UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended May 29, 1999
Commission File No. 0-18348
BE AEROSPACE, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1209796
(State of Incorporation) (I.R.S. Employer Identification No.)
1400 Corporate Center Way
Wellington, Florida 33414
(Address of principal executive offices)
(561) 791-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES[X] NO[ ]
The registrant has one class of common stock, $.01 par value, of which
24,690,932 shares were outstanding as of July 6, 1999.
<PAGE>
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Unaudited Audited
as of as of
May 29, February 27,
1999 1999
---- ----
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 36,037 $ 39,500
Accounts receivable - trade, less allowance for doubtful
accounts of $2,777 (May 29, 1999)
and $2,633 (February 27, 1999) 128,031 140,782
Inventories, net 131,392 119,247
Other current assets 17,059 14,086
---------- ------------
Total current assets 312,519 313,615
---------- ------------
PROPERTY AND EQUIPMENT, net 148,299 138,730
INTANGIBLES AND OTHER ASSETS, net 445,517 451,954
---------- -------------
$ 906,335 $ 904,299
========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 66,876 $ 63,211
Accrued liabilities 87,388 97,065
Current portion of long-term debt 7,981 9,916
---------- --------------
Total current liabilities 162,245 170,192
----------- --------------
LONG-TERM DEBT 581,855 583,715
OTHER LIABILITIES 35,661 34,519
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding - -
Common stock, $.01 par 24,677,437 (May 29, 1999) and
24,602,915 (February 27, 1999) issued and outstanding 247 246
Additional paid-in capital 246,745 245,809
Accumulated deficit (112,662) (124,077)
Accumulated other comprehensive loss (7,756) (6,105)
---------- ---------------
Total stockholders' equity 126,574 115,873
---------- --------------
$ 906,335 $ 904,299
========== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
May 29, May 30,
1999 1998
---- ----
<S> <C> <C>
NET SALES $ 185,032 $ 139,991
COST OF SALES 118,445 88,111
----------- -----------
GROSS PROFIT 66,587 51,880
OPERATING EXPENSES:
Selling, general and administrative 22,028 17,999
Research, development and engineering 11,245 11,972
Amortization 5,696 4,033
Acquisition-related expenses - 32,253
----------- -----------
Total operating expenses 38,969 66,257
----------- -----------
OPERATING EARNINGS (LOSS) 27,618 (14,377)
INTEREST EXPENSE, net 12,622 7,782
EQUITY IN LOSSES OF UNCONSOLIDATED SUBSIDIARY 727 -
------------ ----------
EARNINGS (LOSS) BEFORE INCOME TAXES 14,269 (22,159)
INCOME TAXES 2,854 1,716
------------ -----------
NET EARNINGS (LOSS) $ 11,415 $ (23,875)
============ ===========
BASIC NET EARNINGS (LOSS) PER COMMON SHARE $ .46 $ (1.03)
============ ===========
DILUTED NET EARNINGS(LOSS) PER COMMON SHARE $ .46 $ (1.03)
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
May 29, May 30,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 11,415 $ (23,875)
Adjustments to reconcile net earnings (loss) to net cash flows
provided by operating activities:
Acquisition-related expenses - 32,253
Depreciation and amortization 10,052 8,514
Deferred income taxes (42) (70)
Non-cash employee benefit plan contributions 611 498
Changes in operating assets and liabilities, net
of effects from acquisitions:
Accounts receivable 12,359 7,102
Inventories (12,363) (22,039)
Other current assets (3,000) (1,001)
Accounts and income taxes payable 6,343 (3,833)
Accrued and other liabilities (12,039) 5,003
---------- -----------
Net cash flows provided by operating activities 13,336 2,552
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,237) (8,811)
Change in intangible and other assets (218) (3,733)
Acquisitions, net of cash acquired - (186,271)
--------- -----------
Net cash flows used in investing activities (14,455) (198,815)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under bank credit facilities (2,634) 80,121
Proceeds from issuances of stock, net of expenses 307 3,652
Principal payments on long-term debt - (27,492)
--------- -----------
Net cash flows provided by (used in) financing activities (2,327) 56,281
---------- -----------
Effect of exchange rate changes on cash flows (17) 118
---------- -----------
Net decrease in cash and cash equivalents (3,463) (139,864)
Cash and cash equivalents, beginning of period 39,500 164,685
--------- -----------
Cash and cash equivalents, end of period $ 36,037 $ 24,821
========= ===========
Supplemental disclosures of cash flow information:
Cash paid during period for:
Interest, net $ 20,107 $ 1,560
Income taxes, net $ 716 $ 537
Schedule of non-cash transactions:
Fair market value of assets acquired in acquisitions $ - $ 205,617
Cash paid for businesses acquired in acquisitions $ - $ 186,986
Liabilities assumed and accrued acquisition costs
incurred in connection with acquisitions $ - $ 22,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Notes to Condensed Consolidated Financial Statements May 29, 1999 and
May 30, 1998 (Unaudited - Dollars in thousands, except per share data)
Note 1. BASIS OF PRESENTATION
The condensed consolidated financial statements of BE
Aerospace, Inc. and its wholly-owned subsidiaries (the "Company" or
"B/E") have been prepared by the Company and are unaudited pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information related to the Company's
organization, significant accounting policies and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. In the opinion of management, these unaudited
condensed consolidated financial statements reflect all material
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations and
statements of financial position for the interim periods presented.
These results are not necessarily indicative of a full year's results
of operations. Certain reclassifications have been made to the
February 27, 1999 financial statements to conform to the May 29, 1999
presentation.
Although the Company believes that the disclosures provided
are adequate to make the information presented not misleading, these
unaudited interim condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended February 27, 1999.
Note 2. FISCAL 1999 ACQUISITIONS
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 approximately $9,200 of liabilities,
including related acquisition costs and certain liabilities arising
from the acquisition. PBASCO is a 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 the assumption of approximately $12,800 of
liabilities, including related acquisition costs and certain
liabilities arising from the acquisition. AMP is a 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 "1999
Acquisitions") the Company recorded a charge aggregating $32,253 for
the write-off of acquired in-process research and development and
acquisition-related expenses associated with these and other
transactions.
<PAGE>
The Company determined that these projects ranged from 25% -
80% complete at May 29, 199 and estimates that the cost to complete
these projects will aggregate approximately $11,000, and will be
incurred over a five year period.
The 1999 Acquisitions have been accounted for using purchase
accounting.
In February 1999, the Company sold a 51% interest in its
In-Flight Entertainment subsidiary (the "IFE" Sale) to a wholly-owned
subsidiary of Sextant Avionique SA for an initial sale price of
$62,000 (subject to adjustment based on the actual results of
operations during the two years following the IFE Sale). As a result
of the IFE Sale, the Company accounts for its remaining 49% interest
in IFE using the equity method of accounting.
Note 3. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is defined as all changes in a
company's net assets except changes resulting from transactions with
shareholders. It differs from net income (loss) in that certain items
currently recorded to equity would be a part of comprehensive income
(loss). The following table sets forth the computation of
comprehensive income (loss) for the periods presented:
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
May 29, May 30,
1999 1998
<S> <C> <C>
Net earnings (loss) $ 11,415 $ (23,875)
Other comprehensive income:
Foreign exchange translation adjustment (1,651) (528)
----------- -----------
Comprehensive income (loss) $ 9,764 $ (24,403)
=========== ============
</TABLE>
Note 4. SEGMENT REPORTING
The Company is currently organized based on customer-focused
operating groups operating in a single segment. Each group reports
its results of operations and makes requests for capital expenditures
and acquisition funding to the Company's chief operation
decision-making group. This group is comprised of the Chairman, the
Vice Chairman and Chief Executive Officer, the President and Chief
Operating Officer, the Corporate Senior Vice President of
Administration and Chief Financial Officer and the Executive Vice
President, Marketing and New Product Development. Under this
organizational structure, the Company's operating groups were
aggregated into two reportable segments. The Aircraft Cabin Interior
Products and Services segment is comprised of four operating groups:
the Seating Products Group, the Interior Systems Group, the Flight
Structures and Integration Group and the Services Group, each of
which have separate management teams and infrastructures dedicated to
providing a full range of products to their commercial and general
aviation operator customers. Each of these groups demonstrate similar
economic performance and utilize similar distribution methods and
manufacturing processes. Customers are supported by a single
worldwide after-sale service organization. As described in Note 2,
the Company sold a 51% interest in IFE on February 25, 1999. IFE was
a separate, reportable segment. The Company evaluates the performance
<PAGE>
of its operating segments based primarily on sales, gross profit
before special costs and charges, operating earnings before special
costs and charges, and working capital management.
