UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 for the quarterly period ended
August 26, 1995
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)
(407) 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
16,215,814 shares were outstanding as of October 2, 1995.
BE AEROSPACE, INC.
Item 1. Financial Statements.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
August 26, February 25,
1995 1995
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,490 $ 8,319
Receivables - trade, less allowance for doubtful
accounts of $3,853 (August 26, 1995)
and $4,034 (February 25, 1995) 44,249 48,915
Inventories, net 91,885 71,347
Deferred income taxes 5,779 6,502
Other current assets 7,608 7,434
Total current assets 157,011 142,517
PROPERTY AND EQUIPMENT, net 64,466 60,304
INTANGIBLES AND OTHER ASSETS, net 173,372 177,133
$ 394,849 $ 379,954
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 38,614 $ 35,164
Accrued expenses 20,939 24,481
Income taxes payable 385 1,642
Current portion of long-term debt 5,090 4,667
Total current liabilities 65,028 65,954
LONG-TERM DEBT 188,435 172,693
DEFERRED INCOME TAXES 10,953 11,212
OTHER LIABILITIES 4,234 4,764
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized; no shares outstanding Common Stock,
$.01 par value; 30,000,000 shares
authorized; 16,179,345 (August 26, 1995)
16,095,790 (February 25, 1995) issued 161 160
Additional paid-in capital 119,719 119,209
Retained earnings 7,045 7,418
Cumulative foreign exchange translation adjustment (726) (1,456)
Total stockholders' equity 126,199 125,331
$ 394,849 $ 379,954
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BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
Three Months Ended
August 26, August 27,
1995 1994
NET SALES $ 57,451 $ 55,197
COST OF SALES 38,878 36,789
GROSS PROFIT 18,573 18,408
OPERATING EXPENSES:
Selling, general and administrative 8,443 7,902
Research and development 4,433 2,711
Amortization expense 2,360 2,637
Total operating expenses 15,236 13,250
OPERATING EARNINGS 3,337 5,158
INTEREST EXPENSE, net 3,961 3,629
EARNINGS (LOSS) BEFORE INCOME TAXES (624) 1,529
INCOME TAXES (BENEFIT) (228) 565
NET EARNINGS (LOSS) $ (396) $ 964
NET EARNINGS (LOSS) PER COMMON SHARE $ (.02) $ .06
COMMON AND COMMON EQUIVALENT SHARES 16,118 16,097
========= =========
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BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share data)
Six Months Ended
August 26, August 27,
1995 1994
NET SALES $ 113,045 $ 112,764
COST OF SALES 76,071 75,469
GROSS PROFIT 36,974 37,295
OPERATING EXPENSES:
Selling, general and administrative 16,743 15,976
Research and development 7,980 5,553
Amortization expense 4,693 5,209
Total operating expenses 29,416 26,738
OPERATING EARNINGS 7,558 10,557
INTEREST EXPENSE, net 8,149 7,322
EARNINGS (LOSS) BEFORE INCOME TAXES (591) 3,235
INCOME TAXES (216) 1,197
NET EARNINGS (LOSS) $ (375) $ 2,038
NET EARNINGS PER COMMON SHARE $ (.02) $ .13
COMMON AND COMMON EQUIVALENT SHARES 16,108 16,060
========= =========
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BE AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
August 26, August 27,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ (375) $ 2,038
Adjustments to reconcile net earnings to
net cash flows provided by operating activities:
Depreciation and Amortization 8,413 7,447
Deferred income taxes 948 820
Non cash employee benefit plan contributions 683 182
Changes in operating assets and liabilities:
Accounts receivable 4,306 5,257
Inventories (20,634) (13,530)
Income tax refund receivable 1,934
Other current assets 120 (683)
Accounts payable 3,555 711
Income taxes payable (1,055) 1,149
Other liabilities (4,257) (1,037)
Net cash flows used in operating activities (8,296) 4,288
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,168) (5,345)
Change in other assets - net (2,095) (4,212)
Change in other liabilities (1,023)
Net cash flows used in investing activities (10,263) (10,580)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of credit 17,818 1,813
Repayments of long-term debt (1,235)
Net cash flows provided by financing activities 17,818 578
Effect of exchange rate changes on cash flows (88) 159
Net decrease in cash and cash equivalents (829) (5,555)
Cash and cash equivalents, beginning of period 8,319 13,738
Cash and cash equivalents, end of period $ 7,490 $ 8,183
Supplemental disclosures of cash flow information:
Cash paid during period for interest $ 8,510 $ 7,459
Cash paid during period for income taxes, net 702
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BE AEROSPACE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED AUGUST 26, 1995 AND AUGUST 27, 1994
(Dollars in thousands, except share and per share data)
Note 1. Basis of Presentation:
The information set forth in these consolidated financial statements as of
August 26, 1995 and for the three month periods ended August 26, 1995 and
August 27, 1994 is unaudited and may be subject to normal year-end
adjustments. In the opinion of management, the unaudited consolidated
financial statements reflect all adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial position of
BE Aerospace, Inc. (the "Company" or "BEA") for the periods indicated.
