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 August 31, 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
17,048,328 shares were outstanding as of September 20, 1996.
<PAGE>
BE AEROSPACE, INC.
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
August 31, February 24,
1996 1996
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 14,188 $ 15,376
Receivables - trade, less allowance for doubtful
accounts of $4,562 (August 31, 1996)
and $4,973 (February 24, 1996) 59,935 54,242
Inventories, net 77,518 72,569
Other current assets 8,138 7,621
-------- ---------
Total current assets 159,779 149,808
PROPERTY AND EQUIPMENT, net 86,887 86,357
INTANGIBLES AND OTHER ASSETS, net 196,674 197,421
--------- ---------
$ 443,340 $ 433,586
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 41,867 $ 45,102
Accrued expenses 50,171 56,400
Current portion of long-term debt 5,459 6,482
-------- --------
Total current liabilities 97,497 107,984
LONG-TERM DEBT 282,058 273,192
DEFERRED INCOME TAXES 1,923 1,257
OTHER LIABILITIES 9,718 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; 16,877,867 (August 31, 1996)
16,392,994 (February 24, 1996) issued 169 164
Additional paid-in capital 125,730 121,366
Retained deficit (72,699) (75,995)
Cumulative foreign exchange translation adjustment (1,056) (1,378)
Total stockholders' equity 52,144 44,157
--------- ---------
$443,340 $ 433,586
======== =========
</TABLE>
<PAGE>
BE AEROSPACE, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended
------------------
August 31, August 26,
1996 1995
<S> <C> <C>
NET SALES $ 103,026 $ 57,451
COST OF SALES 68,587 38,732
------ ------
GROSS PROFIT 34,439 18,719
OPERATING EXPENSES:
Selling, general and administrative 12,669 8,443
Research, development and engineering 9,430 11,471
Amortization expense 2,806 2,358
Total operating expenses 24,905 22,272
------ ------
OPERATING EARNINGS (LOSS) 9,534 (3,553)
INTEREST EXPENSE, net 7,464 3,961
----- -----
EARNINGS (LOSS) BEFORE INCOME TAXES 2,070 (7,514)
INCOME TAXES 207 -
NET EARNINGS (LOSS) $ 1,863 $ (7,514)
--------- ---------
EARNINGS (LOSS) PER COMMON SHARE:
NET EARNINGS (LOSS) PER COMMON SHARE $ 0.11 $ (0.47)
COMMON AND COMMON EQUIVALENT SHARES 17,598 16,118
--------- ---------
</TABLE>
<PAGE>
BE AEROSPACE, INC.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Six Months Ended
---------------
August 31, August 26,
1996 1995
<S> <C> <C>
NET SALES $ 200,328 $ 113,045
COST OF SALES 133,342 75,925
------- ------
GROSS PROFIT 66,986 37,120
OPERATING EXPENSES:
Selling, general and administrative 24,254 16,743
Research, development and engineering 19,157 24,774
Amortization expense 5,514 4,650
----- -----
Total operating expenses 48,925 46,167
------ ------
OPERATING EARNINGS (LOSS) 18,061 (9,047)
INTEREST EXPENSE, net 14,399 8,149
------ -----
EARNINGS (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 3,662 (17,196)
INCOME TAXES 366 -
------ -------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 3,296 (17,196)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - 23,332
----- ------
NET EARNINGS (LOSS) $ 3,296 $ (40,528)
--------- ---------
EARNINGS (LOSS) PER COMMON SHARE:
NET EARNINGS (LOSS) PER COMMON SHARE $ .19 $ (2.52)
--------- ---------
COMMON AND COMMON EQUIVALENT SHARES 17,446 16,108
--------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Six Months Ended
----------------
August 31, August 26,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 3,296 $(40,528)
Adjustments to reconcile net loss to net cash flows
provided by operating activities:
Depreciation and amortization 11,840 8,413
Cumulative effect of
change in accounting principle -- 23,332
Deferred income taxes 524 (948)
Non cash employee benefit plan contributions 442 683
Changes in operating assets and liabilities:
Accounts receivable (5,596) 4,306
Inventories (4,693) (3,813)
Other current assets (512) 120
Accounts payable (3,724) 3,555
Other liabilities (5,599) (5,312)
------ ------
Net cash flows used in operating activities (4,022) (8,296)
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,065) (8,168)
Change in intangibles and other assets - net (4,591) (2,095)
------ ------
Net cash flows used in investing activities (11,656) (10,263)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of credit 10,576 17,665
Proceeds from issuances of stock 3,927 153
----- ------
Net cash flows provided by financing activities 14,503 17,818
------ ------
Effect of exchange rate changes on cash flows (13) (88)
Net decrease in cash and cash equivalents (1,188) (829)
Cash and cash equivalents, beginning of period 15,376 8,319
Cash and cash equivalents, end of period $ 14,188 $ 7,490
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during period for interest $ 13,336 $ 8,510
Cash paid during period for income taxes, net $ 309 -
</TABLE>
<PAGE>
BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995
Note 1. Basis of Presentation:
The information set forth in these consolidated financial statements as
of August 31, 1996 and for the six and three month periods ended August 31,
1996 and August 26, 1995 is unaudited and may be subject to normal year-end
adjustments. In the opinion of management, the unaudited consolidated
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 "BEA") for the periods indicated.
