As filed with the Securities and Exchange Commission on september 30, 1998.
Registration No. 333-60209
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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Amendment No. 3
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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BE AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1209796
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 Corporate Center Way, Wellington, Florida 33414 (561) 791-5000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Edmund J. Moriarty, Esq.
General Counsel
1400 Corporate Center Way
Wellington, FL 33414
(561) 791-5000 / (561) 791-3966 (fax)
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies of all communications to:
Rohan S. Weerasinghe, Esq. Winthrop G. Minot, Esq.
Shearman & Sterling Ropes & Gray
599 Lexington Avenue One International Place
New York, New York 10022 Boston, Massachusetts 02110
(212) 848-4000 / (212) 848-7179 (fax) (617) 951-7000/(617) 951-7050 (fax)
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Approximate date of commencement of proposed sale to the public: From time
to time or at one time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 (the "Securities Act") other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
---------------------
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1998
4,000,000 Shares
[Logo] BE Aerospace, Inc.
Common Stock
(0.1 par value)
------------------
All of the 4,000,000 shares of Common Stock, par value $.01 per share ("Common
Stock"), of BE Aerospace, Inc., a Delaware corporation ("B/E" or the "Company"),
offered hereby (the "Offering") are being sold by the Selling Stockholders named
in this Prospectus Supplement under "Principal and Selling Stockholders" (the
"Selling Stockholders"). The Selling Stockholders received such shares in
connection with the acquisition of SMR (as defined herein). Except as provided
by the SMR Acquisition Agreement (as defined in the accompanying Prospectus),
the Company will not receive any of the proceeds of shares sold by the Selling
Stockholders. See "Selling Stockholders" in the accompanying Prospectus.
The Company's Common Stock is quoted on The Nasdaq Stock Market's National
Market ("NNM") under the symbol "BEAV."
On September 29, 1998, the last reported sale price of the Common Stock on the
NNM was $22 9/16 per share. See "Price Range of Common Stock."
For a discussion of certain factors that should be considered in connection with
an investment in the Common Stock, see "Risk Factors" on page 5 of the
accompanying Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Selling
Public Commissions Stockholders(1)(2)
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<S> <C> <C> <C>
Per Share...................... $ $ $
Total(3)....................... $ $ $
</TABLE>
(1) Before deduction of expenses payable by certain of the Selling
Stockholders estimated at $ . Other expenses of issuance and
distribution estimated at $ are payable by the Company. See
"Underwriting."
(2) Except as provided by the SMR Acquisition Agreement, the Company will
not receive any of the proceeds from the sale of shares by the Selling
Stockholders. See "Selling Stockholders" in the accompanying Prospectus
and "Use of Proceeds" herein.
(3) The Company has granted the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement, to purchase a maximum
of 600,000 additional shares solely to cover over-allotments of shares.
If the option is exercised in full, the total Price to Public will be
$ , Underwriting Discounts and Commissions will be $ , Proceeds
to Company will be $ and Proceeds to Selling Stockholders
will be $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters and subject to
their right to reject orders in whole or in part. It is expected that the shares
of Common Stock will be ready for delivery on or about , 1998, against payment
in immediately available funds.
Credit Suisse First Boston
BT Alex. Brown
Morgan Stanley Dean Witter
PaineWebber Incorporated
Prospectus Supplement dated , 1998.
<PAGE>
[pictures]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
SYNDICATE SHORT COVERING TRANSACTIONS, PENALTY BIDS AND PASSIVE MARKET MAKING.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
S-2
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SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial
statements, including the related notes, appearing elsewhere in this Prospectus
Supplement or the accompanying Prospectus. As used in this Prospectus Supplement
or the accompanying Prospectus, unless the context otherwise requires, the
"Company" or "B/E" refers to BE Aerospace, Inc., a Delaware corporation.
References herein to a fiscal year end relate to a year ending on the last
Saturday in February (for example, fiscal 1998 refers to the Company's fiscal
year ended February 28, 1998). Unless otherwise indicated, the information in
this Prospectus Supplement assumes that the Underwriters' over-allotment option
will not be exercised. Market share information presented herein does not
include markets in the former Soviet Union and will vary, sometimes
significantly, from year to year. Investors should carefully consider the
information set forth under the heading "Risk Factors" in the accompanying
Prospectus. In addition, certain statements herein and in the accompanying
Prospectus include forward-looking statements which involve risks and
uncertainties. See "Cautionary Statement Regarding Forward-Looking Statements"
in the accompanying Prospectus.
The Company
B/E is the world's largest manufacturer of commercial and general
aviation aircraft cabin interior products, serving virtually all major airlines
and a wide variety of general aviation customers and airframe manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories, which include aircraft seats,
food and beverage preparation and storage equipment, galley and other interior
structures, oxygen delivery systems, lighting systems and in-flight
entertainment systems. In addition, B/E provides design, integration,
installation and certification services, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications to commercial aircraft passenger cabin
interiors and to manufacture related products, including engineering kits and
interface components. B/E also provides upgrade, maintenance and repair services
for its airline customers around the world. In fiscal 1998, approximately 92%
and 8%, respectively, of the Company's total revenues were derived from major
airlines and airframe manufacturers. Approximately 61% of B/E's revenues for
fiscal 1998 were derived from refurbishment and upgrade orders.
B/E has substantially expanded the size, scope and nature of its
business as a result of a number of acquisitions. Since 1989, the Company has
completed 15 acquisitions for an aggregate purchase price of approximately $680
million in order to increase its cabin interior product and service offerings,
to expand its activities from the commercial to the general aviation market and
to position B/E as the preferred global supplier to its customers. Acquisitions
have also enabled the Company to reduce costs, principally through the
integration of manufacturing facilities, and to leverage its established
customer relationships by selling more products through its integrated sales
force. The largest of the five transactions the Company has completed to date in
fiscal 1999 was the acquisition of SMR Aerospace, Inc. and its affiliates, SMR
Developers LLC and SMR Associates (together, the "SMR Companies" or "SMR"),
together, a leader in providing design, integration, installation and
certification services for commercial aircraft passenger cabin interiors, for a
total aggregate purchase price of approximately $142 million, subject to
adjustment. Management believes that the acquisition of SMR complements the
Company's cabin interior product manufacturing capabilities and positions B/E as
the only company in the industry able to offer its customers the complete range
of products and services required for major cabin interior reconfigurations and
modifications, from the conceptualization and engineering design of new cabin
interiors, to the supply of cabin interior products, through the management of
the integration, final installation and certification processes.
As of August 29, 1998, B/E's backlog was approximately $700 million,
compared with a backlog of $560 million and $420 million on February 28, 1998
and February 22, 1997, respectively. Of the Company's backlog at August 29,
1998, the Company had approximately $370 million with North American carriers,
approximately $176 million with European carriers and approximately $120 million
with Asian carriers. Of such Asian carrier backlog, $34 million is deliverable
in fiscal 1999 and $34 million of the total Asian carrier backlog was with Japan
Airlines, Singapore Airlines and Cathay Pacific. During the six months ended
August 29, 1998, the Company had revenues of $296.3 million and operating
earnings before
S-3
<PAGE>
acquisition-related expenses of $42.3 million, an increase of 27% and 45%,
respectively, over the six months ended August 30, 1997. During the fiscal year
ended February 28, 1998, the Company had revenues of $488.0 million and
operating earnings of $58.7 million, an increase of 18% and 38%, respectively,
over the fiscal year ended February 22, 1997.
Competitive Strengths
The Company believes that it has a strong competitive position
attributable to a number of factors, including the following:
Leading Market Shares and Significant Installed Base. Management
believes that the Company has achieved leading global market positions
in each of its major product categories, with worldwide market shares,
based upon industry sources, of approximately 50% in commercial
aircraft seats, 60% in executive aircraft seats, 90% in coffee makers,
90% in refrigeration equipment, 90% in air valves, 50% in oxygen
delivery systems, 50% in ovens, based on dollar sales for the twelve
months ended August 29, 1998, and 35% in individual-passenger in-flight
entertainment systems, determined on the basis of installed base as of
August 29, 1998. The Company believes these market shares provide it
with significant competitive advantages in serving its customers,
including economies of scale and the ability to commit greater product
development, global product support and marketing resources.
Furthermore, because of economies of scale, in part attributable to its
large market shares and its approximate $4.9 billion installed base of
cabin interior equipment (valued at replacement prices as of August 29,
1998), the Company believes it is among the lowest cost producers in
the cabin interior products industry. The Company also believes that
its large installed base provides B/E with a significant advantage over
competitors in obtaining orders for retrofit and refurbishment
programs, principally because airlines tend to purchase replacement
equipment from the original supplier. In addition, because of the need
for compatible spare parts at airline maintenance depots and the desire
of airlines to maximize fleet commonality, a single vendor is typically
used for all aircraft of the same type operated by a particular
airline.
Combination of Manufacturing and Cabin Interior Design Services. The
Company has continued to expand its products and services, believing
that the airline industry increasingly will seek an integrated approach
to the design, development, integration, installation, testing and
sourcing of aircraft cabin interiors. The Company believes that it is
the only manufacturer of a broad technologically advanced line of cabin
interior products with interior design capabilities. Based on its
established reputation for quality, service and product innovation
among the world's commercial airlines, the Company believes that it is
well positioned to provide "one stop shopping" to these customers,
thereby maximizing sales opportunities for the Company and increasing
the convenience and value of the service provided to its customers.
Technological Leadership/New Product Development. Management believes
that the Company is a technological leader in its industry, with the
largest R&D organization in the industry comprised of approximately 725
engineers. The Company believes that its R&D effort and its on-site
engineers at both the airlines and airframe manufacturers enable B/E to
play a leading role in developing and introducing innovative products
to meet emerging industry trends and needs and thereby gain early
entrant advantages and substantial market shares. Examples of such
product development include: the introduction of several premium and
main cabin class seats, which the Company believes are lighter in
weight and provide greater comfort as a result of their ergonomic
design and pre-engineered individual passenger comfort features; the
Company's family of in-flight entertainment systems, which it believes
to be superior to existing operational systems in terms of performance,
reliability, weight, heat generation and flexibility to adapt to
changing technology; a cappuccino/ espresso maker; a quick chill wine
cooling system; and a constant-pressure, steam cooking oven, which the
Company believes substantially improves the appearance, aroma and taste
of airline food. The Company has developed two individual in-flight
entertainment systems that are designed to meet the varying
technological and price specifications of the airlines and has a new
interactive entertainment system in final development stage. The
Company also has a joint venture with Harris Corporation to develop and
deliver live broadcast television (LiveTV(TM)) to domestic narrow body
commercial aircraft.
S-4
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Proven Track Record of Acquisition Integration. The Company has
demonstrated the ability to make strategic acquisitions and
successfully integrate such acquired businesses by identifying
opportunities to consolidate engineering, manufacturing and marketing
activities, as well as rationalizing product lines. Between 1989 and
January 1996, B/E acquired nine companies and has integrated the
acquisitions by eliminating 11 operating facilities and consolidating
personnel at the acquired businesses, resulting in headcount reductions
of approximately 1,300 employees, through January 1998. B/E's
integration activities, coupled with its re-engineering program, have
positively impacted gross and operating margins (before non-recurring
expenses), which have increased by 369 and 245 basis points,
respectively, during the five-year period ended February 28, 1998.
During fiscal 1999, the Company acquired six additional companies,
including Aerospace Interiors, Inc. ("ASI"), Aerospace Lighting
Corporation ("ALC"), SMR and CF Taylor (as defined herein). The
aggregate purchase price of all acquisitions made by B/E since 1989 is
approximately $680 million. While the Company will continue to be
susceptible to industry-wide conditions, management believes that the
Company's significantly more diversified product line and revenue base
achieved through acquisitions has reduced its exposure to demand
fluctuations in any one product area within the industry.
Growth Opportunities
B/E believes that it is benefitting from four major growth trends:
Increase in Refurbishment and Upgrade Orders. B/E's substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and spare parts. Approximately 61% of B/E's revenues
for the year ended February 28, 1998 were derived from refurbishment
and upgrade orders. The Company believes that it is well positioned to
benefit over the next several years as a result of the airlines'
dramatically improved financial condition and liquidity and the need to
refurbish and upgrade cabin interiors following a deferral of cabin
interior maintenance expenditures in the late 1980s and early 1990s. A
significant portion of the Company's recent growth in backlog, revenues
and operating earnings has been from refurbishment and upgrade
programs, and the Company is currently experiencing a high level of new
order quote activity related to such programs.
Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft.
Airlines have been purchasing a significant number of new aircraft in
part due to current high load factors and the projected growth in
worldwide air travel. According to the Current Market Outlook published
by the Boeing Commercial Airplane Group in 1998 (the "Boeing Report"),
worldwide air travel growth is projected to average 5% per year over
the next ten years and the worldwide fleet of commercial passenger
aircraft is projected to expand from approximately 10,845 at the end of
1997 to approximately 15,900 by the end of 2007 and to approximately
23,500 by the end of 2017. Related growth in aircraft interior product
shipments associated with new aircraft deliveries began during calendar
1996. In 1997, Boeing shipped 375 aircraft versus 269 in 1996 (as
adjusted to include McDonnell Douglas deliveries). In addition, Boeing
has stated plans to ship approximately 550 aircraft in each of calendar
years 1998 and 1999. Furthermore, according to the February 1998
Airline Monitor, the percentage of new Boeing aircraft deliveries
projected to be wide-body aircraft for 1998 through 2002 is 42% as
compared to 37% for the five year period ended December 31, 1997. This
shift toward wide-body aircraft is significant to the Company since
these aircraft require as much as seven times the dollar value of cabin
interior products as do narrow-body aircraft, including substantially
more seats, galley equipment and in-flight entertainment products.
General Aviation and VIP Aircraft Fleet Expansion and Related Retrofit
Opportunities. General aviation and VIP airframe manufacturers are
experiencing a surge in new aircraft deliveries similar to that
occurring in the commercial aircraft industry. According to industry
sources, executive aircraft deliveries amounted to 241 units in
calendar 1996 and were approximately 348 in calendar 1997. Industry
sources indicate that executive aircraft deliveries are expected to be
approximately 450 in calendar 1998 and should reach approximately 545
per year by the year 2000. Several new aircraft models, including the
Visionaire Vantage, Cessna Citation Excel, the Boeing Business Jet,
Global Express and Airbus Business Jet, have been or are expected to be
introduced over the next several years. The overall
S-5
<PAGE>
strength of the U.S. and European economies, advances in engine
technology and avionics and emergence of fractional ownership of
executive aircraft are all important growth factors. In addition to new
aircraft deliveries, the Company believes that it is well positioned to
capitalize on retrofit opportunities in the general aviation and VIP
aircraft fleet which consists of approximately 10,000 aircraft with an
average age of approximately 15 years.
Emergence of Individual Passenger In-flight Entertainment Systems as a
Major New Product Category. Airlines increasingly are demanding
individual passenger in-flight entertainment systems as a method to
attract and retain customers, as the availability of such service
affects passengers' decisions on airline selection. These systems also
provide the airlines with the opportunity to generate increased
revenues, without raising ticket prices, by charging passengers for the
services used. The Company expects that in-flight entertainment
systems, including the new technology designed to deliver live
broadcast television on domestic narrow-body aircraft, will be one of
the fastest growing and among the largest product categories in the
commercial aircraft cabin interior products industry.
Business Strategy
The Company's business strategy is to maintain its leadership position
and best serve its customers by (i) offering the broadest and most integrated
product lines and services in the industry, including not only new product and
follow-on product sales, but also design, integration, installation and
certification services as well as maintenance, upgrade and repair services; (ii)
pursuing a worldwide marketing approach focused by airline and general aviation
airframe manufacturer and encompassing the Company's entire product line; (iii)
pursuing the highest level of quality in every facet of its operations, from the
factory floor to customer support; (iv) remaining the technological leader in
its industry, as well as significantly growing its installed base of products in
the developing in-flight individual passenger entertainment market; (v)
enhancing its position in the growing upgrade, maintenance, inspection and
repair services market; and (vi) pursuing selective strategic acquisitions in
the commercial aircraft and general aviation cabin interior products industries.
Recent Developments
For the fiscal year 1999 to date, the Company has completed six
strategic acquisitions intended to further enhance its leadership position in
the commercial aircraft and general aviation cabin interior products industries.
During the six months ended August 29, 1998, the Company completed the
acquisitions of ASI, Puritan Bennett Aero Systems Co. ("PBASCO"), Aircraft
Modular Products ("AMP"), ALC and SMR. Subsequent to August 29, 1998, the
Company completed the acquisition of CF Taylor. See "The Company - Recent
Acquisitions" in the accompanying Prospectus.
As a result of the acquisitions of PBASCO, AMP and SMR, B/E recorded a
charge of approximately $169 million for the write-off of acquired in-process
research and development and acquisition related expenses. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
accompanying Prospectus. In addition, B/E expects that a portion of the CF
Taylor purchase price will be allocated to in-process research and development
and acquisition-related costs and will be written off and expensed. The Company
has engaged consultants to assist in the allocation of the purchase price of CF
Taylor, which the Company anticipates will be completed prior to the end of the
third quarter ending on November 28, 1998, however, based on recent acquisitions
by the Company, the Company does not expect that the portion of the purchase
price that will be allocated to in-process research and development, and
subsequently written off, will be in excess of 10% of the CF Taylor purchase
price. See "Pro Forma Consolidated Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the
accompanying Prospectus. In-process research and development expenses arise from
new product development projects which are in various stages of completion at
the acquired enterprise at the date of acquisition. In-process research and
development expenses for products under development at the date of acquisition
which have not established technological feasibility and for which no
alternative use is identified are written off.
S-6
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The Offering
Common Stock Offered by the Selling
Stockholders (a)........................ 4,000,000 shares
Common Stock to be Outstanding after
the Offering (a)(b)(c)................. shares
Use of proceeds to the Company............. Except as provided by the SMR
Acquisition Agreement, the Company
will not receive any of the proceeds
from the sale of the Common Stock
offered hereby by the Selling
Stockholders. See "Selling
Stockholders" in the accompanying
Prospectus. If the Underwriters'
over- allotment option is exercised,
the Company will receive the
proceeds thereof. Any net proceeds
received by the Company will be used
for general corporate purposes,
including working capital
requirements to support increased
sales and possible investments in
strategic acquisitions. See "Use of
Proceeds."
NASDAQ Symbol.............................. BEAV
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(a) In addition to the shares of Common Stock to be sold by the Selling
Stockholders as described in this Prospectus Supplement, the holders of
up to 1,166,675 shares of Common Stock have piggyback registration
rights to participate in the Offering. Accordingly, up to an additional
1,166,675 shares of Common Stock may be sold in the Offering. Such
holders (which include the ASI and ALC Sellers as defined in the
accompanying Prospectus) must notify the Company by October 9, 1998 if
they intend to participate in the Offering. In the event the
Underwriters determine that the inclusion of any such shares requested
to be included would adversely affect the Offering, the Company may
reduce the number of shares offered on behalf of the holders with
piggyback rights in this Offering. If any holder of Common Stock elects
to participate in the Offering, the Company will grant an option to the
Underwriters, exercisable for 30 days from the date of this Prospectus
Supplement, to acquire a number of shares of Common Stock equal to 15%
of the shares of Common Stock proposed to be included on behalf of such
holder in the Offering, solely to cover over- allotments of shares, if
any. The Company will not receive any of the proceeds from the sale of
the Common Stock by the holders with piggyback registration rights.
However, if the Underwriters' over-allotment option related to any such
shares of Common Stock (the "Piggyback Shares Option") included in the
Offering is exercised, the Company will receive the proceeds thereof.
Any net proceeds received by the Company will be used for general
corporate purposes, including working capital requirements to support
increased sales and possible investments in strategic acquisitions.
(b) Assumes that the Underwriters' over-allotment option is not exercised.
(c) Does not include 4,041,901 shares of Common Stock issuable upon
exercise of outstanding stock options on the date hereof, including
1,849,654 shares issuable pursuant to options which are currently
exercisable.
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Summary Financial Data
(Dollars in thousands, except per share data)
The following table sets forth historical financial information of B/E.
The financial data as of and for the fiscal years ended February 24, 1996,
February 22, 1997 and February 28, 1998 have been derived from financial
statements which have been audited by B/E's independent auditors. The financial
data as of and for the six months ended August 30, 1997 and August 29, 1998 have
been derived from financial statements which are unaudited, but, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for such periods. Operating results for the six months
ended August 30, 1997 and August 29, 1998 are not necessarily indicative of
results that may be expected for a full year. The following financial
information is qualified by reference to, and should be read in conjunction
with, the B/E historical financial statements, including notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included or incorporated by reference elsewhere in this Prospectus
Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
-------------------------------------------- ----------------------------
Feb. 24, Feb. 22, Feb. 28, August 30, August 29,
1996(a) 1997 1998 1997 1998(b)(k)
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<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ............................................ $ 232,582 $ 412,379 $ 487,999 $ 233,689 $ 296,343
Cost of sales ........................................ 160,031 270,557 309,094 148,477 184,863
--------- --------- --------- --------- ---------
Gross profit ......................................... 72,551 141,822 178,905 85,212 111,480
Operating expenses:
Selling, general and administrative ................ 42,000 51,734 58,622 27,935 37,041
Research, development and engineering .............. 58,327(c) 37,083 45,685 22,550 24,742
Amortization expense ............................... 9,499 10,607 11,265 5,529 7,360
Other expenses ..................................... 4,170(d) -- 4,664(e) -- 169,155(f)
--------- --------- --------- --------- ---------
Operating earnings (loss) .......................... (41,445) 42,398 58,669 29,198 (126,818)
Interest expense, net .............................. 18,636 27,167 22,765 11,531 16,446
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes,
extraordinary item and cumulative
effect of change in accounting principle ........... (60,081) 15,231 35,904 17,667 (143,264)
Income taxes ......................................... -- 1,522 5,386 2,647 4,401
--------- --------- --------- --------- ---------
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting
principle .......................................... (60,081) 13,709 30,518 15,020 (147,665)
Extraordinary item ................................... -- -- 8,956(g) -- --
--------- --------- --------- --------- ---------
Earnings (loss) before cumulative effect
of change in accounting principle .................. (60,081) 13,709 21,562 15,020 (147,665)
Cumulative effect of change in accounting
principle .......................................... (23,332)(c) -- -- -- --
--------- --------- --------- --------- ---------
Net earnings (loss) .................................. $ (83,413) $ 13,709 $ 21,562 $ 15,020 $(147,665)
========= ========= ========= ========= =========
Basic earnings (loss) per share (h):
Earnings (loss) before extraordinary item
and cumulative effect of change in
accounting principle ............................. $ (3.71) $ .77 $ 1.36 $ .68 $ (6.20)
Weighted average common shares ..................... 16,185 17,692 22,442 22,103 23,822
Diluted earnings (loss) per share (h):
Earnings (loss) before extraordinary item
and cumulative effect of change in
accounting principle ............................. $ (3.71) $ .72 $ 1.30 $ .64 $ (6.20)
Weighted average common shares ..................... 16,185 19,097 23,430 23,493 23,822
Other Data:
Gross margin ....................................... 31.2% 34.4% 36.7% 36.5% 37.6%
EBITDA(i) .......................................... $ (18,840) $ 66,545 $ 87,493 $ 41,663 $ 58,595
Backlog, at period end ............................. $ 340,000(j) $ 420,000(j) $ 560,000(j) $ 525,000(j) $ 700,000
August 29,
Balance Sheet Data (end of period): 1998(k)
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Working capital..................................................................................................... $ 182,116
Total assets........................................................................................................ 813,221
Long-term debt...................................................................................................... 464,813
Stockholders' equity................................................................................................ $ 168,950
</TABLE>
(Footnotes on following page)
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(Footnotes for table)
- --------------
(a) On January 24, 1996, the Company acquired all of the stock of Burns
Aerospace Corporation ("Burns"), an industry leader in commercial
aircraft seating. The acquisition of Burns was accounted for as a
purchase, and the results of Burns are included in B/E's historical
financial data from the date of acquisition.
(b) On March 27, 1998, the Company acquired ASI. On April 13, 1998, the
Company acquired PBASCO. On April 21, 1998, the Company acquired AMP.
On July 30, 1998, the Company acquired ALC. On August 7, 1998, the
Company acquired SMR. The results of such acquisitions are included in
B/E's historical financial data from the date of acquisition. See
"Summary -- Recent Acquisitions."
(c) In fiscal 1996, the Company changed its method of accounting relating
to the capitalization of precontract engineering costs that were
previously included as a component of inventories and amortized to
earnings as the product was shipped. Effective February 26, 1995, such
costs have been charged to research, development and engineering and
expensed as incurred and, as a result, periods prior to fiscal 1996 are
not comparable. In connection with such change in accounting, the
Company recorded a charge to earnings of $23,332. See Note 2 of Notes
to Consolidated Financial Statements.
(d) In fiscal 1996, in conjunction with the Company's rationalization of
its seating business and as a result of the Burns acquisition, the
Company recorded a charge to earnings of $4,170 related to costs
associated with the integration and consolidation of the Company's
European seating operations.
(e) In fiscal 1998, the Company resolved a long-running dispute with the
U.S. Government over export sales between 1992 and 1995 to Iran Air.
The Company recorded a charge of $4,664 in fiscal 1998 related to
fines, civil penalties and associated legal fees arising from the
settlement. See "Business -- Legal Proceedings."
(f) During the six months ended August 29, 1998, the Company recorded a
charge of $169,155 for the write-off of acquired in-process research
and development and acquisition-related expenses associated with the
PBASCO, AMP and SMR transactions. In-process research and development
expenses arise from new product development projects that are in
various stages of completion at the acquired enterprise at the date of
acquisition. In-process research and development expenses for products
under development at the date of acquisition that had not established
technological feasibility and for which no alternative use is
identified are written off.
(g) The Company incurred an extraordinary charge of $8,956 during fiscal
1998 for unamortized debt issue costs, tender and redemption premiums
and fees and expenses related to the repurchase of its 9 3/4% Senior
Notes due 2003 (the "9 3/4% Notes").
(h) During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standard No. 128, Earnings per Share, and, accordingly, has
restated earnings per share for all periods presented.
(i) EBITDA represents net earnings before deducting extraordinary items,
income tax expenses, interest expense, net, other expenses and
depreciation and amortization expense. EBITDA is not a measurement in
accordance with generally accepted accounting principles ("GAAP") and
is presented to facilitate a further analysis of B/E's financial
condition. These data are not intended to be a substitute for net
income (loss) or operating cash flow as a measure of B/E's
profitability.
(j) As adjusted to exclude certain backlog which was debooked in August
1997. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Bookings and Backlog Information."
(k) Except as provided by the SMR Acquisition Agreement, the Company will
not receive any of the proceeds from the sale of the shares of Common
Stock by the Selling Stockholders. See "Use of Proceeds."
S-9
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on the NASDAQ National Market
System under the symbol "BEAV." The following table sets forth, for the periods
indicated, the range of high and low per share sales prices for the Common Stock
as reported by NASDAQ:
High Low
---- ---
Fiscal Year Ended February 24, 1996:
First Quarter.................................... 8 5/8 5 1/4
Second Quarter................................... 9 1/4 7 1/2
Third Quarter.................................... 9 1/4 7 1/4
Fourth Quarter................................... 13 5/8 8 7/8
Fiscal Year Ended February 22, 1997:
First Quarter.................................... 16 1/4 9 7/8
Second Quarter................................... 16 3/4 12 3/8
Third Quarter.................................... 25 1/8 15 1/2
Fourth Quarter................................... 29 22 3/4
Fiscal Year Ended February 28, 1998:
First Quarter.................................... 27 1/2 19 1/2
Second Quarter................................... 37 23 5/8
Third Quarter.................................... 41 1/2 27 1/8
Fourth Quarter................................... 32 1/4 20 1/2
Fiscal Year Ended February 27, 1999:
First Quarter.................................... 35 3/4 25 3/4
Second Quarter................................... 33 3/8 21 1/2
Third Quarter (Through September 29, 1998)....... 27 1/8 20 3/4
As of September 22, 1998, the Company had 721 stockholders of record,
and management estimates that there were approximately 14,300 beneficial owners
of the Company's Common Stock. A recent last sale price of the Common Stock as
reported by NASDAQ is set forth on the cover page of this Prospectus Supplement.
DIVIDEND POLICY
The Company has never paid a cash dividend and does not plan to pay
cash dividends on its Common Stock in the foreseeable future. It is the current
policy of the Company's Board of Directors to retain any future earnings for use
in the business of the Company. In addition, terms of the Company's 97/8% Senior
Subordinated Notes due 2006 (the "97/8% Notes"), 8% Senior Subordinated Notes
due 2008 (the "8% Notes") and the Bank Credit Facility (as defined below) place
restrictions on the amount of dividends which may be declared.
S-10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
August 29, 1998. The table should be read in conjunction with the B/E historical
financial statements, including notes thereto, included or incorporated by
reference elsewhere in this Prospectus Supplement or the accompanying
Prospectus.
