SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A 2
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 28, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-18348
BE AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
06-1209796
(I.R.S. Employer Identification No.)
1400 Corporate Center Way, Wellington, Florida 33414
(Address of principal executive offices) (Zip Code)
(561) 791-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes[X] No[ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ ]
The aggregate market value of the registrant's voting stock held by
non-affiliates was approximately $696,357,028 on May 20, 1998 based on the
closing sales price of the registrant's Common Stock as reported on the Nasdaq
National Market as of such date.
The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of December 16, 1998 was 24,447,963 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
INDEX
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
ITEM 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
and Schedule.........................................F-1
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Nasdaq National Market under
the symbol "BEAV." The following table sets forth, for the periods indicated,
the range of high and low per share closing prices for the Common Stock as
reported by Nasdaq.
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
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
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This information required by this section is set forth on pages F-1 through F-20
of this report.
<PAGE>
ITEM 8. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheets, February 28, 1998 and February 22, 1997. F-3
Consolidated Statements of Operations for the Years Ended February F-4
28, 1998, February 22, 1997 and February 24, 1996.
Consolidated Statements of Stockholders' Equity for the Years Ended F-5
February 28, 1998, February 22, 1997 and February 24, 1996.
Consolidated Statements of Cash Flows for the Years Ended February F-6
28, 1998, February 22, 1997 and February 24, 1996.
Notes to Consolidated Financial Statements for the Years Ended F-7
February 28, 1998, February 22, 1997 and February 24, 1996.
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the Years Ended F-20
F-20 February 28, 1998, February 22, 1997 and February 24, 1996.
</TABLE>
[Remainder of page intentionally left blank]
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
B/E Aerospace, Inc.
Wellington, Florida
We have audited the accompanying consolidated balance sheets of B/E
Aerospace, Inc. and subsidiaries as of February 28, 1998 and February 22, 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended February 28, 1998.
Our audits also included the financial statement schedule on page F-20. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of B/E Aerospace, Inc. and
subsidiaries as of February 28, 1998 and February 22, 1997 and the results of
their operations and their cash flows for each of the three years in the period
ended February 28, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 15, 1998
<PAGE>
CONSOLIDATED BALANCE SHEETS, FEBRUARY 28, 1998 AND FEBRUARY 22, 1997
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1998 1997
- ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 164,685 $ 44,149
Accounts receivable - trade, less allowance for doubtful
accounts of $2,190 (1998) and $4,864 (1997) 87,931 73,489
Inventories, net 121,728 92,900
Other current assets 7,869 2,781
---------- ----------
Total current assets 382,213 213,319
-------- --------
PROPERTY AND EQUIPMENT, net 103,821 87,888
INTANGIBLES AND OTHER ASSETS, net 195,723 189,882
---------- -------
$ 681,757 $ 491,089
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 47,858 $ 42,889
Accrued liabilities 38,566 43,837
Current portion of long-term debt 33,285 4,419
--------- ---------
Total current liabilities 119,709 91,145
---------- --------
LONG-TERM DEBT 349,557 225,402
DEFERRED INCOME TAXES 1,207 1,667
OTHER LIABILITIES 14,509 7,114
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding - -
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,891,918 (1998) and 21,893,392 (1997)
shares issued and outstanding 229 219
Additional paid-in capital 240,289 228,710
Accumulated deficit (40,724) (62,286)
Cumulative foreign exchange translation adjustment (3,019) (882)
------------ --------------
Total stockholders' equity 196,775 165,761
---------- ------------
$ 681,757 $ 491,089
========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------------------
February 28, February 22, February 24,
1998 1997 1996
<S> <C> <C> <C>
NET SALES $ 487,999 $ 412,379 $ 232,582
COST OF SALES 309,094 270,557 160,031
-------- --------- ---------
GROSS PROFIT 178,905 141,822 72,551
OPERATING EXPENSES:
Selling, general and administrative 58,622 51,734 42,000
Research, development and engineering 45,685 37,083 58,327
Amortization of intangible assets 11,265 10,607 9,499
Other expenses 4,664 - 4,170
--------- -------- --------
Total operating expenses 120,236 99,424 113,996
--------- -------- --------
OPERATING EARNINGS (LOSS) 58,669 42,398 (41,445)
INTEREST EXPENSE, net 22,765 27,167 18,636
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 35,904 15,231 (60,081)
INCOME TAXES 5,386 1,522 -
------- ------- -----------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 30,518 13,709 (60,081)
EXTRAORDINARY ITEM 8,956 - -
---------- ----------- ------------
EARNINGS (LOSS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 21,562 13,709 (60,081)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - - (23,332)
------------ ------------ -----------
NET EARNINGS (LOSS) $ 21,562 $ 13,709 $(83,413)
========= =========== =========
BASIC EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting principle $ 1.36 $ .77 $ (3.71)
Extraordinary item (.40) - -
Cumulative effect of change in accounting principle - - (1.44)
----------- ----------- ------------
Net earnings (loss) $ .96 $ .77 $ (5.15)
========== ========== ============
Weighted average common shares 22,442 17,692 16,185
========== ========== ============
DILUTED EARNINGS (LOSS) PER SHARE:
Earnings (loss) before extraordinary item and
cumulative effect of change in accounting principle $ 1.30 $ .72 $ (3.71)
Extraordinary item (.38) - -
Cumulative effect of change in accounting principle - - (1.44)
----------- ----------- ------------
Net earnings (loss) $ .92 $ .72 $ (5.15)
=========== =========== ============
Weighted average common shares 23,430 19,097 16,185
========== =========== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(in thousands)
<TABLE>
<CAPTION>
Additional Retained Currency Total
Common Stock Paid-in Earnings Translation Stockholders'
Shares Amount Capital (Deficit)Adjustment Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, February 25, 1995 16,096 $160 $119,209 $7,418 $(1,456) $125,331
Sale of stock under
employee stock purchase plan 74 1 403 - - 404
Exercise of stock options 121 2 896 - - 898
Employee benefit plan
matching contribution 102 1 858 - - 859
Net loss - - - (83,413) - (83,413)
Foreign currency translation
adjustment - - - - 78 78
-------- --------- --------- -------- -------- --------
Balance, February 24, 1996 16,393 164 121,366 (75,995) (1,378) 44,157
Sale of stock under
employee stock purchase plan 58 - 482 - - 482
Exercise of stock options 1,362 14 11,650 - - 11,664
Employee benefit plan
matching contribution 75 1 1,316 - - 1,317
Sale of common stock
under public offering 4,005 40 93,896 - - 93,936
Net earnings - - - 13,709 - 13,709
Foreign currency translation
adjustment - - - - 496 496
---------- --------- -------- ------ ------ --------
Balance, February 22, 1997 21,893 219 228,710 (62,286) (882) 165,761
Sale of stock under
employee stock purchase plan 88 1 1,796 - - 1,797
Exercise of stock options 852 9 8,106 - - 8,115
Employee benefit plan
matching contribution 59 - 1,677 - - 1,677
Net earnings - - - 21,562 - 21,562
Foreign currency translation
adjustment - - - - (2,137) (2,137)
------- ------- -------- -------- -------- ---------
Balance, February 28, 1998 22,892 $ 229 $240,289 $(40,724) $(3,019) $196,775
======== ======= ======== ========= ======== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net earnings (loss) $ 21,562 $ 13,709 $ (83,413)
Adjustments to reconcile net earnings (loss) to
net cash flows provided by (used in) operating activities:
Extraordinary item 8,956 - -
Cumulative effect of accounting change - - 23,332
Depreciation and amortization 24,160 24,147 18,435
Deferred income taxes (460) 410 (3,453)
Non cash employee benefit plan contributions 1,677 1,317 859
Changes in operating assets and liabilities,
net of effects from acquisitions:
Accounts receivable (14,665) (19,366) 6,068
Inventories (28,597) (19,536) (11,929)
Other current assets (5,141) 5,059 (638)
Accounts payable 3,972 (4,767) 3,008
Accrued and other liabilities (1,866) (11,564) 13,169
------- -------- --------
Net cash flows provided by (used in) operating activities 9,598 (10,591) (34,562)
------ -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment (28,923) (14,471) (13,656)
Change in intangibles and other assets (15,686) (1,331) (5,914)
Acquisitions - - (42,500)
-------- ------- ---------
Net cash flows used in investing activities (44,609) (15,802) (62,070)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving lines of credit 5,450 (38,882) 2,000
Proceeds from issuance of stock, net of expenses 11,611 106,082 1,302
Principal payments on long-term debt (101,808) (11,968) (942)
Proceeds from long-term debt 240,419 - 101,252
------- --------- -------
Net cash flows provided by financing activities 155,672 55,232 103,612
------- -------- -------
Effect of exchange rate changes on cash flows (125) (66) 77
---------- ----------- ----------
Net increase in cash and cash equivalents 120,536 28,773 7,057
Cash and cash equivalents, beginning of year 44,149 15,376 8,319
--------- --------- --------
Cash and cash equivalents, end of year $ 164,685 $ 44,149 $ 15,376
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid (received) during year for:
Interest, net $ 25,065 $ 26,097 $ 16,967
Income taxes 5,012 1,209 (3,292)
SCHEDULE OF NON-CASH TRANSACTIONS:
Liabilities assumed and accrued acquisition
costs incurred in connection with the
acquisitions - - 27,532
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 1998, FEBRUARY 22, 1997 AND FEBRUARY 24, 1996
(Dollars in thousands, except per share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation -- B/E Aerospace, Inc. ("B/E" or the
"Company") operates in a single business segment and designs, manufactures,
sells and services a broad line of commercial aircraft cabin interior products
consisting of a broad range of aircraft seating products, passenger
entertainment and service systems, and interior systems products, including
structures as well as all food and beverage storage and preparation equipment.
The Company's customers are the world's commercial airlines. As a result, the
Company's business is directly dependent upon the conditions in the commercial
airline industry.
Consolidation -- The accompanying consolidated financial statements include
the accounts of B/E Aerospace, Inc., its wholly owned and majority owned
subsidiaries. All intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets an
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Income Taxes -- In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes," the Company provides
deferred income taxes for temporary differences between amounts of assets and
liabilities recognized for financial reporting purposes and such amounts
recognized for income tax purposes.
Warranty Costs -- Estimated costs related to product warranties are accrued
at the time products are sold.
Revenue Recognition -- Sales of assembled products, equipment or services
are recorded on the date of shipment or, if required, upon acceptance by the
customer. Revenues and costs under certain long-term contracts are recognized
using contract accounting. The Company sells its products primarily to airlines
worldwide, including occasional sales collateralized by letters of credit. The
Company performs ongoing credit evaluations of its customers and maintains
reserves for potential credit losses. Actual losses have been within
management's expectations.