Results of operations for the interim periods ended August 31, 1996 and
August 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.
The accompanying consolidated 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.
[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 August 31, 1996, as compared
to the Company's results of operations for the three months ended August 26,
1995. The discussion and analysis then addresses the results of the Company's
operations for the six months ended August 31, 1996 as compared to the
Company's results of operations for the six months ended August 26, 1995. The
discussion and analysis then addresses the liquidity and financial condition
of the Company.
THREE MONTHS ENDED AUGUST 31, 1996, AS COMPARED TO THE THREE MONTHS ENDED
AUGUST 26, 1995.
Sales for the three months ended August 31, 1996 were $103,026 or 79%
higher than sales of $57,451 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 $45,575 increase in sales for the three month period,
$29,429 was due to increased seating revenues directly related to the
acquisition of Burns. Excluding the effect of the Burn's acquisition, sales
were up 28% from the comparable period in the prior year.
At August 31, 1996, the Company's backlog stood at $480,000, up from
$450,000 at February 24, 1996. New order bookings in the three months ended
August 31, 1996 of approximately $109,000 were approximately $59,000 greater
than new orders bookings of approximately $50,000 for the comparable period
in the prior year. Management estimates that approximately 36% of its backlog
is deliverable during the balance of fiscal 1997.
Gross profit was $34,439, or 33.4% of sales, for the three months ended
August 31, 1996 and was $15,720 higher than gross profit for the comparable
period in the prior year of $18,719, which represented 32.6% of sales. The
increase in gross profit is primarily the result of the higher sales volumes.
Selling, general and administrative expenses were $12,669 or 12.3% of
sales for the three months ended August 31, 1996. This was $4,226 higher than
selling, general and administrative expenses for the comparable period in the
prior year of $8,443, or 14.7% of sales, principally due to the substantial
increase in revenues and the acquisition of Burns.
Research, development and engineering expenses were $9,430 or 9.2% of
sales, for the three months ended August 31, 1996. For the comparable period
in the prior year, research and development expense was $11,471 or 20.0% of
sales. The decrease in expenses during the current year is the result of a
decrease in the level of activity associated with MDDS, offset somewhat by an
increase in product development activity in the Seating Products Division.
Amortization expense for the quarter ended August 31, 1996 of $2,806 was
$448 more than the amount recorded in the first half of fiscal 1996 as a
result of the Burns acquisition.
Net interest expense was $7,464 for the three months ended August 31,
1996, or $3,503 higher than the net interest expense of $3,961 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.
<PAGE>
BE AEROSPACE, INC.
THREE MONTHS ENDED AUGUST 31, 1996, AS COMPARED TO THE THREE MONTHS ENDED
AUGUST 26, 1995. (CONTINUED)
Earnings before income taxes of $2,070 for the three months ended August
31, 1996 was $9,584 greater than the loss before taxes of $(7,514) in the
prior year.
Income taxes for the three months ended August 31, 1996 were $207 or 10%
of earnings before income taxes as compared to no tax provision in the first
half of fiscal 1996.
Net earnings were $1,863 or $.11 per share for the three months ended
August 31, 1996, as compared to a net loss of $(7,514) or $(.47) per share
for the comparable period in the prior year.
SIX MONTHS ENDED AUGUST 31, 1996, AS COMPARED TO THE SIX MONTHS ENDED
AUGUST 26, 1996.
Sales for the six months ended August 31, 1996 were $200,328 or 77%
higher than sales of $113,045 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 $87,283 increase in sales for the six month period,
$56,129 was due to increased seating revenues directly related to the
acquisition of Burns. Excluding the effect of the Burns acquisition, revenues
were up 28% from the comparable period in the prior year.
At August 31, 1996, the Company's backlog stood at approximately
$480,000, up from approximately $450,000 at February 24, 1996. New order
bookings in the six months ended August 31, 1996 of approximately $230,000
were $113,000 greater than new orders bookings of approximately $118,000 for
the comparable period in the prior year. Management estimates that
approximately 36% of its backlog is deliverable during the balance of fiscal
1997.
Gross profit was $66,986 or 33.4% of sales for the six months ended
August 31, 1996 and was $29,866 higher than gross profit for the comparable
period in the prior year of $37,120, which represented 32.8% of sales. The
increase in gross profit is the result of the higher sales volume.