<TABLE>
<CAPTION>
As of August 29, 1998(a)
(Dollars in thousands)
----------------------
<S> <C>
Short-term debt, including current maturities of long-term debt ................ $ 7,983
Long-term debt, excluding current maturities:
97/8% Senior Subordinated Notes due 2006 ............................ 100,000
8% Senior Subordinated Notes due 2008 ............................... 249,409
Other ............................................................... 115,404
---------
Total long-term debt ............................................. 464,813
Stockholders' equity:
Preferred Stock, $.01 par value, 1,000,000 shares authorized; no shares
issued and outstanding ................................................ --
Common Stock, $.01 par value, 50,000,000 shares authorized; 28,251,910
shares issued and outstanding (b) ..................................... 283
Additional paid-in capital .......................................... 359,660
Accumulated deficit ................................................. (188,389)
Cumulative foreign exchange translation adjustment .................. (2,604)
---------
Total stockholders' equity ....................................... 168,950
---------
Total capitalization ........................................... $ 641,746
=========
</TABLE>
- -----------------
(a) Except as provided by the SMR Acquisition Agreement, the Company will
not receive any of the proceeds from the sale of the shares of Common
Stock by the Selling Stockholders. See "Use of Proceeds." The table
assumes that the Underwriters' over-allotment option will not be
exercised. If such option is exercised in full, stockholders' equity
would increase by approximately $17.5 million (including the Piggyback
Shares Option).
(b) Does not include 4,041,901 shares of Common Stock issuable upon
exercise of outstanding stock options on the date hereof, including
1,849,654 shares issuable pursuant to options which are currently
exercisable.
S-11
<PAGE>
USE OF PROCEEDS
Except as provided by the SMR Acquisition Agreement, the Company will
not receive any of the proceeds from the sale of the shares of Common Stock by
the Selling Stockholders. Pursuant to the SMR Acquisition Agreement, to the
extent the Net Proceeds (as defined in the SMR Acquisition Agreement) from the
sale of the 4,000,000 shares of Common Stock by the SMR Sellers is less than the
SMR Purchase Price (as defined in the accompanying Prospectus), the Company will
pay such difference to the SMR Sellers with funds drawn under the Bank Credit
Facility. If such Net Proceeds exceed the SMR Purchase Price, the SMR Sellers
will remit such excess to the Company. See "Selling Stockholders" in the
accompanying Prospectus. Based on the last sale price of the Common Stock as
reported on The Nasdaq Stock Market's National Market as set forth on the cover
page of this Prospectus Supplement, the Company would be required to pay
approximately $27.8 million to the SMR Sellers with funds drawn under the Bank
Credit Facility. If the Underwriters' over-allotment option is exercised
(including the Piggyback Shares Option), the Company will receive the proceeds
thereof. See "Underwriting." Any net proceeds received by the Company will be
used for general corporate purposes, including working capital requirements to
support increased sales, and possible investments in strategic acquisitions.
S-12
<PAGE>
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share data)
On January 24, 1996, the Company acquired all of the stock of Burns
Aerospace Corporation ("Burns"). On March 27, 1998, the Company acquired
Aerospace Interiors, Inc. ("ASI"). On April 13, 1998, the Company completed its
acquisition of PBASCO and on April 21, 1998, the Company acquired substantially
all of the assets of AMP. On July 30, 1998 the Company acquired ALC and on
August 7, 1998, the Company acquired the SMR Companies. The financial data as of
and for the fiscal years ended February 26, 1994, February 25, 1995, February
24, 1996, February 22, 1997 and February 28, 1998 have been derived from
financial statements which have been audited by B/E's independent auditors. The
financial data for the six months ended August 30, 1997 and August 29, 1998 have
been derived from financial statements which are unaudited, but, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations of such periods. Operating results for the six months
ended August 30, 1997 and August 29, 1998 are not necessarily indicative of
results that may be expected for a full year. The following financial
information is qualified by reference to, and should be read in conjunction
with, the B/E historical financial statements, including notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included or incorporated by reference elsewhere in this Prospectus
Supplement and the accompanying Prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
---------------------------------------------------------------- -----------------------
Feb. 26, Feb. 25, Feb. 24, Feb. 22, Feb. 28, August 30, August 29,
1994 1995 1996 (a) 1997 1998 1997 1998(b)(k)
---- ---- -------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net sales ........................... $ 203,364 $ 229,347 $ 232,582 $ 412,379 $ 487,999 $ 233,689 $ 296,343
Cost of sales ....................... 136,307 154,863 160,031 270,557 309,094 148,477 184,863
--------- --------- --------- --------- --------- --------- ---------
Gross profit ........................ 67,057 74,484 72,551 141,822 178,905 85,212 111,480
Operating expenses:
Selling, general and administrative 28,164 31,787 42,000 51,734 58,622 27,935 37,041
Research, development and engineering 9,876 12,860 58,327(c) 37,083 45,685 22,550 24,742
Amortization expense ............. 7,599 9,954 9,499 10,607 11,265 5,529 7,360
Other expenses ................... -- 23,736(d) 4,170(d) -- 4,664(e) -- 169,155(f)
--------- --------- --------- --------- --------- --------- ---------
Operating earnings (loss) ........... 21,418 (3,853) (41,445) 42,398 58,669 29,198 (126,818)
Interest expense, net ............... 12,581 15,019 18,636 27,167 22,765 11,531 16,446
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before income taxes
(benefit), extraordinary item
and cumulative effect of change
in accounting principle .......... 8,837 (19,872) (60,081) 15,231 35,904 17,667 (143,264)
Income taxes (benefit) .............. 3,481 (6,806) -- 1,522 5,386 2,647 4,401
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary
item and cumulative effect of change
in accounting principle .......... 5,356 (12,066) (60,081) 13,709 30,518 15,020 147,665)
Extraordinary item .................. -- -- -- -- 8,956(g) -- --
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before cumulative
effect of change in accounting
principle ........................ 5,356 (12,066) (60,081) 13,709 21,562 15,020 (147,665)
Cumulative effect of change in
accounting principle.............. -- -- (23,332) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) ................. $ 5,356 $ (12,066) $ (83,413) $ 13,709 $ 21,562 $ 15,020 $(147,665)
========= ========= ========= ========= ========= ========= =========
Basic earnings (loss) per share (h):
Earnings (loss) before extraordinary
item and cumulative effect of change
in accounting principle ........ $ .35 $ (.75) $ (3.71) $ .77 $ 1.36 $ .68 $ (6.20)
Extraordinary item ............... -- -- -- -- (.40)(g) -- --
Cumulative effect of change in
accounting principle ........... -- -- (1.44)(c) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) .............. $ .35 $ (.75) $ (5.15) $ .77 $ .96 $ .68 $ (6.20)
========= ========= ========= ========= ========= ========= =========
Weighted average common shares ... 15,438 16,021 16,185 17,692 22,442 22,103 23,822
Diluted earnings (loss) per share (h):
Earnings (loss) before extraordinary
item and cumulative effect of change
in accounting principle ........ $ .35 $ (.75) $ (3.71) $ .72 $ 1.30 .64 (6.20)
Extraordinary item ............... -- -- -- -- (.38)(g) -- --
Cumulative effect of change in
accounting principle ........... -- -- 1.44(c) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) .............. $ .35 $ (.75) $ (5.15) $ .72 $ 0.92 $ .68 $ (6.20)
========= ========= ========= ========= ========= ========= =========
Weighted average common shares .. 15,623 16,021 16,185 19,097 23,430 23,493 23,822
Other Data:
Gross margin ..................... 33.0% 32.5% 31.2% 34.4% 36.7% 36.5% 37.6%
EBITDA(i) ........................ $ 34,533 $ 36,029 $ (18,840) $ 66,545 $ 87,493 $ 41,663 $ 58,595
Backlog, at period end ........... $ 131,000(j) $ 221,000(j) $ 340,000(j) $ 420,000(j) $ 560,000(j) $525,000(j)$ 700,000
</TABLE>
(Continued on following page)
S-13
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
-------------------------------------------------------------- ------------------------
Feb. 26, Feb. 25, Feb. 24, Feb. 22, Feb. 28, August 30, August 29,
1994 1995 1996 (a) 1997 1998 1997 1998(b)(k)
---- ---- -------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (end of period):
Working capital.................. $ 76,874 $ 76,563 $ 41,824 $ 122,174 $ 262,504 $ 144,686 $ 182,116
Total assets..................... 375,009 379,954 433,586 491,089 681,757 510,521 813,221
Long-term debt................... 159,170 172,693 273,192 225,402 349,557 225,446 464,813
Stockholders' equity............. 133,993 125,331 44,157 165,761 196,775 186,298 168,950
</TABLE>
- ------------------
(a) On January 24, 1996, the Company acquired all of the stock of Burns, an
industry leader in commercial aircraft seating. The acquisition of
Burns was accounted for as a purchase, and the results of Burns are
included in B/E's historical financial data from the date of
acquisition.
(b) On March 27, 1998, the Company acquired ASI. On April 13, 1998, the
company acquired PBASCO. On April 21, 1998, the Company acquired AMP.
On July 30, 1998, the Company acquired ALC. On August 7, 1998, the
Company acquired SMR. The results of such acquisitions are included in
B/E's historical financial data from the date of acquisition. See
"Summary -- Recent Acquisitions."
(c) In fiscal 1996, the Company changed its method of accounting relating
to the capitalization of precontract engineering costs that were
previously included as a component of inventories and amortized to
earnings as the product was shipped. Effective February 26, 1995, such
costs have been charged to research, development and engineering and
expensed as incurred and, as a result, periods prior to fiscal 1996 are
not comparable. In connection with such change in accounting, the
Company recorded a charge to earnings of $23,332. See Note 2 of Notes
to Consolidated Financial Statements.
(d) In fiscal 1996, in conjunction with the Company's rationalization of
its seating business and as a result of the Burns acquisition, the
Company recorded a charge to earnings of $4,170 related to costs
associated with the integration and consolidation of the Company's
European seating operations. In fiscal 1995, the Company charged to
earnings $23,736 of expenses primarily related to intangible assets and
inventories associated with the Company's earlier generations of
passenger entertainment systems.
(e) In fiscal 1998, the Company resolved a long-running dispute with the
U.S. Government over export sales between 1992 and 1995 to Iran Air.
The Company recorded a charge of $4,664 in fiscal 1998 related to
fines, civil penalties and associated legal fees arising from the
settlement. See "Business -- Legal Proceedings."
(f) During the six months ended August 29, 1998, the Company recorded a
charge of $169,155 for the write-off of acquired in-process research
and development and acquisition-related expenses associated with the
PBASCO, AMP and SMR transactions. In-process research and development
expenses arise from new product development projects that are in
various stages of completion at the acquired enterprise at the date of
acquisition. In process research and development expenses for products
under development at the date of acquisition that have not established
technological feasibility and for which no alternative use is
identified are written off.
(g) The Company incurred an extraordinary charge of $8,956 during fiscal
1998 for unamortized debt issue costs, tender and redemption premiums
and fees and expenses related to the repurchase of its 9 3/4% Notes.
(h) During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standard No. 128, Earnings per Share, and, accordingly, has
restated earnings per share for all periods presented.
(i) EBITDA represents net earnings before deducting extraordinary items,
income tax expenses, interest expense, net, other expenses and
depreciation and amortization expense. EBITDA is not a measurement in
accordance with GAAP and is presented to facilitate a further analysis
of B/E's financial condition. These data are not intended to be a
substitute for net income (loss) or operating cash flow as a measure of
B/E's profitability.
(j) As adjusted to exclude certain backlog which was debooked in August
1997. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Bookings and Backlog Information."
(k) Except as provided by the SMR Acquisition Agreement, the Company will
not receive any of the proceeds from the sale of the shares of Common
Stock by the Selling Stockholders. See "Use of Proceeds."
S-14
<PAGE>
PRO FORMA COMBINED FINANCIAL DATA
(Dollars in thousands, except per share data)
The unaudited pro forma combined statements of operations and unaudited
pro forma combined balance sheet give effect to (i) the acquisition by B/E of
SMR, (ii) the acquisitions of AMP, PBASCO and CF Taylor (together, the "Other
Insignificant Acquisitions"), (iii) the issuance of the Company's shares in
connection with the acquisition of SMR and (iv) the refinancing of B/E's 9 3/4%
Notes (which was completed on March 16, 1998). The pro forma combined statement
of operations for the year ended February 28, 1998 is comprised of the results
of B/E for the year ended February 28, 1998, the results of SMR, PBASCO and CF
Taylor for the year ended December 31, 1997 and the results of AMP for the year
ended April 30, 1997. The pro forma combined statements of operations for the
six months ended August 29, 1998 is comprised of the results of B/E and CF
Taylor for the six months ended August 29, 1998, the results of SMR for the five
months ended May 31, 1998 and the results of AMP and PBASCO for the one month
ended March 31, 1998. The pro forma combined balance sheet as of August 29, 1998
has been prepared by combining the consolidated balance sheet of B/E as of
August 29, 1998 with the balance sheet of CF Taylor as of June 30, 1998. (SMR,
AMP and PBASCO were already included in the consolidated balance sheet of B/E as
of August 29, 1998.)
The pro forma combined statements of operations for the year ended
February 28, 1998 and the six months ended August 29, 1998 assume that the
acquisition of SMR, the issuance of the Company's shares in connection with the
acquisition of SMR and the Other Insignificant Acquisitions occurred on February
23, 1997. The pro forma combined balance sheet as of August 29, 1998 assumes
that the acquisition of CF Taylor occurred on August 29, 1998. The pro forma
combined statements of operations and balance sheet do not purport to represent
the results of operations or financial position of the Company had the
transactions and events assumed therein occurred on the dates specified, nor are
they necessarily indicative of the results of operations that may be achieved in
the future. Certain of the pro forma adjustments represent estimates of costs to
be incurred and cost savings expected to be realized in connection with the
acquisition of SMR (expenses related to the SMR selling shareholders which are
now non-recurring). No assurance can be given as to the amount of costs that
will actually be incurred or cost savings that will actually be realized. The
pro forma adjustments are based on management's preliminary assumptions
regarding purchase accounting adjustments. Terms of the SMR purchase and sale
and related agreements (the "Agreements") provided for B/E to issue the SMR
selling shareholders 4,000,000 shares of common stock valued at approximately
$30 per share, for a total of approximately $120 million, subject to adjustment.
The Agreements also provide that in the event that the SMR selling shareholders
do not receive net proceeds (as defined in the SMR Acquisition Agreement) from
the sale of the B/E stock equal to approximately $30 per share, or $120 million,
that B/E will pay such difference and reflect the same as an increase in the
purchase price of SMR. In the event the SMR selling shareholders receive net
proceeds (as defined) greater than approximately $30 per share, or $120 million,
they are obligated to remit such amount to the Company, and such amounts will be
reflected as additional paid in capital by the Company. B/E has guaranteed its
obligations under the Agreements by posting an irrevocable letter of credit in
favor of the SMR selling shareholders. This letter of credit may be drawn upon
after December 31, 1998 if the sellers have not received net proceeds (as
defined) of $120,000 from the sale of the 4,000,000 shares. The Agreements
provide B/E effective control over the timing and amount of shares that the SMR
selling shareholders may sell. See "Selling Stockholders" and "Plan of
Distribution" in the accompanying Prospectus.
The pro forma combined financial information is based upon certain
assumptions and adjustments described in the notes to the pro forma financial
statements. In connection with the acquisitions of AMP, PBASCO and SMR, during
the six months ended August 29, 1998, the Company recorded a charge of 169,155
for in-process research and development and acquisition related expenses. B/E
expects that a portion of the CF Taylor purchase price will be allocated to
in-process research and development and acquisition-related costs and will be
written off and expensed. The Company has engaged consultants to assist in the
allocation of the purchase price of CF Taylor, which the Company anticipates
will be completed prior to the end of the third quarter ending on November 28,
1998, however, based on recent acquisitions by the Company, the Company does not
expect that the portion of the purchase price that will be allocated to
in-process research and development, and subsequently written off, will be in
excess of 10% of the CF Taylor purchase price. The CF Taylor charge has been
excluded in the accompanying pro forma combined statements of operations and pro
forma combined balance sheet. The pro forma combined financial information
should be read in conjunction with the historical financial statements, and
related notes and "Management's Discussion and
S-15
<PAGE>
Analysis of Results of Operations and Financial Condition" contained, with
respect to B/E, in B/E's Annual Report on Form 10-K, as amended, for the year
ended February 28, 1998, and the Quarterly Report on Form 10-Q for the quarter
ended August 29, 1998 and, with respect to SMR, in the audited financial
statements incorporated by reference herein.
(Statements following)
S-16
<PAGE>
B/E Aerospace, Inc.
Pro Forma Combined Statements of Operations (Unaudited)
Year Ended February 28, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Other
Insignificant
B/E Acquisitions Adjustments Combined SMR Adjustments Pro Forma
--- ------------ ----------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 487,999 $ 109,848 $ $ 597,847 $ 72,805 $ $ 670,652
Cost of sales 309,094 79,497 (a) (804) 387,787 43,914(b) 200 431,901
---------- --------- --------- --------- --------- --------- ---------
Gross profit 178,905 30,351 804 210,060 28,891 (200) 238,751
Operating expenses:
Research, development and
engineering 45,685 3,250 (a) 937 50,676 7,389 -- 58,065
(a) 804
Selling, general and
administrative 58,622 9,349 (a) (937) 67,034 8,593(c) (1,251) 74,376
Amortization expense 11,265 2,552 (b) 2,877 16,694 -- (b) 1,729 18,423
Acquisition and other expenses 4,664 2,000 (h) -- 6,664 -- -- 6,664
---------- --------- --------- --------- --------- --------- ---------
Total operating expenses 120,236 17,151 3,681 141,068 15,982 478 157,528
---------- --------- --------- --------- --------- --------- ---------
Operating earnings 58,669 13,200 (2,877) 68,992 12,909 (678) 81,223
Interest expense, net 22,765 587 (d) 14,855 38,207 723(e) 2,520 41,450
---------- --------- --------- --------- --------- --------- ---------
Earnings before income taxes
and extraordinary item 35,904 12,613 (17,732) 30,785 12,186 (3,198) 39,773
Minority interest in net earnings
of subsidiary -- -- -- 1,285(f) (1,285) --
Income taxes 5,386 5,778(g) (6,546) 4,618 2,500(g) (1,152) 5,966
---------- --------- --------- --------- --------- --------- ---------
Earnings before extraordinary
item 30,518 6,835 (11,186) 26,167 8,401 (761) 33,807
Extraordinary item 8,956 -- 8,956 -- 8,956
---------- --------- --------- --------- --------- --------- ---------
Net earnings $ 21,562 $ 6,835 $ (11,186) $ 17,211 $ 8,401 $ (761) $ 24,851
========== ========= =========== ========== ========== ========= =========
Basic earnings per share:
Earnings before extraordinary
item $ 1.36 $ 1.28
Extraordinary item (0.40) (0.34)
------------- ---------
Net earnings $ 0.96 $ 0.94
============= =========
Weighted average common shares 22,442 26,442
Diluted earnings per share:
Earnings before extraordinary
item $ 1.30 $ 1.23
Extraordinary item (0.38) (0.32)
------------- ----------
Net earnings $ 0.92 $ 0.91
============ =========
Weighted average common shares 23,430 27,430
</TABLE>
See accompanying notes to Pro Forma Combined Statements of
Operations for the Year Ended February 28, 1998.
S-17
<PAGE>
B/E Aerospace, Inc.
Notes to Pro Forma Combined Statements of Operations
Year ended February 28, 1998
(a) Reflects adjustments to reclassify certain expenses in a manner
consistent with B/E's presentation, in which B/E classifies certain
engineering related expenses as a component of research and development
as compared to general and administrative expenses or cost of sales.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase price allocation related to the acquired property
and equipment and intangible assets.
(c) Reflects adjustments to eliminate costs paid directly to the selling
shareholders of the acquired businesses. The selling shareholders will
no longer be employed by B/E. Such costs consist of the following:
Shareholder salaries and benefits $ 711
Shareholder bonuses 540
---------
Total $ 1,251
=========
(d) Represents additional interest expense for the year ended February 28,
1998 that would have been incurred had the Other Insignificant
Acquisitions and refinancing of B/E's 9 3/4% Notes (which was completed
on March 16, 1998) taken place on February 23, 1997.
(e) Represents additional interest expense for the year ended February 28,
1998 that would have been incurred had (1) the acquisition by B/E of
SMR, (2) the Company shares issued in the acquisition of SMR and (3)
the refinancing of B/E's 9 3/4% Notes (which was completed on March 16,
1998) taken place on February 23, 1997.
(f) To eliminate minority interest.
(g) To adjust income tax expense to reflect the Company's 15% effective tax
rate.
(h) During the first six months of fiscal 1999, the Company expensed
approximately $169,155 related to in- process research and development
and acquisition-related expenses. These expenses are not recorded in
the Pro Forma Combined Statements of Operations for the year ended
February 28, 1998.
S-18
<PAGE>
B/E Aerospace, Inc.
Pro Forma Combined Statements of Operations (Unaudited)
Six Months Ended August 29, 1998
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Other
Insignificant
B/E Acquisitions Adjustments Combined SMR Adjustments Pro Forma
----------- -------------- ------------ ------------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 296,343 $ 27,089 $ -- $ 323,432 $ 40,315 $ -- $ 363,747
Cost of sales 184,863 19,113 -- 203,976 24,199(b) 83 228,258
--------- --------- --------- --------- --------- --------- ---------
Gross profit 111,480 7,976 -- 119,456 16,116 (83) 135,489
Operating expenses:
Research, development and
engineering 37,041 1,577(a) $ 78 38,696 2,005 -- 40,701
Selling, general and administrative 24,742 4,713(a) (78) 29,377 5,276(c) (549) 34,104
Amortization expense 7,360 -- (b) 497 7,857 8(b) 720 8,585
In-process research and development
and acquisition related expenses 169,155 -- -- 169,155 -- -- 169,155
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses 238,298 6,290 497 245,085 7,289 171 252,545
--------- --------- --------- --------- --------- --------- ---------
Operating earnings (loss) (126,818) 1,686 (497) (125,629) 8,827 (254) (117,056)
Interest expense, net 16,446 (10)(d) 2,047 18,483 179(e) 1,310 19,972
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before income taxes (143,264) 1,696 (2,544) (144,112) 8,648 (1,564) (137,028)
Minority interest -- -- -- -- 1,129(f) (1,129) --
Income taxes 4,401 -- (g) (144) 4,257 2,549(g) (1,344) 5,462
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) $(147,665) $ 1,696 $ (2,400) $(148,369) $ 4,970 $ 909 $(142,490)
========= ========= ========= ========= ========= ========= =========
Basic (loss) per share:
Net earnings (loss) $ (6.20) $ (5.17)
========== =========
Weighted average common shares 23,822 27,570
Diluted (loss) per share:
Net earnings (loss) $ (6.20) $ (5.17)
========== =========
Weighted average common shares 23,822 27,570
</TABLE>
See accompanying notes to Pro Forma Combined Statements of
Operations for the Six Months Ended August 29, 1998.
S-19
<PAGE>
B/E Aerospace, Inc.
Notes to Pro Forma Combined Statements of Operations
Six Months Ended August 29, 1998
(a) Reflects adjustments to reclassify certain expenses in a manner
consistent with B/E's presentation, in which B/E classifies certain
engineering related expenses as a component of research and development
as compared to general and administrative expenses.
(b) Reflects adjustments to depreciation and amortization based on the
preliminary purchase price allocation related to the acquired property
and equipment and intangible assets.
(c) Reflects adjustments to eliminate costs attributable to the selling
shareholders of the acquired businesses. The selling shareholders will
no longer be employed by B/E. Such costs consist of:
Shareholder salaries and benefits $ 549
======
(d) Represents additional interest expense for the six months ended August
29, 1998 that would have been incurred had the Other Insignificant
Acquisitions and refinancing of B/E's 9 3/4% Notes (which was completed
on March 16, 1998) taken place on February 23, 1997.
(e) Represents additional interest expense for the six months ended August
29, 1998 that would have been incurred had (1) the acquisition by B/E
of SMR, (2) the Company shares issued in the acquisition of SMR and (3)
the refinancing of B/E's 9 3/4% Notes (which was completed on March 16,
1998) taken place on February 23, 1997.
(f) To eliminate minority interest.
(g) To adjust income tax expense to reflect the Company's 17% effective tax
rate.
S-20
<PAGE>
B/E Aerospace, Inc.
Pro Forma Combined Balance Sheets (Unaudited)
August 29, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
B/E CF Taylor Adjustments Pro Forma
------------ -------------- -------------- -----------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 29,203 $ -- $ -- $ 29,203
Accounts receivable-- trade, net 113,524 7,739 121,263
Inventories, net 188,668 8,942 197,610
Other current assets 9,506 69 9,575
--------- --------- --------- ---------
Total current assets 340,901 16,750 -- 357,651
Property & equipment, net 136,873 4,447 141,320
Intangibles & other assets, net 335,447 1,898(a) 25,124 354,181
(c) (11,582)
(b) 3,294
--------- --------- --------- ---------
$ 813,221 $ 23,095 $ 16,836 $ 853,152
========= ========= ========= =========
Liabilities & Stockholders' Equity:
Current liabilities:
Accounts payable $ 56,874 $ 4,434 $ -- $ 61,308
Accrued liabilities 93,928 7,079(b) 3,294 104,301
Current portion of long-term debt 7,983 -- -- 7,983
--------- --------- --------- ---------
Total current liabilities 158,785 11,513 3,294 173,592
Long-term debt 464,813 -- (a) 25,124 489,937
Deferred income taxes 1,161 -- -- 1,161
Other liabilities 19,512 -- -- 19,512
--------- --------- --------- ---------
Total liabilities 644,271 11,513 28,418 684,202
--------- --------- --------- ---------
Stockholders' equity:
Common stock 283 10,309(c) (10,309) 283
Additional paid-in capital 359,660 -- 359,660
Accumulated deficit (188,389) 1,273(c) (1,273) (188,389)
Cumulative foreign exchange
translation adjustment (2,604) -- (2,604)
--------- --------- --------- ---------
Total stockholders' equity 168,950 11,582 (11,582) 168,950
--------- --------- --------- ---------
$ 813,221 $ 23,095 $ 16,836 $ 853,152
========= ========= ========= =========
</TABLE>
See accompanying notes to Pro Forma Combined Balance Sheets as
of August 29, 1998.
S-21
<PAGE>
B/E Aerospace, Inc.
Notes to Pro Forma Combined Balance Sheet
August 29, 1998
(a) Reflects the use of cash related to the acquisition of CF Taylor:
Proceeds from borrowings under the Company's Bank Credit
Facility $25,124
(b) The acquisition of CF Taylor has been accounted for as a purchase
pursuant to APB Opinion No. 16 "Business Combinations." The purchase
price has been allocated to the assets and liabilities of CF Taylor
based on relative fair values. Such allocations are subject to final
determination based on valuations and other studies. B/E expects that a
portion of the CF Taylor purchase price will be allocated to in-process
research and development and acquisition-related costs and will be
written off and expensed. The Company has engaged consultants to assist
in the allocation of the purchase price of CF Taylor, which the Company
anticipates will be completed prior to the end of the third quarter
ending on November 28, 1998, however, based on recent acquisitions by
the Company, the Company does not expect that the purchase price that
will be allocated to in-process research and development, and
subsequently written off, will be in excess of 10% of the CF Taylor
purchase price. The CF Taylor charge has been excluded in the
accompanying pro forma combined balance sheet. The final values may
differ significantly from those set forth below:
Purchase cost:
Long-term debt $25,124
Purchase accounting reserves 3,294
Less estimated book value of net assets purchased 11,582
--------
Total $16,836
Allocation of excess of purchase cost over book value of assets:
Goodwill and other intangible assets subject to final determination $16,836
=======
Purchase accounting reserves include the costs to implement the business
integration plan, including severance, relocation, systems conversion and other
business acquisition-related costs.
(c) To reclassify the equity in CF Taylor as part of the allocation of purchase
price.
S-22
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding the directors and
executive officers of the Company. Officers of the Company are elected annually
by the Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Amin J. Khoury...................... 59 Chairman of the Board
Robert J. Khoury.................... 56 Vice Chairman of the Board and Chief Executive Officer
and Director
Paul E. Fulchino.................... 51 President, Chief Operating Officer and Director
Marco C. Lanza...................... 42 Executive Vice President, Marketing and Product
Development
Thomas P. McCaffrey................. 44 Corporate Senior Vice President of Administration, Chief
Financial Officer and Assistant Secretary
E. Ernest Schwartz.................. 62 Corporate Senior Vice President, Development and
Planning
Edmund J. Moriarty.................. 54 Corporate Vice President Law, General Counsel and
Secretary
Jeffrey P. Holtzman................. 43 Corporate Vice President, Treasurer and Assistant Secretary
Sam G. Ayoub........................ 56 Group Vice President and General Manager, Services Group
Roman G. Ptakowski.................. 50 Group Vice President and General Manager, Interior
Systems Group
Scott A. Smith......................... 43 Group Vice President and General Manager, In-Flight
Entertainment Group
Jim C. Cowart....................... 47 Director**
Richard G. Hamermesh................ 50 Director*
Brian H. Rowe....................... 67 Director**
Hansjoerg Wyss...................... 63 Director
</TABLE>
- -----------------------
* Member, Audit Committee.
** Member, Stock Option and Compensation Committee.
S-23
<PAGE>
The Company's Restated Certificate of Incorporation provides that the
Board of Directors is divided into three classes, each nearly as equal in number
as possible, so that each director (in certain circumstances after a
transitional period) will serve for three years, with one class of directors
being elected each year. The Board is currently comprised of three Class I
Directors (Brian H. Rowe, Jim C. Cowart and Paul E. Fulchino), two Class II
Directors (Robert J. Khoury and Hansjoerg Wyss) and two Class III Directors
(Amin J. Khoury and Richard G. Hamermesh). The terms of the Class I, Class II
and Class III Directors expire upon the election and qualification of successor
directors at annual meetings of stockholders held following the end of fiscal
years 1998, 1997 and 1996, respectively. The executive officers of the Company
are elected annually by the Board of Directors following the annual meeting of
stockholders and serve at the discretion of the Board of Directors.