Cash Equivalents -- The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents.
Intangible Assets -- The Company accounts for the impairment and
disposition of long-lived assets in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." In accordance with SFAS No. 121, long-lived assets to be held are reviewed
<PAGE>
for events or changes in circumstances which indicate that their carrying value
may not be recoverable. The Company periodically evaluates the carrying value of
the intangible assets versus the cash benefit expected to be realized and
adjusts for any impairment of value.
Research and Development -- Research and development expenditures are
expensed as incurred.
Stock-Based Compensation -- In October 1995, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which became effective for the Company beginning during fiscal
1997. SFAS No. 123 requires extended disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply Accounting Principles
Board ("APB") Opinion No. 25, which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company continues to apply
APB Opinion No. 25 to its stock-based compensation awards to employees and
discloses the required pro forma effect on net income and earnings per share.
See Note 12.
Earnings (Loss) Per Share -- In fiscal 1998, the Company adopted SFAS No.
128, "Earnings Per Share." Basic earnings per common share calculations are
determined by dividing earnings available to common shareholders by the weighted
average number of shares of common stock. Diluted earnings per share are
determined by dividing earnings available to common shareholders by the weighted
average number of shares of common stock and dilutive common stock equivalents
outstanding (all related to outstanding stock options discussed in Note 12). The
Company's reported primary earnings per share for fiscal 1997 have been restated
to comply with the requirements of SFAS No. 128. The effect on previously
reported earnings per share for fiscal 1997 was as follows:
Primary earnings per share as reported $ .72
Effect of SFAS No. 128 .05
-------
Basic EPS as restated $ .77
=======
SFAS No. 128 had no impact on the Company's reported loss per share for
fiscal 1996.
Comprehensive Income - During 1997 the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," which established standards for the reporting and
displaying of comprehensive income. Comprehensive income is defined as all
changes in a Company's net assets except changes resulting from transactions
with shareholders. It differs from net income in that certain items currently
recorded to equity would be a part of comprehensive income. Comprehensive income
must be reported in a financial statement with the cumulative total presented as
a component of equity. This statement will be adopted by the Company in its
fiscal 1999 quarterly financial statements.
<PAGE>
Segment Information - In June 1997, the FASB issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
will be effective for the Company beginning March 1, 1998. SFAS No. 131
redefines how operating segments are determined and requires disclosure of
certain financial and descriptive information about a company's operating
segments. The Company believes the segment information required to be disclosed
under SFAS No. 131 will be more comprehensive than previously provided,
including expanded disclosure of income statement and balance sheet items. The
Company has not yet completed its analysis of which operating segments it will
report on.
Pensions and Other Postretirement Benefits -- In February 1998, FASB issued
SFAS No. 132, "Employers' Disclosure about Pensions and Other Postretirement
Benefits," which is effective for annual and interim periods beginning after
December 15, 1997. This statement standardizes the disclosure requirements for
pensions and other postretirement benefits to the extent practicable, requires
additional information on changes in the benefit obligations and fair values of
plan assets that will facilitate financial analysis and eliminates certain
disclosures that are no longer as useful as they were under previous statements.
Foreign Currency Translation -- In accordance with the provisions of SFAS
No. 52, "Foreign Currency Translation," the assets and liabilities located
outside the United States are translated into U.S. dollars at the rates of
exchange in effect at the balance sheet dates. Income and expense items are
translated at the average exchange rates prevailing during the period. Gains and
losses resulting from foreign currency transactions are recognized currently in
income, and those resulting from translation of financial statements are
accumulated as a separate component of stockholders' equity.
2. ACCOUNTING CHANGE
In fiscal 1996, the Company undertook a comprehensive review of the
engineering capitalization policies followed by its competitors and others in
its industry peer group. The results of this study and an evaluation of the
Company's policy led the Company to conclude that it should adopt the accounting
method that it believes is followed by most of its competitors and certain
members of its industry peer group. Previously, the Company had capitalized
precontract engineering costs as a component of inventories, which were then
amortized to earnings as the product was shipped. The Company now expenses such
costs as they are incurred. While the accounting policy for precontract
engineering expenditures previously followed by the Company was in accordance
with generally accepted accounting principles, the changed policy is preferable.
3. ACQUISITIONS
On January 24, 1996, the Company acquired all of the outstanding capital
stock of Burns Aerospace Corporation, which designs, manufactures, sells and
services aircraft seating products to commercial airlines worldwide. The
aggregate acquisition cost of $70,032 includes the payment of $42,500 to the
seller and the assumption of approximately $27,532 of liabilities, including
related acquisition costs and certain liabilities arising from the acquisition.
Funds for the acquisition were obtained from proceeds of the long-term debt
issuance described in Note 8.
<PAGE>
The aggregate purchase price for the Burns acquisition has been allocated
to the net assets acquired based on appraisals and management's estimates as
follows:
<TABLE>
<CAPTION>
<S> <C>
Receivables $ 11,396
Inventories 12,624
Other current assets 806
Property and equipment 21,695
Intangible and other assets 23,511
---------
$ 70,032
</TABLE>
4. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the weighted average cost method. Finished goods and work in process
inventories include material, labor and manufacturing overhead costs.
