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 May 31, 1997
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
22,073,022 shares were outstanding as of June 20, 1997.
<PAGE>
B/E AEROSPACE, INC.
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
May 31, February 22,
1997 1997
---- ----
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents .................................... $ 44,223 $ 44,149
Accounts receivable - trade, less allowance for doubtful
accounts of $3,877 (May 31,1997)
and $4,864 (February 22, 1997) .......................... 67,074 73,489
Inventories, net ............................................. 98,171 92,900
Other current assets ......................................... 5,001 2,781
-------- --------
Total current assets ..................................... 214,469 213,319
PROPERTY AND EQUIPMENT, net ....................................... 90,246 87,888
INTANGIBLES AND OTHER ASSETS, net ................................. 187,078 189,882
--------- ---------
$ 491,793 $ 491,089
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................. $ 39,606 $ 42,889
Accrued expenses ............................................. 39,791 43,837
Current portion of long-term debt ............................ 4,072 4,419
--------- ---------
Total current liabilities ............................... 83,469 91,145
--------- ---------
LONG-TERM DEBT .................................................... 225,641 225,402
DEFERRED INCOME TAXES ............................................. 1,411 1,667
OTHER LIABILITIES ................................................. 7,086 7,114
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; 22,070,772 (May 31, 1997)
21,893,392 (February 22, 1997) issued and outstanding 220 219
Additional paid-in capital ................................... 230,559 228,710
Accumulated deficit .......................................... (55,343) (62,286)
Cumulative foreign exchange translation adjustment ........... (1,250) (882)
--------- ---------
Total stockholders' equity .............................. 174,186 165,761
--------- ---------
$ 491,793 $ 491,089
========= =========
</TABLE>
<PAGE>
B/E AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
May 31, May 25,
1997 1996
<S> <C> <C>
NET SALES ................................ $113,846 $ 97,302
COST OF SALES ............................ 72,783 64,755
-------- --------
GROSS PROFIT ............................. 41,063 32,547
OPERATING EXPENSES:
Selling, general and administrative . 12,903 11,585
Research, development and engineering 11,008 9,727
Amortization of intangible assets ... 2,853 2,708
-------- --------
Total operating expenses ....... 26,764 24,020
-------- --------
OPERATING EARNINGS ....................... 14,299 8,527
INTEREST EXPENSE, net .................... 6,130 6,935
-------- --------
EARNINGS BEFORE INCOME TAXES ............. 8,169 1,592
INCOME TAXES ............................. 1,226 159
-------- --------
NET EARNINGS ............................. $ 6,943 $ 1,433
======== ========
NET EARNINGS PER COMMON SHARE ............ $ .30 $ .08
======== ========
COMMON AND COMMON EQUIVALENT SHARES ...... 23,057 17,241
======== ========
</TABLE>
<PAGE>
B/E AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
May 31, May 25,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings ............................................ $ 6,943 $ 1,433
Adjustments to reconcile net earnings to net cash flows
provided by (used in) operating activities:
Depreciation and amortization .................. 6,381 5,350
Deferred income taxes .......................... (275) 534
Non cash employee benefit plan contributions ... 447 83
Changes in operating assets and liabilities:
Accounts receivable ....................... 6,516 (9,402)
Inventories ............................... (5,023) (209)
Other current assets ...................... (2,206) (460)
Accounts payable .......................... (2,263) 1,408
Other liabilities .......................... (5,226) (6,549)
-------- -------
Net cash flows provided by (used in) operating activities 5,294 (7,812)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................... (6,159) (1,218)
Change in other assets - net ........................... (347) 43
------- -------
Net cash flows used in investing activities ............ (6,506) (1,175)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt ............................ (174) (1,364)
Proceeds from issuances of stock ........................ 1,403 1,165
------- -------
Net cash flows provided by (used in) financing activities 1,229 (199)
------- -------
Effect of exchange rate changes on cash flows ................ 57 (39)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......... 74 (9,225)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............... $ 44,149 $ 15,376
======== ========
CASH AND CASH EQUIVALENTS, END OF PERIOD ..................... $ 44,223 $ 6,151
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during period for interest .................... $ 6,327 $ 6,734
======== ========
Cash paid during period for income taxes ................ $ 179
========
</TABLE>
<PAGE>
B/E AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MAY 31, 1997 AND MAY 25, 1996
Note 1. Basis of Presentation:
The information set forth in these consolidated financial statements as
of May 31, 1997 and for the three months ended May 31, 1997 and May 25, 1996
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 B/E Aerospace, Inc.