Amin J. Khoury has been Chairman of the Board of the Company since July
1987 and was Chief Executive Officer until April 1, 1996. Since 1986, Mr. Khoury
has also been the Managing Director of The K.A.D. Companies, Inc., an
investment, venture capital and consulting firm. Mr. Khoury is currently the
Chairman of the Board of Directors of Applied Extrusion Technologies, Inc., a
manufacturer of oriented polypropylene films used in consumer products labeling
and packaging applications, and a member of the Board of Directors of Brooks
Automation, Inc., the leading manufacturer in the U.S. of vacuum central wafer
handling systems for semiconductor manufacturing. Mr. Khoury is employed by the
Company pursuant to an employment agreement extending through May 28, 2003. Mr.
Khoury is the brother of Robert J. Khoury.
Robert J. Khoury has been a Director of the Company since July 1987.
Mr. Khoury was elected Vice Chairman and Chief Executive Officer effective April
1, 1996. From July 1987 until that date, Mr. Khoury served as the Company's
President and Chief Operating Officer. From 1986 to 1987, Mr. Khoury was Vice
President of The K.A.D. Companies, Inc. The Company has entered into an
employment agreement with Mr. Khoury extending through May 28, 2003. Mr. Khoury
is the brother of Amin J. Khoury.
Paul E. Fulchino was elected a Director and President and Chief
Operating Officer of the Company effective April 1, 1996. From 1990 to 1996, Mr.
Fulchino served as President and Vice Chairman of Mercer Management Consulting,
Inc. ("Mercer"), an international general management consulting firm with over
1,100 employees. In addition to his management responsibilities as President of
Mercer, Mr. Fulchino also had responsibility for advising clients throughout the
world, particularly with respect to the transportation industry, including a
number of major airlines. The Company has entered into an employment agreement
with Mr. Fulchino extending through May 28, 2003.
Marco C. Lanza has been the Executive Vice President, Marketing and
Product Development since January 1994. From March 1992 through January 1994,
Mr. Lanza was Vice President and General Manager of the In-Flight Entertainment
Group of the Company. From 1987 through February 1992, Mr. Lanza was Vice
President, Marketing and Product Development of the Company. The Company has
entered into an Employment Agreement with Mr. Lanza extending through December
31, 1999.
Thomas P. McCaffrey has been Corporate Senior Vice President of
Administration, Chief Financial Officer and Assistant Secretary since May 1993.
From August 1989 through May 1993, Mr. McCaffrey was an Audit Director with
Deloitte & Touche LLP, and from 1976 through 1989 served in several capacities,
including Audit Partner, with Coleman & Grant. The Company has entered into an
employment agreement with Mr. McCaffrey extending through May 28, 2003.
E. Ernest Schwartz has been Corporate Senior Vice President --
Development and Planning since December 1997. From March 1992 through November
1997, Mr. Schwartz was Group Vice President and General Manager of the Interior
Systems Group of the Company. From 1986 through February 1992, Mr. Schwartz was
President of Aircraft Products Company, which was acquired by the Company in
1992.
S-24
<PAGE>
Edmund J. Moriarty has been Corporate Vice President Law, General
Counsel and Secretary since November 16, 1995. From 1991 to 1995, Mr. Moriarty
served as Vice President and General Counsel to Rollins, Inc., a national
service company. From 1982 through 1991, Mr. Moriarty served as Vice President
and General Counsel to Old Ben Coal Company, a wholly owned coal subsidiary of
The Standard Oil Company.
Jeffrey P. Holtzman has been Treasurer since September 1993 and Vice
President since November 1996. From June 1986 to July 1993, Mr. Holtzman served
in several capacities at FPL Group, Inc., including Assistant Treasurer and
Manager of Financial Planning. Mr. Holtzman previously worked for Mellon Bank,
Gulf Oil and Arthur Young & Company.
Sam G. Ayoub has been Group Vice President and General Manager of the
Company's Services Group since May 1996 and from November 1994 through April
1996, was Executive Vice President-Services. From 1984 to 1994 Mr. Ayoub served
in several capacities with AAR Corp. including Corporate Vice President
Marketing and President- Technical Services Division. Prior to that Mr. Ayoub
was with United Airlines for 20 years with his last position being General
Manager of their Cargo Division.
Roman G. Ptakowski has been the Group Vice President and General
Manager of the Interior Systems Group since December 1997. From September 1995
through December 1997, Mr. Ptakowski was Vice President, Sales and Marketing of
the Galley Products Group of the Company. From January 1995 through August 1995,
Mr. Ptakowski served as Senior Vice President, Marketing for Farrel Corporation.
Prior to that he was with the ABB Power T&D Company Inc. and Westinghouse
Electric Corp. for 25 years with his last position being General Manager of
their Protective Relay Division.
Scott A. Smith has been the Group Vice President and General Manager of
the In-Flight Entertainment Group since April 1998. From December 1995 through
March 1998, Mr. Smith was with Toshiba American Information Electronics with his
last position being Senior Vice President, Sales of the Americas. From December
1992 to February 1994, Mr. Smith served as Corporate Vice President of
Engineering and from February 1994 to September 1995 served as the General
Manager of the Desktop and Server Product Division of AST Research. Prior to
that, Mr. Smith was with IBM for 16 years and served in numerous capacities,
including Systems Manager of the engineering team which developed IBM's first PC
Server and advanced desktop, Staff Assistant to the Chairman of the Board and
Director of Visual Subsystems Group.
Jim C. Cowart has been a Director of the Company since November 1989.
Mr. Cowart is currently an independent investor and has been a principal of
Cowart & Co. L.L.C. and EOS Capital, Inc., private capital firms retained from
time to time by the Company for strategic planning, competitive analysis,
financial relations and other services. From January 1993 to November 1997, Mr.
Cowart was the Chairman of the Board of Directors and Chief Executive Officer of
Aurora Electronics Inc. From 1987 until 1991, Mr. Cowart was a founding general
partner of Capital Resources Partners, a private investment capital manager.
Prior to such time, Mr. Cowart held various positions in investment banking and
venture capital with Lehman Brothers, Shearson Venture Capital and Kidder,
Peabody & Co.
Richard G. Hamermesh has been a Director of the Company since July
1987. Since August 1987, Dr. Hamermesh has been the Managing Partner of the
Center for Executive Development, an independent executive education consulting
company, and, from December 1986 to August 1987, Dr. Hamermesh was an
independent consultant. Prior to such time, Dr. Hamermesh was on the faculty at
the Harvard Business School. Dr. Hamermesh is also a Director of Applied
Extrusion Technologies, Inc.
Brian H. Rowe has been a Director of the Company since July 1995. He is
currently Chairman Emeritus of GE Aircraft Engines, a principal business unit of
the General Electric Company, where he also served as Chairman from September
1993 through January 1995 and as President from 1979 through 1993. Mr. Rowe is
also a Director of the following companies: January 1980-Fifth Third Bank, an
Ohio banking corporation; December 1994-Stewart
S-25
<PAGE>
& Stevenson Services, Inc., a custom packager of engine systems; March
1995-Atlas Air, Inc., an air cargo carrier; December 1995-Textron Inc., a
manufacturer of aircraft, automobile components, an industrial segment, systems
and components for commercial aerospace and defense industries, and financial
services; March 1996-Canadian Marconi Company, a manufacturer of aerospace,
electronic communications products and surface transportation electronics
systems; and October 1996-Cincinnati Bell Inc., a communications services
company. Since January 1996, Mr. Rowe has served as Executive Vice Chairman of
American Regional Aircraft Industries, Inc.
Hansjoerg Wyss has been a Director of the Company since October 1989.
Since 1977, Mr. Wyss has served as Director, President and is currently Chairman
and Chief Executive Officer of Synthes North America and Synthes Canada, Ltd.,
manufacturers and distributors of orthopedic implants and instruments. Mr. Wyss
formerly held management positions with Monsanto Europe in Belgium and
Schappe-Burlington and Chrysler International in Switzerland. Mr. Wyss earned
his MBA at Harvard Graduate School of Business and attained a Master of Science
from the Swiss Federal Institute of Technology in Zurich. Mr. Wyss presently
sits on numerous Boards including Harvard Graduate School of Business, Norian
Corporation, Boathouse Sports, Southern Utah Wilderness Alliance and the Grand
Canyon Trust.
S-26
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table and notes thereto set forth certain information
with respect to the beneficial ownership of the Company's Common Stock as of
September 9, 1998 by (i) each person who is known to the Company to beneficially
own more than 5% of the outstanding shares of Common Stock of the Company; (ii)
each of the chief executive officer and the four other most highly paid
executive officers of the Company in fiscal 1998 and each director of the
Company; (iii) all executive officers and directors of the Company as a group;
and (iv) each Selling Stockholder. Except as otherwise indicated, each of the
stockholders named below has sole voting and investment power with respect to
the shares of Common Stock beneficially owned:
<TABLE>
<CAPTION>
Common Stock Beneficially Owned
-----------------------------------------------------------------------------------
Number of Percent of Number of Number of Percent of
Shares Prior to Outstanding Shares Offered Shares After Outstanding
Name Offering Shares(1) Hereby Offering Shares(1)
- ---- -------- --------- ------ -------- ---------
<S> <C> <C> <C> <C> <C>
Executive Officers, Directors and 5%
Stockholders:
T. Rowe Price Associates.................. 1,898,300 6.50% 0 1,898,300 6.50%
100 East Pratt
Baltimore, MD 21202
Marco C. Lanza+........................... 185,482(2) ** 0 185,482(2) **
Amin J. Khoury+*.......................... 162,500(3) ** 0 162,500(3) **
Paul E. Fulchino+*........................ 155,179(4) ** 0 155,179(4) **
Hansjorg Wyss*............................ 146,109(5) ** 0 146,109(5) **
Robert J. Khoury+*........................ 114,055(6) ** 0 114,055(6) **
Thomas P. McCaffrey+...................... 113,640(7) ** 0 113,640(7) **
Jim C. Cowart*............................ 54,250(8) ** 0 54,250(8) **
Brian H. Rowe*............................ 30,000(9) ** 0 30,000(9) **
Richard G. Hamermesh*..................... 17,350(10) ** 0 17,350(10) **
All Directors and Executive Officers as a
group (14 Persons)........................ 1,155,430(11) 3.95% 0 1,155,430(11) 3.95%
Selling Stockholders:
SMR Sellers (12):
Oscar J. Mifsud Trust - 1998.......... 1,333,334 4.56% 1,333,334 -- --
Patrick L. Ryan Trust - 1998.......... 1,333,333 4.56% 1,333,333 -- --
David B. Smith Trust - 1998........... 1,333,333 4.56% 1,333,333 -- --
---------
Total shares sold by Selling
Stockholders.................... 4,000,000
=========
</TABLE>
- ---------
+ Named Executive Officer
* Director of the Company
** Less than 1 percent
(1) The number of shares of Common Stock deemed outstanding includes: (i)
28,251,910 shares of Common Stock outstanding as of September 9, 1998;
and (ii) 968,000 shares of Common Stock subject to outstanding stock
options which are exercisable by the named individual or group in the
next sixty days (commencing September 9, 1998).
(2) Includes 185,482 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 61,250 shares of Common Stock
which are not exercisable in the next sixty days.
(3) Includes 162,500 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase
197,500 shares of Common Stock which are not exercisable in the next
sixty days.
(4) Includes 155,179 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 177,500 shares of Common
Stock which are not exercisable in the next sixty days.
(5) Includes 5,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 12,500
shares of Common Stock which are not exercisable in the next sixty
days.
S-27
<PAGE>
(6) Includes 114,055 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 147,500 shares of Common
Stock which are not exercisable in the next sixty days.
(7) Includes 113,640 shares issuable upon the exercise of stock options
exercisable in the next sixty days and shares owned through the Company
401(k) plan. Excludes options to purchase 97,500 shares of Common Stock
which are not exercisable in the next sixty days.
(8) Includes 3,000 shares acquired by a profit sharing plan and 51,250
shares issuable upon the exercise of stock options exercisable in the
next sixty days. Excludes options to purchase 33,750 shares of Common
Stock which are not exercisable in the next sixty days.
(9) Includes 30,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 20,000
shares of Common Stock which are not exercisable in the next sixty
days.
(10) Includes 8,750 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase 12,500
shares of Common Stock which are not exercisable in the next sixty
days.
(11) Includes 968,000 shares issuable upon the exercise of stock options
exercisable in the next sixty days. Excludes options to purchase
938,750 shares of Common Stock which are not exercisable in the next
sixty days.
(12) See "Selling Stockholders" in the accompanying Prospectus.
Additional Shares Subject to Inclusion in the Offering
In addition to the shares of Common Stock to be sold by the Selling
Stockholders as described in this Prospectus Supplement, the holders of up to
1,166,675 shares of Common Stock have piggyback registration rights to
participate in the Offering. Accordingly, up to an additional 1,166,675 shares
of Common Stock may be sold in the Offering. Such holders (which include the ASI
and ALC Sellers) must notify the Company by October 9, 1998 if they intend to
participate in the Offering. If any holder of Common Stock elects to participate
in the Offering, the Company will grant an option to the Underwriters,
exercisable for 30 days from the date of this Prospectus Supplement, to acquire
a number of shares of Common Stock equal to 15% of the shares of Common Stock
proposed to be included on behalf of such holder in the Offering (exclusive of
the shares subject to the over-allotment option), solely to cover
over-allotments of shares, if any. The Company will not receive any of the
proceeds from the sale of the Common Stock by the holders with piggyback
registration rights. However, if the Underwriters' over-allotment option related
to any such shares of Common Stock included in the Offering is exercised, the
Company will receive the proceeds thereof. Any net proceeds received by the
Company will be used for general corporate purposes, including working capital
requirements to support increased sales and possible investments in strategic
acquisitions. See "Use of Proceeds" herein.
In the event the ASI Sellers and ALC Sellers elect to have all of the shares
of Common Stock owned by such holders included in the Offering pursuant to their
piggyback registration rights, the following additional shares of Common Stock
may be sold in the Offering (subject to the Company's right to reduce the number
of shares offered on behalf of the holders with piggyback rights in this
Offering in the event the Underwriters determine that the inclusion of any such
shares requested to be included would adversely affect the Offering):
Number of Percent of
Shares Held Outstanding
Name Prior to Offering Shares(1)
- ---- ----------------- ---------
Selling Stockholders:
ASI Sellers (2):
Gregory and Deborah Fodell
Partnership, Ltd.................... 18,354 **
Gregory and Deborah Fodell
Partnership II, Ltd................. 183,541 **
ALC Sellers (2):
Elise M. Francisco.................... 61,395 **
Louis J. Francisco.................... 260,198 **
Judith D. Tenzyk...................... 160,797 **
Michael J. Tenzyk..................... 160,797 **
Trustees U/A Gertrude Brown
dated 1/7/92........................ 78,936 **
Trustees U/A William Brown
dated 1/7/92........................ 242,657 **
Total Shares subject to
piggyback rights..................... 1,166,675 **
** Less than 1 percent
(1) The number of shares of Common Stock deemed outstanding includes: (i)
28,251,910 shares of Common Stock outstanding as of September 9, 1998; and
(ii) 968,000 shares of Common Stock subject to outstanding stock options
which are exercisable by the named individual or group in the next sixty
days (commencing September 9, 1998).
(2) See "Selling Stockholders" in accompanying Prospectus.
Pursuant to the Merger Agreements (as defined in the accompanying Prospectus)
the holders of such shares of Common Stock who elect not to participate in the
Offering will retain certain registration rights allowing them to sell their
shares from time to time subject to certain "blackout periods" (including a
blackout period beginning for a period of 60 days from October 9, 1998). See
"Selling Stockholders" and "Plan of Distribution" in the accompanying
Prospectus.
S-28
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an
underwriting agreement, dated , 1998 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters") for whom Credit Suisse First
Boston Corporation, BT Alex. Brown Incorporated, Morgan Stanley & Co.
Incorporated and PaineWebber Incorporated are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from the
Selling Stockholders the following respective numbers of shares of Common Stock:
Number
Underwriter of Shares
----------- ----------
Credit Suisse First Boston Corporation............................
BT Alex. Brown Incorporated.......................................
Morgan Stanley & Co. Incorporated.................................
PaineWebber Incorporated..........................................
----------
Total......................................................... 4,000,000
==========
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby (other than those shares covered by the over-allotment option
described below) if any are purchased. The Underwriting Agreement provides that,
in the event of a default by an Underwriter, in certain circumstances the
purchase commitments of the non-defaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of this Prospectus Supplement,
to purchase up to 600,000 additional shares from the Company at the public
offering price less the underwriting discounts and commissions, all as set forth
on the cover page of this Prospectus Supplement. Such option may be exercised
only to cover over-allotments in the sale of the shares of Common Stock. To the
extent such option is exercised, each Underwriter will become obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares of Common Stock as it was obligated to purchase pursuant to
the Underwriting Agreement.
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement and, through the Representatives, to
certain dealers at such price less a concession of $_______ per share, and the
Underwriters and such dealers may allow a discount of $_______ per share on
sales to certain other dealers. After the public offering, the public offering
price and concession and discount to dealers may be changed by the
Representatives.
The Company, the Selling Stockholders and the Company's officers and
directors have agreed that they will not directly or indirectly (i) offer, sell,
contract to sell, pledge, announce their intention to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant for the sale of or otherwise dispose of any shares of Common
Stock or securities convertible into or exchangeable or exercisable for any
shares of Common Stock, whether now owned or thereafter acquired by such person,
or with respect to which such person thereafter acquires the power of
disposition, or file with the Securities and Exchange Commission a registration
statement under the Securities Act of 1933 (the "Securities Act") with respect
to the foregoing or (ii) enter into any swap or other agreement that transfers,
in whole or in part, the economic consequence of ownership of the Common Stock
whether any such swap or transaction is to be settled by delivery of Common
Stock or other securities, in cash or otherwise, with certain limited
exceptions, without prior written consent of Credit Suisse First Boston
Corporation for a period of 90 days after the date of this Prospectus
Supplement.
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<PAGE>
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including civil liabilities under the
Securities Act, or contribute to payments which the Underwriters may be required
to make in respect thereof.
The Representatives, on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions,
penalty bids and "passive" market making in accordance with Regulation M under
the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of Common
Stock in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit the Representatives to
reclaim a selling concession from a syndicate member when the Common Stock
originally sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. In "passive" market making,
market makers in the Securities who are Underwriters or prospective underwriters
may, subject to certain limitations, make bids for or purchases of the Common
Stock until such time, if any, at which a stabilizing bid is made. Such
stabilizing transactions, syndicate covering transactions and penalty bids may
cause the price of shares of Common Stock to be higher than it would otherwise
be in the absence of such transactions. These transactions may be effected on
the Nasdaq National Market or otherwise and, if commenced, may be discontinued
at any time.
Pursuant to the Merger Agreements (as defined in the accompanying
Prospectus), the Company has agreed to pay substantially all fees and expenses
incident to the preparation, filing, amending and supplementing of the
Registration Statement of which this Prospectus Supplement is a part and any
registration, filing, qualification and other fees and expenses of complying
with state Blue Sky or securities law. In addition, in connection with the
acquisition of SMR, the Company has agreed to pay all applicable stock transfer
taxes, brokerage commissions, underwriting discounts or commissions and any fees
of the SMR Sellers' counsel. In connection with the acquisitions of ASI and ALC,
the ASI Sellers and the ALC Sellers will pay all applicable stock transfer
taxes, brokerage commissions, underwriting discounts or commissions and any fees
of such Selling Stockholders' counsel, if such Sellers should choose to
participate in this Offering. In addition, to the extent the Net Proceeds (as
defined in the SMR Acquisition Agreement) from the sale of the 4,000,000 shares
of Common Stock owned by the SMR Sellers is less than the SMR Purchase Price (as
defined in the accompanying Prospectus), the Company will pay such difference to
the SMR Sellers with funds drawn under the Bank Credit Facility. B/E's
obligations to the SMR Sellers under the SMR Acquisition Agreement are secured
by the Irrevocable Letter of Credit. If such Net Proceeds exceed the SMR
Purchase Price, the SMR Sellers will remit such excess to the Company. See
"Selling Stockholders" and "Plan of Distribution" in the accompanying
Prospectus.
The shares of Common Stock are quoted on The Nasdaq Stock Market's
National Market.
Certain of the Underwriters and their affiliates have provided from
time to time, and expect to provide in the future, various advisory, financial
and investment banking services for the Company, for which such Underwriters
have received and will receive customary fees and commissions.
S-30
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NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Stockholders prepare and file a prospectus with the securities
regulatory authorities in each province where trades of the Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
Representations of Purchasers
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company, the Selling
Stockholders and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under "Resale Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
Notice to British Columbia Residents
A purchaser of Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Common Stock acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #95/17, a copy of which may be obtained from the Company. Only
one such report must be filed in respect of the Common Stock on the same date
and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of Common Stock should consult their own legal and
tax advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
legislation.
S-31
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Shearman & Sterling, New York, New York. Certain legal matters in
connection with this offering will be passed upon for the Underwriters by Fried,
Frank, Harris, Shriver & Jacobson (a partnership including professional
corporations).
S-32
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED September 30, 1998
5,166,675 Shares
[Logo] BE AEROSPACE, INC.
Common Stock
----------------
All of the shares (the "Shares") of Common Stock of BE Aerospace, Inc.,
a Delaware corporation ("B/E" or the "Company"), par value $.01 per share (the
"Common Stock"), offered hereby are being offered by certain stockholders listed
herein (collectively, the "Selling Stockholders"), who may from time to time
offer for sale shares of the Common Stock. The Selling Stockholders received
such shares in connection with the acquisitions of either ASI, ALC or SMR (each
as defined herein). Except as provided by the SMR Acquisition Agreement (as
defined herein), the Company will not receive any proceeds from the sale by the
Selling Stockholders of the Shares. See "Selling Stockholders."
Pursuant to the SMR Acquisition Agreement, the Company has agreed to
use reasonable efforts to effectuate a fully underwritten public offering of
Common Stock that could include all or a portion of the Shares. The price in any
such underwritten offering would be negotiated with the underwriters. To the
extent any Shares are not sold by or for the account of the Selling Stockholders
in any such underwritten offering, or any of the Selling Stockholders choose not
to participate in such underwritten offering, the Selling Stockholders have
advised the Company that the Shares of Common Stock offered hereby may be
offered or sold by or for the account of such Selling Stockholders, from time to
time, to purchasers directly, or through brokers in brokerage transactions on
the Nasdaq National Market, or to underwriters or dealers in negotiated
transactions or in a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. From time to
time the Selling Stockholders may engage in short sales, puts and calls and
other transactions in securities of the Company, or derivatives thereof, and may
sell and deliver the Shares in connection therewith. Brokers, dealers and
underwriters that participate in the distribution of the Common Stock offered
hereby may be deemed to be underwriters under the Securities Act of 1933 as
amended, and together with the rules and regulations thereunder (the "Securities
Act"), and any discounts or commissions received by them from the Selling
Stockholders and any profit on the resale of the Common Stock offered hereby by
them may be deemed to be underwriting discounts and commissions under the
Securities Act. The Selling Stockholders may be deemed to be underwriters under
the Securities Act. The Company will bear all expenses in connection with the
offering made hereunder, other than, in the case of the Selling Stockholders who
received their shares in connection with the acquisitions of ASI or ALC, all
applicable stock transfer taxes, brokerage commissions, underwriting discounts
or commissions and fees of such Selling Stockholders' counsel which will be paid
by such Selling Stockholders, pursuant to the relevant Merger Agreements (as
defined herein). The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including certain liabilities under the Securities
Act, in connection with the registration and the offering and sale of the Common
Stock offered hereby. See "Plan of Distribution."
The Common Stock is listed on the Nasdaq National Market ("Nasdaq")
under the symbol "BEAV." On September 29, 1998, the last reported sale price of
the Common Stock was $22.5625 per share.
If necessary, certain information relating to the Selling Stockholders,
the terms of each sale of Common Stock offered hereby, including the public
offering price, the names of any underwriters or agents, the compensation, if
any, of such underwriters or agents and the other terms in connection with the
sale of the Common Stock, in respect of which this Prospectus is delivered will
be set forth in an accompanying Prospectus Supplement (the "Prospectus
Supplement").
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
The date of this Prospectus is , 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or any Prospectus
Supplement and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus and any Prospectus
Supplement does not constitute an offer to sell or the solicitation of an offer
to buy any securities other than the securities to which it relates or an offer
to sell or the solicitation of an offer to buy such securities in any
circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus or any Prospectus Supplement nor any sale made
hereunder or thereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof or thereof or that the information contained herein or therein is correct
as of any time subsequent to the date of such information.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the Commission's regional offices at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act with respect to
the Common Stock to which this Prospectus relates. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement, including the
exhibits thereto. The Registration Statement may be inspected by anyone without
charge at the principal office of the Commission in Washington, D.C., and copies
of all or part of it may be obtained from the Commission upon payment of the
prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission
(Commission File No. 000-18348) by the Company are incorporated in this
Prospectus by reference and made a part hereof:
(1) B/E's Annual Report on Form 10-K for the year ended February
28, 1998 (the "1998 10-K"), filed with the Commission on May
29, 1998, as amended by the amendment to the 1998 10-K filed
with the Commission on June 29, 1998.
(2) The Company's Quarterly Reports on Form 10-Q for the quarter
ended May 30, 1998, filed with the Commission on July 14, 1998
and the quarter ended August 29, 1998, filed with the
Commission on September 25, 1998.
(3) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed with the
Commission on March 7, 1990 under Section 12 of the Exchange
Act, including any report or amendment updating such
description.
(4) The Company's Current Reports on Form 8-K filed on April 13,
1998, April 27, 1998, May 8, 1998 and August 24, 1998,
respectively.
All documents subsequently filed by B/E with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and
prior to the termination of the offering of the Common Stock shall be deemed to
be
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<PAGE>
incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein, or in a document all or a portion of which is incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of the Registration Statement and this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document that is also deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statement or this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. B/E will provide without charge to any
person to whom this Prospectus is delivered, on the written or oral request of
such person, a copy of any or all of the foregoing documents incorporated by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Written requests
should be directed to: Chief Financial Officer, BE Aerospace, Inc., 1400
Corporate Center Way, Wellington, FL 33414. Telephone requests may be directed
to B/E at (561) 791-5000.
In connection with any underwritten offering of the Shares, the
underwriters and certain persons participating in such offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock, including over-allotment, stabilizing transactions, syndicate
short covering transactions and penalty bids. Such transactions may be effected
on the Nasdaq, in the over-the-counter market or otherwise. Such transactions,
if commenced, may be discontinued at any time.
THE COMPANY
General
B/E is the world's largest manufacturer of commercial and general
aviation aircraft cabin interior products, serving virtually all major airlines
and a wide variety of general aviation customers and airframe manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories, which include aircraft seats,
food and beverage preparation and storage equipment, galley and other interior
structures, oxygen delivery systems, lighting systems and in-flight
entertainment systems. In addition, B/E provides design, integration,
installation and certification services, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications to commercial aircraft passenger cabin
interiors and to manufacture related products, including engineering kits and
interface components. B/E also provides upgrade, maintenance and repair services
for its airline customers around the world.
B/E's executive offices are located at 1400 Corporate Center Way,
Wellington, Florida 33414, and its telephone number is (561) 791-5000.
Recent Acquisitions
On March 27, 1998, the Company acquired Aerospace Interiors, Inc.
("ASI") for a total of 201,895 shares of Common Stock, representing a purchase
price of approximately $5.6 million. ASI services, cleans and repairs aircraft
interior parts and products, and is a leading provider of seat repair and
maintenance services performed by non-airline entities. See "Selling
Stockholders."
On April, 14, 1998, the Company acquired Puritan-Bennett Aero Systems
Co. ("PBASCO"), a wholly owned subsidiary of Nellcor Puritan Bennett Inc., for a
cash purchase price of $69.7 million. PBASCO is a leading manufacturer of
commercial aircraft oxygen delivery systems and passenger service unit
components and systems ("PSU") and is a major supplier of air valves, overhead
lights and switches for both commercial and general aviation aircraft.
On April 21, 1998, the Company acquired Aircraft Modular Products
("AMP") for a cash purchase price of $117.3 million. AMP is a leading
manufacturer of cabin interior products for general aviation (business jet) and
commercial-type
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<PAGE>
VIP aircraft, providing a broad line of products including seating, sidewalls,
bulkheads, credenza, closets, galley structures, lavatories, tables and sofas,
as well as related spare parts.
On July 30, 1998, the Company acquired Aerospace Lighting Corporation
("ALC") for a total of 964,780 shares of Common Stock, representing a purchase
price of approximately $28.1 million. ALC is a market leader in producing
interior fluorescent lighting systems for business and corporate jet aircraft.
See "Selling Stockholders."
On August 7, 1998, the Company acquired the common stock of SMR
Aerospace, Inc., the membership interests of SMR Developers LLC, and the
partnership interests of SMR Associates (together, the "SMR Companies" or "SMR")
for a total aggregate purchase price of approximately $120.0 million, subject to
adjustment (the "SMR Purchase Price"). Pursuant to the SMR Acquisition
Agreement, the Company issued 4,000,000 shares of Common Stock to the SMR
Sellers (as defined herein) and paid the SMR Sellers $2.0 million in cash. The
Company also paid $22.0 million in cash to the employee stock ownership plan
(the "ESOP") of Flight Structures, Inc. ("FSI"), a subsidiary of SMR Aerospace,
Inc., pursuant to a separate Stock Purchase Agreement between the ESOP and B/E,
to purchase the minority equity interest in FSI held by the ESOP, bringing the
total aggregate purchase price paid by B/E for SMR to approximately $142.0
million. To the extent the Net Proceeds (as defined in the SMR Acquisition
Agreement), which include the $2 million in cash already received by the SMR
Sellers, from the sale of the 4,000,000 shares of Common Stock is less than the
SMR Purchase Price, the Company will pay such difference to the SMR Sellers with
funds drawn under the Bank Credit Facility (as defined herein). B/E's
obligations to the SMR Sellers under the SMR Acquisition Agreement are secured
by an irrevocable stand-by letter of credit from The Chase Manhattan Bank in
favor of the SMR Sellers. If such Net Proceeds exceed the SMR Purchase Price,
the SMR Sellers will remit such excess to the Company.
