EXHIBIT 99
RISK FACTORS
Significant Indebtedness and Interest Payment Obligations
We have substantial indebtedness and, as a result, significant debt
service obligations. As of February 27, 1999, indebtedness outstanding was
$594 million and represented 83% of total capitalization.
The degree of our leverage could have important consequences to
purchasers or holders of our common stock, including:
o limiting our ability to obtain additional financing to fund our growth
strategy, working capital, capital expenditures, debt service
requirements or other purposes;
o limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to
make principal payments and fund debt service;
o increasing our vulnerability to adverse economic and industry conditions;
and
o increasing our vulnerability to interest rate increases because
borrowings under our bank credit facilities are at variable interest
rates.
Our ability to pay interest on the notes and to satisfy our other debt
obligations will depend upon, among other things, our future operating
performance and our ability to refinance indebtedness when necessary. Each of
these factors is to a large extent dependent on economic, financial,
competitive and other factors, beyond our control. If, in the future, we
cannot generate sufficient cash from operations to make scheduled payments on
the notes or to meet our other obligations, we will need to refinance, obtain
additional financing or sell assets. We cannot assure you that our business
will generate cash flow, or that we will be able to obtain funding, sufficient
to satisfy our debt service requirements.
RESTRICTIONS IN DEBT AGREEMENTS ON OUR OPERATIONS
The operating and financial restrictions and covenants in our existing
debt agreements, including our bank credit facilities, the indentures
governing the 9 7/8% senior subordinated notes, the 8% senior subordinated
notes, the 9 1/2% senior subordinated notes and any future financing
agreements may adversely affect our ability to finance future operations or
capital needs or to engage in other business activities. A breach of any of
these restrictions or covenants could cause a default under the bank credit
facilities and the notes. A significant portion of our indebtedness then may
become immediately due and payable. We are not certain whether we would have,
or be able to obtain, sufficient funds to make these accelerated payments,
including payments on the notes.
DEPENDENCE UPON CONDITIONS IN THE AIRLINE INDUSTRY
Our principal customers are the world's commercial airlines. As a result,
our 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 this 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 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 as to the economic outlook for these
countries. Of our $640 million of backlog at February 27, 1999, we had $48
million with Asian carriers deliverable in fiscal 2000 and a further $42
million deliverable in subsequent fiscal years. Of such Asian carrier backlog,
approximately $50 million was with Japan Airlines, Singapore Airlines and
Cathay Pacific, three of the largest Asian airlines. 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 and future orders from airlines in
these countries may be adversely affected. 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 proportionately more of the
Company's products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Industry Conditions" and "--Deferred Tax
Assets."
NEW PRODUCT INTRODUCTIONS AND TECHNOLOGICAL CHANGE
Airlines currently are taking delivery of a new generation of aircraft
and demanding increasingly sophisticated cabin interior products. As a result,
the cabin interior configurations of commercial aircraft are becoming more
complex and will require more technologically advanced and integrated
products. Our future success may depend to some extent on our ability to
continue to develop, profitably manufacture and deliver, on a timely basis,
other technologically advanced, reliable high-quality products, which can be
readily integrated into complex cabin interior configurations. See
"Business--Products and Services."
COMPETITION
We compete with a number of established companies that have significantly
greater financial, technological and marketing resources than we do. Although
we have achieved a significant share of the market for a number of our
commercial airline cabin interior products, there can be no assurance that we
will be able to maintain this market share. Our ability to maintain our market
share will depend on our ability to remain the supplier of retrofit and
refurbishment products and spare parts on the commercial fleets on which our
products are currently in service. It will also depend on our success in
causing our products to be selected for installation in new aircraft,
including next-generation aircraft, expected to be purchased by the airlines
over the next decade, and in avoiding product obsolescence.
GENERAL AVIATION ACQUISITIONS; ABILITY TO INTEGRATE ACQUIRED BUSINESSES;
ADDITIONAL CAPITAL REQUIREMENTS
Between 1989 and January 1996, we acquired nine companies. During fiscal
1999, we acquired six additional companies. See "Summary--Recent
Developments." Through several of these recent acquisitions, we have expanded
our activities from the commercial to the general aviation market. There can
be no assurance that we will be successful in entering the general aviation
market. We intend to consider future strategic acquisitions in the commercial
airline and general aviation cabin interior industries, some of which could be
material to us. We are in discussions from time to time with one or more third
parties regarding possible acquisitions. As of the date of this Annual Report
we have no agreement or understanding on any acquisition. Our ability to
continue to achieve our goals will depend upon our ability to integrate
effectively the recent and any future acquisitions and to achieve cost
efficiencies. Although we have been successful in the past in doing so, we may
not continue to be successful. See "Business--Competitive Strengths."