Inventories consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Raw materials $ 56,100 $ 45,947
Work-in-process 59,036 39,024
Finished goods 6,592 7,929
---------- ---------
$ 121,728 $ 92,900
========= ========
</TABLE>
<PAGE>
5. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated and amortized
generally on the straight-line method over their estimated useful lives of two
to thirty years (term of lease as to leasehold improvements). Property and
equipment consist of the following:
<TABLE>
<CAPTION>
Years 1998 1997
----- ---- ----
<S> <C> <C> <C>
Land, buildings and improvements 10-30 $ 45,951 $ 42,966
Machinery 3-13 54,178 45,444
Tooling 3-10 24,771 17,179
Furniture and equipment 2-10 26,815 18,327
---------- ---------
151,715 123,916
Less accumulated depreciation and amortization (47,894) (36,028)
---------- ---------
$ 103,821 $ 87,888
========= =========
</TABLE>
6. INTANGIBLES AND OTHER ASSETS
Intangibles and other assets consist of the following:
<TABLE>
<CAPTION>
Straight-line
Amortization
Period (Years) 1998 1997
-------------- ---- ----
<S> <C> <C> <C>
Covenants not-to-compete 14 $ 10,195 $ 10,198
Product technology, production plans and drawings 7-20 60,577 59,484
Replacement parts annuity 20 29,652 29,778
Product approvals and technical manuals 20 22,942 18,331
Goodwill 30 77,452 78,913
Debt issue costs 10 16,789 13,431
Trademarks and patents 20 10,491 10,820
Other intangible assets 5-20 16,540 7,527
Other assets 4,277 6,744
------- ---------
248,915 235,226
Less accumulated amortization (53,192) (45,344)
---------- ----------
$ 195,723 $ 189,882
========= =========
</TABLE>
<PAGE>
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accrued product warranties $ 4,353 $ 5,231
Accrued salaries, vacation and related benefits 17,022 12,868
Accrued acquisition expenses 1,190 5,488
Accrued interest 2,995 6,585
Accrued income taxes 5,373 6,563
Other accrued liabilities 7,633 7,102
----------- ----------
$ 38,566 $ 43,837
========== =========
</TABLE>
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<PAGE>
8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
8% Senior Subordinated Notes $ 249,375 $ -
9 7/8% Senior Subordinated Notes 100,000 100,000
9 3/4% Senior Notes 23,192 124,411
Revolving lines of credit 10,093 4,419
Other long-term debt 182 991
---------- ---------
382,842 229,821
Less current portion of long-term debt (33,285) (4,419)
----------- ----------
$ 349,557 $ 225,402
========== ==========
</TABLE>
8% SENIOR SUBORDINATED NOTES
In February 1998, the Company sold $250,000 of 8% Senior Subordinated
Notes, priced to yield 8.02% (the "8% Notes"). In conjunction with the sale of
the 8% Notes, the Company initiated a tender offer for its 9 3/4% Notes. The net
proceeds from the offering of approximately $240,419 were used for the tender
offer (which expired on February 25, 1998) in which approximately $101,808 of
the 9 3/4% Notes were retired; the remaining $23,192 of the 9 3/4% Notes were
called on March 16, 1998. 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.
The 8% Notes are unsecured senior subordinated obligations of the Company,
subordinated to all senior indebtedness of the Company and mature on March 1,
2008. Interest on the 8% Notes is payable semi-annually in arrears on March 1
and September 1 of each year. The 8% Notes are redeemable at the option of the
Company, in whole or in part, on or after March 1, 2003 at predetermined
redemption prices together with accrued and unpaid interest through the date of
redemption. In addition, at any time prior to March 1, 2001, the Company may, at
predetermined prices together with accrued and unpaid interest through the date
of redemption, redeem up to 35% of the aggregate principal amount of the Notes
originally issued with the net proceeds of one or more equity offerings,
provided that at least 65% of the aggregate principal amount of the 8% Notes
originally issued remains outstanding after the redemption. Upon a change of
control (as defined), each holder of the 8% Notes may require the Company to
repurchase such holder's 8% Notes at 101% of the principal amount thereof, plus
accrued interest to the date of such purchase. The 8% Notes contain certain
covenants, all of which were met by the Company as of February 28, 1998,
including limitations on future indebtedness, restricted payments, transactions
with affiliates, liens, dividends, mergers and transfers of assets.
<PAGE>
9 7/8% SENIOR SUBORDINATED NOTES
The 9 7/8% Senior Subordinated Notes (the "9 7/8% Notes") are unsecured
senior subordinated obligations of the Company, subordinated to all senior
indebtedness of the Company and mature on February 1, 2006. Interest on the 9
7/8% Notes is payable semi-annually in arrears on February 1 and August 1 of
each year. The 9 7/8% Notes are redeemable at the option of the Company, in
whole or in part, at any time after February 1, 2001 at predetermined redemption
prices together with accrued and unpaid interest through the date of redemption.
Upon a change of control (as defined), each holder of the 9 7/8% Notes may
require the Company to repurchase such holder's 9 7/8% Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of such
purchase. The 9 7/8% Notes contain certain restrictive covenants, all of which
were met by the Company as of February 28, 1998, including limitations on future
indebtedness, restricted payments, transactions with affiliates, liens,
dividends, mergers and transfers of assets.