SMR is a leader in providing design, integration, installation and
certification services for commercial aircraft passenger cabin interiors. SMR
provides a broad range of interior reconfiguration services which allow airlines
to change the size of certain classes of service, modify and upgrade the
seating, install telecommunications or entertainment options, relocate galleys,
lavatories, and overhead bins, and install crew rest compartments. SMR is also a
supplier of structural design and integration services, including airframe
modifications for passenger-to-freighter conversions. In addition, SMR provides
a variety of niche products and components that are used to facilitate
reconfigurations and conversions. SMR's services are performed primarily on an
aftermarket basis, and its customers include major airlines, such as United
Airlines, Japan Airlines, British Airways, Air France, Cathay Pacific and
Qantas, as well as Boeing, Airborne Express and Federal Express. See "Selling
Stockholders."
On September 3, 1998, the Company acquired substantially all of the
galley equipment assets and assumed related liabilities of CF Taylor Interiors
Limited and acquired the common stock of CF Taylor (Wales) Limited (collectively
"CF Taylor"), both wholly owned subsidiaries of EIS Group PLC, for a total cash
purchase price of approximately (pound)14.9 million, (approximately $25.1
million, based upon the exchange rate in effect on September 3, 1998). CF Taylor
is a manufacturer of galley equipment for both narrow- and wide-body aircraft,
including galley structures, crew rests and related spare parts.
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<PAGE>
RISK FACTORS
Prior to making an investment decision with respect to the Shares of
Common Stock offered hereby, prospective investors should carefully consider the
specific factors set forth below, together with all of the other information
appearing herein, in light of their particular investment objectives and
financial circumstances.
Dependence upon Conditions in the Airline Industry
The Company's principal customers are the world's commercial airlines.
As a result, the Company's business is directly dependent upon the conditions in
the highly cyclical and competitive commercial airline industry. In the late
1980s and early 1990s, the airline industry suffered a severe downturn, which
resulted in record losses and several air carriers seeking protection under
bankruptcy laws. As a consequence, during such period, airlines sought to
conserve cash by reducing or deferring scheduled cabin interior refurbishment
and upgrade programs and by delaying purchases of new aircraft. This led to a
significant contraction in the commercial aircraft cabin interior products
industry and a decline in the Company's business and profitability. The airline
industry has now experienced five consecutive years of profitability including
record profitability in each of the last three calendar years. This financial
turnaround has, in part, been driven by record load factors, rising fare prices
and declining fuel costs. The airlines have substantially restored their balance
sheets through cash generated from operations and debt and equity placements. As
a result, the levels of airline spending on refurbishment and new aircraft
purchases have expanded. However, due to the volatility of the airline industry
there can be no assurance that the current profitability of the airline industry
will continue or that the airlines will maintain or increase expenditures on
cabin interior products for refurbishments or new aircraft.
In addition, the airline industry is undergoing a process of
consolidation and significantly increased competition. Such consolidation could
result in a reduction of future aircraft orders as overlapping routes are
eliminated and airlines seek greater economies through higher aircraft
utilization. Increased airline competition may also result in airlines seeking
to reduce costs by promoting greater price competition from airline cabin
interior products manufacturers, thereby adversely affecting the Company's
revenues and margins.
Recently, turbulence in the financial and currency markets of many
Asian countries has led to uncertainty with respect to the economic outlook for
these countries. Of the Company's $700 million of backlog at August 29, 1998,
the Company had $34 million with Asian carriers deliverable in fiscal 1999 and a
further $86 million deliverable in subsequent fiscal years. Of such Asian
carrier backlog, approximately $34 million was with Japan Airlines, Singapore
Airlines and Cathay Pacific. Although not all carriers have been affected by the
current economic events in the Pacific Rim, certain carriers could cancel or
defer their existing orders and future orders from airlines in these countries
may be adversely affected. In addition, in June 1998, Boeing announced that
economic conditions in Asia has caused it to adjust their production schedules,
reducing wide body production by approximately 24 aircraft per year in 1999 and
2000 and increasing narrow body aircraft production by approximately 12 aircraft
per year for the same period.
New Product Introductions and Technological Change
Airlines currently are taking delivery of a new generation of aircraft
and demanding increasingly sophisticated cabin interior products. As a result,
the cabin interior configurations of commercial aircraft are becoming more
complex and will require more technologically advanced and integrated products.
For example, airlines increasingly are seeking sophisticated in-flight
entertainment systems, such as the MDDS interactive individual passenger
in-flight entertainment system developed by B/E. The Company expects that
in-flight entertainment systems, including live broadcast television on
narrow-body aircraft, will provide a significant percentage of its future
revenues. Development of the MDDS and related in-flight entertainment systems
required substantial investment by the Company and third parties in research,
development and engineering. The future success of the Company may depend to
some extent on its ability to manufacture successfully and deliver, on a timely
basis, in-flight entertainment products and to have these products perform at
the level expected by B/E's customers and their passengers, as well as the
Company's ability to continue to develop, profitably manufacture and deliver, on
a timely basis, other technologically advanced, reliable high-quality products,
which can be readily integrated into complex cabin interior configurations.
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<PAGE>
Competition
The Company competes with a number of established companies that have
significantly greater financial, technological and marketing resources than the
Company. Although the Company has achieved a significant share of the market for
a number of its commercial airline cabin interior products, there can be no
assurance that the Company will be able to maintain this market share. The
ability of the Company to maintain its market share will depend not only on its
ability to remain the supplier of retrofit and refurbishment products and spare
parts on the commercial fleets on which its products are currently in service,
but also on its success in causing its products to be selected for installation
in new aircraft, including next-generation aircraft, expected to be purchased by
the airlines over the next decade, and in avoiding product obsolescence.
The Company's primary competitors in the market for new passenger
entertainment products, including individual seat video and in-flight
entertainment and cabin management systems, are Matsushita Electronics and
Rockwell Collins, each of which has significantly greater technological
capabilities and financial and marketing resources than the Company.
Adverse Consequences of Financial Leverage
The Company has substantial indebtedness and, as a result, significant
debt service obligations. As of August 29, 1998, the Company had approximately
$472.8 million aggregate amount of indebtedness outstanding, representing
approximately 74% of total capitalization. The degree of the Company's leverage
could have important consequences to purchasers or holders of its shares of
Common Stock, including: (i) limiting the Company's ability to obtain additional
financing to fund future working capital requirements, capital expenditures,
acquisitions or other general corporate requirements; (ii) requiring a
substantial portion of the Company's cash flow from operations to be dedicated
to debt service requirements, thereby reducing the funds available for
operations and further business opportunities; and (iii) increasing the
Company's vulnerability to adverse economic and industry conditions. In
addition, since any borrowings under the Company's bank credit facilities will
be at variable rates of interest, the Company will be vulnerable to increases in
interest rates. The Company may incur additional indebtedness in the future,
although its ability to do so will be restricted by the indentures governing the
Company's 9 7/8% Senior Subordinated Notes due 2006 (the "9 7/8% Notes") and 8%
Senior Subordinated Notes due 2008 (the "8% Notes") and by the terms of its
existing credit facilities with The Chase Manhattan Bank (the "Bank Credit
Facility"). The ability of the Company to make scheduled payments under its
present and future indebtedness will depend on, among other things, the future
operating performance of the Company and the Company's ability to refinance its
indebtedness when necessary. Each of these factors is to a large extent subject
to economic, financial, competitive and other factors beyond the Company's
control.
The Company's bank credit facilities and the indentures governing the
9 7/8% Notes and 8% Notes contain numerous financial and operating covenants
that will limit the discretion of the Company's management with respect to
certain business matters. These covenants will place significant restrictions
on, among other things, the ability of the Company to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments
and investments, including dividend payments and to sell or otherwise dispose of
assets and merge or consolidate with other entities. The Company's bank credit
facilities also require the Company to meet certain financial ratios and tests.
A failure to comply with the obligations contained in the Company's bank credit
facilities, or the indentures governing the 9 7/8% Notes and 8% Notes, could
result in an event of default under the Company's Bank Credit Facility, or the
aforementioned indentures, which could permit acceleration of the related debt
and acceleration of debt under other instruments that may contain
cross-acceleration or cross-default provisions.
Customer Delivery Requirements
The commercial aircraft cabin interior products industry is currently
experiencing a period of rapid growth. From February 22, 1997 to August 29,
1998, the Company has experienced an approximately 67% increase in its backlog.
The ability of the Company to receive new contract awards and to deliver its
existing backlog is dependent upon its (and its suppliers') ability to increase
deliveries to meet the recent surge in demand. Although the Company believes it
has sufficient
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manufacturing capacity to meet customer demand, there can be no assurance that
the Company, or its suppliers, will be able to meet the increased product
delivery requirements.
General Aviation Acquisitions; Ability to Integrate Acquired Businesses;
Additional Capital Requirements
Between 1989 and January 1996, the Company acquired nine companies.
During fiscal 1999, the Company acquired six additional companies, including
ASI, PBASCO, AMP, ALC, SMR and CF Taylor. Through several recent acquisitions,
the Company has expanded its activities from the commercial to the general
aviation market. There can be no assurance that the Company will be successful
in entering the general aviation market. The Company intends to consider future
strategic acquisitions in the commercial airline and general aviation cabin
interior industries, some of which could be material to the Company. B/E is in
discussions from time to time with one or more third parties regarding possible
acquisitions. As of the date of this Prospectus, except as disclosed herein, the
Company has no agreements or understanding with a prospective acquisition
candidate in respect of a specific transaction. The ability of the Company to
continue to achieve its goals will depend upon its ability to integrate
effectively the recent and any future acquisitions and to achieve cost
efficiencies. Although B/E has been successful in the past in doing so, there
can be no assurance that the Company will continue to be successful. See "The
Company -- Recent Acquisitions."
Depending upon, among other things, the acquisition opportunities
available, the Company may need to raise additional funds. The Company may seek
such additional funds through public offerings or private placements of debt or
equity securities or bank loans. Issuance of additional equity securities by the
Company could result in substantial dilution to stockholders. In the absence of
such financing, the Company's ability to make future acquisitions in accordance
with its business strategy, to absorb adverse operating results, to fund capital
expenditures or to respond to changing business and economic conditions may be
adversely affected, all of which may have a material adverse effect on the
Company's business, results of operations and financial condition.
Regulation
The Federal Aviation Administration (the "FAA") prescribes standards
and licensing requirements for aircraft components, including virtually all
commercial airline and general aviation cabin interior products, and licenses
component repair stations within the United States. Comparable agencies regulate
these matters in other countries. If the Company fails to obtain a required
license for one of its products or services or loses a license previously
granted, the sale of the subject product or service would be prohibited by law
until such license is obtained or renewed. In addition, designing new products
to meet existing FAA requirements and retrofitting installed products to comply
with new FAA requirements can be both expensive and time-consuming.
Risks Associated with the Year 2000 Issue
The "Year 2000" issue is the result of computer programs using two
digits rather than four to define the applicable year. Because of this
programming convention, software, hardware or firmware may recognize a date
using "00" as the year 1900 rather than the year 2000. Use of non-Year 2000
compliant programs could result in system failures, miscalculations or errors
causing disruptions of operations or other business problems, including, among
others, a temporary inability to process transactions and invoices or engage in
similar normal business activities.
B/E Technology Initiatives Program. The Company has experienced
substantial growth as a result of having completed 15 acquisitions since 1989.
Essentially all of the acquired businesses were operating on separate
information systems, using different hardware and software platforms. In fiscal
1997, the Company undertook to examine its systems, both pre-existing and
acquired, for Year 2000 compliance with a view to replacing non-compliant
systems and creating an integrated Year 2000 compliant system. In addition, the
Company has undertaken a comprehensive program to address the Year 2000 issue
with respect to the following non-system areas: (i) network switching, (ii) the
Company's non-information technology systems (such as buildings, plant,
equipment and other infrastructure systems that may contain embedded
microcontroller technology), and (iii) the status of major vendors, third party
network service providers and other material
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service providers (insofar as they relate to the Company's business). As
explained below, the Company's efforts to assess its systems as well as
non-system areas related to Year 2000 compliance involve (i) a wide-ranging
assessment of the Year 2000 problems that may affect the Company, (ii) the
development of remedies to address the problems discovered in the assessment
phase and (iii) testing of the remedies.
Assessment Phase. The Company has identified substantially all of its
major hardware and software platforms in use as well as the relevant non-system
areas described above. The Company has determined its systems requirements on a
company-wide basis and has begun the implementation of an enterprise resource
planning (ERP) system, which is intended to be a single system data base onto
which all the Company's individual systems will be migrated. In relation
thereto, the Company has signed contracts with substantially all of its
significant hardware, software and other equipment vendors and third party
network service providers related to Year 2000 compliance.
Remediation and Testing Phase. In implementing the ERP system, the
Company has completed both remediation and testing phases of all internal
systems, LAN's, WAN's and PBX's. These phases were intended to address potential
Year 2000 problems of the ERP system in relation to both information technology
and non-information technology systems and then to demonstrate that the ERP
software was Year 2000 compliant. ERP system software was selected and
applications implemented by a team of internal users, outside system integrator
specialists and ERP application experts. The ERP system was tested between June
1997 to 1998 by this team of experts. To date, one location has been fully
implemented on the ERP system. This company-wide solution is being deployed to
all other B/E sites in a manner that is designed to meet full implementation for
all non-Year 2000 compliant sites by December 31, 1999.
Contingency Plans. The Company has begun to analyze contingency plans
to handle worst case Year 2000 scenarios that the Company believes reasonably
could occur and, if necessary, intends to develop a timetable for completing
such contingency plans.
Costs Related to the Year 2000 Issue. To date, the Company has incurred
approximately $17 million in costs related to the implementation of the ERP
system. The Company currently estimates the total ERP implementation will cost
approximately $30 million. Implementation costs have and will be capitalized to
the extent permitted under generally accepted accounting principles. The Company
expects that it will incur approximately $6 million related to this program
during the remainder of calendar 1998 and an additional $7 million during
calendar 1999.
Risks Related to the Year 2000 Issue. Although the Company's efforts to
be Year 2000 compliant are intended to minimize the adverse effects of the Year
2000 issue on the Company's business and operations, the actual effects of the
issue will not be known until 2000. Difficulties in implementing the ERP system
or failure by the Company to fully implement the ERP system or the failure of
its major vendors, third party network service providers, and other material
service providers and customers to adequately address their respective Year 2000
issues in a timely manner could have a material adverse effect on the Company's
business, results of operations, and financial condition. The Company's capital
requirements may differ materially from the foregoing estimate as a result of
regulatory, technological and competitive developments (including market
developments and new opportunities) in the Company's industry.
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Risks Inherent in International Operations; Risks Associated with the Conversion
by Certain EU Member States to the "Euro"
Foreign operations of B/E accounted for 26% of total sales for each of
the six months ended August 29, 1998 and fiscal 1998, as compared to 24% and 25%
for the six months ended August 30, 1997 and fiscal 1997, respectively. In
addition, the Company has direct investments in a number of subsidiaries in
foreign countries (primarily in Europe). Fluctuations in the value of foreign
currencies affect the dollar value of B/E's net investment in foreign
subsidiaries, with these fluctuations being included in a separate component of
stockholders' equity. Operating results of foreign subsidiaries are translated
into U.S. dollars at average monthly exchange rates. For the six months ended
August 29, 1998 and fiscal 1998, the impact of such transactions on operating
results was not significant; however, B/E reported a cumulative foreign currency
translation amount of $(2.6) million in stockholders' equity at August 29, 1998
as a result of foreign currency adjustments, and there can be no assurance that
the Company will not incur additional adjustments in future periods. In
addition, the U.S. dollar value of transactions based in foreign currency
(collections on foreign sales or payments for foreign purchases) also fluctuates
with exchange rates. Historically, foreign currency risk has not been material
because a substantial majority of the Company's sales have been denominated in
the currency of the country of product origin and no repatriation of earnings
has occurred (or is anticipated). However, there can be no assurance that a
substantial majority of sales will continue to be denominated in the currency of
the country of product origin or as to the impact of changes in the value the
United States dollar or other currencies. The largest foreign currency exposure
results from activity in Dutch guilders, British pounds and Japanese yen.
B/E has not hedged net foreign investments in the past, although it may
engage in hedging transactions in the future to manage or reduce its foreign
exchange risk. There can be no assurance that B/E's attempts to manage its
foreign currency exchange risk will be successful.
The Company's foreign operations could also be subject to unexpected
changes in regulatory requirements, tariffs and other market barriers and
political and economic instability in the countries where it operates. There can
be no assurance as to the impact of any such events that may occur in the
future. See "Risk Factors -- Dependence upon Conditions in the Airline
Industry."
In addition, the Company may be exposed to certain risks as a result of
the conversion by certain European Union ("EU") member states of their
respective currencies to the "euro" as legal currency on January 1, 1999. The
conversion rates between such EU member states' currencies and the euro will be
fixed by the Council of the EU. Risks related to the conversion to the euro
could include, among other things, effects on pricing due to increased
cross-border price transparency, costs of modifying information systems,
including both software and hardware, costs of relying on third parties whose
systems also require modification, changes in the conduct of business and in the
principal markets for the Company's products and services and changes in
currency exchange rate risk. The Company has analyzed whether the conversion to
the euro will materially affect its business operations. While the Company is
uncertain as to the impact of the conversion, the Company does not expect
anticipated costs in connection with the euro conversion to be material.
However, the actual effects of the conversion cannot be known until the
conversion to the euro has taken place and there can be no assurance that the
actual effects of the conversion could not have a material adverse effect on the
Company's business, results of operations, and financial condition.
Environmental Matters
The Company is subject to regulation by federal, state and local
authorities establishing health and environmental quality standards, and may be
subject to liability or penalties for violations of those standards. The Company
is also subject to laws, ordinances and regulations governing remediation of
contamination at facilities it owns or operates or to which it sends hazardous
substances or wastes for treatment, recycling or disposal. The Company believes
that it is in compliance, in all material respects, with all laws affecting its
business. However, there can be no assurance that the Company will continue to
comply with all such laws, or with amended, new or more stringent laws and
regulations which may be adopted in the future. Any such violation of law may
result in penalties and/or liability in private actions filed by injured
parties.
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In addition, future discovery of any environmental contamination or liability at
any of the Company's facilities, including facilities that may be acquired in
connection with any acquisition, may cause the Company to incur significant
expenses as a result thereof.
Dividend Policy; Restrictions on Payment of Dividends
The Company has never paid a cash dividend and does not plan to pay
cash dividends on its Common Stock in the foreseeable future. The Company's Bank
Credit Facility and the Indentures governing the 9 7/8% Notes and the 8% Notes
restrict and limit the payment of dividends on the Common Stock. Future
indebtedness may also contain restrictions and limitations on the payment of
dividends on the Common Stock.
Certain Anti-Takeover Provisions
The Company's Restated Certificate of Incorporation and By-laws contain
provisions that may have the effect of discouraging a third party from making an
acquisition of the Company by means of a tender offer, proxy contest or
otherwise. The Restated Certificate of Incorporation and By-laws of the Company,
among other things, (i) classify the Board of Directors into three classes, with
directors of each class serving for a staggered three-year period, (ii) provide
that directors may be removed only for cause and only upon the approval of the
holders of at least two-thirds of the voting power of the Company's shares
entitled to vote generally in the election of such directors, (iii) require at
least two-thirds of the voting power of the Company's shares entitled to vote
generally in the election of directors to alter, amend or repeal the provisions
relating to the classified board and removal of directors described above and
(iv) permit the Board of Directors to fill vacancies and newly created
directorships on the Board. Such provisions would make the removal of incumbent
directors more difficult and time-consuming and may have the effect of
discouraging a tender offer or other takeover attempt not previously approved by
the Board of Directors. Under the Company's Restated Certificate of
Incorporation, the Board of Directors of the Company also has the authority to
issue up to 1,000,000 shares of preferred stock in one or more series and to fix
the powers, preferences and rights of any such series without stockholder
approval. The Board of Directors could, therefore, issue, without stockholder
approval, preferred stock with voting and other rights that could adversely
affect the voting power of the holders of Common Stock and could make it more
difficult for a third party to gain control of the Company. In addition, under
certain circumstances, Section 203 of the Delaware General Corporation Law makes
it more difficult for an "interested stockholder" (generally a 15% stockholder)
to effect various business combinations with a corporation for a three-year
period. See "Description of Capital Stock".
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Dollars in thousands, except per share data)
Introduction
B/E is the world's largest manufacturer of commercial and general
aviation aircraft cabin interior products serving virtually all major airlines
and a wide variety of general aviation customers and airframe manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories, which include aircraft seats,
food and beverage preparation and storage equipment, galley and other interior
structures, oxygen delivery systems, lighting systems and in-flight
entertainment systems. In addition, B/E provides design, integration,
installation and certification services, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications for commercial aircraft cabin interiors and
to manufacture related products, including engineering kits and interface
components. B/E also provides upgrade, maintenance and repair services for its
airline customers around the world.
B/E's revenues are generally derived from two primary sources:
refurbishment or upgrade programs for the existing worldwide fleets of
commercial and general aviation aircraft, and new aircraft deliveries. B/E
believes its large installed base of products, estimated to be approximately
$4,900,000 as of August 29, 1998 (valued at replacement prices), gives it a
significant advantage over competitors in obtaining orders for refurbishment
programs, principally due to the tendency of the airlines to purchase equipment
for such programs from the original supplier. With the exception of spare parts
sales, B/E's revenues are generated from programs initiated by the airlines
which may vary significantly from year to year in terms of size, mix of products
and length of delivery. As a result, B/E's revenues and margins may fluctuate
from period to period based upon the size and timing of the program and the type
of products sold. Historically, B/E experienced certain trends in its two
revenue drivers: as the airlines took deliveries of large numbers of new
aircraft, refurbishment programs as a percentage of revenues declined and,
similarly, when new aircraft deliveries declined, refurbishment programs tended
to increase in number and size. Changes in revenues by classes of product are
the result of acquisitions and volume demand in the industry, as more fully
described in the discussion and analysis that follows. During the most recent
airline industry recession, which ended in 1994, the airlines significantly
depleted their cash reserves and incurred record losses. In an effort to improve
their liquidity, the airlines conserved cash by reducing or deferring cabin
interior refurbishment and upgrade programs and purchases of new aircraft. As a
result, in contrast with historical experience, B/E experienced declines in the
number of both new orders and refurbishments.
Since early 1994, the airlines have experienced a significant
turnaround in operating results, with the domestic airline industry achieving
record operating earnings during calendar years 1995 through 1997. Consequently,
during fiscal 1998 B/E has experienced significant growth in backlog of seating
and galley products, and has experienced significant growth in revenues and
operating earnings. This growth is a reflection of the airlines' need to begin
refurbishing worn fleets and their ability to do so as a result of the
strengthening of the airlines' balance sheets.
B/E has substantially expanded the size, scope and nature of its
business as a result of a number of acquisitions. On January 24, 1996, the
Company acquired all of the stock of Burns, an industry leader in commercial
aircraft seating. On March 27, 1998, the Company acquired all of the capital
stock of Aerospace Interiors, Inc., which services, cleans and repairs aircraft
interior parts and products, and is a leading provider of seat repair and
maintenance services performed by non-airline entities. On April 13, 1998, the
Company acquired substantially all of the assets and assumed certain of the
liabilities of PBASCO, a leading manufacturer of commercial aircraft oxygen
delivery systems, a leading manufacturer of passenger service unit components
and systems, and a major supplier of air valves, overhead lights and switches,
crew masks and protective breathing devices. On April 21, 1998, the Company
acquired substantially all of the assets and assumed certain of the liabilities
of AMP, a leading manufacturer of cabin interior products for general aviation
(business jet) and commercial type VIP aircraft. On July 30, 1998, the Company
acquired all of the capital stock of ALC, a market leader in producing interior
fluorescent lighting systems for business and corporate jet aircraft. On August
7, 1998, the Company acquired all of the capital stock of SMR Aerospace, Inc., a
leader in providing design, integration, installation
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and certification services for commercial aircraft passenger cabin interiors. On
September 3, 1998, the Company acquired substantially all of the galley
equipment assets and assumed related liabilities of CF Taylor, a manufacturer of
galley equipment and structures for both narrow- and wide-body aircraft. While
the Company will continue to be susceptible to industry-wide conditions,
management believes that the Company's significantly more diversified product
line and revenue base achieved through acquisitions has reduced its exposure to
demand fluctuations in any one product area.
As a result of the acquisitions of PBASCO, AMP and SMR, the Company has
recorded a charge of $169,155 for the write-off of acquired in-process research
and development and acquisition related expenses associated with the
transactions. In addition, in connection with the acquisition of CF Taylor, the
Company anticipates that a portion of the purchase price will be allocated to
acquired in-process research and development. The Company has engaged
consultants to assist in the allocation of the purchase price of CF Taylor,
which the Company anticipates will be completed prior to the end of the third
quarter ending on November 28, 1998, however, based on recent acquisitions by
the Company, the Company does not expect that the purchase price that will be
allocated to in-process research and development, and subsequently written off,
will be in excess of 10% of the CF Taylor purchase price. In-process research
and development expenses arose from new product development projects that were
in various stages of completion at the respective acquired enterprises at the
date of acquisitions. In-process research and development expenses for products
under development at the date of acquisition that had not established
technological feasibility and for which no alternative use was identified were
written off.
New product development projects underway at AMP at the date of
acquisition included, among others, executive aircraft interior products for the
Bombardier Global Express, Boeing Business Jet, Airbus Corporate Jet, Cessna
Citation 560XL, Cessna Citation 560 Ultra, Visionare Vantage and Lear 60, as
well as other specific executive aircraft seating products. New product
development projects underway at PBASCO at the date of acquisition included,
among others, modular drop boxes, passenger and flight crew oxygen masks, oxygen
regulators and generators, protective breathing equipment, on board oxygen
generating systems, reading lights, passenger service units, external viewing
systems for executive and commercial aircraft and cabin monitoring systems. New
product development projects underway at SMR at the date of acquisition
included, among others, pneumatic and electrical deicing systems for the
substantial majority of all executive and commuter aircraft types, crew rest
modules for selected wide-body aircraft, passenger to freighter and combi to
freighter conversion kits for selected wide-body aircraft, hovercraft skirting
devices, cargo nets, and smoke barriers.
Management estimates that the research and development cost to complete
the in-process research and development related to projects underway at PBASCO,
AMP and SMR will aggregate approximately $19,000, which would be incurred over a
3-4 year period. Uncertainties that could impede progress to a developed
technology include (i) availability of financial resources to complete the
development, (ii) regulatory approval (FAA, CAA, etc.) required for each product
before it can be installed on an aircraft, (iii) economic feasibility of
developed technologies, (iv) customer acceptance and (v) general competitive
conditions in the industry. There can be no assurance that the in-process
research and development projects will be successfully completed and
commercially introduced.
Recently, Rockwell Collins has entered the in-flight entertainment
industry by purchasing Hughes Avicom, and in doing so has changed the
competitive landscape for this line of business. The Company has evaluated the
impact of the changing market conditions, and has determined that the long-term
success of this line of business may be enhanced by teaming with a partner with
substantial economic and technology resources. Accordingly, the Company may
monetize all or a portion of its investment in its in-flight entertainment
business.
Over the last two fiscal years, the Company's gross margins have
improved substantially, increasing from 31.2% in fiscal 1996 to 34.4% in fiscal
1997 and to 36.7% in fiscal 1998. The primary reasons for the improvement in
gross margins include: (i) shift in product mix in all divisions toward higher
margin products; (ii) higher unit volumes; and (iii) a company-wide
re-engineering program which has resulted in higher employee productivity and
better manufacturing efficiency.
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B/E's business strategy is to maintain its market leadership position
through various initiatives, including new product development. In fiscal 1998,
research, development and engineering expenses totaled $45,685, or 9.4% of net
sales, primarily consisting of costs related to the development of the MDDS,
with the balance attributable to the seating and galley products businesses.
In January 1998, the Company resolved a long-running dispute with the
U.S. Government over export sales between 1992 and 1995 to Iran, which resulted
in a charge of $4,664 in its fourth quarter, which ended February 28, 1998.
See "Business -- Legal Proceedings."
The following discussion and analysis addresses the results of the
Company's operations for the six months ended August 29, 1998, as compared to
the Company's results of operations for the six months ended August 30, 1997.
The discussion and analysis then addresses the results of the Company's
operations for the year ended February 28, 1998 as compared to the Company's
results of operations for the year ended February 22, 1997. The discussion and
analysis then addresses the results of the Company's operations for the year
ended February 22, 1997 as compared to the Company's results of operations for
the year ended February 24, 1996. The discussion and analysis then addresses the
liquidity and financial condition of the Company and other matters.