The following table presents sales and other financial
information by business segment for the three month periods ended:
MAY 29, 1999
Aircraft Cabin Interior
Products and Services
-----------------------
Sales $185,032
Gross profit $ 66,587
Operating earnings $ 27,618
Working Capital $150,274
<TABLE>
<CAPTION>
MAY 30, 1998
------------
Aircraft Cabin
Interior In-Flight
Products and Services Entertainment Total
--------------------- ------------- -----
<S> <C> <C> <C>
Sales $ 118,129 $ 21,862 $ 139,991
Gross profit $ 45,322 $ 6,558 $ 51,880
Operating loss as reported $ (5,456) $ (8,921) $ (14,377)
Operating earnings (loss) before
special costs $ 19,257 $ (1,381) $ 17,876
Working capital $ 147,539 $ 28,727 $ 176,266
</TABLE>
Note 5. EARNINGS (LOSS) PER SHARE
Basic net earnings (loss) per share is computed using the
weighted average common shares outstanding during the period. Diluted
net earnings (loss) per share is computed by using the average share
price during the period when calculating the dilutive effect of stock
options. Shares outstanding for the periods presented were as follows:
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------
May 29, May 30,
1999 1998
<S> <C> <C>
Weighted average shares outstanding 24,631 23,070
Dilutive effect of employee stock options 269 -
------- ------
Diluted shares outstanding 24,900 23,070
====== ======
</TABLE>
Note 6. RESTRUCTURING CHARGE
During the ourth quarter of fiscal 1999, the Company began to
implement a restructuring plan designed to lower its cost structure and
improve its long-term competitive position. This plan includes
consolidating seven facilities reducing the total number from 21 to 14,
reducing its employment base by approximately 8% and rationalizing its
product offerings. The restructuring costs and charges are comprised of
$61,089 related to impaired inventories and property, plant
<PAGE>
and equipment as a result of the rationalization of its product
offerings; plus severance and related separation costs, lease
termination and other costs of $4,949. The Company anticipates that it
will be substantially complete with this restructuring by the end of the
current fiscal year.
The assets impacted by this program include inventories,
factories, warehouses, assembly operations, administration facilities
and machinery and equipment.
The following table summarizes the restructuring costs:
<TABLE>
<CAPTION>
Balance at Balance at
Feb. 27, 1999 Utilized May 29, 1999
--------------------- --------------------- ------------------
<S> <C> <C> <C>
Severance, lease termination and other costs $ 4,298 $ 1,070 $ 3,228
Impaired inventories, property and equipment 19,911 10,969 8,942
--------------------- --------------------- ------------------
$ 24,209 $ 12,039 $ 12,170
===================== ===================== ==================
</TABLE>
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Dollars in thousands, except per share data)
The following discussion and analysis addresses the results of the
Company's operations for the three months ended May 29, 1999, as compared
to the Company's results of operations for the three months ended May 30,
1998. The discussion and analysis then addresses the liquidity and
financial condition of the Company and other matters.
For comparability purposes, the Company has provided additional pro
forma information giving effect to each of the acquisitions (the "1999
Acquisitions") and dispositions (the "IFE Sale") the Company completed
during fiscal 1999, exclusive of any acquisition-related expenses, as if
they all occurred at the beginning of the year.
Three Months Ended May 29, 1999, as Compared to the Results of Operations for
the Three Months Ended May 30, 1998
Net sales for the fiscal 2000 three-month period were $185,032,
$45,041 and 32.2% greater than sales of $139,991 for the comparable
period in the prior year. The increase in sales is primarily due to the
1999 Acquisitions, offset by the impact of the IFE Sale. On a pro forma
basis, sales increased by $22,672 or 14%.
Gross profit was $66,587 or 36.0% of sales for the three months
ended May 29, 1999. This was $14,707, or 28.3%, greater than the
comparable period in the prior year of $51,880, which represented 37.1%
of sales. The increase in gross profit in the current period is primarily
due to the impact of the 1999 Acquisitions and the IFE Sale, offset by
somewhat lower gross margins on certain of the Company's operations due
to the introduction of a large number of new products during the current
quarter.
Selling, general and administrative expenses were $22,028 or 11.9%
of sales for the three months ended May 29, 1999. This was $4,029, or
22.4% greater than the comparable period in the prior year of $17,999 or
12.9% of sales. While selling, general and administrative spending in the
current period increased as a result of the 1999 Acquisitions; such
expenses as a percentage of sales declined by 100 basis points. Selling,
general and administrative expenses for the three months ended May 29,
1999 was $105 greater than pro forma selling, general and administrative
expenses for the comparable period in the prior year.
Research, development and engineering expenses were $11,245 or
6.1% of sales for the three months ended May 29, 1999, a decrease of $727
over the comparable period in the prior year of $11,972 or 8.6% of sales.
The decrease in research, development and engineering expense in the
current period is primarily attributable to the IFE Sale, offset by an
increase in spending attributable to the 1999 Acquisitions. Importantly,
research, development and engineering as a percentage of sales decreased
by 250 basis points.
Amortization expense for the quarter ended May 29, 1999 of $5,696,
was $1,663 greater than the amount recorded in the first quarter of
fiscal 1999 due to acquisitions completed during fiscal 1999.
<PAGE>
The Company generated operating earnings of $27,618, or 14.9% of
sales as compared to an operating loss of $(14,377), or (10.3%) during
the comparable period in the prior year. Operating earnings in the prior
year, exclusive of acquisition-related expenses were $17,876. The
increase in operating earnings in the current period is the result of the
increase in gross profit along with lower operating expenses as a
percentage of sales. Operating earnings for the current quarter of
$27,618, or 14.9% of sales, were $5,410 or 24.4% greater than pro forma
operating earnings of $22,208 or 13.6% of sales, for the comparable
period in the prior year.
Interest expense, net was $12,622 for the three months ended May
29, 1999, or $4,840 greater than interest expense of $7,782 for the
comparable period in the prior year. The increase in interest expense is
due to the increase in the Company's long-term debt as a result of
acquisitions completed during fiscal 1999.
Earnings before income taxes in the current quarter were $14,269,
as compared to earnings before acquisition-related expenses and incomes
taxes of $10,094 in the prior year's comparable period. Income tax
expense for the quarter ended May 29, 1999 was $2,854, as compared to
$1,716 in the prior year's comparable period. On a pro forma basis, net
earnings and net earnings per share increased by $2,912 and $.12,
respectively, over the comparable amounts in the prior year.
[Remainder of page intentionally left blank]
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements consist of working capital
needs, ongoing capital expenditures and scheduled payments of interest
and principal 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 both acquisitions and revenue growth.
B/E's working capital was $150,274 as May 29, 1999, as compared to
$143,423 as of February 27,1999.
At May 29, 1999, the Company's cash and cash equivalents were
$36,037 as compared to $39,500 at February 27, 1999. Cash provided
from operating activities was $13,336 for the three months ended May
29, 1999. The primary source of cash during the three months ended May
29, 1999 was net earnings, depreciation and amortization of $21,467, a
$12,359 decrease in accounts receivable and a $6,343 increase in
accounts and income taxes payable, offset by a use of cash of $12,363,
related to increases in inventories and $12,039 related to a decrease
in accrued and other liabilities.
The Company's capital expenditures were $14,237 and $8,811 during
the three months ended May 29, 1999 and May 30, 1998, respectively. The
increase in capital expenditures was primarily attributable to (1)
acquisitions completed during 1999, (2) the purchase of previously leased
facilities, (3) the development of a new management information system to
replace the Company's existing systems, many of which were inherited in
acquisitions, and (4) expenditures for plant modernization. The Company
anticipates on-going annual capital expenditures of approximately $30,000
for the next several years to be in line with the expanded growth in
business and the recent acquisitions.