Depending upon, among other things, the acquisition opportunities
available, we may need to raise additional funds. We may seek additional funds
through public offerings or private placements of debt or equity securities or
bank loans. In the absence of such financing, our ability to make future
acquisitions in accordance with our business strategy, to absorb adverse
operating results, to fund capital expenditures or to respond to changing
business and economic conditions may be adversely affected. All of these
factors may have a material adverse effect on our business, results of
operations and financial condition.
REGULATION
The Federal Aviation Administration (the "FAA") prescribes standards and
licensing requirements for aircraft components, including virtually all
commercial airline and general aviation cabin interior products, and licenses
component repair stations within the United States. Comparable agencies
regulate these matters in other countries. If we fail to obtain a required
license for one of our products or services or lose a license previously
granted, the sale of such product or service would be prohibited by law until
such license is obtained or renewed. In addition, designing new products to
meet existing FAA requirements and retrofitting installed products to comply
with new FAA requirements can be both expensive and time-consuming.
See "Business--Government Regulations."
POTENTIAL FAILURE OF COMPUTER SYSTEMS TO RECOGNIZE YEAR 2000
We are highly dependent on our computer software programs and operating
systems in operating our business. We also depend on the proper functioning of
computer systems of third parties, such as vendors and customers. The failure
of any of these systems to appropriately interpret the upcoming calendar year
2000 could have a material adverse effect on our financial condition, results
of operations, cash flow and business prospects. We are currently identifying
our own applications that will not be Year 2000 compliant and taking steps to
determine whether third parties are doing the same. In addition, we are
implementing a worldwide plan to prepare our computer systems to be Year 2000
compliant by the first half of fiscal 2000.
Our inability to remedy our own Year 2000 problems or the failure of
third parties to do so may cause business interruptions or shutdown, financial
loss, regulatory actions, reputational harm and/or legal liability. We can not
assure you that our Year 2000 program or the programs of third parties who do
business with us will be effective or that our estimates about the timing and
cost of completing our program will be accurate. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Year 2000
Costs."
RISKS INHERENT IN INTERNATIONAL OPERATIONS
Our foreign operations accounted for 42% of total sales for fiscal 1999,
as compared to 26% for fiscal 1998 and 25% for fiscal 1997. In addition, we
have direct investments in a number of subsidiaries in foreign countries
(primarily in Europe). Fluctuations in the value of foreign currencies affect
the dollar value of our net investment in foreign subsidiaries, with these
fluctuations being included in a separate component of stockholders' equity.
Operating results of foreign subsidiaries are translated into U.S. dollars at
average monthly exchange rates. We reported a cumulative foreign currency
translation amount of $(6.1) million in stockholders' equity at February 27,
1999 as a result of foreign currency adjustments. There can be no assurance
that we will not incur additional adjustments in future periods. In addition,
the U.S. dollar value of transactions based in foreign currency (collections
on foreign sales or payments for foreign purchases) also fluctuates with
exchange rates. Historically, foreign currency risk has not been material
because a substantial majority of our sales have been denominated in the
currency of the country of product origin and no repatriation of earnings has
occurred (or is anticipated). However, there can be no assurance that a
substantial majority of sales will continue to be denominated in the currency
of the country of product origin or as to the impact of changes in the value
of the United States dollar or other currencies. The largest foreign currency
exposure results from activity in British pounds and Dutch guilders.
We have not hedged net foreign investments in the past, although we may
engage in hedging transactions in the future to manage or reduce our exchange
risk. There can be no assurance that our attempts to manage our foreign
currency exchange risk will be successful.
Our foreign operations could also be subject to unexpected changes in
regulatory requirements, tariffs and other market barriers and political and
economic instability in the countries where we operate. There can be no
assurance as to the impact of any such events that may occur in the future.
See "Risk Factors--Dependence upon Conditions in the Airline Industry."
RISKS ASSOCIATED WITH THE CONVERSION BY CERTAIN EU MEMBER STATES TO THE "EURO"
We may be exposed to certain risks as a result of the conversion by
certain European Union member states of their respective currencies to the
"Euro" as legal currency on January 1, 1999. The conversion rates between such
member states' currencies and the Euro will be fixed by the Council of the
European Union. Risks related to the conversion to the Euro could include,
among other things:
o effects on pricing due to increased cross-border price transparency;
o costs of modifying information systems, including both software and
hardware;
o costs of relying on third parties whose systems also require
modification;
o changes in the conduct of business and in the principal markets for
our products and services; and
o changes in currency exchange rate risk.
We have analyzed whether the conversion to the Euro will materially
affect our business operations. While we are uncertain as to the impact of the
conversion, we do not expect costs in connection with the Euro conversion to
be material. However, the actual effects of the conversion cannot be known
until the conversion to the Euro has taken place and there can be no assurance
that the actual effects of the conversion could not have a material adverse
effect on our business, results of operations, and financial condition.