Six Months Ended August 29, 1998, as Compared to the Six Months Ended August 30,
1997
Net sales for the fiscal 1999 six-month period were $296,343, an
increase of approximately $62,700, or 27% over the comparable period in the
prior year. The recent acquisitions of PBASCO, AMP and SMR accounted for a
substantial portion of the increase in revenues during this period; AMP and
PBASCO generated approximately $36,700 of revenues, in the aggregate, with SMR
adding approximately $6,000. Internal growth during the six months was low due
to uneven airline scheduling requirements. The Company does not believe this
period is reflective of the Company's strong growth in orders and backlog. As
described below, the Company expects very significant internal growth during the
second half of the year and significant internal growth for the full year.
During each of the six months ended August 29, 1998 and the year ended February
28, 1998, the Seating Products and Interior Systems Groups, exclusive of
businesses acquired during fiscal 1999, generated approximately 78% of total
revenues. During the eighteen month period ended August 29, 1998, these two
groups generated their highest bookings ever, with program awards of
approximately $764,909 from the world's airlines, including, among others, Delta
Air Lines, USAirways, British Airways, United Airlines, American Airlines and
Northwest Airlines. The Seating Products Group, which generated approximately
52% of total revenues in Fiscal 1998, had its strongest booking quarter ever
during the quarter ended August 29, 1998, with a book to bill ratio of
approximately 1.9:1; total bookings for the Company during the quarter were
approximately $215,000, and the Company experienced a book to bill ratio of
almost 1.4:1. The scheduled delivery dates for the Seating Products and Interior
Systems Groups along with scheduled deliveries for other programs form the basis
for management's expectation of very significant internal growth for the Company
during the second half of Fiscal 1999.
Gross profit was $111,480 (37.6% of sales) for the six months ended
August 29, 1998. This was $26,268, or 31%, greater than the comparable period in
the prior year of $85,212, which represented 36.5% of sales. The primary reasons
for the improvement in gross margins include: (i) shift in product mix in all
divisions toward higher margin products; (ii) higher unit volumes; and (iii) a
company-wide re-engineering program which has resulted in higher employee
productivity and better manufacturing efficiency.
Selling, general and administrative expenses were $37,041 (12.5% of
sales) for the six months ended August 29, 1998. This was $9,106, or 33%,
greater than the comparable period in the prior year of $27,935 (12.0% of
sales). The increase in selling, general and administrative expenses was
primarily due to inclusion of the relevant expenses of the acquired companies
along with increases associated with internal growth.
Research, development and engineering expenses were $24,742 (8.3% of
sales) for the six months ended August 29, 1998, an increase of $2,192 over the
comparable period in the prior year. The increase in research,
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development and engineering expense in the current period is primarily
attributable to ongoing new product development activities.
Amortization expense for the six months ended August 29, 1998 of $7,360
was $1,831 greater than the amount recorded in the comparable period in the
prior year.
Based on management's assumptions, a portion of the purchase price for
each of the recent acquisitions of PBASCO, AMP and SMR was allocated to
purchased in-process research and development that had not reached technological
feasibility and had no future alternative use. During the first six months of
fiscal 1999, the Company recorded a charge of $169,155 for the write-off of
acquired in-process research and development, acquisition-related and other
expenses. Management estimates that the research and development cost to
complete the in-process research and development related to projects underway at
PBASCO, AMP and SMR will aggregate $19,000 which will be incurred over a 3-4
year period.
Due to the acquisition-related charges of $169,155 during the six
months ended August 29, 1998, the Company incurred an operating loss of
$(126,818), as compared to operating earnings of $29,198 in the prior year's
comparable period. Operating earnings excluding the acquisition-related charges
were $42,337.
Interest expense, net was $16,446 for the six months ended August 29,
1998, or $4,915 greater than interest expense of $11,531 for the comparable
period in the prior year and is due to the increase in the Company's long-term
debt.
The loss before income taxes in the current quarter was $(143,264)
(which includes in-process research and development, acquisition-related and
other expenses of $169,155) as compared to earnings before incomes taxes of
$17,667 in the prior year's comparable period. Earnings before income taxes
excluding the acquisition-related charges were $25,891. Income tax expense for
the six months ended August 29, 1998 was $4,401, as compared to $2,647 in the
prior year's comparable period.
The net loss for the six months ended August 29, 1998 was $(147,665),
or $(6.20) per share (diluted), as compared to net earnings of $15,020 or $.64
per share (diluted), for the comparable period in the prior year.
Year Ended February 28, 1998 Compared to Year Ended February 22, 1997
Sales for the year ended February 28, 1998 were $487,999, or 18% higher
than sales of $412,379 in the prior year, and reflected a 24% increase in
product sales, offset by a $13,305 decline in service revenues (attributable to
discontinued service lines of business). Year over year, the Company experienced
an increase in seating products revenues of approximately $35,000 (or 16%), a
$25,000, or 25% increase in interior systems products revenues and a $29,000, or
56% increase in in-flight entertainment products revenues. The revenue increases
for the Seating Products and In-Flight Entertainment Groups are primarily the
result of retrofit programs that seven of the ten largest airlines in the world
have commenced, while the increase in revenues for the Interior Systems Products
Group is primarily related to both the surge in new aircraft deliveries and the
increase in retrofit activity.
Gross profit was $178,905, or 36.7% of sales, for the year ended
February 28, 1998 and was $37,083, or 26% greater than the prior year's gross
profit of $141,822, which represented 34.4% of sales. The increase in gross
profit, while primarily the result of the higher sales volume, was also
positively impacted by the 230 basis point improvement in gross margin.
Selling, general and administrative expenses were $58,622, or 12% of
sales, for the year ended February 28, 1998. This was $6,888, or 13% higher than
the selling, general and administrative expenses for the prior year of $51,734
(12.5% of sales), and is primarily due to the higher level of sales and
quotation activity, as well as a higher level of customer service, product
support and information technology activities.
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Research, development and engineering expenses were $45,685, or 9.4% of
sales, for the fiscal year ended February 28, 1998. For the prior year,
research, development and engineering expenses were $37,083, or 9.0% of sales.
The increase in research, development and engineering was attributable to B/E's
ongoing new product development programs, including costs related to the
development of the MDDS and related Boeing line-fit expenditures.
Amortization expense for the fiscal year ended February 28, 1998 of
$11,265 was $658, or 6% higher than the amount recorded in the prior year.
Other expenses for the fiscal year ended February 28, 1998 consisted of
a non-recurring charge of $4,664 related to the settlement of a dispute with the
U.S. Government over certain export sales between 1992 and 1995. See "Business
- -- Legal Proceedings."
Net interest expense was $22,765 for the year ended February 28, 1998
or $4,402 less than the net interest expense of $27,167 recorded for the prior
year and is due to the decrease in the Company's long-term debt.
The increase in gross profit offset by somewhat higher operating
expenses and lower interest expenses in the current year resulted in earnings
before income taxes, extraordinary item and cumulative effect of change in
accounting principle of $35,904, an increase of $20,673 over the prior year.
Income taxes for the year ended February 28, 1998 were $5,386, or 15%
of earnings before income taxes as compared to $1,522, or 10% of earnings before
income taxes, in the prior year.
Earnings before extraordinary item were $30,518, or $1.30 per share
(diluted), which includes the $4,664 non-recurring charge related to the
settlement of the dispute with the U.S. Government, for the year ended February
28, 1998, as compared to $13,709, or $.72 per share (diluted), for the prior
year.
The Company incurred an extraordinary charge of $8,956 during fiscal
1998 for unamortized debt issue costs, tender and redemption premiums and fees
and expenses related to the repurchase of its 9 3/4% Notes.
Net earnings were $21,562, or $.96 per share (basic) and $.92 per share
(diluted), for the year ended February 28, 1998, as compared to $13,709, or $.77
per share (basic) and $.72 per share (diluted), for the prior year.
Year Ended February 22, 1997 Compared to Year Ended February 24, 1996
Sales for the year ended February 22, 1997 were $412,379, or 77% higher
than sales of $232,582 for the comparable period in the prior year. Year over
year, Seating revenues increased $120,000, and Services revenues increased by
$19,000. The acquisition of Burns accounted for approximately $104,000 of the
$139,000 increase. Year over year, the interior systems products rose by
$22,000, or 28% while in-flight entertainment revenues increased by $19,000, or
58%. The revenue increases for the Seating Products and In-flight Entertainment
Groups are primarily the result of retrofit programs underway throughout the
airline industry, while the increase in revenues for the Interior Products Group
is primarily related to both the surge in new aircraft deliveries and the
increase in retrofit activity. Excluding the effect of the Burns acquisition,
sales increased 33% year over year.
Gross profit was $141,822, or 34.4% of sales, for the year ended
February 22, 1997, and was $69,271 higher than gross profit for the comparable
period in the prior year of $72,551, which represented 31.2% of sales. The
increase in gross profit was primarily the result of the higher sales volumes
and the mix of all products and services sold.
Selling, general and administrative expenses were $51,734, or 12.5% of
sales, for the year ended February 22, 1997. This was $9,734 higher than
selling, general and administrative expenses for the comparable period in the
prior year of $42,000, or 18.1% of sales, principally due to the substantial
increases in revenues and the acquisition of Burns.
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<PAGE>
Research, development and engineering expenses were $37,083, or 9.0% of
sales, for the year ended February 22, 1997. For the comparable period in the
prior year, research and development expense was $58,327, or 25.1% of sales. The
decrease in expenses during the current year was the result of a decrease in the
level of activity associated with the MDDS interactive entertainment system,
offset somewhat by an increase in product development activity in the Seating
Products Group.
Amortization expense of $10,607 for the year ended February 22, 1997
was $1,108 more than the amount recorded in fiscal 1996 as a result of the Burns
acquisition.
Other expenses of $4,170 for the year ended February 24, 1996 was a
charge to earnings related to costs associated with the integration and
consolidation of the Company's European seating operations in connection with
the Company's rationalization of its seating business and as a result of the
Burns acquisition. There was no similar charge in fiscal 1997.
Net interest expense was $27,167 for the year ended February 22, 1997,
or $8,531 higher than the net interest expense of $18,636 recorded for the
comparable period in the prior year, and was due to the increase in the
Company's long-term debt outstanding throughout most of fiscal 1997 as a result
of the 9 7/8% Notes issued at the time of the Burns acquisition.
Earnings before income taxes of $15,231 for the year ended February 22,
1997 were $75,312 more than the loss before income taxes of $60,081 in the prior
year.
Income taxes for the year ended February 22, 1997 were $1,522, or 10%
of earnings before income taxes, as compared to no tax provision in fiscal 1996.
Net earnings were $13,709, or $.77 per share (basic) and $.72 per share
(diluted), for the year ended February 22, 1997 as compared to a net loss of
($83,413), or ($5.15) per share (basic and diluted) for the comparable period in
the prior year, which included the cumulative effect of an accounting change of
$23,332.
Bookings and Backlog Information
Management estimates that B/E's backlog at August 29, 1998 was
approximately $700,000, approximately 57% of which management believes to be
deliverable during the 12 months following August 29, 1998, compared with a
backlog of $560,000 and $420,000 on February 28, 1998 and February 22, 1997,
respectively (as adjusted for the debooking of the British Airways MDDS program
in August 1997 described below).
On September 15, 1997, British Airways ("BA") notified the Company of
its decision not to conduct a flight trial of B/E's MDDS interactive video
system. BA ultimately selected a competitor's system for their in-flight
entertainment equipment needs. As a result of BA's decision not to move forward
with the interactive program, as of August 1997, the Company debooked
approximately $155,000 of backlog related to the MDDS program. Although the
Company has debooked the BA backlog, the Company is continuing to complete the
initial development and testing of the MDDS product and has completed line fit
certification of its MDDS System on Boeing 747-400 aircraft and has delivered
the first MDDS product to its launch customer, Japan Airlines, in April 1998.
See "Business -- Products and Services."
Liquidity and Capital Resources
The Company's liquidity requirements consist of working capital needs,
ongoing capital expenditures and scheduled payments of interest on its
indebtedness. 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 $182,116 as of August 29, 1998, as
compared to $262,504 as of February 28, 1998.
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<PAGE>
At August 29, 1998, the Company's cash and cash equivalents were
$29,203, as compared to $164,685 at February 28, 1998. Cash provided from
operating activities was $9,686 for the six months ended August 29, 1998. The
primary source of cash during the six months ended August 29, 1998 was the net
loss of ($147,665) offset by non-cash charges for in-process research and
development, depreciation, amortization and acquisition-related expenses of
$185,413, decreases in accounts receivable of $6,163 and increases in accrued
and other liabilities of $11,438, offset by a use of cash of $46,150 related to
increases in inventories and other current assets. The primary use of cash
during the six-month period was $209,636 for the acquisition of PBASCO, AMP and
SMR.
The Company's capital expenditures were $20,210 and $11,656 during the
six months ended August 29, 1998 and August 30, 1997, respectively. The increase
in capital expenditures was primarily attributable to (i) the development of a
new management information system to replace the Company's existing systems,
many of which were inherited in acquisitions, and (ii) expenditures for plant
modernization. The management information system is expected to be installed
over 18 months and will be year 2000 compliant. The Company anticipates ongoing
annual capital expenditures of approximately $35,000 for the next several years
to be in line with the expanded growth in business and the recent acquisitions.
On August 7, 1998, the Company amended its credit facilities with The
Chase Manhattan Bank by increasing the aggregate principal amount that may be
borrowed thereunder by $120,000, up to $320,000, by adding an interim revolving
credit commitment to provide for an irrevocable letter of credit (the "Bank
Credit Facility"). Pursuant to the SMR Acquisition Agreement, to the extent the
Net Proceeds (as defined), which include the $2,000 in cash already received by
the SMR Sellers, from the sale of the four million shares of Common Stock by the
SMR sellers is less than $120,000, the Company will pay such difference to the
SMR Sellers with funds drawn under the Bank Credit Facility.
The Bank Credit Facility consists of a $100,000 revolving credit
facility, an acquisition facility of up to $100,000 and an interim revolving
credit commitment of $120,000 available for the irrevocable letter of credit in
connection with the SMR acquisition. The revolving credit facility expires in
April 2004, the acquisition facility is amortizable over five years beginning in
April 1999, and the interim revolving credit commitment terminates on April 2,
1999. At the termination of the interim revolving credit commitment or, at the
option of the Company, upon the earlier expiration of the Company's obligation
to maintain the irrevocable letter of credit, the aggregate principal amount
that may be borrowed under the Bank Credit Facility will be reduced by $120,000,
back to $200,000.
The Bank Credit Facility is collateralized by the Company's accounts
receivable, inventories and by substantially all of its other personal property.
The Bank Credit Facility contains customary affirmative covenants, negative
covenants and conditions of borrowing, all of which were met by the Company as
of August 29, 1998. At August 29, 1998, indebtedness under the existing Bank
Credit Facility consisted of letters of credit aggregating approximately
$124,000 and outstanding borrowings under the revolving and acquisition credit
facilities aggregating $121,000 (bearing interest at LIBOR plus 1.50% or prime
plus 0.25%, as defined).
In February 1998, the Company sold $250,000 of 8% Notes. In conjunction
with the sale of the 8% Notes, the Company initiated a tender offer for the
$125,000 of 9 3/4% Senior Notes due 2003 (the "9 3/4% Notes"). The net proceeds
from the offering of approximately $240,419 were used (i) for the tender offer
(which expired on February 25, 1998) in which approximately $101,800 of the 9
3/4% Notes were retired, (ii) to call the remaining 9 3/4% Notes on March 16,
1998, and (iii) together with the proceeds from the Bank Credit Facility, to
fund the acquisitions of AMP and PBASCO. The Company incurred an extraordinary
charge of $8,956 for unamortized debt issue costs, tender and redemption
premiums and fees and expenses related to the repurchase of the 9 3/4% Notes.
Long-term debt consists of the Bank Credit Facility, the 9 7/8% Notes and the 8%
Notes. The 9 7/8% Notes and 8% Notes mature on February 1, 2006 and March 1,
2008, respectively.
The Company believes that the 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
requirements through the term of the Bank Credit Facility. The Company believes
that it will be able to refinance the Bank Credit Facility prior
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<PAGE>
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, make planned capital
expenditures, make scheduled payments and 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.
Deferred Tax Assets
The Company has established a valuation allowance related to the
utilization of its deferred tax assets because of uncertainties that preclude it
from determining that it is more likely than not that it will be able to
generate taxable income to realize such asset during the operating loss
carryforward period, which expires in 2012. Such uncertainties include recent
cumulative losses by the Company, the highly cyclical nature of the industry in
which it operates, economic conditions in Asia which is impacting the airframe
manufacturers and the airlines, the Company's high degree of financial leverage
and risks associated with the integration of acquisitions. The Company monitors
these as well as other positive and negative factors that may arise in the
future, as it assesses the necessity for a valuation allowance for its deferred
tax assets.
Year 2000 Costs
The "Year 2000" issue is the result of computer programs using two
digits rather than four to define the applicable year. Because of this
programming convention, software, hardware or firmware may recognize a date
using "00" as the year 1900 rather than the year 2000. Use of non-Year 2000
compliant programs could result in system failures, miscalculations or errors
causing disruptions of operations or other business problems, including, among
others, a temporary inability to process transactions and invoices or engage in
similar normal business activities.
B/E Technology Initiatives Program. The Company has experienced
substantial growth as a result of having completed 15 acquisitions since 1989.
Essentially all of the acquired businesses were operating on separate
information systems, using different hardware and software platforms. In fiscal
1997, the Company undertook to examine its systems, both pre-existing and
acquired, for Year 2000 compliance with a view to replacing non-compliant
systems and creating an integrated Year 2000 compliant system. In addition, the
Company has undertaken a comprehensive program to address the Year 2000 issue
with respect to the following non-system areas: (i) network switching, (ii) the
Company's non-information technology systems (such as buildings, plant,
equipment and other infrastructure systems that may contain embedded
microcontroller technology); and (iii) the status of major vendors, third party
network service providers and other material service providers (insofar as they
relate to the Company's business). As explained below, the Company's efforts to
assess its systems as well as non-system areas related to Year 2000 compliance
involve (i) a wide-ranging assessment of the Year 2000 problems that may affect
the Company, (ii) the development of remedies to address the problems discovered
in the assessment phase and (iii) testing of the remedies.
Assessment Phase. The Company has identified substantially all of its
major hardware and software platforms in use as well as the relevant non-system
areas described above. The Company has determined its systems requirements on a
company-wide basis and has begun the implementation of an enterprise resource
planning (ERP) system, which is intended to be a single system data base onto
which all the Company's individual systems will be migrated. In relation
thereto, the Company has signed contracts with substantially all of its
significant hardware, software and other equipment vendors and third party
network service providers related to Year 2000 compliance.
Remediation and Testing Phase. In implementing the ERP system, the
Company undertook, and has completed, a remediation and testing phase of all
internal systems, LAN's, WAN's and PBX's. These phases were intended to address
potential Year 2000 problems of the ERP system in relation to both information
technology and non-information technology systems and then to demonstrate that
the ERP software was Year 2000 compliant. ERP system software was selected and
applications implemented by a team of internal users, outside system integrator
specialists and ERP application experts. The ERP system was tested between June
1997 to 1998 by this team of experts. To date, one location has been fully
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<PAGE>
implemented on the ERP system. This company-wide solution is being deployed to
all other B/E sites in a manner that is designed to meet full implementation for
all non-Year 2000 compliant sites by December 31, 1999.
Contingency Plans. The Company has begun to analyze contingency plans
to handle worst case Year 2000 scenarios that the Company believes reasonably
could occur and, if necessary, intends to develop a timetable for completing
such contingency plans.
Costs Related to the Year 2000 Issue. To date, the Company has incurred
approximately $17,000 in costs related to the implementation of the ERP system.
The Company currently estimates the total ERP implementation will cost
approximately $30,000 and a portion of the costs have and will be capitalized to
the extent permitted under generally accepted accounting principles. The Company
expects that it will incur approximately $6,000 related to this program during
the remainder of calendar 1998 and an additional $7,000 during calendar 1999.
Risks Related to the Year 2000 Issue. Although the Company's efforts to
be Year 2000 compliant are intended to minimize the adverse effects of the Year
2000 issue on the Company's business and operations, the actual effects of the
issue will not be known until 2000. Difficulties in implementing the ERP system
or failure by the Company to fully implement the ERP system or the failure of
its major vendors, third party network service providers, and other material
service providers and customers to adequately address their respective Year 2000
issues in a timely manner would have a material adverse effect on the Company's
business, results of operations, and financial condition. The Company's capital
requirements may differ materially from the foregoing estimate as a result of
regulatory, technological and competitive developments (including market
developments and new opportunities) in the Company's industry.
Industry Conditions
The Company's principal customers are the world's commercial airlines.
As a result, the Company's business is directly dependent upon the conditions in
the highly cyclical and competitive commercial airline industry. In the late
1980s and early 1990s the world airline industry suffered a severe downturn,
which resulted in record losses and several air carriers seeking protection
under bankruptcy laws. As a consequence, during such period, airlines sought to
conserve cash by reducing or deferring scheduled cabin interior refurbishment
and upgrade programs and delaying purchases of new aircraft. This led to a
significant contraction in the commercial aircraft cabin interior products
industry and a decline in the Company's business and profitability. The airline
industry has now experienced five consecutive years of profitability including
record profitability in each of the last three calendar years. This financial
turnaround has, in part, been driven by record load factors, rising fare prices
and declining fuel costs. The airlines have substantially restored their balance
sheets through cash generated from operations and debt and equity placements. As
a result, the levels of airline spending on refurbishment and new aircraft
purchases have expanded. However, due to the volatility of the airline industry
there can be no assurance that the current profitability of the airline industry
will continue or that the airlines will maintain or increase expenditures on
cabin interior products for refurbishments or new aircraft.
In addition, the airline industry is undergoing a process of
consolidation and significantly increased competition. Such consolidation could
result in a reduction in future aircraft orders as overlapping routes are
eliminated and airlines seek greater economics through higher aircraft
utilization. Increased airline competition may also result in airlines seeking
to reduce costs by producing greater price competition from airline cabin
interior products manufacturers, thereby adversely affecting the Company's
revenues and margins.
Recently, turbulence in the financial and currency markets of many
Asian countries has led to uncertainty with respect to the economic outlook for
these countries. Of the Company's $700,000 of backlog at August 29, 1998, the
Company had $34,000 with Asian carriers deliverable in fiscal 1999 and a further
$86,000 deliverable in subsequent fiscal years. Of such Asian carrier backlog,
approximately $34,000 is with Japan Airlines, Singapore Airlines and Cathay
Pacific. Although not all carriers have been affected by the current economic
events in the Pacific Rim, certain carriers could cancel or defer their existing
orders and future orders from airlines in these countries may be adversely
affected.
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<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere, and incorporated by reference herein, including
statements regarding the business strategy of the Company, the Company's
expected internal growth, potential strategic acquisitions, the products which
the Company expects to offer, implementation of the Company's Year 2000
readiness program, anticipated development and marketing expenditures and
regulatory reform, effects of the conversion by certain EU member states to the
"euro," the intent, belief or current expectations of the Company, its directors
or its officers, primarily with respect to the future operating performance of
the Company, and other statements contained herein, and incorporated by
reference herein, regarding matters that are not historical facts, are
"forward-looking" statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). In addition, when used in this Prospectus and
elsewhere, the words "believe," "anticipate," "expect," intend" and similar
expressions are intended to identify forward-looking statements. Because such
statements include risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause actual results to differ materially from those expressed or implied
by such forward-looking statements include, but are not limited to, the factors
set forth in "Risk Factors," as well as future events that have the effect of
reducing the Company's operating income and available cash balances, such as
unexpected operating losses, delays in the integration of the Company's acquired
businesses, delivery of the Company's MDDS interactive video system, delays in
the implementation of the Company's Year 2000 readiness program, customer
delivery requirements, new or expected refurbishments or cash expenditures
related to possible future acquisitions.
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<PAGE>
BUSINESS
Introduction
B/E is the world's largest manufacturer of commercial and general
aviation aircraft cabin interior products, serving virtually all major airlines
and a wide variety of general aviation customers and airframe manufacturers.
Management believes that the Company has achieved leading global market
positions in each of its major product categories, which include aircraft seats,
food and beverage preparation and storage equipment, galley and other interior
structures, oxygen delivery systems, lighting systems and in-flight
entertainment systems. In addition, B/E provides design, integration,
installation and certification services, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications for commercial aircraft passenger cabin
interiors and to manufacture related products, including engineering kits and
interface components. B/E also provides upgrade, maintenance and repair services
for its airline customers around the world. In fiscal 1998, approximately 92%
and 8%, respectively, of the Company's total revenues were derived from major
airlines and airframe manufacturers. Approximately 61% of B/E's revenues for
fiscal 1998 were derived from refurbishment and upgrade orders.
B/E is the largest manufacturer of airline seats in the world, offering
an extensive line of first class, business class, tourist class and commuter
seats and a complete line of general aviation seating products. The Company is
also the world's largest manufacturer of galley equipment for both narrow- and
wide-body aircraft, including a wide selection of coffee and beverage makers,
water boilers, ovens, liquid containers and refrigeration equipment. In
addition, the Company manufactures a broad range of interior structures,
including galleys, lavatories, sidewalls, credenzas, and closets. The Company is
also a worldwide leader in the manufacture of oxygen delivery systems, passenger
service units, air valves, lighting and switches, and is a major manufacturer of
passenger entertainment and service systems, including individual passenger
in-flight entertainment systems. The Company believes that in-flight
entertainment systems, including the emerging live broadcast television market
for domestic narrow-body aircraft, will be one of the fastest growing and among
the largest product categories in the commercial aircraft cabin interior
products industry.
B/E has substantially expanded the size, scope and nature of its
business as a result of a number of acquisitions. Since 1989, the Company has
completed 15 acquisitions for an aggregate purchase price of approximately $680
million in order to increase its cabin interior product and service offerings,
to expand its activities from the commercial to the general aviation market and
to position B/E as the preferred global supplier to its customers. Acquisitions
have also enabled the Company to reduce costs, principally through the
integration of manufacturing facilities, and to leverage its established
customer relationships by selling more products through its integrated sales
force. The largest of the six transactions the Company has completed in fiscal
1999 was the acquisition of SMR, a leader in providing design, integration,
installation and certification services for commercial aircraft passenger cabin
interiors, for a total aggregate purchase price of approximately $142.0 million.
Management believes that the acquisition of SMR complements the Company's cabin
interior product manufacturing capabilities and positions B/E as the only
company in the industry able to offer its customers the complete range of
products and services required for major cabin interior reconfigurations and
modifications, from the conceptualization and engineering design of new cabin
interiors, to the supply of cabin interior products, through the management of
the integration, final installation and certification processes.
Industry Overview
The commercial and general aircraft cabin interior products industries
encompass a broad range of products and services, including not only aircraft
seating products, passenger entertainment and service systems, food and beverage
preparation and storage systems, and oxygen delivery systems, but also
lavatories, lighting systems, evacuation equipment, overhead bins, as well as a
wide variety of engineering design, integration, installation and certification
services and maintenance, upgrade and repair services. Management estimates that
the industry had annual sales in excess of $1.6 billion dollars during fiscal
1998.
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<PAGE>
Historically, revenues in the airline cabin interior products industry
have been derived from five sources: (i) retrofit programs in which airlines
purchase new components to overhaul completely the interiors of aircraft already
in service; (ii) refurbishment programs in which airlines purchase components
and services to improve the appearance and functionality of certain cabin
interior equipment; (iii) new installation programs in which airlines purchase
new equipment to outfit a newly delivered aircraft; (iv) spare parts; and (v)
equipment to upgrade the functionality or appearance of the aircraft interior.
The retrofit and refurbishment cycles for commercial aircraft cabin interior
products differ by product category. Aircraft seating typically has a
refurbishment cycle of one to two years and a retrofit cycle of seven to eight
years, although during the last industry downturn, these periods tended to be
extended. See "-- Recent Industry Conditions." Galley structures and products
are periodically upgraded or repaired, and require a continual flow of spare
parts, but may be retrofitted only once or twice during the life of the
aircraft.
Historically, revenues in the general aviation cabin interior products
industry have been derived from four sources: (i) retrofit and refurbishment
programs in which the interior components of the aircraft are substantially
overhauled to improve the appearance and functionality; (ii) new installation
programs to outfit newly delivered aircraft; (iii) spare parts; and (iv)
equipment to upgrade the functionality or appearance of the aircraft interior.
The various product and service categories in which the Company
currently participates include:
Seating Products. This is the largest single product category in the
industry and includes first class, business class, tourist class and
commuter seats. Management estimates that the aggregate size of the
worldwide aircraft seat market (including spare parts) during fiscal
1998 was in excess of $570 million. Approximately ten companies
worldwide, including the Company, supply aircraft seats, although the
Company (which has an approximately 50% market share) and three other
competitors share approximately 90% of the market.
Passenger Entertainment and Service Systems ("PESS"). This product
category includes individual seat video systems, overhead video
projection systems, audio distribution systems, passenger control units
("PCUs") and related wiring and harness assemblies and sophisticated
interactive telecommunications and entertainment systems. Management
estimates that the aggregate size of the worldwide PESS market was
approximately $325 million during fiscal 1998. Industry sources expect
the PESS market to increase substantially in the near term as
individual passenger entertainment systems become standard in-flight
entertainment equipment in first, business and tourist classes on
wide-body aircraft and, with the further development of live broadcast
television, many narrow-body aircraft. PESS products are currently
supplied by approximately five companies worldwide. The Company has a
market share of approximately 35% in individual passenger in-flight
entertainment systems, as of August 29, 1998.
Interior Systems Products. This product category includes interior
systems for both narrow-body and wide-body commercial aircraft and
general aviation/VIP aircraft, including a wide selection of coffee and
beverage makers, water boilers, ovens, liquid containers, air chillers,
wine coolers and other refrigeration equipment, oxygen delivery
systems, air valves, lighting and switches, and other interior systems
components. The Company believes it is the only manufacturer with a
complete line of interior systems products and the only supplier with
the capability to fully integrate overhead passenger service units with
either chemical or gaseous oxygen equipment.