The Company believes that the cash flow from operations and
availability under the Company's 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 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 begins to expire in 201l. 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 impact the airframe manufacturers and the airlines, the
<PAGE>
Company's high degree of financial leverage, risks associated with the
implementation of its integrated management information system and risks
associated with the integration of acquisitions. The Company monitors
these uncertainties, 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" ("Y2K") 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-Y2K 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 analyzed its systems, both
pre-existing and acquired, for Y2K compliance with a view to replacing
non-compliant systems and creating an integrated Y2K compliant system. In
addition, the Company has developed a comprehensive program to address
the Y2K issue with respect to the following non-system areas: (1) network
switching, (2) the Company's non-information technology systems (such as
buildings, plant, equipment and other infrastructure systems that may
contain embedded microcontroller technology) and (3) 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 Y2K compliance involve: (1) a wide-ranging
assessment of the Y2K problems that may affect the Company, (2) the
development of remedies to address the problems discovered in the
assessment phase and (3) 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 database 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
Y2K compliance.
<PAGE>
Remediation and Testing Phase. In implementing the ERP system, the
Company undertook and has completed a remediation and testing phase of
all internal systems, LANs, WANs and PBXs. This phase was intended to
address potential Y2K 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 Y2K 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 and March 1998 by this team of
experts. To date, eight locations have 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-Y2K compliant sites by the year 2000.
Program to Assess and Monitor Progress of Third Parties. As noted above,
B/E has also undertaken an action plan to assess and monitor the progress
of third-party vendors in resolving Y2K issues. To date, the Company has
(1) obtained guidance from outside counsel to ensure legal compliance,
(2) generated correspondence to each of its third-party vendors to assess
the Y2K readiness of these vendors and (3) contracted a `Vendor Y2K'
fully automated tracking program to track all correspondence to/from
vendors, to track timely responses via an automatic computer generated
`trigger' to provide an electronic folder for easy reference and
retention and to specifically track internally identified `critical'
vendors. The Company is also currently in the midst of developing an
internal consolidated database of the Company's vendors. To monitor its
third-party vendors, the Company has sent a correspondence mailing to
targeted vendors and is currently following up on non-deliverable letters
and those vendors that indicated material problems in their replies. The
Company believes that the majority of the required compliance and
remediation with respect to these vendors will be completed in the
beginning of the second quarter of fiscal 2000.
Contingency Plans. The Company has begun to analyze contingency plans to
handle the worst-case Y2K 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 Y2K Issue. To date, the Company has incurred
approximately $30,000 in costs related to the implementation of the ERP
system. The Company currently estimates the total ERP implementation will
cost approximately $38,000 and a portion of the costs have and will be
capitalized to the extent permitted under generally accepted accounting
principles.
Risks Related to the Y2K Issue. Although the Company's efforts to be Y2K
compliant are intended to minimize the adverse effects of the Y2Kissue on
the Company's business and operations, the actual effects of the issue
will not be known until the year 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 Y2K issues in a timely manner would have a material
<PAGE>
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. See "Risk
Factors--Potential Failure of Computer Systems to Recognize Year 2000."
Fiscal 1999 Acquisitions
During fiscal 1999, the Company completed four major acquisitions
and two smaller transactions. In April 1999, the company acquired Puritan
Bennett Aero Systems Co., a manufacturer of commercial aircraft oxygen
systems, and "WEMAC" air valve components, overhead lights and switches,
crew masks and protective breathing devices for both general aviation and
commercial aircraft. Also during April 1999, the Company acquired
Aircraft Modular Products, a manufacturer of business jet seating,
cabinetry, and structures. In August 1999, the Company acquired SMR
Aerospace, Inc. and its affiliates ("SMR"), which is a leading supplier
of design, integration, installation and certification services for the
reconfiguration of aircraft, allowing an airline to modify or upgrade the
seating arrangements, install telecommunications, move galley structures
or modify overhead containers or sidewalls, etc. SMR also manufactures
and installs crew rest compartments, and performs the engineering
required to make structural modifications and supplies the kits necessary
for the conversion of passenger to freighter aircraft. In September 1999,
the Company acquired CF Taylor, a leading manufacturer of galley
equipment for both narrow and wide-body aircraft, including galley
structures, crew rests.
Fiscal 1999 Dispositions
In February 1999, the Company sold a 51% interest in its In-Flight
Entertainment subsidiary (the "IFE Sale") to a wholly owned subsidiary of
Sextant Avionique SA for an initial sale price of $62,000 (subject to
adjustment based on the actual results of operations during the two years
following the IFE Sale).
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 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
by delaying purchases of new aircraft. This led to a significant
contraction in the commercial aircraft cabin interior products industry
and a decline in our business and profitability. Since early 1994, the
airlines have experienced a turnaround in operating results, leading the
domestic airline industry to record operating earnings during calendar
<PAGE>
years 1995 through 1998. This financial turnaround has, in part, been
driven by record load factors, rising fare prices and declining fuel
costs. The airlines have substantially improved their balance sheets
through cash generated from operations and the sale of debt and equity
securities. 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 and the current general economic and financial
turbulence, the current profitability of the airline industry may not
continue and the airlines may not be able to 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 our 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. Although not all carriers have been affected
by the current economic events in the Pacific Rim, certain carriers,
including non-Asian carriers that have substantial Asian routes, could
cancel or defer their existing orders. In addition, Boeing has announced
that in light of the continued severe economic conditions in Asia, it
will be substantially scaling back production of a number of aircraft
types, including particularly wide-body aircraft which require up to
five times the dollar content for B/E's products as compared to
narrow-body aircraft.
This report includes forward-looking statements which involve
risks and uncertainties. Our actual experience may differ materially from
that anticipated in such statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Risk
Factors" contained in Exhibit 99 of the Company's Annual Report on Form
10-K for the fiscal year ended February 27, 1999, as well as future
events that may have the effect of reducing the Company's available
operating income and available cash balances, such as unexpected
operating losses or delays in the integration of our acquired businesses,
conditions in the airline industry, customer delivery requirements, new
or expected refurbishments, cash expenditures related to possible future
acquisitions, delays in the implementation of our integrated management
information system, labor disputes involving the Company, its significant
customers or airframe manufacturers, delays or inefficiencies in the
introduction of new products or fluctuations in currency exchange rates.
<PAGE>
Item 1. Legal Proceedings Not applicable.
Item 2. Changes in Securities Not applicable.
Item 3. Defaults Upon Senior Securities Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders Not applicable.
Item 5. Other Information None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
1. Exhibit 27 Financial Data Schedule for the three months
ended May 29, 1999.
2. Exihbit 10.48 Supplemental Executive Money Purchase Retirement Plan.
3. Exhibit 10.49 First Amendment to the Supplemental Executive Money
Purchase Retirement Plan.
4. Exhibit 10.50 Supplemental Executive Deferred Compensation Plan III.
b. Reports on Form 8-K
1. March 3, 1999 Form 8-K relating to the sale of a 51% interest in
the Company's In-Flight Entertainment ("IFE")
business.
2. March 12, 1999 Form 8-K relating to the sale of a 51% interest in
the Company's IFE business.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BE AEROSPACE, INC.
Date: July 8, 1999 By: /s/ Robert J. Khoury
--------------------------------
Vice Chairman and
Chief Executive Officer
Date: July 8, 1999 By: /s/ Thomas P. McCaffrey
-----------------------------
Corporate Senior Vice President of
Administration and Chief
Financial Officer
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BE AEROSPACE, INC.