Results of operations for the interim period ended August 26, 1995 are not
necessarily indicative of the operations for the full fiscal year. For
further information, including information with regard to conditions in the
airline industry and their possible impact on the Company, please refer to
the Company's annual report on Form 10-K for the fiscal year ended
February 25, 1995, as amended.
The accompanying consolidated financial statements consolidate all of the
Company's subsidiaries. All significant intercompany transactions have been
eliminated. Certain amounts in the prior years' Consolidated Financial
Statements have been reclassified to conform to the current fiscal year's
presentation.
Certain information normally included in footnote disclosures to the annual
financial statements has been condensed or omitted in accordance with the
rules and regulations of the Securities and Exchange Commission.
Note 2. Contingencies
The U.S. Departments of Commerce and Justice are jointly conducting an
investigation into the Company's 1992 and 1993 sales of passenger seats for
installation on commercial aircraft owned by Iran Air. The Company applied
for and received an export license from the Department of Commerce for these
transactions, which aggregated approximately $3.1 million. The investigation
appears to center on whether the terms of the export license were strictly
adhered to. The Company is cooperating with government officials, and is
conducting a parallel internal investigation and is determined to resolve
this matter as expeditiously as possible.
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BE AEROSPACE, INC.
(Dollars in thousands, except per share data)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis addresses the results of the Company's
operations for the three and six months ended August 26, 1995, as compared
to the Company's results of operations for the three and six months ended
August 27, 1994 respectively. The discussion and analysis then addresses
the liquidity and financial condition of the Company.
THREE MONTHS ENDED AUGUST 26, 1995, AS COMPARED TO THE RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 27, 1994.
Sales for the three months ended August 26, 1995 were $57,451 or $2,254 (4%)
greater than sales of $55,197 for the comparable period in the prior year.
The increase in sales year over year is due to slightly higher volume of
products shipped.
At August 26, 1995 the Company's backlog stood at $345 million, up from $331
million at February 25, 1995. The Company's revenues are not expected to
increase appreciably until either the level of spending by the airlines for
refurbishment of their existing fleets increases, the Company begins
substantial deliveries of its MDDS interactive entertainment systems in
connection with airline upgrade programs on their existing airline fleets or
new aircraft deliveries increase.
Gross profit was $18,573 or 32% of sales for the three months ended
August 26, 1995 and was $165 greater than the comparable period in the prior
year of $18,408, which represented 33% of sales. The increase in gross
profit is due to the slightly higher volume of units shipped, offset somewhat
by the 1% decline in gross margin to 32% as a result of the mix of products
sold during the period.
Selling, general and administrative expenses were $8,443 (15% of sales) for
the three months ended August 26, 1995. This was $541 higher than the
comparable period in the prior year of $7,902 (14% of sales) and is due to
marginally higher selling costs, including commissions.
Research and development expense was $4,433 or 8% of sales for the three
months ended August 26, 1995. For the comparable period in the prior year,
research and development expense was $2,711 or 5% of sales. The increase in
expense is the result of a substantial increase in the level of activity
during the quarter, principally associated with In-Flight Entertainment
products and also with Seating products.
Amortization expense for the quarter ended August 26, 1995 of $2,360 was
$277 lower than the amount recorded in the first quarter of fiscal 1994 as
a result of the lower level of intangible assets amortized in the current
period.
While revenues and backlog have increased as compared to the prior year
levels, operating earnings for the three month period ended August 26, 1995
have suffered largely due to higher research and development spending.
Net interest expense was $3,961 for the three months ended August 26, 1995,
or $332 higher than the net interest expense of $3,629 recorded for the
comparable period in the prior year, and is due to the increase in the
Company's long-term debt outstanding during the current period, along with
an increase in interest rates.
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BE AEROSPACE, INC.
THREE MONTHS ENDED AUGUST 26, 1995, AS COMPARED TO THE RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 27, 1994 (Continued)
Loss before income taxes of $(624) for the quarter ended August 26, 1995 was
$2,153 less than the earnings of the prior year, primarily as a result of
higher research and development and interest expense incurred during the
current quarter.
Income tax expense benefit for the quarter ended August 26, 1995 was $228 as
compared to a tax provision of $565 (37%) in the same period last year.
Net loss was $(396) or $(.02) per share for the three months ended
August 26, 1995, as compared to $964 or $.06 per share for the comparable
period in the prior year.
SIX MONTHS ENDED AUGUST 26, 1995, AS COMPARED TO THE RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 27, 1994.
Sales for the six months ended August 26, 1995 were $113,045 or $281 higher
than sales of $112,764 for the comparable period in the prior year.
Gross profit was $36,974 or 33% of sales for the six months ended
August 26, 1995 and was $321 lower than the comparable period in the prior
year of $37,295, which represented 33% of sales. The decrease in gross
profit is the result of the mix of products sold during the period.