9 3/4% SENIOR NOTES
The 9 3/4% Senior Notes (the "9 3/4% Notes") are senior unsecured
obligations of the Company, ranking equally with any future senior obligations
of the Company. As described above, at February 28, 1998, $101,808 of the 9 3/4%
Notes had been repurchased; the balance of the 9 3/4% Notes were redeemed in
March 1998.
CREDIT FACILITIES
In April 1998, the Company amended its credit facilities with the Chase
Manhattan Bank by increasing the aggregate principal amount that may be borrowed
thereunder to $200,000 (the "Bank Credit Facility"). The Bank Credit Facility
consists of a $100,000 revolving credit facility and an acquisition facility of
up to $100,000. The acquisition facility is amortizable over five years
beginning April 1999; the revolving facility expires in April 2004. The Bank
Credit Facility is collateralized by the Company's accounts receivable and
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 February 28,
1998. At February 28, 1998, indebtedness under the then-existing Bank Credit
Facility consisted of letters of credit amounting to approximately $4,500.
Borrowings under the Bank Credit Facility currently bear interest at LIBOR
plus 1.25% or prime (as defined). The interest to be charged on the Bank Credit
Facility can increase or decrease based upon specified operating performance
criteria set forth in the Bank Credit Facility Agreement. Amounts may be
borrowed or repaid in $1,000 increments.
FEEL, a subsidiary of the Company, has a short-term revolving line of
credit agreement (the "FEEL Credit Agreement") which is collateralized by
substantially all of the assets of FEEL. Aggregate borrowings outstanding under
the FEEL Credit Agreement were approximately $10,093 as of February 28, 1998.
The Company has guaranteed a portion of the indebtedness outstanding under the
FEEL Credit Agreement.
<PAGE>
Inventum, another subsidiary of the Company, has a revolving line of credit
agreement for approximately $1 million (the "Inventum credit agreement"). The
Inventum Credit Agreement is collateralized by substantially all of the assets
of Inventum. There were no borrowings outstanding under the Inventum Credit
Agreement as of February 28, 1998.
Maturities of long-term debt are as follows:
Fiscal year ending February:
1999 $ 33,285
2000 182
2001 -
2002 -
2003 -
Thereafter 349,375
---------
$ 382,842
=========
Interest expense amounted to $25,834, $28,369 and $18,788 for the years
ended February 28, 1998, February 22, 1997 and February 24, 1996, respectively.
9. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ (920) $ - $ 1,972
State - - 818
Foreign 6,766 1,112 663
-------- --------- --------
5,846 1,112 3,453
Deferred:
Federal (3,666) 2,703 (2,635)
State (716) 1,550 (818)
Foreign (460) 410 -
--------- --------- ---------
(4,842) 4,663 (3,453)
Change in Valuation Allowance 4,382 (4,253) -
--------- --------- ---------
$ 5,386 $ 1,522 $ -
========= ========= ==========
</TABLE>
<PAGE>
The difference between income tax expense and the amount computed by
applying the statutory U.S. federal income tax rate (35%) to the pretax earnings
before extraordinary item and change in accounting principle consists of the
following:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory U.S. federal income tax expense (benefit) $ 9,432 $ 5,331 $ (21,028)
Operating loss (with)/without tax benefit (6,114) (6,164) 14,569
Foreign tax rate differential 1,309 1,267 3,324
Goodwill amortization 537 566 558
Penalties 1,050 - -
Other, net (828) 522 2,577
--------- --------- ----------
$ 5,386 $ 1,522 $ -
========== =========== ==========
</TABLE>
The tax effects of temporary differences and carryforwards that give rise to the
Company's deferred income tax assets and liabilities consist of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accrued vacation $ 1,172 $ 1,117
Inventory reserves 3,987 3,145
Acquisition reserves (1,220) (1,740)
Inventory costs capitalized for tax purposes 1,327 1,236
Bad debt reserves 579 948
Warranty reserve 2,440 1,452
Other 1,731 1,723
--------- ---------
Net current deferred income tax asset 10,016 7,881
--------- ---------
Intangible assets (12,576) (13,565)
Depreciation (1,853) (2,074)
Net operating loss carryforward 27,462 26,309
Research credit carryforward 3,285 2,941
---------- ---------
Net noncurrent deferred income tax asset 16,318 13,611
---------- -------
Valuation allowance (27,541) (23,159)
---------- ---------
Net deferred tax liabilities $ (1,207) $ (1,667)
========== =========
</TABLE>
<PAGE>
The Company has established a valuation allowance of $27,541 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 are 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
As of February 28, 1998, the Company had approximately $66,104 of federal
operating loss carryforwards, which expire at various dates through 2011,
federal research credit carryforwards of $3,285, which expire at various dates
through 2011, and alternative minimum tax credit carryforwards of $410, which
have no expiration date. Approximately $15,000 of the Company's net operating
loss carryforward related to non-qualified stock options will be credited to
additional paid-in-capital rather than income tax expense when utilized.
The Company has not provided for any residual U.S. income taxes on the
approximately $6,005 of earnings from its foreign subsidiaries because such
earnings are intended to be indefinitely reinvested. Such residual U.S. income
taxes, if provided for, would be immaterial.
The Company's federal tax returns for the years ended February 24, 1996 and
February 25, 1995 are currently under examination by the Internal Revenue
Service. Management believes that the resolution of this examination will not
have a material adverse effect on the Company's results of operations or its
financial condition.