SUPPLEMENTAL EXECUTIVE MONEY PURCHASE RETIREMENT PLAN
(As Amended and Restated Effective as of January 1, 1997
-------------------------------------------------------
THIS SUPPLEMENTAL EXECUTIVE MONEY PURCHASE RETIREMENT PLAN, as amended
and restated (the "Plan") made and entered into this ____ day of _________,
1997, effective as of January 1, 1997 by and between BE AEROSPACE, INC., a
corporation organized and existing under the laws of the State of Delaware
(hereinafter referred to as the "Company"), and the employee designated in the
Adoption Agreement attached hereto and made a part hereof (hereinafter referred
to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and its affiliates desire to provide for an
unfunded retirement pay plan for the benefit of a select group of their
management or highly compensated employees, subject to certain conditions and
pursuant to the terms and provisions specified in this Plan;
WHEREAS, the Company adopted the Plan effective as of January 1, 1996
and wishes to amend the Plan in certain respects.
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the Company hereby amends and restates the Plan pursuant to
the following terms and provisions.
ARTICLE 1
DEFINITIONS
1.1 "Adoption Agreement" shall mean an agreement between the Company
and a Participant pursuant to which the Participant is designated as a
Participant and agrees to be bound by the terms and conditions of this Plan.
1.2 "Beneficiary" means the person or persons designated by a
Participant, upon such forms as shall be provided by the Committee, to receive
the death benefits payable under Section 3.2 of the Plan; provided, however,
that if a Participant designates a person other than his surviving spouse, such
spouse shall be required to consent in a notarized writing (before a notary) to
such beneficiary designation before such designation shall be valid and
effective. If the Participant shall fail to designate a Beneficiary, or if for
any reason such designation shall be ineffective, or if such Beneficiary shall
predecease the Participant or die simultaneously with him, then the Beneficiary
shall be, in the following order of preference:
(i) the Participant's surviving spouse, if any, or
(ii) the Participant's estate.
1.3 "Cause" shall mean a determination by the Company that any of the
following have occurred:
<PAGE>
(a) the Participant has materially (i) failed, refused or
neglected to perform and discharge his duties as an employee of the
Company, or (ii) breached any fiduciary duties he may have because of
any position he holds with the Company or any subsidiary or affiliate
thereof;
(b) any conduct by the Participant that either results in the
conviction of a felony or the Participant's conviction of any other
crime involving the Participant's personal dishonesty or moral
turpitude, under the laws of the United States of America or any state
thereof, or the Participant's conviction of an equivalent crime under
the laws of any other jurisdiction;
(c) the Participant has violated any confidentiality,
non-competition or non-solicitation agreement between the Company and
the Participant; or
(d) any willful failure by the Participant to comply with the
Company's internal policies regarding insider trading or insider
dealing.
1.4 "Change in Control" means a "Change in Control" as that term is
defined in that certain Indenture dated as of March 23, 1993 by and between the
Company and United States Trust Company of New York, as trustee, in connection
with the Company's 9 1/4% Senior Notes due 2003.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and successor tax laws.
1.6 "Committee" shall mean the Benefits Committee as appointed by the
Board of Directors of the Company.
1.7 "Company" shall mean BE Aerospace, Inc., a Delaware corporation,
its successors and assigns, and any of their respective subsidiaries and
affiliates.
1.8 "Compensation" shall mean the amount of base salary (excluding any
bonuses, commissions or other compensation) received by a Participant from the
Company during the Plan Year, but excluding any Compensation received prior to
the Effective Date of Participation of the Participant and excluding any
payments during the Plan Year of compensation deferred from a prior Plan Year.
Notwithstanding the foregoing, Compensation shall not include the amount of any
taxable fringe benefits but shall include the amount of pre-tax contributions,
if any, authorized by a Participant under a 401(k) plan maintained by the
Company or any compensation the Participant has elected to defer for the Plan
Year under the BE Aerospace, Inc. Supplemental Executive Retirement Plan.
1.9 "Effective Date of Plan" shall mean January 1, 1996.
1.10 "Effective Date of Participation" shall mean the date specified on
the Participant's Adoption Agreement as the date on which he first becomes
eligible to accrue benefits under the Plan.
1.11 "Participant" shall mean each Employee who is designated by the
Company as being eligible for benefits under this Plan, and who executes an
Adoption Agreement. An Employee shall not be a Participant unless he is deemed
to be among a select group of management or highly compensated employees of the
Company within the meaning of Section 201(2) of ERISA.
<PAGE>
1.12 "Employee" shall mean any full-time, common law employee of the
Company and shall not include persons engaged as independent contractors by the
Company.
1.13 "Leave of Absence" shall mean any absence authorized by the
Company under its standard personnel practices, provided that all persons under
similar circumstances shall be treated alike in the granting of such authorized
Leave of Absence.
1.14 "Plan" shall mean this Supplemental Executive Money Purchase
Retirement Plan as herein set forth and as it may be amended from time to time.
1.15 "Plan Year" shall mean each twelve (12) month period that begins
January 1 and ends December 31.
1.16 "Policy" shall mean the life insurance policy identified on the
Adoption Agreement of a Participant.
1.17 "Retirement Pay" shall mean the retirement pay to which a
Participant who is entitled to receive pursuant to Article 2 hereof.
1.18 "Severance" shall mean a Participant's termination of employment
with the Company for any reason, including death or disability, other than by
the Company for Cause. The term shall not include a Leave of Absence.
1.19 "Trust" shall mean the BE Aerospace, Inc. Executive Deferred
Compensation Trust by and between Security Investment Management & Trust Company
as Trustee and the Company.
1.20 "Trustee" shall mean the person or entity that shall from time
to time be serving as the Trustee of the Trust.
1.21 "Year of Service" shall mean a twelve-consecutive month period of
service with the Company during which the Participant worked full-time for the
Company, including periods of service prior to the Effective Date of the Plan.
ARTICLE 2
RETIREMENT PAY
2.1 Amount of Retirement Pay.
(a) The Retirement Pay payable to a Participant whose
Severance is other than by reason of the Participant's death shall be
equal to the value of an account to be kept by the Committee for the
Participant. The value of the account shall be equal to the cash
surrender value that the life insurance policy identified in the
<PAGE>
Participant's Adoption Agreement (the "Policy") issued on the life of
the Participant would have on the date of the Participant's Severance
if (1) the Company made premium payments to the Policy each Plan Year
(at such times as the Company shall determine), commencing with the
Plan Year in which occurs the Participant's Effective Date of
Participation, in an annual amount equal to the Participant's
Contribution for the Plan Year, and (2) the Policy had a face amount of
insurance equal to the face amount specified in the Adoption Agreement.
(b) For purposes of this Agreement, the "Participant's
Contribution" shall mean the sum of:
(i) 5% of the Participant's Compensation for the Plan
Year; plus
(ii) such additional contribution, if any, for the
Plan Year as the Company, in its sole and absolute discretion,
shall determine should be allocated to the account of the
Participant under this Plan.
(c) The Retirement Pay, less applicable withholding taxes, to
which a Participant is entitled shall be paid by the Company in a lump
sum payment to be made as soon as practicable following the
Participant's Severance.
(d) The Committee's good faith determination of the Retirement
Pay payable to a Participant shall be binding and conclusive on the
Participant and the Company.
(e) Nothing in this Section 2.1 shall require the Company to
acquire or maintain the Policy, or to make any premium payments into
the Policy, nor shall the Participant have any right, title or interest
in the cash value of the Policy if acquired by the Company.
2.2 Death Benefit.
(a) If a Participant dies after he has incurred a Severance,
but before payment has been made to him of his account, then the unpaid
portion of his account under the Plan, less applicable withholding
taxes, shall be paid to the Participant's Beneficiary in a single lump
sum payment as soon as practicable following the Participant's death.
(b) If a Participant incurs a Severance by reason of the
Participant's death, and the Company or the Trust then owns the Policy
identified on the Participant's Adoption Agreement, then a death
benefit shall be paid under the Plan to the Participant's Beneficiary
equal to the death proceeds payable to the Company or the Trust under
the Policy. If the Participant incurs a severance by reason of the
Participants' death, and the Company or the Trust does not then own the
Policy identified on the Participant's Adoption Agreement, then a death
benefit shall be paid to the Participant's Beneficiary equal to the
Participant's Retirement Pay, determined and payable in manner under
Section 2.1 hereof.