General Aviation and VIP Products. The Company entered this line of
business with its acquisition of AMP in April 1998. By combining AMP's
substantial presence in the general aviation and VIP aircraft cabin
interior products industry with that of PBASCO and ALC, B/E has become
the industry's leading manufacturer with a broad product line,
including a complete line of executive aircraft seating products,
flourescent lighting, air valves and oxygen delivery systems as well as
sidewalls, bulkheads, credenzas, closets, galley structures,
lavatories, tables and sofas. B/E has the capability to provide
complete interior packages, including all design services, all interior
components and program management services for executive aircraft
interiors. B/E is the preferred supplier of seating products and
fluorescent lighting systems of essentially every general
aviation-airframe manufacturer.
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<PAGE>
Engineering/Integration and Maintenance/Support Services. The Company
entered the engineering design, integration, installation and
certification services market through the acquisition of SMR in August
1998. The Company has also historically been an active participant in
the growing market for upgrade, maintenance and repair services through
its Services Group. Historically, the airlines have relied on the
airframe manufacturers or in-house engineering resources to provide
engineering design and integration services, as well as maintenance and
repair services. As cabin interior configurations have become
increasingly sophisticated and the airline industry increasingly
competitive, the airlines have begun to outsource such services in
order to increase productivity and reduce costs and overhead. Through
the recent acquisition of SMR, the Company provides design,
integration, installation and certification services for commercial
aircraft passengers cabin interiors, offering its customers in-house
capabilities to design, project manage, integrate, test and certify
reconfigurations and modifications for commercial aircraft passenger
cabin interiors and to manufacture related products, including
engineering kits and interface components. Through its Services Group,
B/E also provides upgrade, maintenance and repair services for the
products which it manufactures as well as for those supplied by other
manufacturers.
Through August 29, 1998, the Company operated primarily in the
commercial aircraft cabin interior products segment of the commercial airlines
supplier industry. Revenues for similar classes of products or services within
this business segment for the six months ended August 30, 1997 and August 29,
1998 and for the fiscal years ended February 1996, 1997 and 1998 are presented
below (dollars in millions):
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
----------------------------------- -------------------------
Feb. 24, Feb. 22, Feb. 28, August 30, August 29,
1996 1997 1998 1997 1998
---- ---- ---- ------------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Seating products......................... $ 97 $ 217 $ 252 $ 127 $ 129
Interior systems products 79 101 126 66 80
Passenger entertainment and service
systems............................... 33 52 81 26 44
Engineering/Integration and
Services.............................. 23 42 29 15 19
General aviation and VIP products........ -- -- -- -- 24
---------- ---------- ---------- ---------- ----------
Total revenues........................... $ 232 $ 412 $ 488 $ 234 $ 296
========== ========== ========== ========== ==========
</TABLE>
Recent Industry Conditions
The Company's principal customers are the world's commercial airlines.
The airlines, particularly the U.S. carriers, incurred record losses during the
three-year period ended December 31, 1993. The losses incurred during the
downturn seriously impaired airline balance sheets and negatively influenced
airline purchasing decisions with respect to both new aircraft and refurbishment
programs. The domestic airlines in large part returned to profitable operations
during calendar year 1994, and achieved record operating earnings during
calendar years 1995 through 1997. During this period, the domestic airlines
substantially restored their balance sheets through cash generated from
operations and debt and equity placements. This improvement in the airlines'
profitability and liquidity has, in turn, led to an increase in refurbishment
and retrofit programs which, coupled with spares revenues, generated
approximately 61% of the Company's revenues in fiscal 1998. Further, throughout
calendar 1997, the aircraft manufacturers continued to experience a significant
increase in new aircraft orders. Among those factors expected to affect the
cabin interior products industry are the following:
Large Existing Installed Base. According to the Current Market Outlook
published by the Boeing Commercial Airplane Group in 1998 (the "Boeing
Report"), the world commercial passenger aircraft fleet consisted of
10,845 aircraft as of the end of 1997, including 3,102 aircraft with
fewer than 120 seats, 4,824 aircraft with between 120 and 240 seats and
2,919 aircraft with more than 240 seats. Based on such fleet numbers,
management estimates that the total worldwide installed base of
commercial and general aviation aircraft cabin interior products,
valued at replacement prices, was approximately $14.7 billion at the
end of 1997. This existing installed base will
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generate continued retrofit, refurbishment and spare parts revenue,
particularly in light of the deterioration of existing interior cabin
functionality and aesthetics resulting from the airlines' deferral of
refurbishment programs in recent years.
Expanding Worldwide Fleet. Worldwide air traffic has grown in every
year since 1946 (except in 1990) and, according to the Boeing Report,
is projected to grow at a compounded average rate of five percent per
year over the next 10 years, increasing annual revenue passenger miles
from approximately 1.7 trillion in 1997 to approximately 4.4 trillion
by 2017 (according to the July 1998 Airline Monitor). Airlines have
recently been purchasing a significant number of new aircraft due in
part to the current high load factors and the projected growth in
worldwide air travel. According to the Boeing Report, the worldwide
fleet of commercial passenger aircraft is projected to expand from
approximately 10,845 at the end of 1997 to approximately 23,500 by the
end of 2017. In 1997, Boeing shipped 375 aircraft versus 269 in 1996
(as adjusted to include McDonnell Douglas deliveries). In addition,
Boeing has stated plans to ship approximately 550 aircraft in each of
calendar years 1998 and 1999. According to Airbus Industrie Global
Market Forecast published in April 1998 (the "Airbus Industrie
Report"), the worldwide installed seat base, which management considers
to be a good indicator for potential growth in the aircraft cabin
interior products industry, is expected to increase from approximately
1.7 million passenger seats at the end of 1997 to approximately 4.1
million passenger seats at the end of 2017. The expanding worldwide
fleet will generate additional revenues from new installation programs,
while the increase in the size of the installed base will generate
additional and continual retrofit, refurbishment and spare parts
revenue.
Wide-body Aircraft Orders. Orders for wide-body, long-haul aircraft
constitute an increasing share of total new airframe orders. According
to the February 1998 Airline Monitor, the percentage of Boeing aircraft
deliveries projected to be wide-body aircraft for 1998 through 2002 is
42%, as compared to 37% for the five-year period ended December 31,
1997. Wide-body aircraft currently carry up to three times the number
of seats as narrow- body aircraft, and because of multiple classes of
service, including large first class and business class configurations,
the Company's average revenue per seat on wide-body aircraft is also
higher. Aircraft crews on wide-body aircraft may make and serve between
300 and 900 meals and may brew and serve more than 2,000 cups of coffee
on a single flight. As a result, wide-body aircraft require as much as
seven times the dollar value of cabin interior products as narrow-body
aircraft, as well as products which are technically more sophisticated
and typically more expensive. Further, individual passenger in-flight
entertainment systems are installed principally on wide-body aircraft.
Airlines are increasingly demanding such systems for long-haul flights
to attract and retain customers, especially as the quality of in-flight
entertainment has become a differentiating factor in passengers'
airline selection decisions. Such systems also provide the airlines
with the opportunity to increase revenues per passenger mile, without
raising ticket prices, by charging individually for services used. For
these reasons, management believes that in the future, interactive
in-flight entertainment systems will be installed on essentially all
wide-body aircraft and, with the further development of live broadcast
in-flight television, many narrow-body planes.
New Product Development. The commercial and general aircraft cabin
interior products industries are engaged in intensive development and
marketing efforts for a number of new products, including full electric
"sleeper seats," convertible seats, interactive individual passenger
entertainment systems, live broadcast television, crew masks, advanced
telecommunications equipment, protective breathing equipment, oxygen
generating systems and new galley equipment. Interactive video
technology provides a passenger with a wide range of computer
capabilities, which are designed to accept information generated by the
passenger and communicate such information to the cabin crew for
assisting passengers and crew with food service selection, the purchase
of duty-free goods, information in connection with the arrival time,
connecting flights, gate and other passenger information, as well as
facilitate effective on-board inventory control and provide individual
entertainment. Live TV(TM), a new product line being developed by a
joint venture between the Company and Harris Corporation, will provide
live broadcast television via satellite to passenger aircraft allowing
passengers the capability to view up to 48 different channels of
television service. New cabin interior products will generate new
installation and retrofit revenues as well as service revenues from
equipment maintenance, inspection and repair.
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Growing Services Markets. Historically, the airlines have relied on
airframe manufacturers or their own in-house engineering resources to
provide engineering, design, integration and installation services, as
well as services related to repairing or replacing cabin interior
products that have become damaged or otherwise non-functional. As cabin
interior product configurations have become increasingly sophisticated
and the airline industry increasingly competitive, the airlines have
begun to outsource such services in order to increase productivity and
reduce costs and overhead. Outsourced services include: (i) engineering
design, integration, installation and certification services, which
will entail providing the capabilities to design, project manage,
integrate, test and certify reconfigurations and modifications for
commercial aircraft and to manufacture related products, including
engineering kits and interface components; and (ii) product upgrades
(such as the installation of a telecommunications module or individual
passenger entertainment unit in an aircraft seat not originally
designed to accommodate such equipment), cabin interior product
maintenance and inspection, as well as other repair services.
Competitive Strengths
The Company believes that it has a strong competitive position
attributable to a number of factors including the following:
Leading Market Shares and Significant Installed Base. Management
believes that the Company has achieved leading global market positions
in each of its major product categories, with market shares, based upon
industry sources, of approximately 50% in commercial aircraft seats,
60% in executive aircraft seats, 90% in coffee makers, 90% in
refrigeration equipment, 90% in air valves, 50% in oxygen delivery
systems, 50% in ovens, based on dollar sales for the twelve months
ended August 29, 1998, and 35% in individual-passenger in-flight
entertainment systems, determined on the basis of installed base as of
August 29, 1998. The Company believes these market shares provide it
with significant competitive advantages in serving its customers,
including economies of scale and the ability to commit greater product
development, global product support and marketing resources.
Furthermore, because of economies of scale, in part attributable to its
large market shares and its approximate $4.9 billion installed base of
cabin interior equipment (valued at replacement prices as of August 29,
1998), the Company believes it is among the lowest cost producers in
the cabin interior products industry. The Company also believes that
its large installed base provides B/E with a significant advantage over
competitors in obtaining orders for retrofit and refurbishment
programs, principally because airlines tend to purchase equipment from
the original supplier. In addition, because of the need for compatible
spare parts at airline maintenance depots and the desire of airlines to
maximize fleet commonality, a single vendor is typically used for all
aircraft of the same type operated by a particular airline.
Combination of Manufacturing and Cabin Interior Design Services. The
Company has continued to expand its products and services, believing
that the airline industry increasingly will seek an integrated approach
to the design, development, integration, installation, testing and
sourcing of aircraft cabin interiors. The Company believes that it is
the only manufacturer of a broad technologically-advanced line of cabin
interior products with interior design capabilities. Based on its
established reputation for quality, service and product innovation
among the world's commercial airlines, the Company believes that it is
well positioned to provide "one stop shopping" to these customers,
thereby maximizing sales opportunities for the Company and increasing
the convenience and value of the service provided to its customers.
Technological Leadership/New Product Development. Management believes
that the Company is a technological leader in its industry, with the
largest R&D organization in the industry currently comprised of
approximately 725 engineers. The Company believes that its R&D effort
and its on-site engineers at both the airlines and airframe
manufacturers enable B/E to play a leading role in developing and
introducing innovative products to meet emerging industry trends and
needs and thereby gain early entrant advantages and substantial market
shares. Examples of such product development include: the introduction
of several premium and main cabin class seats, which the Company
believes provide greater comfort and are lighter in weight as a result
of their ergonomic design
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and pre-engineered individual passenger comfort features; the Company's
family of in-flight entertainment systems, which it believes to be
superior to existing operational systems in terms of performance,
reliability, weight, heat generation and flexibility to adapt to
changing technology; a cappuccino/espresso maker; a quick chill wine
cooling system; and a constant-pressure, steam cooking oven, which the
Company believes substantially improves the appearance, aroma and taste
of airline food. The Company has developed two individual in-flight
entertainment systems that are designed to meet the varying
technological and price specifications of the airlines and has a new
interactive entertainment system in the final development stage. The
Company also has a joint venture with Harris Corporation to develop and
deliver live broadcast television (LiveTV((TM))) to domestic narrow
body commercial aircraft.
Proven Track Record of Acquisition Integration. The Company has
demonstrated the ability to make strategic acquisitions and
successfully integrate such acquired businesses by identifying
opportunities to consolidate engineering, manufacturing and marketing
activities, as well as rationalizing product lines. Between 1989 and
January 1996, B/E acquired nine companies and has integrated the
acquisitions by eliminating 11 operating facilities and consolidating
personnel at the acquired businesses, resulting in headcount reductions
of approximately 1,300 employees, through January 1998. B/E's
integration activities, coupled with its re-engineering program, have
positively impacted gross and operating margins (before non-recurring
expenses), which have increased by 369 and 245 basis points,
respectively, during the five-year period ended February 28, 1998.
During fiscal 1999, the Company acquired six additional companies,
including ASI, PBASCO, AMP, ALC, SMR and CF Taylor, to broaden its
product lines. The aggregate purchase price of all acquisitions made by
B/E since 1989 is approximately $680 million. While the Company will
continue to be susceptible to industry-wide conditions, management
believes that the Company's significantly more diversified product line
and revenue base achieved through acquisitions has reduced its exposure
to demand fluctuations in any one product area.
Growth Opportunities
B/E believes that it has benefitted from four major growth trends.
Increase in Refurbishment and Upgrade Orders. B/E's substantial
installed base provides significant ongoing revenues from replacements,
upgrades, repairs and the sale of spare parts. Approximately 61% of
B/E's revenues for the year ended February 28, 1998 were derived from
refurbishment and upgrade orders. In the late 1980s and early 1990s,
the airline industry suffered a significant downturn, which resulted in
a deferral of cabin interior maintenance expenditures. Since early
1994, the airlines have experienced a turnaround in operating results,
leading the domestic airline industry to record operating earnings
during calendar years 1995 through 1997. Deterioration of cabin
interior product functionality and aesthetics occurred within the
commercial airline fleets during the industry downturn because of
maintenance deferrals. Since the turnaround began, the airlines have
experienced greater utilization resulting from higher load factors,
which has encouraged airlines to increase spending on refurbishments
and upgrades. The Company believes that it is well positioned to
benefit over the next several years as a result of the airlines'
dramatically improved financial condition and liquidity and the need to
refurbish and upgrade cabin interiors. A significant portion of the
Company's recent growth in backlog, revenues and operating earnings has
been from refurbishment and upgrade programs, and the Company has been
experiencing a high level of new order quote activity related to such
programs.
Expansion of Worldwide Fleet and Shift Toward Wide-Body Aircraft.
Airlines have been purchasing a significant number of new aircraft in
part due to current high load factors and the projected growth in
worldwide air travel. According to the Boeing Report, worldwide air
travel growth is projected to average 5% per year over the next 10
years and the worldwide fleet of commercial passenger aircraft is
projected to expand from approximately 10,845 at the end of 1997 to
approximately 15,900 by the end of 2007 and to more than 23,500 by the
end of 2017. Related growth in aircraft interior product shipments
associated with new aircraft deliveries began during calendar 1996. In
1997, Boeing shipped 375 aircraft versus 269 in 1996 (as adjusted to
include McDonnell Douglas deliveries). In addition Boeing has stated
plans to ship approximately 550 aircraft in each of calendar
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years 1998 and 1999. The Company generally receives orders related to
new aircraft deliveries approximately six months before the delivery
date. Furthermore, according to the February 1998 Airline Monitor, the
percentage of new Boeing aircraft deliveries projected to be wide-body
aircraft for 1998 through 2002 is 42% as compared to 37% for the
five-year period ended December 31, 1997. This shift toward wide-body
aircraft is significant to the Company since these aircraft require as
much as seven times the dollar value of cabin interior products as
narrow-body aircraft, including substantially more seats, galley
equipment and in-flight entertainment products.
General Aviation and VIP Aircraft Fleet Expansion and Related Retrofit
Opportunities. General aviation and VIP airframe manufacturers are
experiencing a surge in new aircraft deliveries similar to that
occurring in the commercial aircraft industry. According to industry
sources, executive aircraft deliveries amounted to 241 units in
calendar 1996 and were approximately 348 in calendar 1997. Industry
sources indicate that executive aircraft deliveries are expected to be
approximately 450 in calendar 1998 and should reach 545 per year by the
year 2000. Several new aircraft models, including the Visionaire
Vantage, Cessna Citation Excel, the Boeing Business Jet, Global Express
and Airbus Business Jet, have been or are expected to be introduced
over the next several years. The overall strength of the U.S. and
European economies, advances in engine technology and avionics and
emergence of fractional ownership of executive aircraft are all
important growth factors. In addition, the general aviation and VIP
aircraft fleet consists of approximately 10,000 aircraft with an
average age of approximately 15 years. As aircraft age or ownership
changes, operators retrofit and upgrade the cabin interior, including
seats, sofas and tables, sidewalls, headliners, structures such as
closets, lavatories and galleys, and related equipment including
lighting and oxygen delivery systems. The installed value of a new
interior can range from $1 million for smaller models to up to $7
million for a long haul aircraft. In addition, operators generally
reupholster or replace seats every five to seven years. Management
believes the Company is well positioned to benefit from the retrofit
opportunities due to (i) the 15-year average age of the executive jet
fleet; (ii) operators who have historically reupholstered their seats
are now more inclined to replace these seats with lighter weight, more
modern and 16G-compliant seating models; and (iii) the belief that the
Company is the only manufacturer with the capability for cabin interior
design services, a broad product line for essentially all cabin
interior products and program management services, for true "one-stop
shopping."
Emergence of Individual Passenger In-flight Entertainment Systems as a
Major New Product Category. Airlines increasingly are demanding
individual passenger in-flight entertainment systems as a method to
attract and retain customers, as the availability of such service
affects passengers' decisions on airline selection. These systems also
provide the airlines with the opportunity to generate increased
revenues, without raising ticket prices, by charging passengers for the
services used. In June 1997, the Company announced a joint venture with
Harris Corporation to develop and deliver live broadcast television
(LiveTV(TM)) to domestic narrow-body commercial aircraft. The Company
expects that in-flight entertainment systems, including the new
technology designed to deliver live broadcast television on domestic
narrow-body aircraft, will be one of the fastest growing and among the
largest product categories in the commercial aircraft cabin interior
products industry.
The Company has developed a number of individual in-flight
entertainment systems that are designed to meet the varying
technological and price specifications of the airlines. The Company's
two current systems are (i) the B/E 2000, with an installed base of
approximately 21,000 units, which is a system that provides
non-interactive video programming and (ii) the B/E 2000M, with an
installed base of approximately 11,000 units, which offers similar
functionality to the B/E 2000 but can be upgraded to the Company's
Multimedia Digital Distribution System ("MDDS") product. The MDDS
product, which is in its final development stage, is a fully
interactive entertainment system with the capacity to provide movies on
demand, telecommunications, gaming and other services. The Company has
completed the initial development and testing of the MDDS product and
delivered the first MDDS product to its launch customer, Japan Airlines
("JAL"), in April 1998. The Company also completed the engineering
necessary to enable installation of the MDDS as a line fit option on
Boeing aircraft in 1998. As of August 29, 1998, B/E had an in-flight
entertainment systems backlog of approximately $86 million.
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Recently, Rockwell Collins has entered the in-flight entertainment
industry by purchasing Hughes Avicom, and in doing so has changed the
competitive landscape for this line of business. The Company has
evaluated the impact of the changing market conditions, and has
determined that the long term success of this line of business may be
enhanced by teaming with a partner with substantial economic and
technology resources. Accordingly, the Company may monetize all or a
portion of its investment in its in-flight entertainment business.
Business Strategy
The Company's business strategy is to maintain its leadership position
and best serve its customers by (i) offering the broadest and most integrated
product lines and services in the industry, including not only new product and
follow-on product sales, but also design, integration, installation and
certification services as well as maintenance, upgrade and repair services; (ii)
pursuing a worldwide marketing approach focused by airline and general aviation
airframe manufacturer and encompassing the Company's entire product line; (iii)
pursuing the highest level of quality in every facet of its operations, from the
factory floor to customer support; (iv) remaining the technological leader in
its industry, as well as significantly growing its installed base of products in
the developing in-flight individual passenger entertainment market; (v)
enhancing its position in the growing upgrade, maintenance, inspection and
repair services market; and (vi) pursuing selective strategic acquisitions in
the commercial aircraft and general aviation cabin interior products industries.
Products and Services
Seating Products
The Company is the world's leading manufacturer of aircraft seats,
offering a wide selection of first class, business class, tourist class and
commuter seats. A typical seat manufactured and sold by the Company includes the
seat frame, cushions, armrests and tray table, together with a variety of
optional features such as in-flight entertainment systems, oxygen masks and
telephones. The Company estimates that as of August 29, 1998 the Company had an
aggregate installed base of more than 1,000,000 aircraft seats, valued at
replacement prices, of approximately $2.1 billion.
Tourist Class. The Company is the leading worldwide manufacturer of
tourist class seats. B/E has designed tourist class seats which
incorporate features not previously utilized in that class, such as
top-mounted passenger control units, footrests and improved oxygen
systems.
First and Business Classes. Based upon major airlines program selection
and orders on hand, the Company is the leading worldwide manufacturer
of premium-class seats. First class and business class seats are
generally larger, heavier and more complicated in design, and are
substantially more expensive than tourist class aircraft seats. The
Company's first class seats and certain of its business class seats are
equipped with articulating bottom cushion suspension systems,
sophisticated hydraulic leg-rests, lumbar massage devices, adjustable
thigh support cushions, reading lights, adjustable head and neck
supports and large tables.
Convertible Seats. The Company has developed two types of seats which
can be converted from tourist class triple-row seats to business class
double-row seats with minimal conversion complexity. Convertible seats
allow airline customers to optimize the ratio of business class to
tourist class seats for a given aircraft configuration.
Commuter Seats. The Company is the leading manufacturer of commuter
seats in both the U.S. and worldwide markets. The Company's
Silhouette(TM) Composite commuter seats are similar to commercial jet
seats in comfort and performance but are lightweight and require
minimal maintenance.
Spares. Aircraft seats are exposed to significant stress in the course
of normal passenger activity, and certain seat parts are particularly
susceptible to damage from continued use. As a result, a significant
market exists for spare parts.
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Passenger Entertainment and Service Systems ("PESS")
Management estimates that the Company has the largest installed base of
PESS products in the world, which as of August 29, 1998, valued at replacement
prices, is approximately $470 million. The Company has the leading share of the
market for passenger control units ("PCUs") and related wiring and harness
assemblies, and has developed products aimed at other portions of the PESS
market, including individual seat video systems, advanced multiplexer and
hard-wired distribution systems and other products. The Company believes that it
is a market leader in individual passenger in-flight entertainment systems and
that this product category will be the fastest growing, and among the largest,
product categories in the commercial aircraft cabin interior products industry
in the future.
Individual Passenger Entertainment. The Company has developed a number
of in-flight entertainment systems that are designed to meet the
technological and price specifications of the airlines:
B/E 2000. The B/E 2000, introduced in 1992, is one of the Company's
first-generation individual inflight video systems and offers
centralized electronic distribution of a limited range of programming.
Since its introduction, the Company has installed approximately 21,000
units of the B/E 2000 and earlier generation individual passenger video
systems with 10 airlines.
MDDS Family. The Company has developed a family of next-generation,
individual passenger in-flight entertainment products, which includes
the 2000M and the MDDS:
o B/E 2000M -- The B/E 2000M is an in-flight entertainment
system that offers similar functionality to the 2000 but can
be upgraded to the Company's fully interactive MDDS. Since its
introduction in 1994, the Company has installed approximately
11,000 units.
o MDDS -- B/E's MDDS is a state-of-the-art, fully interactive
individual passenger in-flight entertainment system which has
the capacity to offer numerous movies on demand,
telecommunications, gaming, Nintendo(TM), Sega(TM) and
PC-based games, in-flight shopping and, in the future, live
television, among other services. The Company has completed
the initial development and testing of the MDDS product and
delivered the first MDDS product to its launch customer, JAL,
in April 1998. The Company also completed the engineering
necessary to enable installation of the MDDS as a line fit
option on Boeing aircraft in conjunction with the JAL
delivery.
LiveTV(TM). In June 1997, the Company announced a joint venture with
Harris Corporation to develop and market a system which will allow
airline passengers to receive in-flight, live broadcast television
aboard narrow-body commercial aircraft at each individual passenger
seat. The Company controls a 51 percent voting interest in the joint
venture. Under the joint venture agreement, B/E will provide its
individual-seat video distribution system as its part of the overall
LiveTV(TM) reception system, while Harris Corporation will provide the
specialized aircraft antenna and receiver system to enable in-the-air
reception. The Company expects to be in a position to commence
deliveries to a launch customer for LiveTV(TM) sometime in 1999.
PCUs, Wiring and Harness Assemblies. The Company's PCU product line is
the broadest in the industry, including over 300 different designs
which are functionally similar but differ widely due to the style
preferences and technical requirements of the various airlines. Wiring
and harness assemblies (which stabilize installed wiring) are sold as a
package with PCUs and vary as widely as PCU types.
Distribution Systems. The Company has manufactured hard-wired audio
(since 1963) and video distribution systems (since 1992) and is
currently the principal supplier of such systems to the airline
industry. The Company also offers frequency division multiplex
distribution systems, which deliver substantially improved audio
performance compared to competitors' multiplex systems.
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Interior Systems Products
The Company is the world's largest manufacturer of interior systems
products for both narrow and wide-body aircraft, offering a wide selection of
structures, coffee and beverage makers, water boilers, ovens, liquid containers,
refrigeration equipment, oxygen delivery systems, passenger service units, air
valves, lighting and switches, and a variety of other interior components.
Management estimates that as of August 29, 1998 the Company has an aggregate
installed base of such equipment, valued at replacement prices, of approximately
$1.5 billion.
Coffee Makers. The Company is the leading manufacturer of aircraft
coffee makers, with the Company's equipment currently installed in
virtually every type of aircraft for almost every major airline. The
Company manufactures a broad line of coffee makers, coffee warmers and
water boilers including the Flash Brew Coffee Maker, with the
capability to brew 54 ounces of coffee in one minute, a Combi((TM))
unit which will both brew coffee and boil water for tea while utilizing
25% less electrical power than traditional 5,000 watt water boilers,
and a recently introduced cappuccino/espresso maker.
Ovens. The Company is the leading supplier of a broad line of
specialized ovens, including high-heat efficiency ovens, high-heat
convection ovens, and warming ovens. The Company's newest offering, the
DS-2000 Steam Oven, represents a new method of preparing food in-flight
by maintaining constant temperature and moisture in the food. It
addresses the airlines' need to provide a wider range of foods than can
be prepared by convection ovens.
Refrigeration Equipment. The Company is the worldwide industry leader
in the design, manufacture, and supply of commercial aircraft
refrigeration equipment. The Company recently introduced a self-
contained wine and beverage chiller, the first unit specifically
designed to rapidly chill wine and beverages on board an aircraft.
Galley Structures. Galley structures are generally custom designed to
accommodate the unique product specifications and features required by
a particular carrier. Galley structures require intensive design and
engineering work and are among the most sophisticated and expensive of
the aircraft's cabin interior products. The Company provides a variety
of galley structures, closets and class dividers, emphasizing
sophisticated and higher value-added galleys for wide-body aircraft.
Oxygen Delivery System. The Company is a leading manufacturer of oxygen
delivery systems, passenger service units, air valves, lighting and
switches for both commercial and general aviation aircraft. B/E is the
only manufacturer with the capability to fully integrate its own
manufactured components with overhead passenger service units with
either chemical or gaseous oxygen equipment. The Company's oxygen and
passenger service unit equipment has been approved for use on all
Boeing and Airbus aircraft and is also found on essentially all general
aviation and VIP aircraft.
General Aviation
The Company entered the market for general aviation and VIP aircraft
products with its acquisition of AMP in April 1998. By combining AMP's
substantial presence in the general aviation and VIP aircraft cabin interior
products industry with that of PBASCO and ALC, B/E is now the leading
manufacturer of a broad product line including a complete line of executive
aircraft seating products, flourescent lighting, air valves and oxygen delivery
systems as well as sidewalls, bulkheads, credenzas, closets, galley structures,
lavatories, tables and sofas. B/E has the capability to provide complete
interior packages, including all design services, all interior components and
program management services for executive aircraft interiors. B/E is the
preferred supplier of seating products and flourescent lighting systems at
essentially every general aviation airframe manufacturer.
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Services and Specialty Products
The Company is an active participant in the growing services and custom
products markets. Management believes that the Company's broad and integrated
product line and close relationships with its airline and leasing customers
position the Company to become a leading service provider in this market. Most
participants in this market are small, and management believes that the Company
is the only major product manufacturer in the industry currently participating
in this market.
Engineering Design, Integration, Installation and Certification
Services. Through the acquisition of SMR in August 1998, B/E is a
leader in providing engineering design, integration, installation and
certification services for commercial aircraft passenger cabin
interiors, offering its customers in-house capabilities to design,
project manage, integrate, test and certify reconfigurations and
modifications for commercial aircraft and to manufacture related
products, including engineering kits and interface components. The
Company provides a broad range of interior reconfiguration services
which allow airlines to change the size of certain classes of service,
modify and upgrade the seating, install telecommunications or
entertainment options, relocate galleys, lavatories, and overhead bins,
and install crew rest compartments. B/E is also a leading supplier of
structural design and integration services, including airframe
modifications for passenger-to-freighter conversions.