10. COMMITMENTS AND CONTINGENCIES
Leases -- The Company leases certain of its office, manufacturing and
service facilities and equipment under operating leases, which expire at various
times through February 2007. Rent expense for fiscal 1998, 1997 and 1996 was
approximately $8,848, $7,021 and $2,943, respectively. Future payments under
operating leases with terms currently greater than one year are as follows:
Year ending February:
1999 $ 7,658
2000 6,398
2001 5,079
2002 2,495
2003 2,041
Thereafter 796
----------
$ 24,467
<PAGE>
Litigation -- The Company is a defendant in various legal actions arising
in the normal course of business, the outcome of which, in the opinion of
management, neither individually nor in the aggregate are likely to result in a
material adverse effect to the Company's financial statements.
Employment Agreements -- The Company has employment and compensation
agreements with two key officers of the Company. One of the agreements provides
for an officer to earn a minimum of $550 adjusted annually for changes in the
consumer price index (as defined) per year through 2002, as well as a deferred
compensation benefit equal to the aggregate annual compensation earned through
termination and payable thereafter. Such deferred compensation will be payable
in equal monthly installments over the same number of years it was earned. The
other agreement provides for an officer to receive annual minimum compensation
of $550, and an incentive bonus not to exceed 100% of the officer's then-current
salary through 2001. In addition, when the officer terminates his employment,
the Company is obligated to pay the officer annually, as deferred compensation,
an amount equal to 100% of the officer's annual salary (as defined) for a period
of ten years from the date of termination. Such deferred compensation has been
accrued at the present value of the obligation at February 28, 1998.
The Company has other employment agreements with certain key members of
management that provide for aggregate minimum annual base compensation of $1,825
expiring on various dates through 1999.
Supply Agreement -- The Company had a supply agreement with Applied
Extrusion Technologies, Inc. ("AET"), a related party by way of common
management. Under this agreement, which was terminated in September 1997, the
Company agreed to purchase its requirements for certain component parts through
March 1998 at a price that results in a 33 1/3% gross margin to AET. The
Company's purchases under this contract for the years ended February 28, 1998,
February 22, 1997 and February 24, 1996, were $1,743, $1,642 and $1,301,
respectively.
11. EMPLOYEE RETIREMENT PLAN
In August 1988, the Company established a non-qualified contributory
profit-sharing plan. This plan was amended to incorporate a 401(k) Plan which
permits the Company to match a portion of employee contributions. Commencing in
1995, the Company's 401(k) Plan, was amended to permit the Company's matching
contribution to be made in common stock of the Company. The Company recognized
expenses of $1,677, $1,317 and $859 related to this plan for the years ended
February 28, 1998, February 22, 1997 and February 24, 1996, respectively.
<PAGE>
12. STOCKHOLDERS' EQUITY
Earnings (Loss) Per Share. The Company adopted No. SFAS No. 128 Earnings
Per Share during fiscal year 1998. SFAS No. 128 establishes standards for
computing and presenting basic and diluted earnings (loss) per share. All prior
period earnings (loss) per share data have been restated to conform with SFAS
No. 128. The following table sets forth the computation of basic and diluted
earnings (loss) per share for the years ended February 28, 1998, February 22,
1997 and February 24, 1996:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Numerator - Net earnings (loss) $21,562 $13,709 $(83,413)
======= ======= =========
Denominator:
Denominator for basic earnings (loss) per share -
Weighted average shares 22,442 17,692 16,185
Effect of dilutive securities -
Employee stock options 988 1,405 -
-------- ------- ---------
Denominator for diluted earnings (loss) per share -
Adjusted weighted average shares 23,430 19,097 16,185
======== ====== ======
Basic earnings (loss) per share $ .96 $ .77 $ (5.15)
======== ======= ========
Diluted earnings (loss) per share $ .92 $ .72 $ (5.15)
======== ====== ========
</TABLE>
Stock Option Plans. The Company has various stock option plans, including
the 1989 Stock Option Plan, the 1991 Directors Stock Option Plan, the 1992 Share
Option Scheme and the 1996 Stock Option Plan (collectively, the "Option Plans"),
under which shares of the Company's Common Stock may be granted to key employees
and directors of the Company. The Option Plans provide for granting key
employees options to purchase the Company's common stock. Options are granted at
the discretion of the compensation and stock option committee of the Board of
Directors. Options granted generally vest at the rate of 25% per year from the
date of grant and are exercisable to the extent vested and the option term
cannot exceed ten years.
The following table sets forth options granted, canceled, forfeited and
outstanding:
<TABLE>
<CAPTION>
February 28, 1998 February 22, 1997 February 24, 1996
--------------- ----------------- -----------------
Option Price Option Price Option Price
Per Share Per Share Per Share
Options (in dollars) Options (in dollars) Options (in dollars)
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
beginning of 2,447,425 .081 - 24.93 2,720,350 0.81 - 13.00 2,871,287 0.81 - 13.00
period
Options granted 1,394,250 21.50 -31.50 1,313,500 10.25 -24.94 731,925 7.37 - 10.37
Options exercised (852,174) 0.81 - 29.875 (1,361,925) 0.81 - 16.125 (139,750) 0.81 - 8.75
Options forfeited (58,000) 7.63 - 28.875 (224,500) 7.38 - 16.13 (743,112) 7.00 - 13.00
-------- ------------- ----------- ------------ ---------- -----------
Outstanding, end
of period 2,931,501 7.00 - 13.50 2,447,425 0.81 - 24.93 2,720,350 0.81 - 13.00
========= ============ ============ ============ ========= ============
Exercisable at end
of year 1,317,503 7.00 - 31.50 1,374,927 0.81 - 24.93 2,223,225 0.81 - 13.00
========= ============ ========= ============ =========== ============
</TABLE>
<PAGE>
At February 28, 1998, options were available for grant under each of the
Company's option plans.