ENVIRONMENTAL MATTERS
We are subject to extensive and changing federal, state and foreign laws
and regulations establishing health and environmental quality standards, and
may be subject to liability or penalties for violations of those standards. We
are also subject to laws and regulations governing remediation of
contamination at facilities currently or formerly owned or operated by us to
which we have sent hazardous substances or wastes for treatment, recycling or
disposal. We believe that we are currently in compliance, in all material
respects, with all such laws and regulations. However, we may be subject to
future liabilities or obligations as a result of new or more stringent
interpretations of existing laws and regulations. In addition, we may have
liabilities or obligations in the future if we discover any environmental
contamination or liability at any of our facilities.
BE AEROSPACE, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of net assets available for benefits
as of February 28, 1999 and 1998 2
Statements of changes in net assets available for benefits
for the years ended February 28, 1999 and 1998 3
Notes to financial statements for the years ended
February 28, 1999 and 1998 4
All schedules pursuant to the Department of Labor's rules and regulations are
omitted because of the absence of the conditions under which they are
required.
BE AEROSPACE, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
INDEPENDENT AUDITORS' REPORT
The Benefits Administrative Committee
BE Aerospace, Inc.
1994 Employee Stock Purchase Plan
Wellington, Florida
We have audited the accompanying statements of net assets available for
benefits of BE Aerospace, Inc. 1994 Employee Stock Purchase Plan (the Plan)
as of February 28, 1999 and 1998, and the related statements of changes in
net assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's Administrative Committee. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of BE Aerospace, Inc. 1994
Employee Stock Purchase Plan as of February 28, 1999 and 1998, and the
changes in net assets available for benefits for the years then ended in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 1, 1999
BE AEROSPACE, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF FEBRUARY 28, 1999 AND 1998
- ------------------------------------------------------------------------------
1999 1998
ASSETS - Cash and cash equivalents $1,256,484 $ 859,217
LIABILITIES - Stock subscribed 1,255,781 854,147
---------- ---------
NET ASSETS AVAILABLE FOR BENEFITS $ 703 $ 5,070
========== =========
BE AEROSPACE, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED FEBRUARY 28, 1999 AND 1998
- ------------------------------------------------------------------------------
1999 1998
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of period $ 5,070 $ 1,145
ADDITIONS TO NET ASSETS ATTRIBUTED TO -
Participant payroll deductions 2,167,239 1,462,575
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO -
Purchase of BE Aerospace common stock 2,171,606 1,458,650
----------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of period $ 703 $ 5,070
=========== ==========
BE AEROSPACE, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED FEBRUARY 28, 1999 AND 1998
- -----------------------------------------------------------------------------
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Plan - Effective April 1, 1994, BE Aerospace, Inc. (the
Company) adopted the BE Aerospace, Inc. 1994 Employee Stock Purchase
Plan (the Plan).
The Company is the Plan sponsor. All employees (participants) with a
minimum of 90 days' service, who generally complete a minimum of 20
hours of service per week, are eligible to participate. Under the Plan,
contributions are made on behalf of participants who choose to
contribute from 2% to 15% of their total gross pay.
Common stock of the Company is purchased every six months on
approximately February 28 and August 31 (Option Period). The purchase
price is 85% of the lesser of the fair value of either the first day or
last day of each Option Period. Participants are allocated a pro rata
share of stock consistent with the balance of the participant account.
The stock is then issued by the Plan transfer agent, Boston Equiserve,
directly to the participant. The maximum number of shares available for
each option period to an individual is the largest whole number of
shares which, when multiplied by the fair market value of the Company
stock at the beginning of the option period, produces a dollar amount of
$12,500 or less.
Stock Subscribed - The Plan issues the stock to participants subsequent
to the end of each Option Period but dated the last day of the Option
Period. Therefore, a liability for stock purchased by the Plan but not
yet distributed to the participants has been reflected as stock
subscribed in the accompanying statements of net assets available for
benefits as of February 28, 1999 and 1998.
Stock purchased by the Plan for the years ended February 28, 1999 and
1998, was 151,931 and 63,463 shares, respectively.
Termination Benefits and Vesting - Upon termination of employment with
the Company, a participant is entitled to receive all contributions not
yet used to acquire stock of the Company.
Cash and Cash Equivalents - Cash and cash equivalents consist of highly
liquid investments purchased with original maturities of 90 days or
less.
BE AEROSPACE, INC.
1994 EMPLOYEE STOCK PURCHASE PLAN
Income Tax - The Plan administrator believes that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the Internal Revenue Code of 1986. Plan assets consist
of cash not yet used to purchase common stock. Such cash remains an
asset of the Company until used to purchase common stock. Accordingly,
Plan assets are not held in trust and, therefore, the Plan is not
subject to income tax.
Administrative Expenses - Administrative expenses have been paid
directly by the Company and, accordingly, are not reflected in the
Plan's financial statements. There is no written agreement requiring the
Company to pay these expenses, and the Company may elect to stop paying
Plan expenses at any time.
2. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to terminate the Plan.