<PAGE>
(c) The death benefit under this Section 2.2 shall be treated
as taxable compensation and shall be paid, less applicable withholding
taxes, as soon as practicable following the Participant's death.
2.3 Termination for Cause. In the event that a Participant's employment
with the Company is terminated by the Company for Cause, no benefits shall be
payable under this Plan to the Participant or his Beneficiaries.
2.4 Change in Control. In the event of a Change in Control, then each
Participant, whether or not then employed by the Company, shall receive a lump
sum payment of his Retirement Pay, less applicable withholding taxes, as soon as
practicable following the Change in Control.
2.5 Contributions to Trust. The Company shall contribute to the Trust
for each Plan year an amount equal to the Participant's Contributions, as
defined in Section 3.1(b) hereof, said contributions to be made as soon as
practicable after the end of each Plan year, or at such earlier times as the
Company shall determine.
2.6 Benefit Obligations. Only the entity that actually employs the
Participant at the time of his Severance shall have any obligation to pay
Retirement Pay to the Participant pursuant to this Plan.
ARTICLE 3
ADMINISTRATION
3.1 Powers and Duties. The Committee generally shall be responsible for
the management, operation, interpretation and administration of the Plan. The
Committee shall have such discretionary powers as may be necessary or
appropriate in carrying out its duties. Without limiting the foregoing, the
Committee shall have the power to:
(a) Establish procedures for allocation of responsibilities of the
Plan which are not allocated herein;
(b) Determine the names of those Employees who are eligible to
participate and such other matters as may be necessary to enable payment under
the Plan;
(c) Construe all terms, provisions, conditions and limitations of the
Plan;
(d) Correct any defect, supply any omission or reconcile any
inconsistency that may appear in the Plan;
(e) Determine the amount, manner and time of payment of any benefits
hereunder and prescribe procedures to be followed by Participants to obtain
benefits; and
(f) Perform such other functions and take such other actions as may
be required by the Plan or as may be necessary or advisable to accomplish the
purposes of the Plan.
<PAGE>
The Company shall furnish the Committee with all data and information available
which the Committee may reasonably require in order to perform its functions
hereunder. The Committee may rely without question upon any such data or
information furnished by the Company. Any interpretation or other decision made
by the Committee shall be final, binding and conclusive upon all persons in the
absence of clear and convincing evidence that the Committee acted arbitrarily
and capriciously.
3.2 Agents. The Committee may appoint a Secretary who may, but need
not, be a member of the Committee, and may employ such agents for clerical and
other services, and such counsel, accountants and other professional advisors as
may be required for the purpose of administering the Plan. The Committee may
rely on all tables, valuations, reports, certificates and opinions furnished by
its agents.
3.3 Procedures. A majority of the Committee members shall constitute a
quorum for the transaction of business. No action shall be taken except upon a
majority vote of the Committee. An individual shall not vote or decide upon any
matter relating solely to himself or vote in any case in which his individual
right or claim to any benefit under the Plan is particularly involved. In any
case in which a Committee member is so disqualified to act, and the remaining
members cannot agree on an issue, the Company shall appoint a temporary
substitute member to exercise all of the powers of the disqualified member
concerning the matter in which he is disqualified.
3.4 Claims Procedure. In the event that any Participant or Beneficiary
claims to be entitled to benefits under the Plan and the Committee determines
that such claim should be denied in whole or in part, the Committee shall, in
writing, notify such claimant within ninety (90) days of receipt of such claim
that his claim has been denied, setting forth the specific reasons for such
denial. Such notification shall be written in a manner reasonably expected to be
understood by such Participant or Beneficiary and shall set forth the pertinent
sections of the Plan relied on, and where appropriate, an explanation of how the
claimant can obtain review of such denial.
Within sixty (60) days after the mailing or delivery by the
Committee of such notice, such claimant may request, by mailing or delivery of
written notice to the Committee, a review and/or hearing by the Committee of the
decision denying the claim. If the claimant fails to request such a review
and/or hearing within such sixty (60) day period, it shall be conclusively
determined for all purposes of this Plan that the denial of such claim by the
Committee is correct. If such claimant requests a hearing within such sixty (60)
day period, the Committee shall designate a time (which time shall not be less
than seven (7) nor more than sixty (60) days from the date of such claimant's
notice to the Committee) and a place for such hearing, and shall promptly notify
such claimant of such time and place. A claimant or his authorized
representative shall be entitled to inspect all pertinent Plan documents and to
submit issues and comments in writing. If only a review is requested, the
claimant shall have sixty (60) days after filing a request for review to submit
additional written material in support of the claim. After such review and/or
hearing, the Committee shall promptly determine whether such denial of the claim
was correct and shall notify such claimant in writing of its determination with
sixty (60) days after such review and/or hearing or after receipt of any
additional information submitted.
<PAGE>
3.5 Indemnification. The Company shall indemnify to the fullest extent
permitted by law, each Committee member and each employee or former employee who
assisted the Committee at the request of the Committee or as part of his or her
duties against any expense, liability or loss sustained by reason of any act or
failure to act made in good faith, including, but not limited to, those in
reliance on certificates, reports, tables, opinions or other communications from
any company or agents chosen by the Committee in good faith. Such
indemnification shall include attorneys' fees and other costs and expenses
reasonably incurred in defense of any action brought by reason of any such act
or failure to act.
ARTICLE 4
MISCELLANEOUS
4.1 Participant's Rights Unsecured. The right of a Participant or his
beneficiary to receive a distribution hereunder shall be an unsecured claim
against the general assets of the Company, and neither the Participant nor his
beneficiary nor any other person shall have any rights in or against any amount
credited to the Participant's Account or any specific assets of the Company or
the Trust. The assets of the Trust shall be subject to the creditors of the
Company in the event of the Company's insolvency. If and to the extent not paid
directly from the general assets of the Company, any benefits payable under the
Plan shall be payable from the Trust. Any assets remaining in the Trust, after
payment of all benefits under the Plan shall be paid to the Company.
4.2 Impact on Other Employee Benefits. This Plan shall not be construed
to impact or cause the denial of any benefits to which any Participant may be
entitled under any other welfare or benefit plan of the Company.
4.3 Other Plans. Retirement Pay payments made to Participants under
this Plan shall not be includable as salary or compensation for purposes of
determining the amount of employee benefits under any other retirement, pension,
profit-sharing or welfare benefit plans of the Company.
4.4 Reservation of Right. The Company expects to continue the Plan
indefinitely, but nevertheless reserves the right to modify or amend the Plan or
any provision hereof at any time.
4.5 Governing Law. To the extent not pre-empted by the laws of the
United States, the construction, validity and administration of the Plan shall
be governed by the laws of the State of Florida without reference to the
principles of conflicts of law therein.
4.6 No Assignment. Except with respect to the naming of a Beneficiary
to receive any death benefits payable hereunder, the right to receive payment of
any benefits under the Plan shall not be transferred, assigned or pledged,
except by beneficiary designation, by will, under the laws of decent and
distribution, or as may be otherwise required by law.
4.7 Taxes. The Company shall withhold under the Plan any taxes which it
determines in good faith are required to be withheld under applicable Federal,
state or local tax laws or regulations.
<PAGE>
4.8 Severability. Subject to the provisions of Section 4.5, if any
provision of this Plan is found, held or deemed to be void, unlawful or
unenforceable under any applicable statute or other controlling law, the
remainder of the Plan shall continue in full force and effect.
4.9 Headings and Subheadings. The headings and subheadings of the Plan
are for reference only. In the event of a conflict between a heading or
subheading and the content of an article or paragraph, the content shall
control.
4.10 Gender. The masculine, as used herein, shall be deemed to include
the feminine and the singular to include plural, except where the context
requires a different construction.
4.11 Amendment and Termination. This Plan may be amended or terminated
in any respect at any time by the Company by a writing signed by an officer of
the Company; provided, however, that no amendment or termination of the Plan
shall be effective to reduce any Retirement Pay that accrued before the adoption
of such amendment or termination.
4.12 No Employment Contract. This Plan does not constitute a contract
of employment or impose on any Participant or the Company any obligations to
retain the Participant as an employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed the
day and year first above written.