Upgrade, Maintenance and Repair Services. The Company provides a
comprehensive range of services for cabin interior products on board
aircraft either between flights or on an overnight basis, or at one or
more of eight service centers in the worldwide service network. The
spectrum of services includes systems check and components repair,
parts inventory and management, refurbishment of seating products, on
board surveys regarding status and product installations, as well as
data support functions such as loading and updating of in- flight
systems entertainment software, direct satellite broadcast systems
support and systems integration.
Specialty Products. The Company manufacturers several specialty
products for the commercial airline industry including crew rest
compartments, flight attendant seats, observer seats, and custom
products in the passenger seating area, as well as fire/smoke barriers
and cargo nets. The Company maintains a staff of engineers to design
and certify various modules and kits to accommodate individual
passenger video and telecommunications modules in seat backs and center
consoles which were originally not designed for such applications. The
Company believes it is able to provide products for unique applications
more rapidly than original manufacturers.
Research, Development and Engineering
The Company works closely with commercial airlines to improve existing
products and identify customers' emerging needs. B/E's expenditures in research,
development and engineering totaled $24.7 million, $45.7 million, and $37.1
million for the six months ended August 29, 1998 and for the fiscal years ended
February 28, 1998, and February 22, 1997, respectively. The increase in expenses
during fiscal 1998 is the result of the substantial completion of the Boeing
Line Fit certification activities for MDDS and ongoing product development
activity in the seating and galley products groups. B/E currently employs
approximately 725 professionals in the engineering and product development
areas. As part of its engineering design, integration, installation and
certification services business acquired in August 1998, the Company added
approximately 105 engineers. The Company believes that it has the largest
engineering organization in the cabin interior products industry, with not only
software, electronic, electrical and mechanical design skills but also
substantial expertise in materials composition and custom cabin interior layout
design.
Marketing and Customers
The Company markets and sells its products directly to virtually all of
the world's major airlines and commercial and general aviation aircraft
manufacturers. The Company markets its general aviation products directly to all
of the world's general aviation air frame manufacturers, modification centers
and operators. B/E has a sales and marketing organization of 138 persons, along
with 48 independent sales representatives. B/E's sales to non-U.S. airlines were
$137.0
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<PAGE>
million, $232.7 million, and $203.4 million for the six months ended August 29,
1998 and for the fiscal years ended February 28, 1998 and February 22, 1997,
respectively, or approximately 46%, 48% and 49%, respectively, of net sales
during such periods.
Airlines select manufacturers of cabin interior products primarily on
the basis of custom design capabilities, product quality and performance, on
time delivery, after-sales service and price. B/E believes that its large
installed base, its timely responsiveness in connection with the custom design,
manufacture, delivery and after-sales service of its products and its broad
product line and stringent customer and regulatory requirements all present
barriers to entry for potential new competitors in the cabin interior products
market.
The Company believes that its integrated worldwide marketing approach,
focused by airline and encompassing the Company's entire product line, is
preferred by airlines. Led by a B/E senior executive, teams representing each
product line serve designated airlines which together accounted for
approximately 67% of the purchases of products manufactured by B/E during fiscal
1998. These airline customer teams have developed customer specific strategies
to meet each airline's product and service needs. The Company also staffs
"on-site" customer engineers at major airlines and airframe manufacturers to
represent its entire product line and work closely with the customers to develop
specifications for each successive generation of products required by the
airlines. These engineers help customers integrate the wide range of cabin
interior products and assist in obtaining the applicable regulatory
certification for each particular product or cabin configuration. Through its
on-site customer engineers, the Company expects to be able to more efficiently
design and integrate products which address the requirements of its customers.
The Company provides program management services, integrating all on-board cabin
interior equipment and systems, including installation and FAA certification,
allowing airlines to substantially reduce costs. The Company believes that it is
one of the only suppliers in the commercial aircraft cabin interior products
industry with the size, resources, breadth of product line and global product
support capability to operate in this manner.
The Company markets its general aviation products directly to all of
the world's general aviation airframe manufacturers, modification centers and
operators.
During the latter part of fiscal 1997, the Company initiated a program
management discipline under which a program manager is assigned for each
significant contract. The program manager is responsible for all aspects of the
specific contract, including management of change orders and negotiation of
related non-recurring engineering charges, monitoring the progress of the
contract through its scheduled delivery dates, and overall profitability
associated with the contract. The Company believes that it and its customers
derive substantial benefit from its program management approach, including
better on-time delivery and higher service levels. The Company also believes its
program management approach results in better customer satisfaction and higher
profitability over the life of the contract.
During the six months ended August 29, 1998 and for the fiscal year
ended February 28, 1998, one customer accounted for approximately 17% and 18%,
respectively, of the Company's total revenues, and no other customer accounted
for more than 10% of such revenues. There were no major customers in fiscal 1997
or 1996. Because of differing schedules of various airlines for purchases of new
aircraft and for retrofit and refurbishment of existing aircraft, the portion of
the Company's revenues attributable to particular airlines varies from year to
year.
Backlog
Management estimates that B/E's backlog at August 29, 1998 was
approximately $700 million, approximately 57% of which management believes to be
deliverable in the 12 month following August 29, 1998, compared with a backlog
of $560 million and $420 million on February 28, 1998 and February 22, 1997,
respectively (as adjusted to exclude certain backlog which was debooked in
August 1997). See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Bookings and Backlog Information."
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<PAGE>
Customer Service
The Company believes that it provides the highest level of customer
service and product support available in the commercial aircraft cabin interior
products industry and that such service is a critical factor in the Company's
success. The key elements of such service include (i) rapid response to requests
for engineering designs, proposal requests and technical specifications; (ii)
flexibility with respect to customized features; (iii) on-time delivery; (iv)
immediate availability of spare parts for a broad range of products; and (v)
prompt attention to customer problems, including onsite customer training.
Customer service is particularly important to airlines due to the high cost to
the airlines of late delivery, malfunctions and other problems.
Warranty and Product Liability
The Company warrants its products, or specific components thereof, for
periods ranging from one to ten years, depending upon product type and
component. The Company generally establishes reserves for product warranty
expense on the basis of the ratio of warranty costs incurred by the product over
the warranty period to sales of the product over the warranty period. Actual
warranty costs reduce the warranty reserve as they are incurred. Management
periodically reviews the adequacy of accrued product warranty reserves; and
revisions of such reserves are recognized in the period in which such revisions
are determined.
The Company also carries product liability insurance. The Company
believes that its insurance is generally sufficient to cover product liability
claims.
Competition
The commercial aircraft cabin interior products market is relatively
fragmented with a number of competitors in each of the individual product
categories. Due to the global nature of the commercial airline industry,
competition in product categories comes from both U.S. and foreign
manufacturers. However, as aircraft cabin interiors have become increasingly
sophisticated and technically complex, airlines have demanded higher levels of
engineering support and customer service than many smaller cabin interior
products suppliers can provide. At the same time, airlines have recognized that
cabin interior product suppliers must be able to integrate a wide range of
products, including sophisticated electronic components, particularly in
wide-body aircraft. Management believes that these increasing demands of
airlines upon their suppliers will result in a number of suppliers leaving the
cabin interior products industry and a consolidation of those suppliers which
remain. The Company has participated in this consolidation through strategic
acquisitions and internal growth and intends to continue to participate in the
consolidation.
The Company's principal competitors for seating products include Group
Zodiac S.A., Keiper Recaro GmbH, and a number of other producers in the European
community and Japan. The Company's principal competitors for PESS products are
Matsushita Electronics and Rockwell Collins. The Company's primary competitors
for galley products are JAMCO Limited, Britax PLC, Scott Aviation and
Intertechnique. The Company's market for general aviation products and services
is highly fragmented, consisting of numerous competitors.
Manufacturing and Raw Materials
The Company's manufacturing operations consist of both the in-house
manufacturing of component parts and sub-assemblies and the assembly of Company
specified and designed component parts which are purchased from outside vendors.
The Company maintains state-of-the-art facilities, and management has an
on-going strategic manufacturing improvement plan utilizing focused factories
and cellular production technologies. Management expects that continuous
improvement from implementation of this plan for each of its product lines will
occur over the next several years and should lower production costs, cycle times
and inventory requirements and at the same time improve product quality and
customer response.
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<PAGE>
Government Regulation
The FAA prescribes standards and licensing requirements for aircraft
components, and licenses component repair stations within the United States.
Comparable agencies regulate such matters in other countries. The Company holds
several FAA component certificates and performs component repairs at a number of
its U.S. facilities under FAA repair station licenses. The Company also holds an
approval issued by the UK Civil Aviation Authority to design, manufacture,
inspect and test aircraft seating products in Leighton Buzzard, England and in
Kilkeel, Northern Ireland and the necessary approvals to design, manufacture,
inspect, test and repair its galley products in Nieuwegein, The Netherlands and
to inspect, test and repair products at its eight service centers throughout the
world.
In March 1992, the FAA adopted Technical Standard Order C127 requiring
that all seats on certain new generation commercial aircraft installed after
such date be certified to meet a number of new safety requirements, including an
ability to withstand a 16G force. Management understands that the FAA plans to
adopt in the near future additional regulations which will require that within
the next five years all seats, including those on existing older commercial
aircraft which are subject to the FAA's jurisdiction, will have to comply with
similar seat safety requirements. At August 29, 1998, the Company had developed
15 different seat models which meet these new seat safety regulations.
Patents
B/E currently holds 67 United States patents and 28 international
patents, covering a variety of products. However, the Company believes that the
termination, expiration or infringement of one or more of such patents would not
have a material adverse effect on the Company.
Employees
As of August 29, 1998, B/E had approximately 5,600 employees.
Approximately 73% of these employees are engaged in manufacturing, 13% in
engineering, research and development, and 14% in sales, marketing, product
support and general administration. Approximately 12% of the employees are
represented by unions. On April 25, 1997, the Company completed negotiations
with one of its two domestic unions which represents 8% of the Company's
employees. This contract, which covers a period of three years, was ratified by
the members of the union on April 26, 1997. The contract at the only other
domestic union which represents approximately 2% of the Company's employees runs
to the year 2003. B/E considers its employee relations to be good.
Property
As of August 29, 1998, B/E had 27 principal facilities, comprising an
aggregate of approximately 1.8 million square feet of space. The following table
describes the principal facilities and indicates the location, function,
approximate size and ownership status of each location, including SMR and ALC:
<TABLE>
<CAPTION>
Facility
Size
Location Products and Function (Sq. Feet) Ownership
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
Corporate
Wellington, Florida....................... Corporate headquarters, finance, marketing 17,700 Owned
sales
Seating Products
Litchfield, Connecticut................... Manufacturing, service and warehousing 147,700 Owned
Winston-Salem, North Carolina............. Manufacturing, research and development, 264,800 Owned
finance, marketing and sales; Seating
Products Group Headquarters
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Facility
Size
Location Products and Function (Sq. Feet) Ownership
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
Leighton Buzzard, England................. Manufacturing, service, research and 114,000 Owned(a)
development, sales support, finance and
warehousing
Kilkeel, Northern Ireland................. Manufacturing, sales support and 38,500 Owned
warehousing
Interior Systems
Anaheim, California....................... Manufacturing, service, research and 57,100 Leased
development, sales support, finance and
warehousing
Delray Beach, Florida..................... Manufacturing, service, research and 52,000 Owned
development, sales support, finance and
warehousing; Interior Systems Group
Headquarters
Lenexa, Kansas............................ Manufacturing, service, engineering and 80,000 Leased
warehousing
Nieuwegein, The Netherlands............... Manufacturing, service, research and 39,000 Leased
development, sales support, finance and
warehousing
PESS Products
Irvine, California........................ Manufacturing, service, research and 106,700 Leased
development, sales support, finance and
warehousing; In-flight Entertainment Group
Headquarters
General Aviation and VIP Products
Miami, Florida............................ Manufacturing, service, research and 84,300 Leased
development, sales support, finance and 71,700 Owned
warehousing; General Aviation Headquarters
Fountain Valley, California............... Manufacturing, service, research and 26,000 Owned
development, sales support, finance and
warehousing
Aerospace Lighting Corporation............ Manufacturing, service, research and 20,115 Leased
development, sales support, finance and
warehousing
Services
Orange, California........................ Upgrade, maintenance, inspection and repair, 106,300 Leased
finance, sales support and warehousing;
Services Group Headquarters
Longwood, Florida......................... Upgrade, maintenance, inspection and repair 5,300 Leased
Burnsville, Minnesota..................... Upgrade, maintenance, inspection and repair 7,200 Leased
Woodville, Washington..................... Upgrade, maintenance, inspection and repair 26,800 Leased
Chesham, England.......................... Upgrade, maintenance, inspection and repair 34,000 Owned(a)
Toulouse, France.......................... Upgrade, maintenance, inspection and repair 400 Leased
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Facility
Size
Location Products and Function (Sq. Feet) Ownership
-------- --------------------- ---------- ---------
<S> <C> <C> <C>
Houston, Texas............................ Upgrade, maintenance, inspection and repair 45,000 Owned
Schiphol, The Netherlands................. Upgrade, maintenance, inspection and repair 3,600 Leased
SMR Technologies
Sharon Center, Ohio....................... Service, research and development, sales 16,282 Owned
support, finance and warehousing
Fenwick, West Virginia.................... Manufacturing, service and warehousing 132,600 Owned
Flight Structure and Integration Group
Arlington, Washington..................... Manufacturing, service, research and 130,164 Leased
development, sales support, finance and
warehousing
Jacksonville, Florida..................... Manufacturing, service, engineering, and 75,000 Owned
warehousing
Wokingham, England........................ Manufacturing, service, research and 70,000 Leased
development, sales support, finance and
warehousing
Wales, England............................ Manufacturing, service and warehousing 80,000 Owned
</TABLE>
- ----------
(a) B/E's owned properties in England are mortgaged to Barclays Bank plc to
collateralize credit facilities of BE Aerospace (U.K.) Ltd. in aggregate
amounts of up to approximately (pound)5.0 million.
The Company believes that its facilities are suitable for their present
intended purposes and adequate for the Company's present and anticipated level
of operations. As a result of recent conditions in the airline industry as
described in "-- Industry Overview" and "-- Recent Industry Conditions," B/E's
facilities have been substantially underutilized for the past several years. The
Company believes that its ongoing facility integration program, together with
anticipated continued growth in airline profitability, should result in
significant improvement in the degree of utilization in the Company's
facilities.
Legal Proceedings
The Company is not a party to litigation or other legal proceedings
which the Company believes could reasonably be expected to have a material
adverse effect on the Company's business, financial condition and results of
operations.
In January 1998, the Company entered into a settlement related to a
long-running dispute with the U.S. Government over export sales between 1992 and
1995 to Iran Air. The dispute centered on shipments of aircraft seats and
related spare parts for five civilian aircraft operated by Iran Air. Iran Air
purchased the seats in 1992 and arranged for them to be installed by a
contractor in France. At the time, Iran was not the subject of a U.S. trade
embargo. In connection with its sale of seats to Iran Air, B/E applied for and
was granted a validated export license by the U.S. Department of Commerce (the
"DOC"). The dispute with the U.S. Government centered on whether seats were
delivered to Iran Air before the formal license was issued by the DOC, some
seven months after B/E first applied for the license. The settlement resolved
all disputes between B/E Aerospace and the Department of Justice as well as the
DOC's Bureau of Export Enforcement. As part of the settlement, B/E plead guilty
to a violation of the International Economic Emergency Powers Act and was placed
on probation for a three-year period. In addition, B/E entered into a consent
order with the DOC under which the DOC has agreed to suspend the imposition of a
three-year export denial order on PTC Aerospace, a member of B/E's U.S. Seating
Products Group, provided no further violations of the export laws occur. The
consent order issued by
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<PAGE>
the DOC applies solely to PTC Aerospace ("PTC"), a unit of the Company's Seating
Products Group. PTC is located in Litchfield, Connecticut. Under the terms of
the consent order, if PTC were to violate any federal export laws during the
three year period ending in January 2001, PTC, not B/E, would be subject to an
order denying export privileges. Under the Company's current organization, the
Company believes that it is unlikely that PTC would be in a position to engage
in any export transactions that are not reviewed and controlled at the Seating
Products Group level. As part of the plea agreement that was negotiated with the
Office of the United States Attorney for the District of Connecticut, B/E is
subject to a three year term of corporate probation that began in January 1998.
The probation is unsupervised and thus B/E is not subject to monitoring or other
conditions that impede or affect its ability to conduct business. Under the
probation, the Company must refrain from violating any federal laws. The Company
has taken steps to implement a legal compliance program to prevent and detect
any violations of law. The Company recorded a charge of $4.7 million in its
fourth quarter of fiscal 1998, which ended February 28, 1998, related to fines,
civil penalties and associated legal fees arising from the settlement.
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<PAGE>
USE OF PROCEEDS
Except as provided by the SMR Acquisition Agreement, the Company will
not receive any of the proceeds from the sale of the Shares of Common Stock by
the Selling Stockholders. See "Selling Stockholders." Any net proceeds received
by the Company will be used for general corporate purposes, including working
capital requirements to support increased sales, and possible investments in
strategic acquisitions.
SELLING STOCKHOLDERS
General
B/E has recently made several acquisitions and, pursuant to the
provisions of the agreements governing such acquisitions, B/E agreed to register
shares of Common Stock issued as consideration in such acquisitions. Each of the
Selling Stockholders received the Shares of Common Stock offered hereby in
connection with either the acquisition of ASI, ALC or SMR.
The following are brief summaries of certain provisions of the
agreements governing the Company's recent acquisitions of ASI, ALC, and SMR.
Such summaries do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, such agreements which will be filed
as exhibits to the Registration Statement. Capitalized terms are defined in the
respective agreements unless otherwise defined herein. Whenever any term therein
is referred to, such definition is incorporated herein by reference.
The ASI Acquisition
On March 27, 1998, pursuant to the terms of an Agreement and Plan of
Reorganization and Merger dated as of March 27, 1998, by and among B/E, BE
Acquisition Corp., ASI, the Gregory and Deborah Fodell Partnership, Ltd. (the
"Fodell Partnership I"), the Gregory and Deborah Fodell Partnership II, Ltd.
(the "Fodell Partnership II" and collectively with the Fodell Partnership I, the
"ASI Sellers") and Gregory N. Fodell (the "ASI Merger Agreement"), B/E acquired
from the ASI Sellers all of the outstanding stock of ASI, a company based in
Houston, Texas that services, cleans and repairs aircraft interior parts and
products. In exchange, the ASI Sellers received a total of 201,895 shares of
Common Stock, representing a purchase price of approximately $5.6 million.
Pursuant to the terms of the ASI Merger Agreement, B/E agreed to register the
shares of Common Stock received by the ASI Sellers.
The shares of Common Stock offered by the ASI Sellers by this
Prospectus were initially issued to the ASI Sellers pursuant to the ASI Merger
Agreement. Gregory N. Fodell is a general partner and limited partner of each of
the ASI Sellers and is currently a Vice President - Major Accounts of B/E
Aerospace Services, Inc., a wholly-owned subsidiary of the Company. Immediately
following the closing under the ASI Merger Agreement, the Fodell Partnership I
beneficially owned 18,354 shares of Common Stock and the Fodell Partnership II
beneficially owned 183,541 shares of Common Stock. The B/E Common Stock
beneficially owned by the ASI Sellers represented approximately 0.7% of the
shares of the Company's Common Stock outstanding on September 9, 1998.
The ALC Acquisition
On July 30, 1998, pursuant to the terms of an Agreement and Plan of
Reorganization and Merger dated as of July 30, 1998, by and among B/E, BE
Aerospace Acquisition Corp, Aerospace Lighting Corp., and Louis J. Francisco,
Elsie M. Francisco, Michael J. Tenzyk, Judith D. Tenzyk, Trustee U/A Gertrude
Brown dated 1/7/92 and Trustee U/A William Brown dated 1/7/92 (together, the
"ALC Sellers") (the "ALC Merger Agreement"), B/E acquired from the ALC Sellers
all of the outstanding stock of Aerospace Lighting Corporation ("ALC"), a
company based in Holbrook, New York, that produces interior fluorescent lighting
systems for business and corporate jet aircraft. In exchange, the ALC Sellers
received a total of 964,780 shares of Common Stock, representing a purchase
price of approximately $28.1 million. Pursuant to the terms of the ALC Merger
Agreement, B/E agreed to register the shares of Common Stock received by the ALC
Sellers.
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<PAGE>
The Shares of Common Stock offered by the ALC Sellers by this
Prospectus were originally issued to the ALC Sellers pursuant to the ALC Merger
Agreement. Immediately following the closing under the ALC Merger Agreement,
Louis J. Francisco owned 260,198 shares of Common Stock, Elsie M. Francisco
owned 61,395 shares of Common Stock, Michael J. Tenzyk owned 160,797 shares of
Common Stock, Judith D. Tenzyk owned 160,797 shares of Common Stock, Trustee U/A
Gertrude Brown dated 1/7/92 owned 78,936 shares of Common Stock and Trustees U/A
William Brown Dated 1/7/92 owned 242,657 shares of Common Stock. The Common
Stock received by the ALC Sellers pursuant to the ALC Merger Agreement
constitute all of the shares of the Company's Common Stock held by them. The B/E
Common Stock owned by the ALC Sellers represented approximately 3.3% of the
shares of the Company's Common Stock outstanding on September 9, 1998.
The SMR Acquisition
On August 7, 1998, pursuant to the terms of an Acquisition Agreement
dated as of July 21, 1998, by and among B/E, Oscar J. Mifsud, Patrick L. Ryan,
David B. Smith, the Oscar J. Mifsud Trust - 1998, the Patrick L. Ryan Trust -
1998 and the David B. Smith Trust - 1998 (the several Trusts together, the "SMR
Sellers" and, collectively with the ASI Sellers and the ALC Sellers, the
"Selling Stockholders") (the "SMR Acquisition Agreement" and, together with the
ASI Merger Agreement and the ALC Merger Agreement, the "Merger Agreements"), B/E
acquired from the SMR Sellers all of the outstanding stock of SMR Aerospace,
Inc., all of the outstanding membership interests of SMR Developers LLC, and all
of the outstanding partnership interests of SMR Associates for a total aggregate
purchase price of approximately $120.0 million, subject to adjustment (the "SMR
Purchase Price). Pursuant to the SMR Acquisition Agreement, the Company issued
4,000,000 shares of Common Stock to the SMR Sellers and paid the SMR Sellers
$2.0 million in cash. The Company also paid $22.0 million in cash to the ESOP of
FSI, a subsidiary of SMR Aerospace, Inc., pursuant to a separate Stock Purchase
Agreement between the ESOP and B/E, to purchase the minority equity interest in
FSI held by the ESOP, bringing the total aggregate purchase price paid by B/E
for SMR to approximately $142.0 million. To the extent the Net Proceeds (as
defined in the SMR Acquisition Agreement), which includes the $2.0 million in
cash already received by the SMR Sellers, from the sale of the 4,000,000 shares
of Common Stock is less than the SMR Purchase Price, the Company will pay such
difference to the SMR Sellers with funds drawn under the Bank Credit Facility.
B/E's obligations to the SMR Sellers under the SMR Acquisition Agreement are
secured by an irrevocable stand-by letter of credit from The Chase Manhattan
Bank in favor of the SMR Sellers. If such Net Proceeds exceed the SMR Purchase
Price, the SMR Sellers will remit such excess to the Company. Pursuant to the
terms of the SMR Acquisition Agreement, B/E agreed to register the shares of
Common Stock received by the SMR Sellers.
SMR is a leader in providing design, integration, installation and
certification services for commercial aircraft passenger cabin interiors. SMR
provides a broad range of interior reconfiguration services which allow airlines
to change the size of certain classes of service, modify and upgrade the
seating, install telecommunications or entertainment options, relocate galleys,
lavatories, and overhead bins, and install crew rest compartments. SMR is also a
supplier of structural design and integration services, including airframe
modifications for passenger-to-freighter conversions. In addition, SMR provides
a variety of niche products and components that are used to facilitate
reconfigurations and conversions. SMR's services are performed primarily on an
aftermarket basis, and its customers include major airlines, such as United
Airlines, Japan Airlines, British Airways, Air France, Cathay Pacific and
Qantas, as well as Boeing, Airborne Express and Federal Express.
The shares of Common Stock offered by the SMR Sellers by this
Prospectus were originally issued to the SMR Sellers pursuant to the SMR
Acquisition Agreement. The Common Stock issued to the SMR Sellers constitute all
of the shares of Common Stock that are beneficially owned by the SMR Sellers and
represent approximately 13.7% of the shares of the Company's Common Stock
outstanding on September 9, 1998.
Set forth below are the names of each Selling Stockholder, the number
of shares of Common Stock beneficially owned as of September 9, 1998 by each
Selling Stockholder, the number of Shares that may be offered and sold by or on
behalf of each Selling Stockholder hereunder and the amount of Common Stock to
be owned by each Selling Stockholder upon the completion of the Offering if all
Shares offered by such Selling Stockholder are sold. Except as set forth below,
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<PAGE>
as of September 9, 1998, none of the Selling Stockholders beneficially owns more
than 1% of the outstanding Common Stock and, to the knowledge of the Company,
except for Gregory Fodell, who is an employee of the Company, none of the
Selling Stockholders has had any material relationships with the Company
subsequent to the closings of the respective acquisitions of ASI, ALC and SMR.
Any and all of the Shares listed below under the heading "Shares Offered" may be
offered for sale by or on behalf of the Selling Stockholders. Except as provided
by the Share Disposition Agreement (as defined herein) and the Merger
Agreements, the Selling Stockholders may sell the Shares of Common Stock offered
hereby from time to time and, as a result, no estimate can be given as of the
date hereof as to the amount of Shares of Common Stock that will actually be
offered for sale by the Selling Stockholders or as to the amount of Common Stock
that will be held by the Selling Stockholders upon termination of such offering.
See "Plan of Distribution." Additional information as to the number and
percentage of Shares beneficially owned before the offering by the Selling
Stockholders, the number of Shares to be sold and the number of Shares
beneficially owned after the offering will be set forth in an accompanying
Prospectus Supplement, to the extent necessary.
<TABLE>
<CAPTION>
Shares Beneficially
Owned Shares Beneficially
Prior to Offering Owned After Offering
--------------------- Shears ---------------------
Selling Stockholders Number Percent Offered Number Percent
-------------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
ASI Sellers:
Gregory and Deborah Fodell Partnership, Ltd. 18,354 * 18,354 -- --
Gregory and Deborah Fodell Partnership II, Ltd. 183,541 * 183,541 -- --
ALC Sellers:
Elise M. Francisco 61,395 * 61,395 -- --
Louis J. Francisco 260,198 * 260,198 -- --
Judith D. Tenzyk 160,797 * 160,797 -- --
Michael J. Tenzyk 160,797 * 160,797 -- --
Trustees U/A Gertrude Brown dated 1/7/92 78,936 * 78,936 -- --
Trustees U/A William Brown dated 1/7/92 242,657 * 242,657 -- --
SMR Sellers:
Oscar J. Mifsud Trust - 1998 1,333,334 4.56 1,333,334 -- --
Patrick L. Ryan Trust - 1998 1,333,333 4.56 1,333,333 -- --
David B. Smith Trust - 1998 1,333,333 4.56 1,333,333 -- --
</TABLE>
- ---------------
* The percentage of shares of Common Stock beneficially owned does not exceed
one percent of the outstanding shares of Common Stock as of September 9,
1998.
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<PAGE>
PLAN OF DISTRIBUTION
The SMR Sellers may sell the shares of Common Stock offered
hereby from time to time subject to the terms of the SMR Acquisition Agreement
and the Share Disposition Agreement (the "Share Disposition Agreement") by and
between B/E and the SMR Sellers dated July 21, 1998, pursuant to which the SMR
Sellers agreed to sell the SMR Shares only on such terms and conditions, and at
such times as directed and approved by B/E. The ASI Sellers and the ALC Sellers
may sell shares of Common Stock offered hereby from time to time subject to the
terms of the ASI Merger Agreement and the ALC Merger Agreement, respectively.
The Company has been advised by each of the Selling Stockholders that sales by
such Selling Stockholders of the Shares of Common Stock offered hereby may be
offered or sold by or for the account of such Selling Stockholders, from time to
time, to purchasers directly, or through brokers in brokerage transactions on
the Nasdaq National Market, or to underwriters or dealers in negotiated
transactions or in a combination of such methods of sale, at fixed prices which
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Selling
Stockholders may be deemed to be underwriters within the meaning of the
Securities Act. Where any Selling Stockholder effects such transactions by
selling to or through one or more broker-dealers, such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Stockholders. The Selling Stockholders and any
broker-dealers that participate in the distribution may under certain
circumstances be deemed to be underwriters within the meaning of the Securities
Act, and any commissions received by such broker-dealers and any profits
realized on the resale of shares by them may be deemed to be underwriting
discounts and commissions under the Securities Act. Alternatively, where the
Selling Stockholders from time to time offer the Shares through underwriters,
brokers, dealers or agents, such underwriters, brokers, dealers or agents may
receive compensation in the form of underwriting discounts, commissions or
concessions from the Selling Stockholders and/or the purchasers of the Shares
for whom they act as an agent. The Merger Agreements provide that the Company
indemnify the Selling Stockholders against certain liabilities, including
liabilities under the Securities Act. The Merger Agreements also provide for the
indemnification of the Company by the Selling Stockholders for certain
liabilities, including liabilities under the Securities Act.