(the "Company" or "B/E") for the periods indicated. Results of operations for
the interim periods ended May 31, 1997 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 22, 1997.
The accompanying consolidated financial statements consolidate all of
the Company's subsidiaries. All significant intercompany transactions have
been eliminated. Certain amounts in the prior years' Consolidated Financial
Statements have been reclassified to conform to the current fiscal year's
presentation.
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. Earnings Per Share
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share which
is effective for financial statements issued for periods ending after
December 15, 1997. SFAS No. 128 requires the disclosure of basic and diluted
earnings per share. Earnings per share, as reported and as would be
reportable under SFAS No. 128 for the three months ended May 31, 1997 and May
25, 1996 are as follows:
<TABLE>
<CAPTION>
As Reported
----------------
May 31, May 25,
1997 1996
---- ----
<S> <C> <C>
Primary earnings per share $.30 $.08
Pro Forma
---------------
May 31, May 25,
1997 1996
---- ----
Basic earnings per share $.32 $.09
Diluted earnings per share $.30 $.08
</TABLE>
<PAGE>
B/E 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 May 31, 1997, as compared to the
Company's results of operations for the three months ended May 25, 1996. The
discussion and analysis then addresses the liquidity and financial condition
of the Company.
THREE MONTHS ENDED MAY 27, 1997, AS COMPARED TO THE RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED MAY 25, 1996.
Net sales for the fiscal 1998 three-month period were $113,846, up 17 percent
versus fiscal 1997 first quarter sales of $97,302, reflecting a 25-percent
increase in product sales offset by a $5 million decline in service revenues.
At May 31, 1997 the Company's backlog stood at approximately $580,000 up from
approximately $475,000 at May 25, 1996.
Gross profit was $41,063 (36.1% of sales) for the three months ended May 31,
1997 and was $8,516 or 26% greater than the comparable period in the prior
year of $32,547 which represented 33.4% of sales. The increase in gross
profit is the result of the higher sales volume and the mix of products and
services sold.
Selling, general and administrative expenses were $12,903 (11.3% of sales)
for the three months ended May 31, 1997. This was $1,318 or 11.3% higher than
the comparable period in the prior year of $11,585 (11.9% of sales) and is
primarily due to higher levels of sales and quotation activity, and major new
initiatives in customer service, program management, product support and
information technology.
Research, development and engineering expense was $11,008 or 9.7% of sales
for the three months ended May 31, 1997. For the comparable period in the
prior year, research, development and engineering expense was $9,727 or 10.0%
of sales.
Amortization expense for the quarter ended May 31, 1997 of $2,853 was $145
greater than the amount recorded in the first quarter of fiscal 1997.
The increase in gross profit, offset by somewhat higher operating expenses,
resulted in operating earnings of $14,299 (12.6% of sales), an increase of
$5,772 or 67.7% over the comparable period in the prior year of $8,527 (8.8%
of sales).
Interest expense, net was $6,130 for the three months ended May 31, 1997, or
$805 lower than interest expense of $6,935 recorded for the comparable period
in the prior year, and is due to the decrease in the Company's long-term debt
as compared to FY 97.
<PAGE>
B/E AEROSPACE, INC.