For: BE AEROSPACE, INC.
By: /s/ Joseph Piegari, Vice President
--------------------------------------
Human Resources
<PAGE>
ADOPTION AGREEMENT
By executing this Adoption Agreement, the undersigned (the
"Participant") hereby agrees to become a Participant under the BE Aerospace,
Inc. Supplemental Executive Money Purchase Retirement Plan (the "Plan"), by
adopting the Plan in full as if the Participant were a signatory to the Plan.
The following information applies to the Participant's participation in the
Plan:
1. Participant's Name: ________________________________
2. Participant's Address: ________________________________
3. Insurer: ________________________________
4. Policy Face Amount: ________________________________
5. Policy Number:
6. Percentage of Compensation: ________________________________
7. Effective Date of Participation: ________________________________
8. Beneficiary: ________________________________
The Participant hereby acknowledges his receipt of a copy of the Plan
and acknowledges that his rights to benefits under the Plan are subject to
certain conditions specified in the Plan, including without limitation, the
requirements that his employment with the Company not be terminated for Cause,
as defined in the Plan.
WITNESSES:
- --------------------------- ------------------------------------
PARTICIPANT'S SIGNATURE
- --------------------------- -----------------------------------
DATE
ACKNOWLEDGED AND ACCEPTED BY THE COMPANY
BE AEROSPACE, INC.
By: /s/ Joseph Piegari, Vice President
---------------------------------------
Human Resources
FIRST AMENDMENT TO THE
BE AEROSPACE, INC. SUPPLEMENTAL EXECUTIVE
MONEY PURCHASE RETIREMENT PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1997)
THIS FIRST AMENDMENT, made this ______ day of _____________, 1998, by
BE AEROSPACE, INC. (the "Company") to the BE AEROSPACE, INC. SUPPLEMENTAL
EXECUTIVE MONEY PURCHASE RETIREMENT PLAN, as amended and restated effective as
of January 1, 1997 (the "Plan").
W I T N E S S E T H:
WHEREAS, the Company did establish the Plan for the sole and
exclusive benefit of its eligible participants and their respective
beneficiaries under the terms and provisions of the Internal Revenue Code of
1986, as amended, and
WHEREAS, pursuant to Section 4.11, the Company reserved the right to
amend said Plan;
NOW, THEREFORE, effective as of January 1, 1999, the Plan shall be
amended as follows:
1. The first paragraph of the Plan is hereby amended by replacing the
"SUPPLEMENTAL EXECUTIVE MONEY PURCHASE RETIREMENT PLAN" with the "BE
AEROSPACE, INC. SUPPLEMENTAL EXECUTIVE DEFERRED COMPENSATION PLAN II."
2. Section 1.7 is hereby amended to read as follows:
"1.7 "Company" shall mean BE Aerospace, Inc., a Delaware
corporation, its successors and assignees, any of their respective
subsidiaries and affiliates, and any other entity designated by the
Company."
3. The first sentence of Section 1.8 is hereby amended to read as follows:
"1.8 "Compensation" shall mean wages, including overtime,
bonuses, and any amounts that would have been received by the
Participant from the Company but for an election under Code Sections
125, 401(k), 402(h) or 403(b). Notwithstanding the foregoing,
Compensation shall not include any amounts received during the Plan
Year of compensation deferred from a prior Plan Year."
4. Section 1.14 is hereby amended to read as follows:
"1.14 "Plan" shall mean the BE Aerospace, Inc. Supplemental
Executive Deferred Compensation Plan II as herein set forth and as it
may be amended from time to time."
5. Subparagraph 2.1(b)(i) is hereby amended to read as follows:
"(i) 7 1/2 % of the Participant's Compensation for the prior
Plan Year; plus"
6. In all other respects, the Plan shall remain unchanged by this Amendment.
IN WITNESS WHEREOF, the Employers have caused this instrument to be
executed the day and year first above written.
BE AEROSPACE, INC.
Dated:___________________ By: /s/ Joseph Piegari, Vice President
---------------------------------------
Human Resources
BE AEROSPACE, INC.
SUPPLEMENTAL EXECUTIVE DEFERRED COMPENSATION PLAN III
-------------------------------------------------------
THIS SUPPLEMENTAL EXECUTIVE DEFERRED COMPENSATION PLAN III, effective
as of January 1, 1999 by and between BE AEROSPACE, INC., a corporation organized
and existing under the laws of the State of Delaware (hereinafter referred to as
the "Company"), and the employee designated in the Adoption Agreement attached
hereto and made a part hereof (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company and its subsidiaries and affiliates desire to
provide for an unfunded retirement pay plan for the benefit of a select group of
their management or highly compensated employees, subject to certain conditions
and pursuant to the terms and provisions specified in this Plan;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the Company hereby adopts the Plan pursuant to the following
terms and provisions.
ARTICLE 1
DEFINITIONS
1.1 "Adoption Agreement" shall mean an agreement between the Company
and a Participant pursuant to which the Participant is designated as a
Participant and agrees to be bound by the terms and conditions of this Plan.
1.2 "Beneficiary" means the person or persons designated by a
Participant, upon such forms as shall be provided by the Committee, to receive
the death benefits payable under Section 3.2 of the Plan; provided, however,
that if a Participant designates a person other than his surviving spouse, such
spouse shall be required to consent in a notarized writing (before a notary) to
such beneficiary designation before such designation shall be valid and
effective. If the Participant shall fail to designate a Beneficiary, or if for
any reason such designation shall be ineffective, or if such Beneficiary shall
predecease the Participant or die simultaneously with him, then the Beneficiary
shall be, in the following order of preference:
(i) the Participant's surviving spouse, if any, or
(ii) the Participant's estate.
1.3 "Cause" shall mean a determination by the Company that any of the
following have occurred:
<PAGE>
(a) the Participant has materially (i) failed, refused or
neglected to perform and discharge his duties as an employee of the
Company, or (ii) breached any fiduciary duties he may have because of
any position he holds with the Company or any subsidiary or affiliate
thereof;
(b) any conduct by the Participant that either results in the
conviction of a felony or the Participant's conviction of any other
crime involving the Participant's personal dishonesty or moral
turpitude, under the laws of the United States of America or any state
thereof, or the Participant's conviction of an equivalent crime under
the laws of any other jurisdiction;
(c) the Participant has violated any confidentiality,
non-competition or non-solicitation agreement between the Company and
the Participant; or
(d) any willful failure by the Participant to comply with the
Company's internal policies regarding insider trading or insider
dealing.
1.4 "Change in Control" means a "Change in Control" as that term is
defined in that certain Indenture dated as of March 23, 1993 by and between the
Company and United States Trust Company of New York, as trustee, in connection
with the Company's 9 1/4% Senior Notes due 2003.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and successor tax laws.
1.6 "Committee" shall mean the Benefits Committee as appointed by
the Board of Directors of the Company.
1.7 "Company" shall mean BE Aerospace, Inc., a Delaware corporation,
its successors and assigns, any of their respective subsidiaries and affiliates,
and any other entity designated by the Company.
1.8 "Compensation" shall mean wages, including overtime, bonuses, and
any amounts that would have been received by the Participant from the Company
but for an election under Code Sections 125, 401(k), 402(h) or 403(b).
Notwithstanding the foregoing, Compensation shall not include any amounts
received during the Plan Year of compensation deferred from a prior Plan Year.
1.9 "Effective Date of Plan" shall mean January 1, 1999.
1.10 "Effective Date of Participation" shall mean the date specified on
the Participant's Adoption Agreement as the date on which he first becomes
eligible to accrue benefits under the Plan.
1.11 "Participant" shall mean each Employee who is designated by the
Company as being eligible for benefits under this Plan, and who executes an
Adoption Agreement. An Employee shall not be a Participant unless he is deemed
to be among a select group of management or highly compensated employees of the
Company within the meaning of Section 201(2) of ERISA.
<PAGE>
1.12 "Employee" shall mean any full-time, common law employee of the
Company and shall not include persons engaged as independent contractors by the
Company.