To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing (a) the name of any Selling Stockholder;
(b) the name of any underwriters, brokers, dealers or agents effecting the
transaction on behalf of the Selling Stockholder; (c) the number of shares
involved; (d) the price at which such shares are to be sold; (e) the commissions
paid or discounts or concessions allowed to such underwriters, brokers, dealers
or agents, where applicable; (f) that such underwriters, brokers, dealers or
agents did not conduct any investigation to verify the information set out or
incorporated by reference in this Prospectus, as supplemented, where applicable;
and (g) other facts material to the transaction.
Pursuant to the Merger Agreements, the Company has agreed to pay
substantially all fees and expenses incident to the preparation, filing,
amending and supplementing of the Registration Statement of which this
Prospectus is a part and any registration, filing, qualification and other fees
and expenses of complying with state Blue Sky or securities law. In addition, in
connection with the acquisition of SMR, the Company has agreed to pay all
applicable stock transfer taxes, brokerage commissions, underwriting discounts
or commissions and any fees of the SMR Sellers' counsel. In connection with the
acquisitions of ASI and ALC, the ASI Sellers and the ALC Sellers will pay all
applicable stock transfer taxes, brokerage commissions, underwriting discounts
or commissions and any fees of such Selling Stockholders' counsel.
Pursuant to the Merger Agreements, and subject to certain conditions,
the Company has agreed to keep the Registration Statement relating to the
offering and sale by the Selling Stockholders of the shares of Common Stock
continuously effective until a fixed date following the effectiveness of the
Registration Statement or such earlier date as of which all shares of Common
Stock registered hereunder have been disposed of.
In addition to offering the shares from time to time pursuant to the
Registration Statement (the "shelf portion of the offering"), certain of the
Shares may be sold in a potential underwritten offering (the "underwritten
portion of the offering"). Pursuant to the SMR Acquisition Agreement, the
Company has agreed to use commercially reasonable efforts to try to effectuate a
fully underwritten public offering of Common Stock which will include the Shares
issued to the SMR
-41-
<PAGE>
Sellers. While the Company has no obligation to try to effectuate such an
underwritten offering on behalf of the ASI or ALC Sellers, the ASI and ALC
Sellers could elect to participate, in whole or in part, in any such
underwritten offering, subject to certain exceptions, pursuant to their
respective "piggyback" registration rights contained in the Merger Agreements.
In the event that not all of the Shares are sold in any such underwritten
portion of the offering, or to the extent certain Selling Stockholders choose
not to participate in any such underwritten portion of the offering, such unsold
Shares may be offered by the Selling Stockholders as otherwise described herein
in the shelf portion of the offering. Sales of a substantial number of shares of
Common Stock in the public market, either in the shelf portion of the offering
or the underwritten portion of the offering or otherwise, could adversely effect
the market price of the Common Stock. In addition, there is no assurance that
purchasers who buy Common Stock in the shelf portion of the offering, either
before or after any such underwritten portion of the offering, will receive such
shares on similar terms as those who receive shares in the underwritten portion
of the offering. The public offering price for Shares offered in any
underwritten portion of the offering will be determined through negotiations
between the Company, any Selling Stockholders and the underwriters participating
in such offering and may not be indicative of the market price of the Common
Stock following any such underwritten portion of the offering or during the
shelf portion of the offering.
-42-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock,
$0.01 par value, of which 28,309,929 shares were outstanding as of September 22,
1998, and held by approximately 721 stockholders of record. Holders of Common
Stock are entitled to one vote per share on all matters to be voted upon by the
stockholders and to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor. The indentures relating to
the Company's 9 7/8% Notes and 8% Notes and the Bank Credit Agreement, however,
currently restrict dividend payments by the Company to its stockholders. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock have the right to a ratable portion of the assets remaining after
payment of liabilities. Holders of Common Stock do not have cumulative voting,
preemptive, redemption or conversion rights. All outstanding shares of Common
Stock are, and the shares to be sold in this offering will be, fully paid and
non-assessable.
Preferred Stock
The Company's Restated Certificate of Incorporation (the "Certificate")
provides, among other things, for the authorization of 1,000,000 shares of
Preferred Stock, $0.01 par value (the "Preferred Stock"). The shares of
Preferred Stock may be issued from time to time at the discretion of the Board
of Directors without stockholder approval. The Board of Directors is authorized
to issue these shares in different classes and series and, with respect to each
class or series, to determine the dividend rate, the redemption provisions,
conversion provisions, liquidation preference and other rights and privileges
not in conflict with the Certificate. No shares of Preferred Stock are
outstanding, and the Company has no immediate plans to issue any Preferred
Stock. While issuance of Preferred Stock could provide needed flexibility in
connection with possible acquisitions and other corporate purposes, such
issuance could also make it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company or discourage an attempt
to gain control of the Company. In addition, the Board of Directors, without
stockholder approval, can issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the voting power and other rights
of the holders of Common Stock.
Directors' Exculpation and Indemnification
The Certificate provides that no director of the Company shall be
liable to the Company or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except to the extent otherwise required by the
Delaware General Corporation Law (the "DGCL"). The effect of this provision of
the Certificate is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of a fiduciary duty of care as a
director. This provision does not limit or eliminate the rights of the Company
or any stockholder to seek non-monetary relief, such as an injunction or
rescission in the event of a breach of a director's duty of care. In addition,
the Certificate provides that, if the DGCL is amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
the directors shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. These provisions will not alter the liability of
directors under federal or state securities laws. The Certificate also includes
provisions for the indemnification of the Company's directors and officers to
the fullest extent permitted by Section 145 of the DGCL.
Election and Removal of Directors
The Certificate classifies the board of directors into three classes,
as nearly equal in number as possible, so that each director will serve for
three years, with one class of directors being elected each year. The
Certificate also provides that directors may be removed for cause only with the
approval of the holders of at least two-thirds of the voting power of the
Company's shares entitled to vote generally in the election of directors at an
annual meeting or special meeting called for such purpose. In addition, the
Certificate requires at least two-thirds of the voting power of the Company's
shares entitled to vote generally in the election of directors at an annual
meeting or special meeting called for such purpose to alter, amend or repeal the
provisions relating to the classified board and removal of directors described
above.
-43-
<PAGE>
Management believes that the Certificate provisions described in the
preceding paragraph (the "Provisions"), taken together, reduce the possibility
that a third party could effect a change in the composition of the Company's
board of directors without the support of the incumbent board. The Provisions,
however, may have significant effects on the ability of stockholders of the
Company to change the composition of the incumbent board, to benefit from
transactions which are opposed by the incumbent board, to assume control of the
Company or effect a fundamental corporate transaction such as a merger.
Nevertheless, although the Company has not experienced any problems in the past
with the continuity or stability of the board, management believes that the
Provisions help assure the continuity and stability of the Company's policies in
the future, since the majority of the directors at any time will have prior
experience as directors of the Company.
Section 203 of the Delaware General Corporation Law
The Company is subject to the provisions of Section 203 of the DGCL.
That section provides, with certain exceptions, that a Delaware corporation may
not engage in any of a broad range of business combinations with a person or
affiliate, or associate of such person, who is an "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person becoming an
interested stockholder, or the business combination, is approved by the board of
directors of the corporation before the person becomes an interested
stockholder, (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation in the same transaction that makes
it an interested stockholder (excluding shares owned by persons who are both
officers and directors of the corporation, and shares held by certain employee
stock ownership plans); or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. An "interested
stockholder" is defined as any person that is (i) the owner of 15% or more of
the outstanding voting stock of the corporation or (ii) an affiliate or
associate of the corporation and was the owner of 15% or more of the outstanding
voting stock of the corporation at any time within the three-year period
immediately prior to the date on which it is sought to be determined whether
such person is an interested stockholder.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's Common Stock is
Boston EquiServe L.P., Canton, Massachusetts 02021.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Shares of
Common Stock offered hereby will be passed upon for the Company by Shearman &
Sterling, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company
appearing in its annual report on Form 10-K for the fiscal year ended February
28, 1998, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports included therein and incorporated herein by reference.
Such consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of SMR as of December 31, 1997
and 1996 and for the years ended December 31, 1997 and 1996, have been audited
by Zalick, Torok, Kirgesner, Cook & Co., independent auditors, as stated in
their reports incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
-44-
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson or other person has been authorized to give any
information or make any representation not contained in this Prospectus
Supplement or Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the Company
any Selling Stockholder or any Underwriter. This Prospectus Supplement and the
Prospectus do not constitute an offer to sell or a solicitation of an offer to
buy any of the securities offered hereby in any jurisdiction to any person to
whom it is unlawful to make such offer in such jurisdiction. Neither the
delivery of this Prospectus Supplement or the Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
----------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Summary ................................................................. S-3
Price Range of Common Stock ............................................. S-10
Dividend Policy ......................................................... S-10
Capitalization .......................................................... S-11
Use of Proceeds ......................................................... S-12
Selected Financial Data ................................................. S-13
Pro Forma Consolidated Financial Data ................................... S-15
Management .............................................................. S-23
Principal and Selling Stockholders ...................................... S-27
Underwriting ............................................................ S-30
Notice to Canadian Residents ............................................ S-32
Legal Matters ........................................................... S-33
Page
----
PROSPECTUS
Available Information ..................................................... 2
Incorporation of Certain Documents
by Reference .......................................................... 2
The Company ............................................................... 3
Risk Factors .............................................................. 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ............................................................ 11
Cautionary Statement Regarding
Forward-Looking Statements ............................................ 20
Business .................................................................. 21
Use of Proceeds ........................................................... 38
Selling Stockholders ...................................................... 38
Plan of Distribution ...................................................... 41
Description of Capital Stock .............................................. 43
Legal Matters ............................................................. 44
Experts ................................................................... 44
- --------------------------------------------------------------------------------
BE Aerospace, Inc.
[B/E Logo]
4,000,000 Shares
Common Stock
($0.01 par value)
PROSPECTUS SUPPLEMENT
Credit Suisse First Boston
BT. Alex Brown
Morgan Stanley Dean Witter
PaineWebber Incorporated
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission registration fee......... $ 49,955
Printing.................................................... **
Legal fees and expenses..................................... **
Nasdaq National Market Additional Listing Fee............... 39,038
Accounting fees and expenses................................ **
Miscellaneous............................................... **
--------
Total.............................................. $ **
========
- ---------------
* Estimated
** To be provided by amendment
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, as amended
("DGCL") provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amount paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Section
145 further provides that a corporation similarly may indemnify any such person
serving in any such capacity who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor, against expenses actually
and reasonably incurred in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Registrant's Restated Certificate of Incorporation (the
"Certificate") provides that the Company's Directors shall be liable to the
Registrant or its stockholders for monetary damages for breach of fiduciary duty
as a director except to the extent that exculpation from liabilities is not
permitted under the DGCL as in effect at the time such liability is determined.
The Registrant's Certificate further provides that the Registrant shall
indemnify its directors and officers to the fullest extent permitted by the
DGCL.
II-1
<PAGE>
The directors and officers of the Company are covered under directors'
and officer's liability insurance policies maintained by the Company.
Item 16. Exhibits and Financial Statement Schedules
Exhibit
Number Description
- ------ -----------
Exhibit 3 Articles of Incorporation and By-Laws
3.1 Amended and Restated Certificate of Incorporation*
3.2 Certificate or Amendment of the Restated Certificate
of Incorporation*
3.3 Amended and Restated By-Laws*
Exhibit 4 Instruments defining the rights of security
holders, including debentures
4.1 Specimen Common Stock Certificate*
4.2 Form of Note for the Registrant's Series B 9-7/8%
Senior Subordinated Notes*
4.3 Indenture dated January 24, 1996 between Fleet
National Bank, as trustee, and the Registrant
relating to the Registrant's 9-7/8% Senior
Subordinated Notes and Series B 9-7/8% Senior
Subordinated Notes*
4.4 Indenture dated February 13, 1998 for the
Registrant's issue of 8% Senior Subordinated Notes*
4.5 Form of Note for the Registrant's 8% Senior
Subordinated Notes*
4.6 Form of Stockholders' Agreement by and among the
Registrant, Summit Ventures II, L.P., Summit
Investors II, L.P. and Wedbush Capital Partners*
Exhibit 5
5.1 Opinion of Shearman & Sterling*
Exhibit 10(i) Material Contracts
10.1 Supply Agreement dated as of April 17, 1990 between
the Registrant and Applied Extrusion Technologies,
Inc.*
10.2 Amended and Restated Credit Agreement (the "Chase
Credit Agreement"), dated as of May 18, 1994 among
the Registrant, the banks named therein and The Chase
Manhattan Bank, N.A. as Agent*
10.3 Amendment No. 1 dated May 18, 1994 to the Chase
Credit Agreement*
10.4 Second Amended and Restated Chase Credit Agreement
dated January 19, 1996*
10.5 Third Amended and Restated Chase Credit Agreement
dated May 29, 1997*
10.6 Fourth Amended and Restated Chase Credit Agreement
dated April 3, 1998*
10.6(a) Fifth Amended and Restated Credit Agreement dated
August 7, 1998*
10.7 Receivables Sales Agreement dated January 24, 1996
among the Registrant, First Trust of Illinois, N.A.
and Centrally Held Eagle Receivables Program, Inc.*
10.8 Escrow Agreement dated January 24, 1996 among the
Registrant, Eagle Industrial Product Corporation and
First Trust of Illinois, N.A. as Escrow Agent*
10.9 Acquisition Agreement dated as of December 14, 1995
by and among the Registrant, Eagle Industrial
Products Corporation, Eagle Industries, Inc. and
Great American Management and Investment, Inc.*
10.10 Asset Purchase Agreement dated as of April 16, 1998
by and between Stanford Aerospace Group, Inc. and the
Registrant*
10.11 Stock Purchase Agreement dated as of March 31, 1998
by and between the Registrant and Puritan Bennet
Corporation*
10.12 Acquisition Agreement dated July 21, 1998 among the
Registrant and Sellers named therein*
Exhibit 10(ii) Leases
10.13 Lease dated May 15, 1992 between McDonnell Douglas
Company, as lessor, and the Registrant, as lessee,
relating to the Irvine, California property*
10.14 Lease dated September 1, 1992 relating to the
Wellington, Florida property*
II-2
<PAGE>
10.15 Chesham, England Lease dated October 1, 1973 between
Drawheath Limited and the Peninsular and Oriental
Steam Navigation Company (assigned in February 1985)*
10.16 Utrecht, The Netherlands Lease dated December 15,
1988 between the Pension Fund Foundation for Food
Supply Commodity Boards and Inventum*
10.17 Utrecht, The Netherlands Lease dated January 31, 1992
between G.W. van de Grift Onroerend Goed B.V. and
Inventum*
10.18 Lease dated October 25, 1993 relating to the property
in Longwood, Florida*
Exhibit 10(iii) Executive Compensation Plans and Arrangements
10.19 Amended and Restated 1989 Stock Option Plan
10.20 Directors' 1991 Stock Option Plan*
10.21 1990 Stock Option Agreement with Richard G.
Hamermesh*
10.22 1990 Stock Option Agreement with B. Martha Cassidy
10.23 1990 Stock Option Agreement with Jim C. Cowart*
10.24 1990 Stock Option Agreement with Petros A.
Palandjian*
10.25 1990 Stock Option Agreement with Hansjorg Wyss*
10.26 1991 Stock Option Agreement with Amin J. Khoury*
10.27 1991 Stock Option Agreement with Jim C. Cowart*
10.28 1992 Stock Option Agreement with Amin J. Khoury*
10.29 1992 Stock Option Agreement with Jim C. Cowart*
10.30 1992 Stock Option Agreement with Paul W. Marshall*
10.31 1992 Stock Option Agreement with David Lahar*
10.32 United Kingdom 1992 Employee Share Option Scheme*
10.33 1994 Employee Stock Purchase Plan*
10.34 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Amin J.
Khoury*
10.35 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Robert J.
Khoury*
10.36 Employment Agreement dated as of March 1, 1992
between the Registrant and Marco Lanza (the "Lanza
Agreement")*
10.37 Amendment No. 1 dated as of January 1, 1996 to the
Lanza Agreement*
10.38 Employment Agreement dated as of April 1, 1992
between the Registrant and G. Bernard Jewell*
10.39 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Thomas P.
McCaffrey*
10.40 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Paul E.
Fulchino*
10.41 BE Aerospace, Inc. Savings and Profit Sharing Plan
and Trust -- Financial Statements for the Ten Months
Ended December 31, 1995 and the Year Ended February
28, 1995, Supplemental Schedules and Independent
Auditors' Report*
10.42 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan
Financial Statements as of February 29, 1996 and
February 26, 1995; and for the Year Ended February
29, 1996 and the period from May 15, 1994 (inception)
to February 28, 1995 and Independent Auditors'
Report*
Exhibit 23 Consent of Experts and Counsel
23.1 Consent of Independent Accountants -- Deloitte &
Touche LLP
23.2 Consent of Shearman & Sterling (Included in Exhibit
5.1)
23.3 Consent of Independent Accountants -- Zalick, Torok,
Kirgesner, Cook & Co.
Exhibit 24 Power of Attorney
24.1 Power of Attorney (Included on page II-6)
Exhibit 99
99.1 Agreement and Plan of Reorganization and Merger dated
March 27, 1998 by and among the Registrant, BE
Acquisition Corp., Aerospace Interiors, Inc., Gregory
and Deborah Fodell Partnership, Ltd., Gregory and
Deborah Fodell Partnership II, Ltd. and Gregory N.
Fodell*
II-3
<PAGE>
99.2 Agreement and Plan of Reorganization and Merger dated
as of July 30, 1998 by and among the Registrant, BE
Aerospace Acquisition Corp., Aerospace Lighting
Corp., and Louis J. Francisco, Elsie M. Francisco,
Michael J. Tenzyk, Judith D. Tenzyk, Trustees U/A
Gertrude Brown dated 1/7/92 and Trustee U/A William
Brown dated 1/7/92.*
- -------------------
* Previously filed and incorporated by reference herein. See Exhibit Index.
Item 17. Undertakings
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act, unless the information required to be included in
such post-effective amendment is contained in a periodic report filed
by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act and incorporated herein by reference;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement, unless the information required to be
included in such post-effective amendment is contained in a periodic
report filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Exchange Act and incorporated herein by reference.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the
low or high and of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where
interim financial information is required to be presented by Article 3 of
Regulation S-X is not
II-4
<PAGE>
set forth in the prospectus, to deliver, or cause to be delivered to each person
to whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
financial information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions described in Item 15, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Company has
duly caused this Amendment to the Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Wellington and the State of Florida, on the 30th day of September, 1998.
BE AEROSPACE, INC.
By: *
--------------------------------------
Title: Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act, this Amendment to
the Registration Statement has been signed by the following persons in the
capacities indicated below on the 30th day of September, 1998.
Signature Title
- --------- -----
* Chairman of the Board of Directors
- ---------------------------
Amin J. Khoury
* Vice Chairman of the Board of Directors and Chief
- --------------------------- Executive Officer (principal executive officer)
Robert J. Khoury
* President, Chief Operating Officer and Director
- ---------------------------
Paul E. Fulchino
* Corporate Senior Vice President of Administration,
- --------------------------- Chief Financial Officer and Assistant Secretary
Thomas P. McCaffrey (principal financial and accounting officer)
* Director
- ---------------------------
Jim C. Cowart
* Director
- ---------------------------
Richard G. Hamermesh
* Director
- ---------------------------
Brian H. Rowe
* Director
- ---------------------------
Hansjorg Wyss
*By: /s/ Thomas P. McCaffrey
-----------------------
Thomas P. McCaffrey
Attorney-in-fact
II-6
<PAGE>
Exhibit Index
Exhibit
Number Description
- ------ -----------
Exhibit 3 Articles of Incorporation and By-Laws
3.1 Amended and Restated Certificate of Incorporation(1)
3.2 Certificate or Amendment of the Restated Certificate
of Incorporation(2)
3.3 Amended and Restated By-Laws(14)
Exhibit 4 Instruments defining the rights of security
holders, including debentures
4.1 Specimen Common Stock Certificate(1)
4.2 Form of Note for the Registrant's Series B 9-7/8%
Senior Subordinated Notes(3)
4.3 Indenture dated January 24, 1996 between Fleet
National Bank, as trustee, and the Registrant
relating to the Registrant's 9-7/8% Senior
Subordinated Notes and Series B 9-7/8% Senior
Subordinated Notes(3)
4.4 Indenture dated February 13, 1998 for the
Registrant's issue of 8% Senior Subordinated Notes(4)
4.5 Form of Note for the Registrant's 8% Senior
Subordinated Notes(4)
4.6 Form of Stockholders' Agreement by and among the
Registrant, Summit Ventures II, L.P., Summit
Investors II, L.P. and Wedbush Capital Partners(5)
Exhibit 5
5.1 Opinion of Shearman & Sterling*
Exhibit 10(i) Material Contracts
10.1 Supply Agreement dated as of April 17, 1990 between
the Registrant and Applied Extrusion Technologies,
Inc.(1)
10.2 Amended and Restated Credit Agreement (the "Chase
Credit Agreement"), dated as of May 18, 1994 among
the Registrant, the banks named therein and The Chase
Manhattan Bank, N.A. as Agent(6)
10.3 Amendment No. 1 dated May 18, 1994 to the Chase
Credit Agreement(7)
10.4 Second Amended and Restated Chase Credit Agreement
dated January 19, 1996(3)
10.5 Third Amended and Restated Chase Credit Agreement
dated May 29, 1997(4)
10.6 Fourth Amended and Restated Chase Credit Agreement
dated April 3, 1998(4)
10.6(a) Fifth Amended and Restated Credit Agreement dated
August 7,1998*
10.7 Receivables Sales Agreement dated January 24, 1996
among the Registrant, First Trust of Illinois, N.A.
and Centrally Held Eagle Receivables Program, Inc.(3)
10.8 Escrow Agreement dated January 24, 1996 among the
Registrant, Eagle Industrial Product Corporation and
First Trust of Illinois, N.A. as Escrow Agent(3)
10.9 Acquisition Agreement dated as of December 14, 1995
by and among the Registrant, Eagle Industrial
Products Corporation, Eagle Industries, Inc. and
Great American Management and Investment, Inc.(8)
10.10 Asset Purchase Agreement dated as of April 16, 1998
by and between Stanford Aerospace Group, Inc. and the
Registrant(9)
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<PAGE>
10.11 Stock Purchase Agreement dated as of March 31, 1998
by and between the Registrant and Puritan Bennet
Corporation(10)
10.12 Acquisition Agreement dated July 21, 1998 among the
Registrant and Sellers named therein(16)
Exhibit 10(ii) Leases
10.13 Lease dated May 15, 1992 between McDonnell Douglas
Company, as lessor, and the Registrant, as lessee,
relating to the Irvine, California property(2)
10.14 Lease dated September 1, 1992 relating to the
Wellington, Florida property(2)
10.15 Chesham, England Lease dated October 1, 1973 between
Drawheath Limited and the Peninsular and Oriental
Steam Navigation Company (assigned in February
1985)(14)
10.16 Utrecht, The Netherlands Lease dated December 15,
1988 between the Pension Fund Foundation for Food
Supply Commodity Boards and Inventum(14)
10.17 Utrecht, The Netherlands Lease dated January 31, 1992
between G.W. van de Grift Onroerend Goed B.V. and
Inventum(14)
10.18 Lease dated October 25, 1993 relating to the property
in Longwood, Florida(6)
Exhibit 10(iii) Executive Compensation Plans and Arrangements
10.19 Amended and Restated 1989 Stock Option Plan(11)
10.20 Directors' 1991 Stock Option Plan(11)
10.21 1990 Stock Option Agreement with Richard G.
Hamermesh(11)
10.22 1990 Stock Option Agreement with B. Martha
Cassidy(11)
10.23 1990 Stock Option Agreement with Jim C. Cowart(11)
10.24 1990 Stock Option Agreement with Petros A.
Palandjian(11)
10.25 1990 Stock Option Agreement with Hansjorg Wyss(11)
10.26 1991 Stock Option Agreement with Amin J. Khoury(11)
10.27 1991 Stock Option Agreement with Jim C. Cowart(11)
10.28 1992 Stock Option Agreement with Amin J. Khoury(11)
10.29 1992 Stock Option Agreement with Jim C. Cowart(11)
10.30 1992 Stock Option Agreement with Paul W. Marshall(11)
10.31 1992 Stock Option Agreement with David Lahar(11)
10.32 United Kingdom 1992 Employee Share Option Scheme(2)
10.33 1994 Employee Stock Purchase Plan(12)
10.34 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Amin J.
Khoury(15)
10.35 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Robert J.
Khoury(15)
10.36 Employment Agreement dated as of March 1, 1992
between the Registrant and Marco Lanza (the "Lanza
Agreement")(14)
10.37 Amendment No. 1 dated as of January 1, 1996 to the
Lanza Agreemen(13)
10.38 Employment Agreement dated as of April 1, 1992
between the Registrant and G. Bernard Jewell(14)
10.39 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Thomas P.
McCaffrey(15)
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<PAGE>
10.40 Amended and Restated Employment Agreement dated as of
May 29, 1998 between the Registrant and Paul E.
Fulchino(15)
10.41 BE Aerospace, Inc. Savings and Profit Sharing Plan
and Trust -- Financial Statements for the Ten Months
Ended December 31, 1995 and the Year Ended February
28, 1995, Supplemental Schedules and Independent
Auditors' Report(14)
10.42 BE Aerospace, Inc. 1994 Employee Stock Purchase Plan
Financial Statements as of February 29, 1996 and
February 26, 1995; and for the Year Ended February
29, 1996 and the period from May 15, 1994 (inception)
to February 28, 1995 and Independent Auditors'
Report(14)
Exhibit 23 Consent of Experts and Counsel
23.1 Consent of Independent Accountants -- Deloitte &
Touche LLP**
23.2 Consent of Shearman & Sterling (Included in Exhibit
5.1)
23.3 Consent of Independent Accountants -- Zalik, Torok,
Kirgesner, Cook & Co.**
Exhibit 24 Power of Attorney
24.1 Power of Attorney (Included on page II-6)
Exhibit 99
99.1 Agreement and Plan of Reorganization and Merger dated
March 27, 1998 by and among the Registrant, BE
Acquisition Corp., Aerospace Interiors, Inc., Gregory
and Deborah Fodell Partnership, Ltd., Gregory and
Deborah Fodell Partnership II, Ltd. and Gregory N.
Fodell*
99.2 Agreement and Plan of Reorganization and Merger dated
as of July 30, 1998 by and among the Registrant, BE
Aerospace Acquisition Corp., Aerospace Lighting
Corp., and Louis J. Francisco, Elsie M. Francisco,
Michael J. Tenzyk, Judith D. Tenzyk, Trustees U/A
Gertrude Brown dated 1/7/92 and Trustee U/A William
Brown dated 1/7/92.*
- -------------------
* Previously filed.
** Filed herein.
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1, as amended (No. 33-33689), filed with the Commission on March
7, 1990.
(2) Incorporated by reference to the Company's Registration Statement on
Form S-1, as amended (No. 33-54146), filed with the Commission on
November 3, 1992.
(3) Incorporated by reference to the Company's Registration Statement on
Form S-4 (No. 333-00433), filed with the Commission on January 26,
1996.
(4) Incorporated by reference to the Company's Registration Statement on
Form S-4 (No. 333-47649), filed with the Commission on March 10, 1998.
(5) Incorporated by reference to the Company's Registration Statement on
Form S-2 (No. 33-66490), filed with the Commission on July 23, 1993.
(6) Incorporated by reference to the Company's Annual Report on Form 10-K
as amended for the Fiscal year ended February 26, 1994, filed with the
Commission on May 25, 1994.
(7) Incorporated by reference to the Company's Annual Report on Form 10-K
as amended for the Fiscal year ended February 25, 1995, filed with the
Commission on May 26, 1995.
(8) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 14, 1995, filed with the Commission on December 28,
1995.
iii
<PAGE>
(9) Incorporated by reference to the Company's Current Report on Form 8-K
dated May 8, 1998, filed with the Commission on May 8, 1998.
(10) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 31, 1998, filed with the Commission on April 27, 1998.
(11) Incorporated by reference to the Company's Registration Statement on
Form S-8 (No. 33-48119), filed with the Commission on May 26, 1992.
(12) Incorporated by reference to the Company's Registration Statement on
Form S-8 (No. 33-82894), filed with the Commission on August 16, 1994.
(13) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 26, 1996, filed with the Commission on April 5, 1996.
(14) Incorporated by reference to the Company's Annual Report on Form 10-K
as amended for the Fiscal year ended February 28, 1998, filed with the
Commission on May 29, 1998.
(15) Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended May 30, 1998, filed with the Commission on
July 14, 1998.
(16) Incorporated by reference to the Company's Current Report on Form 8-K
dated August 24, 1998, filed with the Commission on August 24, 1998.
Conformed Copy
Exhibit 23.1
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Amendment No. 3 to
Registration Statement No. 333-60209 of B/E Aerospace, Inc. on Form S-3 of our
report dated April 15, 1998, appearing in and incorporated by reference in the
Annual Report on Form 10-K of B/E Aerospace, Inc. for the year ended February
28, 1998 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
September 30, 1998
Conformed Copy
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form-3 of our report dated February 7, 1998, except for Note 20, as
to which the date is August 7, 1998, relating to the consolidated and combined
financial statements of SMR Aerospace, Inc. (an S Corporation), its affiliates,
and subsidiaries, which appears in the Form 8-K of B/E Aerospace, Inc. dated
August 7, 1998 and to the reference to our Firm under the caption "Experts" in
the Form S-3.
/s/ Zalik, Torok, Kirgesner, Cook & Co.
Cleveland, Ohio
September 30, 1998