<TABLE>
<CAPTION>
Options Outstanding
at February 28,
- -----------------------------------------------------------------------------------------------------------------------
Weighted Weighted Options
Range of Options Average Average Exercisable Weighted
Exercise Price Outstanding Exercise Remaining at February 28, Average
Price Contractual Life 1998 Exercise Price
----- ------------ ---- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 7.00 - $8,875 691,800 $ 8.36 5.82 623,675 $ 8.35
$ 10.00 - $19.00 798,826 $ 17.27 8.45 313,328 $ 18.14
$ 21.50 - $25.8125 511,625 $ 23.02 9.41 149,125 $ 23.38
$ 29.87 - $31.50 929,250 $ 29.89 9.46 231,375 $ 29.89
</TABLE>
The estimated fair value of options granted during fiscal 1998 was $13.56
per share. The estimated fair value of options granted during fiscal 1997 was
$16.60 per share. The Company applies APB Opinion No. 25 and related
Interpretations in accounting for its stock option and purchase plans.
Accordingly, no compensation cost has been recognized for its stock option plans
and its stock purchase plan other than that described above. Had compensation
cost for the Company's stock option plans and its stock purchase plans been
determined consistent with SFAS No. 123, the Company's net earnings and net
earnings per share for the year ended February 28, 1998 and February 22, 1997
would have been reduced to the pro forma amounts indicated in the following
table:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net earnings - as reported $ 21,562 $ 13,709
Net earnings - pro forma $ 13,232 $ 10,709
Net earnings per share - as reported $ 92 $ .72
Net earnings per share - pro forma $ .56 $ .56
Weighted average and pro forma
weighted average common shares 23,430 19,097
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for options granted in 1998 and 1997: risk-free interest rates
of 7.0% and 6.4%; expected dividend yields of 0.0%; expected lives of 3 years
and 4 years; and expected volatility of 40% and 43%, respectively.
<PAGE>
The impact of outstanding non-vested stock options granted prior to fiscal
1997 has been excluded from the pro forma calculation; accordingly, the 1998 and
1997 pro forma adjustments are not indicative of future period pro forma
adjustments, when the calculation will apply to all applicable stock options.
13. EMPLOYEE STOCK PURCHASE PLAN
The Company has established a qualified Employee Stock Purchase Plan, the
terms of which allow for qualified employees (as defined) to participate in the
purchase of designated shares of the Company's common stock at a price equal to
the lower of 85% of the closing price at the beginning or end of each
semi-annual stock purchase period. The Company issued 87,561 and 58,490 shares
of common stock during fiscal 1998 and 1997 pursuant to this plan at an average
price per share of $20.52 and $9.70, respectively.
14. EXPORT SALES AND MAJOR CUSTOMERS
Export sales from the United States to customers in foreign countries
amounted to approximately $132,831, $153,423 and $61,717 in fiscal 1998, 1997
and 1996, respectively. Total sales to all customers in foreign countries
amounted to approximately $232,691, $203,388 and $124,469 in fiscal 1998, 1997
and 1996, respectively. Total sales to Europe amounted to 23%, 29% and 18% in
fiscal 1998, 1997 and 1996, respectively. Total sales to Asia amounted to 18%,
16% and 20% in fiscal 1998, 1997 and 1996, respectively. Major customers
(i.e., customers representing more than 10% of total sales) change from year
to year depending on the level of refurbishmentactivity and/or the level of
new aircraft purchases by such customers. During the fiscal year ended
February 28, 1998, one customer accounted for approximately 18% of the
Company's sales. There were no major customers in fiscal 1997 or 1996.
15. OTHER EXPENSES
In January 1998, the Company resolved 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. 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. Other expenses for the year ended February 28,
1998 relate to fines, civil penalties and associated legal fees arising from the
settlement. Other expenses for the year ended February 24, 1996 relate to costs
associated with the integration and consolidation of the Company's European
seating business.
16. FOREIGN OPERATIONS
Geographic Area -- The Company operated principally in two geographic
areas, the United States and Europe, during the years ended February 28, 1998,
February 22, 1997 and February 24, 1996. There were no significant transfers
between geographic areas during the period. Identifiable assets are those assets
of the Company that are identified with the operations in each geographic area.