1.13 "Leave of Absence" shall mean any absence authorized by the
Company under its standard personnel practices, provided that all persons under
similar circumstances shall be treated alike in the granting of such authorized
Leave of Absence.
1.14 "Plan" shall mean this Supplemental Executive Deferred
Compensation Plan III as herein set forth and as it may be amended from time to
time.
1.15 "Plan Year" shall mean each twelve (12) month period that
begins January 1 and ends December 31.
1.16 "Policy" shall mean the life insurance policy identified on the
Adoption Agreement of a Participant.
1.17 "Retirement Pay" shall mean the retirement pay to which a
Participant is entitled to receive pursuant to Article 2 hereof.
1.18 "Severance" shall mean a Participant's termination of employment
with the Company for any reason, including death or disability, other than by
the Company for Cause. The term shall not include a Leave of Absence.
1.19 "Trust" shall mean the BE Aerospace, Inc. Executive Deferred
Compensation Trust by and between Security Investment Management & Trust Company
as Trustee and the Company.
1.20 "Trustee" shall mean the person or entity that shall from time
to time be serving as the Trustee of the Trust.
1.21 "Year of Service" shall mean a twelve-consecutive month period of
service with the Company during which the Participant worked full-time for the
Company, including periods of service with BE Aerospace, Inc. and its
subsidiaries and affiliates (during the periods in which such entities were
subsidiaries and affiliates of BE Aerospace, Inc.) prior to the Effective Date
of the Plan.
ARTICLE 2
RETIREMENT PAY
2.1 Amount of Retirement Pay.
(a) The Retirement Pay payable to a Participant whose
Severance is other than by reason of the Participant's death shall be
equal to the value of an account to be kept by the Committee for the
<PAGE>
Participant. The value of the Participant's Retirement Pay shall be
equal to the cash surrender value that the life insurance policy
identified in the Participant's Adoption Agreement (the "Policy")
issued on the life of the Participant would have been on the date of
the Participant's Severance if (1) the Company made premium payments
to the Policy each Plan Year (at such times as the Company shall
determine), commencing with the Plan Year in which occurs the
Participant's Effective Date of Participation, in an annual amount
equal to the Participant's Contribution for the Plan Year, and (2)
the Policy had a face amount of insurance equal to the face amount
specified in the Adoption Agreement.
(b) For purposes of this Agreement, the "Participant's
Contribution" shall mean the sum of:
(i) 7 1/2 % of the Participant's Compensation for
the prior Plan Year; plus
(ii) such additional contribution, if any, for the
Plan Year as the Company, in its sole and absolute discretion,
shall determine should be allocated to the account of the
Participant under this Plan.
(c) The Committee's good faith determination of the Retirement
Pay payable to a Participant shall be binding and conclusive on the
Participant and the Company.
(d) Nothing in this Section 2.1 shall require the Company to
acquire or maintain the Policy, or to make any premium payments into
the Policy, nor shall the Participant have any right, title or interest
in the cash value of the Policy if acquired by the Company.
2.2 VESTING.
(a) Vesting Schedule. A Participant will have a vested
interest in a percentage of his or her Retirement Pay determined in
accordance with the following schedule and based on his or her Years of
Service:
Years of Service Applicable Percentage
fewer than 10 0%
10 or more 100%
(b) Acceleration of Vesting Upon Death. Notwithstanding any
provision of the Plan to the contrary, a Participant will be fully
vested in 100% of his or her Retirement Pay upon the Participant's
death while an Employee.
(c) Forfeitures. Except as otherwise provided in the Plan, any
portion of a Participant's Retirement Pay in which the Participant is
not vested upon the separation of service with the Company for any
reason will be forfeited as of the date of such separation of service.
Any forfeitures occurring with respect to a Participant will be applied
to offset the Company's Participant's Contributions pursuant to Section
2.1 applied to offset the Company's Participant's Contributions
pursuant to Section 2.1 hereof for the Plan Year in which the
forfeitures occurred or in any subsequent Plan Year as determined by
the Committee.
<PAGE>
2.3 DISTRIBUTION.
(a) Timing of Distribution. The Participant shall receive the
vested portion of his or her Retirement Pay, less applicable
withholding taxes, as soon as practicable following the later of : (i)
the date on which the Participant' attains age sixty-five (65), or (ii)
the date on which the Participant incurs a Severance. Notwithstanding
the foregoing, the Company may, within its sole discretion, distribute
to a Participant his or her Retirement Pay, less applicable withholding
taxes, as soon as practicable upon the occurrence of the Participant's
Severance (other than by reason of the Participant's death) even if the
Severance occurs prior to the date on which the Participant reaches age
sixty-five (65).
(b) Form of Distribution. The Retirement Pay to which a
Participant is entitled under this Plan shall be paid by the Company in
consecutive [quarterly] installments over a total period of ten years.
Each [quarterly] installment shall be equal to the value of the
Participant's Retirement Pay multiplied by a fraction, the numerator of
which is 1 and the denominator of which is the number of installments
remaining to be paid. Notwithstanding the foregoing, the Company may,
within its sole discretion, distribute to a Participant his or her
Retirement Pay, less applicable withholding taxes, in a lump sum
payment.
2.4 DEATH BENEFIT.
(a) If a Participant dies after he or she has incurred a
Severance, but before payment of his or her Retirement Pay has been
made, then the unpaid portion of his or her Retirement Pay, less
applicable withholding taxes, shall be paid to the Participant's
Beneficiary in a single lump sum payment as soon as practicable
following the Participant's death.
(b) (i) If a Participant incurs a Severance by reason of the
Participant's death, and the Company or the Trust then owns the Policy
identified on the Participant's Adoption Agreement, then a death
benefit shall be paid under the Plan to the Participant's Beneficiary
equal to one-half (1/2) of the death proceeds payable to the Company or
the Trust under the Policy. If, at that time, the Company is the owner
of the Policy, the Company shall retain the remaining one-half (1/2) of
the death proceeds payable under the Policy. If, on the other hand, the
Trust is the owner of the Policy at that time, the Trust shall
distribute the remaining one-half (1/2) of the death proceeds payable
under the Policy to the Company.
(ii) If the Participant incurs a Severance by reason
of the Participants' death, and the Company or the Trust does not then
own the Policy identified on the Participant's Adoption Agreement, then
a death benefit shall be paid to the Participant's Beneficiary equal to
one-half (1/2) of the Participant's Retirement Pay, determined and
payable in manner as provided under Section 2.1 hereof.
<PAGE>
(c) The death benefit under this Section 2.4 shall be treated
as taxable compensation and shall be paid, less applicable withholding
taxes, as soon as practicable following the Participant's death.
2.5 Termination for Cause. In the event that a Participant's employment
with the Company is terminated by the Company for Cause, no benefits shall be
payable under this Plan to the Participant or his Beneficiaries.
2.6 Change in Control. In the event of a Change in Control, then each
Participant, whether or not then employed by the Company, shall become
immediately vested in his or her Retirement Pay and shall receive a lump sum
payment of his or her Retirement Pay, less applicable withholding taxes, as soon
as practicable following the Change in Control.
2.7 Contributions to Trust. The Company shall contribute to the Trust
for each Plan year an amount equal to the Participant's Contributions, as
defined in Section 2.1(b) hereof, said contributions to be made as soon as
practicable after the end of each Plan year, or at such earlier times as the
Company shall determine.
2.8 Benefit Obligations. Only the entity that actually employs the
Participant at the time of the Participant's Severance, shall have any
obligation to pay Retirement Pay as defined in subsection 2.1(a) hereof to the
Participant pursuant to this Plan.
ARTICLE 3
ADMINISTRATION
3.1 Powers and Duties. The Committee generally shall be responsible for
the management, operation, interpretation and administration of the Plan. The
Committee shall have such discretionary powers as may be necessary or
appropriate in carrying out its duties. Without limiting the foregoing, the
Committee shall have the power to:
(a) Establish procedures for allocation of responsibilities
of the Plan which are not allocated herein;
(b) Determine the names of those Employees who are eligible to
participate and such other matters as may be necessary to enable
payment under the Plan;
(c) Construe all terms, provisions, conditions and limitations
of the Plan;
(d) Correct any defect, supply any omission or reconcile any
inconsistency that may appear in the Plan;
(e) Determine the amount, manner and time of payment of any
benefits hereunder and prescribe procedures to be followed by
Participants to obtain benefits; and
<PAGE>
(f) Perform such other functions and take such other actions
as may be required by the Plan or as may be necessary or advisable to
accomplish the purposes of the Plan.
