236)
<INVENTORY> 89,419
<CURRENT-ASSETS> 177,609
<PP&E> 124,302
<DEPRECIATION> (36,192)
<TOTAL-ASSETS> 458,758
<CURRENT-LIABILITIES> 100,666
<BONDS> 282,107
0
0
<COMMON> 167
<OTHER-SE> 66,198
<TOTAL-LIABILITY-AND-EQUITY> 458,758
<SALES> 308,158
<TOTAL-REVENUES> 308,158
<CGS> 204,655
<TOTAL-COSTS> 278,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,845
<INCOME-PRETAX> 8,252
<INCOME-TAX> 825
<INCOME-CONTINUING> 7,427
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,427
<EPS-PRIMARY> .42
<EPS-DILUTED> .41
</TABLE>