BE AEROSPACE, INC. SAVINGS PLAN
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997,
SUPPLEMENTRAL SCHEDULES AND
INDEPENDENT AUDITORS' REPORT
BE AEROSPACE, INC. SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of net assets available for benefits
as of December 31, 1998 and 1997 2
Statements of changes in net assets available for benefits
for the years ended December 31, 1998 and 1997 3
Notes to financial statements 4
SUPPLEMENTAL SCHEDULES PROVIDED PURSUANT TO THE DEPARTMENT
OF LABOR'S RULES AND REGULATIONS:
Line 27a - Schedule of assets held for investment purposes
as of December 31, 1998 13
Line 27d - Schedule of reportable transactions
for the year ended December 31, 1998 14
All other schedules required by the Department of Labor are omitted
because of the absence of the conditions under which they are required.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
INDEPENDENT AUDITORS' REPORT
The Benefits Administrative Committee
BE Aerospace, Inc. Savings Plan
Wellington, Florida
We were engaged to audit the financial statements and supplemental
schedules of BE Aerospace, Inc. Savings Plan (the Plan) as of December 31,
1998 and 1997, and for the years then ended, listed in the Table of Contents.
These financial statements and supplemental schedules are the responsibility
of the Plan's management.
As permitted by Section 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, the Plan administrator instructed us not to perform, and
we did not perform, any auditing procedures with respect to the investment
information summarized in Note 2 and certain information in Notes 3 and 4 that
was certified by PW Trust Company, the trustee of the Plan, except for
comparing the information with the related information included in the
financial statements and supplemental schedules. We have been informed by the
Plan administrator that the trustee holds the Plan's investment assets and
executes investment transactions. The Plan administrator has obtained
certifications from the trustee that the information as of and for the years
ended December 31, 1998 and 1997, provided to the Plan administrator by the
trustee is complete and accurate.
Because of the significance of the information that we did not audit, we
are unable to express, and do not express, an opinion on the accompanying
financial statements and supplemental schedules taken as a whole. The form and
content of the information included in the financial statements and
supplemental schedules, other than that derived from the information certified
by the trustee, have been audited by us in accordance with generally accepted
auditing standards and, in our opinion, are presented in compliance with the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974.
DELOITTE & TOUCHE LLP
Costa Mesa, California
April 15, 1999
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998 AND 1997
- -----------------------------------------------------------------------------
1998 1997
---- ----
ASSETS -
Investments, at fair value (Note 3):
Investment in the PW Trust Company Pooled Trusts (Note 2) $ 52,536,711 $ 39,878,562
BE Aerospace, Inc. common stock (Note 2) 6,001,083 6,390,953
Participant loans receivable 202,986 102,236
------------ ------------
Total investments 58,740,780 46,371,751
EMPLOYER CONTRIBUTIONS RECEIVABLE 423,756 128,318
CASH AND CASH EQUIVALENTS (Note 2) 53,362 36,467
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 59,217,898 $ 46,536,536
============ ============
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- -----------------------------------------------------------------------------
1998 1997
---- ----
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year $ 46,536,536 $ 38,146,077
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation in fair value of investments (Notes 2 and 3) 6,871,721 5,262,288
Interest and dividends (Note 2) 46,875 21,482
- ------------ ------------
Total investment income 6,918,596 5,283,770
Contributions and rollovers (Note 1) 9,918,008 7,275,773
------------ ------------
Total additions to net assets 16,836,604 12,559,543
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Distributions to participants or their beneficiaries 3,465,337 3,768,400
Plan administrative expenses 473,648 361,581
Loan repayments 216,257 39,103
------------ -----------
Total deductions from net assets 4,155,242 4,169,084
------------ -----------
NET INCREASE 12,681,362 8,390,459
------------ -----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 59,217,898 $ 46,536,536
============ ============
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
- ------------------------------------------------------------------------------
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of
Plan - Effective August 1, 1988, BE Aerospace, Inc. (the Company) adopted
the BE Aerospace, Inc. Savings Plan (formerly the BE Aerospace, Inc.
Savings and Profit Sharing Plan and Trust) (the Plan), a defined
contribution retirement plan designed to qualify under Internal Revenue
Code (IRC) Section 401(a) and 401(k) for the cash or deferred arrangement
part of the Plan.
Under the Plan, contributions are made on behalf of employees
(participants) who choose to defer a portion of their total gross pay.
Effective December 1994, the Plan was amended to allow participants to
make a contribution election from 2% to 15%. Elective contributions under
a qualified cash or deferred arrangement are treated as employer
contributions. Company contributions are made in the Company common stock
(the Stock). Participants age 55 or older have the option of receiving
the matching contribution in cash. The Stock is held by the trustee and
adjusted to fair value as determined by published market prices.
Resulting unrealized gains and losses are included in the statement of
changes in net assets available for benefits.
In January 1996, the Company purchased Burns Aerospace, Inc. (Burns) from
Eagle Industries. Former Burns employees who transferred to the Company
and were participants under the Eagle Industries (Eagle) 401(k) Plan were
cashed out of the Eagle plan, and their distributions totaling $7,154,260
were rolled over into the Plan. Participant loans receivables, totaling
$286,417, were transferred into the Plan as a result of the Nellcor
Puritan Bennett acquisition in 1998.