THREE MONTHS ENDED MAY 31, 1997 AS COMPARED TO THE RESULTS OF OPERATIONS FOR
THE THREE MONTHS ENDED MAY 25, 1996. (CONTINUED)
Earnings before income taxes of $8,169 for the quarter ended May 31, 1997 was
$6,577 or 413% greater than the earnings before taxes in the prior year.
Income tax expense for the quarter ended May 31, 1997 was $1,226 or 15% of
earnings before income taxes, as compared to $159, or 10% of earnings before
income taxes in the prior year.
Net earnings were $6,943 or $.30 per share for the three months ended May 31,
1997, as compared to net earnings of $1,433 or $.08 per share for the
comparable period in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist primarily of working capital
needs and scheduled payments of interest on its indebtedness. B/E's primary
requirements for working capital have been directly related to increased
inventory levels as a result of growth in revenues. B/E's working capital was
$131,000 as of May 31, 1997, compared to $122,174 as of February 22, 1997.
In May 1997, the Company amended its existing credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder to $125,000 (the "Bank Credit Facility"). The Bank Credit
Facility consists of a $25,000 Reducing Revolver and a $100,000 Revolving
Facility. The amount of the Reducing Revolver will be reduced automatically
by 12.5% on August 26, 2000 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 a wholly owned subsidiary and has
a five-year maturity. 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 May 31, 1997 indebtedness under the Bank Credit
Facility were letters of credit amounting to approximately $5,100. The
Company had approximately $119,900 available for subsequent borrowings under
its bank credit facility.
The Company's 9 3/4% Senior Notes and 9 7/8% Senior Subordinated Notes are
due March 1, 2003 and February 1, 2006, respectively.
At May 31, 1997, the Company's cash and cash equivalents were $44,223 as
compared to $44,149 at February 22, 1997. Cash provided from operating
activities during the three months ended May 31, 1997 was $5,294 and cash
used in operating activities in the first quarter of fiscal 1997 was $7,812.
The primary source of cash during the three months ended May 31, 1997 was net
earnings of $6,943, non-cash charges for depreciation and amortization of
$6,381 and decreases in receivables of $6,516 offset by a use of cash of
$5,023 related to increases in inventories and $9,695 related to decreases in
other assets and liabilities.
The Company's capital expenditures were $6,159 and $1,218 during the three
months ended May 31, 1997 and May 25, 1996, respectively. The Company
anticipates ongoing capital expenditures of approximately $20 million per
year for the next several years.
<PAGE>
B/E AEROSPACE, INC.
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 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 on 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 in such statements. 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-3 dated December 12, 1996, Exhibit
99 to the Company's Form 10-K for the year ended February 22, 1997, 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>
B/E 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
b. Form 8-K reports None
<PAGE>
B/E 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.
B/E AEROSPACE, INC.
Date: June 30, 1997 By: /s/ Robert J. Khoury
-------------------------
Robert J. Khoury
Vice Chairman and
Chief Executive Officer
Date: June 30, 1997 By: /s/ Thomas P. McCaffrey
----------------------------
Thomas P. McCaffrey
Corporate Senior Vice President
of Administration & Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> MAY-31-1997
<CASH> 44,223
<SECURITIES> 0
<RECEIVABLES> 70,951
<ALLOWANCES> (3,877)
<INVENTORY> 98,171
<CURRENT-ASSETS> 5,001
<PP&E> 129,561
<DEPRECIATION> (39,315)
<TOTAL-ASSETS> 491,793
<CURRENT-LIABILITIES> 83,469
<BONDS> 225,641
0
0
<COMMON> 220
<OTHER-SE> (56,593)
<TOTAL-LIABILITY-AND-EQUITY> 491,793
<SALES> 113,846
<TOTAL-REVENUES> 113,846
<CGS> 72,783
<TOTAL-COSTS> 99,547
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,130
<INCOME-PRETAX> 8,169
<INCOME-TAX> 1,226
<INCOME-CONTINUING> 6,943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,943
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