Selling, general and administrative expenses were $24,254 or 12.1% of
sales for the six months ended August 31, 1996. This was $7,511 higher than
selling, general and administrative expenses for the comparable period in
the prior year of $16,743, or 14.8% of sales, principally due to the
substantial increases in revenues and the acquisition of Burns.
Amortization expense for the six months ended August 31, 1996 of $5,514
was $864 more than the amount recorded in the first half of fiscal 1996 as a
result of the Burns acquisition.
Net interest expense was $14,399 for the six months ended August 31,
1996, or $6,250 higher than the net interest expense of $8,149 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.
<PAGE>
BE AEROSPACE, INC.
Earnings before income taxes of $3,662 for the six months ended August
31, 1996 was $20,858 more than the loss before income taxes of $(17,196) in
the prior year.
Income taxes for the six months ended August 31, 1996 were $366 or 10%
of earnings before income taxes, as compared to no tax provision in the first
half of fiscal 1996.
Net earnings were $3,296 or $.19 per share for the six months ended
August 31, 1996 as compared to a net loss of $(40,528) or $(2.52) 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
BEA's primary requirements for working capital have been directly
related to its accounts receivable and inventory levels, costs associated
with the design and development of the MDDS and other products and scheduled
interest payments on its indebtedness. BEA's working capital was $62,282, as
of August 31, 1996, compared to $41,824 as of February 24, 1996.
In January 1996 the Company amended its existing credit facilities 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, with the commitments of the lenders thereunder reducing during such
five year period, 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 August 31, 1996 indebtedness in an aggregate
principal amount of approximately $47,000, plus letters of credit amounting
to approximately $6,000 were outstanding under the Bank Credit Facility.
The Company's liquidity requirements consist primarily of working
capital needs and scheduled payments of interest on its indebtedness and
costs associated with integrating Burns. As a result of the Burns
acquisition, the Company will have significantly increased cash requirements
for the payment of interest on its outstanding borrowings. No principal
payments are required for any of the borrowings under the Bank Credit
Facility until February, 2001 at which time any unpaid principal under the
Bank Credit Facility will be due and payable.
At August 31, 1996, the Company's cash and cash equivalents were $14,188
as compared to $15,376 at February 24, 1996. Cash used in operating
activities during the six months ended August 31, 1996 was $(4,022), and cash
used in operating activities in fiscal 1996 was $(8,296). The primary source
of cash during the six months ended August 31, 1996 was net earnings of
$3,296 and non-cash charges for depreciation and amortization of $11,840 and
approximately $3.9 million from issuance of common stock which was offset by
a use of cash of $19,158, principally due to increases in receivables and
inventories, as well as decreases in current liabilities.
<PAGE>
BE AEROSPACE, INC.
The Company's capital expenditures were $7,065 and $8,168 during the six
months ended August 31, 1996 and August 26, 1995 respectively. The Company
expects that its capital expenditures for the remainder of fiscal 1997 will
be approximately $7,000. These capital expenditures will relate principally
to maintenance of operations.
The Company believes that cash flow from operations and availability
under the Bank Credit Facility 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 believes that it will be able
to refinance the Bank Credit Facility prior to its termination, although
there can be no assurance that it will be able to do so. 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 which involve risks and
uncertainties. The Company's actual experience may differ materially from
that discussed above. Factors that might cause such a difference include, but
are not limited to, those discussed in "Risk Factors" in the Company's
Registration Statement on Form S-4 dated April 3, 1996, the Company's Form
10-K for the year ended February 24, 1996, as well as future events that have
the effect of reducing the Company's available cash balances, such as
unexpected operating losses or delays in the integration of the Company's
seating business or the delivery of the MDDS interactive video system or
capital expenditures or cash expenditures related to possible future
acquisitions.
<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: October 4, 1996 By:/s/ Robert J. Khoury
-------------------------
Robert J. Khoury
Vice Chairman and
Chief Executive Officer
Date: October 4, 1996 By: /s/ Thomas P. McCaffrey
----------------------------
Thomas P. McCaffrey
Vice President &
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-22-1997
<PERIOD-END> AUG-31-1996
<CASH> 14,188
<SECURITIES> 0
<RECEIVABLES> 64,497
<ALLOWANCES> (4,562)
<INVENTORY> 77,518
<CURRENT-ASSETS> 159,779
<PP&E> 120,403
<DEPRECIATION> (33,516)
<TOTAL-ASSETS> 443,340
<CURRENT-LIABILITIES> 97,497
<BONDS> 282,058
0
0
<COMMON> 169
<OTHER-SE> 51,975
<TOTAL-LIABILITY-AND-EQUITY> 443,340
<SALES> 200,328
<TOTAL-REVENUES> 200,328
<CGS> 133,342
<TOTAL-COSTS> 182,267
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,399
<INCOME-PRETAX> 3,662
<INCOME-TAX> 366
<INCOME-CONTINUING> 3,296
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,296
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