Termination Benefits and Vesting - Upon termination of employment with
the Company, participants are immediately vested in their contributions
and are entitled to receive all vested contributions, with 100% vesting
after five years of service.
Forfeitures - Forfeited nonvested account balances are used to reduce
future employer contributions.
Cash and Cash Equivalents - Cash and cash equivalents consist of
highly liquid investments with initial maturities of 90 days or less.
Investment in the PW Trust Company Pooled Trusts - The investment in the
PW Trust Company Pooled Trusts (the Trusts) consists primarily of
guaranteed insurance contracts (GICs) and certain debt and equity
securities held by the Trusts. It is the policy of the Trusts to hold GIC
investments until maturity. GIC investments are stated at contract value
that approximates their fair value at December 31, 1998 and 1997, as
determined by quoted or published market prices. All other investments
are stated at their fair value.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
- ------------------------------------------------------------------------------
Income Tax - The Plan is intended to be qualified under 401(a) of the
Internal Revenue Code of 1986 and is intended to be exempt from taxation
under 501(a) of the IRC. The Plan received a favorable IRS determination
letter dated August 20, 1998. There were no significant amendments to the
Plan between the date of the determination letter and December 31, 1998.
Therefore, the Plan administrator believes that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the IRC and the related trust was tax exempt as of the
financial statement date. Therefore, no provision of income taxes has
been included in the Plan's financial statements.
Benefits Payable - Benefits under the Plan are distributed upon
retirement, death, disability, or termination of employment. At December
31, 1998 and 1997, payables to participants totaled zero and $43,133,
respectively.
Administrative Expenses - Administrative expenses are paid by the Plan.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
The foregoing description of the Plan provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions.
2. INFORMATION CERTIFIED BY TRUSTEE (UNAUDITED) Plan investments are held
by PW Trust Company, the trustee. The following is a summary of the
unaudited information regarding the Plan, included in the Plan's
financial statements and supplemental schedules, that was prepared by the
trustee and reported to the Plan administrator. The Company has obtained
certifications from the trustee that such information is complete and
accurate.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
- ----------------------------------------------------------------------------
a. Assets held at fair value as of December 31:
1998 1997
---- ----
Investments, at fair value:
GIC Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan $ 10,325,398 $ 9,647,288
Balanced Value Portfolio of the PW Trust
Company Pooled Trust for Employee Benefits
Plan 8,505,410 6,983,055
Capital Growth Portfolio of the PW Trust
Company Pooled Trust for Employee Benefits
Plan 14,673,768 11,148,710
Strategic Balance Portfolio of the PW Trust
Company Pooled Trust for Employee Benefits
Plan 4,778,480 3,048,384
Strategic Growth Portfolio of the PW Trust
Company Pooled Trust for Employee Benefits
Plan 8,043,749 4,726,181
Target Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 5,215,260 3,893,093
Overseas Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 994,646 431,851
BE Aerospace, Inc. common stock 6,001,083 6,390,953
------------ -----------
Total investments 58,537,794 46,269,515
Cash and cash equivalents - Money Market Fund 53,362 36,467
------------- ------------
$ 58,591,156 $ 46,305,982
============= ============
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
- -----------------------------------------------------------------------------
b. Changes in net assets available for benefits for the years
ended December 31:
1998 1997
---- ----
Investment income:
Net appreciation in fair value of investments $ 6,871,721 $ 5,262,288
Interest and dividends 46,875 21,482
----------- -----------
Total investment income $ 6,918,596 $ 5,283,770
=========== ===========
c. Line 27a - Schedule of assets held for investment purposes as of
December 31, 1998, excluding participant loan data obtained from
the Company (see supplemental schedule)
d. Line 27d - Schedule of reportable transactions for the year ended
December 31, 1998 (see supplemental schedule)
3. INVESTMENTS
Investments consist of the following:
AS OF DECEMBER 31, 1998
---------------------------------------
FAIR
COST VALUE
GIC Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan $ 8,877,340 $ 10,325,398
Balanced Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 5,737,317 8,505,410
Capital Growth Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 8,543,888 14,673,768
Strategic Balance Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 3,491,776 4,778,480
Strategic Growth Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 5,454,248 8,043,749
Target Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 4,481,319 5,215,260
Overseas Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 909,997 994,646
BE Aerospace, Inc. common stock 5,078,165 6,001,083
Participant loans receivable 202,986 202,986
------------ ------------
$ 42,777,036 $ 58,740,780
============ ============
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (Continued)
- -----------------------------------------------------------------------------
AS OF DECEMBER 31, 1997
---------------------------------------
FAIR
COST VALUE
GIC Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan $ 8,285,706 $ 9,647,288
Balanced Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 4,585,451 6,983,055
Capital Growth Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 7,340,587 11,148,710
Strategic Balance Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 2,554,079 3,048,384
Strategic Growth Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 4,019,957 4,726,181
Target Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 3,392,434 3,893,093
Overseas Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits 437,462 431,851
BE Aerospace, Inc. common stock 3,401,478 6,390,953
Participant loans receivabl 102,236 102,236
----------- -----------
$34,119,390 $46,371,751
=========== ===========
Investments are in the custody of the trustee under a trust agreement
with the Plan. The trustee has no authority, however, for the purchase or
sale of investments.