Selling, general and administrative expenses were $16,743 (15% of sales) for
the six months ended August 26, 1995. This was $767 higher than the
comparable period in the prior year of $15,976 (14% of sales), principally
due to higher seller costs, including commissions.
Research and development expenses were $7,980 or 7% of sales for the six
months ended August 26, 1995. For the comparable period in the prior year,
research and development expense was $5,553 or 5% of sales. The increase
in expense during the current year is the result of an increase in the level
of activity in on-going research and development programs, principally
associated with In-Flight Entertainment products and also with Seating
products.
Amortization expense for the six months ended August 26, 1995 of $4,693 was
$516 less than the amount recorded in the first half of fiscal 1995 as a
result of the lower level of intangible assets amortized in the current
period.
While revenues and backlog have increased as compared to the prior year
levels, operating earnings for the six month period ended August 26, 1995
have suffered largely due to higher research and development spending.
Net interest expense was $8,149 for the six months ended August 26, 1995,
or $827 higher than the net interest expense of $7,322 recorded for the
comparable period in the prior year, and is due to the increase in the
Company's long-term outstanding debt during the current period, along with
an increase in rates.
The loss before income taxes of ($591) for the six months ended August 26,
1995 was $1,788 less than the earnings of the prior year, primarily as a
result of higher interest and research and development expense incurred
during the current year.
Income tax benefit for the six months ended August 26, 1995 was ($216) or
37% of loss before income taxes, as compared to a tax rate of 37% in the
first half of fiscal 1995.
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BE AEROSPACE, INC.
The net loss of $375 or $(.02) per share for the six months ended
August 26, 1995 as compared to earnings of $2,038 or $ .13 per share for
the comparable period in the prior year. The decrease in earnings per share
reflects the impact of higher research and development and interest expense
during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary requirements for working capital are directly related
to its accounts receivable and inventory levels, as well as costs associated
with the design and development of its MDDS interactive video system, and
improvements to its property and equipment. The Company's working capital
was $91,983 as of August 26, 1995 compared to $76,563 as of February 25,
1995.
In October 1993, the Company obtained Credit Facilities aggregating $85,000.
The credit facilities are comprised of two revolving lines of credit,
initially aggregating $40,000 and $45,000. The $40,000 revolving line of
credit is collateralized by the stock of a wholly owned subsidiary and may
be borrowed and repaid in $1,000 increments and has decreasing availability
through November 1998. The $45,000 revolving line of credit may be borrowed
in $1,000 increments, is subject to borrowing base calculation set forth in
the credit facility agreement, is collateralized by substantially all the
Company's assets and is due and payable in full in November 1998. The
credit facilities bear interest at prime plus .50% or at the Company's
option, LIBOR plus 1.75%. As of August 26, 1995, the availability under
the $40,000 revolving line of credit had been reduced to $29,500, resulting
in a total credit facility aggregating $74,500, of which $52,000 was
outstanding.
The Company believes that cash on hand, cash flow from operations and
available bank borrowings will be sufficient to meet its working
capital requirements for the foreseeable future.
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BE AEROSPACE, INC.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The U.S. Departments of Commerce and Justice are jointly conducting an
investigation into the Company's 1992 and 1993 sales of passenger seats for
installation on commercial aircraft owned by Iran Air. The Company applied
for and received an export license from the Department of Commerce for
these transactions, which aggregated approximately $3.1 million. The
investigation appears to center on whether the terms of the export license
were strictly adhered to. The Company is cooperating with government
officials, and is conducting a parrallel internal investigation and is
determined to resolve this matter as expeditiously as possible.
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.
On July 26, 1995, the following actions were taken at the Company's Annual
Meeting of Stockholders:
a. Mr. Jim C. Cowart was elected as a Class I Director of the Company to
serve until the 1998 Annual Meeting 12,767,373 shares voting in favor and
1,199,216 shares withheld. Mr. Brian Rowe was elected as a Class I
Director of the Company to serve until the 1998 Annual Meeting 12,767,905
shares voting in favor and 1,198,684 shares withheld.
b. The Company's Amended and Restated 1989 Stock Option Plan was amended
to increase the aggregate number of shares available for grant there-
under with 7,871,807 shares voting in favor 5,950,455 shares opposed
and 144,327 shares abstaining.
c. A proposal to adopt the MacBride Principles submitted by New York City
Comptroller Alan G. Hewesi on behalf of the New York City Employees'
Retirement System, the New York City Teachers' Retirement System, the
New York City Police Pension Fund and the New York City Fire Department
Pension Fund was not adopted with 633,283 shares voting in favor,
10,128,372 shares opposed, 782,474 shares abstaining, and 2,392,460
shares not voting.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K. None.
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BE AEROSPACE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BE AEROSPACE, INC.
Date: October 4, 1995 By: /s/ Amin J. Khoury
Chairman of the Board and
Chief Executive Officer
Date: October 4, 1995 By: /s/ Thomas P. McCaffrey
Vice President & Chief Financial Officer
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