EXHIBIT 99.1
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES REFORM ACT OF 1995
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Gulfstream Aerospace Corporation (the "Company" or
"Gulfstream") cautions readers that the important factors set
forth below, as well as factors discussed in other documents
filed by the Company with the Securities and Exchange Commission
(the "SEC"), among others, could cause the Company's actual
results to differ materially from statements contained in this
report, future filings by the Company with the SEC, the Company's
press releases and oral statements made by or on behalf of the
Company. The words "estimate", "project", "anticipate",
"expect", "intend", "believe", and similar expressions are
intended to identify forward looking statements.
Aircraft Production
While the Company generally receives non-refundable deposits
in connection with each order, an order may be cancelled (and the
deposit returned) under certain conditions if the delivery of a
Gulfstream V aircraft is delayed more than six months after a
customer's scheduled delivery date. An extended delay in the
production process could cause an increase in the number of
cancellations of orders, which could have an adverse effect on
the Company's results of operations.
In contrast to its historical practice of discontinuing
prior models, the Company will continue to manufacture and sell
Gulfstream IV-SPs at the same time that it manufactures and sells
Gulfstream Vs. The Company expects to increase its aircraft
production rate in 1997 as compared to its aircraft production
rate in 1996. In addition, the Company has announced its plan to
increase its annual production rate to approximately 60 aircraft
by 1999, a two-fold increase over its 1996 annual production
rate. No assurance can be given as to the extent to which the
Company can successfully increase its rate of production.
The Business Jet Aircraft Market
The Company's principal business is the design, development,
manufacture and marketing of large and ultra-long range business
jet aircraft. Because of the high unit selling price of its
aircraft products and the availability of commercial airlines and
charters as alternative means of business travel, a downturn in
general economic conditions could result in a reduction in the
orders received by the Company for its new and pre-owned
aircraft. The Company would not be able to rely on sales of
other products to offset a reduction in sales of its aircraft.
If a potential purchaser is experiencing a business downturn or
is otherwise seeking to limit its capital expenditures, the high
unit selling price of a new Gulfstream aircraft could result in
such potential purchaser deferring its purchase or changing its
operating requirements and electing to purchase a competitor's
lower priced aircraft. Since the Company relies on the sales of
a relatively small number of high unit selling price new aircraft
to provide approximately 55% to 65% of its revenues, small
decreases in the number of aircraft delivered in any year could
have a material adverse effect on the results of operation for
that year.
The Company believes that its reputation and the exemplary
safety record of its aircraft are important selling points for
new and pre-owned Gulfstream aircraft. However, if one or a
number of catastrophic events were to occur with the Gulfstream
fleet, Gulfstream's reputation and sales of Gulfstream aircraft
could be adversely affected.
In many cases, the Company has agreed to accept, at the
customer's option, the customer's pre-owned aircraft as a trade-
in in connection with the purchase of a Gulfstream V. Based on
the current market for pre-owned aircraft, the Company expects to
continue to be able to resell such pre-owned aircraft, and does
not expect to suffer a loss with respect to the possible trade-in
of such aircraft. However, an increased level of pre-owned
aircraft or changes in the market for pre-owned aircraft may
increase the Company's inventory costs and may result in the
Company receiving lower prices for its pre-owned aircraft.
The market for large cabin business jet aircraft is highly
competitive. The Gulfstream IV-SP competes in the large cabin
business jet aircraft market segment, principally with Dassault
Aviation S.A. (which has announced that it will merge with
Aerospatiale SA) and Bombardier Inc. ("Bombardier"). The
Gulfstream V competes in the ultra-long range business jet
aircraft market segment, primarily with the Global Express, which
is being marketed by Canadair, a subsidiary of Bombardier, and
which, according to published reports, is scheduled for
certification in May 1998, 18 months after the initial delivery
of the Gulfstream V. The Boeing Company, in partnership with
General Electric Co., is marketing a version of the Boeing 737
into the ultra-long range business jet aircraft market segment.
Boeing has indicated that it expects this aircraft to be
available for delivery in the fourth quarter of 1998. In June
1997, Airbus Industrie announced it would market a version of the
Airbus A319 into this market segment as well. Airbus has
indicated it expects the aircraft to be available in early 1999.
The Company's competitors may have access to greater resources
(including, in certain cases, governmental subsidies) than are
available to the Company.
The Company's ability to compete successfully in the large
business jet and ultra-long range business jet aircraft markets
over the long term requires continued technological and
performance enhancements to Gulfstream aircraft. No assurance
can be given that the Company's competitors will not be able to
produce aircraft capable of performance comparable or superior to
Gulfstream aircraft in the future.
Purchased Materials and Equipment
Approximately 70% of the production costs of both the
Gulfstream IV-SP and the Gulfstream V consist of materials and
equipment purchased from other manufacturers. While the
Company's production activities have never been materially
affected by its inability to obtain components, and while the
Company maintains business interruption insurance in the event
that such a disruption should occur, the failure of the Company's
suppliers to meet the Company's performance specifications,
quality standards, pricing terms or delivery schedules could have
a material adverse impact on the profitability of the Company's
new aircraft sales or the ability of the Company to timely
deliver new aircraft to customers.
Possible Fluctuations in Quarterly and Annual Results
The Company records revenue from the sale of a new "green"
aircraft (i.e., before exterior painting and installation of
customer selected interiors and optional avionics) when that
aircraft is delivered to the customer. As a result, a delay or
an acceleration in the delivery of new aircraft may affect the
Company's revenues for a particular quarter or year and may make
quarter-to-quarter or year-to-year comparisons difficult. In
addition, the Company's production schedule may be affected by
many factors, including timing of deliveries by suppliers.
Pending Tax Audit
The Company is involved in a tax audit by the Internal
Revenue Service covering the years ended December 31, 1991
and 1990. The revenue agent's report includes several proposed
adjustments involving the deductibility of certain compensation
expense, items relating to the initial capitalization of the
Company as well as the allocation of the original purchase price
for the acquisition by the Company of the Gulfstream business,
including the treatment of advance payments with respect to and
the cost of aircraft that were in backlog at the time of the
acquisition and the amortization of amounts allocated to
intangible assets. The Company believes that the ultimate
resolution of these issues will not have a material adverse
effect on its financial statements because the financial
statements already reflect what the Company currently believes is
the expected loss of benefit arising from the resolution of
these issues. However, because the revenue agent's report is
proposing adjustments in amounts materially in excess of what the
Company has reflected in its financial statements and because it
may take several years to resolve the disputed matters, the
ultimate extent of the Company's expected loss of benefit and
liability with respect to these matters cannot be predicted with
certainty and no assurance can be given that the Company's
financial position or results of operations will not be adversely
affected.
Leverage and Debt Service
The degree to which the Company is leveraged at a particular
time could have important consequences to the Company, including
the following: (i) the Company's ability to obtain additional
financing in the future for working capital, capital
expenditures, product development, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a
portion of the Company's and its subsidiaries' cash flow from
operations must be dedicated to the payment of the principal of
and interest on its indebtedness; (iii) the Company's credit
agreement contains certain restrictive financial and operating
covenants, including, among others, requirements that the Company
satisfy certain financial ratios; (iv) a significant portion of
Gulfstream's borrowings will be at floating rates of interest,
causing Gulfstream to be vulnerable to increases in interest
rates; (v) the Company's degree of leverage may make it more
vulnerable in a downturn in general economic conditions; and (vi)
the Company's financial position may limit its flexibility in
responding to changing business and economic conditions.