The Company shall furnish the Committee with all data and information available
which the Committee may reasonably require in order to perform its functions
hereunder. The Committee may rely without question upon any such data or
information furnished by the Company. Any interpretation or other decision made
by the Committee shall be final, binding and conclusive upon all persons in the
absence of clear and convincing evidence that the Committee acted arbitrarily
and capriciously.
3.2 Agents. The Committee may appoint a Secretary who may, but need
not, be a member of the Committee, and may employ such agents for clerical and
other services, and such counsel, accountants and other professional advisors as
may be required for the purpose of administering the Plan. The Committee may
rely on all tables, valuations, reports, certificates and opinions furnished by
its agents.
3.3 Procedures. A majority of the Committee members shall constitute a
quorum for the transaction of business. No action shall be taken except upon a
majority vote of the Committee. An individual shall not vote or decide upon any
matter relating solely to himself or vote in any case in which his individual
right or claim to any benefit under the Plan is particularly involved. In any
case in which a Committee member is so disqualified to act, and the remaining
members cannot agree on an issue, the Company shall appoint a temporary
substitute member to exercise all of the powers of the disqualified member
concerning the matter in which he is disqualified.
3.4 Claims Procedure. In the event that any Participant or Beneficiary
claims to be entitled to benefits under the Plan and the Committee determines
that such claim should be denied in whole or in part, the Committee shall, in
writing, notify such claimant within ninety (90) days of receipt of such claim
that his claim has been denied, setting forth the specific reasons for such
denial. Such notification shall be written in a manner reasonably expected to be
understood by such Participant or Beneficiary and shall set forth the pertinent
sections of the Plan relied on, and where appropriate, an explanation of how the
claimant can obtain review of such denial.
Within sixty (60) days after the mailing or delivery by the
Committee of such notice, such claimant may request, by mailing or delivery of
written notice to the Committee, a review and/or hearing by the Committee of the
decision denying the claim. If the claimant fails to request such a review
and/or hearing within such sixty (60) day period, it shall be conclusively
determined for all purposes of this Plan that the denial of such claim by the
Committee is correct. If such claimant requests a hearing within such sixty (60)
day period, the Committee shall designate a time (which time shall not be less
than seven (7) nor more than sixty (60) days from the date of such claimant's
notice to the Committee) and a place for such hearing, and shall promptly notify
such claimant of such time and place. A claimant or his authorized
representative shall be entitled to inspect all pertinent Plan documents and to
submit issues and comments in writing. If only a review is requested, the
claimant shall have sixty (60) days after filing a request for review to submit
additional written material in support of the claim. After such review and/or
hearing, the Committee shall promptly determine whether such denial of the claim
was correct and shall notify such claimant in writing of its determination with
sixty (60) days after such review and/or hearing or after receipt of any
additional information submitted.
<PAGE>
3.5 Indemnification. The Company shall indemnify to the fullest extent
permitted by law, each Committee member and each employee or former employee who
assisted the Committee at the request of the Committee or as part of his or her
duties against any expense, liability or loss sustained by reason of any act or
failure to act made in good faith, including, but not limited to, those in
reliance on certificates, reports, tables, opinions or other communications from
any company or agents chosen by the Committee in good faith. Such
indemnification shall include attorneys' fees and other costs and expenses
reasonably incurred in defense of any action brought by reason of any such act
or failure to act.
ARTICLE 4
MISCELLANEOUS
4.1 Participant's Rights Unsecured. The right of a Participant or his
beneficiary to receive a distribution hereunder shall be an unsecured claim
against the general assets of the Company, and neither the Participant nor his
beneficiary nor any other person shall have any rights in or against any amount
credited to the Participant's Account or any specific assets of the Company or
the Trust. The assets of the Trust shall be subject to the creditors of the
Company in the event of the Company's insolvency. If and to the extent not paid
directly from the general assets of the Company, any benefits payable under the
Plan shall be payable from the Trust. Any assets remaining in the Trust, after
payment of all benefits under the Plan, shall be paid to the Company.
4.2 Impact on Other Employee Benefits. This Plan shall not be construed
to impact or cause the denial of any benefits to which any Participant may be
entitled under any other welfare or benefit plan of the Company.
4.3 Other Plans. Retirement Pay payments made to Participants under
this Plan shall not be includable as salary or compensation for purposes of
determining the amount of employee benefits under any other retirement, pension,
profit-sharing or welfare benefit plans of the Company.
4.4 Reservation of Right. The Company expects to continue the Plan
indefinitely, but nevertheless reserves the right to modify or amend the Plan or
any provision hereof at any time.
4.5 Governing Law. To the extent not pre-empted by the laws of the
United States, the construction, validity and administration of the Plan shall
be governed by the laws of the State of Florida without reference to the
principles of conflicts of law therein.
4.6 No Assignment. Except with respect to the naming of a Beneficiary
to receive any death benefits payable hereunder, the right to receive payment of
any benefits under the Plan shall not be transferred, assigned or pledged,
except by beneficiary designation, by will, under the laws of decent and
distribution, or as may be otherwise required by law.
<PAGE>
4.7 Taxes. The Company shall withhold under the Plan any taxes which it
determines in good faith are required to be withheld under applicable Federal,
state or local tax laws or regulations.
4.8 Severability. Subject to the provisions of Section 4.5, if any
provision of this Plan is found, held or deemed to be void, unlawful or
unenforceable under any applicable statute or other controlling law, the
remainder of the Plan shall continue in full force and effect.
4.9 Headings and Subheadings. The headings and subheadings of the Plan
are for reference only. In the event of a conflict between a heading or
subheading and the content of an article or paragraph, the content shall
control.
4.10 Gender. The masculine, as used herein, shall be deemed to include
the feminine and the singular to include plural, except where the context
requires a different construction.
4.11 Amendment and Termination. This Plan may be amended or terminated
in any respect at any time by the Company by a writing signed by an officer of
the Company; provided, however, that no amendment or termination of the Plan
shall be effective to reduce any Retirement Pay that accrued before the adoption
of such amendment or termination.
4.12 No Employment Contract. This Plan does not constitute a contract
of employment or impose on any Participant or the Company any obligations to
retain the Participant as an employee, to change the status of the Participant's
employment, or to change the Company's policies regarding termination of
employment.
IN WITNESS WHEREOF, the Company has caused the Plan to be executed the
day and year first above written
For: BE AEROSPACE, INC.
By: /s/ Joseph Piegari, Vice President
---------------------------------------
Human Resources
<PAGE>
ADOPTION AGREEMENT
By executing this Adoption Agreement, the undersigned (the
"Participant") hereby agrees to become a Participant under the BE Aerospace,
Inc. Supplemental Executive Deferred Compensation Plan III (the "Plan"), by
adopting the Plan in full as if the Participant were a signatory to the Plan.
The following information applies to the Participant's participation in the
Plan:
1. Participant's Name: __________________________
2. Participant's Address: __________________________
3. Insurer: __________________________
4. Policy Face Amount: __________________________
5. Policy Number: __________________________
6. Percentage of Compensation: __________________________
7. Effective Date of Participation: __________________________
8. Beneficiary: __________________________
The Participant hereby acknowledges his receipt of a copy of the Plan
and acknowledges that his rights to benefits under the Plan are subject to
certain conditions specified in the Plan, including without limitation, the
requirements that his employment with the Company not be terminated for Cause,
as defined in the Plan.
WITNESSES:
- --------------------------- ------------------------------------
PARTICIPANT'S SIGNATURE
- --------------------------- -----------------------------------
DATE
ACKNOWLEDGED AND ACCEPTED BY THE COMPANY
BE AEROSPACE, INC.
By: /s/ Joseph Piegari, Vice President
______________________________________
Human Resources