During the years ended December 31, 1998 and 1997, the Plan's investments
appreciated in fair value by $6,871,721 and $5,262,288, respectively.
4. STATEMENT OF CHANGES IN NET ASSESTS AVAILABLE FOR BENEFITS BY FUND
FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
December 31, 1998 supplemental information by fund--Part (1)
------------------------------------------------------------------------------------
Balanced Capital Strategic Strategic Target
GIC Value Growth Balance Growth Value
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year ........... $ 9,661,261 $ 6,987,974 $ 11,141,452 $ 3,046,930 $ 4,712,287 $ 3,883,521
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair
value of investments ................ 601,409 1,142,495 3,179,738 894,394 2,142,810 326,785
Interest and dividends - - - - - -
----------- ------------ ----------- ----------- ----------- ----------
Total investment income (loss) .... 601,409 1,142,495 3,179,738 894,394 2,142,810 326,785
Contributions and rollovers ............. 971,920 900,770 1,740,810 932,043 1,596,885 1,283,383
Total additions to net assets ... 1,573,329 2,043,265 4,920,548 1,826,437 3,739,695 1,610,168
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Distributions to participants or
their beneficiaries ................... 1,104,657 430,038 933,477 167,467 512,129 271,846
Plan administrative expenses ............ 43,908 95,976 151,765 45,983 71,527 55,698
Loan repayments - - - - - -
---------- ---------- ---------- ---------- ---------- -----------
Total deductions from net assets 1,148,565 526,014 1,085,242 213,450 583,656 327,544
----------- ---------- ----------- ---------- ---------- -----------
NET INCREASE ............................ 424,764 1,517,251 3,835,306 1,612,987 3,156,039 1,282,624
ACCOUNT TRANSFERS ....................... 276,253 27,774 (250,501) 148,412 223,317 85,111
NET ASSETS AVAILABLE FOR
BENEFITS, end of year ................. $ 10,362,278 $ 8,532,999 $ 14,726,257 $ 4,808,329 $ 8,091,643 $ 5,251,256
============ ============ ============ ============ ============ ============
4. STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND
FOR THE YEAR ENDED DECEMBER 31, 1998 (UNAUDITED) (Continued)
December 31, 1998 supplemental information by fund--Part (2)
---------------------------------------------------------------------------------
BE Aerospace Cash and
common Participant cash
Overseas Stock Loans Equivalents Total
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year $ 432,269 $ 6,532,139 $ 102,236 $ 36,467 $ 46,536,536
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair
value of investments 94,612 (1,510,522) - - 6,871,721
Interest and dividends - - 30,590 16,285 46,875
--------- ------------- --------- -------- -----------
Total investment income (loss) 94,612 (1,510,522) 30,590 16,285 6,918,596
Contributions and rollovers 330,790 2,160,797 - 610 9,918,008
---------- ------------- -------- -------- -----------
Total additions to net assets 425,402 650,275 30,590 16,895 16,836,604
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Distributions to participants or
their beneficiaries 26,789 305,351 (286,417) - 3,465,337
Plan administrative expenses 8,791 - - - 473,648
Loan repayments - - 216,257 - 216,257
---------- ------------ --------- -------- -----------
Total deductions from net assets 35,580 305,351 (70,160) 4,155,242
---------- ------------ --------- -------- -----------
NET INCREASE 389,822 344,924 100,750 16,895 12,681,362
ACCOUNT TRANSFERS 182,093 (692,459) - - -
----------- ------------ --------- -------- ------------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $ 1,004,184 $ 6,184,604 $ 202,986 $ 53,362 $ 59,217,898
=========== =========== ========= ======== ============
The Plan maintains a holding account that allows for the future
distributions of cash and cash equivalents and liabilities to the appropriate
fund.