<PAGE>
The following table presents net sales and operating income for the years
ended February 28, 1998, February 22, 1997 and February 24, 1996, and
identifiable assets as of February 28, 1998, February 22, 1997 and February 24,
1996 by geographic area.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Net Sales:
<S> <C> <C> <C>
United States $365,957 $312,497 $ 169,830
Europe 122,042 99,882 62,752
------- --------- ----------
Total: $487,999 $412,379 $ 232,582
======== ======== =========
Operating Earnings (Loss):
United States $ 38,928 $ 33,834 $ (35,822)
Europe 19,741 8,564 (5,623)
-------- --------- ---------
Total: $58,669 $ 42,398 $(41,445)
======= ======== =========
Identifiable Assets:
United States $ 541,675 $ 380,273 $ 332,832
Europe 140,082 110,816 100,754
-------- --------- ---------
Total: $681,757 $ 491,089 $ 433,586
======== ========= =========
</TABLE>
17. FAIR VALUE INFORMATION
The following disclosure of the estimated fair value of financial
instruments at February 28, 1998 and February 22, 1997 is made in accordance
with the requirements of SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments." The estimated fair value amounts have been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
<PAGE>
The carrying amounts of cash and cash equivalents, accounts
receivable-trade, and accounts payable are a reasonable estimate of their fair
values. At February 28, 1998, the Company's 8% Notes have a carrying value of
$249,375 and fair value of $248,750, while the Company's 9 7/8% Notes have a
carrying value of $100,000 and fair value of $107,500. Additionally, at February
28, 1998, the Company's 9 3/4% Notes have a carrying value of $23,192 and fair
value of $24,410. The carrying amounts of other long-term debts approximate fair
value because the obligations either bear interest at floating rates or compare
favorably with fixed rate obligations that would be available to the Company.
The fair value information presented herein is based on pertinent
information available to management as of February 28, 1998. Although management
is not aware of any factors that would significantly affect the estimated fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these consolidated financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
18. SELECTED QUARTERLY DATA (Unaudited)
Summarized quarterly financial data for fiscal 1998 is as follows:
<TABLE>
<CAPTION>
Year Ended February 28, 1998
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Sales $ 113,846 $ 119,843 $ 128,998 $ 125,312
Gross profit 41,063 44,149 46,650 47,043
Earnings before extraordinary item 6,943 8,077 9,432 6,066
Extraordinary item - - - (8,956)
--------- ---------- ---------- ----------
Net earnings (loss) $ 6,943 $ 8,077 $ 9,432 $ (2,890)
========== ========== ========== =========
Basic net earnings (loss) per share:
Before extraordinary item $ .32 $ .36 $ .41 $ .27
Extraordinary item - - - (.40)
---------- ---------- ---------- ----------
Net earnings (loss) per share $ .32 $ .36 $ .41 (.13)
========== ========= ========= =========
Diluted net earnings (loss) per share:
Before extraordinary item $ .30 $ .34 $ .40 $ .26
Extraordinary item - - - (.38)
----------- ---------- ---------- ----------
Net earnings (loss) per share $ .30 $ .34 .40 $ (.12)
========== ========= ========== ==========
</TABLE>
<PAGE>
Summarized quarterly financial data for fiscal 1997 is as follows:
<TABLE>
<CAPTION>
Year Ended February 22, 1997
----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $97,302 $ 103,026 $ 107,823 $ 104,228
Gross profit 32,547 34,439 36,510 38,326
Net earnings 1,433 1,863 4,131 6,282
Net earnings per share - Basic .09 .11 .24 .30
Net earnings per share - Diluted .08 .10 .22 .29
</TABLE>
<PAGE>
19. SUBSEQUENT EVENTS (Unaudited)
On April 13, 1998, the Company completed its acquisition of Puritan
Bennett Aero Systems Co. ("PBASCO") for approximately $69,700 in cash and the
assumption of liabilities aggregating approximately $2,810. PBASCO is the
leading manufacturer of commercial aircraft oxygen delivery systems and "WEMAC"
air valve components and in addition supplies overhead lights and switches, crew
masks and protective breathing devices for both commercial and general aviation
aircraft.
On April 21, 1998, the Company acquired substantially all of the assets of
Aircraft Modular Products ("AMP") for approximately $117,300 in cash and assumed
certain liabilities aggregating approximately $2,840. AMP is a leading
manufacturer of cabin interior products for general aviation (business jet) and
commercial - type VIP aircraft, providing a broad line of products including
seating, sidewalls, bulkheads, credenzas, closets, galley structures,
lavatories, tables and sofas; along with related spare parts.
As a result of the acquisitions of PBASCO and AMP, the Company will record a
charge of $32,253 for the write-off of acquired in-process research and
development and acquisition-related expenses associated with these and other
transactions. 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 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 was identified were written off. The in-process research and
development projects have been valued based on expected net cash flows over the
product life, costs to complete, the stage of completion of the projects, the
result of which has been discounted to reflect the inherent risk associated with
the completion of the projects, and the realization of the efforts expended.
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. In-process research and development and acquisition-related
expenses associated with PBASCO were approximately $13,000. The Company has
determined that these projects were approximately 28% complete at the date of
acquisition, and estimates that the cost to complete these projects will
aggregate approximately $11,800, and will be incurred over a four year period.
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, Visionaire Vantage and Lear 60, as well as
other specific executive aircraft seating products. In-process research and
development and acquisition related expenses associated with AMP were
approximately $19,253. The Company has determined that these projects were
approximately 25% complete at the date of acquisition, and estimates that the
cost to complete these projects will aggregate approximately $4,800, and will be
incurred over a two 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) continued 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.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, threunto duly authorized.
BE Aerospace, Inc.
By: /s/ THOMAS P MCCAFFREY
----------------------------------
Title: Corporate Senior Vice
President of Administration and
Chief Financial Officer
Date: December 18, 1998