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND FOR THE
YEAR ENDED DECEMBER 31, 1997 (UNAUDITED)
December 31, 1998 supplemental information by fund--Part(1)
-------------------------------------------------------------------------------------
Balanced Capital Strategic Strategic Target
GIC Value Growth Balance Growth Value
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year $ 10,242,926 $ 6,272,522 $ 8,552,004 $ 1,958,799 $ 2,975,820 $ 1,788,273
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair
value of investments 617,592 1,159,170 1,979,922 418,420 624,311 548,827
Interest and dividends - - - - - -
----------- ---------- ---------- ----------- ----------- -----------
Total investment income (loss) 617,592 1,159,170 1,979,922 418,420 624,311.00 548,827.00
Contributions and rollovers 1,043,732 685,079 991,533 690,171 1,130,643 905,439
------------ ---------- ---------- ----------- ----------- ------------
Total additions to net assets 1,661,324 1,844,249 2,971,455 1,108,591 1,754,950 1,454,266
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Distributions to participants or
their beneficiaries 1,684,714 565,669 578,400 121,775 228,034 192,063
Plan administrative expenses 44,372 82,056 120,721 30,683 45,461 36,553
Loan repayments - - - - - -
---------- ---------- ---------- ----------- ----------- ------------
Total deductions from net assets 1,729,086 647,725 699,121 152,458 273,495 228,616
----------- ---------- ----------- ----------- ----------- ------------
NET (DECREASE) INCREASE (67,762) 1,196,524 2,272,334 956,133 1,481,459 1,225,650
ACCOUNT TRANSFERS (513,903) (481,072) 317,114 131,998 255,008 869,598
----------- ----------- ---------- ------------ ---------- ------------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $ 9,661,261 $ 6,987,974 $ 11,141,452 $ 3,046,930 $ 4,712,287 $ 3,883,521
=========== =========== ============ =========== =========== ===========
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS BY FUND FOR THE
YEAR ENDED DECEMBER 31, 1997 (UNAUDITED) (Continued)
December 31, 1998 supplemental information by fund--Part(2)
-------------------------------------------------------------------------------------
BE Aerospace Cash and
Common Participant cash
Overseas Stock Loans Equivalents Total
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year $ - $ 6,031,985 $ 133,783 $ 189,965 $ 38,146,077
ADDITIONS TO NET ASSETS
ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair
value of investments (7,856) (78,098) - - 5,262,288
Interest and dividends - - 7,556 13,926 21,482
----------- ------------ -------- -------- ----------
Total investment income (loss) (7,856) (78,098) 7,556 13,926 5,283,770
Contributions and rollovers 200,311 1,628,865 - - 7,275,773
----------- ------------ -------- -------- -----------
Total additions to net assets 192,455 1,550,767 7,556 13,926 12,559,543
DEDUCTIONS FROM NET ASSETS
ATTRIBUTED TO:
Distributions to participants or
their beneficiaries 2,049 395,690 - - 3,768,400
Plan administrative expenses 1,735 - - - 361,581
Loan repayments - - 39,103 - 39,103
----------- ------------ -------- -------- ------------
Total deductions from net assets 3,784 395,696 39,103 - 4,169,084
NET (DECREASE) INCREASE 188,671 1,155,071 (31,547) 13,926 8,390,459
ACCOUNT TRANSFERS 243,598 (654,917) - (167,424) -
----------- ------------ -------- --------- ------------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $ 432,269 $ 6,532,139 $ 102,236 $ 36,467 $ 46,536,536
============ ============= ========= ======== ============
The Plan maintains a holding account that allows for the future
distributions of cash and cash equivalents and liabilities to the appropriate
fund.
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS BY FUND AS OF DECEMBER 31,
1998 (UNAUDITED)
December 31, 1998 supplemental information by fund--Part(1)
------------------------------------------------------------------------------------
Balanced Capital Strategic Strategic Target
GIC Value Growth Balance Growth Value
ASSETS:
Investments, at fair value:
Investment in the PW Trust Company
Pooled Trusts $ 10,325,398 $ 8,505,410 $14,673,768 $ 4,778,480 $ 8,043,749 $ 5,215,260
BE Aerospace, Inc. common stock
Participant loans receivable - - - - - -
------------ ----------- ----------- ----------- ----------- -----------
Total investments 10,325,398 8,505,410 14,673,768 4,778,480 8,043,749 5,215,260
EMPLOYER CONTRIBUTIONS
RECEIVABLE 36,880 27,589 52,489 29,849 47,894 35,996
CASH AND CASH EQUIVALENTS - - - - - -
------------ ----------- ----------- ---------- ----------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS $ 10,362,278 $ 8,532,999 $14,726,257 $ 4,808,329 $ 8,091,643 $ 5,251,256
============ =========== =========== =========== =========== ===========
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS BY FUND AS OF DECEMBER 31,
1998 (UNAUDITED) (Continued)
December 31, 1998 supplemental information by fund--Part(2)
------------------------------------------------------------------------------------
BE Aerospace Cash and
Common Participant cash
Overseas Stock Loans Equivalents Total
ASSETS:
Investments, at fair value:
Investment in the PW Trust Company
Pooled Trusts $ 994,646 $ - $ - $ - $ 52,536,711
BE Aerospace, Inc. common stock 6,001,083 - - 6,001,083
Participant loans receivable - - 202,986 - 202,986
--------- -------------- -------- ------- --------------
Total investments 994,646 6,001,083 202,986 - 58,740,780
EMPLOYER CONTRIBUTIONS
RECEIVABLE 9,538 183,521 - - 423,756
CASH AND CASH EQUIVALENTS - - - 53,362 53,362
---------- ------------ --------- --------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS $1,004,184 $ 6,184,604 $ 202,986 $ 53,362 $ 59,217,898
========== ============ ========= ========= =============
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS BY FUND AS OF
DECEMBER 31, 1997 (UNAUDITED)
December 31, 1998 supplemental information by fund--Part(1)
------------------------------------------------------------------------------------
Balanced Capital Strategic Strategic Target
GIC Value Growth Balance Growth Value
ASSETS:
Investments, at fair value:
Investment in the PW Trust Company
Pooled Trusts $ 9,647,288 $ 6,983,055 $ 11,148,710 $ 3,048,384 $ 4,726,181 $ 3,893,093
BE Aerospace, Inc. common stock
Participant loans receivable - - - - - -
------------- ------------- -------------- ------------- ------------- -------------
Total investments 9,647,288 6,983,055 11,148,710 3,048,384 4,726,181 3,893,093
EMPLOYER CONTRIBUTIONS
RECEIVABLE 13,973 4,919 (7,258) (1,454) (13,894) (9,572)
CASH AND CASH EQUIVALENTS - - - - - -
------------ ------------- -------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR
BENEFITS $ 9,661,261 $ 6,987,974 $ 11,141,452 $ 3,046,930 $ 4,712,287 $ 3,883,521
============= ============= ============== ============= ============= ============
TATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS BY FUND AS OF
DECEMBER 31, 1997 (UNAUDITED) (Continued)
December 31, 1998 supplemental information by fund--Part(2)
------------------------------------------------------------------------------------
BE Aerospace Cash and
Common Participant cash
Overseas Stock Loans Equivalents Total
ASSETS:
Investments, at fair value:
Investment in the PW Trust Company
Pooled Trusts $ 431,851 $ - $ - $ - $ 39,878,562
BE Aerospace, Inc. common stock - 6,390,953 - - 6,390,953
Participant loans receivable - - 102,236 - 102,236
---------- ------------- -------- -------- -------------
Total investments 431,851 6,390,953 102,236 - 46,371,751
EMPLOYER CONTRIBUTIONS
RECEIVABLE 418.00 141,186 - - 128,318
CASH AND CASH EQUIVALENTS - - - 36,467 36,467
---------- ------------ -------- -------- --------------
NET ASSETS AVAILABLE FOR
BENEFITS $ 432,269 $ 6,532,139 $ 102,236 $ 36,467 $ 46,536,536
=========== ============ ========= ======== ==============
SUPPLEMENTAL SCHEDULES PROVIDED PURSUANT TO
THE DEPARTMENT OF LABOR'S RULES AND REGULATIONS
BE AEROSPACE, INC. SAVINGS PLAN
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
- --------------------------------------------------------------------------
Units/ Current
Rates Cost Value
GIC Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 481,187 $ 8,877,340 $ 10,325,398
Balanced Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 229,167 5,737,317 8,505,410
Capital Growth Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 504,567 8,543,888 14,673,768
Strategic Balance Portfolio of the PW Trust
Company Pooled Trust for Employee
Benefits Plan 227,237 3,491,776 4,778,480
Strategic Growth Portfolio of the PW Trust
Company Pooled Trust for Employee
Benefits Plan 325,318 5,454,248 8,043,740
Target Value Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plan 276,440 4,481,319 5,215,26
Overseas Portfolio of the PW Trust Company
Pooled Trust for Employee Benefits Plans 65,611 909,997 994,646
BE Aerospace, Inc. common stock 294,513 5,078,165 6,001,083
Participant loans receivable 6 to 13% 202,986 202,986
------------ ------------
$ 42,777,036 $ 58,740,780
============ ============
BE AEROSPACE, INC. SAVINGS PLAN
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- ----------------------------------------------------------------------------
Purchase Selling Cost of
Price Price Asset Net Gain
GIC Portfolio of the PW Trust Company Pooled
Trust for Employee Benefits Plan -
638 transactions $ 3,632,304 $ 3,621,538 $ 3,106,518 $ 515,020
Strategic Growth Portfolio of the PW Trust
Company Pooled Trust for Employee Benefits
Plan - 434 transactions 2,558,214 1,368,401 1,108,141 260,260
Balance Value Portfolio of the PW Trust
Company Pooled Trust for Employee Benefits
Plan - 392 transactions 1,446,928 1,068,291 695,389 372,902
Capital Growth Portfolio of the PW Trust for
Employee Benefits Plan - 474 transactions 2,704,792 2,302,002 1,442,169 859,833
Strategic Balance Portfolio of the PW Trust for
Employee Benefits Plan - 355 transactions 1,349,882 511,952 409,417 102,535
Target Value Portfolio of the PW Trust for
Employee Benefits Plan - 397 transactions 1,925,996 922,223 827,299 94,924
Overseas Portfolio of the PW Trust for
Employee Benefits Plan - 231 transactions 599,300 129,813 124,639 5,174